6 October 2021

Allied Minds plc

Half-Yearly Report for the six months ended 30 June 2021

6 October 2021 -- 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 2021.

Highlights

·      $44.9 million invested in portfolio companies, of which $43.9 million was raised from third-party investment during the six months ended 30 June 2021

·      $4.0 million invested in portfolio companies post-period end, of which $3.3 million was raised from third-party investment

·      Net cash and investments at 30 June 2021: $18.1 million (FY20: $24.5 million), of which $17.7 million held at parent level (FY20: $22.3 million)

·      Series B preferred share raise in OcuTerra Therapeutics has led to the deconsolidation of this portfolio company following Allied Minds shareholding reducing to below threshold for control

·      Spin Memory is embarking on an Assignment for the Benefit of Creditors in light of the challenges faced and the investment has been reduced to a fair value of nil in the period

·      Share buyback programme launched in June 2021 to buy back up to $3.0 million of the Group's shares to redistribute excess capital for the benefit of shareholders

o  As of 5 October 2021 a total of 2,537,712 shares had been purchased at a cost of $0.7 million

·      BridgeComm:

o  Commenced sales of its Optical Inter-Satellite Link terminals - used in programs for space and ground applications with commercial and US Government customers.

o  Launched Managed Optical Communication Array technology which allows for multi-domain capabilities to share large volumes of data significantly faster with increased security. Sales expected to commence during H2 2021.

·      Federated Wireless:

o  Awarded multi-million-dollar contract from the US Department of Defense as part of its 5G Smart Warehouse Initiative.

o  Delivered innovative low cost, private wireless solution to Carnegie Mellon University's Living Edge Lab, a world class research organisation pioneering intelligent contact tracing technology in school environments, in the global fight against COVID-19, in partnership with AWS.

o  Partnered with industry giants including AWS, Intel, Cisco, JMA, as well as utilities-focused Anterix, to rapidly deploy private network solutions across key verticals including federal, public sector, education, maritime and robotics.

o  Approval from US Federal Communications Commission and National Telecommunications and Information Association to begin commercial operations in US territories of American Samoa, Guam and Puerto Rico.

OcuTerra:

o  Closed $32.1 million Series B funding from new investors.

o  Proceeds will be used to fund a Phase II clinical trial of its OTT166 asset in diabetic retinopathy, as well as for other working capital needs.

o  Now funded for the immediate future.

·      Orbital Sidekick:

o  Closed $16 million Series A funding led by Temasek - included new investors Energy Innovation Capital and Syndicate 708 and existing investors Allied Minds and 11.2 Capital.

o  Launched most powerful satellite yet, Aurora, to collect and analyse hyperspectral data, with a broad focus on sustainability.

o  Expanding satellite operations within existing partnerships with Phillips 66 and iPIPE to provide better leak prevention and monitoring for the energy sector - full commercialisation anticipated during 2022.

·      Spark Insights:

o  Due to the ongoing delay in securing financing, the company is exploring options including a sale, disposal of assets, winding down and/or similar avenues.

·      Spin Memory:

o  Embarking on an Assignment for the Benefit of Creditors. In light of the challenges securing new customers and the impact of COVID-19, the decision has been made to liquidate.

Harry Rein, Chariman of Allied Minds, commented:

"In the first half of this financial year, the business has continued to drive the strategic objectives of focusing on supporting the existing portfolio companies and maximising value within our portfolio of investments.

"A number of our portfolio companies have made significant progress in the first half, including successful funding rounds, development milestones, contract wins and partnerships with large industry players.

"Our objectives from our Strategic Update at the start of the year remain unchanged, with recent progress reaffirming that the Group as a whole remains well-positioned to deliver venture capital-like returns for shareholders upon exit within a reasonable timeframe."

For more information, please contact:

About Allied Minds

Allied Minds plc is an IP commercialisation company focused on early stage company development within the technology sector. With origination relationships that span US federal laboratories, universities, and leading US corporations, Allied Minds historically created, and now operates and funds, a portfolio of companies to generate long-term value for its investors and stakeholders.  Based in Boston, Allied Minds supports its businesses with capital, management, expertise and shared services.  For more information, please visit www.alliedminds.com.

This 2021 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 2020 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 is an IP commercialisation company primarily focused on early stage company development within the technology sector. 

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

The Group and its associates 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 its associates 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.

