Microsaic Systems - Half-year Report
30/09/2022 07:00
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RNS Number : 2520B Microsaic Systems plc 30 September 2022
30 September 2022
Microsaic Systems plc
("Microsaic", "Microsaic Systems" or the "Company")
Interim Results for the six months ended 30 June 2022
Microsaic Systems plc (AIM: MSYS), the developer of micro-electronic
instruments and analytical solutions, is pleased to announce its unaudited
interim results for the six months ended 30 June 2022 ("H1 2022"). Performance
has exceeded Board expectations with the new high-tech services division
launch in April helping with the transition from product-only sales to
customer-centric service solutions in science and engineering services that
include analytical and AI software service programmes designed for the medical
device, environmental, aerospace and food
industries.
Highlights
· Unaudited revenues of £735k: an increase of 47% on H1 2021 (£499k)
· Increase in gross profit by 164% to £433k (H1 2021: £164k)
· Adjusted EBITDA loss of £661k an improvement of 21% on H1 2021
(£839k loss)
· Total comprehensive loss reduced by 65% to £705k (H1 2021: £2.01m
loss)
· Cash at 30 June 2022 was £2.56m (H1 2021: £4.48m)
· International deployment of Microsaic's products and services in
applications such as water monitoring of chemicals and pathogens continues to
expand. Units have been installed in Ireland and the UK and are being shipped
to Japan and the US for installation during H2 2022
· Laboratory services that have been completed are for toxic shock,
insulin and a range of metabolites carried out under contract by Microsaic as
mass spectrometry services. Other laboratory service work scheduled for H2
2022 include ceramides and pesticides
· Mass spectrometry units have been installed and demonstrated in
Modern Water mobile monitoring vehicles
· March: Bob Moore joined the Board. Bob is a UK qualified lawyer and
brings over 35 years' commercial and legal experience to the Company
· April: New manufacturing services framework and an initial contract
worth £400k with Innovenn UK Limited, a division of DeepVerge plc, supplying
services for multi-sensor upgrades of environmental and human health
diagnostic equipment
· April: Launch of Microsaic Services Division providing integrated
solutions in science and engineering services that include analytical and AI
software service programmes designed for the medical device, environmental,
aerospace and food industries
Post Period Events
· August: Microsaic appointed as an Authorised Partner for Kingfield
Electronics Limited ("Kingfield") for front-end research, development, and
engineering product development in scientific instrumentation and
micro-engineering adding these complementary services to Kingfield's existing
electronics aerospace, defence, and process and scientific instrumentation
clients
· August: ISO 9001:2015 Surveillance Audit secured
Outlook
· The growth in revenues, at higher margins, illustrates that Microsaic
is able to access additional revenues from other innovative companies seeking
a high quality product design, development and manufacturing service. As a
result, the Board expects the solid sales momentum noted in H1 to continue
through H2.
Gerry Brandon, Acting Executive Chairman of Microsaic Systems plc, commented:
"The change in business strategy which began in 2021 has carried through to
2022. The result of which can be seen in the increased revenues and gross
profit which have led to reduced losses. We look forward to continued growth
with our existing collaboration partners and already see new business
opportunities developing for 2023 through the Authorised Partnership with
Kingfield Electronics Limited. The Board notes a strong momentum of sales
growth in H1 and expects this to continue through H2 with a strong orderbook."
Enquiries:
Microsaic Systems plc
Gerry Brandon, Acting Executive
Chairman
+44 (0)734 0055 648
Singer Capital Markets (Nominated Adviser & Joint Broker)
Aubrey Powell / George Tzimas / Asha
Chotai
+44 (0)20 7496 3000
Turner Pope Investments (TPI) Limited (Joint Broker)
Andy Thacker / James
Pope
+44 (0)20 3657 0050
About Microsaic Systems
Microsaic has over 20 years' experience in microelectronics and development of
instrumentation. The Company has a robust and innovative patent portfolio in
cutting-edge technology designed and developed for "Industry 4.0"
application serving markets in diversified Industries,
Human and Environmental Health. Microsaic's system solutions have enabled
analytical detection and characterisation at the point-of-need, whether within
a 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.
