Allied Minds plc

Half-Yearly Report for the six months ended 30 June 2020

15 October 2020 -- Boston, MA - Allied Minds plc ("Allied Minds" or the "Company" and together with its consolidated subsidiaries, the "Group"), the IP commercialisation company focused on early stage technology businesses, today announces its interim results for the six months ended 30 June 2020.

Highlights

·      $14.4 million invested in portfolio companies, including $5.5 million post-period end

·     Third party investors subscribed for $13.5 million of portfolio company equity, including $6.3 million post-period end

·     Net cash and investments at 30 June 2020: $34.2 million (FY19: $90.6 million), of which $29.9 million held at parent level (FY19: $84.1 million)

·      BridgeComm:

o Joint development agreement (JDA) with Boeing HorizonX (Boeing) to collaboratively develop applications of the One-to-Many (OTM) technology

o Secured additional $2.0 million of convertible debt financing from Allied Minds on top of the $1.0 million invested by Boeing at the end of 2019

o Secured additional $1.5 million of convertible debt financing from Boeing upon successful achievement of development milestones under the JDA, post-period end

o Entered into partnership with Nokia to develop ultra-high-speed throughput solutions to facilitate faster deployment of 5G networks, post-period end

·      Federated Wireless:

o Announced new Connectivity-as-a-Service (CaaS) offering that lets U.S. enterprises buy and deploy private 4G and 5G networks with a single click through AWS(R) and Microsoft Azure(R) marketplaces

o Raised $13.7 million of additional Series C funding from Allied Minds and existing investor, Pennant Investors, to accelerate expansion and adoption of its partnerships with AWS and Microsoft Azure to offer Connectivity-as-a-Service and expand into 6 GHz band for 5G services

o Potential market opportunity expanded upon additional 100 megahertz of contiguous mid-band spectrum in the 3.45-3.55 GHz band unlocked for commercial 5G deployment

·      Orbital Sidekick:

o  Awarded a multi-year contract by the Department of the Air Force's commercial investment group (AFVentures) as part of its Strategic Financing (STRATFI) program, under which the company will receive $4.0 million of non-dilutive financing in Q4 2020, with the opportunity to receive up to $12.0 million of additional non-dilutive financing over next three years to match private funds raised

·      Spin Memory:

o Raised $8.25 million of additional Series B funding from existing investors, including Abies Ventures, Applied Ventures, LLC (the venture capital arm of Applied Materials, Inc.), ARM Technology Investments Limited ("ARM") and Allied Minds, to support continued research in MRAM, including work with its existing development partners, Applied Materials and ARM

·      TableUp acquired by TouchBistro, Inc. in stock-for stock transaction, post-period end

Joseph Pignato, Chief Executive Officer of Allied Minds, commented:

"The recent financings at three of our most promising portfolio companies while we are faced with the unprecedented challenges brought by the COVID-19 pandemic is an excellent indication of the underlying strength of the portfolio and the important work that each company is focused on. We value the additional capital invested by our existing partners who have stepped up during these difficult times.

"New commercial partnerships announced by both BridgeComm and Federated Wireless, coupled with renewed vigor demonstrated by existing partners at both BridgeComm and Spin Memory continue to demonstrate the significant technical and commercial progress made at these significant companies.

"The announced sale of Table Up is an important step towards generating portfolio liquidity for our shareholders by choosing the right partners and allowing us to maximise monetisation opportunities."

For more information, please contact:

Allied Minds plc  

ir@alliedminds.com                                               +1 617 419 1800

Instinctif Partners     

Adrian Duffield, Kay Larsen, Chantal Woolcock      020 7457 2020

Further information on Allied Minds is available on our website: www.alliedminds.com

About Allied Minds

Allied Minds plc is an IP commercialisation company focused on early stage company development within the technology sector. Allied Minds manages and funds, a portfolio of seven companies primarily in the technology sector, to generate long-term value for its investors and stakeholders.  The portfolio companies are based upon a broad range of underlying innovative technologies ranging from semiconductors, wireless connectivity, to space-based imagery and analytics. 

Based in Boston, Allied Minds supports its businesses with capital, management, expertise and shared services.  For more information, please visit www.alliedminds.com.

