REG - Microsaic Systems - Half-year Report
16/01/2024 07:00
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RNS Number : 8234Z Microsaic Systems plc 16 January 2024
16 January 2024
Microsaic Systems plc
("Microsaic", "Microsaic Systems" or the "Company")
Interim Results for the six months ended 30 June 2023
Microsaic Systems plc (AIM: MSYS), the developer of micro-electronic
instruments and analytical solutions, is pleased to announce its unaudited
interim results for the six months ended 30 June 2023. The extensive research
and development work behind our novel ProteinID, PFAS (forever chemicals) and
acrylamide detection technologies has concluded with working test units
following the period end. Building on our transition from unit (4500 MiD®)
product mass spectrometer sales only to customer-centric service solutions in
science and engineering services, the Company is now focusing on commercial
testing, sales and servicing of these exciting new technologies.
A copy of these interim results is being made available on the Company's
website at https://www.microsaic.com/investors/
(https://www.microsaic.com/investors/) , and hard copies will be sent to
shareholders who have requested communications in that format.
Highlights
· Unaudited revenues of £139k: a decrease of 81% on H1 2022 (£735k)
· EBITDA adjusted loss of £1,023k which is 55% higher than H1 2022
(£661k)
· Total comprehensive loss of £1,079k an increase of 53% compared to
H1 2022 (£705k)
· Cash at 30 June 2023 was £587k (H1 2022: £2.56m)
· An agreement was signed with a new global technology distributor
Avantor (via VWR International Ltd)
· Orders for 8 Units received for manufacture in H2 2023
Post Period Events
· Technical issues with the testing of key components from suppliers
holding up the manufacturing process are being resolved with up to 10 units
now in final test or being manufactured in H2 2023
· Unit orders shipped in H2 (including one demonstration unit)
increased to 6 with sales revenue invoiced at £262k by year end
· July 2023: The DeepVerge plc announcement on 26 June 2023 about its
dire financial position resulted in the outstanding debt of circa £1.3m to
the Company not being settled. As a result, the Company's annual audited
accounts could not be finalised and trading on AIM was then temporarily
suspended on 3 July pending publication of the Company's annual audited
accounts
· September 2023: Gerry Brandon resigned as Executive Chairman on 25
September and was replaced by Bob Moore who was previously a non-executive
director of the Company
· October 2023: notice of redundancy was issued to all staff and notice
given to close the Woking premises before year end
· December 2023: After private financing initiatives failed to complete
and after considering delisting from AIM and putting the Company into
administration the Board engaged Turner Pope Investments to raise sufficient
capital with the objective of restoration of its shares to trading on AIM and
make an asset acquisition. A targeted acquisition saw the Company enter into
an Exclusivity Agreement with DeepVerge plc to acquire certain assets of its
Modern Water business. This is part of the Company's growth strategy to offer
a wider range of technologies and a more comprehensive service by enhancing
our equipment manufacturing and supply capabilities.
· January 2024: The Company announced it has executed an Acquisition
Agreement with DeepVerge plc and its subsidiary, Innovenn UK Limited, to
acquire certain assets comprising the Modern Water business for a total
consideration of £100,000 payable at completion. The Company also announced
that Turner Pope Investments has successfully secured conditional funding
commitments to raise gross proceeds of circa £2.1 million through a placing
of 169,000,000 New Ordinary Shares. Net proceeds of the Placing (being £1.8
million) are to be deployed to satisfy the acquisition and support the capital
needs of the Company as enlarged by the acquired Modern Water business which
will be restarted under Microsaic's ownership.
Outlook
· The Board looks forward to the conclusion of commercial testing of
our novel ProteinID and PFAS detection technologies during 2024 and increased
production of our core 4500 MiD® units. Assuming the refinancing of the
Company and acquisition of Modern Water technology and assets is completed,
the Company intends to deploy these acquired technologies together with our
existing and newly developed products in a growing worldwide market.
Bob Moore, Acting Executive Chairman of Microsaic Systems plc, commented:
"2023 has been a very difficult year for the Company and a total reset of the
business has been required as a result. Nevertheless, the research and
development work by our talented technical team and substantial investment
over many years has resulted in novel detection technologies that are now
ready for commercial testing and deployment into the market. We look forward
to collaborating with large original equipment manufacturers (OEMs) to realise
the potential of our products through their extensive sales and marketing
channels."
