30 March 2021

Allied Minds

Annual Results Release

Allied Minds plc (LSE: ALM) ("the Group" or the "Company"), the IP commercialisation company focused on early stage company development within the technology sector, announces its annual results for the year ended 31 December 2020.

·    Net cash and cash equivalents at 31 December 2020: $24.5 million (FY19: $90.6 million), of which $22.3 million is held within Allied Minds (FY19: $84.1 million).

·  $27.9 million invested in portfolio companies, of which $13.7 million was raised from third-party investment.

·   Revenues of $0.5 million (2019: $2.7 million) mainly from non-recurring engineering (NRE) and service contracts, reflecting the early stage nature of our portfolio companies.

·   On 14 February 2020, Allied Minds paid a special dividend of 12.62 pence per ordinary share totaling £30.49 million. 

·    Post-period end, additional restructuring efforts announced, including direct management of the              portfolio by the Board and elimination of the Chief Executive Officer role.

Harry Rein, Chairman of Allied Minds, said:

"In 2020 we continued to execute our strategy of supporting our existing portfolio companies and seeking to monetise opportunities for portfolio company interests. We have instituted a new governance structure which is efficient, streamlined and cost-effective and is best suited to achieve value creation from our portfolio. During 2020 we saw the benefit of this strategy with the payment of a special dividend.

"A number of our portfolio companies made significant progress during the year. We believe in the future prospects of our portfolio companies, and are focused on achieving well-timed, risk-adjusted returns for our shareholders.

"The Board remain of the view that the group as a whole remains well positioned to maximise value and deliver additional returns to shareholders."

Selected Portfolio Company Highlights

·    BridgeComm (consolidated subsidiary):

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

o  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

·    Federated Wireless (equity accounted investment):

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 (preference share investment held at fair value):

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) programme, under which the company received $4.0 million of non-dilutive financing and has the opportunity to receive up to $12.0 million of additional non-dilutive financing over the next three years to match private funds raised

o  Entered into definitive agreement to secure $16.0 million in a Series A Preferred financing round expected to close in Q2 2021 subject to approval by the Committee on Foreign Investments in the United States 

·    Spin Memory (equity accounted investment):

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

o  Facing significant liquidity issues due to its inability to secure new customers coupled with the unexpected loss of a government bid in late Q4 2020.  Delays of the required testing of its development chip with ARM for nearly nine months due to the work-from-home orders in the State of California due to COVID-19 has had a direct effect

•     TableUp (preference share investment held at fair value) acquired by TouchBistro, Inc. in stock-for stock transaction. The stock held in TouchBistro is held at fair value under IFRS9

In compliance with Listing Rule 9.6.3R, the following document will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism:

·    Annual Report and Accounts for the year ended 31 December 2020.

Printed copies of these documents will be posted to shareholders shortly. Copies will also be available shortly  on  the  Investor  Relations  section  of  the  Company's  website  at  http://www.alliedminds.com/investor/.

The 2021 Annual General Meeting will be held at 10:00 a.m. ET on 12 May 2021 at the Company's headquarters located at 374 Congress Street, Suite 308, Boston, Massachusetts 02210, USA.

For more information, please contact:

For further information, please visit www.alliedminds.com.

Notes

(i) Nature of announcement

This Annual Results Release was approved by the directors on 29 March 2021. The financial information set out in this Annual Results Release does not constitute the Company's statutory accounts for the years ended 31 December 2020 or 2019 but is derived from those accounts.  Statutory accounts for the year ended 31 December 2019 have been filed with the Registrar of Companies. Statutory accounts for 2020 will be delivered to the registrar of companies in due course. The auditor has reported on those accounts; its report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.  The text of the Auditor's report can be found in the Company's full Annual Report and Accounts for the year ended 31 December 2020 (2020 Annual Report). 

(ii) Forward looking statements

This Annual Results Release and the 2020 Annual Report contain statements that are or may be forward-looking statements, including statements that relate to the Company's future prospects, developments and strategies. The Group considers any statements that are not historical facts as "forward-looking statements".  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 2020 Annual Report. These forward-looking statements are made in good faith based on assumptions regarding the present and future business strategies of the Company and the environment in which it will operate in the future and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. Each forward-looking statement speaks only as at the date of this Annual Results 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.

2020 Annual Report and Accounts

STRATEGIC REPORT

Chairman's Report

Allied Minds started 2020 with a new Board and a recalibrated strategy focused exclusively on funding and operating our existing investment portfolio of businesses and to operate a streamlined and highly cost-efficient organisation.

During 2020, the Group undertook a critical assessment of its portfolio of very early stage and pre-revenue companies.  As a result of this strategic review, the Board instituted a new form of governance that is better suited to achieving value creation from its venture-like portfolio.  Under the new corporate structure, announced in January 2021, the Group will be led by its Non-Executive Directors (NEDs) and the role of Chief Executive Officer will no longer be required. 

Throughout 2020, alongside the thorough portfolio review, Allied Minds continued to drive the strategic objectives first announced in April 2019 of focusing exclusively on supporting the existing portfolio companies and maximising monetisation opportunities for portfolio company interests.

Early in 2020 we demonstrated the benefits of this approach to delivering shareholder value with the payment of a 12.62 pence per share dividend in February, which followed the sale of HawkEye 360 in the third quarter of 2019.

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.

Allied Minds remains a significant shareholder in each of its portfolio companies, and all companies in the portfolio, regardless of prior funding, are at the knee of the commercialisation curve.  While seeing significant opportunities, each company also needs to manage the significant risks which are typical and customary for emerging companies, including market development and penetration, leading to revenue growth.

At the end of the first quarter of 2020 the coronavirus pandemic and its impact both in the US and globally, meant we were equally focused on ensuring the wellbeing, safety, and security of our workforce across all our portfolio companies.

Swift and effective actions were taken to allow all of us to continue operating safely using remote working environments and virtual meeting platforms and I would like to pay tribute to all employees for their resilience and commitment throughout this highly challenging period.

