Microsaic Systems - Final Results
11/10/2024 07:00
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RNS Number : 7832H Microsaic Systems plc 11 October 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
11 October 2024
Microsaic Systems plc
("Microsaic" or the "Company")
Annual Report & Accounts for the year to 31 December 2023
Microsaic Systems plc (AIM: MSYS), the developer of micro-electronic
instruments and analytical solutions, hereby announces its audited financial
results for the year ended 31 December 2023 ("FY23"). The Company's FY23
Annual Report is included at the end of this announcement and is now available
on the Company's website at www.microsaic.com (http://www.microsaic.com) .
The Company will make a further announcement in due course to confirm the
posting of its FY23 Annual Report to shareholders who have requested
information in hard copy, along with notice of the Company's next annual
general meeting.
The shares will, however, remain suspended from trading until the publication
of the interim results to 30 June 2024, which the Company expects to publish
later this month.
Notwithstanding the ongoing temporary suspension of trading in the Company's
ordinary shares, the Company will continue to make announcements as and when
there are developments that require announcement in accordance with its
obligations under the AIM Rules for Companies.
Financial Highlights:
· Total revenue decreased by 70% on the previous year to £0.49m (2022:
£1.57m) reflecting the absence of sales to DeepVerge plc;
· Operating expenses decreased to £2.88m (2022: £3.27m) reflecting
the inclusion of certain restructuring and closure costs, which were more than
offset by low impairment charges of £6k in contrast to 2022 debt impairment
charges of £1.13m arising entirely due to the insolvency of DeepVerge plc;
· Operating loss of £2.60m (2022: £2.55m);
· Loss before tax of £2.60m (2022: £2.53m) after providing for:
o Impairment of related party debt of £6k (2022: £1.13m);
o Share-based payments of £21k (2022: £0.23m);
o Depreciation and amortisation of £286k (2022: £281k);
· Cash and cash equivalents at 31 December 2023 of £0.17m (2022:
£1.24m).
Post-year end events:
· On 12 January 2024 the Company announced the intention to acquire
certain assets and elements of the Modern Water business from DeepVerge plc
subject to successful fundraising;
· On 15 January 2024 the Company announced the successful placing of
£1.8m in new shares;
· On 16 January 2024 the Company shares were restored and relisted on
the AIM market;
· On 25 January 2024 the Company announced the completion of the
acquisition of the Modern Water business from DeepVerge plc for a
consideration of £100,000.
· On 16 February 2024 the Company announced the reactivation of the
Modern Water laboratory and production facilities in smaller premises at Sand
Hutton, York, England. The Company is also working with a large OEM in the
United States to optimise the Company's PFAS system for commercial use.
· On 27 March 2024 the Company announced that it had agreed terms with
GX Group, based in Usk Wales, for the continued manufacturing and further
development of Continuous Toxicity Monitoring instruments ("CTMs") and related
consumables previously sold by the Modern Water business.
· On 14 June the Company announced that it had reached non-binding
heads of terms with Aptamer Group plc (AIM: APTA) ("Aptamer") for the
development of a range of Optimer® binders to be used in its newly developed
Pathogen Detector to be adapted for the detection of multiple pathogens of
serious concern to public health that can be found in water in addition to
Covid-19 (the "Agreement").
· On 25 June the Company announced that it had received a research and
development tax credit from HMRC of £262,000 for qualifying costs expended in
2022.
· Net cash balance at 4 October 2024 was £0.45m.
Outlook
As part of the Company's reset, it has successfully raised net £1.8m, moved
its headquarters to York England on a much-reduced cost base and has engaged a
new management and operations team. The new streamlined business and
acquisition of the Modern Water business has greatly expanded and diversified
the potential sales and client base of the Company. The Modern Water
acquisition has enabled the Company to access a wide range of valuable IP,
instrumentation and consumables for water and effluent discharge toxicity
monitoring and water security. These newly acquired capabilities are expected
to provide the Company with growth and revenue opportunities in the short
term. The assets of and equipment supplied by Modern Water are also
complementary to the Company's miniaturised mass spectrometer which can be
adapted and integrated into a broader and wider range of testing solutions
away from the laboratory including localised PFAS detection and measurement.
The outlook for water related security, toxicity measurement and remedial
actions is one of the highest sector growth areas. The Company is committed to
becoming a major water toxicity solutions provider with our extensive range of
instruments and services and through collaborative ventures in the sector.
The acquisition of the Modern Water business is having a transformational
impact on the Company. Previously the Company was reliant on sales and
servicing limited to usage of our mini-mass spectrometers but with limited
ongoing after sales revenue with no consumables. Now post-acquisition the
Company has increasing revenue streams from a much broader range of
instruments and products. We now have servicing and revenue from sales of our
Microtox® brand consumable reagents used in the suite of Modern Water toxic
water measuring instruments. These instruments include the laboratory LX,
portable FX and our automated online Continuous Toxic Monitoring device. We
manufacture sector leading Microtox® reagents for both laboratory and
in-field Modern Water instrument use. Furthermore, the Company has acquired
the rights to build and market the Pathogen Detector that we intend to expand
from proven Covid-19 detection in water to a groundbreaking multi pathogen
device to identify a much wider range of pathogens, including viruses, in
water. During the current year, the Modern Water business has and is expected
to produce the majority of the Company's revenues.
Since the acquisition of the Modern Water business, the Company has reset the
business to reduce overheads and to improve operational efficiencies. We have
focused on marketing and integrating the successful Microtox® reagent brand
and associated water testing instrumentation into the Company's complementary
mini-mass spectrometer portfolio. The Company has also targeted investment and
funds to upgrade the design and electronics of our Modern Water instruments
that are attracting the most market interest and sales. The flagship project
in Qatar has progressed well in compliance with our contractual obligations to
commission the Continuous Toxic Monitoring machines installed as an online
water monitoring network around Doha and to complete local training of
operatives. The Company has positioned itself to ensure the outsourced
manufacturing of existing Modern Water instruments will continue and can meet
growing market demand together with in-house manufacturing of our Microtox®
reagents at our laboratory in York which is fully functional. The Company
intends to make a more detailed trading statement together with the Interim
Results, which are expected to be release in the coming weeks, about how we
are positioned to move forward successfully, including the commercialisation
of our novel Pathogen Detector to rapidly detect a wide range of pathogens in
water.
As Executive Chairman, I would like to acknowledge the support shown by new
and existing shareholders, stakeholders, suppliers to the business and by our
talented management and staff. We look forward to demonstrating the strategic
and operational progress of the business through the rest of 2024 and beyond.
Microsaic Systems plc +44 (0) 20 3657 0050
Bob Moore, Acting Executive Chairman via TPI
Singer Capital Markets (Nominated Adviser) +44 (0)20 7496 3000
Alex Bond / Oliver Platts
Turner Pope Investments (TPI) Limited (Broker) +44 (0) 20 3657 0050
Andy Thacker / James Pope
About Microsaic Systems and Modern Water
Microsaic is highly experienced in microelectronics and development of
instrumentation. Having acquired the Modern Water business it has reset,
diversified and widened its capabilities into broader based analytical
equipment supply and services company with combined technologies resulting in
comprehensive water testing capabilities. The Company has an extensive
existing and newly acquired innovative patent portfolio in industry-leading
technology designed and developed for "Industry 4.0" application serving
markets in diversified Industries, Human and Environmental Health. Microsaic's
micro-mass spectrometer system and Modern Water water testing solutions
enables analytical detection and characterisation at the point-of-need,
whether within a mobile testing capability, conventional laboratory setting,
or within a bioprocessing facility for continuous detection of data at
multiple steps in the process workflow.
Microsaic's products and solutions are commercially available through global
markets via a network of regional and local partners, targeting its core
laboratory, manufacturing and point-of-need applications.
Annual Report and Accounts for the year ended 31 December 2023
CHAIRMAN'S STATEMENT
For the year ended 31 December 2023
Dear Shareholders,
I hereby present the Company's audited annual report and accounts for the year
ended 31 December 2023. The year 2023 commenced with the Company continuing
its transition from an R&D focused instrument business with the
development of the innovative miniaturised mass spectrometers to a more
commercially focused service business, but the Company ran into significant
financial difficulties arising from the cessation of trading with the
Company's largest related business party, DeepVerge plc. The unexpected
failure of this major customer had a serious and material financial impact on
the business during 2023 and its ability to then operate as a going concern,
which inevitably resulted in a suspension of the Company's shares from trading
on AIM in June 2023.
During the second half of 2023 the Company implemented a major restructuring
programme, affecting the Board, senior management and staff. We subsequently
successfully refinanced the business bringing financial stability and a return
to trading of the shares on AIM in January 2024. The shares were again
suspended from trading on AIM from 1 July 2024 due to the delay in publishing
these accounts. The shares are expected to return to trading on AIM
immediately following publication of both these accounts and the interim
results to 30 June 2024.
As part of the restructuring programme I took over as Executive Chair in
September 2023 and once we had completed the refinancing the goal of the Board
was to undertake a strategic and operational review leading to the
restructuring and reset of the Company.
The restructuring included the resignation of one executive director and a
major reduction of the cost-base. The Company also successfully acquired the
Modern Water business in January 2024 to broaden its future offering and
enhance its revenue stream opportunities. The acquisition is becoming
transformational for the Company in both the short and long term and will be
an important part of resetting and accelerating the business performance.
Financial Highlights:
· Total revenue decreased by 70% on the previous year to £0.49m (2022:
£1.57m) reflecting the absence of sales to DeepVerge plc;
· Operating expenses decreased to £2.88m (2022: £3.27m) reflecting
the inclusion of certain restructuring and closure costs, which were more than
offset by low impairment charges of £6k in contrast to 2022 debt impairment
charges of £1.13m arising entirely due to the insolvency of DeepVerge plc;
· Operating loss of £2.60m (2022: £2.55m);
· Loss before tax of £2.60m (2022: £2.53m) after providing for:
o Impairment of related party debt of £6k (2022: £1.13m);
o Share-based payments of £21k (2022: £0.23m);
o Depreciation and amortisation of £286k (2022: £281k);
· Cash and cash equivalents at 31 December 2023 of £0.17m (2022:
£1.24m);
· Net cash balance at 4 October 2024 was £0.45m.
Post-year end events:
· On 12 January 2024 the Company announced the intention to acquire
certain assets and elements of the Modern Water business from DeepVerge plc
subject to successful fundraising;
· On 15 January 2024 the Company announced the successful placing of
£1.8m in new shares;
· On 16 January 2024 the Company shares were restored and relisted on
the AIM market;
· On 25 January 2024 the Company announced the completion of the
acquisition of the Modern Water business from DeepVerge plc for a
consideration of £100,000.
· On 16 February 2024 the Company announced the reactivation of the
Modern Water laboratory and production facilities in smaller premises at Sand
Hutton, York, England. The Company is also working with a large OEM in the
United States to optimise the Company's PFAS system for commercial use.
