15 June 2022

Allied Minds plc

("Allied Minds", the "Group", or the "Company")

Annual Results and Notice of AGM

Allied Minds plc (LSE: ALM), the IP commercialisation company focused on early-stage company development within the technology sector, announces its annual results for the year ended 31 December 2021.

Investment and Financial Highlights

• $68.5 million invested in portfolio companies, of which $61.8 million was raised from third-party investment.
• Cash and cash equivalents at 31 December 2021: $9.7 million (FY20: $24.5 million), of which $9.0 million is held within Allied Minds (FY20: $22.3 million).
• Revenues of $1.5 million (2020: $0.5 million) mainly from non-recurring engineering (NRE) and service contracts within Bridgecomm, reflecting the early stage nature of our portfolio companies.
• 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  A total of 2,537,712 shares, to date, have been purchased at a cost of $0.7 million.

Selected Portfolio Company Highlights

·      BridgeComm (consolidated subsidiary):

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 (MOCA) technology which allows for multi-domain capabilities to share large volumes of data significantly faster with increased security.

o  Developed a proprietary, patent awarded set of technologies around point to multipoint optical communications using MOCA technology. 

o  Advanced one-to-many optical wireless communications (OWC) using MOCA technology to support Low Earth Orbit (LEO) constellations.

o  Post year end, Allied Minds and AE Industrial HorizonX Venture Fund I, LP (HorizonX), jointly contributed an aggregate of $0.8 million of convertible bridge financing to BridgeComm, each contributing $0.4 million. The bridge financing will be applied to support the business to the completion of a new financing round.

·      Federated Wireless (equity accounted investment):

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

o  In November 2021, Allied Minds invested $4,283,000 in Federated as bridge financing, which is held at fair value of $4,500,000 at 31 December 2021.

o  Post year end, Federated Wireless announced two Series D fundraises for a total of $72 million, giving Federated Wireless a post money valuation of $302 million.

o  Allied Minds' bridge financing fully converted following the post year end completion of the Series D funding rounds. As a result, Allied Minds' fully‐diluted ownership of the issued share capital of Federated Wireless stands at 23.96%.

o  Key appointments made to the company's leadership team in 2021, including Chief Commercial Officer and Chief Financial Officer.

o  Achieved 3.8x revenue growth in 2021 and expects continued momentum through 2022 and beyond.

·      OcuTerra (ordinary and preference share holding):

o  Closed $35 million Series B funding from new investors and as part of the raise the company was deconsolidated from the group financial statements.

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  The company is preparing for the start of the Phase 2 trial, and is building out its managerial and clinical team.

o  Now funded for the immediate future.

·      Orbital Sidekick (investment held at fair value):

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  Expanded the team from 12 to 39, which is expected to reach 65 employees by the end of 2022.

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 2023.

o  Signed a contract with one of the largest pipeline operators in North America - Energy Transfer - to deliver recurring monitoring services from our satellites through 2023.

o  Orbital has sufficient cash to fund the business until August 2022 and is in advanced talks with potential investment firms and strategic partner groups to secure the required funding.

·      Touch Bistro (investment held at fair value)

o  On 28 March 2022, Allied Minds announced that it had completed the disposal of its residual shareholding in Touch Bistro for $5.5m CAD ($4.4m USD) in line with its strategy of monetising its investment portfolio. Of the sale proceeds, $4.97m CAD has been received and $0.53m CAD is to be held in escrow, with an initial release date in Q3 2022, subject to any then outstanding claims.

Corporate Developments

Post-period end, Allied Minds announced in March 2022 that it will undertake a formal review of the Company's strategic options (the "Strategic Review") including, but are not limited to, a sale of the Company itself, which the Board intends to conduct under the framework of a "Formal Sale Process" in accordance with Rules 2.4 and 2.6 of the Takeover Code, alternatively, to seek to distribute certain assets and any cash reserves directly back to shareholders through a re-structure.

The Company also announced the resignation of Non-Executive Directors, Mark Lerdal and the forthcoming resignation of Harry Rein. Harry Rein and Bruce Failing, the Senior Independent Director, and the Company's largest shareholders are working to ensure an orderly transition to any new Independent Directors.

