REG - Supply @ME Capital - 2021 Annual Financial Report
31/05/2022 07:00
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RNS Number : 3115N Supply @ME Capital PLC 31 May 2022
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31 May 2022
Supply@ME Capital plc
(The "Company" or "SYME")
2021 Annual Financial Report
Supply@ME Capital plc, the fintech business which provides an innovative
Platform for use by manufacturing and trading companies to access Inventory
Monetisation© solutions enabling their businesses to generate cashflow,
announces its final results for the year ended 31 December 2021.
The 2021 Annual Financial Report has been uploaded and is available on the
National Storage Mechanism and is also available on the Company's website,
www.supplymecapital.com (http://www.supplymecapital.com) .
A hard copy version of the full Annual Report and Accounts for the year ended
2021 will be dispatched to those shareholders who have elected to receive
paper communications in due course and a PDF version will be published on the
Supply@ME website next week.
Consolidated Financial Summary
2021 2020
£m £m
Total revenue 0.5 1.1
Gross (loss)/profit (0.3) 0.4
Adjusted operating loss(1) (4.4) (1.4)
(Loss) before tax (12.2) (2.8)
Total assets 10.6 3.3
Net (liabilities) (1.4) (0.5)
(1)Adjusted operating loss is the operating (loss) before deemed cost of
listing, acquisition related costs and impairment charges.
Operational Highlights
In-transit monetisation
2021 Q1 2022
Net growth in capital under management 4% 17%
The increase in the net growth in Q1 2022 is a combined increase from the
existing TradeFlow USD and EURO funds. The movement was due to the volatility
seen in other asset classes over this period, and the removal of travel
restrictions and COVID-19 controls in many parts of the world, both of which
resulted in a rise of new investors looking for fixed income alternative
investments.
Warehoused Goods monetisation
Pipeline £164.8m
The pipeline KPI represents the current potential value of warehoused goods
inventory to be monetised rather than pipeline revenue expected to be earned
by the Group (being the Company and its subsidiaries). As such, this provides
a good indicator of the level of demand for the Groups warehoused goods
monetisation services. This pipeline represents the value as at most practical
date possible prior to the issue of this annual report (being 24 May 2022).
Alessandro Zamboni, CEO, Supply@ME Capital Plc, said: "2021 was a formative
year for Supply@ME. Across the Group, we have built significant value into the
business by way of technological improvements, recruiting new talent,
strengthening our internal processes and the acquisition of TradeFlow Capital
Management Ltd. Achieving these important milestones has laid the
foundations for sustained growth going forward."
David Bull, Non-Executive Director, Supply@ME Capital Plc, said: "Throughout
2021, the entire team at Supply@ME worked tremendously to seize opportunities
and further progress the business, despite the challenging conditions wrought
by a global pandemic followed by a supply chain crisis. The numbers in 2021
are reflective of a period of building, testing, learning and futureproofing.
Now, with an enhanced leadership team and significant investment into the
proprietary business model and platforms, I look forward to the new dimension
the business will add to the global supply chain finance landscape as it
continues to grow."
Notes
Supply@ME Capital PLC and its operating subsidiaries (together the "Group")
provide an innovative fintech platform (the "Platform") for use by
manufacturing and trading companies to access inventory trade solutions
enabling their businesses to generate cashflow, via a non-credit approach and
without incurring debt. This is achieved by their existing eligible
inventory being added to the Platform and then monetised via purchase by third
party Inventory Funders. The inventory to be monetised can include
warehouse goods waiting to be sold to end-customers or goods/commodities that
are part of a typical import/export transaction. SYME announced in August 2021
the launch of a global Inventory Monetisation programme which will be
focused on both inventory in transit monetisation and warehouse goods
monetisation. This program will be focused on creditworthy companies and not
those in distress or otherwise seeking to monetise illiquid inventories.
Contacts
Alessandro Zamboni, CEO, Supply@ME Capital plc, investors@supplymecapital.com
Paul Vann, Walbrook PR Limited, +44 (0)20 7933 8780; paul.vann@walbrookpr.com
Brian Norris, Cicero/AMO, +44 (0)20 7947 5317; brian.norris@cicero-group.com
(mailto:brian.norris@cicero-group.com)
Management Report
Chief Executive Officer's Statement
The need for Supply@ME, and the need for the services which this business
offers, is even greater now than when we launched on the London Stock Exchange
in 2020. 2021 was a year of global crisis and disruption. Business confidence
for many fell to new lows and the focus was on surviving COVID-19. Supply
chains have had to be rebuilt stronger: "just in time" has given way to "just
in case". This did not happen overnight. Local driver shortages have
exacerbated global problems. Supply@ME has learnt considerably from the
experiences of the past two years, and as a result we believe the future is
very bright.
What We Built
Business confidence in 2021 stymied our progress in some areas. Like many of
our shareholders and partners, I expected us to have completed several
inventory monetisations by the year end. However, the impact that COVID-19 had
on business priorities for our partners, and which multiple lockdowns had on
the speed of decision making, was significant. While we could not control
this, our business and offering are stronger with the benefit of additional
time and the feedback we have been able to incorporate into the Platform. For
Supply@ME, 2021 was a formative year.
We Secured Funding and Additional Investment
The proceeds from the two funding arrangements entered into during 2021
allowed the Company to complete the acquisition of TradeFlow (our first
M&A deal), as well as to continue the important investment into the assets
of the Group, including the intellectual property rights over the platform,
and to invest in recruiting our new leadership team. The recent Capital
Enhancement Plan, announced in April 2022, was fully subscribed by the
longterm investor Venus Capital SA ("Venus Capital") which proved that
professional investors believe in the inventory monetisation business model.
We also intend to enable existing shareholders of the Company to acquire new
ordinary shares on the same terms as Venus Capital. This combination of retail
and institutional investment will provide the Group with both commercial and
financial support for the next phase of the Group's development.
We Built Our Leadership Team
The Group's unwavering approach is to build a scalable business which
exemplifies the strong regulatory requirements required of a listed company.
In this regard, we believe shareholders are in good hands thanks to the
experience and dedication of our Executive Directors, Alessandro Zamboni, John
Collis and Thomas (Tom) James and our leadership team comprising our Chief
Financial Officer, our Chief People Officer, our Group Head of Enterprise Risk
Management, our Group Head of Operations and Transformation and our Group Head
of Origination. Further information on our executive directors and members of
our leadership team can be found on page 51 and 23, respectively, in the
Company's full Annual Report & Accounts 2021. Additionally, the Company
learned from, and leveraged, the deep corporate governance experience of our
previous Chairman, James (Jim) Coyle. The Board and the Nomination committee
are now focused on evaluating potential candidates for the Chair and
Non-Executive Director positions with capabilities and experience that will
complement those of the existing executive and Non-Executive Directors in
order to future proof the Board as the Group enters its next stage of
development.
We Completed the Acquisition of TradeFlow
The addition of TradeFlow to our Group provides the ability to offer an
unrivalled inventory monetisation journey, allowing us to offer a unique, and
end-to-end, inventory monetisation journey from exporters to importers,
followed by a unique warehouse goods monetisation service. With a broader
footprint and customer base in Singapore, TradeFlow gives us a clear launch
pad for the Asian marketplace and links to key trading hubs globally.
We Clarified the Business Model
We distinguished the pure FinTech business from the inventory funding
structure as the provider of each inventory monetisation transaction. Details
of the current business model can be found on page 14 in the Company's full
Annual Report & Accounts 2021 including those activities that are expected
to be delivered by the Group in their capacity as inventory servicer, and
those that are expected to be delivered by segregated stock (trading)
companies which will be owned by the Global Inventory Fund (the "Fund"). While
the TradeFlow acquisition complemented the existing business model, the value
of what Supply@ ME has built, in terms of the technology and talent, also
became apparent. Our proprietary Platform has an intrinsic value and has
generated significant interest from other operators, from banks to debt
funders, to improve or facilitate their own inventory backed or based
facilities. Accordingly, we launched our White-label initiative at the end of
August 2021. We have also invested heavily, both in terms of time and
resources, upgrading the underpinning architecture and how it can avail of
TradeFlow's technology within its TradeFlow+ system. Our discussions with
potential inventory funders regarding the introduction of an equity line into
the capital structure of each inventory monetisation led to, and was addressed
by, the launch of the Fund as announced in August 2021. This Fund can serve as
an equity partner as well as on a standalone basis. The Fund also leverages
the funding structure of TradeFlow Capital, a further benefit to, and
justification for, the acquisition.
What We Learned
As the impact of COVID-19 crystallised for many businesses, the minds of Chief
Financial Officers (CFOs) at companies of every size have increasingly turned
to how to survive and thrive in the 'new normal'. There is a universal need to
find alternative solutions to manage the risks which the pandemic has brought
about. Some of these are obvious and indeed are the same which Supply@ME was
created to address. Businesses in every country in which we operate, or may
wish to operate, are retaining more inventory for longer. Monetising this
inventory and alleviating the increased cost holds an obvious and growing
appeal.
However, there are also new risks which have arisen and gained prominence.
Supply@ME is well placed to support businesses to find solutions to many of
these. From working on the digitisation of operations to inventory cost
optimisation and understanding client and supplier risk, the experience of the
past two years has emphasised the depth of services which our platform can
offer. Monetisation at the core will be combined with other services to bring
us closer to our clients. There is clear evidence that the service developed
by Supply@ME offers not only a means to allow corporates to sell goods but
also a real commercial partnership which allows our clients to better manage
their data, using this to monetise their inventory, optimise their supply
chain, and so further receive value from the same information generated.
There is much more to come, and we will continue to adopt a 'test and learn'
approach. We are now eager to put these lessons into practice.
Future Plans - Looking Ahead
There is now a new era of digitalisation and digitisation of supply chains.
The speed at which we have reached this point has been accelerated by the
recent geo-political crisis and the rise of new technology and business
paradigms (such as Web 3.0).
It is clear that corporates need to improve their processes. They are having
to set new objectives for their supply chains with greater focus on
resiliency, risk management and efficiency - optimising inventory management
and, enhancing the cash position as a key indicator for credit evaluation. In
our experience, corporate treasurers are moving from a reactive approach to a
more proactive and dynamic view.
For in-transit transactions, we are observing progress towards a new vision of
a modernised global trade finance ecosystem, with networks and players
focussed on digitalising parts of the trade and finance processes, providing a
framework for digitally connecting and facilitating interoperation among these
networks through sets of shared standards, processes, protocols, and guiding
principles. An integral part of this new vision is the "interoperability
layer", a global framework of standards and policies that enables participants
in the trade ecosystem to seamlessly connect to both present and future
networks.
Our Group wants to play the key role in this huge target addressable market
promoting its unique business proposition:
· Through our Platform, as an enabler of an innovative commercial model
which allows each Corporate to manage new strategic objectives for their
supply chain management (resiliency, cash optimisation, inventory efficiency
and digitisation of the trade process regarding both international and
domestic trade deals); and
· For investors, generating a unique opportunity in the alternative
capital markets, presenting an attractive risk/reward proposition within an
innovative asset class aimed at supporting the real economy.
We believe this can be achieved along global supply chains, both during the
export-to-import in-transit journey and during the warehoused goods
days-in-inventory phase, when goods are stored and enabling CFOs to more
efficiently manage the core assets of their business.
This can be realised and scaled, by leveraging our unique business model,
underpinned by the technology and the market expertise that our team has. The
positive results achieved regarding client companies' origination activities
and inventory funding routes expansion are further evidence of this.
It is fair to say the financial results for the year ended 31 December 2021 do
not provide the full picture of the vast amount of work that the Supply@ME
team have undertaken to continue to develop the Group and the Platform for
future success.
Alessandro Zamboni
Chief Executive Officer and Executive Director
The Market
The traditional supply chain funding model came under acute and intense
pressure during the global pandemic. But the last two years has reinforced the
viability of Supply@ME's innovative fintech solutions as COVID-19 and recent
geo-political unrest expedited technological advancement in areas such as
treasury, risk management and demand planning, in the face of unprecedented
supply chain disruption.
Additionally, the era of companies acting as conventional creditors to meet
the needs of the market is over. At Supply@ME, we are building a new inventory
monetisation model that gives firms the opportunity to adopt non-credit
approaches to free up digitally value from their inventories.
Our market analysis can therefore be viewed through a number of prisms: how
CFOs will leverage digitalisation, new methods being used by corporates to
manage their resiliency, the future global trade finance ecosystem and the
alternative asset investment industry.
The Changing Market
Large Enterprises
The role of today's CFO or treasurer has been rethought in recent times and
now encompasses a comprehensive approach to managing enterprise liquidity.
CFOs and Treasurers now place a premium on speed and flexibility for
evaluating liquidity financing alternatives. Bank-independent technology
solutions are becoming the preferred model. Further, seamless integration with
enterprise resource planning (ERP) systems and the ability to make swift
decisions (for instance, access to financing short-term investments) based on
underlying cash positions, are now priorities for large enterprises.
Building a new trusted data environment, which includes a Clients ERP data
transfers, the Inventory Monetisation model invented by Supply@ME aims to
create a new commercial approach to allow CFOs and treasurers to unlock value
from their inventory.
Small and Medium Enterprises (SMEs)
At the same time as Supply@ME first listed on the London Stock Exchange, in
March 2020, SMEs began to be negatively impacted by the outbreak of the
COVID-19 pandemic. According to the OECD report Financing SMEs and
Entrepreneurs 2022, over 50% of SMEs reported a significant drop in revenue
and risked being put out of business in less than three months. However, the
SME sector has rebounded, as we emerge from the global pandemic with new
lending sources emerging as a result of government monetary policy and a
renewal in business confidence.
But it is no secret that traditional banks could be doing more to serve the
SME sector. There is a perceived lack of appetite to lend to these businesses,
with the complexity of this lending outweighing the potential returns. Many
business owners have been pushed to dip into their personal finances or forgo
debt altogether. However, as businesses begin to bounce back from the impact
of Covid-19 and the supply chain crisis, many are looking to invest in their
operations to expedite recovery. The alternative finance sector is growing to
meet this demand. Supply@ME's Inventory Monetisation service offers an
improved alternative to traditional financing. Supply@ME has created a new way
to support SME needs, through a unique non-credit approach.
Digital Evolution
In retrospect, the recent supply chain crisis may not have been a matter of
if, but when. The "just in time" logistics model was always vulnerable to
shock, but previous models relied on such a shock being easily correctable or
highly unlikely. Companies' ability to forecast demand and determine how to
meet it has been further challenged by the increasingly global scope of supply
chains.
As companies begin to shift from this previous system to a more high-tech,
digitised supply chain, companies like Supply@ME have a role to play. The
unprecedented shift to new technologies forms a cornerstone of our business
model - as the digital maturity of more companies increases, our system will
slot in alongside them.
Resilience - The New Risk Management
Following the shocks to the existing supply chain structure, the business
world has begun to pivot from risk management to resilience. McKinsey found in
a 2020 survey that "just over threequarters of respondents said they planned
to improve resilience through physical changes to their supply chain
footprints". Repeating the survey in 2021, McKinsey found "an overwhelming
majority (92 percent) said that they had done so".
The survey also revealed a shift in strategy. Many of the companies surveyed
were planning a multi-branch approach to improve supply chain resilience.
These steps included increases in the inventory of critical products,
components, and materials, diversifying supply bases by relocating supply and
production networks. As companies shift their supply chains to this new focus
on resilience, they will need access to capital and to improve their inventory
data analytics capabilities. Supply@ME's Inventory Monetisation service can
facilitate this shift.
In-Transit Risks
The 2021 Suez Canal obstruction now seems like a minor footnote in the issues
that supply chains have faced over the last few years, yet it highlights to
the world the wider issue of in-transit risk. The last 12 months have reminded
shippers that relying on just-in-time supply from container shipping can be
risky.
Companies might begin to increase inventories and safety buffers, both at
departure and arrival ports. With this added cost, many businesses might also
realise that the funds locked up in their inventory could be put to better use
elsewhere in their business. While the outlook for containerised logistics and
global supply chains remains uncertain, businesses can turn to in-transit
inventory monetisation to unlock the liquidity tied up with increased stock
levels.
Risk Response Strategies
The frequency and magnitude of supply chain disruptions have been increasing
dramatically in the decade preceding the war in Ukraine.
Executive teams have placed a new weight on key supply chain actions, to
protect their businesses in the short term and transform their resilience over
the next decade.
With the winding down of government support, companies are more aware than
ever of the need to keep track of accessible liquidity. Financial institutions
oil the wheels of trade, for example around 40 percent of global goods traded
is supported by bank-intermediated trade finance. Despite trade finance's
critical role, however, gaps in coverage have been recognized for some time,
particularly for the SMEs that serve an increasingly important role in global
trade.
This process has been exacerbated by the impact of the COVID-19 pandemic and
is expected to continue without high-level intervention. As trade and supply
chains grow more complex, SMEs face greater challenges in accessing liquidity.
In this regard, we think that the alternative investments market combined with
state-of-the art fintech providers can be the solution. Supply@ME will play a
key role in this space in the coming years.
The Growth of Alternate Asset Classes
Hedge Funds
The robust growth of the hedge fund sector has continued in 2022. So far this
year, taking advantage of increased economic volatility and risk management,
the hedge fund industry comfortably outperformed the S&P Total Return
Index. In 2021, according to HFR, hedge funds delivered global annual returns
of 10.3%, the second year in succession a double-digit return was recorded.
Furthermore, total hedge fund assets now exceed $4 trillion.
Accordingly, Supply@ME's business model and inventory monetisation services
are well-suited to the hedge fund asset class, reinforced by the opportunity
to leverage TradeFlow's experience in structuring and advising hedge funds.
Private Debt
The private debt market has also emerged from the global pandemic in a
stronger condition.
Private debt funds raised a record amount of capital with fewer, yet larger,
funds closing. Aggregate capital increased 14% in 2021 to $193.4 billion
across 202 funds, down from 2020's 255 funds closed. Indeed, there has been a
notable increase in the number of funds gathering commitments of more than $1
billion - and even as much as $10 billion - by some of private capital's
largest managers.
Among investors surveyed by Preqin in November 2021, 36% said they looked to
private debt for a reliable income stream, while 37% were attracted to its
high risk-adjusted returns, a unique combination across private capital.
The upsurge in private debt capital and the attractive risk/returns projected
by the funds advised by TradeFlow bode well for Supply@ME's future
performance.
Digital assets
As an investable asset, trade finance has desirable attributes, including
typically low default rates, attractive yields (compared with traditional
instruments), short-term durations and self liquidating disposition. However,
institutional investors, to date, have not embraced at-scale trade finance as
an investable asset. Indeed, the trade finance market tends to be illiquid and
non-transparent for reasons including technology limitations - resulting in
the lack of a transparent electronic market - and limited risk assessment
expertise among institutional investors. A key first step toward bringing
liquidity to the trade finance market has been the recent expansion of the
"trade as an asset" concept - the notion of transforming trade finance
transactions into instruments readily exchangeable on securities markets. The
model of the creation of a digital representation of assets (such as
"tokenisation") could expand the market considerably and the Supply@ME
Platform is ready to take advantage of this opportunity.
The New Way Of Corporates To Manage Their Resiliency
Resilience: The New Risk-Management Paradigm
The discussion so far has focused on non-financial risk in a continuously
changing world. Non-financial risk is found to be deeply embedded in corporate
operations. As the 21st-century business environment becomes ever more
volatile and disruptive, companies are beginning to question standard
risk-management approaches. The thought leaders among them are now calling for
new approaches that go beyond risk management, toward corporate resilience.
Resilience is still an emerging approach.
In a 2020 McKinsey survey, just over three-quarters of respondents said they
planned to improve resilience through physical changes to their supply chain
footprints. By 2021, an overwhelming majority (92 percent) said that they had
done so. But the survey revealed significant shifts in footprint strategy.
Last year, most companies planned to pull multiple levers in their efforts to
improve supply chain resilience, combining increases in the inventory of
critical products, components, and materials with efforts to diversify supply
bases while localising or regionalising supply and production networks. In
practice, companies were much more likely than expected to increase
inventories, and much less likely either to diversify supply bases (with raw
material supply being a notable exception) or to implement nearshoring or
regionalization strategies. In this regard, only 2 percent of companies have
visibility into their supply base beyond the second tier.
In-Transit Risks: Navigating the Current Disruption in Containerised Logistics
We believe container freight rates will remain elevated throughout most of
2022 while the containerised logistics disruption persists. Container demand
is driven by end consumer spending on goods, shippers' desire to continue
stocking inventory, and an economic re-opening that may shift spend back to
services.
In the short term, manufacturers may have little option when it comes to
changing their current suppliers and existing manufacturing footprint, but in
the medium term they could cultivate alternative suppliers. Some successful
strategies could evaluate near-shoring options, or use suppliers in India and
South America that reduce exposure to the main Transpacific trade lane.
Manufacturers can also rethink product design, particularly to limit highly
customisable components that are complex to source. Assessing products and
redesigning packaging is often a quick win and can help to improve efficiency
in container space utilisation.
Shippers can also re-evaluate their overall supply chain design and strategy.
The last 12 months have reminded shippers that relying on just-in-time supply
from container shipping can be risky.