· On 27 March 2024 the Company announced that it had agreed terms with
GX Group, based in Usk Wales, for the continued manufacturing and further
development of Continuous Toxicity Monitoring instruments ("CTMs") and related
consumables previously sold by the Modern Water business.
· On 14 June the Company announced that it had reached non-binding
heads of terms with Aptamer Group plc (AIM: APTA) ("Aptamer") for the
development of a range of Optimer® binders to be used in its newly developed
Pathogen Detector to be adapted for the detection of multiple pathogens of
serious concern to public health that can be found in water in addition to
Covid-19 (the "Agreement").
· On 25 June the Company announced that it had received a research and
development tax credit from HMRC of £262,000 for qualifying costs expended in
2022.
Corporate governance
I was appointed as an independent Non-Executive Director in March 2022 and
following the resignation of the former Executive Chair Mr Brandon on 25
September 2023, I was appointed as Executive Chair. Alongside the strategic
review and business reset the Board is collectively committed to a high
standard of corporate governance. We intend to recruit an independent
Non-Executive Chair and at least one more Non-Executive Director. With the
support of this strengthened Board, I intend to move to the executive CEO role
to accelerate our growth and business development always maintaining proper
and good governance of the Company.
Outlook
As part of the Company's reset, it has successfully raised net £1.8m, moved
its headquarters to York England on a much-reduced cost base and has engaged a
new management and operations team. The new stream-lined business and
acquisition of the Modern Water business has greatly expanded and diversified
the potential sales and client base of the Company. The Modern Water
acquisition has enabled the Company to access a wide range of valuable IP,
instrumentation and consumables for water and effluent discharge toxicity
monitoring and water security. These newly acquired capabilities are expected
to provide the Company with growth and revenue opportunities in the short
term. The assets of and equipment supplied by Modern Water are also
complementary to the Company's miniaturised mass spectrometer which can be
adapted and integrated into a broader and wider range of testing solutions
away from the laboratory including localised PFAS detection and measurement.
The outlook for water related security, toxicity measurement and remedial
actions is one of the highest sector growth areas. The Company is committed to
becoming a major water toxicity solutions provider with our extensive range of
instruments and services and through collaborative ventures in the sector.
The acquisition of the Modern Water business is having a transformational
impact on the Company. Previously the Company was reliant on sales and
servicing limited to usage of our mini-mass spectrometers but with limited
ongoing after sales revenue with no consumables. Now post-acquisition the
Company has increasing revenue streams from a much broader range of
instruments and products. We now have servicing and revenue from sales of our
Microtox® brand consumable reagents used in the suite of Modern Water toxic
water measuring instruments. These instruments include the laboratory LX,
portable FX and our automated online Continuous Toxic Monitoring device. We
manufacture sector leading Microtox® reagents for both laboratory and
in-field Modern Water instrument use. Furthermore, the Company has acquired
the rights to build and market the Pathogen Detector that we intend to expand
from proven Covid-19 detection in water to a groundbreaking multi pathogen
device to identify a much wider range of pathogens, including viruses, in
water. During the current year, the Modern Water business is expected to
produce the majority of the Company's revenues.
As Executive Chairman, I would like to acknowledge the support shown by new
and existing shareholders, stakeholders, suppliers to the business and by our
talented management and staff. We look forward to demonstrating the strategic
and operational progress of the business through 2024 and beyond.
Bob Moore
Executive Chairman
10 October 2024
STRATEGIC REPORT
For the year ended 31 December 2023
Progress during 2023
The results for 2023 need to be considered on the basis that no further
payments and no further revenues were received from DeepVerge plc.
2023 revenues were £0.49m, a 70% decrease on the prior year (2022:
£1.57m). If sales to DeepVerge plc are excluded from these figures, the
resulting sales to customers excluding DeepVerge plc were £0.43m, being 34%
higher than in prior year (2022: £0.32m). This quantum of business was
far below that needed to achieve profitability and accordingly the business
reported substantial losses.
The overall gross margin reflected the blend of low margins on equipment
sales, medium margins on consulting services and higher margins on
consumables. The gross profit declined commensurately with the decline in
sales.
Operational Highlights
· Microsaic's products and services in applications such as water
monitoring of chemicals and pathogens have been installed in Ireland, UK,
Japan and the US
· Laboratory services for toxic shock, insulin and a range of
metabolites carried out under contract by Microsaic as mass spectrometry
services
· Mass spectrometry units have been installed and demonstrated in
mobile monitoring vehicles
Strategic Focus
Historically the Company has served 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 detection of PFAS (forever chemicals) in the food chain,
manufacture of high value biologic drugs and food contamination, including
Acrylamide, 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.
With the acquisition of the Modern Water business in January 2024 the company
has reset and repositioned itself in the increasingly important water security
and safety market. The ability to bring the rapidity of MicroTox® toxicity
testing in combination with the discrimination possible using mass
spectrometry gives a unique offering that covers both a rapid warning of a
problem with the water supply and the subsequent identification of the cause
of the problem. The senior management of the company also see areas to add
additional techniques, both developed in-house and in collaboration with
strategic partners to expand to a fully realised total solution to the water
industry. This has considerably extended the reach of the Company with access
to new markets to offer a much wider range of technologies and services.
Business Model
In 2023, the Company made a successful transition from reliance on the sale of
its Mass Spectrometer instruments, consumables and spare parts to a balanced
including solutions for end-users such as design, development and enhancement
of third-party equipment to integrate with partner hardware and software.
Shortly after the year-end the Company raised £1.8m in new equity to provide
working capital funding which also enabled the acquisition of the assets of
the Modern Water business from DeepVerge plc. The immediate priority in 2024
was to adopt, integrate and progress the Modern Water work-in-progress and
customer order book in tandem with fulfilling legacy Microsaic customer
orders, and this work is ongoing.
As of mid-year 2024 the MicroTox® reagent production laboratories were fully
functional with freeze dried new product being shipped worldwide, with
increasing sales revenues. Pre-orders are being taken for a new production
run, scheduled to start the end of 2024, of the LX laboratory instrument that
underpins the use of the MicroTox® reagents. The Continuous Toxic Monitoring
(CTM) project in Qatar is progressing well with 27 Continuous Toxic Monitoring
Machines commissioned in Q3 2024 to monitor the water purity throughout
Doha. This success of this flagship project is expected to result in
increased sales of CTMs and services in the Gulf States region during 2025.
Moving forward the Company will look to engage in strategic relationships in
key areas to progress new products and introduce existing ones to wider
markets both in the UK with domestic water companies and water authorities
internationally. The objective of the Company is to be technology driven with
a social purpose focussing on the rapidly growing sector to monitor toxins in
water and water pollution.
Stakeholder Engagement
Section 172 of the Companies Act 2006 ("S.172") recognises that companies are
run for the benefit of 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, shareholders, partners
(including distributors, OEMs and collaborators on new products), and our key
suppliers such as our manufacturing contractors 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 (2018).
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.
The Company has shifted the focus to growth in commercial sales across both
product and service offerings targeting solutions to meet the requirements of
existing clients and investigating markets to capitalise on the value of the
new business model. The Directors continue to engage with shareholders and key
stakeholders keeping them up to date on progress.
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 2023 was the restructuring of the business to ensure economic
viability and to deliver a more commercial focus with emphasis on delivery of
solutions, beyond equipment sales.
b) the interests of the company's 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.
During the year under review, major restructuring changes were made to address
the more commercial focus of the business model. These changes were made with
full consultation with team members. We ensured that supportive HR systems
were in place and decisions on new personnel were made in collaboration with
the team and an appropriate consultation process. Although most employees left
the company, the process enabled our commitments to them to be met, which
would not have been possible without the restructuring and refinancing of the
business.
c) the need to foster the company's business relationships with suppliers,
customers and others - Customer satisfaction and trust are critical for our
success. By providing a high quality product, solution or service to meet
those demands, we increase customer satisfaction. Over a 22 year period, this
has allowed us to build trust within the community we operate in and with our
customers showing our commitment to quality and continuous improvement. This
includes our ongoing commitment to ensure that our suppliers continued to be
paid on time.
d) the impact of the company's operations on the community and the environment
- The Company meets operational efficiencies and systematic processes that
come with our certification of ISO 9001 leading indirectly to positive
community and environmental impacts.
As part of the ISO 9001 process, we are required to consistently monitor and
manage our operations. This has led to improvements in efficiency and
effectiveness.
ISO 9001 requires us to have a process for selecting and managing suppliers.
This has led us to selecting suppliers who also have a commitment to
sustainability, thus extending the environmental and community impact.
ISO 9001 requires us to identify and address risks in our daily operations,
which indirectly benefit the environment and the community by preventing
incidents that could have negative effects.
e) the desirability of the company maintaining a reputation for high standards
of business conduct - the Company acted in a professional manner during 2023
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 to
meet and discuss with senior management and members of the Board.
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 2023 Year to 31 December 2022 Increase/
(Decrease)
£000s £000s £000s
Products 286 207 80
Consumables and spare parts 98 138 (40)
Product support services income 48 55 (8)
Consultancy services income 60 1,168 (1,108)
Total 492 1,568 (1,076)
The Company's revenue declined in 2023 due to the cessation of Consultancy and
related sales to DeepVerge plc which comprised £1.25m in 2022. Revenue
comprises the sale of products, consumables and spare parts, product support
services income and consultancy services income (comprising science and
engineering consultancy, laboratory services and monitoring services). The
Board reviews trading results and monitors cash on a monthly basis.
Profit/(Loss) & Cash Metrics Year to 31 December Year to 31 December Increase/
2023 2022 (Decrease)
£000s £000s £000s
Loss from operations before share-based payments, interest, and tax
(2,583) (2,317) (266)
Net cash used in operating and investing activities (1,010) (2,345) 1,335
Cash and cash equivalents 173 1,241 (1,068)
The Company's profitability is monitored against budget on a monthly basis.
Revenue decreased year on year while other operating expenses decreased and
there were no further costs in relation to corporate transactions. The Company
monitors its cash position closely, and forecasts are updated on a regular
basis.
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. Given the significant change in business
model throughout 2023 and 2024, direct analysis has not been possible but
these metrics are being monitored going forward.
Financial Results - 2023
Income and expenditure
Total revenue of £492k decreased 70% compared to the prior year (2022:
£1,568k) due principally to the substantial decline in consulting revenues
due to the absence of any sales to DeepVerge plc.
The large decline in gross profit in 2023 to £299k (2022: £950k) was
commensurate with the decline in revenue arising above.
Total operating expenses (excluding share-based payments and impairment) of
£2,876k (2022: £2,136k), increased by £740k driven by the costs of
restructuring the business during Q4 2023. Impairment costs decreased
substantially from £1.13m in 2022 to £6k in 2023 as the receivable from
DeepVerge plc was impaired in the prior year.