Across the portfolio, several companies achieved milestone funding events and delivered strong progress in technology development, underpinned by blue-chip partnerships that were put in place or continued to thrive during the year.

BridgeComm signed a JDA with Boeing HorizonX (Boeing) to collaboratively develop applications of One-to-Many (OTM) technology, and secured several additional rounds of convertible debt financing. The company also entered into a partnership with Nokia to develop ultra-high-speed throughput solutions to facilitate faster deployment of 5G networks.

Federated Wireless (Federated) also delivered strong technological progress involving blue chip partnerships, launching a new Connectivity-as-a-Service (CaaS) offering that lets US enterprises buy and deploy private 4G and 5G networks with a single click through AWS(R) and Microsoft Azure(R) marketplaces. Federated also raised additional funding during the year whilst its market opportunity expanded with the unlocking of an additional 100 megahertz of contiguous mid-band spectrum in the 3.45-3.55 GHz band for commercial 5G deployment.

Orbital Sidekick (Orbital) was awarded a multi-year contract by the Department of the US Air Force's commercial investment group (AFVentures) as part of its Strategic Financing (STRATFI) programme and this brought further financing and financing opportunities.  Orbital then secured conditional funding, which is expected to close in Q2 2021 subject to approval by the Committee on Foreign Investments in the United States (CFIUS). 

The Board also made further moves to rationalise the portfolio with the acquisition of TableUp by TouchBistro, Inc. in a stock-for-stock transaction.

However, COVID-19 had a negative impact on several companies in the portfolio including Federated, Spin Memory (Spin), and Spark Insights (Spark).  Federated was able to mitigate against this impact and is now back on track with its strategic plan and timing, including meeting projected revenue targets for 2021. 

Meanwhile, Spin continues to face commercial and financing challenges that the Spin Board of Directors, with the support of the NEDs, are working to address in 2021.  In the event financing is not obtained or projected revenue is not realised, Spin may need to seek alternative paths that may include filing for bankruptcy, selling its intellectual property assets, and/or other similar avenues to orderly wind down the company in the near term.  

Furthermore, while Spark is continuing to achieve development milestones with respect to its intellectual property, the delay in securing financing has put the company in a difficult cash position.  In the event financing is not realised within the coming weeks, Spark will need to immediately resort to alternative paths that include selling its assets, filing for bankruptcy, winding down and/or similar avenues.

In each case, the NEDs are working closely with the management teams at Spin and Spark, respectively, to tackle the challenges faced by these companies, including exploring all alternatives available to such companies, and to determine how to achieve the best outcome for its investors.   

We remain in close communication with customers, suppliers and partners, working together to navigate this changing environment.  In 2020, the Group was able to demonstrate the ability of its portfolio companies to raise funds and achieve key technical and commercial milestones, despite the global challenges of COVID-19.

Going forward, while the NEDs and Allied Minds will continue to support all our portfolio companies, and intend to continue providing guidance, advice, assistance with fundraising and strategic opportunities, it will be the qualified and strong management teams in place who will be running the respective businesses and responsible for advancing and progressing their respective companies forward, including leading fundraising activities and identifying and securing new investors.  The NEDs believe that on balance, and taking into consideration the challenges facing some of the Group's portfolio companies that may hinder success, the Group as a whole remains well-positioned to maximise its value and deliver additional returns to our shareholders within a reasonable timeframe.

Allied Minds' cash position will be used to strategically support those portfolio companies that will enable it to further its objective of maximising value and returns for its shareholders.

Harry Rein, Chairman

29 March 2021

Company Overview

Overview

Allied Minds is an IP commercialisation company primarily focused on early stage company development within the technology sector. 

We have historically invested in companies at an early stage, including seed investments to build companies based on a technical breakthrough or invention.  As such, our investments have significant upside potential, but also carry significant risk inherent in the early stage model. 

The Group is currently comprised of seven portfolio companies based upon a broad range of underlying innovative technologies ranging from semiconductors to wireless connectivity to space-based imagery and analytics. 

The ability of the Group's portfolio companies to raise funds and continue achieving important technical and commercial milestones while building upon key partnership relationships across the portfolio signify the strength of the Group and demonstrates that it 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 several 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 varying degrees of commercial impact across the portfolio in the past year, 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, while some of our companies have been impacted more negatively than others, overall, 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 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. 

Model

As a manager of a technology-focused portfolio in which we hold significant ownership positions, we seek to provide hands-on support over the life of our companies to support their growth, focusing on enabling and driving commercialisation, supporting follow-on investment rounds, and positioning for superior monetisation opportunities. 

Allied Minds offers operational and management support to each of its portfolio companies leveraging the deep domain expertise of our management team in their respective careers as entrepreneurs, operators, directors, advisors, and investors.  Our employees have expertise in business strategy, sales and marketing, operations, finance, legal and transaction execution. 

We play an active role in developing the strategic direction of our portfolio companies and driving ongoing planning and assessment.  Our executives and Non-Executive Directors serve on the boards of directors of our portfolio companies, working with them to develop and implement strategic, operating and funding plans.  We evaluate on an on-going basis the progress and potential of each of the portfolio company's businesses, and make strategic and funding decisions based on the regular review of operational and financial performance and the achievement of key milestones.  Together with our management, the respective portfolio company boards of directors define the critical milestones, or inflection points, for each portfolio company and measure tangible progress towards commercialisation and the key factors for a successful monetisation event.  Portfolio company management is accountable for these milestones, which are developed into annual management objectives (MBOs). 

As our portfolio companies meet the objectives identified for success, we will participate in subsequent capital raises to mitigate dilution, to the extent consistent with our goal to maximise risk and time-adjusted returns for our shareholders and taking into account competing uses of capital across our portfolio.  Co-investors in later rounds include financial, strategic and commercial partners.  Where appropriate, we seek to include partners who validate the market opportunity and can provide support and/or commercial commitments to accelerate, expand and/or de-risk the path to commercialisation.

By helping our portfolio companies' management teams remain focused on critical objectives through the provision of human, financial and strategic resources, we believe we are able to accelerate their development and success.  We believe that Allied Minds' experience and hands-on support provide our portfolio companies with significant competitive advantages within their respective markets.