CHAIRMAN'S STATEMENT
Introduction
The shift in commercial strategy from product-only sales to customer-centric
service solutions began with the launch of the Microsaic Services Division
earlier this year resulting in an uplift in revenues of 47% to £735k in H1
2022 (H1 2021: £499k) and a healthy order book for the second half of the
year. With 20 years of expertise in research and development of miniaturised
mass-spectrometry equipment, with 60 patents in scientific analytical
instrumentation, the combination of science and engineering services now
delivers turn-key project management, hardware and software product
development, and product lifecycle management systems with quality management
to ISO 9001:2015 standards.
Relevant Global Trends
Microsaic has adapted to a changing world where supply chains and health-care
systems have been disrupted by Covid and the Ukraine war, creating new
opportunities in science and engineering services. Our proprietary technology
and know-how is being deployed to address a number of needs and shifting
trends in the way companies and even national bodies seek to source
technology-enabled solutions.
The Covid pandemic, has amongst other things, also emphasised the need for
national capability, supply chain resilience and on-shoring with core
competence of delivering both upstream and downstream services to
manufacturers to ensure continuity rather than relying on off-shore
capabilities. Microsaic is able to address this demand for more localised
solutions by supplying through partners which are already present in the major
markets.
The health costs associated with ageing populations with limited economic
capacity have highlighted the need for automation and technology-driven
efficiencies in healthcare, particularly for surveillance in disease
biomarkers as the move to digital health diagnostics becomes inevitable,
either in GP offices or bedside observations of proteins in patient
treatments.
At the same time, there is a heightened realisation of the finite, shared
resources of our planet and the need to manage levels of pollutants by
measuring them. Microsaic's miniaturised portable mass spectrometry units
have application in monitoring pollution and are being rolled out as part of
the DeepVerge Modern Water mobile monitoring services. The complementary
systems have the ability to monitor contaminants in the air, in soil, rivers,
lakes and sea and in wastewater. All areas offer the opportunity to identify
recycling processes - which all play a role in the management of the circular
economy.
There is no doubt that the conflict in Ukraine has demonstrated that defence
and security are a necessity, and also need to be deployed in an agile and
affordable manner. This comes with supply chain resilience, the availability
of technology which is closer to home and the provision of science and
engineering services to the Defence Science and Technology Laboratory,
Ministry of Defence and the Home Office.
Collaboration across partner core competences
Microsaic and DeepVerge plc ("DeepVerge") have been working together since
March 2021 when the parties signed a 3-year framework agreement under which
Microsaic supplies its own miniaturised mass spectrometry equipment and
services on a non-exclusive basis across DeepVerge's global sales, marketing
and distribution channels, for healthcare diagnostic and environmental health
applications.
In April 2022, Microsaic and Innovenn UK Limited, a subsidiary of DeepVerge,
entered into a new Manufacturing Services Framework Agreement ("MSFA") with an
initial contract worth £400,000 supplying services for Multi-Sensor Upgrades
of Environmental and Human Health Diagnostic Equipment.
These new services leverage the considerable depth and breadth of technical
design, engineering and delivery expertise within the Microsaic team and
diversifies the Company's revenues beyond equipment sales of Mass
Spectrometers, in line with the Company's shift in strategy. By offering the
skillsets that created the smallest compact mass spectrometer in the world,
collaboration partners, such as DeepVerge and Kingfield Electronics Limited,
who recently appointed Microsaic as their Authorised Partner, can outsource
engineering development of existing and new analytical instrumentation
equipment while concentrating on growing their business.
Going Concern
Having considered the plans and prospects of the business, the Board of
Directors believes that the Company has enough cash to cover its anticipated
working capital requirements for the next 12 months. Therefore, the Directors
have adopted the going concern basis of reporting in preparing the financial
statements.
Outlook
The growth in revenues, at higher margins, illustrates that Microsaic is able
to access additional revenues from other innovative companies seeking a high
quality product design, development and manufacturing service. As a result,
the Board expects the solid sales momentum noted in H1 to continue through H2.
