REG - Microsaic Systems - Final Results
16/01/2024 07:00
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RNS Number : 7772Z Microsaic Systems plc 16 January 2024
16 January 2024
Microsaic Systems plc
("Microsaic" or the "Company")
Final Results for the year ended 31 December 2022
Microsaic Systems plc (AIM: MSYS), the developer of micro-electronic
instruments and analytical solutions, is pleased to announce its audited
financial results for the year ended 31 December 2022 ("FY22"). The Company's
FY22 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 FY22 Annual Report to shareholders who have requested
information in hard copy, along with notice of the Company's next annual
general meeting.
Financial Highlights
· Total revenues increased 73% on the previous year to £1.57m (2021:
£0.91m) of which DeepVerge comprised £1.29m (2021: £0.39m);
· Other operating income of £nil (2021: £67k);
· Operating expenses increased to £3.27m (2021: £2.48m) including
costs in relation to the impairment of related party debt of £1.13m (2021:
£nil);
· Adjusted EBITDA* loss of £2.04m (2021: £1.77m
· Loss before tax of £2.53m (2021: £3.40m) after providing for:
o Impairment of related party debt of £1.13m (2021: £nil);
o Share-based payments of £0.23m (2021: £1.36m);
o Depreciation and amortisation of £281k (2021: £199k);
o Professional fees of £Nil (2021: £66k) relating to corporate activities;
· Cash and cash equivalents as at 31 December 2022 of £1.24m (2021:
£3.46m).
*EBITDA before share-based payments and professional fees relating to
corporate activities
Post-year end events:
· Supply chain issues that had restricted production of mass
spectrometry MID and MIDas units in 2022 have now been resolved. Production
restarted during mid-2023, with unit orders from existing and new distributor
appointments resulted in shipment of 5 units by the end of 2023.
· Development and launch of MicrylaMiD(TM), a real-time inline
detection of Acrylamide in food to comply with EU and UK regulatory
requirements for the monitoring of this carcinogenic substance in food and
beverage production.
· MiDex and ProteinID commercialisation as part of a solutions package
for detection of molecules in pharma bioprocessing development has begun.
· New website launch, rebranding and marketing strategy resulted in an
uplift in lead generation for the new solutions being offered by Microsaic.
· On 19 April 2023, DeepVerge announced that it could not meet its
obligation to creditors and that a payment plan had been tentatively agreed
for its outstanding liability to Microsaic. However, on 26 June 2023,
DeepVerge announced that it would no longer support the ongoing costs of its
subsidiaries and is seeking to realise whatever value is possible through the
sale of one or more of the Labskin, Modern Water and Glanaco business units
and DeepVerge's shares were suspended from trading on AIM. As at 26 June 2023,
the balance owed by DeepVerge to Microsaic stood at £1,351,894. Following the
deduction of VAT on the amount outstanding of £221,725, which was
subsequently recovered from HMRC, the net of VAT potential bad debt is
£1,130,169. As no further receipts from DeepVerge are expected, this amount
of £1,130,169 has been charged in full within expected credit losses as at 31
December 2022. The results for 2022, subsequent performance in 2023 and the
prospects for 2024 and beyond therefore need to be considered on the basis
that no further payments and no further revenues are expected to be received
from DeepVerge.
· As a consequence of the above mentioned related party issues a delay
in the publication of these accounts was announced on 29 June, resulting in
the shares being suspended from trading on AIM with effect from 3 July 2023,
pending publication of the FY22 annual report and accounts.
· On 25 September 2023 it was announced that Gerry Brandon, Executive
Chairman, had resigned and left the Company and the Board with immediate
effect, to be replaced as Executive Chairman by Bob Moore, who joined the
Company as a Non-Executive Director in March 2022.
· As announced on 3 November 2023, and explained in further detail in
the shareholder circular dated 4 December 2023, the Company has begun a very
significant cost reduction exercise which is expected to result in the Company
remaining as an operating business, with access to sufficient resources
(including external contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading relationships.
Ongoing activities are expected to include recently redesigned and developed
PFAS and ProteinID technologies which have undergone internal testing ahead of
commercial field trials, and which the Company now expects to bring to market
through partnership agreements in 2024.
· The company has engaged in a fundraising process, to provide working
capital for the above transition and also to enable it to acquire from
DeepVerge the trade and assets relating to MicroTox® bio-reagents manufacture
and supply of associated testing equipment known as the Modern Water business.
It is the view of the directors that this acquisition will have a positive
impact on cash in the near future and allow Microsaic to capitalise on the
synergies between the two technologies. In order to facilitate this fundraise,
resolutions put to shareholders at a general meeting on 29 December 2023 have
been passed to consolidate every 625 Existing Ordinary Shares of 0.01p into
one Consolidated Ordinary Share of 6.25p; to sub-divide each Consolidated
Ordinary Share into one New Ordinary Share of 0.001p and one Deferred Share of
6.249p; and to issue 200,000,000 New Ordinary Shares. Firm commitments have
been obtained for subscriptions in the New Ordinary Shares, subject to
restoration to trading of the company's ordinary shares on AIM.
Outlook
The impact of the related party issues, in particular the failure of DeepVerge
to pay the £1.13m owed to Microsaic, has fundamentally changed the outlook
for the Company. The very significant cost reduction exercise announced on 3
November 2023 is expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external contractors)
to maintain production of the current mass spectrometer machines, the
commercialisation of PFAS and ProteinID technologies and the continuation of
existing trading relationships, but in a very different position than expected
at the start of 2023.
Revenues and gross margins grew in 2022, despite the dramatic shortfall of
electronic components available for orders of mass spectrometer units. Only 5
units were shipped in 2022 before year end compared to 19 in 2021. The supply
chain has since improved and production restarted in May 2023, with 5 units
shipped by the end of 2023. As of the end of 2023, there is a prospective
equipment sales pipeline of approximately 19 units in addition to service and
spares revenue. It is unlikely that all of these prospective sales will become
firm orders. In order to facilitate these sales, it is necessary that the
company raises additional funds. Subject to restoration to trading on AIM, the
company has secured commitments for funding which will allow current
operations together with operations after a proposed acquisition to continue
on a much reduced cost base.
The proposed acquisition is an opportunity to acquire the trade and assets
comprising the Modern Water business from DeepVerge relating to the Microtox®
bio-reagent product and its associated testing equipment. The majority of the
work undertaken by the Company for DeepVerge related to the re-design of the
MicroTox® LX test equipment, installation and commissioning of Modern Water
equipment at customer sites and improvements to the Modern Water virus
detection system, making the Company well positioned to understand the Modern
Water business. Based on the firm commitments received in the fundraising, the
directors intend to pursue this acquisition, which should provide the company
with an additional, cash generating, revenue stream. As the enlarged Company
matures, opportunities to collaborate and synergies are expected to be
realised between the two revenue streams.
The Company is in the process of raising sufficient funds to facilitate these
sales, to allow operations to continue on a much reduced cost base and to
remain admitted and trading on AIM. As announced today, the Company
successfully secured conditional funding commitments to raise gross proceeds
of approximately £2.1m gross (£1.8m net) through a placing of 169,000,000
New Ordinary Shares with new and existing investors at an issue price of 1.25
pence per New Ordinary Share.
Bob Moore, Executive Chairman of Microsaic Systems plc, commented
"We would like to thank our existing shareholders and new investors for the
support they have shown for the refinancing of the Company and its growth
plans. We are delighted that the Company intends to retain its AIM listing
and, following admission, have the necessary financing to both complete an
acquisition and provide capital to invest in and develop the enlarged
business. The assets being acquired are complementary to the existing
Microsaic business model. Using the acquired assets, we intend to restart the
manufacture of Microtox® bioreagents for water testing in the near term. Post
acquisition, we will seek positive cash generation from these new activities
and look to benefit from growth opportunities and potential synergies over the
longer term. Microsaic's cost base has been dramatically reduced and we will
now operate a much leaner, more efficient model."
Enquiries:
Microsaic Systems plc +44 (0) 20 3657 0050
Bob Moore, Acting Executive Chairman via TPI
Singer Capital Markets (Nominated Adviser and Joint Broker) +44 (0)20 7496 3000
Aubrey Powell / Angus Campbell / Oliver Platts
Turner Pope Investments (TPI) Limited (Joint Broker and Placing Agent) +44 (0) 20 3657 0050
Andy Thacker / James Pope
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 systems are commercially available through global
markets via a network of regional and local partners, targeting its core
laboratory, manufacturing and point of need applications.
CHAIRMAN'S STATEMENT
For the year ended 31 December 2022
Dear Shareholders,
I am pleased to present the Company's annual report and accounts for the year
ended 31 December 2022. The year continued to be a transitional one. This was
from sales of our existing technologies to maturing innovative research and
development of miniaturised mass spectrometers with enhanced capabilities
targeted at PFAS (forever chemicals) detection, ProteinID analysis for
bio-pharma drug manufacturing, and for Acrylamide (a potentially carcinogenic
chemical) detection in high temperature cooking of foods. This will result in
a more commercially focused business, seeking to generate new revenues from a
wider range of capabilities for sales and services provided to customers.
There had been higher demand for mass spectrometer equipment from existing
clients but supply chain shortages of microchips caused by the Covid pandemic
lowered our ability to meet the demand. This has been rectified post year end.
The revenues for the year were £1.57m, representing an uplift from the £906k
achieved in 2021. However, of this revenue, sales to the related party
DeepVerge plc ("DeepVerge"), as set out in note 28, totalled £1,248,828 (plus
VAT) of which they have only settled £118,659 (plus VAT) leaving a balance of
£1,130,169 (plus VAT) outstanding. On 19 April 2023, DeepVerge announced
that it could not meet its obligation to creditors and that a payment plan had
been tentatively agreed with Microsaic. However, on 26 June 2023, DeepVerge
plc announced that it would no longer be able to support its subsidiaries and
was anticipating a sale or liquidation of these assets. The impact of this on
the Company has been recognised as an adjusting event after the reporting date
with £1,130,169 charged as an impairment of related party debt. Excluding
revenues from DeepVerge, revenues for 2022 were only £318,869, significantly
below the prior year. The results for 2022, subsequent performance in 2023 and
forecasts for 2024 and beyond therefore need to be considered on the basis
that no further payments and no further revenues are expected to be received
from DeepVerge.
The Company ended the year with £1.24m in cash, trade receivables net of
expected credit losses of £389k and corporation tax credits receivable of
£0.51m. At 8 January 2024 cash stood at £148k.
Given the significant changes to the business following the year end,
resulting mainly from the problems with DeepVerge as outlined above,
shareholders' attention is drawn to the post year end events outlined below
and the risks highlighted in the Directors' Report and the material
uncertainty in the going concern assessment.
Financial Highlights:
· Total revenues increased 73% on the previous year to £1.57m (2021:
£0.91m) of which DeepVerge comprised £1.29m (2021: £0.39m);
· Other operating income of £nil (2021: £67k);
· Operating expenses increased to £3.27m (2021: £2.48m) including
costs in relation to the impairment of related party debt of £1.13m (2021:
£nil);
· Adjusted EBITDA* loss of £2.04m (2021: £1.77m
· Loss before tax of £2.53m (2021: £3.40m) after providing for:
o Impairment of related party debt of £1.13m (2021: £nil);
o Share-based payments of £0.23m (2021: £1.36m);
o Depreciation and amortisation of £281k (2021: £199k);
o Professional fees of £Nil (2021: £66k) relating to corporate activities;
· Cash and cash equivalents as at 31 December 2022 of £1.24m (2021:
£3.46m).
*EBITDA before share-based payments and professional fees relating to
corporate activities
Post-year end events:
· Supply chain issues that had restricted production of mass
spectrometry MID and MIDas units in 2022 have now been resolved. Production
restarted during mid-2023, with unit orders from existing and new distributor
appointments resulted in shipment of 5 units by the end of 2023.
· Development and launch of MicrylaMiD(TM), a real-time inline
detection of Acrylamide in food to comply with EU and UK regulatory
requirements for the monitoring of this carcinogenic substance in food and
beverage production.
· MiDex and ProteinID commercialisation as part of a solutions package
for detection of molecules in pharma bioprocessing development has begun.
· New website launch, rebranding and marketing strategy resulted in an
uplift in lead generation for the new solutions being offered by Microsaic.
· On 19 April 2023, DeepVerge announced that it could not meet its
obligation to creditors and that a payment plan had been tentatively agreed
for its outstanding liability to Microsaic. However, on 26 June 2023,
DeepVerge announced that it would no longer support the ongoing costs of its
subsidiaries and is seeking to realise whatever value is possible through the
sale of one or more of the Labskin, Modern Water and Glanaco business units
and DeepVerge's shares were suspended from trading on AIM. As at 26 June 2023,
the balance owed by DeepVerge to Microsaic stood at £1,351,894. Following the
deduction of VAT on the amount outstanding of £221,725, which was
subsequently recovered from HMRC, the net of VAT potential bad debt is
£1,130,169. As no further receipts from DeepVerge are expected, this amount
of £1,130,169 has been charged in full within expected credit losses as at 31
December 2022. The results for 2022, subsequent performance in 2023 and the
prospects for 2024 and beyond therefore need to be considered on the basis
that no further payments and no further revenues are expected to be received
from DeepVerge.
· As a consequence of the above mentioned related party issues a delay
in the publication of these accounts was announced on 29 June, resulting in
the shares being suspended from trading on AIM with effect from 3 July 2023,
pending publication of the FY22 annual report and accounts.
· On 25 September 2023 it was announced that Gerry Brandon, Executive
Chairman, had resigned and left the Company and the Board with immediate
effect, to be replaced as Executive Chairman by Bob Moore, who joined the
Company as a Non-Executive Director in March 2022.
· As announced on 3 November 2023, and explained in further detail in
the shareholder circular dated 4 December 2023, the Company has begun a very
significant cost reduction exercise which is expected to result in the Company
remaining as an operating business, with access to sufficient resources
(including external contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading relationships.