This 2020 half-yearly report release may contain statements that are or may be forward-looking statements, including statements that relate to the Company's future prospects, developments and strategies. The forward-looking statements are based on current expectations and are subject to known and unknown risks and uncertainties that could cause actual results, performance and achievements to differ materially from current expectations, including, but not limited to, those risks and uncertainties described in the risk management section of the strategic report included in the 2019 Annual Report and Accounts. These forward-looking statements are based on assumptions regarding the present and future business strategies of the Company and the environment in which it will operate in the future. Each forward-looking statement speaks only as at the date of this half-yearly report release. Except as required by law, regulatory requirement, the Listing Rules and the Disclosure Guidance and Transparency Rules, neither the Company nor any other party intends to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014.

Interim Management Report

Overview

Allied Minds plc (Allied Minds or the Group) is an IP commercialisation company primarily focused on early stage company development within the technology sector. 

The progress made by our portfolio companies, especially during these challenging and unprecedented times, demonstrates the promise and vigor of these businesses. 

Specifically, with full FCC certification, Federated Wireless is making strides towards full commercial operations in the 3.5 GHz band and sits at the forefront of a potential greater market opportunity as the US unlocked additional mid-band spectrum for commercial deployment using a shared spectrum framework. Furthermore, with the additional funding raised, we are encouraged by Federated Wireless's opportunity to expand upon important commercial partnerships and accelerate the adoption of its new CaaS offering into greater markets.

Both Spin Memory and BridgeComm have also made further product development advances through working with their existing strategic partners.  Spin Memory's further development engagement with important industry partners, Applied Materials (Applied) and ARM, was also supported by the additional $8.25 million funds raised from existing investors including both Applied and ARM in July.  The technical progress made at BridgeComm through its partnership with Boeing, including achievement of certain development milestones, unlocked an additional $1.5 million of convertible debt financing, post period end, from Boeing which will support the ongoing joint development work.

We are also excited by the commercial progress made at our earlier stage investments.  Orbital Sidekick's ability to secure non-dilutive financing from the United States Air Force positions the company well to expand its reach in the future.  Also, its ability to convert an early pilot participant into a customer coupled with the anticipated launch of its first dedicated hyperspectral imagery satellite in December 2020 further ready the company to begin commercialising its technology.   

Finally, we were pleased to report TouchBistro's acquisition of TableUp as a successful step towards realising value for our shareholders. 

The Group's ability to raise funds and continue achieving important technical and commercial milestones while building upon key partnership relationships across the portfolio signify the strength of its companies and demonstrate that the Group remains on track as it works to execute on maximising the value of its portfolio company interests and delivering well-timed, risk-adjusted returns for its shareholders.

COVID-19

As we navigate the uncertainties brought by the coronavirus pandemic, Allied Minds continues to closely monitor, assess, and respond to the impacts of COVID-19 in order to ensure the continued health, safety, and security of its workforce across its portfolio companies.  The Group has taken a number of actions to enable Allied Minds and its portfolio companies to continue operating safely and effectively, including implementing remote working environments, using virtual meeting platforms, and reducing travel.

While COVID-19 has had some commercial impact on the portfolio in the past few months, such impact has not been significant and the actions and mitigation put in place by the Group have enabled day-to-day operations to continue effectively across the portfolio.  As highlighted in this report, the achievements across our portfolio demonstrate that our companies are continuing to make progress against their respective commercial and strategic objectives even during this pandemic. We remain in close communication with all of our customers, suppliers and partners to collaborate on how to best support each other's needs in this new environment.  Furthermore, Allied Minds continues to engage with each of its portfolio companies to help manage and mitigate against potential impacts on each company's business, including assisting with employee support, cash management, and contingency planning. 

While we remain cautious and vigilant about what the coming months may bring, we continue to be optimistic and expect to be able to navigate these uncertain times whilst delivering the results of our stated strategy in the coming years. 

Strategy

Allied Minds' strategy is focused on supporting its existing portfolio companies and maximising monetisation opportunities for portfolio company interests.  The Board aims to monetise the Group's ownership positions at the appropriate time, recognising the value and benefit in achieving well-timed risk-adjusted returns for the benefit of shareholders.

Upon the event of successful monetisation events from the sale of portfolio companies or portfolio company interests, Allied Minds anticipates distributing the net proceeds to its shareholders, after due consideration of potential follow-on investment opportunities within the existing portfolio and working capital requirements.    

Outlook

Allied Minds' portfolio companies, led by experienced, motivated and resourceful management teams, have continued to make substantial technical and commercial progress.  The milestones achieved demonstrate examples of solving difficult technical problems, developing innovative products and services across a range of large potential markets, establishing important partnerships to develop technology and go to market channels, and the creation of shareholder value.