Gerard Brandon
Acting Executive Chairman
30 September 2022
Financial Review
Statement of Comprehensive Income
In H1 2022, total revenues of £734,914 were £235,629 (47.2%) above H1 2021
(£499,285). Reflecting the shift in strategy, service and support revenues
were £502,317 (H1 2021: £12,170) and represented 68.4% of total revenue (H1
2021: 2.4%). In comparison, product revenue of £165,011 (H1 2021: £367,474)
represented 22.4% of total revenue (H1 2021: 73.6%) whilst consumables and
spares revenues of £67,586 (H1 2021: £119,641) represented 9.2% of total
revenue (H1 2021: 24.0%).
A new accounting policy for cost of sales has been introduced to reflect the
staff time directly attributable to the new service lines (further information
is included in note 5) and therefore the comparative periods have been
restated accordingly (note 14). Gross margin in H1 2022 was 59.0%, exceeding
the margin achieved in H1 2021 of 32.8% (restated), as a result of a higher
proportion of services sales which generate higher margins.
Operating expenses of £1,134,310 were stable and also slightly lower by
£27,304 (2.4%) than the comparative period (H1 2021 restated: £1,161,614).
With increased gross profit and relatively flat operating expenses, the loss
from operations before share-based payments of £700,934 marks a 26.3%
improvement on the loss in H1 2021 (restated: £950,652).
Share-based payments of £126,002 fell substantially by £1,031,700 (89.1%)
compared with H1 2021 (restated: £1,157,702) chiefly reflecting the full
vesting of directors share options in H1 2021 and with no further option
grants since February 2021.
Adjusted EBITDA is deemed by the Board to be a key performance indicator of
the Company's profitability. The adjusted EBITDA loss in H1 2022 was £661,491
compared with £838,804 in H1 2021, an improvement of £177,313. Note 7
details the reconciliation between Adjusted EBITDA loss and comprehensive loss
for the period.
The comprehensive loss of £704,711 is 64.9% lower than H1 2021 (restated:
£2,008,203) reflecting the aforementioned changes which have been
implemented. The H1 2021 comprehensive loss is £98,722 higher than
previously reported due to the recognition of an accrued tax credit receivable
as set out in note 14. Accordingly, the basic loss per share of 0.011p has
reduced by 72.5% compared to last year (H1 2021 restated: 0.040p per share)
following the improved performance of the business during the period.
Statement of Financial Position
Total non-current assets of £453,533 are £53,092 lower (31 December 2021:
£506,625). The reduction is mainly attributable to the decrease in right of
use assets by £35,979, representing the depreciation charge in the period.
Total current assets of £4,317,724 are £330,787 lower (31 December 2021:
£4,648,511). The main contributor to this reduction is the £902,136 lower
cash balance at the period end of £2,562,741 (31 December 2021: £3,464,876)
and this is discussed further in the Statement of Cash Flows section which
follows. The main increase offsetting the cash reduction is the rise by
£480,657 in trade and other receivables to £1,112,605 (31 December 2021:
£631,948). The main component of that increase is trade receivables of
£820,566 which have increased by £493,505 (31 December 2021: £327,061).
Total assets of £4,771,257 are £383,879 lower (31 December 2021:
£5,155,136), mainly due to the movement in total current assets as explained
above.
Total equity of £4,194,511 is £378,709 lower (31 December 2021:
£4,573,220). The movements during the period were the comprehensive loss of
£704,711 offset by the exercise of warrants and directors fees paid in shares
totalling £285,000 and a share-based reserve movement of £41,002 in respect
of leavers.
Current liabilities of £453,081 are £27,283 higher (31 December 2021:
£425,798). This is mainly due to trade and other payables of £379,382 which
are up by £24,711 (31 December 2021: £354,611).
Total non-current liabilities of £123,665 are £32,453 lower (31 December
2021: £156,118). This is mainly due to a £37,538 reduction in non-current
lease liabilities to £18,620 (31 December 2021: £56,158) as right of use
assets approach the end of their term and their renewal dates.