Ongoing activities are expected to include recently redesigned and developed
PFAS and ProteinID technologies which have undergone internal testing ahead of
commercial field trials, and which the Company now expects to bring to market
through partnership agreements in 2024.
· The company has engaged in a fundraising process, to provide working
capital for the above transition and also to enable it to acquire from
DeepVerge the trade and assets relating to MicroTox® bio-reagents manufacture
and supply of associated testing equipment known as the Modern Water business.
It is the view of the directors that this acquisition will have a positive
impact on cash in the near future and allow Microsaic to capitalise on the
synergies between the two technologies. In order to facilitate this fundraise,
resolutions put to shareholders at a general meeting on 29 December 2023 have
been passed to consolidate every 625 Existing Ordinary Shares of 0.01p into
one Consolidated Ordinary Share of 6.25p; to sub-divide each Consolidated
Ordinary Share into one New Ordinary Share of 0.001p and one Deferred Share of
6.249p; and to issue 200,000,000 New Ordinary Shares. Firm commitments have
been obtained for subscriptions in the New Ordinary Shares, subject to
restoration to trading of the company's ordinary shares on AIM.
Corporate governance
Good corporate governance is important to support our future growth. The Board
has extensive experience in publicly listed companies and is committed to
maintaining the highest standards where possible. 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
continues to trade on AIM, the Board intends to recruit a further independent
Non-Executive Director and at least one Executive Director. Assuming the
proposed fundraising and acquisition completes, Mr Moore will be replaced by a
Non-Executive Chairman and he will assume the role of Chief Executive until
further notice.
Outlook
The impact of the related party issues, in particular the failure of DeepVerge
to pay the £1.13m owed to Microsaic, has fundamentally changed the outlook
for the Company. The very significant cost reduction exercise announced on 3
November 2023 is expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external contractors)
to maintain production of the current mass spectrometer machines, the
commercialisation of PFAS and ProteinID technologies and the continuation of
existing trading relationships, but in a very different position than expected
at the start of 2023.
Revenues and gross margins grew in 2022, despite the dramatic shortfall of
electronic components available for orders of mass spectrometer units. Only 5
units were shipped in 2022 before year end compared to 19 in 2021. The supply
chain has since improved and production restarted in May 2023, with 5 units
shipped by the end of 2023. As of the end of 2023, there is a prospective
equipment sales pipeline of approximately 19 units in addition to service and
spares revenue. It is unlikely that all of these prospective sales will become
firm orders. In order to facilitate these sales, it is necessary that the
company raises additional funds. Subject to restoration to trading on AIM, the
company has secured commitments for funding which will allow current
operations together with operations after a proposed acquisition to continue
on a much reduced cost base.
The proposed acquisition is an opportunity to acquire the trade and assets
comprising the Modern Water business from DeepVerge relating to the Microtox®
bio-reagent product and its associated testing equipment. The majority of the
work undertaken by the Company for DeepVerge related to the re-design of the
MicroTox® LX test equipment, installation and commissioning of Modern Water
equipment at customer sites and improvements to the Modern Water virus
detection system, making the Company well positioned to understand the Modern
Water business. Based on the firm commitments received in the fundraising, the
directors intend to pursue this acquisition, which should provide the company
with an additional, cash generating, revenue stream. As the enlarged company
matures, opportunities to collaborate and synergies are expected to be
realised between the two revenue streams.
The Company is in the process of raising sufficient funds to facilitate these
sales, to allow operations to continue on a much reduced cost base and to
remain admitted and trading on AIM. As announced today, the Company
successfully secured conditional funding commitments to raise gross proceeds
of approximately £2.1m gross (£1.8m net) through a placing of 169,000,000
New Ordinary Shares with new and existing investors at an issue price of 1.25
pence per New Ordinary Share.
Bob Moore
Executive Chairman
15 January 2024
STRATEGIC REPORT
For the year ended 31 December 2022
Progress during 2022
The results for 2022, subsequent performance in 2023 and prospects for 2024
and beyond need to be considered on the basis that no further payments and no
further revenues are expected to be received from DeepVerge. The impact of
these events overshadows the successful technical, commercial and strategic
developments in 2022 and has forced the Company to fundamentally restructure
its cost base and operating model to survive into 2024.
2022 revenues were £1.57m, an increase of 73% on the prior year (2021:
£0.91m). The introduction of consultancy services (comprising science and
engineering consultancy, laboratory services and monitoring services) in 2022
provided total services revenues of £1.22m (2021: £0.06m). Product sales,
specifically of mass spectrometer units, were reduced to 5, resulting in
revenue of just £0.21m (2021: £0.62m) due to the impact of supply chain
shortages of electronic components and consumables revenue also fell to
£0.12k (2021: £0.37m). The supply chain issues have been resolved during
2023.
Of this revenue, sales to the related party DeepVerge, as set out in note 28,
totalled £1,248,828 (plus VAT) of which they have only settled £118,659
(plus VAT) leaving a balance of £1,130,169 (plus VAT) outstanding. On 26
June 2023, DeepVerge plc announced that it would no longer be in a position to
support its subsidiaries, and was anticipating a sale or liquidation of those
assets. This has been recognised as an adjusting event after the reporting
date with £1,130,169 charged as an impairment of related party debt.
Gross margin overall was 61% (2021: 42%), increasing due to the shift towards
consultancy service revenue. Services gross margin was in line with the
overall margin and averaged 61% following the introduction of consultancy
services (comprising science and engineering consultancy, laboratory services
and monitoring services) as well as product support services income (2021:
39%, product support services only). Product gross margins averaged 46% (2021:
31%) and consumables 79% (2021: 72%).
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
· March 2022: Bob Moore joined the Board. Bob is a UK qualified lawyer
and brings over 35 years' commercial and legal experience to the Company
· April 2022: 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 (although as outlined above this revenue stream ceased in
early 2023)
· April 2022: Launch of Microsaic Services Division providing
integrated solutions in consultancy services (comprising science and
engineering consultancy, laboratory services and monitoring services) that
include analytical and AI software service programmes designed for the medical
device, environmental, aerospace and food industries
· August 2022: Microsaic became an Authorised Partner of Kingfield
Electronics Limited for front-end research, development, and engineering
product development in scientific instrumentation and micro-engineering adding
these complementary services to its existing offering of fully integrated
turnkey solutions, box build, printed circuit board assembly ("PCBA"),
commissioning, final test, service, retrofit and world-wide shipping logistics
· September 2022: Microsaic in collaboration with DeepVerge plc, was
appointed to carry out mass spectroscopy-based sample analysis over two-years
in an environmental monitoring and remediation project with MèreMer for its
Blue Carbon Resilience Flagship project. However, due to the issues outlined
above at DeepVerge, and the apparent failure of MèreMer to secure funding for
this project from at least one of its underlying clients, no revenues are
expected to result from this collaboration.
Operations
The Company revenues and gross margins grew in 2022, despite the dramatic
shortfall of electronic components for orders of mass spectrometer units, down
from 19 in 2021 to 5 units shipped before year end. The supply chain has
improved and production has begun with mass spectrometer units delivered in Q3
and Q4 2023.
Strategic Focus
Microsaic serves Human Health, Environmental Health and Diversified markets
with equipment and design services for mass detection technology, which can be
used at the point of need (including mobile testing capability) to drive
better informed, faster decisions in real time and to solve real-world toxic
testing problems.
Typical point of need markets and applications include process analytical
technology for the manufacture of high value biologic drugs, detection of PFAS
chemicals and food contamination screening. The Company is also developing a
longer-term capability in point of care diagnostics. The Company is also
supporting the development of the Intelligent Knife (iKnife) by supplying
Imperial College London with mobile mass spectrometer capability to complete
the development of this innovative technology for cancer removal surgery.
Microsaic's technology can also be used in standard laboratory settings, for
example in the established pharmaceutical, academic and chemical industries.
Business Model
In 2022, 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.
Whilst the intention remains to pursue this more balanced approach, the
immediate priority in 2024 is to meet demand for our traditional products and
services whilst supporting the roll out of new solutions such as PFAS and
ProteinID.
Stakeholder Engagement
Section 172 of the Companies Act 2006 ("S.172") recognises that companies are
run for the benefit shareholders, but that the long-term success of a business
is dependent on maintaining relationships with stakeholders and considering
the external impact of the Company's activities.
Microsaic's key stakeholders are our employees, shareholders, partners
(including distributors, OEMs and collaborators on new products), and our key
suppliers such as our manufacturing contractor and key R&D subcontractors.
By working with all stakeholder groups, the Company can unlock the potential
of the business and maximise the value created. The key principles and values
adopted by the Company are detailed under Principle 8 of the QCA Corporate
Governance Code (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 2022 was the continuity towards a more commercial focus with
emphasis on delivery of solutions, beyond equipment sales.
b) the interests of the company's employees - During the year under review,
some personnel 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 done in collaboration with the team. Although the changes
announced in November 2023 included a consultation process, they have resulted
in unavoidable redundancies.
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 21 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, which reduces waste, energy consumption, and our overall
environmental footprint.
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 2022
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 2022 Year to 31 December 2021 Increase/
(Decrease)
£ £ £
Products 206,915 617,613 (410,698)
Consumables and spare parts 137,397 230,832 (93,435)
Product support services income 54,803 58,431 (3,628)
Consultancy services income 1,168,582 - 1,168,582
Total 1,567,697 906,876 660,821
The Company's revenue performance strengthened again in 2022 following the
development of new service revenues and increased by 73% to £1.57m (2021:
£0.91m) of which DeepVerge comprised £1.29m (2021: £0.39m). Revenue
comprises the sale of products, consumables and spare parts, product support
services income and the new consultancy services income (comprising science
and engineering consultancy, laboratory services and monitoring services). The
income arising from DeepVerge, including the vast majority of the consultancy
services income, ceased in early 2023. The Board reviews trading results and
monitors cash on a regular basis.
Profit/(Loss) & Cash Metrics Year to 31 December Year to 31 December 2021 Increase/
2022 (Decrease)
£ £ %
Loss from operations before share-based payments, interest, and tax
(2,316,594) (2,034,235) 14
Net cash used in operating and investing activities (2,345,284) (1,937,263) 21
Cash and cash equivalents 1,241,480 3,464,876 (64)
The Company's profitability is monitored against budget on a monthly basis.
The 14% increase in the loss from operations before share-based payments is
driven directly by the impairment of related party debts. Revenue increased
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. Key points to note are:
· Sales shipments of MS instruments were 74% below last year, due to
supply chain issues;
· Microsaic worked with its manufacturing partner to try to mitigate
production levels. Due to constraints on accessing semi-conductors for the
production of full mass spectrometer units, we were able to meet some demands
for spare parts for existing units in the field for support while we waited
for production to restart. This was restarted in May 2023;
· On the customer front, two development project agreements were
entered into during the year;
· ProteinID was successfully transferred to manufacturing, although
significantly later than originally planned while work on the launch of our
LC-MS family of products was placed on hold.
Financial Results - 2022
Income and expenditure
Total revenue of £1,576,697 increased 73% compared to the prior year (2021:
£906,876). The maiden consultancy services (comprising science and
engineering consultancy, laboratory services and monitoring services) revenues
were £1,168,582 (2021: nil). Product revenues of £206,915 (2021: £617,613)
and product support services revenues of £54,803 (2021: £58,431) decreased
by 67% and 6% respectively. Consumables revenue of £137,397 (2021: £230,832)
decreased by 60%.
Gross profit in 2022 of £949,367 (2021: £380,751) rose by 149% over last
year following both greater revenue overall and a shift in the revenue mix
towards the new service lines with higher margins. The gross margin of 61%
(2021: 42%) reflects this change in revenue mix and services margins. The new
accounting policy in respect of cost of sales of product support services and
cost of sales of consultancy services is set out in note 1 and includes an
allocation of wages to cost of sales. The effect on the prior period is set
out in note 32.
Other operating income was £nil (2021: £67,283). In the prior year this
related to use of the Coronavirus Job Retention Scheme grant, co-development
income and an insurance claim income.
Total operating expenses (excluding share-based payments) of £3,265,961
(2021: £2,482,169), increased by £783,792 (32%) and the main increases and
decreases are set out in the table below. A significant unforeseen cost in the
year was the impairment of trade receivables arising from subsidiaries of
DeepVerge plc, as the result of the RNS issued by that company on 26 June
2023. This has increased the loss for the year by £1,130,169, being the total
amount of outstanding debt less recoverable VAT. Excluding this, total
operating expenses (excluding share based payments) of £2,135,792 (2021:
£2,416,380) reduced by 346,377 or 14% on the prior year, and the main
increases and decreases are set out in the table below.
The loss from operations for the year before share-based payments rose by 14%
over last year to £2,316,594 (2021: £2,034,235).
Share based payments of £234,749 are £1,129,015 lower than the prior year
(2021: £1,363,764). This reduction arises from the issue of new options in
February 2021 with no further options awarded in 2022, and Brokers fees
settled in shares in 2021 but not in 2022.
Finance costs of £7,013 were higher than the prior year (2021: £4,604). The
entirety of this cost in 2022 relates to interest on the lease liability.
Finance income of £23,423 increased compared with the prior year (2021:
£6,237) due to higher interest rates on bank deposits offsetting reducing
cash balances.
The tax credit on ordinary activities in the year was £246,224 (2021:
£267,785). This comprises a tax credit of £261,312 for 2022 less a reduction
in the tax credit from the prior year by £15,088.
The total comprehensive loss for the year of £2,288,709 is a 27% decrease
over the prior year (2021: £3,128,581). The decrease in the total
comprehensive loss by £839,872 was due chiefly to the share-based payments
decrease of £1,129,015 and the increase in gross profit of £568,716 compared
to the prior year offset by the costs in relation to the impairment of related
party debt of £1.13m (2021: £nil). The basic loss per share fell by 36% from
0.056 pence in 2021 to 0.036 pence per share in 2022. This reflects the 27%
decrease in total comprehensive loss and the increase in weighted average
number of shares in issue of 14% (refer to note 10) as a result of the
exercise of warrants and issue of fee shares to certain Directors (refer to
note 19).