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 whilst at the same time ensuring that the Group is being managed in as cost efficient manner as possible, regularly reviewing the on going costs associated with being a listed company.

In general, the Group holds its position in a portfolio company for as long as it believes the risk and time-adjusted value of that position is maximised by its continued ownership and effort. From time to time, it engages in discussions with other companies interested in the portfolio companies (or the Group's interest in those companies), either in response to enquiries or as part of a process the Group and board initiate. To the extent that Allied Minds believes that a portfolio company's further growth and development can best be supported by a different ownership structure or if it otherwise believes it is in shareholders' best interests, the Group may seek to sell some or all of its 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 its existing portfolio companies and its ability to translate that value into cash as effectively and efficiently as possible and to deliver that cash, net of the Group's obligations and operating cash needs, to its 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.

Share Buyback Programme

The Board continually keeps it's capital position under review. Following Spin Memory Inc.'s potential liquidation and based on the anticipated future capital requirements of the Group's portfolio companies, and also thanks in part to the Group's recent operating cost reductions, the Board determined that the Group had excess capital which could be distributed for the benefit of shareholders. It believes that a share buyback is the most value accretive means of distributing this capital.     

In June 2021, the Board approved a new programme to buy back up to $3.0 million of the Group's shares. Share purchases take place in open market transactions and are made from time to time depending on market conditions, share price, trading volume and other factors. The Group entered into a non-discretionary arrangement with Numis Securities Limited to manage the Buyback Programme and repurchase the Group's shares on its behalf, and within certain parameters.

The current Buyback Programme runs until to the release of these interim results and future buybacks will be deterimined as appropriate by the Board based on the prevailing capital requirements for the Group's portfolio companies at any given time along with the other above mentioned factors.

The Buyback Programme is in accordance with Allied Minds' general authority to purchase a maximum of 24,218,799 Ordinary Shares, granted by its shareholders at the Annual General Meeting held on 12 May 2021 and the purpose is to reduce share capital. Shares purchased under the Buyback Programme will be cancelled.

COVID-19

As Allied Minds navigates the uncertainties brought by the coronavirus pandemic, we continue 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 companies have been impacted more than others, overall, the achievements across the portfolio demonstrate that these companies are continuing to make progress against their respective commercial and strategic objectives even during this pandemic. Allied Minds remains in close communication with all customers, suppliers and partners to collaborate on how to best support each other's needs in this new environment. Furthermore, the Group continues to engage with each of its portfolio companies to manage and mitigate against potential impacts on each company's business, including assisting with employee support, cash management and contingency planning. 

While there is caution and vigilance around what the coming months may bring, the Group continues to be optimistic and expects to be able to navigate these uncertain times whilst delivering the results of its stated strategy in the coming years. 

Outlook

There has been substantial technical and commercial progress from within some portfolio companies during this half, including successful funding rounds, development milestones, contract wins and industry partnerships. These companies' technologies help to solve important global issues, from the digital divide to sustainable energy, sight loss to remote connectivity.

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.

However, other portfolio companies have made less progress and as previously reported, appropriate actions are being taken.

The Board of Allied Minds continually assess its portfolio of investments and with a member of the Board sitting on or leading the boards of all our material investments, the Board can ensure it is optimally placed to take timely decisions based on up to date information.

This approach has ensured that decisive actions are taken, even if these are sometimes difficult such as the decision to liquidate Spin Memory, and consider options to sell Spark Insights.

Although the remaining portfolio companies are mostly at a relatively early stage in their lifecycle, the Board is positive about their prospects and is increasingly confident of delivering venture capital-like returns upon exit if the portfolio companies continue to meet their planned technical and commercial goals.

Portfolio Company Valuation

Of the Company's seven active portfolio companies, two are currently majority owned and/or  controlled, and therefore fully consolidated in the Company's consolidated financial statements prepared in accordance with UK-adopted international financial reporting standards.

Of the remaining five portfolio companies, the Company holds a significant influencing minority stake in three of these companies, a minority stake in one of these companies (OcuTerra Therapeuitics) and a small position in the fifth (TouchBistro, Inc.) as a result of the stock-for-stock sale of TableUp, Inc in 2020.  For those portfolio, where Allied Minds holds a significant influencing 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 by the method of accounting under  IAS 28. Accordingly, since Allied Minds has significant influence 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 3 September 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 services 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.