Statement of Cash Flows:
Cash and cash equivalents fell £902,136 from £3,464,876 at 31 December 2021
to £2,562,741 at 30 June 2022.
The main component of this reduction was due to cash used in operating
activities (see note 12), which increased to £997,506 and was £90,260 higher
than H1 2021 (£907,246). Cash absorbed by operating activities before working
capital movements improved by £309,342 to £579,451 (H1 2021: £888,793),
primarily due to lower losses. However, this was offset by working capital
movements amounting to a net increase in cash absorbed of £418,055 (H1 2021:
£18,453 increase). The largest component of the working capital movements was
due to an increase in trade receivables by £485,413 (H1 2021: £298,503
increase) which is expected to improve in H2 2022.
Net cash used in investing activities in H1 2022 of £65,500 (H1 2021:
£50,832) increased by £14,668. The movements were an increase in the
purchases of property, plant and equipment by £25,526 to £65,019 (H1 2021:
£39,493), off-set by a decrease in the purchases of intangibles by £7,333 to
£6,331 (H1 2021: £13,664) and interest received was £3,525 higher at
£5,850 (H1 2021: £2,325).
Net cash from financing activities amounted to £160,870 (H1 2021:
£5,044,261). The main difference compared to the comparative period are net
proceeds of share issues from warrant exercises of £200,000 compared with net
cash raised from the February 2021 fundraising of £5,083,140.
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
6 months 6 months Year to 31
to 30 June to 30 June December
2022 2021 2021
Notes Unaudited Unaudited Audited
RESTATED¹ RESTATED¹
£ £ £
Revenue 4 734,914 499,285 906,876
Cost of sales 14 (301,538) (335,356) (526,125)
Gross profit 433,376 163,929 380,751
Other operating income - 47,033 67,283
Research and development expenses (219,491) (312,755) (738,145)
Professional fees - Corporate transactions - (65,789) (65,789)
Other operating expenses 14 (914,819) (783,070) (1,678,335)
Total operating expenses (1,134,310) (1,161,614) (2,482,269)
Loss from operations before share-based payments (700,934) (950,652) (2,034,235)
Share-based payments 11 (126,002) (1,157,702) (1,363,764)
Loss from operations after share-based payments (826,936) (2,108,354) (3,397,999)
Financial cost (4,104) (1,554) (4,604)
Finance income 7,083 2,983 6,237
Loss before tax (823,957) (2,106,925) (3,396,366)
Tax on loss on ordinary activities 119,246 98,722 267,785
Total comprehensive loss for the period (704,711) (2,008,203) (3,128,581)
Loss per share attributable to the equity holders of the Company
Basic and diluted loss per ordinary shares
¹See note 14 for an explanation of the prior period restatement. 6 (0.011)p (0.040)p (0.056)p
STATEMENT OF FINANCIAL POSITION (UNAUDITED) AS AT 30 JUNE 2022
30 June 30 June 31 December
2022 2021 2021
Notes Unaudited Unaudited Audited
RESTATED¹
£ £ £
ASSETS
Non-current assets
Intangible assets 66,637 77,294 74,405
Property, plant and equipment 296,342 112,645 305,687
Right of use assets 90,554 15,037 126,533
Total non-current assets 453,533 204,976 506,625
Current assets
Inventories 255,346 377,156 283,902
Trade and other receivables 1,112,605 524,049 631,948
Corporation tax receivable 387,032 317,290 267,785
Cash and cash equivalents 2,562,741 4,483,252 3,464,876
Total current assets 4,317,724 5,701,747 4,648,511
TOTAL ASSETS 4,771,257 5,906,723 5,155,136
EQUITY AND LIABILITIES
Equity
Share capital 1,731,413 1,702,913 1,702,913
Share premium 28,262,518 28,006,018 28,006,018
Share-based payment reserve 2,817,181 2,743,064 2,888,707
Retained losses (28,616,601) (26,904,040) (28,024,418)
Total Equity 4,194,511 5,547,955 4,573,220
Current liabilities
Trade and other payables 379,382 245,346 354,611
Lease liability 73,699 16,143 71,187
Total current liabilities 453,081 261,489 425,798
Non-current liabilities
Provision 9 105,045 97,279 99,960
Lease liability 18,620 - 56,158
Total non-current liabilities 123,665 97,279 156,118
Total liabilities 576,746 358,768 581,916
TOTAL EQUITY AND LIABILITIES 4,771,257 5,906,723 5,155,136
¹See note 14 for an explanation of the prior period restatement.