Total operating expenses (excluding share-based payments) of £3,265,961
(2021: £2,482,169), increased by £783,792 (32%) and the main increases and
decreases are set out in this table.
2022 2021 Increase/ Comment on increase or decrease
(decrease)
£ £ £
Expected credit loss charged / (released) 1,127,416 (65,825) 1,193,241 Increase due to impairment of related party debt (note 15 and note 28)
Depreciation of property, plant and equipment 178,102 90,628 87,474 Increase due to equipment additions in late 2021 and during 2022 (note 12)
Staff payroll 1,198,495 1,117,245 81,250 Average staff numbers increased by one during the year plus annual pay
reviews.
Agency staff 201,020 152,648 48,372 Main increase due to consultant head of finance in 2022 instead of salaried
CFO in 2021, partly offset by termination of engineering consultancy in 2021.
Warranty provision charged / (released) 23,007 (22,832) 45,839 Materials used increased in 2022 as a unit was used to replace an item rather
than effect on onsite repair, and the reduction in provisions was greater in
2021.
Other items 614,306 585,455 28,851 The change in these items is not separately analysed as they are largely
similar between years and the increase is less than 5% overall.
Travel & subsistence 70,268 42,830 27,438 Reflecting increased business development activities including renewed
conference attendance post pandemic.
Sales & marketing 35,171 8,551 26,620 Increase due to expanded business development activities including conference
and trade shows and online marketing and PR.
IP costs 50,090 34,472 15,618 Increase in patent renewals.
Repairs & maintenance 31,308 20,190 11,118 Increased costs in relation to greater revenue generating activities.
Insurance 50,030 39,661 10,369 Increase in insurance rates and to cover new service lines.
Bad debts 0 19,079 (19,079) Write off of irrecoverable debts in 2021.
Recruitment fees 15,143 55,277 (40,134) Reduced use of search firms to fulfil vacancies.
Corporate transactions 0 65,789 (65,789) Restructuring undertaken and completed in 2021.
Directors payroll (excluding share based payments) 85,359 354,334 (268,975) Retirement of CFO in 2021 replaced by consulting Head of Finance and CEO left
during 2022 with Chairman undertaking Executive role.
Salaries charge to COGS (413,754) (15,333) (398,421) Re-allocation of staff salary costs from operating expenses to cost of sales
chiefly in relation to the new consultancy services in 2022 and per accounting
policy note 1.
Total operating expenses 3,265,961 2,482,169 783,792
Balance Sheet
Total non-current assets decreased £3,188 to £503,437 (2021: £506,625).
There was a significant reduction in right of use assets as the Woking lease
approaches renewal and also a modest reduction in patents which was mostly
offset by continued and substantial investment in plant and equipment.
Current assets at £2,623,898 were down £2,024,613 over last year (2021:
£4,648,511). The decrease is mainly due to a substantially lower cash balance
of £1,241,480 (down £2,223,396) whilst there were decreases in trade and
other receivables (down £37,584) and corporation tax receivable (up £246,224
due to 2021 tax credit not yet received as at 31 December 2022) whilst
inventories were largely unchanged (down £9,857). The decrease in cash is
explained in the Cash Flow section which follows. After impairment for
expected credit loss, primarily on amounts owed by related parties as set out
in notes 28 and 30, trade receivables have increased £64,500 year on year.
This is offset by reductions in prepayments, accrued income and other debtors
totalling £102,084. Inventories of finished goods decreased substantially due
to supply chain issues continuing post the COVID-19 pandemic largely offset by
increases in stocks of components as they became available in readiness for
all components becoming available to manufacture finished goods once more.
Total assets at £3,127,335 at year end were £2,027,801 lower than the prior
year (2021: £5,155,136), reflecting the impact of the loss for the year
reducing current assets at the year-end as set out above.
Total equity at £2,719,259 at year end was £1,853,961 less than the prior
year due to the effect of retained losses for the year of £2,288,709 offset
partially by the charge for vesting of share options totalling £149,748 and
by the share issue in respect of the exercise of warrants by a director as set
out in note 28 and fee shares for certain directors as set out in note 25.
The reduction in the share-based payments reserve is due to the staff options
net charge amounting to £149,748 off-set by share-based option credits in
respect of lapsed options of £337,584 and warrant exercises of £300,075.
Current liabilities at the year-end comprised trade and other payables and
lease liability due within 12 months of the year end. Trade and other payables
at £236,445 (2021: £354,611) were £118,166 less than the prior year and
mainly reflected a decrease in trade payables (down £131,038) and lower other
payables, taxes and social security (down £18,919) partly offset by higher
accruals and deferred income (up £31,791). The lease liability of £52,918 at
year end mainly represented the Company's lease on property in Woking which
expired in September 2023.
Total non-current liabilities at £118,713 at the year-end were £37,405 less
than the prior year. This was mainly due to the decrease in the lease
liability by £52,830 as the Company's lease on the property in Woking expired
in September 2023, partly offset by an increase in provisions by £15,425
reflecting an increase in the dilapidations adjusted for inflation.
Total liabilities of £408,076 are £173,840 less than in the prior year due
to the decrease in current and non-current liabilities as set out above.
Cash Flow
Net cash used in operating activities in 2022 of £2,089,140 was £479,857
higher than the previous year. This reflects R&D tax credit receipts
falling by £218,568 and cash absorbed by working capital increasing by
£1,211,491, with the increase in DeepVerge debt, net of expected credit
losses, of £1,097,507 representing the majority of this. These increases in
cash used in operating activities were partly offset by the loss from
operations before share-based payments decreasing by £681,531 and increases
in the non-cash items of depreciation, amortisation and provisions by
£268,500.
Net cash used in investing activities decrease by £71,836 to £256,144
compared with £327,980 in 2021. The movements in the year were a decrease in
the purchases of property, plant and equipment by £52,647 and intangible
assets by £2,003 and interest received higher by £17,186.
Net cash generated by financing activities fell by £4,883,182 to £121,888
(2021: £5,005,070). This largely reflects the fall in proceeds from share
issues net of share issue costs by £4,883,140 following the fund raise in
February 2021.
The net decrease in cash for the year by £2,223,396 resulted in a cash
balance as at 31 December 2022 of £1,241,480.
Going Concern
The Company's trading performance improved in 2022, with higher sales and
reduced losses. However, excluding revenues from DeepVerge, revenues were only
£318,869, significantly below the prior year. Only 5 units were shipped in
2022 before year end compared to 19 in 2021. The supply chain has since
improved and production restarted in May 2023, with 5 units shipped by the end
of 2023. As of year end 2023, there is a prospective equipment sales pipeline
of approximately 19 units in addition to service and spares revenue. It is
unlikely that all of these prospective sales will become firm orders, however
the Board aims to deliver a cost base, excluding any 'plc' costs in the event
that the Company raises sufficient funds to remain public, consistent with a
similar level of unit sales to 2022 and 2023.
The Board has conducted a thorough assessment of the Company's cash reserves
and working capital requirements. As of 31 December 2022, the Company had
£1.2 million (31 December 2021: £3.5 million) in cash and bank balances. As
at 8 January 2024, the cash and bank balances had fallen to £148k The Board
acknowledges that, in the absence of additional funding, the company will not
have sufficient working capital to continue in operations beyond January 2024.
As such, the Board has commenced a fundraising process and received sufficient
firm commitments (conditional on the Company's restoration of admission to
trading on AIM and the company entering into an acquisition agreement for
Modern Water's assets) to be satisfied that the company will be able to meet
its liabilities as they fall due over the next twelve months.
As part of these forecasts, the Directors have included the expected cashflows
arising from the proposed acquisition of the trade and assets of Modern Water,
which is expected to be cash positive within the next twelve months. In so
doing, the Directors have made assumptions regarding the level of sales and
costs based on historical trading performance, and an expectation that the
business will be able to resume production of reagents within a few months of
acquisition.
Assuming the acquisition proceeds, the directors have assessed a cash
requirement for a plausible downside scenario covering 12 months from the date
of approval of the financial statements at minimum gross proceeds of £1.0
million, and have determined the amount to be raised through the proposed
fundraise is sufficient to meet these requirements.
Stakeholders should be aware that there is an inherent uncertainty in any
fundraising process; with the satisfactory completion of the process being
dependent on the restoration of the Company's shares to trading on AIM, and
the Company entering into an acquisition agreement for Modern Water's assets
(which was executed on 12 January 2024). As such, it is the position of the
Board that a material uncertainty exists in respect of their going concern
assessment. The Company will actively monitor and assess its financial
position to ensure that it can meet the demands of its plans effectively.
In light of this, the Directors have adopted the going concern basis for
reporting in the preparation of the financial statements and are proactively
exploring funding options and have developed contingency plans to address the
potential need for additional resources. Detailed information regarding the
Board's assessment, sensitivities, and contingency plans can be found in note
3 of the financial statements.
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
Difficulties in restarting the Modern Water business post-acquisition Technical, operational and commercial risks of restarting a business that has VERY HIGH 1 Former Modern Water employees with relevant technical, operational and HIGH
been largely dormant for most of the past 12 months commercial expertise have been engaged as either employees or consultants.
2 Relationships with former Modern Water agents and customers are being built,
with clear evidence of current demand for both reagents and equipment.
Insufficient working capital Shortage of liquidity to meet liabilities as they fall due VERY HIGH 1 Reduce all costs to a minimum as announced on 3 November 2023. MEDIUM
2 Raise sufficient funds to provide additional working capital, including to
remain on AIM.
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.
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, including PFAS and ProteinID, to promote these as well
as developing new sales channels.
Loss of competitive advantage in miniaturised mass spectrometry Competitors developing competing products MEDIUM The Company believes the market is large enough for competitors to co-exist. LOW
Reliance on third party manufacturing facilities A replacement manufacturer is necessary MEDIUM Work closely with our manufacturing partner and hold regular review meetings. LOW
Ensure contingency plans are prepared and reviewed.
Retention and recruitment of key employees Loss of key employees and consultants and subsequent difficulty in recruiting MEDIUM Key employees are to be offered retention terms or become consultants with MEDIUM
suitable replacements knowledge transfer arrangements for new staff to be put in place.
From the analysis above there are two main risks facing the business:
1. Despite the Company's efforts to ensure financial stability,
there are significant risks associated with its ability to continue as a going
concern. The cash balance at 8 January 2024 was just £147,603 There are
material uncertainties in the assessment of going concern. The Directors
undertake a going concern assessment on a rolling basis looking ahead at least
12 months. At the date of approval of the financial statements the Directors
assess the current cash position, inputs and sensitivities in the cash flow
forecast model. In this forecast there are known sensitivities which are
difficult to both quantify and assess the timing of costs, including, and not
limited to, the timing and availability of funding and the rate of conversion
to cash of the sales and services pipeline.
2. It is important to acknowledge that there is a need for
additional funding as outlined in these financial statements, with this
funding contingent on restoration of admission to trading on AIM post year
end. The Company's growth trajectory and the pursuit of a cash flow positive
position will necessitate additional funding from sources such as debt or
equity. These considerations pose risks to the Company's ability to sustain
its operations as a going concern.
Key events and progress post year end
· On 26 June 2023, the related party DeepVerge announced that it would
no longer support the ongoing costs of its subsidiaries and is seeking to
realise whatever value is possible through the sale of one or more of the
Labskin, Modern Water and Glanaco business units and DeepVerge's shares were
suspended. As at 26 June 2023, the balance owed by DeepVerge to Microsaic
stood at £1,351,894. Following the deduction of VAT on the amount outstanding
of £221,725, which is subject to relief from VAT on bad debts relief, the
net of VAT potential bad debt £1,130,169. As no further receipts from
DeepVerge are expected, this amount of £1,130,169 has been charged in full
within expected credit losses as at 31 December 2022. The results for 2022,
subsequent performance in 2023 and the prospects for 2024 and beyond therefore
need to be considered on the basis that no further payments and no further
revenues are expected to be received from DeepVerge.
· As announced on 3 November 2023, and explained in further detail in
the shareholder circular dated 4 December 2023, the Company has begun a very
significant cost reduction exercise which is expected to result in the Company
remaining as an operating business, with access to sufficient resources
(including external contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading relationships.
Ongoing activities are expected to include recently redesigned ProteinID
technology which has undergone internal testing ahead of commercial field
trials, and which the Company now expects to bring to market through a
partnership approach in 2024.
· The Cmpany has engaged in a fundraising process with Turner Pope
Investment (TPI) Ltd, to provide working capital for the above transition and
to acquire the Modern Water business from subsidiaries of DeepVerge relating
to the Microtox® bio-reagent product and its associated testing equipment. It
is the view of the directors that this acquisition will be cash positive in
the near future, and allow Microsaic to capitalise on the synergies between
the two technologies. In order to facilitate this fundraise, resolutions have
been passed to consolidate every 625 Existing Ordinary Shares of 0.01p into
one Consolidated Ordinary Share of 6.25p; to sub-divide each Consolidated
Ordinary Share into one New Ordinary Share of 0.001p and one Deferred Share of
6.249p; and to issue 200,000,000 New Ordinary Shares. Firm commitments have
been obtained for subscriptions in the New Ordinary Shares, subject to
restoration to trading of the company's ordinary shares on AIM.
Outlook
The impact of the related party issues, in particular the failure of DeepVerge
to pay the £1.13m owed to Microsaic, has fundamentally changed the outlook
for the Company. The very significant cost reduction exercise announced on 3
November is expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external contractors)
to maintain production of the current mass spectrometer machines,
commercialise PFAS and ProteinID technologies and continue existing trading
relationships, but in a very different position than expected at the start of
2023. The acquisition of the trade and assets of Modern Water is also expected
to provide the company with an additional cash-positive revenue stream.
Revenues and gross margins grew in 2022, despite the dramatic shortfall of
electronic components available for orders of mass spectrometer units. Only 5
units were shipped in 2022 before year end compared to 19 in 2021. The supply
chain has since improved and production restarted in May 2023, with 5 units
shipped by the end of 2023. As of year end 2023, there is a prospective
equipment sales pipeline of approximately 19 units in addition to service and
spares revenue. It is unlikely that all of these prospective sales will become
firm orders, however the Board aims to deliver a reset cost base, excluding
any 'plc' costs in the event that the Company raises sufficient funds to
remain public admitted to trading on AIM, consistent to outsource the
manufacture of a similar or greater level of unit sales to those in 2022 and
2023.