Enquiries:
Microsaic Systems plc +44 (0) 20 3657 0050
Bob Moore, Acting Executive Chairman via TPI
Singer Capital Markets +44 (0)20 7496 3000
(Nominated Adviser & Joint Broker)
Aubrey Powell / Angus Campbell / Oliver Platts
Turner Pope Investments (TPI) Limited +44 (0) 20 3657 0050
(Joint Broker)
Andy Thacker / James Pope
About Microsaic Systems
Microsaic has over 20 years' experience in microelectronics and development of
instrumentation. The Co mpany has an extensive and innovative patent portfolio
in industry-leading technology designed and developed for "Industry 4.0"
application serving markets in diversified Industries,
Human and Environmental Health. Microsaic's very energy efficient micro
system solutions have enabled analytical detection and characterisation at the
point-of-need, whether within a mobile testing capability, conventional
laboratory setting, or within a bioprocessing facility for continuous
detection of data at multiple steps in the process workflow.
Microsaic's products and solutions are commercially available through global
markets via a network of regional and local partners, targeting its core
laboratory, manufacturing and point-of-need applications.
Chairman's Statement
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 which include the acquisition of the Modern Water business, both in
early 2024.
We are delighted that the Company has been able to remain solvent after a
total reset and by retaining our admission to trading on AIM the Company now
has the necessary financing to complete the acquisition and provide capital to
invest in and develop the enlarged business. The assets acquired are
complementary to the existing Microsaic business model. Using the acquired
assets we intend to restart the manufacture of the MicroTox® bio-reagents 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 outsourced manufacturing and servicing model for
our existing and acquired testing machine technologies. 2024 will prove to be
a busy year. The objective is to reset and redesign the Company around a new
and much more efficient cost model based on the integration of the enlarged
business to optimise growth of sales, solutions and services income to be
generated by the combined entities.
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2023
6 months 6 months Year to 31
to 30 June to 30 June December
2023 2022 2022
Notes Unaudited Unaudited Audited
£ £ £
Revenue 4 139,404 734,914 1,567,697
Cost of sales 5 (145,494) (301,538) (618,330)
Gross profit (6,090) 433,376 949,367
Other operating income - - -
Research and development expenses (312,637) (219,491) (404,043)
Impairment of related party debt - - (1,130,169)
Other operating expenses (852,726) (914,819) (1,731,749)
Total operating expenses (1,165,363) (1,134,310) (3,265,961)
Loss from operations before share-based payments (1,171,453) (700,394) (2,316,594)
Share-based payments 11 - (126,002) (234,749)
Loss from operations after share-based payments (1,171,453) (826,936) (2,551,343)
Financial cost (873) (4,104) (7,013)
Finance income 12,592 7,083 23,423
Loss before tax (1,159,734) (823,957) (2,534,933)
Tax on loss on ordinary activities 81,207 119,246 246,224
Total comprehensive loss for the period (1,078,527) (704,711) (2,288,709)
Loss per share attributable to the equity holders of
the Company
Basic and diluted loss per ordinary shares 6 (0.017)p (0.011)p (0.036)p
Note that the above revenues in the 6 months to 20 June 2023 include £65,826
to DeepVerge plc subsidiaries (1H 2022: £546,718, FY22 £1,248,828). Although
DeepVerge made payments to cover the revenues in the period, on 26 June 2023,
DeepVerge announced that it would no longer be able to support its
subsidiaries and was anticipating a sale or liquidation of these assets. The
results above, subsequent performance in 2023 and expectations or 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.
