REG - Supply@ME Capital - 2023 Annual Report and Accounts
01/05/2024 07:15
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RNS Number : 7091M Supply@ME Capital PLC 01 May 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 2014/596/EU, WHICH IS PART OF UNITED KINGDOM DOMESTIC LAW PURSUANT
TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK
MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS
DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
1 May 2024
Supply@ME Capital plc
(the "Company", "Supply@ME" or "SYME" and, together with its subsidiaries, the
"Group")
2023 Annual Report and Accounts
SYME, the fintech business which provides an innovative fintech platform (the
"Platform") for use by manufacturing and trading companies to access Inventory
Monetisation© ("IM") solutions enabling their businesses to generate
cashflow, is pleased to announce its 2023 Annual Report and Accounts providing
the Group's final results for the year ended 31 December 2023.
2023 Annual Report and Accounts Highlights:
The below consolidated financial summary of the Group's income statement items
are presented distinguishing the continuing operations (being the Group's
Inventory Monetisation segment) and the discontinued operations consisting of
TradeFlow Capital Management Pte Ltd. and its subsidiaries (the "TradeFlow
Group"). The results of the TradeFlow Group were consolidated by the Group up
to 30 June 2023, at which point the Group completed the disposal of an 81%
stake in the TradeFlow Group. Following the 30 June 2023, the TradeFlow Group
was no longer consolidated by the Group and instead the fair value of the
Group's remaining 19% stake was recognised as an investment in the
consolidated statement of financial position, with the gain on sale of the 81%
stake being recognised in the Group's statement of comprehensive income.
The consolidated financial summary of the Group's balance sheet items includes
the total assets and liabilities from both continuing and discontinued
operations as at 31 December 2022, but only the total assets and liabilities
from continuing operations as at 31 December 2023.
Consolidated financial summary:
2023 2022
£000 £000
Continuing operations
Revenue from continuing operations 158 138
Adjusted operating loss(1) (3,625) (4,651)
(Loss) before tax from continuing operations (4,160) (7,711)
(Loss) from discontinued operations (185) (2,167)
Total loss for the year (4,345) (9,878)
Total assets 2,184 8,346
Net (liabilities) (3,807) (2,025)
(1 )Adjusted operating loss is the operating (loss) from continuing
operations before impairment charges and fair value adjustments.
Operational matters:
As at 19 April 2024 As at 21 April 2023
Warehoused Goods monetisation pipeline £330.7 million £374.6 million
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 Group's warehoused goods
monetisation services. This pipeline represents the value as at the most
practicable date possible prior to the issue of this annual report (being 19
April 2024) and has been calculated on a consistent basis as the prior year
comparative. It should be noted that of the current pipeline figure of £330.7
million, there is one single client that accounts for approximately 57% of the
total pipeline.
As referenced in the business, trading and funding update announcement issued
by the Company on 29 February 2024, the Group is in the process of conducting
a full review of its pipeline and is progressing with requesting a formal
letter of interest from each client company in its pipeline for which there is
currently not a signed term sheet in place. At the date of this announcement,
approximately 9% of the £330.7 million current pipeline figures are supported
by either signed term sheets or the signed new letter of interest. This
percentage is expected to grow as the new process becomes fully embedded.
Alessandro Zamboni, CEO of SYME, said: "I am pleased to report that SYME has
made tangible progress during 2023, and following the announcements we have
made already in 2024 regarding the commitment for the first White-Label
transaction and the opportunity to commence work with the investment banking
industry, we are excited about what lies ahead in 2024. The first two
successfully executed Inventory Monetisation transactions confirm our model is
an effective solution for our corporate clients. Additionally, I believe the
Inventory Monetisation transactions are a safe asset class for inventory
funders, and those who have already joined us on our journey are receiving
attractive returns on their investments. This leads me to conclude the Group
is better positioned now than ever before in terms of commercial opportunities
despite the challenges we have experienced with our corporate funding in
recent months.
The team are now prioritising the completion of the first White-Label
transaction, the implementation of the security token and the IM
securitisation programmes. Alongside this, we are focused on ensuring our
corporate funding is sufficient to implement these priorities as the Group
moves towards the breakeven. Looking further ahead, we hope to be able to
generate sufficient returns for our loyal shareholders which includes both
institutional and retail investors."
Albert Ganyushin, Chairman, SYME, said: "The progress with the White-Label IM
in partnership with a leading commercial bank, tokenisation backed by leaders
in digital asset finance and now the agreement with a neo bank to fund
companies from our Italian pipeline, clearly demonstrates the market relevance
of our innovative product, which is evidently gaining traction with leading
players in their respective market segments. The team managed to overcome many
challenges in 2023 and put in place foundations for SYME to start delivering
in 2024 on its tremendous potential of reaching a large addressable market."
For the purposes of UK MAR, the person responsible for arranging release of
this announcement on behalf of SYME is Alessandro Zamboni, CEO.
Legal notices:
An electronic copy of the 2023 Annual Report and Accounts will shortly be
available for inspection on the Company's website at
https://www.supplymecapital.com/investors/ and will be submitted to the
National Storage Mechanism maintained by the Financial Conduct Authority
("FCA") and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . A hard copy version
of the 2023 Annual Report and Accounts will be dispatched to those
shareholders who have elected to receive paper communications in due course.
Forward looking statements and other important information:
This document contains forward looking statements, which are statements that
are not historical facts and that reflect Supply@ME's beliefs and expectations
with respect to future events and financial and operational performance. These
forward looking statements involve known and unknown risks, uncertainties,
assumptions, estimates and other factors, which may be beyond the control of
Supply@ME and which may cause actual results or performance to differ
materially from those expressed or implied from such forward looking
statements. Nothing contained within this document is or should be relied
upon as a warranty, promise or representation, express or implied, as to the
future performance of Supply@ME or its business. Any historical information
contained in this statistical information is not indicative of future
performance.
The information contained in this document is provided as of the dates
shown. Nothing in this document should be construed as legal, tax,
investment, financial, or accounting advice, or solicitation for or an offer
to invest in Supply@ME.
Contact information:
Alessandro Zamboni, CEO, Supply@ME Capital plc, investors@supplymecapital.com
Notes:
SYME and its operating subsidiaries provide its 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.
2023 ANNUAL REPORT AND ACCOUNTS
Highlights
During 2022 Supply@ME demonstrated that the concept of Inventory Monetisation
works. Building on this progress, during 2023 and early 2024 the business has
continued to learn and develop its track record. This had been demonstrated
by the first traditional monetisation of inventory in Italy and the signing of
agreement for monetisation of inventory in the UK. The strategic partnership
with a group of private investors and subject matter experts of working
capital solutions to launch an independent Swiss-based trading business ("CH
Trading Hub") and the secured commitment of USD$5 million from an asset
manager specialised in digital assets to start the overall US$100 million
security token issuance also demonstrates progress. In addition, the Group has
successfully agreed the first White-Label commitment with Banco BPM S.p.A
("BBPM") to fund up to €10 million of an existing client's inventory,
launching a new revenue stream for the Company. This is complimented by the
recent announcement of the relationship between Supply@ME and an Italian neo
bank to provide funding, initially for €35 million as part of an overall
programme up to €135 million, of inventory in relation to the Supply@ME
Italian client pipeline.
This announcement, together with the full Annual Report and Accounts for the
year ended 31 December 2023, explains the foundations which have been
established to enable delivery of the business model to clients with a wide
range of inventory through the development of methodologies across varying
business models. It will also highlight the opportunities available through
the development of our delivery model in collaboration with the CH Trading Hub
and the possibilities available through traditional and non-traditional
funding routes. Taking these factors together, the Board believes this
outlines why the Group's current financial performance does not demonstrate
its longer-term potential.
Chairman's Statement
Dear Shareholders,
I am pleased to share this statement after my first full year as Chair of
Supply@ME. The reasons I joined the Company continue to hold true, the passion
and enthusiasm of the team and desire to help Supply@ME with its mission of
unlocking barriers for investors to be able to fund inventory and ultimately
help businesses access a new type of working capital solution.
The unique solution which Supply@ME offers is starting to gain traction in the
market which is demonstrable by the tangible progress made during 2023 of the
first traditional Inventory Monetisation being executed in Italy. A further
such transaction was also fully contracted with the first UK Company during
2023, albeit there has been a delay in execution of this transaction largely
as a result of the IM being managed alongside an existing floating charge
facility which has required the client company to gain specific waivers from
existing lenders. While this has resulted in delay to completing the deal, it
nonetheless serves as further proof an IM transaction model can work in the
UK, including alongside existing financing facilities. To deliver the first IM
transactions the Group has connected through its IM Platform the client
company, inventory funder and stock company to facilitate the execution of the
IM transactions. This in itself requires confidence from all stakeholders in
the accountancy, legal and technology frameworks and internal processes
designed to facilitate Inventory Monetisation transactions over the Platform.
I look forward to seeing both the client and inventory funder base grow as the
model begins to scale.
The increased interest in tokenisation of assets is an area of opportunity for
Supply@ME, which will be discussed in more detail in this year's Annual Report
and Accounts. The viability of tokenisation of inventory had already been
demonstrated by the Group's strategic partnership with VeChain Foundation ("VE
Chain") and was further solidified by the progress made in structuring a
security token framework with the CH Trading Hub, owned by Société
Financière Européenne S.A. ("SFE"), which will allow a first security token
issuance up to USD$100 million to be subscribed in tranches, largely by
institutional investors who are active in the digital asset markets.
A significant milestone for the Company has been the signing of the first
White-Label commitment from BBPM to fund up to €10 million of inventory of
an existing client of the bank. This in my view will open up an additional
market for the Supply@ME Platform and will create the opportunity for the
Group to work closely with a range of established financial institutions and
their existing client base using the Group's unique model. The agreement with
BBPM also recognises the deep expertise of the team as inventory servicing
specialists.
Despite the positive steps set out above, 2023 has not been without it
challenges, the Board and team have invested a significant amount of time
focusing on ensuring the Group has sufficient funding to realise its
potential, potential which is not representative of either the financial
results or the diminishing share price during 2023. I would like to take the
opportunity to thank our shareholders for their continued support and
appreciation of the potential of our unique product.
I am excited about the prospects for 2024, we have a market relevant product,
which is gaining recognition and interest, a strong team who have pulled
together to weather some challenging waters and I look forward to seeing the
Supply@ME Group reach its large addressable market.
Albert Ganyushin, Chairman, Supply@ME
CEO Statement
Dear Shareholders,
In 2022 we proved the Supply@ME model through conducting the first IM
transaction using funds from a non-fungible tokens ("NFT") issuance. From the
work that the team and I have conducted during 2023 and to date in 2024, I
strongly believe there continue to be huge opportunities for the applicability
for our model through tokenisation which will be discussed in this year's
Annual Report and Accounts.
Following the inaugural IM transaction, we continued the progress into 2023
and have taken the IM model to institutional investors. Firstly, through the
Open Market Inventory Monetisations taking place that were announced during
2023, and the agreement with the Italian neo bank recently announced.
Secondly, by the accumulation of work conducted during the year which resulted
in the signing of the White-Label commitment from BBPM to deliver inventory
funding to an existing client of BBPM through our IM Platform. The
significance of the engagement of institutional investors and highly reputable
banks in these transactions cannot be understated. It demonstrates the
credibility of the model we have been working to develop.
We made changes to our business model during 2023 in recognition of the
evolution of the regulation of the fund management industry and to cater to
the needs of potential inventory funders who wanted to see a segregated
structure of the Platform provider, the Supply@ME Group and the investment
adviser, previously TradeFlow Capital Management Pte. Limited ("TradeFlow")
and their Cayman-based global inventory fund ("GIF"). This separation came
about as the result of the disposal of the 81% stake in the TradeFlow business
which was completed on 30 June 2023 (the "TradeFlow Restructuring"). The
TradeFlow Restructuring is expected to create value for shareholders by
eliminating any perception of conflicts of interest between the two businesses
and providing both businesses with greater commercial opportunities through
the clear differentiation of responsibilities of the individual entities.
During 2023 and early 2024 Supply@ME has developed an alternative IM
infrastructure through collaboration with a group of private investors and
subject matter experts of working capital solutions to launch, the CH Trading
Hub, to replace the GIF. The CH Trading Hub, owned by SFE, is assuming control
of the independent stock companies from the GIF to manage the overall trading
businesses using the Platform and the associated inventory servicer activities
provided by the Group. This structure is designed to enable us to scale the
offering of the Group as specialist inventory servicer with a stable partner
in the CH Trading Hub. We share more detail about this structure in the Our
Delivery Model section of this announcement.
Additionally, the CH Trading Hub will handle the token route. In this regard,
the Group is studying together with VE Chain how to implement the phase 2
within the strategic agreement signed and it is working with the CH Trading
Hub to launch a security token framework which will allow up to US$100m to be
issued and subscribed, mostly by institutional investors active in the digital
asset markets. The security token is expected to be issued by a vehicle
sponsored by SFE and be tradeable on authorised digital asset exchanges. The
first tranche of this can be seen by the recent announcement of a secured
commitment of USD$5 million from an asset manager specialised in digital
assets.
Despite the positive steps set out above, 2023 was a challenging year for the
Company from a funding perspective, which has impacted the team. I want to
take this opportunity to thank the Board and the Supply@ME team for their
ongoing support and commitment to our unique product. I am proud of how the
team has collaborated to navigate these challenges and the unwavering
commitment shown to creating our Inventory Monetisation product.
I am excited to take the Group forward into 2024, we are focused on continuing
to evolve the processes, technologies and methodologies which support our
various client's business models and inventory types and ultimately create a
new market for inventory funding. Whether that be through Open Market
Inventory Monetisations, tokenisation of inventory as an asset and
democratisation of the sale of this through digital asset exchanges, or
White-Label transactions with financial institutions, the progress that is
being steadily made should start to show through the expansion of our track
record and our ability to first breakeven, and then to scale.
Alessandro Zamboni, CEO
Our delivery model
During 2023 we have continued to enhance our business operating model with
continued development of our FinTech IM Platform, including not only the
underlying software but also the supporting processes, methodologies, and
legal framework.
The inventory funding framework evolved further in 2023 through the launch of
an independent CH Trading Hub. The CH Trading Hub, owned by SFE has purchased
certain independent stock companies, to meet the needs of specific IM
transactions, and is in the process of assuming control of the existing
independent stock companies from the GIF. The CH Trading Hub will also
incorporate new independent stock companies as required in the future.
The advantages to the Supply@ME Group of this new collaboration with the CH
Trading Hub are detailed below:
- Firstly, the CH Trading hub is located in Switzerland which is
traditionally an important trading hub (in particular for raw materials and
commodities) and a region establishing itself as a global leader in the
custody of digital assets partly through its creation of a digital asset
ecosystem that allows for innovation and diversity within a clear regulatory
framework 1 . These characteristics are more desirable to potential inventory
funders compared to the previous location of the GIF, being the Cayman
Islands. The CH Trading Hub has already seen increased interest from potential
inventory funders as a result of this new structure.
- Secondly, this change responds to an evolution in the regulation
of the fund management industry. In particular, the Monetary Authority of
Singapore, Singapore's financial regulator, had advised that TradeFlow should
separate its licensed fund management activities from the rest of the
TradeFlow business. Potential inventory funders had also provided feedback
that the segregation of the Platform provider and the investment adviser would
help to eliminate any perceived conflicts of interest between these two roles.
The completion of the TradeFlow Restructuring on 30 June 2023 resulted in the
clear differentiation of the responsibility of both Supply@ME and TradeFlow,
and lead to the opportunity to collaborate with a group of private investors
and subject matter experts in working capital solutions to launch the CH
Trading Hub.
The intention is that the CH Trading Hub, through its ownership of the
independent stock companies, will act as an asset (inventory) management group
and invest its equity capital to build up a dedicated internal structured
financing team and provide, when needed, equity capital for specific IM
transactions. The CH Trading Hub also has ownership of a dedicated
securitisation company authorised in Luxembourg which it intends to leverage
to help facilitate the access of inventory funders to the IM transaction,
through both the traditional and token financing routes.
As a result of the above, the CH Trading Hub is working closely with the Group
to maximise the opportunity for the IM Platform and to constitute an Inventory
Monetisation infrastructure which can be used by both banks for their
White-Label offering, and investment banks, security token arrangers and other
inventory funders to adopt and implement ad-hoc Inventory Monetisation
programmes. In the case of the White-Label offering it allows banks to
leverage their already wide client base, and in the case of other potential
inventory funders it allows them to work closely with Supply@ME to access its
pipeline of client companies who have already expressed interest in unlocking
their working capital through Inventory Monetisation.
In a typical Open Market IM transaction (being an IM transaction from the
pipeline originated by the Group and funded by third-party investors),
Supply@ME acts as the due diligence provider and originator in respect of the
client company, and as the IM Platform provider and inventory servicer in
respect of the independent stock company. For each Open Market IM transaction,
the Group generates revenues from the following activities:
- Pre-Inventory Monetisation activities carried out directly with
the client company wishing to have their inventory monetised, including due
diligence in respect of the client company itself and its potential eligible
inventory, and origination of the full IM contracts with the relevant stock
company; and
- Post-Inventory Monetisation activities carried out directly with
the relevant stock company including the usage of the Supply@ME platform under
a Software as a Service ("SaaS") contract and the support and administration
activities such as the monitoring, controlling, and reporting on the inventory
monetised.
This model can be flexed and adapted based on the requirements of the
inventory funders particularly in the case of White-Label partners. For
example, the level of due diligence required on a particular client company
may vary if it is already a client of a White-Label inventory funder, or they
may not require the use of a stock company in a particular structure, in which
case some of the post-Inventory Monetisation fees (such as the SaaS license
fee) may be charged directly to the White-Label inventory funder rather than
to the relevant stock company.
During 2023, the Supply@ME platform has further developed its White-Label
offering. Coupled with security protocols and other Platform modules the Group
has a clear understanding of the costs and timelines to deliver modules for a
White-Label partner which will sit within a ring-fenced set of Microsoft Azure
resources. This is in part due to the Group establishing its own dedicated
Microsoft Azure cloud environment which allows for multi-tenancy, meaning that
true White-Label capabilities exist in deploying a 'just tech' solution to any
partners should they wish to proceed directly and not through an independent
stock company.
White-Label partners, with training and support from the Supply@ME team, can
acquire the necessary Platform modules and manage their own Inventory
Monetisation solutions using their own personnel and entity structures as
agreed with each White-Label partner. In this scenario, the Supply@ME team
will be able to provide on-going training and Platform module support to
provide an optimal solution for any White-Label partner with the adaptability
to meet their individual requirements.
Pre-Inventory Monetisation activities:
Due Diligence and Origination
The Group works both directly, and with an ecosystem of partners, to identify
client companies who are interested in Inventory Monetisation, detail of 2023
client company pipeline can be seen above.
After initial discussions with the client the appropriate inventory model is
applied, and the Supply@ME team then, with secure data sharing and
collaboration of the client, carry out an early-stage in-depth analysis of
sales history, historical inventory data, and future projected sales which
then allows an initial value of eligible monetisable inventory to be
determined. During this stage, the Group's inventory analysis expertise is
used to assess this data on a granular level which includes breaking the
initial eligible inventory down to an individual Stock Keeping Units ("SKUs")
level.
With our Customer Relationship Management ("CRM") Module, we track each
client's progress through the origination phase, assigning tasks to
individuals as necessary and tracking completion off those tasks. This module
also gives greater oversight on pipeline activities and prioritisation, and
understanding of inventory attrition rates as the client progresses through
the due diligence process. With our secure data sharing tool, we ensure bank
level security when a client is sharing data with us, and provide user only
access that is truly necessary. With our e-signature tool, we can adhere to
all the necessary jurisdiction guidelines around e-signatures, including ID
verification using government issued ID documents.
This detailed assessment further filters out and identifies typical ineligible
inventory items according to the Supply@ME Inventory due diligence parameters
(or "Risk Appetite"). Further consideration is also given to inventory turns,
forecast and historical sales, margins, seasonality, rates of obsolescence,
and criticality of the SKU to the client. The selected SKUs chosen meet the
Group, the stock company, and the inventory funder's Risk Appetite.
The result of this detailed analysis in a list of qualifying SKUs that are
considered as eligible items for a potential Inventory Monetisation
transaction. Alongside this, an in depth analysis is then completed on the
client's business (e.g. credit analysis) and processes including, for example,
how they track and store inventory, manage orders, and deliver orders etc.
Additionally, analysis is carried out in terms of potential remarketers that
can be used to mitigate the risk for the inventory funders of the disposal of
any unsold goods, where required. Each deal is then run through the stock
company's cashflow model to ensure sustainability parameters are not breached.
Once the above due diligence analysis is complete this is shared with the
client and with any potential inventory funders. Once a specific inventory
funder accepts a specific client company, the process moves from the due
diligence to the contracting phase, and it is here that the formal commercial
contract between the client company and the relevant stock company governing
the IM transaction are negotiated and finalised.
Lastly, once the contracts are signed by the stock company and the client
company, training is given on the Trading Module to ensure a best in class
user experience for the client in uploading their first, and subsequent files.
The client is then ready to carry out their first IM.
Post-Inventory Monetisation activities
Platform and Inventory Service Provider
The Supply@ME IM Platform is crucial to the overall IM transaction as it is
through this software technology that the inventory being monetised is
recorded, monitored and reported on. In order to have usage of the Platform,
the relevant stock company will pay a licence fee to the Group. In addition to
the usage of the Platform, the stock company also relies on the Group's
expertise in monitoring, controlling, and reporting on the eligible inventory
items post monetisation as part of the inventory servicer activities provided.
To facilitate these activities, throughout the course of a contract the client
company must provide inventory data extracted from their Enterprise Resource
Planning ("ERP") system which allows the Group to carefully monitor the
inventory monetised (via inventory analytics) and to identify anomalies to be
queried with the client company.
In the case of the eligible order-based inventory models the Supply@ME team
has developed a methodology to analyse the inventory SKUs required to satisfy
orders received by the client company and which are used for internal client
projects required to deliver these orders. The Group's monitoring team set Key
Performance Indicators ("KPIs") and Key Risk Indicators ("KRIs") based on the
in-depth knowledge of the client's business model and selected eligible SKUs
gained during the due diligence process. This allows them to quickly,
robustly, and efficiently monitor and assess the performance of each SKU as up
to date data is received from the client company. The data used to complete
the monitoring activities includes detailed information on the client
company's sales, inventory movements, end customer orders, and supplier
purchase orders. This continuous monitoring process enables the Group to
understand and report to the stock company (who own the goods as a result of
the Inventory Monetisation) if the client company is adhering to the operating
cycles and behaviours observed during the due diligence phase. Data driven
discussions are held with the client around any anomalies detected and if
necessary, remediation strategies are agreed. Following this, the monitoring
and reporting cycle begins again. In our live clients we have seen evidence of
minor anomalies due to unexpected client behaviours. Once we held the data
driven discussions with the clients, they refined some of their processes to
behave as per the expectations of our legal frameworks. It is reassuring that
our monitoring procedures can identify these kinds of anomalies, and even more
so that the clients amend their behaviours appropriately. This leads to a
lasting value add relationship between Supply@ME, the stock company, and the
clients.
The Platforms "data factory" module facilitates the level of data ingestion
required, automated application of key business rules and the creation of a
unique inventory data-lake to design and develop advanced inventory data
analytic metrics such as seasonality, obsolescence risk, critical components,
margin and sales trends, and to some extent, client behaviours. Together this
enables the Group to effectively monitor and identify anomalies in the
inventory data being collected for monitoring and reporting purposes. During
2023 the data ingestion module has continued to be stress tested through live
client data being available and evolving our inventory models and the
adaptation of our Platform to match the requirements of these models. The
Group also provides administrative support in the facilitation of the client
company's buybacks of the inventory monetised, and refills of new eligible
inventory items over the course of the IM transaction contract.
As a result of the granular level of data ingestion and storage available
through the Platform, Supply@ME is able at any time to provide an up-to-date
picture of the inventory monetised (and therefore owned) by the relevant stock
company, together with any receivable amounts owed to the relevant stock
companies. This seeks to provide our traditional funding partners with the
necessary reassurance and transparency needed for such IM transactions.
As the Group's business scales up, the focus will be on how to augment the
existing technology to allow the activities referred to above to be completed
in the most efficient and effective way. This will be particularly important
as the volume of data being collected, monitored, and reported on increases
with each new IM transaction that is facilitated over the Platform, and as the
business seeks to refine and improve its existing processes. Those
improvements and advancements to the Platform made over the past year are
detailed below.
How we adapt to scale the business
"One size does not fit all" where Inventory Monetisation is concerned.
Supply@ME's business model has been developed further during 2023, and to date
in 2024, and adapted for a range of client company inventory models and
inventory funder's appetite for different inventory types. Understanding the
needs of a range of businesses and building this into the Group's processes
and methodologies will enable faster scaling as the Supply@ME business model
will meet the needs of a broader base of client companies and inventory funder
requirements. Each client company and hence every inventory model presented
to the Group has unique features that need to be carefully considered and
evaluated to ensure the correct eligible inventory items are selected for
monetisation. This requires the Supply@ME team to:
- Understand the business industry within which the client company
operates, alongside the individual business model;
- Work together with the client company to ensure the data required
to accurately assess and monitor the eligible inventory items can be supplied
in the required format and within the required timeframes;
- Identify the appropriate inventory model and monitoring approach
to use, or determine if a new approach will be required;
- Use its inventory analysis expertise to select which SKUs qualify
as eligible inventory to be monetised. This will largely be focused on
reducing the risk to the relevant stock company of being left with unsold
inventory;
- Prepare the client company due diligence report which includes
explanations regarding any ineligible inventory items identified through the
process;
- Liaise with the relevant stock company to identify potential
inventory funders;
- Liaise with the client company and relevant stock company to
originate the formal contractual arrangement between the two parties;
- Provide training to the relevant parties on the use of the
Platform to allow for the monetisation of the eligible inventory items (which
is facilitated using the Platform); and
- Continuously monitor the eligible inventory to allow for reporting
to the relevant stock company over the performance of the inventory selected
and to ensure remediation strategies can be applied by the stock company if
necessary.