Share based payments of £21k were £214k lower than the prior year (2022:
£235k) and reflect limited activity comprising the vesting of 280 million EMI
options in February 2023 which subsequently lapsed as staff left employment.
No options or warrants were exercised during the year and all had lapsed by
31(st) December 2023 to leave a zero balance on the share based payment
reserve.
Finance costs of £5k were slightly lower than the prior year (2022: £7k).
These costs comprised £3k in penalty interest for late HMRC filings and £2k
of interest on lease liabilities.
Finance income of £13k decreased compared with the prior year (2022: £23k)
as higher interest rates on bank deposits were more than offset by reducing
cash balances.
The R&D tax credit for development activities conducted during 2023 has
not yet been compiled and accordingly the amount recognised in the financial
statements is £nil. (2022: £246k credit recognised in the statement of
comprehensive income). The R&D tax credit claim for 2022 was
successfully received in full during the first half of 2024.
The total comprehensive loss for the year of £2,597k was higher than the
prior year (2022: £2,289k). The significant decline in gross profits in
2023 arising from the absence of any sales to DeepVerge plc coupled with
business restructuring costs gave rise to substantially higher losses than in
2022 offset partially by an absence of any significant debt impairment charges
in 2023. The basic loss per share was 0.041 pence versus 0.036 pence per
share in 2022.
Balance Sheet
Total non-current assets decreased £337k to £166k (2022: £503k). This was
principally due to an absence of any asset additions during the year and a
number of asset divestments and scrappings pursuant to the reorganisation of
the company and the closure of the Woking office.
Current assets at £547k were down £2,076k (2022: £2,623k). The decrease was
mainly due to a substantially lower cash balance of £173k (down £1,068k) as
business losses were absorbed coupled with rationalisations to inventory and
trade debtors.
Total assets at £713k at year end were £2,414k lower than the prior year
(2022: £3,127k), reflecting the impact of the loss for the year reducing
current assets at the year-end as set out above.
Total equity at £144k was £2,576k less than the prior year (2022: £2,720k),
reflecting absorption of the year's post-tax loss and the release of the share
based payment reserve.
Total liabilities of £570k were £163k higher than in the prior year (2022:
£407k) due to the timing of the restructuring programme which generated
significant closure and severance-related costs with some remaining
outstanding at 31 December 2023 and becoming settled shortly thereafter.
Cash Flow
Net cash used in operating activities in 2023 of £1,058k was substantially
lower than the previous year (2022: £2,133k) and reflected the efforts of the
Directors to improve the financial position of the company with a concerted
effort towards cost-cutting and as well as a favourable swing in working
capital as the Company's operations reduced towards the end of the year.
After allowing for the general absence of asset purchases in the year and the
receipt of £48k from the sale of assets, there was a net cash inflow from
investing activities of £48k (2022: net cash used £212k).
Net cash used by financing was £59k (2022: £122k generated) due to no major
funding initiatives during 2023 in contrast to 2022.
The net decrease in cash for the year of £1,069k (2022: £2,223k) resulted in
a cash balance as at 31 December 2023 of £173k (2022: £1,241k)
Going Concern
The Company is loss making and has raised funds in the past by issuing equity
in discrete tranches. The most recent fundraises were completed on 5 February
2021 and January 2024 where the Company raised £5.2m and £1.8m respectively
after expenses from new and existing shareholders.
At 31 December 2023, the company held cash balances totalling £173k and net
current assets of £20k. Combined with operating losses of £2.6m in each of
the years ended 31 December 2022 and 2023, the ability of the Company to
settle liabilities as they fall due was therefore in doubt.
Following the January 2024 fundraise the directors restructured the business
to reduce the cost base and utilised £0.1m of the fundraise to purchase the
trade and assets of the Modern Water business and have focused on reviving
Microsaic's pipeline of sales alongside the production and sale of reagents
and instruments for Modern Water.
As a result of the investment and the Company continuing to be loss making,
the cash balance at 4 October 2024 was £0.45m. The Company has been
generating negative EBITDA since the end of December 2023.
In assessing the ability of the company to continue as a Going Concern, the
directors have reviewed sales projections and cashflow forecasts to 31
December 2025 alongside a thorough review of the Company's reserves and
working capital requirements from the date of approval of the financial
statements. Under the base case forecast, the directors anticipate sales of
instruments and reagents to be sufficient over the 14 month period to 31
December 2025 to allow the Company to meet its liabilities as they fall due.
Of these sales, the Company has secured a Qatar contract as discussed in the
Strategic Report (valued at €571k), with cash inflows expected to commence
in Q4 of 2024, although the timing of this inflow is uncertain.
The directors acknowledge there are significant uncertainties inherent in
forecasting future sales, given the requirement of the Company to effectively
restart trading during 2024 and volatile trading environments. It is possible
that the sales assumptions underpinning these forecasts may not be achieved,
or that margin assumptions may not be met. Consequently, the directors have
explored sensitivities to the above base case to model the impact of reduced
sales, including a "severe but plausible" downside scenario.
Sensitivity Analysis
The directors believe that a severe but plausible downside scenario, whereby
no instrument sales are included for the second half of 2025, would still
allow the Company to maintain positive cash headroom to 31 December 2025.
However, in the event that none of the unconfirmed sales (being sales not
currently contracted) realise, the Company would have insufficient working
capital to continue in operation past February 2025.
In addition to the scenarios described above, the Directors have performed a
reverse stress test ("Reverse Stress Test") to quantify the level of sales
decline and cost increases that can be absorbed.
The Reverse Stress Test only considers cost savings from directly attributable
variable costs associated with the reduction in sales, including production
costs, Directors salaries and marketing costs. No other cost savings are
assumed to be delivered. The Directors note however that the Company has been
able to make significant cost savings in the past with short lead times.
The directors have concluded that, applying the above conditions in the
Reverse Stress Test, a minimum sales level of approximately £84k per month,
in addition to the Qatar contract, is required to enable the Company to remain
liquid and with positive cash headroom over the going concern assessment
period. While the directors consider this to be an achievable target, it is
acknowledged that this exceeds the level of turnover experienced in the year
ending 31 December 2023 or in 2024 to date.
While the directors remain confident that there is a reasonable possibility
that the forecast sales pipeline can be converted into new customers and be
cash generative for the Company, at the date of this report the future
required minimum sales levels have not been achieved. Accordingly, there is a
material uncertainty that may cast significant doubt over the Company's
ability to continue as a going concern.
Mitigating actions
The Directors consider the scenario envisaged under the Reverse Stress Test
arising to be unlikely, and that in the event it did arise the Company has
demonstrated its ability to deliver cost savings and seek alternative capital.
If performance deviates materially from the base case, there are several
actions that the Company could undertake to mitigate the liquidity and profit
impact. These include:
· Cost savings initiatives with a focus on areas of discretionary spend
such as marketing, travel and certain professional fees. These cost savings
are included within the existing forecasts
· Reduction in stock purchases and manufacturing levels to reflect the
lower sales projections
· Reduction in project, IT and CAPEX spend which for a short period of
time would not adversely impact our sales and customer proposition.
Going Concern Assessment
Having considered the forecasts noted above, the mitigating actions available
to management, recent trading performance and having regard to the
macroeconomic risks and uncertainties to which the Company is exposed, the
Directors have a reasonable expectation that the Company has adequate
resources to continue operating for the foreseeable future and to operate for
a period of at least 12 months from the date of these financial statements.
Accordingly, the financial statements have been prepared on a going concern
basis.
Stakeholders should be aware that there is a material uncertainty arising on
this assessment in respect of the inherent uncertainty attached to the future
sales pipeline and projections, and the associated timing of cash receipts.
The financial statements do not include the adjustments that would result if
the Company was unable to continue as a going concern.
Outlook
The impact of the related party issues, in particular the failure of DeepVerge
plc to pay the £1.1m owed to the Company and to implement a debt reduction
plan, fundamentally changed the outlook for the Company. DeepVerge plc became
technically bankrupt in mid 2023 extinguishing any likelihood of any recovery
of this debt. A very significant cost reduction exercise was implemented in Q4
2023 to transform the Company to remain as an operating business, with access
to sufficient resources (including external contractors) to maintain
production of the current mass spectrometer machines and continue existing
trading relationships.
Shortly after the year end the Company raised £1.8m in January 2024 to
facilitate these sales and allow operations to continue on a much-reduced cost
base and to remain on AIM. A main objective of the fund raise was to acquire
the Modern Water business which the board considered to be an essential
acquisition for the Company to be able to remain as a going concern. As a
result of the successful fund raise the Company was able to stabilise and
resurrect relationships and sales with previous Modern Water customers. A
principal contract to implement commissioning of the 27 Continuous Toxic
Measurement (CTM) machines already delivered to Qatar was resurrected. The
Company signed a new purchase order for commissioning of and training on these
CTMs and for supply of Microtox® reagent consumables to Qatar. These
Microtox® reagents are manufactured at our newly opened laboratory near York
England. The Company was invited and participated on the Great Britain &
Northern Ireland Department of Business and Trade sponsored stand at the
Singapore International Water Week as part of our revised marketing plan to
supply comprehensive and industry leading toxic water testing solutions with
the new brand name of 'Tethys Purity'.
We are substantially rebuilding and redesigning our organisation as a slimmer
and leaner operation, focusing on the sale of our water toxicity testing
equipment and consumables recently acquired from Modern Water together with
our mini mass spectrometer marketed as complimentary technologies. This
broader and more diverse capability of the Company is designed to deliver much
better economic growth for the Company.
Due to market demand for Modern Water laboratory equipment the business plan
has been accelerated to include production of the LX instrument this year with
initial sales expected late 2024 into 2025.
Additionally, we are working with an external partner to restart production of
the QuickChek SRB kit again due to market demand in the Gulf region.
Further demand of the CTM systems in Qatar and surrounding region is
confidently expected in 2025.
The Strategic Report was approved by the Board of Directors on 10 October 2024
and signed on its behalf by:
Bob Moore
Executive Chairman
DIRECTORS' REPORT
The Directors present their report for the year ended 31 December 2023.
Principal activity, business review and business risks
Until January 2024 the principal activity of the Company was the
commercialisation and development of miniaturised micro-engineering equipment,
originally for mass spectrometry instruments. Now post-acquisition of the
Modern Water business the Company is now principally focussed on monitoring
water for toxins and pathogens by integrating the wider equipment portfolio
together with manufacture of specialised Microtox® reagent consumables. 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 (2022: £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. The Company conducts periodic reviews of its patent
portfolio to align it with current business strategy. After the most recent
review in 2023, the active patent portfolio has reduced to 51 patents with 7
additional patents applications in the filing process.
Directors
Between 1 January 2023 and 31 December 2023, the following Directors held
office:
Gerard Brandon, Non-Executive Chairman (Age 61) (1)
Dr Nigel Burton, Non-Executive Director (Age 66)
Bob Moore, Independent Non-Executive Director (Age 67) (2)
( )
(1) Resigned as a Director on 25 September 2023. Age at date of resignation.
