Microsaic Systems - Final Results
30/05/2022 07:00
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RNS Number : 1647N Microsaic Systems plc 30 May 2022
30 May 2022
Microsaic Systems plc
("Microsaic" or the "Company")
Final Results for the year ended 31 December 2021
Microsaic Systems plc (AIM: MSYS), the developer of point of need mass
spectrometry ("MS") instruments and related services, is pleased to announce
its audited financial results for the year ended 31 December 2021. The
Company's Annual Report is included at the end of this announcement and will
shortly be made available on the Company's website at www.microsaic.com
(http://www.microsaic.com) .
Financial Highlights:
· Total revenues increased 357% on the previous year to £0.91m (2020:
£0.20m)
· Orders exceeded £1m with order backlog of £125k at year-end for
shipping in 2022
· Other operating income of £67k (2020: £97k)
· Adjusted EBITDA loss of £1.77m (2020: £2.17m) (EBITDA before
share-based payments and professional fees relating to corporate activities)
· Operating expenses reduced to £2.50m (2020: £2.73m)
· Loss before tax of £3.40m (2020: £2.59m) after providing for:
o Share-based payments of £1.36m (2020: £52k)
o Depreciation of £161k (2020: £167k);
o Amortisation of £38k (2020: £41k)
o Professional fees of £66k (2020: £149k) relating to corporate activities
· February 2021: oversubscribed fundraising with gross proceeds of
£5.5 million raised
· Cash and cash equivalents at 31 December 2021 of £3.46m (2020:
£0.40m)
Post Year-End Events:
· March 2022: Appointment of Robert Moore to the Board, Glenn Tracey
stepped down from his role as CEO
· April: Multi-year Manufacturing Framework Services Agreement ("MFSA")
was signed with DeepVerge plc ("DeepVerge") to miniaturise electronic
engineering, alter the design and provide blueprints for building a range of
its Modern Water equipment, including the addition of a range of "Sentinel"
remote sensors to make use of Artificial Intelligence ("AI") and in a further
iteration of Modern Water's Microtox®PD device worth £400,000. The MFSA
provides for additional iterations and upgrades to other equipment.
Outlook
New services offered under the revised strategy gives Microsaic the ability to
exploit the data generated from existing and adapted MS equipment, something
that had not previously been utilised. AI-driven data analytics offers our
distribution partners in the environmental and life science sectors additional
ongoing shared revenue streams from our CE-marked equipment and consumables.
Predictive services are already adding value for existing clients and expected
to deliver real-time monitoring to detect contaminants in the environment. We
will soon provide medical diagnosis at point of care. Microsaic has moved on
from just selling equipment and consumables, focusing on generating
sustainable, recurring revenues from multiple sources. We now have improved
visibility, months ahead, and are more secure in our revenue growth
expectations this year, based on equipment and consumable sales and the recent
£400,000 Manufacturing Framework Services Agreement that are already above
the revenues of H1 2021.
Gerry Brandon, Executive Chairman and acting CEO of Microsaic Systems plc,
commented
"2021 was transformational with a new Board, new business model and the
financial injection that has delivered significant progress in the ongoing
move from product sales to customer-centric service solutions in Human and
Environmental Health. This has resulted in the identification of multiple
sources of revenues that are expected to maintain growth this year and into
2023."
Enquiries:
Microsaic Systems plc +44 (0) 734 0055 648
Gerry Brandon, Executive Chairman
N+1 Singer (Nominated Adviser & Joint Broker) +44 (0)20 7496 3000
Aubrey Powell / George Tzimas (Corporate Finance)
Tom Salvesen (Corporate Broking)
Turner Pope Investments (TPI) Limited (Joint Broker) +44 (0) 20 3657 0050
Andy Thacker / James Pope
About Microsaic Systems
Microsaic floated on AIM in 2011 to develop and commercialise
micro-engineering chip-based mass spectrometry equipment. Having invested
c. £30m over 20 years of development, Microsaic has a robust and
innovative patent portfolio in cutting-edge technology designed and developed
for "Industry 4.0" application. Microsaic serves markets in Human
Health, Environmental Health and Diversified Industries. Microsaic's system
solutions enable analytical detection and characterisation at the
point-of-need, whether within a conventional laboratory setting, or within a
bioprocessing facility for continuous MS detection data at multiple steps in
the process workflow.
Microsaic's products and systems are commercially available through global
markets via a network of regional and local partners, targeting its core
laboratory, manufacturing and point of need applications.
Report and Accounts for the year ended 31 December 2021
CHAIRMAN'S STATEMENT
Dear Shareholders,
Following my appointment as Chairman on 5 February 2021, it is my pleasure to
present the Company's annual report and accounts for the year ended 31
December 2021.
Our Business
Microsaic Systems plc ("Microsaic" or the "Company") was established in 2001
to develop and commercialise point-of-need, micro-engineering technologies to
miniaturise mass spectrometry ("MS"), lower the footprint of equipment by up
to 90 per cent. compared to standard MS, and to offer online solutions to
bio-processing in pharmaceutical manufacturing. To date, more than 180 units
have been supplied and installed with companies such as Merck, which has
published scientific reviews of the micro-engineered technologies.
In the 19 years since the Company's inception, £30 million has been invested
towards the development of state-of-the-art compact mass spectrometry.
Following completion of the fundraise in February 2021, a further capital
injection of £5.5 million (before expenses) was obtained. In connection with
this fundraise, there were a number of changes to Microsaic's board of
directors (the "Board" or the "Directors") which led to a review of the
Company's business model. Throughout the year, transitioning the focus towards
commercial delivery of services, in addition to mass spectrometer equipment
sales, has opened additional avenues of income. Supported by a robust patent
portfolio in cutting-edge technology, the team of experts in physics,
micro-electronic engineering, software architecture and organic chemical
laboratory support, we have seen a return to higher sales coming out of the
pandemic period, as we head into 2022. Moving on from the disappointing
performance in 2020, the transformation of the Company's business model is
making a significant impact on the prospects of the business.
Results
2021 has seen a fundamental shift in the strategic business model which is
already showing encouraging results and momentum. The new partnership,
co-operation, collaboration and commercial development agreements signed
during the year have transformed the business. Revenue increased by 357% over
the prior year, and also surpassed 2019 levels by 5%, whilst employee
headcount was lower in 2021 than 2020. The Company headed into 2022 with
shared revenues from partners and increased service opportunities. Moving on
from the disappointing performance in 2020, the transformation of the
Company's business model is making a significant impact on the prospects of
the business. This can be seen in the operational highlights in the Strategic
Report.
Financial Highlights:
· Total revenues increased 357% on the previous year to £0.91m (2020:
£0.20m);
· Orders exceeded £1m, the largest increase since 2013, with the
backlog of £125k of orders at the year-end anticipated to be shipped during
2022 (2020: order backlog £nil);
· Other operating income of £67k (2020: £97k);
· Operating expenses reduced to £2.50m (2020: £2.73m);
· Adjusted EBITDA loss of £1.77m (2020: £2.17m) (EBITDA before
share-based payments and professional fees relating to corporate activities)
· Loss before tax of £3.40m (2020: £2.59m) after providing for:
o Share-based payments of £1.36m (2020: £52k)
o Depreciation of £161k (2020: £167k) and amortisation of £38k (2020:
£41k);
o Professional fees of £66k (2020: £149k) relating to corporate
activities;
· February 2021: oversubscribed fundraising with gross proceeds of
£5.5 million raised; and
· Cash and cash equivalents at 31 December 2021 of £3.46m (2020:
£0.40m).
Post-year end events:
· March 2022: Appointment of Robert Moore to the Board, Glenn Tracey
stepped down from his role as CEO.
· April 2022: Multi-year Manufacturing Framework Services Agreement
("MFSA") with DeepVerge plc ("DeepVerge") was signed to provide the design,
assembly, quality and project management functions for a range of Modern Water
equipment, including the addition of a range of "Sentinel" sensors to make use
of Artificial Intelligence ("AI") and Internet of Things ("IoT") in a further
iteration of DeepVerge, Modern Water's Microtox®PD device worth an initial
£400,000. The MFSA provides for additional iterations and upgrades to other
equipment with an estimated total contract value of the order of £1m, subject
to agreement on additional Scope of Work statements, and anticipated delivery
over the period until the end of 2023.
Corporate governance
I believe that good corporate governance is important to support our future
growth. The Board has extensive experience in publicly listed companies as
well as running businesses in the healthcare and environmental sectors and is
committed to maintaining the highest standards where possible. An independent
Non-Executive Director, Robert Moore, was appointed in March 2022 and we are
exploring other candidates to bring additional balance to the Board.
Outlook
The fresh injection of funding and the new Board has quickly resulted in
strategic changes which have presented multiple growth opportunities. The
business model has moved on from equipment-only sales and transformed into a
collaborative offering for new products and services with a focus on design,
build and commission services with a revenue sharing commercial strategy being
established, supported by AI data analysis services. Out-sourced production
and in-licensing of AI technologies have helped reduce development costs,
increased revenues and built on the expertise and experience of a highly
skilled team of micro-engineering equipment technology specialists.
The partnerships and alliances, derived from the new business model have
increased the capacity of our micro-engineering MS equipment to provide
surveillance against contaminants and threats for existing clients and our
partners clients in the pharma, environmental and life science sectors.
The new services offered under the revised strategy gives the Microsaic team
the ability to fully exploit the data generated from existing and adapted MS
equipment, something that had not previously been utilised. AI-driven data
analytics offers our distribution partners in the environmental and life
science sectors additional ongoing shared revenue streams from our CE-marked
equipment and consumables. Predictive services for quality control in
real-time are already adding value for existing and new clients coming online
to manage their production risk in active pharmaceutical ingredients, and to
detect contaminants in the environment. We will soon add the capability to
provide medical diagnosis at point of care. Microsaic has moved on from just
selling equipment and consumables, to focusing on generating sustainable,
recurring revenues. Notwithstanding the continuing global uncertainties in
managing through the current and any future pandemic, we now have improved
visibility, months ahead, and are more secure in our expectations of growth
from a solid footing.
Gerard Brandon
Executive Chairman
27 May 2022
STRATEGIC REPORT
For the year ended 31 December 2021
Progress during 2021
2021 revenues were £0.9m, an increase of 357% on the prior year (2020:
£0.2m), with orders for the year exceeding £1m, representing a significant
milestone for the Company. Following the effects of COVID-19, sales in the
first half (£0.5m) were predominantly a roll-over from delayed orders in
2020, but with stronger order intake in the second half indicating newly
secured instrument and service business in Environmental and Human Health.
Gross margin was 44% (2020: 50%), falling due to a change in product mix.
Product gross margins averaged 31% (2020: 37%) and consumables 63% (2020:
56%). Services to customers are provided by in house staff and their costs are
included in operating expenses and are not included in the gross margin.
Operational Highlights
· February: Over-subscribed placing of £5.5m (gross proceeds), new
board and structural change to commercially focused and collaboration-based
business model.
· Five key commercial hires to focus on:
o acceleration of revenues on environmental detection of water contamination
and in human health markets,
o delivering real-time on-site monitoring,
o data analytics with connected Internet of Things ("IoT"), and
o AI and support services.
· March: commercial agreement with DeepVerge. Microsaic products and
services deployed internationally in applications such as water monitoring of
chemicals and pathogens, and in support of DeepVerge's rapidly growing Labskin
division.
· May: Collaboration with Swansea University to combine real-time
monitoring of environmental water using AI in determining the link between
environmental chemical pollution and human health.
· July: World first demonstration by Microsaic of real-time monitoring
of on-line production of biotherapeutic drugs (vaccines and anti-cancer
treatments) using Process Analytical Technology within a micro-engineered MS
solution.
· August: launched a miniaturised mass spectrometer platform to achieve
triple quadrupole limits of detection for real-time monitoring and
identification of Chemicals of Emerging Concern ("CECs") in water and soil.
· September: signed an agreement with Jiangsu Henzhihe Technologies
Co. Ltd. ("HZH"), acting as the manufacturer, integrator and service centre
in support of distribution and prospective OEM partnerships in China.
· October: launch and immediate roll-out of compact MS technology
integrated with autosampler and separation technology, wrapped in closed-loop
(automated) control software, for use in the scale-up and operation of drug
manufacturing.
· November: Microsaic's point of need platform to include Gas
Chromatography ("GC") capability, extending the Companies existing liquid
chromatography ("LC") capability to offer a platform for the automated
detection of organic chemicals in both non-volatile and volatile compounds
such as therapeutics, antibiotics, pesticides, petrochemicals, and personal
care products.
Strategic Progress
Post the placing in February 2021, the Board repositioned the Company's
business model and strategy, transitioning from selling capital-based
scientific instrumentation to scientists, towards solving real world problems
in the Environmental and Human Health sectors. The Board believes this
transition will establish higher levels of end-user engagement, and the shift
in the business model is already leading to a greater proportion of recurring
revenue through workflows, software, and services.
Progress on this strategy has been made in 2021 contributing towards the
Company's increased order book, particularly in H2 2021, and the Board
believes this progress will yield significant sales growth in 2022 and beyond,
despite the challenging business environment.
Transition from capital instrument sales to complete workflows in Human and
Environmental Health
· The Company launched a complete workflow for the bioprocessing
industry, targeted at contract research and manufacturing organisations
("CRMO"), integration partners and biopharmaceutical companies who manufacture
biologic vaccines and therapeutics for major diseases such as chronic
autoimmune diseases. Biopharmaceuticals is a well-established and rapidly
growing sector (valued at circa $200 billion in a 2020 report(1)), which
faces significant challenges around process robustness. This is particularly
apparent within upstream processing, which relies on fundamental biology and
carries inherent product variability. Continuous point-of-need MS would
provide timely and critical safety and quality assurance, as adverse effects
would be identified earlier in the process and mitigated upstream. The
analytical instrumentation market in upstream bioprocessing alone was
projected to be worth circa $390 million in 2020(2). The Company believes
that its compact, easy-to-use, MS technology is well-positioned to access a
share of this market, working with bioprocessing instrument providers, CRMOs
and end-users in biopharmaceutical manufacturing alike.
· Microsaic's platform now offers automated detection of organic
chemicals in both non-volatile and volatile compounds such as therapeutics,
antibiotics, pesticides, petrochemicals, and personal care products. The
platform can be used in Human Diagnostics where measurements are
increasingly being made in the doctor's clinic or during surgery, with
applications including the real time monitoring of Therapeutic
Drugs. Microsaic's technologies can also detect contaminants in soil and
water in minutes and is well suited to front line environmental monitoring of
CECs at the point of need. The latest addition to Microsaic's platform is
the integration of the Company's compact MS technology with GC and
extends Microsaic's existing applications in LC". This combination will
provide an extensive range of analysis required by end-users for chemical
detection, for use in a combined market estimated to be worth over $1
billion(3).
Driving the value of data, through collaborations in software and AI in
Environmental Health
· Collaboration with DeepVerge. Microsaic is participating in the front
line water analysis portfolio of Modern Water (a division of DeepVerge) by
adding a new portable real-time sewage monitoring capability, particularly for
monitoring "organics" such as drugs of abuse and active pharmaceutical
ingredients ("APIs"). Both companies are engaged in a collaboration to deliver
complete solutions, with a backbone of analytics delivered to end users
powered by powerful AI techniques.
· Collaboration with Swansea Medical School. The detection platform
will combine environmental sample preparation and epigenetic approaches
with Microsaic's miniaturised MS. Through partnership with stakeholders in
the environmental sector, this collaboration is designed to better inform
pollution remediation, improve management processes for reduced emission and
promote safer handling of PFAS chemicals. The partnership will include the
application of AI methodology to real-time water detection.
Increasing the proportion of recurring revenue through scientific services
In October 2021, Microsaic launched its services business, providing a suite
of solutions, which provide knowledge, applications and services, including
environmental, bioprocessing optimisation and analytics and workflow
solutions, and emerging translational medicine. Markets span industries,
including Pharmaceuticals/Biopharmaceuticals, Food Safety, Environmental and
Clinical, and this business will further augment the Company's transition
towards offering complete solutions to end-users in Human and Environmental
Health.
Partnership progress with DeepVerge plc
In October 2021, Deepverge increased orders for pathogen monitoring equipment
for shipment in 2021 to partners and customers based in the UK, India, and
China, which included upgrades to DeepVerge Modern Water Microtox(®)PD(4)
units, and Microsaic mass spectrometer units. Configurations of the Microsaic
equipment were included in these orders to DeepVerge for the integrated
detection of PFAS (Per- and Polyfluoroalkyl Substances or 'forever
chemicals'). This monitoring capability forms part of broader integrated
solutions offered by DeepVerge for monitoring toxicity and heavy metal
pollutants as well as the prevalence of SARS-CoV-2 as part of the ongoing
pandemic response.
Operations
The Company received orders exceeding £1m in 2021, sales of £0.9m with the
backlog of orders expected to ship during early 2022. The main reason for this
backlog was due to global supply constraints, mainly resulting from COVID-19.