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 2021

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 2022 Annual General Meeting will be held at 2.00 pm EDT on 27 July 2022 at the Company's headquarters located at 374 Congress Street, Suite 308, Boston, Massachusetts 02210, USA.

For further 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.

Forward looking statements

This Annual Results Release and the 2021 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 2021 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.

2021 Annual Report and Accounts

STRATEGIC REPORT

Chairman's Report

This is my last Chairman's letter to you having taken the decision to stand down from the Board upon signing off these accounts.

Following this decision and conscious of the recent board changes, there is a need to appoint additional directors to the board of the Company. The Directors are working closely with the Company's largest shareholders to identify and recruit new directors to the board of the Company.

Allied Minds has an unusual Board structure, having been comprised solely of Non-Executive Directors, with each portfolio company having its own Board of Directors.  The Non-Executive Directors of Allied Minds serve on the Boards or have observer status on each active portfolio company.  This has enabled us to work in a cost-efficient manner while utilising the skills of the Allied Minds directors.

Over my time as Chairman I, and my Board colleagues, have reviewed the portfolio of investments we inherited and took the appropriate tough decisions to ensure we maximise those investments with the most perceived value and move them towards monetisation.

As at the start of 2021, all the portfolio companies Allied Minds was invested in were essentially pre or at the early stages of generating revenue, and a number of them faced substantial challenges.  These challenges resulted in us exiting or closing our investments in several companies, leaving us with six companies which, in my and the Board's view, have significant potential and merit support.

This restructuring of the portfolio has been challenging. In several cases hopes and expectations of the value of our investments were out of line with reality and this has had a consequential impact on  the share price. However, this rebasing of the value of the investments, and providing clarity to all shareholders, needed to take place, and we now have six investments which have potential. Of these our investment in Federated Wireless is the most valuable, as demonstrated by the recent Series D upround at a post-money valuation of $302 million.

As part of the Board's review of its strategic options, and its frustrations with the undervaluation of the Company on the stock market, and the costs of being a listed entity, the Board announced in March 2022 that we were undertaking a formal strategic review and sale process. This review may lead to an offer for the Company, or a distribution of assets and cash to shareholders.

It has been my pleasure to serve as your Chairman, and I wish my successor every success.

Harry Rein

Chairman

14 June 2022

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 six portfolio companies based upon a broad range of underlying innovative technologies ranging from wireless connectivity to space-based imagery and analytics. 

The Group remains focused to execute its plan to maximise the value of its portfolio company interests and deliver well-timed, risk-adjusted returns for its shareholders.

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. 

We seek to play an active role in developing the strategic direction of our portfolio companies and driving ongoing planning and assessment.  Our 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. 

 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. Co-investors in later rounds include financial, strategic and commercial partners.

Strategy

Allied Minds is focused on supporting its existing portfolio companies and maximising monetisation opportunities for portfolio company interests.  For some time, the Board has been reviewing the range of strategic options available to it in order to return value to shareholders. The Board resolved, in March 2022, to undertake a formal review of the Company's strategic options (the "Strategic Review") including, but not limited to, a sale of the Company itself, which the Board intends to conduct under the framework of a "Formal Sale Process" in accordance with Rules 2.4 and 2.6 of the Takeover Code, alternatively, to seek to distribute certain assets and any cash reserves directly back to shareholders through a re-structure. The Strategic Review is solely aimed at creating and/or realising shareholder value.

Subject to conclusion of the Strategic Review, the Board will continue to aim to monetise the Group's ownership positions at the appropriate time, recognising the value and benefit in achieving well-timed risk-adjusted returns for the benefit of shareholders. Upon the event of successful monetisation events from the sale of portfolio companies or portfolio company interests, Allied Minds anticipates distributing the net proceeds to its shareholders, after due consideration of potential follow-on investment opportunities within the existing portfolio and working capital requirements. 

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. 

The Board aims to ensure 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. The Board notes that the costs of maintaining a premium listing on the London Stock Exchange are prohibitive for a company of Allied Minds' current size and maintaining a public listing is expensive with more than 50 per cent of the Company's annual budget devoted to meeting the requirements of being a listed company.