Based on the firm commitments received to date, the directors believe
Microsaic to be in a good position to rebuild its trade and grow as an
enlarged and reset Company over the next 12 months and future years.
The Strategic Report was approved by the Board of Directors on 15 January 2024
and signed on its behalf by:
Bob Moore
Executive Chairman
DIRECTORS' REPORT
The Directors present their report for the year ended 31 December 2022.
Principal activity, business review and business risks
The principal activity of the Company continued to be the commercialisation
and development of miniaturised micro-engineering equipment, originally for
mass spectrometry instruments but now to include integration of AI and
Internet of Things analytical sensors for existing and new clients to generate
recurring shared revenues for monitoring across biologic bio-processing,
environmental and human health and likely to extend to aviation, the food
industry and oil & gas sectors. A review of the business is contained
within the Strategic Report.
Results and dividends
The results for the Company are given in the statement of comprehensive
income. The Company is currently making losses and has retained losses which
have to be recovered before it can pay a dividend. Therefore, the Directors do
not recommend the payment of a dividend (2021: £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.
During 2022, R&D projects and R&D expenses totalled £783,544 (2021:
£752,257) or 26.8% (2021: 25.0%) of the total of cost of sales and operating
expenses excluding share-based payments. Current plans are to continue
focusing on commercial development associated projects that are demanded from
new and existing clients to optimise resources through collaborations and
joint ventures.
Directors
Between 1 January 2022 and 31 December 2022, the following Directors held
office:
Gerard Brandon, Non-Executive Chairman (Age 61) (1)
Nigel Burton, Non-Executive Director (Age 65)
Bob Moore, Independent Non-Executive Director (Age 66) (2)
Glenn Tracey, Chief Executive Officer (Age 50) (3)
( )
(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.
(3) Resigned as a Director on 31 March 2022. Age at date of resignation.
On 28 January 2022, it was announced that Glenn Tracey was stepping down to
pursue a non-competitive opportunity and he resigned as a Director on 31 March
2022. On 15 March 2022, Bob Moore was appointed as Independent Non-Executive
Director.
Directors' interests
The Directors' interests in the shares of the Company are:
Ordinary shares of 0.01p Ordinary shares of 0.01p Ordinary shares of 0.25p
at 31 October 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) This figure includes 50,000,000 shares by a person closely associated with
Gerard Brandon.
Significant shareholdings
Shareholders, excluding Directors, having a beneficial interest of 3% or more
of the Company's shares:
Ordinary shares of 0.01p each
at 31 October 2023
Shareholder Number %
Unicorn Asset Management 750,000,000 11.79
Premier Miton Investors 454,815,410 7.15
Intuitive Investments Group 192,000,000 3.02
Employees
The Board regards the expertise and contributions of its employees as critical
to its future success. Executive management regularly update employees on the
progress of the business. The Board seeks to remunerate its employees fairly
and has adopted a flexible working hours policy to cater for employee needs.
Full and fair consideration is given to applications for employment received
regardless of age, gender, colour, ethnicity, disability, nationality,
religious beliefs or sexual orientation.
The Board would like to thank all its employees for their contributions to
date.
Company share ownership plans
The Company operates two Employee Share Option Schemes ("ESOS"), an approved
scheme and an unapproved scheme.
The ESOS were formed to enable the incentivisation of employees to be aligned
to the performance of the Company. Under the ESOS the Company grants employees
options to acquire the Company's ordinary shares subject to:
· Vesting periods (normally three years for new grants) and an exercise
period of up to ten years from the date of grant;
· The exercise price is normally the market price of the ordinary
shares at the close of business the day before the date of grant unless the
award is linked to an equity fundraise; and
· Performance and time-based vesting conditions as appropriate.
Options are granted up to the maximum amount allowed under the limits of the
Enterprise Management Incentive ("EMI") Scheme - these options are called
'Approved Options'. The EMI Scheme is subject to the provisions of Schedule
5 of the Income Tax (Earnings and Pensions) Act 2003 and 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 2022. In the prior year on 4 and 5 February 2021,
the Company cancelled all existing options which were all out-of-the-money and
replaced them with options over 1,125 billion ordinary shares of 0.1p each
following the share capital restructuring and fund raise. Options awarded to
staff and Directors are detailed in note 25. Following completion of the
recently announced redundancy programme, all share options have expired.
Management of risk
The management of operational risk is covered in the Strategic Report while
financial risk is detailed under note 28 Financial Instruments.
Health and safety and the environment
The Company is committed to providing a safe environment for its staff and
other parties for whom it has a responsibility. It has set up systems and
processes to ensure compliance with health and safety legislation and the
Board reviews an update on health and safety matters at each main Board
meeting.
The Company is also mindful of its corporate responsibilities concerning the
impact of its activities on the environment and seeks to minimise this impact
where practicable.
Quality management system
The Company's mission is to deliver miniaturised micro-electronic equipment
and Internet of Things designed to analyse data, using AI analytical services,
demanded by clients that include, but are not exclusively related to
miniaturised 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 2022 financial year are
included in note 28, with additional information included in compliance with
AIM Rule 19 included therein and elsewhere including in the Chairman's
Statement and the Strategic Report.
Directors' responsibilities
The Directors are responsible for preparing the Annual Report and Accounts in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Company
financial statements in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. Under company law
the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Company and the profit or loss of the Company for that period.
In preparing the financial statements the Directors are required to:
· Select suitable accounting policies and then apply them consistently;
· Make judgements and accounting estimates that are reasonable and
prudent; and
· State whether international accounting standards in conformity with
the requirements of the Companies Act 2006 have been followed, subject to any
material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Statement of disclosure to auditors
So far as each Director is aware, there is no relevant audit information of
which the Company's auditors are unaware. Additionally, the Directors have
taken all the steps that they should have taken to make themselves aware of
any relevant audit information and to establish that the Company's auditors
are aware of that information.
Auditors
Saffery LLP has expressed its willingness to remain in office as auditors of
the Company, and a resolution for its re-appointment will be proposed at the
forthcoming Annual General Meeting.
Future developments
An indication of likely future developments in the business of the Company are
included in the Strategic Report.
This Directors' Report was approved by the Board of Directors on 15 January
2024 and signed on its behalf:
Bob Moore
Executive Chairman
Company number 03568010
DIRECTORS' REMUNERATION COMMITTEE REPORT
For the year ended 31 December 2022
Dear Shareholders
Dr Burton chairs the Remuneration Committee. Bob Moore joined the Committee on
15 March 2022 at the time of his appointment to the Board.
Gerard Brandon was acting CEO and Executive Chairman from when the former
Chief Executive, Glenn Tracey, left the Board on 31 March 2022. Following the
year end Mr Brandon resigned on 25 September 2023 Dr Nigel Burton continued as
a Non-executive Director and Bob Moore joined the Board as Senior Independent
Non-Executive Director on 15 March 2022, and 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 (2021 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 are no new share options granted to the Directors during 2022.
Details of the shares held by Directors are listed in the Directors' Report.
Implementation of the remuneration policy in 2022
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) 250,000,000
Dr Nigel Burton (warrants exercised 11 February 2022) 200,000,000
In line with their service agreements, Gerard Brandon and Dr Nigel Burton have
taken their annual fees of £50,000 and £35,000 respectively, for the first
two years of their appointment, in shares at the price of 0.1 pence per share
being the placing price of the equity fundraising completed in February 2021,
subject to payment of all necessary employee taxes and national insurance
contributions. Since February 2023, fees have been paid in cash monthly in
arrears.
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.
(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 2022 is detailed below. Non-cash payments represent
life assurance premiums.
Salaries & fees Non-cash payments Pension contributions Share- based payments Year to 31 December 2022 Year to 31 December 2021
£ £ £ £ £ £
Gerard Brandon(1) - - - 50,000 50,000 420,129
Nigel Burton - - - 35,000 35,000 331,599
Bob Moore(2) 23,750 - - - 23,750 -
Glenn Tracey(3) 36,308 155 2,363 - 38,826 323,692
Others(4) - - - - - 290,477
TOTAL 60,058 155 2,363 85,000 147,576 1,365,897
(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.
(4) Relates to directors who resigned in 2021.
The share-based payments charge in the year relates to fees paid in shares for
Messrs Brandon and Burton.
Directors' share options
Share options and warrants over the Company's ordinary shares held by the
Directors at the year-end were as follows (note that these subsequently lapsed
on 25 September 2023 following Mr Brandon's resignation):
At 31 December 2022 At 31 December 2022 Performance Conditions Exercise price Exercise period
0.01p ordinary shares Vested Pence
Number Number
Gerard Brandon 250,000,000 250,000,000 Yes 0.1p 5 February 2021 -
4 February 2026.
TOTAL 250,000,000 250,000,000
The Company's share price started the year at 0.150 pence and ended the year
at 0.033 pence, with a close high and low over the year of 0.195 pence and
0.033 pence respectively (with an intra-day high and low over the year of
0.220 pence and 0.030 pence respectively).
The share-based payment charge in relation to the share option grants to
Directors and lapsed options during the year was £nil (2021: £995,214).
The Directors' Remuneration Report was approved by the Board of Directors on
15 January 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 2022
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,
until his resignation after the year end on 25 September 2023, Gerard Brandon,
with Bob Moore joining on 15 March 2022 at the time of his appointment to the
Board. Dr Burton became Chairman of the Committee, following the resignation
of Peter Grant and has appropriate relevant financial experience. The Board
considers that the Committee has an appropriate and experienced blend of
commercial, financial and industry expertise to enable it to fulfil its
duties.
Financial Reporting and External Audit Process
The Chairman of the Committee participated in the Audit Planning meeting held
in November 2022 with the external auditors to plan the financial audit,
discussed potential key audit matter(s) and along with the Committee reviewed
the Audit Strategy Document.
The Board as a whole, reviewed the going concern paper prepared by management
including detailed financial forecasts for the period 2023 to 2024, 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 2022 Annual Report and Accounts
have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, are fair, balanced
and provide the information necessary for shareholders to assess the Company's
performance, business model and strategy.
Risk Management and Internal Controls
The Board considered as part of its review of risks those risks detailed in
the Strategic Report including mitigating actions. At the date of this report,
the Company continues to be a going concern. The key risk facing the Company
is the very challenging working capital position. As announced on 3 November
2023 and explained above, the Company has implemented a significant cost
reduction exercise and is expecting to raise sufficient 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. The Finance
Director reviewed and updated the Company's Financial Procedures Manual to
ensure it was in line with current practice. There were no reported instances
of fraud during the year.
The Company's auditors are encouraged to raise comments on internal control in
their management letter following the annual audit. The points raised and
actions arising are monitored through to completion by the Finance & Audit
Committee.
Whistleblowing
The Committee had no whistleblowing incidents reported during 2022. Dr Nigel
Burton has been appointed Primary Designated Officer during the year and
Gerard Brandon as Alternative Designated Officer.
Committee Meetings
The Committee met twice in the year. Both meetings related to the Annual
Report and Accounts which the external auditors attended.
Auditors Fees and Non-Audit Services
The Committee reviewed and agreed to the proposed audit fee of £31,065 (2021:
£29,500). Fees for other audit related services during the year amounted to
£4,300 (2021: £1,575). These fees included the review of 2022 interims and
the provision of information around accounting standards.
Auditor Independence
The Committee satisfied itself on the auditors' independence. Mr Roger Weston
is undertaking his fifth audit of the Company in the capacity of partner in
charge, and he will rotate off the audit this year to maintain independence.
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 15 January 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 2022
Board composition
Gerard Brandon was acting CEO and Executive Chairman from when the former
Chief Executive, Glenn Tracey, left the Board on 31 March 2022. Following the
year end Mr Brandon resigned on 25 September 2023 Dr Nigel Burton continued as
a Non-executive Director and Bob Moore joined the Board as Senior Independent
Non-Executive Director on 15 March 2022, and was appointed 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
(http://www.microsaic.com/investors/governance-new). This extract from that
statement is included in the Annual Report & Accounts as required by the
Quoted Companies Alliance's ("QCA") Corporate Governance Code for small and
mid-size quoted companies (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. 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 described in the Strategic Report.
Challenges:
Staying relevant to future customer needs
Customer needs evolve rapidly. Future product specifications are driven by
end-user requirements. This will inform Microsaic's product strategy as its
Mass Spectrometer detectors move from customer laboratories into production
and front-line operating environments. Microsaic aims to ensure that its
strategic product development remains focused on meeting demanding
biopharmaceutical applications.
Remaining innovative in an advancing technological landscape
Microsaic has successfully developed and implemented advanced technology with
over 80 patents to date. This has led to a solid foundation serving scientists
in the laboratory in small molecule drug discovery, and increasingly in 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 significant cost reductions and has focused
product development on applications with larger biological molecules, such as
peptides and small proteins.
The Company has extended its product capabilities further into Life Science
applications, and will invest in these applications 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 Management Team, which reports into the
Executive, meets regularly to review commercial, technical, operational, and
financial risks facing the business. These risks are assessed according to
their nature and magnitude based on the seriousness of the risk and the
likelihood of the risk occurring. The effectiveness of the controls
implemented to minimise the risks are also reviewed. The aim of these reviews
is to provide reasonable assurance that material risks are identified, and
appropriate action is taken at an early stage. From this review the Company
maintains its internal risk register which is reviewed annually by the
Board.
The annual budget is reviewed and approved by the Board. Financial results,
with comparisons to budget, and latest forecasts are reported monthly to the
Board together with a report on operational achievements, objectives and
issues encountered. Significant variances from plan are discussed at Board
meetings and actions set in place to address them.
Measures continue to be taken to review and improve internal controls and risk
management procedures. The Company has a Financial Procedures Manual which
includes approval levels for authorisation of expenditure, potential fraud
scenarios, payment approval process, expenses guidelines etc. This is updated
as necessary.