The Board believes that the shareholder returns to date and completion of successful fundraisings throughout its portfolio, together with achieving portfolio company milestones, have positioned Allied Minds as well as possible to maximise returns for its shareholders. 

Portfolio Company Valuation

Of the Company's seven active portfolio companies, three are currently majority owned and controlled, and therefore fully consolidated in the Company's consolidated financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union (adopted IFRS).  The Company's condensed consolidated financial statements do not include current valuations of these portfolio companies.

Of the remaining four portfolio companies, the Company holds a significant minority stake in three of these companies and a small position in the fourth as a result of the stock-for-stock sale of TableUp, Inc. post-period end.  In each case, where Allied Minds holds a significant minority stake, it is able to exercise significant influence over the portfolio company by virtue of its large, albeit minority, ownership stake in the portfolio company and its representation on the board of directors. The investment in preferred stock in these portfolio companies is accounted for under IFRS 9 and is classified by the Company as an investment at fair value in the Company's consolidated financial statements.  Due to the equity-like characteristics of the Company's common stockholdings in Spin Memory and Federated Wireless, the two investments are accounted for under IAS 28 and are classified by the Company as investments in associates. Accordingly, since Allied Minds has significant influence over these entities through the voting rights/potential voting rights held at Spin Memory and Federated Wireless, it gives access to the returns associated with an ownership interest in these associates.

Allied Minds provides qualitative and quantitative disclosure in relation to the commercial and financial progress of its portfolio companies, and directional commentary on valuation.  In addition, where commercially possible, Allied Minds provides, for each portfolio company: (i) the date of the last equity funding round, (ii) the post-money valuation of such round, (iii) the named key co-investors in such round, and (iv) the Company's issued and outstanding ownership, and fully-diluted ownership, of such portfolio company. 

This information is set forth in the Portfolio Review and Developments section below.  The ownership interests are as of 14 October 2020.  The fully-diluted percentages take into account outstanding stock options granted to employees, directors and advisors, current stock options available for grant pursuant to the company's stock option plan, and outstanding warrants to purchase common and preferred stock. 

The post-money valuations disclosed for each entity below do not represent IFRS 13 fair values but rather, are based on the pre-money valuation set by the investors in the latest financing round plus the total money raised in that round. 

There can be no guarantee that the aforementioned post-money valuations of the portfolio companies will be considered to be correct in light of the future performance of the various companies, or that the Company would be able to realise proceeds in the amount of such valuations, or at all, in the event of a sale by it of any of its portfolio companies or its ownership interest in such portfolio companies. 

Portfolio Review and Developments

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BridgeComm, Inc. ⁽¹⁾

In January 2020, BridgeComm announced the collaboration with Boeing to pioneer the development of applications of the One-to-Many (OTM) technology pursuant to a joint development agreement (JDA). 

In connection with the JDA, BridgeComm secured $1.0 million from Boeing HorizonX in the form of convertible debt financing pursuant to a note purchase agreement.  Allied Minds subscribed for $2.0 million of convertible debt under the same note purchase agreement.  In August 2020, BridgeComm successfully completed a formal presentation to Boeing of the concept design review phase and demonstration of the lab platform for the OTM functionalities.  As a result of achieving this milestone, BridgeComm secured the remaining $1.5 million of convertible debt from Boeing.

In September 2020, BridgeComm entered into a partnership with Nokia in efforts to develop high-speed optical communications.  The partnership will facilitate faster deployment of 5G networks and bring about an ultra-high-speed throughput solution that will provide a faster and more secure network optimised for citizens and governments alike.  The two companies have secured a promising collaborative relationship, as BridgeComm has already integrated some of Nokia's high-speed optical equipment into its systems with successful initial lab demonstrations.

Formed in 2015 and based in Denver, Colorado, BridgeComm is developing and commercialising optical wireless communication (OWC) solutions.  It has begun development of a global network of optical ground stations designed to support complementary fixed and mobile terminals that provide high-bandwidth, high-security solutions for unique applications. 

OWC is a wireless technology offering rapid point-to-point data transmission via beams of light that connect from one telescope to another using low-power, safe, infrared lasers in the terahertz spectrum.  It holds tremendous potential to augment RF, fibre and mmWave technologies and extend the capabilities of the terrestrial fibre grid, particularly in hard-to-access environments and in areas where cell towers do not currently exist.

The technology underpinning BridgeComm's solution was sourced originally from The Aerospace Corporation and Draper Laboratories and was initially focused on point-to-point data transmission only. 