Currently, the business model of a client company will be initially
categorised into one of the inventory models set out below. The Supply@ME team
has developed specialist inventory analysis expertise for each of these models
based on the characteristics of the industry and inventory.
Generic Goods
Client companies who trade finished goods, so purchase and resell specific
goods, are a tried and tested client model for the Group and hence can move
through the onboarding and due diligence process swiftly.
Orders Based Model
Client companies who create or manufacture products "to order" can be serviced
by Group's "orders-based model". The Supply@ME team has developed a
methodology to analyse the inventory SKUs required to satisfy orders received
by the client company and which are used for internal client project required
to deliver these orders.
Maturing Goods
The Group has recently implemented a new methodology for goods that mature
over time and whose price appreciates or gathers wealth as they mature. These
goods are typically in the agri-food sector such as cheese or wine, and
leverage available external price matrices to benchmark the current value of
the maturing products. This methodology is core to the BBPM White-Label
binding term sheet commitment announced in the RNS of 3(rd) January 2024. The
Group also plans to develop methodologies that will allow it to assess the
inventory value for goods that appreciate during the maturation process but
for which external pricing matrices are not available. This will open up the
market to a broader base of companies whose goods mature, for example cheese,
wine and cured meats.
Manufacturing
Where a client company takes raw materials and transforms them into finished
goods, Supply@ME has developed a methodology to identify eligible items that
includes both the raw materials (before transformation) and the finished goods
(after transformation). This model is being further developed to account for
more complex manufacturing scenarios.
The Group's ability to scale
The key to scaling the Supply@ME business is largely linked to automation of
the core elements of our delivery model. This will allow the Group to
effectively service the different client company business models in the most
efficient way possible, which will in turn enable us to grow our pipeline of
eligible client companies in order to meet the varying appetite of inventory
funders. During 2023 progress has been made through the clear identification
of the key serviceable client business models and the development of the
associated internal processes required to allow client companies to access the
benefits of the Supply@ME Platform. The Group sees the key to its ability to
further scale as becoming:
- best in class in inventory analytics for each of these different
models;
- building automation through our due diligence processes making it
fast and easy for client companies to receive feedback on eligible inventory
items and enabling them to establish if Inventory Monetisation is viable for
their inventory; and
- building automation and technological scalability in our
monitoring and reporting activities to proactively detect, report and mitigate
risks for the relevant stock company.
Pipeline
The outcome of the recent lending survey conducted by the European Central
Bank clearly indicates that corporates are trying to optimise their cost of
funding, considering the high level of interest rates which impacts their net
profits. This trend also reflects the current Supply@ME pipeline, where some
client companies decided to review the use of the Inventory Monetisation
facility or to wait for better market conditions before proceeding. Also, some
potential client companies were excluded from the pipeline due to the
deterioration of their financial and/or business outlook.
For this reason, in order to support the inventory funding processes managed
by the CH Trading Hub, to date during 2024 a new process has been introduced
where client companies are asked to sign a Letter of Intent ("LoI"), which
going forward will be the catalyst to inclusion in our pipeline numbers, this
new operational KPI is referenced below.
For the purpose of the Annual Report and Accounts for the year ended 31
December 2023 and this announcement, we include reference to the pipeline KPI
used in previous years which represents the current potential value of
warehoused goods inventory to be monetised rather than the pipeline revenue to
be earned by the Group as well as this new measure which is underpinned by
those client companies who have signed an LoI or term sheet ("New LoI pipeline
number"). The new LoI process has been very recently introduced and the
associated numbers are currently low, we anticipate being able to provide a
stronger indication of the pipeline in our next market update.
Country Breakdown
Italy
As the track record of transactions and awareness of our Inventory
Monetisation Platform, and its ability to facilitate Open Market IM's,
continues to grow following the inaugural Italian transaction in September
2022 with VE Chain and further traditional funding IM transaction in 2023,
there is interest from small and large businesses, with differing levels of
monetisable inventory. The success of our first IM reignited discussions with
businesses which had first been introduced to Supply@ME before the pandemic.
Our pipeline of Italian opportunities continues to evolve, and we are
developing the options to facilitate further IMs with other inventory funders
via the CH Trading Hub.
The new Italian legislation pegno non possessorio (the "PNP Regulation") was
published in January 2023 and came into effect in June 2023 introducing the
concept of "security interest" (a concept widely adopted across Europe and the
UK) into Italian law, allowing entrepreneurs to access financing of their
inventory more easily, without having to sell, transform or otherwise dispose
of their business assets. The first traditional IM transaction in Italy
leveraged this regulation. Supply@ME anticipates it will create further
opportunity for traditional inventory funders to invest in IM transactions
considering the proposed improvements to the legal enforceability of
guarantees over the inventory, through the arrangement of white-label
agreements, as happened with BBPM as per the Company' announcement made on 3
January 2024. Additionally, the recent announcement with regards the
Supply@ME's commitments with the Italian neo bank will enable the Company to
make solid progress in the Italian market.
Client companies from Italy included in the overall pipeline KPI have
inventory equivalent to £318.6 million as at 19 April 2024 (£162.5 million
at 21 April 2023). It is worthy of note that 59% of this number is comprised
of the inventory of one large corporate Italian client. The New LoI pipeline
number is £19.2 million.
United Kingdom
Origination in the UK has slowed in line with the market indications that
corporates are trying to optimise their cost of funding and the availability
of dedicated inventory funding programmes by the CH Trading Hub. As Supply@ME
continues to onboard the existing pipeline and build its track-record, this
will unlock further related client company opportunities in UK. Client
companies from the UK included in the overall pipeline KPI have inventory
equivalent to £1.8 million as at 19 April 2024, (£212.1 million as at 21
April 2023). The New LoI pipeline number is £1.8 million.
Europe (excluding UK and Italy)
Client companies have typically been sourced through Supply@ME's strong
relationships held with a global eco-system of introducers which have also
enabled the growth in a wider European portfolio of client companies;
including opportunities in France and Germany. There are several larger ticket
opportunities to monetise inventory subject to the appropriate structure and
funding being in place. Supply@ME has opportunistically engaged a company with
inventory in warehouses in other European countries and currently £10.3
million of the pipeline for both the historical method of reporting and the
New LoI pipeline number is located in other European location. Further details
will be announced in due course.
Financial review
2023 2022 Movement
£000 £000 £000
Continuing operations
Revenue from continuing operations 158 138 20
Operating loss from continuing operations before impairment charges and fair (3,625) (4,651) 1,026
value adjustments
Fair value adjustments to investments (68) - (68)
Impairment charges (384) (1,078) 694
Operating loss from continuing operations (4,077) (5,729) 1,652
Finance costs (83) (1,982) 1,899
Loss before tax from continuing operations (4,160) (7,711) 3,551
Income tax - - -
Loss after tax from continuing operations (4,160) (7,711) 3,551
Loss from discontinued operations (185) (2,167) 1,982
Total loss for the year (4,345) (9,878) 5,533
Movement
Pence Pence Pence
Total loss per share ("EPS") (0.0073) (0.0228) 0.0155
The Group's consolidated financial statements for the year ended 31 December
2023 ("FY23") have been prepared in line with UK adopted International
Accounting Standards ("IAS"). The TradeFlow operations continued to be
classified as discontinued operations and assets held for resale in line with
the requirements of IFRS 5 ("Non-current Assets Held for Sale and Discontinued
Operations") from 1 January 2023 until the date of completion of the TradeFlow
Restructuring, being 30 June 2023.
As shown in the financial summary above, the TradeFlow (discontinued)
operations contributed a loss of £185,000 (inclusive of the profit of
£718,000 recognised in connection with the TradeFlow disposal) in FY23,
compared to a loss of £2,167,000 from discontinued operations for the year
ended 31 December 2022 ("FY22").
Revenue from continuing operations
2023 2022 Movement
£000 £000 £000
Revenue
Due Diligence fees 94 102 (8)
Inventory Monetisation fees 64 36 28
Total revenue from continuing operations 158 138 20
The table above provides a breakdown of the Group's revenue from Inventory
Monetisation activities during FY23. Revenue 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 to the Group's
FY23 consolidated financial statements included within this Annual Report and
Accounts.
During FY23, the Group recognised £158,000 (FY22: £138,000) of Inventory
Monetisation revenue, which it split 59% related to due diligence fees (FY22:
74%), and the remaining 41% relating to Inventory Monetisation fees (FY22:
26%).
In line with IFRS 15 ("Revenue from Contracts with Customers") the Group
recognised the due diligence revenues when the due diligence services have
been delivered and the Group's performance obligation has been satisfied.
During FY23, the Group has continued to carry out, and charge for due
diligence activities, and the £94,000 recognised as revenue reflects the
value of those due diligence activities completed during FY23.
Following the announcement of the first Italian IM transactions during 2022
and 2023, which were facilitated using the Group's IM Platform, the Group
recognised Inventory Monetisation fees of £64,000 during FY23. These fees
related to the following activities:
1) Origination fees - the origination of the contracts between the client
company wishing to have their inventory monetised and the independent stock
(trading) company that purchased the inventory from the client company. In
line with IFRS 15 ("Revenue from Contracts with Customers") the Group
recognised these revenues at the point in time they are due to be received
from the client;
2) IM Platform usage fees - usage of the Group's IM Platform, under a
Software as a Service ("SaaS") contract, by the independent stock (trading)
company to facilitate the purchase of the inventory from the client company.
In line with IFRS 15 ("Revenue from Contracts with Customers") the Group
recognised these revenues over the time period they related to; and
3) IM service fees - the support and administration activities, such as
the monitoring of the inventory purchased, that the Group performs in
connection with the use of the Group's IM Platform. In line with IFRS 15
("Revenue from Contracts with Customers") the Group recognised these revenues
over the time period they related to.
These revenues are expected to grow in future accounting periods in line with
expected growth in both the number of IM transactions that are facilitated
using the Group's IM Platform and, the quantum of inventory monetised by the
independent stock (trading) companies per transaction, increases.
Operating loss from continuing operations before impairment charges and fair
value adjustments
During the first half of 2023, the Group was focused on securing the binding
commercial agreements in terms of the first IM transactions to use traditional
funding in both Italy and the UK. While the binding contract for the latter of
these two IM transactions was agreed in July 2023, there has been a delay in
the completion of the initial inventory purchased which has largely been the
result of the IM being managed alongside an existing floating charge facility
which has required this client company to gain specific waivers from their
current lender. While this has resulted in delays to this deal, it has proven
that an IM transaction model is able to work alongside existing financing
facilities.
During the second half of 2023, the Group continued to make important progress
to enhance its business operating model with continued differentiation of the
IM Platform including, not only the underlying software, but also the
supporting processes, methodologies and legal framework. Alongside this, the
Group has worked on developing a new inventory funding framework through the
launch of CH Trading Hub, has spent considerable time and effort securing its
first commitment which will launch the Group's White-Label go-to-market
strategy, and has been working with various investment banks and digital asset
providers to explore and develop a wider variety of inventory funding routes.
All these activities have continued into 2024 as outlined in more detail in
the Annual Report and Accounts for the year ended 31 December 2023 and in this
announcement.
The Group recorded an operating loss from continuing operations before
impairment charges and fair value adjustments for FY23 of £3,625,000 (FY22:
£4,651,000 loss). The major contributing factors that resulted in the
reduction of the operating loss from continuing operations before impairment
charges and fair value adjustments of £1,026,000 are described below:
- An aggregate decrease in the loss from gross profit and
administration expenses of £537,000 from £4,123,000 recognised in the year
ended 31 December 2023, compared to £4,660,000 recognised in the prior year
ended 31 December 2022. This decrease largely resulted from focused cost
saving efforts that were implemented throughout during 2023, in particular in
the second half of the year when the Group experienced cash flow pressures as
a result of delayed contractual funding amounts due to the Group. In
particular, the professional and legal fees reduced by £643,000 during FY23
as management made an effort to bring certain activities in house, staff costs
reduced by £211,000 during FY23 as certain staff members who left during the
year were not replaced, either at all or immediately, and contractor costs
reduced by £59,000 during FY23 as the Group ended certain agreements with
contractors as specific activities that were being worked on came to an end.
When the Group has sufficient cash balances in the future, management will
look to increase some of the costs again in order to support and drive growth
and expansion. The decreases set out above were partially offset by:
· higher LTIP costs in FY23 as a result of a full 12 month of charges
in relation to the October 2022 LTIP grants, compared to just two months of
charges in FY22, and seven month of charges of the May 2023 LTIP grants; and
· higher interest and penalty costs incurred across the Group due to
late payments being made as a result of the delayed revenue generation and
contractual funding being received by the Group.
- an increase of £489,000 in the other operating income recognised
during FY23 to a total of £498,000 for the current financial year compared to
£9,000 recognised in FY22. The majority of this increase arose as a result of
a settlement agreement reached with an existing supplier during FY23 to reduce
the total amount payable by the Group in exchange for payment of a lower
agreed amount by a specific date. The difference in the previous amount owed
and the agreed final settlement amount resulted in a gain recognised in the
income statement of £376,000 in FY23 (FY22: £nil). The other two main
factors contributing to the increase in other operating income in the current
financial period are:
· an increase in interest income recognised during FY23 of £25,000
compared to the prior period. This interest income was charged on late payment
of contractual amounts due to the Group; and
· an amount of £87,000 recognised during FY23 (2022: £nil) which
relates to claims made in Italy for research and development tax credits
relating to the 2021 and 2022 financial years. These amounts are expected to
be utilised by the Group over the next three years from 2024 to 2026, in equal
instalments each year, to reduce the balance of other Italian tax payables.
Impairment charges and fair value adjustments from continuing operations
2023 2022 Movement
£000 £000 £000
Impairment charges from continuing operations 384 1,078 694
Fair value adjustment on investment in TradeFlow 68 - (68)
452 1,078 626
The impairment charges from continuing operations of £384,000 recognised
during FY23 relate to the impairment of the Group's internally developed IM
platform as at 31 December 2023 in line with the requirements of IAS 36
("Impairment of Assets"). This followed the conclusion that indicators of
impairment were present, which included the losses continued to be generated
by the assets held by the Group's Italian operating subsidiaries. In line with
the going concern statement, set out in note 2 to the Group's FY23
consolidated financial statements included within this announcement, there is
currently a material uncertainty with respect to both the future timing and
growth rates of the forecast cash flows arising from the use of the internally
developed IM Platform intangible asset. As such, the Directors have prudently
decided to continue to impair the full carrying amount of this asset of
£384,000 as at 31 December 2023 (2022: £1,078,000).
The fair value adjustment to the investment in TradeFlow of £68,000
recognised during FY23 (2022: £nil) reflects the worsening of the net
liability position of TradeFlow between 30 June 2023, being the date of
disposal is the 81% stake in TradeFlow, and the year end balance sheet date of
31 December 2023. The quantum of the fair value adjustment has been determined
with reference to the value of the change in the net liabilities of TradeFlow
between these two dates.
Discontinued Operations
The revenue and operating loss of the TradeFlow operations for the period from
1 January 2023 through to the date on which the TradeFlow Restructuring was
completed, being 30 June 2023, are shown in the table below. As detailed
above, the TradeFlow operations continued to be classified as discontinued
operations and assets held for resale in line with the requirements of IFRS 5
("Non-current Assets Held for Sale and Discontinued Operations") from 1
January 2023 and up until 30 June 2023. After this point, TradeFlow was no
longer consolidated by the Group and instead the Group now recognises the fair
value of the remaining 19% investment in TradeFlow on its balance sheet as an
investment. The comparatives show the revenue and operating loss of the
TradeFlow operations for the full year ended 31 December 2022.
6 months to 2022
30 June 2023*
£000 £000
Revenue from discontinued operations 684 629
Administrative expenses (1,037) (1,705)
Other operating income 24 22
Amortisation of intangible assets arising on acquisition (442) (846)
Acquisition related earn-out payments - 710
Impairment charges - (765)
Foreign currency translation loss reclassified to comprehensive income (62) -
Profit on disposal of 81% of TradeFlow 718 -
Operating loss from discontinued operations (115) (1,955)
*Represents the results for the six-month period prior to the finalisation of
the TradeFlow Restructuring on 30 June 2023.
TradeFlow's investment advisory revenue arose from investment advisory
services provided in TradeFlow's capacity as investment advisor to its
well-established USD fund and its growing EUR fund. In line with IFRS 15
("Revenue from Contracts with Customers") these revenues were recognised when
the investment advisory services have been delivered and TradeFlow's
performance obligation has been satisfied.
Further details of the costs recognised during the first six months of 2023
prior to the completion of the TradeFlow Restructuring on 30 June 2023 that
are set out in the table above are detailed below:
- amortisation of intangible assets arising on acquisition of
£442,000 during FY23. These costs related to the intangible assets recognised
by the Group in connection with the TradeFlow acquisition, which had an
initial fair value of £6,888,000. The £442,000 represents the amortisation
charge arising on these assets for the six month period from 1 January 2023
through to the date on which the TradeFlow Restructuring was completed, being
30 June 2023;
- foreign currency translation loss reclassified to comprehensive
income of £62,000 during FY23. This represents the cumulative foreign
currency translation reserve created on consolidation in respect of the
TradeFlow operations. This is reclassified to income statement at 30 June 2023
due to TradeFlow no longer being consolidated by the Group from this date; and
- the profit on disposal of the 81% of TradeFlow of £718,000. On
the 30 June 2023, the net assets of TradeFlow (representing a value of
£1,634,000 at 30 June 2023) are no longer consolidated by the Group, and
instead the fair value of the new 19% investment of £352,000 was recognised
on the balance sheet, together with the £2,000,000 remaining cash
consideration to be received. The difference between these items resulted in a
profit on disposal of the 81% of TradeFlow recorded in the Group's FY23
consolidated statement of comprehensive income of £718,000.
As shown above there were no additional acquisition related earn-out costs
recognised during 2023 which reflected the fact that as part of the TradeFlow
Restructuring all future potential earn-out payments were offset against the
initial cash consideration value.
As detailed above, following the finalisation of the TradeFlow Restructuring
on 30 June 2023, the assets and liabilities of TradeFlow, including the
intangible assets arising as part of the original TradeFlow acquisition in
July 2021, are no longer consolidated by the Group. As such no further
impairment charges relating to the discontinued operations were recognised
during 2023. Instead, a calculation was undertaken to calculate any gain or
loss arising on the change in ownership structure of the TradeFlow operations.
The details of this calculation are set out below, and further detail can be
found in note 26 to the Group's FY 23 consolidated financial statements
included within this announcement.
.
As at 30 June 2023
£ '000
Accounting fair value of the 81% ownership of the TradeFlow operations 2,000
disposed of by the Group
Accounting fair value of 19% ownership of the TradeFlow operations retained by 352
the Group
2,352
Less:
Accounting fair value of net assets disposed of by the Group (1,634)
Profit on disposal of 81% of TradeFlow 718
With regards to the £2,000,000 remaining cash consideration that was due to
the Company as a result of the TradeFlow Restructuring, this amount was
assumed by The AvantGarde Group S.p.A ("TAG"), the Group's majority
shareholder, from the buyers of the 81% stake in TradeFlow by way of a debt
novation deed signed on 30 June 2023. The £2,000,000 was to be repaid by TAG
to SYME in multiple tranches, with the final tranche being due by 31 January
2024. As at 31 December 2023 an amount of £772,000 remained outstanding from
TAG in relation to this amount (31 December 2022: £nil), of which £227,000
was overdue and £500,000 was due for payment on 31 January 2024.
Subsequent to 31 December 2023, and prior to the release of the Group's FY23
consolidated financial statements included within this announcement, TAG had
repaid £655,000 of the remaining amounts that were outstanding at 31 December
2023, through a combination of £569,000 cash payments and a further £86,000
offsets against amounts owed by the Group to TAG.
The Company has been charging a late fee to TAG in terms of overdue payments
of this particular receivable balance, and this late fee is calculated at a
compounding rate of 15% per annum on any amounts of the instalments not
transferred to the Company by the relevant due date, in accordance with the
contractual arrangements. During the year ended 31 December 2023, the Group
recognised £11,000 of interest revenue (2022: £nil) in relation to the late
payments by TAG in respect of this particular receivable balance. As at 31
December 2023, the full amount of this interest revenue remained outstanding.
To determine the accounting fair value of the retained 19% investment in
TradeFlow of £352,000, management used the specifics set out in the TradeFlow
share purchase agreement dated 30 June 2023. Further details of this
calculation are set out in note 26 the Group's FY 23 consolidated financial
statements included within this announcement. Following this calculation,
management then applied a discount of 25% to this fair value to take account
of the fact that the Company no longer controls the TradeFlow operations. This
discount applied is a management judgement that will continue to be reassessed
at each reporting date.
New equity funding
On 28 April 2023, the Company and Venus Capital S.A. ("Venus Capital") entered
into a new equity subscription agreement, pursuant to which Venus Capital
committed to subscribe for 4,500,000,000 new ordinary shares (the
"Subscription Shares") at £0.0005 per Subscription Share (the "Subscription
Agreement") over two separate tranches, both of which took place in May 2023.
The total gross proceeds received by the Group in relation to this
Subscription Agreement was £2,250,0000 or £2,137,500 net of the £112,500
commission that was charged be Venus Capital in connection with the issue of
the Subscription Shares. An additional £112,500 was paid to Venus Capital in
respect of agreed costs and expenses incurred by Venus Capital in connection
with the Subscription Agreement.
The Subscription Agreement required new warrants to be issued to Venus Capital
at a ratio of one warrant for every two Subscription Shares issued. This
resulted in an obligation for the Group to issue 2,250,000,000 new warrants to
Venus Capital ("New Venus Warrants") which existed at 31 December 2023. The
New Venus Warrants are each exercisable into one new ordinary share at a price
equal to £0.00065 pence per share up to a final exercise date of 31 December
2026. As at 31 December 2023, the obligation to issue these share warrants to
Venus Capital has been recognised within equity as "warrants to be issued"
within the share-based payment reserve. These share warrants had a total fair
value of £1,717,000. As at 31 December 2023, all of these share warrants
remain outstanding.
The total share issue costs incurred in connection with the Subscription
Agreement during FY23 were £1,971,000 including £1,717,000 relating to the
fair value of the warrants issued, £225,000 relating the commission and other
fees charged by Venus Capital and £29,000 of other share issue costs. This
has been accounted for as a £1,971,000 reduction to share premium during FY23
given there was sufficient share premium created on the issue of the
Subscription Shares.
New debt financing
In addition to the new equity funding referred to above, the Group also needed
to secure new debt financing during FY23 to support the working capital needs
of the Group while it continues to fully establish the business model and
create a track record of revenue generation. This has presented a number of
challenges to the Group, not only due to the general challenging economic and
commercial environment throughout 2023, including the high interest rate
environment and its impact on economic prospects and investor sentiment, but
also the start-up nature Group's business as this in itself significantly
limits funding options compared with larger, more mature, UK businesses
especially in the fintech sector. With these factors in mind, the Board
carefully considered what options were available and concluded that entering
into the following debt financing with TAG, the Group's major shareholder,
were in the best interests of the Group and its shareholders. Details of the
new debt financing arrangement entered into with TAG during FY23 are
summarised below.
TAG Unsecured Working Facility
On the 28 April 2023, the Company and TAG entered into a fixed term unsecured
working capital loan agreement (the "TAG Unsecured Working Capital facility").
This agreement was subsequently amended on 30 June 2023 in conjunction with
the TradeFlow Restructuring. Under the amended TAG Unsecured Working Capital
facility, TAG agreed to provide, subject to customary restrictions, an
unsecured working capital facility of up to £800,000 to cover the Group's
interim working capital and growth needs.
On 30 June 2023, the Company issued a draw down notice to TAG under the
amended TAG Unsecured Working facility for the full £800,000 available. As at
31 December 2023, TAG had provided £250,000 of the £800,000 that had been
drawn down by the Company (31 December 2022: £nil), however subsequent to 31
December 2023, and prior to the release of Group's FY23 consolidated financial
statements included within this announcement, TAG had provided the remaining
£550,000 of the £800,000 that had been drawn down by the Company.
The initial due date for repayment by the Company of amounts (if any) drawn
under the TAG Unsecured Working Capital facility is 1 February 2028, however
on 26 March 2024, the Company and TAG signed a second deed of amendment
agreement, which allowed the full outstanding amount of the amended TAG
Unsecured Working Capital facility, being £800,000, to be extinguished by the
issue of 1,500,000,000 new ordinary shares which were issued to TAG on 28
March 2024.
Any sums drawn under the TAG Unsecured Working Capital facility attracted a
non-compounding interest rate of 10% per annum, and any principal amount
(excluding accrued interest). During the year ended 31 December 2023, the
Company recognised interest expense of £7,000 (2022: £nil), which all
remained unpaid as at 31 December 2023, but which was settled in full as part
of the repayment made on the 28 March 2024.
Top-Up Shareholder Loan Agreement
On 28 September 2023, the Company and TAG entered into a unsecured shareholder
loan agreement (the "Top-Up Shareholder Loan Agreement"), pursuant to which
TAG agreed to provide the Company with a further facility of up to £3,500,000
to cover the Company's working capital and growth needs up to 30 June 2025.
Full details of this Top-Up Shareholder Loan Agreement are set out in note 28
to the Group's FY 23 consolidated financial statements included within this
announcement. In summary, under the Top-Up Shareholder Loan Agreement the
Company has the ability to draw down up to £3,500,000 in monthly instalments
over the period to 30 June 2025, with the monthly drawdown amount calculated
in order to ensure that the Group's projected cash balance on the last
business day of the coming calendar month will not be less than £250,000
after taking into account the Group's scheduled balance of receipts and
payments for the next month.
The repayment of any sum drawn down under the TAG Top-Up Shareholder Loan
Agreement will be due five calendar years from the date which funds are
received by the Company subject to the relevant draw down request and any sums
drawn down by the Company under the TAG Top-Up Unsecured Shareholder Loan will
attract a non-compounding interest rate of 10% per annum, and any principal
amount (excluding accrued interest) outstanding on a relevant due date shall
attract a compounding rate of 15% per annum thereafter. Interest will be due
to be paid annually on 31 March of each relevant calendar year.