The Company is working hard to mitigate any risks to its key supply chain such
that any future impact will be minimal.
Strategic Focus
Microsaic serves Human Health, Environmental Health and Diversified markets
with equipment and design services for mass detection technology, which can be
used at the point of need to drive better informed, faster decisions in real
time and to solve real-world problems.
Typical point of need markets and applications include process analytical
technology for the manufacture of high value biologic drugs, food
contamination screening as well as cannabinoid screening. The Company is also
developing a longer-term capability in point of care diagnostics.
Microsaic's technology can also be used in standard laboratory settings, for
example in the established pharmaceutical, academic and chemical industries.
Business Model
The Company has moved from revenues in 2021 derived from the sale of its MS
instruments, consumables and spare parts to deliver solutions for end-users,
and in 2022 now operates a revenue sharing, hardware, software and
micro-engineering design services business model. Working with collaboration
partners is reducing the Company's reliance on equipment sales (which depend
on lengthy sales cycles) and in 2022 Microsaic has quickly moved towards a
recurring revenue-based model, which is expected to increase the proportion of
revenues from AI and analytical electronic sensor-based Internet of Things.
These revenue streams are in addition to premium services relating to 24/7
operation and support and data analytics, in particular Industry 4.0 smart
technology for the bioprocessing industry, which are also expected to form an
increasing proportion of revenues. Other equipment developed in collaboration
with partners, will shift towards the integration of sensors and analysers to
solve specific problems for a range of industries, which our partners already
operate in.
Product Overview
The Company's existing products use miniaturised chip-based technology and are
designed to deliver application versatility, ease of deployment and provide
users with real-time information to make decisions in a quicker and more
cost-effective manner.
Throughout 2021, Microsaic introduced our In-Field Screening solution for
real-time monitoring. This was largely focused on the environmental market and
monitoring of PFAS (Perfluoroalkyl and Polyfluoroalkyl Substances) and other
CECs (Chemicals of Emerging Concern). This real-time monitoring solution can
be utilised in other markets as diverse as water, pharmaceuticals, chemicals,
academia, and food and beverage.
Microsaic's technology development has pivoted towards more dedicated
solutions to solve specific problems in Human and Environmental Health and
Diversified Industries.
Stakeholder Engagement
Section 172 of the Companies Act 2006 ("S.172") recognises that companies are
run for the benefit shareholders, but that the long-term success of a business
is dependent on maintaining relationships with stakeholders and considering
the external impact of the Company's activities.
Microsaic's key stakeholders are our employees, partners (including
distributors, OEMs and collaborators on new products), and our key suppliers
such as our manufacturing contractor and key R&D subcontractors. By
working with all stakeholder groups, the Company can unlock the potential of
the business and maximise the value created. The key principles and values
adopted by the Company are detailed under Principle 8 of the QCA Corporate
Governance Code.
For Microsaic, engagement with our key stakeholders is part of how we operate
as a business. Actively seeking to understand the concerns and aspirations of
our employees, how we can better engage with them, how we can work more
closely with the partners who distribute our products and those that we
collaborate with, plus the challenges faced by our manufacturing partner and
other suppliers.
Compared to 2020, this year was less challenging and enabled the Company to
focus on its growth. A key priority in 2021 was redefining the commercial
focus, targeting solutions to meet the requirements of existing clients and
investigating markets to capitalise on the value of the new business model.
Microsaic is now sufficiently capitalised to take advantage of the
opportunities available to a commercial focused business and face-to-face
engagement restricted during the pandemic lock-down with shareholders and
stakeholders was eased. The Directors continue to engage with shareholders and
key stakeholders keeping them up to date on progress.
The key decisions made by the Board during the year are outlined below:
· In February 2021, new directors were appointed to the Board. The
incumbent CEO and CFO remained and implemented the new business model. In
contrast to the previous year, additional staff were hired to meet the demand
for new services being offered after a successful fundraise was completed on 5
February 2021 raising £5.5 million before expenses.
Under S.172, a company's directors have a duty to discharge their
responsibilities having regard to:
a) the likely consequences of any decision in the long term - the focus of the
Board during 2021 was the reorganisation and adjustment to a more commercial
focus with emphasis on delivery of solutions, beyond equipment sales.
b) the interests of the company's employees - following the fund raise in
February 2021, all employees who had agreed to a temporary 20 per cent.
reduction during the pandemic had their salaries restored.
c) the need to foster the company's business relationships with suppliers,
customers and others - customers were treated fairly during the year.
Suppliers continued to be paid on time.
d) the impact of the company's operations on the community and the environment
- there was no adverse impact on the community or environment from the
decisions made by the Board during the year.
e) the desirability of the company maintaining a reputation for high standards
of business conduct - the Company acted in a professional manner during 2021
liaising with key stakeholders and followed the principles and values of the
Company as outlined in the Corporate Governance Report.
f) the need to act fairly as between members of the company - the Board
treated shareholders fairly and made sure it kept them up to date through
regular press releases. Significant shareholders were given the opportunity,
through a market soundings exercise to invest in the Company. The strategic
review process was undertaken for the benefit of shareholders and other key
stakeholders.
Performance Measurement
The ongoing performance of the Company is managed and monitored using several
key financial and non-financial performance indicators as detailed below:
Revenue Year to 31 December 2021 Year to 31 December 2020 Increase/
(Decrease)
£ £ %
Products 617,613 83,397 641
Consumables and spare parts 230,832 105,135 120
Service and support income 58,431 9,726 501
Total 906,876 198,258 357
The Company's revenue performance strengthened in 2021 following the impact of
the COVID-19 pandemic, and increased by 357% to £0.91m (2020: £0.20m).
Restrictions on travel to support partners and customers have only recently
been lifted. Revenue comprises the sale of products, consumables and spare
parts, and service and support income. The Board reviews trading results and
monitors cash on a regular basis.
Profit/(Loss) & Cash Metrics Year to 31 December Year to 31 December 2020 Increase/
2021 (Decrease)
£ £ %
Loss from operations before share-based payments, interest, and tax
(2,034,235) (2,531,746) (15)
Net cash used in operating and investing activities (1,937,263) (2,126,275) (9)
Cash and cash equivalents 3,464,876 397,069 773
The Company's profitability is monitored against budget on a monthly basis.
The 15 per cent. reduction in the loss from operations before share-based
payments was the result of growth in revenue whilst keeping operating costs
consistent and a reduction in corporate transaction related costs following
the restructuring. The Company monitors its cash position closely, and
forecasts are updated on a regular basis. The year-end cash position was in
line with the Board's expectations.
Non-financial key performance indicators measure a number of key areas,
including commercial and operational targets, such as number of sales orders,
unit production, new products transferred to manufacturing, number of
collaborations, agreements signed with new customers and quality measures from
the Company's ISO 9001:2015 system. Key points to note are:
· Sales orders for MS instruments were significantly above last year;
· Microsaic worked with its manufacturing partner to increase
production levels;
· On the customer front, two new partner agreements were entered into
during the year;
· The Company was able to continue with two important partner
collaborations, albeit delayed, both in bioprocessing; and
· ProteinID was successfully transferred to manufacturing, although
significantly later than originally planned while work on the launch of our
LC-MS family of products was placed on hold. Progress on the latter has been
delayed due to the worldwide supply chain shortages of electronic components.
It is anticipated that it will be resumed towards the end of 2022, with sales
commencing during Q2 2023.
Financial Results - 2021
Profit and Loss
Total revenue of £906,876 increased 357 per cent. compared to the prior year
(2020: £198,258) which had been impacted by the COVID-19 pandemic, and ahead
of 2019 revenues of £872,125. Product revenues of £617,613 (2020: £83,397)
and service revenues of £58,431 (2020: £9,726) increased by 641 per cent.
and 501 per cent. respectively. Consumables revenue of £230,832 (2020:
£105,135) increased by 120 per cent.
Gross profit in 2021 of £395,984 (2020: £99,910) rose by 296 per cent. over
last year following a significant increase in product revenues, as customer
investment decisions were postponed due to the COVID-19 pandemic. The gross
margin of 44 per cent (2020: 50 per cent.) is reduced on the last year
predominantly due to an increased proportion of lower margin unit sales
compared to higher margin consumables.
Other operating income of £67,283 (2020: £96,626) relates to a mix of
Coronavirus Job Retention Scheme grant, co-development income and insurance
claim income (2020: solely Coronavirus Job Retention Scheme grant).
Total operating expenses (excluding share-based payments) of £2,497,502
(2020: £2,728,282), fell by 8 per cent. chiefly due to the reduction of
corporate transaction professional fees as the restructuring completed early
in 2021, new Non-executive Directors fees and Brokers fees being settled in
shares and a reduction in research and development expenses. Corporate
transactions-related professional fees of £65,789 fell by £83,575 as the
restructuring and fundraise completed early in the year during February 2021.
The main increase in expenditure compared to 2020 relates to payroll costs
increased by £137,950 to £1,545,368. This reflected increasing staffing
levels (after redundancies in 2020) and the restoration of staff salaries to
pre-pandemic levels (reversing in full an agreed temporary 20 per cent.
reduction during the pandemic in 2020).
The loss from operations for the year before share-based payments fell by 20
per cent. over last year to £2,034,235 (2020: £2,531,746).
Share based payments of £1,363,764 are £1,311,523 higher than the prior year
(2020: £52,241). This follows the cancellation of options and the issue of
new options as part of the restructuring in February 2021, together with
Non-executive Directors fees and Brokers fees settled in shares
Finance costs of £4,604 were less than the prior year (2020: £10,775). The
majority of this cost relates to interest on the lease liability.
Finance income of £6,237 increased compared with the prior year (2020:
£4,393) due to higher cash balances offset by reduced interest rates.
The tax credit on ordinary activities in the year was £267,785 (2020:
£217,711). In 2020, expenditure on R&D projects had been scaled back in
line with the contingency plan to mitigate the impact of the COVID-19
pandemic. The R&D tax credit claim is £50,074 higher than in 2020 as
there was a return to higher levels of staff time on eligible R&D.
The total comprehensive loss for the year of £3,128,581 is a 32 per cent.
increase over the prior year (2020: £2,372,658). The increase in the total
comprehensive loss by £755,923 was due chiefly to the share-based payments
increase of £1,311,523 over the prior year which was partially offset by a
£296,074 improvement in gross profit and other operating costs reduced
by£107,753. The basic loss per share fell by 89 per cent. from 0.52 pence in
2020 to 0.056 pence per share in 2021. The weighted average number of shares
in issue increased by 1,013 per cent. (refer to note 10) as a result of the
fund raise on 5 February 2021 (refer to note 18).
Balance Sheet
Total non-current assets increased £259,313 to £506,625 (2020: 247,312). The
increase is due to a substantial increase in investment in plant and equipment
and the renewal of the Woking lease.
Current assets at £4,648,511 are up £3,289,414 over last year (2020:
£1,359,097). The increase is mainly due to a substantially higher cash
balance of £3,464,876 (up £3,067,807) as well as higher trade and other
receivables (up £458,077) and corporation tax receivable (up £49,217),
partly off-set by lower inventories (down £285,687). The increase in cash
reflects the fund-raise in February 2021, the increase in trade receivables
and lower inventories reflects the increased sales in 2021 compared to 2020.
The lower inventories also relate to supply chain issues arising from the
COVID-19 pandemic.
Total assets at £5,155,136 are £3,548,727 higher than last year (2020:
£1,606,409), mainly due to the higher level of current assets at the year-end
given the increased cash balance.
Total equity at £4,573,220 is £3,330,240 above last year due to the share
issue net of costs in February 2021 of £3,700,132 (adjusted for cash costs
and the fair value of broker warrants) plus the movement on share-based
payment reserve of £2,564,443 offset by the reduction in retained reserves of
£2,934,335. The increase in the share-based payments reserve is due to fair
value of broker warrants in relation to the February 2021 share issue and new
options net charge amounting to £1,255,681 off-set by share-based option
credits in respect of unvested cancelled options of £194,246.
Current liabilities comprise trade and other payables and lease liability due
within 12 months of the year end. Trade and other payables at £354,611 (2020:
£185,927) are £168,684 more than last year and mainly reflects an increase
in trade payables (up £167,460), with lower level of accruals and deferred
income (down £32,817) offset by higher other payables, taxes and social
security (up £34,041). The lease liability of £71,187 mainly represents the
Company's leasehold property in Woking which expires in September 2023.
Total non-current liabilities at £156,118 are £30,986 more than last year.
This is mainly due to the increase in the lease liability by £55,061
reflecting the Company having renewed its Woking lease in September 2021
offset by a reduction in provisions of £24,075 reflecting lower estimated
warranty claims.
Total liabilities of £581,916 are £218,487 more than in the prior year due
to the increase in current and non-current liabilities as set out above.
Cash Flow
Net cash used in operating activities in 2021 of £1,609,283 is £440,327
lower than last year reflecting the reduction by £497,511 in the loss from
operations before share-based payments for the year. The R&D tax credit
receipts fell by £103,016 offset by improvements in working capital movements
of £155,045.
Net cash used in investing activities of £327,980 compares with £76,665 in
2020. The main movements in the year were an increase in the purchases of
property, plant and equipment of £235,882 and intangible assets of £1,564
and interest received lower by £13,869.
Net cash generated by financing activities amounted to £5,005,070 and relates
to the net proceeds of the fund raise in February 2021 offset by payment of
lease commitments (chiefly in relation to the Woking site) during the year.
The net increase in cash for the year of £3,067,807 resulted in a cash
balance as at 31 December 2021 of £3,464,876.
Going Concern
The Company's resilience has improved following the equity fundraise completed
in February 2021 when the Company successfully raised £5.5 million (before
expenses), with improved trading performance, a revised business strategy and
the additional Manufacturing Framework Services Agreement ("MFSA") signed with
DeepVerge for an initial value worth £400,000 (with no capital costs for
Microsaic). The MFSA provides for additional iterations and upgrades to other
equipment which could generate further contracts and income for the Company in
the first half of 2023. With the recent advent of new service revenue streams,
the plans and prospects for the business are modest in projecting the pace and
quantum of new revenue and the Company is expected to continue to be loss
making in the short-term. Having taken this careful approach, the Board
believes that the Company has sufficient cash to cover the anticipated working
capital requirements for at least the next 12 months from the date of signing
of the Annual Report and Accounts. Therefore, the Directors have adopted the
going concern basis of reporting in preparing the financial statements. The
Board's assessment of the going concern basis is explained in more detail in
note 3 to the financial statements, including sensitivities and contingency
plans.
Risk Management
The Company manages risk from an operational perspective, where it assesses
and weighs up the potential risks to the business and how it can mitigate
these risks. The Board has identified the following risks and associated
mitigating actions as follows:
Description Risk Risk rating pre-mitigation Mitigating actions Risk rating post-mitigation
Unable to grow sales required to achieve sustainable profitability Sales growth is too slow to achieve targets HIGH Pursuing a new strategy involving services and investing in business MEDIUM
development to promote these as well as developing new sales channels.
COVID-19 pandemic has material impact on sales Low or little demand from affected markets and less opportunity to visit MEDIUM Continue dialogue remotely with partners. Increase collaborations regarding MEDIUM
potential customers the development of new products and expand sales channels. Ensure staff have a
safe and protected work environment.
Unable to raise additional funds if required in the future Inability to continue as a going concern MEDIUM Communicate effectively with shareholders and potential investors. Ensure the MEDIUM
business plan is implemented effectively with the focus on expanding sales
channels and growing revenues, whilst adjusting variable costs in line with
actual revenues.
Reliance on third party manufacturing facilities A replacement manufacturer is necessary MEDIUM Work closely with our manufacturing partner and hold regular review meetings. LOW
Ensure contingency plans are prepared and reviewed.
Retention and recruitment of key employees Loss of key employees and subsequent difficulty in recruiting suitable LOW Ensure the Company's remuneration package is competitive and aligned to LOW
replacements performance. Retain key staff by investing in their development.
Loss of competitive advantage in miniaturised mass spectrometry Competitors developing competing products MEDIUM The Company continues to innovate, invest in IP, and focus on its core LOW
strengths around point of care, ease of use and simplicity of maintenance. The
Company believes the market is large enough for competitors to co-exist.
From the analysis above there are three main risks facing the business:
1. Although some countries have weathered the COVID-19 pandemic better
than others, the global health crisis continues to slow the potential for
improved revenues overseas, particularly in the APAC region. However, the new
business model saw sales of units increase supported by services utilising
in-house expertise and experience which do not require travel to support
installations. Restrictions on international travel to and from partner
countries has eased and we will continue to monitor the situation very
closely. The Company will follow government guidelines in the UK and abroad to
plan international visits to customers. Restrictions on working from home have
eased and while we encourage staff to go into the premises, we remain open to
a flexible approach to ensure the health and safety of our employees as a
priority.
2. Failing to grow the sales required to achieve sustainable
profitability is a clear risk. To mitigate this, soon after the funds raised
in February 2021 the Company altered the business model to create a
substantial uplift in revenues from multiple sales channels in products and
services to provide solutions to clients, generating recurring revenues
through design, prototype and preparation of blueprint for transfer to
manufacture of third-party equipment. Investment in business development has
already delivered positive results bringing in £400,000 in design and
development contracts after year end and the additional iterations and
upgrades to generate further contracts and income for the Company into 2023.