Outlook

There was substantial technical and commercial progress from within some portfolio companies during 2021 and post period, including successful funding rounds, development milestones, contract wins and industry partnerships. 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 of Allied Minds continually assesses 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 will not be impacted by the departure of Harry Rein as Chairman and a process is currently underway to ensure the appropriate number of non-executive directors serve on the board. 

This approach has ensured that decisive actions are taken, even if these are sometimes difficult such as the decision to liquidate Spin Memory, and 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 upon exit if the portfolio companies continue to meet their planned technical and commercial goals.

Portfolio Company Valuation

Of the Company's six active portfolio companies, one is currently majority owned and controlled, and therefore fully consolidated in the Company's consolidated financial statements prepared in accordance with UK adopted International Accounting Standards.

Of the remaining five portfolio companies, the Company holds a significant minority stake in three of these companies and small positions in both TouchBistro, Inc. (as a result of the stock-for-stock sale of TableUp, Inc.) and Concirrus (as a result of the stock-for-stock sale of Spark Insights, 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 Federated Wireless, this investment is accounted for under IAS 28 and is classified by the Company as investments in associates. Accordingly, since Allied Minds has significant influence over this entity through the voting rights/potential voting rights held, it gives access to the returns associated with an ownership interest in this associate. For Ordinary stock holdings, where the group does not have significant influence, these investments are held at fair value in the Company's consolidated financial statements.

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 03 May 2022. 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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1)   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.  Interest in the optical communications market is growing with commercial space opportunities and government programs looking for the unique characteristics of high speed and security.

BridgeComm has developed a proprietary, patent awarded set of technologies around point to multipoint optical communications using Managed Optical Communication Array (MOCA) technology.  This means BrideComm can truly complement legacy Radio Frequency (RF) technology.  BrideComm has demonstrated this capability to customers and is now developing terminals for specific applications. Key partners include Space Micro for production of point to multipoint terminals based on MOCA technology and Boeing that has supported BridgeComm and partnered on key applications.

The conflict in the Ukraine has highlighted the value of Bridgecomm's point to multi point technology. BridgeComm's one-to-many high-speed optical communications technology allows for dispersed communications which are difficult to detect and/or intercept.  Current battlefield communications tend to use a single point of distribution with the risk of a single point of failure.  BridgeComm's one-to-many communications enables a mesh network, eliminating this point of failure. The goal is to install 1000's of satellites with BridgeComm's non mechanical software driven optical communications system.  This would allow dispersed battlefield control from space.  In addition it is hoped that BridgeComm's technology will provide the optical intersatellite communications capability of choice for all proliferated low earth orbit constellations.

BridgeComm will require up to $5mm additional capital to deliver an existing contract with The Space Development Agency, the objective of which is to prove MOCA technology over longer distances.

BridgeComm is currently in partnering discussions with Aeroequity Industrial partners to provide additional funding and US government sourcing expertise.  In addition, for BridgeComm to succeed as a US government vendor, it will need to be a US based company.  Because AEI brings technical and government knowledge, it is planed that Allied Minds will be a large minority shareholder post transaction which is expected to be a down round to the last valuation.

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%

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

Founded in 2012, Federated is the market leader in Citizen Band Radio Service (CBRS) shared spectrum. Shared spectrum, also known as CBRS, is an innovative technology that delivers the best attributes of traditional wireless and Wi-Fi, with lower fixed cost, higher quality, and greater efficiency and scale.

As the first to market with a Spectrum Access System ("SAS"), Federated Wireless is the nationwide leader in enabling, commercializing, and driving adoption of shared spectrum. With more than 350 customers and over 90,000 connected devices across the United States and territories, the company serves a customer base spanning defense, government, manufacturing, telecommunications, utilities, real estate, and education, with a wide range of use cases ranging from network densification and mobile offload to private wireless and industrial IoT. Noteworthy customers include Charter, Comcast, Verizon, the US Department of Defense and Carnegie Mellon University.