As at 31 December 2023, the Group had issued draw down notices to the value of
£969,000 to TAG, however these amounts had not yet been received by the Group
(31 December 2022: £nil). As a result of the late payment of the amounts
drawn down by TAG, the Group recognised interest income of £11,000 (2022:
£nil), which all remained unpaid as at 31 December 2023.
Subsequent to 31 December 2023, and prior to the release of the Group's FY23
consolidated financial statements included within this announcement, the
Company issued additional draw down notices under the Top-Up Shareholder Loan
Agreement to the value of £779,000 and had received £nil from TAG.
Late payment challenges encountered by the Group during 2023
As previously communicated by the Company through its RNS announcements dated
5 December 2023 and 29 February 2024, the Group has experienced a number of
cash flow pressures during the second half of 2023, and to date in 2024, as a
result of a number of delayed contractual funding amounts due to the Group
from TAG. The delayed contractual payments resulted from TAG experiencing
delays in funding it was itself expecting. The Board has been monitoring the
situation closely including requesting regular updates from TAG regarding the
expected timing delays, and representation as to the mitigating actions that
TAG itself has been putting in place to allow them to demonstrate their
ongoing commitment to support the Company and to provide the contractual
payments, albeit on a delayed payment schedule.
As detailed above, the Group has continued to receive payments from TAG
following 31 December 2023 and TAG has provided further representations to the
Board that it will continue to provide the outstanding amounts, and that TAG
is itself in the process of securing additional facilities and arrangements to
enable performance against these representations. Additionally, the Board is
exploring alternative options of funding in order to meet its ongoing working
capital needs and to reduce the reliance of the Group on TAG.
Cash flow
The Group decreased its net cash balance by £575,000 (2022: £1,133,000
decrease) due to a combination of the following cash inflows and outflows
during FY23:
- cash inflow of £2,068,000, net of commission and other share
issue costs, received from the issue of new ordinary shares during the first
half of 2023 under the Subscription Agreement, and from existing warrant
holders who chose to convert their warrants (which had been issued in
conjunction with the open offer completed during 2022);
- cash inflows from long-term borrowing from discontinued operations
of £405,000 due to the new long-term borrowings secured by TradeFlow during
the six-month period in 2023 prior to the completion of the TradeFlow
Restructuring;
- cash inflows from long-term borrowing from continuing operations
of £139,000, net of repayments and other finance costs, predominantly due to
amounts received under the amended TAG Unsecured Working facility agreed
during 2023 less the cash repayments made during 2023 in relation to the
long-term bank borrowings; and
- cash inflow of £1,228,000 that have been received during the year
ended 31 December 2023 from TAG in relation to the repayment of the remaining
cash consideration that was due as a result of the TradeFlow Restructuring.
These net cash inflows were then offset by the following items:
- net outflows from operating activities of £3,633,000 (2022:
£4,555,000 net outflow);
- continued investment in the Group's IM Platform of £458,000
(2022: £1,175,000); and
- removal of the opening cash balance of the TradeFlow operations of
£324,000 to reflect the fact that the TradeFlow Restructuring was completed
on 30 June 2023 and the TradeFlow assets and liabilities are no longer
consolidated by the Group at the period end.
2023 2022
£000 £000
Net cash flow from operating activities (3,633) (4,555)
Net cash flow from investing activities 446 (1,197)
Net cash flow from financing activities 2,612 4,619
Net increase in cash and cash equivalents (575) (1,133)
Foreign exchange differences to cash and cash equivalents on consolidation (1) (13)
Cash and cash equivalents at 1 January 581 1,727
Cash and cash equivalents as at 31 December 5 581
Net liabilities
As at 31 December 2023 net liabilities were £3,807,000 (31 December 2022: net
liabilities of £2,025,000), representing an increase in the net liability of
the Group of £1,782,000.
The increase in the net liability position at 31 December 2023 compared to 31
December 2022 is largely due to the following:
- the addition of the new assets created as a result of the
TradeFlow Restructuring including a) the £772,000 outstanding cash
consideration receivable by the Company from TAG as at 31 December 2023 (31
December 2022: £nil), following TAG's assumption of the outstanding cash
consideration payable from the buyers of TradeFlow on 30 June 2023, and b) the
£284,000 investment balance relating to the fair value of the Group's
remaining 19% ownership of TradeFlow as at 31 December 2023. Further details
on these new assets can be found in notes 26 and 27 to the Group's FY 2023
consolidated financial statements included within this announcement.
This increase in assets compared to 31 December 2022 was then offset by:
- the removal of the assets and liabilities relating to TradeFlow
from the Group's consolidated balance sheet at 30 June 2023 to reflect the
fact that the TradeFlow Restructuring was completed on this date. The value of
the net asset relating to TradeFlow that were consolidated as at 31 December
2022 was £2,283,000;
- the reduction in the cash balance from £257,000 as at 31 December
2022 to £5,000 as at 31 December 2023 reflecting a number of delayed
contractual funding amounts due to the Group from TAG in the second half of
2023;
- an increased in provisions from £468,000 as at 31 December 2022
to £575,000 as at 31 December 2023 reflecting additional interest amounts and
penalties due on overdue tax and social security balances due;
- a small increase in other working capital items primarily due to
the overall net cash outflows from operations.
Going Concern
The Board's assessment of going concern, the key considerations and the
material uncertainties thereto are set out in the note 2 to the Group's FY 23
consolidated financial statements included within this announcement.
Related Parties
Note 28 to the Group's FY 23 consolidated financial statements included within
this announcement contains details of the Group's related parties.
Subsequent events
Note 30 to the Group's FY 23 consolidated financial statements included within
this announcement contains details of all subsequent events.
Principal Risks and Uncertanities
The Group's approach to risk management is that the Board regularly considers
the principal risks faced by the Group and takes a proactive approach to those
risks identified, primarily through the application of the COSO (Committee of
Sponsoring Organizations of the Treadway Commission) framework. The leadership
team have undertaken a bottom-up internal self-assessment approach to
evaluating risks across all areas of the business in line with the COSO
framework. Consideration was given to perceived risk with regard to Impact,
Likelihood, Vulnerability and Velocity by internal functional experts. The
identified risks were then reviewed and assessed centrally and key risks to
the business are managed and mitigated. The key risks and mitigations are
periodically presented to the Board and Audit Committee.
The most significant risks and uncertainties the Group faces are listed in the
table below, categorised by the principal risk, together with the approach
that has been taken to manage the impact of this risk on the Group, any
changes to the risk profile since 2022 and an assessment of the importance of
this risk considering the likelihood and impact of it post the mitigations
outlined.
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.
Business Model and Strategic Competition
Movement since 2022 Likelihood Impact
Maintained at same level Unlikely Major
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
The Group's business model is that of an innovative Platform for Inventory The Group continues to acknowledge the risk of new and potentially larger The progress made during 2023 in the commencement of the variety of routes to
Monetisation, aiming to capitalise upon market developments where supply competitors entering the Inventory Monetisation space and regularly monitors market and the associated ability in the Group
chains may be placed under pressure. new entrants to keep abreast of changes to this risk factor.
gives strategic competitive advantage, alongside the flexibility in the
business model.
By its nature this is a new FinTech product which leads to an inherent risk of Over the past few years, a focus of the Group has been significantly investing
there being limited market interest in the product or on the converse a in building, developing and flexing its unique model and has also diversified
competitive offering being created by another organisation which outstrips our the business model to encompass a variety of routes to market from White-Label Although there have been announcements from other companies with regard to
model or size. product offerings, tokenisation and traditional inventory funding. progressing their own inventory funding model, Supply@ME is not aware of any
other offering of Inventory Monetisation facilitated through a platform
aligned to the Supply@ME business model. The investments made since the
Group's inception would be challenging for a competitor to replicate over a
Additionally, as detailed in the "how we scale the business" section of this short period at this stage.
announcement the Group's understanding and ability to deliver for a range of
client companies business model adds to its competitive advantage, especially
against potential new entrants to the market place.
Future development and strategy
Movement since 2022 Likelihood Impact
Maintained at same level Possible Major
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
The Group is unable to build the IM Platform in line with its strategy at a This risk will reduce as the Group's business model and product becomes more During 2023, the Company has proven its ability to deliver an additional
pace and cost aligned to funding available and revenue generation. established. Despite business progress made during 2023, the scalability of successful Inventory Monetisation and worked hard to secure its first
the Group's product remains unproven, which could affect the Group's ability commitment linked to the While-Label product offering, which was then
to increase revenues and profit margins in the future at the rate needed to announced in early 2024.
ensure success of the business model.
These developments demonstrate the establishment of the business model and
The key to our long-term business growth remains our IM Platform. The IM product. However, the pace of growth is slower than anticipated and as such
Platform and product roadmap are continually being enhanced to enable seamless the scalability of the business model is still to be fully demonstrated.
interactions with clients and inventory funders, with minimal human
intervention, using a lean workforce to deliver a high volume of transactions
and revenue. This groundwork will allow for increased efficiency going forward
and will continue to be progressed as different inventory models are presented
to the Group for consideration.
Macro global and economic risks
Movement since 2022 Likelihood Impact
Increased Possible Moderate
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
The current global macro environment has an effect on all businesses, The market for supply chain finance is large. As such, any increases to The risk in this area has increased in the last year in our view largely due
including the Group, its corporate clients and inventory funders. Supply@ME's market share to even a small degree, this could have a positive to the macro-economic environment. The increased uncertainty arising from
Consideration has been given to changes in loan appetite of potential impact on the business. continued global conflict is having an impact on overall business confidence
corporate clients.
which is also being felt by Supply@ME.
The business is currently focusing on clients based in the UK and Europe,
The increased level of conflict globally, in particular the war in Ukraine and Italy in particular. This narrowing of focus should mitigate some of the risk Although Supply@ME is not a lender and does not provide financing the
the increased tensions in the Middle East, could potentially affect the inherent from the increased global conflict. decreased appetite of SME's and large enterprises for loans due to higher
success of businesses who would be client companies of Supply@ME, leading to a
interest rates could arguably reduce the size of the potential addressable
smaller potential market. market for Supply@ME.
To mitigate the risk to the business of immigration constraints caused by
Brexit the Company has obtained a Visa Sponsorship Licence.
Consideration has also been given to the impacts of Brexit. As our business
model requires legal contracts complaint with laws in individual countries the
impact on the operations of the business from this macro event is limited. The
restrictions of free movement of people and the immigrations requirements in
the UK as a result of Brexit is of greater concern.
Inventory Funding Risk
Movement since 2022 Likelihood Impact
Reduced Possible Major
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
Key to the Suppy@ME business model is the interest of funders to acquire Developing a strategic partnership with SFE mitigates some of this risk as SFE The Group has seen positive progress in this area during 2023 including, the
inventory and invest in the new model for which Supply@ME provides pre and will proactively manage the funder relationships in any Inventory Monetisation first traditional funding of inventory, the developments in the securitisation
post monetisation services. If there is no interest, or reduced interest by transaction, which is a positive development in this area as it should allow of assets and the first White-Label commitment. This progress, together with
funders to invest in this asset class of inventory there is risk to the for a greater understanding of the funders' requirements. the new strategic partnership with SFE has reduced this risk to the Group
Supply@ME business model.
through demonstrating there is interest from a variety of market players to
fund inventory.
Additionally, the diversification of potential routes to market mitigates this
risk. These potential routes include funding provided by White-Label partners,
traditional funding and tokenisation as potential funding routes for
inventory.
Technological Advancements
Movement since 2022 Likelihood Impact
Maintained at same level Unlikely Moderate
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
Technology is advancing at a phenomenal rate. The development of and increased A growth mindset and innovation are encouraged at Supply@ME across all members There have been technology advancements in the market during 2023, and while
use of AI being one of the recent most significant. The increased digitisation of the team. This will help the team and the Group to stay abreast of new the Group's focus on innovation and learning has continued in order to keep
of assets is also a relevant advancement. technology and its use. One example of this is the whole team starting to abreast of these changes, this risk has remained static compared to 2022. This
undertake the Route Crypto Training during 2023. is in part due to the constant changing technological landscape but also due
As a Fintech business it is essential that our technology and the team's to the current limited availability of financial resources that the Group has
knowledge of new technology user cases keeps pace with the external to invest in this area.
environment so that any new relevant technologies can be included into the IM
Platform as efficiently and effectively as possible.
Commercial Legal Risk
Movement since 2022 Likelihood Impact
Reduced Unlikely Minor
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
The Supply@ME business model requires new and detailed legal contracts to be When Supply@ME engages with a new a corporate client the location of their A significant amount of time and resources have been invested into the
in place in each global jurisdiction in which a monetisation is to take place. inventory is a key part of early discussions and companies are progressed development of standard commercial contracts for the UK and Italy, and these
through the Supply@ME pipeline taking this into consideration. have been implemented with client(s) in these two regions.
This is required in order to ensure the contracts are tailored to specific
circumstances and regulations in that new region. This creates a risk of the
Group potentially breaching legislation specific to a new region. It also
means that the first monetisation in a new region could have significant External legal expertise is sought for each country region that the Group is Solid progress has also been made on establishing legal structures in France
up-front cost in both time and finances depending on the complexities of that engaging in business to reduce any risk of breach of local legislation and to where corporate clients in the Group's pipeline have approached Supply@ME with
region. However, as the business expands to more regions, this will then lead ensure the leadership team is made aware of any specific legal circumstances inventory they wish to have monetised. Given this progress over 2023, this
to a scalable model which can be replicated in a much more efficient manner that might be unique to a particular country or region. risk has reduced compared to the prior year.
for each new client onboarded in an already established region.
Financial Risk
Financial risk takes into consideration risk resulting from the loss of
capital. Consideration is given to liquidity, market and credit risk.
Group Funding Risk
Movement since 2022 Likelihood Impact
Increased Likely Major
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
The Company and the Group remain in the early stage of development and have The Company and its Board are continually reviewing the cashflow position of Funding was challenging during 2023 due to the delays in funding being
not generated consistent revenues from operations to date and are not the Group and, as required, will explore additional funding facilities received. As such this risk as increased when compared to 2022. There were
currently profitable. In addition, predicting the time frames within which the available to meet the cash flow, working capital and growth needs of the unforeseen delays which impacted on:
Group will commence the generation of consistent revenues remains difficult. Group. To support this the Company remains engaged with several key
As a result of the current stage of development, the Group has needed to rely stakeholder and finance providers to fulfil the future funding needs and to - Our people, which increased the risk of attrition.
on funding from various sources in the past including equity placings, various provide the Group options to diversify the current sources of funding and
shareholder funding commitments together with other loan and convertible loan mitigate the risk of being dependent on the various funding commitment - Our third-party suppliers, which increased the risk of the company
note facilities. provided by TAG. being able to seek the external expertise it required.
- Our ability to build the technology infrastructure at a pace
originally.
Despite continued confidence in its long-term strategic aims, the Directors To help mitigate the impacts of the delayed funding payments from TAG during
continue to recognise additional financing will likely be required and that 2023 and to date in 2024, the Board are in regular contact with TAG and have While the business progress has been positive over 2023 and early 2024, this
the availability of future potential funding options may be limited and could been working closely with them to ensure the committed payments are risk will remain high until the Group is able to consistently generate revenue
potentially be on terms that are not favourable to the Group and may be continually being received, albeit on a delayed basis. Alongside this the which is sufficient to cover its costs.
dilutive to shareholders. Board are in regular contact with the CFO to ensure they are fully aligned on
the use to funds that are available.
Additionally, during 2023, and to date in 2024, the Group has experienced
delays in terms of the funding commitments that had been entered into with its
key shareholder, TAG. This created a new risk to the Group in terms of the
relevant counterparty being able to provide funding in line with their
contractual commitments to the Group.
Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed
internal processes, people and systems or from external events.
Business Continuity Risk
Movement since 2022 Likelihood Impact
Decreased Unlikely Moderate
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
Our business is evolving. As a business evolves, processes need to adapt and 'Key Person' dependency is an element of business continuity risk, to mitigate The team has consistently been focused on process documentation to create
improve. Not keeping abreast of these changes exposes the Group to risk of not this all policies, processes, and procedures are clearly documented, along robust business continuity plans and to build this into every element across
delivering for our clients and/or business failure. with training videos, and standardised templates enabling any team member to the Group. As a result of the work completed in 2023 and early 2024, this risk
be able to carry out part of a process. has decreased as compared to the prior year.
It is also key that our IM Platform is accessible and available, which
requires any outage time being kept to an absolute minimum. As such processes
and policies being in place to allow for business continuity when faced with
technical issues is key to the Groups success as a result any failure or Business continuity plans are in place and are presented to third parties when
inaccessibility of our IM platform is considered a principal risk for the necessary. They are also reviewed and tested to ensure robustness.
Group.
All our technological components are backed by Service Level Agreements and
support plans, with scheduled back-ups and restoration plans should they fail.
All our processes are able to be run manually should there be a significant
downtime any of on our components.
When working with third party suppliers we ensure agreement encompass business
continuity measures/ service level agreement in order to mitigate the risk
that the IM Platform processes are impacted by the business interruption of
services provided by key suppliers.
Talent and Diversity Risk
Movement since 2022 Likelihood Impact
Increased Possible Moderate
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
Loss of certain member of the Board and leadership team could lead to a The Board and leadership team continue to work closely to mitigate this risk The cash flow challenges faced by the Group during 2023, and early 2024, has
reduced ability to effectively run the Group, while loss of the key members of by keeping lines of communication open with the team. Additionally, during had an impact on the Supply@ME team and led to some attrition. The risk of
the team could hamper the speed at which the Group is able to scale up the 2023 the regular succession planning reviews were extended to cover all levels loss of key members if the team has increased during this period, including in
business and increase operational efficiency. of the team so that any key vulnerabilities were clearly identified. These the leadership team. Given the current focus on cost control, not all of these
reviews are conducted by the Nomination Committee supported by the Chief vacancies have been filled and instead work has been distributed to the
Executive Officer and Chief People Officer. remaining team members. The Board and Chief People Officer are actively
managing this risk.
Feedback was gathered from the team in late 2023 through the annual employee
experience and engagement survey. This insight has assisted in putting in
place measures to continue to minimise risk of attrition of key members of the
team, and to allow the Board to identify key areas of importance across the
team.
While the Group does not yet have the resources available to it to incentivise
employees via the payment of bonuses or pay rises, the Board continued to make
awards under the Long-Term incentive plan during 2023.
Cyber Security Risk
Movement since 2022 Likelihood Impact
Maintained at same level Unlikely Major
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
The proprietary fintech Platform developed by the Group and used to facilitate The Group is aware of growing cybersecurity risks and regularly reviews the Cyber security risk is perceived to be one of the most important global
Inventory Monetisation transactions is the intellectual property of the robustness of cybersecurity provisions around its network. This includes business risks in 2024 as outlined by recent research by Allianz. Supply@ME
Supply@ME Group. Given the global rise in the number of data and cybersecurity mandatory staff training to recognise data breach and/or phishing attempts, has also noted an increase in phishing attempts. Despite the increased macro
breaches carried out by malicious actors or hackers, the Group's intellectual via software such as malware or ransomware. The major technology components risk, the mitigating actions the Group has in place has led to the conclusion
property may be at risk of being stolen as a result of unauthorised access to of the IM Platform require Multi-Factor Authentication as an added level of that this risk has remained unchanged when compared to the prior year.
its systems. security. All data is held in a cloud environment that has threat monitoring,
detection, and alerts as standard protocols.
The Group has put in place an approved Data Breach Response Policy.
Regulatory, Legal and Reputational Risk
Regulatory, Legal and Reputation Risk are defined as those relating to the
legal and regulatory frameworks within which the Company operates.
Reputational risk is linked to this as all of these areas related to the
engagement in activities that detract from Group's goal of being a trusted and
reputable Company.
Corporate Legal and Regulatory Risk
Movement since 2022 Likelihood Impact
Increased Possible Moderate
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
The Group breaches a legal or regulatory requirement which impacts its ability Supply@ME is a small team, who are supported by external experts to help Enlisting the support of external experts comes at a cost which has to be
to deliver for its stakeholder. ensure the Group is compliant with its various legal and regulatory balanced with its current financial position. The risk in this area has
requirements. The Board has oversight and has been thoughtfully hired for increased during 2023 as the spend on advisors has been carefully considered
their combined expertise to challenge and support the business in this area. and reduced in line with cash flow constraints.
Data Protection
Movement since 2022 Likelihood Impact
Maintained at same level Rare Moderate
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
Effective data protection is fundamental to our business and a data protection The Group has engaged extensively with recognised data protection experts to During 2022 our processes and procedures around data protection were reviewed
breach could damage stakeholder relationships, incur costs and damage establish appropriate data protection policies and procedures in the and refined. During 2023 this process has continued. The risk in this area
reputation. Operating in multiple jurisdictions leaves a risk of breach of jurisdictions within which it currently operates. remains consistent compared to the end of 2022.
individual jurisdictional legislation.
Reputational Risk
Movement since 2022 Likelihood Impact
Increased Possible Moderate
Principal Risk How are we mitigating this risk? Change in principal risk since 2022
A positive reputation will assist a business to become more successful. Being In the past Supply@ME sought support from external public and investor The budget for external public and investor relations support has been reduced
a desirable business partner to all types of stakeholders will have a positive relations agencies to assist in brand and communications management. The Board during 2023 in line with cash flow. The increased consideration given by the
impact on business performance. The Groups reputation becoming damaged will and leadership team have becoming increasingly considered in the team prior to communicating externally has had mixed responses from the Groups
impact the speed at which it can expand, growth and prove its business model. communications made externally follow advice received from these experts. wide retail shareholder base. Additional investment in external public and
investor relations support will be sought in line with the resource and cash
availability.
Statement of Director's responsibilities
The responsibility statement below has been prepared in connection with the
annual report and financial statements for the year ended 31 December 2023.
Certain parts thereof are not included within this announcement. The Directors
confirm that to the best of their knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation taken as a whole; and
- the strategic report, contained within the annual report and
financial statements for the year ended 31 December 2023, includes a fair
review of the development and performance of the business and the position of
the Company and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties
that they face.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Supply@ME Capital PLC
websites. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
This responsibility statement was approved by the Board of Directors and is
signed on its behalf by:
Alessandro Zamboni
Chief Executive Officer
30 April 2024
Financial Statements
The final results announcement for the year ended 31 December 2023 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 2023 Annual Report
and Accounts. The accounting policies adopted in this announcement are
consistent with the Annual Report and Accounts for the year ended 31 December
2023.
The financial information has been extracted from the financial statements for
the year ended 31 December 2023, which have been approved by the Board of
Directors and on which the auditors have reported on without qualification.
The audit report also included a material uncertainty relating to going
concern. Full details of the audit report can be seen in the 2023 Annual
Report and Accounts.
Consolidated Statement of Comprehensive Income for the Year Ended 31 December
2023
Note Year ended 31 December 2023 Year ended 31 December 2022
£ 000 £ 000
Continuing operations
Revenue 3 158 138
Cost of sales (603) (338)
Gross (loss) (445) (200)
Administrative expenses 6 (3,678) (4,460)
Other operating income 5 498 9
Operating loss from continuing operations before impairment charges and fair 3 (3,625) (4,651)
value adjustments
Fair value adjustments to investments 27 (68) -
Impairment charges 6 (384) (1,078)
Operating loss from continuing operations (4,077) (5,729)
Finance costs 4 (83) (1,982)
Loss before tax from continuing operations (4,160) (7,711)
Income tax 10 - -
Loss after tax from continuing operations (4,160) (7,711)
Discontinued operations
Loss from discontinued operations 26 (185) (2,167)
Total loss for the year (4,345) (9,878)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations 304 (539)
Total comprehensive loss for the year (4,041) (10,417)
Loss attributable to:
Owners of the company (4,041) (10,417)
Earnings/(loss) per share Pence Pence
Basic and diluted loss per share - continuing operations 11 (0.0070) (0.0178)
Basic and diluted loss per share - discontinued operations 11 (0.0003) (0.0050)
Basic and diluted loss per share - total 11 (0.0073) (0.0228)
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 2023
Note As at 31 December 2023 As at 31
£ 000
December 2022
£ 000
Non-current assets
Intangible assets and goodwill 12 - -
Investment 27 284 -
Property, plant and equipment 3 7
Other non-current assets 19 19
Total non-current assets 306 26
Current assets
Trade and other receivables 13 1,026 1,219
Cash and cash equivalents 5 257
Receivable from related party 14 847 -
1,878 1,476
Assets of disposal group held for sale 26 - 6,844
Total current assets 1,878 8,320
Total assets 2,184 8,346
Current liabilities
Trade and other payables 16 4,569 4,587
Liabilities of disposal group held for sale 26 - 4,561
Total current liabilities 4,569 9,148
Net current liabilities (2,691) (828)
Non-current liabilities
Long-term borrowings 17 840 748
Provisions 18 575 468
Deferred tax liabilities 7 7
Total non-current liabilities 1,422 1,223
Net liabilities (3,807) (2,025)
Equity attributable to owners of the parent
Share capital 15 5,989 5,897
Share premium 25,396 25,269
Share-based payment reserve 24 7,969 5,871
Other reserves (11,048) (11,413)
Retained losses (32,113) (27,649)
Total equity (3,807) (2,025)
The above consolidated statement of financial position should be read in
conjunction with the accompanying notes. These consolidated financial
statements were approved and authorised for issue by the Board on 30 April
2024 and signed on its behalf by:
......................................... .........................................
Alessandro Zamboni David Bull
Chief Executive Officer and Executive Director Independent Non-Executive Director and Chair of Audit Committee
Supply@ME Capital Plc
Company registration number: 03936915
Consolidated Statement of Changes in Equity for the Year Ended 31 December
2022
.