Companies may need to increase inventories and safety buffers, both at
departure and at arrival ports. This adds costs to the supply chain, which may
lead to broader redesigns in product sourcing and manufacturing. While the
outlook for containerised logistics and global supply chains remains
uncertain, there are actions that shippers could consider to bolster
supply-chain resilience and aid recovery. The future may be uncertain, but
shippers' ability to react is controllable and known.
The Business Model Canvas: An unprecedent inventory monetisation business
model
The Business Model Canvas ("BMC") of the Group envisages the unique value
proposition to be "inventory monetisation specialists", promoting, via a
dedicated structure, an innovative service model which allows corporates (our
clients) across the globe to improve their inventory management activities,
freeing up extra-value from the goods handled (such as capital locked into the
warehouse or referred to an import/export transaction, efficiencies across the
supply chain served or new sales channels). Hence, this value proposition
includes the objective of the Group to be inventory analyst' tech-champions
for both the in-transit & warehoused goods and sides.
Key partners
· Inventory Funders (investors in alternative asset class and Asset
based Lenders ('ABLs'))
· Asset management servicers
· Arrangers
· Commercial Banks
· Insurance Companies
· External Rating Agency
· External technology factories & vertical components providers
Key activities
· Inventory Monetisation servicing
· White-label platform delivered as a service
· Investment Advisory
Key resources
· Our People
· Platform - state of the art technology
· Legal & accounting framework
Cost structure
· People
· Technology - internal team and external partners
· Accounting and Legal - inventory monetisation is a unique service
model
· PR and Marketing
· Administrative expenses such as local subsidiaries
Revenue streams
· "Captive" inventory monetisation platform servicing (generated
through the use of the Platform to facilitate inventory monetisation
transactions and to carry out origination and due diligence services)
· "White-label" inventory monetisation platform servicing (generated
through delivery to Banks and Funds of the use of the Platform following a
software as a service model)
· Investment Advisory fee (generated by TradeFlow in its capacity as
investment advisor to the funds)
Value proposition
· Inventory monetisation scientists non-credit approach alternative
funding routes end to end experience - import/ export and warehoused goods
· Inventory analysis tech champions
· New asset class to invest
Customer relationships
· Inventory management optimisation
· Improving supply-chain risk management & working capital
efficiency
Customer Segments
· Import/export businesses
· SME/Mid-Cap
· Commercial Banks customer base (including Large Corporates)
· International Associations/ Trade finance marketplaces
Channels
· Originators (eco-system of external sales force/ introducers)
· Corporate finance advisers
· Commercial Bank
The BMC of the Group also considers another key player: the Inventory Funders.
By providing, a dedicated, regulated structure aimed at aligning each
Inventory Monetisation transaction with corporates, we believe that Inventory
Funders are now seeing the investment as a new asset class - complex but
investable, considering the risk/reward projected. Our prospective Inventory
Funders are typically investors with appetite for a new asset class or
alternative investment opportunities, being debt and credit funds, hedge funds
or asset-based lenders.
The other key partners are, effectively, the rest of the eco-system supporting
the execution of each inventory monetisation transaction (in-transit &
warehoused goods). We see an important role for Commercial Banks, considering
the potential interest of these type of banks in our White-label proposition
(where the bank uses the Platform to deliver inventory-backed financial
products - studied and developed by themselves - directly to their clients).
The key activities delivered: inventory monetisation platform providers and
asset management experts
Our activities are split between those of Asset Managers and the FinTech
service based business, and the activities delivered respectively by the
subsidiaries of Supply@ME Capital plc, whether warehoused inventory
monetisation in Italy or the United Kingdom, or investment advisory provided
by TradeFlow.
In more detail, the Inventory Monetisation transactions are delivered -
through a global programme sponsored by the Company - by segregated, regulated
alternative funds which use fund administration services provided by APEX
Group(1).
As of today, the Global Inventory programme has 4 funds (SP - segregated
portfolios):
· In transit goods transactions:
o CEMP - USD Trade Flow Fund SP (in-transit transactions denominated in USD)
o CEMP - Euro Trade Flow Fund SP (in-transit transactions denominated in
EUR)
· Warehoused goods transactions(2):
o Global Inventory Fund 1 SP (transactions regulated by the Italian law)
o Global Inventory Fund 2 SP (transactions regulated by the UK and UK common
law).
(1) Apex Group - Single Source Financial Solution Provider.
(https://www.apexgroup.com/)
(2) As announced by the Company in the RNS of 6 August 2021.
We distinguish the activities of the servicers (TradeFlow - acting as an
Investment Advisory Company(3) using its unique ICT system(4) - and local
Supply@ME subsidiaries - acting as Inventory Servicers leveraging our
Platform) and the Funders. Each Inventory Monetisation transaction can involve
multiple types of investors depending on the risk appetite:
· Equity investors (typically Hedge Fund and Family Offices) may be
interested in direct subscription to the 4 Funds. The Funds can be aligned to
each inventory monetisation transaction (whether in-transit or warehoused
goods) and, additionally, achieve leverage through the debt issuance programme
as below;
· Debt Investors (whether Debt and Credit Funds, Asset Based Lenders,
or Family Offices) may be interested to subscribe:
o The Senior Notes programme of the two active TradeFlow Funds. In this
regard, the Company announced in the RNS published on 9 August 2021, that the
TradeFlow Capital funds received. Leveraging the global investor network of
the Company, the funds have already secured investors subscribing for the
full, initial $40 million issuance);
o The notes/loans borrowed directly by the so named "Stock (trading)
Companies" established for each jurisdiction in order to deploy the inventory
- warehoused goods - monetisation transactions
· For investors interested in a Shariah compliant asset class, the
Global Inventory programme will launch a dedicated compartment arranged by
Reyl-Intesa Sanpaolo(5), as announced by the Company in the RNS of 23 November
2021
(3) TradeFlow is a Registered Fund Management Company regulated by the
Monetary Authority of Singapore and Member of the Alternative Investment
Management Association.
(4) TradeFlow is a Corporate Member of the Singapore FinTech Association and
FinTech Certified by the SFA.
(5) REYL Innovative Banking.
(https://www.reyl.com/en?gclid=Cj0KCQjwxtSSBhDYARIsAEn0thRy8_j1oI1I_AdRPrv0yYg9SwNfLUd8mua3a-TlX6q150KkKIzkFz8aAorpEALw_wcB)
The role of the Platform is essential with reference to the funding structure
represented above. In this regard, Inventory Funders (in particular Commercial
Banks and Debt and Credit Funds) could also use the Platform to improve their
self-funding strategy (where the Inventory Monetisation service is offered
directly to the existing customer base or eligible, already identified,
prospects).
The framework above also clarifies the difference between the role of
TradeFlow and other Supply@ME subsidiaries, acting as servicers without any
direct inventory risk in their balance-sheet, and the Funds which are the
commercial counterparties of the Corporates for each inventory monetisation
transaction. In this regard, it could be envisaged that, in order to promote
the Funds sponsored by the Company, Supply@ME Capital plc may have a minor
exposure in the Funds subscribing the shares.
Our Platform
We consider our "Platform" to be a unique combination of software modules,
exponential technology components (such as Artificial Intelligence, Internet
of Things and Blockchain), dedicated legal and accounting frameworks and
business rules/methodologies delivered via a hybrid ICT architecture.
We firmly believe in our innovative business model, supported by the Platform,
driven by the subject matter experts of our Group.
More specifically, the ICT architecture envisages the use of 2 cloud
environments (Microsoft Azure for warehoused goods monetisation and AWS for
the in-transit model delivered by TradeFlow) plus an external integration with
distributed ledger frameworks (in this regard, the Group has worked with SIA
S.p.A. to develop the specific software and infrastructure modules and now is
also in discussion with other blockchain global protocols.
The clients of our Platform are:
· Global Inventory Funds and their Stock Companies;
· Inventory Funders (acting as lenders);
· TradeFlow Capital (acting as Investment Advisory Company of the Funds
sponsored by the Company);
· Corporates, as commercial counterparties of the Stock Company or
directly of the Funds; or
· Banks, as White-label users of the Platform as a service
(underpinning their inventory based and/or backed financial products directly
provided by the Banks to their clients).
The Platform road map envisages that data sources have a key role for the
Platform, triggering the value-added service provided by the Group (whether
inventory data analysis or inventory monetisation provided by the Funds
sponsored by the Company). Accordingly data ingestion services have a critical
role in the overall Platform operations. Additionally, the inventory register
and trading modules are able to produce the innovative data analysis and
support the creation of the security package in favour of the inventory
funders involved in each Inventory Monetisation.
The monitoring component of the Platform is constructed by business rules
(which support the creation of specific key risk and performance indicators)
and are expected to be underpinned by software modules able to enable the user
to visualise early warnings, trigger inspections (to report digitally) and
track the action plan/ remediation plan agreed with the corporate client. The
Platform's road-map further envisages the adoption of IoT frameworks in order
to improve the effectiveness and the efficiency of the monitoring and
inspections activities.
TradeFlow uses a dedicated suite (TradeFlow+) made of multiple software
modules reflecting the expertise of the team in the trade finance space,
delivering a unique non-credit approach aimed at monetising inventory
in-transit (import/export transactions where the buyer is supported to
optimise its supply chain relationship).
The high level of automation ensured by the TradeFlow+ suite allows TradeFlow
to efficiently manage its operations, leveraging exponential technologies
(such as Artificial Intelligence for the documentation analysis during the
client onboarding and the Internet of Things to support the vessel tracking
phase). Additionally, the suite can also produce mandatory reports regarding
the performance of each import/export transaction. We consider this to be
important given the vision of the Company to allow, in the future,
third-parties operators (such as new Trade Finance Funds or international
trading desks of commercial Banks) to adopt the suite through White-label
agreements.
In this regard, the whole Platform road-map considers the importance of the
opportunity presented by the White-label service model. Considering the market
outlook and the increasing appetite of Banks, Funds and FinTech platforms to
extend their product offering, the Group wants to play a key role in the
inventory backed/based financial product engineering also allowing new
partners to use specific components of the Platform "as a service". However,
the Inventory Monetisation facility (in transit and warehoused goods) will
remain the unique, distinct and proprietary product of the Company.
Finally, the Group continues to study and explore opportunities to adopt
blockchain and digital tokenisation into our systems, to support the delivery
and the scalability of the business model.
Building the eco-system of partners and channels
Client company origination
Origination of client companies(1) with inventory suitable for inventory
monetisation continued steadily in our core focus regions of Italy and the
United Kingdom. Demand for the inventory monetisation service remains strong,
despite the respective business challenges in each region as a result of
COVID-19 and global supply chain difficulties throughout 2021.
Once lockdown restrictions had begun to ease worldwide, pressure on supply
chains intensified. Heavy goods vehicle drivers were in short supply, flight
and shipping schedules were severely disrupted, parts shortages led to goods
not being produced, and worker illness meant entire factories had to be shut
down; goods simply were not reaching their next destination on time - if at
all. No part of the supply chain was spared, and difficulties continue to the
present day.
As businesses look to recover from the pandemic, the supply chain model has
undergone a marked shift from 'just in time' goods delivery to 'just in case',
whereby companies will hold a surplus of stock and parts just in case of
future disruption. Facilitating such a shift will require significantly more
working capital. We are readying our business to help existing and potential
client companies adapt to the new world order, underpinned by our innovative
inventory monetisation platform. As such, the expected value of warehoused
goods inventory monetisation transactions across our Group's current global
pipeline totals £164.8 million.(*)
(*)It is important to note that the monetary value represents the potential
value of inventory to be monetised by client companies rather than the
pipeline revenue expected to be earned by the Group. However, this does
provide a good indicator of the level of demand for the Group's current and
future services. These pipeline numbers also do not include any client
companies that have been lost due to either failing to meet eligibility
criteria or delays in obtaining funding. A full review of the pipeline was
conducted in 2021 and some of these lost client companies can be expected to
be re-onboarded once the first inventory monetisation has been completed.
(1)The number of companies originated refers to those with which we were in
active dialogue with and had progressed toward inventory monetisation via our
innovative platform as of 31 December 2021. The status of these companies in
the origination pipeline was either "on hold" and awaiting a match with a
suitable inventory funder, or "active" and progressed into our thorough due
diligence procedures. The final stage, once client companies with inventory to
monetise are matched with suitable funders and passed rigorous due diligence
assessments, will see client companies enter the transaction phase.
Italy
Italy was the busiest region for potential client company origination activity
in 2021 by some margin and we originated a total of 43 client companies. Of
those, 21 companies were considered to be active and represent approximately
£111 million of potential inventory ready to be monetised.
We work with a select panel of originators, or business introducers, in Italy.
The number of client companies originated was largely due to the strength of
our local relationships, having worked closely with our panel of brokers and
external advisors. Some business was also instigated due to our growing,
positive reputation and, on some occasions, companies were introduced to
Supply@ME by client companies already in the pipeline.
United Kingdom
In the United Kingdom, we originated a total of 6 potential client companies
by the year-end, of which 4 progressed to active status. Active client
companies represented approximately £28 million of potential inventory to be
monetised.
To note, we appointed as Group Head of Origination Nicola Bonini to lead
dedicated origination activity in the United Kingdom. Nicola took up her role
in September 2021, therefore the client origination numbers in the United
Kingdom largely represent an exceptional effort from Nicola and her team
beginning in the final quarter of 2021.
The United Kingdom market faced a raft of challenges to ordinary business
activity, not least the disruption to trading caused by COVID-19 and the
impacts of the supply chain crisis.
Government schemes such as the Coronavirus Business Interruption Loan Scheme
(CBILS) gave a much-needed lifeline to SMEs. CBILS provided up to £5 million
emergency funding to help businesses recover from lost revenue and cashflow
disruption due to the pandemic - which, in 2021, included the third national
lockdown from 6 January, with legal restrictions not lifting until 19th July.
Against this unprecedented backdrop of uncertainty, the vast majority of
businesses suitable for inventory monetisation were not considering
alternative funding; they were focused on surviving the pandemic, not striving
for new growth.
Middle East and North Africa (MENA)
While business in Europe continues to be our core focus, £26 million
(sterling equivalent) of client companies were originated in the MENA region
in 2021. Progress was made on a number of fronts to lay the groundwork for
future inventory monetisation transactions in MENA jurisdictions, including
the UAE, supported by a select panel of local partners and brokers in the
region.
Building on the partnership that began in 2020, Supply@ME continued to work
with iMass Investments, to support a number of client origination and
inventory funding activities, including an agreement with Lenovo Financial
Services META LLC ("LFS"). As announced in the RNS of 11 January 2021, LFS is
able to market the Supply@ME platform to its customer base in the Middle East,
Turkey and Africa regions (excluding South Africa), as a complementary product
to LFS' existing offering.
Additionally, Supply@ME received confirmation in January 2021 that the
authorisation process for the Group's Shariah-compliant Inventory Monetisation
Platform was successfully completed. Sheikh Dr. Mohamed Elgari and Sheikh
Yusuf Talal DeLorenzo in their capacity as members of Sharia Scholar Board
confirmed in an official communication that "following a review in compliance
with the AAOIFI Shariah standards, The Sharia Scholar Board hereby approves
the Inventory Monetisation Structure as acceptable within the principles of
Shariah."
United States
Supply@ME continued to explore the possibility of launching its inventory
monetisation service to client companies in the United States throughout 2021.
Following the RNS of 22 October 2020, the Company built upon its partnership
with Anthony Brown of the consulting company, Epicirean Brands, trading as The
Trade Advisory (the "Trade Advisory") during the 2021 reporting period.
Anthony Brown continues to provide strategic advice to our Board of Directors
in relation to seizing the unique opportunity to develop our Inventory
Monetisation service in the United States.
Inventory monetisation funding routes
We continued to attract a selection of high-quality prospective funders -
including banks and asset-based lenders - to the platform throughout 2021,
working closely with local partners and brokers.
The Group had hoped inventory monetisation transactions would be further
along in their progression by year-end. However, due to the innovative nature
of our model and the calibre of the banks with which we are in discussions,
the due diligence procedures are robust and, therefore, require time to
complete accurately. In accordance with the RNS of 11 November 2021, the Board
feels inaugural transactions must be focused on accuracy rather than speed.
Additionally, each funder has its own specific requirements and appetites for
clients and inventory they are prepared to fund. Our origination team is
working diligently to align client company inventories with the investment
appetites of our strong panel of prospective inventory funders.
The Board continues to focus on the delivery of the first inaugural Inventory
Monetisation transaction which is expected to generate a snowball effect among
the rest of prospective Inventory Funders identified.
Italy
The Italian subsidiary was in discussion with 8 banks in relation to funding
inventory via our innovative platform at year-end, including the first
Inventory Funder for the inaugural Italian inventory monetisation transaction,
as stated in the Trading Update of 31 December 2021.
In addition, we were in discussion with one potential funder of a White-label
agreement in 2021.
Separately, we were working closely with the Italian Government's SACE
Guarantee, in order to study a new bespoke guarantee which would commence
following the expiry of the current scheme, which is due to expire in 2022.
United Kingdom
As mentioned in the Trading Update of 31 December 2021, we undertook an
increased programme of marketing activity in the United Kingdom, which raised
significant awareness among potential client companies and Inventory Funders.
As such, our number of originators, or business introducers increased from 3
to 59 during the reporting period. Originators include asset-based lenders,
banks, accountants, advisors and other asset-based platforms.
This dramatic increase in originators is a testament to the strength of the
proposition we are building and the confidence of the prospective funders,
which include large global banks and major accountancy firms.
In total, this resulted in us entering discussions with four potential
inventory monetisation funders in the UK and five banks in initial
conversations to complete inventory monetisation transactions via a
White-label agreement.
MENA
Further to the RNS announcement of 23 November 2021, we continued to work
alongside the Shariah fund arranger Intesa Sanpaolo Private Bank (Suisse)
Morval SA to provide funding for our Shariah-compliant Inventory Monetisation
platform in the Middle East.
In parallel, we leveraged our partnership with I-MASS LLC in order to explore
further inventory funding alliances in the region, including with a local
challenger bank.
In total, we entered discussions with three potential funders of inventory
monetisation transactions in the MENA region.
United States
As a result of our ongoing partnership with Anthony Brown of the consulting
company The Trade Advisory we entered discussions with three potential
inventory monetisation transaction funders and one potential funder of a White
Label transaction.
As stated above, we continue to explore the possibilities around launching a
platform in the United States, buoyed by strong interest and a unique
opportunity to deliver the company's innovative inventory monetisation
platform in the region.
The Revenue Model
We clarified and fine-tuned our overall business model, distinguishing the
pure FinTech business (our Platform being our people and our software) from
the inventory funding structure. In this regard:
· the Platform has, by definition, an intrinsic value and accordingly
can also be used by other operators (such as banks or other debt funders) to
improve inventory backed or based facilities. We consider it to be an enabler
of each transaction. For this reason, we officially launched our White-label
initiative at the end of August 2020, invested further time in upgrading ICT
architecture, selected and started new tech streams, while leveraging and
understanding the components used by TradeFlow Capital within its TradeFlow+
system.
· the areas of improvement suggested by inventory funders in the last
year regarding the introduction of an equity (first loss) line in the capital
structure of each inventory monetisation transaction was addressed with the
launch of the Global Inventory Fund (the "Fund"), which can work as equity
provider and/or on a standalone basis (the Fund could deliver by itself a
inventory monetisation transaction). The Global Inventory Fund leverages the
current funding structure of TradeFlow Capital - another reason, in our
opinion, that supports the acquisition of the Singapore-based business.
As such, we are now focused on establishing and growing the following active,
and future, revenue streams:
· "Captive" inventory monetisation platform servicing ("C.IM"): this is
revenue generated through the use of the Platform to facilitate inventory
monetisation transactions performed by the Fund and its Inventory Funders.
This revenue is generated by the Group's Supply@ME operating subsidiaries, and
in the future is expected to be supplemented by Tijara Pte Ltd, a technology
subsidiary company of TradeFlow. Revenue will be earned in relation to the
following activities:
o origination and due diligence (preinventory monetisation); and
o monitoring, controlling and reporting (post-inventory monetisation).
During the year ended 31 December 2021, the Group recognised £0.3m of C.IM
revenue relating to due diligence fees. When fully delivered, this stream is
expected to generate revenues of approximately 1-3% of the gross value of the
inventories monetised (purchase price plus VAT).
· "White-label" inventory monetisation platform servicing ("WL.IM"):
this is the revenue to be generated through the use of the Platform by third
parties who choose to employ the self-funding model. When delivered, this
stream is expected to generate recurring software-software as-a-service
revenues of approximately 0.5-1.5% of the value of each Inventory Monetisation
transaction (the amount of funding provided). No WL.IM revenue was recognised
by the Group during the year ended 31December 2021.
· Investment Advisory ("IA"): this is the revenue stream currently
being generated by TradeFlow in its capacity as investment advisor to its
well-established funds, as well as its anticipated role as investment advisor
to the Fund going forward. This stream is expected to generate recurring
revenues of approximately 1.25% of Assets Under Management for which TradeFlow
acts as advisor. Additionally, TradeFlow could receive a further performance
incentive fee of up to 15% of the profits generated by the Fund, based on
performance. During the year ended 31 December 2021, the Group recognised
£0.2m of IA revenue, representing TradeFlow's addition to the Group's revenue
from 1 July to 31 December 2021.