The Company's auditors are encouraged to raise comments on internal control in
their management letter following the annual audit. The points raised and
actions arising are monitored through to completion by the Finance & Audit
Committee.
PRINCIPLES TO MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
PRINCIPLE 5: Maintain the Board as a well-functioning, balanced team led by
the Chairman.
The Board currently consists of one Executive Chairman, and 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. Assuming the proposed fundraising and acquisition completes, Mr
Moore will be replaced by a Non-executive Chairman and he will assume the role
of Chief Executive until further notice.
Mr John Mottram replaced Mr Anthony Clayden as Head of Finance (non-board
level) in November 2023. Glenn Tracey, CEO, resigned on 31 March 2022 and the
then Chairman stepped into an executive role until his resignation in
September 2023.
The Company held 8 Board meetings during 2022 (2021: 19).
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 Directors are always in the best interests of the Company
and its shareholders. In addition, the skills and business judgement which
they possess and regularly exercise contributes to the efficient and effective
running of the Company.
The Company appreciates that circumstances which might or might appear to
affect a Director's judgement may well include financial dependence on the
Company and whether the Director is, or represents, a major shareholder. The
Chairman and Non-Executive Director are financially independent of the Company
as they have other sources of income, although Dr Burton became a
significant shareholder during 2022 following his exercise of his warrants. Mr
Brandon and Mr Moore do not represent significant shareholders; 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
until December 2022, which although not a shareholder of the Company, was
strategically important to the future success of Microsaic throughout 2022 and
until it's 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 2022 were as follows.
Name Position during 2022 Regular Board Meetings Finance & Audit Committee Remuneration Committee
Gerard Brandon(1) Executive Chairman 8 (8) 1 (2) 0 (0)
Glenn Tracey(3) Chief Executive Officer 3 (3) n/a n/a
Nigel Burton Non-Executive Director 8 (8) 2 (2) 0 (0)
Bob Moore(2) Non-Executive Director 5 (5) 1 (2) 0 (0)
(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.
(3) Resigned as a Director on 31 March 2022. Age at date of resignation.
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 a Non-executive Chairman to Modern
Water plc, which was subsequently acquired by DeepVerge plc
(formerly Integumen plc) in November 2020. Gerard is a Fellow of the Ryan
Academy of Entrepreneurs in Dublin.
Dr Nigel Burton, Non-executive Director
Term of office: Appointed a Director on 5 February 2021 at a General Meeting
of the Company. Dr Burton is also Chairman of the Finance & Audit
Committee and the Remuneration Committee.
Background and suitability for the role: Nigel is currently a Non-Executive
Director of BlackRock Throgmorton Trust plc and several AIM quoted companies
including eEnergy Group plc and Location Sciences 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 (Bob) 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 traded 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 through its parent company in Luxembourg). Bob also acts as
Non-Executive Chairman of Mobile Streams plc, an AIM quoted 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;
· Dorsey and Whitney Europe LLP as solicitors for the Company;
· Neville Registrars Ltd as the Company's registrar; and
· Menzies LLP for ongoing advice on Corporation tax, VAT and PAYE.
PRINCIPLE 7: Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement.
Board Evaluation Process
The Board believes that, in addition to dealing with any matters as they
arise, it is appropriate to carry out a formal evaluation of the performance
of the Board each year. This is intended to ensure that the Board remains
effective, well-informed and able to make high quality and timely decisions
for the benefit of all stakeholders in the Company.
The usual evaluation involves each Director completing an evaluation
questionnaire which covers effectiveness from multiple angles including: Board
structure and committees; Board arrangements, frequency and time; content of
Board meetings; Board culture; Board evaluation and succession; and individual
contributions. The completed questionnaires are anonymised and collated
independently into a summary, and comments and any areas of concern are
highlighted for discussion with the Board.
No formal evaluation process took place in 2022.
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 ;and
· The Directors' Finance & Audit Committee Report.
The Corporate Governance Report was approved by the Board of Directors on 15
January 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 2022
Opinion
We have audited the financial statements of Microsaic Systems plc for the year
ended 31 December 2022 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 2022 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 judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
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 (2021: £50,000). This is based on 2.5% of operating
expenditure in the draft financial statements at the planning stage of the
audit for the year ended 31 December 2022. Performance materiality was set at
65% of materiality.
Our triviality level was set at £2,000 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
successful completion of a fundraise, this to provide the Company with
sufficient working capital and to finance its proposed reduced cost base, as
well as providing sufficient cash to complete and develop a proposed
acquisition of trade and assets.
Given the inherent uncertainty of a fundraise, along with other matters as set
forth in note 3, we concur with the directors' assessment that a material
uncertainty exists that may cast significant doubt on the company's ability to
continue as a going concern. 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 the
following:
· Obtained and critically assessed for arithmetical
accuracy and consistency the directors' formal going concern assessment;
· Reviewed 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;
· Identified the key assumptions within the forecast,
being the existence and timing of sales opportunities and the completeness of
forecast costs, and challenged management on the appropriateness of these;
· Performed a sensitivity analysis on these key
assumptions underlying the directors' going concern assessment;
· Obtained corroborating evidence for the existence of
the sales pipeline and likelihood of conversion through review of
correspondence with sales prospects;
· Critically reviewed the provided business case for
the proposed acquisition, and stress tested the forecasts to identify the cash
requirements over the next twelve months
· Obtained representations and underlying evidence from
third party brokers regarding the plausibility of the Company raising the
required funding;
· Discussed events after the reporting date with the
directors to assess their impact on the going concern assumption, including
comparison of the post year end cash balances to forecast positions; and
· Reviewed 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 directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic Report and the
Directors' Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
· the Strategic Report and the Directors' Report have
been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its
environment obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept, or
returns adequate for our audit have not been received from branches not
visited by us; or
· the financial statements are not in agreement with
the accounting records and returns; or
· certain disclosures of directors' remuneration
specified by law are not made; or
· we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors' Responsibilities Statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The specific procedures for this engagement and the extent to
which these are capable of detecting irregularities, including fraud are
detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the company's financial statements to
material misstatement and how fraud might occur, including through discussions
with the directors, discussions within our audit team planning meeting,
updating our record of internal controls and ensuring these controls operated
as intended. We evaluated possible incentives and opportunities for fraudulent
manipulation of the financial statements. We identified laws and regulations
that are of significance in the context of the company by discussions with
directors and updating our understanding of the sector in which the company
operates.
Laws and regulations of direct significance in the context of the company
include The Companies Act 2006, 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 reviewed the company's records
of breaches of laws and regulations, minutes of meetings and correspondence
with relevant authorities to identify potential material misstatements
arising. We discussed the company's policies and procedures for compliance
with laws and regulations with members of management responsible for
compliance.
During the planning meeting with the audit team, the engagement partner drew
attention to the key areas which might involve non-compliance with laws and
regulations or fraud. We enquired of management whether they were aware of any
instances of non-compliance with laws and regulations or knowledge of any
actual, suspected or alleged fraud. We addressed the risk of fraud through
management override of controls by testing the appropriateness of journal
entries and identifying any significant transactions that were unusual or
outside the normal course of business. We assessed whether judgements made in
making accounting estimates gave rise to a possible indication of management
bias. At the completion stage of the audit, the engagement partner's review
included ensuring that the team had approached their work with appropriate
professional scepticism and thus the capacity to identify non-compliance with
laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we
would become aware of it. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial
Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
…………………………………..
Roger Weston (Senior Statutory Auditor)
for and on behalf of Saffery LLP
Chartered Accountants
Statutory Auditors
71 Queen Victoria Street
London
EC4V 4BE
15 January 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2022
Year to 31 December 2022 Year to 31 December 2021
Notes RESTATED
£ £
Revenue 5 1,567,697 906,876
Cost of sales (618,330) (526,225)
Gross profit 949,367 380,651
Other operating income 6 - 67,283
Professional fees - Corporate transactions - (65,789)
Impairment of related party debt 28 (1,130,169)
Other operating expenses (2,135,792) (2,416,380)
Total operating expenses 7 (3,265,961) (2,482,169)
Loss from operations before share-based payments (2,316,594) (2,034,235)
Share-based payments 25 (234,749) (1,363,764)
Loss from operations after share-based payments 7 (2,551,343) (3,397,999)
Financial cost 8 (7,013) (4,604)
Finance income 8 23,423 6,237
Loss before tax (2,534,933) (3,396,366)
Tax on loss on ordinary activities 9 246,224 267,785
Total comprehensive loss for the year (2,288,709) (3,128,581)
Loss per share attributable to the equity holders of the Company
Basic and diluted loss per ordinary share (pence) 10 (0.036)p (0.056)p
The notes form part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
31 December 2022 31 December 2021
Notes
£ £
ASSETS
Non-current assets
Intangible assets 11 69,160 74,405
Property, plant and equipment 12 380,272 305,687
Right of use assets 13 54,005 126,533
Total non-current assets 503,437 506,625
Current assets
Inventories 14 274,045 283,902
Trade and other receivables 15 594,364 631,948
Corporation tax receivable 9 514,009 267,785
Cash and cash equivalents 1,241,480 3,464,876
Total current assets 2,623,898 4,648,511
TOTAL ASSETS 3,127,335 5,155,136
EQUITY AND LIABILITIES
Equity
Share capital 19 1,731,413 1,702,913
Share premium 21 28,262,518 28,006,018
Share-based payment reserve 2,400,796 2,888,707
Retained losses (29,675,468) (28,024,418)
Total equity 2,719,259 4,573,220
Current liabilities
Trade and other payables 16 236,445 354,611
Lease liability 13 52,918 71,187
Total current liabilities 289,363 425,798
Non-current liabilities
Provisions 17 115,385 99,960
Lease liability 13 3,328 56,158
Total non-current liabilities 118,713 156,118
Total liabilities 408,076 581,916
TOTAL EQUITY AND LIABILITIES 3,127,335 5,155,136
The financial statements were approved for issue by the Board of Directors
on15 January 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 2022
Share
-based payment Total
Share Share Retained
Notes capital premium reserve Losses equity
£ £ £ £ £
At 1 January 2021 1,140,913 24,867,886 324,264 (25,090,083) 1,242,980
Total comprehensive loss for the year - - - (3,128,581) (3,128,581)
Transaction with owners:
Shares issued-- placing 19 562,000 5,058,000 - - 5,620,000
Share issue costs 21 - (1,919,868) 1,503,008 - (416,860)
Transfer in respect of lapsed share options - - (194,246) 194,246 -
Share-based payments-share options 25 - - 1,255,681 - 1,255,681
At 31 December 2021 1,702,913 28,006,018 2,888,707 (28,024,418) 4,573,220
Total comprehensive loss for the year - - - (2,288,709) (2,288,709)
Transaction with owners:
Shares issued 19 28,500 256,500 - - 285,000
Transfer in respect of directors warrants exercised 19 (300,075) 300,075 -
Transfer in respect of lapsed share options - - (337,584) 337,584 -
Share-based payments options 25 - - 149,748 - 149,748
At 31 December 2022 1,731,413 28,262,518 2,400,796 (29,675,468) 2,719,259
The notes form part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
Year to 31 Year to 31
December December
2022 2021
£ £
Cash flows from operating activities
Cash absorbed by operations 31 (2,133,332) (1,827,851)
Corporation tax received - 218,568
Net cash used in operating activities (2,133,332) (1,609,283)
Cash flows from investing activities
Purchases of intangible assets 11 (26,880) (28,883)
Purchases of property, plant and equipment 12 (208,495) (305,334)
Interest received 23,423 6,237
Net cash used in investing activities (211,952) (327,980)
Cash flows from financing activities
Proceeds from share issues 200,000 5,500,000
Share issue costs - (416,860)
Repayment of lease liabilities 13 (78,112) (78,070)
Net cash generated by / (used in) financing activities 121,888 5,005,070
Net (decrease) / increase in cash and cash equivalents (2,223,396) 3,067,807
Cash and cash equivalents at the beginning of the year 3,464,876 397,069
Cash and cash equivalents at the end of the year 1,241,480 3,464,876
The notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2022
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 1-7 Park Road, Caterham, Surrey, CR3
5TB. 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 £.
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
With effect from 1 January 2022, the company has changed the 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 32, 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 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.
Other operating income
Other operating income includes grant income, insurance income arising from a
claim and income from development contracts. The Company's management assesses
the contracts at each balance sheet date, including the costs to completion,
which are subject to estimation uncertainty. Grant income is recognised when
there is reasonable assurance that the grant will be received, and the Company
will comply with any attached conditions. Grants are recognised in the profit
or loss in line with the expenditure they are intended to compensate and are
shown gross of the underlying expense. The Company received CJRS grants during
the prior year, which has been recognised in line with the corresponding
payroll expenditure. There are no unfulfilled conditions attached to the grant
that the Company is aware of.
Segmental reporting
The Company currently has one business segment, being the research,
development and commercialisation of scientific instruments. This is
undertaken wholly within the United Kingdom. Revenue by geographical market is
analysed in note 5.
Intangible assets
Trademarks and patents are stated at historic cost of registration less
accumulated amortisation and any accumulated impairment losses. Amortisation
is charged to operating expenses and calculated to write off the cost in equal
annual instalments over five years, which is a prudent estimate of their
useful economic lives.
Certain software is stated at historic cost less accumulated amortisation and
any accumulated impairment losses. Amortisation is charged to operating
expenses and calculated to write off the cost in equal annual instalments over
three years, which is considered to be a prudent estimate of its useful
economic life.
Property, plant and equipment
Items of property, plant and equipment are stated at cost of acquisition or
production costs less accumulated depreciation and impairment losses.