STATEMENT OF CHANGES IN EQUITY (UNAUDITED) AS AT 30 JUNE 2022
Share
based
Share Share payment
Retained Total capital premium
reserve Losses equity
RESTATED¹
£ £ £
£ £
At 1 January 2021 1,140,913 24,867,886 324,264 (25,090,083) 1,242,980
Total comprehensive loss for the period as presented in the unaudited interim - (2,106,925) (2,106,925)
financial statements to 30 June 2021 - -
Impact of restatement of R&D tax credit recognition (see note 14) - 98,722 98,722
- -
Transactions with owners
Shares issued 562,000 5,058,000 - - 5,620,000
Share issue costs - (1,919,868) 1,503,008 - (416,860)
Transfer in respect of lapsed share options - - (194,246) 194,246 -
Share based payments-share options - - 1,110,038 - 1,110,038
At 30 June 2021 1,702,913 28,006,018 2,743,064 (26,904,040) 5,547,955
At 1 July 2021 1,702,913 28,006,018 2,743,064 (26,904,050) 5,547,955
Total comprehensive loss for the period - (1,120,378) (1,120,378)
- -
Transactions with owners
Shares issued - - -
- -
Share issue costs - - -
- -
Transfer in respect of lapsed share options - - -
- -
Share based payments-share options - - 145,643 - 145,643
At 31 December 2021 1,702,913 28,006,018 2,888,707 (28,024,418) 4,573,220
At 1 January 2022 1,702,913 28,006,018 2,888,707 (28,024,418) 4,573,220
Total comprehensive loss for the period - (704,711) (704,711)
- -
Transactions with owners
Shares issued 28,500 256,500 - - 285,000
Share issue costs - - -
- -
Transfer in respect of lapsed share options - - (112,528) 112,528 -
Share based payments share options - - 41,002 - 41,002
At 30 June 2022 1,731,413 28,262,518 2,817,181 (28,616,601) 4,194,511
¹See note 14 for an explanation of the prior period restatement.
STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
6 months 6 months Year to 31 December
to 30 June to 30 June 2021
2022 2021 Audited
Notes Unaudited Unaudited
£ £ £
Cash flows from operating activities
Cash absorbed by operations 12 (997,506) (907,246) (1,827,851)
Corporation tax received - - 218,568
Net cash used in operating activities (997,506) (907,246) (1,609,283)
Cash flows from investing activities
Purchases of intangible assets (6,331) (13,664) (28,883)
Purchases of property, plant and equipment (65,019) (39,493) (305,334)
Interest received 5,850 2,325 6,237
Net cash used in investing activities (65,500) (50,832) (327,980)
Cash flows from financing activities
Proceeds from share issues 200,000 5,500,000 5,500,000
Share issue costs - (416,860) (416,860)
Repayment of lease liabilities (39,130) (38,879) (78,070)
Net cash from/(used in) financing activities 160,870 5,044,261 5,005,070
Net increase/(decrease) in cash and cash equivalents (902,136) 4,086,183 3,067,807
Cash and cash equivalents at beginning of the year 3,464,876 397,069 397,069
Cash and cash equivalents at the end of the period 2,562,741 4,483,252 3,464,876
NOTES TO THE INTERIM FINANCIAL INFORMATION (UNAUDITED)
1. Nature of operations
Microsaic Systems plc is registered in England and Wales. The Company's
registered office is GMS House, Boundary Road, Woking, GU21 5BX. The Company
has no subsidiaries, so the financial information relates to the Company only.
