REG - Supply @ME Capital - Half-year Report
29/09/2023 07:00
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RNS Number : 0864O Supply @ME Capital PLC 29 September 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 2014/596/EU, WHICH IS PART OF DOMESTIC LAW OF THE UNITED KINGDOM OF
GREAT BRITAIN AND NORTHERN IRELAND ("UK") 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.
29 September 2023
Supply@ME Capital plc
(the "Company", "Supply@ME" or "SYME" and, together with its subsidiaries, the
"Group")
Unaudited interim results for the six months ended 30 June 2023 and entry into
Top-Up Shareholder Loan Agreement and Side Letter Agreement
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, announces its unaudited results for the six months ended 30 June
2023 ("H1 2023") and entry into Top-Up Shareholder Loan Agreement and Side
Letter Agreement - details of which are set out in Appendices 1 and 2 to this
announcement, respectively.
Highlights from the H1 2023 interim results:
· Group revenue from continuing operations of £0.1m in H1 2023
compared to nil in the comparative interim period for the six-month period
ended 30 June 2022 ("H1 2022"). The £0.1m revenue includes a combination of
the various elements of revenue related to:
- origination and due diligence fees (pre-IM), charged directly by
the Group to the Client Companies; and
- fees relating to the Platform usage and servicing (post-IM),
charged to the relevant independent Stock Company involved in each IM.
· This increase reflects the completion of the first IMs over the prior
12-month period and continued due diligence activities.
· Group operating loss from continuing operations of £2.3m in the
current interim period compared to £2.1m in H1 2022.
· Finance costs have significantly reduced by £1.4m in H1 2023
compared to H1 2022 due to the replacement of Mercator Capital Management Fund
LP debt financing with longer term equity funding from Venus Capital S.A.
("Venus Capital") during 2022 and H1 2023.
· Loss from discontinuing operations of £0.2m in H1 2023, compared to
a loss of £2.6m in H1 2022, primarily as a result of:
- a gain on disposal of 81% of the TradeFlow Capital Management Pte.
Ltd. ("TradeFlow") operations (the "TradeFlow Restructuring") of £0.7m
recognised in H1 2023; and
- no additional impairment or acquisition related earn-out charges
recognised in H1 2023, compared to an aggregate total of £1.5m for these
charges recognised in H1 2022.
· The combined impact of the above resulted in a total loss of £2.6m
in H1 2023, compared to £6.2m in H1 2022.
· The completion of the TradeFlow Restructuring on 30 June 2023
resulted in the removal of the TradeFlow net assets from the Group's
consolidated balance sheet as at 30 June 2023 and the recognition of two new
assets. Further details as set out below:
- the value of the TradeFlow net assets removed from the Group's
consolidated balance sheet as at 30 June 2023 was £1.6m. This included the
net book value of the intangible assets that were recognised by the Group as
part of the TradeFlow acquisition in July 2021;
- the addition of the new receivable balance of £2.0m relating to
the outstanding cash consideration still to be received by the Company as at
30 June 2023; and
- the addition of the new investment of £0.3m relating to the
Group's remaining 19% ownership of TradeFlow.
· Execution of the new equity funding that was announced on 28 April
2023 with Venus Capital. This resulted in a cash inflow to the Group of
£2.0m, net of commission and other share issue costs.
With the completion of inaugural IMs, the Group now expects to start to build
a demonstrable track record of revenue generation as it scales delivery of new
IM transactions.
Operational Highlights
· The completion of the TradeFlow Restructuring on 30 June 2023 was an
important step for the Group as it will allow us to better serve both the
needs of our client companies and the funders of both businesses. It will
create value for the Company shareholders ("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.
· Following the reconfiguration of investment advisory business line
through the disposal of majority stake of TradeFlow, 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").
· Completion of commercial agreements for the inaugural Open-Market
IMs, using traditional funding, showcases the Group's progress against the
activity outlined in its year end 2022 business update. In particular,
significant progress has been made against the Group's key operational key
performance indicators ("KPIs") with the evolving pipeline of IM
opportunities.
· The pipeline (representing the value of the inventory to be
monetised) was valued at £404.5m as at 22 September 2023, which compares to
£374.6.m as at 21 April 2022. This increase reflects the strength of the
proposition and its appeal to quality businesses, across a diversified
portfolio of companies both in Italy and the UK, with demand driving
opportunities in other European countries.
· The Group is now in advanced stages of formalising a White-Label IM
agreement with a leading Italian banking group ("WL Inventory Funder") to
execute an initial IM transaction with an inventory value to be monetised of
up to €10m, which involves an existing client of the WL Inventory Funder.
This White-Label IM agreement (which remains subject to contract) is expected
to allow the Group to scale its revenue in Italy, leveraging the balance sheet
and the client base of the WL Inventory Funder in specific supply chains.
· Similarly, the Group has started exploring similar White-Label IM
partnerships in the UK.
· Supply@ME 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 ("CH Trading Hub") to replace the
Cayman-based global inventory fund ("GIF"), previously advised by TradeFlow.
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, to manage the overall trading
businesses using the Platform and the associated services provided by the
Group.
· Additionally, the CH Trading Hub will handle the token route
including implementation of the strategic agreement with VeChain Foundation
("VE Chain"). In this regard, the Group is working with the CH Trading Hub on
the launch of 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.
· Discussions have commenced with a global investment bank to serve as
a cornerstone funder for IMs of the Group's current and prospective pipeline,
deploying a scalable and multi-jurisdictional Open-Market IM programme.
Summary of H1 2023 financial results
The below unaudited consolidated financial summary of the Group's income
statement is presented to distinguish the continuing operations (being the
Group's IM segment) and the discontinued operations consisting of TradeFlow
and its subsidiaries (the "TradeFlow Group"). The unaudited consolidated
financial summary of the Group's balance sheet includes the total assets and
liabilities from both continuing and discontinued operations as at 31 December
2022, however, no longer includes the assets and liabilities of the TradeFlow
Group as at 30 June 2023, following SYME's disposal of 81% of the TradeFlow
Group on 30 June 2023.
Consolidated financial summary:
6 months to 30 June 2023 6 months to 30 June 2022
Unaudited Unaudited
£m £m
Continuing operations
Revenue from continuing operations 0.1 -
Adjusted operating loss(1) from continuing operations (2.0) (2.0)
Operating loss from continuing operations (2.3) (2.1)
Loss from continuing operations (2.4) (3.6)
Loss from discontinued operations(2) (0.2) (2.6)
Total loss for the period (2.6) (6.2)
As at 30 June 2023 As at 31 December 2022
Unaudited Audited
£m £m
Total assets 3.4 8.3
Net liabilities (2.1) (2.0)
(1 )Adjusted operating loss is the operating (loss) from continuing
operations before impairment charges.
(2) Discontinued operations relate to the operations of the TradeFlow Group,
and these have been presented in line with IFRS 5 ("Non-current Assets Held
for Sale and Discontinued Operations"). The prior period's income statement
has been restated to aid comparability in line with the standard. Revenue from
discontinued operations in H1 2023 was £0.7m (H1 2022: £0.2m).
Operational KPI
As at 22 September 2023 As at 21 April 2023
Unaudited Unaudited
Warehoused Goods monetisation pipeline £404.5m £374.6m
The pipeline KPI shown above 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 most practical date possible prior to the issue of this interim report
(being 22 September 2023). The Company expects that the increase of the
pipeline will be reflected in new due diligence activities over the coming
months and, accordingly, additional due diligence fees for the Group's
subsidiaries. In the case of positive due diligence outcomes, such pipeline
would then be expected to move into IM phase at which stage the Group's
subsidiaries will be able to charge its IM fees (including origination fees,
fees for the usage of the Platform and IM servicing fees).
Entry into Top-Up Shareholder Loan Agreement and Side Letter 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 The AvantGarde Group S.p.A. (an entity
ultimately beneficially wholly-owned and controlled by Alessandro Zamboni,
Chief Executive Officer of the Company) ("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").
As disclosed in the Company's second supplementary prospectus published on 30
June 2023 (the "Secondary Supplementary Prospectus"), the Company entered into
an English law governed share purchase agreement with Dr. Thomas (Tom) James
and John Collis, former Directors (the "Buyers") on 30 June 2023, pursuant to
which, the Company sold 81% of the issued share capital of TradeFlow Capital
Management Pte. Limited. The £2,000,000 TAG Amount (as defined in the Second
Supplementary Prospectus) was novated from the Buyers to TAG on the terms of
an English law governed debt novation deed entered into between the Company,
the Buyers and TAG on 30 June 2023 (the "Debt Novation Deed"). Pursuant to the
Debt Novation Deed, TAG agreed with the Company to settle the TAG Amount in
three tranches: £500,000 on 30 June 2023 (which, as at the date of this
announcement, has been paid to the Company by TAG); £1,000,000 on 30
September 2023; and £500,000 on 31 January 2024. On 28 September 2023, the
Company and TAG entered into an English law governed side letter agreement
("Side Letter Agreement"), cast as a deed, in relation to the outstanding TAG
Amount, pursuant to which TAG agreed to pay to the Company £1,000,000 on 31
October 2023, and £500,000 on 31 January 2024.
TAG has agreed to pay a 15% per annum compounding rate of interest on the
£1,000,000 of principal amount of the TAG Amount for the period of 30
September 2023 to 31 October 2023, and shall incur a 15% per annum compounding
rate of interest on any outstanding principal amount of the TAG Amount
following the agreed payment dates.
The entry by (i) the Company and TAG into the Top-Up Shareholder Loan
Agreement and (ii) the Company and TAG into the Side Letter Agreement each
constituted a material related party transaction for the purposes of DTR 7.3
and were, accordingly, voted upon by the independent Directors (excluding
Alessandro Zamboni, who, in each case, constituted a "related party" (as such
term is defined in IFRS)), and such independent Directors consider each such
material related party transaction in respect of the Top-Up Shareholder Loan
Agreement and the Side Letter Agreement to be fair and reasonable from the
perspective of the Company and its Shareholders who are not a related party.
Alessandro Zamboni, CEO, Supply@ME Capital plc, said:
"The past six months have been productive for Supply@ME, with our team working
tirelessly on several key development workstreams. I am delighted with the
progress we have made. We've started to build our track record on IMs which
have unlocked a significant increase in engagement and interest in the
Supply@ME Platform, both in our core markets and further afield. Our pipeline
is strong and the experience we have gained continues to streamline the
onboarding process. The launch of the Swiss Trading Hub will be a key
development which provides the long-term framework for Inventory Monetisations
and sends a clear and positive message to potential Inventory Funders, in both
traditional and digital asset classes.