Depreciation is charged to the statement of comprehensive income on a
straight-line basis to write-off the carrying value of each asset to residual
value over its estimated useful economic life as follows:
Plant and equipment - 33.3% on a straight line basis
Fixtures and fittings - 33.3% on a straight line basis
Software - 33.3% on a straight line basis
Pensions
The Company has an auto-enrolment pension scheme for employees. Contributions
are charged to the statement of comprehensive income in the period they are
payable.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the first-in first-out principle and includes expenditure incurred in
acquiring the inventories and bringing them to their present location and
condition. The cost of finished goods and work in progress comprises raw
materials, direct labour and other direct costs. Net realisable value is the
estimated selling price in the ordinary course of business less applicable
selling expenses. The inventory provision is based on identifying slow moving
stock items from recent historic and anticipated future sales and providing
where appropriate for those items which may be surplus to anticipated or
identifiable demand.
Provisions
Provisions are established where the Directors have identified an obligation
which is probable and where the amount can be estimated reliably.
Taxation
Current taxes are based on the results of the Company and are calculated
according to local tax rules using the tax rates that have been enacted by the
balance sheet date.
The Company recognises research and development tax credits receivable in cash
as a current asset under the heading corporation tax receivable. Any
difference to amounts received are dealt with as adjustments to prior period
tax.
Deferred tax is provided in full using the balance sheet liability method for
all taxable temporary differences arising between the tax bases of assets and
liabilities and their carrying values for financial reporting purposes.
Deferred tax is measured using currently enacted or substantially enacted tax
rates. Deferred tax assets are recognised to the extent the temporary
difference will reverse in the foreseeable future and that it is probable that
future taxable profit will be available against which the asset can be
utilised.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are
translated into sterling at the rates of exchange ruling at the balance sheet
date. Transactions in foreign currencies are recorded at the rate ruling at
the date of transaction, or forward contract rate, if applicable. All
differences are taken to the statement of comprehensive income.
Financial instruments
Financial assets and financial liabilities are recognised in the Company's
statement of financial position when the Company becomes a party to the
contractual provisions of the instrument. Examples of the Company's financial
instruments include:
Cash and cash equivalents
The fair value of cash and cash equivalents is considered to be their carrying
amount due to their short-term maturity.
Trade receivables
The Company's trade receivables do not carry a significant financing element
as defined by IFRS 15. Therefore, trade receivables are recorded at
transaction price (e.g., invoice amount excluding costs collected on behalf of
third parties) and throughout the life of the receivable at an amount equal to
lifetime expected credit losses ("ECL"). The Company has applied a simplified
"provision matrix" for calculating expected credit losses as a practical
expedient. The percentage ranges are applied to the receivable balance.
Current 1-30 days past due 31-60 days past due 61-90 days past due 91-120 days past due 121-150 days past due 151-180 days past due 181 days + past due
0%-1% 1%-2% 1%-2% 1%-2% 2%-5% 5%-10% 10%-20% 10%-50%
Other points:
· The Company determines whether trade receivables are impaired through
regular meetings between finance and business development.
· The credit situation of new customers is reviewed before the first
shipment. If possible, a credit report is obtained. If there is any concern
over the credit worthiness of the customer, the Company may ask the customer
to pay an amount in advance or enter into a confirmed letter of credit
(Non-UK/Europe) etc.
· Trade receivables are considered low risk at initial recognition but
this changes if they have an overdue invoice(s). Depending on the value of the
shipment, the customer may be placed on hold until the overdue amount is paid.
Discussions as to why an invoice is overdue are held promptly between finance
and business development and the customer.
· The provision is monitored at customer level by business development
and finance.
· If the Company is having ongoing dialogue with the customer regarding
their overdue balance the debt will not be written off. It may be that a
payment plan can be agreed or more time is given to the customer to sell the
product. If the customer is not actively engaging with the Company legal
action may be taken.
· Forward looking information from business development is taken into
account when preparing the provision matrix including geographical risk,
changes in customer circumstances and macro-economic factors.
Under IFRS 9 impairment for receivables including trade receivables is
assessed using an expected loss model. For trade receivables this focuses on
the risk that, and an extent to which, a receivable will default. Accordingly,
the Company calculates the allowance for credit losses by considering the cash
shortfalls it would incur in various default scenarios and multiplying the
shortfalls by the probability of each scenario occurring. The Company only has
short-term receivables and has adopted a "simplified approach" in assessing
impairment.
The Company has applied a simplified "provision matrix" for calculating
expected losses as a practical expedient (e.g., for trade receivables), as the
Directors believe that this is consistent with the general principles for
measuring expected losses. The provision matrix is based on an entity's
historical default rates over the expected life of the trade receivables and
is adjusted for forward-looking estimates.
In preparing the provision matrix the Company looks at the geographic base of
its trade receivables and whether they are existing or new customers. Finally,
management considered forward looking information that may affect the default
rates applied in the matrix.
The risk profile of related party debts are considered to differ from the
wider trade receivables pool, and so the above provision matrix percentages
are not applied to the amounts owed by DeepVerge subsidiaries.
In the light of the adjusting post balance sheet event set out in note 30, it
is the opinion of the directors that conditions at the year-end were such that
the expected credit loss on those debts is equal to the amount unpaid at 26
June 2023, less reclaimable VAT.
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 2022 and 2021.
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 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
Reference to the Conceptual Framework (Amendments to IFRS 3 Business 1 January 2022
Combinations)
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 1 January 2022
16)
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37 1 January 2022
Provisions, Contingent Liabilities and Contingent Assets)
Annual improvements 2018-2020 cycle 1 January 2022
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
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)
The Directors are evaluating the impact that these standards will have on the
financial statements of Company, but at this stage the impact is not expected
to be material.
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, 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
Classification of Liabilities as Current or Non-Current, Non-current 1 January 2024
Liabilities with Covenants: amendments to IAS 1
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) 1 January 2024
The Directors are evaluating the impact that these standards will have on the
financial statements of Company, but at this stage the impact is not expected
to be material.
3. Going concern
The Company is loss making and has raised funds in the past by issuing equity
in discrete tranches. The most recent fundraise was completed on 5 February
2021 where the Company raised £5.2 million after expenses from new and
existing shareholders.
The Company's trading performance improved in 2022, with higher sales and
reduced losses. However, excluding revenues from DeepVerge, revenues were only
£318,869, significantly below the prior year. Only 5 units were shipped in
2022 before year end compared to 19 in 2021. The supply chain has since
improved and production restarted in May 2023, with 7 units expected to be
shipped by the end of 2023. As of year end 2023, there is a prospective
equipment sales pipeline of approximately 19 units in addition to service and
spares revenue. It is unlikely that all of these prospective sales will become
firm orders. The board has enacted plan to enable to company to operate on a
much reduced cost base. In particular, this has unfortunately necessitated the
redundancy of all Microsaic staff, to be completed in early 2024. Going
forward, the Company will outsource more of the manufacturing cycle, including
the sourcing of components and shipping, to its existing manufacturing
partner. Through the use of contractors, the Company will continue to assist
with the testing and installation of units, as well as the development of
designs. The board have prepared cashflow forecasts based on this new
operating model to cover the next 12 months.
Alongside this new operating model, it is the intention of the board to
acquire the trade and assets relating to the Microtox® brand and Modern Water
business. Cashflow forecasts have been prepared covering the next 12 months,
and it is the opinion of the directors that the acquired trade can be cash
positive over that period. In preparing these forecasts, the Directors have
made assumptions regarding the level of sales and costs based on historical
trading performance, and an expectation that the business will be able to
resume production of reagents within a few months of acquisition.
Factoring in those forecasts, the Board has conducted a thorough assessment of
the Company's cash reserves and working capital requirements from the date of
approval of the financial statements. As at 8 January 2024, the cash and bank
balances had fallen to £148k. The Board acknowledges that, in the absence of
additional funding, the company will not have sufficient working capital to
continue in operations beyond January 2024 and that a fundraise is required to
allow the Company to transition to reduced cost base operations and complete
the proposed acquisition. As such, the Board has commenced a fundraising
exercise, and obtained sufficient firm commitments to meet the cash
requirements of its forecasts. The completion of the fundraise is dependent
upon the restoration of the company's shares to trading on AIM and the company
entering into an acquisition agreement for the trade and assets of the
Microtox® brand and Modern Water business. As such. there is a material
uncertainty regarding the going concern status of the Company.
Stakeholders should be aware of the material uncertainty surrounding the need
for additional funding and the associated risks involved. Assuming the
acquisition proceeds, the directors have assessed a cash requirement for a
plausible downside scenario covering 12 months from the date of approval of
the financial statements at minimum gross proceeds of £1.0 million, and have
determined the amount to be raised through the proposed fundraise sufficient
to meet these requirements. The Company will actively monitor and assess its
financial position to ensure that it can meet the demands of its plans
effectively.
Having taken this careful approach through a review of the Company cost base,
proposed fundraise and proposed acquisition, the Board believes that the
enlarged Company will have enough cash to cover its anticipated working
capital requirements for at least the next 12 months from the date of signing
of the Annual Report and Accounts. On this basis, the Directors have concluded
that it is appropriate to prepare the financial statements on a going concern
basis, subject to the above material uncertainty.
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 trade receivables
The Company's policies for calculating expected credit losses on trade
receivables are set out in note 1.
An area of significant judgment in the year is the expected credit loss
arising on the debts owed by Deepverge plc and its subsidiaries, totalling
£1,511,198. On 26 June 2023, DeepVerge plc announced that it would no longer
be in a position to support its subsidiaries, and was anticipating a sale or
liquidation of those assets. As such, no recovery of the remaining £1,351,894
owed is expected.
It is the judgement of the directors that the conditions leading to this
situation would have been present at 31 December 2022. As such, this has been
recognised as an adjusting event after the reporting date, and impairment of
£1,130,169 recognised; being the outstanding debt less VAT recoverable.
Share-based payments
The calculation of the share-based payment expense utilises assumptions and
estimates (for example volatility, future exercise rates etc) which may differ
from actual results. Details of the assumptions are set out in note 25. The
Company uses the Black Scholes Option pricing model to determine a theoretical
option call price. If there are market related conditions (e.g., realising
certain share price targets before vesting) then the Company uses external
advisers to apply more advanced modelling techniques. In terms of inputs
volatility is the most difficult input to estimate and is probably the key
input where management has had to use its discretion.
Carrying value of inventories
It is the intention of the directors that the Company will move away from
purely the sale of goods as its primary revenue stream, instead developing new
lines of service revenue. As such, there is a risk that the inventory holding
may not recover its full carrying value.
The directors believe that all inventories held at 31 December 2022 will
ultimately be sold above their purchase price. However, in light of the
uncertainty in these forecasts, and the potential for stock turnover days to
significantly increase, a provision of £61,987 (2021: £90,139) has been made
for stock obsolescence. There is significant uncertainty in this estimate, but
the directors believe it is an appropriate estimate for potential future write
off of inventories.
The detailed breakdown of inventories can be seen in note 14.
These assumptions are reviewed at each balance sheet date and amended if
required.
5. Revenue
Throughout 2022, the Company operated in one business segment, that of
research, development and commercialisation of mass spectrometry instruments.
Products are sold ex-works: The attribution of revenue is based on the country
or group of countries to where the goods are shipped. In 2022 our largest
customers had the following revenues as a percentage of total revenues:
Customer number 1 - 79.7% (Note that this customer is DeepVerge and, as
disclosed elsewhere in the report, although modest revenues were achieved in
early 2023, no further revenues have been or are expected to be received since
then).
The geographical analysis of revenue (by shipment destination) was as follows:
Year to 31 December 2022 Year to 31 December 2021
£ £
UK 1,354,872 532,364
USA 103,752 187,673
EU 67,646 71,887
China 30,631 106,076
ROW 10,796 8,876
1,567,697 906,876
The analysis of revenue by product or service was as follows:
Year to 31 December 2022 Year to 31 December 2021
£ £
Equipment units 206,915 617,613
Consumables 11,942 36,983
Service spares 107,717 193,849
Accessories 17,738 -
Product support 54,803 58,431
Consulting services 1,168,582 -
1,567,697 906,876
5. Other operating income
Year to 31 December Year to 31 December 2021
2022
£ £
Coronavirus Job Retention Scheme Grant - 20,829
Co-development income - 26,204
Insurance claims - 20,250
- 67,283
6. Expenses by nature
Year to 31 December 2022 Year to 31 December 2021
RESTATED
Loss from operations after share-based payments is stated after £ £
charging/(crediting):
Amortisation and impairment of intangible assets 30,487 38,241
Depreciation of right of use assets 72,528 70,499
Impairment of related party debt 1,130,169 -
Expected credit losses (excluding impairment of related party debt) (2,754) (46,746)
Movement in inventory provision (28,152) 32,535
Inventory items expensed 313,047 616,282
Staff benefit expense 1,519,276 2,807,699
Depreciation of property, plant and equipment 178,102 90,628
Provision for warranty (415) (24,075)
Research and development expenses 783,544 752,257
Professional fees (including audit fees detailed below) 220,990 161,791
Pension costs 144,038 173,051
Exchange loss/(gain) 1,198 1,216
Directors' emoluments (before pensions and share based payments) 60,213 266,799
7. Expenses by nature (continued)
Year to 31 December 2022 Year to 31 December 2021
£ £
Services provided by the Company's auditors
Fees payable to the Company's auditors for the audit of the financial
statements
31,065 22,150
Fees payable in respect of prior years 7,350 -
Fees payable to the Company's auditors for other services
- Audit related services 4,300 1,575
42,715 23,725
8. Finance income and Finance cost
Year to 31 December 2022 Year to 31 December 2021
£ £
Bank interest receivable 23,423 6,237
Interest cost under IFRS 16 (7,013) (4,433)
Other interest - (171)
(7,013) (4,604)
9. Tax on loss on ordinary activities
Year to 31 December Year to 31 December 2021
2022
Domestic current period tax £ £
UK corporation tax (246,224) (267,785)
Tax on loss on ordinary activities (246,224) (267,785)
Factors affecting the current tax credit for the period: Year to 31 December Year to 31 December 2021
2022
£ £
Loss before tax (2,534,933) (3,396,366)
Loss before tax multiplied by standard rate of UK corporation tax of 19%
(2021: 19%)
(481,637) (645,310)
Effects of:
Expenses not deductible for tax purposes 29,173 251,679
Fixed asset differences (6,689) (39,228)
Additional deduction for R&D expenditure (193,535) (116,399)
R&D Expenditure Credit - 484
Movement in deferred tax not recognised 317,880 279,259
Capital gain - 1,730
Other tax adjustments, reliefs and transfers (7,600) -
Surrender of tax losses for R&D tax credit refund 81,097 -
Adjustments to tax charge in respect of previous periods 15,087 -
Current tax credit (246,224) (267,785)
The Company has estimated tax losses of £26,930,453 (2021: £25,056,703)
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
2022 December
2021
Loss after tax attributable to equity shareholders £ (2,288,709) (3,128,581)
Weighted average number of ordinary 0.01p shares for the purpose of basic and 6,324,666,516 5,537,461,036
diluted loss per share
Basic and diluted loss per ordinary share (0.036)p (0.056)p
The basic loss per share reduced by 36% from 0.056p per share to 0.036p per
share. This reflects the decrease in the loss after tax to equity shareholders
and the increased weighted average shares outstanding in the year ended 31
December 2022 compared to year ended 31 December 2021.