Financial Review
2021 2020 Movement
£m £m £m
Revenue 0.5 1.1 (0.6)
Operating (loss) before deemed cost of listing, (4.4) (1.4) (3.0)
acquisition related costs and impairment
charges
Deemed cost of listing, acquisition related costs and impairment charges (6.4) (1.4) (5.0)
Operating (loss) (10.8) (2.8) (8.0)
Finance costs (1.3) - (1.3)
(Loss) before tax (12.2) (2.8) (9.4)
Income tax (0.3) (0.1) (0.1)
(Loss) for the year (12.5) (2.9) (9.6)
Earnings per share (EPS) Pence Pence
(0.04) (0.01)
Revenue by segment
2021 2020 Movement
£m £m £m
Inventory Monetisation 0.3 1.1 (0.8)
Investment Advisory 0.2 - 0.3
Total revenue 0.5 1.1 (0.6)
The Investment Advisory revenue has been rounded down to £0.2m in order to
ensure the table adds to the rounded total revenue figure.
Revenue by service line is recognised in accordance with IFRS 15 ("Revenue
from Contracts with Customers") and more details on the Group's revenue
recognition policies can be found in the note 2 consolidated financial
statements.
Inventory Monetisation segment
For the year ended 31 December 2021, the Group recognised £0.3m (2020:
£1.1m) revenue from its inventory monetisation segment relating solely to due
diligence services provided by the Group's Italian operating subsidiary. In
line with IFRS 15 ("Revenue from Contracts with Customers") the Group
recognised these revenues when the due diligence services have been delivered
and the Group's performance obligation has been satisfied. The £1.1m of
revenue recognised by the inventory monetisation segment in the prior year
related solely to an origination contract entered into with related party,
1AF2 S.r.l. In connection with this contract, 1AF2 S.r.l contracted with the
Group to perform due diligence on those companies that it had originated.
During the current year, the Group recognised a further £0.2m revenue on this
related party contract, with the remainder of the revenue recognised arising
from due diligence services provided to third party client companies. Further
details of this and other related party transactions are set out in note 29 to
the Group's consolidated financial statements.
The reduction of £0.8m in the revenue recognised by the inventory
monetisation segment during the year end 31 December 2021 is the result of the
delays experienced by the Group in facilitating the first inventory
monetisation transaction and increased time and effort being spent on the
development of the Platform and the associated operational processes and
procedures.
Investment Advisory segment
Investment segment revenue arises from investment advisory services provided
by the Group's wholly owned subsidiary, TradeFlow, in its capacity as
investment advisor to its well-established USD fund and its newer EUR fund
during the six month period from the date of acquisition (being 1 July 2021)
through to year end. As TradeFlow was not owned by the Group during the prior
financial year, no such revenues were recognised. In line with IFRS 15
("Revenue from Contracts with Customers") the Group recognised these revenues
when the investment advisory services have been delivered and the Group's
performance obligation has been satisfied.
Geographical revenue breakdown
The Group's inventory monetisation operations are currently predominately
located in Italy, while the investment advisory operations are predominately
located in Singapore.
Operating loss
During the year the Group has primarily focused on refining and developing the
business model through investing heavily, utilising both internal time and
resources, on activities such as upgrading the architecture of the internally
generated Platform. Additionally, significant amounts of time and effort have
been spent:
· on building a solid base for effective internal controls and
governance processes;
· completing the Group's acquisition of TradeFlow during the year; and
· on post-acquisition integration activities.
All of these activities are expected to give the Group a strong foundation as
it enters the next stage of development.
The Group recorded an operating loss before deemed cost of listing,
acquisition related costs and impairment charges during the year of £4.4m
(2020: £1.4m loss). This increase of £3.0m is largely due to the following
factors:
· an increase in staff and contractor costs of £1.2m as the Group
built out the leadership team and has been focused on developing its ICT
architecture alongside the inventory monetisation legal & accounting
framework;
· an increase of professional fees of £0.5m arising from a focus on
improving the internal controls and governance processes; and
· the fact that the prior year contained costs for approximately nine
months, following the reverse take-over that completed in March 2020, compared
to a full 12 months of costs in the currently financial year.
Deemed cost of listing, acquisition related costs and impairment charges
2021 2020
£m £m
Deemed cost of listing - 1.4
Transaction costs 2.0 -
Amortisation of intangible assets arising on acquisitions 0.4 -
Acquisition related earn-outs 1.4 -
Impairment charges 2.6 -
Total 6.4 1.4
The acquisition related costs arise due to business combinations in accordance
with IFRS 3 ("Business Combinations") and include the following in the current
financial year:
· Transaction costs of £2.0m. Of this total, £1.9m represented the
fair value of shares issued as consideration to third party intermediaries who
either introduced TradeFlow to the Company or who provided due diligence
activities in respect of the TradeFlow business, market, sector and geographic
location. The remaining £0.1m related to legal fees that were directly
associated with the acquisition;
· Amortisation of intangible assets arising on acquisition of £0.4m.
These costs related to the intangible assets recognised by the Group in
connection with the TradeFlow acquisition, which have a fair value of £6.9m.
The £0.4m represents the amortisation charge for these assets for the six
month period from acquisition on 1 July 2021; and
· Acquisition related earn-out costs of £1.4m. Elements of the
consideration payable for the TradeFlow acquisition require post-acquisition
service obligations to be performed by the earn-out shareholders over a
three-year period. While these legally form part of the consideration costs,
under IFRS 3 ("Business Combinations") they must be accounting for as deemed
remuneration through the profit and loss. The £1.4m recognised for the year
ended 31 December 2021 represents the proportion of the total fair value of
the future earn-out payments that are linked to the services provided in the
current financial year.
The impairment charges of £2.6m in the current financial year have arisen due
to the following two factors:
Firstly, in connection with the initial TradeFlow goodwill recognised. As at
31 December 2021, management carried out an impairment test in line with IAS
36 ("Impairment of Assets") on the TradeFlow Cash Generated Unit ("CGU"). This
followed the conclusion that indicators of impairment were present, including
under performance against forecast. In carrying out this test, the Directors
applied what they consider to be prudent assumptions concerning reductions to
forecast revenue levels and the weighted average cost of capital ("WACC") used
as the discount rate. The result of this impairment test was that the
recoverable amount of the TradeFlow CGU was determined to be lower than the
net invested capital value held on the balance sheet at 31 December 2021 by
£0.8m and as such an impairment charge has been recognised for this amount;
and
Secondly, in connection with the Group's internally developed IM platform. As
at 31 December 2021, management carried out an impairment test in line with
IAS 36 ("Impairment of Assets") on this intangible asset. This followed the
conclusion that indicators of impairment were present, including the current
year losses being generated by the Group's Italian operating subsidiary, to
which the asset relates. In carrying out this test, the Directors considered
discounted cash flows and a weighted average cost of capital ("WACC") as the
discount rate. Under this methodology the recoverable amount of the investment
did not require an impairment to be made. However, as noted in the going
concern statement, set out in note 2 to the consolidated financial statements,
there is currently a material uncertainty with respect to both the future
timing and growth rates of the forecast discounted cash flows arising from the
use of the Internally developed IM Platform intangible asset. As such, the
Directors have prudently decided to impair the full carrying amount of this
asset of £1.8m as at 31 December 2021.
In the prior year the Group incurred deemed costs of listing of £1.4m
relating to the reverse acquisition.
Acquisition of TradeFlow
On 1 July 2021 the Group acquired TradeFlow for total consideration, as
defined by IFRS 3 ("Business Combinations"), of £7.1m, split between cash
consideration of £4m and equity consideration of £3.1m.
As part of the terms of the agreement to acquire TradeFlow, acquisition
related earn-out payments were included. Together with the initial cash
payment and issue of equity, these components form the total legal
consideration agreed between the parties. The acquisition related earn-out
payments are determined by reference to pre-determined revenue milestone
targets in each of the 2021, 2022 and 2023 financial years. As these earn-out
payments have substantive post-acquisition service conditions attached to
them, the Directors have concluded that IFRS 3 ("Business Combinations")
requires the fair value of these earn-out payments to be accounted for as a
charge to the income statement (as deemed remuneration) rather than as
consideration.
Following the acquisition, a purchase price fair value exercise was completed
which identified intangible assets of £6.9m, and goodwill of £2.2m, both of
which have been recognised in the Group's consolidated balance sheet at the
date of acquisition. As described above the goodwill has subsequently been
impaired by £0.8m, leaving a balance of £1.4m as at 31 December 2021.
Details of those intangible assets identified during the purchase price fair
value exercise are set out in the table below:
2021
£m
Customer relationships 4.8
Brand (TradeFlow) 0.2
CTRM software 1.4
AI software 0.4
Total acquired intangible assets 6.9
Deferred tax liability arising on recognition of acquired intangible assets (1.2)
Total acquired intangible assets (net of deferred tax liability) 5.7
Other net liabilities acquired (0.8)
Total identifiable net assets acquired 4.9
TradeFlow contributed £0.2m of revenue and (£0.5m) to the Group's operating
loss for the period between the date of acquisition, being 1 July 2021, and
the 31 December 2021. As a preliminary assessment, had the acquisition of
TradeFlow been completed on the first day of the financial year, Group
revenues would have been approximately £0.3m higher and Group operating loss
would have been approximately £0.6m higher.
Group Funding Facilities utilised during the year
During the year the Group secured two different funding facilities. The
proceeds of both have been used to support the Group's working capital and
growth requirements and cover the cash consideration element of the TradeFlow
acquisition. Further details of these two facilities are set out below:
Negma convertible Mercator funding
loan notes Facilities
£m
£m
At 1 January 2021 - -
Net cash inflows (5.0) (6.6)
Fair value of warrant instruments issued in connection with funding facilities - 0.5
Amortisation of finance costs (0.6) (0.5)
Cash repayments 2.0 -
Non cash repayments 3.6 0.9
As at 31 December 2021 - (5.7)
Negma convertible loan notes
On 16 June 2021, the Company entered into a subscription agreement with Negma
Group Limited for an initial tranche of Convertible Loan Notes with a par
value of £5.6m and for which the Group received £5.0m in cash. As shown in
the table, £3.6m of this was settled via the conversion of the loan notes
into equity and £2.0 was settled in cash, leaving the facility totally repaid
at year end. During the current financial year the Group recognised total
finance costs of £0.6m in relation to these convertible loan notes.
Mercator funding facilities
On 29 September 2021, the Company entered into a loan note facility with
Mercator Capital Management Fund LP ("Mercator"), with a total draw down of
£7.0m or £6.6m net of capitalised finance costs. These loan note facilities
had a term of 12 months and require monthly repayments to be made either in
cash or via the issue of a convertible loan note at the Company's discretion.
During the period to 31 December 2021, all repayments had been settled through
the issue of convertible loan note and all of these had been converted to
equity.
In connection with the Mercator loan note facility, the Company also issued
share warrants, details of which are set out in note 28 to the consolidated
financial statements. The fair value of these warrants was also capitalised
and this, together with the other capitalised finance costs, will be
recognised over the term of the loan notes using the effective interest rate
method. The total of the finance costs recognised in the current financial
year is £0.5m.
The Mercator convertible loan notes do not have any interest costs in addition
to that of the Mercator loan notes, however an additional amount of finance
costs of £0.1m have been recognised during the current financial year as a
result of:
· additional commitment fees of £25,000; and
· the recognition of the fair value of the warrants issued in
connection with the convertible loan notes. This fair value was £88,000.
Both costs have been fully recognised in the income statement during the
current year given the liability to which they relate has been extinguished by
31 December 2021.
Cashflow
The Group increased its net cash balance by £1.1m (2020: £0.4m) due to net
proceeds from the financing activities of £9.6m which assisted the funding of
the acquisition of Tradeflow (net of the cash acquired) of £3.5m and
increased investment in the Platform of £1.0m. This offset by an outflow from
operating activities of £3.9m.
2021 2020
£m £m
Net cash flow from operating activities (3.9) (0.9)
Cash flows from investing activities (4.6) (0.9)
Net cash flows from financing activities 9.6 2.2
Net increase in cash and cash equivalents 1.1 0.4
Cash and cash equivalents at 1 January 0.6 0.1
Cash and cash equivalents at 31 December 1.7 0.6
Net liabilities
As at 31 December 2021 the Group's net liabilities were £1.4m (2020: net
liabilities of £0.5m). The movement in net assets is primarily explained as
follows:
· a net increase of £5.9m from the acquisition of TradeFlow,
representing a net asset fair value of £4.9m, together with initial goodwill
of £2.2m, offset by amortisation charges of £0.4m and impairment charges of
£0.8m;
· a decrease of a net amount of £1.2m in the net book value of the
Group's internally developed IM Platform intangible asset, representing
additions during the year of £1.0m from internally generated assets, offset
against an amortisation charge in the year of £0.4m and impairment charges of
£1.8m;
· an increase in borrowings of £5.7m relating to the Mercator loan
notes.
Going concern
The Board's assessment of going concern and the key considerations relating to
this are set out in the Directors' Report and note 2 to the consolidated
financial statements.
Related Parties
The main related party agreements in place during the year related to shared
service agreements with The AvantGarde Group S.p.A ("TAG") and Eight Capital
Partners Plc, along with due diligence services provided to 1AF2 S.r.l (now a
part of TAG) by the Group.
See note 29 of the consolidated financial statements for further details of
the Group's related parties.
Subsequent events
Note 31 of the consolidated financial statements sets out the details of
subsequent events following 31 December 2021, including details of the
Company's capital enhancement plan and renegotiation of the Mercator funding
facilities announced on 27 April 2022.
Principal Risks and Uncertainties
The Board confirms that throughout 2021 a robust assessment of the principal
risks facing the Company was completed. A comprehensive list of Group-wide
risks and emerging risks was reviewed and monitored throughout the year. The
most significant risks and uncertainties we face are listed in the table
below, categorised by principal risk.
Strategic Risk
Strategic risk is defined as the failure to build a sustainable, diversified
and profitable business that can successfully adapt to environment changes due
to the inefficient use of Group's available resources.
Key Risks Management of risk
STRATEGIC COMPETITION
The Company's business model is that of an innovative Platform for inventory The Company acknowledges the risk, but believes it is able to more readily
monetisation, aiming to capitalise upon market developments where supply adapt to changing market conditions than larger entrants.
chains may be placed under pressure, leading suppliers to hold increased
amounts of inventory in order to supply both on and offline retailers, with a
resultant restriction on available working capital. However, the Company is
aware of certain larger key entrants to related markets that may be able to
offer related products on a larger scale, which could affect the Company's
forecast revenues and profit margins.
FUTURE DEVELOPMENT AND STRATEGY
Certain aspects of the Company's operations remain unproven in operation, This is acknowledged through the Company's strategic plan, which recognises
which could affect the Company's forecast revenues and profit margins. the uncertainty of returns from an evolving business model.
FUNDING RISK
The risk that demand from Corporates for Inventory Monetisation transactions - We carefully manage this matching by:
which generates revenue for the Company via the Platform consumption - cannot
be met by the Global Inventory Funds and TradeFlow Funds when and where they · Building long-term relationships with investors (Investors in the
fall due or can only be met at an uneconomic price. This risk varies with the Global Inventory programme and Inventory Funders) and developing a
economic attractiveness of Global Inventory programme as an investment, the forward-looking pipeline of new investors/ inventory funders;
level of diversification of funding sources and the level of resilience of
these funding sources through economic cycles. · actively managing concentration risk and diversifying sources of
funding;
· leveraging a seasoned team of arrangers and placing agents
GLOBAL ECONOMIC RISKS
The recovery from COVID-19 is uncertain; however, the impact on supply chains The Company acknowledges the risk, but believes it is able to more readily
may prove positive for the Company's business. Nonetheless, the Board adapt to changing market conditions than larger entrants.
appreciates the inherent uncertainly posed by the current geo-political
crises.
EQUITY DILUTION RISK
The Company is not currently profitable. Despite strong confidence in its The Company remains engaged with several key stakeholders in respect of
business plan and forecasts, the Directors recognise that this may cause funding strategies.
limitations in the Company's funding options, or those which are dilutive to
shareholders.
Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed
internal processes, people and systems or from external events.
Key Risks Management of risk
EMPLOYEE AND KEY MAN RISK
Loss of certain key executives could lead to a reduced ability to effectively Through their contractual agreements, Executive Directors remain highly
run the Company, while loss of the leadership team could materially hamper the incentivised to remain with the Company. The Long Term Incentive Plan being
Company's move to profitability and increased operational efficiency. put to shareholders at the AGM will also support retention of key members of
the team.
BUSINESS CONTINUITY RISK
As an expanding Company, business continuity plans inherently will lack The Company is engaged with third parties in relation to business continuity
visibility in terms of any new subsidiaries. planning.
Regulatory, Reputation and Conduct Risk
Regulatory, reputation and conduct risk is defined as engaging in activities
that detract from Group's goal of being a trusted and reputable Company with
products, services and processes designed for customer success and delivered
in a way that will not cause customer detriment or regulatory censure.
Key Risks Management of risk
DATA PROTECTION
The Company undergoes data protection assessments, predominantly under The Company is engaged with third parties in relation to addressing data
Regulation (EU) 2016/679 (General Data Protection Regulation) and the Data protection issues in the jurisdictions within which it operates.
Protection Act 2018, but the Board recognises that operating in multiple
jurisdictions leaves it at risk of breach of individual jurisdictional
legislation.
FINANCIAL RISK MANAGEMENT
The Board monitors the internal risk management function across the Group and The Board are apprised of the Company's risk register on at least a quarterly
advises on all relevant risk issues. There is regular communication with basis, and respond appropriately.
internal departments, external advisors and regulators. The Company's policies
on financial instruments and the risks pertaining to those instruments are set
out in the accounting policies in notes 2 and 25 of the Company's consolidated
financial statements.
The strategic report can be seen in full on page 4 to page 48 within the
Company's full Annual Report & Accounts 2021, which will be uploaded and
will be available on the National Storage Mechanism and on the Company's
website.
The strategic report is approved by the Board of Directors and signed on its
behalf by:
Alessandro Zamboni
Chief Executive Officer
Directors' responsibilities pursuant to DTR 4
The Directors confirm that to the best of their knowledge:
· the Group consolidated financial statements have been prepared in
accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and the requirements of UK adopted
International Accounting Standards and give a true and fair view of the
assets, liabilities, financial position and profit and loss of the Group; and
· the Annual Report includes a fair review of the development and
performance of the business and the position of the Group, and the parent
Company, together with a description of the principal risks and uncertainties
that they face.
Disclosure of information to the auditor
Each Director at the date of approval of this annual report confirms that:
· so far as the Directors are aware, there is no relevant audit
information of which the Group's and Company's auditor is unaware; and
· all the Directors have taken all the steps that they ought to have
taken as Directors in order to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that information.
External Auditor
The auditor, Crowe U.K. LLP, will be proposed for re-appointment at the
forthcoming Annual General Meeting.
2021 AGM
The Notice of Annual General Meeting for 2021 will be circulated to all the
shareholders at least 21 working days before the AGM and it will also be made
available on our corporate website www.supplymecapital.com. The voting on the
resolutions will be announced via the Regulatory News Service.
Post balance sheet events
Details of post events since the reporting date can be found in note 31 to the
Group's consolidated Financial Statements.
Statement of Directors' Responsibilities
The Directors acknowledge their responsibilities for preparing the Annual
Report and the financial statements 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 elected to prepare the Group
consolidated financial statements in accordance with International Accounting
Standards in conformity with the requirements of the Companies international
accounting standards in conformity with the requirements of UK adopted
International Accounting Standards. 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 Group and of the Group's
results for that period.
In preparing these financial statements, the directors are required to:
· select suitable accounting policies and apply them consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· state whether applicable IFRSs have been followed, subject to any
material departures disclosed and explained in the financial statements; and
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group and Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Group and 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 the financial statements and other information included in the annual
reports may differ from legislation in other jurisdictions.
The Report of the Directors set out from page 96 to page 101 in the Company's
full Annual Report & Accounts 2021 is approved by the Board of Directors
and signed on its behalf by:
Alessandro Zamboni
Chief Executive Officer and Executive Director
30 May 2022
Financial Statements
The final results announcement for the year ended 31 December 2021 is prepared
in accordance with UK adopted International Accounting Standard and does not
include all the information required for full annual financial statements.
This announcement should be read in conjunction with the 2021 Annual Report.
The accounting policies adopted in this announcement are consistent with the
Annual Report for the year ended 31 December 2021.
The financial information has been extracted from the financial statements for
the year ended 31 December 2021, which have been approved by the Board of
Directors and on which the auditors have reported without qualification. The
audit report included a material uncertainty relating to going concern. Full
details can be seen in the 2021 Annual Report.