(2)Appointed as a Director on 15 March 2022. Appointed as Executive Chairman
25 September 2023.
Directors' interests
The Directors' historic interests in the shares of the Company were:
Ordinary shares of 0.01p Ordinary shares of 0.01p Ordinary shares of 0.25p
at 31 December 2023 at 31 December 2022 at
31
De
ce
mb
er
20
21
Number % Number % Number %
Gerard Brandon(1) 190,000,000 2.99 190,000,000 2.99 140,000,000 2.30
Dr Nigel Burton 300,500,000 4.72 300,500,000 4.72 65,500,000 1.08
Bob Moore - - - - - -
490,500,000 7.71 490,500,000 7.71 205,500,000 3.38
(1) Resigned 25 September 2023. This figure includes 50,000,000 shares by a
person closely associated with Gerard Brandon.
The above table highlights the historic director's shareholding interests in
the company at 31 December 2023 and prior years. In January 2024 all of the
company's 6,361 million ordinary shares were subjected to a 625:1
consolidation to result in 10.2 million shares in total and 10.2 million
deferred shares issued in order to maintain the nominal value of equity, with
such deferred shares holding almost no rights. A capital raise then took
place with the issuance of 169 million additional ordinary shares for a net
cash consideration after costs of £1.8million. The resulting number of
ordinary shares in the company after these events in January 2024 was 178
million. The table below highlights the major shareholders at suspension of
trading on 30 June 2024 and includes the holdings of all Directors.
Significant shareholdings
In January 2024 the shares were subject to a 625 to 1 consolidation followed
by a placing. Further to this, the significant shareholdings in the company
including Directors' interests were as follows at suspension of trading on 30
June 2024.
Ordinary shares of 0.001p each at 10 September 2024
Holder Shares %
Bob Moore 9,040,000 5.05%
Nigel Burton 2,480,800 1.38%
Premier Miton Group 16,000,000 8.93%
Unicorn 1,200,000 0.67%
Spreadex 8,000,000 4.46%
Nick Slater 8,000,000 4.46%
Edale Capital LLP (Edale Europe Absolute Master Fund) 8,000,000 4.46%
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 the Company's employees for their
contributions to date.
Company share ownership plans
During the year the Company operated 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 has 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.
No options were awarded in 2023. As a result of the restructuring programme
during Q4 2023, the Company had no remaining employees at 31 December 2023 and
hence no share options were in existence at this date.
Management of risk
The management of operational risk is covered in the Corporate Governance
Report while financial risk is detailed under note 27 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 micro-electronic 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 2023 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 Financial Reporting
Standards as adopted by the United Kingdom. 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:
· Properly select and apply accounting policies ;
· Present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· Provide additional disclosures when compliance with the specific
requirements in IFRS's are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity's
financial position and financial performance, and
· Make an assessment of the Company's ability to continue as a going
concern.
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 also 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 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 is
included in the Strategic Report.
This Directors' Report was approved by the Board of Directors on 10 October
2024 and signed on its behalf by:
Bob Moore
Executive Chairman
Company number 03568010
DIRECTORS' REMUNERATION COMMITTEE REPORT
For the year ended 31 December 2023
Dear Shareholders
Dr Nigel Burton chairs the Remuneration Committee which includes Bob Moore.
Gerard Brandon was acting CEO and Executive Chairman and resigned on 25
September 2023. Dr Nigel Burton continued as a Non-Executive Director and Bob
Moore was appointed Executive Chairman following Mr Brandon's resignation.
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. There
are no other payments currently in place. A discretionary bonus scheme based
on performance against individual and business objectives did not operate
during the year (2022 bonus: Nil).
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
There were no new share options granted to the Directors during 2023.
Details of the shares held by Directors are listed in the Directors' Report.
Implementation of the remuneration policy in 2023
The following long term warrant awards were part of the reorganisation of the
Company to incentivise the new Directors appropriately. These warrants are
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% 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.
On 11 February 2022 Dr Burton exercised all of his warrants.
Director Number of Options Number of Warrants
Gerard Brandon (lapsed on resignation on 25 September 2023) 0 250,000,000
Dr Nigel Burton (warrants exercised 11 February 2022) 0 200,000,000
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(2) 3 months
Bob Moore 15 March 2022 Twelve months(3) 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) Mr Brandon resigned on 25 September 2023 and waived his rights to notice
pay.
(3) The initial term is the earlier of 12 months or the first AGM. Subject to
re-election at AGM, the appointment is anticipated to last at least 3 years.
Directors' emoluments
Directors' remuneration in 2023 is detailed below.
Salaries & fees Non-cash payments Pension contributions Share- based payments Year to 31 December 2023 Year to 31 December 2022
£ £ £ £ £ £
Gerard Brandon(1) 97,820 - - - 97,820 50,000
Nigel Burton 35,000 - - - 35,000 35,000
Bob Moore(2) 30,000 - - - 30,000 23,750
Glenn Tracey(3) - - - - - 38,826
TOTAL 162,820 - - - 162,820 147,576
(1) Resigned as a Director on 25 September 2023.
(2) Appointed as a Director on 15 March 2022.
(3) Resigned as a Director on 31 March 2022.
Directors' share options
There were no Share options or warrants over the Company's ordinary shares
held by the Directors at the year-end .
The share-based payment charge in relation to the share option grants to
Directors and lapsed options during the year was £nil (2022: £nil).
The Directors' Remuneration Report was approved by the Board of Directors on
10 October 2024 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 2023
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 Bob
Moore. 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 March 2024 with the external auditors to plan the financial audit,
discussed potential key audit matters 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 2024 to 2025, 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 2023 Annual Report and Accounts
have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted for use in the United Kingdom, and with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS
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. At the date of this report,
the Company continues to be a going concern (subject to material uncertainty
around future revenues, as set out in Note 3). As announced on 3 November 2023
and explained above, the Company implemented a significant cost reduction
exercise and in January 2024 raised £1.8m in funds to provide additional
working capital, including to remain on AIM.
Another key responsibility of the Committee is to review the Company's
internal control systems, including internal financial controls. An
independent and qualified chartered accountant was contracted to review and
update 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 2023. Dr Nigel
Burton was appointed Primary Designated Officer during the year.
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 £62k (2022:
£31k). Fees for other audit related services during the year amounted to £4k
(2022: £4k). These fees included the review of 2023 interims and the
provision of information around accounting standards.
Auditor Independence
The Committee satisfied itself on the auditors' independence. Mr Roger Weston
has completed his five annual audits of the Company in the capacity as partner
in charge, and now rotates off the audit this year to maintain independence
and is replaced by Stuart Macdougall. 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 10 October 2024 and signed on its behalf by:
Dr Nigel Burton
Chairman of the Finance & Audit Committee
CORPORATE GOVERNANCE REPORT
For the year ended 31 December 2023
Board composition
Gerard Brandon was acting CEO and Executive Chairman until his resignation on
25 September 2023. Dr Nigel Burton continued as a Non-Executive Director and
Bob Moore was promoted from Senior Independent Non-Executive Director to
Executive Chairman following Mr Brandon's resignation. Their biographies are
detailed under Principle 6 in this Report.
Board Committees
The Finance & Audit and Remuneration Committees are chaired by Dr Nigel
Burton, and Bob Moore is a member of both committees, as was Mr Brandon until
his resignation. Bob Moore was the Senior Independent Non-Executive Director
until his appointment as Executive Chairman following Mr Brandon's
resignation.
Chairman's Corporate Governance Statement
The full corporate governance statement is published and maintained up to date
on the Company's website at
https://www.microsaic.com/investors/#corporate_governance
(https://www.microsaic.com/investors/#corporate_governance) . 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 (2018) (the "2018 Code").
The Board is committed to maintaining high standards of corporate governance
and, with effect from 26 September 2018, the Board adopted the 2018 Code.
The 2018 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.
Following the Board changes in September 2023, provided that the Company
remains public, the Board intends to recruit a further independent
Non-Executive Director and at least one executive director so that Mr Moore
can return to his Non-Executive role. The Head of Finance and Company
Secretary role was contracted to Anthony Clayden of Strategic Finance Director
Limited, although in November 2023 he was replaced in both roles by John
Mottram.
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 2018 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
detection systems, 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 subject to
the available resources.
Business Model:
The Company's business model is outlined in the Strategic Report.
Challenges:
Staying relevant to future customer needs
Customer needs evolve rapidly. Future product specifications are driven by
end-user requirements and the Company has identified water toxicity monitoring
as its main target sector particularly given there is a greatly increased
public awareness for the essential need for pure and safe potable water. This
will inform Microsaic's product strategy as its Mass Spectrometer detectors
move from customer laboratories into production and front-line operating
environments including the potentially large market for PFAS (forever
chemicals) monitoring . Microsaic aims to ensure that its strategic product
development remains focused on meeting demanding life sciences and Modern
Water's toxic water testing applications.
Remaining innovative in an advancing technological landscape
Microsaic has successfully developed and implemented advanced technology with
over 80 patents to date and has acquired additional intellectual property and
instrument designs with the acquisition of the Modern Water business. This has
led to a solid foundation serving scientists in the laboratory i increasingly
in life and environmental science markets. The Company conducts periodic
reviews of its patent portfolio to align it with current business strategy.
After the most recent review in 2023, the active patent portfolio has reduced
to 51 patents with 7 additional patents applications in the filing process.
The Company has recently made substantial cost reductions via a major
restructuring programme in Q4 2023. As a result, the new and substantially
smaller organisation will continue to operate selective elements of the
Microsaic Systems business with a focus on developing this in conjunction with
the Modern Water portfolio.
The Company has extended its product capabilities further through the
acquisition of the assets of the Modern Water business from DeepVerge plc and
will invest in this business subject to available resources.
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 new 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 to minimise or eliminate them.
From this review the Company maintains its internal risk register which is
being amended to take in to account the acquisition of the Modern Water
business.
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 solution-based MEDIUM
business development to promote these as well as developing new sales
channels.
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. MEDIUM
Ensure contingency plans are prepared and reviewed.
Retention and recruitment of key employees Loss of key employees and subsequent difficulty in recruiting suitable MEDIUM Ensure the Company's remuneration package is competitive and aligned to MEDIUM
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 MEDIUM
strengths around point of care, ease of use and simplicity of maintenance.
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 one Non-Executive
Director. An independent Non-Executive Director, Bob Moore, was appointed in
March 2022, although following the resignation of the former Executive
Chairman Mr Brandon on 25 September 2023, Mr Moore was appointed as Executive
Chairman. Provided that the Company remains public, the Board intends to
recruit a further independent Non-Executive Director and at least one
executive director so that Mr Moore can return to his Non-Executive role. Mr
John Mottram replaced Mr Anthony Clayden as Head of Finance (non-board level)
in November 2023.
The Company held 10 Board meetings during 2023 (2022: 8).
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. The Chairman acts as the communicator for
Board decisions where appropriate.