BridgeComm has recently focused its efforts on developing its new OTM technology which is a breakthrough in OWC that provides bi-directional, ultra-high-speed mesh connectivity for terrestrial, airborne and space systems. 

OTM builds on the basic connectivity that traditional point-to-point optical terminals provide and enables a much broader set of telecommunications applications.  This technology enables optical wireless communications systems to create bi-directional mesh connectivity similar to, and complementary with, radio frequency systems.

OTM is capable of supporting terrestrial, airborne and space systems that require 10-100+ Gbps throughput, as well as the high reliability and redundancy inherent in mesh architecture.  Furthermore, OTM maintains the inherent security features in OWC, while supporting the mesh architecture.  OTM also provides a much-needed new option for high-speed connectivity in environments where RF spectrum is limited or congested.

BridgeComm has developed a patent portfolio with a number of patents filed covering a broad range of advancements in fiberless optical communications for applicability to space, air, and terrestrial usage including its new OTM technology.

Holdings and valuation:

·      Date of Last Funding Round: September 2018

·      Post-Money Valuation: $38.0 million

·      Co-Investors: Boeing HorizonX Ventures (venture arm of Boeing Company)

·      Allied Minds' Issued and Outstanding Ownership: 81.30%

·      Allied Minds' Fully-Diluted Ownership: 62.92%

·     BridgeComm has made significant progress against its key operational objectives since its last funding round. 

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Federated Wireless, Inc.

In January 2020, the FCC announced that the agency had certified Federated Wireless' SAS, paving the way for full commercial operations in the 3.5 GHz band.

In February 2020, Federated Wireless announced a new Connectivity-as-a-Service offering that lets U.S. enterprises buy and deploy private 4G and 5G networks with a single click through the Amazon Web Services (AWS)(R) and Microsoft Azure(R) marketplaces. These end-to-end managed services provided by Federated Wireless include discovery, planning, design, build, operation and support, enabling enterprises to reap the benefits of 5G with minimum risk and capital expenditure.

The new service offering was developed with specific attention to the needs of the cloud-native enterprises of today, who have come to depend on seamless integration between their own IT departments and global public clouds. Close collaboration with AWS and Microsoft Azure has resulted in development and delivery of a service that these innovative IT organisations will see as a natural extension of their existing environments.  

The new managed service reduces the complexity of enterprise adoption of 5G private networks with one-click provisioning through the AWS Marketplace and seamless integration with the full range of IoT applications provided by the Amazon Partner Network (APN). AWS-enabled private networks are an ideal solution for industrial and manufacturing IoT environments in which device types, locations and densities are widely varied and wireless interference using legacy WiFi networks is both extremely common and highly detrimental to business performance.

In March 2020, Federated Wireless extended its Spectrum Controller platform to enable spectrum sharing in the 6GHz band, allowing operators and enterprises to accelerate delivery of Wi-Fi 6 and 5G services.

In April 2020, Federated Wireless closed on $13.7 million of additional Series C funding from Allied Minds and existing investor, Pennant Investors.  Allied Minds contributed half of the proceeds, $6.85 million.  The funding will be used to accelerate the expansion and adoption of Federated's partnerships with AWS and Microsoft Azure to offer Connectivity-as-a-Service and the current work to expand into the 6GHz band for 5G services.

In August 2020, the White House and Department of Defense (DoD) announced that 100 megahertz (MHz) of contiguous mid-band spectrum in the 3.45-3.55 GHz band will be made available for commercial 5G deployment using a spectrum sharing framework.  As a key player in developing shared spectrum CBRS capabilities, this additional spectrum provides potential new market opportunities for Federated Wireless as it is uniquely positioned to support this incremental band with algorithms, standard product development, and improved sensor capabilities.

Founded in 2012, Federated Wireless has led its industry in development of shared spectrum Citizens Broadband Radio System (CBRS) capabilities, taking a lead role in the formation of the CBRS Alliance, being the first to complete a wide range of trials with its Spectrum Access Systems (SAS), and deploying the industry's first nationwide Environmental Sensing Capability (ESC) network.

The company's partner ecosystem includes more than 40 device manufacturers and edge partners, all of which are dedicated to collaborating to advance development and proliferation of CBRS services. Federated Wireless' customer base includes companies spanning the telecommunications, energy, hospitality, education, retail, office space, municipal and residential verticals, with use cases ranging from network densification and mobile offload to Private LTE and Industrial IoT.

