TIDMMSYS
RNS Number : 7772Z
Microsaic Systems plc
16 January 2024
16 January 2024
Microsaic Systems plc
("Microsaic" or the "Company")
Final Results for the year ended 31 December 2022
Microsaic Systems plc (AIM: MSYS), the developer of
micro-electronic instruments and analytical solutions, is pleased
to announce its audited financial results for the year ended 31
December 2022 ("FY22"). The Company's FY22 Annual Report is
included at the end of this announcement and is now available on
the Company's website at www.microsaic.com .
The Company will make a further announcement in due course to
confirm the posting of its FY22 Annual Report to shareholders who
have requested information in hard copy, along with notice of the
Company's next annual general meeting.
Financial Highlights
-- Total revenues increased 73% on the previous year to GBP1.57m
(2021: GBP0.91m) of which DeepVerge comprised GBP1.29m (2021:
GBP0.39m);
-- Other operating income of GBPnil (2021: GBP67k);
-- Operating expenses increased to GBP3.27m (2021: GBP2.48m)
including costs in relation to the impairment of related party debt
of GBP1.13m (2021: GBPnil);
-- Adjusted EBITDA* loss of GBP2.04m (2021: GBP1.77m
-- Loss before tax of GBP2.53m (2021: GBP3.40m) after providing for:
o Impairment of related party debt of GBP1.13m (2021:
GBPnil);
o Share-based payments of GBP0.23m (2021: GBP1.36m);
o Depreciation and amortisation of GBP281k (2021: GBP199k);
o Professional fees of GBPNil (2021: GBP66k) relating to
corporate activities;
-- Cash and cash equivalents as at 31 December 2022 of GBP1.24m (2021: GBP3.46m).
*EBITDA before share-based payments and professional fees
relating to corporate activities
Post-year end events:
-- Supply chain issues that had restricted production of mass
spectrometry MID and MIDas units in 2022 have now been resolved.
Production restarted during mid-2023, with unit orders from
existing and new distributor appointments resulted in shipment of 5
units by the end of 2023.
-- Development and launch of MicrylaMiD(TM) , a real-time inline
detection of Acrylamide in food to comply with EU and UK regulatory
requirements for the monitoring of this carcinogenic substance in
food and beverage production.
-- MiDex and ProteinID commercialisation as part of a solutions
package for detection of molecules in pharma bioprocessing
development has begun.
-- New website launch, rebranding and marketing strategy
resulted in an uplift in lead generation for the new solutions
being offered by Microsaic.
-- On 19 April 2023, DeepVerge announced that it could not meet
its obligation to creditors and that a payment plan had been
tentatively agreed for its outstanding liability to Microsaic.
However, on 26 June 2023, DeepVerge announced that it would no
longer support the ongoing costs of its subsidiaries and is seeking
to realise whatever value is possible through the sale of one or
more of the Labskin, Modern Water and Glanaco business units and
DeepVerge's shares were suspended from trading on AIM. As at 26
June 2023, the balance owed by DeepVerge to Microsaic stood at
GBP1,351,894. Following the deduction of VAT on the amount
outstanding of GBP221,725, which was subsequently recovered from
HMRC, the net of VAT potential bad debt is GBP1,130,169. As no
further receipts from DeepVerge are expected, this amount of
GBP1,130,169 has been charged in full within expected credit losses
as at 31 December 2022. The results for 2022, subsequent
performance in 2023 and the prospects for 2024 and beyond therefore
need to be considered on the basis that no further payments and no
further revenues are expected to be received from DeepVerge.
-- As a consequence of the above mentioned related party issues
a delay in the publication of these accounts was announced on 29
June, resulting in the shares being suspended from trading on AIM
with effect from 3 July 2023, pending publication of the FY22
annual report and accounts.
-- On 25 September 2023 it was announced that Gerry Brandon,
Executive Chairman, had resigned and left the Company and the Board
with immediate effect, to be replaced as Executive Chairman by Bob
Moore, who joined the Company as a Non-Executive Director in March
2022.
-- As announced on 3 November 2023, and explained in further
detail in the shareholder circular dated 4 December 2023, the
Company has begun a very significant cost reduction exercise which
is expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external
contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading
relationships. Ongoing activities are expected to include recently
redesigned and developed PFAS and ProteinID technologies which have
undergone internal testing ahead of commercial field trials, and
which the Company now expects to bring to market through
partnership agreements in 2024.
-- The company has engaged in a fundraising process, to provide
working capital for the above transition and also to enable it to
acquire from DeepVerge the trade and assets relating to MicroTox(R)
bio-reagents manufacture and supply of associated testing equipment
known as the Modern Water business. It is the view of the directors
that this acquisition will have a positive impact on cash in the
near future and allow Microsaic to capitalise on the synergies
between the two technologies. In order to facilitate this
fundraise, resolutions put to shareholders at a general meeting on
29 December 2023 have been passed to consolidate every 625 Existing
Ordinary Shares of 0.01p into one Consolidated Ordinary Share of
6.25p; to sub-divide each Consolidated Ordinary Share into one New
Ordinary Share of 0.001p and one Deferred Share of 6.249p; and to
issue 200,000,000 New Ordinary Shares. Firm commitments have been
obtained for subscriptions in the New Ordinary Shares, subject to
restoration to trading of the company's ordinary shares on AIM.
Outlook
The impact of the related party issues, in particular the
failure of DeepVerge to pay the GBP1.13m owed to Microsaic, has
fundamentally changed the outlook for the Company. The very
significant cost reduction exercise announced on 3 November 2023 is
expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external
contractors) to maintain production of the current mass
spectrometer machines, the commercialisation of PFAS and ProteinID
technologies and the continuation of existing trading
relationships, but in a very different position than expected at
the start of 2023.
Revenues and gross margins grew in 2022, despite the dramatic
shortfall of electronic components available for orders of mass
spectrometer units. Only 5 units were shipped in 2022 before year
end compared to 19 in 2021. The supply chain has since improved and
production restarted in May 2023, with 5 units shipped by the end
of 2023. As of the end of 2023, there is a prospective equipment
sales pipeline of approximately 19 units in addition to service and
spares revenue. It is unlikely that all of these prospective sales
will become firm orders. In order to facilitate these sales, it is
necessary that the company raises additional funds. Subject to
restoration to trading on AIM, the company has secured commitments
for funding which will allow current operations together with
operations after a proposed acquisition to continue on a much
reduced cost base.