Given the Chairman's current capacity as an Executive Chairman, the other NED
provides the appropriate level of challenge to both the Chairman and
management. The recent changes resulting from the resignation of Mr Brandon
will be addressed by the recruitment of further directors to achieve the
appropriate Board and management structure.
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 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 not financially dependent on the
Company as they have other sources of income, although Dr Burton became a
significant shareholder during 2022 following his exercise of his warrants. Mr
Moore does not represent a significant shareholder; however, Mr Brandon did
have a material interest in share warrants of the Company as detailed below
until his resignation on 25 September 2023. Dr Burton is also a Director of
DeepVerge plc and Mr Brandon was also a Director of DeepVerge plc until
December 2022, which although not a shareholder of the Company, was
strategically important to the future success of Microsaic throughout 2022 and
until its well-publicised difficulties emerged in April and June 2023. Under
the QCA Guidelines the independence of Mr Brandon whilst Chairman and Dr
Burton as a Non-Executive Director could be challenged under the following
areas, but in all cases the Board believes that they act in an independent
manner and where a conflict of interest could arise or be perceived to arise,
they abstain from voting. Bob Moore was appointed as Senior Independent
Non-Executive Director in March 2022, and remained in that role until his
appointment to replace Mr Brandon as Executive Chairman in September 2023.
Name and position Potential issue Comments
Gerard Brandon Held 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 approved by shareholders at a General Meeting
Chairman (until 25 September 2023)
Former Director of DeepVerge plc
DeepVerge plc was strategically important to the success of the Company in
2022 and early 2023
Temporary Executive Director capacity
Elevated senior management to develop and implement strategy and consulting
with the Non-Executive Directors who had oversight during the period
Dr Nigel Burton Significant shareholder in the Company following the exercise of warrants The warrants were awarded to attract a Non-Executive Director of the
appropriate calibre to the Company. The award was approved by shareholders at
Non-Executive Director a General Meeting
Director of DeepVerge plc DeepVerge plc was strategically important to the success of the Company in
2022 and early 2023
The Board recognises the importance of good governance arrangements.
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 2023 were as follows.
Name Position during 2023 Regular Board Meetings Finance & Audit Committee Remuneration Committee
Gerard Brandon(1) Executive Chairman until 25 September 2023 6 (6) 1 (2) 0 (0)
Nigel Burton Non-Executive Director 8 (8) 2 (2) 0 (0)
Bob Moore(2) Non-Executive Director. 8 (8) 1 (2) 0 (0)
Executive Chairman from 25 September 2023
(1) Resigned as a Director on 25 September 2023. Age at date of resignation.
(2)Appointed as a Director on 15 March 2022. Appointed as Non-Executive
Chairman 25 September 2023.
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, resigned on 25
September 2023. Gerard was also a member of the Finance & Audit Committee
and the Remuneration Committee until his resignation.
Background and suitability for the role: Gerard Brandon is Chief Executive
Officer of Cellulac plc and was CEO of DeepVerge plc until November 2022. 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 Non-executive Chairman of 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 is currently a Non-Executive
Director of BlackRock Throgmorton Trust plc and several AIM listed companies
including eEnergy Group plc and Sorted Group Holdings plc. Nigel was a
Non-Executive Director of DeepVerge plc until becoming interim CEO in November
2022. He 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, Executive Chairman (formerly 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. Mr Moore was Senior Independent
Non-Executive until 25 September 2023, when he replaced Mr Brandon following
his resignation.
Background and suitability for the role: Bob is a UK qualified lawyer and
brings over 35 years' commercial and legal experience to the Board. Bob 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. Bob subsequently co-founded, and is Managing
Director of, private oil and gas exploration company Ardent Oil Ltd (operating
in the UK, Denmark and Luxembourg). Bob 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 LLP for annual audit;
· Freeths as solicitors for the Company;
· Neville Registrars Ltd as the Company's registrar; and
· Menzies LLP for ongoing advice on Corporation tax, R&D tax
credits, 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.
No formal evaluation process took place in 2023.
Succession Planning
As is common with many small AIM quoted companies, the Company does not have
internal candidates to succeed the 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/
(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 as shown below. They include details of the work of those
committees:
· The Directors' Remuneration Committee Report
· The Directors' Finance & Audit Committee Report
The Corporate Governance Report was approved by the Board of Directors on 10
October 2024 and signed on its behalf by:
Bob Moore
Executive Chairman
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MICROSAIC SYSTEMS PLC
For the year ended 31 December 2023
Opinion
We have audited the financial statements of Microsaic Systems plc (the
'company') for the year ended 31 December 2023 which comprise the 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 2023 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 as applied to listed entities, 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 judgement, 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.
Except for the matter described in the material uncertainty related to going
concern section, we have determined that there are no other key audit matters
to be communicated in our report.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in
evaluating the effect of misstatements and in forming our opinion. Our overall
objective as auditor is to obtain reasonable assurance that the financial
statements as a whole are free from material misstatement, whether due to
fraud or error. We consider materiality to be magnitude by which
misstatements, including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatement below this level will not necessarily be evaluated
as immaterial as we also take account of the qualitative nature of identified
misstatements, and the circumstances of their occurrence, when evaluating
their effect on the financial statements as a whole.
Based on our professional judgement, and taking into account the possible
metrics used by investors and other readers of the accounts, we applied a
materiality of £55,000 (2022: £55,000). This was based on 2% of operating
expenditure in the unaudited trial balance at the planning stage of the audit
for the year ended 31 December 2023. Performance materiality was set at 75% of
materiality.
Our triviality level was set at £6,000 and any uncorrected audit differences
below this level were not reported to management, unless warranted under
qualitative grounds.
Material uncertainty relating to going concern
We draw attention to note 3 in the financial statements, which indicates that
the company's ability to continue as a going concern is dependent upon
achieving future sales beyond those currently contracted.
Given the inherent uncertainty of securing future sales, which are as yet
unagreed and unable to be substantiated, we concur with the directors'
assessment, as stated in note 3, that a material uncertainty exists that may
cast significant doubt on the company's ability to continue as a going concern
through to 31 December 2025. Our opinion is not modified in respect of this
matter.
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 entity's ability to
continue to adopt the going concern basis of accounting included:
· Obtaining and critically assessing for arithmetical
accuracy and consistency the Company's Board approved going concern assessment
used to model future financial performance;
· Reviewing the projected cashflows and other available
evidence to assess the ability of the company to continue in operation for at
least 12 months from the date of signing this report;
· Identifying the key assumptions within the forecast,
being the existence of sales opportunities, and timing of related cash flows
and challenged management on the appropriateness of these;
· Obtaining corroborative support for the key
assumptions and estimates used in the cashflow forecast;
· Reviewing the directors' sensitivity analysis on the
key assumptions underlying their going concern assessment and extended with
our own analyses;
· Obtaining corroborating evidence for the existence of
the sales pipeline and likelihood of conversion through review of
correspondence with sales prospects, to the extent possible given the material
uncertainty set out above;
· Assessing the sales pipeline for contradictory
evidence over the likelihood and value of future sales, by considering
accuracy of previous sales forecasts;.
· Considering the impact of mitigating actions in the
event that forecast sales were not in line with projections, including a
reduction in recruitment and sales activity and alternative production
arrangements for Microsaic instruments, and assessing the feasibility of
implementing these actions;
· Stress testing the model to identify the minimum
level of cash sales required to enable the Company to meet liabilities as they
fell due;
· Enquiring with the directors regarding events after
the reporting date to assess their impact on the going concern assumption,
including comparison of the post year end cash balances to forecast positions
and understanding future plans and cash headroom; and
· Reviewing the disclosures relating to going concern
included within these financial statements to ensure they are consistent with
the requirements of UK-adopted international accounting standards, and that
they present a true and fair view to readers of the financial statements.
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 other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information. 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, and UK Tax legislation, 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 queried management on any of
breaches of laws and regulations and reviewed minutes of meetings 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.
…………………………………..
Stuart Macdougall (Senior Statutory Auditor)
for and on behalf of Saffery LLP
Statutory Auditors
71 Queen Victoria Street
London
EC4V 4BE
10 October 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2023
Year to 31 December 2023 Year to 31 December 2022
Notes
£000s £000s
Revenue 5 492 1,568
Cost of sales (193) (618)
Gross profit 299 950
Impairment of related party debt 28 (6) (1,130)
Other operating expenses (2,876) (2,136)
Total operating expenses 6 (2,882) (3,266)
Loss from operations before share-based payments (2,583) (2,317)
Share-based payments 25 (21) (235)
Loss from operations after share-based payments 6 (2,604) (2,551)
Financial cost 8 (5) (7)
Finance income 8 13 23
Loss before tax (2,597) (2,535)
Tax on loss on ordinary activities 9 - 246
Total comprehensive loss for the year (2,597) (2,289)
Loss per share attributable to the equity holders of the Company
Basic and diluted loss per ordinary share (pence) 10 (0.041)p (0.036)p
The notes form part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
31 December 2023 31 December 2022
Notes
£000s £000s
ASSETS
Non-current assets
Intangible assets 11 53 69
Property, plant and equipment 12 113 380
Right of use assets 13 - 54
Total non-current assets 166 503
Current assets
Inventories 14 103 274
Trade and other receivables 15 10 594
Corporation tax receivable 9 261 514
Cash and cash equivalents 173 1,241
Total current assets 547 2,623
TOTAL ASSETS 713 3,127
EQUITY AND LIABILITIES
Equity
Share capital 19 1,731 1,731
Share premium 21 28,263 28,263
Share-based payment reserve - 2,401
Retained losses (29,850) (29,675)
Total equity 144 2,720
Current liabilities
Trade and other payables 16 519 236
Lease liability 13 8 53
Total current liabilities 527 289
Non-current liabilities
Provisions 17 30 115
Lease liability 13 13 3
Total non-current liabilities 43 118
Total liabilities 570 407
TOTAL EQUITY AND LIABILITIES 713 3,127
The financial statements were approved for issue by the Board of Directors on
10 October 2024 and signed on its behalf by:
Bob Moore, Executive Chairman
Company number 03568010
The notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
Share
-based payment Total
Share Share Retained
Notes capital premium reserve Losses Equity
£000s £000s £000s £000s £000s
At 1 January 2022 1,703 28,006 2,889 (28,024) 4,574
Total comprehensive loss for the year - - - (2,289) (2,289)
Transaction with owners:
Shares issued-- placing 19 28 257 - - 285
Transfer in respect of directors warrants exercised - - (300) 300 -
Transfer in respect of lapsed share options - - (338) 338 -
Share-based payments-share options 25 - - 150 - 150
At 31 December 2022 1,731 28,263 2,401 (29,675) 2,720
Total comprehensive loss for the year - - - (2,597) (2,597)
Transaction with owners:
Shares issued - - - - -
Transfer in respect of lapsed warrants 26 - - (1,503) 1,503 -
Transfer in respect of lapsed share options 25 - - (919) 919 -
Share-based payments options 25 - - 21 - 21
At 31 December 2023 1,731 28,263 - (29,850) 144
The notes form part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 31 December 2023
Year to 31 Year to 31
December December
2023 2022
£000s £000s
Cash flows from operating activities
Cash absorbed by operations 31 (1,311) (2,133)
Corporation tax received 253 -
Net cash used in operating activities (1,058) (2,133)
Cash flows from investing activities
Purchases of intangible assets 11 (11) (27)
Purchases of property, plant and equipment 12 (2) (208)
Proceeds from sale of Non-current assets 48 -
Interest received 13 23
Net cash used in investing activities 48 (212)
Cash flows from financing activities
Proceeds from share issues - 200
Share issue costs - -
Repayment of lease liabilities 13 (59) (78)
Net cash generated by / (used in) financing activities (59) 122
Net (decrease) / increase in cash and cash equivalents (1,069) (2,223)
Cash and cash equivalents at the beginning of the year 1,241 3,465
Cash and cash equivalents at the end of the year 173 1,241
The notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2023
The principal activity of the 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 as a public limited company (plc) 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 (IFRS) in conformity with the requirements
of the Companies Act 2006.