The company's solution is based on technology developed with support from Virginia Tech and the US Department of Defense (DoD). It has several issued patents and pending applications protecting proprietary technology underpinning its ESC sensor design and its SAS.  These patents are primarily focused on systems and algorithms embedded in its core technologies.

Holdings and valuation:

·      Date of Last Funding Round: September 2019 (second closing in April 2020)

·      Post-Money Valuation: $215.0 million

·      Co-Investors: American Tower (NYSE: AMT), GIC, Singapore's sovereign wealth fund, Pennant Investors and SBA Communications (NASDAQ: SBAC)

·      Allied Minds' Issued and Outstanding Ownership: 43.11%

·      Allied Minds' Fully-Diluted Ownership: 36.61%

·      Federated Wireless has made significant progress against its key operational objectives since its last funding round. 

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OcuTerra Therapeutics, Inc. (formally known as SciFluor Life Sciences, Inc.) ⁽¹⁾

OcuTerra is a drug development company focused on creating best-in-class compounds, initially targeting the field of ophthalmology.  OcuTerra's lead clinical asset, SF0166, is a topical eye droplet treatment for Age-related Macular Degeneration (AMD) and Diabetic Macular Edema (DME), both widely prevalent retinal diseases that lead to blindness if left untreated. 

OcuTerra has experienced clinical delays since its last funding round and the valuation is substantially impaired due to a prolonged inability to attract new external financing.  Clinical development activities at OcuTerra have been pared back, and are now focused exclusively on the toxicology studies necessary to initiate the Phase II trials for SF0166. 

During Q4 2019 (and completing in Q1 2020), OcuTerra raised $1.325 million of convertible debt financing from third parties and continues its fundraising efforts for an external equity financing to fund Phase II trials.  It is uncertain if OcuTerra will be successful in securing the required funds in 2020.

Holdings and valuation:

·      Date of Last Funding Round: November 2019 (convertible debt into next preferred equity round)

·      Valuation: n/a

·      Co-Investors: Various third parties

·      Allied Minds' Issued and Outstanding Ownership: 62.67%

·      Allied Minds' Fully-Diluted Ownership: 54.16%

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Orbital Sidekick, Inc.

Throughout the year, Orbital Sidekick has continued to work closely with its pilot program participants and through successful validation and demonstration of its technology, has achieved important operational milestones by expanding on these relationships and converting an early participant into a customer.  

In July 2020, Allied Minds and 11.2 Capital collectively invested $2.0 million in the form of SAFEs (simple agreements for equity), which will convert into shares of preferred stock in the company's next equity financing round. 

Oribital Sidekick was awarded a multi-year contract by the Department of the Air Force's commercial investment group (AFVentures) as part of its Strategic Financing (STRATFI) program, under which the company will receive $4.0 million of non-dilutive financing in Q4 2020, with the opportunity to receive up to $12.0 million of additional non-dilutive financing over next three years to match private funds raised.

Orbital Sidekick's first fully dedicated hyperspectral imagery satellite is scheduled to launch in December 2020, which together with its existing on-board processing technology deployed on the International Space Station, will allow Orbital Sidekick to further accelerate its ability to deliver near-real-time analysis and disseminate critical information to end-users.

Orbital Sidekick is a company developing capabilities in aerial and space-based hyperspectral imaging and analytics, initially for the oil and gas industry. Orbital Sidekick's Spectral Intelligence™ platform is designed to enable more efficient monitoring of natural resource assets and infrastructure integrity. Orbital Sidekick is initially targeting monitoring of assets for the oil and gas market - estimated at over $4.0 billion annually. There are potentially multiple additional commercial and government applications for its technology.

Allied Minds led the seed round of Orbital Sidekick in April 2018 with an investment of $3.5 million for a significant minority stake.  11.2 Capital, a VC firm specialising in breakthrough technologies, invested alongside Allied Minds.

Orbital Sidekick was founded by Dan Katz and Tushar Prabhakar, leveraging their extensive experience in small-sat design as engineers at Space Systems Loral. The team has built a complementary network of advisors to bring expertise in oil and gas operations and regulations, hyperspectral analysis, and data services.

Holdings and valuation:

·      Date of Last Funding Round: April 2018

·      Post-Money Valuation: $11.7 million

·      Co-Investors: 11.2 Capital

·      Allied Minds' Issued and Outstanding Ownership: 33.23%

·      Allied Minds' Fully-Diluted Ownership: 29.67%

·      Orbital Sidekick has made significant progress against its key operational objectives since its last funding round. 