Microsaic is a high technology company developing compact, chip-based mass
spectrometers that are designed to improve the efficiency of pharmaceutical
R&D.
2. Basis of preparation
The interim financial statements of the Company for the six months ended 30
June 2022, which are unaudited, have been prepared in accordance with the
accounting policies set out in the annual report and accounts for the year
ended 31 December 2021, which were prepared under International Financial
Reporting Standards ("IFRS") with the exception of Revenue and Cost of sales
policies which have been amended for the year ending 31 December 2022, as per
notes 4, 5 and 14. Comparable information for the six months ended 30 June
2021 has been restated in accordance with these policies.
This report does not constitute statutory accounts as defined in Section 434
of the Companies Act 2006 and has not been audited. The financial information
for the full preceding year is based on the statutory accounts for the year
ended 31 December 2021. Those statutory accounts have been filed with the
Registrar of Companies. The auditor's report on those statutory accounts was
unqualified.
As permitted, this interim report has been prepared in accordance with the AIM
Rules for Companies and not in accordance with IAS 34 "Interim Financial
Reporting" and therefore it is not fully compliant with IFRS.
The interim financial statements are presented in pounds sterling.
3. 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 following estimates and assumptions are those that, in addition to those
set out in the annual report and accounts for the year ended 31 December 2021,
have a risk of causing a material adjustment to the carrying amounts of assets
and liabilities:
Carrying value of trade receivables
The Company has applied a simplified "provision matrix" for calculating
expected credit losses as a practical expedient. The percentage ranges are
applied to the receivable balance.
Current 1-30 days past due 31-60 days past due 61-90 days past due 91-120 days past due 121-150 days past due 151-180 days past due 181 days + past due
0%-1% 1%-2% 1%-2% 1%-2% 2%-5% 5%-10% 10%-20% 10%-50%
The directors have reviewed the expected credit losses calculated in
accordance with the "provision matrix" above and believe that there is no
change required to the provision in respect of recoverability.
4. Revenues
IFRS 15 provides a single, principles based five-step model to be applied to
all contracts with customers. The five-step framework includes:
Identify the contract(s) with a customer;
Identify the performance obligations in the contract; Determine the
transaction price;
Allocate the transaction price to the performance obligations in the contract;
and Recognise revenue when the entity satisfies a performance obligation.
The Company recognises revenue from the following four sources:
Sale of products;
Sale of consumables and spare parts; Product service and product support; and
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 service, product support 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 service and product support revenue
Service and support to our OEMs and Distributors includes training their sales
and service teams and servicing the products from time to time. Discounts are
offered and agreed as part of the contractual terms. Terms are Ex Works so
control passes when the customer receives the service. Payment terms are
generally 30 days from the date of invoice.
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.
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.
The geographical analysis of revenues (by location of shipment) was as
follows:
6 months 6 months Year to 31
to 30 June to 30 June December
2022 2021 2021
Unaudited Unaudited Audited
£ £ £
UK 634,200 220,192 532,364
Japan 8,279 - 1,000
USA 50,703 130,960 187,673
Europe 29,610 42,057 71,887
China 12,122 106,076 106,076
South Korea - - 3,662
Rest of World - - 4,214
734,914 499,285 906,876
The product group analysis of revenues was as follows:
6 months 6 months Year to 31
to 30 June to 30 June December
2022 2021 2021
Unaudited Unaudited Unaudited
£ £ £
Product/Unit Consumables and spares 165,011 367,474 617,614
Service and support income 67,586 119,641 230,831
502,317 12,170 58,431
734,914 499,285 906,876
5. Cost of sales
With effect from 1 January 2022, the company has adopted new accounting
policies for the presentation of cost of sales, to better reflect the costs
associated with the new revenue streams. The financial impact of this change
is set out in note 14, and the new policies applied are as follows:
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 service and product support income
The cost of sales of service and support income is the time-based
apportionment of the employment costs of the relevant staff spent on the
delivery of the service and support 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 revenue
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.