The company has driven several significant advancements in 2021. These include the launch of the secondary CBRS spectrum market via its Spectrum Exchange; significant deployments of a dedicated CBRS network for IoT research at Fort Carson, CO, and another for modernization of the Marine Corps Logistics Command warehouse operations in Albany, GA; along with deployment of the first CBRS networks in Puerto Rico and the U.S Virgin Islands, delivering service to the region's Wireless Internet Service Providers (WISPs) and Mobile Network Operators (MNOs). The last year has seen its customer and partner base expand rapidly into new verticals and the number of active CBRS devices grow significantly. As of the publication of this report, the company has more than 350 customers, with more than 90,000 devices deployed, which together indicate strong momentum for the entire market segment.

Accelerating private 5G wireless for enterprise

Federated Wireless is powering innovation in how networks are delivered and reshaping wireless connectivity for cloud-enabled technologies. The company is focused on accelerating enterprise adoption of private wireless networking and delivering new capabilities for network edge innovation. Its goal is to simplify and automate how wireless networks are purchased, deployed, provisioned, and managed, making it easier for organizations to customize their network to business requirements, and speed time to market with advancements in IoT, VR/AR, and other digital technologies.

Critical to the Federated Wireless strategy is expanding its edge solutions, which it will achieve through collaboration with hyperscale providers that have been growing and strengthening over the past two years, including AWS, Intel, HPE-Aruba, JMA, Cisco, and others. The company's top priorities include:

·     Investing in cloud-native tools to empower edge innovation, including automation, application analytics, and zero touch provisioning (ZTP);

·     Mobilizing the ecosystem with a heightened focus on relationship management, business development, and sales enablement;

·   Expanding product capabilities for sharing in 6 Ghz and promoting its adoption domestically and internationally; and,

·      Ramping up commercial capacity with increased investment in Sales, Marketing, and Customer Success.

Investing in growth

In addition to significant investments in product development, Federated Wireless made key appointments to the company's leadership team in 2021, including:

·      Industry veteran Chris Swan joined as Chief Commercial Officer to focus on delivering the very significant growth opportunity for the business with leadership over sales, marketing, and customer care.

·      Strategic operations and finance executive Loren Buck joins as Chief Financial Officer.

Financially, Federated Wireless saw 3.8x revenue growth in 2021 and expects continued momentum through 2022 and beyond.

Subsequent to year end, Federated Wireless raised $72 million through a two stage Series D funding to fuel growth in 5G private wireless and other strategic focuses. An affiliate of Cerberus Capital Management, L.P. led the round, with affiliates of Fortress Investment Group, Giantleap Capital, and LightShed Ventures added as new investors with existing investors Allied Minds and GIC, Singapore's sovereign wealth fund, also participating.

Holdings and valuation:

·      Date of Last Funding Round: May 2022

·      Post-Money Valuation: $302 million

·      Co-Investors: Cerberus Capital Management LLP and GIC (Singapore's sovereign wealth fund)

·      Allied Minds' Fully-Diluted Ownership: 23.96%

3)   OcuTerra Therapeutics, Inc. (ordinary and preference share holding)

OcuTerra is a clinical stage ophthalmology company developing innovative small molecule drugs for non-invasive use in treating ophthalmologic diseases that are currently treated in the early stages with a "watch and wait" protocol.  The company has announced a Series B financing of $35m that will be used to fund a Phase 2 trial starting in Q3 2022 of its non-invasive eyedrops (OTT166) for use in early active management of Diabetic Retinopathy.  It will be studied in the trial for the treatment of moderate to severe non-proliferative and mild proliferative Diabetic Retinopathy. Diabetic Retinopathy is a disease that results in loss of vision for diabetic patients.

Phase 1b clinical trials of OTT166 eye drops in patients with diabetic retinopathy and wet AMD have demonstrated safety, tolerability and clear clinical evidence of biological activity.  OTT166 is a novel small molecule selective integrin inhibitor that has been engineered to have the required physiochemical characteristics to be able to reach the retina , where the damage occurs, from eye drop application.  The current standard of care involves injections into the eye and/or laser treatment.  The OcuTerra drops are intended to be used earlier in the treatment of Retinopathy, potentially delaying or eliminating the need for intravitreal injections. If the Phase 2 trial is successful, the next step would be a Phase 3 trial involving more patients and if successful in meeting the clinical end points application to the FDA for approval. 