Consolidated Statement of Comprehensive Income for the Year Ended 31 December
2021
Note Year ended 31 December 2021 Year ended 31 December 2020
£ 000 £ 000
Revenue 4 538 1,147
Cost of sales (804) (739)
Gross (loss)/profit (266) 408
Administrative expenses 8 (4,165) (1,904)
Other operating income 7 - 53
Operating loss before deemed cost of listing and acquisition related costs and 4 (4,431) (1,443)
impairment charge
Deemed cost of listing 8 - (1,376)
Transaction costs 8 (2,009) -
Amortisation of intangible assets arising on acquisition 8 (391) -
Acquisition related earn-out payments 8 (1,410) -
Impairment charges 8 (2,573) -
Operating loss (10,814) (2,819)
Finance costs 6 (1,341) -
Loss before tax (12,155) (2,819)
Income tax 12 (332) (145)
Loss for the year (12,487) (2,964)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations 6 2
Total comprehensive loss for the year (12,481) (2,962)
Loss attributable to:
Owners of the company (12,481) (2,962)
Pence Pence
Earnings per share
Basic and diluted 14 (0.04) (0.01)
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Consolidated Statement of Financial Position as at 31 December 2021
Note As at 31 December 2021 As at 31
£ 000
December 2020*
£ 000
Non-current assets
Intangible assets and goodwill 15 7,895 1,236
Tangible assets 17 2
Deferred tax asset 13 - 422
Total non-current assets 7,912 1,660
Current assets
Trade and other receivables 16 896 1,113
Cash and cash equivalents 1,727 552
Total current assets 2,623 1,665
Total assets 10,535 3,325
Current liabilities
Trade and other payables 20 3,500 3,373
Derivative financial instruments - 24
Loan notes 18 5,732 -
Total current liabilities 9,232 3,397
Net current liabilities (6,609) (1,732)
Non-current liabilities
Long-term borrowings 18 1,284 22
Provisions 21 340 358
Deferred tax liabilities 13 1,104 -
Total non-current liabilities 2,728 380
Net liabilities (1,425) (452)
Equity attributable to owners of the parent
Share capital 17 5,486 5,420
Share premium 18,171 11,820
Share-based payment reserve 28 2,018 -
Other reserves (10,891) (13,986)
Retained losses (16,209) (3,706)
Total equity (1,425) (452)
To more accurately reflect the nature of certain items in the balance sheet,
the prior year comparatives include a reclassification of bank borrowings of
£22,000 from Trade and other payables to Long-term borrowings. In addition,
the prior year comparative deferred tax asset balance of £422,000 has been
reclassified from Trade and other receivables to non-current assets to comply
with IAS 1 ("Presentation of Financial Statements".
The above consolidated statement of financial position should be read in
conjunction with the accompanying notes. The consolidated financial statements
on pages 48 to 75 were approved and authorised for issue by the Board on 30
May 2022 and signed on its behalf by:
......................................... .........................................
Alessandro Zamboni David Bull
CEO and Executive Director Independent Non-Executive Director and Chair of Audit Committee
Supply@ME Capital plc
Registration number: 039369
Consolidated Statement of Changes in Equity for the Year Ended 31 December
2021
Note Share capital Share premium Other reserves Share- based payment reserve Merger reserve Reverse takeover reserve Forex reserve Retained earnings Total
£ 000
£ 000
£ 000
£ 000
£ 000
£ 000 £ 000 £ 000 £ 000
At 1 January 2020 148 - - - - - 3 (708) (557)
Forex retranslation - - - - - - - (34) (34)
At 1 January 2020 after forex retranslation 148 - - - - - 3 (742) (591)
Loss for the year - - - - - - - (2,964) (2,964)
Forex retranslation difference - - (8) - - - 10 - 2
Loss for the year and total comprehensive income - - (8) - - - 10 (2,964) (2,962)
Transfer to reverse takeover reserve (148) - - - - 148 - - -
Recognition of plc equity at acquisition date 4,767 9,597 - - - (13,505) - - 859
Reverse takeover of Supply@ME S.r.l. 646 - - - 223,832 (224,478) - - -
Issue of shares for cash 7 2,234 - - - - - - 2,241
Cost of share issues - (11) - - - - - - (11)
Legal reserve - - 12 - - - - - 12
At 31 December 2020 5,420 11,820 4 - 223,832 (237,835) 13 (3,706) (452)
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity for the Year Ended 31 December
2021
Note Share capital Share premium Other reserves Share-based payment reserve Merger reserve Reverse takeover reserve Forex reserve Retained earnings Total
£ 000
£ 000
£ 000
£ 000
£ 000
£ 000 £ 000 £ 000 £ 000
At 1 January 2021 5,420 11,820 4 - 223,832 (237,835) 13 (3,706) (452)
Loss for the year - - - - - - - (12,487) (12,487)
Forex retranslation difference - - - - - - 5 1 6
Loss for the year and total comprehensive income - - - - - - 5 (12,486) (12,481)
Issuance of new shares 17 66 6,351 - - 3,073 - - - 9,490
Issue of warrants 28 - 608 - - - - 608
Credit to equity for acquisition related earn-out payments 27 - 1,410 - - - - 1,410
Legal reserve movement - - 17 - - - - (17) -
At 31 December 2021 5,486 18,171 21 2,018 226,905 (237,835) 18 (16,209) (1,425)
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated Statement of Cash Flows for the Year Ended 31 December 2021
Year ended 31 December 2021 Year ended 31 December 2020*
£ 000
£ 000
Cash flows from operating activities
Loss for the year (10,814) (2,819)
Adjustments for non-cash costs relating deemed cost of listing and acquisition
related costs and impairment charge
Deemed cost of listing in reverse acquisition - 1,376
Acquisition related transaction costs 1,900 -
Acquisition related earn-out payments 1,410 -
Amortisation of intangible assets arising on acquisition 391 -
Impairment charges 2,573
6,274 1,376
Other non-cash adjustments (70) 16
Other depreciation and amortisation 396 203
Increase to provisions 52 40
Decrease/(increase) in accrued income (46) -
Decrease/(increase) in trade receivables 505 (717)
Increase/(decrease) in trade and other payables 77 296
Other decreases/(increases) in net working capital (158) 686
Net cash flows from operations (3,784) (919)
Finance costs paid in cash (2) -
Income taxes paid in cash (89) (19)
Other collections - 6
Net cash flow from operating activities (3,875) (932)
Cash flows from investing activities
Cash from reverse acquisition of Abal plc - 93
Acquisition of property, plant and equipment (7) (2)
Acquisition of intangible assets (1,020) (1,026)
Cash consideration on acquisition of Tradeflow, net of cash acquired (3,523) -
Net cash flows from investing activities (4,550) (935)
Cash flows from financing activities
Increase/(decrease) in long-term borrowings - 22
Net cash inflow from Mercator loan notes 6,629 -
Other finance costs paid in cash (25) -
Cash inflow from Negma convertible loan notes 5,000 -
Cash repayment to Negma convertible loan notes (2,016) -
Proceeds from issue of ordinary shares, net of allowable issue costs - 2,230
Net cash flows from financing activities 9,588 2,252
Net increase in cash and cash equivalents 1,163 385
Foreign exchange differences to cash and cash equivalents on consolidation 12 24
Cash and cash equivalents at 1 January 552 143
Cash and cash equivalents at 31 December 1,727 552
*In addition, to better reflect the nature of certain cash flow items the
prior year comparatives include the a reclassification of bank borrowings of
£22,000 from Trade and other payables to Long-term borrowings.
Significant non-cash transactions
During the year, the Group issued 3,313,496,990 ordinary shares in the
Company. 2,000,496,990 new ordinary shares were admitted to trading during the
year in connection with convertible loan notes that were converted to equity
at the discretion of the subscriber during the year. These convertible loans
were issued to extinguish in exchange for £4,501,000 principal value of
convertible loan notes. 813,000,000 new ordinary shares were admitted to
trading during the year as part of the consideration package for the Company's
acquisition of TradeFlow Capital Management Pte. Ltd ("TradeFlow").
500,000,000 new ordinary shares were admitted to trading during the year as
consideration for support with the TradeFlow acquisition. Further details of
share issues can be found in note 17. Further details of the convertible loan
note facilities can be found in note 19. Further details of the acquisition of
TradeFlow can be found in note 27.
The reconciliation of the movement in net debt is set out in note 26.
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
Notes to the Consolidated Financial Statements for the Year Ended 31 December
2021
1 General information
Supply@ME Capital plc is a public limited company incorporated in England and
Wales. The address of its registered office is 27/28 Eastcastle Street,
London, W1W 8DH, United Kingdom. Supply@ME Capital's shares are listed on the
Standard List of the main market of the London Stock Exchange.
These consolidated financial statements have been prepared in accordance with
UK adopted International Accounting Standards.
The financial statements of the Group, consisting Supply@ME Capital plc (the
"Company") and its subsidiaries (the "Group"), are presented in Pounds
Sterling and all values are rounded to the nearest thousand pounds (£'000)
except when otherwise stated.
These consolidated financial statements have been prepared in accordance with
the accounting policies set out below, which have been consistently applied to
all the years presented.
2 Accounting policies
Going concern
At the 31 December 2021 the Group had cash balances of £1,727,000 (31
December 2020: £552,000) and net current liabilities of £6,609,000 (31
December 2020: net current liabilities £1,732,000). The Group has posted a
loss for the year ended 31 December 2021 after tax of £12,481,000 (2020: loss
£2,962,000) and retained losses were £16,209,000 (31 December 2020: losses
£3,706,000).
The current liabilities as at 31 December 2021 of £9,232,000 included
£5,732,000 relating to the outstanding balance of loan notes which the Group
issued on 29 September 2021. As outlined in the note 31, following the 31
December 2021, £2,035,000 of this balance has been repaid through the issue
of new convertible loan notes, of which a principal amount of £1,357,000 has
been converted into new ordinary shares in the Company at the request of the
convertible loan note holder following the period end date, but prior to the
issue of these annual consolidated financial statements. The remaining
£678,000 has been repaid in cash following the amendment deed signed with the
lender on 26 April 2022 (refer to note 31 for further details on any post
balance sheet events). In addition to the above, £395,000 included within
current liabilities is in relation to deferred income held on the balance
sheet as at 31 December 2021 and a further £293,000 relates to refundable
client deposits which are expected to be returned to the customers following
31 December 2021.
On the 26 April 2022, the Company agreed a new equity funding facility which
provides a binding commitment with a new investor, Venus Capital SA ("Venus
Capital"), to invest up to £7,500,000 in exchange for multiple tranches of
new ordinary shares to be issued by the Company over a period with a long stop
date of 31 December 2023 (the "Capital Raise Plan"). These tranches have been
structured as follows:
· New ordinary shares issued from 26 April to date - at the date of
these consolidated financial statements being issued, the Company has issued
3,320,000,000 of new ordinary shares to Venus Capital in exchange for
£1,660,000;
· Additional mandatory tranches to the value of £2,090,000; and
· Additional optional tranches (where the exercise is at the option of
the Company) to the value of £3,750,000.
It should be noted that the issue of the new ordinary shares under the Capital
Raise Plan is subject the necessary authorisations from shareholders which the
Company is planning to require at the General Meeting to be held in
conjunction with the 2021 Annual General Meeting.
Additionally, the Capital Raise Plan also saw the Company enter into an
agreement with Venus Capital regarding a loan facility of up to £1,950,000
commencing from June 2022, including £450,000 to cover the arrangement fees
relating to the Capital Raise Plan, which would be repayable in shares and
which would have a maturity date of 31 December 2025 and an 10% per annum
interest rate.
The key objective of the Capital Raise Plan is to allow the outstanding loan
notes to be repaid in cash rather than via further convertible loan note
issues. To assist with this, on the 26 April 2022, the Company also signed an
amendment letter in respect of these loan notes. This amendment gave the
Company to ability to meet this objective.
Taking into account the factors above and in order to consider their
assessment of the Group as a going concern, the Directors have reviewed the
forecast cashflows for the next 12 months. The cashflow forecasts take into
account that the Group meets its day to day working capital requirement
through its cash resources and are based on the enlarged Group, including
TradeFlow. The Directors have prepared the forecast using their best
estimates, information and judgement at this time, including the Capital Raise
Plan and loan note amendment announced on the 27 April 2021. The Directors
have also considered the expected cashflows arising from TradeFlow's
investment advisory services ("IA" revenue stream) as well as from the use of
the Group's innovative Platform to facilitate inventory monetisation
transactions ("C.IM" revenue stream). This reflects the fact that the
Directors expect the Group to fully operationalise the business model in the
near future.
Despite the facts outlined above, there is currently an absence of a
historical track record relating to inventory monetisation transactions being
facilitated by the Group's Platform, the Group generating the full range of
fees from the use of its Platform and the Group being cash flow positive. As
such the Directors have prudently identified uncertainty in the cash flow
model. This uncertainty arises with respect to both the future timing and
growth rates of the forecast cashflows arising from the Group's multiple
revenue streams referred to above. In this regard, if these future revenues
are not secured as the Directors envisage, it is possible that the Group will
have a shortfall in cash and require additional funding during the forecast
period. In addition certain cashflows in relation to the financing
transactions noted above have not yet occurred and the issue of new ordinary
shares under the Capital Raise Plan is subject to the authorisation from
shareholders in the General Meeting. On the basis of the above, the Directors
believe there are material uncertainties which may cast significant doubt upon
the entities ability to continue as a going concern.
The Directors do however remain confident in the business model and believe
the Group could be managed in a way to allow it to meet its ongoing
commitments and obligations through mitigating actions including cost saving
measures and securing alternative sources of funding should this be required.
This includes the application by certain of the Company's subsidiaries to
access specialised loans for SME businesses provided by Italian commercial
banks with the support of government guarantees. These such loans will allow
the Group to access a lower cost of capital.
As such the Directors consider it appropriate to prepare these annual
consolidated financial statements on a going concern basis and have not
included the adjustments that would result if the Company and Group were
unable to continue as a going concern.
Adjusted performance measures
Management believes that adjusted performance measures provide meaningful
information to the users of the accounts on the operating performance of the
business. Accordingly, the adjusted measure of operating profit and exclude,
where applicable, deemed cost of listing, transaction costs, amortisation of
intangible assets arising on acquisitions, acquisition related earn-out
payments and impairment charges. These terms are not defined terms under IFRSs
and may therefore not be comparable with similarly titled profit measures
reported by other companies. They are not intended to be a substitute for, or
superior to, GAAP measures. The items excluded from adjusted results are those
which arise due to the reverse takeover, as disclosed in note 3 and items that
are charged to the consolidated statement of comprehensive income in
accordance with IFRS 3 ("Business Combinations"). They are not influenced by
the day-to-day operations of the Group.
Basis of consolidation
The Group financial statements consolidate those of the Company and its
subsidiary undertakings drawn up to 31 December 2021. Subsidiaries are
entities over which the Group has control. Control comprises an investor
having power over the investee and is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect
those returns through its power. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. They are deconsolidated
from the date that control ceases.
On 23 March 2020, the Company, completed a reverse acquisition of Supply@ME
S.r.l., a company registered in Italy. Further information about this
transaction is disclosed in note 3.
On 1 July 2021 the Company completed the acquisition of the entire share
capital of TradeFlow by way of cash and share consideration. As such from this
date TradeFlow became a fully owned subsidiary of the Company and will form
part of the Group's consolidated financial performance and position from the
date of acquisition.
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
New and revised accounting standards and interpretations
Management has concluded that to date there has been no impact on the results
or net assets of the Company as a result of adopting new or revised accounting
standards.
New standards, interpretations and amendments not yet effective
At the date of authorisation of the Group's financial statements, certain new
standards, amendments and interpretations to existing standards have been
published by the International Accounting Standards Board but are not yet
effective in the UK and have not been adopted early by the Group. The most
significant of these are as follows, which are effective for the periods
beginning after 1 January 2022:
· Amendments to IFRS 3 Business Combinations Reference to the
Conceptual Framework
· Amendments to IAS 16 Property, Plant and Equipment - Proceeds before
Intended Use
· Amendments to IAS 37 Provisions, Contingent Liabilities, Contingent
Assets Onerous Contracts - Cost of Fulfilling a Contract
· Annual Improvements 2018-202
· Amendments to IAS 1 Classification of Liabilities as Current
· Amendments to IAS 1 Disclosure of Accounting policies
· Amendments to IAS 8 Definition of Accounting Estimates
· Amendments to IAS 12 Deferred Tax related to Assets and Liabilities
arising from a Single Transaction
· IFRS 17 Insurance Contracts
All relevant standards, amendments and interpretations to existing standards
will be adopted in the Group's accounting policies in the first period
beginning on or after the effective date of the relevant pronouncement of
adoption by the UK Accounting Standards Endorsement Board.
The directors do not anticipate that the adoption of these standards,
amendments and interpretations will have a material impact on the Group's
consolidated financial statements in the periods of initial application.
Business Combinations
The acquisition of subsidiaries and businesses are accounted for using the
acquisition method under IFRS 3 "Business Combinations".
Measurement of consideration
The consideration for each acquisition is measured at the aggregate of the
fair values, at the date of exchange, of assets given, liabilities incurred to
former owners and equity instruments issued by the Group in exchange for
control of the acquiree.
Acquisition related earn-out payments (deemed remuneration)
In accordance with the IFRS Interpretations Committee's interpretation of
paragraph B55 of IFRS 3 ("Business Combinations"), the cost of the business
combination excludes consideration which requires post-acquisition service
obligations to be performed by the selling shareholders.
In the event that the deemed remuneration is to be equity settled under IFRS 2
("Share-Based Payments"), the fair value is determined at the grant date and
then charged to the consolidated statement of comprehensive income over the
period of the service obligations.
Fair value assessment
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. Where the fair value of the assets and liabilities at
acquisition cannot be determined reliably in the initial accounting, these
values are considered to be provisional for a period of 12 months from the
date of acquisition. If additional information relating to the condition of
these assets and liabilities at the acquisition date is obtained within this
period, then the provisional values are adjusted retrospectively. This
includes the restatement of comparative information for prior periods.
Intangible assets arising on business combinations are recognised initially at
fair value at the date of acquisition. Subsequently they are carried at cost
less accumulated amortisation and impairment charges.
Goodwill
Goodwill arises where the consideration of the business combination exceeds
the Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. This is recognised as an
asset and is tested annually for impairment. The identifiable assets and
liabilities acquired are incorporated into the consolidated financial
statements at their fair value to the Group
Transaction costs
Transaction costs associated with the acquisition are recognised in the
consolidated statement of comprehensive income as incurred and separately
disclosed due to the nature of this expense.
Intangible assets
Goodwill
Goodwill arising on consolidation is recognised as an asset.
Following initial recognition, goodwill is subject to impairment reviews, at
least annually, and measured at cost less accumulated impairment losses. Any
impairment is recognised immediately in the consolidated statement of
comprehensive income and is not subsequently reversed.
Other intangible assets
a) Internally developed Inventory Monetisation ("IM") platform
The core activity of the existing Supply@Me business is the creation and
marketing of a software-driven secure platform (the "IM Platform") that can be
used for the facilitation, recording and monitoring of IM transactions between
third party client companies and segregated trading companies (known as stock
companies). The software modules which form part of the IM Platform can also
be used, through a White-label model, by third party banks in order for them
to deploy their own inventory backed financial products. The internally
generated IM Platform includes not only the software but also:
· the methodologies and business policies underpinning each IM
transaction
· the legal and accounting frameworks required to support each IM
transaction
· the technical infrastructure (cloud environment, distributed ledger
technology) used to support each IM transaction.
Associated with this core activity are significant product development
requirements to address compliance with legal, regulatory, accounting,
valuation and insurance criteria. The three main categories of cost are:
Software and infrastructure development, intellectual property (IP) related
costs and professional fees related to the development of legal and accounting
infrastructure.
These costs are capitalised and initially measured at cost and are amortised
over their estimated useful economic lives, considered to be 5 years, on a
straight-line basis. Amortisation of this internally developed IM platform
is charged within cost of sales in the consolidated statement of comprehensive
income.
Amortisation methods and useful lives are reviewed at each reporting date and
adjusted if appropriate. The carrying amount is reduced by any provision for
impairment where necessary.
b) Acquired intangible assets
Intangible assets arising on business combinations are recognised initially at
fair value at the date of acquisition. Subsequently they are carried at cost
less accumulated amortisation. Amortisation of acquired intangible assets is
charged within administrative expenses in the consolidated statement of
comprehensive income but is excluded from the adjusted operating profit
measures as described above.
The estimated useful lives of the acquired intangible assets are set out
below:
Customer relationships 13 years
Brand (TradeFlow) 5 years
Commodity Trade Risk Management ("CTRM") software 5 years
Artificial Intelligence and back-office ("AI") software 5 years
Amortisation methods and useful lives are reviewed at each reporting date and
adjusted if appropriate. The carrying amount is reduced by any provision for
impairment where necessary.
Impairment
At each balance sheet date, the Group reviews the carrying amounts of its
intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent
of any impairment loss. Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. Recoverable amount is the
higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a discount rate that reflects current market
assessments of the time value and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted. If the recoverable
amount of an asset (or cash-generating unit) is estimated to be less than its'
carrying amount, the carrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately. Where an
impairment loss subsequently reverses, the carrying amount of the asset (or
cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately.
Revenue recognition
Revenue for the Group is measured at the fair value of the consideration
received or receivable. The Group recognises revenue when the performance
obligation is satisfied, the amount of revenue can be reliably measured and it
is probable that future economic benefits will flow to the entity. Currently
all the Group's revenues are recognised at a point in time when the relevant
performance obligation has been satisfied.