Its optical wireless solutions have particular applications in the fast growing area of space and satellite communications, enabling constellations companies to provide broadband more effectively from space to fill gaps in broadband coverage in remote areas and across developing countries lacking digital infrastructure.

During the first half of the year, BridgeComm has developed and commenced sales of its Optical Inter-Satellite Link terminals which are being used in programs for space and ground applications with commercial and US Government customers. In March 2021, it launched its Managed Optical Communication Array technology which allows for multi-domain capabilities to share large volumes of data significantly faster with increased security. Sales of this solution are expected to commence during H2 2021. In April 2021, BridgeComm successfully demonstrated in-field high-speed optical communications of  speeds beyond 100GB per second which are key for inter-satellite high speed data transfer and is the culmination of its collaboration with Nokia.

BridgeComm will need to seek additional financing during 2022 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.

On 9 July 2021, Allied Minds invested an additional $600,000 of bridge financing to BridgeComm to further support operations.  In connection with this additional bridge financing the convertible bridge invested by Boeing HorizonX and Allied Minds was increased to $5.5 million in total. The bridge will convert into preference shares in 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 is an industry leader in enterprise shared spectrum 5G private wireless and has developed technology and products to enable the revolutionary shared spectrum model in the US 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 Connectivity-as-a-Service ("CaaS") offering.  Federated partners with industry giants including AWS (Amazon), Intel, Cisco, JMA, as well as utilities-focused Anterix, to rapidly deploy private network solutions across key verticals such as federal, public sector, education, maritime and robotics.

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. Contract wins in this space have included the US Department of Defense and Carnegie Mellon University.

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. With more than 200 customers and growing across carriers, cable, wireline, WISP and other segments, Federated has over 65k CBRS nodes deployed, implementing a wide range of use cases including fixed wireless, IoT automation, carrier offload, and operator spectrum augmentation. 

In April 2021, the US Federal Communications Commission (FCC) in coordination with the National Telecommunications and Information Association (NTIA) announced Federated Wireless' approval to begin commercial operations in the remote US territories of American Samoa, Guam, and Puerto Rico. Using the latest hardened Environmental Sensing Capability (ESC) sensors, the Federated Wireless team deployed an upgraded ESC network in Puerto Rico within three months. This swift stand-up of a network led Federated to secure commercial contracts from five of the top mobile operators in the US territory. CBRS technology will provide more people with access to high speed connectivity throughout the region.

Federated has always been committed to eliminating the digital divide. It took two major steps this year to help bring CBRS technologies to more areas throughout the United States. First, Federated announced the successful commercialisation of its Fixed Wireless Planner. The state-of-the-art planning tool allows fixed wireless companies to decrease their deployment costs by visualising potential network configurations and identifying prime areas for installation of fixed wireless devices. Secondly, Federated entered into a partnership with Learning Alliance, a leading organisation that trains veterans and civilians in wireless trade skills. Learning Alliance will offer the Federated Certified Professional Installer (CPI) course as a part of its trade curriculum, growing the tower workforce and increasing the number of people who can install CBRS-enabled devices.

Federated has long led the industry in development of shared spectrum CBRS capabilities, taking a lead role in the formation of the CBRS Alliance, being the first to market with leading technology to facilitate widespread utilisation of this ubiquitous resource. The company's partner ecosystem includes more than 40 device manufacturers and edge partners, all of whom have dedicated rescoure to collaborate with Federated to advance the development and proliferation of CBRS services. Federated's 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.

Federated is led by President and CEO Iyad Tarazi and a team of industry veterans who continue to pioneer new territory in the commercialisation and expansion of shared spectrum.

On June 1st, Federated filed with the FCC that it has determined the appropriate procedures for its Spectrum Exchange prototype. The Spectrum Exchange product will allow for winners of Priority Access Licenses (PALs) to lease spectrum that they own but are not using to interested third parties, such as local governments, school districts, independent wireless service providers and more. These entities can use the additional spectrum to provide better quality service to their communities or customer base, thus growing the CBRS ecosystem.

Federated's products have won multiple awards this year validating they are truly best-in-class. Most recently, the Federated Wireless Spectrum Controller won a TMC Communications Solutions Product of the Year award. This award is given to leading products that perform over a multitude of different telecommunications capabilities. Furthermore, Federated won a Gold Telecommunications Stevie Award for its "Private Wireless Simplified" product. Additionally, the company's landmark deployment with the Department of Defense was recognised by ChannelVision Magazine with a Visionary Spotlight Award.