6. Loss per share
6 months 6 months Year to 31
to 30 June to 30 June December
2022 2021 2021
Unaudited Unaudited Audited
RESTATED
Comprehensive loss attributable to equity shareholders (£) (704,711) (2,008,203) (3,128,581)
Weighted average number of ordinary 0.01p
(2021: 0.01p) shares for the purpose of basic
and diluted loss per share 6,287,359,621 4,989,624,815 5,537,461,036
Basic and diluted loss per ordinary share (p) (0.011)p (0.040)p (0.056)p
The basic loss per share has continued to reduce. It fell by 72% compared with
H1 2021. This was due to a 65% reduction in comprehensive loss as well as the
impact of the share reorganisation early in 2021 and issues of equity in 2022.
The main contributions to the reduction in comprehensive loss was an increase
in gross profit of 164% and a reduction in share-based payment costs by 93%.
The 6 months to 30 June 2021 loss per share has been re-stated due to the
change in recognition of R&D tax credit receivable as set out in note 14.
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.
7. Adjusted EBITDA Loss
A key indicator of performance for the Company is Adjusted EBITDA Loss (Loss
of earnings before interest, tax, depreciation, amortisation and other items
such as share-based payments and exceptional one-off expenditure). Detailed
below is the Adjusted EBITDA Loss for the period:
6 months 6 months Year to 31-Dec
to 30 June to 30 June 2021
2022 2021 Unaudited
Unaudited Unaudited
£ £ £
Comprehensive loss for period (704,711) (2,008,203) (3,128,581)
Adjust for:
Tax on loss on ordinary activities (119,246) (98,722) (267,785)
Depreciation of property, plant and equipment 74,364 39,222 90,628
Depreciation of right of use assets 35,980 34,368 70,499
Amortisation of Intangibles 14,099 20,133 38,241
Net finance cost (2,979) (1,429) (1,633)
Share-based payments (excluding fee shares) 41,002 1,110,038 1,255,681
Exceptional costs - 65,789 65,789
Adjusted EBITDA Loss (661,491) (838,804) (1,877,161)
8. Employees and employment related costs
6 months 6 Months Year to 31
to 30 June
to 30 June
December
Staff Numbers
2022 2021 2021
Unaudited Unaudited Audited
RESTATED
Directors 3 4 4
Other staff 19 17 18
Average Headcount 22 21 22
Employment costs (including Directors) £ £ £
Wages and salaries 514,539 590,195 1,123,276
Social security costs 74,710 67,452 160,902
Termination payments 21,125 - 18,189
Pension costs 77,578 80,296 173,051
Employment related share-based payments 82,943 1,143,800 1,332,240
770,895 1,881,743 2,807,699
9. Provisions
Total unaudited
Dilapidations Warranty £
£ £
Balance at 1 January 2022 75,779 24,181 99,960
Provided for/(Reduction) during the period 8,199 (3,114) (5,085)
Balance at 30 June 2022 83,978 21,067 105,045
The dilapidations provision has been updated for the estimated impact of
inflation. The warranty provision methodology was updated to reflect more
recent performance with the increased value of products under warranty offset
by reduced warranty claim rates and costs.
10. Commitments
As at 30 June 2022, purchase commitments relating to purchase orders placed
on, and related contractual arrangements and obligations, with our third-party
manufacturers amounted to £684,978 (31 December 2021: £781,990).
11. Share-based payments
The share-based payments charge comprises: 6 months 6 Months Year to 31
to 30 June
to 30 June
December
2022 2021 2021
Unaudited Unaudited Audited
RESTATED
£ £ £
Directors' fees settled in shares 41,941 33,762 76,559
Share options granted 41,002 1,110,038 1,255,681
Employment related share-based payments 82,943 1,143,800 1,332,240
Brokers' fees settled in shares 43,059 13,902 31,524
126,002 1,157,702 1,363,764
The Directors' fees settled in shares in respect of the years commencing 5
February 2021 and 5 February 2022 and Broker's fees settled in shares in
respect of the year commencing 5 February 2021 are both in respect of paying
annual fees in advance at the placing price of 5 February 2021 being a
valuation of 0.1p per ordinary share of 0.01p nominal value. The restatement
above reflects the inclusion of Brokers' fees settled in shares previously
included as Directors' fees settled in shares.