The proposed acquisition is an opportunity to acquire the trade
and assets comprising the Modern Water business from DeepVerge
relating to the Microtox(R) bio-reagent product and its associated
testing equipment. The majority of the work undertaken by the
Company for DeepVerge related to the re-design of the MicroTox(R)
LX test equipment, installation and commissioning of Modern Water
equipment at customer sites and improvements to the Modern Water
virus detection system, making the Company well positioned to
understand the Modern Water business. Based on the firm commitments
received in the fundraising, the directors intend to pursue this
acquisition, which should provide the company with an additional,
cash generating, revenue stream. As the enlarged Company matures,
opportunities to collaborate and synergies are expected to be
realised between the two revenue streams.
The Company is in the process of raising sufficient funds to
facilitate these sales, to allow operations to continue on a much
reduced cost base and to remain admitted and trading on AIM. As
announced today, the Company successfully secured conditional
funding commitments to raise gross proceeds of approximately
GBP2.1m gross (GBP1.8m net) through a placing of 169,000,000 New
Ordinary Shares with new and existing investors at an issue price
of 1.25 pence per New Ordinary Share.
Bob Moore, Executive Chairman of Microsaic Systems plc,
commented
"We would like to thank our existing shareholders and new
investors for the support they have shown for the refinancing of
the Company and its growth plans. We are delighted that the Company
intends to retain its AIM listing and, following admission, have
the necessary financing to both complete an acquisition and provide
capital to invest in and develop the enlarged business. The assets
being acquired are complementary to the existing Microsaic business
model. Using the acquired assets, we intend to restart the
manufacture of Microtox(R) bioreagents for water testing in the
near term. Post acquisition, we will seek positive cash generation
from these new activities and look to benefit from growth
opportunities and potential synergies over the longer term.
Microsaic's cost base has been dramatically reduced and we will now
operate a much leaner, more efficient model."
Enquiries:
Microsaic Systems plc +44 (0) 20 3657 0050
Bob Moore, Acting Executive Chairman via TPI
Singer Capital Markets (Nominated
Adviser and Joint Broker)
Aubrey Powell / Angus Campbell
/ Oliver Platts +44 (0)20 7496 3000
Turner Pope Investments (TPI)
Limited (Joint Broker and Placing
Agent)
Andy Thacker / James Pope +44 (0) 20 3657 0050
About Microsaic Systems
Microsaic has over 20 years' experience in microelectronics and
development of instrumentation. The Company has a robust and
innovative patent portfolio in cutting-edge technology designed and
developed for "Industry 4.0" application serving markets in
diversified Industries, Human and Environmental Health. Microsaic's
system solutions have enabled analytical detection and
characterisation at the point-of-need, whether within a
conventional laboratory setting, or within a bioprocessing facility
for continuous detection of data at multiple steps in the process
workflow.
Microsaic's products and systems are commercially available
through global markets via a network of regional and local
partners, targeting its core laboratory, manufacturing and point of
need applications .
CHAIRMAN'S STATEMENT
For the year ended 31 December 2022
Dear Shareholders,
I am pleased to present the Company's annual report and accounts
for the year ended 31 December 2022. The year continued to be a
transitional one. This was from sales of our existing technologies
to maturing innovative research and development of miniaturised
mass spectrometers with enhanced capabilities targeted at PFAS
(forever chemicals) detection, ProteinID analysis for bio-pharma
drug manufacturing, and for Acrylamide (a potentially carcinogenic
chemical) detection in high temperature cooking of foods. This will
result in a more commercially focused business, seeking to generate
new revenues from a wider range of capabilities for sales and
services provided to customers. There had been higher demand for
mass spectrometer equipment from existing clients but supply chain
shortages of microchips caused by the Covid pandemic lowered our
ability to meet the demand. This has been rectified post year
end.
The revenues for the year were GBP1.57m, representing an uplift
from the GBP906k achieved in 2021. However, of this revenue, sales
to the related party DeepVerge plc ("DeepVerge"), as set out in
note 28, totalled GBP1,248,828 (plus VAT) of which they have only
settled GBP118,659 (plus VAT) leaving a balance of GBP1,130,169
(plus VAT) outstanding. On 19 April 2023, DeepVerge announced that
it could not meet its obligation to creditors and that a payment
plan had been tentatively agreed with Microsaic. However, on 26
June 2023, DeepVerge plc announced that it would no longer be able
to support its subsidiaries and was anticipating a sale or
liquidation of these assets. The impact of this on the Company has
been recognised as an adjusting event after the reporting date with
GBP1,130,169 charged as an impairment of related party debt. E
xcluding revenues from DeepVerge, revenues for 2022 were only
GBP318,869, significantly below the prior year. The results for
2022, subsequent performance in 2023 and forecasts for 2024 and
beyond therefore need to be considered on the basis that no further
payments and no further revenues are expected to be received from
DeepVerge.
The Company ended the year with GBP1.24m in cash, trade
receivables net of expected credit losses of GBP389k and
corporation tax credits receivable of GBP0.51m. At 8 January 2024
cash stood at GBP148k.
Given the significant changes to the business following the year
end, resulting mainly from the problems with DeepVerge as outlined
above, shareholders' attention is drawn to the post year end events
outlined below and the risks highlighted in the Directors' Report
and the material uncertainty in the going concern assessment.
Financial Highlights:
-- Total revenues increased 73% on the previous year to GBP1.57m
(2021: GBP0.91m) of which DeepVerge comprised GBP1.29m (2021:
GBP0.39m);
-- Other operating income of GBPnil (2021: GBP67k);
-- Operating expenses increased to GBP3.27m (2021: GBP2.48m)
including costs in relation to the impairment of related party debt
of GBP1.13m (2021: GBPnil);
-- Adjusted EBITDA* loss of GBP2.04m (2021: GBP1.77m
-- Loss before tax of GBP2.53m (2021: GBP3.40m) after providing for:
o Impairment of related party debt of GBP1.13m (2021:
GBPnil);
o Share-based payments of GBP0.23m (2021: GBP1.36m);
o Depreciation and amortisation of GBP281k (2021: GBP199k);
o Professional fees of GBPNil (2021: GBP66k) relating to
corporate activities;
-- Cash and cash equivalents as at 31 December 2022 of GBP1.24m (2021: GBP3.46m).