"We have also made further significant progress in building the fundamentals
for a scalable business model. The security token framework is close to being
launched - which is in line with future trends of the crypto bond market -
and, critically, on the formalisation of our first white label partnership
together with a first transaction, which we expect to prove an effective
working relationship from day one. The new agreed funding facility gives us a
clear platform from which to pursue the exciting opportunities that lie ahead.
"The SYME Board and I are positive about the prospects for the Group, given
the operational and strategic progress being made, and we look forward to
providing further business updates to the market in due course."
- Ends -
For the purposes of UK MAR, the person responsible for arranging release of
this announcement on behalf of SYME is Alessandro Zamboni, CEO.
Enquiries
Investors & analysts:
Alessandro Zamboni, CEO, Supply@ME Capital plc, investors@supplymecapital.com
(mailto:investors@supplymecapital.com)
Media:
MHP Group, Supplyme@mhpgroup.com (mailto:Supplyme@mhpgroup.com)
APPENDIX 1 - CEO REPORT AND INTERIM FINANCIAL STATEMENTS
Chief Executive's report
Business model summary
The Group provide its innovative fintech Platform for use by manufacturing and
trading companies to access IM 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 ("IM
Transactions").
The completion of the TradeFlow Restructuring on June 2023 was an important
step for the Group. When we acquired TradeFlow in July 2021, we had a clear
goal to support businesses at every stage of the inventory lifecycle. We
remain committed to this and will continue to explore opportunities to
integrate in-transit and cross-border inventory programmes. John Collis and
Tom James made a valuable contribution to our business and our board, but this
was a necessary restructuring which removes any potential or perceived
conflict of interest. It will enable both businesses to better realise their
potential by providing greater commercial opportunities through the clear
differentiation of responsibilities of the individual entities. With the
completion of the TradeFlow Restructuring we can now redouble our efforts and
focus on our core business lines.
Business model canvas: structural market drivers making business more and more
relevant
Corporates in our core markets and globally have taken a multilayered approach
to improving their supply chain resilience. These steps have included
increasing inventory levels, with the incumbent cost of storing this inventory
also increasing. The impact on cashflow and the demand for funding to
alleviate this has never been greater. The dual drivers of inflation and
climate linked changes to seasonality of inventories has also prompted
reassessments and crystalised focus. There is now an abundance of highly
profitable, long-established manufacturing and trading businesses which
present an opportunity for investors, particularly those comfortable with
receivables, to generate strong returns by monetising their inventories via
the Platform.
Traditional financial institutions are not specialists in inventory.
Historically, the difficulties in evaluating the inventories and the risk of
fraud due to infrequent and imprecise monitoring combined with the
unattractive prospect of disposing of unsold inventory have reduced engagement
with this asset class, with lenders offering restrictive terms and
unattractive rates. However, the need for a commercial facility for inventory
is clear. Supply@ME has developed the systems and technology which remove the
barriers to entry and provide certainty and security for Inventory Funders. We
also have now begun to establish a track record of completed IM transactions
supported by different funding routes.
Supply@ME's onboarding process for clients has been honed and is now
demonstrably straightforward. We have, and are continuing to, invest heavily
in our inventory ingestion, rule processing, and monitoring technology and
expertise to ensure that it plugs seamlessly into existing systems and
enhances monitoring.
We are confident in our ability to attract and convert client companies in our
core markets and to add to this list of countries. For Inventory Funders, we
are now progressing several paths and have commenced discussions to secure a
cornerstone funder. This type of partnership will unlock a new level of
momentum for the business. In tandem with this, the completion of the next
stage of the security token framework will, alongside traditional funding,
ensure we are increasingly well placed to furnish the demand in our pipeline.
New funding structure
Supply@ME's acquisition of TradeFlow Capital had, as one of its central goals,
the creation of an independent trading business, the Stock Companies, owned by
a regulated fund, which would use Supply@Me's IM Platform to facilitate the IM
transactions. The regulated fund GIF also served to raise equity capital for
IM Transactions. The restructuring of our relationship with TradeFlow was
driven by an evolution in the regulation of the fund management industry, in
particular, the direction from the Monetary Authority of Singapore, that
TradeFlow should separate its licensed fund management activities from the
rest of its business.
Since then, Supply@ME has been collaborating with a group of private investors
and subject matter experts in working capital solutions, to launch an
independent Swiss-based trading business ("CH Trading Hub") to replace the
GIF, previously advised by TradeFlow.
Switzerland is traditionally an important trading hub (in particular for raw
materials and commodities) and one of the more advanced jurisdictions
regarding the regulation over the digital asset industry.
The CH Trading Hub, owned by Société Financière Européenne S.A. ("SFE"),
will invest its equity capital to build up a dedicated internal structured
financing team. It is expected that SFE will assume the control of the
independent Stock Companies from the GIF once this restructure is completed,
to manage the overall trading businesses using the platform and the services
provided by the Group from this point.
Finally, the CH Trading Hub will handle the token route including progressing
the strategic agreement with VeChain. In this regard, the Group is working
with the CH Trading Hub on the launching of a security token framework which
will see up to US$100m issued which is expected to be subscribed mostly by
institutional investors active in the digital asset markets. The security
token will be issued by a vehicle sponsored by SFE and it will be tradeable on
authorised digital asset exchanges.
Updates to the Platform
Over the past six months, the Group has continued to improve its Platform to
ensure that it is and will continue to be best-in-class and that it has the
capabilities to scale with the business and diversification of the required
monetisation portfolios, both in terms of geographies and industries.
We have continued to leverage the enhanced expertise we brought onto our team
via key hires in 2022, and to leverage and further build out the vital
partnerships with our software factory and information and commercial
technology ("ICT") partners.
To that end the key areas of more recent development can be broken down into
five modules.
1. Onboarding Module
In order to more efficiently & effectively manage the pipeline of client
prospects for Inventory Monetisation, a dedicated Onboarding Module has been
implemented. This module allows:
· analysis and identification of eligible inventory items using
purpose-built workflows to drive due diligence tasks;
· clear and transparent pipeline tracking;
· comprehension and insight into the inventory associated risks;
· secure exchange of data for clients and to various third parties;
· production of critical inputs into the Trading and Monitoring
modules;
· production of due diligence reports for presentation to potential
Inventory Funders.
With the above information, it allows the Platform to represent clients to
prospective Inventory Funders and finalise the commercial agreements governing
the IM transaction.
2. Data Module
Data and analyses are core to our business model and what makes the Platform
distinct.
As previously discussed in the Annual Report and Accounts for the year ended
31 December 2022, the 'data factory' software module allows for the required
level of data ingestion we have envisaged alongside API management and the
automated application of key business rules. We have continued to enhance this
module, utilising "Test & Learn" methodologies that have enabled us to
augment our analysis models and interact with our key partners more
effectively.
The inventory data-lake continues to be enhanced, hitting key milestones, to
enable advanced inventory data analytic metrics such as seasonality,
obsolescence risk, critical components, margin and sales trends, inventory
risk scores, and to enable robust and accurate monitoring and reporting.
3. Trading Module
Leveraging the feedback from the first IM transactions with existing clients,
we continue to improve both our processes (from efficiency and client focussed
points of view), security protocols, and user experience of the Trading
Module.
4. Monitoring & Reporting Module
We have achieved key checkpoints in developing the key controls and KPIs that
need to be monitored for each Inventory Monetisation and believe that these
are key to providing Inventory Funders comfort against the risk of potential
fraud.
We continue to build out the suite of reports for the various audiences, such
as Client Companies, Stock Companies, Inventory Funders, in a robust and
auditable manner.
5. Web3 Module
The Group continues to leverage its relationship with VeChain and to enhance
on the Web3 solution. Integrating the technology to the Platform ready for
Web3 will help us to introduce the IM as a new asset class to a broader range
of investors. It also means the Group is able to harness the developments in
this nascent sector at pace, including the ability to explore the issuance of
non-fungible tokens (NFTs), participating in digital ownership and
business-to-business (B2B) marketplaces, decentralised finance and tokenised
governance protocol. In this space, the Group and the CH Trading Hub will
continue to explore further collaborations with digital asset investment banks
and exchanges.
Update on the Group's Operational KPIs
Client company origination
Origination of client companies with inventory suitable for Inventory
Monetisation has seen a significant increase both in the quality of businesses
we are engaging and the strength of initial discussions. The first IM
Transactions already have positively changed the tone and we are now operating
at a more optimal level at each stage of client engagement. Our business in
Italy is at a more advanced stage, however the impact of the UK IM has been
significant, and we expect business in that market to follow a similar
timeline as we have already experienced in Italy.
Pipeline of client companies now stands at £404.5m as at 22 September 2023.
The drivers for inventory solutions are also diversifying, with supply chain
frustrations, the impact of inflation and climate all prompting enquiries. We
are confident in the appeal of the Platform to client companies in our core
markets and also expect to expand, the list of territories in which we
operate, due to a combination of market factors and demand from potential
clients.
Italy
The group now has the track record of two IM Transactions, in markedly
different sectors, being industrial vehicles and tyre retreading, which serves
to emphasise the value of our Platform to a deeper pool of prospective
clients. Our existing businesses are also now vital advocates and reference
points for those wishing to engage with Inventory Monetisation. The benefits
of this are significant. This third-party endorsement of our unique and
innovative model is also helping us to attract larger businesses with
significant portfolios of monetisable inventory.
The Group is now in advanced stages of formalising a White-Label IM agreement
with the WL Inventory Funder to execute an initial IM transaction with an
inventory value to be monetised of up to €10m, which involves an existing
client of the WL Inventory Funder. This White-Label IM agreement (which
remains subject to contract) will allow the Group to scale its revenue in
Italy, leveraging the balance sheet and the client base of the WL Inventory
Funder in specific supply chains. This first transaction will likely see us
expanding the IM footprint in the agrifood sector, focusing on those goods
which retain long-term value and high demand.
Formalising our first White Label partnership, much like our first IM
Transaction, has required significant discussion and due diligence, including
the involvement of a Big 4 consultancy firm. It is a new product for our
partners and their customer base, without precedent, but we are confident that
completing our initial white label agreement will provide a template for
similar partnerships in Italy, the UK and other territories.