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
AS AT 30 JUNE 2023
30 June 30 June 31 December
2023 2022 2022
Notes Unaudited Unaudited Audited
£ £ £
ASSETS
Non-current assets
Intangible assets 60,546 66,637 69,160
Property, plant and equipment 286,609 296,342 380,272
Right of use assets 38,018 90,554 54,005
Total non-current assets 385,173 453,533 503,437
Current assets
Inventories 283,771 255,346 274,045
Trade and other receivables 448,392 1,112,605 594,364
Corporation tax receivable 342,519 387,032 514,009
Cash and cash equivalents 587,024 2,562,741 1,241,480
Total current assets 1,661,706 4,317,724 2,623,898
TOTAL ASSETS 2,046,879 4,771,257 3,127,335
EQUITY AND LIABILITIES
Equity
Share capital 1,731,413 1,731,413 1,731,413
Share premium 28,262,518 28,262,518 28,262,518
Share-based payment reserve 2,316,048 2,817,181 2,400,796
Retained losses (30,669,247) (28,616,601) (29,675,468)
Total Equity 1,640,732 4,194,511 2,719,259
Current liabilities
Trade and other payables 218,984 379,382 236,445
Lease liability 17,929 73,699 52,918
Total current liabilities 236,913 453,081 289,363
Non-current liabilities
Provision 9 148,649 105,045 115,385
Lease liability 20,584 18,620 3,328
Total non-current liabilities 169,233 123,665 118,713
Total liabilities 406,146 576,746 408,076
TOTAL EQUITY AND LIABILITIES 2,046,879 4,771,257 3,127,335
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
AS AT 30 JUNE 2023
Share
based
Share Share payment Retained Total
capital premium reserve Losses equity
£ £ £ £ £
At 1 January 2022 1,702,913 28,006,018 2,888,707 (28,024,418) 4,573,220
Total comprehensive loss for the period - - - (704,711) (704,711)
Transactions with owners
Shares issued 28,500 256,500 - - 285,000
Transfer in respect of lapsed share options - - (112,528) 112,528 -
Share based payments share options - - 41,002 - 41,002
At 30 June 2022 1,731,413 28,262,518 2,817,181 (28,616,601) 4,194,511
At 1 July 2022 1,731,413 28,262,518 2,817,181 (28,616,601) 4,194,511
Total comprehensive loss for the period - - - (1,583,998) (1,583,998)
Transactions with owners
Transfer in respect of directors warrants exercised - - (300,075) 300,075 -
Transfer in respect of lapsed share options - - (225,056) 225,056 -
Share based payments-share options - - 108,746 - 108,746
At 31 December 2022 1,731,413 28,262,518 2,400,796 (29,675,468) 2,719,259
At 1 January 2023 1,731,413 28,262,518 2,400,796 (29,675,468) 2,719,259
Total comprehensive loss for the period - - - (1,078,527) (1,078,527)
Transactions with owners
Transfer in respect of lapsed share options - - (84,748) 84,748 -
Share based payments share options - - - - -
At 30 June 2023 1,731,413 28,262,518 2,316,048 (30,669,247) 1,640,732
STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2023
6 months 6 months Year to 31
to 30 June to 30 June December
2023 2022 2022
Notes Unaudited Unaudited Audited
£ £ £
Cash flows from operating activities
Cash absorbed by operations 12 (870,893) (997,506) (2,133,332)
Corporation tax received 252,697 - -
Net cash used in operating activities (618,196) (997,506) (2,133,332)
Cash flows from investing activities
Purchases of intangible assets (5,307) (6,331) (26,880)
Purchases of property, plant and equipment (23,397) (65,019) (208,495)
Interest received 12,592 5,850 23,423
Net cash used in investing activities (16,112) (65,500) (211,952)
Cash flows from financing activities
Proceeds from share issues - 200,000 200,000
Share issue costs - - -
Repayment of lease liabilities (20,148) (39,130) (78,112)
Net cash from/(used in) financing activities (20,148) 160,870 121,888
Net increase/(decrease) in cash and cash equivalents (654,456) (902,136) (2,223,396)
Cash and cash equivalents at beginning of the year 1,241,480 3,464,876 3,464,876
Cash and cash equivalents at the end of the period 587,024 2,562,741 1,241,480
NOTES TO THE INTERIM FINANCIAL INFORMATION (UNAUDITED)
1. Nature of Operations
Microsaic Systems plc (the "Company") is registered in England and Wales. The
Company's registered office is 1-7 Park Road, Caterham, Surrey CR3 5TB, with
effect from 11 January 2024. The Company has no subsidiaries, so the financial
information relates to the Company only. Microsaic is a high technology
company developing compact, chip-based mass spectrometers that are designed to
improve the efficiency of pharmaceutical R&D.