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Spark Insights, Inc. ⁽¹⁾

In June 2020, Spark Insights achieved a key technical milestone and successfully released version 1.0 of its post-catastrophe automated damage assessment product, in line with its operational plan and in time for deployment at the start of hurricane season. 

Spark Insights is an advanced analytics company developing data products for the rapidly growing insurance analytics market.  Allied Minds formed Spark Insights in late 2018 and completed a $3.2 million Series Seed financing in April 2019.

Given the increasing prevalence of catastrophic events, including hurricanes, floods, and wildfires, property insurers are struggling to quantify the impact on their policies, both before and after a catastrophic event occurs.  Spark Insights plans to leverage the advent of unique data sets, including advances in satellite imagery and weather data, combined with proprietary analytics to transform critical workflows for these property insurers.

Spark Insights' focus is at the intersection of several addressable markets including insurance analytics, underwriting losses, and catastrophe modeling platforms.

Ira Scharf, co-founder and CEO of the company, has over 15 years of bringing products to market in the insurance industry and over 10 years in the weather industry, in addition to degrees from MIT and Harvard Business School.

Holdings and valuation:

·      Date of Last Funding Round: April 2019

·      Post-Money Valuation: $3.2 million

·      Co-Investors: n/a

·      Allied Minds' Issued and Outstanding Ownership: 70.59%

·      Allied Minds' Fully-Diluted Ownership: 60.00%

·      Spark Insights has made reasonable progress against its key operational objectives since its last funding round. 

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Spin Memory, Inc.

In July 2020, Spin Memory closed on $8.25 million of additional Series B funding from existing investors including Abies Ventures, Applied Ventures, LLC (the venture capital arm of Applied Materials, Inc.), ARM and Allied Minds.  Allied Minds invested $4.0 million in the funding round.  This additional funding will be used to support Spin Memory's continued research in MRAM, including the ongoing work with its existing development partners, Applied Materials and ARM.

In August 2020, Spin Memory unveiled a new innovation, the Universal Selector, that is currently in development.  This technology presents a potential new way of designing dynamic random-access memory (DRAM), magnetoresistive random-access memory (MRAM), Resistive RAM (ReRAM) and other emerging memory technologies, and has the potential to allow on-chip memory to achieve higher levels of performance, reliability, and density than currently available. 

Founded in 2006 and based in Fremont, CA, Spin Memory is the preeminent MRAM IP provider.  Through collaboration with industry leaders, Spin Memory is transforming the semiconductor industry by addressing the biggest challenge, memory, in next-generation electronics systems such as Artificial Intelligence, Autonomous Driving, 5G Communication and Computing at the Edge.  Spin Memory's disruptive STT-MRAM IP can replace large, power-hungry on-chip SRAM with dense, low-power MRAM and ultimately challenge DRAM as a lower-power, easier-to-use persistent mass-storage solution.

The technology underpinning Spin Memory's offering was sourced originally from New York University and has more than 200 patents issued or pending.  These patents cover everything from the fundamental aspects of these areas of invention to derivative improvements. 

Holdings and valuation:

·      Date of Last Funding Round: November 2018 (final closing in July 2020)

·      Post-Money Valuation: $180.25 million

·      Co-Investors: ARM Technology Investments Limited, Applied Ventures, LLC, Abies Venture Fund, Woodford Investment Management (now succeeded by Schroder Investment Management Limited) and Invesco Asset Management

·      Allied Minds' Issued and Outstanding Ownership: 43.01%

·      Allied Minds' Fully-Diluted Ownership: 33.98%

·     Spin Memory has made significant progress against its key operational objectives since its last funding round. 

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TouchBistro, Inc. (acquirer of TableUp, Inc.)

On 5 August 2020, TableUp was wholly acquired by TouchBistro, Inc. in a stock-for-stock transaction.  As a result of such transaction, Allied Minds received common shares of TouchBistro valued at $5.99 million.

The Group made its initial investment in TableUp in April 2018.  TableUp is a provider of loyalty and marketing solutions for the restaurant industry and is highly regarded for its proprietary guest retention solution, which is used by more than 600 restaurants throughout the U.S and will enable TouchBistro to fully integrate customer loyalty and guest marketing into its all-in-one point-of-sale (POS) and restaurant management platform.   