United Kingdom
Our first IM transaction using traditional funding in the UK represented a key
milestone, providing proof of concept in the market, a tangible track record
and a template for IMs being managed within an existing floating charge
facility, confirming the ability to work alongside existing financing
arrangements as a commercial facility. Since the announcement of this
transaction, momentum has increased, and we feel confident in our stated goal
of securing white label and self-funding agreements. Origination in the UK has
also been gathering pace and we have a strong growing pipeline of prospective
clients. The triggers which prompt businesses to contact us have also
broadened and we are seeing a growing number of businesses affected by supply
chain issues and climate related impacts seeking to offset increased costs. In
the UK, the next milestones will be aligning long-term funding partnerships
and White Label alliances.
Outlook
In the coming months Supply@ME will look to finalise its first White Label
Partnership in Italy, implement the security token funding route and secure
the backing of international Inventory Funders. These three initiatives will
form the basis of the next phase of growth for our business, as we target the
Group's revenue growth and opening the scale-up momentum. The new CH Trading
Hub will provide the backbone for these initiatives and future transactions,
providing a new layer of long-term certainty for Inventory Funders and
corporates. This is a formative period for the business, and we are confident
in our ability to deliver against these stated objectives to ultimately
deliver greater value for our clients, investors and shareholders.
Financial review
6 months to 6 months to Movement
30 June 2023 30 June 2022
Unaudited Unaudited
Unaudited
£000 £000 £000
Continuing operations
Revenue from continuing operations 77 - 77
Operating loss from continuing operations before impairment charges (1,981) (1,963) (18)
Impairment charges (349) (151) (198)
Operating loss from continuing operations (2,330) (2,114) (216)
Finance costs (22) (1,466) 1,444
Loss before tax from continuing operations (2,352) (3,580) 1,228
Income tax (24) - (24)
Loss after tax from continuing operations (2,376) (3,580) 1,204
Loss from discontinued operations (185) (2,610) 2,425
Total loss for the year (2,561) (6,190) 3,629
Movement
Pence Pence Pence
Total loss per share ("EPS") (0.0046) (0.0162) 0.0116
The Group's unaudited condensed consolidated interim financial statements for
the six-month period ended 30 June 2023 ("H1 2023") have been prepared in line
with International Accounting Standard IAS 34 ("Interim Financial Reporting").
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. The prior period income statement has been restated to aid
comparability in line with the standard.
As shown in the financial summary above, the TradeFlow operations contributed
a loss of £185,000 (inclusive of the gain of £718,000 recognised in
connection with the TradeFlow Restructuring) in H1 2023.
Revenue from continuing operations
6 months to 6 months to Movement
30 June 2023 30 June 2022
Unaudited Unaudited
Unaudited
£000 £000 £000
Revenue
Due Diligence fees 40 - 40
Inventory Monetisation fees 37 - 37
Total revenue from continuing operations 77 - 77
The table above provides a break down of the Group's revenue from Inventory
Monetisation activities during H1 2023. 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
condensed consolidated financial statements for the year ended 31 December
2022 (the "2022 Annual Report").
During H1 2023, the Group recognised £77,000 (H1 2022: nil) of Inventory
Monetisation revenue, which it split 52% related to due diligence fees, and
the remaining 48% relating to Inventory Monetisation fees.
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 H1 2023, the Group has continued to carry out, and charge for due
diligence activities, and the £40,000 recognised as revenue reflects the
value of those due diligence activities completed during H1 2023.
Following the announcement of the first Italian IM transactions during 2022
and H1 2023, which were facilitated using the Group's Platform, the Group
recognised Inventory Monetisation fees of £37,000. 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
During H1 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, the latter of these being announced in early July 2023.
In conjunction with this, efforts have also been directed to building and
continually reevaluating the Group's Inventory Monetisation pipeline following
the announcement of the inaugural IM transactions. In addition, progress has
made in terms of the Group's White-Label initiative, and in terms of securing
new sources of inventory funding. Further details of this progress has been
set out earlier in this announcement.
The Group recorded an operating loss from continuing operations before
impairment charges for H1 2023 of £1,981,000 (H1 2022: £1,963,000 loss).
There have been two main changes in the components to this figures that
largely offset each other including:
· an increase in professional and legal fees in H1 2023 as the Group
undertook several different corporate activities such as the TradeFlow
Restructuring, the financing and equity subscription that was announced in
conjunction with the 2022 Annual Report, and the regulatory requirement to
keep the prospectus that the Company issued in October 2022 updated for any
significant changes to the business. In addition, the Group are continuing to
invest into improving the functionality and enhancing the performance of the
IM Platform, and certain of those costs did not meet the criteria for
capitalisation under IAS 38 ("Intangible Assets"). As such, these costs have
been expensed during H1 2023. An example of such costs includes those related
to early-stage planning and research activities; and
· these increases were then offset by an increase to other operating
income during H1 2023 as a result of a settlement agreement reached with an
existing supplier 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 H1 2023.
Impairment charges from continuing operations
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
£000 £000
Impairment charges from continuing operations 349 151
349 151
The impairment charges from continuing operations of £349,000 recognised
during H1 2023 relate to the impairment of the Group's internally developed IM
platform as at 30 June 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 4 to the unaudited condensed
consolidated interim financial statements, 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 £349,000 as at
30 June 2023.
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 have been 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"). The
comparatives show the revenue and operating loss of the TradeFlow operations
for H1 2022.
6 months to 6 months to
30 June 2023 30 June 2022 Unaudited
Unaudited
£000 £000
Revenue from discontinued operations 684 209
Operating loss from discontinued operations before acquisition relation costs, (329) (555)
impairment charges and costs/(gains) relating to the restructuring of the
TradeFlow ownership
Amortisation of intangible assets arising on acquisition (442) (406)
Acquisition related earn-out payments - (747)
Impairment charges - (765)
Foreign currency translation loss reclassified to other comprehensive income (62) -
Gain arising on the restructuring of the TradeFlow operations 718 -
Operating loss from discontinued operations (115) (2,473)
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 in H1 2023 set out in the table above
are detailed below:
· amortisation of intangible assets arising on acquisition of
£442,000. 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 other comprehensive
income of £62,000. 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 gain arising on the restructuring of the TradeFlow operations 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 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 gain arising
on the restructuring of the TradeFlow operations recorded in the unaudited
condensed consolidated interim income statement of £718,000.
As shown above there were no additional acquisition related earn-out costs
recognised during H1 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.
Additionally, 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 H1 2023.
Instead, a calculation was undertaken to calculate any gain or loss arising on
as a result of the change in ownership structure of the TradeFlow operations.
The details of this calculation set out in below and in further detail can be
found in note 21 to unaudited condensed consolidated interim financial
statements for the six-month period ended 30 June 2023.
6 months to
30 June 2023
Unaudited
£ '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)
Gain arising on the restructuring of the TradeFlow ownership 718
New equity funding
On 28 April 2023, the Company and 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 subscription 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 30 June 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 30 June 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 30 June 2023, all of these share warrants remain
outstanding.
The total share issue costs incurred in connection with the Subscription
Agreement during H1 2023 were £1,972,000 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 £30,000 of other share issue costs.
This has been accounted for as a £1,972,000 reduction to share premium during
H1 2023 given there was sufficient share premium created on the issue of the
Subscription Shares.
New debt financing
On the 28 April 2023, the Company and The AvantGarde Group S.p.A ("TAG"), the
Group's major shareholder, 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
shall provide, subject to customary restrictions, a facility of up to
£800,000 to cover the Company's interim working capital and growth needs.
The due date for repayment by the Company of amounts (if any) 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
30 June 2023, no funds had been received from TAG in respect of this facility,
however subsequent to 30 June 2023, and prior to the release of these
unaudited condensed consolidated interim financial statements, TAG had
provided £245,000 of the £800,000 that had been drawn down by the Company.
Cash flow
The Group decreased its net cash balance by £465,000 (H1 2022: £797,000
decrease) due to a combination of the following cash inflows and outflows:
· cash inflow of £2,018,000, net of commission and other share issue
costs, received from the issue of new ordinary shares during H1 2023 under the
Subscription Agreement, and from existing warrant holders who chose to convert
their warrants (which had been issued in issued in conjunction with the open
offer completed during 2022), during H1 2023; and
· cash inflows from long-term borrowing of £372,000, net of repayments
and other finance costs, predominantly due to the new long-term borrowings
secured by TradeFlow during the six-month period prior to the completion of
the TradeFlow Restructuring.
These net cash inflows were then offset by the following items:
· net outflows from operating activities of £2,143,000 (H1 2022:
£2,095,000 net outflow);
· increased investment in the Group's IM Platform of £388,000 (H1
2022: £164,000); 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.
6 months to 6 months to
30 June 2023 Unaudited 30 June 2022 Unaudited
£000 £000
Net cash flow from operating activities (2,143) (2,095)
Net cash flow from investing activities (712) (187)
Net cash flow from financing activities 2,390 1,485
Net increase in cash and cash equivalents (465) (797)
Foreign exchange differences to cash and cash equivalents on consolidation (19) (25)
Cash and cash equivalents at 1 January 581 1,727
Cash and cash equivalents as at 30 June 97 905
Net liabilities
As at 30 June 2023 net liabilities were £2,108,000 (31 December 2022: net
liabilities of £2,025,000).
The largely stable net liability position at 30 June 2023 compared to 31
December 2022 is due to the following:
· the addition of the new assets created as a result of the TradeFlow
Restructuring including the £2,000,000 outstanding cash consideration
receivable by the Company from TAG, following TAG's assumption of the
receivable from the buyers of TradeFlow on 30 June 2023, and the £352,000 new
investment balance accounting for the Group's remaining 19% ownership of
TradeFlow. Further details on these new assets can be found in notes 3, 13 and
21 to the unaudited condensed consolidated interim financial statements for
the six-month period ended 30 June 2023.
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; and
· 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 and the key considerations thereto are
set out in the note 4 to the unaudited condensed consolidated interim
financial statements for the six-month period ended 30 June 2023.
Related Parties
Note 22 to the unaudited condensed consolidated interim financial statements
for the six-month period ended 30 June 2023 contains details of the Group's
related parties.
Subsequent events
Note 23 to the unaudited condensed consolidated interim financial statements
for the six-month period ended 30 June 2023 contains details of all subsequent
events.
Directors' Responsibility Statement
The Directors are responsible for preparing the unaudited condensed
consolidated interim financial statements in accordance with applicable law
and regulations. A list of current directors is maintained on the Group's
website: https://www.supplymecapital.com.
The Directors confirm that, to the best of their knowledge, the unaudited
condensed consolidated interim financial statements have been prepared in
accordance with IAS 34 ("Interim Financial Reporting"), as issued by the
International Accounting Standards Board as contained in UK - adopted
International Financial Reporting Standards, and give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company,
or the undertakings included in the consolidation as a whole as required by
DTR 4.2.4 R of the FCA's Disclosure Guidance and Transparency Rules ("DTRs").