*EBITDA before share-based payments and professional fees
relating to corporate activities
Post-year end events:
-- Supply chain issues that had restricted production of mass
spectrometry MID and MIDas units in 2022 have now been resolved.
Production restarted during mid-2023, with unit orders from
existing and new distributor appointments resulted in shipment of 5
units by the end of 2023.
-- Development and launch of MicrylaMiD(TM) , a real-time inline
detection of Acrylamide in food to comply with EU and UK regulatory
requirements for the monitoring of this carcinogenic substance in
food and beverage production.
-- MiDex and ProteinID commercialisation as part of a solutions
package for detection of molecules in pharma bioprocessing
development has begun.
-- New website launch, rebranding and marketing strategy
resulted in an uplift in lead generation for the new solutions
being offered by Microsaic.
-- On 19 April 2023, DeepVerge announced that it could not meet
its obligation to creditors and that a payment plan had been
tentatively agreed for its outstanding liability to Microsaic.
However, on 26 June 2023, DeepVerge announced that it would no
longer support the ongoing costs of its subsidiaries and is seeking
to realise whatever value is possible through the sale of one or
more of the Labskin, Modern Water and Glanaco business units and
DeepVerge's shares were suspended from trading on AIM. As at 26
June 2023, the balance owed by DeepVerge to Microsaic stood at
GBP1,351,894. Following the deduction of VAT on the amount
outstanding of GBP221,725, which was subsequently recovered from
HMRC, the net of VAT potential bad debt is GBP1,130,169. As no
further receipts from DeepVerge are expected, this amount of
GBP1,130,169 has been charged in full within expected credit losses
as at 31 December 2022. The results for 2022, subsequent
performance in 2023 and the prospects for 2024 and beyond therefore
need to be considered on the basis that no further payments and no
further revenues are expected to be received from DeepVerge.
-- As a consequence of the above mentioned related party issues
a delay in the publication of these accounts was announced on 29
June, resulting in the shares being suspended from trading on AIM
with effect from 3 July 2023, pending publication of the FY22
annual report and accounts.
-- On 25 September 2023 it was announced that Gerry Brandon,
Executive Chairman, had resigned and left the Company and the Board
with immediate effect, to be replaced as Executive Chairman by Bob
Moore, who joined the Company as a Non-Executive Director in March
2022.
-- As announced on 3 November 2023, and explained in further
detail in the shareholder circular dated 4 December 2023, the
Company has begun a very significant cost reduction exercise which
is expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external
contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading
relationships. Ongoing activities are expected to include recently
redesigned and developed PFAS and ProteinID technologies which have
undergone internal testing ahead of commercial field trials, and
which the Company now expects to bring to market through
partnership agreements in 2024.
-- The company has engaged in a fundraising process, to provide
working capital for the above transition and also to enable it to
acquire from DeepVerge the trade and assets relating to MicroTox(R)
bio-reagents manufacture and supply of associated testing equipment
known as the Modern Water business. It is the view of the directors
that this acquisition will have a positive impact on cash in the
near future and allow Microsaic to capitalise on the synergies
between the two technologies. In order to facilitate this
fundraise, resolutions put to shareholders at a general meeting on
29 December 2023 have been passed to consolidate every 625 Existing
Ordinary Shares of 0.01p into one Consolidated Ordinary Share of
6.25p; to sub-divide each Consolidated Ordinary Share into one New
Ordinary Share of 0.001p and one Deferred Share of 6.249p; and to
issue 200,000,000 New Ordinary Shares. Firm commitments have been
obtained for subscriptions in the New Ordinary Shares, subject to
restoration to trading of the company's ordinary shares on AIM.
Corporate governance
Good corporate governance is important to support our future
growth. The Board has extensive experience in publicly listed
companies and is committed to maintaining the highest standards
where possible. An independent Non-Executive Director, Bob Moore,
was appointed in March 2022, although following the resignation of
the former Executive Chairman Mr Brandon on 25 September 2023, Mr
Moore was appointed as Executive Chairman. Provided that the
Company continues to trade on AIM, the Board intends to recruit a
further independent Non-Executive Director and at least one
Executive Director. Assuming the proposed fundraising and
acquisition completes, Mr Moore will be replaced by a Non-Executive
Chairman and he will assume the role of Chief Executive until
further notice.
Outlook
The impact of the related party issues, in particular the
failure of DeepVerge to pay the GBP1.13m owed to Microsaic, has
fundamentally changed the outlook for the Company. The very
significant cost reduction exercise announced on 3 November 2023 is
expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external
contractors) to maintain production of the current mass
spectrometer machines, the commercialisation of PFAS and ProteinID
technologies and the continuation of existing trading
relationships, but in a very different position than expected at
the start of 2023.
Revenues and gross margins grew in 2022, despite the dramatic
shortfall of electronic components available for orders of mass
spectrometer units. Only 5 units were shipped in 2022 before year
end compared to 19 in 2021. The supply chain has since improved and
production restarted in May 2023, with 5 units shipped by the end
of 2023. As of the end of 2023, there is a prospective equipment
sales pipeline of approximately 19 units in addition to service and
spares revenue. It is unlikely that all of these prospective sales
will become firm orders. In order to facilitate these sales, it is
necessary that the company raises additional funds. Subject to
restoration to trading on AIM, the company has secured commitments
for funding which will allow current operations together with
operations after a proposed acquisition to continue on a much
reduced cost base.
The proposed acquisition is an opportunity to acquire the trade
and assets comprising the Modern Water business from DeepVerge
relating to the Microtox(R) bio-reagent product and its associated
testing equipment. The majority of the work undertaken by the
Company for DeepVerge related to the re-design of the MicroTox(R)
LX test equipment, installation and commissioning of Modern Water
equipment at customer sites and improvements to the Modern Water
virus detection system, making the Company well positioned to
understand the Modern Water business. Based on the firm commitments
received in the fundraising, the directors intend to pursue this
acquisition, which should provide the company with an additional,
cash generating, revenue stream. As the enlarged company matures,
opportunities to collaborate and synergies are expected to be
realised between the two revenue streams.