Note Share capital Share premium Other reserves* Share-based payment reserve Merger reserve* Reverse takeover reserve* Foreign currency reserve* Retained losses Total
£ 000
£ 000
£ 000
£ 000
£ 000
£ 000 £ 000 £ 000 £ 000
At 1 January 2022 5,486 18,171 21 2,018 226,905 (237,834) 18 (16,209) (1,425)
Loss for the year - - - - - - - (9,878) (9,878)
Forex retranslation difference - - - - - - (539) - (539)
5,486 18,171 21 2,018 226,905 (237,834) (521) (26,087) (11,841)
Issuance of new shares 15 406 10,396 - - - - - - 10,802
Costs incurred in connection with the issuance of new ordinary shares - (4,024) - - - - - (1,605) (5,629)
Credit to equity for issue of warrants 24 - - - 5,292 - - - - 5,292
Exercise of Open Offer Warrants 15 1 31 - (40) - - - 40 32
Credit to equity for prior year acquisition related earn-out payments - - - 172 - - - - 172
Settlement of prior year acquisition related earn-out payments 15 4 695 - (699) - - - - -
Debit to equity for current year and future acquisition related earn-out - - - (883) - - - - (883)
payments
Equity settled employee share-based payment schemes - - - 11 - - - - 11
Pension plan actuarial gain or loss - - 16 - - - - - 16
Subsidiaries disposed of during the year - - - - - - - 3 3
At 31 December 2022 5,897 25,269 37 5,871 226,905 (237,834) (521) (27,649) (2,025)
*The "other reserves" balance in the consolidated statement of financial
position represents an aggregate of other reserves, the merger relief reserve,
the reverse takeover reserve and the foreign currency reserve.
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
2023
Note Share capital Share premium Other reserves* Share-based payment reserve Merger reserve* Reverse takeover reserve* Foreign currency reserve* Retained losses Total
£ 000
£ 000
£ 000
£ 000
£ 000
£ 000 £ 000 £ 000 £ 000
At 1 January 2023 5,897 25,269 37 5,871 226,905 (237,834) (521) (27,649) (2,025)
Foreign currency translation reserve reclassified to comprehensive income on 62 - 62
disposal of 81% of TradeFlow
Loss for the year - - - - - - - (4,345) (4,345)
Forex retranslation difference - - - - - - 304 - 304
5,897 25,269 37 5,871 226,905 (237,834) (155) (31,994) (6,004)
Issuance of new shares 15 90 2,160 - - - - - - 2,250
Costs incurred in connection with the issuance of new ordinary shares - (1,971) - - - - - (1,971)
Credit to equity for issue of warrants 24 - - - 1,717 - - - - 1,717
Exercise of Open Offer Warrants 15 2 70 - (95) - - - 95 72
Increase in fair value of previously issued warrants - (132) - 346 - - - (214) -
Equity settled employee share based payment schemes - - - 130 - - - - 130
Pension plan actuarial gain or loss - - (1) - - - - - (1)
At 31 December 2023 5,989 25,396 36 7,969 226,905 (237,834) (155) (32,113)
(3,807)
*The "other reserves" balance in the consolidated statement of financial
position represents an aggregate of other reserves, the merger relief reserve,
the reverse takeover reserve and the foreign currency reserve.
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 2023
Note Year ended 31 December 2023 Year ended 31 December 2022
£ 000 £ 000
Cash flows from operating activities
Loss before interest and tax for the year from continuing operations (4,077) (5,729)
Loss before interest and tax for the year from discontinued operations (115) (1,955)
Total loss for the period before interest and tax (4,192) (7,684)
Adjustments for non-cash acquisition related costs
Acquisition related earn-outs - (710)
Amortisation of intangible assets arising on acquisition 26 442 846
Adjustment for impairment charge
Impairment charges 6 384 1,843
Adjustments for fair value on investments
Fair value adjustments to investments 27 68 -
Adjustments for non-cash costs related to the disposal of the discontinued
operations
Foreign currency translation loss reclassified to comprehensive income 26 62 -
Profit on disposal of 81% of TradeFlow 26 (718) -
238 1,979
Other non-cash adjustments 137 (134)
Other depreciation and amortisation 81 51
Increase in provisions 118 110
Decrease/(increase) in accrued income 5 (38)
Decrease/(increase) in trade and other receivables 401 (44)
(Decrease)/increase in trade and other payables (759) 1,158
Other decreases/(increases) in net working capital 385 337
Net cash flows from operations (3,586) (4,265)
Interest paid in cash (47) (14)
Income taxes paid in cash in respect of prior period amounts owing - (276)
Net cash flow from operating activities (3,633) (4,555)
Cash flows from investing activities
Purchase of intangible assets 12 (458) (1,175)
Increase in other non-current assets - (18)
Purchase of tangible assets - (4)
Cash inflow due to consideration received from related party on disposal of 1,228 -
discontinued operations
Cash outflow on disposal of discontinued operations 26 (324) -
Net cash flows from investing activities 446 (1,197)
Cash flows from financing activities
Net cash inflow from new long-term borrowings 655 2,334
Cash repayment of existing long-term borrowings (105) -
Cash inflow from issue of new ordinary shares 2,322 7,013
Cost of share issue paid in cash 25 (254) (231)
Other finance costs paid in cash (6) (425)
Cash inflow from convertible loan notes - 1,500
Cash repayment of loan notes and convertible loan notes - (5,572)
Net cash flows from financing activities 2,612 4,619
Net movement in cash and cash equivalents (575) (1,133)
Foreign exchange differences to cash and cash equivalents on consolidation (1) (13)
Cash and cash equivalents at 1 January 581 1,727
Cash and cash equivalents at 31 December 5 581
During the year ended 31 December 2023, there were no significant non-cash
transactions.
During the prior year ended 31 December 2022, the Group reported the following
significant non-cash transactions:
- A total of 5,298,382,757 new ordinary shares were issued during
the prior year to extinguish £3,274,166 principal value of convertible loan
notes; and
- 213,525,520 new ordinary shares were issued during the prior year
to settle the acquisition related earn-out payments for the financial year
ended 31 December 2021.
The reconciliation of the movement in net debt is set out in note 23.
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
2023
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 of 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
As at 31 December 2023 the Group had a cash and cash equivalents balance from
continuing operations of £5,000 (31 December 2022: £257,000 cash and cash
equivalents from continuing operations, £324,000 cash and cash equivalents
from discontinued operations). The Group's consolidated net current
liabilities of £2,691,000 as at 31 December 2023, compared to a consolidated
net current liability position of £828,000 as at 31 December 2022. The Group
has posted a total comprehensive loss for the year ended 31 December 2023 of
£4,041,000 (2022: comprehensive loss of £10,417,000) and retained losses as
at 31 December 2023 were £32,113,000 (31 December 2022: retained losses
£27,649,000).
Funding secured during 2023
During the year ended 31 December 2023, the Group continued to source
additional funding with the primary aim of allowing it to meet its working
capital and growth needs as it focuses on scaling up the Group's business
model and the continued investment into the Group's Platform. In sourcing this
new funding, the focus has been on creating a more stable source of Group
funding. These new sources of funding were announced in conjunction with the
issue of the 2022 Annual Report on 28 April 2023 and the interim results for
the six-month period ended 30 June 2023 on 29 September 2023. These new
sources of funding included:
· the subscription agreement with Venus Capital S.A. ("Venus Capital")
dated 28 April 2023 for the issue of the 4,500,000 new ordinary shares (the
"Subscription Shares") at £0.0005 per Subscription Share (the "Subscription
Agreement"). The issue of the Subscription Shares raised gross proceeds of
£2,250,000 during the first six months of the year (the "2023 Venus
Subscription");
· the fixed term unsecured working capital loan agreement with The
AvantGarde Group S.p.A ("TAG"), the Group's major shareholder, dated 28 April
2023 (the "TAG Unsecured Working Capital facility"), which was then amended on
30 June 2023 in conjunction with the finalisation of the disposal of the 81%
stake in ownership of TradeFlow Capital Management Pte. Limited ("TradeFlow")
(the "TradeFlow Restructuring"). On 30 June 2023, the Company issued a draw
down notice to TAG under the amended TAG Unsecured Working Facility for the
full £800,000 of funding available under this facility. As at 31 December
2023, £250,000 had been received from TAG in respect of this facility. As set
out in note 30, subsequent to 31 December 2023, and prior to the issue of
these financial statements, the remaining £550,000 had been received from
TAG. Additionally, on 26 March 2024, the Company and TAG signed a second deed
of amendment agreement, which allowed the full outstanding amount of the
amended TAG Unsecured Working Capital facility to be was extinguished by the
issue of 1,500,000,000 new ordinary shares issued to TAG on 28 March 2024; and
· the top up unsecured shareholder loan agreement with TAG, dated 28
September 2023 ("TAG Top-Up Shareholder Loan Agreement"), details of which are
set out below:
a) The ability of the Company to draw down up to £3.5 million in monthly
instalments over the period to 30 June 2025;
b) On a monthly basis the Board will assess (acting in good faith and in
its sole and absolute discretion) if the Group's projected cash balance on the
last business day of the coming calendar month will be less than £250,000
following the Group's scheduled balance of receipts and payments for the next
month by reference to, inter alia, the Group's contracted receivables,
revenues and payables due for receipt or payment in the next month, the
Group's contracted fixed operating expenditure and/or capital expenditure due
for payment in the next month, the cash inflows in the next month arising from
any warrants that have been contractually exercised and any projected
unrestricted cash amounts resulting from any contractually agreed alternative
equity, debt or hybrid financing (including, but not limited to, pursuant to a
pre-emptive offering of ordinary shares and a non-pre-emptive offering of
ordinary shares) for such month;
c) If the above assessment results in the Group's projected cash
balance on the last business day of the coming calendar month being less than
£250,000, the Company may draw down an amount under the TAG Top-Up
Shareholder Loan Agreement which is no greater than the GBP amount to ensure
that the Group's bank balances in the coming month shall be equal to
£250,000;
d) Repayment of any sum drawn down under the TAG Top-Up Shareholder Loan
Agreement will be due five calendar years (calculated on the basis of a year
of 360 days) from the date which funds are received by the Company subject to
the relevant draw down request; and
e) Any sums drawn down by the Company under the TAG Top-Up Unsecured
Shareholder Loan will attract a non-compounding interest rate of 10% per
annum, and any principal amount (excluding accrued interest) outstanding on a
relevant due date shall attract a compounding rate of 15% per annum
thereafter. Interest will be due to be paid annually on 31 March of each
relevant calendar year.
As at 31 December 2023, the Company had issued draw down notices to TAG for a
total amount of £969,000 under the Top-Up Shareholder Loan Agreement, however
the full amount of this draw down was outstanding. As set out in note 30,
subsequent to 31 December 2023, and prior to the issue of these financial
statements, the Company issues additional draw down notices under the Top-Up
Shareholder Loan Agreement to the value of £779,000 and had received £nil
from TAG in respect of this facility.
In addition to the new sources of funding securing during 2023, which have
been highlighted above, the Company completed the TradeFlow Restructuring on
30 June 2023 and the remaining cash proceeds that were due from the buyers of
TradeFlow (the "Buyers") as a result of this transaction was £2,000,000. TAG
assumed this £2,000,000 obligation of the Buyers by way of a deed of novation
also signed on 30 June 2023 ("Deed of Novation") and in exchange received
consideration TAG acquired 1,026,525,520 existing ordinary shares of nominal
value £0.00002 each in the capital of the Company from the Buyers. This
£2,000,000 was due in tranches from tranche and the final tranche was due to
be payable by 31 January 2024.
As at 31 December 2023, £1,228,000 of the £2,000,000 due under the Deed of
Novation had been repaid by TAG to the Company. The payment had been received
through a split of £771,000 in cash, £421,000 by way of formal debt novation
agreements with specific suppliers whereby the debt held by the Group
companies was novated to TAG with no recourse by to the Group companies, and
£36,000 by way of offset against amounts owed by the Group companies to TAG.
The Company is now charging a late fee to TAG calculated at a compounding rate
of 15% per annum on any amounts of the instalments not transferred to the
Company by the relevant due date. As set out in note 30, subsequent to 31
December 2023, and prior to the issue of these financial statements £655,000
of the £772,000 outstanding at 31 December 2023 was repaid through the
combination of cash payments and the offsetting of amounts due to TAG from the
Group, leaving a remaining balance of £117,000.
Taking into consideration the factors above and in order to consider their
assessment of the Group as a going concern, the Directors have reviewed the
forecast cash flows for the next 12 months from approval of these consolidated
financial statements. The cash flow forecasts take into account that the Group
meets its day to day working capital requirements through its forecast
available and committed cash resources. The Directors have prepared the
forecast using their best estimates, information and judgement at this time,
including the receipt of cash that is contractually committed under the TAG
Top-Up Shareholder Loan Agreement. The Directors have also considered the
expected cash flows arising from the use of the Group's innovative Platform to
facilitate Inventory Monetisation transactions. This reflects the business
progress that has been made to date and the fact that the Directors expect the
Group to continue to prove the concept of its business model and to fully
operationalise in the near future following the progress steps that have made
to date.
Despite the facts outlined above, there continues to be an absence of a
historical recurring track record relating to multiple Inventory Monetisation
transactions being facilitated by the Group's 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 cash flows arising
from the Group's multiple Inventory Monetisation revenue streams. 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, the cash inflows
arising from the TAG Top-Up Shareholder Loan Agreement have not yet been fully
received. These amounts have been factored into the cash flow forecast in line
with the contractual commitments received from the counterparty and/or the
latest updates from TAG. As such, there is a risk that these cash flows might
not be received or might not reach the Group in the time frame expected
despite the contractual commitment in place.
On the basis of the factors identified in the above paragraph, 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.
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 from
continuing operations excludes, where applicable, impairment charges and fair
value adjustments. 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 items that
are charged to the consolidated statement of comprehensive income due to the
impairment of the Group's intangible assets or investments. 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 2023. 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.
The TradeFlow Restructuring transaction was completed on 30 June 2023 and at
this point the Company reduced its ownership in TradeFlow from 100% to 19% by
selling 81% of the issued share capital to Tom James and John Collis. As such
from 30 June 2023, TradeFlow was no longer consolidated into the Group's
results and the profit on disposal of the 81% of TradeFlow has been recognised
in the statement of comprehensive income.
Supply@ME Technologies S.r.l. was incorporated by the Company in Italy on 25
March 2022 for the purpose of holding the Group's intellectual property rights
relating to the Platform together with future developments in a dedicated
entity.
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
There are no new and revised standards that have a material impact on the
entity in the current or future reporting periods and on foreseeable future
transactions.
New standards, interpretations and amendments not yet effective
There are no new standards that are issued but not yet effective which would
be expected to have a material impact on the Company in the current or future
reporting periods or on foreseeable future transactions.
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.
Investment in equity instruments
The Group measures its investments in equity instruments, where no significant
influence or control exists, at fair value with any changes recognised through
the statement of comprehensive income.
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 Inventory Monetisation
("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 and expenditure in order to develop compliance with legal,
regulatory, accounting, valuation and insurance criteria. This expenditure
includes software and infrastructure development, intellectual property ("IP")
related costs and professional fees related to the development of legal and
accounting infrastructure.
Research expenditure is written off in the year in which it is incurred.
Expenditure on internally developed products, in particular the IM Platform,
is capitalised if it can be demonstrated that:
- it is technically and commercially feasible to develop the asset
for future economic benefit;
- adequate resources are available to maintain and complete the
development;
- there is the intention to complete and develop the asset for
future economic benefit;
- the company is able to use the asset;
- use of the asset will generate future economic benefit; and
- expenditure on the development of the asset can be measured
reliably.
Where these costs are capitalised, they are 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. As the acquired intangible assets recognised by
the Group during the year ended 31 December 2022 and 31 December 2023 arose on
the acquisition of TradeFlow, the amortisation of acquired intangible assets
is charged within loss from discontinued operations in the consolidated
statement of comprehensive income.
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 pre-tax 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. The
Group's revenues are recognised at the point when the relevant performance
obligation has been satisfied, this can result in all the revenue being
recognised at a specific point in time or over time as detailed below.
Following the TradeFlow Restructuring the Group is now focussed on its core
business lines:
- IM transactions from the pipeline originated by the Group and
funded by third-party investors ("Open Market IM"); and
- IM deals with local commercial banks and their client companies
("White-Label IM").
The Group recognises revenue from the following activities:
a) Open Market IM - Due diligence fees:
This revenue arises from due diligence services performed by the Group 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 statement of financial
position, 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 the case where 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 report 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.
b) Open Market IM - Origination fees:
This revenue arises from origination of the contracts between the client
company wishing to have their inventory monetised and the independent stock
(trading) company that purchased the inventory from the client company. Given
the stage of the Group's development, and the evolution of the Group's
contracting arrangements, as at 31 December 2023, the Group had facilitated
two IM transactions over its IM Platform and therefore had received
origination fees from two client companies, one of which took place during the
year ended 31 December 2022 and the other during the year ended 31 December
2023. The non-refundable origination fees received from the client company
relates to the fee payable to the Group at the point in time the client
company enters into binding contracts with the stock (trading) company to
purchase its inventory. The Group have recognised the non-refundable
origination fee as revenue at the point in time that the fee becomes
receivable from the client company. This is consistent with the fact that
there are no performance obligations that remain to be completed by the Group
relating to this fee at this point in time.
c) Open Market IM - IM Platform usage fees: This revenue arises from usage
of the Group's IM Platform by the independent stock (trading) company to
facilitate the purchase of the inventory from the client company. Given the
stage of the Group's development, and the evolution of the Group's contracting
arrangements, as at 31 December 2023, the Group had facilitated two IM
transactions over its IM Platform and therefore had received IM Platform usage
fees from the independent stock (trading) company in respect of these two IM
transactions only. Management concluded that the usage of the IM Platform
granted by the Group to the stock (trading) company represented a Software as
a Service ("Saas") contract and as such the annual IM Platform usage fees are
recognised over time in line with the time period covered by the contract as
required by IFRS 15 ("Revenue from Contracts with Customers"). As the annual
IM Platform usage fees are received by the Group at the beginning of the
annual period, any unrecognised amounts are held on the balance sheet as
deferred income.
d) Open Market IM - IM service fees: This revenue arises as a result of
the service fees charged by the Group to the independent stock (trading)
company as remuneration for the support and administration activities, such as
the monitoring of the inventory purchased, the Group performs in connection
with the use of the Group's IM Platform. Given the stage of the Group's
development, and the evolution of the Group's contracting arrangements, as at
31 December 2023, the Group had facilitated two IM transactions over its IM
Platform and therefore had received IM service fees from the independent stock
(trading) company in respect of two IM transactions only. Management concluded
that the support and administration activities performed in exchange for these
fees represent separately identifiable performance obligation and as such the
annual fees are recognised over time in line with the time period covered by
the contract as required by IFRS 15 ("Revenue from Contracts with Customers").
These service fees are accrued up to the point the fees are received and then
any unrecognised amounts are held on the balance sheet as deferred 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, the cost of sales
includes both the costs of the work force who are engaged in the due diligence
related processes, the amortisation of the costs relating to the internally
developed IM platform, and any external costs directly related to the
completion of the due diligence activities. Management regard these items as
the direct costs associated with generating the Open Market IM revenue; in
line with similar fintech companies.
Leases
The Group does not have any material lease arrangements that would be required
to be accounted for under IFRS 16 ("Leases"). In addition, in accordance with
IFRS 16 ("Leases"), any short term lease costs are recognised in the
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, including any associated
penalties and late payment charges. 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") any deferred tax
assets have been classified as non-current assets.
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.
Functional and presentation 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 statement
of comprehensive income.
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 FY23 and FY22 below:
2023 2022
Closing Average Closing Average
SGD 1.7188 1.6684 1.6218 1.7221
EUR 1.1534 1.1495 1.1276 1.1780
USD 1.2732 1.2432 1.2102 1.2495
*the 2023 Singapore dollar ("SGD") exchange rate shown in the table above are
for the following periods, closing - 30 June 2023, average - for the six month
period ended 30 June 2023. This reflects the fact that the TradeFlow
Restructuring was finalised and completed on 30 June 2023 and TradeFlow was
deconsolidated from the Group's results from this date.
Consolidation of foreign entities:
On consolidation, results of the foreign entities are translated from the
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 receivable
from related party and 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. When applicable, 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.
Financial liabilities
Classification
Financial liabilities comprise trade and other payables, long-term borrowings,
loan notes and convertible loan notes.
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.
Long-term borrowings and loan notes
Interest bearing long-term borrowings and loan notes and 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 for any principal repayments made since inception.
Convertible loan notes
Convertible loan notes that were issued by the Group in the prior period were
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, were 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 were adjusted to take into account the fair value of
those notes that have been converted into new 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 warrants issued in
connection with the cost of issuing new equity, loan notes and convertible
notes during the relevant year, and acquisition related earn-out payments.
Share warrants
Certain equity-settled share-based payments relate to the warrants issued in
connection with the cost of issuing new equity, loan notes and convertible
loan notes. These 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 these equity-settled share-based
transactions are set out in note 24.
The fair value determined at the grant date of the equity-settled share-based
payments relating to the warrants issued in connection with the issue of
equity are netted off against the amount of share premium that is recognised
in respect of the share issue to which they directly relate. Any amounts in
excess of the share premium recognised, are netted off against retained
losses.
The fair value determined at the grant date of the equity-settled share-based
payments relating to the warrants issued in connection with the issue of loan
notes, convertible loan notes or other debt instruments are netted off against
the fair value of the underlying loan notes, 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 Group's statement of
comprehensive income using the effective interest method.
If there are any subsequent modifications made to any of the terms of
equity-settled share-based payments relating to the warrants issued by the
Group, the change in fair value is calculated as the difference between the
fair value of the modified equity-settled share-based payment and that of the
original equity-shared share-based payment. This calculation relates to any
warrants that are still outstanding and have not been converted into ordinary
shares at the time of the subsequent modification. The change in the fair
value is then accounted on a consistent basis to the initial fair value.
In respect of the share-based payments, the fair value is not revised at
subsequent reporting dates, however, the fair value is released from the
share-based payment reserve at the point in time that any of the warrants are
exercised by the third party holder.
Employee share schemes
Grants made to certain employees of the Group will result in a charge
recognised in the Group's statement of comprehensive income. Such grants will
be measured at fair value at the date of grant and will be expensed on a
straight-line basis over the vesting period, based on the Group's estimate of
the shares that will eventually vest. Vesting assumptions are reviewed during
each period to ensure they reflect current expectations.
Full details of the Group's share-base payments refer to note 24.
Acquisition related earn-out payments
In addition, the Group previously recognised a share-based payment reserve in
connection with acquisition related earn-out payments arising from the
acquisition of TradeFlow. The fair value of these earn-out payments were
measured using the same methods as outlined above. Given the service
conditions related to these payments are linked to one of the Group's current
subsidiaries, the share-based payment expense is recognised within the
consolidated financial statements as an increase to the share-based payment
reserve and through the Group's statement of comprehensive income. The fair
value determined at the grant date of these equity-settled share-based
payments are recognised over the vesting period on a straight-line basis,
based on the estimate of equity instruments that will eventually vest. Vesting
assumptions are reviewed during each period to ensure they reflect current
expectations and any changes required to true-up the related share-based
payment reserve are recognised through the Group's income statement in the
relevant period.
Discontinued Operations
The Group classifies non-current assets and disposal groups as held for sale
if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. Non-current assets and
disposal groups classified as held for sale are measured at the lower of their
carrying value and fair value less costs to sell. Costs to sell are the
incremental costs directly attributable to the disposal of an asset (disposal
group), excluding finance costs and income tax expense.
The criteria for held for sale classification is regarded as met only when the
sale is highly probable and the asset or disposal group is available for
immediate sale in its present condition. Actions required to complete the sale
should indicate that it is unlikely that significant changes to the sale will
be made or that decisions to sell will be withdrawn. Management must be
committed to the plan to sell the asset and the sale expected to be completed
within one year from the date of the classification.
Assets and liabilities classified as held for sale are presented separately in
the balance sheet.
A disposal group qualifies as a discontinued operation if it is a component of
an entity that either has been disposed or, is classified as held for sale,
and:
a) Represents a separate major line of business or geographical area of
operations; and
b) Is part of a single co-ordinated plan to dispose of a separate major
line of business or geographical area of operations.
Discontinued operations are excluded from the results of continuing operations
and are presented as a single amount as profit or loss after tax from
discontinued operations in the income statements. All other notes in the
financial statements include amounts for continuing operations, unless
otherwise mentioned.
The Board considered that in light of the TradeFlow Restructuring that
commenced during the second half of 2022, the TradeFlow operations meet the
criteria to be classified as held for sale at 31 December 2022 as at this date
the details of the TradeFlow Restructuring had all been agreed in principle
between the parties and was expected to be completed post year end together
with the publication of the 2022 Annual Report and Accounts. As a result the
TradeFlow operations were available for immediate sale in its present
condition and it was highly probable that that sale would be completed within
12 months of 31 December 2022. The TradeFlow Restructuring was completed and
finalised on 30 June 2023 at which point the Group reduced its ownership in
TradeFlow from 100% to 19%. Prior to completion of the TradeFlow
Restructuring, the TradeFlow operations were continued to be classified as
held for sale in the Group's consolidated financial statements. Following the
30 June 2023, the TradeFlow operates were deconsolidated from the Group's
financial statements.
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 adjustments to equity in respect
of the fair value of outstanding share-based payments including warrants
issued in connection with the cost of issuing new equity or debt instruments
during the relevant period, employee share schemes and acquisition related
earn-out payments.
"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 losses" 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 as a result 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 IAS 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.
- The Directors are required to make a judgement as to if the
receipt of non-refundable origination fees received from the client companies
represent a distinct performance obligation under IFRS 15 ("Revenue from
Contracts with Customers"). The Board and management have concluded that no
separately identifiable performance obligation is carried out by the Group
associated with this fee.
Estimates
Valuation of share warrants issued
During the current financial year the Group issued share warrants in
connection with the new equity funding. In the prior financial year the
Company also issued share warrants in connection with loan notes and certain
convertible loan notes alongside the issue of new equity. As these share
warrants were issued as a cost of securing new equity investment or funding
facilities for the Group, 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 models (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 models were between 97% -
88% and were based the actual volatility of the Company's share price from the
date of the reverse takeover (being March 2020) take to the date at which the
relevant valuation model was run.
The fair value cost of those share warrants that were issued connection with
new equity funding during the financial year ended 31 December 2023 were
recognised as debits to equity on the consolidated statement of financial
position. If the expected volatility rate was adjusted by plus 10%, then the
impact on the fair value recognised as the initial debit to equity in the
current year would have been approximately plus £84,000. If the expected
volatility rate was adjusted by minus 10%, then the impact on the fair value
recognised as the initial debit to equity in the current year would have been
approximately minus £89,000.