The Directors further confirm that the unaudited condensed consolidated
interim financial statements include a fair review of the information required
by DTR 4.2.7R and DTR 4.2.8R.
In accordance with the DTR Rule 4.2.9(2)R, the Directors confirm that these
unaudited interim condensed consolidated financial statements have not been
audited or reviewed by auditors pursuant to the Financial Reporting Council
guidance on Review of Interim Financial Information.
The Directors have shared all the relevant working papers with their advisers.
By Order of the Board
Alessandro Zamboni
Chief Executive Officer
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 6
MONTH PERIOD ENDED 30 JUNE 2023
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
Notes £ '000 £ '000
Continuing operations
Revenue 5 77 -
Cost of sales 7 (185) (183)
Gross loss (108) (183)
Administrative expenses 7 (2,258) (1,769)
Other operating income / (costs) 8 385 (11)
Operating loss from continuing operations before impairment charges (1,981) (1,963)
Impairment charges 12 (349) (151)
Operating loss from continuing loss (2,330) (2,114)
Finance costs 6 (22) (1,466)
Loss before tax from continuing operations (2,352) (3,580)
Taxation 9 (24) -
Loss for the period from continuing operations (2,376) (3,580)
Discontinuing operations
Loss for the period from discontinuing operations 21 (185) (2,610)
Total loss for the period (2,561) (6,190)
Other comprehensive income
Exchange differences on translating foreign operations 415 (257)
Total comprehensive loss for the period (2,146) (6,447)
Loss per share Pence Pence
Basic and diluted loss per share - continuing operations
11 (0.0043) (0.0094)
Basic and diluted loss per share - discontinued operations
11 (0.0003) (0.0068)
Basic and diluted loss per share - total 11 (0.0046) (0.0162)
The above unaudited condensed consolidated statement of comprehensive income
should be read in conjunction with the accompanying notes.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30
JUNE 2023
30 June 2023 31 December 2022
Unaudited Audited
Notes £ '000 £ '000
Non-current assets
Intangible assets and goodwill 12 - -
Tangible assets 5 7
Investment 21 352 -
Other non-current assets 19 19
Total non-current assets 376 26
Current assets
Trade and other receivables 13 933 1,219
Receivable from related party 13 2,000 -
Cash and cash equivalents 97 257
3,030 1,476
Assets of disposal group held for sale 21 - 6,844
Total current assets 3,030 8,320
Total assets 3,406 8,346
Current liabilities
Trade and other payables 14 4,335 4,587
Liabilities of disposal group held for sale 21 - 4,561
Total current liabilities 4,335 9,148
Net current liabilities (1,305) (828)
Non-current liabilities
Long-term borrowings 15 741 748
Provisions 16 431 468
Deferred tax liabilities 7 7
Total non-current liabilities 1,179 1,223
Net liabilities (2,108) (2,025)
Equity attributable to owners of the parent
Share capital 17 5,988 5,897
Share premium 25,348 25,269
Share-based payment reserve 20 7,949 5,871
Other reserves (10,998) (11,413)
Retained losses (30,395) (27,649)
Total equity (2,108) (2,025)
The above unaudited condensed consolidated statement of financial position
should be read in conjunction with the accompanying notes.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6
MONTH PERIOD ENDED 30 JUNE 2022
Share capital Share premium Other reserves* Share-based payment reserve Merger relief reserve* Reverse takeover reserve* Foreign currency reserve* Retained earnings Total
£ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000
As at 1 January 2022 5,486 18,171 21 2,018 226,905 (237,835) 18 (16,209) (1,425)
Loss for the 6-month period - - - - - - - (6,190) (6,190)
Forex retranslation difference - - - - - - (257) - (257)
Loss for the period and total comprehensive income 5,486 18,171 21 2,018 226,905 (237,835) (239) (22,399) (7,872)
Issue of warrants - - - 180 - - - - 180
Warrants to be issued - - - 3,074 - - - - 3,074
Issuance of new ordinary shares 95 2,922 - - - - - - 3,017
Share issue costs - (1,593) - - - - - (1,591) (3,184)
Credit to equity for acquisition related earn-out payments - - - 747 - - - - 747
As 30 June 2022 5,581 19,500 21 6,019 226,905 (237,835) (239) (23,990) (4,038)
*The "other reserves" balance in the unaudited condensed 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 unaudited condensed consolidated statement of changes in equity
should be read in conjunction with the accompany notes.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6
MONTH PERIOD ENDED 30 JUNE 2023
Share capital Share premium Other reserves* Share-based payment reserve Merger relief reserve* Reverse takeover reserve* Foreign currency reserve* Retained earnings Total
£ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000
As at 1 January 2023 5,897 25,269 37 5,871 226,905 (237,834) (521) (27,649) (2,025)
Loss for the 6-month period - - - - - - - (2,561) (2,561)
Forex retranslation difference
- - - - - - 415 - 415
Loss for the period and total comprehensive income 5,897 25,269 37 5,871 226,905 (237,834) (106) (30,210) (4,171)
Credit to equity for issue of warrants
- - - 1,717 - - - - 1,717
Exercise of Open Offer warrants - - - -
1 23 (29) 29 24
Issuance of new shares 90 2,160 - - - - - - 2,250
Increase in fair value of previously issued warrants - - - - -
(132) 346 (214) -
Share issue costs - (1,972) - - - - - - (1,972)
Equity settled employee share-based payment schemes
- - - 44 - - - - 44
As 30 June 2023 5,988 25,348 37 7,949 226,905 (237,834) (106) (30,395) (2,108)
*The "other reserves" balance in the unaudited condensed 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 unaudited condensed consolidated statement of changes in equity
should be read in conjunction with the accompany notes.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTH
PERIOD ENDED 30 JUNE 2023
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
£ '000 £ '000
Cash flows from operating activities
Loss before interest and tax from continuing operations (2,330) (2,114)
Loss before interest and tax from discontinued operations (115) (2,473)
Total loss for the period before interest and tax (2,445) (4,587)
Adjustments for non-cash acquisition related costs and impairment charge
Acquisition related earn-outs - 747
Amortisation of intangible assets arising on acquisition 442 406
Adjustment for impairment charge
Impairment charges 349 916
Adjustments for non-cash costs related to the disposal of the discontinued
operations
Foreign currency translation reserve reclassified to other comprehensive
income
62 -
Gain arising on restructuring of discontinued operations (718) -
135 2,069
Other non-cash adjustments 86 10
Other depreciation and amortisation 43 16
(Decrease) / increase in provisions (21) 3
Decrease in accrued income 5 1
Decrease in trade and other receivables 426 27
(Decrease) / increase in trade and other payables (572) 407
Other decreases in net working capital 224 229
Cash flows from operations (2,119) (1,825)
Interest paid in cash (24) (2)
Income taxes paid in respect of prior period amounts owing
- (268)
Net cash flows from operating activities (2,143) (2,095)
Cash flows from investing activities
Purchase of tangible assets - (4)
Purchase of intangible assets (388) (164)
Increase in non-current assets - (19)
Cash outflow on disposal of discontinued operations (324) -
Net cash flows from investing activities (712) (187)
Cash flows from financing activities
Net cash inflow from new long-term borrowings 405 3,050
Cash repayment of other long-term borrowings (33) (1,685)
Cash inflow from issue of new ordinary shares 2,274 1,660
Other finance costs paid in cash (1) (183)
Share issue costs paid in cash (255) -
Cash repayment of loan notes and convertible loan notes - (1,357)
Cash flows from financing activities 2,390 1,485
Net movement in cash and cash equivalents (465) (797)
Foreign exchange differences to cash and cash equivalents on consolidation (19) (25)
Cash and cash equivalents as at 1 January 581 1,727
Cash and cash equivalents at the end of the period 97 905
The above unaudited condensed consolidated statement of cash flows should be
read in conjunction with the accompanying notes
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2023
1 Company information
Supply@ME Capital plc (the "Company") is a public limited company incorporated
in England and Wales. The address of its registered office 27/28 Eastcastle
Street, London, W1W 8DH, United Kingdom. Supply@ME Capital's ordinary shares
are admitted to listing on the standard segment of the Official List of the
Financial Conduct Authority and to trading on the main market for listed
securities of the London Stock Exchange plc.
These unaudited condensed consolidated interim financial statements of the
Company and its subsidiaries (the "Group") have been approved for issue by the
board of directors of the Company (the "Board") on 28 September 2023.
2 Basis of preparation
Accounting convention
These unaudited interim financial statements for the half-year reporting
period ended 30 June 2023 has been prepared in accordance with Accounting
Standard IAS 34 ("Interim Financial Reporting").
The interim report does not include all the notes of the type normally
included in annual unaudited financial statements. Accordingly, this report is
to be read in conjunction with the annual report and accounts for the year
ended 31 December 2022 (the "2022 Annual Report") and any public announcements
made by the Company during the interim reporting period.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period with the exception
of the estimation of income tax (refer to note 9 for further details).
New and amended standards adopted by the group
No new or amended standards became applicable for the current reporting period
that impacted the Group. The Group did not have to change its accounting
policies or make retrospective adjustments as a result of adopting any new or
amended standards in the current interim reporting period.
3 Significant changes in the current reporting period
Below provides a summary of the significant changes that occurred during the
six month period ended 30 June 2023.
New Equity Subscription Agreement
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"). The issue of the Subscription Shares was made over two tranches
(in line with the Subscription Agreement) 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.
In addition to the £112,500 of commission chargeable by Venus Capital (as set
out above):
- £112,500 was paid to Venus Capital in respect of agreed costs and
expenses incurred by Venus Capital in connection with the Subscription
Agreement; and
- New warrants were required to be issued to Venus Capital at a ratio of
one warrant for every two Subscription Shares issued under the Subscription
Agreement. 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 30 June
2023. The New Venus 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 at 30 June 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.
The fees referred to above were agreed through the commission and fee letter
signed with Venus Capital and the new warrant instrument agreement, both of
which were also dated 28 April 2023.
In connection with the above, the final exercise date of the existing
8,175,000,000 warrants issued to Venus Capital during 2022 in connection with
the Capital Enhancement Plan was extended from 31 December 2025 for 12 months
to 31 December 2026, through a deed of amendment to the existing warrant
instruments dated 28 April 2023.