The Group recognises revenue from the following activities:
a) Captive inventory monetisation platform servicing ("C.IM") - Due
diligence fees:
This revenue arises from due diligence services performed by Group's Italian
subsidiary, Supply@Me Srl, in relation to the potential client companies. This
due diligence covers topics such as the client's financial information,
operations, credit rating and analysis of its inventory.
Given the stage of the Group's development, and the evolution of the Group's
contracting arrangements, the due diligence revenues recognised by the Group
to date have been limited. Further details are provided below:
Historical contractual arrangements - Prior to June 2020, the Group's
contractual arrangements required the client to make a down payment intended
to remunerate the Group for the due diligence services being provided.
However, these agreements did not clearly identify the Group's performance
obligation and such down payments were also refundable under certain
circumstances and up to the point when the Platform was able to be used for
the first time by the client companies.
Due to the above circumstances, these down payments have not been recognised
as revenue under IFRS 15 ("Revenue from Contracts with Customers") until the
specific performance obligation, being the use of the Group's Platform for the
first time, has been satisfied by the Group. Until such time, these amounts
have been recognised as deferred income in the balance sheet, or as other
payables in the case where a refund has been requested (due to the current
delays being experienced by the Group), but not yet paid as at the balance
sheet date.
Current contractual arrangements - Post June 2020, the Group updated its
contractual arrangements to specifically identify a separate performance
obligation in relation to the completion of the due diligence services being
provided by the Group, also considering the actual benefits the client
companies can directly obtain from such activities, even in case the inventory
monetisation transaction does not take place. In these contracts, the due
diligence fees are paid in advance by the client companies, and the revenue is
recognised when the Group has successfully fulfilled its performance
obligation, being the completion of the due diligence service and
communication to the client in this respect through the issuance of a detailed
due diligence report. Prior to the completion of the performance obligation,
the due diligence fees received are held on the balance sheet as deferred
income.
In order to conclude if the performance obligations have been successfully
fulfilled, management currently assess this on a client-by-client basis to
ensure that the control of the due diligence has been transferred to the
client company. In developing this accounting policy management have made the
assessment that the due diligence services result in a distinct beneficial
service being provided to client companies as the information provides insight
into their business which can also be used for alternative purposes as well
(such as client companies business and operational optimisation). This is also
referred to the critical accounting judgements and sources of estimation
uncertainty note.
Specific contractual arrangements with related party originator - During 2020,
the Group entered into an origination contract with 1AF2 S.r.l in connection
with the identification of potential client companies. Also, during 2020, 1AF2
S.r.l merged with The AvantGarde Group S.p.A ("TAG"). As set out in the
related party note to these accounts (note 29), both 1AF2 S.r.l and TAG are
related parties of the Group.
Under this origination contract it was the originators responsibility to carry
out the due diligence services. However, given the Group already had this
expertise the originator chose to contract with the Group to perform the due
diligence services on their behalf. In this case the Group acts as a service
provider to the originator, with the completion of single due diligence
activities the identified performance obligation.
This specific contract stipulated a fee to cover the performance of due
diligence services for a specific number of clients. This fee was paid at the
date the contract was signed. Management's judgement was that the provision
of each of the individual due diligence reviews represented a distinct
performance obligation under IFRS 15 ("Revenue from Contracts with
Customers").
As such, the fees received in advance were held on the balance sheet as
deferred income, and the revenue was recognised in line with the completion of
each of the due diligence reviews, specifically where the performance
obligation had been satisfied being the completion and communication of the
due diligence results.
During FY21, this contractual arrangement accounted for 33% of the Group's
total revenue (2020: 100%).
b) Investment Advisory ("IA") fees: This revenue arises from investment
advisory services provided by the Groups wholly owned subsidiary, TradeFlow,
in its capacity as investment advisor of the Global Inventory Fund (more
specifically, at the date of this report to its well-established CEMP - USD/
EUR Trade Flow Funds Segregated Portfolios). Investment Advisory fees are
generated on a monthly basis through investment advisory agreements and are
generally based on an agreed percentage of the valuation of Assets Under
Management ("AUM") during the relevant period. Investment Advisory fees are
recognised as the service is provided and it is probable that the fee will be
collected. As these fees are generally received following the particular
period to which they relates, any amounts that have been recognised as revenue
but not yet received, are recorded on the balance sheet as accrued income.
Cost of Sales
Cost of sales represents those costs that can be directly related to the sales
effort. At this early stage in the Group's development, where the C.IM revenue
comprises entirely due diligence fee revenue, the cost of sales includes both
the costs of the work force who are engaged in that process and the
amortisation of the costs relating to the internally developed IM platform.
Management regard both as the direct costs associated with generating the C.IM
revenue; in line with similar FinTech companies.
Leases
The Group has entered into short term lease contracts (as defined by IFRS 16
"Leases") in respect of one property only and as such, at this time, the Group
does not have any material lease arrangements that would be required to be
accounted for under IFRS 16 ("Leases"). For these leases the costs are
recognised in consolidated statement of comprehensive income in the period
which is covered by the term of the lease.
Property, Plant and equipment
Recognition and measurement
All property, plant and equipment is stated at cost less accumulated
depreciation and impairment. The costs of the plant and equipment is the
purchase price plus any incidental costs of acquisition. Depreciation
commences at the point the asset is brought into use.
If there is any indication that an asset's value is less than it's carrying
amount an impairment review is carried out. Where impairment is identified an
asset's value is reduced to reflect this.
The residual values and useful economic lives of plant and equipment are
reviewed by management on an annual basis and revised to the extent required.
Depreciation
Depreciation is charged to write off the cost, less estimated residual values,
of all plant and equipment equally over their expected useful lives. It is
calculated at the following rates:
· Computers and IT equipment at 33% per annum.
Tax
The tax expense for the period comprises current tax. Tax is recognised in
profit or loss, except that a charge attributable to an item of income or
expense recognised as other comprehensive income is also recognised directly
in other comprehensive income.
Deferred tax is recognised on temporary differences between the carrying
amounts of assets and liabilities in the consolidated financial statements
and the corresponding tax bases used in the computation of taxable profit and
is accounted for using the statement of financial position method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting
profit.
The carrying amount of any deferred tax assets is reviewed at each statement
of financial position date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised based on tax rates
that have been enacted or substantively enacted at the statement of financial
position date. Deferred tax and current tax are charged or credited to profit
or loss, except when it relates to items charged or credited in other
comprehensive income or directly to equity, in which case the deferred tax is
also recognised in other comprehensive income or equity respectively.
In line with IAS 1 "Presentation of Financial Statements" the deferred tax
assets have been classified as non-current assets. This has resulted in a
reclassification of the deferred tax asset as at 31 December 2020 from Trade
and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and other short-term highly
liquid investments that are readily convertible to a known amount of cash and
are subject to an insignificant risk of change in value.
Functional and presentational currencies
The consolidated financial statements are presented in pounds sterling (£),
the Company's functional currency.
Foreign currency
The main currencies for the Group are the euro (EUR), pounds sterling (GBP),
US dollars (USD) and Singapore dollars (SGD).
Foreign currency transactions and balances
Items included in the consolidated financial statements of each of the Group's
subsidiaries are measured using their functional currency. The functional
currency of the parent and each subsidiary is the currency of the primary
economic environment in which the entity operates.
Foreign currency transactions are translated into the functional currency
using the average exchange rates in the month. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the
translation at the reporting period end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the profit and
loss.
Share capital, share premium and brought forward earnings are translated using
the exchange rates prevailing at the dates of the transactions.
See applicable exchange rates to GBP used during FY21 and FY20 below:
2021 2020
Closing Average Closing Average
SGD 1.8195 1.8487 - -
EUR 1.1907 1.1592 1.1118 1.1250
USD 1.3477 1.3775 - -
Consolidation of foreign entities:
On consolidation, results of the foreign entities are translated from the
local functional currency to pounds sterling, the presentational currency of
the Group, using average exchange rates during the period. All assets and
liabilities are translated from the local functional currency to pounds
sterling using the reporting period end exchange rates. The exchange
differences arising from the translation of the net investment in foreign
entities are recognised in other comprehensive income and accumulated in a
separate component of equity.
Employee benefits
Short-term employee benefits
The Group accounts for employee benefits in accordance with IAS 19 ("Employee
Benefits").
Short-term employee benefits are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid if the Group has
a present legal or constructive obligation to pay this amount as a result of
past service provided by the employee and the obligation can be estimated
reliably.
Defined contribution pension obligations
The Group accounts for retirement benefit costs in accordance with IAS 19
("Employee Benefits").
Contributions to the Group's defined contributions pension scheme are charged
to profit or loss in the period in which they become payable.
Financial assets
Classification
Financial assets currently comprise trade and other receivables, cash and cash
equivalents.
Recognition and measurement
Loans and receivables
Loans and receivables are mainly contractual trade receivables and are
non-derivative financial assets with fixed or determinable payments that do
not have a significant financial component and are not quoted in an active
market. Accordingly, trade and other receivables are recognised at
undiscounted invoice price. A reserve for credit risk is made at the beginning
of each transaction and adjusted subsequently through profit and loss.
Impairment provisions for trade receivables are recognised based on the
simplified approach within IFRS 9 ("Financial Instruments") using the lifetime
expected credit losses. During this process the probability of the non-payment
of trade receivables is assessed. This probability is then multiplied by the
amount of the expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade receivables, which
are reported net, such provisions are reported in a separate provision account
with the loss being recognised within administrative expenses in the
consolidated statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
Cash and cash equivalents
Cash and other short-term deposits in the Statement of Financial Position
comprise cash at banks and in hand and short-term deposits with an original
maturity of three months or less and where there is an insignificant risk of
changes in value. In the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above.
Financial liabilities
Classification
Financial liabilities comprise trade and other payables, loan notes, long-term
borrowings, convertible loan notes and derivative financial instruments.
Recognition and measurement
Trade and other payables
Trade and other payables are initially recognised at fair value less
transaction costs and thereafter carried at amortised cost.
Derivative financial instruments
The Group's derivative financial instruments is a historic convertible loan
note that was both issued and then cleared in the past by a debt for equity
swap, and warrants were issued with options to acquire shares that are
accounted for at fair value, with changes in value taken through profit and
loss. The release of the fair value discount on the debt for equity swap has
been taken to the income statement as these warrants expired during the
current year.
Loan note and long-term borrowings
Interest bearing loan notes and long-term borrowings are initially recorded at
the proceeds received, net of direct issue costs (including commitment fees,
introducer fees and the fair value of warrants issued to satisfy issue costs).
Finance charges, including direct issue costs, are accounted for on an
amortised cost basis to the consolidated statement of comprehensive income
using the effective interest method and are added to the carrying amount of
the instrument to the extent that they are not settled in the period in which
they arise. The carrying value of the loan notes have been adjusted to take
for the fair value of principal repayments made since inception.
Convertible loan notes
Convertible loan notes issued by the Group are recorded at the fair value of
the convertible loan notes issued, net of direct issue costs including
commitment fees. Finance charges, including direct issue costs, are accounted
for on an amortised cost basis to the consolidated statement of comprehensive
income using the effective interest method and are added to the carrying
amount of the instrument to the extent that they are not settled in the period
in which they arise. The carrying value of the convertible loan notes have
been adjusted to take for the fair value of those notes that have been
converted into ordinary shares since inception.
Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of a past event, it is probable that the Group will be
required to settle the obligation and the amount can be reliably estimated.
Share-based payments
Equity-settled share-based payments relate to the acquisition related earn-out
payments and warrants issued in connection with the cost of issuing loan notes
and convertible notes during the current year.
Equity-settled share-based payments are measured at the fair value of the
equity instruments at the grant date. The fair value excludes the effect of
non-market-based vesting conditions. Details regarding the determination of
the fair value of equity-settled share-based transactions are set out in note
28.
The fair value determined at the grant date of the equity-settled share-based
payments relating to the earn-out payments are expensed over the vesting
period on a straight-line basis, based on the Group's estimate of equity
instruments that will eventually vest. At each balance sheet date, the Group
revises its estimate of the number of equity instruments expected to vest as a
result of the effect of non-market-based vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in income statement
such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves.
The fair value determined at the grant date of the equity-settled share-based
payments relating to the warrants issued are net off against the fair value of
the loan notes or convertibles loan notes to which they directly relate. The
fair value is then expensed together with the other related finance costs on
an amortised cost basis to the consolidated statement of comprehensive income
using the effective interest method. In respect of the share-based payments,
the fair value is not revised at subsequent reporting dates.
Equity
"Share capital" represents the nominal value of equity shares issued.
"Share premium" represents the excess over nominal value of the fair value of
consideration received for equity shares net of expenses of the share issue.
"Other reserves" represents legal reserves in respect of Supply@ME S.r.l. In
accordance with Article 2430 of the Italian Civil Code, Supply@ME S.r.l., a
limited liability company registered in Italy, with a corporate capital of
euro 10,000 or above shall annually allocate as a legal reserve an amount of
5% of the annual net profit until the legal reserve will be equal to 20% of
corporate capital.
"Share-based payment reserve" represents the credit adjustments to equity in
respect of the fair value of outstanding share-based payments including
acquisition related earn-out payments and warrants issued in connection with
the cost of issuing loan notes and convertible notes during the current year.
"Merger relief reserve" represents the excess of the value of the
consideration shares issued to the shareholders of Supply@ME S.r.l. upon the
reverse takeover over the fair value of the assets acquired.
"Reverse takeover reserve" represents the accounting adjustments required to
reflect the reverse takeover upon consolidation. Specifically, removing the
value of the "investment" in Supply@ME S.r.l., removing the share capital of
Supply@ME S.r.l. and bringing in the pre-acquisition equity of Supply @ME
Capital plc.
"FX reserves" represents foreign currency translation differences on
consolidation of subsidiaries reporting under a different functional currency
to the parent company.
"Retained earnings" represents retained losses of the Group. As a result of
the reverse takeover, the consolidated figures include the retained losses of
the Group only from the date of the reverse takeover together with the brought
forward losses of Supply@ME S.r.l.
Critical accounting judgements and sources of estimation uncertainty
The preparation of financial information in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires the Directors
to exercise their judgement in the process of applying the accounting policies
which are detailed above. These judgements are continually evaluated by the
Directors and management and are based on experience to date and other
factors, including reasonable expectations of future events that are believed
to be reasonable under the circumstances.
The key estimates and underlying assumptions concerning the future and other
key sources of estimation uncertainty at the statement of financial position
date, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial period,
are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods
A number of these key estimates and underlying assumptions have been
considered for the first time this financial year as a results of specific
transactions outlined in these consolidated financial statements. The
Directors have evaluated the estimates using historical experience and other
methods considered reasonable specific to the circumstances. The Directors
have also but also in consultation with third-party experts where appropriate.
These estimates will be evaluated on an ongoing basis as required.
The Group believes that the estimates and judgements that have the most
significant impact on the annual results under IFRS are as set out below:
Judgements
Internally developed intangible assets
The cost of an internally generated IM platform comprises all directly
attributable costs necessary to create, produce, and prepare the asset to be
capable of operating in the manner intended by management. During the period
judgement was required to distinguish those costs that were capable of being
capitalised under IAS 38 ("Intangible assets") and that costs that related to
research activities, the cost of which has been recognised as an expense
during the relevant period.
Revenue recognition - assessment of performance obligations
The Directors are required to make a judgement as to if the due diligence
services represent a distinct performance obligation under IFRS 15 ("Revenue
from Contracts with Customers"). The Board and management have concluded that
this is indeed the case due to the distinct beneficial service being provided
to client companies through the delivery of the due diligence report which
provide insight and information into the business.
Accounting for acquisition related earn-out payments
The terms of the agreement to acquire TradeFlow included acquisition related
earn-out payments that, together with the initial cash payment and issue of
equity, form the total legal consideration agreed between the parties. The
acquisition related earn-out payments are determined by reference to
pre-determined revenue milestone targets in each of the 2021, 2022 and 2023
financial years. These payments may be forfeited by the selling shareholders
should they, in certain circumstances, no longer remain employed prior to the
end of each earn-out period. Under the IFRS Interpretations Committee's
interpretation of paragraph B55 of IFRS 3 ("Business Combinations"), the
Directors have concluded that the inclusion of the substantive
post-acquisition service conditions requires the fair value of these earn-out
payments to be accounted for as a charge to the income statement (as deemed
remuneration) rather than as consideration.
Business combinations
The share purchase agreements governing the acquisition of TradeFlow included
an option for the selling shareholders, who remained directors of Tradeflow
following the acquisition, to repurchase and give the ability for these
selling shareholders to veto certain actions in relation to the TradeFlow
business for the first 24 months of ownership. The Directors consider these
clauses to be protective in nature and not substantive and are in place to
protect these selling shareholders during the earn-out period. Furthermore,
the Directors have assessed the option clauses to be unlikely during the year
and at the balance sheet date. Therefore, the Directors have concluded that
Supply@ME Capital plc has control over TradeFlow.
Estimates
Intangible assets in a business combination
On the acquisition of a business the identifiable intangible assets may
include customer relationships, brands and internally generated software. The
fair value of certain of these assets is determined by discounting estimated
future net cash flows generated by the asset where no active market for the
asset exists. The use of different assumptions for the expectations of future
cash flows and the discount rate would change the valuation of the intangible
assets, with a resultant impact on the goodwill or gain on acquisition
recognised.
On acquisition the Group recognised intangible assets of £6,888,000,
representing customer relationships (£4,829,000), Brand ("TradeFlow")
(£205,000), CTRM software (£1,429,000) and AI software (£425,000).
Customer relationships
The most significant intangible asset recognised is relationships with
customers, in this case being potential investors to the Global Inventory
programme (more specifically, at the date of this report to its
well-established CEMP - USD/ EUR Trade Flow Funds Segregated Portfolios) for
which TradeFlow acts as an investment advisor. A model was used that present
valued the earnings forecast to be generated by the investor relationships,
net of a reasonable return on other assets also contributing to that stream of
earnings. The significant assumptions used in this model were as follows:
Discount rate - 25%
Annual customer attrition rate - 5%
If the discount rate was adjusted by 2.5% the impact on the value of the asset
would be approximately plus or minus £769,000 and £605,000 respectively. If
the annual customer attrition rate was adjusted by 2.5% the impact on the
value of the asset would be approximately plus or minus £989,000 and
£824,000 respectively
Brand
The brand has been valued by present valuing the saved costs by owning the
brand rather than paying a royalty to licence the brand. The significant
assumptions used in this model were as follows:
Discount rate - 25%
Royalty rate - 1%
If the discount rate was adjusted by 2.5% the impact on the value of the asset
would be not be impacted. If the royalty rate was adjusted by 1% the impact on
the value of the asset would be approximately plus or minus £220,000.
CTRM software
CTRM software has been valued by present valuing the saved costs by owning the
software rather than paying a royalty to licence the software. The significant
assumptions used in this model were as follows:
Discount rate - 25%
Royalty rate - 7%
If the discount rate was adjusted by 2.5% the impact on the value of the asset
would be approximately plus or minus £110,000. If the royalty rate was
adjusted by 1% the impact on the value of the asset would be approximately
plus or minus £220,000.
AI software
AI software has been valued with reference to the costs that would have to be
expended in order to recreate the asset. The cost assumptions were based on
historical costs and as such there we no significant judgemental or subjective
assumptions.
Useful Economic Lives of Acquired Intangibles
On acquisition, the useful economic lives of acquired intangibles, which are
key estimates, are assessed by management. The estimated useful lives of the
acquired intangible assets are set out below:
Customer relationships 13 years
Brand (TradeFlow) 5 years
CTRM software 5 years
AI software 5 years
These useful economic lives have been based on the following factors:
· Customer relationships - the period over which 95% of the value of
the customer relationships is expected to be achieved.
· Brand, CTRM software and AI software - the specific characteristics
of the asset, its life to date and benchmarking to market data for comparable
acquisition transactions.
We have outlined below a sensitivity analysis detailing the impact of changing
the useful economic lives of each of the acquired intangibles would have on
the amortisation charged to profit or loss for the year ended 31 December
2021:
Decreasing useful life by 3 years Increasing useful life by 3 years
Approximate increase in amortisation (£000) Approximate decrease in amortisation (£000)
Customer relationships 56 35
Brand (TradeFlow) 31 8
CTRM software 214 54
AI software 64 16
Total 365 112
Valuation of acquisition related earn-out payments
The acquisition related earn-out payments described above, are able to be
settled in either cash or equity. The contracts governing the acquisition of
TradeFlow however contain conflicting terms with respect to which party has
the right to decide whether to settle the earn-out payments in cash or shares.
After taking legal advice, management have concluded that the choice is at the
discretion of the Company, and that it is the Company's current intention to
settle these payments in equity, capturing them within the scope of IFRS 2
("Share-based payments").
As such the Directors were required to determine the fair value of the
equity-settled share-based payments at the date on which they were granted.
This valuation needed to take into account the following market conditions
related to these earn-out awards:
· The number of shares to be issued will be determined using the Volume
Weighted Average Price ("VWAP") over the 20 dealing days to the end of the
relevant financial year subject to a floor of 1p. In addition, the number of
shares will be enhanced by 50% if the VWAP is greater than 1p; and
· That 50% of any earn-out shares may not be sold for 12 months
following the award but are not contingent on continued employment.