The Company is in the process of raising sufficient funds to
facilitate these sales, to allow operations to continue on a much
reduced cost base and to remain admitted and trading on AIM. As
announced today, the Company successfully secured conditional
funding commitments to raise gross proceeds of approximately
GBP2.1m gross (GBP1.8m net) through a placing of 169,000,000 New
Ordinary Shares with new and existing investors at an issue price
of 1.25 pence per New Ordinary Share.
Bob Moore
Executive Chairman
15 January 2024
STRATEGIC REPORT
For the year ended 31 December 2022
Progress during 2022
The results for 2022, subsequent performance in 2023 and
prospects for 2024 and beyond need to be considered on the basis
that no further payments and no further revenues are expected to be
received from DeepVerge. The impact of these events overshadows the
successful technical, commercial and strategic developments in 2022
and has forced the Company to fundamentally restructure its cost
base and operating model to survive into 2024.
2022 revenues were GBP1.57m, an increase of 73% on the prior
year (2021: GBP0.91m). The introduction of consultancy services (
comprising science and engineering consultancy, laboratory services
and monitoring services) in 2022 provided total services revenues
of GBP1.22m (2021: GBP0.06m). Product sales, specifically of mass
spectrometer units, were reduced to 5, resulting in revenue of just
GBP0.21m (2021: GBP0.62m) due to the impact of supply chain
shortages of electronic components and consumables revenue also
fell to GBP0.12k (2021: GBP0.37m). The supply chain issues have
been resolved during 2023.
Of this revenue, sales to the related party DeepVerge, as set
out in note 28, totalled GBP1,248,828 (plus VAT) of which they have
only settled GBP118,659 (plus VAT) leaving a balance of
GBP1,130,169 (plus VAT) outstanding. On 26 June 2023, DeepVerge plc
announced that it would no longer be in a position to support its
subsidiaries, and was anticipating a sale or liquidation of those
assets. This has been recognised as an adjusting event after the
reporting date with GBP1,130,169 charged as an impairment of
related party debt.
Gross margin overall was 61% (2021: 42%), increasing due to the
shift towards consultancy service revenue. Services gross margin
was in line with the overall margin and averaged 61% following the
introduction of consultancy services ( comprising science and
engineering consultancy, laboratory services and monitoring
services) as well as product support services income (2021: 39%,
product support services only). Product gross margins averaged 46%
(2021: 31%) and consumables 79% (2021: 72%).
Operational Highlights
-- Microsaic's products and services in applications such as
water monitoring of chemicals and pathogens have been installed in
Ireland, UK, Japan and the US
-- Laboratory services for toxic shock, insulin and a range of
metabolites carried out under contract by Microsaic as mass
spectrometry services
-- Mass spectrometry units have been installed and demonstrated in mobile monitoring vehicles
-- March 2022: Bob Moore joined the Board. Bob is a UK qualified
lawyer and brings over 35 years' commercial and legal experience to
the Company
-- April 2022: New manufacturing services framework and an
initial contract worth GBP400k with Innovenn UK Limited, a division
of DeepVerge plc, supplying services for multi-sensor upgrades of
environmental and human health diagnostic equipment (although as
outlined above this revenue stream ceased in early 2023)
-- April 2022: Launch of Microsaic Services Division providing
integrated solutions in consultancy services ( comprising science
and engineering consultancy, laboratory services and monitoring
services ) that include analytical and AI software service
programmes designed for the medical device, environmental,
aerospace and food industries
-- August 2022: Microsaic became an Authorised Partner of
Kingfield Electronics Limited for front-end research, development,
and engineering product development in scientific instrumentation
and micro-engineering adding these complementary services to its
existing offering of fully integrated turnkey solutions, box build,
printed circuit board assembly ("PCBA"), commissioning, final test,
service, retrofit and world-wide shipping logistics
-- September 2022: Microsaic in collaboration with DeepVerge
plc, was appointed to carry out mass spectroscopy-based sample
analysis over two-years in an environmental monitoring and
remediation project with MèreMer for its Blue Carbon Resilience
Flagship project. However, due to the issues outlined above at
DeepVerge, and the apparent failure of MèreMer to secure funding
for this project from at least one of its underlying clients, no
revenues are expected to result from this collaboration.
Operations
The Company revenues and gross margins grew in 2022, despite the
dramatic shortfall of electronic components for orders of mass
spectrometer units, down from 19 in 2021 to 5 units shipped before
year end. The supply chain has improved and production has begun
with mass spectrometer units delivered in Q3 and Q4 2023.
Strategic Focus
Microsaic serves Human Health, Environmental Health and
Diversified markets with equipment and design services for mass
detection technology, which can be used at the point of need
(including mobile testing capability) to drive better informed,
faster decisions in real time and to solve real-world toxic testing
problems.
Typical point of need markets and applications include process
analytical technology for the manufacture of high value biologic
drugs, detection of PFAS chemicals and food contamination
screening. The Company is also developing a longer-term capability
in point of care diagnostics. The Company is also supporting the
development of the Intelligent Knife (iKnife) by supplying Imperial
College London with mobile mass spectrometer capability to complete
the development of this innovative technology for cancer removal
surgery.
Microsaic's technology can also be used in standard laboratory
settings, for example in the established pharmaceutical, academic
and chemical industries.
Business Model
In 2022, the Company made a successful transition from reliance
on the sale of its Mass Spectrometer instruments, consumables and
spare parts to a balanced including solutions for end-users such as
design, development and enhancement of third-party equipment to
integrate with partner hardware and software.
Whilst the intention remains to pursue this more balanced
approach, the immediate priority in 2024 is to meet demand for our
traditional products and services whilst supporting the roll out of
new solutions such as PFAS and ProteinID.
Stakeholder Engagement
Section 172 of the Companies Act 2006 ("S.172") recognises that
companies are run for the benefit shareholders, but that the
long-term success of a business is dependent on maintaining
relationships with stakeholders and considering the external impact
of the Company's activities.
Microsaic's key stakeholders are our employees, shareholders,
partners (including distributors, OEMs and collaborators on new
products), and our key suppliers such as our manufacturing
contractor and key R&D subcontractors. By working with all
stakeholder groups, the Company can unlock the potential of the
business and maximise the value created. The key principles and
values adopted by the Company are detailed under Principle 8 of the
QCA Corporate Governance Code (2018).