The company believes that it is well positioned to transform the treatment of Diabetic Retinopathy.  Currently the company is preparing for the start of the Phase 2 trial, and is building out its managerial and clinical team.

Allied Minds is a minority shareholder in OcuTerra and as such there is no current intention to invest any further capital in the company.

Holdings and valuation:

·      Date of Last Funding Round: November 2021

·      Valuation: $51.3 million

·      Co-Investors: Various third parties

·      Allied Minds' Issued and Outstanding Ownership: 17.06%

·      Allied Minds' Fully-Diluted Ownership: 12.33%

4)   Orbital Sidekick Inc. (Orbital) (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 SideKick has grown significantly over the past 12 months, expanding the team from 12 to 39. The Company is expected to reach 65 employees by the end of 2022. Orbital has invested heavily in product development, engineering, and analytics, and is now growing the Sales & Marketing Team ahead of the launch and commissioning of 6 satellite GHOSt constellation beginning in Q3 of 2022. The Company's technology demonstration mission - Aurora - successfully validated its hyperspectral sensor technology performance in a space environment and served as a dress rehearsal for the GHOSt constellation. The company has recently signed a contract with one of the largest pipeline operators in North America - Energy Transfer - to deliver recurring monitoring services from its satellites through 2023. The Company recently signed a significant work program contract with In-Q-Tel, and expects to expand its footprint within the defense & intelligence community in 2022 and beyond. The Company is also developing products for the mining and agriculture industries, along with fire fuel and carbon mapping capabilities.

Orbital has sufficient cash to fund the business until August 2022. Orbital is in advanced talks with potential investment firms and strategic partner groups to secure the required funding. The additional funding will allow the company to add its product to an additional six satellite launches.

Holdings and valuation:

·      Date of Last Funding Round: April 2021

·      Post-Money Valuation: $46 million

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

·      Allied Minds' Issued and Outstanding Ownership in respect of preference shares: 26.52%

·      Allied Minds' Fully-Diluted Ownership: 24.11%

5)   Concirrus (acquirer of Spark Insights Inc.) (common shares in Concirrus)

On 1 November 2021, Allied Minds announced the disposal of portfolio company Spark Insights, Inc. to Concirrus, a private UK-based insurance technology company. The disposal is valued at $700,000 USD and was paid in Concirrus stock.

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

On 28th March 2022, Allied Minds announces that it had completed the disposal of its residual shareholding in Touch Bistro for $5.5m CAD ($4.4m USD) in line with its strategy of monetising its investment portfolio. Of the sale proceeds, $4.97m CAD has been received and $0.53m CAD is to be held in escrow, with an initial release date in Q3 2022, subject to any then outstanding claims.

Key Performance Indicators

In 2020, the Company measured its performance through the percentage level of achievement of management by objectives (MBOs). These objectives sought to link financial, operational, technical and other performance milestones established by the Board directly to remuneration and KPIs. In 2021, however, MBOs were removed following changes in the Company's management structure and the  absence of Executive Directors.

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, as further set out in the director compensation schemes previously disclosed to the market.

1.   Increase Company Non-Executive Director (NED) engagement at each portfolio company. We have continued to hold NED roles on the board of each of the significant portfolio investments.

2.  Provide strategic, operational and financing support and assistance to the portfolio companies through representation on the board of each portfolio company. We have continued to provide this support to each of the portfolio companies throughout the period. 

3.  Critically evaluate and monitor portfolio company progress with objective of maximising shareholder return on investment (ROI). We have critically evaluated the performance and this has resulted in the investment portfolio changes in the period.

4.   Manage HQ cash and expenses to maximise shareholder ROI, HQ expenses in the current year were $5.69m (2020: $7.11m).

We note that as a result of the strategic changes announced 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 2021, $68.5 million was invested into existing portfolio companies. This included $6.8 million invested by Allied Minds, with $61.7 million coming from third-party investment, to further accelerate the development of the Group's existing companies. 