Judgement was required in determining the most appropriate inputs into the
valuation model (refer to detail in note 27) used and the key judgemental
input was the expected volatility rate of the Company's share price over the
relevant period and the assumption applied in the model was 90%, with 162%
applied for any required holding period. This assumption reflects the
Company's actual volatility from the date of listing through the grant date,
and the Company's actual volatility for a 12 month period prior to the grant
date, respectively. Given the Group's early stage of development, it was
concluded that the Group's actual volatility was the most appropriate rate to
use. If the expected volatility rates were adjusted by plus 10%, then the
impact on the fair value recognised in the income statement in the current
year would have been approximately minus £65,000. If the expected volatility
rates were adjusted by minus 10%, then the impact on the fair value recognised
in the income statement in the current year would have been approximately plus
£54,000.
If management had reached the alternative conclusion that the choice to settle
in either cash or shares is at the discretion of the TradeFlow shareholder,
they would have been accounting for under IFRS 2 ("Share-based payments"). The
impact would be to increase the acquisition related earn-out charge by
approximately £3.3 million.
Valuation of share warrants issued
During the year the Company issued share warrants in connection with the loan
notes and certain convertible loan notes that were also issued during the year
ended 31 December 2021. As these share warrants were issued as a cost of
securing the funding facility they fall into the scope of IFRS 2 ("Share-based
payments"). As such the Directors were required to determine the fair value of
the equity-settled share-based payments at the date on which they were
granted. Judgement was required in determining the most appropriate inputs
into the valuation model (Black Scholes) used and the key judgemental input
was the expected volatility rate of the Company's share price over the
relevant period and the assumption applied in the model was 97% and was based
the actual volatility of the Company's share price from the date of the RTO.
If the expected volatility rate was adjusted by plus 10%, then the impact on
the fair value in the current year would have been approximately plus
£71,000. If the expected volatility rate was adjusted by minus 10%, then the
impact on the fair value in the current year would have been approximately
minus £76,000.
3 Reverse acquisition during the year ended 31 December 2020
On 23 March 2020, the Company acquired through a share for share exchange the
entire share capital of Supply@ME S.r.l, whose principal activity is an
early-stage business that delivers an innovative technology platform for
inventory monetisation that enables a wide range of manufacturing and trading
customers to improve their working capital position by releasing capital from
their inventory stock.
Although the transaction resulted in Supply@ME S.r.l. becoming a wholly owned
subsidiary of the Company, the transaction constitutes a reverse acquisition
as the previous shareholders of Supply@ME S.r.l. own a substantial majority of
the Ordinary Shares of the Company and the executive management of Supply@ME
S.r.l. became the executive management of Supply@ME Capital plc, previously
Abal Group plc.
In substance, the shareholders of Supply@ME S.r.l. acquired a controlling
interest in the Company and the transaction has therefore been accounted for
as a reverse acquisition. As the Company's activities prior to the acquisition
were purely the maintenance of the AIM Listing, acquiring Supply@ME S.r.l and
raising equity finance to provide the required funding for the operations of
the acquisition it did not meet the definition of a business in accordance
with IFRS 3 for the purpose of these consolidated financial statements of the
Group.
Accordingly, in these consolidated financial statements, the reverse
acquisition did not constitute a business combination and was accounted for in
accordance with IFRS 2 "Share-based Payments" and the associated IFRIC
guidance. Although, the reverse acquisition is not a business combination, the
Company has become a legal parent and is required to apply IFRS 10 and prepare
consolidated financial statements. The Directors have prepared these
consolidated financial statements using the reverse acquisition methodology,
but rather than recognising goodwill, the difference between the equity value
given up by the Supply@ME S.r.l.'s shareholders and the share of the fair
value of net assets gained by the Supply@ME S.r.l. shareholders is charged to
the statement of comprehensive income as a share-based payment on reverse
acquisition and represents in substance the cost of acquiring a main market
listing.
In accordance with reverse acquisition accounting principles, these
consolidated financial statements represent a continuation of the consolidated
statements of Supply@ME S.r.l. and include:
· The assets and liabilities of Supply@ME S.r.l. at their
pre-acquisition carrying value amounts and the results for both years; and
· The assets and liabilities of the Company as at 23 March 2020 and its
results from the date of the reverse acquisition (23 March 2020) to 31
December 2021.
On 23 March 2020, the Company issued 32,322,246,220 ordinary shares to acquire
the whole of the share capital of Supply@ME S.r.l. The prospectus dated 4(th)
March 2020 had an issue price of £0.006945 per share of the Company's share
capital to be issued and therefore valued the investment in Supply@ME S.r.l.
at £224,478,000.
Because the legal subsidiary, Supply@ME S.r.l., was treated on consolidation
as the accounting acquirer and the then legal Parent Company, Supply@ME
Capital plc, was treated as the accounting subsidiary, the fair value of the
shares deemed to have been issued by Supply@ME S.r.l. was calculated at
£859,000 based on an assessment of the purchase consideration for a 100%
holding of Supply@ME Capital plc, being its entire share capital of
101,094,276 Ordinary Shares at the last listing price of £0.0085.
The fair value of the net assets of Supply@ME Capital plc at acquisition was
as follows:
£ 000
Cash and cash equivalents 93
Receivables 50
Payables (660)
Total Net Liabilities (517)
The difference between the deemed cost (£859,000) and the fair value of the
net liabilities assumed per above of £517,000 resulted in £1,376,000 being
expensed within "reverse acquisition expenses" in accordance with IFRS 2,
Share-Based Payments, reflecting the economic cost to Supply@ME S.r.l.
shareholders of acquiring a quoted entity.
The reverse acquisition reserve which arose from the reverse takeover is made
up as follows:
£'000
Pre-acquisition equity(1) (14,881)
Supply@ME S.r.l. equity at acquisition(2) 148
Investment in Supply@ME S.r.l.(3) (224,478)
Reverse acquisition expense(4) 1,376
(237,835)
Notes:
1. Recognition of pre-acquisition equity of Supply@ME Capital plc as at 23
March 2020.
2. Supply@ME S.r.l. had issued equity of £148,000. As these consolidated
financial statements present the capital structure of the legal parent entity,
the equity of Supply@ME S.r.l. is eliminated.
3. The value of the shares issued by the Company in exchange for the
entire share capital of Supply@ME S.r.l. The above entry is required to
eliminate the balance sheet impact of this transaction.
4. The reverse acquisition expense represents the difference between the
value of the equity issued by the Company, and the deemed consideration given
by Supply@ME S.r.l. to acquire the Company.
4 Segmental reporting
IFRS 8 ("Operating segments") requires the Group's operating segments to be
established on the basis of the components of the Group that are evaluated
regularly by the chief operating decision maker, which has been determined to
be the Board of Directors. At this early stage of development, the Group's
structure and internal reporting is continually developing. Prior to the
acquisition of TradeFlow on 1 July 2021, the Board considered that the Group
operated in a single business segment of due diligence and all activities were
undertaken in Italy.
Following the acquisition, the Board of Directors manage the Group as two
operating segments being inventory monetisation (comprising the Group's
Italian operating subsidiary) and investment advisory (comprising the
TradeFlow operations), alongside the head office costs (comprising the
Company). To date the inventory monetisation segment has been focused on the
development of the IM platform and the provision of due diligence services.
The key metrics assessed by the Board of Directors include revenue and
adjusted operating profit (before deemed cost of listing, acquisition related
costs and impairment charges) which is presented below. Revenue is presented
by basis of recognition and by service line, in accordance with IFRS 15.
As the business continues to grow, it is expected that the operating segments
may need to be monitored and updated to reflect the needs and requirement of
the chief operating decision maker.
Year ended 31 December 2021 Inventory Monetisation Investment Advisory Head office Consolidated Group
£ 000 £ 000 £ 000 £ 000
Revenue
Due Diligence fees 279 - - 279
Investment Advisory fees - 259 - 259
Revenue by operating segment 279 259 - 538
Operating loss before deemed cost of listing and acquisition related costs and (1,071) (407) (2,953) (4,431)
impairment charges
All the Group's revenue is recognised at a point in time.
As at 31 December 2021 Inventory Monetisation Investment Advisory Head office Consolidated Group
£ 000 £ 000 £ 000 £ 000
Balance sheet
Assets 802 181 9,552 10,535
Liabilities (4,363) (1,526) (6,071) (11,960)
Net assets / (liabilities) (3,561) (1,345) 3,481 (1,425)
The Company completed the acquisition of TradeFlow in 1 July 2021 and
therefore the above tables include the results from this date and the assets /
(liabilities) only as at 31 December 2021.
Geographical analysis
The Group's inventory monetisation operation is currently predominately
located in Europe, while the investment advisory operations are currently
predominately located in Singapore.
5 Deemed cost of listing
2021 2020
£ 000 £ 000
Deemed cost of listing - share-based payment - 1,376
As explained in note 3, the reverse acquisition of Supply@ME S.r.l. does not
meet the requirements of IFRS 3 Business Combinations so has been accounted
for under IFRS 2 ("Share-Based Payments").
The amount of £1,376,000 represents the deemed cost of acquisition over the
net assets of Supply@ME S.r.l. that were acquired. Under IFRS 2, the deemed
costs of obtaining the listing have been expensed to profit and loss.
6 Finance costs
2021 2020
£ 000 £ 000
Interest expense - loan notes / convertible loan notes 1,252 -
Interest expense - long-term borrowings 89 -
Total finance costs 1,341 -
7 Other operating income
2021 2020
£ 000 £ 000
Write back of payables - 53
- 53
8 Operating loss
The Group's operating loss for the year has been arrived at after charging
(crediting):
2021 2020
£ 000
£ 000
Amortisation of internally developed IM platform (note 15) 391 234
Depreciation 5 1
Staff costs (note 10) 1,728 745
Short-term lease costs 43 -
Professional and legal fees 1,825 1,327
Contractor costs 180 -
Insurance 123 66
Training and recruitment costs 75 -
In addition to the above, the Group incurred the following costs relating the
deemed cost of listing in the prior year, acquisition related costs and
impairment charges as detailed below:
2021 2020
£ 000
£ 000
Deemed cost of listing (note 5) - 1,376
Transaction costs (note 27) 2,009 -
Amortisation of intangible assets arising on acquisition (note 15) 391 -
Acquisition related earn-out payments (note 27) 1,410 -
Impairment charges (note 15) 2,573 -
Total deemed cost of listing, acquisition related costs and impairment charges 6,383 1,376
9 Auditors' remuneration
During the year, the Group obtained the following services from the Group's
auditor, at the costs detailed below:
2021 2020
£ 000
£ 000
Fees payable to the Company's auditors for the audit of the consolidated 75 27
financial statements
Fees payable to the Company's auditors and its associates for other services
to the Group:
Audit of the Companies subsidiaries 29 10
Audit fees relating to prior periods 30 -
Total audit fees 134 37
Non-audit services - -
Total audit and non-audit related services 134 37
10 Staff costs
The aggregate payroll costs (including directors' remuneration) were as
follows:
2021 2020
£ 000
£ 000
Wages, salaries and other short term employee benefits 1,476 633
Social security costs 166 95
Post-employment benefits 86 1
Redundancy costs - 16
Total staff costs 1,728 745
The average number of persons employed by the Group (including executive
directors) during the year, analysed by category was as follows:
2021 2020
No.
No.
Executive directors 2 1
Finance, Risk and HR 2 1
Sales and marketing 4 3
Legal 2 2
Operations and Platform development 9 7
Total average number of people employed 19 14
11 Key management personnel
Key management compensation (including directors):
2021 2020
£ 000
£ 000
Wages, salaries and short-term employee benefits 890 361
Social security costs 60 -
Post-employment benefits 60 -
Total key management compensation 1,010 361
Key management personnel consist of the Company leadership team and the
Directors.
No retirement benefits are accruing to Company Directors under a defined
contribution scheme (2020: none), however the Chief Executive Officer received
cash in lieu of payments to a defined contribution pension scheme of £49,310
during the year (2020: none). This was allowable under his directors
employment contract. Of the £49,310, £21,560 that was paid during FY21 but
which related to base salary earned in FY20. The remaining £27,750 related to
base salary earned in FY21.
The Directors' emoluments are detailed in the Remuneration Report of the
Annual Report and Accounts for the year ended 31 December 2021.
12 Income tax
Tax charged in the income statement:
2021 2020
£ 000 £ 000
Current Taxation
UK Corporation tax - -
Foreign taxation paid/(receivable) by subsidiaries 332 145
332 145
The tax on loss before tax for the period is more than (2020 - less than) the
standard rate of corporation tax in the UK of 19% (2020 - 19%).
The differences are reconciled below:
2021 2020
£ 000 £ 000
Loss before tax 12,155 2,819
Corporation tax at standard rate - 19% (2,309) (536)
Effect of expenses not deductible in determining taxable profit (tax loss) 929 593
Increase in tax losses carried forward which were unutilised in the current 616 38
year
Tax adjustments in respect of foreign subsidiaries (timing differences) 1,096 50
Total tax charge 332 145
13 Deferred tax
The following are the deferred tax (liabilities) / assets have been recognised
by the Group and movements thereon during the current and prior year:
Deferred tax liability arising on acquired intangible assets Deferred tax asset arising on short-term timing differences Total
£ 000
£ 000
£ 000
As at 1 January 2020 - 283 283
Foreign exchange movement - 17 17
Additions - 142 142
Credit / (charge) to income - (20) (20)
As at 31 December 2020 - 422 422
Foreign exchange movement - (28) (28)
As at 1 January 2021 - 394 394
Arising on acquisition of TradeFlow (1,171) - (1,171)
Additions - 24 24
Credit / (charge) to income 67 (254) (187)
Impairment (164) (164)
As at 31 December 2021 (1,104) - (1,104)
The deferred tax liability arises on the acquisition of TradeFlow and in
particular on the fair value uplift that was applied to the acquired
intangible assets. This deferred tax liability will be released in line with
the amortisation profile of the acquired intangible assets.
The deferred tax asset represents an aggregate of the following short-term
timing differences:
As at 31 December 2021 As at 31 December 2020
£ 000
£ 000
Short-term timing differences
Arising on revenue recognition timing differences - 383
Arising on amortisation costs timing differences - 36
Arising on IAS 19 timing differences - 3
Total short term deferred tax timing differences - 422
In line with IAS 1 ("Presentation of Financial Statements") the prior year
comparative deferred tax asset balance of £422,000 has been reclassified from
Trade and other receivables to non-current assets.
Arising on revenue recognition timing differences
These deferred tax assets arise due to the Group's Italian subsidiary
recognising revenue in the local tax accounts (in accordance with local rules)
ahead of the IFRS 15 revenue recognition policy applied in the Group
consolidated financial statements. As such this generated income taxes payable
in Italy for the Group relating to revenue that will not be recognised in the
consolidated Group accounts until a later period at which time these timing
differences will be reversed.
The decrease in these short-term timing differences over the year resulted
from amounts being recognised as revenue under IFRS 15 in the current period
or amounts no longer expected to be recognised as revenue in the future due to
refunds having been requested from clients.
Arising on amortisation costs timing differences
These deferred tax assets arise due to the Group's Italian subsidiary
capitalising certain expenditure in their local tax accounts (in accordance
with local rules), that did not meet the requirements for capitalisation under
IAS 38. As such this resulted in lower costs in the local tax accounts and
these timing differences will be reversed as these capitalised items are
amortised.
Deferred tax asset impairment assessment
As at 31 December 2021, the Directors reviewed the carrying amount of all
deferred tax assets to determine whether sufficient future taxable income will
be generated to permit the use of the existing deferred tax assets. In order
to be prudent, and to follow a consistent approach used to determine the
impairment of the Group's internally generated IM platform asset (refer to
note 15 for further details), the Directors reached the conclusion to impair
the full carrying value of the deferred tax assets as at the year-end date.
In addition, unrecognised deferred tax assets, relating tax losses carried
forward across the Group, total approximately £1.2 million and have not been
recognised due to uncertainty over the timing and extent of future taxable
profits. The losses can be carried forward indefinitely and have no expiry
date.
14 Earnings per share
The calculation of the Basic earnings per share (EPS) is based on the loss for
the year of £12,487,000 (2020 - loss £2,964,000) and on a weighted average
number of ordinary shares in issue of 33,921,396,568 (2020 - 27,118,800,563).
The basic EPS from continuing operations is (0.04) pence (2020 - (0.01)).
The following share warrants and future acquisition related earn-out payments
to be issued in shares were in issue at the dates shown below and if
exercised, would dilute the earnings per share in the future.
2021 2020
No.
No.
Number of shares:
Share warrants 522,791,511 11,363,636
Acquisition related earn-out share options 1,578,324,153 -
Total 2,101,115,664 11,363,636
No dilution per share was calculated for 2021 and 2020 as with the reported
loss they are all anti-dilutive.
15 Intangible assets
Customer Relation-ships Brand CTRM Software AI Software Goodwill Internally developed IM platform Total
£ 000
£ 000 £ 000 £ 000 £ 000 £ 000
Cost or valuation
At 1 January 2020 - - - - - 606 606
Additions - - - - - 1,027 1,027
At 31 December 2020 - - - - - 1,633 1,633
Forex retranslation adjustment - - - - - (109) (109)
At 1 January 2021 - - - - - 1,524 1,524
Arising of acquisition of TradeFlow 4,829 205 1,429 425 2,199 - 9,087
Additions - - - - - 1,020 1,020
At 31 December 2021 4,829 205 1,429 425 2,199 2,544 11,631
Amortisation
At 1 January 2020 - - - - - 194 194
Amortisation charge - - - - - 203 203
At 31 December 2020 - - - - - 397 397
Forex retranslation adjustment - - - - - (17) (17)
At 1 January 2021 380 380
Amortisation charge 186 20 143 43 - 391 783
At 31 December 2021 186 20 143 43 - 771 1,163
Impairment
At 1 January 2021 - - - - - - -
Impairment charge - - - - 800 1,773 2,573
At 31 December 2021 - - - - 800 1,773 2,573
Net Book Value
At 31 December 2021 4,643 185 1,286 382 1,399 - 7,895
At 31 December 2020 - - - - - 1,236 1,236
The following intangible assets arose on the acquisition of TradeFlow during
the current period; Customer relationships, Brand, Commodity Trade Risk
Management ("CTRM") software, Artificial Intelligence and back-office ("AI")
software and Goodwill. The carrying value of these assets at the date of
acquisition is shown in the table above.
Impairment assessment - Internally developed IM Platform
The Directors considered the current year losses of the Group's Italian
subsidiary, to which the Internally developed IM platform relates, as an
impairment indicator and therefore, in accordance to IAS 36 ("Impairment of
Assets"), an impairment test on this asset has been performed as at 31
December 2021.
This impairment test has been carried out using the Group's 2022 - 2025
Business Plan prepared by the management and approved by the Board of
Directors on 30 May 2022, and, in particular, the cash flows the particular
asset is expected to generate during the forecasted period in its current
condition. The recoverable amount has been identified in the value in use,
equal to the sum of the discounted future cash flows (considering a terminal
value) that the asset will be able to generate according to management
estimates in its current condition.
The weighted average cost of capital ("WACC") has been used as the discount
rate, which takes into account the specific risks of the asset and reflects
the current market conditions and the cost of money, based on a weighting
between the cost of debt and the cost of equity, calculated on the basis of
the values of comparable companies operating in the same sector. The value of
the WACC thus determined was equal to 10.64%.
The recoverable amount of the investment was higher than its carrying amount
using this methodology as at 31 December 2021.
However, as noted in the full going concern statement, set out in note 2,
there is currently an absence of a historical track record relating to
inventory monetisation transactions being facilitated by the Group's Platform,
the generation of the full range of fees from the use of its Platform and the
Group being cash flow positive. As such the Directors have prudently
identified a material uncertainty in relation to the going concern statement.
The Directors have also concluded that this uncertainty applies to the
discounted cash flow model used in this impairment test also. In particular,
there is uncertainty that arises with respect to both the future timing and
growth rates of the forecast discounted cash flows arising from the use of the
Internally developed IM Platform intangible asset.
As such, the Directors have prudently decided to impair the full carrying
amount of this asset as at 31 December 2021. This impairment loss may
subsequently be reversed and if so, the carrying amount of the asset will be
increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the investment in
prior years.
Impairment assessment - TradeFlow
The Directors considered the underperformance of TradeFlow compared to the
forecast for the year ended 31 December 2021 (included in the independent
valuation report prepared for the purposes of the acquisition) to be an
impairment indicator. In particular, the Directors noted that 80% of the
earn-out milestone target, which had been set in line with the forecast
referred to above, for the year ended 31 December 2021 was achieved.
Therefore, in accordance with IAS 36 ("Impairment of Assets"), an impairment
test on the TradeFlow Cash Generating Unit ("CGU") has been performed as at 31
December 2021.
This impairment test has been carried out using the Group's 2022 - 2025
Business Plan prepared by the management and approved by the Board of
Directors on 30 May 2022, and, in particular, the cash flows the TradeFlow CGU
is expected to generate during the forecasted period in its current
conditions. In performing the impairment test, the Directors reduced its
revenue forecasts by 20% each year over this period in order to reflect the
circumstances experienced in the current financial year. The Directors believe
this is a prudent assumption to have made given the current expectations are
for revenue to be largely in line with the unadjusted forecasts going forward.