For Microsaic, engagement with our key stakeholders is part of
how we operate as a business. Actively seeking to understand the
concerns and aspirations of our employees, how we can better engage
with them, how we can work more closely with the partners who
distribute our products and those that we collaborate with, plus
the challenges faced by our manufacturing partner and other
suppliers.
The Company has shifted the focus to growth in commercial sales
across both product and service offerings targeting solutions to
meet the requirements of existing clients and investigating markets
to capitalise on the value of the new business model. The Directors
continue to engage with shareholders and key stakeholders keeping
them up to date on progress.
Under S.172, a company's directors have a duty to discharge
their responsibilities having regard to:
a) the likely consequences of any decision in the long term -
the focus of the Board during 2022 was the continuity towards a
more commercial focus with emphasis on delivery of solutions,
beyond equipment sales.
b) the interests of the company's employees - During the year
under review, some personnel changes were made to address the more
commercial focus of the business model. These changes were made
with full consultation with team members. We ensured that
supportive HR systems were in place and decisions on new personnel
were done in collaboration with the team. Although the changes
announced in November 2023 included a consultation process, they
have resulted in unavoidable redundancies.
c) the need to foster the company's business relationships with
suppliers, customers and others - Customer satisfaction and trust
are critical for our success. By providing a high quality product,
solution or service to meet those demands, we increase customer
satisfaction. Over a 21 year period, this has allowed us to build
trust within the community we operate in and with our customers
showing our commitment to quality and continuous improvement. This
includes our ongoing commitment to ensure that our suppliers
continued to be paid on time.
d) the impact of the company's operations on the community and
the environment -The Company meets operational efficiencies and
systematic processes that come with our certification of ISO 9001
leading indirectly to positive community and environmental
impacts.
As part of the ISO 9001 process, we are required to consistently
monitor and manage our operations. This has led to improvements in
efficiency and effectiveness, which reduces waste, energy
consumption, and our overall environmental footprint.
ISO 9001 requires us to have a process for selecting and
managing suppliers. This has led us to selecting suppliers who also
have a commitment to sustainability, thus extending the
environmental and community impact.
ISO 9001 requires us to identify and address risks in our daily
operations, which indirectly benefit the environment and the
community by preventing incidents that could have negative
effects.
e) the desirability of the company maintaining a reputation for
high standards of business conduct - the Company acted in a
professional manner during 2022 liaising with key stakeholders and
followed the principles and values of the Company as outlined in
the Corporate Governance Report.
f) the need to act fairly as between members of the company -
the Board treated shareholders fairly and made sure it kept them up
to date through regular press releases. Significant shareholders
were given the opportunity to meet and discuss with senior
management and members of the Board.
Performance Measurement
The ongoing performance of the Company is managed and monitored
using several key financial and non-financial performance
indicators as detailed below:
Revenue Year to Year to Increase/
31 December 31 December (Decrease)
2022 2021
GBP GBP GBP
--------------------------------- ------------- ------------- ------------
Products 206,915 617,613 (410,698)
Consumables and spare parts 137,397 230,832 (93,435)
Product support services income 54,803 58,431 (3,628)
Consultancy services income 1,168,582 - 1,168,582
--------------------------------- ------------- ------------- ------------
Total 1,567,697 906,876 660,821
--------------------------------- ------------- ------------- ------------
The Company's revenue performance strengthened again in 2022
following the development of new service revenues and increased by
73% to GBP1.57m (2021: GBP0.91m) of which DeepVerge comprised
GBP1.29m (2021: GBP0.39m). Revenue comprises the sale of products,
consumables and spare parts, product support services income and
the new consultancy services income ( comprising science and
engineering consultancy, laboratory services and monitoring
services ). The income arising from DeepVerge, including the vast
majority of the consultancy services income, ceased in early 2023.
The Board reviews trading results and monitors cash on a regular
basis.
Profit/(Loss) & Cash Metrics Year to Year to 31 Increase/
31 December December (Decrease)
2022 2021
GBP GBP %
------------------------------------------ -------------- -------------- ------------
Loss from operations before share-based ( 2,034,235
payments, interest, and tax (2,316,594) ) 14
Net cash used in operating and investing
activities (2,345,284) (1,937,263) 21
Cash and cash equivalents 1,241,480 3,464,876 (64)
------------------------------------------ -------------- -------------- ------------
The Company's profitability is monitored against budget on a
monthly basis. The 14% increase in the loss from operations before
share-based payments is driven directly by the impairment of
related party debts. Revenue increased year on year while other
operating expenses decreased and there were no further costs in
relation to corporate transactions. The Company monitors its cash
position closely, and forecasts are updated on a regular basis.
Non-financial key performance indicators measure a number of key
areas, including commercial and operational targets, such as number
of sales orders, unit production, new products transferred to
manufacturing, number of collaborations, agreements signed with new
customers and quality measures from the Company's ISO 9001:2015
system. Key points to note are:
-- Sales shipments of MS instruments were 74% below last year, due to supply chain issues;
-- Microsaic worked with its manufacturing partner to try to
mitigate production levels. Due to constraints on accessing
semi-conductors for the production of full mass spectrometer units,
we were able to meet some demands for spare parts for existing
units in the field for support while we waited for production to
restart. This was restarted in May 2023;
-- On the customer front, two development project agreements were entered into during the year;
-- ProteinID was successfully transferred to manufacturing,
although significantly later than originally planned while work on
the launch of our LC-MS family of products was placed on hold.
Financial Results - 2022
Income and expenditure
Total revenue of GBP1,576,697 increased 73% compared to the
prior year (2021: GBP906,876). The maiden consultancy services (
comprising science and engineering consultancy, laboratory services
and monitoring services ) revenues were GBP 1,168,582 (2021: nil).
Product revenues of GBP206,915 (2021: GBP617,613) and product
support services revenues of GBP54,803 (2021: GBP58,431) decreased
by 67% and 6% respectively. Consumables revenue of GBP 137,397
(2021: GBP230,832) decreased by 60%.
Gross profit in 2022 of GBP949,367 (2021: GBP380,751) rose by
149% over last year following both greater revenue overall and a
shift in the revenue mix towards the new service lines with higher
margins. The gross margin of 61% (2021: 42%) reflects this change
in revenue mix and services margins. The new accounting policy in
respect of cost of sales of product support services and cost of
sales of consultancy services is set out in note 1 and includes an
allocation of wages to cost of sales. The effect on the prior
period is set out in note 32.