12. Cash absorbed by operations
6 months 6 months Year to 31
to 30 June to 30 June December
2022 2021 2021
Unaudited Unaudited Audited
RESTATED
£ £ £
Total comprehensive loss for the year (704,711) (2,008,203) (3,128,581)
Adjustments for:
Amortisation of intangible assets 14,099 20,133 38,241
Depreciation of right of use assets 35,980 34,367 70,499
Depreciation of property, plant and equipment 74,364 39,222 90,628
Transfer of property, plant and equipment to
cost of goods - 23,867 23,164
Profit on disposal of right of use assets - - (113)
Decrease in provision for warranty (3,114) (26,756) (24,075)
Increase in provision for dilapidations 8,199 - -
(Decrease)/Increase in provision for expected
credit losses 4,755 (18,532) (65,825)
Share-based payments (inclusive of fees settled in shares) 126,002 1,157,702 1,363,764
Increase/(Decrease) in inventory provision (14,033) (10,442) 32,535
Tax on loss on ordinary activities (119,246) (98,722) (267,785)
Interest on lease liability 4,104 1,554 4,433
Interest received (5,850) (2,983) (6,237)
Cash absorbed by operations before movements in working capital
(579,451) (888,793) (1,869,352)
Movements in working capital:
Decrease/(Increase) in inventories 42,587 202,883 253,152
(Increase)/Decrease in trade and other receivables (485,413) (298,503) (398,083)
Increase/(Decrease) in trade and other payables 24,771 59,419 168,684
Accrued furlough income - 17,748 17,748
Net movement in working capital (418,055) (18,453) 41,501
Cash absorbed by operations (997,506) (907,246) (1,827,851)
13. Related party transactions
Microsaic and DeepVerge plc ("DeepVerge") have two directors in common: Gerard
Brandon and Nigel Burton. In particular, Gerard Brandon is Executive Chairman
of Microsaic and CEO of DeepVerge.
On 19 April 2022, Microsaic signed a new Manufacturing Services Framework
Agreement ("MSFA") with Innovenn UK Limited, a division of DeepVerge plc
("DeepVerge"), to refine and miniaturise existing monitoring equipment for
environmental and human health diagnostics, together with an initial contract
worth £400,000. The MSFA framework sets out the terms and conditions for
Microsaic to improve and manufacture certain DeepVerge products and to provide
the design, assembly, quality, and project management functions necessary to
produce and ship equipment based on DeepVerge approved specifications, design,
and quality requirements.
In summary for the six months ended 30 June 2022, revenue from DeepVerge sales
totalled £546,718 and purchases from DeepVerge were £nil. At 30 June 2022,
£632,021 was owed by DeepVerge to Microsaic in relation to the revenue
recognised in H1 2022 and £65,610 was owed by Microsaic to DeepVerge.
At 30 June 2022, Director Nigel Burton owed £14,100 in respect of tax and
national insurance which was settled in July 2022.
14. Prior period restatement
The year to 31 December 2021 Cost of Sales and other operating expenses have
been restated to reclassify amounts of £7,424 for the 6-month period to 30
June 2021 and £15,233 for the 12-month period to December 2021. There was no
effect on the final results.
To reflect the change in revenue, further detail with regards to the product
group of how revenue is generated has been included within note 4.
An adjustment was made to the Income statement for the tax credit receivable
through R&D claims. Previously, the accrued tax credit receivable was not
included at each half year. This has been included for the 6-month period to
30 June 2022 at £119,246 (being £134,355 for the 6 months less an
adjustment of £15,089 in respect of the year ended 31 December 2021) on the
basis that the directors believe it is probable that it will be recovered. The
6 month period to 30 June 2021 has accordingly been re-stated to include an
amount of £98,722. Subsequently this has impacted the calculation of loss per
share, note 6.
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