The fair value cost of those share warrants that were issued in connection
with new debt funding were recognised in the consolidated statement of
comprehensive income. There were no share warrants issued in the financial
year ended 31 December 2023 that were connected with new debt funding.
During the current year the expiry date of certain of the share warrants, that
had previously been issued in connection with the issue of new equity during
the year ended 31 December 2022, was extended by 12 months. The Directors were
required to determine the change in the fair value of these share warrants as
a result of the modification to the expiry date. To do so, the same valuation
model (Black Scholes) was used and change in fair value was calculated as the
difference between the fair value of the modified shared warrants and that of
the original fair value.
Non-controlling discount
During the current financial year, the Group finalised and completed the
TradeFlow Restructuring in which it disposed of 81% of its investment in
TradeFlow. To determine the accounting fair value of the retained 19%
investment in TradeFlow, management used the specifics set out in the
TradeFlow share purchase agreement dated 30 June 2023. Further details of this
calculation are set out in note 26 to these consolidated financial statements.
Following this calculation, management then applied a discount of 25% to this
fair value calculated at 30 June 2023 to take account of the fact that the
Company no longer controls the TradeFlow operations. This discount applied is
a management judgement that will continue to be reassessed at each reporting
date. If the discount rate was adjusted by plus 10%, then the impact on the
profit on disposal of 81% of TradeFlow recognised in the statement of
comprehensive income in the current financial year would have been lower by
£47,000. If the discount rate was adjusted by minus 10%, then the impact on
the profit on disposal of 81% of TradeFlow recognised in the statement of
comprehensive income in the current financial year would have been higher by
£47,000.
3 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 of TradeFlow, the Board of Directors managed the
Group as two operating segments being Inventory Monetisation (currently
comprising largely of the Group's Supply@ME 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, the provision
of due diligence services and the facilitation of the initial IM transaction
that took place during 2022 and 2023.
During 2022, the management team and the Board of Directors of the Company
began work in respect of the TradeFlow Restructuring and as a result, the
TradeFlow operations have been classified as a discontinued operation under
IFRS 5 ("Non-current assets held for sale and discontinued operations") for
the purposes of the consolidated annual financial statement for the year ended
31 December 2022 and for the year ended 31 December 2023. Further to the
above, the TradeFlow Restructuring transaction was finalised on 30 June 2023
resulting in the Group reducing its ownership in TradeFlow from 100% to 19%
through the disposal of 81% of the issued share capital in TradeFlow. As such
the Group has reverted back to a single segment from its continuing operations
for the financial year ended 31 December 2022 and for the year ended 31
December 2023, being Inventory Monetisation, alongside the head office costs
(largely compromising the Company).
The key metrics assessed by the Board of Directors include revenue and
adjusted operating profit (before impairment charges and fair value
adjustments) which is presented below. Revenue is presented by basis of IFRS
15 ("Revenue from Contracts with Customers") revenue recognition and by
service line.
Year ended 31 December 2023 Inventory Monetisation Head office Consolidated Group -
continuing operations
£ 000 £ 000 £ 000
Revenue from continuing operations
Due diligence fees 94 - 94
Inventory Monetisation fees 64 - 64
Revenue from continuing operations 158 - 158
Operating loss from continuing operations before impairment charges and fair (1,061) (2,564) (3,625)
value adjustments
All the Group's revenue from due diligence fees is recognised at a point in
time. Of the revenue generated from Inventory Monetisation fees, £11,000 is
generated from origination fees which is recognised at a point in time, and
the remaining £53,000 is generated from usage of the Group's IM Platform and
services provided by the Group in connection with the IM transaction. This
£53,000 of revenue is recognised over time and the amount recognised in the
current financial year relates to the performance obligations satisfied prior
to 31 December 2023.
As at 31 December 2023 Inventory Monetisation Head office Consolidated Group - continuing operations
£ 000 £ 000 £ 000
Balance sheet
Assets 971 1,213 2,184
Liabilities (4,321) (1,670) (5,991)
Net (liabilities) (3,350) (457) (3,807)
Geographical analysis
The Group's Inventory Monetisation operation is currently predominately
located in Europe, while the investment advisory operations (classified as a
discontinued operation) were predominately located in Singapore for the six
month period from 1 January to 30 June 2023.
Comparative segmental reporting
Year ended 31 December 2022 Inventory Monetisation Head office Consolidated Group - continuing operations
£ 000 £ 000 £ 000
Revenue
Due diligence fees 102 - 102
Inventory Monetisation fees 36 - 36
Revenue by operating segment 138 - 138
Operating loss from continuing operations before impairment charges (1,308) (3,343) (4,651)
All the Group's revenue from due diligence fees is recognised at a point in
time. Of the revenue generated from Inventory Monetisation fees, £20,000 is
generated from origination fees which is recognised at a point in time, and
the remaining £16,000 is generated from usage of the Group's IM Platform and
services provided by the Group in connection with the IM transaction. This
£16,000 of revenue is recognised over time and the amount recognised in the
current financial year relates to the performance obligations satisfied prior
to 31 December 2022.
As at 31 December 2022 Inventory Monetisation Head office Consolidated Group - continuing operations
£ 000 £ 000 £ 000
Balance sheet
Assets 635 867 1,502
Liabilities (4,773) (1,037) (5,810)
Net (liabilities) (4,138) (170) (4,308)
Geographical analysis
The Group's Inventory Monetisation operation is currently predominately
located in Europe, while the investment advisory operations (classified as a
discontinued operation) were predominately located in Singapore during the
year ended 31 December 2022.
4 Finance costs from continuing operations
2023 2022
£ 000 £ 000
Interest expense - long-term borrowings 38 13
Interest expense - loan notes / convertible loan notes - 1,969
Other interest expense 45 -
Total finance costs 83 1,982
Included within the interest expense related to long-term borrowings is an
amount of £7,000 (2022: £nil) accrued in relation to the TAG Unsecured
Working Capital facility.
5 Other operating income from continuing operations
2023 2022
£ 000 £ 000
Gain arising on settlement of outstanding creditor balance
376 -
Interest income 31 6
Other operating income 91 3
498 9
The gain arising on settlement of outstanding creditor balance relates to the
settlement agreement, dated 2 May 2023, with an existing creditor of the
Group. This settlement agreement reduced the total amount that was owed by the
Group, to this supplier, in exchange for payment of the new agreed amount by a
specific date. The total amount owed to this specific creditor prior to the
settlement agreement being signed was €1,130,250. This amount was reduced to
€700,000 as a result of the negotiations proceeding the signing of the
settlement agreement. This resulted in a difference of €420,250 or £376,000
which has been recorded as other operating income in the consolidated
statement of comprehensive income for the year ended 31 December 2023.
Included within the interest income is an amount of £22,000 (2022: £nil)
accrued as receivable from TAG in relation to late payments received in
connection with the TAG Top-Up Shareholder Loan Agreement and the Deed of
Novation signed with TAG in connection with the TradeFlow Restructuring.
6 Operating loss
The Group's operating loss from continuing operations for the year has been
arrived at after charging (crediting):
2023 2022
£ 000
£ 000
Amortisation of internally developed IM platform (note 12) 74 47
Depreciation 4 4
Staff costs (note 8) 1,850 2,061
Professional and legal fees 1,551 2,194
Contractor costs 215 274
Insurance 98 100
Training and recruitment costs 5 4
Long-term incentive plan costs ("LTIP's") 131 11
In addition to the above, the Group incurred the following costs from
continuing operations relating to impairment charges and fair value
adjustments as detailed below:
2023 2022
£ 000
£ 000
Impairment charges (note 12) 384 1,078
Fair value adjustments on investments (note 26) 68 -
Total impairment charges and Fair value adjustments 452 1,078
The following acquisition related costs, impairment charges, and costs/(gains)
relating to the restructuring of the TradeFlow ownership, have been recognised
in the discontinued operations:
2023 2022
£ 000
£ 000
Amortisation of intangible assets arising on acquisition (note 12)* 442 846
Acquisition related earn-out payments (note 24) - (710)
Impairment charges (note 12) - 765
Foreign currency translation gain reclassified to other comprehensive 62 -
income
Profit on disposal of 81% of TradeFlow (note 26) (718) -
(214) 901
* The amortisation of intangible assets arising on acquisition in FY23
reflects the charge recognised during the period from 1 January 2023 to 30
June 2023, compared to in FY22 where the charge recognised reflects a full
year of amortisation. This reflects the fact that the TradeFlow Restructuring
was finalised and completed on 30 June 2023 and TradeFlow was deconsolidated
from the Group's results from this date.
7 Auditors' remuneration
During the year, the Group obtained the following services from the Group's
auditor, at the costs detailed below:
2023 2022
£ 000
£ 000
Fees payable to the Company's auditors for the audit of the consolidated 110 100
financial statements
Fees payable to the Company's auditors and its associates for other services
to the Group:
Audit of the Companies subsidiaries 20 34
Audit fees relating to prior periods 6 24
Total audit fees 136 158
Non-audit assurance services - 25
Total audit and non-audit assurance related services 136 183
8 Staff costs
The aggregate payroll costs (including directors' remuneration) included
within continuing operations were as follows:
2023 2022
£ 000
£ 000
Wages, salaries and other short term employee benefits 1,590 1,783
Social security costs 190 203
Post-employment benefits 70 76
Total staff costs 1,850 2,061
The aggregate payroll costs (including directors' remuneration) included
within discontinued operations were as follows:
2023 2022
£ 000
£ 000
Wages, salaries and other short term employee benefits 337 680
Social security costs 11 27
Total staff costs - discontinued operations* 348 706
*The aggregate payroll costs in FY23 included within discontinued operations
reflects the costs recognised during the period from 1 January 2023 to 30 June
2023, compared to in FY22 where the aggregate payroll costs included within
discontinued operations reflect a full year of costs. This reflects the fact
that the TradeFlow Restructuring was finalised and completed on 30 June 2023
and TradeFlow was deconsolidated from the Group's results from this date.
The average number of persons employed by the Group (including executive
directors) during the year, analysed by category was as follows:
2023 2022
No.
No.
Executive directors 2 3
Finance, Risk and HR 4 5
Sales and marketing 3 4
Legal 1 1
Operations and Platform development 11 13
Total average number of people employed* 21 26
* The average number of people employed in FY23 reflects the TradeFlow staff
employed for the period from 1 January 2023 to 30 June 2023, compared to in
FY22 where the number of people employed reflect a full year of TradeFlow
staff. This reflects the fact that the TradeFlow Restructuring was finalised
and completed on 30 June 2023 and TradeFlow was deconsolidated from the
Group's results from this date. The average number of people employed during
the year ended 31 December 2023, includes three TradeFlow staff members
classified within "Operations and Platform development" (2022: five) and one
TradeFlow staff member classified within "Executive directors" (2022: two).
9 Key management personnel
Key management compensation (including directors):
2023 2022
£ 000
£ 000
Wages, salaries and short-term employee benefits 1,254 1,521
Social security costs 115 111
Post-employment benefits 44 42
Total key management compensation 1,413 1,674
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 (2022: none), however the Chief Executive Officer received
cash in lieu of payments to a defined contribution pension scheme of £12,420
during the year (2022: £12,420). This was allowable under his director's
employment contract.
The Directors' emoluments are detailed in the Remuneration Report of the
Annual Report and Accounts for the year ended 31 December 2023.
10 Income tax
Tax charged in the income statement:
2023 2022
£ 000 £ 000
Current Taxation
UK Corporation tax - -
Foreign taxation paid/(receivable) by subsidiaries - continuing operations - -
- -
The tax on loss before tax for the period is more than (2022 - more than) the
standard rate of corporation tax in the UK of 23.5% (2022 - 19%).
The differences are reconciled below:
2023 2022
£ 000 £ 000
Loss before tax (4,345) (9,877)
Corporation tax at standard rate - 23.5% (2022: 19%) (1,022) (1,877)
Effect of expenses not deductible in determining taxable profit (tax loss) 82 817
Increase in tax losses carried forward which were unutilised in the current 912 1,612
year
Tax adjustments in respect of foreign subsidiaries (timing differences) - -
Over provision of deferred tax in prior years - (1)
Income not taxable - (452)
Deferred tax not recognised 28 (131)
Differences between UK and foreign tax legislation - 31
Total tax charge - (1)
In addition, unrecognised deferred tax assets, relating to tax losses carried
forward across the Group 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. The total approximate tax losses carried
forward across the Group as at 31 December 2023 were £20.8 million (31
December 2022: £16.8 million).
11 Earnings/(loss) per share
The calculation of the basic earnings/(loss) per share ("EPS") is based on the
total loss for the year of £4,345,000 (2022 - loss £9,878,000) and on a
weighted average number of ordinary shares in issue of 59,880,078,004 (2022 -
43,240,915,594). The basic EPS is (0.0073) pence (2022 - (0.0228) pence).
The calculation of the basic earnings/(loss) per share (EPS) from continuing
operations is based on the total loss for the year from continuing operations
of £4,160,000 (2022 - loss £7,711,000) and on a weighted average number of
ordinary shares in issue of 59,880,078,004 (2022 -43,240,915,594). The basic
EPS from continuing operations is (0.0070) pence (2022 - (0.0178) pence).
The calculation of the Basic earnings/(loss) per share (EPS) from discontinued
operations is based on the total loss for the year discontinued operations of
£185,000 (2022 - loss £2,167,000) and on a weighted average number of
ordinary shares in issue of 59,880,078,004 (2022 - 43,240,915,594). The basic
EPS from discontinued operations is (0.0003) pence (2022 - (0.0050) pence).
The Company has share warrants and employee share scheme options in issue as
at 31 December 2023, which would dilute the earnings per share if or when they
are exercised in the future. A summary of these is set out below and further
details of these share warrants and employee share options can be found in
note 24.
31 December 2023 31 December 2022
No. No.
Share warrants - issued 9,297,651,062 9,408,179,441
Share warrants - to be issued 2,250,000,000 -
Long-term incentive plan ("LTIP") options 1,095,753,404 874,783,094
Total 12,643,404,466 10,282,962,535
No dilution per share was calculated for 2023 and 2022 as with the reported
loss they are all anti-dilutive.
12 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 2022 4,829 205 1,429 425 2,199 2,544 11,631
Additions - - - - - 1,125 1,125
Reclassified to assets of disposal group held for sale (4,829) (205) (1,429) (425) (2,199) - (9,087)
At 31 December 2022 - - - - - 3,669 3,669
Additions - - - - - 458 458
At 31 December 2023 - - - - - 4,127 4,127
Amortisation
At 1 January 2022 186 20 143 43 - 771 1,163
Amortisation charge 401 44 309 92 - 47 893
Reclassified to assets of disposal group held for sale (587) (64) (452) (135) - - (1,238)
At 31 December 2022 - - - - - 818 818
Amortisation charge - - - - - 74 74
At 31 December 2023 - - - - - 892 892
Impairment
At 1 January 2022 - - - - 800 1,773 2,573
Impairment charge - - - - 765 1,078 1,843
Reclassified to assets of disposal group held for sale - - - - (1,565) - (1,565)
At 31 December 2022 - - - - - 2,851 2,851
Impairment charge - - - - - 384 384
At 31 December 2023 - - - - - 3,235 3,235
Net Book Value
At 31 December 2023 - - - - - - -
At 31 December 2022 - - - - - - -
The following intangible assets arose on the acquisition of TradeFlow during
the year ended 31 December 2021; 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. As at 31 December
2022, the TradeFlow operations were reclassified as discontinued operations
and as such the net book value of the intangible assets relating to the
TradeFlow operations have been reclassified to assets of the disposal group
held for sale at this date. On 30 June 2023, the Group completed the TradeFlow
Restructuring and as such the assets and liabilities of TradeFlow, including
the intangible assets referred to above, are no longer consolidated by the
Group as of 30 June 2023. Further details are set out in note 26.
Impairment assessment - Internally developed IM Platform
The Directors considered the continued current year losses of the Group's
Italian subsidiary, to which the Internally developed IM platform relates, and
the full impairment of this intangible asset in the prior year, as an
impairment indicators and therefore, in accordance to IAS 36 ("Impairment of
Assets"), considered if as at 31 December 2023, this intangible asset required
further impairment in relation the additions made during the year, or if some
of the prior year impairment could be reversed.
The full going concern statement, set out in note 2, noted there is currently
an absence of a historical recurring 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 from more
than a limited number of Inventory Monetisation transactions, 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 these uncertainties also apply 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 continue to impair the full
carrying amount of this asset as at 31 December 2023. 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 finalisation of the TradeFlow Restructuring occurred on 30 June 2023 and
as a result from this date the assets and liabilities of TradeFlow, including
the intangible assets acquired in connection with the acquisition of TradeFlow
in July 2021, are no longer consolidated by the Group. As such the Group did
not recognise any additional impairment charges with respect to the TradeFlow
goodwill and other acquired intangible assets during the year ended 31
December 2023. The details of the calculation of the profit on disposal of 81%
of TradeFlow recognised in these condensed consolidated interim financial
statements can be found in note 26.
The impairment charges recognised in the prior periods resulted from
impairment tests carried out by the Directors at previous balance sheet dates.
These tests were required in accordance with IAS 36 ("Impairment of Assets")
given the Directors had identified indicators of impairment of the TradeFlow
Cash Generating Unit ("CGU") at the respective prior balance sheet dates.
13 Trade and other receivables
As at 31 December 2023 As at 31 December 2022
£ 000
£ 000
Trade receivables 15 7
Other receivables 976 1,179
Prepayments 35 33
Total trade and other receivables 1,026 1,219
14 Receivable from related party
As at 31 December 2023 As at 31 December 2022
£ 000 £ 000
Receivable from related party 772 -
Interest receivable from related party 22 -
Other related party receivable 53 -
Total receivable from related party 847 -
Receivable from related party
This balance represents the amount receivable from TAG under the Deed of
Novation which created the obligation for TAG to settle the £2,000,000 cash
payment that was due from the buyers to the Company, as a result of the sale
of the 81% majority stake in TradeFlow.
As at 31 December 2023, £1,228,000 of the £2,000,000 has been repaid by TAG
to the Company. The payment has been received through a split of £771,000 in
cash, £421,000 by way of formal debt novation agreements with specific
suppliers whereby the debt held by the Group companies was novated to TAG with
no recourse by to the Group companies, and £36,000 by way of offset against
amounts owed by the Group companies to TAG.
As set out in note 30, subsequent to 31 December 2023, and prior to the
release of these financial statements, TAG had repaid £655,000 of the
remaining amounts that were outstanding at 31 December 2023 through the
receipt of cash payments and further offsets against amounts owed to TAG by
the Group, leaving a remaining balance of £117,000.
Interest receivable from related party
This represents the interest that is receivable from TAG as at 30 December
2023 relating to the late payments of both the TAG Top-Up Shareholder Loan
Agreement and the Deed of Novation. These interest amounts have been
calculated at a compounding rate of 15% per annum on the overdue amounts. As
at 31 December 2023, the full amount of this interest revenue remained
outstanding.
Other related party receivable
In relation to the Group debt that was formally novated to TAG in lieu of a
cash payment under the Deed of Novation, as at 31 December 2023 the Group held
an amount receivable from TAG on its balance sheet for the value of £53,000
(31 December 2022: £nil). This primarily related to VAT amounts on certain
"proforma" invoices that were formally novated, as the VAT receivable was yet
to be recorded in the Group's statement of financial position. As such, this
amount has been recorded as being receivable from TAG and when the "formal"
invoices are issued from the supplier, this amount will be reclassified as a
VAT receivable.
15 Share capital
Allotted, called up and fully paid shares
As at 31 December 2023 As at 31 December 2022
No. 000 £ 000 No. 000 £ 000
Equity
Ordinary shares of £0.00002 each 61,232,096 1,224 56,621,568 1,132
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 2,242
Total 61,519,374 5,989 56,908,846 5,897
Reconciliation of allotted, called up and full paid
2023 2022
No. 000 £ 000 No. 000 £ 000
Ordinary shares as at 1 January 56,908,846 5,897 36,355,720 5,486
New ordinary shares issued to Venus Capital in connection with 2023 Venus
Subscription
4,500,000 90 - -
New ordinary shares issued to fulfil the conversion of Open Offer warrants
110,528 2 49,508 1
New ordinary shares issued to fulfil the conversion of Mercator Capital
Management Fund LP convertible loan notes
- - 1,400,898 28
New ordinary shares issued to Venus Capital in connection with the Capital
Enhancement Plan
- - 14,350,000 287
New ordinary shares issued to settle the FY21 acquisition related earn-out
payments
- - 213,526 4
New ordinary shares issued in connection with Open Offer completed during the
year
- - 641,710 13
New ordinary shares issued to fulfil the conversion of Venus Capital
convertible loan notes
- - 3,897,484 78
Total at 31 December 61,519,374 5,989 56,908,846 5,897
Details of new shares allotted during the current financial year
New ordinary shares issued to Venus Capital in connection with 2023 Venus
Subscription
On 28 April 2023, the Company and Venus Capital entered into the new
Subscription Agreement, pursuant to which Venus Capital committed to subscribe
for 4,500,000,000 new Subscription Shares at £0.0005 per Subscription Share.
The issue of the Subscription Shares was made over two tranches (in line with
the 2023 Venus Subscription) as set out below:
- an initial tranche of 3,375,000,000 Subscription Shares for gross
proceeds of £1,687,500 (or £1,603,125 net of a 5% commission chargeable by
Venus Capital). This tranche of Subscription Shares were admitted to a
Standard Listing and to trading on the Main Market on 5 May 2023; and
- a second tranche of 1,125,000,000 Subscription Shares for proceeds
of up to £562,500 gross (or up to £534,375 net a 5% commission chargeable by
Venus Capital). This tranche of Subscription Shares were admitted to a
Standard Listing and to trading on the Main Market on 30 May 2023.
New ordinary shares issued to fulfil the conversion of Open Offer warrants
Further to the issue of new ordinary shares on the 18 August 2022 as a result
of the Open Offer, the Company also issued 320,855,008 warrants( ) to certain
qualifying shareholders who participated in its open offer (the "Open Offer
Warrants"). Following the issue of the Open Offer Warrants, certain holders
have elected to exercise their Open Offer Warrants and this resulted in a
total of 110,528,379 new ordinary shares being issued during the year ended 31
December 2023 in relation to Open Offer Warrant conversion.
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.
16 Trade and other payables
As at 31 December 2023 As at 31 December 2022
£ 000
£ 000
Trade payables 1,314 2,209
Other payables 943 747
Current portion of long-term bank borrowings 192 158
Social security and other payroll taxes due 1,566 977
Accruals 488 402
Contract liabilities 59 94
Accrued interest payable to related party 7 -
Total trade and other payables 4,569 4,587
17 Long-term borrowings
As at 31 December 2023 As at 31 December 2022
£ 000
£ 000
Non-current portion of long-term bank borrowings 590 748
Working capital loan due to TAG 250 -
Total long-term borrowings 840 748
Non- current portion of long-term bank borrowings
On 12 October 2022, Supply@ME Technologies S.r.l, entered into a new long term
loan facility with Banco BPM S.p.A (the "Banco BPM Facility"). The obligations
of Supply@ME Technologies S.r.l under the Banco BPM Facility are guaranteed by
the Company. The key commercial terms of the Banco BPM Facility include:
a) €1 million in principal amount;
b) 275 basis points over Euribor interest rate; and
c) a five-year repayment term (the final payment to be made on
11 October 2027), including an initial six months of interest only repayments,
followed by 54 months of combined principal and interest repayments.
Fees totalling €52,000 were incurred in connection with the arrangement of
the Banco BPM Facility. These costs have been capitalised and will be spread
over the term of the Banco BPM Facility. The amount include in the table above
represents the non-current portion of the Banco BPM Facility. The current
portion is set out in note 16 above.
Working capital loan due to TAG
On the 28 April 2023, the Company and TAG entered into a fixed term unsecured
working capital loan agreement (the "TAG Unsecured Working Capital facility").
Under the TAG Unsecured Working Capital facility, TAG agreed to provide,
subject to customary restrictions, a facility of up to £2,800,000, in
tranches up to 31 January 2024, to cover the Company's interim working capital
and growth needs.
In conjunction with the TradeFlow Restructuring, which was completed on 30
June 2023, the £2,000,000 receivable by the Company that was assumed by TAG
from the Buyers, was offset against the current obligations of TAG under TAG
Unsecured Working Capital facility. The amendment to the TAG Unsecured Working
Capital facility was agreed on 30 June 2023 and this reduced the obligations
to the Company under the TAG Unsecured Working Capital facility to up to
£800,000 (the "amended TAG Unsecured Working Capital facility").
On 30 June 2023, the Company issued a draw down notice to TAG under the
amended TAG Unsecured Working Facility for the full £800,000 available. As at
31 December 2023, £250,000 had been received from TAG in respect of this
facility (31 December 2022: nil). The due date for repayment by the Company of
amounts drawn under the amended TAG Unsecured Working Capital facility is 1
February 2028.
Any sums drawn under the amended TAG Unsecured Working Capital facility will
attract a non-compounding interest rate of 10% per annum, and any principal
amount (excluding accrued interest) outstanding on 1 February 2028 will
attract a compounding interest rate of 15% per annum thereafter. Interest
will be due to be paid annually on 31 March of each relevant calendar
year. In respect of these amounts received from TAG for the year ended 31
December 2023, the Group recognised an interest expense of £7,000 (2022:
£nil), which all remained unpaid as at 31 December 2023.
As set out in note 30, subsequent to 31 December 2023, and prior to the
release of these financial statements, TAG had provided the remaining
£550,000 in order to satisfy the full amount of £800,000 drawn down by the
Company under the amended TAG Unsecured Working Capital facility. Additionally
on 26 March 2024, the Company and TAG signed a second deed of amendment
agreement, which allowed the full outstanding amount of the amended TAG
Unsecured Working Capital facility to be extinguished by the issue of
1,500,000,000 new ordinary shares which were issued to TAG on 28 March 2024.
Loan notes and convertible loan notes
During the prior financial year ended 31 December 2022, the Group also had
borrowings in the form of loan notes and convertible loan notes. While both of
these had been fully repaid as at 31 December 2022, there was activity in
relation to these balances during FY22. A summary of this activity is set out
below.