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.

In general, we will hold our position in a portfolio company for as long as we believe the risk and time-adjusted value of that position is maximised by our continued ownership and effort.  From time to time, we engage in discussions with other companies interested in our portfolio companies (or our interest in those companies), either in response to enquiries or as part of a process we initiate.  To the extent we believe that a portfolio company's further growth and development can best be supported by a different ownership structure or if we otherwise believe it is in our shareholders' best interests, we may seek to sell some or all of our position in the portfolio company.  These sales may take the form of privately negotiated sales of stock or assets, mergers and acquisitions, public offerings of the portfolio company's securities and, in the case of publicly traded portfolio companies, sales of their securities in the open market.  

The value of Allied Minds is dependent upon the value of our existing portfolio companies and our ability to translate that value into cash as effectively and efficiently as possible and to deliver that cash, net of our obligations and operating cash needs, to our 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, means that Allied Minds is well positioned to maximise returns for its shareholders. 

Portfolio Company Valuation

Of the Company's seven active portfolio companies, three are currently majority owned and/or controlled, and therefore fully consolidated in the Company's consolidated financial statements prepared in accordance with international financial reporting standards conformity with the requirements of the Companies Act 2016.

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 (TouchBistro, Inc.) as a result of the stock-for-stock sale of TableUp, Inc.  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, these 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 29 March 2021.  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. (BridgeComm) (consolidated subsidiary)

BridgeComm is developing high-speed optical wireless communications to provide fast, secure, enterprise-grade broadband service for space, terrestrial and 5G connectivity.  BridgeComm's newest technology is unique and IP protected which enables one-to-many communications via optical wireless offering efficient communication to satellites, planes and land-based networks enabling 5G equivalent performance.  The technology promises higher throughput over longer distances with added security than what is available today.  The technology also has the ability to solve the "last mile connectivity" challenge for 5G networks.

On 15 January 2020, Allied Minds announced the next stage in BridgeComm's relationship with Boeing HorizonX whereby the two companies were collaboratively pioneering the development of BridgeComm's new technology for terrestrial, airborne and space systems.  Together, BridgeComm and Boeing are bidding on several US government contracts requiring optical communications as they look to commercialise the development work achieved to date.  It is anticipated that this process will lead to first revenue from the newly developed technology in 2021.

On 28 September 2020, Allied Minds announced that BridgeComm partnered with Nokia to jointly develop high-speed optical communications to facilitate faster deployment of 5G networks.  The focus of the work with Nokia is to utilise optical communications to solve the "well known" last mile connectivity problem prevalent in the fixed wireless industry. 

BridgeComm will need to seek additional financing to further fund its next stage of development work.  Allied Minds currently has fully diluted ownership (ownership percentage including currently issued shares and potential outstanding shares to be issued) of 62.92% in BridgeComm.  The $4.5 million convertible bridge invested by Boeing HorizonX and Allied Minds will convert into the next round of financing. 

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: 81.15%

·    Allied Minds' Fully-Diluted Ownership: 62.92%

Federated Wireless Inc. (Federated) (equity accounted investment)

Federated has developed technology and products to enable the revolutionary shared spectrum model in the United States to further enable wireless communications, adoption of the Internet-of-Things ("IoT") and edge computing.  Federated also has the ability to deploy private wireless networks through its newly announced Connectivity-as-a-Service ("CaaS") offering. 

CaaS is focused on enabling enterprise customers the ability to build their own private networks in a low risk and low capital expenditure manner.  For the first time, enterprises will be able to control their own network, bypassing traditional Internet Service Providers, on the back of Federated's Spectrum Access System ("SAS").  These networks have the ability to be more powerful than traditional WiFi while also providing more security, opening up a new market for Federated.

On 18 February 2020, Federated announced that it entered into agreements with both AWS and Azure to function as channel partners to drive commercialisation of the CaaS offering through their online marketplaces.

On 8 October 2020, the U.S. Department of Defense announced that Federated had been awarded the project at the Marine Corps Logistics Base Albany, GA to develop a 5G Smart Warehousing solution focused on vehicular storage and maintenance.  This award represents the first CaaS-related opportunity for Federated from its previously announced new channel partners.  The list of Federated partners involved in this project include GE Research, KPMG LLP, Scientific Research Corporation as well equipment suppliers, AWS and Cisco, Inc.

Since the Federal Communications Commission ("FCC") announced the authorisation of the full commercial deployment of Federated's SAS on 27 January 2020, Federated is now able to support its customers as they deploy their new networks.  A key feature of Federated's SAS offering is that it is the only FCC authorised company with a fully deployed Environmental Sensing Capability as required by the FCC.  This has allowed Federated to operate unabated, providing a significant competitive advantage. 

Federated's first customers to deploy are focused on the Wireless Internet Service industry as well as Verizon's build out of their network to add 3.5GHZ CBRS.  This has led to Federated realising its recurring revenue model for the first time since it was granted authorisation.  Federated expects more customers under contract to begin to deploy soon who are looking to benefit by adding access to 3.5GHz CBRS.  This will further accelerate Federated's valuable recurring revenue model into 2021.  Federated expects its revenue to grow by significant multiples in 2021 compared with 2020 when it was first able to initiate its services.

Federated has sufficient cash to fund its growth into 2022. Allied Minds currently owns 36.61% of Federated and expects that if the company continues to achieve its planned key milestones, it will be in a position to attract any future equity financing in an upround. 

Holdings and valuation:

·    Date of Last Funding Round: September 2019 (second closing post-period end 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. 

OcuTerra Therapeutics, Inc. (consolidated subsidiary)

OcuTerra (previously SciFluor Life Sciences, Inc.) 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 sought to raise external equity financing since 2018 to fund Phase II trials for SF0166, on the back of safety and preliminary efficacy data from the Phase I/II trials.  This process has not been successfully completed to date.  As a result, 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.  To assist with its fundraising efforts, OcuTerra engaged Maxim Group LLC.  During Q4 2019 (and completing in Q1 2020), OcuTerra raised $1.325 million of convertible debt financing from third parties.  In addition, in Q3 2020 and post-period end in Q1 2021, OcuTerra raised an aggregate of $200K of debt financing from third parties, half of which was raised from Maxim Group LLC, 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 2021.