Should these not materialise as estimated, the Directors have prepared
mitigating actions which would be undertaken if necessary as set out in note
3.
3. The inability to continue as a going concern. This has been mitigated
by the successful fundraise in February 2021 where the Company raised £5.5
million before expenses, the developing strategic relationship with DeepVerge
plc and the introduction of new services during 2022. The Board's assessment
of the going concern basis is summarised in more detail in note 3.
Key events and progress post year end
· Multi-year Manufacturing Framework Service Agreement with DeepVerge
plc for a range of Modern Water equipment, including the addition of a range
of "Sentinel" sensors to make use of Artificial Intelligence and Internet of
Things is a further iteration of DeepVerge, Modern Water's Microtox®PD device
with a value to Microsaic of £400,000 with an estimated total contract value
of the order of £1m, subject to agreement on additional Scope of Work
statements, and anticipated delivery over the period until the end of 2023.
Signing of agreement with DeepVerge
On 24 March 2021, Microsaic signed a non-exclusive Framework Services
Agreement with DeepVerge for the distribution of its products across the
geographic markets addressed by DeepVerge. This agreement does not restrict
Microsaic from developing and engaging with its existing or other new
partners. DeepVerge offers Microsaic the opportunity of increasing volumes
substantially, from an established global sales platform, and an extended
reach into markets beyond that for standard laboratory use of MS.
Under the terms of the agreement, DeepVerge has committed to allocate
resources up to a value of £150,000 to assemble a pilot facility for
Microsaic's systems at DeepVerge's York laboratories, to provide access for
potential customers and clients of DeepVerge to verify and validate the
technology in numerous application settings beyond those historically targeted
by Microsaic.
Additionally, this agreement opens the opportunity for collaboration in
several areas:
· DeepVerge will incorporate AI software and services into Microsaic's
technology. This fits in with Microsaic's strategy in bioprocessing, where AI
enables faster decision making from complex data sets;
· DeepVerge will utilise and integrate Microsaic's technology into
Labskin products and services, in pursuit of human and environmental health
applications. Microsaic's technology is ideally suited for screening
applications and especially for protein detection (e.g., with Microsaic's
MiD® ProteinID technology); this collaboration will also progress both
companies' respective strategies in point of care diagnostics, where the
Directors believe that combining the technologies could have a synergistic
effect;
· Certain Microsaic employees will be located at DeepVerge's sites in
the UK, to assist with particular collaborations (e.g., Labskin's facility at
York); and
· Microsaic will collaborate with Modern Water Group (part of
DeepVerge) to develop solutions for point of need water quality and pathogen
testing.
The Framework Services Agreement with DeepVerge constituted a related party
transaction under Rule 13 of the AIM Rules for Companies, by virtue of
Microsaic and DeepVerge having two directors in common. At the time of
entering into the agreement, the Independent Directors, being Glenn Tracey and
Bevan Metcalf, confirmed that they considered, having consulted with the
Company's nominated adviser, that the terms of the Framework Services
Agreement were fair and reasonable insofar as the Company's shareholders are
concerned. Additional orders received under this agreement were similarly
assessed as being consistent with the terms of the FSA and therefore also fair
and reasonable. In 2022 the FSA was amended to include additional new products
and provide for other new items to be added to the agreement, subject always
to the review by the respective companies' nominated advisers.
Outlook
The Board is targeting significant scale up of the business in 2022 which will
be underpinned by:
· The roll-out of Microsaic's scientific and micro-engineering design
services business, in particular implementation of Framework Agreements for
high-value design, prototype and blueprint preparation for mass production of
sensor-based Internet of Things clients (via DeepVerge);
· The extension of Microsaic's detection platform in both LC and GC
applications in Human and Environmental Health real-time monitoring;
· The expansion of Microsaic's revenues through its partners,
particularly through its collaborations in water detection with DeepVerge; and
· Significant OEM partnership deals, and strategic interest in the
Company
If 2021 was about turnaround, then 2022 is about significant business
inflection. We have worked tirelessly in 2021, putting in place the necessary
building blocks in and around our technology, extending our business model to
cover services, workflows and software.
The COVID-19 era has demonstrated the resilience of humans and ingenuity of
our scientists, and the ability for us to respond quickly with solutions for
real-world problems. Real-time detection is a central facet of advancing this
human endeavour. Microsaic is exceptionally well placed with its capabilities
in real-time detection.
I am absolutely delighted with how Microsaic has emerged following the
COVID-19 pandemic, stronger than how we entered it. I am very optimistic about
our future.
The Strategic Report was approved by the Board of Directors on 27 May 2022 and
signed on its behalf by:
Gerard Brandon
Executive Chairman
Notes
(1 ) 2020 Global Life Sciences Outlook, Deloitte
(2) Report on upstream bioprocessing analytical instrumentation, TDA
consultants 2019
(3) SDI Report
(4 ) Microtox® PD has been designed to be retrofitted into
existing Modern Water equipment to detect and identify a range of infectious
viruses and bacteria including SARS-CoV-2, E. coli, Legionella and
Cryptosporidium, on a single chip, using AI, in real-time
DIRECTORS' REPORT
The Directors present their report for the year ended 31 December 2021.
Principal activity, business review and business risks
The principal activity of the Company continued to be the commercialisation
and development of miniaturised micro-engineering equipment, originally for
mass spectrometry instruments but now to include integration of AI and
Internet of Things analytical sensors for existing and new clients to generate
recurring shared revenues for monitoring across biologic bio-processing,
environmental and human health and likely to extend to aviation, the food
industry and oil & gas sectors. A review of the business is contained
within the Strategic Report.
Results and dividends
The results for the Company are given in the statement of comprehensive
income. The Company is currently making losses and has retained losses which
have to be recovered before it can pay a dividend. Therefore, the Directors do
not recommend the payment of a dividend (2020: £nil).
Business Development & Sales
Revenues are made through OEM and distribution sales channels with direct and
collaboration partners currently in place, covering North America, Europe,
China, Southeast Asia and Japan.
Research and development ("R&D")
R&D is important for the Company's success and has led to the filing of
over 80 patents to date. During the year, R&D projects and R&D
expenses totalled £738,145 (2020: £777,597) or 28.3 per cent. (2020: 28.5
per cent.) of total operating expenses excluding share-based payments. Current
plans are to invest in commercial development associated projects that are
demanded from new and existing clients to optimise resources through
collaborations and joint ventures.
Directors
Between the 1 January 2021 and 31 December 2021, the following Directors held
office:
Gerard Brandon, Non-executive Chairman (Age 60)(1)
Peter Grant, Non-executive Chairman (Age 65)(2)
Nigel Burton, Non-executive Director (Age 64)(1)
Eric Yeatman, Non-executive Director (Age 58)(2)
Glenn Tracey, Chief Executive Officer (Age 50)(3)
Bevan Metcalf, Finance Director and Company Secretary (Age 64)(4)
(1)Appointed as a Director on 5 February 2021.
(2)Resigned as a Director on 5 February 2021.
(3)Resigned as a Director on 31 March 2022.
(4)Resigned as a Director and Company Secretary on 17 December 2021 (upon his
retirement).
On 5 February 2021, Gerard Brandon and Dr Nigel Burton were appointed to
the Board as Non-executive Chairman and Non-executive Director respectively,
replacing Peter Grant and Eric Yeatman who resigned as part of the
reorganisation. Their biographies are detailed in the Corporate Governance
Report.
On 22 October 2021, Bevan Metcalf's retirement was announced, and he resigned
as a Director and Company Secretary on 17 December 2021.
Post year end on 28 January 2022, it was announced that Glenn Tracey was
stepping down to pursue a non-competitive opportunity and he resigned as a
Director on 31 March 2022. Also post year end on 15 March 2022, Robert Moore
was appointed as Independent Non-executive Director.
Directors' interests
The Directors' interests in the shares of the Company are:
Ordinary shares of 0.01p Ordinary shares of 0.01p Ordinary shares of 0.25p
at 31 March 2022 at 31 December 2021 at
31
De
ce
mb
er
20
20
Number % Number % Number %
Gerard Brandon(1) 190,000,000 2.99 140,000,000 2.30 - -
Dr Nigel Burton 300,500,000 4.72 65,500,000 1.08 - -
Robert Moore - - - - - -
490,500,000 7.71 205,500,000 3.38 - -
(1) This figure includes 50,000,000 shares by a person closely associated with
Gerard Brandon.
Significant shareholdings
Shareholders, excluding Directors, having a beneficial interest of 3% or more
of the Company's shares:
Ordinary shares of 0.01p each
at 31 March 2022
Shareholder Number %
Unicorn Asset Management 750,000,000 11.79
Hargreaves Lansdown Asset Management 711,327,347 11.18
Interactive Investor 520,095,997 8.18
Jarvis Investment Management 495,791,678 7.79
Premier Miton Investors 482,129,838 7.58
ISPartners Investment Solutions 362,125,000 5.69
Halifax Share Dealing 239,526,327 3.77
Barclays Wealth 193,693,535 3.04
Intuitive Investments Group 192,000,000 3.02
Employees
The Board regards the expertise and contributions of its employees as critical
to its future success. Executive management regularly update employees on the
progress of the business. The Board seeks to remunerate its employees fairly
and has adopted a flexible working hours policy to cater for employee needs.
Full and fair consideration is given to applications for employment received
regardless of age, gender, colour, ethnicity, disability, nationality,
religious beliefs or sexual orientation.
The Board would like to thank all its employees for their continued
contribution.
Company share ownership plans
The Company operates two Employee Share Option Schemes ("ESOS"), an approved
scheme and an unapproved scheme.
The ESOS were formed to enable the incentivisation of employees to be aligned
to the performance of the Company. Under the ESOS the Company grants employees
options to acquire the Company's ordinary shares subject to:
· Vesting periods (normally three years for new grants) and an exercise
period of up to ten years from the date of grant;
· The exercise price is normally the market price of the ordinary
shares at the close of business the day before the date of grant unless the
award is linked to an equity fundraise; and
· Performance and time-based vesting conditions as appropriate.
Options are granted up to the maximum amount allowed under the limits of the
Enterprise Management Incentive ("EMI") Scheme - these options are called
'Approved Options'. The EMI Scheme is subject to the provisions of Schedule
5 of the Income Tax (Earnings and Pensions) Act 2003 and have tax advantages
for the employee and employer. There is an unapproved scheme, which has no tax
advantages, for those awards which do not qualify under the Approved Option
scheme.
On 4 and 5 February 2021, the Company cancelled all existing options which
were all out-of-the-money. Options held by Peter Grant, former Chairman
(3,500,000), Glenn Tracey, CEO (4,800,000) and Bevan Metcalf, FD (4,620,000)
on 31 December 2020 were cancelled in February 2021. Options held by staff
amounting to 3,690,000, were also cancelled in February 2021.
These cancelled options were replaced with options over 1,125 billion ordinary
shares of 0.1p each following the share capital restructuring and fund raise.
This included options and warrants over 675 million ordinary shares of 0.1p
each for the directors. No options were awarded in 2020. Options awarded to
staff and Directors are detailed in note 25.
Management of risk
The management of operational risk is covered in the Strategic Report while
financial risk is detailed under note 28 Financial Instruments.
Health and safety and the environment
The Company is committed to providing a safe environment for its staff and
other parties for whom it has a responsibility. It has set up systems and
processes to ensure compliance with health and safety legislation and the
Board reviews an update on health and safety matters at each main Board
meeting.
The Company is also mindful of its corporate responsibilities concerning the
impact of its activities on the environment and seeks to minimise this impact
where practicable.
Quality management system
The Company's mission is to deliver miniaturised micro-electronic equipment
and Internet of Things designed to analyse data, using AI analytical services,
demanded by clients that include, but are not exclusively related to
miniaturised mass spectrometry instruments that provide innovative compact
detection with high quality and reliability.
The Company's quality policy applies to the development, marketing and support
of our products. In all its activities the Company is strongly focused on
commitment to the requirements of its customers including:
· Management of risks to prevent operational and product problems that
may adversely impact customer satisfaction and the interests of other parties;
and
· Management of any externally provided products and services to ensure
that they meet specified requirements including changing needs.
To help management achieve its policy, the business management system has been
developed using a process approach including a Plan-Do-Check cycle, risk-based
thinking, and a fundamental commitment to the continual improvement of the
system and its effectiveness and integration into the Company's activities.
The Company's Quality Management System is based on ISO 9001:2015. This
standard puts considerable emphasis on risk management and management
involvement within the quality management system.
Directors' indemnity and insurance
The Company has granted an indemnity to its Directors and Officers under which
the Company indemnifies them, subject to the terms of the deed of indemnity,
against costs, charges, losses, damages and liabilities incurred by them in
the performance of their duties. The Company also maintains Directors and
Officers liability insurance against the consequences of actions brought
against them in relation to their duties for the Company.
Related party transactions
The interests of the Directors are shown in the Directors' Report while their
remuneration is detailed in the Directors' Remuneration Report. Other related
party transactions involving the Directors during the 2021 financial year are
included in note 28.
Directors' responsibilities
The Directors are responsible for preparing the Annual Report and Accounts in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Company
financial statements in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. Under company law
the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Company and the profit or loss of the Company for that period.
In preparing the financial statements the Directors are required to:
· Select suitable accounting policies and then apply them consistently;
· Make judgements and accounting estimates that are reasonable and
prudent; and
· State whether international accounting standards in conformity with
the requirements of the Companies Act 2006 have been followed, subject to any
material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Statement of disclosure to auditors
So far as each Director is aware, there is no relevant audit information of
which the Company's auditors are unaware. Additionally, the Directors have
taken all the steps that they should have taken to make themselves aware of
any relevant audit information and to establish that the Company's auditors
are aware of that information.
Auditors
Saffery Champness LLP has expressed its willingness to remain in office as
auditors of the Company, and a resolution for its re-appointment will be
proposed at the forthcoming Annual General Meeting.
Future developments
An indication of likely future developments in the business of the Company are
included in the Strategic Report.
This Directors' Report was approved by the Board of Directors on 27 May 2022
and signed on its behalf:
Gerard Brandon
Executive Chairman
Company number 03568010
DIRECTORS' REMUNERATION COMMITTEE REPORT
For the year ended 31 December 2021
Dear Shareholders
2021, much like 2020, was a challenging year for the Company because of the
many impacts of the COVID-19 pandemic. Directors and staff took a temporary 20
per cent. reduction in their remuneration, effective from 1 April 2020 to 31
January 2021, with full payment restored with effect from 1 February 2021
following the successful placing in February 2021.
As part of the placing process, Gerard Brandon and Dr Nigel Burton were
appointed to the Board with Peter Grant and Eric Yeatman stepping down from
the Board. Both Mr Brandon and Dr Burton sit on the Remuneration Committee and
Dr Burton chairs the Committee. Robert Moore joined the Committee on 15 March
2022 at the time of his appointment to the Board.
This report has been prepared with reference to the Quoted Companies Alliance
guide "Remuneration Committee Guide for Small and Mid-Size Quoted Companies."
The Company has sought to comply with the overarching principles of the
guidance, although not all recommended disclosures have been included on the
basis that they are not relevant to the current circumstances of the Company.
This report sets out the Company's policy on the remuneration of Executive and
Non-executive Directors, together with details of Directors' remuneration
packages and service contracts.
Remuneration policy
The remuneration policy for Executive Directors, determination of their
individual remuneration packages and their performance appraisals have been
delegated to the Board's Remuneration Committee.
Remuneration of the Executive Directors
In setting the remuneration for the Executive Directors, the Remuneration
Committee considers several factors including:
· Basic salaries and benefits available to Executive Directors of
comparable companies;
· Need to pay Executive Directors a competitive salary in line with the
nature and complexity of their work;
· Need to attract and retain Executive Directors of an appropriate
calibre;
· Need to ensure Executive Directors' commitment to the continued
success of the Company by means of incentive schemes; and
· Need for the remuneration awarded to reflect performance.
The remuneration of the Executive Directors consists of basic salary, share
options, life assurance and a contributory personal pension of 7.5 per cent.
of basic salary.
Given the challenging circumstances, a discretionary bonus scheme based on
performance against individual and business objectives did not operate during
the year (2020 bonus: Nil).
As mentioned above the Executive Directors agreed to a temporary 20 per cent.
reduction in their salary and benefits from 1 April 2020 to 31 January 2021,
with full remuneration reinstated and new options packages introduced in
tandem with the placing.
Remuneration of the Non-executive Chairman and Non-executive Directors
The Chairman of the Remuneration Committee discusses the remuneration of the
Non-executive Directors with the Executive Directors. The remuneration is then
discussed and agreed by the Board (excluding Directors with a conflict of
interest) following recommendation by the Remuneration Committee, having a
view to rates paid in comparable organisations. The Non-executive Directors do
not receive any pension, bonus or other Company benefits.