The Directors used WACC as the discount rate, which takes into account the
specific risks of the TradeFlow CGU forecasts, and reflects the current market
conditions and the cost of money, based on a weighting between the cost of
debt and the cost of equity, calculated on the basis of the values of
comparable companies operating in the same sector. Given the early stage
development of the TradeFlow business, the Directors initial determined WACC
to be equal to 16.43%.
However, the Directors also noted that the independent purchase price
accounting exercise carried out in respect of the TradeFlow, applied a
discount rate of 25.00% to the forecast cashflows. This discount rate has been
determined largely by reference to the initial rate of return, which would
ensure the present value of the future TradeFlow CGU forecasts equalled to the
value of the investment made.
In order to ensure consistency between the WACC applied in this impairment
test and the recent purchase price accounting exercise, the Directors took the
decision and subsequently adjusted the discount rate applied in the impairment
test to 25.00%. This is also believed to be a prudent assumption.
Using the assumptions applied above, the recoverable amount has been
identified as the value in use, equal to the sum of the discounted future cash
flows (including a terminal value and terminal value growth rates of 1.5%)
that the TradeFlow CGU will be able to generate according to management
estimates in its current condition. This recoverable amount of the TradeFlow
CGU was determined to be lower than its carrying amount on the balance sheet
at 31 December 2021 by £800,000.
As such, in accordance with IAS 36 ("Impairment of Assets"), an impairment
charge of £800,000 has been recognised against the value of the goodwill
initially recognised in line with IFRS 3 ("Business Combinations"). This
impairment charge has also been recognised in the profit and loss in the
current financial year.
16 Trade and other receivables
As at 31 December 2021 As at 31 December 2020
£ 000
£ 000
Trade receivables 13 489
Contract assets 84
Other receivables 727 601
Prepayments 72 23
Total current trade and other receivables 896 1,113
17 Share capital
Allotted, called up and fully paid shares
As at 31 December 2021 As at 31 December 2020
No. 000 £ 000 No. 000 £ 000
Equity - -
Ordinary shares of £0.00002 each 36,068,442 721 32,754,945 655
Deferred shares of £0.04000 each 63,084 2,523 63,084 2,523
2018 Deferred shares of £0.01000 each 224,194 2,242 224,194 2,2412
36,355,720 5,486 33,042,223 5,420
New shares allotted during the current financial year
On 7 July 2021, the Company allotted 1,477,705,882 new ordinary shares. These
shares were issued with the following activities:
· 813,000,000 were issued as consideration for the acquisition of
TradeFlow;
· 500,000,000 were issued as consideration to intermediaries and
introducers which support the TradeFlow acquisition; and
· 164,705,882 were issued in connection with the conversion of
£560,000 convertible loan notes held by Negma Group.
On 29 July 2021 the Company allotted 315,000,000 new ordinary shares in
connection with the conversion of £1,008,000 convertible loan notes held by
Negma Group.
On 3 September 2021 the Company allotted 840,000,000 new ordinary shares in
connection with the conversion of £2,016,000 convertible loan notes held by
Negma Group.
On 18 November 2021 the Company allotted 77,614,382 new ordinary shares in
connection with the conversion of £158,333 convertible loan notes held
Mercator Capital Management Fund LP.
On 29 November 2021 the Company allotted 221,836,063 new ordinary shares in
connection with the conversion of £300,000 convertible loan notes held
Mercator Capital Management Fund LP.
On 21 December 2021 the Company allotted 381,340,661 new ordinary shares in
connection with the conversion of £458,333 convertible loan notes held
Mercator Capital Management Fund LP.
Rights, preferences and restrictions
Ordinary shares have the following rights, preferences, and restrictions:
The Ordinary shares carry rights to participate in dividends and distributions
declared by the Company and each share carries the right to one vote at any
general meeting. There are no rights of redemption attaching to the Ordinary
shares.
Deferred shares have the following rights, preferences, and restrictions:
The deferred shares carry no rights to receive any dividend or distribution
and carry no rights to vote at any general meeting. On a return of capital,
the Deferred shareholders are entitled to receive the amount paid up on them
after the Ordinary shareholders have received £100,000,000 in respect of each
share held by them. The Company may purchase all or any of the Deferred shares
at an appropriate consideration of £1.
2018 Deferred shares have the following rights, preferences, and restrictions:
The deferred shares carry no rights to receive any dividend or distribution
and carry no rights to vote at any general meeting.
Reconciliation of allotted, called up and fully paid shares
As at 31 December 2021 As at 31 December 2020
No. 000 £ 000 No. 000 £ 000
As at 1 January 33,042,223 5,420 - 148
Transfer to RTO reserve - - - (148)
Bring in plc share capital - 388,372 4,767
Reverse acquisition - 32,322,246 646
Issue of shares for cash - 331,604 7
Shares issued on conversion of convertible loan notes (note 19) 2,000,497 40 - -
Shares issued as consideration for acquisition (note 27) 813,000 16 - -
Shares issued as consideration for support with the TradeFlow acquisition 500,000 10 - -
(note 27)
As at 31 December 36,355,720 5,486 33,042,223 5,420
18 Loan notes and Long-Term Borrowings
Loan notes
On 29 September 2021, the Company announced it had entered a loan note
facility with Mercator Capital Management Fund LP ("Mercator"). The new loan
note facility consisted of a short-term loan with the following key terms:
· Initial draw down of £5 million, with a further £2 million
available within 60 days subject to certain conditions precedent which were
subsequently met;
· 12-month term, with an interest rate of 10%;
· The principal and interest to be repaid on a monthly basis; and
· Warrants will be issued representing 20% of both tranches. The
warrants will have a term of 3 years from issue and an exercise price of 130%
of the lowest closing VWAP over the ten trading days immediately preceding the
issue of the warrants.
The loan note facility was linked to a convertible loan note facility also
entered into with Mercator, which was able to be used should the Company elect
not to repay any of the interest or principal relating to the loan notes in
cash. The Mercator convertible loan note facility was for the same aggregate
value as the loan facility including interest, being £7.7 million, and was
able to be drawn in tranches equal to the monthly loan repayments. Further
details of the Mercator convertible loan notes can be found in note 19.
The loan notes were initially recorded at the proceeds received, net of direct
issue costs (including commitment fees, introducer fees and the fair value of
warrants issued to satisfy issue costs). As at 31 December 2021, the Company
had made the first two monthly repayments which had been satisfied through the
issue of convertible loan notes in order to allow the Group to preserve cash
for working capital requirements or to facilitate further new strategic
initiatives. The finance charges, including direct issue costs, are accounted
for on an amortised cost basis using the effective interest method. The
effective interest rate applied was 47.5%.
Further details on the fair value of the warrants are set out in note 28.
The movement in the loan notes during the current financial year are set out
in the table below:
£ 000
Loan note liability at 1 January 2021 -
Initial drawdown net of commitment, introducer fees and fair value of warrants 4,209
issued in connection with the loan notes
Second drawdown net of commitment and introducer fees 1,900
Amortisation of finance costs during the period recognised in the income 540
statement
Less Repayments made via issues of convertible loan notes (917)
Loan note liability at 31 December 2021 5,732
Long-Term Borrowings
As at 31 December 2021 As at 31 December 2020
£ 000
£ 000
Unsecured loan notes 1,263 -
Other bank borrowings 21 22
Total long-term borrowings 1,284 22
TradeFlow entered into an unsecured loan note subscription agreement on 23
October 2020 and this was recognised by the Group from the date of
acquisition. This loan note was for a principal amount of USD 1,700,000. The
terms of this agreement require the principal to be repaid as one lump sum on
the 23 October 2023 along with an additional cost of issue of USD 300,000.
As at 31 December 2021, the Group has recognised £1,263,000 (USD 1,700,000)
as a long-term liability. These TradeFlow loan notes bear a simple fixed
interest rate of 8.235% per annum which is to be paid semi-annually. As at 31
December 2021, the Group has recognised the accrued interest that had not been
paid of £84,000 (2020: nil) within trade and other payables. In addition, the
Group has also recognised accrued interest in respect of the cost of issue
using the effective interest rate method, resulting in additional accrued
interest of £77,000 as at 31 December 2021.
The total interest expense recognised in the income statement for the current
financial year, from the date of acquisition of TradeFlow, in relation to this
unsecured loan note was £86,000 (2020: nil).
TradeFlow entered into an unsecured loan note subscription agreement on 23
October 2020 and this was recognised by the Group from the date of
acquisition. This loan note was for a principal amount of USD 1,700,000. The
terms of this agreement require the principal to be repaid as one lump sum on
the 23 October 2023 along with an additional cost of issue of USD 300,000.
As at 31 December 2021, the Group has recognised £1,263,000 (USD 1,700,000)
as a long-term liability. These TradeFlow loan notes bear a simple fixed
interest rate of 8.235% per annum which is to be paid semi-annually. As at 31
December 2021, the Group has recognised the accrued interest that had not been
paid of £84,000 (2020: nil) within trade and other payables. In addition, the
Group has also recognised accrued interest in respect of the cost of issue
using the effective interest rate method, resulting in additional accrued
interest of £77,000 as at 31 December 2021.
The total interest expense recognised in the income statement for the current
financial year, from the date of acquisition of TradeFlow, in relation to this
unsecured loan note was £86,000 (2020: nil).
TradeFlow entered into an unsecured loan note subscription agreement on 23
October 2020 and this was recognised by the Group from the date of
acquisition. This loan note was for a principal amount of USD 1,700,000. The
terms of this agreement require the principal to be repaid as one lump sum on
the 23 October 2023 along with an additional cost of issue of USD 300,000.
As at 31 December 2021, the Group has recognised £1,263,000 (USD 1,700,000)
as a long-term liability. These TradeFlow loan notes bear a simple fixed
interest rate of 8.235% per annum which is to be paid semi-annually. As at 31
December 2021, the Group has recognised the accrued interest that had not been
paid of £84,000 (2020: nil) within trade and other payables. In addition, the
Group has also recognised accrued interest in respect of the cost of issue
using the effective interest rate method, resulting in additional accrued
interest of £77,000 as at 31 December 2021.
The total interest expense recognised in the income statement for the current
financial year, from the date of acquisition of TradeFlow, in relation to this
unsecured loan note was £86,000 (2020: nil).
19 Convertible loan notes
During the current financial year, the Company entered two different
convertible loan note arrangements. These are set out below:
Negma convertible loan notes
On 16 June 2021, the Company entered a subscription agreement with Negma Group
Ltd ("Negma"") for the issue of an initial tranche of £5,600,000 of
convertible loan notes, in exchange for cash proceeds of £5,000,000.
The difference between the par value of the convertible loan notes and the
cash received is the effective interest charged in relation to these
instruments.
Negma issued conversion notices during the period totalling £3,584,000 which
resulted in the issue of 1,319,705,882 ordinary shares (for further detail see
note 17).
The remaining £2,016,000 convertible loan note balance was repaid in cash
following the drawdown of the initial tranche of the loan notes referred to
above.
The total interest cost of £600,000 in relation to these convertible loan
notes has been recognised as a finance expense during the current period.
Mercator convertible loan notes
As set out in note 18, the Company entered a second convertible loan note
agreed with Mercator in connection with the loan note facility described
above.
The Mercator convertible loan notes contains the following key terms:
· They were each to be issued at par value;
· Each convertible loan note had a 12-month term, a conversion price of
85% of the lowest 10 day closing VWAP prior to the issue of the conversion
notice and was able to be convertible at the holders request;
· Warrants are to be issued for 20% of each tranche. The warrants will
have a term of 3 years from issue and an exercise price of 130% of the lowest
closing VWAP over the ten trading days immediately preceding the request to
issue a new tranche.
During the year ended 31 December 2021, the Company issued convertible loan
notes to Mercator to the value of £916,667, however as at 31 December 2021
these had fully been converted into 680,791,106 ordinary shares.
The Mercator convertible loan notes did not have any interest costs in
addition to the loan notes but did have costs relating to commitment fees of
£25,000 and the fair value of the warrants of £88,000 associated with
warrants. Both costs have been recognised in the income statement in the
current year given the liability to which they relate has been extinguished
(2020: nil). Further details on the fair value of the warrants is set out in
note 28.
As at 31 December 2021, the convertible loan note liability is nil (2020:
nil).
Historical convertible loan notes
In addition to the above, the Company also had the following historical
convertible loan notes and associated derivative financial instruments which
expired during the year resulting in a credit to the income statement in
respect of the outstanding fair value of £24,000.
20 Trade and other payables
As at 31 December 2021 As at 31 December 2020
£ 000
£ 000
Trade payables 1,086 1,062
Other payables 588 271
Social security and other taxes 994 792
Accruals 437 117
Contract liabilities 395 1,131
3,500 3,373
The decreased in contract liabilities over the period is a result of:
· £182,000 being recognised as revenue in the year ended 31 December
2021 in line with the due diligence performance obligations having been
satisfied during this time; and
· A number of refunds having been requested from client companies
during the current financial year in connection with the Group's older
contracts that allowed for this. A number of these amounts were refunded
during the year, but a number were due for repayment as at 31 December 2021
and were recorded within other payables. Management is confident that some of
these client companies are likely to return following the first inventory
monetisation transactions being executed on the Platform.
21 Provisions
Post-employment benefits Provision for risks and charges Provision for VAT and penalties Total
£ 000 £ 000 £ 000 £ 000
At 1 January 2020 - - 207 211
Released to profit and loss - - - (4)
Provided for in the year 32 40 79 151
At 31 December 2020 32 40 286 358
Forex retranslation adjustment - (4) (19) (23)
At 1 January 2021 32 36 267 335
Released to profit and loss - - (58) (58)
Provided for in the year 26 51 - 77
Payments (11) - - (11)
Actuarial (gain)/loss (3) - - (3)
At 31 December 2021 44 87 209 340
Post-employment benefits
Post-employment benefits include severance pay and liabilities relating to
future commitments to be disbursed to employees based on their permanence in
the company. This entirely relates to the Italian subsidiary where severance
indemnities are due to each employee at the end of the employment
relationship.
Post-employment benefits relating to severance indemnities are calculated by
estimating the amount of the future benefit that employees have accrued in the
current period and in previous years using actuarial techniques. The
calculation is carried out by an independent actuary using the "Projected Unit
Credit Method".
Provision for risks and charges
Provision for risks and charges includes the estimated amounts of penalties
for payment delays referring the tax payables recorded in the Italian
subsidiary financial statements which, at the closing date, are overdue.
Provision for VAT and penalties
In advance of the Group's first monetisation transaction, a number of advance
payments have been received by the Group's Italian subsidiary from potential
client companies in accordance with agreed contractual terms. These payments
have been recognised as revenue in accordance with local accounting rules.
These advance payments, for which an invoice has not yet been issued, have
been made exclusive of VAT. As at 31 December 2021, the Group has included a
provision relating to a potential VAT liability, including penalties, in
respect of these advance payments of £209,000 (31 December 2020: £286,000).
The reduction in the provision during the year represents the fact that a
number of these payments have been refunded, at the customer's request, and
therefore the potential VAT liability has been removed.
At the point in the future when the associated monetisation transaction takes
place, the potential VAT liability will be settled by the Group. At this same
point in time, the Directors expect to be able to recover the VAT from the
client companies as invoices in respect of the monetisation transactions are
issued. The timing of these future monetisation transactions currently
remains uncertain and as such no corresponding VAT receivable has been
recognised as at 31 December 2021, however there is a contingent asset of
£149,000 as at 31 December 2021 (31 December 2020: £204,000) in respect of
this.
From time to time, during the course of business, the Group maybe subject to
disputes which may give rise to claims. The Group will defend such claims
vigorously and provision for such matters are made when costs relating to
defending and concluding such matters can be measured reliably. There were no
cases outstanding as at 31 December 2021 that meet the criteria for a
provision to be recognised.
22 Pension and other schemes
Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The assets of the
scheme are recognised as being held separately from those of the Group and
Company and will be paid over to an independently administered fund. The
pension cost charge represents contributions payable by the Group to the fund.
The total pension charge for the year represents contributions payable by the
Group to the scheme and amounted to £86,000 (2020: £1,000).
Contributions totalling £21,000 (2020: £2,000) were payable to the scheme at
the end of the year and are included in creditors. This has been paid post
year end.
23 Capital commitments
There were no capital commitments for the Group at 31 December 2021 or 31
December 2020.
24 Contingent liabilities
There were no contingent liabilities for the Group at 31 December 2021 or 31
December 2020.
25 Financial instruments
Financial assets
Carrying value Fair value
As at 31 December 2021 As at 31 December 2020 As at 31 December 2021 As at 31 December 2020
£ 000 £ 000 £ 000 £ 000
Financial assets at amortised cost:
Cash and cash equivalents 1,727 552 1,727 552
Trade receivables 13 489 13 489
Other receivables 727 601 727 601
2,467 1,642 2,467 1,642
Valuation methods and assumptions: The directors believe due to their short
term nature, the fair value approximates to the carrying amount.
Financial liabilities
Carrying value Fair value
As at 31 December 2021 As at 31 December 2020 As at 31 December 2021 As at 31 December 2020
£ 000 £ 000 £ 000 £ 000
Financial liabilities at amortised cost:
Loan notes 5,732 - 5,732 -
Long-term borrowings 1,284 22 1,284 22
Trade payables 1,086 1,062 1086 1,062
Other payables 588 271 588 271
8,690 1,355 8,690 1,355
Fair value
As at 31 December 2021 As at 31 December 2020
£ 000 £ 000
Financial liabilities at fair value through profit and loss:
Derivative financial instruments - 24
Valuation methods and assumptions: The directors believe that the fair value
of trade and other payables approximates to the carrying value.
Risk management
The Group is exposed through its operations to the following financial risks:
credit risk, foreign exchange risk; and liquidity risk.
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing these risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements. There have been no
substantive changes in the Group's exposure to financial instrument risks,
its objectives, policies and processes for managing those risks or the methods
used to measure them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, were as follows:
· trade receivables;
· cash at bank; and
· trade and other payables.
General objectives, policies and processes
The board had overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining ultimate
responsibility for them, it had delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives
and policies to the Group's finance function. The board received monthly
reports from the chief Financial Officer through which it reviewed the
effectiveness of the processes put in place and the appropriateness of the
objectives and policies it had set. The overall objective of the board was to
set polices that sought to reduce risk as far as possible without unduly
affecting the Group's competitiveness and flexibility. Further details
regarding these policies are set out below.
Interest rate risk
At present the directors do not believe that the Group has significant
interest rate risk and consequently does not hedge against such risk. Cash
balances earn interest at variable rates.
The Group's interest generating financial assets as at 31 December 2021
comprised cash at bank of £,1,727,000 (2020: £552,000). Interest is paid on
cash at floating rates in line with prevailing market rates.
The Group's interest generating financial liabilities as at 31 December 2021
comprised loan notes of £5,732,000, loan term borrowings of £1,284,000 (2020
- £22,000).
Sensitivity analysis
At 31 December 2021, had the LIBOR 1 MONTH rate of 0.01047 (2020 - 0.01913)
increased by 1% with all other variables held constant, the increase in
interest receivable on financial assets would amount to approximately £nil
(2020 - £nil). Similarly, a 1% decrease in the LIBOR 1 MONTH rate with all
other variables held constant would result in a decrease in interest
receivable on financial assets of approximately £nil (2020 - £nil).
Credit risk and impairment
Credit risk is the risk of financial loss to the Group if a customer or a
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk from credit sales. It
is Group policy, implemented locally, to assess the credit risk of new
customers before entering contracts. Such credit ratings take into account
local business practices. The Group has a credit policy under which each new
customer is analysed individually for creditworthiness before the Group's
standard payment and delivery terms and conditions are offered.
Credit risk also arises from cash and cash equivalents and deposits with banks
and financial institutions. To manage this, the Group has made sure that they
use reputable banks.
The Group's chief financial officer monitors the utilisation of the credit
limits regularly.
The Group's maximum exposure to credit by class of individual financial
instrument is shown in the table below:
Carrying value as at 31 December 2021 Maximum exposure as at 31 December 2021 Carrying value as at 31 December 2020 Maximum exposure as at 31 December 2020
£ 000 £ 000 £ 000 £ 000
Cash and cash equivalents 1,727 1,727 552 552
Trade receivables 13 13 489 489
1,740 1,740 1,041 1,041
As at 31 December 2021, the assets held by the Group are not past due or
impaired.
Trade receivables are all considered to be low risk and have been fully repaid
since year end.
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in
various parts of the world whose functional currency is not the same as the
functional currency in which the Group operates. Although its global market
penetration reduces the Group's operational risk, in that it has diversified
into several markets, the Group's net assets arising from such overseas
operations are exposed to currency risk resulting in gains or losses on
retranslation into sterling. Only in exceptional circumstances would the Group
consider hedging its net investments in overseas operations as generally it
does not consider that the reduction in foreign currency exposure warrants the
cash flow risk created from such hedging techniques.
The Group's policy is, where possible, to allow Group entities to settle
liabilities denominated in their functional currency (primarily Euros or pound
sterling) with the cash generated from their own operations in that currency.
Where Group entities have liabilities denominated in a currency other than
their functional currency (and have insufficient reserves of that currency to
settle them) cash already denominated in that currency will, where possible,
be transferred from elsewhere within the Group.