The Board of Allied Minds is very encouraged by the progress being made at Federated. It met its first half revenue expectation and is on track to meet its growth ambitions in the coming years.

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%

OcuTerra Therapeutics, Inc. (common stock and prefered share investment held at fair value)

OcuTerra Therapeutics, Inc. ('OcuTerra'), is a clinical stage ophthalmology drug development company focused on treating diabetic retinopathy earlier to preserve vision and avoid intravitreal injections, OcuTerra's lead clinical asset, OTT166, is a topical eye droplet treatment for diabetic retinopathy, a diabetes-related eye disease that can lead to blindness if left untreated.

As of April 2021, OcuTerra Therapeutics was deconsolidated from the Group's financial statements as a result of the first closing of its Series B Preferred Stock financing round. On that date Allied Minds' issued and outstanding ownership percentage dropped from 62.67% to 27.58%. As at this date Allied Minds was able to exercise significant influence over the entity by virtue of its large, albeit minority, stake in the company and its representation on the OcuTerra Therapeutics's board of directors. At this point the common stock was equity accounted under IAS 28 and the preferred shares holdings held at fair value through profit and loss under IFRS 9.

On 21 June 2021, OcuTerra completed the third closing of the same Series B financing and as a result, Allied Minds' ownership dropped to 18.98% of the issued and outstanding shares. Since Allied Minds' ownership dropped below 20% and it does not hold a majority on its board of directors. Based on these factors management have judged that Allied Minds cannot alone impact the policy making processes of the company and given there are no other material transaction between the investor and investee have determined Allied Minds no longer has significant influence over the investee and the investment does not meet the definition of an associate under IAS 28 at this point. As such, Allied Minds' share of common stock is accounted as an investment at fair value in accordance with IFRS 9 for the period beyond 21 June 2021 and at 30 June 2021.

As of 3 September 2021, OcuTerra had closed its Series B funding round at  $32.1 million of external equity financing to fund Phase II trials for OTT166, on the back of safety and preliminary efficacy data from the Phase I/II trials. This resulted in a post-money valuation of $49.5m. This funding is now sufficient for OcuTerra Therapeutics' immediate needs.

OcuTerra's Board has been further strengthened with the appointment of experienced   biotech executive Brent Saunders as Chairman and Robert Ruffolo, Ph.D, and Robin Steele as Directors in May 2021.

Holdings and valuation:

·      Date of Last Funding Round: September 2021 (5^th Closing of next preferred equity round)

·      Post-Money Valuation: $49.5 million

·      Co-Investors: Various third parties

·      Allied Minds' Issued and Outstanding Ownership: 17.7%

·      Allied Minds' Fully-Diluted Ownership: 12.8%

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

Orbital is establishing a space-based infrastructure of hyperspectral sensors to provide monitoring services and solutions to the energy sector and beyond. It has a proprietary analytics platform 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 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 with the added benefit of helping to minimise environmental damage.

Following its $16m Series A funding round in April 2021, Orbital launched its newest and most powerful hyperspectral imaging satellite, Aurora, in June 2021. It will serve OSK's customers in the energy, mining, and defense sectors, including oil and gas pipeline monitoring and methane mapping, clean energy resource exploration, sustainable mining practices and wildfire risk mitigation. This will also enable Orbital to realise revenue from its first pilot programme participants from the oil and gas pipeline industry - now converted into paying customers.

On 13 April 2021, Allied Minds announced that Orbital had closed $16.0 million in a Series A Preferred financing round led by Temasek, an investment company headquartered in Singapore. 

The combined expected proceeds of $32.0 million raised from both the Series A financing and the funds available from the US Air Force's Tech Incubator's STRATFI programme, in which Orbital is participating, are 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.

During the period, Orbital has also expanded satellite operations within its partnerships with global energy leaders Phillips 66 and iPIPE to provide better leak prevention and monitoring for the energy sector. Full commercialisation for these projects is expected during 2022.