Share options and shares
Options held by Peter Grant, former Chairman (3,500,000), Glenn Tracey, CEO
(4,800,000) and Bevan Metcalf, former Finance Director (4,620,000) on 31
December 2020, were cancelled in February 2021. All cancelled options were
significantly out-of-the-money and were cancelled prior to the issue of new
options to Glenn Tracey and Bevan Metcalf. As outlined below, new share
options were awarded to the Executive Directors to fully re-incentivise them
and align their interests with shareholders.
Details of the shares held by Directors are listed in the Directors' Report.
Implementation of the remuneration policy in 2021
The following long term option and warrant awards were part of the
reorganisation of the Company to incentivise the new Board appropriately.
These options and warrants will be exercisable at the placing price of 0.1
pence per ordinary share for 5 years from 5 February 2021, provided that the
ordinary shares have traded at a Volume Weighted Average Price (VWAP) at or
above a 50 per cent. premium to the placing price for 20 consecutive business
days, at any time since their issue, or on a change of control of the Company.
The vesting conditions were met in March 2021 and these options and warrants
became exercisable in full at that point.
Director Number of Options Number of Warrants
Glenn Tracey 150,000,000
Bevan Metcalf 75,000,000
Gerard Brandon 250,000,000
Dr Nigel Burton 200,000,000
In line with their service agreements, Gerard Brandon and Dr Nigel Burton have
taken their annual fees of £50,000 and £35,000 respectively, for the first
two years of their appointment, in shares at the price of 0.1 pence per share
being the placing price of the equity fundraising completed in February 2021,
subject to payment of all necessary employee taxes and national insurance
contributions. Thereafter, fees will be paid in cash monthly in arrears.
It was agreed by the Committee that the Executive Director's remuneration
would be increased to their March 2020 levels on 1 February 2021.
Directors' notice periods
Details of the Director's notice periods as per their service contract are as
follows:
Contract date Term Notice period
Nigel Burton 5 February 2021 Three years(1) 3 months
Gerard Brandon 5 February 2021 Three years(1) 3 months
Robert Moore 15 March 2022 Twelve months(2) 3 months
(1)Notice cannot be given by the Directors during the first two years of their
appointment except to the end of the period to which their fees have been paid
in advance.
(2)The initial term is the earlier of 12 months or the first AGM. Subject to
re-elections at AGM the appointment is anticipated to last at least 3 years.
Directors' emoluments
Directors' remuneration in 2021 is detailed below. Non-cash payments represent
life assurance premiums.
Salaries & fees Non-cash payments Pension contributions Share- based payments Year to 31 December 2021 Year to 31 December 2020
£ £ £ £ £ £
Gerard Brandon(1) - - - 420,129 420,129 -
Nigel Burton(1) - - - 331,599 331,599 -
Glenn Tracey(3) 131,570 575 9,292 182,255 323,692 135,168
Bevan Metcalf(4) 115,777 1,427 18,033 80,245 215,482 131,634
Peter Grant(2) 15,000 - - (54,983) (39,983) 64,201
Eric Yeatman(2) 2,450 - - 112,528 114,978 23,800
Other(5) - - - - - 12,699
TOTAL 264,797 2,002 27,325 1,071,773 1,365,897 367,322
(1)Appointed as a Director on 5 February 2021.
(2)Resigned as a Director on 5 February 2021.
(3)Resigned as a Director on 31 March 2022.
(4)Resigned as a Director and Company Secretary on 17 December 2021.
(5)Relates to a director who resigned in 2020.
The share-based payments charge in the year relates to options awarded in
February 2021 to Messrs Brandon, Burton, Tracey, Metcalf and Yeatman less
credits for cancellation of all previous options of all directors (including
Mr Grant).
The 750 million options and warrants (replacing all previous options) granted
to Directors vested during the year as the performance criterion that the
Company's ordinary shares traded at a Volume Weighted Average Price at or
above a 50 per cent. premium to the placing price for 20 consecutive business
days, was achieved.
Directors' share options
Share options and warrants over the Company's ordinary shares held by the
Directors at the year-end were as follows:
At 31 December 2020 At 31 December 2021 At 31 December 2021
Exercise period
Performance Conditions Exercise price
0.25p ordinary 0.01p ordinary Vested Pence
shares shares
Number Number
Glenn Tracey 100,000 - - Yes 47.75p 17 April 2015 - 17 April 2025. Cancelled February 2021.
200,000 - - No 23.5p 13 January 2016 - 13 January 2026. Cancelled February 2021.
1,000,000 - - Yes 5p 14 September 2016 - 14 September 2026. Cancelled February 2021.
2,500,000 Yes 1.55p 12 June 2019 - 12 June 2029.
Cancelled February 2021.
- 150,000,000 150,000,000 Yes 0.1p 5 February 2021 -
4 February 2026.
Gerard Brandon - 250,000,000 250,000,000 Yes 0.1p 5 February 2021 -
4 February 2026.
Nigel Burton - 200,000,000 200,000,000 Yes 0.1p 5 February 2021 -
4 February 2026.
4,800,000 600,000,000 600,000,000
The Company's share price started the year at 0.20 pence and ended the year at
0.15 pence, with a close high and low over the year of 0.39 pence and 0.14
pence respectively (with an intra-day high and low over the year of 0.44 pence
and 0.13 pence respectively).
The share-based payment charge in relation to the share option grants to
Directors and lapsed options during the year was £995,214 (2020: £51,753).
The Directors' Remuneration Report was approved by the Board of Directors on
27 May 2022 and signed on its behalf by:
Dr Nigel Burton
Chairman of the Remuneration Committee
DIRECTORS' FINANCE & AUDIT COMMITTEE REPORT
For the year ended 31 December 2021
Introduction
This report details how the Finance & Audit Committee ("the Committee")
has met its responsibilities under its terms of reference. The Committee is a
sub-committee of the Board. As Non-executive Directors, the members of the
Committee are, together with the Board as a whole, responsible for the
integrity and probity of the Company. The work of the Committee is aimed at
supporting the creation of long-term value for shareholders.
The Committee continues to act as an oversight sub-committee of the Board,
considering and challenging but not itself performing the relevant processes.
The ultimate responsibility for reviewing and approving the Annual Report and
Accounts and interim financial statements remains with the Board.
The Committee does not believe there is a requirement for an internal audit
function due to the Company's size and level of complexity.
Role and Responsibilities
The Board has established a Finance & Audit Committee to monitor the
integrity of the Company's financial statements and the effectiveness of the
Company's internal financial controls. The Committee's role and
responsibilities are set out in the terms of reference which are available
from the Company's website. The terms of reference are reviewed regularly and
amended where appropriate. During the year, the Committee worked with
management and the external auditors in fulfilling these responsibilities.
The Committee report deals with the key areas in which it plays an active role
and has responsibility. These areas are as follows:
i. Financial reporting and related primary areas of judgement;
ii. The external audit process;
iii. Risk management and internal controls; and
iv. Whistleblowing procedures.
The members of the Finance & Audit Committee are Dr Nigel Burton and
Gerard Brandon with Robert Moore joining on 15 March 2022 at the time of his
appointment to the Board. Dr Burton became Chairman of the Committee,
following the resignation of Peter Grant and has appropriate relevant
financial experience. The Board considers that the Committee has an
appropriate and experienced blend of commercial, financial and industry
expertise to enable it to fulfil its duties.
Financial Reporting and External Audit Process
The Chairman of the Committee participated in the Audit Planning meeting held
in December 2021 with the external auditors to plan the financial audit,
discussed potential key audit matter(s) and along with the Committee reviewed
the Audit Strategy Document.
The Board as a whole, reviewed the going concern paper prepared by management
including detailed financial forecasts for the period 2022 to 2023, related
assumptions, risks and opportunities, sensitivities, and areas for mitigation.
The outcome of the Board's discussions on going concern is explained in more
detail in note 3.
The Committee has satisfied itself that the 2021 Annual Report and Accounts
have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, are fair, balanced
and provide the information necessary for shareholders to assess the Company's
performance, business model and strategy.
Risk Management and Internal Controls
The Board considered as part of its review of risks those risks detailed in
the Strategic Report including mitigating actions. Following the successful
fundraise in February 2021 the Company continues to be a going concern. The
key risk still facing the Company is the ongoing impact of the COVID-19
pandemic on the results of the business.
Another key responsibility of the Committee is to review the Company's
internal control systems, including internal financial controls. The Finance
Director reviewed and updated the Company's Financial Procedures Manual to
ensure it was in line with current practice. There were no reported instances
of fraud during the year.
The Company's auditors are encouraged to raise comments on internal control in
their management letter following the annual audit. The points raised and
actions arising are monitored through to completion by the Finance & Audit
Committee.
Whistleblowing
The Committee had no whistleblowing incidents reported during 2021. Dr Nigel
Burton has been appointed Primary Designated Officer during the year and
Gerard Brandon as Alternative Designated Officer.
Committee Meetings
The Committee met twice in the year. Both meetings related to the Annual
Report and Accounts which the external auditors attended.
Auditors Fees and Non-Audit Services
The Committee reviewed and agreed to the proposed audit fee of £22,150 (2020:
£20,750). Fees for other audit related services during the year amounted to
£1,575 (2020: £2,070). These fees included the review of 2021 interims and
the provision of information around accounting standards.
Auditor Independence
The Committee satisfied itself on the auditors' independence. Mr Roger Weston
is undertaking his fourth audit of the Company, in the capacity of partner in
charge and no non-audit services have been provided in the current financial
year.
The Report of the Finance & Audit Committee was approved by the Board of
Directors on 27 May 2022 and signed on its behalf by:
Dr Nigel Burton
Chairman of the Finance & Audit Committee
CORPORATE GOVERNANCE REPORT
For the year ended 31 December 2021
Restructuring of the Company
On 4 February 2021, shareholders passed resolutions at a General Meeting
appointing Gerard Brandon and Dr Nigel Burton to the Board of the Company
as Non-executive Chairman and Non-executive Director respectively, with effect
from 5 February 2021. Their biographies are detailed under Principle 6 in
this Report.
The Finance & Audit and Remuneration Committees are chaired by Dr Nigel
Burton, and Gerard Brandon and Robert Moore are members of both committees.
Dr Nigel Burton will assume the responsibilities of Senior Non-executive
Director.
As anticipated in the Circular published on 19 January 2021, Peter Grant,
Non-executive Chairman and Eric Yeatman, Non-executive Director, stepped down
from the Board with effect from 5 February 2021.
Chairman's Corporate Governance Statement
The full corporate governance statement is published and maintained up to date
on the Company's website at
(http://www.microsaic.com/investors/governance-new). This extract from that
statement is included in the Annual Report & Accounts as required by the
Quoted Companies Alliance's ("QCA") Corporate Governance Code for small and
mid-size quoted companies (the "Code").
The Board is committed to maintaining high standards of corporate governance
and, with effect from 26 September 2018, the Board adopted the Code.
The Code sets out ten broad principles of corporate governance.
It states what are considered to be appropriate corporate
governance arrangements for growing companies and requires companies to
provide an explanation about how they are meeting the principles
through certain prescribed disclosures.
The Chairman leads the Board and is responsible for its overall effectiveness
in directing the Company. He manages the Board agenda and ensures that all
Directors receive accurate, timely and clear information
and effectively contribute their various talents and experience in the
development and implementation of the Company's strategy. He ensures that the
nature and extent of the significant risks which the Company is willing to
embrace in the implementation of its strategy are challenged
and determined by the Board. The Chairman is responsible for ensuring that
the Board implements, maintains and communicates effective corporate
governance processes and for promoting a culture of openness and debate
designed to foster a positive governance culture throughout the Company.
The Board has considered how each principle is applied
and provides below an explanation of the approach taken in relation to
each principle and how they support the Company's medium to long-term
success.
The Board agenda is regularly reviewed to ensure that all matters which the
Board should consider are addressed. This allows for presentations from the
Management Team so that the Board benefits from their input.
The Company includes a Remuneration Committee Report and a Finance & Audit
Committee Report in its Annual Report and Accounts.
The evaluation of the Board's effectiveness due to have been carried out in
January 2021 was postponed until January 2022 considering the restructuring of
the Board carried out in February 2021. Although the process was started in
early 2022, it was agreed that it was appropriate to suspend the process until
the Board is further strengthened with the expected appointment of an
additional Non-executive Director and both a new CEO and a new Finance
Director.
Save in respect of Principle 5 in consideration of the independence of the
Non-executive Directors, which is considered in more detail below, the Board
considers that it does not depart from any of the principles of the Code.
PRINCIPLES TO DELIVER GROWTH
PRINCIPLE 1: Establish a strategy and business model which promote long-term
value for shareholders.
Strategy:
Microsaic's strategic aim is to capitalise on its strengths in point of need
MS detection, and access high-growth and emerging Life Science and
Environmental applications, as well as niches in traditional small molecule
markets. The Company intends to achieve its strategy with a business model
built on customer focus, collaborations, and technology innovation.
Business Model:
The Company's business model is described in the Strategic Report.
Challenges:
Staying relevant to future customer needs
Customer needs evolve rapidly. Future product specifications are driven by
end-user requirements. This will inform Microsaic's product strategy as its
MS detectors move from the customer's laboratory into production, and
front-line operating environments. Microsaic will ensure that its strategic
product development will remain focused on meeting demanding biopharmaceutical
applications.
Remaining innovative in an advancing technological landscape
Microsaic has successfully developed and implemented advanced technology at
the core of its design with over 80 patents to date. This has led to a solid
foundation serving scientists in the laboratory in small molecule drug
discovery, and increasingly in support of its endeavours in life and
environmental science markets.
The Company continues to invest in product development projects, which the
Board believes will be attractive to the growing market for laboratory-based
applications with larger biological molecules, such as peptides and small
proteins.
The Company has extended its product capabilities further into Life Science
applications, such as bioprocessing, potentially significantly reducing the
cost of analysis and the cost of poor quality.
PRINCIPLE 2: Seek to understand and meet shareholder needs and expectations.
See the website for further disclosures concerning how the Company seeks to
engage with shareholders and how successful this has been.
PRINCIPLE 3: Consider wider stakeholder and social responsibilities and their
implications for long-term success. See the website for further disclosures.
PRINCIPLE 4: Embed effective risk management, considering both opportunities
and threats, throughout the organisation.
The Board aims to ensure that the Company's risk management framework
identifies and addresses all relevant risks in order to execute and
deliver the strategy.
The Directors recognise their responsibility for the Company's systems of
internal control and have established systems to ensure that an appropriate
and reasonable level of oversight and control is provided. The Company's
systems of internal controls are designed to help the Company meet its
business objectives by appropriately managing and wherever possible mitigating
risks faced by the Company. The controls can only provide reasonable, not
absolute, assurance against material misstatement or loss.
The Company's Management Team, which reports into the
Executive, meets regularly to review commercial, technical, operational, and
financial risks facing the business. These risks are assessed according to
their nature and magnitude based on the seriousness of the risk and the
likelihood of the risk occurring. The effectiveness of the controls
implemented to minimise the risks are also reviewed. The aim of these reviews
is to provide reasonable assurance that material risks are identified, and
appropriate action is taken at an early stage. From this review the Company
maintains its internal risk register which is reviewed annually by the
Board.
The annual budget is reviewed and approved by the Board. Financial results,
with comparisons to budget, and latest forecasts are reported monthly to the
Board together with a report on operational achievements, objectives and
issues encountered. Significant variances from plan are discussed at Board
meetings and actions set in place to address them.
Measures continue to be taken to review and improve internal controls and risk
management procedures. The Company has a Financial Procedures Manual which
includes approval levels for authorisation of expenditure, potential fraud
scenarios, payment approval process, expenses guidelines etc. This is updated
as necessary.
The Company's auditors are encouraged to raise comments on internal control in
their management letter following the annual audit. The points raised and
actions arising are monitored through to completion by the Finance & Audit
Committee.
PRINCIPLES TO MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
PRINCIPLE 5: Maintain the Board as a well-functioning, balanced team led by
the Chairman.
The Board currently consists of one Executive Chairman, and two Non-executive
Directors. Bevan Metcalf, the previous Financial Director retired on 17
December 2021. To help with a smooth transition, the Company has appointed Mr
Anthony Clayden, as Interim Head of Finance (non-board level), until a
permanent successor is appointed. Glenn Tracey, CEO, resigned on 31 March 2022
and the Chairman has stepped into an executive role temporarily until a
suitable replacement is appointed. A formal search process to identify an
additional independent Non-executive Director is well advanced.
The Company held 19 Board meetings during 2021. (In 2020 the Company faced
several challenges including the COVID-19 pandemic, and ensuring that the
Company remained a going concern, holding 39 meetings during the year.)
The Company has an equal opportunity policy to recruitment at Board level
and within the Company at large and seeks diversity as opportunities arise,
within the framework of selecting the most suitable person, based on relevant
skills, abilities, experience and location, as required for the role.