2. Basis of preparation
The interim financial statements of the Company for the six months ended 30
June 2023, which are unaudited, have been prepared in accordance with the
accounting policies set out in the annual report and accounts for the year
ended 31 December 2022, which were prepared under International Financial
Reporting Standards ("IFRS").
This report does not constitute statutory accounts as defined in Section 434
of the Companies Act 2006 and has not been audited. The financial information
for the full preceding year is based on the statutory accounts for the year
ended 31 December 2022. Those statutory accounts have been published and will
shortly be filed with the Registrar of Companies. The auditor's report on
those statutory accounts was unqualified.
As permitted, this interim report has been prepared in accordance with the AIM
Rules for Companies and not in accordance with IAS 34 "Interim Financial
Reporting" and therefore it is not fully compliant with IFRS.
The interim financial statements are presented in pounds sterling.
3. Critical accounting estimates and judgements
Accounting estimates and judgements are continually evaluated and are based on
past experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The
resulting accounting estimates could, by definition, differ from the actual
outcome.
Estimates and adjustments that have a risk of causing a material adjustment to
the carrying amounts of assets and liabilities are set out in the annual
report and accounts for the year ended 31 December 2022, and no additional
items have been identified.
4. Revenues
IFRS 15 provides a single, principles based, five-step model to be applied to
all contracts with customers. The five-step framework includes:
Identify the contract(s) with a customer;
Identify the performance obligations in the contract; Determine the
transaction price;
Allocate the transaction price to the performance obligations in the contract;
and Recognise revenue when the entity satisfies a performance obligation.
The Company recognises revenue from the following four sources:
Sale of products;
Sale of consumables and spare parts; Product service and product support; and
Consultancy services.
All revenues and trade receivables arise from contracts with customers.
Revenue is measured based on the consideration which the Company expects to be
entitled in a contract with a customer and excludes amounts collected on
behalf of third parties. The sale of products, consumables and spare
parts is recognised when the sole performance obligation is met which is
usually on delivery to the customer. For product service, product support and
consultancy services revenue, the performance obligation is satisfied over the
duration of the service period and revenue is recognised in line with the
satisfaction of the performance obligation.
Sale of products
The Company sells compact mass spectrometers (Microsaic 4500 MiD®) mainly
through OEMs and Distributors. A small proportion of its sales are direct to
the customer. Discounts are offered and agreed as part of the contractual
terms. Terms are generally Ex Works so control passes when the customer
collects the goods. Payment terms are generally 30 days from the date of
invoice.
Sales of consumables and spare parts
The Company sells consumables and spare parts mainly through OEMs and
Distributors. Terms are generally Ex Works so control passes when the customer
collects the goods. Discounts are offered and agreed as part of the
contractual terms. Payment terms are generally 30 days from the date of
invoice.
Product service and product support revenue
Service and support to our OEMs and Distributors includes training their sales
and service teams and servicing the products from time to time. Discounts are
offered and agreed as part of the contractual terms. Terms are Ex Works so
control passes when the customer receives the service. Payment terms are
generally 30 days from the date of invoice.
Usually, there is no obligation on the Company for returns, refunds or similar
arrangements. Also, the Company does not manufacture specific items to a
customer's specification and no financing component is included in the terms
with customers.
The Company provides assurance warranties which are 15 months from the date of
shipment for OEMs and Distributors. These warranties confirm that the product
complies with agreed-upon specifications. The Company is looking to provide
service warranties in the future to direct customers in Europe, where the
revenue from such warranties will be recognised over the period of the service
agreement.
Consultancy services revenue
Consultancy services comprise science and engineering consultancy, laboratory
services and monitoring services. These services are delivered over a period
of time usually in accordance with a master services agreement and/or
statement of works with an agreed outcome at the end of the project or project
phase.
Consultancy services revenue is recognised by reference to the stage of
completion of the project or project phase at the balance sheet date as
follows:
· Where there are defined project or project phase milestones, the
revenue is recognised in full on completion of the project or project phase
and on a time basis for the stage of completion where the project or project
phase is not completed at the balance sheet date. The stage of completion is
recognised as the proportion of time spent on the project or project phase
compared with the total time anticipated to complete the project or project
phase; and/or
· Where the project is defined with the client in terms of time spent,
the revenue is recognised on the basis of consulting time spent on the project
by the Company at the time-based rates agreed with the client.