Other operating income was GBPnil (2021: GBP67,283). In the
prior year this related to use of the Coronavirus Job Retention
Scheme grant, co-development income and an insurance claim
income.
Total operating expenses (excluding share-based payments) of
GBP3,265,961 (2021: GBP2,482,169), increased by GBP783,792 (32%)
and the main increases and decreases are set out in the table
below. A significant unforeseen cost in the year was the impairment
of trade receivables arising from subsidiaries of DeepVerge plc, as
the result of the RNS issued by that company on 26 June 2023. This
has increased the loss for the year by GBP1,130,169, being the
total amount of outstanding debt less recoverable VAT. Excluding
this, total operating expenses (excluding share based payments) of
GBP2,135,792 (2021: GBP2,416,380) reduced by 346,377 or 14% on the
prior year, and the main increases and decreases are set out in the
table below.
The loss from operations for the year before share-based
payments rose by 14% over last year to GBP2,316,594 (2021:
GBP2,034,235).
Share based payments of GBP234,749 are GBP1,129,015 lower than
the prior year (2021: GBP1,363,764). This reduction arises from the
issue of new options in February 2021 with no further options
awarded in 2022, and Brokers fees settled in shares in 2021 but not
in 2022.
Finance costs of GBP7,013 were higher than the prior year (2021:
GBP4,604). The entirety of this cost in 2022 relates to interest on
the lease liability.
Finance income of GBP23,423 increased compared with the prior
year (2021: GBP6,237) due to higher interest rates on bank deposits
offsetting reducing cash balances.
The tax credit on ordinary activities in the year was GBP246,224
(2021: GBP267,785). This comprises a tax credit of GBP261,312 for
2022 less a reduction in the tax credit from the prior year by
GBP15,088.
The total comprehensive loss for the year of GBP2,288,709 is a
27% decrease over the prior year (2021: GBP3,128,581). The decrease
in the total comprehensive loss by GBP839,872 was due chiefly to
the share-based payments decrease of GBP1,129,015 and the increase
in gross profit of GBP568,716 compared to the prior year offset by
the costs in relation to the impairment of related party debt of
GBP1.13m (2021: GBPnil). The basic loss per share fell by 36% from
0.056 pence in 2021 to 0.036 pence per share in 2022. This reflects
the 27% decrease in total comprehensive loss and the increase in
weighted average number of shares in issue of 14% (refer to note
10) as a result of the exercise of warrants and issue of fee shares
to certain Directors (refer to note 19).
Total operating expenses (excluding share-based payments) of
GBP3,265,961 (2021: GBP2,482,169), increased by GBP783,792 (32%)
and the main increases and decreases are set out in this table.
Increase/
2022 2021 (decrease) Comment on increase or decrease
GBP GBP GBP
---------- ---------- ------------ --------------------------------------
Expected credit Increase due to impairment
loss charged of related party debt (note
/ (released) 1,127,416 (65,825) 1,193,241 15 and note 28)
---------- ---------- ------------ --------------------------------------
Depreciation Increase due to equipment
of property, additions in late 2021 and
plant and equipment 178,102 90,628 87,474 during 2022 (note 12)
---------- ---------- ------------ --------------------------------------
Average staff numbers increased
by one during the year plus
Staff payroll 1,198,495 1,117,245 81,250 annual pay reviews.
---------- ---------- ------------ --------------------------------------
Main increase due to consultant
head of finance in 2022 instead
of salaried CFO in 2021, partly
offset by termination of engineering
Agency staff 201,020 152,648 48,372 consultancy in 2021.
---------- ---------- ------------ --------------------------------------
Materials used increased in
2022 as a unit was used to
replace an item rather than
effect on onsite repair, and
Warranty provision the reduction in provisions
charged / (released) 23,007 (22,832) 45,839 was greater in 2021.
---------- ---------- ------------ --------------------------------------
The change in these items
is not separately analysed
as they are largely similar
between years and the increase
Other items 614,306 585,455 28,851 is less than 5% overall.
---------- ---------- ------------ --------------------------------------
Reflecting increased business
development activities including
renewed conference attendance
Travel & subsistence 70,268 42,830 27,438 post pandemic.
---------- ---------- ------------ --------------------------------------
Increase due to expanded business
development activities including
conference and trade shows
Sales & marketing 35,171 8,551 26,620 and online marketing and PR.
---------- ---------- ------------ --------------------------------------
IP costs 50,090 34,472 15,618 Increase in patent renewals.
---------- ---------- ------------ --------------------------------------
Increased costs in relation
to greater revenue generating
Repairs & maintenance 31,308 20,190 11,118 activities.
---------- ---------- ------------ --------------------------------------
Increase in insurance rates
Insurance 50,030 39,661 10,369 and to cover new service lines.
---------- ---------- ------------ --------------------------------------
Write off of irrecoverable
Bad debts 0 19,079 (19,079) debts in 2021.
---------- ---------- ------------ --------------------------------------
Reduced use of search firms
Recruitment fees 15,143 55,277 (40,134) to fulfil vacancies.
---------- ---------- ------------ --------------------------------------
Restructuring undertaken and
Corporate transactions 0 65,789 (65,789) completed in 2021.
---------- ---------- ------------ --------------------------------------
Retirement of CFO in 2021
replaced by consulting Head
Directors payroll of Finance and CEO left during
(excluding share 2022 with Chairman undertaking
based payments) 85,359 354,334 (268,975) Executive role.
---------- ---------- ------------ --------------------------------------
Re-allocation of staff salary
costs from operating expenses
to cost of sales chiefly in
relation to the new consultancy
Salaries charge services in 2022 and per accounting
to COGS (413,754) (15,333) (398,421) policy note 1.
---------- ---------- ------------ --------------------------------------
Total operating
expenses 3,265,961 2,482,169 783,792
---------- ---------- ------------ --------------------------------------
Balance Sheet
Total non-current assets decreased GBP3,188 to GBP503,437 (2021:
GBP506,625). There was a significant reduction in right of use
assets as the Woking lease approaches renewal and also a modest
reduction in patents which was mostly offset by continued and
substantial investment in plant and equipment.