Currency profile
Financial assets
- Cash Sterling: £1,585,000 (2020 - £539,000)
- Cash Euro: £92,000 (2020 - £13,000)
- Cash US Dollar: £44,000 (2020 - £nil)
- Cash Singapore Dollar: £5,000 (2020 - £nil)
- Trade receivables Sterling: £nil (2020 - £nil)
- Trade receivables Euro: £13,000 (2020 - £489,000)
Financial liabilities
- Trade payables Sterling: £193,100 (2020 - £342,000)
- Trade payables Euro: £879,000 (2020 - £720,000)
Trade payables Singapore Dollar: £14,0000 (2020 - £nil)
Sensitivity analysis
At 31 December 2021, if Sterling had strengthened by 10% against the below
currencies with all other variables held constant, loss before tax for the
year would have been approximately
- EUR: £131,000 higher (2020 - £41,000 lower).
- Singapore Dollar: £51,000 higher
Conversely, if the below currencies had weakened by 10% with all other
variables held constant, loss before tax for the year would have been
approximately:
- EURO: £131,000 lower (2020 - £41,000 higher).
- Singapore Dollar: £51,000 lower
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due.
The board receives rolling 12-month cash flow projections on a regular basis
as well as information regarding cash balances. At the statement of financial
position date, these projections indicated that the Group expects to have
sufficient liquid resources to meet its obligations under all reasonably
expected circumstances.
There were no undrawn facilities at 31 December 2021 or 31 December 2020.
At 31 December 2021 Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years
£ 000 £ 000 £ 000 £ 000 £ 000
Liabilities
Loan notes 1,493 4,239 - - -
Long-term borrowings* - 2 1,269 13
Trade and other payables 1,674 - - - -
Social security and other taxes 994 - - - -
Total liabilities 4,161 4,241 1,269 13 -
At 31 December 2020 Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years
£ 000 £ 000 £ 000 £ 000 £ 000
Liabilities
Loans and borrowings* - - 2 19 1
Trade and other payables 1,333 - - - -
Social security and other taxes 792 - - - -
Total liabilities 2,125 - 2 19 1
* To better reflect the nature of certain items the prior year comparatives
include the a reclassification of bank borrowings of £22k from Trade and
other payables to long-term borrowings. The tables above also reflect the
repayment profile for this reclassified amount.
Capital risk management
The Group's capital management objectives are to ensure the Group is
appropriately funded to continue as a going concern and to provide an adequate
return to shareholders commensurate with risk. The Group defines capital as
being total shareholder's equity. The Group's capital structure is
periodically reviewed and, if appropriate, adjustments are made in the light
of expected future funding needs, changes in economic conditions, financial
performance and changes in Group structure. As explained in notes 18 and 19,
the Group has currently entered into external debt finance by way of loan
notes, long term borrowings and convertible loan notes.
The Group adheres to the capital maintenance requirements as set out in the
Companies Act.
Capital for the reporting periods under review is summarised as follows:
- Net liabilities: (£1,425,000) (2020: (£452,000))
- Cash and cash equivalents: £1,727,000 (2020: £552,000)
26 Net debt
The Group reconciliation of the movement in net debt is set out below:
Cash at bank Loan notes Convertible loan notes Long-term borrowings Total
£ 000 £ 000 £ 000 £ 000 £ 000
At 1 January 2021 552 - - (22) 530
Net Cashflows 686 (6,629) (5,000) - (10,943)
Fair value of warrants - 520 - - 520
Amortisation of finance costs - (540) (600) - (1,140)
Cash repayments - - 2,016 2,016
Non cash repayments - 917 3,584 - 4,501
Arising on acquisition 477 - - (1,229) (752)
Foreign exchange 12 - - (33) (21)
As at 31 December 2021 1,727 (5,732) - (1,284) (5,289)
Cash at bank Long-term borrowings Total
£ 000 £ 000
At 1 January 2020 143 - 143
Net Cashflows 385 (22) 363
Foreign exchange 24 - 24
As at 31 December 2020 552 (22) 530
27 Business combinations
On 1 July 2021, the Group completed the acquisition of the entire issued share
capital of TradeFlow Capital Management Pte. Ltd ("TradeFlow"). TradeFlow is a
leading Singapore-based FinTech-powered commodities trade enabler focused on
small and medium size entities. The Board approved the acquisition by the
Group to complement its global offering of its "warehouse goods" inventory
monetisation platform with the TradeFlow offering of monetising "in-transit"
inventory (in particular, commodities). It was also expected the acquisition
generate a number of attractive synergy benefits for Group from both a funding
and customer origination perspective.
TradeFlow owes 85% of the issued share capital of Tijara Pte. Limited and 50%
of the issued share capital of TradeFlow Capital Management Systems Pte.
Limited. Both of these companies are at very early-stage of their development
and their results and balances as at 31 December 2021 are immaterial to the
Group.
The provisional net asset amounts in respect of the identifiable assets
acquired and liabilities which have recognised in the financial statements are
set out in the table below. These are based on a fair valuation of the
acquired identifiable net assets as at the acquisition date. The assets and
liabilities recognised as a result of the acquisition are:
Book Value Fair value Adjustment Fair Value
£ 000 £ 000 £ 000
Net assets / (liabilities) acquired
Cash and cash equivalents 477 - 477
Accrued income 47 - 47
Trade and other receivables 6 - 6
Property, plant and equipment 9 - 9
Trade and other payables (137) - (137)
Long-term borrowings (1,229) - (1,229)
Intangible assets
Customer relationships 4,829 4,829
Brand - "TradeFlow" 205 205
CTRM Software 1,429 1,429
AI Software 425 425
Deferred tax liability (1,171) (1,171)
Total identifiable net (liabilities) / assets acquired (827) 5,717 4,890
Satisfied by:
Consideration under IFRS 3:
£'000
Cash consideration 4,000
Equity instruments (813,000,000 new ordinary shares) 3,089
Total consideration 7,089
Goodwill recognised on acquisition 2,199
Consideration accounted as deemed remuneration
Acquisition related earn-out recognised in the current financial year 1,410
Acquisition related earn-out expected to be recognised in future periods 3,126
4,536
The goodwill arising is attributable to:
· the significant amount of knowledge, experience and expertise
acquired through the TradeFlow workforce, and in particular the earn-out
shareholders;
· the anticipated future profit from growth opportunities; and
· synergies expected to be realised with the Group.
The goodwill arising from the acquisition has been allocated to the TradeFlow
Cash Generated Unit ("CGU"). Fair value adjustments of £6,888,000 have been
recognised for acquisition-related intangible assets and related deferred tax
of £1,171,000. Details of intangible assets recorded can be found in note 15.
As detailed above, elements of the consideration payable for this acquisition
require post-acquisition service obligations to be performed by the earn-out
shareholders over a three-year period. These amounts are accounted for as
deemed remuneration (see notes 2 and 24) as required by IFRS 3 ("Business
Combinations").
Transaction costs of £2,009,000 have been charged to the statement of
comprehensive income as a transaction cost. £1,900,000 of these costs
represented the fair value of 500,000,0000 new ordinary shares issued as
consideration to third party intermediaries who either introduced TradeFlow to
the Company or who provided due diligence activities in respect of the
TradeFlow business, market, sector and geographic location. The Companies Act
2006 required that when these shares were issued they be accompanied by an
independent valuers report as to the value of the services. However, due to an
error on behalf of the Company, this was not done at the time. Despite this,
the shares were issued in good faith between company and the third parties and
remain legal and valid and the independent valuation report has now
subsequently been received by the Company and, having sought legal advice,
this and an amended share issue form will be lodged with Companies House to
rectify the situation. The remaining £109,000 related to legal fees that were
directly associated with the acquisition.
The acquisition contributed £231,000 of revenue and (£522,000) to the
Group's operating loss before acquisition related costs for the period between
the date of acquisition and the balance sheet date. As a preliminary
assessment, had the acquisition of TradeFlow been completed on the first day
of the financial year, Group revenues would have been approximately £259,000
higher and Group's operating loss before acquisition related costs would have
been approximately £590,000 higher.
28 Share-based payments
Acquisition related earn-out payments
As explained in notes 2 and 27, the terms of the agreement to acquire
TradeFlow included acquisition related earn-out payments that, together with
the initial cash payment and issue of equity, form the total legal
consideration agreed between the parties.
This acquisition related earn-out payments are determined by reference to
pre-determined revenue milestone targets in each of the 2021, 2022 and 2023
financial years. These payments may be forfeited by the selling shareholders
should they, in certain circumstances, no longer remain employed prior to the
end of each earn-out period. As such, under the IFRS Interpretations
Committee's interpretation of paragraph B55 of IFRS 3 ("Business
Combinations"), the fair value of these earn-out payments have been accounted
for a charge to the income statement (as deemed remuneration) rather than as
consideration.
The terms of the agreements also allow this acquisition related earn-out
payments to be settled in either cash or equity at the discretion of the
Company. As it is the Company's current intention is to settle these payments
in equity, they have been fair valued at the grant date in line with IFRS 2
("Share-based payments"). When the Company choses to issue the earn-out
payment in shares, the number of shares to be issued will be determined using
the Volume Weighted Average Price ("VWAP") over the 20 dealing days to the end
of the relevant financial year subject to a floor of 1p. In addition, the
number of shares will be enhanced by 50% if the VWAP is greater than 1p.
Finally, 50% of any earn-out shares may not be sold for 12 months following
the award but are not contingent on continued employment.
Taking into account the factors above, value of the earn-out payments settled
by way of equity have market conditions associated with them, being the future
share price, and the fair value at grant date (being 1 July 2021) has been
estimated using a Monte Carlo simulation model. A further discount has been
applied to the 50% which are subject to lock in provisions, and this discount
factor has been calculated using a Finnerty model, being a variant of the
Black Scholes model.
The key judgemental assumptions have been detailed in note 2. The models above
have assumed the non-market conditions surrounding these earn-out payments /
awards will be meet and as such in future periods the impact of the revision
of the original estimates, if any, will be recognised in the income statement
such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves.
The expense recognised in the income statement in the current financial year
and the expected expense to be recognised in future periods are set out in
note 23 above.
Share warrants
As explained in notes 18 and 19, during the year the Company entered into a
funding facility with Mercator which included the Company issuing loan notes
in exchange for funding. These loan notes linked to a convertible loan note
facility, which was able be used should the Company elect not to repay any of
the interest or principal relating to the loan notes in cash. Both the loan
note and convertible loan note agreements required share warrants to be issued
representing 20% of the face value of any loan notes or convertible loans
issued. The warrants have a term of 3 years from issue and an exercise price
of 130% of the lowest closing VWAP over the ten trading days immediately
preceding the issue of the warrants.
The total number of share warrants issued during the current financial year
was 522,791,511, details of which are set out in the table below.
As these share warrants were issued as a cost of securing the funding facility
they fall into the scope of scope of IFRS 2 ("Share-based payments"). As such,
the Directors were required to determine the fair value of the equity-settled
share-based payments at the date on which they were granted. The fair value
was determined using a Black Sholes model and the key judgemental assumptions
have been detailed in note 2.
Date of issue Principal value of warrants issued (£000) Number of warrants Exercise price Fair value (£000) Amount recognised in during FY21(£000)
1October 2021 1,400 443,726,030 £0.00316 520 177
1November 2021 92 29,197,856 £0.00314 42 42
1December 2021 92 49,867,625 £0.00184 46 46
Total 1,584 522,791,511 608 265
The total fair value of the above share warrants issued during the current
financial year is £608,000. Of this amount £520,000 related to those
warrants issued in connection with the loan notes and were netted off the
initial proceeds received on the balance sheet. This amount is being amortised
to the income statement using the effective interest rate method and £177,000
was recognised in the income statement for the period ended 31 December 2021.
The remaining £88,000 related to those warrants issued in connection with the
convertible loan notes, this amount was fully in the income statement in the
current year given the liability to which they relate has been extinguished.
29 Related party transactions
The total fair value of the above share warrants issued during the current
financial year is £608,000. Of this amount £520,000 related to those
warrants issued in connection with the loan notes and were netted off the
initial proceeds received on the balance sheet. This amount is being amortised
to the income statement using the effective interest rate method and £177,000
was recognised in the income statement for the period ended 31 December 2021.
The remaining £88,000 related to those warrants issued in connection with the
convertible loan notes, this amount was fully in the income statement in the
current year given the liability to which they relate has been extinguished.
29
Related party transactions
During the year to 31 December 2021, the following are treated as related
parties:
Alessandro Zamboni
Alessandro Zamboni is the CEO of the Group and is also the sole director of
The AvantGarde Group S.p.A as well as holding numerous directorships across
companies including AZ company S.r.l - a private limited company. Both of
these entities are related parties due the following transactions that took
place over the current or prior financial year.
Following historical transactions with AZ company S.r.l the Group had an
amount payable of £63,000 to this related party at 31 December 2020 which was
paid off during the year. There were no further transactions undertaken with
AZ company S.r.l during the current financial year with the exception of the
repayment of the amount owing at 31 December 2020 detailed above. There were
no balances outstanding with AZ company S.r.l at 31 December 2021.
The AvantGarde Group S.p.A ("TAG") and its subsidiaries
As at 31 December 2021 TAG held 35.3% of the Company's total ordinary shares
in issued in Supply@ME Capital plc (as at 31 December 2021: 38.9%).
As announced in the RNS issued on 24 December 2020, 1AF2 S.r.l. and TAG
previously merged. Alessandro Zamboni was also a director of 1AF2 S.r.l.
During 2020, the Group entered into an origination contract with 1AF2 S.r.l in
connection with the identification of potential client companies. Under this
origination contract it was the related party's responsibility to carry out
due diligence services. However, given the Group already had this expertise
they chose to contract with the Group to perform the due diligence services on
their behalf.
This specific contract stipulated a fee to cover the performance of due
diligence services for a specific number of clients. This fee was paid at the
date the contract was signed. As such, the fees received in advance were held
on the balance sheet as deferred income, and the revenue was recognised in
line with the completion of each of the due diligence reviews. During the year
ended 31 December 2021, £175,000 (2020: £1,134,000) of the Group's revenue
related to client companies originated by TAG (previously 1AF2 S.r.l) as
referred to above, and for which the Group was contracted to carry out due
diligence services. This revenue was recognised in line with the Group's
revenue recognition policy set out in note 3.
In addition to the above, following the reverse takeover in March 2020, the
Group entered into a Master Service Agreement with TAG in respect of certain
shared service to be provided to the Group. During the year ended 31 December
2021, the Group paid £129,000 (2020: £48,000) to TAG in respect of this
agreement.
Following the above transactions with TAG the Group has a net amount payable
of £64,000 as at 31 December 2021 (net amount receivable of £232,000 as at
31 December 2020).
The TAG Group includes other companies which the Group had entered into
transaction with. These companies include the Future of Fintech Srl and
RegTech Open Project S.p.A, a regulatory technology company focussed on the
development of an integrated risk management platform for Banks, Insurance
Companies and Large Corporations. Alessandro Zamboni is also the sole director
of both these companies.
As at 31 December 2021 there is an outstanding amount owed to the Group of
£6,000 from Future of Fintech in relation to severance pay accrued by former
employees which has been transferred to the Group by the related party (31
December 2020: nil).
As at 31 December 2021 there is an outstanding amount owed by the Group of
£5,000 to RegTech Open Project S.p.A in relation historical amounts owing for
regulatory technology professional services provided to the Group (31 December
2020: amount owed by the Group of £4,000).
Eight Capital Partners Plc
Dominic White, the previous Non-Executive Chairman, is a director of Eight
Capital Partners PLC, and David Bull, an Independent Non-Executive Director
and audit committee chair is the CEO of Eight Capital Partners PLC. Following
the reverse takeover in March 2020, the Company entered into a Master Service
Agreement with Eight Capital Partners Plc in respect of certain shared service
to be provided to the Group. During the year, the Group paid £72,000 (2020:
£60,000) to Eight Capital Partners Plc in respect of this agreement. As at 31
December 2021 there is an outstanding amount owed by the Group of £8,000 (31
December 2020: £2,000). Since the year end the Master Service Agreement with
Eight Capital Partners plc has been terminated.
Epsion Capital Ltd
Epsion Capital, is a wholly owned subsidiary of Eight Capital Partners Plc and
conducted the placing for the RTO and were paid £159,000 in respect of these
activities. This related party has not been used in 2021 and there were no
amounts outstanding at either 31 December 2021 or 2020.
30 Controlling party
At 31 December 2021 the Directors do not believe that a controlling party
exists.
31 Subsequent events
Issue of convertible loans and related warrants
On each of the 4 January 2022, 2 February 2022 and the 4 March 2022, the
Company issued further convertible loan notes in lieu of the monthly cash
repayments in respect of the outstanding loan notes. Each of these
convertible loan notes was for a principal amount of £678,333, and together
totalled £2,035,000. In additional, warrants to the value of 20% of the
principal value were also issued, this equated to a total number of warrants
issued of 262,891,765.
Issue of new share capital following conversion of convertible loan notes
On 13 January 2022, the Company allotted 594,664,101 new ordinary shares as a
result of the conversion £678,333 of the convertible loan notes issued and
subscribed by Mercator Group.
On 28 February 2022, the Company allotted 489,787,922 new ordinary shares as a
result of the conversion £500,000 of the convertible loan notes issued and
subscribed by Mercator Group.
On 29 March 2022, the Company allotted 316,446,349 new ordinary shares as a
result of the conversion £178,333 of the convertible loan notes issued and
subscribed by Mercator Group.
Issue of new share capital following capital raise
On the 26 April 2022, the Company agreed a new equity funding facility with
provides a binding commitment with a new investor, Venus Capital SA ("Venus
Capital"), to invest up to £7,500,000 in exchange for multiple tranches of
new ordinary shares to be issued by the Company over a period with a long stop
date of 31 December 2023 (the "Capital Raise Plan"). These tranches have been
structured as follows:
· New ordinary shares issued from 26 April to date - at the date of
these consolidated financial statements being issued, the Company has issued
3,320,000,000 of new ordinary share to Venus Capital in exchange for
£1,660,000;
· Additional mandatory tranches to the value of £2,090,000; and
· Additional optional tranches (where the exercise is at the option of
the Company) to the value of £3,750,000.
It should be noted that the issue of the new ordinary shares under the Capital
Raise Plan is subject the necessary authorisations from shareholders which the
Company is planning to require at the General Meeting to be held in
conjunction with the 2021 Annual General Meeting.
Additionally, the Capital Raise Plan also saw the Company entered into an
agreement with Venus Capital regarding a loan facility of up to £1,950,000
commencing from June 2022, including £450,000 to cover the arrangement fees
relating to the Capital Raise Plan, which would be repayable in shares and
which would have a maturity date of 31 December 2025 and an 10% per annum
interest rate.
Restructure of Mercator funding facility
The key objective of the Capital Raise Plan is to allow the outstanding
Mercator loan notes to be repaid in cash rather than via further convertible
loan note issues. To assist with this, on the 26 April 2022, the Company and
Mercator signed an amendment deed to the Loan Note Instrument and Convertible
Loan Note Instruments that were agreed on 29 September 2021 (the "Mercator
Amendment"). This amendment is aimed at avoiding further conversions under the
terms of the Instruments and allows the Company:
· to repay in cash the £678,333.34 of outstanding Convertible Loan
Notes issued by the Company on 4 March 2022, using the proceeds of the first
tranche of the Capital Raise. This repayment was made on 9 May 2022 and
included an additional interest charge of 8%;
· to repay in cash to Mercator the balance of the outstanding Loan Note
Instrument, through an updated instalment plan, in accordance with the current
terms and conditions of the Instruments and the new conditions comprised in
the Mercator Amendment.
Pursuant to the Mercator Amendment, Mercator has further agreed that the
Company is required to issue only one further tranche of warrants related to
20% of the most recent Loan Note Instrument monthly repayment of £678,333.34.
Establishment of Supply@Me technologies S.r.l
On 25 March 2022, the Company established a new 100% owned subsidiary called
Supply@ME technologies S.r.l. The new subsidiary is currently non-operational
but it is expected in the future that the Group's Intellectual Property rights
relating to the Platform will be purchased by this new entity from another
Group entity, Supply@Me S.r.l. Following this, it is expected that all future
developments will be undertaken by this newly established subsidiary. This
will highlight the value generated by the Platform in terms of trademarks,
technology and innovative legal & accounting frameworks. It is also
envisaged that the newly established entity will be the direct counterparty of
White-label contracts and other potential strategic partnerships which the
Group is evaluating.
New loan into TradeFlow
On 1 April 2022, TradeFlow entered into a loan agreement for USD 3,800,000,
with a maturity date of 31 March 2026. The loan bears simple interest at a
fixed rate of $7.9% per annum.
The loan will be used to pay down the existing outstanding unsecured loan
notes which as at 31 December 2021 had a principal balance of £1,263,000 and
accrued interest of £77,000.
Board restructuring
On 4 March 2022, James Coyle, the Non-Executive Chairman at the time, resigned
from the Board of Directors of the Company in order to focus on his other
business interests.
On 14 April 2022, Susanne Chishti, an independent non-executive director,
resigned from the Board of Directors of the Company in order to explore new
business opportunities.
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