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%

Orbital Sidekick Inc. (Orbital) (preference share investment held at fair value)

Orbital has developed a proprietary analytics platform based upon its hyperspectral technology that allows it to take a proprietary "chemical fingerprint" from space.  Initially, Orbital is addressing the very current and large concerns about the environment by focusing on potential energy pipeline failures.  By employing its space-based technology, it is able to detect and identify natural gas, oil leaks and other failures much more rapidly than current monitoring techniques in a more cost effective way and the added benefit of helping to minimise environmental damage.

Orbital's first fully dedicated hyperspectral imagery satellite is scheduled to launch in 2021, which together with its existing on-board processing technology deployed on the International Space Station, will allow Orbital to realise revenue from its first pilot programme participants from the oil and gas pipeline industry that it has been able to convert to paying customers.

On 15 October 2020, Allied Minds announced that Orbital 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") programme.  Orbital received $4.0 million of non-dilutive financing in Q4 2020 from the programme and has the opportunity to receive up to $12.0 million of additional non-dilutive financing over the next three years to match private funds raised.

On 24 December 2020, Allied Minds announced that Orbital had conditionally secured $16.0 million in a Series A Preferred financing round led by Temasek, an investment company headquartered in Singapore.  The Series A financing closing is subject to approval by the Committee on Foreign Investments in the United States (CFIUS).  In March 2021, CFIUS informed Orbital that it will enter an additional 45-day investigation period regarding the transaction, which is not atypical of like transactions.  Accordingly, the financing is expected to close in Q2 2021.

The combined expected proceeds of $32.0 million raised from both the Series A financing and the funds available from the STRATFI programme is significant and will allow Orbital to focus on scaling its business and growing its sales pipeline to rapidly bring its products to market and enable the launch of additional satellites to support its customers.

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 in respect of preference shares: 33.23%

·    Allied Minds' Fully-Diluted Ownership: 29.67%

Spark Insights Inc. (Spark) (consolidated subsidiary)

Spark is an advanced analytics company developing data products for the rapidly growing insurance analytics market.  Allied Minds formed Spark in late 2018. 

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

In June 2020, Spark achieved a key technical milestone and successfully released version 1.0 of its post-catastrophe automated damage assessment product.

As a result of challenges posed by COVID-19, Spark has faced delays in fundraising and is now in a difficult cash position.  If Spark fails to raise additional financing in the coming weeks, Spark will need to immediately consider and execute on alternative paths that include selling its assets, filing for bankruptcy, winding down and/or similar avenues.

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%

Spin Memory Inc. (Spin) (equity accounted investment)

Spin is a leader in providing magnetoresistive random-access memory ("MRAM") intellectual property.  Through its collaboration with industry leaders, Spin Memory is looking to transform 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 represents the last remaining portfolio company from Allied Minds' original investment platform.

During 2020, Spin was able to "tape out" the demonstration chip co-developed with Arm pursuant to its joint development agreement, entered into in very late Q4 2018, representing the first time that Spin was able to demonstrate its Endurance Engine technology in silicon. 

Unfortunately, the work-from-home orders in the State of California due to COVID-19 delayed the required testing of the chip for nearly nine months.  The testing did commence in early Q4 2020 and the initial results are promising.  However, this delay has affected Spin's ability to secure new customers.  As a result, this, coupled with an unexpected loss of a government bid in late Q4 2020, Spin is now facing significant liquidity issues. 

Spin's Board of Directors and management team have worked to adjust the company's operating plan to account for the delays described above and are currently working with its shareholders to develop a funding plan that will allow it to identify and secure commercial partners for its product, expertise and intellectual property in 2021.   As previously disclosed, any financing contemplated by Spin is expected to be a significantly reduced valuation and dilutive to any non-participants in the round.  While this is disappointing, a down-round financing is not uncommon in early venture capital companies and the Board is hopeful that any funding raised will give Spin an opportunity to maximise net value for shareholders either through an asset sale or acquisition or securing key partners and revenue-generating customers in the coming months.  In the event financing is not obtained or projected revenue is not realised, Spin may need to seek alternative paths that may include filing for bankruptcy, selling its intellectual property assets, and/or other similar avenues to orderly wind down the company in the near term.  

Holdings and valuation:

·    Date of Last Funding Round: November 2018 (date of first closing, 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%

TouchBistro, Inc. (acquirer of TableUp, Inc.) (common shares in TouchBistro)

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.

Key Performance Indicators

The Key Performance Indicators (KPIs) selected to measure the performance of the Company in 2020 were percentage level of achievement of management by objectives (MBOs). These objectives seek to link financial, operational, technical and other performance milestones established by the Board directly to remuneration and KPIs.  Performance against 2019 KPIs is set out below:

The MBOs set by the Board for 2020, along with the level of achievement against such MBOs, is set forth below:

Additional detail with respect to determination of such achievement is set forth in the Remuneration Report of the 2020 Annual Report.

The following Key Performance Indicators (KPIs) were selected to measure the performance of the Company in 2021.  These objectives seek to link financial, operational, technical and other performance milestones established by the Board directly to remuneration and KPIs.

1.    Increase Company Non-Executive Director (NED) engagement at each portfolio company

2.    Appoint at least one NED on each portfolio company's board

3.    Provide strategic, operational and financing support and assistance to the portfolio companies through representation on the board of each portfolio company

4.    Critically evaluate and monitor portfolio company progress with objective of maximising shareholder return on investment (ROI)

5.    Maintain strong shareholder engagement, including annual capital markets day

6.    Manage HQ cash and expenses to maximise shareholder ROI

We note that as a result of the strategic changes implemented by the Board on 15 January 2021, the portfolio shall be managed by the Board, all of whom are Non-Executive Directors, on a go-forward basis.  The Board places equal importance on each of the listed KPIs.