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(1)  Designates that this company is a subsidiary of the Group 

Risk Management

The principal risks and uncertainties surrounding Allied Minds and its portfolio companies are set out in detail on pages 27 to 33 in the Risk Management section of the Strategic Report included in the 2019 Annual Report and Accounts. Such risks and uncertainties include those in connection with science and technology development or commercialisation failures; lack of profitability; inherent limitations on exclusive licenses with US universities and other federally-funded research institutions; regulatory restrictions and limitations; loss of key senior management risk; termination of critical IP licenses; the Company being deemed to be an investment company; inability to generate sufficient revenue, attract investment or generate liquidity events; lack of capital; Brexit; and COVID-19, all as further described in the 2019 Annual Report and Accounts.

There have not been any significant changes in the nature of the risks set forth therein that will affect the next six months of the financial year, therefore, such risks are applicable to the remaining six months of the financial year. A copy of the 2019 Annual Report and Accounts is available on the Company's website at http://www.alliedminds.com/investor/.

Financial Review

Condensed Consolidated Statement of Comprehensive Income

*See note 15 for details of the adjustment.

Revenue decreased by $1.4 million, to $0.1 million for the six months ended 30 June 2020 (HY19: $1.5 million), when compared to the same period in the prior year. This decrease is primarily attributable to deconsolidation of one of the company's subsidiaries in the second half of 2019. The decrease is partly offset by revenue from existing and new contracts in 2020 at BridgeComm of $0.1 million. Cost of revenue at $0.1 million for the six months ended 30 June 2020 (HY19: $0.6 million) was higher as a percentage of revenue, when compared to the same period in the prior year, mainly due to deconsolidation of one of the company's subsidiaries where higher gross margins are obtained.

Selling, general and administrative (SG&A) expenses decreased by $8.6 million, to $6.6 million for the six months ended 30 June 2020 (HY19: $15.2 million). This reduction was mainly due to the deconsolidation of one of the company's subsidiaries in the second half of 2019, as well as cost reductions at headquarters implemented during 2019.

Research and development (R&D) expenses decreased by $9.8 million, to $2.5 million for the six months ended 30 June 2020 (HY19: $12.3 million). The decrease was primarily due to the deconsolidated and closed and dissolved subsidiaries in the second half of 2019. The remainder of the decrease reflects the net effect from R&D spend at the other subsidiaries.

Net finance cost increased by $7.5 million for the six months ended 30 June 2020 to $2 million (HY19: finance income of $5.5 million). The increase reflects the impact from deconsolidation of one of the company's subsidiaries in the second half of 2019 and the net finance cost of $2.1 million as a result of IFRS 9 fair value accounting of the subsidiary preferred shares liability balance of $1.9 million and convertible note payable balance of $0.2 million (HY19: $4.9 million and $nil). The change was primarily from adjustments at BridgeComm.

Other expense increased to $3.7 million (HY19: other income $30.6 million) reflecting $3.6 million in gain on investments held at fair value that is offset by $0.5 million in fair value change in note receivable provided to TableUp and measured at fair value through profit or loss. The change is also attributable to the Company's share of loss of $6.8 million from the deconsolidated entities accounted under the equity method.

As a result of the above discussed factors, total comprehensive loss for the year increased by $24.3 million to $15.0 million for the six months ended 30 June 2020 (HY19: comprehensive income of $9.3 million).

Condensed Consolidated Statement of Financial Position

Significant performance-impacting events and business developments reflected in the Group's financial position at the half year end include:

Non-current assets increased by $3.2 million, to $75.9 million at 30 June 2020 (FY19: $72.7 million), mainly due to an increase of $3.6 million in investment in portfolio companies at fair value.

o  Investments at fair value increased to $72.4 million as of 30 June 2020 (FY19: 61.9 million). As a result of the fair value accounting for investments held at fair value, Allied Minds recorded a gain of $3.6 million in the Consolidated Statements of Comprehensive Income/ (Loss). In addition, the increase reflects $6.9 million in additional funding by Allied Minds in April 2019 when Federated Wireless completed the second closing of its $13.7 million Series C Preferred Stock financing.

o  Investments in associates decreased to $nil million as of 30 June 2020 (FY19: 6.8 million). As a result of the deconsolidation of Federated Wireless in the second half of 2019 and equity method accounting for investments held on the date of deconsolidation, Allied Minds recorded a share of loss of $6.8 million in the Consolidated Statements of Comprehensive Income/ (Loss) that reduced the investment in Federated to a zero balance.

o  Right-of-use assets decreased by $0.2 million as of 30 June 2020 (FY19: $1.0 million) primarily related by depreciation of $0.2 million.

o  Property and equipment increased by $0.4 million to $1.9 million as of 30 June 2020 (FY19: $1.5 million), mainly reflecting acquisition of property and equipment of $0.6 million offset by depreciation of $0.2 million.

o  Intangible assets decreased by $0.2 million to $3 thousand at 30 June 2020 (FY19: $0.2 million) as a result of impairment and amortisation of $0.2 million.