The principal role of the Chairman of the Board is to manage and provide
leadership to the Board of Directors of the Company. The Chairman is
accountable to the Board and acts as a direct liaison between the Board and
the management of the Company, ordinarily through the Chief Executive
Officer. The Chairman acts as the communicator for Board decisions where
appropriate.
Given the Chairman's current capacity as an Executive Chairman until the CEO
successor is appointed, the other NEDs including the recently appointed
independent NED provide the appropriate level of challenge to both the
Chairman and management. The Chairman has elevated the role of the senior
management team within the Company who now report to him and together
developed the new services strategy in consultation with and being rolled out
by this team.
The Chairman is responsible for the effective leadership, operation and
governance of the Board and its Committees. He ensures that all Directors
contribute effectively to the development and implementation of the
Company's strategy, while ensuring that the nature and extent of the
significant risks the Company is willing to embrace in the implementation of
its strategy are determined and challenged.
The Chief Executive Officer is responsible for the management of the Company,
providing executive leadership and for implementing the Company's strategy.
The Board believes that the advice, behaviour and character of its Chairman
and Non-executive Director are always in the best interests of the Company and
its shareholders. In addition, the skills and business judgement which they
possess and regularly exercise contributes to the efficient and effective
running of the Company.
The Company appreciates that circumstances which might or might appear to
affect a Director's judgement may well include financial dependence on the
Company and whether the Director is, or represents, a major shareholder. The
Chairman and Non-executive Director are financially independent of the Company
as they have other sources of income. Mr Brandon and Dr Burton do not
represent significant shareholders; however, they do have a material interest
in share warrants of the Company as detailed below. They are also Directors of
DeepVerge plc which, although not a shareholder of the Company, is
strategically important to the future success of Microsaic. Under the QCA
Guidelines the independence of the Chairman and Non-executive Director could
be challenged under the following areas, but in all cases the Board believes
that the Chairman and Non-executive Director always act in an independent
manner and where a conflict of interest could arise or be perceived to arise,
they abstain from voting:
Name and position Potential issue Comments
Gerard Brandon Holds a material interest of 250 million share warrants in the Company. This award was required to attract a Chairman of the appropriate calibre to
the Company. The award was passed by shareholders at a General Meeting. The
Chairman performance condition, prior to vesting, was based on the Company's shares
trading at a VWAP at or above a 50 per cent. premium to the placing price for
20 consecutive business days at any time since their issue.
DeepVerge plc is strategically important to the future success of the Company.
Director of DeepVerge plc Involving the elevated senior management to develop and implement strategy and
consulting with the Non-executive Directors who have oversight during this
period.
Temporary Executive Director capacity
Name and position Potential issue Comments
Dr Nigel Burton Held a material interest of 200 million share warrants in the Company. These This was required to attract a Non-executive Director of the appropriate
were exercised on 13 February 2022 calibre to the Company. The award was passed by shareholders at a General
Non-executive Director
Meeting. The performance condition, prior to vesting, was based on the
Company's shares trading at a VWAP at or above a 50 per cent. premium to the
placing price for 20 consecutive business days at any time since their issue.
DeepVerge plc is strategically important to the future success of the Company.
Director of DeepVerge plc
The Board recognises the importance of good governance arrangements.
Currently, the Board does not include two independent Non-executive Directors.
A process is underway to appoint a second independent Non-executive Director
with relevant experience.
The Board has an established Finance & Audit Committee and Remuneration
Committee. The Company believes it is currently too small to have a separate
Nominations Committee, so this role is taken on by the Board of Directors as a
whole.
Details and links to the terms of reference of the Finance & Audit
Committee and Remuneration Committee are set out under Principle 9 on the
website.
Details of Directors and their time commitment are set out under Principle 6
below. The attendance of the Directors at the regular Board and Committee
Meetings during the year ended 31 December 2021 were as follows.
Name Position Regular Board Meetings Finance & Audit Committee Remuneration Committee
Peter Grant(1) Non-executive Chairman 5 (5) - -
Gerard Brandon(2) Non-executive Chairman 11 (13) 2(2) 1(1)
Glenn Tracey Chief Executive Officer 19 (19) n/a n/a
Bevan Metcalf(3) Finance Director 19 (19) n/a n/a
Eric Yeatman(1) Non-executive Director 5 (5) - -
Nigel Burton(2) Non-executive Director 11 (13) 2(2) 1(1)
(1)Peter Grant and Eric Yeatman resigned as Directors on 5 February 2021.
(2)Gerard Brandon and Nigel Burton were appointed Directors on 5 February
2021.
(3)Bevan Metcalf resigned as a Director upon his retirement on 17 December
2021
Numbers in brackets denote the total number of meetings that each Director was
eligible to attend during the year.
PRINCIPLE 6: Ensure that between them the Directors have the necessary
up-to-date experience, skills and capabilities.
Biographical details of the Board of Directors, their skills, suitability and
availability are set out below.
Gerard Brandon, Executive Chairman
Term of office: Appointed a Director on 5 February 2021. Gerard is also a
member of the Finance & Audit Committee and the Remuneration Committee.
Background and suitability for the role: Gerard Brandon is Chief Executive
Officer of both DeepVerge plc and Cellulac plc. In 1996 he became founder and
CEO of Alltracel Pharmaceuticals plc ("Alltracel"), where he built a team
which oversaw numerous patents granted on refined cellulose. Alltracel was
admitted to trading on AIM in 2001. In 2004, he was appointed as a Managing
Partner for Farmabrand Private Equity. In March 2020, he was appointed as a
Non-executive Chairman to Modern Water plc, which was subsequently acquired by
DeepVerge plc (formerly Integumen plc) in November 2020. Gerard is a Fellow
of the Ryan Academy of Entrepreneurs in Dublin.
Dr Nigel Burton, Non-executive Director
Term of office: Appointed a Director on 5 February 2021 at a General Meeting
of the Company. Dr Burton is also Chairman of the Finance & Audit
Committee and the Remuneration Committee.
Background and suitability for the role: Nigel spent over 14 years as an
investment banker at leading City institutions including UBS Warburg and
Deutsche Bank, including as the Managing Director responsible for the energy
and utilities industries. Nigel also spent 15 years as Chief Financial Officer
or Chief Executive Officer of a number of private and public companies.
Mr Robert Moore, Non-executive Director
Term of office: Appointed a Director on 15 March 2022 by the Board of
directors of the Company. Mr Moore is also a member of the Finance & Audit
Committee and the Remuneration Committee.
Background and suitability for the role: Robert is a UK qualified lawyer and
brings over 35 years' commercial and legal experience to the Board. Robert has
acted as Head of International Legal Affairs at Enterprise Oil plc (a UK FTSE
100 company prior to its acquisition by Shell in 2002) and as co-founder and
Commercial Director of Granby Oil & Gas plc, which was listed on AIM from
2005 until its sale in 2008. Robert subsequently co-founded, and is Managing
Director of, private oil and gas exploration company Ardent Oil Ltd (operating
in the UK, Denmark and Luxembourg). Robert also acts as Non-executive Chairman
of Mobile Streams plc, an AIM listed company, having been appointed to the
role in July 2021.
The Company uses external advisers.
The Board has retained the services of the following advisers:
· Singer Capital Markets as Nominated Adviser and Joint Broker;
· Turner Pope Investments as Joint Broker;
· Saffery Champness LLP for annual audit;
· Dorsey and Whitney Europe LLP as solicitors for the Company;
· Neville Registrars Ltd as the Company's registrar; and
· Menzies LLP for ongoing advice on, Corporation tax, VAT and PAYE.
PRINCIPLE 7: Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement.
Board Evaluation Process
The Board believes that, in addition to dealing with any matters as they
arise, it is appropriate to carry out a formal evaluation of the performance
of the Board each year. This is intended to ensure that the Board remains
effective, well-informed and able to make high quality and timely decisions
for the benefit of all stakeholders in the Company.
The usual evaluation involves each Director completing an evaluation
questionnaire which covers effectiveness from multiple angles including: Board
structure and committees; Board arrangements, frequency and time; content of
Board meetings; Board culture; Board evaluation and succession; and individual
contributions. The completed questionnaires are anonymised and collated
independently into a summary, and comments and any areas of concern are
highlighted for discussion with the Board.
The last evaluation was carried out in January 2020. This process has been
suspended during the current period and in the absence of a replacement CEO
and Finance Director and will be resumed following their appointment.
The evaluation of the Board's effectiveness due to have been carried out in
January 2021 was postponed until January 2022 in light of the restructuring of
the Board carried out in February 2021. Although the process was started in
early 2022, it was agreed that it was appropriate to suspend the process until
the Board is further strengthened with the expected appointment of an
additional Non-executive Director and both a new CEO and a new Finance
Director.
Succession Planning
As is common with many small AIM quoted companies, the Company does not have
internal candidates to succeed the existing Executive Directors. This will
be kept under review, especially when recruiting for senior roles as vacancies
arise. However, the Board does not believe it is appropriate to recruit
additional Directors or senior personnel solely for the purpose
of Board succession planning.
Training of Directors
It is recognised that there continues to be more regulation of which Directors
need to be aware. The Board will continue to ensure that Directors receive
appropriate support to keep up to date.
PRINCIPLE 8: Promote a culture that is based on ethical values and
behaviours.
The Company is committed to achieving the highest possible ethical standards
in conducting its business. The Company expects all employees and Directors to
maintain the same high standards. To achieve these ends, Microsaic encourages
freedom of expression and speech whilst not accepting prejudice of any kind.
Ethics is based on a set of principles and clear moral and ethical values.
The Company takes its principles and values very seriously and expects staff
at all levels to look to these principles and values for guidance.
Principles:
The Board has adopted the following four principles:
1. Management must lead by example. Good ethics should be most
noticeable at the top. Every employee must be accountable to the same rules.
2. Corporate values must be implemented throughout the Company. Every
forum and medium should be used to spread the message and, most of all, the
Company must practice what it preaches.
3. Meetings with staff (both one on one and group) to discuss the values
and what they mean to each employee must be undertaken when implementing a
value system. This will help to get everyone in the Company on the same page
and committed.
4. The values of the Company must endure changes in leadership. The
longer ethical values last, the more ingrained they will become.
Values
The Company conducts its business around seven core values:
1. Integrity - applying high ethical standards and being honest. The
Company will conduct its business with honesty to all stakeholders and will
uphold high moral principles.
2. Mutual respect, empathy and trust in dealing with others. An
environment of mutual respect, empathy and trust is necessary to promote
integrity. Trust in the workplace is critical to organisational success.
3. Innovation - a passion to experiment and deliver new solutions.
A focus on research and development is very important to the future success
of the Company. The Company is continually looking to deliver innovative
solutions and has a collaborative approach to meeting customer needs.
4. Teamwork - drives high performance. Microsaic relies heavily on
teamwork. A team approach is more efficient, faster, benefits from
multi-skills especially in problem solving, increases learning opportunities
and encourages a sense of belonging, which often translates to a greater
sense of ownership and accountability for the work.
5. Quality - we take pride in everything we do. The Company is strongly
focused on quality from the products it produces to the processes it operates.
The Company is ISO 9001:2015 compliant.
6. Customer focus - go the extra mile for our customers. The Company
assigns the highest priority to customer satisfaction. We listen to our
customers and create solutions for unmet customer needs.
7. Shareholder value - striving to deliver value to shareholders. The
key objective of the Company is achieving sustainable profitability. Every
employee understands how they fit into the profitability picture. Everyone's
common goal is to build a strong, profitable Company that
will endure and provide a reasonable return to shareholders.
PRINCIPLE 9: Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board.
See the website for further disclosures at
https://www.microsaic.com/investors/governance-new/
PRINCIPLE 10: Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders.
The following committee reports are included in these Annual Report &
Accounts. They include details of the work of those committees:
· The Directors' Remuneration Committee Report; and
· The Directors' Finance & Audit Committee Report.
The Corporate Governance Report was approved by the Board of Directors on 27
May 2022 and signed on its behalf by:
Gerard Brandon
Executive Chairman
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MICROSAIC SYSTEMS PLC
For the year ended 31 December 2021
Opinion
We have audited the financial statements of Microsaic Systems plc for the year
ended 31 December 2021 which comprise Statement of Comprehensive Income, the
Statement of Financial Position, the Statement of Changes in Equity, the
Statement of Cash Flows and notes to the financial statements, including
significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK-adopted
international accounting standards.
In our opinion, the financial statements:
· give a true and fair view of the state of the Company's affairs as at
31 December 2021 and its loss for the year then ended;
· have been properly prepared in accordance with UK-adopted
international accounting standards; and
· have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the Company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the FRC's Ethical
Standard, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Our approach to the audit
We tailored the scope of our audit to ensure that we obtained sufficient
evidence to support our opinion on the financial statements as a whole, taking
into account the structure of the Company, the accounting processes and
controls, and the industry in which it operates.
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements. In particular, we
looked at areas where the Directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter How our scope addressed this matter
Going concern Our audit procedures included the following:
The going concern assumption is a fundamental principle in the preparation of · reviewing projected cashflows and other available evidence to assess
financial statements. the ability of the Company to continue in operation for at least 12 months
from the date of signing this report;
Given the historic operating losses and the inherent uncertainty of sale
forecasts, it was concluded at the planning stage that there was a risk of · reconciled projections to the audited financial statements,
material uncertainty in the going concern assessment. As such, significant management accounts and bank statements;
audit time was devoted to testing of the going concern assessment, and the
going concern assumption is considered to be a key audit matter. · performed a sensitivity analysis on key assumptions underlying the
directors' going concern assessment, including the forecast revenue streams
and levels of sales, gross margin achieved and cost base required to service
sales;
· considered the impact of the agreements signed with DeepVerge plc
both in the year and post year end on potential cashflows and operations.
Additional procedures considered are set out below in the section Conclusions
relating to going concern
Based on our procedures, we concluded that there is no material uncertainty in
relation to going concern and that the continued adoption of the going concern
basis of accounting in these financial statements remains appropriate.
Our application of materiality
The scope of our audit was influenced by our application of materiality. An
audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement. Misstatements may arise due to
fraud or error. They are considered material if individually or in aggregate,
they could reasonably be expected to influence the economic decisions of users
taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative
thresholds for materiality, as set out below. These, together with qualitative
considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures and to evaluate the effect of
misstatements, if any, both individually and in aggregate on the financial
statements as a whole.
We have applied a materiality of £50,000 (2020: £50,000). This is based on
2% of operating expenditure for the year ended 31 December 2021. Performance
materiality was set at 80% of materiality.
Our triviality level was set at £2,500 which is 5% of planning materiality,
and any uncorrected audit differences below this level were not reported to
management, unless warranted under qualitative grounds.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the Company's ability to continue to adopt the going concern
basis of accounting included:
· obtaining, critically appraising and assessing for arithmetical
accuracy the directors' formal going concern assessment;
· reviewing projected cashflows and other available evidence, including
bank statements and the Company's framework agreement and scheme of works with
Deepverge plc, to assess the ability of the Company to continue in operation
for at least 12 months from the date of signing this report;
· performing a sensitivity analysis on key assumptions underlying the
directors' going concern assessment;
· discussion of events after the reporting date with the directors to
assess their impact on the going concern assumption, including comparison of
the post year end cash balances and financial performance to forecast
positions.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Company's ability to continue
as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic Report and the Directors'
Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the Strategic Report and the Directors' Report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its
environment obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept, or returns adequate
for our audit have not been received from branches not visited by us; or
· the financial statements are not in agreement with the accounting
records and returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we require
for our audit.
Responsibilities of directors
As explained more fully in the Directors' Responsibilities Statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The specific procedures for this engagement and the extent to
which these are capable of detecting irregularities, including fraud are
detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the Company's financial statements to
material misstatement and how fraud might occur, including through discussions
with the directors, discussions within our audit team planning meeting,
updating our record of internal controls and ensuring these controls operated
as intended. We evaluated possible incentives and opportunities for fraudulent
manipulation of the financial statements. We identified laws and regulations
that are of significance in the context of the Company by discussions with
directors and updating our understanding of the sector in which the Company
operates.
Laws and regulations of direct significance in the context of the Company
include The Companies Act 2006, the AIM Rules for Companies and UK Tax
legislation, particularly with reference to Research Development Expenditure
Credits.
Audit response to risks identified:
We considered the extent of compliance with these laws and regulations as part
of our audit procedures on the related financial statement items including a
review of financial statement disclosures. We reviewed the company's records
of breaches of laws and regulations, minutes of meetings and correspondence
with relevant authorities to identify potential material misstatements
arising. We discussed the company's policies and procedures for compliance
with laws and regulations with members of management responsible for
compliance.
During the planning meeting with the audit team, the engagement partner drew
attention to the key areas which might involve non-compliance with laws and
regulations or fraud. We enquired of management whether they were aware of any
instances of non-compliance with laws and regulations or knowledge of any
actual, suspected or alleged fraud. We addressed the risk of fraud through
management override of controls by testing the appropriateness of journal
entries and identifying any significant transactions that were unusual or
outside the normal course of business. We assessed whether judgements made in
making accounting estimates gave rise to a possible indication of management
bias. At the completion stage of the audit, the engagement partner's review
included ensuring that the team had approached their work with appropriate
professional scepticism and thus the capacity to identify non-compliance with
laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we
would become aware of it. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial
Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
…………………………………..