The financial statements have been prepared in sterling, which is the
functional currency of the company. Monetary amounts in these financial
statements are rounded to the nearest £000.
These financial statements have been prepared under the historical cost
basis.
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 four sources:
1) Sale of products;
2) Sale of consumables and spare parts;
3) Product support services; and
4) Consultancy services.
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 product support services and consultancy
services 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.
Product support services revenue
Product support services 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.
Usually, 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.
Consultancy services revenue
Consultancy services comprises science and engineering consultancy, laboratory
services and monitoring services. These services are delivered over a period
of time usually in accordance with a master services agreement and/or
statement of works with an agreed outcome at the end of the project or project
phase. Payment terms are generally 30 days from the date of invoice.
Consultancy services revenue is recognised by reference to the stage of
completion of the project or project phase at the balance sheet date as
follows:
· Where there are defined project or project phase milestones, the
revenue is recognised in full on completion of the project or project phase
and on a time basis for the stage of completion where the project or project
phase is not completed at the balance sheet date. The stage of completion is
recognised as the proportion of time spent on the project or project phase
compared with the total time anticipated to complete the project or project
phase; and/or
· Where the project is defined with the client in terms of time spent,
the revenue is recognised on the basis of consulting time spent on the project
by the Company at the time-based rates agreed with the client.
Cost of sales
Cost of sales of products
The cost of sales of mass spectrometers and related equipment is the bought in
purchase cost of the product or the transfer value from stock value if a unit
has been previously written down. Usually, the sale is made on an Ex-Works
basis but if it were not the cost of delivery to the customer is also included
in cost of sales.
Cost of sales of consumables and spare parts
The cost of sales of consumable and spare parts is the bought in purchase cost
of the consumable or spare part or the transfer value from stock value if an
item has been previously written down. Usually, the sale is made on an
Ex-Works basis but if it were not the cost of delivery to the customer is also
included in cost of sales.
Cost of sales of product support services
The cost of sales of product support services income is the time-based
apportionment of the employment costs of the relevant staff spent on the
delivery of the product support services income plus any related costs of
fulfilment such as travel expenses and any externally incurred direct costs.
For the purposes of cost of sales, the employment costs are considered to be
salaries, pensions and employers national insurance but cost of sales does not
include share-based payments nor any apportionment of training or overheads.
Cost of sales of consultancy services
The cost of sales of consultancy services (comprising science and engineering
consultancy, laboratory services and monitoring services) is the time-based
apportionment of the employment costs of the relevant staff spent on the
delivery of this revenue plus any related costs of fulfilment such as travel
expenses and any externally-incurred direct costs. For the purposes of cost of
sales, the employment costs are considered to be salaries, pensions and
employers national insurance but does not include share-based payments nor any
apportionment of training or overheads.
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.
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. In respect of the year-ending 31(st) December 2023 the R&D tax
credit claim has not yet been made and no amount has been recognised.
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
formula for calculating expected credit losses as a practical expedient.
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 formula 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 formula is based on an entity's historical default rates
over the expected life of the trade receivables and is adjusted for
forward-looking estimates.
Given the immaterial value of trade receivables at 31(st) December 2023 the
Company is not disclosing the details of its simplified formula for
calculating expected credit losses.
The risk profile of related party debts is considered to differ from the wider
trade receivables pool, and so the simplified formula is not applied to the
amounts owed by DeepVerge plc subsidiaries.
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 2023 and 2022.
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.
2. 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
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)
International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12) 1 January 2023
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.
Standard Effective date, annual period beginning on or after
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) 1 January 2024
Classification of Liabilities as Current or Non-Current, Non-current 1 January 2024
Liabilities with Covenants: amendments to IAS 1
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) 1 January 2024
The directors are evaluating the impact that these standards will have on the
financial statements of the Company.
At the date of authorisation of these financial statements, the following
standards and interpretations relevant to Company and which have not been
applied in these financial statements, 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
Lack of Exchangeability (Amendments to IAS 21) 1 January 2025
IFRS 18 - Presentation and Disclosure in Financial Statements 1 January 2027
IFRS 19 - Subsidiaries without Public Accountability: Disclosures 1 January 2027
The directors are evaluating the impact that these standards will have on the
financial statements of the Company.
3. Going concern
The Company is loss making and has raised funds in the past by issuing equity
in discrete tranches. The most recent fundraises were completed on 5 February
2021 and January 2024 where the Company raised £5.2m and £1.8m respectively
after expenses from new and existing shareholders.
At 31 December 2023, the company held cash balances totalling £173k and net
current assets of £20k. Combined with operating losses of £2.6m in each of
the years ended 31 December 2022 and 2023, the ability of the Company to
settle liabilities as they fall due was therefore in doubt.
Following the January 2024 fundraise the directors restructured the business
to reduce the cost base and utilised £0.1m of the fundraise to purchase the
trade and assets of the Modern Water business and have focused on reviving
Microsaic's pipeline of sales alongside the production and sale of reagents
and instruments for Modern Water.
As a result of the investment and the Company continuing to be loss making,
the cash balance at 4 October 2024 was £0.45m. The Company has been
generating negative EBITDA since the end of December 2023.
In assessing the ability of the company to continue as a Going Concern, the
directors have reviewed sales projections and cashflow forecasts to 31
December 2025 alongside a thorough review of the Company's reserves and
working capital requirements from the date of approval of the financial
statements. Under the base case forecast, the directors anticipate sales of
instruments and reagents to be sufficient over the 14 month period to 31
December 2025 to allow the Company to meet its liabilities as they fall due.
Of these sales, the Company has secured a Qatar contract as discussed in the
Strategic Report (valued at €571k), with cash inflows expected to commence
in Q4 of 2024, although the timing of this inflow is uncertain.
The directors acknowledge there are significant uncertainties inherent in
forecasting future sales, given the requirement of the Company to effectively
restart trading during 2024 and volatile trading environments. It is possible
that the sales assumptions underpinning these forecasts may not be achieved,
or that margin assumptions may not be met. Consequently, the directors have
explored sensitivities to the above base case to model the impact of reduced
sales, including a "severe but plausible" downside scenario.
Sensitivity Analysis
The directors believe that a severe but plausible downside scenario, whereby
no instrument sales are included for the second half of 2025, would still
allow the Company to maintain positive cash headroom to 31 December 2025.
However, in the event that none of the unconfirmed sales (being sales not
currently contracted) realise, the Company would have insufficient working
capital to continue in operation past February 2025.
In addition to the scenarios described above, the Directors have performed a
reverse stress test ("Reverse Stress Test") to quantify the level of sales
decline and cost increases that can be absorbed.
The Reverse Stress Test only considers cost savings from directly attributable
variable costs associated with the reduction in sales, including production
costs, Directors salaries and marketing costs. No other cost savings are
assumed to be delivered. The Directors note however that the Company has been
able to make significant cost savings in the past with short lead times.
The directors have concluded that, applying the above conditions in the
Reverse Stress Test, a minimum sales level of approximately £84k per month,
in addition to the Qatar contract, is required to enable the Company to remain
liquid and with positive cash headroom over the going concern assessment
period. While the directors consider this to be an achievable target, it is
acknowledged that this exceeds the level of turnover experienced in the year
ending 31 December 2023 or in 2024 to date.
While the directors remain confident that there is a reasonable possibility
that the forecast sales pipeline can be converted into new customers and be
cash generative for the Company, at the date of this report the future
required minimum sales levels have not been achieved. Accordingly, there is a
material uncertainty that may cast significant doubt over the Company's
ability to continue as a going concern.
Mitigating actions
The Directors consider the scenario envisaged under the Reverse Stress Test
arising to be unlikely, and that in the event it did arise the Company has
demonstrated its ability to deliver cost savings and seek alternative capital.
If performance deviates materially from the base case, there are several
actions that the Company could undertake to mitigate the liquidity and profit
impact. These include:
· Cost savings initiatives with a focus on areas of discretionary spend
such as marketing, travel and certain professional fees. These cost savings
are included within the existing forecasts
· Reduction in stock purchases and manufacturing levels to reflect the
lower sales projections
· Reduction in project, IT and CAPEX spend which for a short period of
time would not adversely impact our sales and customer proposition.
Going Concern Assessment
Having considered the forecasts noted above, the mitigating actions available
to management, recent trading performance and having regard to the
macroeconomic risks and uncertainties to which the Company is exposed, the
Directors have a reasonable expectation that the Company has adequate
resources to continue operating for the foreseeable future and to operate for
a period of at least 12 months from the date of these financial statements.
Accordingly, the financial statements have been prepared on a going concern
basis.
Stakeholders should be aware that there is a material uncertainty arising on
this assessment in respect of the inherent uncertainty attached to the future
sales pipeline and projections, and the associated timing of cash receipts.
The financial statements do not include the adjustments that would result if
the Company was unable to continue as a going concern.
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:
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.
On closure of the Company's Woking office, inventories were reviewed and
disposed of where felt unlikely to be sellable. Additionally, the inventory
has recently been reviewed in detail and the carrying value of remaining
obsolete items has been written down to zero. As such, the directors believe
that all inventories held at 31 December 2023 will ultimately be sold above
their carrying value, and the provision for stock obsolescence at 31st
December 2023 was £nil (2022: £62k).
The detailed breakdown of inventories can be seen in note 14.
Allocation of staff benefit expense to Cost of Sales
In line with the Company's disclosed accounting policies, an element of staff
benefit expense is allocated to Cost of Sales to reflect the time-based
apportionment of the employment costs of the relevant staff spent on the
delivery of product support and consultancy services income. In the current
year, this allocation has been estimated based on the level of service income
in the current year and prior year, and the gross margin achieved on service
income in the prior year. The resultant reallocation was £35k (2022: £420k).