Financial Review

During 2020, $27.9 million was invested into existing subsidiary businesses and associates. This included $14.4 million from subsidiary and associate fundraisings invested by Allied Minds, with $13.6 million coming from third-party investment, to further accelerate the development of the Group's existing companies. 

Consolidated Statement of Comprehensive Profit

Revenue decreased by $2.2 million, to $0.5 million in 2020 (2019: $2.7 million). This decrease is primarily attributable to the ownership of Federated Wireless being an entity which was previously consolidated. In the second half of 2019 control of this entity was lost, and going forward has been equity accounted for under IAS28 ("deconsolidated").  The decrease is partly offset by revenue from new contracts in 2020 at BridgeComm of $0.1 million. Cost of revenue at $0.2 million (2019: $1.4 million) was lower as a percentage of revenue, when compared to the prior year, mainly due to deconsolidation of the Company's subsidiaries and inventory write-offs at closed and dissolved companies in 2019.

Selling, general and administrative (SG&A) expenses decreased by $23.8 million, to $10.5 million (2019: $34.3 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 $11.4 million, to $4.7 million (2019: $16.1 million). The decrease was primarily due to the deconsolidated and closed and dissolved subsidiaries in 2019. The remainder of the decrease reflects the net effect from R&D spend at the remaining subsidiaries.

Net finance cost increased by $11.8 million in 2020 to $1.8 million (2019: income of $10.0 million). The increase reflects the impact from deconsolidation of one of the company's subsidiaries in the second half of 2019 partly offset by net finance cost of $1.5 million from IFRS 9 fair value accounting of the subsidiary preferred shares liability balance (2019: finance income of $9.3 million), convertible note payable balance of $0.3 million (2019: $nil) and interest income, net of interest expense, of $23 thousand (2019: $0.7 million). The change was primarily from adjustments at BridgeComm.

Other loss increased to $38.8 million (2019: income of $89.4 million) reflecting $31.9 million loss on investments held at fair value as well as the company's share of loss of $6.8 million from its associates.   

As a result of these factors, total comprehensive loss increased by $106.7 million to $55.6 million (2019: income of $51.1 million). Total comprehensive loss attributed to the equity holders of the Group was $53.1 million (2019: income of $52.1 million) and $2.5 million loss (2019: $1.1 million) was attributable to the owners of non-controlling interests.

Consolidated Statement of Financial Position

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

Non-current assets

Property and equipment increased by $0.1 million to $1.6 million (2019: $1.5 million), primarily as a result of purchases of approximately $1.0 million, mainly at BridgeComm, offset by depreciation expense of $0.5 million and $0.4 million in disposals.

Intangible assets decreased by $0.2 million to $nil million (2019: $0.2 million) mainly as a result of amortisation expense of $0.2 million.

Investments at fair value decreased to $39.1 million (2019: $61.9 million). As a result of the fair value accounting for investments held at fair value, Allied Minds recorded a loss of $31.9 million in the Consolidated Statements of Comprehensive (Loss)/ Income. The decrease is offset by $6.9 million in additional funding by Allied Minds in April 2020 when Federated Wireless completed the second closing of its $13.7 million Series C Preferred Stock financing, as well as $4.0 million in additional funding by Allied Minds in July 2020 when Spin Memory completed a new closing of its $8.3 million Series B-1 Preferred Stock financing. In addition, on 5 August 2020, TableUp, one of Allied Minds' portfolio companies, was acquired by TouchBistro, Inc. ("TouchBistro"). The acquisition was structured as a stock-for-stock transaction in which TouchBistro acquired 100% of the shares of TableUp in exchange for the issuance of TouchBistro common shares to the shareholders of TableUp. A total of 2,542,662 common shares of TouchBistro was paid to Allied Minds valued at $5.99 million at the time of the transaction. Allied Minds' share of common stock has been accounted as an investment at fair value. At 31 December 2020, the fair value of Allied Minds' investment in TouchBistro was subsequently measured at $2.8 million.

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

Right-of-use assets decreased to $0.6 million (2019: $1.0 million) primarily related to depreciation of $0.4 million.

Current assets

Cash and cash equivalents decreased by $66.0 million to $24.5 million (2019: $90.5 million). The decrease is mainly attributed to $17.8 million of net cash used in operations, $10.7 million cash used in investing activities and $37.5 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.

Trade and other receivables increased by $0.1 million due to an increase in trade receivables of $0.3 million. This increase is offset in part by a decrease in prepaid expenses of $0.2 million mainly from write off advanced payments for unfinished inventory units at BridgeComm.

Other financial assets have increased by $0.7 million to $2.3 million (2019: $1.6 million) primarily due to IFRS 9 fair value accounting of TableUp's convertible note issued to Allied Minds in 2019, offset by the issuance of a SAFE note receivable of $1.5 million by Allied Minds to Orbital Sidekick. The fair market value change of the notes was recorded as an offset to the $28.7 million loss on investments held at fair value in the Consolidated Statements of Comprehensive (Loss)/ Income.

Current liabilities

Subsidiary preferred shares increased by $1.5 million to $6.5 million (2019: $5.0 million) primarily driven by $1.5 million in IFRS 9 fair value adjustment for the year.

Deferred revenue decreased by $0.2 million to $3.6 million (2019: $3.4 million) primarily due to revenue recognised at BridgeComm and offset by new revenue contract entered at Spark Insights in 2020.

Loans increased by $3.1 million (2019: $ nil) primarily due to an increase in convertible promissory notes of $2.5 million at BridgeComm.

Non-current liabilities

Lease liabilities decreased by $1.0 million (2018: $2.9 million) primarily due to lease payments.

Other non-current liabilities decreased by $0.5 million (2019: $1.9 million) primarily due to loan payments of convertible promissory notes at OcuTerra Therapeutics.

Equity

Net equity decreased by $94.3 million to $58.3 million (2019: $152.6 million) reflecting the combination of comprehensive loss for the period of $55.6 million, dividend payments to shareholders of $39.7 million and loss on non-controlling interest of $18,000 offset by $8,000 in issuance of ordinary shares and a $1.1 million charge due to equity-settled share based payments.