As at 30 June 2023, the Group had a total of 10,425,000,000 warrants
outstanding with Venus Capital, including 8,175,000,000 previously issued to
Venus Capital during 2022 and 2,250,000,000 to be issued to Venus Capital as
at 30 June 2023. During the six-month period ended 30 June 2023, no warrants
held by Venus Capital have been converted.
Extension to the expiry date of the warrants issued in connection with the
Open Offer carried out on 17 August 2022
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
shares 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 "Open Offer Warrants"). These warrants were able to be exercised at any
time up to 31 December 2025 and have an exercise price of 0.065 pence per
warrant.
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 were asked if they would like to vote to extend the expiry date of the
Open Offer Warrants from 31 December 2025 by 12 months to 31 December 2026.
This resolution was successfully passed at the Group's 2023 Annual General
Meeting, and a deed of amendment to the existing Open Offer warrant instrument
was signed, on 23 June 2023. As at 30 June 2023, the Group had 235,751,597
Open Offer Warrants outstanding. During the six month period ended 30 June
2023, 35,595,411 Open Offer Warrants were converted into new ordinary shares
raising £23,137 for the Group.
The AvantGarde Group S.p.A ("TAG") unsecured Working Capital loan agreement
On the 28 April 2023, the Company and TAG, the Group's major shareholder,
entered into a fixed term unsecured working capital loan agreement (the "TAG
Unsecured Working Capital facility"). Under the TAG Unsecured Working Capital
facility, TAG shall 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.
The due date for repayment by the Company of amounts (if any) 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.
TradeFlow Restructuring
On 30 June 2023 the Company announced that had entered into relevant
commercial agreement to restructure the ownership of TradeFlow Capital
Management Pte. Limited ("TradeFlow") (the "TradeFlow Restructuring") 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
providing both businesses with greater commercial opportunities through the
clear differentiation of responsibilities of the individual entities.
In the months prior to the finalisation of the TradeFlow Restructuring, the
Board noted an evolution in the regulation of the fund management industry.
The Monetary Authority of Singapore, Singapore's financial regulator, has
approved that TradeFlow should separate its licensed fund management
activities from the rest of the TradeFlow business. In light of these market
developments, the Company and TradeFlow have mutually agreed that it is in the
best interests of Group's shareholders to separate the Platform (fintech
business) from the fund management activities (regulated business), in order
to clarify the Group's market position and improve the growth prospects for
both businesses.
The key highlights of the TradeFlow Restructuring are set out below:
- The Group reduced 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"), creating a clear separation between Group's inventory
monetisation ("IM") fintech Platform (the "Platform") and TradeFlow's
regulated fund management business.
- This separation is aimed at removing any potential or perceived
future conflicts of interest between the two businesses and associated
regulatory and commercial hurdles, which will in turn improve the growth
prospects of both businesses.
- The consideration for the Group's 81% stake in TradeFlow was
£14,386,100 (the "Cash Quantum") 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 dated 1 July
2021 (the "TradeFlow Acquisition").
- TAG assumed the obligation of the Buyers to pay the Company the
remaining £2,000,000 of the Cash Quantum (the "TAG Amount") by way of a
novation. The TAG Amount will be repaid by TAG to SYME in multiple tranches,
with the final tranche being payable 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 TAG Amount was offset against the current obligations of TAG
under TAG Unsecured Working Capital facility, of which further details are set
out above. The amendment to the TAG Unsecured Working Capital facility was
agreed on 30 June 2023 and this reduced the obligations under the TAG
Unsecured Working Capital facility to up to £800,000.
- The acquisition of the 1,026,525,520 existing Ordinary Shares
by TAG from the Buyers did not create any dilution to existing Shareholders
and the deemed price per Ordinary Share to be acquired from the Buyers was
approximately 0.195 pence, approximately 50% above the closing price on 29
June 2023 of 0.13 pence per ordinary share.
- Additionally, 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 ("APAC") region, for a
total consideration of £1,000,000 payable over a three-year period.
- The finalisation of the TradeFlow Restructuring commercial
agreements on the 30 June 2023 cancelled any obligations on the Group that
arose when the Buyers provided written notice to the Board, on 24 March 2023,
of their intention to exercise their rights to buy back 100% of the share
capital of TradeFlow.
The accounting for the TradeFlow Restructuring has been reflected in the
unaudited interim financial statements for the six months ended 30 June 2023.
The gain arising on the restructuring of the TradeFlow operations recorded in
the unaudited condensed consolidated statement of comprehensive income was
£718,000, and the value of the retained 19% investment in TradeFlow has been
valued at £352,000 as at 30 June 2023. The TradeFlow operations contributed a
loss of £185,000 (inclusive of the gain arising on the restructuring of the
TradeFlow operations referred to above) in the current interim period ended 30
June 2023. Refer to note 21 to these interim financial statements for further
details.
Settlement of outstanding debt with a significant creditor
On 2 May 2023, the Group entered into a settlement agreement with an existing
creditor of Supply@Me Srl, a wholly owned subsidiary 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 gain of €420,250 or £376,000 which has been
recorded as other operating income in the condensed consolidated statement of
comprehensive income for the six months ended 30 June 2023.
4 Going Concern
At the 30 June 2023 the Group had cash and cash equivalents from continuing
operations of £97,000 (31 December 2022: £257,000 cash and cash equivalents
from continuing operations, £324,000 cash and cash equivalents from
discontinued operations) and net consolidated current liabilities of
£1,305,000 (31 December 2022: £828,000). The Group has posted a total
comprehensive loss for the six-month period ended 30 June 2023 of £2,146,000
(six-month period ended 30 June 2022: total comprehensive loss £6,447,000)
and retained losses were £30,395,000 as at 30 June 2023 (31 December 2022:
losses £27,649,000).
During the six-month period the Company 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 included:
- the Subscription Agreement with Venus Capital for the issue of the
Subscription Shares which raised gross proceeds of £2,250,000 during H1 2023;
and
- the TAG Unsecured Working Capital facility, which was then amended
on 30 June 2023 in conjunction with the finalisation of 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
available. As at 30 June 2023, no funds had been received from TAG in respect
of this facility. As set out in note 23, subsequent to 30 June 2023, and prior
to the release of these interim financial statements, TAG had provided an
amount of £245,000 in relation to the £800,000 drawn down by the Company on
the 30 June 2023 under the amended TAG Unsecured Working Capital facility.
Further details of these two sources of funding, including the amendment made
to the TAG Unsecured Working Capital facility as part of the TradeFlow
Restructuring on 30 June 2023, are set out in note 3 to these condensed
consolidated interim financial statements.
In addition following the 30 June 2023, the Company has been continuing to
explore additional options of funding to support the Group while a positive
revenue track record is established. As at the date of issue of these interim
financial statements, the Company also announced the binding commitment in
respect of a top up unsecured shareholder loan agreement with TAG, dated 28
September 2023 ("TAG Top-Up Shareholder Loan Agreement"). Details of this
include:
- The ability of the Company to draw down up to £3.5million 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; 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.
Taking into account the factors above and in order to consider their
assessment of the Group as a going concern, the Directors have reviewed the
forecast cashflows for the next 12 months. The cashflow forecasts take into
account that the Group meets its day to day working capital requirement
through its cash resources. The Directors have prepared the forecast using
their best estimates, information and judgements at this time, including the
outstanding funding contracted to be receivable from the amended TAG Unsecured
Working Capital and the TAG Top-Up Shareholder Loan Agreement, and the
£1.5million still be receivable in connection with the TradeFlow
Restructuring. The Directors have also considered the expected cashflows
arising from due diligence fees and fees projected to be received from the use
of the Group's innovative Platform to facilitate inventory monetisation
transactions.
Despite the facts outlined above, there is currently an absence of a
historical 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 cashflows arising from
the Group's 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, certain cashflows in relation to the funding
agreements noted above have not yet been fully received. These amounts have
been factored into the cash flow forecasts in line with contractual
commitments received from the counterparties. 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 various contractual commitments 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.
This includes the application by certain of the Company's subsidiaries to
access specialised loans for SME businesses provided by Italian commercial
banks with the support of government guarantees, which will allow the Group to
access a lower cost of capital.
As such the Directors consider it appropriate to prepare these interim
condensed consolidated financial statements on a going concern basis, taking
into account the material uncertainties noted above, and have not included the
adjustments that would result if the Company and Group were unable to continue
as a going concern.
5 Revenue and operating segments
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 are continually developing. Prior to the
acquisition of TradeFlow on 1 July 2021, the Board of Directors 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 (largely
comprising the Group's Supply@ME subsidiaries) and investment advisory
(comprising the TradeFlow operations), alongside the head office costs
(largely 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 transactions that
took place during 2022 and to date during 2023.
During the second half of 2022, the management team and the Board of Directors
of the Company began work in respect of the TradeFlow Restructuring, and on 24
March 2023 the Company made an announcement regarding the 100% buy back option
that had been exercised by the TradeFlow directors. 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 these condensed consolidated interim financial statements.
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 to the Buyers.
As such, the Group has reverted back to a single segment from its continuing
operations for the current interim period ended 30 June 2023, being inventory
monetisation, alongside the head office costs (largely compromising the
Company). This split has been shown below alongside the comparative from the
prior interim period which has not been restated.
The key metrics assessed by the Board of Directors include revenue and
adjusted operating profit (before acquisition related costs and impairment
charges) which are presented below. Revenue is presented by basis of IFRS 15
("Revenue from Contracts") revenue recognition and by service line.
Inventory Monetisation Head office Consolidated Group
Unaudited Unaudited Unaudited
Six months to 30 June 2023 £'000 £'000 £'000
Revenue from continuing operations
Due Diligence fees 40 - 40
Inventory monetisation fees 37 - 37
Revenue from continuing operations 77 - 77
Operating loss from continuing operations impairment charges
(489) (1,492) (1,981)
As at 30 June 2023
Balance sheet
Assets 852 2,554 3,406
Liabilities (4,332) (1,182) (5,514)
Net assets /(liabilities) (3,480) 1,372 (2,108)
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 £26,000 is generated from usage of the Group's IM Platform and
services provided by the Group in connection with the IM transaction. This
£26,000 of inventory monetisation fees is recognised over time and the amount
recognised in the current financial period relates to the performance
obligations satisfised during the six-month period ended 30 June 2023.
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.
