Amphion Innovations : Preliminary Results for the year ended 31 December 2015

ff42013a-2df8-427f-a516-4cc9064dad18.pdf 23 June 2016 Amphion Innovations plc Final Results for the year to 31 December 2015

London and New York, 23 June 2016 - Amphion Innovations plc (LSE: AMP) ("Amphion" or the "Company"), the developer of medical and technology businesses, today announces its audited final results for the year to 31 December 2015 (the "Period").

Financial Highlights:

• Net Asset Value per ordinary share in the Company ("Ordinary Shares") was 3.8 pence (US

  $0.055)* at Period-end, an increase from 0.7 pence (US $0.01) per Ordinary Share at 31 December 2014;

• Raised £2.1 million through the placing of new Ordinary Shares (June 2015) and the exercise of warrants throughout the Period;

• Cash resources as at Period-end of approximately US $0.9 million; and

• Reduced total liabilities by US $1.4 million during the Period.

  Partner Companies' Highlights :

• Successful IPO of Partner Company Motif Bio plc ("Motif") in April 2015, raising £2.8 million at 20 pence per Motif share;

• Motif raised a further £22 million at 50 pence per share in July 2015 with a placing of new Motif shares with institutional investors;

• Independent tests on Motif's lead antibiotic product iclaprim showed it to be effective in vitro against a range of Gram-positive bacteria, and was found to be 16 times more potent than trimethoprim, an existing synthetic antibiotic used to treat bacterial infections; and

• Kromek Group plc ("Kromek") raised £11 million in August 2015 through a placing of new Kromek shares.

  Post-Period Highlights:

• Motif began dosing the first patient in the Phase III iclaprim trials (March 2016);

• Loans in the amount of US $6,308,600 owing to the estate of former Chairmen restructured;

• Convertible Promissory Notes in the amount of £5,707,738 amended and extended

* Exchange rate at 31 December 2015 - 1.4746.

Richard Morgan, CEO of Amphion Innovations plc commented:

"The rise in our Net Asset Value per Ordinary Share was mainly due to the increase in the value of our holdings in Motif Bio plc. Following its successful IPO in April 2015, Motif concluded a financing in July to raise £22 million (before expenses) in a placing with several leading institutional investors, at a price significantly higher than the IPO price. We believe Motif has a very bright future and is now on its way to becoming a significant player in the antibiotic market, which has a growing need for novel therapies. "We are committed to working closely with Motif to help it achieve its goals. In addition, we now have the opportunity to move forward one or two other Partner Companies and, for the first time in many years, to begin to explore the possibility of adding to Amphion's portfolio. We look forward to the future with renewed confidence and to being able to report further progress from our Partner Companies in due course."

Contacts:

Amphion Innovations

Charlie Morgan

+1 212 210 6224

Yellow Jersey PR

Charles Goodwin / Dominic Barretto

+44 (0)7747 788 221

Panmure Gordon Limited (Nominated Adviser and Corporate Broker) Freddy Crossley / Duncan Monteith (Corporate Finance)

Charlie Leigh-Pemberton (Corporate Broking)

+44 (0)20 7886 2500

Northland Capital Partners Limited (Joint Corporate Broker) Patrick Claridge / David Hignell (Corporate Finance)

John Howes (Corporate Broking)

+44 (0)20 3861 6625

Plumtree Capital Limited (Financial Adviser) Stephen Austin

+44 (0)20 7183 2493

+646 568 7502

Chief Executive Officer's Statement Financial Results and Net Asset Value

Revenue in 2015 was US $519,855 (2014: US $484,700) while total administrative expenses were US

$4,680,212 in 2015 (2014: US $3,494,351). As a result, the operating loss for the year was US

$4,160,357 (2014: US $3,009,651). Revenue remained below that of prior years due partly to the absence of licensing income from DataTern and partly from the inability of our Partner Companies to contribute management fees.

Total administrative expenses have at least two different components: the general overheads and operating costs of the parent company and the expenses incurred within and by DataTern, our wholly- owned subsidiary. The latter are consolidated into the total but are dictated by the activity related to the IP licensing programme, which is discussed further below. The former includes the write-down of fees and other income due from the Partner Companies, which are now judged to be uncollectable, and also includes certain expenses related to the fund-raising activities described further below. General overhead and operating expenses excluding expenses related to DataTern, the write down of receivables and the fund-raising expenses, were again tightly controlled at US $1,769,809 (2014: US

$1.5 million).

During the year, the Company was able to raise capital from the equity capital markets for the first time in seven years. In April, holders of warrants associated with an institutional lender elected to exercise all their warrants, generating approximately £581,000 in net proceeds to the Company. In June the Company raised additional capital through a placing of new Ordinary Shares, with net proceeds to the Company of circa £1.54 million before expenses. In addition, in June and July the Company completed an exchange of Kromek shares for Convertible Notes to those note holders who had duly notified the Company in December 2014. Partly as a result of these financing activities, the Company's total liabilities decreased by US $1.41 million over the year and, as at Period-end, the Company's cash balance was US $936,981.

Following the successful IPO of Motif on London's AIM market in early April 2015, Motif's share price rose from 20 pence at the IPO to a high of 70.75 pence at the end of June. At the end of the year, the share price was 42.75 pence. As a result, the value of Amphion's holdings in Motif rose from US $13.2 million at the end of December 2014 to US $27.0 million at the end of December 2015. This increase was the main factor behind the improvement in Amphion's Net Asset Value per Ordinary Share to 3.8 pence at 31 December 2015. At the same time the share price of Kromek finished the year at 35.5 pence, which was almost exactly where it started. Since the start of 2016, the Kromek share price has fallen to 29 pence, while Motif's share price has remained broadly unchanged and is currently 47.5 pence. Motif and Kromek also completed substantial financings in July and August 2015 respectively and have sufficient financial resources relative to their current operating costs.

Amphion's holding of intellectual property assets is valued at amortised cost of US $275,016. In addition to the initial purchase of these IP assets from our Partner Company, FireStar Software, Amphion has made significant additional investment in these assets, which has been expensed as incurred and the value of those assets continues to be carried only at amortised historical cost. The Directors believe that the realisable value of the intellectual property assets held by DataTern is substantially in excess of the carrying value. Further to this, the incremental investments being made in the pursuit of the parties infringing DataTern's IP will generate a significant profit. We believe that if we are successful in concluding licensing agreements with the various infringing parties at levels that meet our expectations, the Company's NAV per Ordinary Share could be significantly higher.

Motif Bio plc

On 2 April 2015, Motif successfully completed its IPO and admission to AIM, raising £2.8 million at 20 pence per ordinary share. On 23 June 2015, Motif concluded a conditional placing of 44 million new ordinary shares at a placing price of 50 pence per ordinary share with institutional investors to raise

£22 million. On 22 July 2015, the FDA designated iclaprim as a Qualified Infectious Diseases Product ("QIDP") for hospital acquired bacterial pneumonia ("HABP"). This satisfied the final condition of the placing, with admission of the 44 million new ordinary shares occurring on 27 July 2015. On 22 July 2015, the Company reported that the FDA had also designated iclaprim as QIDP for acute bacterial skin and skin structure infections ("ABSSSI"), the second of two serious and life threatening infections for which Motif applied for QIDP status. With QIDP designation, iclaprim is now eligible for a total of 10 years of market exclusivity from the date of approval.

The decision by Motif to focus on its antibiotic programme has proven to be timely given the growing recognition of the worldwide problems caused by antibiotic resistance. In July 2014, Prime Minister David Cameron announced the launch of a global taskforce, under the leadership of Jim O'Neill, former chairman of Goldman Sachs Asset Management, to coordinate an international effort to seek new therapies to combat antibiotic resistant superbugs. Prime Minister Cameron commented: "If we fail to act, we are looking at an almost unthinkable scenario where antibiotics no longer work and we are cast back to the dark ages of medicine where treatable infections and injuries can kill once again". Motif's mission is to address this global health crisis by developing new antibiotics that work in different ways to those commonly used today.

Iclaprim has a novel mechanism of action and enjoys a number of important clinical and commercial attributes, such as a low propensity to develop resistance, which has been demonstrated in vitro. Iclaprim was originally developed by Hoffman-La Roche Inc. and completed comprehensive development in 2008, including two Phase III trials with over 900 patients, half of whom were treated with this antibiotic. Although the FDA declined to approve the drug at the time, despite having met the original goals agreed with the agency, the FDA confirmed that they were satisfied with the safety profile of iclaprim and this was confirmed in Motif's April 2015 meeting with the agency. On 2 March 2016, Motif announced that the first person to enter the new Phase III trial had been screened and dosed. The trial is expected to take about 18 months and, in light of the extensive development history and the improvements in the trial design, Motif believes the drug will meet the new endpoints. Subject to the necessary regulatory approvals, Motif expects to begin marketing the drug in 2018.

DataTern and the Intellectual Property Licensing Programme

DataTern Inc. ("DataTern"), a wholly owned subsidiary of the Company, announced in September that it received a favourable ruling by the U.S. District Court in Massachusetts (the "Court"), which denied two motions for summary judgment filed by MicroStrategy Inc. ("MicroStrategy") seeking dismissal of DataTern's claims on the grounds of validity and infringement. In May 2015, there was a hearing on the two motions: one motion argued that DataTern's '502 patent is invalid under section 101 of the United States Patent Act, and the second argued that MicroStrategy did not infringe the '502 patent.

The Court found that the '502 patent solved a specific problem in computing using an inventive concept and concluded that the invention was eligible for patent protection under the U.S. Supreme Court's most recent precedent. On the second motion, concerning the issue of infringement, the Court denied MicroStrategy's motion seeking a determination that it did not infringe because its Business Platform did not use an "object model", leaving the door open to revisit related issues in the future.

These were important and favourable rulings, taken together with the ruling from the Federal Circuit Court of Appeals received in late December 2014, in its appeal in the MicroStrategy case, which the