Consolidated Statement of Cash Flows

The Group's net cash outflow from operating activities of $17.1 million in 2020 (2019: $44.8 million, restated) was primarily due to the losses for the year of $55.5 million and the net effect from movement in working capital of $4.1 million offset by other finance charges of $1.6 million, the adjustment for non-cash items such as depreciation, amortisation, impairments and share-based expenses of $2.1 million and $38.8 million in losses due to fair value adjustments and equity method accounting.

The Group had a net cash outflow from investing activities of $11.3 million in 2020 (2019: $21.5 million). This outflow predominately related to purchases of property and equipment of $0.5 million (2019: $3.6 million) and an additional investment in Federated Wireless and Spin Memory of $10.9 million made by Allied Minds in April and July 2020. The investing cash outflow was offset by $0.1 million in receipt of payments from Allied Minds' finance sub-lease.

The Group's net cash outflow from financing activities of $37.7 million in 2020 (2019: $13.7 million) primarily 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 $1.1 million in lease payments. The decrease was offset by $2.9 million proceeds from issuance of convertible notes and $0.2 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 maintain healthy, highly liquid cash balances that are readily available for investment in a manner consistent with the Board's strategy for the Company and Group. To further minimise its exposure to risks the Group does not maintain any material borrowings or cash balances in foreign currency.

The Directors have further considered the on-going viability of the Company through to December 2023, as required pursuant to the 2018 version of the UK Corporate Governance Code, in the Management and Governance section of the 2020 Annual Report.

Risk Management

The execution of the Group's strategy is subject to a number of risks and uncertainties.  The Board has adopted a system of continuous review in which it regularly consults with management to identify principal and emerging risks facing the Group and to assess and determine how to address and mitigate against such risks in a manner consistent with the Company's risk appetite to achieve its strategic goals.  Throughout the year, the Board considers and reviews both risks arising from the internal operations of the Group, and those arising from the business environment in which it operates.  It is possible that one or more of these identified risks could impact the Group in a similar timeframe which may compound their effects.

With our focus on early stage company development, commercialisation and monetisation, the Group inherently faces significant risks and challenges.  The overall aim of the risk management policy is to achieve an effective balance of risk and reward, although ultimately, no strategy can provide an absolute assurance against loss.

The Board has carried out a robust assessment of the principal and emerging risks facing the Group, including those that would threaten its business model, future performance, solvency and/or liquidity.  The major risks and uncertainties identified by the Board are set out below, along with the consequences and mitigation strategy of each risk.

1.            The science and technology being developed or commercialised by the Group's businesses may fail and/or the Group's businesses may not be able to develop their innovations and intellectual property into commercially viable products or technologies.  There is also a risk that some of the portfolio companies may fail or not succeed as anticipated, whether as a result of technical, product, market, fund-raising or other risks, resulting in an impairment of the Group's value.

Impact: The failure of any of the Group's portfolio companies would impact the Group's value.  A failure of one of the major portfolio companies could also impact the Group's reputation as a builder of high value businesses and possibly make additional fund raising at the Group or portfolio company level more difficult.

Mitigation:

·      Before making any follow-on investment in the current portfolio, extensive due diligence is carried out by the Group which covers all the major business risks including market size, strategy, adoption and intellectual property.  Where appropriate, we seek validation through co-investment by other strategic and/or financial parties.

·      A disciplined approach to capital allocation is pursued whereby we closely monitor milestone developments before committing additional capital.  Should a project fail to achieve sufficient progress or is unable to attract other co-investors, we may terminate the investment.

·      Dedicated leadership with deep industry or sector knowledge, and relevant technical and/or leadership experience, is recruited to management positions, and the Group ensures that each portfolio company has independent directors and/or other advisors, as appropriate for the relevant stage of development.

·      Each portfolio company holds board of director meetings at least quarterly, with participation from the Group's management and/or investment team, along with senior management and independent directors and/or advisors, as appropriate, of such portfolio company.

·      The shared services model provides meaningful administrative support to our earlier stage portfolio companies, including strong budgetary and financial controls that ensure good governance.

·      Within the Group there is meaningful operating and investment expertise that provide direct, hands-on and strategic, operating and fund-raising support to its portfolio companies, as appropriate.

·      The Group actively uses third party advisors and consultants, specific to the particular domain in which a portfolio company operates, to assist on market strategy and direction. 

2.             The Group expects to continue to incur substantial expenditure in further research and development, product development, sales and marketing and other operational activities of its businesses.  There is no guarantee that the Group or any of its individual portfolio companies will become profitable prior to the achievement of a portfolio company sale or other liquidity event, and, even if the Group or any of its individual portfolio companies does become profitable, such profitability may not be sustainable.  The Group may not be able to attract other co-investors, or monetise its ownership interests in portfolio companies, during any specific time frame or otherwise on desirable terms, if at all.

Impact: Allied Minds' objective is to generate returns for its shareholders through early stage company development within the technology sector.  Such value is expected to be delivered through the commercialisation and monetisation of these businesses via a sale or other liquidity event for each.  The timing and size of these potential inflows is uncertain and, should liquidity events not be forthcoming, or in the event that they are achieved at values significantly less than the amount of capital invested, then it would be difficult to sustain the current levels of investment in the other portfolio companies.  This would lead to reduced participation in funding rounds, which will result in a lower ownership position, or potentially impact the ability of a company to raise additional funds. 

Mitigation:

·     The Group retains sufficient cash balances in order to support its cash flow requirements, including Allied Minds' investment requirements for each portfolio company and for corporate resources.

·     The Group has close relationships with a wide group of investors, including within its current shareholder base, and continues to identify and develop strategic and financial relationships for co-investing in the Group's portfolio companies.

·     Senior management continually seeks to build and maintain strategic and financial relationships for the Group, and each portfolio company continually seeks to engage in strategic and financial relationships relevant to their respective markets and to maintain current information on, and awareness of, potential fund-raising and monetisation strategies.