The geographical analysis of revenues (by location of shipment) was as
follows:
6 months 6 months Year to 31
to 30 June to 30 June December
2023 2022 2022
Unaudited Unaudited Audited
£ £ £
UK 11,251 634,200 1,354,872
USA 2,185 50,703 103,752
EU 71,636 29,610 67,646
China 54,332 12,122 30,631
ROW - 8,279 10,796
139,404 734,914 1,567,697
The product group analysis of revenues was as follows:
6 months 6 months Year to 31
to 30 June to 30 June December
2023 2022 2022
Unaudited Unaudited Audited
£ £ £
Product/Unit 47,087 165,011 206,915
Consumables and spares 13,596 67,586 137,397
Service and support income 78,721 502,317 1,223,385
139,404 734,914 1,567,697
Note that the above revenues in the 6 months to 20 June 2023 include £65,826
to DeepVerge subsidiaries (1H 2022: £546,718, FY22 £1,248,828). 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 results above, subsequent performance in 2023 and expectations or
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.
5. Cost of sales
Cost of sales of products
The cost of sales of mass spectrometers and related equipment is the bought in
purchase cost of the product or the transfer value from stock value if a unit
has been previously written down. Usually, the sale is made on an Ex-Works
basis but if it were not the cost of delivery to the customer is also included
in cost of sales.
Cost of sales of consumables and spare parts
The cost of sales of consumable and spare parts is the bought in purchase cost
of the consumable or spare part or the transfer value from stock value if an
item has been previously written down. Usually, the sale is made on an
Ex-Works basis but if it were not the cost of delivery to the customer is also
included in cost of sales.
Cost of sales of product service and product support income
The cost of sales of service and support income is the time-based
apportionment of the employment costs of the relevant staff spent on the
delivery of the service and support income plus any related costs of
fulfilment such as travel expenses and any externally incurred direct costs.
For the purposes of cost of sales, the employment costs are considered to be
salaries, pensions and employers national insurance but does not include
share-based payments nor any apportionment of training or overheads.
Cost of sales of consultancy services revenue
The cost of sales of consultancy services (comprising science and engineering
consultancy, laboratory services and monitoring services) is the time-based
apportionment of the employment costs of the relevant staff spent on the
delivery of this revenue plus any related costs of fulfilment such as travel
expenses and any externally-incurred direct costs. For the purposes of cost of
sales, the employment costs are considered to be salaries, pensions and
employers national insurance but does not include share-based payments nor any
apportionment of training or overheads.
6. Loss per share
6 months 6 months Year to 31
to 30 June to 30 June December
2023 2022 2022
Unaudited Unaudited Audited
Comprehensive loss attributable to equity (1,078,527) (704,711) (2,288,709)
shareholders (£)
Weighted average number of ordinary 0.01p
(2022: 0.01p) shares for the purpose of basic 6,324,666,516 6,287,359,621 6,324,666,516
and diluted loss per share
Basic and diluted loss per ordinary share (p) (0.017)p (0.011)p (0.036)p
The basic loss per share has marginally increased when compared with H1 2022.
This was due to a 56% increase in the comprehensive loss, arising mainly from
the 81% reduction in revenues.
Potential ordinary shares are not treated as dilutive as the Company is loss
making, therefore the weighted average number of ordinary shares for the
purposes of the basic and diluted loss per share are the same.