Roger Weston (Senior Statutory Auditor)
for and on behalf of Saffery Champness LLP
Chartered Accountants
Statutory
Auditors
71 Queen Victoria Street
London
EC4V 4BE
27 May 2022
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
Year to 31 December 2021 Year to 31 December 2020
Notes
£ £
Revenue 5 906,876 198,258
Cost of sales (510,892) (98,348)
Gross profit 395,984 99,910
Other operating income 6 67,283 96,626
Research and development expenses (738,145) (777,597)
Professional fees - Corporate transactions (65,789) (149,364)
Other operating expenses (1,693,568) (1,801,321)
Total operating expenses 7 (2,497,502) (2,728,282)
Loss from operations before share-based payments (2,034,235) (2,531,746)
Share-based payments 25 (1,363,764) (52,241)
Loss from operations after share-based payments 7 (3,397,999) (2,583,987)
Financial cost 8 (4,604) (10,775)
Finance income 8 6,237 4,393
Loss before tax (3,396,366) (2,590,369)
Tax on loss on ordinary activities 9 267,785 217,711
Total comprehensive loss for the year (3,128,581) (2,372,658)
Loss per share attributable to the equity holders of the Company
Basic and diluted loss per ordinary share (pence) 10 (0.056)p (0.52)p
The notes form part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
31 December 2021 31 December 2020
Notes
£ £
ASSETS
Non-current assets
Intangible assets 11 74,405 83,763
Property, plant and equipment 12 305,687 114,145
Right of use assets 13 126,533 49,404
Total non-current assets 506,625 247,312
Current assets
Inventories 14 283,902 569,589
Trade and other receivables 15 631,948 173,871
Corporation tax receivable 9 267,785 218,568
Cash and cash equivalents 3,464,876 397,069
Total current assets 4,648,511 1,359,097
TOTAL ASSETS 5,155,136 1,606,409
EQUITY AND LIABILITIES
Equity
Share capital 19 1,702,913 1,140,913
Share premium 21 28,006,018 24,867,886
Share-based payment reserve 2,888,707 324,264
Retained losses (28,024,418) (25,090,083)
Total equity 4,573,220 1,242,980
Current liabilities
Trade and other payables 16 354,611 185,927
Lease liability 13 71,187 52,370
Total current liabilities 425,798 238,297
Non-current liabilities
Provisions 17 99,960 124,035
Lease liability 13 56,158 1,097
Total non-current liabilities 156,118 125,132
Total liabilities 581,916 363,429
TOTAL EQUITY AND LIABILITIES 5,155,136 1,606,409
The financial statements were approved for issue by the Board of Directors on
27 May 2022 and signed on its behalf by:
Gerard Brandon
Executive Chairman
Company number 03568010
The notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share
-based payment Total
Share Share Retained
Notes capital premium reserve Losses equity
£ £ £ £ £
At 1 January 2020 1,140,913 24,867,886 412,539 (22,857,941) 3,563,397
Total comprehensive loss for the year - - - (2,372,658) (2,372,658)
Transaction with owners:
Shares issued - - - - -
Share issue costs - - - - -
Transfer in respect of lapsed share options - - (140,516) 140,516 -
Share-based payments-share options 25 - - 52,241 - 52,241
At 31 December 2020 1,140,913 24,867,886 324,264 (25,090,083) 1,242,980
Total comprehensive loss for the year - - - (3,128,581) (3,128,581)
Transaction with owners:
Shares issued - placing 19 562,000 5,058,000 - - 5,620,000
Share issue costs 21 - (1,919,868) 1,503,008 - (416,860)
Transfer in respect of lapsed share options - - (194,246) 194,246 -
Share-based payments options 25 - - 1,255,681 - 1,255,681
At 31 December 2021 1,702,913 28,006,018 2,888,707 (28,024,418) 4,573,220
The notes form part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
Year to 31 Year to 31
December December
2021 2020
£ £
Cash flows from operating activities
Cash absorbed by operations 31 (1,827,851) (2,371,194)
Corporation tax received 218,568 321,584
Net cash used in operating activities (1,609,283) (2,049,610)
Cash flows from investing activities
Purchases of intangible assets 11 (28,883) (27,319)
Purchases of property, plant and equipment 12 (305,334) (69,452)
Interest received 6,237 20,106
Net cash used in investing activities (327,980) (76,665)
Cash flows from financing activities
Proceeds from share issues 5,500,000 -
Share issue costs (416,860) -
Repayment of lease liabilities 13 (78,070) (97,414)
Net cash generated by / (used in) financing activities 5,005,070 (97,414)
Net decrease in cash and cash equivalents 3,067,807 (2,223,689)
Cash and cash equivalents at the beginning of the year 397,069 2,620,758
Cash and cash equivalents at the end of the year 3,464,876 397,069
The notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2021
The principal activity of the public limited company continues to be the
research, development and commercialisation of miniaturised mass spectrometry
instruments that are designed to improve the efficiency of pharmaceutical
R&D. The Company is incorporated in England and its registered address is
GMS House, Boundary Road, Woking, Surrey, GU21 5BX. The Company has no
subsidiaries, so the financial information relates to the Company only.
1. Accounting policies
The following principal accounting policies have been used consistently in the
preparation of these financial statements.
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006.
These financial statements have been prepared under the historical cost basis
except where financial instruments are required to be carried at fair value
under IFRS.
Revenue recognition
IFRS 15 provides a single, principles based five-step model to be applied to
all contracts with customers. The five-step framework includes:
1) Identify the contract(s) with a customer;
2) Identify the performance obligations in the contract;
3) Determine the transaction price;
4) Allocate the transaction price to the performance obligations in the
contract; and
5) Recognise revenue when the entity satisfies a performance obligation.
The Company recognises revenue from the following three sources:
1) Sale of products;
2) Sale of consumables and spare parts; and
3) Service and support income.
All revenues and trade receivables arise from contracts with customers.
Revenue is measured based on the consideration which the Company expects to be
entitled in a contract with a customer and excludes amounts collected on
behalf of third parties. The sale of products, consumables and spare parts is
recognised when the sole performance obligation is met which is usually on
delivery to the customer. For service and support income revenue, the
performance obligation is satisfied over the duration of the service period
and revenue is recognised in line with the satisfaction of the performance
obligation.
Sale of products
The Company sells compact mass spectrometers (Microsaic 4500 MiD(®)) mainly
through OEMs and Distributors. A small proportion of its sales are direct to
the customer. Discounts are offered and agreed as part of the contractual
terms. Terms are generally Ex Works so control passes when the customer
collects the goods. Payment terms are generally 30 days from the date of
invoice.
Sales of consumables and spare parts
The Company sells consumables and spare parts mainly through OEMs and
Distributors. Terms are generally Ex Works so control passes when the customer
collects the goods. Discounts are offered and agreed as part of the
contractual terms. Payment terms are generally 30 days from the date of
invoice.
Service and support income
Service and support to our OEMs and Distributors includes training their sales
and service teams and servicing the products from time to time. Discounts are
offered and agreed as part of the contractual terms.
Terms are Ex Works so control passes when the customer receives the service.
Payment terms are generally 30 days from the date of invoice.
Generally, there is no obligation on the Company for returns, refunds or
similar arrangements. Also, the Company does not manufacture specific items to
a customer's specification and no financing component is included in the terms
with customers.
The Company provides assurance warranties which are 15 months from the date of
shipment for OEMs and Distributors. These warranties confirm that the product
complies with agreed-upon specifications. The Company is looking to provide
service warranties in the future to direct Europe customers, where the revenue
from such warranties will be recognised over the period of the service
agreement.
Other operating income
Other operating income includes grant income, insurance income arising from a
claim and income from development contracts. The Company's management assesses
the contracts at each balance sheet date, including the costs to completion,
which are subject to estimation uncertainty. Grant income is recognised when
there is reasonable assurance that the grant will be received, and the Company
will comply with any attached conditions. Grants are recognised in the profit
or loss in line with the expenditure they are intended to compensate and are
shown gross of the underlying expense. The Company received CJRS grants during
the year, which has been recognised in line with the corresponding payroll
expenditure. There are no unfulfilled conditions attached to the grant that
the Company is aware of.
Segmental reporting
The Company currently has one business segment, being the research,
development and commercialisation of scientific instruments. This is
undertaken wholly within the United Kingdom. Revenue by geographical market is
analysed in note 5.
Intangible assets
Trademarks and patents are stated at historic cost of registration less
accumulated amortisation and any accumulated impairment losses. Amortisation
is charged to operating expenses and calculated to write off the cost in equal
annual instalments over five years, which is a prudent estimate of their
useful economic lives.
Certain software is stated at historic cost less accumulated amortisation and
any accumulated impairment losses. Amortisation is charged to operating
expenses and calculated to write off the cost in equal annual instalments over
three years, which is considered to be a prudent estimate of its useful
economic life.
Property, plant and equipment
Items of property, plant and equipment are stated at cost of acquisition or
production costs less accumulated depreciation and impairment losses.
Depreciation is charged to the statement of comprehensive income on a
straight-line basis to write-off the carrying value of each asset to residual
value over its estimated useful economic life as follows:
Plant and equipment - 33.3% on a straight line basis
Fixtures and fittings - 33.3% on a straight line basis
Software - 33.3% on a
straight line basis
Pensions
The Company has an auto-enrolment pension scheme for employees. Contributions
are charged to the statement of comprehensive income in the period they are
payable.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the first-in first-out principle and includes expenditure incurred in
acquiring the inventories and bringing them to their present location and
condition. The cost of finished goods and work in progress comprises raw
materials, direct labour and other direct costs. Net realisable value is the
estimated selling price in the ordinary course of business less applicable
selling expenses. The inventory provision is based on identifying slow moving
stock items from recent historic and anticipated future sales and providing
where appropriate for those items which may be surplus to anticipated or
identifiable demand.
Provisions
Provisions are established where the Directors have identified an obligation
which is probable and where the amount can be estimated reliably.
Taxation
Current taxes are based on the results of the Company and are calculated
according to local tax rules using the tax rates that have been enacted by the
balance sheet date.
The Company recognises research and development tax credits receivable in cash
as a current asset under the heading corporation tax receivable. Any
difference to amounts received are dealt with as adjustments to prior period
tax.
Deferred tax is provided in full using the balance sheet liability method for
all taxable temporary differences arising between the tax bases of assets and
liabilities and their carrying values for financial reporting purposes.
Deferred tax is measured using currently enacted or substantially enacted tax
rates. Deferred tax assets are recognised to the extent the temporary
difference will reverse in the foreseeable future and that it is probable that
future taxable profit will be available against which the asset can be
utilised.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are
translated into sterling at the rates of exchange ruling at the balance sheet
date. Transactions in foreign currencies are recorded at the rate ruling at
the date of transaction, or forward contract rate, if applicable. All
differences are taken to the statement of comprehensive income.
Financial instruments
Financial assets and financial liabilities are recognised in the Company's
statement of financial position when the Company becomes a party to the
contractual provisions of the instrument. Examples of the Company's financial
instruments include:
Cash and cash equivalents
The fair value of cash and cash equivalents is considered to be their carrying
amount due to their short-term maturity.
Trade receivables
The Company's trade receivables do not carry a significant financing element
as defined by IFRS 15. Therefore, trade receivables are recorded at
transaction price (e.g., invoice amount excluding costs collected on behalf of
third parties) and throughout the life of the receivable at an amount equal to
lifetime expected credit losses ("ECL"). The Company has applied a simplified
"provision matrix" for calculating expected credit losses as a practical
expedient. The percentage ranges are applied to the receivable balance.
Current 1-30 days past due 31-60 days past due 61-90 days past due 91-120 days past due 121-150 days past due 151-180 days past due 181 days + past due
0%-1% 1%-2% 1%-2% 1%-2% 2%-5% 5%-10% 10%-20% 10%-50%
Other points:
· The Company determines whether trade receivables are impaired through
regular meetings between finance and business development.
· The credit situation of new customers is reviewed before the first
shipment. If possible, a credit report is obtained. If there is any concern
over the credit worthiness of the customer, the Company may ask the customer
to pay an amount in advance or enter into a confirmed letter of credit
(Non-UK/Europe) etc.
· Trade receivables are considered low risk at initial recognition but
this changes if they have an overdue invoice(s). Depending on the value of the
shipment, the customer may be placed on hold until the overdue amount is paid.
Discussions as to why an invoice is overdue are held promptly between finance
and business development and the customer.
· The provision is monitored at customer level by business development
and finance.
· If the Company is having ongoing dialogue with the customer regarding
their overdue balance the debt will not be written off. It may be that a
payment plan can be agreed or more time is given to the customer to sell the
product. If the customer is not actively engaging with the Company legal
action may be taken.
· Forward looking information from business development is taken into
account when preparing the provision matrix including geographical risk,
changes in customer circumstances and macro-economic factors.
Under IFRS 9 impairment for receivables including trade receivables is
assessed using an expected loss model. For trade receivables this focuses on
the risk that, and an extent to which, a receivable will default. Accordingly,
the Company calculates the allowance for credit losses by considering the cash
shortfalls it would incur in various default scenarios and multiplying the
shortfalls by the probability of each scenario occurring. The Company only has
short-term receivables and has adopted a "simplified approach" in assessing
impairment.
The Company has applied a simplified "provision matrix" for calculating
expected losses as a practical expedient (e.g., for trade receivables), as the
Directors believe that this is consistent with the general principles for
measuring expected losses. The provision matrix is based on an entity's
historical default rates over the expected life of the trade receivables and
is adjusted for forward-looking estimates.
In preparing the provision matrix the Company looks at the geographic base of
its trade receivables and whether they are existing or new customers. Finally,
management considered forward looking information that may affect the default
rates applied in the matrix.
Financial liability and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the
Company after deducting all its liabilities.
Bank borrowings
The Company had no bank borrowings at 31 December 2021 and 2020.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Equity instruments
Equity instruments issued by the Company are recorded at the value of the
proceeds received net of direct issue costs including the fair value of any
warrants issued in lieu of issue costs. The Company has no derivative
financial assets or investments in equity instruments.
Leases
For all leases, the Company recognises a right of use asset and corresponding
lease liability on the balance sheet, which are depreciated and amortised
respectively over the lease term. However, where leases are low value or of
less than 12 months old, the Company has taken advantage of the practical
expedient allowing the expense to be recognised on a straight line basis over
the lease term.
Research and development
Expenditure on research is recognised as an expense in the period in which it
is incurred.
Development costs incurred on specific projects are capitalised when all the
following conditions are satisfied:
· Completion of the intangible asset is technically feasible so that it
will be available for use or sale;
· The Company intends to complete the intangible asset and use or sell
it;
· The Company has the ability to use or sell the intangible asset;
· The intangible asset will generate probable future economic benefits.
Among other things, this requires that there is a market for the output from
the intangible asset or for the intangible asset itself, or, if it is to be
used internally, the asset will be used in generating such benefits;
· There are adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
· The expenditure attributable to the intangible asset during its
development can be measured reliably.
Costs incurred which do not meet all of the above criteria are expensed as
incurred. No development costs have been capitalised to date.
Share-based payments
In accordance with IFRS 2 "Share-based payments", the Company reflects the
economic cost of awarding shares and share options to Directors, employees and
advisors by recording an expense in the statement of comprehensive income
equal to the fair value of the benefit awarded; fair value being determined by
reference to option pricing models. The expense is recognised in the statement
of comprehensive income over the vesting period of the award.
The fair value of warrants issued to advisors as remuneration for their
services in a fundraising will be charged to share premium over the vesting
period of the award.
1. Adoption of new and revised standards
During the financial year, the Company has adopted the following new IFRSs
(including amendments thereto) and IFRIC interpretations, that became
effective for the first time.
Standard Effective date, annual period beginning on or after
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 1 January 2021
7, IFRS 4 and IFRS 16)
Covid 19-Related Rent Concessions (Amendment to IFRS 16 Leases) 1 April 2021
Their adoption has not had any material impact on the disclosures or amounts
reported in the financial statements.
Standards issued but not yet effective
At the date of authorisation of these financial statements, the following
standards and interpretations relevant to the Company and which have not been
applied in these financial statements, were in issue but were not yet
effective. In some cases, these standards and guidance have not been endorsed
for use in the UK and will not be adopted until such time as endorsement is
confirmed.
Standard Effective date, annual period beginning on or after
Reference to the Conceptual Framework (Amendments to IFRS 3 Business 1 January 2022
Combinations)
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 1 January 2022
16)
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37 1 January 2022
Provisions, Contingent Liabilities and Contingent Assets)
Annual improvements 2018-2020 cycle 1 January 2022
IFRS 17 - Insurance Contracts 1 January 2023
Amendments to IFRS 17 - Insurance Contracts; 1 January 2023
and Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to
IFRS 4 Insurance Contracts)
Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of 1 January 2023
Financial Statements and IFRS Practice Statement 2 Making Materiality
Judgements)
Definition of Accounting Estimates (Amendments to IAS 8 Accounting Policies, 1 January 2023
Changes in Accounting Estimates and Errors)
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction (Amendments to IAS 12 Income Taxes)
Classification of Liabilities as Current or Non-Current: amendments to IAS 1 1 January 2024(1)
(1) In November 2021 it was proposed that the amendment be deferred until
not earlier than 1 January 2024.