Comparative segmental reporting
Inventory Monetisation Investment Advisory Head office Consolidated Group
Unaudited Unaudited Unaudited Unaudited
Six months to 30 June 2022 £'000 £'000 £'000 £'000
Revenue
Due Diligence fees - - - -
Investment Advisory fees - 209 - 209
Revenue by operating segment - 209 - 209
Operating loss before acquisition related costs and impairment charges
(286) (584) (1,648) (2,518)
As at 30 June 2022
Balance sheet
Assets 347 993 6,917 8,257
Liabilities (4,023) (3,279) (4,993) (12,295)
Net assets /(liabilities) (3,676) (2,286) 1,924 (4,038)
6 Finance costs from continuing operations
6 months to 6 months to
30 June 2023 30 June 2022 Unaudited
Unaudited
£ '000 £ '000
Interest expense - loan notes/ convertible loan notes - 1,464
Interest expense - long-term borrowings 21 2
Other interest expense 1 -
Total finance costs 22 1,466
7 Operating loss from continuing operations
The Group's operating loss from continuing operations before impairment
charges has been arrived at after charging:
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
£ '000 £ '000
Amortisation of internally developed IM platform 39 13
Depreciation 2 2
Staff costs 912 1,001
Professional and legal fees 1,065 771
Contractor costs 183 120
Insurance 46 59
Training and recruitment costs 2 6
Long-term incentive plan ("LTIP") 44 -
In addition to the above, the Group incurred the following costs from
continuing operations relating to impairment charges as detailed below:
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
£ '000 £ '000
Impairment charges (note 12) 349 151
Total impairment charges 349 151
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:
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
£ '000 £ '000
Amortisation of intangible assets arising on acquisition (note 21) 442 406
Acquisition related earn-out payments - 747
Impairment charges - 765
Foreign currency translation gain reclassified to other comprehensive 62 -
income
Gain arising on the restructuring of the TradeFlow ownership (note 21) (718) -
(214) 1,918
8 Other operating income from continuing operations
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
£ '000 £ '000
Gain arising on settlement of outstanding creditor balance 376 -
Interest receivable on outstanding receivable balance 9 -
Other operating costs - (11)
Total other operating income from continuing operations 385 (11)
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 condensed
consolidated income statement of the Group for the six months ended 30 June
2023.
9 Taxation from continuing operations
Income tax expense for the period to 30 June 2023 primarily represents a tax
charge of £21,000 arising in respect of the gain on settlement of outstanding
creditor balance as described in note 8 above, as well as the interest charged
on income taxes during the six-month period ended 30 June 2023 in line with
the IAS 12 ("Income Taxes").
To date any accumulated tax losses resulting from net losses in the condensed
consolidated financial statement have not been recognised in the balance sheet
given the Group does not have a track record of generating profits against
which these accumulated losses could be offset.
10 Dividends
During the six-month period ended 30 June 2023 the Group did not pay a
dividend (six months to 30 June 2022: no dividend).
The Directors do not foresee a dividend being payable in the next financial
year as the Group will be concentrating on growing its market share and
enhancing its technology and capabilities.
11 Earnings / (loss) per share
The calculation of the basic earnings/(loss) per share ("EPS") is based on the
loss for the six-month period of £2,561,000 (2022 - loss £6,190,000) and on
a weighted average number of ordinary shares in issue of 55,136,008,130 (2022:
38,271,981,611). The basic EPS is (0.0046) pence (2022: (0.0162)).
The calculation of the basic EPS from continuing operations is based on the
loss for the six-month period from continuing operations of £2,376,000 (2022
- loss £3,580,000) and on a weighted average number of ordinary shares in
issue of 55,136,008,130 (2022: 38,271,981,611). The basic EPS from continuing
operations is (0.0043) pence (2022 - (0.0094) pence).
The calculation of the basic EPS from discontinued operations is based on the
loss for the six-month period from discontinued operations of £185,000 (2022
- loss £2,610,000) and on a weighted average number of ordinary shares in
issue of 55,136,008,130 (2022: 38,271,981,611). The basic EPS from
discontinued operations is (0.0003) pence (2022 - (0.0068) pence).
The Company has share warrants and employee share scheme options in issue as
at 30 June 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
detail of these share warrants and employee share options can be found in note
20.
30 June 2023 30 June 2022
Unaudited Unaudited
No. No.
Warrants and employee share options
Share warrants - issued 9,372,584,030 785,683,276
Share warrants - to be issued 2,250,000,000 5,086,149,157
Long-term incentive plan ("LTIP") options 1,195,831,529 -
Acquisition related earn-out share-based payments - 1,282,550,632
Total 12,818,415,559 7,154,383,065
No dilution per share was calculated for either period in the table above as
with the reported loss they are all anti-dilutive.
12 Intangible assets
Customer Relationships Brand CTRM Software AI Software Goodwill Internally developed platform Total
£'000 £'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 - - - - - 164 164
At 30 June 2022 4,829 205 1,429 425 2,199 2,708 11,795
Amortisation
At 1 January 2022 186 20 143 43 - 771 1,163
Charge for the period 193 21 148 44 - 13 419
At 30 June 2022 379 41 291 87 - 784 1,582
Impairment
At 1 January 2022 - - - - 800 1,773 2,573
Impairment charges - - - - 765 151 916
At 30 June 2022 - - - - 1,565 1,924 3,489
Net book value
At 30 June 2022 (Unaudited) 4,450 164 1,138 338 634 - 6,724
Cost or valuation
At 1 January 2023 - - - - - 3,669 3,669
Additions - - - - - 388 388
At 30 June 2023 - - - - - 4,057 4,057
Amortisation
At 1 January 2023 - - - - - 818 818
Charge for the period
- - - - - 39 39
At 30 June 2023 - - - - - 857 857
Impairment
At 1 January 2023 - - - - - 2,851 2,851
Impairment charges - - - - - 349 349
At 30 June 2023 - - - - - 3,200 3,200
Net book value
At 30 June 2023 (Unaudited) - - - - - - -
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 21.
Impairment assessment - Internally developed IM Platform
The Directors considered the continued current period 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 impairment
indicators and therefore, in accordance to IAS 36 ("Impairment of Assets"),
considered if at 30 June 2023 this intangible asset required further
impairment in relation to the additions made during the period, or if some so
the prior impairment charges could be reversed.
The full going concern statement, set out in note 4, 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 30 June 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 six-month period
ended 30 June 2023. The details of the calculation of the gain arising on the
restructuring of the TradeFlow operations recognised in these condensed
consolidated interim financial statements can be found in note 21.
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
30 June 2023 31 December 2022
Unaudited Audited
£ '000 £ '000
Trade receivables 14 7
Receivable from related party 2,000 -
Other receivables 908 1,179
Prepayments 11 33
2,933 1,219
The receivable from related party represents the £2,000,000 due from the
Group's major shareholder, TAG, that arose on the 30 June 2023 as a result of
TAG assuming the obligation, by way of a debt novation deed, of the Buyers (in
the TradeFlow Restructuring transaction) to pay the Company the remaining
£2,000,000 due under the share purchase agreement. This receivable from TAG
will be repaid by TAG in multiple tranches, with the final tranche being
payable by 31 January 2024. As the final repayment date is within 12 months of
the balance sheet date, this receivable has been classified as a current
asset. As set out in note 23, subsequent to 30 June 2023, and prior to the
release of these interim financial statements, TAG had paid the first
£500,000 to the Company in respect of the outstanding £2,000,000 receivable
as at 30 June 2023.
14 Trade and other payables
30 June 2023 31 December 2022
Unaudited Audited
£ '000 £ '000
Trade payables 1,715 2,209
Other payables 748 747
Current portion of long-term borrowings 106 158
Social security and other taxes 1,456 977
Accruals 263 402
Contract liabilities 47 94
4,335 4,587
15 Long-term Borrowings
30 June 2023 31 December 2022
Unaudited Audited
£ '000 £ '000
Bank borrowings (non-current portion) 741 748
741 748
On 13 October 2022, the Company announced that its subsidiary, Supply@ME
Technologies S.r.l, had 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 14 above.
16 Provisions
Post-employment benefits Provision for risks and charges Provision for VAT and penalties Total
£'000 £'000 £'000 £'000
At 31 December 2022 (Audited) 38 85 345 468
Fx translation adjustment (2) (2) (11) (15)
Carrying amount at 1 January 2023 36 83 334 453
Released to profit and loss - (15) - (15)
Provided for during the period 3 - - 3
Paid at the end of the employment relationship
(10) - - (10)
At 30 June 2023 (Unaudited) 29 68 334 431
Post-employment benefits
Post-employment benefits include severance pay and liabilities relating to
future commitments to be disbursed to employees based on their permanence in
the company. This entirely relates to the Italian subsidiary where severance
indemnities are due to each employee at the end of the employment
relationship. Post-employment benefits relating to severance indemnities are
calculated by estimating the amount of the future benefit that employees have
accrued in the current period and in previous years using actuarial
techniques. The calculation is carried out by an independent actuary using the
"Projected Unit Credit Method".
Provision for risks and charges
Provision for risks and charges includes the estimated amounts of penalties
for payment delays referring the tax payables recorded in the Italian
subsidiary financial statements which, at the closing date, are overdue.
Provision for VAT and penalties
In advance of the Group's first monetisation transaction, a number of advance
payments have been received by the Group's Italian subsidiary from potential
client companies in accordance with agreed contractual terms. These payments
have been recognised as revenue in accordance with local accounting rules.
These advance payments, for which an invoice has not yet been issued, have
been made exclusive of VAT. As at 30 June 2023, the Group has included a
provision relating to a potential VAT liability, including penalties, in
respect of these advance payments of £195,000 (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 30 June 2023, however there is a contingent asset of £138,000 as at 30
June 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 30 June
2023, however has been revalued to £139,000 as at 30 June 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 30 June 2023 that meet the criteria for a provision to
be recognised.
17 Share capital
Allotted, called up and fully paid shares
30 June 2023 31 December 2022
Unaudited Audited
No. 000 £ '000 No. 000 £ '000
Ordinary shares of £0.00002 each 61,157,163 1,223 56,621,568 1,132
Deferred shares of £0.04 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 61,444,441 5,988 56,908,846 5,897
New shares allotted during the interim period to 30 June 2023
New ordinary shares issued to Venus Capital in connection with Equity
Subscription Agreement
On the 28 April 2023, the Company and 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 at £0.0005 per share. The issue of
these new ordinary shares to Venus Capital was made over two tranches as set
out below:
- an initial tranche of 3,375,000,000 new ordinary shares for
gross proceeds of £1,687,500 (or £1,603,125 net of a 5% commission
chargeable by Venus Capital). This tranche of 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 for
proceeds of up to £562,500 gross (or up to £534,375 net a 5% commission
chargeable by Venus Capital). This tranche of new ordinary 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 the following share issues during the six-month period ended 30 June
2023:
- On 11 January 2023, the Company issued 67,471 of new ordinary
shares as an Open Offer Warrant conversion.