Holdings and valuation:

·      Date of Last Funding Round: April 2021

·      Post-Money Valuation: $46.0 million

·      Co-Investors: Temasek, Energy Innovation Capital, Syndicate 708 and 11.2 Capital

·      Allied Minds' Issued and Outstanding Ownership in respect of preference shares: 26.34%

·      Allied Minds' Fully-Diluted Ownership: 24.11%

Spark Insights Inc. (Spark) (consolidated subsidiary)

Spark is an advanced analytics company developing predictive analytics for the insurance industry through the use of artificial intelligence, smart data, and remote sensing 

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's insights leverage unique data sets, including advances in satellite imagery and weather data, combined with proprietary analytics to transform critical workflows for these property insurers.

However, as reported at the full year results, as a result of challenges posed by COVID-19, Spark has faced delays in fundraising and is now in a difficult cash position.  The ongoing delay in securing financing has resulted in the company exploring options including a sale, disposal of assets, winding down and/or similar avenues.

As of 13 September 2021, Allied Minds had invested $172,250 of bridge financing to support the operation of the company.

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: 70.44%

·      Allied Minds' Fully-Diluted Ownership: 60.00%

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

As announced on 23 June 2021, Spin Memory, Inc. the provider of magnetoresistive random access memory (MRAM), is embarking on an Assignment for the Benefit of Creditors.

Allied Minds first invested $1.5m in Spin Memory in November 2007 and continued to provide funding in subsequent fundraising rounds. Allied Minds' total investment in Spin Memory to date is $50.5m. As indicated at the full year results in March, despite shareholders providing operational and financial support, Spin Memory faced significant liquidity issues. These were due to challenges in securing new customers, alongside the impact of COVID-19, which significantly delayed the required testing of its development chip with ARM.

In light of these challenges and the significant quantum of capital committed to Spin Memory to date the Board of Allied Minds has concluded that it is no longer prepared to make any further investment into Spin Memory and the Board of Spin Memory has taken the decision to liquidate. 

An Assignment for the Benefit of Creditors offers the business a greater chance of liquidating its assets to pay creditors with any additional proceeds being available to return to its shareholders.

Allied Minds is a minority shareholder in Spin Memory with a fully diluted holding of 34%. There can be no guarantee that Allied Minds will receive any capital from the liquidation proceedings.

TouchBistro, Inc. (acquirer of TableUp, Inc.) (common shares investment held at fair value)

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.

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.  

Risk Management

The principal risks and uncertainties surrounding Allied Minds and its portfolio companies are set out in detail on pages 24 to 29 in the Risk Management section of the Strategic Report included in the 2020 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 2020 Annual Report and Accounts with the risk in respect of COVID-19 updated as above.

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 2020 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

Revenue increased by $0.1 million, to $0.2 million for the six months ended 30 June 2021 (HY20: $0.1 million), when compared to the same period in the prior year. This increase is primarily attributable to revenue from existing and new contracts in 2021 at BridgeComm of $0.2 million. Cost of revenue at $0.1 million for the six months ended 30 June 2021 (HY20: $0.1 million) was lower as a percentage of revenue, when compared to the same period in the prior year, mainly due to the nature of the revenue being delivered.

Selling, general and administrative (SG&A) expenses decreased by $0.3 million, to $6.3 million for the six months ended 30 June 2021 (HY20: $6.6 million). This reduction was mainly due to the deconsolidation of a subsidiary, OcuTerra, in the first half of 2021.

Research and development (R&D) expenses decreased by $1.0 million, to $1.5 million for the six months ended 30 June 2021 (HY20: $2.5 million). The decrease was primarily due to the deconsolidation of a subsidiary, OcuTerra, in the first half of 2021. The remainder of the decrease reflects the net effect from R&D spend at the other subsidiaries.

Net finance cost increased by $1.7 million for the six months ended 30 June 2021 to $3.7 million (HY20: finance cost of $2.0 million). The increase in the net cost reflects the impact from the deconsolidation of OcuTerra in the first half of 2021 of $7.7 million plus the increase of $0.3 million of a convertible note payable due to the fair value adjustment at 30 June 2021. This increase was offset, in part, by the $4.4 million decrease of the subsidiary preferred shares liability balance at BridgeComm as a result of IFRS 9 fair value accounting.

Other income increased to $10.0 million (HY20: other expense $3.7 million) reflecting $14.2 million of gain on deconsolidation of OcuTerra offset by $1.8 million in loss on investments held at fair value and the Company's share of loss of $2.4 million from the deconsolidated entities accounted under the equity method.