The Directors are evaluating the impact that these standards will have on the
financial statements of Company, but at this stage the impact is not expected
to be material.
3. Going concern
The Company is loss making and has raised funds in the past by issuing equity
in discrete tranches. The most recent fundraise was completed on 5 February
2021 where the Company raised £5.2 million after expenses
from new and existing shareholders. As of 31 December 2021, the Company had
£3.5 million in cash and bank balances.
During 2022, the Company has introduced new services taking advantage of its
depth of expertise in mass spectrometry, analytical techniques and related
technologies to serve existing and new markets alongside its historic product
and service offerings. Accordingly, the cash and financial projections of the
business
incorporate this expansion of revenue sources and the Directors have reviewed
them under various scenarios to assess the sensitivity of the Company's going
concern position.
With the recent advent of new service revenue streams, the plans and prospects
for the business are modest in projecting new revenue and do not yet forecast
break even. The key sensitivities considered include changes to the projected
sales of the various product or service lines and corresponding adjustments to
costs which could be delayed, reduced or not incurred at all if the related
projected sales were not to materialise. Accordingly, the Company monitors
actual versus expected performance and retains a contingency plan, if
required, to preserve cash and bank balances.
Having taken this careful approach, the Board believes that the Company has
enough cash to cover its anticipated working capital requirements for at least
the next 12 months from the date of signing of the Annual Report and Accounts.
On this basis, the Directors have concluded that it is appropriate to prepare
the financial statements on a going concern basis.
4. Critical accounting estimates and judgements
Accounting estimates and judgements are continually evaluated and are based on
past experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The
resulting accounting estimates could, by definition, differ from the actual
outcome.
The estimates and assumptions that have a risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are summarised below:
Share-based payments
The calculation of the share-based payment expense utilises assumptions and
estimates (for example volatility, future exercise rates etc) which may differ
from actual results. Details of the assumptions are set out in note 25. The
Company uses the Black Scholes Option pricing model to determine a theoretical
option call price. If there are market related conditions (e.g., realising
certain share price targets before vesting) then the Company uses external
advisers to apply more advanced modelling techniques. In terms of inputs
volatility is the most difficult input to estimate and is probably the key
input where management has had to use its discretion.
Carrying value of inventories
It is the intention of the directors that the Company will move away from the
sale of goods as its primary revenue stream, instead developing new lines of
service revenue. As such, there is a risk that the inventory holding may not
recover its full carrying value.
The directors believe that all inventories held at 31 December 2021 will
ultimately be sold above their purchase price. However, in light of the
uncertainty in these forecasts, and the potential for stock turnover days to
significantly increase, a provision of £90,139 has been made for stock
obsolescence. There is significant uncertainty in this estimate, but the
directors believe it is an appropriate estimate for potential future write off
of inventories.
The detailed breakdown of inventories can be seen in note 14.
These assumptions are reviewed at each balance sheet date and amended if
required.
4. Revenue
Throughout 2021, the Company operated in one business segment, that of
research, development and commercialisation of mass spectrometry instruments.
Products are sold ex-works: The attribution of revenue is based on the country
or group of countries to where the goods are shipped. In 2021 our largest
customers had the following revenues as a percentage of total revenues:
Customer number 1 - 42.5 per cent.
Customer number 2 - 10.6 per cent.
Customer number 3 - 9.0 per cent.
Customer number 4 - 8.5 per cent.
The geographical analysis of revenue (by shipment destination) was as follows:
Year to 31 December 2021 Year to 31 December 2020
£ £
UK 532,364 2,225
USA 187,673 41,346
China 106,076 126
EU 71,887 57,280
ROW 4,214 5,128
South Korea 3,662 83,397
Japan 1,000 8,756
906,876 198,258
6. Other operating income
Year to 31 December Year to 31 December 2020
2021
£ £
Coronavirus Job Retention Scheme Grant 20,829 96,626
Co-development income 26,204 -
Insurance claims 20,250 -
67,283 96,626
7. Expenses by nature
Year to 31 December 2021 Year to 31 December 2020
Loss from operations after share-based payments is stated after £ £
charging/(crediting):
Amortisation of intangible assets 38,241 40,767
Depreciation of right of use assets 70,499 87,237
Expected credit losses (46,746) 64,281
Movement in inventory provision 32,535 17,650
Inventory items expensed 2,249 (3,318)
Staff benefit expense 2,807,699 1,466,342
Depreciation of property, plant and equipment 90,628 80,034
Provision for warranty (24,075) (12,713)
Material costs including R&D 50,293 58,071
Professional fees (including audit fees detailed below) 161,791 182,069
Pension costs 173,051 153,476
Exchange loss/(gain) 1,216 2,897
Directors' emoluments (before pensions and share based payments) 266,799 292,140
Year to 31 December 2021 Year to 31 December 2020
£ £
Services provided by the Company's auditors
Fees payable to the Company's auditors for the audit of the financial
statements
22,150 20,750
Fees payable to the Company's auditors for other services
- Audit related services 1,575 2,070
23,725 22,820
8. Finance income and Finance cost
Year to 31 December 2021 Year to 31 December 2020
£ £
Bank interest receivable 6,237 4,393
Interest cost under IFRS 16 (4,433) (9,041)
Other interest (171) (1,734)
(4,604) (10,775)
9. Tax on loss on ordinary activities
Year to 31 December Year to 31 December 2020
2021
Domestic current period tax £ £
UK corporation tax receivable (267,785) (218,568)
Adjustment for prior periods - 857
Current tax credit (267,785) (217,711)
Tax on loss on ordinary activities (267,785) (217,711)
Factors affecting the current tax credit for the period: Year to 31 December Year to 31 December 2020
2021
£ £
Loss before tax (3,396,366) (2,590,369)
Loss before tax multiplied by standard rate of UK corporation tax of 19%
(2020: 19%)
(645,310) (492,170)
Effects of:
Non-deductible expenses 251,679 6,774
Depreciation 17,219 15,206
Capital allowances (54,317) (13,363)
Profit on disposal of property, plant and equipment (2,130) (16)
Research and development expenditure (116,399) (94,045)
RDEC 484 -
Tax losses carried forward 279,259 359,046
Previous period research and development adjustment - 857
Chargeable gain 1,730 -
Current tax credit (267,785) (217,711)
The Company has estimated tax losses of £25,056,703 (2020: £23,587,006)
available for carry forward against future trading profits. Deferred tax is
detailed in note 17.
10. Basic and diluted loss per ordinary share
Year to 31 December Year to 31
2021 December
2020
Loss after tax attributable to equity shareholders £ (3,128,581) (2,372,658)
Weighted average number of ordinary 0.25p shares for the purpose of basic and
diluted loss per share
- 456,365,146
Weighted average number of ordinary 0.01p shares for the purpose of basic and 5,537,461,036 -
diluted loss per share
Basic and diluted loss per ordinary share (0.056)p (0.52)p
The basic loss per share reduced by 89 per cent. from 0.52p per share to
0.056p per share. Whilst there was an increase in the loss after tax to equity
shareholders this was more than offset by the share reorganisation and issue
of equity as set out in Note 18. Potential ordinary shares are not treated as
dilutive as the Company is loss making, therefore the weighted average number
of ordinary shares for the purposes of the basic and diluted loss per share
are the same.
11. Intangible assets
Intangible assets comprise patents, trademarks and software owned by the
Company. The cost is amortised on a straight-line basis over their estimated
useful life.
Year ended 31 December 2021: £
Cost
At 1 January 2021 592,296
Additions 28,883
At 31 December 2021 621,179
Amortisation
At 1 January 2021 508,533
Charge for the year 38,241
At 31 December 2021 546,774
Net book value
At 31 December 2021 74,405
Year ended 31 December 2020 £
Cost 564,977
At 1 January 2020
Additions 27,319
At 31 December 2020 592,296
Amortisation
At 1 January 2020 467,766
Charge for the year 40,767
At 31 December 2020 508,533
Net book value
At 31 December 2020 83,763
12. Property, plant and equipment
Year ended 31 December 2021:
Plant and equipment Fixtures and fittings Total
£ £ £
Cost
At 1 January 2021 850,596 178,307 1,028,903
Additions 305,334 - 305,334
Disposals (64,246) - (64,246)
Transfers (25,270) - (25,270)
At 31 December 2021 1,066,414 178,307 1,244,721
Plant and equipment Fixtures and fittings Total
£ £ £
Depreciation
At 1 January 2021 736,472 178,286 914,758
Charge for the year 90,607 21 90,628
Disposals (64,246) - (64,246)
Transfers (2,106) - (2,106)
At 31 December 2021 760,727 178,307 939,034
Net book value
At 31 December 2021 305,687 - 305,687
Year ended 31 December 2020:
Plant and equipment Fixtures and fittings Total
£ £ £
Cost
At 1 January 2020 787,487 185,038 972,525
Additions 69,452 - 69,452
Disposals (6,343) (6,731) (13,074)
At 31 December 2020 850,596 178,307 1,028,903
Depreciation
At 1 January 2020 663,015 184,783 847,798
Charge for the year 79,802 232 80,034
Disposals (6,345) (6,729) (13,074)
At 31 December 2020 736,472 178,286 914,758
Net book value
At 31 December 2020 114,124 21 114,145
Transfers from plant and equipment were moved to stock and then sold to a
customer.
13. Lease reporting
IFRS 16 was effective for annual reporting periods on or after 1 January 2019
and removes the distinction between finance and operating leases for lessees.
For lessees, all leases are now recorded on the balance sheet as liabilities,
at the present value of the future lease payments, along with an asset
reflecting the right of use of the asset over the lease term. This information
aims to provide users of financial statements with the basis to assess the
effect leases have on the financial position, financial performance and cash
flows of an entity.
Right of use lease assets
Property Equipment Total
£ £ £
Cost
At 1 January 2021 179,763 8,441 188,204
Additions 138,933 9,961 148,894
Disposals - (8,441) (8,441)
At 31 December 2021 318,696 9,961 328,657
Depreciation
At 1 January 2021 133,816 4,984 138,800
Charge for the year 67,643 2,856 70,499
Disposals - (7,175) (7,175)
At 31 December 2021 201,459 665 202,124
Carrying amount
At 31 December 2021 117,237 9,296 126,533
Lease liability Property Equipment Total
£ £ £
At 1 January 2021 49,831 3,636 53,467
Repayment of lease liabilities (74,997) (3,073) (78,070)
Additions 138,933 9,961 148,894
Interest on lease liabilities 4,326 107 4,433
Disposals - (1,379) (1,379)
At 31 December 2021 118,093 9,252 127,345
Lease liability maturity analysis
2021 2020
Property Equipment Property Equipment
Gross lease payments due: £ £ £ £
Within one year 75,000 3,279 51,577 2,637
Between two and five years 51,666 6,609 - 1,111
126,666 9,888 51,577 3,748
Less future financing charges (8,573) (636) (1,746) (112)
118,093 9,252 49,831 3,636
14. Inventories
Year to 31 December 2021 Year to 31 December 2020
£ £
Raw materials 177,212 262,506
Finished goods 196,829 364,687
Subtotal 374,041 627,193
Provision for inventories (90,139) (57,604)
Total 283,902 569,589
Inventories are lower in 2021 following a significantly higher level of sales
during the year and production challenges due to a global shortage of
components. The provision increased in 2021, mainly due to a small number of
units of finished goods.
15. Trade and other receivables
Year to 31 December 2021 Year to 31 December 2020
£ £
Amounts falling due within one year
Trade receivables 327,061 108,529
Provision for expected credit losses (2,762) (68,587)
Other receivables 307,649 123,385
Other taxes and social security - 10,544
631,948 173,871
Year to 31 December 2021 Year to 31 December 2020
£ £
Not past due 299,160 37,849
1 to 30 days past due 901 2,506
270 days past due 27,000 68,174
327,061 108,529
Year to 31 December 2021 Year to 31 December 2020
£ £
Provision for expected credit losses on trade receivables:
Balance brought forward (68,587) (4,306)
Written back to P&L during the year 68,587 4,306
Provided during the year (2,762) (68,587)
Balance carried forward (2,762) (68,587)
The provision for expected credit losses is entirely in respect of not past
due invoices. For trade receivables the loss allowance is mandatorily measured
at an amount equal to the lifetime expected credit losses.
16. Trade and other payables
Year to 31 December 2021 Year to 31 December 2020
£ £
Amounts falling due within one year
Trade payables 230,494 63,034
Other taxes and social security 43,514 29,174
Other payables 30,979 11,278
Accruals and deferred income 49,624 82,441
354,611 185,927
17. Provisions
Dilapidations Warranties TOTAL
£ £ £
Balance at 1 January 2021 75,779 48,256 124,035
Provided for/(reduced) during the year - (24,075) (24,075)
Balance at 31 December 2021 75,779 24,181 99,960
The provision for anticipated dilapidations is in respect of the Company's
leasehold premises at Woking. The amount carried forward of £75,779 is based
on the potential future cost which could be incurred at the end of the lease.
The Company provides OEMs and distributors with a 15-month warranty on MS
products. The provision represents the anticipated cost of servicing those
warranty claims. The provision is based on historical costs including product,
replacement parts and the cost-of-service engineers that may have to be
incurred over the warranty period. The provision for warranty at the end of
the year is £24,181. There were no significant claims during the year.
18. Deferred tax
Deferred taxation provided in the financial statements: £
Balance at 1 January and 31 December 2021 -
Year to 31 December 2021 Year to 31 December 2020
£ £
Accelerated capital allowances 61,741 21,688
Tax losses carried forward (61,741) (21,688)
- -
A deferred tax asset in respect of tax losses has only been recognised to
the extent of the deferred tax liability in respect of accelerated capital
allowances at a tax rate of 25 per cent. (2020: 19 per cent.). The Company has
estimated tax losses of £25,056,703 (2020: £23,587,006) available for carry
forward against future trading profits. The deferred tax asset that would
arise on these losses if it were recognised at 25% is £6,264,176 (2020:
£4,481,531 based on 19%).
19. Share capital
The total share capital of the Company comprises Ordinary and Deferred shares
as follows:
2021 2021 2020 2020
Allotted, called up and fully paid: Number £ Number £
Ordinary shares of 0.25p each - - 456,365,146 1,140,913
Ordinary shares of 0.01p each 6,076,365,146 607,637 - -
Deferred shares of 0.24p each 456,365,146 1,095,276 - -
As at 31 December 6,532,730,292 1,702,913 456,365,146 1,140,913
The Ordinary share capital of the Company comprises:
2021 2021 2020 2020
Allotted, called up and fully paid: Number £ Number £
Ordinary shares of 0.25p each as at 1 January 456,365,146 1,140,913 456,365,146 1,140,913
Effect of share split and deferment - (1,095,276) - -
Issue of ordinary share capital of 0.01p each 5,620,000,000 562,000 - -
As at 31 December 6,076,365,146 607,637 456,365,146 1,140,913
On 4 February 2021 the Company undertook a share reorganisation and split each
ordinary share of 0.25p each into one (1) ordinary share of 0.01p each and
twenty-four (24) deferred shares of 0.01p each followed by the immediate
consolidation of every twenty-four (24) deferred shares of 0.01 pence each
into one (1) deferred share of 0.24 pence.
Each ordinary share of 0.01p each carries the same rights as the ordinary
shares of 0.25p each did before the share reorganisation. That is, each
ordinary share has the right to one vote and is entitled to participate in any
distribution made by the Company including the right to receive a dividend,
and on a winding up of the Company. The ordinary shares are not redeemable or
liable to be redeemed at the option of the Company or the shareholder.
Each deferred share of 0.24p has no right to receive notice of, or attend or
vote at, any general meeting of the Company, no right to participate in the
profits of the Company whether by dividend, other distribution, return of
capital (whether or not upon a winding up) or otherwise, save that, upon a
return of capital upon a winding up, the holders of deferred shares shall be
entitled to the return of the nominal value of each deferred share held after
£10,000,000 has been returned on each ordinary share, nor are the deferred
shares redeemable or liable to be redeemed at the option of the Company or the
shareholder.
In addition, the Company issued 5,620,000,000 ordinary shares of 0.01p each as
follows:
· 5,000,000,000 ordinary shares of 0.01p each to raise £5.0 million
before expenses at the placing price of 0.1 pence per new ordinary share;
· 500,000,000 ordinary shares of 0.01p each to raise £500,000 to the
Company's Broker Turner Pope at the Placing Price of 0.1 pence per new
ordinary share to meet additional demand for the shares;
· 35,000,000 ordinary shares of 0.01p each at the placing price of 0.1
pence per new ordinary share in respect of the first year of fees due to
Turner Pope for the provision of its broking services to the Company; and
· 85,000,000 ordinary shares of 0.01p each at the placing price of 0.1
pence per new ordinary share in settlement of the Non-executive Directors'
first year's fees in respect of Gerard Brandon (50,000,000 shares) and Dr
Nigel Burton (35,000,000 shares).