Current assets decreased by $57.3 million, to $40.6 million as of 30 June 2020 (FY19: $97.9 million), mainly due to a reduction in cash and cash equivalents of $56.3 million.

o  Cash and cash equivalents decreased by $56.3 million to $34.2 million at 30 June 2020 from $90.5 million at 31 December 2019. The decrease is mainly attributed to $10.6 million of net cash used in operations, $7.5 million cash from investing activities and $38.2 million cash used in financing activities primarily reflecting $39.7 million in cash dividend payment to shareholders as a result of the sale of Allied Minds' share in HawkEye in 2019.

o Trade and other receivables decreased by $0.4 million due to a decrease in trade receivables of $0.1 million and a decrease in prepaid expenses of $0.3 million as a result of deconsolidation of Federated Wireless in the second half of 2019.

o  Other financial assets have decreased by $0.5 million to $1.1 million (FY2019: $1.6 million) primarily due to IFRS 9 fair value accounting of TableUp's convertible note issued to Allied Minds in 2019. The fair market value change was recorded as an offset to the $3.6 million gain on investments held at fair value in the Consolidated Statements of Comprehensive Income/ (Loss).

Non-current liabilities decreased by $1.1 million, to $3.7 million as of 30 June 2020 (FY19: $4.8 million) reflecting a decrease of $0.5 million in lease liability and a reduction in loans balance of $0.6 million at 30 June 2019.

Current liabilities increased by $1.0 million, to $14.2 million at 30 June 2020 (FY19: $13.2 million) mainly reflecting a net increase of $1.9 million in subsidiary preferred shares liability, $1.6 million in loans and $0.2 million in deferred revenue that is offset by a decrease in trade and other payables of $2.7 million. The increase in subsidiary preferred shares liability reflects the fair value adjustment for the period of $1.9 million. The increase in loans primarily reflects the receipt of PPP loans, issuance of convertible notes and an increase in fair market value of such notes at half year.

Net equity decreased by $54.0 million to $98.5 million at 30 June 2020 (FY19: $152.5 million) reflecting the combination of comprehensive loss for the period of $15.0 million, a cash dividend payment to shareholders as a result of the sale of Allied Minds' share in HawkEye in 2019 of $39.7 million offset by $0.7 million credit due to equity-settled share based payments.

Condensed Consolidated Statement of Cash Flows

*See note 15 for details of the adjustment.

The Group's net cash outflow from operating activities of $10.8 million in the six months ended 30 June 2020 (HY19: $30.3 million) was primarily due to the net operating losses for the period of $14.8 million (HY19: income of $9.5 million) and a reduction in working capital and other finance costs of $1.0 million (HY19: $9.7 million). The operating cash outflow was offset by adjustments for non-cash accounting entries such as depreciation, amortisation, share of net loss of associate and share-based expenses of $4.3 million (HY19: $30.1 million).

The Group had a net cash outflow from investing activities of $7.1 million in the six months ended 30 June 2020 (HY19: net cash outflow of $5.0 million). This outflow predominately related to purchases of property and equipment and intangibles of $0.6 million (HY19: $2.5 million) and an additional investment in Federated Wireless of $6.9 million made by Allied Minds in April 2020. The investing cash outflow was offset by $0.4 million in receipt of payments from Allied Minds' finance sub-lease.

The Group's net cash outflow from financing activities of $38.4 million in the six months ended 30 June 2020 (HY19: $8.0 million) reflects, in part, the cash dividend payment to shareholders of $39.7 million as a result of the sale of Allied Minds' share in HawkEye in 2019 and $0.5 million in lease payments. The decrease was offset by $1.4 million proceeds from issuance of convertible notes and $0.4 million receipt of PPP loans. Additionally, cash inflows from financing activities in the period included proceeds from issuance of share capital at Allied Minds.

The Group's strategy is to manage its cash balance to focus exclusively on supporting its existing portfolio companies and maximising monetisation opportunities for such companies. To further minimise its exposure to risks the Group does not maintain any material borrowings or cash balances in foreign currency.

Condensed Consolidated Statement of Comprehensive Income

*See accompanying notes to consolidated financial statements. Prior year financials have been restated (see note 15).

Condensed Consolidated Statement of Financial Position