Loan notes
On 29 September 2021, the Company announced it had entered into a loan note
facility with Mercator Capital Management Fund LP ("Mercator"). The balance of
this loan note facilities as at 1 January 2022 was £5,732,000 and this was
fully settled during 2022 through a combination of repayments made in cash for
£2,191,000 and through the issue of convertible notes worth £4,592,000.
Additionally, the Group recognised finance costs in relation to these loan
notes during the year ended 31 December 2022 of £1,051,000. These finance
costs were recognised on an amortised cost basis using the effective interest
rate method where the interest rate applied was 47.5%.
Convertible loan notes
The convertible loan note liability arose during FY22 as a result of the
partial repayment of the loan notes of £4,592,000 through the issue of
convertible loan notes. Additionally, an amount of £145,000 which represented
an additional interest charge relating to the loan notes was also settled
through the issue of convertible loan notes during the prior financial year.
In connection with the 2023 Venus Subscription, total convertible loan notes
of £418,000 were issued and Venus Capital provided the Group with debt
financing of £1,500,000 which was repayable via a convertible loan note. A
total of £32,000 in interest costs were recognised in relation to the Venus
Capital convertible loan notes during FY22.
The total convertible loan note balance of £6,687,000 was then fully settled
prior to 31 December 2022 through cash repayments of £3,381,000 and the
remaining balance of £3,306,000 being converted into ordinary shares of the
Company.
Non- current portion of long-term bank borrowings
On 12 October 2022, Supply@ME Technologies S.r.l, entered into a new long term
loan facility with Banco BPM S.p.A (the "Banco BPM Facility"). The obligations
of Supply@ME Technologies S.r.l under the Banco BPM Facility are guaranteed by
the Company. The key commercial terms of the Banco BPM Facility include:
a) €1 million in principal amount;
b) 275 basis points over Euribor interest rate; and
c) a five-year repayment term (the final payment to be made on
11 October 2027), including an initial six months of interest only repayments,
followed by 54 months of combined principal and interest repayments.
Fees totalling €52,000 were incurred in connection with the arrangement of
the Banco BPM Facility. These costs have been capitalised and will be spread
over the term of the Banco BPM Facility. The amount include in the table above
represents the non-current portion of the Banco BPM Facility. The current
portion is set out in note 16 above.
Working capital loan due to TAG
On the 28 April 2023, the Company and TAG entered into a fixed term unsecured
working capital loan agreement (the "TAG Unsecured Working Capital facility").
Under the TAG Unsecured Working Capital facility, TAG agreed to provide,
subject to customary restrictions, a facility of up to £2,800,000, in
tranches up to 31 January 2024, to cover the Company's interim working capital
and growth needs.
In conjunction with the TradeFlow Restructuring, which was completed on 30
June 2023, the £2,000,000 receivable by the Company that was assumed by TAG
from the Buyers, was offset against the current obligations of TAG under TAG
Unsecured Working Capital facility. The amendment to the TAG Unsecured Working
Capital facility was agreed on 30 June 2023 and this reduced the obligations
to the Company under the TAG Unsecured Working Capital facility to up to
£800,000 (the "amended TAG Unsecured Working Capital facility").
On 30 June 2023, the Company issued a draw down notice to TAG under the
amended TAG Unsecured Working Facility for the full £800,000 available. As at
31 December 2023, £250,000 had been received from TAG in respect of this
facility (31 December 2022: nil). The due date for repayment by the Company of
amounts drawn under the amended TAG Unsecured Working Capital facility is 1
February 2028.
Any sums drawn under the amended TAG Unsecured Working Capital facility will
attract a non-compounding interest rate of 10% per annum, and any principal
amount (excluding accrued interest) outstanding on 1 February 2028 will
attract a compounding interest rate of 15% per annum thereafter. Interest
will be due to be paid annually on 31 March of each relevant calendar
year. In respect of these amounts received from TAG for the year ended 31
December 2023, the Group recognised an interest expense of £7,000 (2022:
£nil), which all remained unpaid as at 31 December 2023.
As set out in note 30, subsequent to 31 December 2023, and prior to the
release of these financial statements, TAG had provided the remaining
£550,000 in order to satisfy the full amount of £800,000 drawn down by the
Company under the amended TAG Unsecured Working Capital facility. Additionally
on 26 March 2024, the Company and TAG signed a second deed of amendment
agreement, which allowed the full outstanding amount of the amended TAG
Unsecured Working Capital facility to be extinguished by the issue of
1,500,000,000 new ordinary shares which were issued to TAG on 28 March 2024.
Loan notes and convertible loan notes
During the prior financial year ended 31 December 2022, the Group also had
borrowings in the form of loan notes and convertible loan notes. While both of
these had been fully repaid as at 31 December 2022, there was activity in
relation to these balances during FY22. A summary of this activity is set out
below.
Loan notes
On 29 September 2021, the Company announced it had entered into a loan note
facility with Mercator Capital Management Fund LP ("Mercator"). The balance of
this loan note facilities as at 1 January 2022 was £5,732,000 and this was
fully settled during 2022 through a combination of repayments made in cash for
£2,191,000 and through the issue of convertible notes worth £4,592,000.
Additionally, the Group recognised finance costs in relation to these loan
notes during the year ended 31 December 2022 of £1,051,000. These finance
costs were recognised on an amortised cost basis using the effective interest
rate method where the interest rate applied was 47.5%.
Convertible loan notes
The convertible loan note liability arose during FY22 as a result of the
partial repayment of the loan notes of £4,592,000 through the issue of
convertible loan notes. Additionally, an amount of £145,000 which represented
an additional interest charge relating to the loan notes was also settled
through the issue of convertible loan notes during the prior financial year.
In connection with the 2023 Venus Subscription, total convertible loan notes
of £418,000 were issued and Venus Capital provided the Group with debt
financing of £1,500,000 which was repayable via a convertible loan note. A
total of £32,000 in interest costs were recognised in relation to the Venus
Capital convertible loan notes during FY22.
The total convertible loan note balance of £6,687,000 was then fully settled
prior to 31 December 2022 through cash repayments of £3,381,000 and the
remaining balance of £3,306,000 being converted into ordinary shares of the
Company.
18 Provisions
Post-employment benefits Provision for risks and charges Provision for VAT and penalties Total
£ 000 £ 000 £ 000 £ 000
At 1 January 2022 46 92 221 359
Released to profit and loss - (19) (20) (39)
Provided for in the year 22 12 144 178
Payments (8) - - (8)
Actuarial (gain)/loss (22) - - (22)
At 31 December 2022 38 85 345 468
Forex retranslation adjustment (1) (2) (8) (11)
At 1 January 2023 37 83 337 457
Released to profit and loss - (28) - (28)
Provided for in the year 17 139 - 156
Payments (13) - - (13)
Actuarial (gain)/loss 3 - - 3
At 31 December 2023 44 194 337 575
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
and interest for payment delays referring the tax and social security payables
recorded in the Italian subsidiary financial statements which, at the closing
date, are overdue. The increase of the current financial year in primarily due
the interest component as the interest rates in Italy have risen during FY23
to an average at 5% during 2023 (2022: 1.5% in 2022).
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 2023, the Group has included a
provision relating to a potential VAT liability, including penalties, in
respect of these advance payments of £196,000 (31 December 2022: £201,000).
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 2023, however there is a contingent asset of
£140,000 as at 31 December 2023 (31 December 2022: £143,000) in respect of
this.
An additional amount of £144,000 was added to the provision during the second
half of 2022 to reflect the fact that the Italian intercompany invoice was
issued late and this balance reflects potential VAT penalties that may arise
due to the timing of the invoice. This balance remains provided for at 31
December 2023, however has been revalued to £141,000 as at 31 December
2023.
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 2023 that meet the criteria for a
provision to be recognised.
19 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 £53,000 for continuing operations (2022:
£55,000).
Contributions totalling £16,000 (2022: £9,000) were payable to the scheme at
the end of the year and are included in creditors. This has been paid post
year end.
20 Capital commitments
There were no capital commitments for the Group at 31 December 2023 or 31
December 2022.
21 Contingent liabilities
There were no contingent liabilities for the Group at 31 December 2023 or 31
December 2022.
22 Financial instruments
Financial assets
Carrying value Fair value
As at 31 December 2023 As at 31 December 2022 As at 31 December 2023 As at 31 December 2022
£ 000 £ 000 £ 000 £ 000
Financial assets at amortised cost:
Cash and cash equivalents 5 257 5 257
Trade receivables 15 7 15 7
Receivable from related party 847 - 847 -
Other receivables 974 1,179 974 1,179
1,841 1,443 1,841 1,443
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 2023 As at 31 December 2022 As at 31 December 2023 As at 31 December 2022
£ 000 £ 000 £ 000 £ 000
Financial liabilities at amortised cost:
Long-term borrowings 1,032 906 1,032 906
Trade payables 1,314 2,209 1,314 2,209
Other payables 943 747 943 747
3,289 3,862 3,289 3,862
Valuation methods and assumptions: The directors believe that the fair value
of trade and other payables approximates to the carrying value.
There are no financial liabilities that are carried at fair value through the
profit and loss as at 31 December 2023 (31 December 2022: £nil).
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 and other receivables;
- cash at bank;
- receivables from related parties;
- trade and other payables; and
- long-term borrowings.
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 from continuing operations as
at 31 December 2023 comprised cash and cash equivalents of £5,000 (2022:
£257,000). Interest is paid on cash at floating rates in line with prevailing
market rates. In addition, late payment interest of £22,000 was recognised
during the year ended 31 December 2023 (2022: £nil) relating to the late
payments of both the TAG Top-Up Shareholder Loan Agreement and the Deed of
Novation. These interest amounts have been calculated at a compounding rate of
15% per annum on the overdue amounts. As at 31 December 2023, the full amount
of this interest revenue remained outstanding.
The Group's interest generating financial liabilities from continuing
operations as at 31 December 2023 comprised long-term borrowings of
£1,032,000 (2022: £906,000).
Sensitivity analysis
At 31 December 2023, had the LIBOR 3 MONTH rate of 4.968 (2022 - 2.015)
increased by 1% with all other variables held constant, the increase in
interest receivable on financial assets would amount to approximately £nil
(2022 - £nil). Similarly, a 1% decrease in the LIBOR 3 MONTH rate with all
other variables held constant would result in a decrease in interest
receivable on financial assets of approximately £nil (2022 - £nil).
At 31 December 2023, had the EURIBOR 3 MONTH rate of 3.905 (2022 - 2.162)
increased by 1% with all other variables held constant, the increase in
interest payable on financial assets would amount to approximately £7,000
(2022 - £9,000). Similarly, a 1% decrease in the EURIBOR 3 MONTH rate with
all other variables held constant would result in a decrease in interest
receivable on financial assets of approximately £7,000 (2022 - £9,000).
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.
In connection with the completion of the TradeFlow Restructuring, the balance
of the consideration payable to the Company was £2,000,000 and this debt to
the Company was assumed by TAG from the Buyers of the 81% stake in TradeFlow.
This receivable was to be received in multiple tranches with the final payment
due on 31 January 2024. Prior to agreeing to this receivable being assumed by
TAG and for it to be repaid over multiple tranches, the Board analysed the
creditworthiness of TAG and carried out due diligence including how TAG
intended to source funds to make the required payments. As at 31 December
2023, an amount of £772,000 was still outstanding in connection with this
receivable from TAG, of which £272,000 was overdue and £500,000 was due at
the end of January 2024. Due to certain late payments of this receivable, the
Board are closely monitoring the creditworthiness of TAG to ensure that
payments continued to be received, albeit on a delayed schedule.
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 2023 Maximum exposure as at 31 December 2023 Carrying value as at 31 December 2022 Maximum exposure as at 31 December 2022
£ 000 £ 000 £ 000 £ 000
Cash and cash equivalents 5 5 257 257
Trade receivables 15 15 7 7
Receivable from related party 847 847 - -
867 867 264 264
As at 31 December 2023, the assets held by the Group have not been impaired,
in particular the trade receivables and receivable from related party are all
considered to be low risk. Subsequent to 31 December 2023, 77% of the
receivable from related party has been repaid.
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 as at 31 December 2023
As at 31 December 2023 As at 31 December 2022
Financial assets
£000 £000
Cash and cash equivalents: Sterling 3 229
Cash: Euro 2 28
Cash: US Dollar - -
Cash: Singapore Dollar - 324
Trade receivables: Sterling - -
Trade receivables: Euro 15 7
Trade receivables: Singapore Dollar - 1
Financial liabilities As at 31 December 2023 As at 31 December 2022
£000 £000
Trade payables: Sterling 865 482
Trade payables: Euro 449 1,727
Trade payables: Singapore Dollar - 6
Long-term borrowings: Sterling 250 -
Long-term borrowings: Euro 782 906
Long-term borrowings: Singapore - 3,171
The comparative currency profile information above includes TradeFlow
financial assets and liabilities as at 31 December 2022, which formed part of
the of the assets/liabilities held for disposal groups within the consolidated
statement of financial position as at 31 December 2022.
Sensitivity analysis
At 31 December 2023, 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: £19,000 higher (2022 - £60,000 higher)
- Singapore Dollar: £nil (2022 - £69,000 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: £1,000 lower (2022 - £60,000 lower)
- Singapore Dollar: £nil lower (2022 - £69,000 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.
As set out in note 28, the TAG Top-Up Shareholder Loan Agreement gives the
Company the ability to draw down up to £3.5 million in line with specific
conditions. As at 31 December 2023, the Company had issued draw down notices
for £969,000 and subsequent to 31 December 2023, additional draw down notices
to the value of £779,000 were issued. As such, £1.8 million remains undrawn.
As at 31 December 2022, the Group has no undrawn facilities.
At 31 December 2023 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
Long-term borrowings 76 182 223 676
Trade and other payables 1,511 746 - - -
Social security and other taxes 1,566 - - - -
Total liabilities 3,153 928 223 676 -
At 31 December 2022 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
Long-term borrowings - 158 189 559
Trade and other payables 2,209 747 - - -
Social security and other taxes 977 - - - -
Total liabilities 3,186 905 189 559 -
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 issued share capital, share premium and all other equity reserves
attributable to the equity holders of the parent. 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 note 28,
the Group has currently entered into financing facilities from TAG during the
year ended 31 December 2023.
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: (£3,807,000) (2022: (£2,025,000))
- Cash and cash equivalents: £5,000 (2022: £257,000)
- Share Capital £5,989,000 (2022: £5,897,000)
23 Net debt
The Group reconciliation of the movement in net debt from continuing
operations is set out below:
Total long-term borrowings (current and non-current portion)
£ 000
At 1 January 2023 (906)
Net cash flows (145)
Foreign exchange 19
As at 31 December 2023 (1,032)
Loan notes Convertible loan notes Total long-term borrowings (current and non-current portion) Total
£ 000 £ 000 £ 000 £ 000
At 1 January 2022 (5,732) - (1,284) (7,016)
Net cash flows - (1,500) (2,403) (3,903)
Convertible loan notes issued as repayment of loan notes, share issue costs - (5,187) - (5,187)
and/or interest
Amortisation of finance costs (1,051) - (356) (1,407)
Cash repayments made during the year 2,191 3,381 5,572
Repayment of convertible loan notes via share issues - 3,306 3,306
Repayment of loan notes via issue of convertible loan notes 4,592 - - 4,592
Reclassification of disposal group held for sale - 3,171 3,171
Foreign exchange - - (34) (34)
As at 31 December 2022 - - (906) (906)
24 Share-based payments
Share warrants issued to Mercator
During 2021 the Group entered into a funding facility with Mercator Capital
Management Fund LP ("Mercator") which included the Group issuing loan notes in
exchange for funding. These loan notes linked to a convertible loan note
facility, which was able to be used should the Group 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. Under the terms of amendment agreement
signed with Mercator dated 26 April 2022, no further warrants were required to
be issued on the monthly repayments due following April 2022.
The total number of share warrants issued to Mercator during the years ended
31 December 2021 and 2022 was 961,832,433 (the "Mercator Warrants"). Details
of the outstanding share warrants issued to Mercator are set out in the table
below. There have been no movement in these Mercator Warrants during the year
ended 31 December 2023, however as announced by the Company on 23 November
2023, and further on 28 March 2024, the Company approved the transfer of
Mercator Warrants from Mercator to an independent third-party purchaser(s).
Date of issue Number of warrants outstanding Exercise price Expiry date
1October 2021 443,726,031 £0.00316 1 October 2024
1November 2021 29,197,856 £0.00314 1 November 2024
1December 2021 49,867,625 £0.00184 1 December 2024
4January 2022 77,763,767 £0.00174 4 January 2025
2February 2022 79,179,799 £0.00171 2 February 2025
4March 2022 105,948,198 £0.00128 4 March 2025
10 June 2022 176,149,157 £0.00085 10 June 2025
Total 961,832,433
The total fair value of the above Mercator Warrants has been fully expensed in
the prior periods. No further costs have been recognised in the current
financial year ended 31 December 2023, and none of these warrants have been
converted during the same period. During the prior financial year ended 31
December 2022, an amount of £579,000 was recognised in the income statement
relating to the fair value of the Mercator Warrants.
Share warrants issued to Venus under Capital Enhancement Plan
On the 27 April 2022, the Company announced it had entered into a subscription
agreement with Venus Capital in connection with the Group's Capital
Enhancement Plan. The subscription agreement specified that the Company was
required to issue one warrant for every two shares issued in connection with
the mandatory tranches of the new shares issues. This was a total of
3,425,000,000 share warrants. The subscription agreement specified that the
Group was required to issue one warrant for every five shares issued in
connection with the optional tranches of the new shares issues. This was a
total of 1,500,000,000 share warrants. Additionally, an amount of
3,250,000,000 share warrants were issued to Venus Capital in connection with
the signing of the subscription agreement on 26 April 2022. As such the Group
issued a total of 8,175,000,000 share warrants to Venus Capital during the
year ended 31 December 2022, and as at the 31 December 2023, these all remain
outstanding. The initial terms of the warrants specified that they could be
exercised at any time up to 31 December 2025 and have an exercise price of
0.065 pence per warrant.
As these share warrants were issued as a cost of issuing new ordinary shares
to Venus Capital they fall into of scope of IFRS 2 ("Share-based payments").
The total fair value of the above share warrants issued to Venus Capital under
the Capital Enhancement Plan was £4,795,000 and this amount has been fully
recognised during 2022.
Share warrants issued to retail shareholders under the Open Offer
On 22 July 2022, the Group announced the Open Offer, giving existing
shareholders the opportunity to subscribe for up to 641,710,082 new ordinary
share in the Group on the basis of one Open Offer share for every 66 existing
ordinary shares held at an offer price of 0.05 pence per Open Offer
share. The Open Offer closed on 17 August 2022 and on 18 August 2022, the
Group announced it would allot and issue 641,710,082 new ordinary shares to
those qualifying shareholders and that this would raise £320,855 gross (and
£269,855 net of fees and expenses) for the Group.
In addition to the new ordinary share that were issued, the Group also issued
320,855,008 warrants to the qualifying shareholders on the basis of one
warrant for every two ordinary shares received as a result of the Open Offer.
The initial terms of the warrants specified that they could be exercised at
any time up to 31 December 2025 and have an exercise price of 0.065 pence per
warrant.
As these share warrants were issued as a cost of issuing the new Open Offer
ordinary shares they fall into 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. The total fair value of
the above share warrants issued in connection with the Open Offer was
£261,000 and this amount was fully recognised during 2022.
Subsequent to the issue of the Open Offer warrants, and prior to 31 December
2023, an amount of 160,036,379 (31 December 2022: 49,508,000) of these
warrants have been converted in exchange for new ordinary shares and as at 31
December 2023 there is a balance of 160,818,629 Open Offer warrants which
remained outstanding (31 December 2022: 271,347,008). On the exercise of the
Open Offer warrants, the fair value amount is reclassified from the
share-based payment reserve to retained losses as set out in the consolidated
statement of changes in equity for the year ended 31 December 2023.
Share warrants issued to Venus Capital under the 2023 Venus Subscription
On the 28 April 2023, the Company announced it had and entered into a new
subscription agreement with Venus Capital, pursuant to which Venus Capital
committed to subscribe for 4,500,000,000 new ordinary shares over two tranches
as set out below:
- an initial tranche of 3,375,000,000 new ordinary shares were
admitted to a Standard Listing and to trading on the Main Market on 5 May
2023; and
- a second tranche of 1,125,000,000 new ordinary shares were
admitted to a Standard Listing and to trading on the Main Market on 30 May
2023.
Under the new subscription agreement, new warrants are required to be issued
to Venus Capital at a ratio of one warrant for every two subscription shares
issued under the new subscription agreement. This resulted in an obligation
for the Group to issue 2,250,000,000 new warrants to Venus ("New Venus
Warrants") which existed at 31 December 2023. These new warrants are each
exercisable into one new ordinary share at a price equal to 0.065 pence per
share up to a final exercise date of 31 December 2026.
As these share warrants were issued as a cost of issuing new ordinary shares
to Venus Capital they fall into 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 which required
certain judgements to be made in determining the most appropriate inputs to be
used model and the key judgemental assumptions have been detailed in note 2.
In particular, the key judgemental point was the expected volatility rate of
the Company's share price over the relevant period prior to the grant of the
warrants. The assumption applied in the model for the warrants to be issued to
Venus Capital was 88%. This was based on the actual volatility of the
Company's shares over the historical period from March 2020 (the date of the
reverse takeover) to the valuation date.
The total fair value of the above new share warrants issued to be Venus
Capital under the 2023 Venus Subscription was £1,717,000 and this amount has
been fully recognised during the year ended 31 December 2023. Given this
amount directly related to the cost of issuing new ordinary shares to Venus
Capital, the total amount of £1,717,000 have been offset against the share
premium balance in accordance with IAS 32 ("Financial Instruments") and the
Companies Act 2006. This amount was offset against the related share premium
that was created in connection with the relevant issue of ordinary share to
Venus Capital as set out in the consolidated statement of changes in equity
for the year ended 31 December 2023.
Extension to the expiry date of the warrants issued in connection with the
Open Offer carried out on 17 August 2022 and the warrants issued to Venus
Capital during 2022
In connection with the 2023 Venus Subscription, the final exercise date of the
existing 8,175,000,000 warrants issued to Venus Capital during 2022, under the
Capital Enhancement Plan, was agreed to be extended from 31 December 2025 for
12 months to 31 December 2026, through a deed of amendment to the existing
warrant instruments. This deed of amendment was also dated 26 April 2023.
In line with the extension to the expiry date of the existing 8,175,000,000
warrants held by Venus Capital, the shareholders who participated in the Open
Offer during 2022 were asked if they would like to vote to extend the expiry
date of the warrants issued during the Open Offer from 31 December 2025 by 12
months to 31 December 2026. This resolution was successfully passed at the
2023 Annual General Meeting, and a deed of amendment to the existing warrant
instrument was signed, on 23 June 2023.
As outlined above, both of these warrants had been valued previously in line
with IFRS 2 ("Share-based payments"). The modification to the expiry date has
therefore also been valued in line with IFRS 2 ("Share-based payments") with
the change in fair value calculated as the difference between the fair value
of the modified equity instrument and that of the original equity instrument,
both of which are estimated a the date of the modification being 28 April 2023
for the relevant warrants held by Venus Capital, and 23 June 2023 for this
warrants issued in connection with the Open Offer.
The change in the fair value due to the extension of the expiry date on those
warrants still outstanding at 31 December 2023 was £346,000. Given this
amount directly related to the cost of issuing new ordinary shares in the past
to Venus Capital or under the Open Offer, an amount of £132,000 has been
offset against the share premium balance in accordance with IAS 32 ("Financial
Instruments"). This amount was offset against the related share premium that
was created in connection with issue of the relevant Venus Capital / Open
Offer share issue. The remaining fair value amount of £214,000 has been
recognised in retained losses as set out in the consolidated statement of
changes in equity for the year ended 31 December 2023.
Asummary of the share warrants outstanding as at 31 December 2023 is detailed
in the table below:
The total fair value of the above Mercator Warrants has been fully expensed in
the prior periods. No further costs have been recognised in the current
financial year ended 31 December 2023, and none of these warrants have been
converted during the same period. During the prior financial year ended 31
December 2022, an amount of £579,000 was recognised in the income statement
relating to the fair value of the Mercator Warrants.
Share warrants issued to Venus under Capital Enhancement Plan
On the 27 April 2022, the Company announced it had entered into a subscription
agreement with Venus Capital in connection with the Group's Capital
Enhancement Plan. The subscription agreement specified that the Company was
required to issue one warrant for every two shares issued in connection with
the mandatory tranches of the new shares issues. This was a total of
3,425,000,000 share warrants. The subscription agreement specified that the
Group was required to issue one warrant for every five shares issued in
connection with the optional tranches of the new shares issues. This was a
total of 1,500,000,000 share warrants. Additionally, an amount of
3,250,000,000 share warrants were issued to Venus Capital in connection with
the signing of the subscription agreement on 26 April 2022. As such the Group
issued a total of 8,175,000,000 share warrants to Venus Capital during the
year ended 31 December 2022, and as at the 31 December 2023, these all remain
outstanding. The initial terms of the warrants specified that they could be
exercised at any time up to 31 December 2025 and have an exercise price of
0.065 pence per warrant.
As these share warrants were issued as a cost of issuing new ordinary shares
to Venus Capital they fall into of scope of IFRS 2 ("Share-based payments").
The total fair value of the above share warrants issued to Venus Capital under
the Capital Enhancement Plan was £4,795,000 and this amount has been fully
recognised during 2022.
Share warrants issued to retail shareholders under the Open Offer
On 22 July 2022, the Group announced the Open Offer, giving existing
shareholders the opportunity to subscribe for up to 641,710,082 new ordinary
share in the Group on the basis of one Open Offer share for every 66 existing
ordinary shares held at an offer price of 0.05 pence per Open Offer
share. The Open Offer closed on 17 August 2022 and on 18 August 2022, the
Group announced it would allot and issue 641,710,082 new ordinary shares to
those qualifying shareholders and that this would raise £320,855 gross (and
£269,855 net of fees and expenses) for the Group.
In addition to the new ordinary share that were issued, the Group also issued
320,855,008 warrants to the qualifying shareholders on the basis of one
warrant for every two ordinary shares received as a result of the Open Offer.