- On 31 January 2023, the Company issued 1,800,019 of new
ordinary shares as an Open Offer Warrant conversion.
- On 3 March 2023, the Company issued 494,481 of new ordinary
shares as an Open Offer Warrant conversion.
- On 5 May 2023, the Company issued 227 of new ordinary shares as
an Open Offer Warrant conversion.
- On 24 May 2023, the Company issued 1,145,518 of new ordinary
shares as an Open Offer Warrant conversion.
- On 6 June 2023, the Company issued 19,337,713 of new ordinary
shares as an Open Offer Warrant conversion.
- On 14 June 2023, the Company issued 12,749,982 of new ordinary
shares as an 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.
Reconciliation of allotted, called up and fully paid shares
As at 30 June 2023
No. 000 £ 000
As at 1 January 2023 (Audited) 56,908,846 5,897
New ordinary shares issued to Venus Capital in connection with Equity 4,500,000 90
Subscription Agreement dated 28 April 2023
New ordinary shares issued to fulfil the conversion of Open Offer Warrants 35,595 1
As at 30 June 2023 (Unaudited) 61,444,441 5,988
18 Financial instruments
Financial assets at amortised cost
Carrying value Fair value
30 June 2023 31 December 2022 30 June 2023 31 December 2022
Unaudited Audited Unaudited Audited
£'000 £'000 £'000 £'000
Cash and cash equivalents 97 257 97 257
Trade receivables 14 7 14 7
Receivable from related party 2,000 - 2,000 -
Other receivables 908 1,179 908 1,179
3,019 1,443 3,019 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 at amortised cost
Carrying value Fair value
30 June 2023 31 December 2022 30 June 2023 31 December 2022
Unaudited Audited Unaudited Audited
£'000 £'000 £'000 £'000
Long-term borrowings 847 906 847 906
Trade payables 1,715 2,209 1,715 2,209
Other payables 748 747 748 747
3,310 3,862 3,310 3,862
Valuation methods and assumptions:
The directors believe that the fair value of all financial liabilities at
amortised cost approximate to their carrying values.
The Group has no derivative financial instruments as at 30 June 2023 (31
December 2022: nil)
Valuation methods and assumptions:
Further information relating to the valuation of the derivative financial
instruments is available in note 23 of the annual financial statements for the
year ended 31 December 2022.
19 Financial risk management
Note 23 to the annual financial statements for the year ended 31 December 2022
include the Group's objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its financial
instruments and its exposure to interest rate risk, credit risk, foreign
exchange risk and liquidity risk.
20 Share-based payments
Share warrants issued to Mercator
During 2021 the Group entered into a funding facility with Mercator which
included the Group issuing loan notes in exchange for funding. These loan
notes were 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 during the year ended 31 December
2022 was 439,040,922, which together with the total of 522,791,511 issued
during the year ended 31 December 2021 takes the total number of share
warrants issued to Mercator as at 30 June 2023 to 961,832,433 (31 December
2022: 961,832,433). Details of the outstanding share warrants issued to
Mercator are set out in the table below. There have been no movement in these
share warrants during the six month period ended 30 June 2023.
Date of issue Number of warrants outstanding at 30 June 2023 Exercise price Expiry date
No.
1 October 2021 443,726,030 £0.00316 1 October 2024
1 November 2021 29,197,856 £0.00314 1 November 2024
1 December 2021 49,867,625 £0.00184 1 December 2024
4 January 2022 77,763,767 £0.00174 4 January 2025
2 February 2022 79,179,799 £0.00171 2 February 2025
4 March 2022 105,948,198 £0.00128 4 March 2025
10 June 2022 176,149,158 £0.00085 10 June 2025
Total 961,832,433
The total fair value of the above share warrants issued to Mercator has been
fully expensed in the prior periods, including £236,000 in the six-month
period ended 30 June 2022. No further costs have been recognised in the
current interim period ended 30 June 2023, and none of these warrants have
been converted during the same period.
Share warrants issued to Venus Capital under Capital Enhancement
Plan
On the 27 April 2022, the Group announced it had entered into a subscription
agreement with Venus Capital in connection with the Capital Enhancement Plan.
The subscription agreement specified that the Group 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 30 June
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").
The total fair value of the above share warrants to be issued in connection
with the Open Offer was £261,000 and this amount has been fully recognised
during 2022.
Subsequent to the issue of the Open Offer warrants, and prior to 30 June 2023,
an amount of 85,103,411 (31 December 2022: 49,508,000) of these warrants have
been converted in exchange for new ordinary shares and as at 30 June 2023
there is a balance of 235,751,597 Open Offer warrants which remained
outstanding. 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 Groups condensed consolidated statement of changes in equity
for the six months ended 30 June 2023.
Share warrants issued to Venus Capital under April 2023 Equity Subscription
Agreement
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 30 June 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. 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 ranged from of 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 take over) to the valuation date.
The total fair value of the above new share warrants issued to be Venus
Capital under the April 2023 Equity Subscription Agreement was £1,717,000 and
this amount has been fully recognised during the six-month period ended 30
June 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"). This amount was offset against the related share premium that
was created in connection with the relevant issue of ordinary share to Venus
Capital.
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 new equity subscription agreement that was signed with
Venus Capital on 28 April 2023, the final exercise date of the existing
8,175,000,000 warrants issued to Venus Capital during 2022, under the Capital
Enhancement Plan, were 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 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 30 June 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, the
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 warrants / Open Offer share issue. The remaining
fair value amount of £214,000 has been recognised in retained losses.
A summary of the share warrants outstanding as at 31 December 2022 is detailed
in the table below:
Number of warrants outstanding at 30 June 2023 Number of warrants outstanding at 31 December 2022
No. No.
Unaudited Audited
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 issued to retail shareholders 235,751,597 271,347,008
Share warrants to be issued to Venus Capital 2,250,000,000 -
Total 11,622,584,030 9,408,179,441
A summary of the fair value of the share warrants recorded during the period
are detailed in the table below:
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
£'000 £'000
Share warrants issued to Mercator - 236
Share warrants issued to Venus - 3,019
Share warrants issued to retail shareholders - -
Share warrants to be issued to Venus Capital 1,717 -
Change in fair value due to extension of expiry date of existing share 346 -
warrants issued to Venus Capital and retail shareholders in prior periods
Total 2,063 3,255
Employee share scheme awards
October 2022 Employee share scheme
On 31 October 2022, the Group awarded an long-term incentive plan ("LTIP")
conditional on performance conditions to certain employees, being the
achievement of specified Total Shareholder Return ("TSR") (market condition)
performance, as well as continued employment. The TSR performance relates 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
price 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. In addition to
the satisfaction of the TSR performance condition, the Group's Remuneration
Committee must also be satisfied that the potential level of vesting of the
LTIP is appropriate in all circumstances.
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 two 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 total
share-based payment charge recognised in the condensed consolidated income
statement for the six month period ended 30 June 2023 was £33,000 (the six
months to 30 June 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:
2023 2022
No. No.
Outstanding at 1 January (audited) 874,783,094 -
Conditionally awarded in period - -
Exercised during the period - -
Forfeited or expired in period (22,500,000) -
Outstanding at 30 June (unaudited) 852,283,094 -
Exercisable at 30 June (unaudited) - -
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, the achievement of performance conditions relating to the
specified Total Shareholder Return ("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 the 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. For the award to
vest the Group's Remuneration Committee must also be satisfied that the
inventory was monetised on acceptable commercial terms.
As with the October 2022 LTIP award in addition to the satisfaction of the
performance conditions set out above, the Group's Remuneration Committee must
also be satisfied that the potential level of vesting of the LTIP is
appropriate in all circumstances.
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 two 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 total
share-based payment charge recognised in the condensed consolidated income
statement for the six month period ended 30 June 2023 was £11,000 (H1 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:
2023 2022
No. No.
Outstanding at 1 January (audited) - -
Conditionally awarded in period 343,548,435 -
Exercised during the period - -
Forfeited or expired in period - -
Outstanding at 30 June (unaudited) 343,548,435 -
Exercisable at 30 June (unaudited) - -
Acquisition related earn-out payments
The terms of the TradeFlow acquisition completed in July 2021 included related
earn-out payments that, which together with the initial cash payment and issue
of equity, form the total legal consideration agreed between the
parties.
This acquisition related earn-out payments are determined by reference to
pre-determined revenue milestone targets in each of the 2021, 2022 and 2023
financial years. These payments may be forfeited by the selling shareholders
should they, in certain circumstances, no longer remain employed prior to the
end of each earn-out period. As such, under the IFRS Interpretations
Committee's interpretation of paragraph B55 of IFRS 3 ("Business
Combinations"), the fair value of these earn-out payments have been accounted
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 intention to settle these
payments in equity, they were previously fair valued at the grant date in line
with IFRS 2 ("Share-based payments").
In connection with the TradeFlow Restructuring that was completed on the 30
June 2023, any future potential earn-out payments were offset against the
initial cash consideration amount and as such, no further acquisition related
earn-out amounts were recognised during the current interim period for the six
months ended 30 June 2023.
The expense recognised in the income statement in the comparative interim
period for the six months ended 30 June 2022 was £747,000, which represented
the estimated fair value of the earn-out payments based on managements
judgements at that time.
21 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 5).
Subsequently, on 30 June 2023 the Company announced that had entered into
relevant binding commercial agreements to complete the TradeFlow
Restructuring. Further details as to the rationale for the restructuring of
the TradeFlow ownership can be found in note 3 above. 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 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 a debt novation deed. The £2,000,000 will be repaid by TAG to SYME in
multiple tranches, with the final tranche being payable 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
interim financial statements for the six months ended 30 June 2023. During the
period from 1 January 2023 and up until the date of completion of the
TradeFlow Restructuing, 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 gain
arising on the restructuring of the TradeFlow operations referred to below) in
the current interim period ended 30 June 2023.
On the 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 value of the new 19%
investment of £352,000 was recognised on the balance sheet, together with the
£2,000,000 remaining consideration to be received from TAG. The difference
between these items resulted in a gain arising on the restructuring of the
TradeFlow operations recorded in the unaudited condensed consolidated interim
financial statements of £718,000.
Consistent with the full interim financial statements, the financial
information of the TradeFlow operations for the six-month period ended 30 June
2023 is unaudited. An audit of this financial information will be conducted as
part of the preparation of the annual financial statements for the year end 31
December 2023.