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 2022: £
Cost
At 1 January 2022 621,179
Additions 26,880
Disposals (20,546)
At 31 December 2022 627,513
Amortisation
At 1 January 2022 546,774
Charge for the year 30,487
Disposals (18,908)
At 31 December 2022 558,353
Net book value
At 31 December 2022 69,160
Year ended 31 December 2021 £
Cost 592,296
At 1 January 2021
Additions 28,883
At 31 December 2021 621,179
Amortisation
At 1 January 2021 508,533
Charge for the year 38,241
At 31 December 2021 546,774
Net book value
At 31 December 2021 74,405
12. Property, plant and equipment
Year ended 31 December 2022:
Plant and equipment Fixtures and fittings Total
£ £ £
Cost
At 1 January 2022 1,066,414 178,307 1,244,721
Additions 208,495 - 208,495
Transfers 44,192 - 44,192
Disposals (42,583) - (42,583)
At 31 December 2022 1,276,518 178,307 1,454,825
Plant and equipment Fixtures and fittings Total
£ £ £
Depreciation
At 1 January 2022 760,727 178,307 939,034
Charge for the year 178,102 - 178,102
Disposals (42,583) - (42,583)
At 31 December 2022 896,246 178,307 1,074,553
Net book value
At 31 December 2022 380,272 - 380,272
Year ended 31 December 2021:
Plant and equipment Fixtures and fittings Total
£ £ £
Cost
At 1 January 2021 850,596 178,307 1,028,903
Additions 305,334 - 305,334
Disposals (64,246) - (64,246)
Transfers (25,270) - (25,270)
At 31 December 2021 1,066,414 178,307 1,244,721
Depreciation
At 1 January 2021 736,472 178,286 914,758
Charge for the year 90,607 21 90,628
Disposals (64,246) - (64,246)
Transfers (2,106) - (2,106)
At 31 December 2021 760,727 178,307 939,034
Net book value
At 31 December 2021 305,687 - 305,687
Transfers from plant and equipment were moved to stock and then sold to a
customer.
13. Lease reporting
Right of use lease assets
Property Equipment Total
£ £ £
Cost
At 1 January 2022 318,696 9,961 328,657
Additions - - -
Disposals - - -
At 31 December 2022 318,696 9,961 328,657
Depreciation
At 1 January 2022 201,459 665 202,124
Charge for the year 69,466 3,062 72,528
Disposals - - -
At 31 December 2022 270,925 3,727 274,652
Carrying amount
At 31 December 2022 47,771 6,234 54,005
Property Equipment Total
£ £ £
Cost
At 1 January 2021 179,763 8,441 188,204
Additions 138,933 9,961 148,894
Disposals - (8,441) (8,441)
At 31 December 2021 318,696 9,961 328,657
Depreciation
At 1 January 2021 133,816 4,984 138,800
Charge for the year 67,643 2,856 70,499
Disposals - (7,175) (7,175)
At 31 December 2021 201,459 665 202,124
Carrying amount
At 31 December 2021 117,237 9,296 126,533
Lease liability Property Equipment Total
£ £ £
At 1 January 2022 118,093 9,252 127,345
Repayment of lease liabilities (75,000) (3,112) (78,112)
Additions - - -
Interest on lease liabilities 6,782 231 7,013
Disposals - - -
At 31 December 2022 49,875 6,371 56,246
Property Equipment Total
£ £ £
At 1 January 2021 49,831 3,636 53,467
Repayment of lease liabilities (74,997) (3,073) (78,070)
Additions 138,933 9,961 148,894
Interest on lease liabilities 4,326 107 4,433
Disposals - (1,379) (1,379)
At 31 December 2021 118,093 9,252 127,345
Lease liability maturity analysis
2022 2021
Property Equipment Property Equipment
Gross lease payments due: £ £ £ £
Within one year 51,666 3,220 75,000 3,279
Between two and five years - 3,448 51,666 6,609
51,666 6,668 126,666 9,888
Less future financing charges (1,791) (297) (8,573) (636)
49,875 6,371 118,093 9,252
14. Inventories
Year to 31 December 2022 Year to 31 December 2021
£ £
Raw materials 266,853 177,212
Finished goods 69,179 196,829
Subtotal 336,032 374,041
Provision for inventories (61,987) (90,139)
Total 274,045 283,902
During 2022, continuing component shortages in the supply chain largely
prevented the manufacture of complete mass spectrometers, with only two being
manufactured during the year. Consequently, the balance of sales of these
products was met from inventories and some obsolete units were written off
which together reduced the stock of finished goods over the year. In contrast,
raw materials increased as key components were purchased in bulk when
available in the supply chain so that once all components become available it
became possible to resume manufacture of complete mass spectrometers during
2023.
The stock provision reduced overall. Some older raw materials were written off
during the year, whilst the overall provision for raw materials increased in
respect of slow-moving items. This was offset, however, as older units of now
superseded finished goods were also written off during 2022, which
substantially reduced the remaining provision for finished goods to a
negligible level.
15. Trade and other receivables
Year to 31 December 2022 Year to 31 December 2021
£ £
Amounts falling due within one year
Trade receivables 1,518,977 327,061
Provision for expected credit losses (1,130,178) (2,762)
Other receivables 205,565 307,649
Other taxes and social security - -
594,364 631,948
Year to 31 December 2022 Year to 31 December 2021
£ £
Not past due 266,927 299,160
1 to 30 days past due 145,494 901
31 to 60 days past due 137,000 -
61 to 90 days past due 120,000 -
91 to 120 days past due 216,775 -
121 to 150 days past due 147,043 -
151 to 180 days past due 77,160 -
Over 180 days past due 408,578 27,000
1,518,977 327,061
Year to 31 December 2022 Year to 31 December 2021
£ £
Provision for expected credit losses on trade receivables:
Balance brought forward (2,762) (68,587)
Written back to P&L during the year - 68,587
Provided during the year (1.127,416) (2,762)
Balance carried forward (1,130,178) (2,762)
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 2022 Year to 31 December 2021
£ £
Amounts falling due within one year
Trade payables 99,456 230,494
Other taxes and social security 43,613 43,514
Other payables 11,961 30,979
Accruals and deferred income 81,415 49,624
236,445 354,611
17. Provisions
Dilapidations Warranties TOTAL
£ £ £
Balance at 1 January 2022 75,779 24,181 99,960
Provided for/(reduced) during the year 15,840 (415) 15,425
Balance at 31 December 2022 91,619 23,766 115,385
Dilapidations Warranties TOTAL
£ £ £
Balance at 1 January 2021 75,779 48,256 124,035
Provided for/(reduced) during the year - (24,075) (24,075)
Balance at 31 December 2021 75,779 24,181 99,960
The provision for anticipated dilapidations is in respect of the Company's
leasehold premises at Woking. The amount carried forward of £91,619 is based
on the potential future cost which could be incurred at the end of the lease.
The Company provides OEMs and distributors with a 15-month warranty on 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. One unit (2021: Nil) was
replaced during the year rather than being repaired, as this was considered to
be more efficient. The provision for warranty at the end of the year was
£23,766 (2021: £24,181).
18. Deferred tax
Deferred taxation provided in the financial statements: £ £
Year to 31 December 2022 Year to 31 December 2021
£ £
Accelerated capital allowances 95,068 61,741
Tax losses carried forward (95,068) (61,741)
- -
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% (2021: 25%). The Company has estimated tax
losses of £26,930,453 (2021: £25,056,703) available for carry forward
against future trading profits. The additional deferred tax asset that would
arise on these losses if it were recognised at 25% is £6,637,545 (2021:
£6,202,435).
19. Share capital
The total share capital of the Company comprises Ordinary and Deferred shares
as follows:
2022 2022 2021 2021
Allotted, called up and fully paid: Number £ Number £
Ordinary shares of 0.01p each 6,361,365,146 636,137 6,076,365,146 607,637
Deferred shares of 0.24p each 456,365,146 1,095,276 456,365,146 1,095,276
As at 31 December 6,817,730,292 1,731,413 6,532,730,292 1,702,913
The Ordinary share capital of the Company comprises:
2022 2022 2021 2021
Allotted, called up and fully paid: Number £ Number £
Ordinary shares of 0.01p (0.25p) each as at 1 January 6,076,365,146 607,637 456,365,146 1,140,913
Effect of share split and deferment - - - (1,095,276)
Issue of ordinary share capital of 0.01p each 285,000,000 28,500 5,620,000,000 562,000
As at 31 December 6,361,365,146 636,137 6,076,365,146 607,637
19. Share capital (continued)
In the year ended 31 December 2022 there were a total of 285,000,000 newly
issued shares. Of these, 200,000,000 were subscribed by Nigel Burton in
February 2022 through the exercise of 200,000,000 share warrants.
Additionally, 85,000,000 newly issued shares represented Non-Executive
Directors' fees for the second year settled in shares in respect of Gerard
Brandon (50,000,000 shares) and Dr Nigel Burton (35,000,000 shares).
During the prior year (in February 2021), the Company undertook a share
reorganisation and split each ordinary share of 0.25p each into one (1)
ordinary share of 0.01p each and twenty-four (24) deferred shares of 0.01p
each followed by the immediate consolidation of every twenty-four (24)
deferred shares of 0.01 pence each into one (1) deferred share of 0.24 pence.
Each ordinary share of 0.01p each carries the same rights as the ordinary
shares of 0.25p each did before the share reorganisation. That is, each
ordinary share has the right to one vote and is entitled to participate in any
distribution made by the Company including the right to receive a dividend,
and on a winding up of the Company. The ordinary shares are not redeemable or
liable to be redeemed at the option of the Company or the shareholder.
Each deferred share of 0.24p has no right to receive notice of, or attend or
vote at, any general meeting of the Company, no right to participate in the
profits of the Company whether by dividend, other distribution, return of
capital (whether or not upon a winding up) or otherwise, save that, upon a
return of capital upon a winding up, the holders of deferred shares shall be
entitled to the return of the nominal value of each deferred share held after
£10,000,000 has been returned on each ordinary share, nor are the deferred
shares redeemable or liable to be redeemed at the option of the Company or the
shareholder.
In addition, the Company issued 5,620,000,000 ordinary shares of 0.01p each as
follows:
· 5,000,000,000 ordinary shares of 0.01p each to raise £5.0 million
before expenses at the placing price of 0.1 pence per new ordinary share;
· 500,000,000 ordinary shares of 0.01p each to raise £500,000 to the
Company's Broker Turner Pope at the Placing Price of 0.1 pence per new
ordinary share to meet additional demand for the shares;
· 35,000,000 ordinary shares of 0.01p each at the placing price of 0.1
pence per new ordinary share in respect of the first year of fees due to
Turner Pope for the provision of its broking services to the Company; and
· 85,000,000 ordinary shares of 0.01p each at the placing price of 0.1
pence per new ordinary share in settlement of the Non-executive Directors'
first year's fees in respect of Gerard Brandon (50,000,000 shares) and Dr
Nigel Burton (35,000,000 shares).
The Deferred share capital of the Company comprises:
2022 2022 2021 2021
Allotted, called up and fully paid: Number £ Number £
Deferred shares of 0.24p each as at 1 January 456,365,146 1,095,276 - -
Effect of share split on 4 February 2021 to deferred shares of 0.24p each - - 456,365,146 1,095,276
As at 31 December 456,365,146 1,095,276 456,365,146 1,095,276
20. Reserves
The share premium account represents the excess over the nominal value for
shares allotted less issue costs. The share option reserve represents
accumulated charges made under IFRS 2 in respect of share-based payments.
Where share options that have vested expire, lapse or are exercised, the
amounts within the share-based payments reserve relating to those options are
transferred to retained earnings as shown in the Statement of Changes in
Equity.
21. Share premium
Year to 31 December 2022 Year to 31 December 2021
£ £
Opening balance brought forward 28,006,018 24,867,886
Share issue in the year 256,500 5,058,000
Share issue costs - Cash - (416,860)
Share issue costs - Broker Warrants - (1,503,008)
Closing balance carried forward 28,262,518 28,006,018
The movement on share premium in the year relates to 285,000,000 newly issued
shares as described in note 19.
For the prior year, the fundraising in February 2021 raised a total of £5.5
million (before expenses) at a placing price of 0.1p per share. The placing
raised £5.0 million and the broker warrant £0.5 million, before expenses.
The share premium on the fundraising was the placing price of 0.1p per share
less the nominal value of 0.01p per share multiplied by the number of shares
issued. The cash costs amounted to £416,860 including broker commissions and
fees, legal fees etc. In addition, 997,000,000 broker warrants were issued to
Turner Pope Investments (TPI) Ltd at a fair value of £1,503,008.
At the same time as the fundraising in February 2021, 120,000,000 ordinary
shares of 0.01p were issued in lieu of fees in respect of the first year of
fees due to Turner Pope Investments (TPI) for the provision of its broking
services to the Company and of the first year of fees for the Non-executive
Directors. Further details of the prior year's share issues are set out in
note 19.