These assumptions are reviewed at each balance sheet date and amended if
required.
5. Revenue
Throughout 2023, the Company operated in one business segment, that of
research, development and commercialisation of mass spectrometry
instruments. Revenue comprises the sale of products and the supply of
services. Products are sold ex-works and the attribution of revenue is based
on the country or group of countries to where the goods are shipped.
Services are generally delivered at the customer's site of installation.
In 2023 the revenue of our largest customer amount to 45% of the total Company
sales (2022: 79.7%).
The geographical analysis of revenue (by shipment destination) was as follows:
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
UK 109 1,354
USA 10 104
EU 137 68
China 215 31
ROW 21 11
492 1,568
The analysis of revenue by product or service was as follows:
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Equipment units 286 207
Consumables 63 12
Service spares 35 108
Accessories - 18
Product support 48 55
Consulting services 60 1,168
Total Reported Sales 492 1,568
Less: Sales to DeepVerge plc (65) (1,249)
Total Sales to customers (excluding DeepVerge plc) 427 319
6. Expenses by nature
Year to 31 December 2023 Year to 31 December 2022
Loss from operations after share-based payments is stated after £000s £000s
charging/(crediting):
Amortisation and impairment of intangible assets 27 30
Depreciation of right of use assets 76 73
Impairment of related party debt 6 1,130
Expected credit losses (excluding impairment of related party debt) - (3)
Movement in inventory provision (62) (28)
Loss on disposal of fixed assets (48) -
Inventory items expensed 158 313
Staff benefit expense 1,186 1,375
Depreciation of property, plant and equipment 183 178
Research and development expenses 87 784
Professional fees (including audit fees detailed below) 267 221
Pension costs 132 144
Exchange loss/(gain) - 1
Directors' emoluments (before pensions and share based payments) 96 60
7. Expenses by nature
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Services provided by the Company's auditors
Fees payable to the Company's auditors for the audit of the financial
statements
62 31
Fees payable in respect of prior years - 7
Fees payable to the Company's auditors for other services
- Audit related services 4 4
66 42
8. Finance income and Finance cost
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Bank interest receivable 13 23
Interest cost under IFRS 16 (2) (7)
Other Interest (3) -
(5) (7)
9. Tax on loss on ordinary activities
Year to 31 December Year to 31 December
2023 2022
Domestic current period tax £000s £000s
UK corporation tax charge - (246)
Tax on loss on ordinary activities - (246)
Year to 31 December Year to 31 December
2023 2022
Factors affecting the current tax credit for the period:
£000s £000s
Loss before tax (2,597) (2,535)
Loss before tax multiplied by standard rate of UK corporation tax of 23.5%
(9months at 25% and 3 months at 19%) (2022: 19%)
(610) (482)
Effects of:
Expenses not deductible for tax purposes 2 29
Fixed asset differences 1 (7)
Additional deduction for R&D expenditure - (194)
Movement in deferred tax not recognised 642 318
Other tax adjustments, reliefs and transfers (37) (8)
Surrender of tax losses for R&D tax credit refund - 81
Adjustments to tax charge in respect of previous periods 2 15
Current tax credit - (248)
The Company has estimated tax losses of £29,236k (2022: £26,930k) available
for carry forward against future trading profits. Deferred tax is detailed
in note 18.
10. Basic and diluted loss per ordinary share
Year to 31 December Year to 31
2023 December
2022
Loss after tax attributable to equity shareholders £000s (2,597) (2,289)
Weighted average number of ordinary 0.01p shares for the purpose of basic and 6,361,365,146 6,324,666,516
diluted loss per share
Basic and diluted loss per ordinary share (0.041)p (0.036)p
The basic loss per share increased to 0.040p per share versus 0.036p per share
in the prior year. This reflects the increase in the loss after tax to equity
shareholders in the year ended 31 December 2023 compared to year ended 31
December 2022.
Under IAS33 the calculation of basic and diluted earnings / (loss) per
ordinary share is adjusted retrospectively when the number of issued ordinary
shares changes after the balance sheet date but before the financial
statements are authorised for issue. As detailed in Note 30, existing
shares were subject to a 625:1 consolidation into 10,178,185 new ordinary
shares of 0.001p nominal value and then 169,000,000 new ordinary shares of
0.001p nominal value were then issued. This brings the total issued ordinary
shares to 179,178,185. The basic and diluted loss per share taking into
account the consolidation and number of new ordinary shares in existence at
the date of publishing the Annual Report and Accounts would be 1.449 pence.
(computed as £2,597k loss divided by 179,178,185 shares).
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 2023: £000s
Cost
At 1 January 2023 628
Additions 11
Disposals (15)
At 31 December 2023 624
Amortisation
At 1 January 2023 558
Charge for the year 27
Disposals (15)
At 31 December 2023 570
Net book value
At 31 December 2023 53
Year ended 31 December 2022 £000s
Cost 621
At 1 January 2022
Additions 27
Disposals (21)
At 31 December 2022 627
Amortisation
At 1 January 2022 547
Charge for the year 30
On Disposals (19)
At 31 December 2022 558
Net book value
At 31 December 2022 69
12. Property, plant and equipment
Year ended 31 December 2023:
Plant and equipment Fixtures and fittings Total
£000s £000s £000s
Cost
At 1 January 2023 1,277 178 1,455
Additions 2 - 2
Transfers - - -
Disposals (240) (178) (418)
At 31 December 2023 1,039 - 1,039
Plant and equipment Fixtures and fittings Total
£ £ £
Depreciation
At 1 January 2023 896 178 1,074
Charge for the year 183 - 183
Disposals (154) (178) (332)
At 31 December 2023 925 - 925
Net book value
At 31 December 2023 113 - 113
Year ended 31 December 2022:
Plant and equipment Fixtures and fittings Total
£000s £000s £000s
Cost
At 1 January 2022 1,068 178 1,246
Additions 208 - 208
Transfers 44 - 44
Disposals (43) - (43)
At 31 December 2022 1,277 178 1,455
Plant and equipment Fixtures and fittings Total
£000s £000s £000s
Depreciation
At 1 January 2022 761 178 939
Charge for the year 178 - 178
Disposals (43) - (43)
At 31 December 2022 896 178 1,074
Net book value
At 31 December 2022 380 - 380
Transfers from plant and equipment were moved to stock and then sold to a
customer.
13. Lease reporting
Right of use lease assets
Server Property Equipment Total
£000s £000s £000s £000s
Cost
At 1 January 2023 - 319 10 329
Additions 22 - - 22
Disposals - - - -
At 31 December 2023 22 319 10 351
Depreciation
At 1 January 2023 - 270 4 274
Charge for the year 22 48 6 76
Disposals - - - -
At 31 December 2023 22 318 10 350
Carrying amount
At 31 December 2023 - - - -
Server Property Equipment Total
£000s £000s £000s £000s
Cost
At 1 January 2022 - 319 10 329
Additions - - - -
Disposals - - - -
At 31 December 2022 - 319 10 329
Depreciation
At 1 January 2022 - 201 1 202
Charge for the year - 69 3 72
Disposals - - - -
At 31 December 2022 - 270 4 274
Carrying amount
At 31 December 2022 - 49 6 55
Lease liability Server Property Equipment Total
£000s £000s £000s £000s
At 1 January 2023 - 50 6 56
Repayment of lease liabilities (5) (51) (3) (59)
Additions 22 - - 22
Interest on lease liabilities 1 1 - 2
Disposals - - - -
At 31 December 2023 18 - 3 21
Server Property Equipment Total
£000s £000s £000s £000s
At 1 January 2022 - 118 9 127
Repayment of lease liabilities - (75) (3) (78)
Additions - - - -
Interest on lease liabilities - 7 - 7
Disposals - - - -
At 31 December 2022 - 50 6 56
Lease liability maturity analysis
2023 2022
Server Property Equipment Property Equipment
Gross lease payments due: £000s £000s £000s £000s £000s
Within one year 5 - 3 52 3
Between two and five years 14 - - - 3
19 - 3 52 6
Less future financing charges (1) - (-) (2) (-)
18 - 3 50 6
14. Inventories
Year to 31 December 2023 Year to 31 December
2022
£000s £000s
Raw materials 80 267
Finished goods 23 69
Subtotal 103 336
Provision for inventories (-) (62)
Total 103 274
Inventory consists of raw materials and finished goods which are held on
consignment with two of the company's trading partners. During 2023, a
significant amount of inventory was reviewed and written down to £nil
value.
15. Trade and other receivables
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Amounts falling due within one year
Trade receivables 8 1,519
Provision for expected credit losses (6) (1,130)
Other receivables 8 205
10 594
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Not past due 8 267
1 to 30 days past due - 145
31 to 60 days past due - 137
61 to 90 days past due - 120
91 to 120 days past due - 217
121 to 150 days past due - 147
151 to 180 days past due - 77
Over 180 days past due - 409
8 1,519
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Provision for expected credit losses on trade receivables:
Balance brought forward (1,130) (3)
Utilised in year 1,130
Written back to P&L during the year - -
Provided during the year (6) (1,127)
Balance carried forward (6) (1,130)
The provision for expected credit losses on trade receivables is mandatorily
measured at an amount equal to the lifetime expected credit losses. The
Company's approach to calculating the lifetime expected credit losses is
described in note 1.
16. Trade and other payables
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Amounts falling due within one year
Trade payables 182 99
Other taxes and social security 92 44
Other payables 67 12
Accruals and deferred income 178 81
519 236
Included within other payables is a sum of £65,000 in respect of an onerous
contract which reflects the maximum amount that the Company might pay in
settlement.
17. Provisions
Dilapidations Warranties TOTAL
£000s £000s £000s
Balance at 1 January 2023 92 24 116
Provided for/(reduced) during the year (22) (4) (26)
Settled during the year (60) - (60)
Balance at 31 December 2023 10 20 30
Dilapidations Warranties TOTAL
£000s £000s £000s
Balance at 1 January 2022 76 24 100
Provided for/(reduced) during the year 16 (-) 15
Balance at 31 December 2022 92 24 115
The provision for anticipated dilapidations is in respect of the Company's
former leasehold premises at Woking which were vacated on 23 December 2023.
The dilapidation charge was agreed in the amount of £70,000 and was
substantially settled in December 2023 through the non-return of the deposit
of £60,000 and a balance of £10,000 owing at the year-end.
The Company provides OEMs and distributors with a 15-month warranty on Mass
Spectrometer 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 was £20k (2022: £24k).
18. Deferred tax
Deferred taxation provided in the financial statements:
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Accelerated capital allowances 28 95
Tax losses carried forward (28) (95)
- -
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% (2022: 25%). The Company has estimated tax
losses of £29,236k (2022: £26,930k) available for carry forward against
future trading profits.