3.          A significant portion of the Group's intellectual property relates to technologies which originated in the course of research conducted in, and initially funded by, US universities or other federally-funded research institutions.  Although the Group has been granted exclusive licenses to use this intellectual property, there are certain limitations inherent in these licenses, for example as required by the Bayh-Dole Act of 1980.

Impact: There are certain circumstances where the US government has rights to utilise the underlying intellectual property without any economic benefit flowing back to the Group.  In the event that this were to happen, this could impact the financial return to the Group on its investment in the applicable portfolio companies.

Mitigation:

·     To the Board's knowledge, while these so called "march in" rights exist, the US government has never had cause to use them.

·    The Group seeks to develop dual use capabilities for the technology it licenses and generally tends to avoid use cases directly applicable to government use.

·     This risk is also mitigated through employing experienced technology transfer experts supported by our legal team to assess risks that may arise out of this eventuality.

4.           The Group, including certain of the portfolio companies, currently has in place cooperative research and development agreements with certain US Department of Defense laboratories and other federally funded government institutions.  Certain regulatory measures apply to these agreements which restrict the export of information and material that may be used for military or intelligence applications by a non-US person.  Compliance with these regulatory measures may be complex and limit commercial alternatives.

Impact: If the Group were to breach restrictions on the use of certain licensed technologies, particularly those derived from federally funded research facilities, this could materially impact upon the Group's ability to license additional intellectual property from these establishments.  In certain circumstances, it may also lead to the termination of existing licenses.  In the event that this were to happen, this could materially affect a number of the Group's businesses, potentially harm the reputation and standing of the Group and cause the termination of certain important relationships with federally funded research institutions.

Mitigation:

·     Prior to licensing any technology under these agreements, the Group's management seeks to identify the commercial and other alternatives available for products and services associated with such technology and innovations, and to ensure that there are sufficient markets available to justify the capital investment.

·   Prior to the commercialisation process, the Group's management seeks to obtain all the necessary clearances from applicable regulatory bodies to ensure that the export of products based upon the licensed IP is strictly in accordance with government guidelines.

·    The Group, including certain of the portfolio companies, employs a number of individuals with experience in working with various government agencies.

·   Senior management is fully cognisant of the regulations and sensitivities in relation to this issue, in particular with International Traffic in Arms Regulations (ITAR) which regulate the use of technologies for export, and has numerous mitigating actions available should issues arise.

5.      The Group operates in complex and specialised business domains and requires highly qualified and experienced management to implement its strategy successfully.  All of the operations of the Group are located in the United States, which is a highly competitive employment market.  Furthermore, given the relatively small size of the senior management at the corporate level, the Group is reliant on a small number of key individuals.

Impact: There is a risk that the Group may lose key personnel, or fail to attract or retain new personnel.  The loss of key personnel may negatively affect the Group's competitive advantage.

Mitigation:

·    The Board annually seeks external expertise to assess the competitiveness of the compensation packages of its senior management, and to ensure that the structure of compensation is designed to incentivise performance and retention properly.

·    Senior management continually monitor and assess compensation levels to ensure the Group remains competitive in the employment market.

6.        A large proportion of the overall value of the Group's businesses may be concentrated in a small        proportion of the Group's businesses.  If one or more of the intellectual property rights relevant to a valuable business were terminated, this would have a material adverse impact on the overall value of the Group's businesses.

Impact: The termination of critical IP licenses would materially impact the value of the portfolio company and have a consequent effect on the value of the overall Group.

Mitigation:

·      In each portfolio company, the management is specifically directed to pursue a policy of generating and patenting additional intellectual property to both provide additional protection and create direct IP ownership for the company.

·      Where possible, the Group seeks to negotiate intellectual property ownership rights in any research and development agreement it enters into with a network partner, such that the Group becomes a part owner of the underlying IP.

7.          The US Investment Company Act of 1940 regulates companies which are engaged primarily in the business of investing, reinvesting, owning, holding or trading in securities.  Securities issued by companies other than consolidated partner companies are generally considered ''investment securities'' for purposes of the Investment Company Act, unless other circumstances exist which actively involve the company holding such interests in the management of the underlying company.

Impact:  If the Company is deemed to be an ''investment company'' subject to regulation under the Investment Company Act, applicable restrictions could make it impractical for the Group to continue its business as contemplated and could have a material adverse effect on its business.  If anything were to happen which would cause the Company to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on capital structure, ability to transact business with portfolio companies and ability to compensate key employees, could make it impractical for it to continue its business as currently conducted.  

Mitigation:

·      The Company intends to monitor and conduct its operations so that it will not be deemed to be an investment company under the Investment Company Act.

·      The Company seeks to build value through its current portfolio of majority-owned or primarily controlled subsidiary companies; it is not engaged primarily in the business of investing, reinvesting, owning, holding or trading in securities and does not own or propose to acquire investment securities above prescribed thresholds under the Investment Company Act.

·      Currently the Company holds more than 50% of the voting securities of certain of its portfolio companies, and more than 25% of all of its other portfolio companies (except TouchBistro which acquired TableUp in a stock-for-stock transaction), and intends to continue to try to hold the majority of the voting securities in its portfolio companies, or otherwise maintain primary control.

·      In addition to ownership levels, the Company seeks to maintain significant influence in portfolio companies through a combination of the following:

o  Rights to elect representatives to the board of directors, with ability to exercise influence over the portfolio company's business strategy, operating plans, budgets and key corporate decisions;

o  Legal rights, such as access to information (books and records) and financial statements, liquidation preferences, registrations rights, rights of first refusal, pre-emptive rights and co-sale rights;

o  Protective provisions, such as rights to block certain portfolio company actions; and

o  Active involvement in the management of our earlier stage portfolio companies, such as shared service support, business development introductions, co-locating, and key management recruiting.

8.             As a result of the Group's strategy, the Group's overall success is dependent on a limited, finite portfolio of businesses.  If one or more of such businesses were to fail, this would have a material adverse impact on the overall value of the Group's businesses and the Group's ability to return money to shareholders. 

Impact: The failure of one or more remaining Group businesses would materially impact the overall value of the Group's portfolio and have a consequent effect on the returns available to shareholders.