As a result of the above discussed factors, total comprehensive loss for the year decreased by $13.3 million to $1.7 million for the six months ended 30 June 2021 (HY20: comprehensive loss of $15.0 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 $3.1 million, to $47.5 million at 30 June 2021 (FY20: $44.4 million), mainly due to an increase of $3.9 million in investment in portfolio companies at fair value.

o  Investments at fair value increased to $45.5 million as of 30 June 2021 (FY20: 41.6 million). The increase reflects the recognition of a $5.7 million investment as a result of the deconsolidation of OcuTerra offset, in part, by a loss of $1.8 million  of the fair value accounting for other investments held at fair value.

o  Right-of-use assets decreased to $0.4 million as of 30 June 2021 (FY20: $0.6 million) primarily related by amortisation of $0.2 million.

o  Property and equipment decreased by $0.3 million to $1.3 million as of 30 June 2021 (FY20: $1.6 million), mainly reflecting depreciation of $0.3 million.

Current assets decreased by $8.7 million, to $23.9 million as of 30 June 2021 (FY20: $32.6 million), mainly due to a reduction in cash and cash equivalents of $6.4 million.

o   Cash and cash equivalents decreased by $6.4 million to $18.1 million at 30 June 2021 from $24.5 million at 31 December 2020. The decrease is mainly attributed to $6.3 million of net cash used in operations, $14.2 million cash used in investing activities and $14.1 million cash provided by financing activities.

o  Trade and other receivables decreased by $0.7 million due to a decrease in trade receivables of $0.3 million and a decrease in prepaid expenses of $0.4 million as a result of deconsolidation of OcuTerra in the first half of 2021.

o  Other financial assets have decreased by $1.6 million to $0.7 million (FY2020: $2.3 million) primarily due to the conversion of Orbital's convertible note of $1.5 million into preferred shares upon the closing of the Series A funding.

Non-current liabilities decreased by $1.8 million, to $0.4 million as of 30 June 2021 (FY20: $2.2 million) mainly reflecting a decrease of $0.6 million in lease liability and a reduction in loans balance of $1.1 million at 30 June 2021.

Current liabilities decreased by $4.5 million, to $11.9 million at 30 June 2021 (FY20: $16.4 million).  The decrease mainly reflects the combination of a fair value adjustment of $4.4 million in the subsidiary preferred shares liability and a $0.9 million reduction in trade and other payables. This combined decrease was offset, in part, by an increase in both loans of $0.3 million and deferred revenue of $0.5 million. The increase in loans primarily reflects the receipt of PPP loans and an increase in fair market value of existing convertible notes at half year.

Net equity increased by $0.7 million to $59.0 million at 30 June 2021 (FY20: $58.3 million) mainly reflecting the combination of comprehensive loss for the period of $1.7 million and repurchase of ordinary shares of $0.2 million offset by the effect of deconsolidation of OcuTerra of $2.4 million and $0.2 million charge due to equity-settled share based payments.

Condensed Consolidated Statement of Cash Flows

The Group's net cash outflow from operating activities of $6.3 million in the six months ended 30 June 2021 (HY20: $10.2 million) was primarily due to the net operating losses for the period of $1.5 million (HY20: loss of $14.8 million) and adjustments for non-cash accounting entries such as depreciation, amortisation, share of net loss of associate, gain on deconsolidation, loss on investments held at fair value and share-based expenses of $9.2 million (HY20: $5.1 million). The operating cash outflow was offset by a reduction in working capital and other finance costs of $4.4 million (HY20: $0.6 million).

The Group had a net cash outflow from investing activities of $14.3 million in the six months ended 30 June 2021 (HY20: net cash outflow of $7.1 million). This outflow was predominately related to the deconsolidation of OcuTerra totaling $13.3 million plus the $1.0 million investment made in the Orbital  Series A funding.

The Group's net cash inflow provided by financing activities of $14.1 million in the six months ended 30 June 2021 (HY20: net cash outflow $39.0 million) reflects, in part, proceeds from issuance of preferred shares in subsidiaries of $14.6 million and the receipt of $0.3 million of PPP loans. The increase was offset by $0.6 million in lease payments and $0.2 million payments to repurchase the company's own shares. 

The Group's strategy is to manage its cash balance to focus exclusively on supporting its existing portfolio companies, noting any commitments are determined based on current facts and commitments on a case by case basis 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

Condensed Consolidated Statement of Financial Position