Consolidated Statement of Comprehensive Loss

Revenue increased by $1.0 million, to $1.5 million in 2021 (2020: $0.5 million). This increase is primarily attributable to revenue from existing and new contracts in 2021 at BridgeComm. Cost of revenue at $0.4 million (2020: $0.2 million) was lower as a percentage of revenue, when compared to the prior year, mainly due to the nature of the revenue being delivered.

Selling, general and administrative (SG&A) expenses increased by $0.1 million, to $10.6 million (2020: $10.5 million). This increase was mainly due to additional professional fees incurred in regards to the latest financing at OcuTerra Therapeutics in the first half of 2021.

Research and development (R&D) expenses decreased by $2.1 million, to $2.6 million (2020: $4.7 million). The decrease was primarily due to the deconsolidation of two subsidiaries in 2021. The remainder of the decrease reflects the net effect from R&D spend at the remaining subsidiaries.

Net finance cost increased by $1.0 million in 2021 to $2.8 million (2020: $1.8 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 and $0.1 million increase of a convertible note payable due to the fair value adjustment. This increase was offset by the $5.2 million decrease of the subsidiary preferred shares liability balance at BridgeComm as a result of IFRS 13 fair value accounting. Lastly, interest expense, net of interest income, was $0.2 million in 2021 (2020: $23 thousand).

Other expenses decreased to $1.3 million (2020: $38.8 million) reflecting $14.2 million of gain on deconsolidation of OcuTerra and Spark Insights, $0.4 million of gain from Paycheck Protection Program (PPP) loan forgiveness and $0.3 million of compensation from third parties for disposal of fixed assets, offset by $13.9 million loss on investments held at fair value as well as the company's share of loss of $2.3 million from its associates.   

As a result of these factors, total comprehensive loss decreased by $39.3 million to $16.3 million (2020: $55.6 million). Total comprehensive loss attributed to the equity holders of the Group was $15.6 million (2020: loss of $53.1 million) and $0.7 million loss (2020: $2.5 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 decreased by $0.8 million to $0.8 million (2020: $1.6 million), reflecting depreciation expense of $0.5 million, impairment loss of $0.5 million offset by $0.2 million in gain on disposal of fixed assets.

Investments at fair value decreased to $33.9 million (FY20: 41.6 million). The change reflects the recognition of a $5.7 million investment as a result of the deconsolidation of OcuTerra and $0.7 million investment as a result of the disposal of Spark Insights. The increase was offset, in part, by a loss of $14.1 million of the fair value accounting for other investments held at fair value.

Right-of-use assets decreased to $0.4 million (2020: $0.6 million) primarily related to depreciation of $0.3 million offset by recognition of a new lease entered into by BridgeComm of $0.1 million in 2021.

Current assets

Cash and cash equivalents decreased by $14.8 million to $9.7 million (2020: $24.5 million). The decrease is mainly attributed to $9.1 million of net cash used in operations, $18.7 million cash used in investing activities, offset by $13.0 million cash provided by financing activities.

Trade and other receivables decreased by $0.1 million to $5.9 million (2020: $5.8 million) due to a cumulative decrease in trade receivables and prepaid expenses of $0.1 million as a result of deconsolidation of OcuTerra in the first half of 2021.

Other financial assets have increased by $2.8 million to $5.1 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 offset by Allied Minds' $4.3 million investment in Federated Wireless in the form of SAFEs (simple agreements for equity).

Current liabilities

Subsidiary preferred shares decreased by $5.2 million to $1.3 million (2020: $6.5 million) primarily driven by $5.2 million in IFRS 9 fair value adjustment at BridgeComm for the year.

Deferred revenue increased by $1.3 million to $4.9 million (2020: $3.6 million) primarily due to new revenue contracts recognised at BridgeComm in 2021.

Loans decreased by $0.1 million (2020: $3.1 million) primarily due to forgiveness of PPP loans.

Non-current liabilities

Lease liabilities decreased by $1.0 million to $0.8 million (2020: $1.8 million) primarily due to lease payments offset by issuance of a new lease at BridgeComm in second half of 2021.

Other non-current liabilities decreased by $1.4 million (2020: $1.4 million) primarily due to loan payments of convertible promissory notes at OcuTerra Therapeutics.