Mitigation:

·      The Board is committed to engaging and working closely with the remaining portfolio companies to provide guidance and advice as they navigate funding, operational, and other needs.

·      The Board continues to monitor performance, progress, and development of each portfolio company to critically assess the return prospects of the remaining portfolio and make adjustments as necessary.

9.            Given its current cash and financial position, the Group expects to remain operational through December 2023.  However, if the Group is unable to generate sufficient revenue, appropriately manage expenses, attract co-investors to participate in follow-on portfolio company financings, or generate a sale or other liquidity event for any of its existing portfolio companies or portfolio company interests prior to the end of such period, then the Group's business, financial condition, results of operations, prospects and future viability could be adversely affected.

Impact:  Lack of capital could restrict the Group's ability to further fund, develop and commercialise its existing businesses.  In turn, this could ultimately lead to failure of individual portfolio companies and loss of investment as well as failure of the Group as a whole.  

Mitigation:

·    The Board and Senior management continually seek to build and maintain close relationships with its shareholder base and other strategic partners at the Group level, and each portfolio company continually seeks to engage in strategic relationships relevant to their respective markets and to maintain current information on and awareness of potential fund-raising and monetisation strategies.

·    The Company strives to maintain majority ownership and/or primary control over all of the portfolio companies and/or portfolio company board representation, so that it can seek to influence optimal capital allocation, use of cash, and fund-raising strategy.  

·    The Company has built a valuable portfolio of companies since its inception.

·    The Company continuously and critically reviews the progress of its portfolio companies against pre-set milestones to ensure its financial capital and human resource is properly allocated to the more promising areas of its portfolio to help strengthen and accelerate the Group's path to monetisation.

Brexit

On 23 June 2016, the UK electorate voted to leave the European Union (EU) in a so-called "Brexit" referendum.  Following several delays, parliament ratified the withdrawal agreement, and the UK left the EU on 31 January 2020.  This began a transition period that ended on 31 December 2020.  Effective as of 1 January 2021, new rules for how the UK and EU will live, work and trade together were put in place.  The UK is no longer part of the EU's political bodies or institutions and is now free to set its own trade policy with other countries. 

It is expected that companies based in the UK and with significant UK and EU operational focus will be the most directly impacted by Brexit.  All of the Group's portfolio companies are based in the US, and substantially all of the business and operations of the Group are conducted in the US. 

Brexit exposes the Group to increased foreign currency risk.  Foreign exchange risk is an exposure for the Group as it derives substantially all of its revenue in US dollars and the Group's businesses borrow, account in, and are valued in, US dollars, but its shares trade in amounts denominated in pounds sterling.  Any capital raised by the Group in the UK would be denominated in pounds sterling, but would be allocated to portfolio companies which operate in the US and whose functional currency is US dollars.

If the Group requires and fails to obtain sufficient capital on acceptable terms, it may be forced to forego further investment in developing certain of its current businesses, and otherwise be subject to a material adverse impact on the Group's business and financial condition.

COVID-19

The ongoing spread of the coronavirus disease (COVID-19) that started in December 2019 has been declared a public health emergency of international concern by the World Health Organisation.  COVID-19 has the potential to greatly disrupt all aspects of the Group's business.  Potential impacts include the risk to the health and safety of our workforce, the ability for our businesses to operate normally, global economics, and the flow of goods and services.  Our people could be at potential health risk if they come into contact with confirmed cases of COVID-19.  In addition, given the mandatory health and safety restrictions across the world, including travel and quarantine restrictions, it may affect the ability of our workforce to continue working normally.  There could also be disruption to operations as a result of the virus negatively impacting our suppliers, customers and partners, including cancelled contracts, suppliers and customers going out of business, and delays in performance.  Finally, the virus has already caused downturn to the global economy, which may become worse as it continues to spread.  This may make it difficult for our portfolio companies to raise money, enter into new strategic partnerships, retain customers, or continue operations. 

In order to mitigate against these risks, we are closely monitoring the health, safety and security of our workforce and complying with applicable regulatory requirements and guidelines.  We have continued to implement temporary travel restrictions and have made accommodations that will allow our workforce to work remotely.  We are also in close communication with all of our customers, suppliers and partners to collaborate on how to best support each other's needs in this difficult environment. 

The Group is closely monitoring developments regarding COVID-19 and will continuously reassess and put in place appropriate continuity plans to mitigate against the risks faced.  Furthermore, with the release and distribution of viable vaccinations for COVID-19 in January 2021, we hope that the health and safety of all will be better protected in the coming year.

Corporate and Social Responsibility

Details on the Group's policies, activities and aims with regard to its corporate and social responsibilities, including diversity, are included in the Sustainability section of the 2020 Annual Report and are incorporated into this Strategic Report by reference.

This Strategic Report has been approved by the Board of Directors.

ON BEHALF OF THE BOARD

Harry Rein                                         

Chairman                                           

29 March 2021

Directors' Responsibilities Statement

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year.  Under that law the directors are required to prepare the group financial statements, in accordance with applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and  International Financial Reporting Standards (IFRS) as adopted by Regulation (EC) No 1606/2002 as it applies in the European Union.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company and of their profit or loss for that period.

In preparing these financial statements, the Directors are required to:

·    select suitable accounting policies and apply them consistently;

·    make judgements and estimates that are reasonable and prudent;

·    provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance;

·    prepare the financial statements on the going concern basis unless it is inappropriate to presume the group will continue in business; and 

·    prepare a director's report, a strategic report and director's remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006.  The Directors are responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the group's performance, business model and strategy.

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors responsibilities pursuant to DTR4

The Directors confirm to the best of their knowledge:

•     the consolidated and Parent Company financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and loss of the Company and the undertakings included in the consolidation taken as a whole; and 

•     The annual report includes a fair review of the development and performance of the business and the financial position of the group and the parent company, together with a description of the principal risks and uncertainties that they face.

We consider the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position, performance, business model and strategy.

ON BEHALF OF THE BOARD

Harry Rein                                         

Chairman                                           

29 March 2021