7. EBITDA Adjusted Loss
A key indicator of performance for the Company is Adjusted EBITDA Loss (Loss
of earnings before interest, tax, depreciation, amortisation and other items
such as share-based payments and exceptional one-off expenditure). Detailed
below is the Adjusted EBITDA Loss for the period:
6 months 6 months Year to
to 30 June to 30 June 31-Dec
2023 2022 2022
Unaudited Unaudited Unaudited
£ £ £
Comprehensive loss for period (1,078,527) (704,711) (2,288,709)
Adjust for:
Tax on loss on ordinary activities (81,207) (119,246) (246,224)
Depreciation of property, plant and equipment 95,250 74,364 178,102
Depreciation of right of use assets 37,797 35,980 72,528
Amortisation of Intangibles 13,921 14,099 30,487
Net finance cost/(income) (10,176) (2,979) 16,410
Share-based payments (excluding fee shares) - 41,002 234,749
EBITDA Adjusted Loss (1,022,942) (661,491) (2,002,657)
8. Employees and employment related costs
6 months 6 months Year to 31
to 30 June
to 30 June
December
2023 2022 2022
Unaudited Unaudited Audited
Staff Numbers
Directors 2 3 3
Other staff 21 19 19
Average Headcount 23 22 22
£ £ £
Employment costs (including Directors)
Wages and salaries 526,258 514,539 985,734
Social security costs 57,000 74,710 133,630
Termination payments 4,854 21,125 21,125
Pension costs 70,954 77,578 144,038
Employment related share-based payments 21,277 82,943 234,749
680,343 770,895 1,519,276
9. Provisions
Dilapidations Warranties TOTAL
£ £ £
Balance at 1 January 2023 91,619 23,766 115,385
Provided for/(reduced) during the period 25,907 7,357 33,264
Balance at 30 June 2023 117,526 31,123 148,649
The dilapidations provision has been updated for the estimated impact of
inflation.
10. Commitments
As at 30 June 2023, purchase commitments relating to purchase orders placed
on, and related contractual arrangements and obligations, with our third-party
manufacturers amounted to £559,800 (31 December 2022: £651,944).
11. Share-based payments
The share-based payments charge comprises 6 months 6 months Year to
to 30 June to 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
£ £ £
Directors' fees settled in shares - 41,941 85,000
Share options granted - 41,002 149,749
Employment related share-based payments - 82,943 234,749
Brokers' fees settled in shares - 43,059 -
- 126,002 234,749
There were no Directors' fees settled in shares in the 6 month period to 30
June 2023.
12. Cash absorbed by operations
6 months 6 months Year to 31
to 30 June to 30 June December
2023 2022 2022
Unaudited Unaudited Audited
£ £ £
Total comprehensive loss for the year (1,078,527) (704,711) (2,288,709)
Adjustments for:
Amortisation of intangible assets 13,921 14,099 30,487
Depreciation of right of use assets 37,797 35,980 72,528
Depreciation of property, plant and equipment 95,250 74,364 178,102
Transfer of property, plant and equipment to - - (44,192)
cost of goods
Profit on disposal of right of use assets - - 1,638
Increase/(Decrease) in provision for dilapidation 25,907 8,199 (415)
Increase/(Decrease) in provision for warranty 7,357 (3,114) 15,840
Increase/(Decrease) in provision for expected - 4,755 1,127,416
credit losses
Share-based payments (inclusive of fees settled in shares) - 126,002 234,749
Increase/(Decrease) in inventory provision 15,652 (14,033) (28,152)
Tax on loss on ordinary activities (81,207) (119,246) (246,224)
Interest on lease liability 2,416 4,104 7,013
Interest received (12,592) (5,850) (23,423)
Cash absorbed by operations before movements in working capital (974,026) (579,451) (963,342)
Movements in working capital:
(Increase)/Decrease in inventories (25,378) 42,587 38,008
(Increase)/Decrease in trade and other receivables 145,972 (485,413) (1,089,832)
Increase/(Decrease) in trade and other payables (17,461) 24,771 (118,166)
Cash absorbed by operations (870,893) (997,506) (2,133,332)
13. Related party transactions
During the period, Microsaic and DeepVerge plc ("DeepVerge") had two directors
in common: Gerard Brandon and Nigel Burton. Gerard Brandon was Executive
Chairman of Microsaic and CEO of DeepVerge until his resignation on 25
September 2023.
In the six months ended 30 June 2023, revenue from DeepVerge subsidiaries
totalled £65,826 to (1H 2022: £546,718, FY22 £1,248,828). 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 results above, subsequent performance in 2023 and expectations or
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.
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, 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 £1.4m gross in early 2023.
On 26 June 2023 DeepVerge issued an RNS casting significant doubt on its
ability to settle this debt. In preparing the accounts to 31 December 2022,
given that it was the opinion of the directors that the conditions leading to
this were in existence at 31 December 2022, a provision for expected credit
losses of £1,130,169 (2021: £0) was recognised against this debt in the
accounts to 31 December 2022. This represented the amount of outstanding debt
at 26 June 2023, less recoverable VAT. No further provisions were made in
relation to DeepVerge in the six months ended 30 June 2023.
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