Current assets at GBP2,623,898 were down GBP2,024,613 over last
year (2021: GBP4,648,511). The decrease is mainly due to a
substantially lower cash balance of GBP1,241,480 (down
GBP2,223,396) whilst there were decreases in trade and other
receivables (down GBP37,584) and corporation tax receivable (up
GBP246,224 due to 2021 tax credit not yet received as at 31
December 2022) whilst inventories were largely unchanged (down
GBP9,857). The decrease in cash is explained in the Cash Flow
section which follows. After impairment for expected credit loss,
primarily on amounts owed by related parties as set out in notes 28
and 30, trade receivables have increased GBP64,500 year on year.
This is offset by reductions in prepayments, accrued income and
other debtors totalling GBP102,084. Inventories of finished goods
decreased substantially due to supply chain issues continuing post
the COVID-19 pandemic largely offset by increases in stocks of
components as they became available in readiness for all components
becoming available to manufacture finished goods once more.
Total assets at GBP3,127,335 at year end were GBP2,027,801 lower
than the prior year (2021: GBP5,155,136), reflecting the impact of
the loss for the year reducing current assets at the year-end as
set out above.
Total equity at GBP2,719,259 at year end was GBP1,853,961 less
than the prior year due to the effect of retained losses for the
year of GBP2,288,709 offset partially by the charge for vesting of
share options totalling GBP149,748 and by the share issue in
respect of the exercise of warrants by a director as set out in
note 28 and fee shares for certain directors as set out in note 25.
The reduction in the share-based payments reserve is due to the
staff options net charge amounting to GBP149,748 off-set by
share-based option credits in respect of lapsed options of
GBP337,584 and warrant exercises of GBP300,075.
Current liabilities at the year-end comprised trade and other
payables and lease liability due within 12 months of the year end.
Trade and other payables at GBP236,445 (2021: GBP354,611) were
GBP118,166 less than the prior year and mainly reflected a decrease
in trade payables (down GBP131,038) and lower other payables, taxes
and social security (down GBP18,919) partly offset by higher
accruals and deferred income (up GBP31,791). The lease liability of
GBP52,918 at year end mainly represented the Company's lease on
property in Woking which expired in September 2023.
Total non-current liabilities at GBP118,713 at the year-end were
GBP37,405 less than the prior year. This was mainly due to the
decrease in the lease liability by GBP52,830 as the Company's lease
on the property in Woking expired in September 2023, partly offset
by an increase in provisions by GBP15,425 reflecting an increase in
the dilapidations adjusted for inflation.
Total liabilities of GBP408,076 are GBP173,840 less than in the
prior year due to the decrease in current and non-current
liabilities as set out above .
Cash Flow
Net cash used in operating activities in 2022 of GBP2,089,140
was GBP479,857 higher than the previous year. This reflects R&D
tax credit receipts falling by GBP218,568 and cash absorbed by
working capital increasing by GBP1,211,491, with the increase in
DeepVerge debt, net of expected credit losses, of GBP1,097,507
representing the majority of this. These increases in cash used in
operating activities were partly offset by the loss from operations
before share-based payments decreasing by GBP681,531 and increases
in the non-cash items of depreciation, amortisation and provisions
by GBP268,500.
Net cash used in investing activities decrease by GBP71,836 to
GBP256,144 compared with GBP327,980 in 2021. The movements in the
year were a decrease in the purchases of property, plant and
equipment by GBP52,647 and intangible assets by GBP2,003 and
interest received higher by GBP17,186.
Net cash generated by financing activities fell by GBP4,883,182
to GBP121,888 (2021: GBP5,005,070). This largely reflects the fall
in proceeds from share issues net of share issue costs by
GBP4,883,140 following the fund raise in February 2021.
The net decrease in cash for the year by GBP2,223,396 resulted
in a cash balance as at 31 December 2022 of GBP1,241,480.
Going Concern
The Company's trading performance improved in 2022, with higher
sales and reduced losses. However, excluding revenues from
DeepVerge, revenues were only GBP318,869, significantly below the
prior year. Only 5 units were shipped in 2022 before year end
compared to 19 in 2021. The supply chain has since improved and
production restarted in May 2023, with 5 units shipped by the end
of 2023. As of year end 2023, there is a prospective equipment
sales pipeline of approximately 19 units in addition to service and
spares revenue. It is unlikely that all of these prospective sales
will become firm orders, however the Board aims to deliver a cost
base, excluding any 'plc' costs in the event that the Company
raises sufficient funds to remain public, consistent with a similar
level of unit sales to 2022 and 2023.
The Board has conducted a thorough assessment of the Company's
cash reserves and working capital requirements. As of 31 December
2022, the Company had GBP1.2 million (31 December 2021: GBP3.5
million) in cash and bank balances. As at 8 January 2024, the cash
and bank balances had fallen to GBP148k The Board acknowledges
that, in the absence of additional funding, the company will not
have sufficient working capital to continue in operations beyond
January 2024. As such, the Board has commenced a fundraising
process and received sufficient firm commitments (conditional on
the Company's restoration of admission to trading on AIM and the
company entering into an acquisition agreement for Modern Water's
assets) to be satisfied that the company will be able to meet its
liabilities as they fall due over the next twelve months.
As part of these forecasts, the Directors have included the
expected cashflows arising from the proposed acquisition of the
trade and assets of Modern Water, which is expected to be cash
positive within the next twelve months. In so doing, the Directors
have made assumptions regarding the level of sales and costs based
on historical trading performance, and an expectation that the
business will be able to resume production of reagents within a few
months of acquisition.
Assuming the acquisition proceeds, the directors have assessed a
cash requirement for a plausible downside scenario covering 12
months from the date of approval of the financial statements at
minimum gross proceeds of GBP1.0 million, and have determined the
amount to be raised through the proposed fundraise is sufficient to
meet these requirements.
Stakeholders should be aware that there is an inherent
uncertainty in any fundraising process; with the satisfactory
completion of the process being dependent on the restoration of the
Company's shares to trading on AIM, and the Company entering into
an acquisition agreement for Modern Water's assets (which was
executed on 12 January 2024). As such, it is the position of the
Board that a material uncertainty exists in respect of their going
concern assessment. The Company will actively monitor and assess
its financial position to ensure that it can meet the demands of
its plans effectively.