Equity

Net equity decreased by $13.6 million to $44.7 million (2020: $58.3 million) reflecting the combination of comprehensive loss for the period of $16.3 million, repurchase of ordinary shares of $0.7 million offset by the effect of deconsolidation of OcuTerra and Spark Insights of $3.2 million and $0.2 million charge due to equity-settled share based payments.

Consolidated Statement of Cash Flows

The Group's net cash outflow from operating activities of $9.1 million in 2021 (2020: $17.1 million) was primarily due to the losses for the year of $16.3 million offset by      the net effect from movement in working capital of $1.7 million, other finance charges of $2.6 million, the adjustment for non-cash items such as depreciation, amortisation, impairments, share of net loss of associate, gain on deconsolidation, loss on investments held at fair value and share-based payment expenses of $2.9 million.

The Group had a net cash outflow from investing activities of $18.7 million in 2021 (2020: $11.3 million). This outflow was predominately related to the deconsolidation of OcuTerra and Spark Insights totaling $13.3 million, the $0.9 million investment made in the Orbital Series A funding and $4.3 million investment made in Federated in the form of a SAFE.

The Group's net cash inflow provided by financing activities of $13.0 million in 2021 (FY20: $37.7 million) reflects, in part, proceeds from issuance of preferred shares in subsidiaries of $14.6 million and the receipt of $0.2 million of PPP loans. The increase was offset by $1.1 million in lease payments and $0.7 million payments to repurchase the company's own shares.

The Group's strategy is to maintain healthy, highly liquid cash balances that cover its operating expenses as a publicly listed entity and are readily available for small, follow-on investments in portfolio companies 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 for the next three years, as required pursuant to the 2018 version of the UK Corporate Governance Code, in the Management and Governance section of the Annual Report and Accounts at pages 26 to 27.

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 Directors, management and/or investment team, along with senior management and independent directors and/or advisors, as appropriate, of such portfolio company.

·      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 portfolio companies expect 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.

·      Non-Executive Directors seek 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.         Certain of the portfolio companies currently have 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 certain portfolio companies 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. As announced on 31 March 2022 and updated on 31 May 2021, the Chairman of the Company has announced his intention to resign from the board of directors following the publication of these annual report and accounts for the year ended 31 December 2021. The Company has an urgent need to appoint new directors to the board in order to ensure effective management to implement the execution of its strategy.

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. The Company also needs to identify and appoint new non-executive directors to the board of the Company with sufficient experience to execute the Company's strategy.

Mitigation:

·      The Company is working with its largest shareholders to identify and appoint new non-executive directors to the board of directors of the Company.

·      Senior management continually monitor and assess compensation levels to ensure the Group remains competitive in the recruitment 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 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 in one of its portfolio companies, and more than 20% of all of its other portfolio companies (except TouchBistro, OcuTerra and Concirrus), and intends to continue to try to maintain significant influence in portfolio companies.

·      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; and

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

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 the next three years.  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.

·      The Company recognises the need to identify and appoint new non-executive directors to the board of the Company with sufficient experience to execute its strategy. It is working with its largest shareholders to identify and appoint new non-executive directors to the board of directors of the Company.

COVID-19

As Allied Minds navigates the continued consequences of the coronavirus pandemic, we continue to closely monitor, assess, and respond to the impacts of the pandemic. The Group took 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 the consequences of the coronavirus pandemic have had varying degrees of commercial impact across the portfolio in the past year, the actions and mitigation put in place by the Group enabled day-to-day operations to continue effectively across the portfolio.  Allied Minds remains in close communication with all customers, suppliers and partners to collaborate on how to best support each other's needs in the post-pandemic environment.

Ukraine

The Board has considered the potential impact on the Group of the current situation in Ukraine. The Group has no operations in Russia, Ukraine or Belarus and, as such, does not expect and direct, material impact on its business. Any possible impact to the Group would likely manifest itself in inflationary pressure, and deterioration in global economic performance and confidence. These impacts are being monitored closely by the Board.

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 on pages 53 to 56 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                                

14 June 2022

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION