TIDMNLG
RNS Number : 2323B
Arria NLG PLC
15 June 2016
15 June 2016
Arria NLG plc
("Arria", the "Company" or the "Group")
Half Year Results
Arria NLG plc (AIM: NLG), a technology leader in Natural
Language Generation ("NLG"), is pleased to announce its half year
results for the six month period ended 31 March 2016.
Operational Highlights
-- Major new product launch initiative announced in the period -
launch of Recount, our first SaaS product and SDK Developer Cloud,
our software development kit, targeted for second half of the
year.
-- Platform product sales continue to strengthen.
-- Number of Platform product clients contributing to revenue in
the period continued to increase to 6 for the six months ended 31
March 2016 (HY15: 5).
-- Major partnership agreement announced in the period with Genpact Inc.
-- Client reach continues to broaden entering into US utilities,
business process outsourcing and information technology
services.
-- Successful continuation of patent program with a further 3
patents announced in the period increasing the total patent
portfolio granted by 75% from 4 to 7. Subsequent to the period end
a further two patents were granted bringing the total to 9.
Financial Highlights
-- Despite total revenues decreasing to GBP226k (HY15: GBP904k)
following the loss of the Shell contract in April 2015, total non
oil and gas revenues increased 133% to GBP226k (HY15: GBP97k).
-- Total costs excluding amortization and share based payment
charges increased 19% to GBP3.4 million (HY15: GBP2.8 million)
reflecting investment in new product development strategy.
-- Operating loss excluding amortisation and share based payment
charges increased by 62% to GBP3.2 million (HY15: GBP1.9 million)
reflecting loss of oil and gas client revenues and investment in
new product strategy.
-- Loss before tax was GBP8.4 million (HY15: GBP2.7 million).
-- Concluded successful placing of 18.75 million ordinary shares
at 32p for an initial aggregate consideration of GBP6.0 million
(subject to sharing agreements and variable upwards or downwards -
(see notes 7 and 14 for further details).
-- Concluded the issue GBP1.573 million convertible loan notes
with attached 4.482 million unlisted B Warrants in the period ended
31 March 2016.
-- Subsequent to the period end concluded further fundraising of
GBP262,000 by way of convertible loan notes and issue of 0.761
million unlisted B Warrants all of which has been received (see
note 17 for further details).
-- The Group is in the process of seeking further fundraising,
including listing on the New Zealand and Australian Stock
Exchanges, to provide adequate working capital to enable the Group
to continue as a going concern The Company has plans in place to
raise capital in the short term as needed. (see note 2 for further
details).
Commenting on the results, Stuart Rogers Arria Chairman and CEO
said "We have continued to make good and steady progress across the
first half of the financial year in delivering the Company's
strategic plan. In addition to growing new strategic relationships
with large companies such as Genpact, and continuing to develop our
valuable and growing portfolio of patents, we have invested in
future growth by creating further business lines. Our first
Software as a Service (SaaS) product, called Recount, is being
brought to market in the summer of 2016. Recount provides small and
medium sized business owners with a full-time virtual financial
adviser. Further, Arria NLG will be licensing its Software
Development Kit (SDK), the NLG Developer Cloud. We believe that we
remain well positioned to take advantage of the business trends
currently being seen and where ever-challenging business needs are
met by new and innovative Artificial Intelligence technologies such
as ours which our shareholders have helped us bring to the market.
We would like to take this opportunity to thank our continually
supportive investor base and our employees for their hard
work."
For further information, please visit www.arria.com or
contact:
Arria NLG plc Tel +44 (0)20 7100 4540
Stuart Rogers
Chairman and Chief Executive
--------------------------------- ---------------------------------------
Allenby Capital Tel: +44 (0)20 3328 5656
Nominated Adviser & Joint Broker
Nick Naylor
Jeremy Porter
James Reeve
--------------------------------- ---------------------------------------
MSL Capital Markets Tel: +64 (0)4 472 2716
Lead Manager
Andrew McDouall
Justine Dunnett
Peter Lynds
--------------------------------- ---------------------------------------
Stockdale Securities Tel: +44 (0)20 7601 6100
Joint Broker
Antonio Bossi
Robert Finlay
--------------------------------- ---------------------------------------
IFC Advisory Tel: +44 (0)20 3053 8671
Financial PR and IR tim.metcalfe@investor-focus.co.uk
Tim Metcalfe graham.herring@investor-focus.co.uk
Graham Herring heather.armstrong@investor-focus.co.uk
Heather Armstrong
--------------------------------- ---------------------------------------
Ruder Finn Tel: +1 541-326-5847
PR (USA) Tel: +1 203-246-1304
Scott Beaver (West Coast)
Brianna Mulligan (East Coast)
--------------------------------- ---------------------------------------
Arria NLG
Arria NLG's core product is known as the Arria NLG Platform, a
form of artificial intelligence software specialised in extracting
information from complex data sources and communicating that
information in natural language (i.e. as if written by a human).
The scientific foundation for the Arria NLG Platform is based on
more than 30 years of research and development by the founders of
Arria Data2Text Limited at the University of Aberdeen. For
additional information, visit www.arria.com. Follow Arria NLG on
Twitter, LinkedIn, Google+ and YouTube.
CHAIRMAN'S STATEMENT
I am pleased to present our financial results for the six months
ending 31 March 2016 and to update you on our progress made during
the first half of this financial year. Arria NLG has made good
commercial and financial progress during the period, as you will
read in the detailed financial sections following this letter. As
we have said frequently, the continued commitment and support from
our shareholders is testament to their ongoing belief in the value
proposition of the Company's NLG capabilities and in particular of
our positioning within the market as the dominating force in
realising the commercial potential of Natural Language
Generation.
Arria NLG is a scientific leader in the development of NLG
tools. Since we were admitted to trading on the AIM market of the
London Stock Exchange in 2013, we have expanded our customer base
and evolved our core NLG technologies in preparation for a series
of global product launches during 2016.
Arria NLG's main asset is a set of software components called
the Arria NLG Platform. The Arria NLG Platform represents the
combined work of leading scientists in the field of NLG, built on
research those scientists began over 30 years ago. The Arria NLG
Platform converts a large range of structured data sources into
rich narrative content and provides written and graphical insights,
recommendations, and forecasts for a wide variety of commercial and
industrial use cases. The Arria NLG Platform is a collection of
tools and systems that have been protected by US patents and patent
applications and are continuously being improved upon.
Progress is reported in three areas: (a) expanding the business
through new client acquisition, (b) expanding the revenue producing
potential of the Company by developing new channels for
distribution of Arria's NLG technologies, and (c) protecting the
intellectual property through patent filings.
Commercial Progress and Business Update
The primary commercial accomplishments of this reporting period
were the announcement of the framework agreement with Genpact and
its subsequent extension into multiple production applications
(announced following the period end), gaining one large US-based
utility customer, and establishing a framework agreement with INOVX
Solutions.
During the reporting period the Company signed a Framework
Agreement for configuration, development and licensing of
applications using Arria NLG's patented NLG software with a major
electric utility in the eastern region of the United States.
The contract outlined a statement of work and costs for an
initial application to create a problem-detection dashboard in one
of the utility's regional operating units, with specific
deployment, licensing and payment schedules. Additionally, the
framework agreement provided the terms for future configuration,
deployment and licensing of further applications using Arria's NLG
technologies.
INOVX Solutions Inc. is a global leader in advanced asset
integrity management software in the oil and gas industry, that is
partnering with Arria NLG's unique NLG Platform to provide
real-time advanced data analysis and commentary to INOVX's 3D asset
modeling software. Through its 'Asset Virtualization(R)' INOVX
generates virtual environments to allow field assets to be
monitored and managed through interaction with 3D models. This
partnership will further enhance the INOVX user's experience by
communicating expert insights written up by Arria's NLG Platform in
real time.
Embedded subject matter expertise is a key feature of the Arria
NLG Platform. It enables companies, such as INOVX, to capture years
of specialized field knowledge into software that the company and
its users can then retain for years to come. Arria NLG uses its
patented Natural Language Generation technology to create a
'Virtual Data Scientist' to analyse and communicate what is
happening in the data using the language and terminology specific
to the company and its users.
The partnership joins two leading Artificial Intelligence
technologies at a crucial point of development for 'giving a voice
to the Internet of Things'. With the application of Arria's NLG
Platform, INOVX will make a marked step forward to innovate its
product with the power of advanced NLG from Arria NLG.
Genpact began in 1997 as a business unit within General
Electric. In January 2005, Genpact became an independent company to
bring their process expertise and unique capabilities in lean
management to clients beyond GE, and then in August 2007, they
became a publicly-traded company (NYSE: G) based in Silicon Valley.
Genpact is the architect of the Lean DigitalSM enterprise and a
global business process outsourcing and information technology
services company with a market capitalization in excess of US$5
billion.
Under the framework agreement with Genpact, Arria NLG supplies
its natural language generation and other artificial intelligence
technologies to Genpact to provide real-time advanced data analysis
and commentary while automating credit reporting and financial
planning and analysis for Genpact's customers. The partnership
offers Arria NLG the opportunity to leverage the global reach of
Genpact's expansive real-world business processing
environments.
To support this client growth and to help extend Arria NLG's
technologies into new channels of distribution, successful capital
raising activities continued during the reporting period. We
announced a successful funding by way of convertible loan notes in
March, and earlier in the period the Company announced a
subscription agreement placing 18.75 million ordinary shares at 32p
for an initial aggregate consideration of GBP6.0 million subject to
sharing agreements with Lanstead, a specialist international
investment firm, of which to the date of this report the Company
has received GBP1.371 million (see notes 7 and 14 for further
details).
A Growing Portfolio of NLG Patents
Arria NLG has been awarded nine US patents in the last three
years, of which six cover advances in core technology used in the
Arria NLG Platform. The other three patents cover features
(including referring expression generation and user directed
reporting) that would be desirable features of any NLG system,
including competitors' NLG systems. Arria NLG has many more US
patents pending and continues to file patent applications on its
most significant innovations. The 20-year terms granted by these
patents will provide competitive obstacles to competitors
attempting either to incorporate covered feature enhancements to
their existing NLG systems or to upgrade their systems to the level
of sophistication offered by the Arria NLG Platform.
During the reporting period, Arria NLG was granted three
patents, with the following specifics:
Method And Apparatus For Referring Expression Generation - which
covers an essential component of Arria NLG's products for
information analysis and delivery. The Company's products automate
the real-time analysis and delivery of reports, whilst also
generating language that follows intuitive rules for how humans
communicate and comprehend information. The innovations embodied in
the new patent allow a report's second or subsequent mention of a
complex machine, device or process to be expressed in a word or
two, rather than by its full name. For example, the operator of an
electrical power plant, who receives the actionable intelligence
contained in an Arria NLG report, is not required to read in full
repeated references to the same components of a particular machine
after the report establishes that this component of this machine is
being discussed.
Method And Apparatus For Updating A Previously Generated Text -
which covers a key component of Arria NLG's information analysis
and delivery products. The Company's products not only automate the
real-time analysis and delivery of reports, they also dynamically
update the reports as frequently as the user desires, or in
response to changes in the data such as alert thresholds being
crossed more frequently or to a greater degree. A less intelligent
NLG system typically re-writes the report, often a very different
report from the one originally created, whereas the new patented
features allow the Arria NLG Platform to update the existing report
in a more concurrent fashion, an approach that a human expert would
take when updating his or her own work.
Method and Apparatus for Situational Analysis Text Generation -
a continuation of the US patent application that resulted in US
Patent No. 8,762,134, bearing the same title. The new patent claims
additional innovations disclosed, but not claimed in US Patent No.
8,762,134. Arria NLG's patents and patent applications cover
critical NLG processes that the Company currently applies to
innovative applications delivered to our growing list of global
clients, as well as to a range of SaaS-delivered packaged
applications that are in development for a number of markets and to
the Company's proprietary Software Development Kit.
Arria NLG's expanding patent portfolio strengthens its plan to
become the global leader in automating data analysis and
information delivery in any industrial or consumer setting.
Future Commercial Direction
Our main assets are our people and the set of software
components called the Arria NLG Platform. Arria NLG's business
direction is to license the NLG Platform via three different
service offerings. First, we use the NLG Platform to build bespoke
applications for large corporate customers, such as Genpact and
INOVX, who need to automate reporting across their businesses.
Second, we are building our own Software as a Service (SaaS)
products using the NLG Platform. And third, we provide key elements
of the NLG Platform as a Software Development Kit (SDK) that allows
third-party developers to build narrative extensions to their own
applications. Three different uses of Arria NLG's technologies,
three different distribution channels and three robust service
offerings to generate potential future revenues.
Our first SaaS product, called Recount, is being brought to
market in the summer of 2016. Recount provides small and medium
sized business owners with a full-time virtual financial adviser.
Recount takes business data from financial management systems
(beginning with Xero and QuickBooks, then rolling out to other
cloud based accounting systems, business intelligence and CRM
products) and provides insights, perspective and guidance via rich
narratives that contain both written and graphical explanation. The
usual charts and dashboards provided by such systems are improved
upon via concise written insights and the kind of insightful
commentary usually provided by a user's accountant, analyst or
sales manager. This is not just another robo-advisor: it's a
sophisticated explanatory tool that communicates the meaning and
significance of financial data in natural language.
With their decades of experience, Arria NLG's scientists and
engineers have identified the key functionalities that need to be
available to anyone who wants to build a sophisticated NLG
application. Until recently we have only leveraged those learnings
internally through automation of software development steps, making
it possible for our teams to quickly build new applications using a
tool set building on a common code base. We are now confident that
our tool kit is at a level of maturity where it makes sense to
license the toolkit to third parties as a Software Development Kit
(SDK), so that software developers who lack NLG expertise can build
NLG applications in the same way that Arria NLG does.
To provide a commercial model for this enterprise, Arria NLG is
building what we call the NLG Developer Cloud. This is a collection
of software components, associated tools, resources and
documentation that together enable experienced developers to create
NLG applications. The Arria NLG Platform is by default provided as
a hosted service in the cloud, supporting revenue models based on
usage. For customers who require on-premise use for data security
or other reasons, installation of the NLG Platform on the
customers' servers is also possible.
FINANCIAL REVIEW
In the September 2015 financial statements the Chairman's letter
identified the extension of Arria NLG's core NLG technology into
two new directions - the launch of our first stand-alone SaaS
product targeting the financial management and reporting market,
and the release of our SDK. The financial performance of the Group
in the subsequent 6 months reflects the first stages of the
successful execution of the strategic plan in the first half of
this financial year. Key financial highlights from the period are
illustrated below;
-- Despite total revenues decreasing to GBP226k (HY15: GBP904k)
following loss of the Shell contract in April 2015, total non oil
and gas revenues increase 133% to GBP226k (HY15: GBP97k).
-- Total number of clients contributing to revenue in the period
increased from 5 to 6 as the Group continued to expand its
commercial reach into industry sectors outside of oil and gas.
-- Operating loss excluding amortisation and share based payment
charges increased by 62% to GBP3.2 million (HY15: GBP1.9 million)
reflecting loss of oil and gas client revenues and investment in
new product strategy.
-- Operating costs excluding amortisation and share based
payments charges increased by 31% to GBP3.0 million (HY15: GBP2.3
million). The increase reflects the ongoing investment in new
product development strategy.
-- Average net monthly costs during the period, excluding
non-recurring transaction related costs, amortisation,
depreciation, capitalized software development costs and share
based payments charges were GBP468k (GBP325k (HY15: GBP325k)
representing a 44% increase against the same period in the prior
year.
-- Loss before tax was GBP8.4 million (HY15: GBP2.7 million).
-- Average staff numbers for the period were 63 (HY15: 49). At
31 March 2016, approximately 71% of staff were involved in the
delivery side of the business (HY15: 65%). The percentage of total
staff involved in delivery is expected to increase as staff numbers
grow.
-- At 31 March 2016 the Group had GBP2.1 million net cash (HY15:
GBP1.0 million) and net assets of GBP18.1 million (HY15: GBP21.29
million).
-- On 15 October 2015 a total of 18,750,000 new ordinary shares
of GBP0.001 each in the Company were conditionally subscribed for
by Lanstead, (a specialist international investment firm) at an
issue price of 32 pence per new ordinary share (see note 7 and 14
for further details).
-- During the period 4.55 million Long Term Incentive Plan share
options were issued. This resulted in a share based payment charge
of GBP617,819 (see note 6 for further details).
-- Subsequent to the period end the Company successfully
concluded a subscription for GBP262,000 of convertible loan notes
of GBP1.00 each with certain of the Company's existing shareholders
and other investors, the principal terms of which were the same as
the loan notes allotted on 18 March 2016.
Going Concern
In considering the ability of the Group to meet its financial
obligations as they fall due, the Board has considered the expected
trading performance of the Group, including working capital
requirements and the level of overheads to be funded. The Directors
have prepared a business plan and cash flow forecast for the period
to 31 December 2017.
The forecast contains certain assumptions about future sales,
the gross margins achievable and the level of other operating
expenses. In addition to this business plan, the Directors have
considered various downside sensitivities and management actions
that could be undertaken to ensure the ongoing operation of the
Group. The Group is in the process of seeking further fundraising
in the form of equity or convertible debt, including listing on the
New Zealand and Australian Stock Exchanges, to provide adequate
working capital to support the commercialisation of its Natural
Language Generation technology and enable the Group to continue as
a going concern. The extent and frequency of funding required will
depend on the speed and quantum with which the Group secures
additional profitable revenue growth. The Directors are confident
of securing sufficient additional funding within the next financial
year, for its near term requirements.
Having reviewed the business plan and subject to the
uncertainties described above, the Directors have a reasonable
expectation that the Group will have adequate resources to continue
operating for the foreseeable future. Therefore, the Directors
continue to adopt the going concern basis in preparing the interim
financial statements and these do not include adjustments that
would result if the Group was unable to continue as a going
concern. Should fundraising negotiations prove unsuccessful, the
Group would be unable to meet its debts as they fall due in the
foreseeable future. As a result, the Directors have concluded that
pending successful agreement of additional funding there exists a
material uncertainty which may cast significant doubt over the
ability of the Group to continue as a going concern.
Outlook and prospects
The principal risks facing the business have not changed
significantly during this first half year and are consistent with
the risks disclosed in the Strategic Report within the Annual
Report and Financial Statements for the year ended 30 September
2015.
Growing the base of satisfied customers also should lead to
growing revenues. The overall structure of Arria NLG's business
today is far more robust than that of just two years ago. Within
the last two years, Arria NLG has diversified its customer base,
not only by industry, but by the type of companies we serve. Arria
NLG's strongly supported commercial relationship with Shell was
undone by the historic and unprecedented changes in the oil and gas
market. In the place of this near-singular focus on Shell, Arria
NLG has grown its number of clients, the industrial diversity of
those clients, and attracted several partnership opportunities with
global companies offering business process consulting services.
At the heart of every Arria NLG success story is a client, and
our plan is to grow our customer base, both within the Company's
traditional global corporate market, and also by encompassing the
needs of mid-sized organisations and the software developer
community as well. A fundamental component of Arria NLG's plan is
to strengthen and evolve the capabilities of its core product, the
Arria NLG Platform, and also to package these capabilities to form
two new distribution directions: targeted Software-as-a-Service
(SaaS) offerings to medium-sized businesses and the NLG Developer
Cloud, a software development kit (SDK) that provides a set of
tools for third-party developers to use.
In four short years, Arria NLG has transitioned the technology,
known as Natural Language Generation, from the halls of academia at
the University of Aberdeen to an established and growing business
commercialisation. We have developed real installed applications
with global companies who have a growing appreciation of and
appetite for what Arria's NLG technologies can do for their
businesses.
Arria NLG's four years of growth to this stage have been
achieved due to many fortunate circumstances, for which the Company
is grateful: a growing group of supportive shareholders, insightful
and visionary founders, access to capital, talented, innovative and
loyal employees, strong professional adviser firms, the nature of
the technology itself, and the changing nature of business demands
for faster intelligence and a growing reliance on artificial
intelligence technologies. Arria NLG remains well positioned to
take advantage of these business trends where ever-challenging
business needs are met by new and innovative Artificial
Intelligence ("AI") technologies such as what our shareholders have
helped us bring to the market.
Stuart Rogers
Chairman and Chief Executive Officer
15 June 2016
INTERIM CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Six months ended Year ended
31 March
31 March 2016 2015 30 September 2015
Unaudited Unaudited Audited
Notes (GBP000's) (GBP000's) (GBP000's)
Revenue 8 226 904 1,476
Cost of sales (354) (533) (922)
-------------------- ---------------- -----------------
Gross profit/(loss) (128) 371 554
Administrative expenses
- Share-based payments 6 (1,177) (31) (2,348)
- Amortisation of intangibles (705) (705) (1,410)
- Impairment of intangibles - - (133)
- Other administrative costs (3,024) (2,314) (4,818)
-------------------- ---------------- -----------------
Total administrative expenses (4,906) (3,050) (8,709)
-------------------- ---------------- -----------------
Operating loss 6 (5,034) (2,679) (8,155)
Finance expense 7 (3,389) (24) (117)
-------------------- ---------------- -----------------
Loss before tax (8,423) (2,703) (8,272)
Taxation credit 9 608 178 991
-------------------- ---------------- -----------------
Loss after tax for the period (7,815) (2,525) (7,281)
-------------------- ---------------- -----------------
Other Comprehensive Income
Items that may be subsequently reclassified to profit or loss:
Currency translation differences (12) (26) (11)
Total comprehensive loss for the period (7,827) (2,551) (7,292)
-------------------- ---------------- -----------------
Loss per share
Basic and diluted loss per share 10 (0.06)p (0.02)p (0.07)p
-------------------- ---------------- -----------------
The results reflected above relate to continuing activities.
The above statement should be read in conjunction with the
accompanying notes.
INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30
As at 31 March As at 31 March September
2016 2015 2015
Unaudited Unaudited Unaudited
Notes (000's) (000's) (000's)
ASSETS
Non-current assets
Goodwill 14,353 14,353 14,353
Other intangible assets 11 8,386 9,443 8,605
Property, plant and equipment 12 150 158 148
Other financial assets 5 398 - -
189 174 182
Trade and other receivables -------------- -------------- --------------
23,476 24,128 23,288
-------------- -------------- --------------
Current assets
Trade and other receivables 723 688 289
Other financial assets 5 1,272 - -
2,136 1,016 2,299
Cash and cash equivalents -------------- -------------- --------------
4,131 1,704 2,588
-------------- -------------- --------------
TOTAL ASSETS 27,607 25,832 25,876
-------------- -------------- --------------
EQUITY AND LIABILITIES
Equity attributable to holders of the parent
Ordinary share capital 14 124 104 104
Share premium 14 12,600 6,764 6,764
Merger reserve 15 21,830 28,092 21,830
Other reserves (1) 8 11
(16,481) (13,678) (9,843)
Retained loss -------------- -------------- --------------
18,072 21,290 18,866
TOTAL EQUITY -------------- -------------- --------------
Non-current liabilities
Deferred tax 1,454 1,799 1,581
Borrowings 13 5,065 - 3,663
876 - 666
Derivative liability 13 & 5 -------------- -------------- --------------
7,395 1,799 5,910
Current liabilities
Trade and other payables 2,140 1,488 1,100
- 1,255 -
Borrowings 13 -------------- -------------- --------------
2,140 2,743 1,100
9,535 4,542 7,010
TOTAL LIABILITIES -------------- -------------- --------------
TOTAL EQUITY AND LIABILITIES 27,607 25,832 25,876
-------------- -------------- --------------
The above statement should be read in conjunction with the
accompanying notes.
INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY
Notes Share Share Premium Merger Other Accumulated Total Equity
Capital (GBP000's) Reserve Reserves Losses (GBP000's)
(GBP000's) (GBP000's) (GBP000's) (GBP000's)
As at 1 October 2014
(Audited) 103 6,429 28,092 34 (11,184) 23,474
Issue of shares 14 1 407 - - - 408
Share issue
transaction costs 14 - (72) - - - (72)
Share based payment
expense - - - - 31 31
------------ -------------- ------------ ------------ ------------ -------------
Total contributions by
owners of the
Company 1 335 - - 31 367
Loss for the year - - - - (2,525) (2,525)
Currency translation
differences - - - (26) - (26)
------------ -------------- ------------ ------------ ------------ -------------
Total comprehensive
expense for the
period - - - (26) (2,525) (2,551)
------------ -------------- ------------ ------------ ------------ -------------
As at 31 March 2015
(unaudited) 104 6,764 28,092 8 (13,678) 21,290
------------ -------------- ------------ ------------ ------------ -------------
As at 1 April 2015
(unaudited) 104 6,764 28,092 8 (13,678) 21,290
Share based payment
expense - - - - 2,317 2,317
Transfer of merger
reserve to
accumulated
losses 15 - - (6,262) - 6,262 -
------------ -------------- ------------ ------------ ------------ -------------
Total contributions by
owners of the
of the company - - (6,262) - 8,579 2,317
Loss for the year - - - - (4,756) (4,756)
Currency translation
differences - - - 15 - 15
Recycling of foreign
exchange reserve
on liquidation of
subsidiary - - - (12) 12 -
------------ -------------- ------------ ------------ ------------ -------------
Total comprehensive
expense for the
year - - - 3 (4,744) (4,741)
------------ -------------- ------------ ------------ ------------ -------------
As at 30 September
2015 (Audited) 104 6,764 21,830 11 (9,843) 18,866
------------ -------------- ------------ ------------ ------------ -------------
As at 1 October 2015
(Audited) 104 6,764 21,830 11 (9,843) 18,866
Issue of shares 14 20 5,981 - - - 6,001
Share issue
transaction costs 14 - (145) - - - (145)
Share based payment
expense - - - - 1,177 1,177
------------ -------------- ------------ ------------ ------------ -------------
Total contributions by
owners of the
company 20 5,836 - - 1,177 7,033
Loss for the year - - - - (7,815) (7,815)
Currency translation
differences - - - (12) - (12)
------------ -------------- ------------ ------------ ------------ -------------
Total comprehensive
expense for the
period - - - (12) (7,815) (7,827)
------------ -------------- ------------ ------------ ------------ -------------
As at 31 March 2016
(Unaudited) 124 12,600 21,830 (1) (16,481) 18,072
------------ -------------- ------------ ------------ ------------ -------------
The above statement should be read in conjunction with the
accompanying notes.
INTERIM CONDENSED STATEMENT OF CASH FLOWS
Six months Six months Year ended
ended 31 March ended 31 March 30 September
2016 2015 2015
Unaudited Unaudited Audited
Notes (GBP000's) (GBP000's) (GBP000's)
Cash flows from operating
activities
Loss before taxation (8,423) (2,703) (8,272)
Adjustments for:
Depreciation of plant and
equipment 12 43 53 92
Finance expense 3,389 24 117
Amortisation of intangible
assets 11 705 705 1,410
Impairment of intangibles - - 133
Tax credit received 480 45 639
1,177 31 2,348
Share based payments -------------- -------------- --------------
Operating cash outflows
before
(2,629) (1,845) (3,533)
movements in working capital -------------- -------------- --------------
(Increase)/decrease in trade
and other receivables (271) 57 426
Increase/(decrease) in trade 1,006 (554) (919)
and other payables -------------- -------------- --------------
Net cash used in operating (1,894) (2,342) (4,026)
activities -------------- -------------- --------------
Cash flows from investing
activities
Purchase of plant and
equipment 12 (45) (9) (38)
(486) - -
Purchase of intangible assets 11 -------------- -------------- --------------
Net cash used in investing (531) (9) (38)
activities -------------- -------------- --------------
Cash flows from financing
activities
Proceeds from loan notes 13 1,573 1,232 4,345
Loan notes issue transaction
costs 13 (80) - (131)
Interest paid (94) (1) (2)
Share issue transaction costs 14 (313) (92) (72)
Proceeds from issue of
ordinary 1,155 408 408
shares 14 -------------- -------------- --------------
Net cash from financing 2,241 1,547 4,548
activities -------------- -------------- --------------
Net (decrease)/increase in
cash
and
cash equivalents (184) (804) 484
Cash and cash equivalents at
the
beginning of the period 2,299 1,743 1,743
Exchange gains on cash
21 77 72
and cash equivalents ------------- -------------- --------------
Cash and cash equivalents at
end of period 2,136 1,016 2,299
-------------- -------------- --------------
The above statement should be read in conjunction with the
accompanying notes.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX
MONTHSED
31 MARCH 2016
1. GENERAL INFORMATION
The condensed interim financial statements are for ARRIA NLG plc
(the Company) and its controlled entities (the Group).
The Group develops software that provides Natural Language
Generation ("NLG") services and SaaS (Software as a Service)
services to industry.
The Company is a public limited company domiciled in the United
Kingdom and incorporated under registered number 07812686 in
England and Wales. The Company's registered office is Space One, 1
Beadon Road, Hammersmith, London W6 0EA, United Kingdom.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 30
September 2015 were approved by the directors on 10 December 2015
and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, however did contain an
emphasis of matter paragraph in respect of going concern and did
not contain any statement under section 498 of the Companies Act
2006. These condensed interim financial statements have been
reviewed, not audited.
2. BASIS OF PREPARATION
These condensed interim financial statements for the six months
ended 31 March 2016 have been prepared in accordance with the AIM
rules and with IAS 34, 'Interim financial reporting', as adopted by
the European Union. The condensed interim financial statements
should be read in conjunction with the annual financial statements
for the year ended 30 September 2015 which have been prepared in
accordance with IFRSs as adopted by the European Union.
Going Concern
At the interim balance sheet date, the group had net assets of
GBP18.1 million, including cash of GBP2.1 million. The Group made a
loss before tax of GBP8.4 million in the period and expects to
continue to make losses in the near term as it invests in
developing new markets for its products and secures its position in
commercialising Natural Language Generation. In the medium term,
the focus will be on growing revenues in order to achieve
profitability and positive cash flows.
On 9 June 2016 the Company entered into subscription agreements
with certain investors, pursuant to which the investors agreed to
subscribe for GBP262,000 of convertible loan notes (for further
details see note 17).
In considering the ability of the Group to meet its financial
obligations as they fall due, the Board has considered the expected
trading performance of the Group, including working capital
requirements and the level of overheads to be funded. The Directors
have prepared a business plan and cash flow forecast for the period
to 31 December 2017. The forecast contains certain assumptions
about future sales, the gross margins achievable and the level of
other operating expenses. In addition to this business plan, the
Directors have considered various downside sensitivities and
management actions that could be undertaken to ensure the ongoing
operation of the Group. The Group is in the process of seeking
further fundraising in the form of equity or convertible debt,
including listing on the New Zealand and Australian Stock
Exchanges, to provide adequate working capital to support the
commercialisation of its Natural Language Generation technology and
enable the Group to continue as a going concern. The extent and
frequency of funding required will depend on the speed and quantum
with which the Group secures additional profitable revenue growth.
The Directors are confident of securing sufficient, additional
funding within the next financial year, for its near term
requirements.
Having reviewed the business plan and subject to the
uncertainties described above, the Directors have a reasonable
expectation that the Group will have adequate resources to continue
operating for the foreseeable future. Therefore, the Directors
continue to adopt the going concern basis in preparing the interim
financial statements and these interim financial statements do not
include adjustments that would result if the Group was unable to
continue as a going concern. Should fundraising negotiations prove
unsuccessful, the Group would be unable to meet its debts as they
fall due in the foreseeable future. As a result, the Directors have
concluded that pending successful agreement of additional funding
there exists a material uncertainty which may cast significant
doubt over the ability of the Group to continue as a going
concern.
3. ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the
previous financial year.
Adoption of new and revised International Financial Reporting
Standards
New and amended standards adopted by the Group
There are no standards that have been adopted by the Group for
the first time for the financial year beginning on 1 October 2015
that have a material impact on the Group.
New standards issued which are not yet applicable
IFRS 9 - Financial Instrument
IFRS 9 addresses the classification, measurement and recognition
of financial assets and financial liabilities. The complete version
of IFRS 9 was issued in July 2014. It replaces the guidance in IAS
39 that relates to the classification and measurement of financial
instruments. IFRS 9 retains but simplifies the mixed measurement
model and establishes three primary measurement categories for
financial assets: amortised cost, fair value through OCI and fair
value through P&L. The basis of classification depends on the
entity's business model and the contractual cash flow
characteristics of the financial asset. Investments in equity
instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present
changes in fair value in OCI not recycling. There is now a new
expected credit losses model that replaces the incurred loss
impairment model used in IAS 39. For financial liabilities there
were no changes to classification and measurement except for the
recognition of changes in own credit risk in other comprehensive
income, for liabilities designated at fair value through profit or
loss. The standard is effective for accounting periods beginning on
or after 1 January 2018. Early adoption is permitted subject to EU
endorsement. The Group is yet to assess IFRS 9's full impact.
IFRS 15 - Revenue from contracts with customers
IFRS 15 deals with revenue recognition and establishes
principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity's contracts with
customers. Revenue is recognised when a customer obtains control of
a good or service and thus has the ability to direct the use and
obtain the benefits from the good or service. The standard replaces
IAS 18 'Revenue' and IAS 11 'Construction contracts' and related
interpretations. The standard is effective for annual periods
beginning on or after 1 January 2018 and earlier application is
permitted subject to EU endorsement. The Group is assessing the
impact of IFRS 15.
IFRS 16 - Leases
Under the previous guidance in IAS 17, a lessee had to make a
distinction between a finance lease (on balance sheet) and an
operating lease (off balance sheet). The new standard requires
lessees to recognise almost all lease contracts on the balance
sheet; the only optional exemptions are for certain short term
leases and leases of low-value assets. An interest expense on the
lease liability and depreciation on the 'right-of-use' asset will
also have to be recognised. IFRS 16 will be effective for the first
time for the year beginning 1 October 2019 (subject to EU
endorsement). The Group is assessing the impact of IFRS 16.
4. ESTIMATES
In preparing these Condensed interim financial statements, the
significant judgments made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements for the year ended 30 September 2015, with the exception
of the accounting treatment of the issue of ordinary shares in the
period to Lanstead (see note 14 for further details).
5. FINANCIAL RISK MANAGEMENT
Financial instruments and fair value estimation
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, fair value interest
rate risk & cash flow interest rate risk), credit risk and
liquidity risk. The condensed interim financial statements do not
include all financial risk management information and disclosures
required in the annual financial statements; they should be read in
conjunction with the Group's annual financial statements as at 30
September 2015.
There have been no changes in the risk management policies since
the year end.
Fair Value Estimation and Techniques
The table below analyses financial instruments carried at fair
value. All instruments are Level 2 derivative instruments on the
basis that they are not traded in an active market and are valued
using valuation techniques based on observable data:
As at 31 As at 31 As at 30 September
March 2016 March 2015 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Current Asset
Derivative Asset 398 - -
Non-Current Asset
Derivative Asset 1,272 - -
------------ ------------ -------------------
Total Assets 1,670 - -
------------ ------------ -------------------
Derivative Liability 876 - 666
------------ ------------ -------------------
Total Liabilities 876 - 666
------------ ------------ -------------------
Derivative Financial Asset
The derivative financial asset is consideration receivable from
Lanstead which has been treated as a derivative financial asset.
Its fair value has been determined by reference to the Company's
share price at the balance sheet date as measured against a
benchmark share price of GBP0.426667. If the actual share price
exceeds the benchmark price during any of the 18 settlement months,
the Company will receive more than 100% of the monthly settlement
due for that month, should the share price fall below the benchmark
price, the Company will receive less than 100% of the expected
monthly settlement for that month, both on a pro rata basis (see
note 14 for further details).
The embedded derivative is revalued at the balance sheet date
based on the share price prevailing at that date and any change in
fair value is recognised in the Income statement. The loss on
derivative asset recognised at 31 March 2016 is based on the
closing share price of GBP0.2063 measured against the benchmark
price of GBP0.466667.
(GBP000's
At 1 October 2015 (Audited) -
Initial fair value of receivable 5,100
Installment settled (254)
---------
Loss on derivative due to fair value change (3,176)
---------
At 31 March 2016 (Unaudited) 1,670
=========
Derivative Liability
The Group's derivative liability is also classified as a level 2
instruments on the basis that it is not traded in an active market
and is valued using valuation techniques based on observable data.
The valuation technique used is a discounted cash flow analysis
using observable market interest rates which value the host debt
instrument, with residual being the fair value of the derivative
liability.
GBP000's
At 1 April 2015 (Unaudited) -
--------
On issue of Loan Notes 666
--------
At 30 September 2015 (Audited) 666
--------
At 1 October 2015 (Audited) 666
On issue of Loan Notes 210
At 31 March 2016 (Unaudited) 876
========
Group's Valuation Process
The Group's finance department performs the valuations of
financial assets and liabilities required for financial reporting
purposes. This team reports directly to the Chief Financial Officer
(CFO) and the Audit Committee (AC). Discussions of valuation
processes and results are held between the CFO, AC and the finance
team at least once every half year, in line with the Group's
reporting dates.
6. OPERATING LOSS
The Group's operating loss has been arrived at after
charging:
Six months ended Six months ended Year ended
31 March 31 March 30 September
2016 2015 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Employee and consultant costs 2,597 2,200 4,260
Operating lease rentals 142 130 258
Depreciation charge 43 53 92
Research and development (1), (2) 277 430 980
Foreign exchange (gains) (33) (120) (228)
Legal and professional fees 516 199 613
(1) Research and development costs contain GBP262,000 employee
related costs (HY15: GBP415,000).
(2) GBP451,000 of research and development costs were
capitalised in the six months ended 31 March 2016 (HY15: Nil).
Share Based Payments
As at As at As at
31 March 31 March 30 September
2016 2015 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Staff share options 10 31 40
Long term incentive plan (LTIP) share options (1) 618 - -
Loan note warrants (2) 549 - 2,124
Other warrants - - 184
---------- ---------- ------------
Total 1,177 31 2,348
========== ========== ============
(1) Issued a total of 4.55 million LTIP share options in
December 2015 at an exercise price of GBP0.001 per share. The
awards are made as restricted stock units under the LTIP. 1.9
million shares were fully vested on issue, 0.4 million shares
lapsed or were cancelled, and the remaining options vest
progressively over the next two years subject to personal and
company performance criteria.
(2) Issued a total of 4.7 million loan notes that had a total of
14.4 million warrants attached (see note 13 for further
details).
7. FINANCE EXPENSE
As at As at As at
31 March 31 March 30 September
2016 2015 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Interest on loan notes 213 24 117
Loss on derivative asset (1) 3,176 - -
---------- ---------- ------------
Total 3,389 24 117
========== ========== ============
(1) In October 2015, Lanstead, an institutional investor, agreed
to subscribe for 18,750,000 million new ordinary shares in the
Company at an issue price of 32 pence per share for an aggregate
consideration of GBP6.0 million. In addition, Arria NLG entered
into two sharing agreements with Lanstead. 15 per cent. of the
GBP6,000,000 gross proceeds of the subscription, being GBP900,000,
were retained by the Company and the balance of GBP5,100,000 was
pledged by the Company pursuant to two sharing agreements with
Lanstead (see note 14 for further details).
The consideration receivable from Lanstead has been treated as a
derivative financial asset and its fair value has been determined
by reference to the Company's share price at the balance sheet date
as measured against a benchmark share price of GBP0.426667. If the
actual share price exceeds the benchmark price during any of the 18
settlement months, the Company will receive more than 100% of the
monthly settlement due, should the share price fall below the
benchmark price, the Company will receive less than 100% of the
expected monthly settlement. Both on a pro rata basis.
The loss on derivative asset recognised at 31 March 2016 is
based on the closing share price of GBP0.2063 measured against the
benchmark price of GBP0.466667.
8. SEGMENT NFORMATION
The Board of Directors is the Group's chief operating
decision-maker. Management has determined the operating segments
based on the information reviewed by the Board of Directors for the
purpose of resource allocation and assessment of performance, and
considers the Group has one operating segment, being the provision
of computer software. Revenue is all generated from one
geographical location, being the UK. Corporate costs are head
office costs which cannot be allocated to the segment.
The following is an analysis of revenues and results from
operations and assets by business segment:
Revenue Six months ended Six months ended Year ended
31 March 2016 31 March 2015 30 September 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Provision of computer software 226 904 1,476
---------------- ---------------- -----------------
Total 226 904 1,476
================ ================ =================
Loss before tax Six months ended Six months ended Year ended
31 March 31 March 30 September
2016 2015 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Provision of computer software (2,163) (1,762) (4,156)
Corporate costs (6,260) (941) (4,116)
---------------- ---------------- -----------------
Total (8,423) (2,703) (8,272)
================ ================ =================
Assets As at As at As at
31 March 2016 31 March 2015 30 September 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Provision of computer software 23,918 25,571 24,163
Corporate costs 3,689 261 1,713
---------------- ---------------- -----------------
Total 27,607 25,832 25,876
================ ================ =================
9. INCOME TAX
Income tax credit is recognised based on management's estimate
of the weighted average annual income tax rate expected for the
full financial year. The average UK annual tax rate used for the
year to 30 September 2015 was 20.50%. The UK tax rate for the six
months ended 31 March 2016 was 20%.
Changes to the UK corporation tax rates were substantively
enacted as part of the Finance Bill 2015 on 26 October 2015. These
include reductions to the main rate to reduce the rate to 19% from
1 April 2017 and to 18% from 1 April 2020.
A further change to the UK corporation tax rate was announced in
the Chancellor's Budget on 16 March 2016. The change announced is
to reduce the main rate to 17% from 1 April 2020.
10. LOSS PER SHARE
Basic earnings per share for each period is calculated by
dividing the earnings attributable to shareholders by the weighted
average number of ordinary shares in issue during the period based
on the capital structure of Arria NLG plc. Details of the earnings
and weighted average number of ordinary shares used in each
calculation are set out below. As the Group is loss-making, share
options in issue are anti-dilutive and therefore diluted loss per
share is equal to the basic loss per share.
Six months Six months Year
ended ended ended
31 March 2016 31 March 2015 30 September 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Loss attributable to owners of the parent (7,815) (2,525) (7,281)
------------- ------------- -----------------
Weighted average number of shares Number Number Number
(000's) (000's) (000's)
For basic and diluted loss per share 121,127 102,952 102,951
------------- ------------- -----------------
Basic and diluted loss per share (0.06)p (0.02)p (0.07)p
============= ============= =================
11. OTHER INTANGIBLE ASSETS
NET BOOK VALUE
Intellectual Capitalised Development Total Other
Property Costs Intangible
GBP000's) Assets
(GBP000's) (GBP000's)
At 1 October 2014 (Audited)
619
9,529 10,148
Amortisation (533) (172) (705)
At 31 Mar 2015 (Unaudited) 8,996 447 9,443
------------------------------ -------------- ------------------------------------------ --------------------------
At 1 Apr 2015 (Unaudited) 8,996 447 9,443
Amortisation (635) (70) (705)
Impairment expense - (133) (133)
Re-allocation (102) 102 -
---------------------------- ------- ---------------------- ---------------------
At 30 Sep 2015 (Audited) 8,259 346 8,605
---------------------------- ------- ---------------------- ---------------------
At 1 October 2015 (Audited) 8,259 346 8,605
Additions 34 452 486
Amortisation (635) (70) (705)
------------------------------ -------------------------------- ---------------------- ---------------------
At 31 March 2016 (Unaudited) 7,658 728 8,386
------------------------------ -------------------------------- ---------------------- ---------------------
The residual carrying value of intellectual property on the
balance sheet at 31 March 2016 arose on the acquisition of Arria
Data2Text Limited on 1 May 2012.
In the period ended 31 March 2016 GBP452,000 of research and
development costs were capitalised (HY15: Nil). These costs are
staff costs related to the development of Recount and Developer
Cloud (SDK).
Following a review of the business opportunities available to
the Group during the prior year, the Directors determined to
continue to focus on developing the NLG software in advance of SQM3
in the near term. An impairment review based on value in use was
performed at the year end resulting in an impairment charge of
GBP133,000 being recognised at 30 September 2015. The carrying
value of intellectual property relating to SQM3 at 31 March 2016
was GBPNil (HY15: GBP133,000).
12. PROPERTY, PLANT AND EQUIPMENT
Net Book Value
(GBP000's)
At 1 October 2014 202
Additions 9
Disposals (1)
Depreciation (52)
---------------
At 31 March 2015 (unaudited) 158
---------------
At 1 April 2015 (unaudited) 158
Additions 29
Depreciation (39)
---------------
At 30 September 2015 (unaudited) 148
---------------
At 1 October 2015 (audited) 148
Additions 45
Depreciation (43)
---------------
At 31 March 2016 (unaudited) 150
---------------
13. BORROWINGS
As at As at As at
31 March 2015 31 March 2015 30 September 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Current
Convertible notes (i) - 1,255 -
Non-current
Convertible notes (i) 5,065 - 3,663
------------- ------------- -----------------
Total 5,065 1,255 3,663
============= ============= =================
(i) Convertible notes
The Company issued the following convertible loan notes;
On 30 September 2014 the Company entered into a subscription
agreement with the Ikonic Fund SAC Limited ("Ikonic"), pursuant to
which Ikonic agreed to subscribe for GBP3.08 million of loan notes
in three tranches. On 11 June 2015 Ikonic agreed to the early
drawdown of the last two instalments. In consideration of Ikonic
agreeing to the early drawdown of the two instalments, the Company
also granted 6 million unlisted B Warrants for new ordinary shares
(with a nominal value of GBP0.001 per share) in the Company,
exercisable for a period up to 11 June 2019, at GBP0.12p per new
ordinary share. These B Warrants were accounted for as share based
payments.
13. BORROWINGS
Between the period July 2015 and March 2016 the Company entered
into subscription agreements with various shareholders to subscribe
for a total of GBP2.838 million of convertible loan notes. The loan
notes have attached, 9.41 million unlisted B Warrants for new
ordinary shares (with a nominal value of GBP0.001 per share) in the
Company, exercisable to 11 June 2019 at GBP0.12 per new ordinary
share. The B Warrants were issued on the basis of 2 warrants for
every 1 US$ equivalent of loan note. These were accounted for as
share based payments.
All current loan notes have a maturity date of 31 October 2019
and accrue interest at a rate of 5% above the Bank of England base
rate as at 31 October of each year. Interest payments commenced 31
October 2015 and are payable annually on 31 October each year
thereafter until the maturity date. The Company can redeem the loan
notes, without penalty or fee, at any time upon 10 business days'
notice to the holders of the loan notes (the "Noteholders"). The
Noteholders are entitled to convert the loan notes and any accrued
but unpaid interest into new ordinary shares at a price of GBP0.40
per share (subject to adjustment in certain customary
circumstances) during the first 10 business days of each calendar
year and also following receipt of notice that the Company intends
to redeem the loan notes.
(GBP000's)
Loan Note Movements
At 1 October 2014 (Audited) -
Face value of notes issued 1,232
Accrued interest 23
-----------
At 31 March 2015 (Unaudited) 1,255
-----------
At 1 April 2015 (Unaudited) 1,255
Face value of additional notes issued 3,113
Derivative Liability *1 (666)
Capitalised costs (131)
Accrued Interest *2 92
-----------
At 30 September 2015 (audited) 3,663
-----------
At 1 October 2015 (audited) 3,663
Face value of notes issued 1,573
Derivative liability *1 (210)
Capitalised costs (80)
Accrued interest *2 213
Interest paid (94)
-----------
At 31 March 2016 (unaudited) 5,065
-----------
*1 The derivative liability arises as the loan agreements
contain an option for the holder to convert the notes to ordinary
shares and an option for the Company to repay the notes early.
These options to convert and repay early give rise to a compound
embedded derivative. Part of the proceeds received are allocated to
the derivative instrument. (See Note 5 for further details).
*2 Accrued interest is calculated by applying the effective
interest rate of 10.51% to the loan liability component.
14. SHARE CAPITAL AND PREMIUM
The issued share capital in the period was as follows:
Ordinary Share Share
shares Capital Premium Total
(Number) (GBP000's) (GBP000's) (GBP000's)
At 1 October 2014
(Audited) 102,562,724 103 6,429 6,532
Issue of share capital 1,166,486 1 407 408
Share issue transaction - - (72) (72)
costs ----------- -------------- -------------- --------------
At 31 Mar 2015(Unaudited) 103,729,210 104 6,764 6,868
-------------- -------------- -------------- --------------
At 1 Apr
2015(Unaudited) 103,729,210 104 6,764 6,868
-------------- -------------- -------------- --------------
103,729,210 104 6,764 6,868
At 30 Sep 2015 (Audited) -------------- -------------- -------------- --------------
At 1 October 2015
(Audited) 103,729,210 104 6,764 6,868
Issue of share capital 19,951,400 20 5,981 6,001
Share issue transaction - - (145) (145)
costs ----------- -------------- -------------- -------------
At 31 March 2016
(Unaudited) 123,680,610 124 12,600 12,724
-------------- -------------- -------------- --------------
Issue of Ordinary share capital in the period
On 15 October 2015 a total of 18,750,000 new ordinary shares of
GBP0.001 pence each in the Company were conditionally subscribed
for by Lanstead, (a specialist international investment firm) at an
issue price of 32 pence per new ordinary share. 15 per cent. of the
GBP6,000,000 gross proceeds of the subscription, being GBP900,000,
were retained by the Company and the balance of GBP5,100,000 was
pledged by the Company pursuant to two sharing agreements with
Lanstead (the "Sharing Agreements"). The Sharing Agreements,
details of which are set out below, entitle the Company to receive
back those proceeds on a pro rata monthly basis over a period of 18
months, subject to adjustment upwards or downwards each month
depending on the Company's share price at the time, as explained in
more detail below. The Sharing Agreements provide the opportunity
for the Company to benefit from positive future share price
performance.
The Sharing Agreements
As part of the subscription, the Company entered into the
Sharing Agreements, pursuant to which the Company returned an
amount equal to 85 per cent. of the gross proceeds of the
subscription to Lanstead. The Sharing Agreements will enable the
Company to share in any share price appreciation over the Benchmark
Price (as defined below). However, if the Company's share price
remained less than the Benchmark Price then the amount received by
the Company under the Sharing Agreements will be less than the 85
per cent. of the gross proceeds of the subscription which were
pledged by the Company to Lanstead at the outset.
Each of the Sharing Agreements provide that the Company will
receive 18 monthly settlement amounts as measured against a
benchmark share price of 42.66667 pence per share (the "Benchmark
Price"). The monthly settlement amounts for each Sharing Agreement
were structured to commence two months following the admission to
AIM of the new ordinary shares under the relevant Sharing
Agreement.
If the measured share price (the "Measured Price"), calculated
as the average volume weighted share price of the Company's
ordinary shares over an agreed period prior to the monthly
settlement date, exceeds the Benchmark Price, the Company will
receive more than 100 per cent. of that monthly settlement due on a
pro rata basis according to the excess of the Measured Price over
the Benchmark Price. There is no upper limit placed on the
additional proceeds receivable by the Company as part of the
monthly settlements and the amount available in subsequent months
is not affected. Should the Measured Price be below the Benchmark
Price, the Company will receive less than 100 per cent. of the
monthly settlement calculated on a pro rata basis and the Company
will not be entitled to receive the shortfall at any later
date.
For example, if on a monthly settlement date the calculated
Measured Price exceeds the Benchmark Price by 10 per cent., the
settlement on that monthly settlement date will be 110 per cent. of
the amount due from Lanstead on that date. If on the monthly
settlement date the calculated Measured Price is below the
Benchmark Price by 10 per cent., the settlement on the monthly
settlement date would be 90 per cent. of the amount due on that
date. Each settlement as so calculated would be in final settlement
of Lanstead's obligation on that settlement date.
Assuming the Measured Price equals the Benchmark Price on the
date of each and every monthly settlement, Arria NLG would receive
aggregate proceeds of GBP6.0 million (before expenses) from the
subscription and related Sharing Agreements, made up of the
GBP900,000 of the subscription initially retained by the Company
and 18 monthly settlements of approximately GBP283,333. The Company
agreed to pay Lanstead's legal costs incurred in the subscription
and entering into the Sharing Agreements and in addition, agreed to
issue to Lanstead 937,500 ordinary shares of GBP0.001 each in the
Company (the "Value Payment Shares").
In no event will fluctuations in the Company's share price
result in any increase in the number of new ordinary shares issued
by the Company or received by Lanstead.
During January 2016 263,900 ordinary shares of were issued under
the Company's LTIP scheme and had an exercise price of GBP0.001 per
ordinary share. These new ordinary shares issued rank pari passu
with the existing ordinary shares (see note 6 for further
details).
15. MERGER RESERVE
(GBP000's )
At 1 October 2014 (Audited) 28,092
At 31 March 2015 (Unaudited) 28,092
---------
At 1 April 2015 (Unaudited) 28,092
Transfer of merger reserve to accumulated losses (6,262)
---------
At 30 September 2015 (Audited) 21,830
---------
At 1 October 2015 (Audited) 21,830
---------
At 31 March 2016 (Unaudited) 21,830
=========
The merger reserve arose on the acquisition of SQi3 Solutions
Limited on 28 September 2012, Arria Data2text Limited on 25 October
2013 and Global IP Inc., on 25 October 2013 reflecting the
consideration paid in shares. The Company took advantage of merger
relief under the Companies Act 2006 and did not record the premium
on these shares. The premium was credited to the merger
reserve.
During the year ended 30 September 2015 GBP6.262 million was
transferred from the merger reserve to accumulated losses, as the
investments in SQi3 Solutions Limited and Global IP Inc and
associated goodwill were impaired at 30 September 2014 and 30
September 2015.
16. RELATED PARTY TRANSACTIONS
Key management compensation
Key management includes Directors (executive and non-executive),
the Chief Financial Officer, Chief Operating Officer, and Company
Secretary. The compensation paid or payable to key management is
shown below:
As at As at As at
31 March 2016 31 March 2015 30 September 2015
Unaudited Unaudited Audited
(GBP000's) (GBP000's) (GBP000's)
Salaries and other short term benefits 415 424 894
Company contributions to money purchase
pension schemes 13 14 28
Share based payments 301 - -
------------- ------------- -----------------
Total 729 438 922
============= ============= =================
17. SUBSEQUENT EVENTS
Genpact Extends Three NLG Applications to Phase II
Development
Following the successful completion of initial prototypes, Arria
NLG has now been commissioned to work with Genpact in developing
three fully market-ready applications for Genpact's customer base,
initially in the banking and financial services industries. The
applications are designed to improve existing automation systems by
providing numerous complex business reporting processes which will
transform the ability to perform existing tasks with the speed and
scale advantages of advanced AI technology. The applications are:
i) Model Documentation and Validation; ii) Financial Planning and
Analysis (FP&A) Reporter; and iii) Credit Assessment.
Issue of patents
Subsequent to the period end Arria NLG was granted to further
patents increasing to total number of patents granted from seven to
nine. The two additional patents were granted by the US Patent and
Trademark Office.
-- The eighth patent granted was on Arria NLG's Method,
Apparatus, and Computer Program Product for User-Directed Reporting
which created an important new feature, and part of the Arria NLG
Platform. The patent covers a new feature of Arria NLG's products,
which automates real-time data analysis and generates reports using
language that follows intuitive rules for how humans communicate
and comprehend information. This patent covers flexible
modification of search parameters not only for reports that may be
generated with Arria NLG's advanced artificial intelligence
technology, but also with more rudimentary, template based NLG
systems offered by several of Arria NLG's competitors.
-- The ninth patent granted was on Arria NLG's Method and
Apparatus for Annotating a Graphical Output. This patent covers new
features of Arria NLG's products, which automate real-time data
analysis and generate reports using language that follows intuitive
rules for how humans communicate and comprehend information. The
innovations protected by this new patent tie together graphs and
graphical annotations with the corresponding narrative in natural
language reports that the Arria NLG software generates. The new
patent is part of a broad diversification plan that Arria NLG has
instituted to enhance versatility and improve ease of use, as well
as to increase the analytic power and actionable conclusions of its
NLG products.
Listing on the New Zealand Stock Exchange and the Australian
Securities Exchange
On 30 June 2015 the Company announced a fund raising of GBP3.75
million by way of the issue of convertible loan notes (the "Loan
Notes") and unlisted B warrants (the "B Warrants"). In this
announcement the board of the Company (the "Board") stated its
intention of exploring other sources of finance, including
undertaking a public offering of shares in conjunction with a
listing on the New Zealand Stock Exchange (the "NZX").
The Company is well advanced in preparing for the NZX listing as
well as a listing on the Australian Securities Exchange (the "ASX")
and an associated fundraising. In connection with these listings
the Company intends to maintain a listing in the United Kingdom and
the Board is considering the most suitable structure for this.
A further announcement will be made in the coming weeks with
regards to the likely timing and structure of the transaction.
As part of the listings on the NZX and the ASX the Company plans
to raise additional funding and the Company has commenced
discussions with a number of potential investors on this matter.
Should the listings and the associated fund raising not complete
before the end of the summer the Company will need to seek
alternative sources of finance in the short term. The Company has
plans in place to raise capital in the short term as needed.
Issue of convertible loan notes and warrants
On 9 June 2016 the Company allotted GBP262,000 of convertible
loan notes pursuant to subscription agreements entered into by
certain investors. The loan notes have attached, 761,044 unlisted B
Warrants for new ordinary shares (with a nominal value of GBP0.001
per share) in the Company, exercisable in the period to 11 June
2019, at GBP0.12 per new ordinary share. These will be accounted
for as share based payments. The loan notes for these other
investors are constituted by a loan note instrument with
substantially the same terms and conditions as those announced
previously.
INDEPENDENT REVIEW REPORT TO ARRIA NLG PLC
Report on the condensed interim financial statements
Our conclusion
We have reviewed the condensed interim financial statements (the
"interim financial statements") in the condensed interim financial
statements of Arria NLG plc for the 6 month period ended 31 March
2016. Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the AIM Rules for
Companies.
Emphasis of matter
Without modifying our conclusion on the interim financial
statements, we have considered the adequacy of the disclosure made
in note 2 to the condensed interim financial statements concerning
the group's ability to continue as a going concern. The directors
are in the process of seeking further fundraising to provide
adequate working capital to support the commercialisation of
Natural Language Generation technology and should fundraising not
be successful, the group would not be able to meet its debts as
they fall due in the foreseeable future. These conditions, along
with the other matters explained in note 2 to the financial
statements, indicate the existence of a material uncertainty which
may cast significant doubt about the group's ability to continue as
a going concern. The interim financial statements do not include
the adjustments that would result if the group was unable to
continue as a going concern.
What we have reviewed
The interim financial statements comprise:
-- the interim condensed statement of financial position as at 31 March 2016;
-- the interim condensed statement of comprehensive income for the period then ended;
-- the interim condensed statement of cash flows for the period then ended;
-- the interim condensed statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the condensed
interim financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the AIM Rules for
Companies.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The condensed interim financial statements are the
responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the condensed interim
financial statements in accordance with the AIM Rules for Companies
which require that the financial information must be presented and
prepared in a form consistent with that which will be adopted in
the company's annual financial statements.
Our responsibility is to express a conclusion on the interim
financial statements in the condensed interim financial statements
based on our review. This report, including the conclusion, has
been prepared for and only for the company for the purpose of
complying with the AIM Rules for Companies and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the condensed
interim financial statements and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 June 2016
a) The maintenance and integrity of the Arria NLG plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FAMATMBIBMBF
(END) Dow Jones Newswires
June 15, 2016 02:29 ET (06:29 GMT)
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