22. Commitments
Year to 31 December 2022 Year to 31 December 2021
£ £
Contracted for but not provided in the financial statements 651,944 781,990
The commitment above relates to purchase orders placed on, and related
contractual arrangements and obligations, with third-party manufacturers.
23. Directors' emoluments
Year to 31 December 2022 Year to 31 December 2021
£ £
Salaries and fees 60,058 264,797
Non-cash payments 155 2,002
Pension costs 2,363 27,325
Employment related share-based payments 85,000 1,071,773
147,576 1,365,897
In the year to 31 December 2022, one Executive Director that served during the
year accrued benefits under the Company's auto-enrolment pension scheme. The
employment related share-based payments comprise directors fees paid in share
options to two directors.
There are no key management personnel other than the Directors. The highest
paid Director, Mr Gerard Brandon, received emoluments of £50,000 as disclosed
in the Directors' Remuneration Report, which included a share-based payment
charge of £50,000.
There was an unrealised gain of £30,000 on the exercise of 200,000,000
warrants by Dr Nigel Burton during the year.
24. Employees
Year to 31 December 2022 Year to 31 December 2021
Number Number
Directors 3 4
Other staff 19 18
Average Headcount 22 22
Year to 31 December 2022 Year to 31 December 2021
£ £
Employment costs (including Directors)
Wages and salaries 985,734 1,123,317
Social security costs 133,630 160,902
Termination payments 21,125 18,189
Pension costs 144,038 173,051
Employment related share-based payments 234,749 1,332,240
1,519,276 2,807,699
25. Share-based payments
The share-based payments charge comprises Year to 31 December 2022 Year to 31 December 2021
£ £
Directors' fees settled in shares 85,000 76,559
Vesting of share options 149,749 1,255,681
Employment related share-based payments 234,749 1,332,240
Brokers' fees settled in shares - 31,524
234,749 1,363,764
The Directors' fees settled in shares in respect of the financial years ended
31 December 2022 and 31 December 2021 and Broker's fees settled in shares in
respect of the year ended 31 December 2021 are both in respect of fees
incurred. The Directors' fees relate to annual fees. The Broker's fees were
settled in advance at the placing date of 5 February 2021 with a valuation of
0.1p per ordinary share of 0.01p nominal value, which aligned with the placing
price.
Share option schemes
The Company operates an EMI and an unapproved share option scheme as a means
of encouraging ownership and aligning interests of staff and shareholders. The
table below shows the number of options outstanding and exercisable at 31
December 2022 and 31 December 2021 and the weighted average exercise price.
Year to 31 December 2022 Year to 31 December 2021
Number of options Weighted average exercise price Number of options Weighted average exercise price
Outstanding at the beginning of the year 1,125,000,000 0.1p 17,475,000 5.1p
Granted during the year - - 1,125,000,000 0.1p
Forfeited/expired during the year (320,000,000) 0.1p (17,475,000) (5.1p)
Exercised during the year (200,000,000) 0.1p - -
Outstanding at 31 December 605,000,000 0.1p 1,125,000,000 0.1p
Exercisable at 31 December 325,000,000 0.1p 750,000,000 0.1p
200,000,000 of options were exercised on 11 February 2022 at an exercise price
of 0.1p when the market price was 0.115p on that date.
In the prior year, Staff and Directors agreed to cancel existing options prior
to the award of new options as these options were all out-of-the-money.
Existing options held by Directors and staff amounting to 13,110,000 were
cancelled on 4 February 2021. A further 3,500,000 options held by Peter Grant
were cancelled on 5 February 2021, and 865,000 options related to previous
leavers.
Options and warrants over 1,125 million ordinary shares were awarded to
Directors, staff and a consultant on 5 February 2021 at the time of the
fundraising. The new options granted are exercisable at the placing price of
0.1p for five years from the 5 February 2021.
Details of options in issue at the year-end are:
Date of grant Exercise price Latest exercise date Estimated fair value Number of options 31 December 2022 Number of options 31 December 2021
February 2021 0.1p February 2026 0.150p 325,000,000 750,000,000
February 2021 0.1p February 2026 0.153p 280,000,000 375,000,000
605,000,000 1,125,000,000
The weighted average share price at the date of grant for share options was
0.25 pence. The options outstanding at 31 December 2022 were all granted at an
exercise price of 0.1p with an exercise period of five years from the date of
grant and a remaining contractual life of 3 years and 1 month.
The 375 million options granted to staff during the prior year have no
performance conditions associated with them but there is a two-year holding
period before the options can vest.
The 750 million options and warrants granted during the prior year to
Directors and a consultant vested during the year, as the performance
criterion that the Company's ordinary shares traded at a Volume Weighted
Average Price at or above a 50% premium to the placing price for 20
consecutive business days, was achieved. The share-based payment charge was
estimated at £1,125,281 and this was recognised in full in 2021.
The fair value of the 375 million options granted to staff in February 2021
was estimated at 0.153p per share and for the 750 million options granted to
Directors was estimated at 0.150p per share on the measurement date.
The estimated fair values of the share options were calculated by applying the
Black Scholes or Monte Carlo models in all cases except for the 750 million
options granted to Directors. In respect of the 750 million options granted to
the Directors, a binomial model was used since the options were significantly
in the money at the grant date and there was a very high probability of
achieving the share price hurdle condition.
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.
The model inputs using Black Scholes were:
Date of grant Exercise price Share price Risk free rate Expected volatility Gross dividend yield
February 2021 0.10p 0.25p 0.03% 29% -
The expected volatility for the February 2021 grant is based on the 5-year
volatility of comparable companies.
Total expenses of £85,000 (2021: £1,332,280) related to equity settled
share-based payment transactions were recognised in the Statement of
Comprehensive Income the year comprising charges in respect of directors' fees
settled in shares. For the prior year, the figure comprised new options
granted totalling £1,385,700 plus directors' fees settled in shares totalling
£76,599 less credits in respect of cancelled options that had not vested
totalling £130,019.
In respect of cancelled options that had vested, £337,584 (2021: £194,246)
was transferred from share-based payment reserve to the retained losses
reserve. In respect of exercised options, £300,075 (2021: £Nil) was
transferred from share-based payment reserve to the retained losses reserve.
26. Warrants
Broker warrants to subscribe for up to 997,000,000 ordinary shares, which
represented 20 per cent of the placing shares, were granted to Turner Pope
Investments (TPI) Ltd as part of the fundraising in February 2021. The broker
warrants are capable of exercise for a period of two years from 5 February
2021. The lapsed subsequent to the year end as set out in note 30. 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 is based on the 2-year
volatility of comparable companies.
27. Financial instruments
The Company's financial instruments comprise cash and various trade
receivables and trade payables that arise directly from its operations. No
trading in financial instruments is undertaken. The main risks arising from
the Company's financial instruments are liquidity, currency and interest rate.
The Board oversees the management of these risks, which are summarised below.
Liquidity risk
The Company finances its operations from equity funding provided by
shareholders and revenues generated by the business. The Company seeks to
manage liquidity risk to ensure enough funds are available to meet working
capital requirements.
The Company 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
commercial objectives of the Company will be achieved.
Inflationary risk
The Company faces a risk in the current higher inflationary environment that
slow paying trade debtors and cash balances will erode in value due to the
impact of inflation. In respect of cash balances, this in slightly offset by
higher interest rates on term deposits. Further, as expenses exceed revenue
this increases the risk of widening losses, although this could be potentially
offset by the Company's ability to grow revenue more than the corresponding
increase in costs.
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, 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 2022 and
31 December 2021.
Capital management
The Company's capital base comprises equity attributable to shareholders. As
the Company's focus has been on establishing itself as a successful supplier
of equipment design and engineering services, the primary objective in
managing cash spend has been to achieve progress on product development and
commercialisation in a cost-efficient manner and in managing liquidity risk to
ensure the Company continues as a going concern.
28. Related party transactions
Microsaic and DeepVerge plc ("DeepVerge") had two directors in common at the
start of 2022: Gerard Brandon and Nigel Burton. Gerard Brandon was, until his
resignation on 25 September 2023, Executive Chairman of Microsaic and was CEO
of DeepVerge until 3 November 2022 and resigned from the Board of DeepVerge on
7 November 2022. Nigel Burton is a Non-executive Director of Microsaic and was
a Non-executive Director of DeepVerge until becoming interim CEO on 3 November
2022.
Microsaic traded with two subsidiaries of DeepVerge during the year, Innovenn
UK Limited and Rinocloud Limited, which for the purposes of this note are
combined as a total. In summary for the year ended 31 December 2022, revenue
from DeepVerge sales totalled £1,248,828 (2021: £385,593) and purchases from
DeepVerge totalled £0 (2021: £210,600).
At 31 December 2022, £1,511,198 (2021: £247,412) inclusive of VAT was owed
by DeepVerge to Microsaic relating to the supply of goods and services
recognised as revenues for the year ended 31 December 2022. The Company had
expected to receive material payments from DeepVerge beginning in December
2022, but in the absence of these and given the increasing levels of overdue
payments from DeepVerge, the Company sought to reach a formal agreement with
DeepVerge, as first announced in the RNS dated 18 April 2023,. However, given
the circumstances of DeepVerge's financial position (per note 30), it was not
possible to obtain written agreement although DeepVerge made initial payments
in line with the informally agreed plan - hence the outstanding balance
reduced from £1.5m to approximately £1.4 m gross in early 2023.
As described in note 30, subsequent to the year-end DeepVerge issued an RNS
casting significant doubt on its ability to settle this debt. As outlined
above, it is 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: £0) has been recognised against this debt. This
represents the amount of outstanding debt at 26 June 2023, less recoverable
VAT.
At 31 December 2022, £65,610 (2021: £65,610) was owed by Microsaic to
DeepVerge. This remains unpaid by Microsaic.
On 14 February 2022, Dr Nigel Burton, Non-executive Director, exercised
warrants relating to 200 million Ordinary Shares, reflecting an investment of
£200,000 in Microsaic.
On 12 January 2024 Microsaic entered into an acquisition agreement for the
trade and assets of the Microtox business of Modern Water, as set out in note
3.
29. Control
As at 31 December 2022, no individual shareholder had a controlling interest
in the Company.
30. Events after the Reporting Date
Adjusting events subsequent to 31 December 2022:
· On 26 June 2023, the related party DeepVerge announced that it would
no longer support the ongoing costs of its subsidiaries and is seeking to
realise whatever value is possible through the sale of one or more of the
Labskin, Modern Water and Glanaco business units and DeepVerge's shares were
suspended. As at 26 June 2023, the balance owed by DeepVerge to Microsaic
stood at £1,351,894. Following the deduction of VAT on the amount outstanding
of £221,725, which has since been recovered from HMRC as bad debt relief, the
net of VAT potential bad debt £1,130,169. As the likelihood of any further
receipts from DeepVerge is highly uncertain, this amount of £1,130,169 has
been charged in full within expected credit losses as at 31 December 2022.
Non-adjusting events subsequent to 31 December 2022:
· On 5 February 2023, the Broker warrants to subscribe for up to
997,000,000 ordinary shares at an exercise price of 0.1p as set out in note 26
lapsed unexercised;
30. Events after the Reporting Date (continued)
· On 25 September 2023 it was announced that Gerry Brandon, Executive
Chairman, had resigned and left the Company and the Board with immediate
effect, to be replaced as Executive Chairman by Bob Moore, who joined the
Company as a Non-Executive Director in March 2022.
· As announced on 3 November 2023, and explained in further detail in
the shareholder circular dated 4 December 2023, the Company has begun a very
significant cost reduction exercise which is expected to result in the Company
remaining as an operating business, with access to sufficient resources
(including external contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading relationships.
Ongoing activities are expected to include recently redesigned PFAS and
ProteinID technologies which have undergone internal testing ahead of
commercial field trials, and which the Company now expects to bring to market
through partnership agreements in 2024.
31. Cash absorbed by operations
Year to 31 Year to 31
December December
2022 2021
£ £
Total comprehensive loss for the year (2,288,709) (3,128,581)
Adjustments for:
Amortisation of intangible assets 30,487 38,241
Depreciation of right of use assets 72,528 70,499
Depreciation of property, plant and equipment 178,102 90,628
Transfer of property, plant and equipment to cost of goods (44,192) 23,164
(Profit)/Loss on the disposal of assets 1,638 (113)
Decrease in provision for warranty (415) (24,075)
Increase in provision for dilapidations 15,840 -
(Decrease)/Increase in provision for expected credit losses 1,127,416 (65,825)
Share-based payments 234,749 1,363,764
Increase/(Decrease) in inventory provision (28,152) 32,535
Tax on loss on ordinary activities (246,224) (267,785)
Interest on lease liability 7,013 4,433
Interest received (23,423) (6,237)
Movements in working capital
Decrease /(Increase) in inventories 38,008 253,152
(Increase)/Decrease in trade and other receivables (1,089,832) (398,083)
Increase/(Decrease) in trade and other payables (118,166) 168,684
Accrued furlough income - 17,748
Cash absorbed by operations (2,133,332) (1,827,851)
32. Prior period restatement
As set out in the Accounting Policies (Note 1) for Cost of Sales, from 1
January 2022 new policies were adopted. Accordingly, for the year to 31
December 2021, Cost of Sales and other operating expenses have been restated
to reclassify the amount £15,233 from operating expenses to cost of sales.
There was no effect on the loss after tax.
The previous policy for cost of sales included external direct costs but did
not include an apportionment of staff costs. Under the new policy, includes a
time-based apportionment of staff costs in respect of providing services to
customers. With the introduction of new service-based revenue stream, this
better reflects the matching of income and expenditure arising from contracts
with customers.
As a result of the changes, updates to the disclosures in note 7 Expenses by
Nature have also been updated. Research & Development expenses, which were
previously shown on the face of the Statement of Comprehensive Income, are now
split between Administrative Expenses and Cost of Sales, and so disclosed in
total in note 7. Similarly, as Cost of Sales no longer solely includes the
cost of inventories sold, note 7 discloses the cost of inventory items
expensed. Comparative disclosures have been made in line with the current year
disclosures.
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