The initial terms of the warrants specified that they could be exercised at
any time up to 31 December 2025 and have an exercise price of 0.065 pence per
warrant.
As these share warrants were issued as a cost of issuing the new Open Offer
ordinary shares they fall into 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. The total fair value of
the above share warrants issued in connection with the Open Offer was
£261,000 and this amount was fully recognised during 2022.
Subsequent to the issue of the Open Offer warrants, and prior to 31 December
2023, an amount of 160,036,379 (31 December 2022: 49,508,000) of these
warrants have been converted in exchange for new ordinary shares and as at 31
December 2023 there is a balance of 160,818,629 Open Offer warrants which
remained outstanding (31 December 2022: 271,347,008). On the exercise of the
Open Offer warrants, the fair value amount is reclassified from the
share-based payment reserve to retained losses as set out in the consolidated
statement of changes in equity for the year ended 31 December 2023.
Share warrants issued to Venus Capital under the 2023 Venus Subscription
On the 28 April 2023, the Company announced it had and entered into a new
subscription agreement with Venus Capital, pursuant to which Venus Capital
committed to subscribe for 4,500,000,000 new ordinary shares over two tranches
as set out below:
- an initial tranche of 3,375,000,000 new ordinary shares were
admitted to a Standard Listing and to trading on the Main Market on 5 May
2023; and
- a second tranche of 1,125,000,000 new ordinary shares were
admitted to a Standard Listing and to trading on the Main Market on 30 May
2023.
Under the new subscription agreement, new warrants are required to be issued
to Venus Capital at a ratio of one warrant for every two subscription shares
issued under the new subscription agreement. This resulted in an obligation
for the Group to issue 2,250,000,000 new warrants to Venus ("New Venus
Warrants") which existed at 31 December 2023. These new warrants are each
exercisable into one new ordinary share at a price equal to 0.065 pence per
share up to a final exercise date of 31 December 2026.
As these share warrants were issued as a cost of issuing new ordinary shares
to Venus Capital they fall into 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 which required
certain judgements to be made in determining the most appropriate inputs to be
used model and the key judgemental assumptions have been detailed in note 2.
In particular, the key judgemental point was the expected volatility rate of
the Company's share price over the relevant period prior to the grant of the
warrants. The assumption applied in the model for the warrants to be issued to
Venus Capital was 88%. This was based on the actual volatility of the
Company's shares over the historical period from March 2020 (the date of the
reverse takeover) to the valuation date.
The total fair value of the above new share warrants issued to be Venus
Capital under the 2023 Venus Subscription was £1,717,000 and this amount has
been fully recognised during the year ended 31 December 2023. Given this
amount directly related to the cost of issuing new ordinary shares to Venus
Capital, the total amount of £1,717,000 have been offset against the share
premium balance in accordance with IAS 32 ("Financial Instruments") and the
Companies Act 2006. This amount was offset against the related share premium
that was created in connection with the relevant issue of ordinary share to
Venus Capital as set out in the consolidated statement of changes in equity
for the year ended 31 December 2023.
Extension to the expiry date of the warrants issued in connection with the
Open Offer carried out on 17 August 2022 and the warrants issued to Venus
Capital during 2022
In connection with the 2023 Venus Subscription, the final exercise date of the
existing 8,175,000,000 warrants issued to Venus Capital during 2022, under the
Capital Enhancement Plan, was agreed to be extended from 31 December 2025 for
12 months to 31 December 2026, through a deed of amendment to the existing
warrant instruments. This deed of amendment was also dated 26 April 2023.
In line with the extension to the expiry date of the existing 8,175,000,000
warrants held by Venus Capital, the shareholders who participated in the Open
Offer during 2022 were asked if they would like to vote to extend the expiry
date of the warrants issued during the Open Offer from 31 December 2025 by 12
months to 31 December 2026. This resolution was successfully passed at the
2023 Annual General Meeting, and a deed of amendment to the existing warrant
instrument was signed, on 23 June 2023.
As outlined above, both of these warrants had been valued previously in line
with IFRS 2 ("Share-based payments"). The modification to the expiry date has
therefore also been valued in line with IFRS 2 ("Share-based payments") with
the change in fair value calculated as the difference between the fair value
of the modified equity instrument and that of the original equity instrument,
both of which are estimated a the date of the modification being 28 April 2023
for the relevant warrants held by Venus Capital, and 23 June 2023 for this
warrants issued in connection with the Open Offer.
The change in the fair value due to the extension of the expiry date on those
warrants still outstanding at 31 December 2023 was £346,000. Given this
amount directly related to the cost of issuing new ordinary shares in the past
to Venus Capital or under the Open Offer, an amount of £132,000 has been
offset against the share premium balance in accordance with IAS 32 ("Financial
Instruments"). This amount was offset against the related share premium that
was created in connection with issue of the relevant Venus Capital / Open
Offer share issue. The remaining fair value amount of £214,000 has been
recognised in retained losses as set out in the consolidated statement of
changes in equity for the year ended 31 December 2023.
A summary of the share warrants outstanding as at 31 December 2023 is detailed
in the table below:
Number of warrants outstanding at 31 December 2023 Number of warrants outstanding at 31 December 2022
Share warrants issued to Mercator 961,832,433 961,832,433
Share warrants issued to Venus Capital 8,175,000,000 8,175,000,000
Share warrants to be issued to Venus Capital 2,250,000,000 -
Share warrants issued to retail shareholders 160,818,629 271,347,008
Total 11,547,651,062 9,408,179,441
A summary of the fair value of the share warrants issued during the period,
including the change in fair value due to modification of the terms of certain
share warrants, are detailed in the table below:
2023 2022
£ 000 £ 000
Share warrants issued to Mercator - 236
Share warrants issued to Venus Capital - 4,795
Share warrants to be issued to Venus Capital 1,717 -
Share warrants issued to retail shareholders - 261
Increase in fair value of outstanding warrants issued to Venus Capital and 346 -
retail shareholders as a result of expiry date extension
Total 2,063 5,292
Acquisition related earn-out payments
The terms of the TradeFlow acquisition completed in July 2021 included related
earn-out payments that, together with the initial cash payment and issue of
equity, form the total legal consideration agreed between the
parties. Further details are set out below.
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
as 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 to settle
these payments in equity, they were previously fair valued at the grant date
in line with IFRS 2 ("Share-based payments") estimated using a Monte Carlo
simulation model.
During the preparation of the prior year financial statements of the Company,
management applied their judgement at the time as to the likelihood of the
earn-out targets being achieved and this led the Directors to revise their
previous IFRS 2 judgements, in connection with the acquisition related
earn-out payments where the 2022 earn-out targets had not been met, and the
likelihood of acquisition related earn-out targets for 2023 being met was
considered to be remote. As a result, as at 31 December 2022, the share-based
payment reserve in connection with the 2022 and 2023 acquisition related
earn-out payments was £nil and an amount of £883,000 was released during the
financial year ended 31 December 2022 reflecting the change in management
judgement.
As the acquisition related earn-out payment for the 2021 targets was settled
during July 2022, an additional amount was added to the share-based payment
reserve of £172,000 which covered the amounts to be recognised in FY22 in
line with the estimated vesting date of March 2022. As this relates to the
TradeFlow operations, it has been recognised through the loss from
discontinued operations in the year ended 31 December 2022. Following the
settlement of the 2021 acquisition related earn-out payments in July 2022, as
at 31 December 2022, the relevant share-based payment reserve had been
released and the corresponding increase in share capital and share premium was
recognised.
As a result of the TradeFlow Restructuring that was commenced during the
second half of 2022 and was completed on 30 June 2023, any future potential
acquisition related earn-out payments were offset against the cash
consideration agreed for the Group's 81% stake in TradeFlow that was disposed
of. As such, no further acquisition related earn-out payments were recognised
in the current financial year being the year ended 31 December 2023.
Employee share scheme awards
October 2022 Employee share scheme
On 31 October 2022, the Group awarded an LTIP conditional on performance
conditions, being the achievement of specified Total Shareholder Return
("TSR") (market condition) performance, as well as continued employment. The
TSR performance related to a three year period over the 2022, 2023 and 2024
financial years and the required TSR performance is set out in the table below
with the adjusted share price measurement period being the average closing
mid-market price of a share over a three month period ending on the last
dealing day of the performance period:
Adjusted share price per share Percentage of TSR award vesting
Below 0.6945 pence 0%
Equal to 0.6945 pence 25%
1penny or greater 100%
Vesting is on a straight-line basis between target levels.
The vesting date of these share awards is 31 October 2025, and the continued
employment covers up until this date. The share awards issued to the Chief
Executive Officer are subject to an additional 2 years holding period
following the vesting date.
For those share schemes with market related vesting conditions, the fair value
is determined using the Monte Carlo model at the grant date. The following
table lists the inputs to the model used for the awards granted in the year
ended 31 December 2022 based on information at the date of grant:
LTIP awards (granted on 31 October 2022) TSR element
Share price at date of grant 0.08 pence
Award price 0.002 pence
Volatility 116.38%
Life of award 3 years
Risk free rate 3.34%
Dividend yield 0%
Fair value per award 0.0245 pence
The additional holding period applicable to the share awards issued to the
Chief Executive Officer have been valued using the Finnerty model. The
following table lists the inputs to the model used for the awards granted in
the year ended 31 December 2022 based on information at the date of grant:
LTIP awards (granted on 31 October 2022) TSR element additional holding period
Share price at date of grant 0.08 pence
Award price 0.08 pence
Volatility 116.73%
Life of holding period 2 years
Risk free rate 3.60%
Dividend yield 0%
Fair value per award with holding period 0.0208 pence
These awards will be equity-settled by award of ordinary shares. The total
share-based payment charge recognised in the consolidated statement of
comprehensive income for the year ended 31 December 2023 in relation to the
October 2022 employee share scheme options is £60,000 (2022: £11,000). As
all social security charges with respect to the share awards will be the
responsibility of the employee, no expense has been recognised by the Group in
respect of these charges.
The following table summarised the movements in the number in share awards
issued by the Company in October 2022:
2023 2022
No. No.
Outstanding at 1 January 874,783,094 -
Conditionally awarded in year - 874,783,094
Exercised - -
Forfeited or expired in year (88,125,000) -
Outstanding at 31 December 786,658,094 874,783,094
Exercisable at the end of the year - -
May 2023 Employee share scheme
On 19 May 2023, the Group awarded its second LTIP conditional on performance
conditions to certain employees, being the achievement on continued employment
and the achievement of performance conditions relating to the specified TSR
(market condition) performance (50%) and the specific GBP amount of inventory
monetised (non market condition) (50%). Each of the performance conditions
relate to a three year period over the 2023, 2024 and 2025 financial years and
the required performance is as follows:
- with respect to the TSR element the adjusted share price
measurement period is the average closing mid-market price of a share price
over a three month period ending on the last dealing day of the performance
period, being 31 December 2025. If the average share price during the
measurement period is 0.15p then 25% of the aware will vest, and this
increases on a straight line basis to 0.3p for 100% of vesting; and
- with respect to the GBP amount of inventory monetised the
measurement period is by the end of the performance period, being 31 December
2025. 25% of the award will vest if £300m of inventory is monetised (in
aggregate) over the three year performance period, increasing on a straight
line to 100% of the award to vest if £400m of inventory is monetised (in
aggregate) over the same three year performance period.
The vesting date of these share awards is 19 May 2026, and the continued
employment covers up until this date. The share awards issued to the Chief
Executive Officer are subject to an additional 2 years holding period
following the vesting date.
For those share schemes with market related vesting conditions, the fair value
is determined using the Monte Carlo model at the grant date. For those share
schemes with non-market vesting conditions, the fair value is determined using
the Black Scholes model at the grant date. The following table lists the
inputs to the models used for the May 2023 share awards granted based on
information at the date of grant:
LTIP awards (granted on 19 May 2023) TSR element Inventory Monetisation element
Share price at date of grant 0.14 pence 0.14 pence
Award price 0.002 pence 0.002 pence
Volatility 119.81% n/a
Life of award 3 years 3 years
Risk free rate 3.90% n/a
Dividend yield 0% 0%
Fair value per award 0.1098 pence 0.1384 pence
The additional holding period applicable to the share awards issued to the
Chief Executive Officer have been valued using the Finnerty model. The
following table lists the inputs to the model used for the awards granted in
interim period ended 30 June 2023 based on information at the date of grant:
LTIP awards (granted on 19 May 2023) TSR element Inventory Monetisation element
Share price at date of grant 0.14 pence 0.14 pence
Award price 0.14 pence 0.14 pence
Volatility 127.25% 127.25%
Life of award 2 years 2 years
Risk free rate 3.87% 3.87%
Dividend yield 0% 0%
Fair value per award 0.0924 pence 0.1165 pence
These awards will be equity-settled by award of ordinary shares. The total
share-based payment charge recognised consolidated statement of comprehensive
income for the year ended 31 December 2023 in relation to the May 2023
employee share scheme options was £71,000 (2022: nil). As all social security
charges with respect to the share awards will be the responsibility of the
employee, no expense has been recognised by the Group in respect of these
charges.
The following table summarised the movements in the number in share awards
issued by the Company in May 2023:
2023 2022
No. No.
Outstanding at 1 January - -
Conditionally awarded in year 343,548,435 -
Exercised - -
Forfeited or expired in year (34,453,125) -
Outstanding at 31 December 309,095,310 -
Exercisable at the end of the year - -
The total fair value of the above Mercator Warrants has been fully expensed in
the prior periods. No further costs have been recognised in the current
financial year ended 31 December 2023, and none of these warrants have been
converted during the same period. During the prior financial year ended 31
December 2022, an amount of £579,000 was recognised in the income statement
relating to the fair value of the Mercator Warrants.
Share warrants issued to Venus under Capital Enhancement Plan
On the 27 April 2022, the Company announced it had entered into a subscription
agreement with Venus Capital in connection with the Group's Capital
Enhancement Plan. The subscription agreement specified that the Company was
required to issue one warrant for every two shares issued in connection with
the mandatory tranches of the new shares issues. This was a total of
3,425,000,000 share warrants. The subscription agreement specified that the
Group was required to issue one warrant for every five shares issued in
connection with the optional tranches of the new shares issues. This was a
total of 1,500,000,000 share warrants. Additionally, an amount of
3,250,000,000 share warrants were issued to Venus Capital in connection with
the signing of the subscription agreement on 26 April 2022. As such the Group
issued a total of 8,175,000,000 share warrants to Venus Capital during the
year ended 31 December 2022, and as at the 31 December 2023, these all remain
outstanding. The initial terms of the warrants specified that they could be
exercised at any time up to 31 December 2025 and have an exercise price of
0.065 pence per warrant.
As these share warrants were issued as a cost of issuing new ordinary shares
to Venus Capital they fall into of scope of IFRS 2 ("Share-based payments").
The total fair value of the above share warrants issued to Venus Capital under
the Capital Enhancement Plan was £4,795,000 and this amount has been fully
recognised during 2022.
Share warrants issued to retail shareholders under the Open Offer
On 22 July 2022, the Group announced the Open Offer, giving existing
shareholders the opportunity to subscribe for up to 641,710,082 new ordinary
share in the Group on the basis of one Open Offer share for every 66 existing
ordinary shares held at an offer price of 0.05 pence per Open Offer
share. The Open Offer closed on 17 August 2022 and on 18 August 2022, the
Group announced it would allot and issue 641,710,082 new ordinary shares to
those qualifying shareholders and that this would raise £320,855 gross (and
£269,855 net of fees and expenses) for the Group.
In addition to the new ordinary share that were issued, the Group also issued
320,855,008 warrants to the qualifying shareholders on the basis of one
warrant for every two ordinary shares received as a result of the Open Offer.
The initial terms of the warrants specified that they could be exercised at
any time up to 31 December 2025 and have an exercise price of 0.065 pence per
warrant.
As these share warrants were issued as a cost of issuing the new Open Offer
ordinary shares they fall into 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. The total fair value of
the above share warrants issued in connection with the Open Offer was
£261,000 and this amount was fully recognised during 2022.
Subsequent to the issue of the Open Offer warrants, and prior to 31 December
2023, an amount of 160,036,379 (31 December 2022: 49,508,000) of these
warrants have been converted in exchange for new ordinary shares and as at 31
December 2023 there is a balance of 160,818,629 Open Offer warrants which
remained outstanding (31 December 2022: 271,347,008). On the exercise of the
Open Offer warrants, the fair value amount is reclassified from the
share-based payment reserve to retained losses as set out in the consolidated
statement of changes in equity for the year ended 31 December 2023.
Share warrants issued to Venus Capital under the 2023 Venus Subscription
On the 28 April 2023, the Company announced it had and entered into a new
subscription agreement with Venus Capital, pursuant to which Venus Capital
committed to subscribe for 4,500,000,000 new ordinary shares over two tranches
as set out below:
- an initial tranche of 3,375,000,000 new ordinary shares were
admitted to a Standard Listing and to trading on the Main Market on 5 May
2023; and
- a second tranche of 1,125,000,000 new ordinary shares were
admitted to a Standard Listing and to trading on the Main Market on 30 May
2023.
Under the new subscription agreement, new warrants are required to be issued
to Venus Capital at a ratio of one warrant for every two subscription shares
issued under the new subscription agreement. This resulted in an obligation
for the Group to issue 2,250,000,000 new warrants to Venus ("New Venus
Warrants") which existed at 31 December 2023. These new warrants are each
exercisable into one new ordinary share at a price equal to 0.065 pence per
share up to a final exercise date of 31 December 2026.
As these share warrants were issued as a cost of issuing new ordinary shares
to Venus Capital they fall into 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 which required
certain judgements to be made in determining the most appropriate inputs to be
used model and the key judgemental assumptions have been detailed in note 2.
In particular, the key judgemental point was the expected volatility rate of
the Company's share price over the relevant period prior to the grant of the
warrants. The assumption applied in the model for the warrants to be issued to
Venus Capital was 88%. This was based on the actual volatility of the
Company's shares over the historical period from March 2020 (the date of the
reverse takeover) to the valuation date.
The total fair value of the above new share warrants issued to be Venus
Capital under the 2023 Venus Subscription was £1,717,000 and this amount has
been fully recognised during the year ended 31 December 2023. Given this
amount directly related to the cost of issuing new ordinary shares to Venus
Capital, the total amount of £1,717,000 have been offset against the share
premium balance in accordance with IAS 32 ("Financial Instruments") and the
Companies Act 2006. This amount was offset against the related share premium
that was created in connection with the relevant issue of ordinary share to
Venus Capital as set out in the consolidated statement of changes in equity
for the year ended 31 December 2023.
Extension to the expiry date of the warrants issued in connection with the
Open Offer carried out on 17 August 2022 and the warrants issued to Venus
Capital during 2022
In connection with the 2023 Venus Subscription, the final exercise date of the
existing 8,175,000,000 warrants issued to Venus Capital during 2022, under the
Capital Enhancement Plan, was agreed to be extended from 31 December 2025 for
12 months to 31 December 2026, through a deed of amendment to the existing
warrant instruments. This deed of amendment was also dated 26 April 2023.
In line with the extension to the expiry date of the existing 8,175,000,000
warrants held by Venus Capital, the shareholders who participated in the Open
Offer during 2022 were asked if they would like to vote to extend the expiry
date of the warrants issued during the Open Offer from 31 December 2025 by 12
months to 31 December 2026. This resolution was successfully passed at the
2023 Annual General Meeting, and a deed of amendment to the existing warrant
instrument was signed, on 23 June 2023.
As outlined above, both of these warrants had been valued previously in line
with IFRS 2 ("Share-based payments"). The modification to the expiry date has
therefore also been valued in line with IFRS 2 ("Share-based payments") with
the change in fair value calculated as the difference between the fair value
of the modified equity instrument and that of the original equity instrument,
both of which are estimated a the date of the modification being 28 April 2023
for the relevant warrants held by Venus Capital, and 23 June 2023 for this
warrants issued in connection with the Open Offer.
The change in the fair value due to the extension of the expiry date on those
warrants still outstanding at 31 December 2023 was £346,000. Given this
amount directly related to the cost of issuing new ordinary shares in the past
to Venus Capital or under the Open Offer, an amount of £132,000 has been
offset against the share premium balance in accordance with IAS 32 ("Financial
Instruments"). This amount was offset against the related share premium that
was created in connection with issue of the relevant Venus Capital / Open
Offer share issue. The remaining fair value amount of £214,000 has been
recognised in retained losses as set out in the consolidated statement of
changes in equity for the year ended 31 December 2023.
A summary of the share warrants outstanding as at 31 December 2023 is detailed
in the table below:
Number of warrants outstanding at 31 December 2023 Number of warrants outstanding at 31 December 2022
Share warrants issued to Mercator 961,832,433 961,832,433
Share warrants issued to Venus Capital 8,175,000,000 8,175,000,000
Share warrants to be issued to Venus Capital 2,250,000,000 -
Share warrants issued to retail shareholders 160,818,629 271,347,008
Total 11,547,651,062 9,408,179,441
A summary of the fair value of the share warrants issued during the period,
including the change in fair value due to modification of the terms of certain
share warrants, are detailed in the table below:
2023 2022
£ 000 £ 000
Share warrants issued to Mercator - 236
Share warrants issued to Venus Capital - 4,795
Share warrants to be issued to Venus Capital 1,717 -
Share warrants issued to retail shareholders - 261
Increase in fair value of outstanding warrants issued to Venus Capital and 346 -
retail shareholders as a result of expiry date extension
Total 2,063 5,292
Acquisition related earn-out payments
The terms of the TradeFlow acquisition completed in July 2021 included related
earn-out payments that, together with the initial cash payment and issue of
equity, form the total legal consideration agreed between the
parties. Further details are set out below.
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
as 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 to settle
these payments in equity, they were previously fair valued at the grant date
in line with IFRS 2 ("Share-based payments") estimated using a Monte Carlo
simulation model.
During the preparation of the prior year financial statements of the Company,
management applied their judgement at the time as to the likelihood of the
earn-out targets being achieved and this led the Directors to revise their
previous IFRS 2 judgements, in connection with the acquisition related
earn-out payments where the 2022 earn-out targets had not been met, and the
likelihood of acquisition related earn-out targets for 2023 being met was
considered to be remote. As a result, as at 31 December 2022, the share-based
payment reserve in connection with the 2022 and 2023 acquisition related
earn-out payments was £nil and an amount of £883,000 was released during the
financial year ended 31 December 2022 reflecting the change in management
judgement.
As the acquisition related earn-out payment for the 2021 targets was settled
during July 2022, an additional amount was added to the share-based payment
reserve of £172,000 which covered the amounts to be recognised in FY22 in
line with the estimated vesting date of March 2022. As this relates to the
TradeFlow operations, it has been recognised through the loss from
discontinued operations in the year ended 31 December 2022. Following the
settlement of the 2021 acquisition related earn-out payments in July 2022, as
at 31 December 2022, the relevant share-based payment reserve had been
released and the corresponding increase in share capital and share premium was
recognised.
As a result of the TradeFlow Restructuring that was commenced during the
second half of 2022 and was completed on 30 June 2023, any future potential
acquisition related earn-out payments were offset against the cash
consideration agreed for the Group's 81% stake in TradeFlow that was disposed
of. As such, no further acquisition related earn-out payments were recognised
in the current financial year being the year ended 31 December 2023.
Employee share scheme awards
October 2022 Employee share scheme
On 31 October 2022, the Group awarded an LTIP conditional on performance
conditions, being the achievement of specified Total Shareholder Return
("TSR") (market condition) performance, as well as continued employment. The
TSR performance related to a three year period over the 2022, 2023 and 2024
financial years and the required TSR performance is set out in the table below
with the adjusted share price measurement period being the average closing
mid-market price of a share over a three month period ending on the last
dealing day of the performance period:
Adjusted share price per share Percentage of TSR award vesting
Below 0.6945 pence 0%
Equal to 0.6945 pence 25%
1 penny or greater 100%
Vesting is on a straight-line basis between target levels.
The vesting date of these share awards is 31 October 2025, and the continued
employment covers up until this date. The share awards issued to the Chief
Executive Officer are subject to an additional 2 years holding period
following the vesting date.
For those share schemes with market related vesting conditions, the fair value
is determined using the Monte Carlo model at the grant date. The following
table lists the inputs to the model used for the awards granted in the year
ended 31 December 2022 based on information at the date of grant:
LTIP awards (granted on 31 October 2022) TSR element
Share price at date of grant 0.08 pence
Award price 0.002 pence
Volatility 116.38%
Life of award 3 years
Risk free rate 3.34%
Dividend yield 0%
Fair value per award 0.0245 pence
The additional holding period applicable to the share awards issued to the
Chief Executive Officer have been valued using the Finnerty model. The
following table lists the inputs to the model used for the awards granted in
the year ended 31 December 2022 based on information at the date of grant:
LTIP awards (granted on 31 October 2022) TSR element additional holding period
Share price at date of grant 0.08 pence
Award price 0.08 pence
Volatility 116.73%
Life of holding period 2 years
Risk free rate 3.60%
Dividend yield 0%
Fair value per award with holding period 0.0208 pence
These awards will be equity-settled by award of ordinary shares. The total
share-based payment charge recognised in the consolidated statement of
comprehensive income for the year ended 31 December 2023 in relation to the
October 2022 employee share scheme options is £60,000 (2022: £11,000). As
all social security charges with respect to the share awards will be the
responsibility of the employee, no expense has been recognised by the Group in
respect of these charges.
The following table summarised the movements in the number in share awards
issued by the Company in October 2022:
2023 2022
No. No.
Outstanding at 1 January 874,783,094 -
Conditionally awarded in year - 874,783,094
Exercised - -
Forfeited or expired in year (88,125,000) -
Outstanding at 31 December 786,658,094 874,783,094
Exercisable at the end of the year - -
May 2023 Employee share scheme
On 19 May 2023, the Group awarded its second LTIP conditional on performance
conditions to certain employees, being the achievement on continued employment
and the achievement of performance conditions relating to the specified TSR
(market condition) performance (50%) and the specific GBP amount of inventory
monetised (non market condition) (50%). Each of the performance conditions
relate to a three year period over the 2023, 2024 and 2025 financial years and
the required performance is as follows:
- with respect to the TSR element the adjusted share price
measurement period is the average closing mid-market price of a share price
over a three month period ending on the last dealing day of the performance
period, being 31 December 2025. If the average share price during the
measurement period is 0.15p then 25% of the aware will vest, and this
increases on a straight line basis to 0.3p for 100% of vesting; and
- with respect to the GBP amount of inventory monetised the
measurement period is by the end of the performance period, being 31 December
2025. 25% of the award will vest if £300m of inventory is monetised (in
aggregate) over the three year performance period, increasing on a straight
line to 100% of the award to vest if £400m of inventory is monetised (in
aggregate) over the same three year performance period.