The Deferred share capital of the Company comprises:
2021 2021 2020 2020
Allotted, called up and fully paid: Number £ Number £
Deferred shares of 0.24p each as at 1 January - - - -
Effect of share split on 4 February 2021 to deferred shares of 0.24p each 456,365,146 1,095,276 - -
As at 31 December 456,365,146 1,095,276 - -
20. Reserves
The share premium account represents the excess over the nominal value for
shares allotted less issue costs. The share option reserve represents
accumulated charges made under IFRS 2 in respect of share-based payments.
Where share options that have vested expire, lapse or are exercised, the
amounts within the share-based payments reserve relating to those options are
transferred to retained earnings as shown in the Statement of Changes in
Equity.
21. Share premium
Year to 31 December 2021 Year to 31 December 2020
£ £
Opening balance brought forward 24,867,886 24,867,886
Share issue in the year 5,058,000 -
Share issue costs - Cash (416,860) -
Share issue costs - Broker Warrants (1,503,008) -
Closing balance carried forward 28,006,018 24,867,886
The fundraising on 5 February 2021 raised a total of £5.5 million (before
expenses) at a placing price of 0.1p per share. The placing raised £5.0
million and the broker warrant £0.5 million, before expenses. The share
premium on the fundraising was the placing price of 0.1p per share less the
nominal value of 0.01p per share multiplied by the number of shares issued.
The cash costs amounted to £416,860 including broker commissions and fees,
legal fees etc. In addition, 997,000,000 broker warrants were issued to Turner
Pope Investments (TPI) Ltd at a fair value of £1,503,008.
At the same time as the fundraising on 5 February 2021, 120,000,000 ordinary
shares of 0.01p were issued in lieu of fees in respect of the first year of
fees due to Turner Pope Investments (TPI) for the provision of its broking
services to the Company and of the first year of fees for the Non-executive
Directors.
Further details of the share issues are set out in note 18.
22. Commitments
Year to 31 December 2021 Year to 31 December 2020
£ £
Contracted for but not provided in the financial statements 781,990 426,595
The commitment above relates to purchase orders placed on, and related
contractual arrangements and obligations, with our third-party manufacturers.
23. Directors' emoluments
Year to 31 December 2021 Year to 31 December 2020
£ £
Salaries and fees 264,797 291,086
Non-cash payments 2,002 1,054
Pension costs 27,325 23,429
Employment related share-based payments 1,071,773 51,753
1,365,897 367,322
In the year to 31 December 2021 the two Executive Directors that served during
the year accrued benefits under the Company's auto-enrolment pension scheme.
The employment related share-based payments comprise the charges arising from
the grant of options on 5 February 2021 plus non-executive directors fees
settled by the issue of 85,000,000 ordinary shares of 0.01p each for a full
year in advance, reduced by the credits to the income and expenditure
statement in relation to unvested charges in respect of the cancellation of
share options granted in prior years.
There are no key management personnel other than the Directors. The highest
paid Director, Mr Glenn Tracey, received emoluments of £323,445 as disclosed
in the Directors' Remuneration Report, which included a share-based payment
charge of £182,255.
There were no gains on the exercise of share options in the year.
24. Employees
Year to 31 December 2021 Year to 31 December 2020
Number Number
Directors 4 5
Other staff 18 21
Average Headcount 22 26
Year to 31 December 2021 Year to 31 December 2020
£ £
Employment costs (including Directors)
Wages and salaries 1,123,276 1,081,201
Social security costs 160,902 121,141
Termination payments 18,189 58,283
Pension costs 173,051 153,476
Employment related share-based payments 1,332,240 52,241
2,807,699 1,466,342
25. Share-based payments
The share-based payments charge comprises Year to 31 December 2021 Year to 31 December 2020
£ £
Directors' fees settled in shares 76,559 -
Share options granted 1,255,681 52,241
Employment related share-based payments 1,332,240
Brokers' fees settled in shares 31,524 -
1,363,764 52,241
The Directors' fees settled in shares and Broker's fees settled in shares are
both in respect of paying annual fees in advance from 5 February 2021 at the
placing price of that date being a valuation of 0.1p per ordinary share of
0.01p nominal value.
Share option schemes
The Company operates an EMI and an unapproved share option scheme as a means
of encouraging ownership and aligning interests of staff and shareholders. The
table below shows the number of options outstanding and exercisable at 31
December 2021 and the weighted average exercise price.
Year to 31 December 2021 Year to 31 December 2020
Number of options Weighted average exercise price Number of options Weighted average exercise price
Outstanding at the beginning of the year 17,475,000 5.1p 18,644,000 5.2p
Granted during the year 1,125,000,000 0.1p - -
Forfeited/expired during the year (17,475,000) (5.1p) (1,169,000) 6.0p
Exercised during the year - - - -
Outstanding at 31 December 1,125,000,000 0.1p 17,475,000 5.1p
Exercisable at 31 December 750,000,000 0.1p 4,375,000 9.8p
Staff and Directors agreed to cancel existing options prior to the award of
new options as these options were all out-of-the-money. Existing options held
by Directors and staff amounting to 13,110,000 were cancelled on 4 February
2021. A further 3,500,000 options held by Peter Grant were cancelled on 5
February 2021, and 865,000 options related to previous leavers.
Options and warrants over 1,125 million ordinary shares were awarded to
Directors, staff and a consultant on 5 February 2021 (2020: nil), at the time
of the fundraising. The new options granted are exercisable at the placing
price of 0.1p for five years from the 5 February 2021.
The 750 million options and warrants granted to Directors and a consultant
vested during the year, as the performance criterion that the Company's
ordinary shares traded at a Volume Weighted Average Price at or above a 50 per
cent. premium to the placing price for 20 consecutive business days, was
achieved. The share-based payment charge is estimated at £1,125,281 and has
been recognised in full in 2021.
The 375 million options granted to staff have no performance conditions
associated with them but there is a two-year holding period before the options
can vest. The share-based payment charge is estimated at £577,826 vesting
over two years from the date of grant.
Details of options in issue at the year-end are:
Date of grant Exercise price Latest exercise date Estimated fair value Number of options 31 December 2021 Number of options 31 December 2020
July 2012 42.00p July 2022 12.1p - 190,000
May 2014 46.80p May 2024 11.4p - 90,000
November 2014 49.50p November 2024 11.9p - 100,000
April 2015 47.75p May 2025 10.5p - 100,000
January 2016 23.50p January 2026 11.7p - 395,000
September 2016 5.00p September 2026 2.0p - 2,000,000
September 2016 5.00p September 2026 0.6p - 2,000,000
January 2018 4.05p January 2028 1.3p - 2,100,000
January 2018 4.05p January 2028 2.2p - 5,500,000
June 2019 1.55p June 2029 0.7p - 5,000,000
February 2021 0.1p February 2026 0.150p 750,000,000 -
February 2021 0.1p February 2026 0.153p 375,000,000 -
1,125,000,000 17,475,000
The weighted average share price at the date of grant for share options
granted in the year was 0.25 pence. The options outstanding at 31 December
2021 were all granted at an exercise price of 0.1p with an exercise period of
five years from the date of grant and a remaining contractual life of 4 years
and 1 month.
The fair value of the 375 million options granted to staff on 5 February 2021
was estimated at 0.153p per share and for the 750 million options granted to
Directors was estimated at 0.150p per share on the measurement date.
The estimated fair values of the share options were calculated by applying the
Black Scholes or Monte Carlo models in all cases except for the 750 million
options granted to Directors. In respect of the 750 million options granted to
the Directors, a binomial model was used since the options were significantly
in the money at the grant date and there was a very high probability of
achieving the share price hurdle condition.
The period of exercise for all options granted up to 31 December 2020 is ten
years from the date of grant and the vesting period is normally three years
from the date of grant. Prior to 2016 the expected volatility had been
determined by calculating the historical volatility of the share price over
the previous year. From September 2016, and consistent with the application
guidance in IFRS 2, the Directors considered the most appropriate method to
calculating volatility to be the use of the historical volatility of
comparable listed companies. The model inputs are detailed below.
The model inputs using Black Scholes were:
Date of grant Exercise price Share price Risk free rate Expected volatility Gross dividend yield
July 2012 42.00p 42.00p 0.50% 33% -
May 2014 46.80p 46.80p 2.69% 16% -
November 2014 49.50p 49.50p 2.05% 18% -
April 2015 47.75p 47.75p 1.58% 17% -
January 2016 23.50p 23.50p 1.74% 38% -
September 2016 5.00p 5.12p 0.87% 30% -
January 2018 (staff) 4.05p 4.29p 0.79% 31% -
January 2018 (directors) 4.05p 4.29p 1.29% 39% -
June 2019 1.55p 1.55p 0.87% 34% -
February 2021 0.10p 0.25p 0.03% 29% -
The expected volatility for the February 2021 grant is based on the 5-year
volatility of comparable companies.
Total expenses of £1,332,280 related to equity settled share-based payment
transactions were recognised in the Statement of Comprehensive Income the year
(2020: £52,241) comprising charges in respect of new options granted
totalling £1,385,700 (2020: £52,241) plus directors' fees settled in shares
totalling £76,599 less credits in respect of cancelled options that had not
vested totalling £130,019 (£nil).
In respect of cancelled options that had vested, £194,246 (2020: £140,516
comprising £10,819 in respect of cancelled staff options and £129,697 in
respect of lapsed warrants per note 26) was transferred from share-based
payment reserve to the retained losses reserve.
26. Warrants
Broker warrants to subscribe for up to 997,000,000 ordinary shares, which
represented 20 per cent of the placing shares, were granted to Turner Pope
Investments (TPI) Ltd as part of the fundraising on 5 February 2021. The
broker warrants are capable of exercise for a period of two years from 5
February 2021. The fair market value of the warrants charged to share based
payment reserved was calculated at £1,503,008 based on the following inputs:
Date of grant Exercise price Share price Risk free rate Expected volatility Gross dividend yield
February 2021 0.01p 0.25p 0.03% 33% -
The expected volatility for the February 2021 grant is based on the 2-year
volatility of comparable companies.
27. Financial instruments
The Company's financial instruments comprise cash and various trade
receivables and trade payables that arise directly from its operations. No
trading in financial instruments is undertaken. The main risks arising from
the Company's financial instruments are liquidity, currency and interest rate.
The Board oversees the management of these risks, which are summarised below.
Liquidity risk
The Company finances its operations from equity funding provided by
shareholders and revenues generated by the business. The Company seeks to
manage liquidity risk to ensure enough funds are available to meet working
capital requirements. The Company successfully raised £5.5 million before
expenses through the issue of new shares in February 2021.
The Company invests its cash reserves in bank and money market deposits as a
liquid resource to fund its operations. The Company's strategy for managing
cash is to balance interest income with counterparty risk ensuring the
availability of cash to match the profile of the Company's cash flows.
The £5.5 million raised in February 2021 is anticipated by the Board of
Directors to take the Company through to profitability. In reviewing the
Company as a going concern, as outlined in note 3, management prepared
alternative business scenarios where performance falls below management
expectation. Contingency plans and mitigating actions have been identified in
case actual results differ from the Company's business plans. There can be no
guarantee that the commercial objectives of the Company will be achieved.
Interest rate risk
The Company does not face any significant interest rate risk as it has no
borrowings. Surplus funds are invested to maintain a balance between
accessibility of funds, competitive rates, and counterparty risk while
investing funds safely.
Credit risk
The Company manages its credit risk in cash and cash equivalents by spreading
surplus funds between creditworthy financial institutions. The Company is also
exposed to credit risk attributable to trade and other receivables. The
maximum credit risk in respect of the financial assets at each period end is
represented by the balance outstanding on trade and other receivables. The
Company monitors the credit worthiness of its customers on a regular basis.
Foreign currency risk
The majority of the Company's transactions are denominated in pounds sterling.
The Company has no long-term commitments to purchase goods or services in
foreign currencies. Purchases denominated in foreign currency are expensed at
the exchange rate prevailing at the date of the transaction and represents an
immaterial proportion of the Company's total expenditure.
The only assets and liabilities denominated in foreign currencies relate to
trade receivables and trade payables with overseas counterparties together
with small balances of US dollar and Euro currencies to settle these
liabilities. The risks and sums involved are immaterial.
Fair values
The Directors consider that there is no material difference between the book
value and the fair value of the financial instruments on 31 December 2021 and
31 December 2020.
Capital management
The Company's capital base comprises equity attributable to shareholders. As
the Company's focus has been on establishing itself as a successful supplier
of equipment design and engineering services, the primary objective in
managing cash spend has been to achieve progress on product development and
commercialisation in a cost-efficient manner and in managing liquidity risk to
ensure the Company continues as a going concern.
28. Related party transactions
Microsaic and DeepVerge plc ("DeepVerge") have two directors in common: Gerard
Brandon and Nigel Burton. In particular, Gerard Brandon is Chairman of
Microsaic and CEO of DeepVerge.
In March 2021, the two companies signed a three-year technology and commercial
agreement, via DeepVerge's subsidiary, Innovenn UK Limited, whereby Microsaic
will supply its products and services on a non-exclusive basis across
DeepVerge's global sales, marketing and distribution channels, delivering
portable solutions for healthcare diagnostic evaluation and environmental
contamination detection of samples. This included an initial order by
DeepVerge for three units with a total value of £100,000, plus a commitment
of up to £150,000 from DeepVerge for equipment and services to be installed
at pilot facilities in DeepVerge's laboratories based in York.
In July 2021, Microsaic processed a further smaller purchase order from
DeepVerge under the Agreement, supplying certain additional mass spectrometry
equipment for quality and contamination detection in a range of markets
including water and soil analysis. The value of this order was approximately
£72,000.
In December 2021, Microsaic received a further order from DeepVerge for
additional miniaturised MS equipment and services with a total order value of
approximately £262k. Of this, £109k was pursuant to the March 2021
agreement. Additionally, £153k of the order includes a number of units of
Microsaic's newly developed SPE-LC Systems and related consumables which will
be used for quality and contamination detection in a range of markets
including water and soil analysis.
The SPE-LC System is expected to be used to detect CECs in water, and will be
supplied to DeepVerge to form part of DeepVerge's third generation solution of
multiplex pathogen detection and the launch of its Modern Water Mobile
Services, which will facilitate auto-sampling at wastewater sites to reduce
the time and cost of detection.
In summary for the year ended 31 December 2021, revenue from DeepVerge sales
totalled £385,593 and purchases from DeepVerge totalled £210,600. At 31
December 2021, £247,412 was owed by DeepVerge to Microsaic in relation to the
December 2021 orders and £65,610 was owed by Microsaic to DeepVerge.
29. Control
As at 31 December 2021, no individual shareholder had a controlling interest
in the Company.
30. Events after the Reporting Date
Subsequent to 31 December 2021:
· On 14 February 2022, Dr Nigel Burton, Non-executive Director,
exercised warrants relating to 200 million Ordinary Shares, reflecting an
investment of £200,000 in Microsaic;
· On 19 April 2022, Microsaic signed a new Manufacturing Services
Framework Agreement ("MSFA") with Innovenn UK Limited, a division of DeepVerge
plc ("DeepVerge"), to refine and miniaturise existing monitoring equipment for
environmental and human health diagnostics, together with an initial contract
worth £400,000. The MSFA framework sets out the terms and conditions for
Microsaic to improve and manufacture certain DeepVerge products and to provide
the design, assembly, quality, and project management functions necessary to
produce and ship equipment based on DeepVerge approved specifications, design,
and quality requirements. DeepVerge is a related party and further details
regarding the relationship are set out in the Related party transactions note
28.
31. Cash absorbed by operations
Year to 31 Year to 31
December December
2021 2020
£ £
Total comprehensive loss for the year (3,128,581) (2,372,658)
Adjustments for:
Amortisation of intangible assets 38,241 40,767
Depreciation of right of use assets 70,499 87,237
Depreciation of property, plant and equipment 90,628 80,034
Transfer of property, plant and equipment to cost of goods 23,164 -
Profit on disposal of right of use assets (113) (1,426)
Decrease in provision for warranty (24,075) (12,713)
(Decrease)/Increase in provision for expected credit losses (65,825) 64,281
Share-based payments 1,363,764 52,241
Increase/(Decrease) in inventory provision 32,535 17,650
Tax on loss on ordinary activities (267,785) (217,711)
Interest on lease liability 4,433 9,041
Interest received (6,237) (4,393)
Movements in working capital
Decrease /(Increase) in inventories 253,152 (200,998)
(Increase)/Decrease in trade and other receivables (398,083) 209,838
Increase/(Decrease) in trade and other payables 168,684 (104,636)
Accrued furlough income 17,748 (17,748)
Cash absorbed by operations (1,827,851) (2,371,194)
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