19. Share capital
The total share capital of the Company comprises Ordinary and Deferred shares
as follows:
2023 2023 2022 2022
Allotted, called up and fully paid: Number £000s Number £000s
Ordinary shares of 0.01p each 6,361,365,146 636 6,361,365,146 636
Deferred shares of 0.24p each 456,365,146 1,095 456,365,146 1,095
As at 31 December 6,817,730,292 1,731 6,817,730,292 1,731
The Ordinary share capital of the Company comprises:
2023 2023 2022 2022
Allotted, called up and fully paid: Number £000s Number £000s
Ordinary shares of 0.01p (0.25p) each as at 1 January 6,361,365,146 636 6,076,365,146 608
Effect of share split and deferment - - - -
Issue of ordinary share capital of 0.01p each - - 285,000,000 28
As at 31 December 6,361,365,146 636 6,361,365,146 636
There were no issuances of equity during the year.
Shortly after the year end the company executed a 625:1 share consolidation to
yield 10,178,185 new shares of 0.001p and 10,178,185 deferred shares of 6.249p
nominal value.
A fundraising took place immediately thereafter via a placing with the
issuance of 169,000,000 new shares at a price of 1.25p raising total gross
proceeds of £2.1m and net proceeds of £1.8m. The resulting number of
shares immediately after this placing was 179,178,185.
The Deferred share capital of the Company comprised:
2023 2023 2022 2022
Allotted, called up and fully paid: Number £000 Number £000s
Deferred shares of 0.24p each as at 1 January 456,365,146 1,095 456,365,146 1,095
As at 31 December 456,365,146 1,095 456,365,146 1,095
After the year end and as part of the share consolidation an additional
10,178,185 deferred shares of nominal value 6.249p were created.
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 2023 Year to 31 December
2022
£000s £000s
Opening balance brought forward 28,263 28,006
Share issue in the year - 257
Share issue costs - Cash - -
Share issue costs - Broker Warrants - -
Closing balance carried forward 28,263 28,263
22. Commitments
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Contracted for but not provided in the financial statements 560 652
The commitment above relates to purchase orders placed on, and related
contractual arrangements and obligations, with third-party manufacturers.
Following the year end, a long term contract with a supplier responsible for
assembling and testing Microsaic instruments was terminated, in return for the
Company agreeing to make a modest monthly payment, allowed for in the going
concern assessment, over the next 2 years. At the year end, the commitment
relating to this contract was £0.5m, but subsequent to the year-end following
negotiation a revised settlement agreement was reached.
23. Directors' emoluments
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Salaries and fees 163 60
Non-cash payments - -
Pension costs - 2
Employment related share-based payments - 85
163 147
There are no key management personnel other than the Directors. The highest
paid Director, Mr Gerard Brandon, received emoluments of £97,820 as disclosed
in the Directors' Remuneration Report.
24. Employees
Year to 31 December 2023 Year to 31 December 2022
Number Number
Directors 3 3
Other staff 15 19
Average Headcount 18 22
Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Employment costs (including Directors)
Wages and salaries 986 986
Social security costs 110 134
Termination payments 69 21
Pension costs 132 144
Employment related share-based payments 21 235
1,318 1,520
25. Share-based payments
The share-based payments charge comprises Year to 31 December 2023 Year to 31 December 2022
£000s £000s
Directors' fees settled in shares - 85
Vesting of share options 21 150
Employment related share-based payments 21 235
Brokers' fees settled in shares - -
21 235
The Directors' fees settled in shares in respect of the previous financial
year ended 31 December 2022 were in respect of fees incurred. The Directors'
fees relate to annual fees.
Share option schemes
The Company operated 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 2023 and 31 December 2022 and the weighted average exercise price.
All staff were made redundant during Q4 2023 and accordingly all share options
have been forfeited.
Year to 31 December 2023 Year to 31 December 2022
Number of options Weighted average exercise price Number of options Weighted average exercise price
Outstanding at the beginning of the year 605,000,000 0.1p 1,125,000,000 0.1p
Granted during the year - - - -
Forfeited/expired during the year (605,000,000) 0.1p (320,000,000) 0.1p
Exercised during the year - - (200,000,000) 0.1p
Outstanding at 31 December - - 605,000,000 0.1p
Exercisable at 31 December - - 325,000,000 0.1p
Options and warrants over 1,125 million ordinary shares were awarded to
Directors, staff and a consultant on 5 February 2021. These options granted
were exercisable at the price of 0.1p for five years from the 5 February 2021
but have now been forfeited.
The table below illustrates that there were no options in issue at the
year-end:
Date of grant Exercise price Latest exercise date Estimated fair value Number of options 31 December 2023 Number of options 31 December 2022
February 2021 0.1p February 2026 0.150p - 325,000,000
February 2021 0.1p February 2026 0.153p - 280,000,000
- 605,000,000
The weighted average share price at the date of grant for share options was
0.25 pence. There were no outstanding options at 31(st) December 2023.
The estimated fair values of the share options were calculated by applying the
Black Scholes or Monte Carlo models.
In line with the application guidance in IFRS 2, the Directors considered the
most appropriate method of calculating volatility to be the use of the
historical volatility of comparable listed companies. The model inputs are
detailed below.
In respect of cancelled options that had vested, £919k (2022: £338k) was
transferred from share-based payment reserve to the retained losses reserve.
In respect of exercised options, £nil (2022: £300k) was transferred from
share-based payment reserve to the retained losses reserve. The resulting
balance on the share based payment reserve was £nil at 31 December 2023.
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 in February 2021. The broker
warrants were capable of exercise for a period of two years from 5 February
2021. These warrants lapsed during the year. 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 0.1p 0.25p 0.03% 33% -
The expected volatility for the February 2021 grant was based on the 2-year
volatility of comparable companies.
In respect of lapsed warrants, £1,503k (2022: £nil) was transferred from the
share-based payment reserve to the retained losses reserve.
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 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.
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.
The business scenarios include exploration of the use of export trade
financing, short term debt, letters of credit, performance/surety bonds on
larger orders and equity funding options. Reduction of overhead by staff
reduction, suspend discretionary spend on projects under development and
initiate contingency plans to address the potential need for additional
resources to achieve cashflow positive. There can be no guarantee that the of
the Company will be achieved.
Inflationary risk
The directors believe that the recent risks to the business arising from the
higher inflationary environment have subsided as world economies have now
emerged and progressed beyond the post-Covid recovery boom.
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.
Prior to the RNS of 26 June 2023 issued by DeepVerge plc, management had
actively engaged to manage the outstanding debts. A repayment plan was in
place to pay down the debt, and services provided in 2023 were settled in line
with the standard payment terms.
Credit control with related parties is managed by direct communication with
the counterparty and all significant transactions required the approval of the
Board of Directors of the Company.
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 2023 and
31 December 2022.
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 had one director in common at the start of 2023:
Nigel Burton. Nigel Burton is a Non-executive Director of Microsaic and was a
Non-executive Director of DeepVerge plc until becoming interim CEO on 3
November 2022.
Microsaic traded with two subsidiaries of DeepVerge plc during the prior year,
which for the purposes of this note are combined as a total. In summary for
the year ended 31 December 2023, revenue from DeepVerge plc sales totalled
£50k (2022: £1,248k) and purchases from DeepVerge plc totalled £57k (2022:
£nil).
At 31 December 2023, £nil (2022: £1,511k) inclusive of VAT was owed by
DeepVerge plc to Microsaic relating to the supply of goods and services
recognised as revenues for the year ended 31 December 2022.
During the year DeepVerge plc issued an RNS casting significant doubt on its
ability to settle this debt. It was the opinion of the directors that the
conditions leading to this were in existence at 31 December 2022, and so a
provision for expected credit losses of £1,130,169 (2021: £nil) was
recognised against this debt in the prior year. This represented the amount of
outstanding debt at 26 June 2023, less recoverable VAT. This debt was then
written off in the current year, partially netted-off by the sum of £65k
owing by Microsaic to DeepVerge plc.
29. Control
As at 31 December 2023, no individual shareholder had a controlling interest
in the Company.
30. Events after the Reporting Date
Adjusting events subsequent to 31 December 2023:
· None
Non-adjusting events subsequent to 31 December 2023:
· On 12 January 2024 the company announced the intention to acquire
certain assets and elements of the Modern Water business from DeepVerge plc
subject to successful fundraising.
· On 15 January 2024 the company announced the successful placing of
£1.8million via the issuance of 169,000,000 in new shares. This was
pursuant to a capital reorganisation that had been announced on 3 December
2023 and implemented on 15 January 2024 to consolidate the existing shares of
6,361,365,625 by 625:1 into 10,178,185 shares. Accordingly, upon completion
the company had 179,178,185 issued ordinary shares.
· On 16 January 2024 the company shares were restored and relisted on
the AIM market.
· On 25 January 2024 the company announced the completion of the
acquisition of the Modern Water business from DeepVerge plc. The transaction
comprised the acquisition of various items of intellectual property including
patents and the trading name as well as customer listings, customer contracts
and adoption of work-in-progress. The total cost of the acquisition was
£100,000 and the expected impact on the 2024 financial performance of the
company is expected to be in the region of £300,000 in additional sales and
£150,000 in additional gross profits.
· On 25 January 2024 the Company announced the completion of the
acquisition of the Modern Water business from DeepVerge plc for a
consideration of £100,000.
· On 16 February 2024 the Company announced the reactivation of the
Modern Water laboratory and production facilities in smaller premises at Sand
Hutton, York, England. The Company is also working with a large OEM in the
United States to optimise the Company's PFAS system for commercial use.
· On 27 March 2024 the Company announced that it had agreed terms
with GX Group, based in Usk Wales, for the continued manufacturing and further
development of Continuous Toxicity Monitoring instruments ("CTMs") and related
consumables previously sold by the Modern Water business.
· On 14 June the Company announced that it had reached non-binding
heads of terms with Aptamer Group plc (AIM: APTA) ("Aptamer") for the
development of Optimer® binders to be used for the detection of pathogens of
serious concern to public health that can be found in water (the "Agreement").
· On 25 June the Company announced that it had received a research
and development tax credit from HMRC of £262,000 for qualifying costs
expended in 2022.
31. Cash absorbed by operations
Year to 31 Year to 31
December December
2023 2022
£000s £000s
Total comprehensive loss for the year (2,597) (2,289)
Adjustments for:
Amortisation of intangible assets 27 30
Depreciation of right of use assets 76 73
Depreciation of property, plant and equipment 183 178
Transfer of property, plant and equipment to cost of goods - (44)
Loss /(Profit) on disposal of fixed assets 38 2
Decrease / (Increase) in provisions for dilapidations & warranty (85) 16
Increase in provision for expected credit losses 6 1,127
Share-based payments 21 235
Remuneration paid in shares - -
Tax on loss on ordinary activities - (246)
Interest on lease liability 2 7
Interest received (13) (23)
Movements in working capital
Decrease in inventories 170 10
Decrease/(Increase) in trade and other receivables 577 (1,090)
Increase/(Decrease) in trade and other payables 282 (118)
Cash absorbed by operations (1,313) (2,132)
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