The vesting date of these share awards is 19 May 2026, and the continued
employment covers up until this date. The share awards issued to the Chief
Executive Officer are subject to an additional 2 years holding period
following the vesting date.
For those share schemes with market related vesting conditions, the fair value
is determined using the Monte Carlo model at the grant date. For those share
schemes with non-market vesting conditions, the fair value is determined using
the Black Scholes model at the grant date. The following table lists the
inputs to the models used for the May 2023 share awards granted based on
information at the date of grant:
LTIP awards (granted on 19 May 2023) TSR element Inventory Monetisation element
Share price at date of grant 0.14 pence 0.14 pence
Award price 0.002 pence 0.002 pence
Volatility 119.81% n/a
Life of award 3 years 3 years
Risk free rate 3.90% n/a
Dividend yield 0% 0%
Fair value per award 0.1098 pence 0.1384 pence
The additional holding period applicable to the share awards issued to the
Chief Executive Officer have been valued using the Finnerty model. The
following table lists the inputs to the model used for the awards granted in
interim period ended 30 June 2023 based on information at the date of grant:
LTIP awards (granted on 19 May 2023) TSR element Inventory Monetisation element
Share price at date of grant 0.14 pence 0.14 pence
Award price 0.14 pence 0.14 pence
Volatility 127.25% 127.25%
Life of award 2 years 2 years
Risk free rate 3.87% 3.87%
Dividend yield 0% 0%
Fair value per award 0.0924 pence 0.1165 pence
These awards will be equity-settled by award of ordinary shares. The total
share-based payment charge recognised consolidated statement of comprehensive
income for the year ended 31 December 2023 in relation to the May 2023
employee share scheme options was £71,000 (2022: nil). As all social security
charges with respect to the share awards will be the responsibility of the
employee, no expense has been recognised by the Group in respect of these
charges.
The following table summarised the movements in the number in share awards
issued by the Company in May 2023:
2023 2022
No. No.
Outstanding at 1 January - -
Conditionally awarded in year 343,548,435 -
Exercised - -
Forfeited or expired in year (34,453,125) -
Outstanding at 31 December 309,095,310 -
Exercisable at the end of the year - -
25 Share issue costs
The costs relating to the various share issues that took place during the year
have been netted off against the amount of share premium that is recognised in
respect of the share issue to which they directly relate. Any amounts in
excess of the share premium recognised, are taken to retained earnings.
Details of the share issue costs recognised during the year ended 31 December
2023 are set out in the table below.
2023
Costs recognised in share premium £ 000 Costs recognised in retained earnings
£ 000
2023 Venus Subscription warrant costs (note 24) 1,717 -
Other costs (legal fees, listing fees, commission cost) 254 -
Impact of extension of expiry date of warrants issued during 2022 relating to
Capital Enhancement plan and Open Offer warrants (note 24)
132 214
Total 2,103 214
2022
Costs recognised in share premium Costs recognised in retained earnings
£ 000 £ 000
Capital enhancement plan warrant costs (note 24) 3,204 1,591
Capital enhancement plan costs settled through issue of convertible loan notes
343 -
Open offer warrant costs (note 24) 247 14
Other costs (legal fees, listing fees, registrars' fees) 230 -
Total 4,024 1,605
26 Discontinued operations and TradeFlow Restructuring
During the second half of 2022, the Board of Directors of the Company began
the process of the TradeFlow Restructuring, and as such in the financial
statements for the year ended 31 December 2022, it was considered that the
TradeFlow operations meet the criteria to be classified as held for sale at
the balance sheet date in accordance with IFRS 5 ("Non-current Assets Held for
Sale and Discontinued Operations"). This is due to the fact that as at this
date the details of the TradeFlow Restructuring had all been agreed in
principle between the parties and was expected to be completed post year-end.
As a result the TradeFlow operations were available for immediate sale in its
present condition and it was highly probably that that sale would be completed
at 31 December 2022. With the classification as discontinued operations, the
TradeFlow operations have been excluded from the segmental reporting note
(note 3).
Subsequently, on 30 June 2023 the Company announced that had entered into
relevant binding commercial agreements to complete the TradeFlow
Restructuring. The rationale behind the completion of the TradeFlow
Restructuring is to better serve the needs of the Group's client companies and
funders of both businesses, and to create value for the Company's shareholders
by eliminating any perception of conflicts of interest between the two
businesses and provide both businesses with greater commercial opportunities
through the clear differentiation of responsibilities of the individual
entities.
The TradeFlow Restructuring resulted in the Group reducing its ownership in
TradeFlow from 100% to 19% by selling 81% of the issued share capital in
TradeFlow to Tom James and John Collis (the "Buyers"). The consideration for
the Group's 81% stake in TradeFlow was £14,386,100 of which £12,386,100 was
netted off against potential future amounts owed by the Group to the Buyers
under the terms of an earn-out letter relating to the original acquisition of
TradeFlow in July 2021.
This resulted in a remaining £2,000,000 consideration to be receivable by the
Group. On the 30 June 2023, the Group's major shareholder, TAG, assumed the
obligation of the Buyers to pay the Company the remaining £2,000,000 by way
of the Deed of Novation. The £2,000,000 was to be repaid by TAG to SYME in
multiple tranches, with the final tranche being due for payment by 31 January
2024. In consideration for assuming the £2,000,000 obligation of the Buyers,
TAG acquired 1,026,525,520 existing ordinary shares of nominal value £0.00002
each in the capital of the Company from the Buyers.
The accounting for the TradeFlow Restructuring has been reflected in the
consolidated financial statements for the year ended 31 December 2023. During
the period from 1 January 2023 and up until the date of completion of the
TradeFlow Restructuring, being 30 June 2023, the TradeFlow operations
continued to meet the criteria to be classified as held for sale in accordance
with IFRS 5 ("Non-current Assets Held for Sale and Discontinued Operations").
The TradeFlow operations contributed a loss of £185,000 (inclusive of the
profit on disposal of 81% of TradeFlow referred to below) in the period from 1
January 2023 to 30 June 2023.
From 30 June 2023, the assets and liabilities of TradeFlow, including the
intangible assets acquired on the acquisition of TradeFlow in July 2021, are
no longer consolidated by the Group, and instead the fair value of the new 19%
investment of £352,000 was recognised on the balance sheet, together with the
outstanding consideration to be received from TAG as at 30 June 2023. The
difference between these items resulted in a profit on disposal of 81% of
TradeFlow recorded in the consolidated financial statements for the year ended
31 December 2023 of £718,000.
The results of the TradeFlow (discontinued) operations for the period from 1
January 2023 to 30 June 2023 are presented below:
6 months to 2022
30 June 2023*
£ 000 £ 000)
Revenue 684 629
Administrative expenses (1,037) (1,705)
Other operating income 24 22
Amortisation of intangible assets (442) (846)
Acquisition related earn-out - 710
Impairment - (765)
Foreign currency translation loss reclassified to comprehensive income (62) -
Profit on disposal of 81% of TradeFlow 718 -
Operating loss (115) (1,955)
Finance costs (145) (356)
Loss before tax (260) (2,311)
Deferred tax credit 75 144
Loss for the period (185) (2,167)
*Represents the results for the six-month period prior to the finalisation of
the TradeFlow Restructuring on 30 June 2023.
The net cash flows from the TradeFlow operations were as follows:
6 months to 2022
30 June 2023*
£ 000 £ 000
Net cash flow from operating activities (405) (1,228)
Net cash flow from investing activities - (1)
Net cash flow from financing activities 405 1,517
Net cash outflow - 288
*Represents the cash flows for the six-month period prior to the finalisation
of the TradeFlow Restructuring on 30 June 2023.
The calculation of the profit on disposal of 81% of TradeFlow as at 30 June
2023is shown below:
As at
30 June 2023
£ 000
Accounting fair value of the 81% ownership of the TradeFlow operations
disposed of by the Group
2,000
Accounting fair value of 19% ownership of the TradeFlow operations retained by
the Group
352
2,352
Less:
Accounting fair value of net assets disposed of by the Group (1,634)
Profit on disposal of 81% of TradeFlow 718
The value of the 19% ownership of the TradeFlow operations retained by the
Company was calculated with reference to the specifics set out in the
TradeFlow Restructuring share purchase agreement dated 30 June 2023 (the
"TradeFlow SPA"). These specifics included:
a. The TradeFlow SPA set out the total legal consideration for the 81% of
the TradeFlow business and required an cash amount of £2,000,000 to be
payable to the Company by the Buyers as a result of the TradeFlow
Restructuring;
b. Based on the amount agreed in a) above, the estimated accounting fair
value of 100% of the TradeFlow operations is assumed to be £2,469,000; and
c. Based on the numbers set out in a) and b) above, the fair value of the
19% investment in TradeFlow retained by the Company as at 30 June 2023 is
£469,000. Management then applied a discount of 25% to this fair value to
take account of the fact that the Group no longer controls TradeFlow
operations. This discount applied is a management judgement that will continue
to be reassessed at each reporting date.
The major classes of assets and liabilities of the TradeFlow operations as at
31 December 2022 and 30 June 2023, immediately prior to the finalisation of
the TradeFlow Restructuring, are shown below:
As at 30 June 2023* As at 31 December 2022
£ 000 £ 000
Assets
Intangible assets 5,841 6,283
Tangible assets 2 4
Trade and other receivables 174 101
Contract assets 119 132
Cash and cash equivalents 305 324
Assets of disposal group held for sale 6,441 6,844
Liabilities
Trade and other payables 482 430
Long-term borrowings 3,440 3,171
Deferred tax liability 885 960
Liabilities of disposal group held for sale 4,807 4,561
Net assets 1,634 2,283
*Represents the assets and liabilities of the TradeFlow operations as at 30
June 2023 immediately prior to the finalisation of the TradeFlow
Restructuring.
TradeFlow loan-term borrowings
On 1 April 2022, TradeFlow settled the outstanding unsecured loan notes
earlier than the original maturity date of 23 October 2023. This involved the
settlement of the principal amount of USD$1,700,000, the additional redemption
premium cost of USD $300,000 and accrued interest of USD $100,000. These
loan-term borrowings were replaced by a second long-term loan facility, with
the same third party, for USD $3,800,000, which has a maturity date of 31
March 2026. The replacement long-term borrowings bears a simple fixed interest
rate of 7.9% per annum and has an additional redemption premium cost of
USD$200,000 which is payable at the time the principal is repaid. In
accordance with IFRS 9 ("Financial Instruments") the second long-term loan
facility resulted in a substantial modification to the previous loan note
facility.
Both the unsecured loan notes and the new loan facility include a redemption
premium cost which is payable together with the settlement of the principal
amount of the facility. This redemption premium cost is recognised over the
expected life of the facility using the effective interest rate method. Due to
the early settlement of the unsecured loan notes this resulted in the
unrecognised portion of the redemption premium cost being accelerated. This
contributed an additional finance cost of £122,000 during the year ended 31
December 2022.
On 22 May 2023, TradeFlow signed an additional loan agreement with the same
third party as the loan agreement signed on 1 April 2022. This new loan
agreement was for USD $500,000, which has a maturity date of 31 March 2026.
The new long-term borrowings bears a simple fixed interest rate of 7.9% per
annum and has an additional redemption premium cost of USD$50,000 which is
payable at the time the principal is repaid. As with the existing long-term
borrowings, the redemption premium cost is recognised over the expected life
of the facility using the effective interest rate method.
27 Investments
As set out in note 26, the fair value of the 19% investment in the equity
instruments of TradeFlow was initially recorded having regard to the
accounting consideration received for the disposal of 81% of the Group's
holding in TradeFlow as adjusted for an appropriate discount for loss of
control. At the 31 December 2023, a fair value adjustment of £68,000 was
recorded on the basis of the movement in the TradeFlow net liabilities between
30 June 2023, the date of disposal, and the balance sheet date, being 31
December 2023.
28 Related Party Transactions
During the year ended 31 December 2023, the following are treated as related
parties:
Alessandro Zamboni
Alessandro Zamboni is the Chief Executive Officer of the Group and is also the
sole director of the AvantGarde Group S.p.A ("TAG") as well as holding
numerous directorships across companies including RegTech Open Project plc.
Both of these entities are related parties due the following transactions that
took place over the current or prior financial years.
TAG and the Group's operating subsidiaries
Alessandro Zamboni is the CEO of the Group and is also the sole director of
TAG. As at 31 December 2023, TAG held 24.00% of the Company's total ordinary
shares issued in Supply@ ME Capital plc (as at 31 December 2022: 22.5%).
Following the reverse takeover in March 2020, the Group entered into a Master
Service Agreement with TAG in respect of certain shared services to be
provided to the Group. During the year ended 31 December 2023, the Group
incurred expenses of £39,000 (2022: £70,000) to TAG in respect of this
agreement. Additionally, during the year ended 31 December 2023, the Group
incurred costs of £22,000 from TAG (2022: £nil) in relation certain ICT
services provided, reimbursed TAG for an amount of £2,400 relating to ICT
costs that TAG initially incurred on behalf of the Group (2022: £nil), and
had recognised £45,000 of capitalised legal costs which had been incurred on
behalf of the Group by TAG (2022: £nil).
In relation to the amounts detailed above, as at 31 December 2023 the
following amounts were recognised in the consolidated statement of financial
position:
- no amounts were included in either trade receivable or trade
payables as being owed by the Group to TAG (31 December 2022: £9,000 net
Receivable); and
- an amount of £58,000 (2022: £nil) had been accrued as other
payables in respect of those costs that had been incurred but not yet invoiced
by TAG as at 31 December 2023.
TAG and TradeFlow Restructuring
On 30 June 2023, TAG assumed the remaining £2,000,000 consideration arising
from the TradeFlow Restructuring, to be receivable by the Group from the
Buyers, by way of a debt novation deed. The £2,000,000 was to be repaid by
TAG to the Company in multiple tranches, with the final tranche being due by
31 January 2024. As at 31 December 2023 an amount of £772,000 remained
outstanding from TAG in relation to this amount (31 December 2022: £nil), of
which £227,000 was overdue and £500,000 was due for payment on 31 January
2024.
The payment of the £1,228,000 received prior to 31 December 2023, was paid
through a split of £771,000 in cash, £421,000 by way of formal debt novation
agreements with specific suppliers whereby the debt held by the Group was
novated to TAG with no recourse by to the Group, and £36,000 by way of offset
against amounts owed by the Group to TAG.
In relation to the Group debt that was novated to TAG in lieu of a cash
payment, as at 31 December 2023 the Group held an amount receivable from TAG
on its balance sheet for the value of £53,000 (31 December 2022: £nil). This
primarily related to VAT amounts on certain "proforma" invoices that had been
novated, as the VAT receivable was yet to be recorded in the Group's statement
of financial position. As such, this amount has been recorded as being
receivable from TAG and when the "formal" invoices are issued from the
supplier, this amount will be reclassified as a VAT receivable.
The Company has been charging a late fee to TAG in terms of overdue payments
of this particular receivable balance, and this late fee is calculated at a
compounding rate of 15% per annum on any amounts of the instalments not
transferred to the Company by the relevant due date, in accordance with the
contractual arrangements. During the year ended 31 December 2023, the Group
recognised £11,000 of interest revenue (2022: £nil) in relation to the late
payments by TAG in respect of this particular receivable balance. As at 31
December 2023, the full amount of this interest revenue remained outstanding.
As set out in note 30, subsequent to 31 December 2023, and prior to the
release of these financial statements, TAG had repaid £655,000 of the
£772,000 outstanding at 31 December 2023 through the receipt of cash payments
and further offsets against amounts owed to TAG. The related late payment
interest remained unpaid and continues to accrue interest.
TAG Unsecured Working Facility
On the 28 April 2023, the Company and TAG entered into a fixed term unsecured
working capital loan agreement (the "TAG Unsecured Working Capital facility").
Under the TAG Unsecured Working Capital facility, TAG agreed to provide,
subject to customary restrictions, a facility of up to £2,800,000, in
tranches up to 31 January 2024, to cover the Company's interim working capital
and growth needs. In conjunction with the TradeFlow Restructuring, which was
completed on 30 June 2023, the £2,000,000 receivable by the Company that was
assumed by TAG from the Buyers, was offset against the current obligations of
TAG under TAG Unsecured Working Capital facility. The amendment to the TAG
Unsecured Working Capital facility was agreed on 30 June 2023 and this reduced
the obligations to the Company under the TAG Unsecured Working Capital
facility to up to £800,000 (the "amended TAG Unsecured Working Capital
facility").
The due date for repayment by the Company of amounts drawn under the TAG
Unsecured Working Capital facility is 1 February 2028. Any sums drawn under
the TAG Unsecured Working Capital facility will attract a non-compounding
interest rate of 10% per annum, and any principal amount (excluding accrued
interest) outstanding on 1 February 2028 will attract a compounding interest
rate of 15% per annum thereafter. Interest will be due to be paid annually on
31 March of each relevant calendar year.
On 30 June 2023, the Company issued a draw down notice to TAG under the
amended TAG Unsecured Working Facility for the full £800,000 available. As at
31 December 2023, £250,000 had been received from TAG in respect of this
facility (31 December 2022: £nil). In respect of these amounts received from
TAG, the Group recognised an interest expense of £7,000 (2022: £nil), which
all remained unpaid as at 31 December 2023.
As set out in note 30, subsequent to 31 December 2023, and prior to the
release of these financial statements, TAG had provided the remaining
£550,000 in order to satisfy the full amount of £800,000 drawn down by the
Company under the amended TAG Unsecured Working Capital facility. Additionally
on 26 March 2024, the Company and TAG signed a second deed of amendment
agreement, which allowed the full outstanding amount of the amended TAG
Unsecured Working Capital facility to be extinguished by the issue of
1,500,000,000 new ordinary shares which were issued to TAG on 28 March 2024.
Top-Up Shareholder Loan Agreement
On 28 September 2023, the Company and TAG entered into an English law governed
top-up unsecured shareholder loan agreement (the "Top-Up Shareholder Loan
Agreement"), pursuant to which TAG agreed to provide the Company with a
further facility of up to £3,500,000 to cover the Company's working capital
and growth needs up to 30 June 2025 (the "Top-Up Facility").
Details of this Top-Up Facility are set out below:
- The Company has the ability to draw down up to £3.5 million in
monthly instalments over the period to 30 June 2025;
- On a monthly basis the Board will assess (acting in good faith and
in its sole and absolute discretion) if the Group's projected cash balance on
the last business day of the coming calendar month will be less than £250,000
following the Group's scheduled balance of receipts and payments for the next
month by reference to, inter alia, the Group's contracted receivables,
revenues and payables due for receipt or payment in the next month, the
Group's contracted fixed operating expenditure and/or capital expenditure due
for payment in the next month, the cash inflows in the next month arising from
any warrants that have been contractually exercised and any projected
unrestricted cash amounts resulting from any contractually agreed alternative
equity, debt or hybrid financing (including, but not limited to, pursuant to a
pre-emptive offering of ordinary shares and a non-pre-emptive offering of
ordinary shares) for such month;
- If the above assessment results in the Group's projected cash
balance on the last business day of the coming calendar month being less than
£250,000, the Company may draw down an amount under the TAG Top-Up
Shareholder Loan Agreement which is no greater than the GBP amount to ensure
that the Group's bank balances in the coming month shall be equal to
£250,000;
- Repayment of any sum drawn down under the TAG Top-Up Shareholder
Loan Agreement will be due five calendar years (calculated on the basis of a
year of 360 days) from the date which funds are received by the Company
subject to the relevant draw down request;
- Any sums drawn down by the Company under the TAG Top-Up Unsecured
Shareholder Loan will attract a non-compounding interest rate of 10% per
annum, and any principal amount (excluding accrued interest) outstanding on a
relevant due date shall attract a compounding rate of 15% per annum
thereafter. Interest will be due to be paid annually on 31 March of each
relevant calendar year.
As at 31 December 2023, the Group had issued draw down notices to the value of
£969,000 to TAG, however these amounts had not yet been received by the Group
(31 December 2022: £nil). As a result of the late payment of the amounts
drawn down by TAG, the Group recognised an interest revenue of £11,000 (2022:
nil), which all remained unpaid as at 31 December 2023.
As set out in note 30, subsequent to 31 December 2023, and prior to the issue
of these financial statements, the Company issued additional draw down notices
under the Top-Up Shareholder Loan Agreement to the value of £779,000 and had
received £nil from TAG.
RegTech Open Project S.p.A ("RTOP S.p.A") and RegTech Open Project plc ("RTOP
plc")
RTOP plc is a regulatory technology company focussed on the development of an
integrated risk management platform for Banks, Insurance Companies and Large
Corporations. Alessandro Zamboni is a non-executive director of RTOP plc and
Albert Ganyushin is the Chair of the board of directors of RTOP plc. TAG also
is the majority ultimate beneficial shareholder of RTOP plc. Prior to RTOP
plc's listing of its ordinary shares on the standard segment of the Official
List of the Financial Conduct Authority and to trading on the main market for
listed securities of London Stock Exchange plc in August 2023, the operations
of this RTOP plc were run through RTOP S.p.A and Alessandro Zamboni was the
sole director of RTOP S.p.A.
In July 2022, the Company entered into an agreement with RegTech S.p.A,
pursuant to which RTOP S.p.A was engaged to build and create a number of
modules for the Company, including "data factory" (i.e., data ingestion and
business rule application), and, during the year ended 31 December 2022,
£270,000 has been paid by the Company to RTOP S.p.A pursuant to that
agreement. As at 31 December 2022 there is an outstanding amount accrued by
the Group of £58,000 to RTOP S.p.A in relation to this specific agreement.
During the year ended 31 December 2023, no further activities were undertaken
with RTOP S.p.A, with the exception of the payment of the amounts that had
been accrued at 31 December 2022. As such no amounts were outstanding with
RTOP S.p.A at 31 December 2023 (31 December 2022: £nil).
As part of RTOP Plc's listing onto the main market of the London Stock
Exchange in August 2023, the contract referred to above was novated to RTOP
plc.
TradeFlow Capital Management Pte. Ltd. ("TradeFlow")
On 30 June 2023, TradeFlow entered into a three-year White-Label licence
agreement with Supply@ME Technologies S.r.l., a wholly owned subsidiary of the
Group, with respect to use of the Platform, on a non-exclusive basis and
limited to the Asia-Pacific region, for a total consideration of £1,000,000
payable over a three-year period. As at 31 December 2023, no amounts have been
billed in respect of this contract, and no revenues have been recognised, as
the two parties have been undergoing discussions regarding the point in time
when the access to the Platform will be activated.
Eight Capital Partners Plc
David Bull, an Independent Non-Executive Director and audit committee chair
was the CEO of Eight Capital Partners Plc from 22 June 2021 until 12 August
2022. 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. This agreement was terminated in
early 2022 and as such there were no expenses in respect of this agreement
with Eight Capital Partners Plc were incurred during the year ended 31
December 2023 (year ended 31 December 2022: £3,000).
SFE Société Financière Européenne SA
During the current financial year, the Group has been collaborating with a
group of private investors and subject matter experts of working capital
solutions to launch an independent Swiss-based trading business (the "CH
Trading Hub") to replace the Cayman-based global inventory fund ("GIF"),
previously advised by TradeFlow Capital Management Pte. Ltd. The CH Trading
Hub, owned by Société Financière Européenne S.A. ("SFE"), is also expected
to assume control of the independent stock companies from the GIF once this
restructuring is completed, and has purchased / set up additional stock
companies in order to manage the overall trading businesses using the Platform
and the associated services provided by the Group. Alessandro Zamboni, the CEO
of SYME Group, has, along with a number of other investors, a personal
non-controlling interest in SFE. During the year ended 31 December 2023, no
transactions were directly entered into between the Group and SFE, however
subsequent to 31 December 2023, and prior to the release of these financial
statements, both the Group and SFE where parties to the term sheet that was
signed with respect to the commitment for the first White-Label transaction.
29 Controlling party
At 31 December 2022 the Directors do not believe that a controlling party
exists.
30 Subsequent events
Shares issued post year relating to Open Offer Warrant Conversions
On 11 January 2024, the Company announced the exercise of 31,055 Open Offer
Warrants by certain Qualifying Shareholders, and the issue of 31,055 Open
Offer Warrant Shares.
On 19 February 2024, the Company announced the exercise of 14,772 Open Offer
Warrants by certain Qualifying Shareholders, and the issue of 14,772 Open
Offer Warrant Shares.
TAG unsecured Working Capital loan agreement
Subsequent to 31 December 2023, and prior to the release of these financial
statements, TAG had provided the remaining £550,000 in order to satisfy the
full amount of £800,000 drawn down by the Company under the amended TAG
Unsecured Working Capital facility. Additionally on 26 March 2024, the Company
and TAG signed a second deed of amendment agreement, which allowed the full
outstanding amount of the amended TAG Unsecured Working Capital facility to be
extinguished by the issue of 1,500,000,000 new ordinary shares which were
issued to TAG on 28 March 2024.
Top-Up Shareholder Loan Agreement
Subsequent to 31 December 2023, and prior to the release of these financial
statements, the Company issued further draw down notices to TAG for an
aggregate amount of £779,000, bringing the total amount drawn down under the
Top-Up Shareholder Loan Agreement to £1.7 million. The total amount drawn
remains unpaid as at the date of these financial statements.
Deed of Novation
Subsequent to 31 December 2023, and prior to the release of these financial
statements, TAG had repaid £655,000 of the £772,000 remaining outstanding at
31 December 2023, leaving an amount outstanding of £117,000. The associated
late payment interest remained outstanding and continues to accrue at the
release date of the financial statements.
1 Swiss Digital Asset Custody Report 2023, The Capital Markets and
Technology Association
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