The results of the TradeFlow operations for the period are presented below:
6 months to 6 months to
30 June 2023* 30 June 2022
Unaudited Unaudited
£ '000 £ '000
Revenue 684 209
Administrative expenses (1,037) (775)
Other operating income 24 11
Operating loss before acquisition related costs, impairment charges and (329) (555)
costs/(gains) relating to the restructuring of the TradeFlow ownership
Amortisation of intangible assets (442) (406)
Acquisition related earn-out - (747)
Impairment - (765)
Foreign currency translation loss reclassified to other comprehensive (62) -
income
Gain arising on restructuring of TradeFlow ownership 718 -
Operating loss (115) (2,473)
Finance costs (145) (206)
Loss before tax (260) (2,679)
Deferred tax credit 75 69
Loss for the period (185) (2,610)
*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 6 months to
30 June 2023* 30 June 2022
Unaudited Unaudited
£ '000 £ '000
Net cash flow from operating activities (405) (1,305)
Net cash flow from investing activities - (1)
Net cash flow from financing activities 405 2,111
Net cash outflow - 805
*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 gain arising on the restructuring of the TradeFlow
ownership is shown below:
6 months to 6 months to
30 June 2023 30 June 2022
Unaudited Unaudited
£ '000 £ '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) -
Gain arising on the restructuring of the TradeFlow ownership 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:
30 June 2023* 31 December 2022
Unaudited Audited
£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 an 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 six-month
period ended 30 June 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.
22 Related party transactions
During the six-month period to 30 June 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 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 interim periods.
Alessandro Zamboni and The AvantGarde Group S.p.A ("TAG ") and its
subsidiaries
Alessandro Zamboni is the CEO of the Group and is also the sole director of
The AvantGarde Group S.p.A. As at 30 June 2023 TAG current holds 24.03% of the
Company's total ordinary shares in 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 service to be provided
to the Group. During the six month period ended 30 June 2023, the Group
incurred expenses of £25,000 (period ended 30 June 2022: £26,000) to TAG in
respect of this agreement.
During the six month period ended 30 June 2023, the Group also incurred costs
of £8,000 from TAG (period ended 30 June 2022: nil) in relation certain ICT
services provided.
As at 30 June 2023 there is an outstanding amount owed by the Group of
£16,000 to TAG in relation to the services outlined above (30 June 2022:
nil).
The TAG Group includes other companies which the Group had entered into
transactions with such as the Future of Fintech Srl. Alessandro Zamboni is
also the sole director of both this company. As at 30 June 2023 there is an
outstanding amount owed to the Group of £6,000 from Future of Fintech in
relation to severance pay accrued by former employees which has been
transferred to the Group by the related party (30 June 2022: £6,000).
TAG and TradeFlow Restrucutring
As set out in notes 3,13 and 21 above, 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 will be repaid by TAG to SYME in multiple tranches, with the
final tranche being payable by 31 January 2024. As at 30 June 2023 the full
£2,000,000 receivable was outstanding (30 June 2022: nil). As set out in
note 23, subsequent to 30 June 2023, and prior to the release of these interim
financial statements, TAG had paid the first £500,000 to the Company in
respect of the outstanding £2,000,000 receivable as at 30 June 2023.
TAG Unsecured Working Facility
As set out in note 3 above, 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 shall 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, of
which further details are set out above. 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 due date for repayment by the Company of amounts (if any) 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
30 June 2023, no funds had been received from TAG in respect of this facility.
As set out in note 23, subsequent to 30 June 2023, and prior to the release of
these interim financial statements, TAG had provided an amount of £245,000 in
relation to the £800,000 drawn down by the Company on the 30 June 2023 under
the amended TAG Unsecured Working Capital facility.
RegTech Open Project ("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 Open Project
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 six month period ended 30 June 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 30 June 2023 (30 June 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, the 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 ("APAC") region, for a total consideration of
£1,000,000 payable over a three-year period. As at 30 June 2023, no amounts
have been billed in respect of this contract.
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 six-month period
ended 30 June 2023 (six-month period ended 30 June 2022: £3,000).
23 Events occurring after the reporting period
Shares issued post 30 June 2023 relating to Open Offer Warrant Conversions
- On 5 July 2023, the Company announced the exercise of 9,150,232
Open Offer Warrants by certain Qualifying Shareholders, and the issue of
9,150,232 Open Offer Warrant Shares.
- On 17 August 2023, the Company announced the exercise of
8,676,602 Open Offer Warrants by certain Qualifying Shareholders, and the
issue of 8,676,602 Open Offer Warrant Shares.
- On 12 September 2023, the Company announced the exercise of
2,390,091 Open Offer Warrants by certain Qualifying Shareholders, and the
issue of 2,390,091 Open Offer Warrant Shares.
- On 26 September 2023, the Company announced the exercise of
2,245,089 Open Offer Warrants by certain Qualifying Shareholders, and the
issue of 2,245,089 Open Offer Warrant Shares.
TAG and TradeFlow Restrucutring
Subsequent to 30 June 2023, and prior to the release of these interim
financial statements, TAG had paid the first £500,000 to the Company in
respect of the outstanding £2,000,000 receivable as at 30 June 2023.
Pursuant to the Debt Novation Deed that was signed in connection with the
TradeFlow Restructuring and TAG assuming the £2,000,000 debt to the Company
from the Buyers, TAG agreed with the Company to settle the TAG Amount in three
tranches: £500,000 on 30 June 2023 (which, as at the as referred to above,
has been paid to the Company by TAG); £1,000,000 on 30 September 2023; and
£500,000 on 31 January 2024.
On 28 September 2023, the Company and TAG entered into an English law governed
side letter agreement ("Side Letter Agreement"), cast as a deed, in relation
to the outstanding TAG Amount, pursuant to which TAG agreed to pay to the
Company £1,000,000 on 31 October 2023, and £500,000 on 31 January
2024.
In signing the Side Letter Agreement, TAG has agreed to pay a 15% per annum
compounding rate of interest on the £1,000,000 of principal amount of the TAG
Amount for the period of 30 September 2023 to 31 October 2023, and shall incur
a 15% per annum compounding rate of interest on any outstanding principal
amount of the TAG Amount following the agreed payment dates.
TAG Unsecured Working Facility
Subsequent to 30 June 2023, and prior to the release of these interim
financial statements, TAG provided an amount of £245,000 in relation to the
funds drawn down by the Company, being £800,000, on the 30 June 2023 under
the amended TAG Unsecured Working Capital facility.
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.
Cautionary Statement
These Interim Results have been prepared in accordance with the requirements
of English Company Law and the liabilities of the Directors in connection with
these Interim Results shall be subject to the limitations and restrictions
provided by such law.
These Interim Results are prepared for and addressed only to the Group's
shareholders as a whole and to no other person. The Group, its Directors,
employees, agents, or advisers do not accept or assume responsibility to any
other person to whom these Interim Results are shown or into whose hands it
may come, and any such responsibility or liability is expressly disclaimed.
These Interim Results contain forward looking statements, which are
unavoidably subject to risk and uncertainty because they relate to events and
depend upon circumstances that will occur in the future. It is believed that
the expectations set out in these forward-looking statements are reasonable,
but they may be affected by a wide range of variables which could cause future
outcomes to differ from those foreseen. All statements in these Interim
Results are based upon information known to the Group at the date of this
report. Except as required by law, the Group undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise.
APPENDIX 2 - ENTRY INTO TOP-UP SHAREHOLDER LOAN AGREEMENT AND SIDE LETTER
AGREEMENT
Top-Up Shareholder Loan Agreement
On 28 September 2023, the Company and TAG entered into an English law governed
Top-Up Shareholder Loan Agreement, pursuant to which TAG shall provide,
subject to customary restrictions, the Top-Up Loan Facility of up to
£3,500,000 to cover the Company's working capital and growth needs up to 30
June 2025.
The Company may draw down on the Top-Up Facility on a monthly basis if the
Board assess (acting in good faith and in its sole and absolute discretion)
that 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. In
such circumstances, the Company may draw down an amount of the Top-Up Facility
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.
The due date for repayment by the Company of each respective amount (if any)
drawn under the Top-Up Shareholder Loan Agreement shall be five calendar years
(calculated on the basis of a year of 360 days) from the day on which the
funds are received by the Company subject to the relevant drawn down request.
Any sums drawn under the Top-Up Shareholder Loan Agreement shall attract a
non-compounding interest rate of 10% per annum, and any principal amount
(excluding accrued interest) outstanding on the relevant due date shall
attract a compounding interest rate of 15% per annum thereafter.
Pursuant to the Top-Up Shareholder Loan Agreement, the Company gave certain
customary warranties and undertakings to TAG, and TAG gave certain customary
warranties to the Company.
Side Letter Agreement
As disclosed in the Secondary Supplementary Prospectus published on 30 June
2023, the Company entered into an English law governed share purchase
agreement with the Buyers on 30 June 2023, pursuant to which, the Company sold
81% of the issued share capital of TradeFlow Capital Management Pte. Limited.
The £2,000,000 TAG Amount (as defined in the Second Supplementary Prospectus)
was novated from the Buyers to TAG on the terms of an English law governed
Debt Novation Deed entered into between the Company, the Buyers and TAG on 30
June 2023. Pursuant to the Debt Novation Deed, TAG agreed with the Company to
settle the TAG Amount in three tranches: £500,000 on 30 June 2023 (which, as
at the date of this announcement, has been paid to the Company by TAG);
£1,000,000 on 30 September 2023; and £500,000 on 31 January 2024. On 28
September 2023, the Company and TAG entered into an English law governed Side
Letter Agreement, cast as a deed, in relation to the outstanding TAG Amount,
pursuant to which TAG agreed to pay to the Company £1,000,000 on 31 October
2023, and £500,000 on 31 January 2024.
TAG has agreed to pay a 15% compounding rate of interest on the £1,000,000 of
principal amount of the TAG Amount for the period of 30 September 2023 to 31
October 2023, and shall incur a 15% compounding rate of interest on any
outstanding principal amount of the TAG Amount following the agreed payment
dates.
The entry by (i) the Company and TAG into the Top-Up Shareholder Loan
Agreement and (ii) the Company and TAG into the Side Letter Agreement each
constituted a material related party transaction for the purposes of DTR 7.3
and were, accordingly, voted upon by the independent Directors (excluding
Alessandro Zamboni, who, in each case, constituted a "related party" (as such
term is defined in IFRS)), and such independent Directors consider each such
material related party transaction in respect of the Top-Up Shareholder Loan
Agreement and the Side Letter Agreement to be fair and reasonable from the
perspective of the Company and its Shareholders who are not a related party.
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