In light of this, the Directors have adopted the going concern
basis for reporting in the preparation of the financial statements
and are proactively exploring funding options and have developed
contingency plans to address the potential need for additional
resources. Detailed information regarding the Board's assessment,
sensitivities, and contingency plans can be found in note 3 of the
financial statements.
Risk Management
The Company manages risk from an operational perspective, where
it assesses and weighs up the potential risks to the business and
how it can mitigate these risks. The Board has identified the
following risks and associated mitigating actions as follows:
Description Risk Risk Mitigating actions Risk
rating rating
pre-mitigation post-mitigation
Difficulties Technical, VERY HIGH 1 Former Modern Water HIGH
in restarting operational employees with relevant
the Modern and commercial technical, operational
Water business risks of restarting and commercial expertise
post-acquisition a business have been engaged as
that has been either employees or
largely dormant consultants.
for most of
the past 12 2 Relationships with
months former Modern Water
agents and customers
are being built, with
clear evidence of current
demand for both reagents
and equipment.
----------------------- ---------------- ------------------------------- -----------------
Insufficient Shortage of VERY HIGH 1 Reduce all costs to MEDIUM
working capital liquidity a minimum as announced
to meet liabilities on 3 November 2023.
as they fall
due 2 Raise sufficient funds
to provide additional
working capital, including
to remain on AIM.
----------------------- ---------------- ------------------------------- -----------------
Unable to raise Inability MEDIUM Communicate effectively MEDIUM
additional to continue with shareholders and
funds if required as a going potential investors.
in the future concern Ensure the business
plan is implemented
effectively with the
focus on expanding sales
channels and growing
revenues, whilst adjusting
variable costs in line
with actual revenues.
----------------------- ---------------- ------------------------------- -----------------
Unable to grow Sales growth HIGH Pursuing a new strategy MEDIUM
sales required is too slow involving services and
to achieve to achieve investing in solution-based
sustainable targets business development,
profitability including PFAS and ProteinID,
to promote these as
well as developing new
sales channels.
----------------------- ---------------- ------------------------------- -----------------
Loss of competitive Competitors MEDIUM The Company believes LOW
advantage in developing the market is large
miniaturised competing enough for competitors
mass spectrometry products to co-exist.
----------------------- ---------------- ------------------------------- -----------------
Reliance on A replacement MEDIUM Work closely with our LOW
third party manufacturer manufacturing partner
manufacturing is necessary and hold regular review
facilities meetings. Ensure contingency
plans are prepared and
reviewed.
----------------------- ---------------- ------------------------------- -----------------
Retention and Loss of key MEDIUM Key employees are to MEDIUM
recruitment employees be offered retention
of key employees and consultants terms or become consultants
and subsequent with knowledge transfer
difficulty arrangements for new
in recruiting staff to be put in place.
suitable replacements
----------------------- ---------------- ------------------------------- -----------------
From the analysis above there are two main risks facing the
business:
1. Despite the Company's efforts to ensure financial stability,
there are significant risks associated with its ability to continue
as a going concern. The cash balance at 8 January 2024 was just
GBP147,603 There are material uncertainties in the assessment of
going concern. The Directors undertake a going concern assessment
on a rolling basis looking ahead at least 12 months. At the date of
approval of the financial statements the Directors assess the
current cash position, inputs and sensitivities in the cash flow
forecast model. In this forecast there are known sensitivities
which are difficult to both quantify and assess the timing of
costs, including, and not limited to, the timing and availability
of funding and the rate of conversion to cash of the sales and
services pipeline.
2. It is important to acknowledge that there is a need for
additional funding as outlined in these financial statements, with
this funding contingent on restoration of admission to trading on
AIM post year end. The Company's growth trajectory and the pursuit
of a cash flow positive position will necessitate additional
funding from sources such as debt or equity. These considerations
pose risks to the Company's ability to sustain its operations as a
going concern.
Key events and progress post year end
-- On 26 June 2023, the related party DeepVerge announced that
it would no longer support the ongoing costs of its subsidiaries
and is seeking to realise whatever value is possible through the
sale of one or more of the Labskin, Modern Water and Glanaco
business units and DeepVerge's shares were suspended. As at 26 June
2023, the balance owed by DeepVerge to Microsaic stood at
GBP1,351,894. Following the deduction of VAT on the amount
outstanding of GBP221,725, which is subject to relief from VAT on
bad debts relief, the net of VAT potential bad debt GBP1,130,169.
As no further receipts from DeepVerge are expected, this amount of
GBP1,130,169 has been charged in full within expected credit losses
as at 31 December 2022. The results for 2022, subsequent
performance in 2023 and the prospects for 2024 and beyond therefore
need to be considered on the basis that no further payments and no
further revenues are expected to be received from DeepVerge.
-- As announced on 3 November 2023, and explained in further
detail in the shareholder circular dated 4 December 2023, the
Company has begun a very significant cost reduction exercise which
is expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external
contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading
relationships. Ongoing activities are expected to include recently
redesigned ProteinID technology which has undergone internal
testing ahead of commercial field trials, and which the Company now
expects to bring to market through a partnership approach in
2024.
-- The Cmpany has engaged in a fundraising process with Turner
Pope Investment (TPI) Ltd, to provide working capital for the above
transition and to acquire the Modern Water business from
subsidiaries of DeepVerge relating to the Microtox(R) bio-reagent
product and its associated testing equipment . It is the view of
the directors that this acquisition will be cash positive in the
near future, and allow Microsaic to capitalise on the synergies
between the two technologies. In order to facilitate this
fundraise, resolutions have been passed to consolidate every 625
Existing Ordinary Shares of 0.01p into one Consolidated Ordinary
Share of 6.25p; to sub-divide each Consolidated Ordinary Share into
one New Ordinary Share of 0.001p and one Deferred Share of 6.249p;
and to issue 200,000,000 New Ordinary Shares. Firm commitments have
been obtained for subscriptions in the New Ordinary Shares, subject
to restoration to trading of the company's ordinary shares on
AIM.
Outlook
The impact of the related party issues, in particular the
failure of DeepVerge to pay the GBP1.13m owed to Microsaic, has
fundamentally changed the outlook for the Company. The very
significant cost reduction exercise announced on 3 November is
expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external
contractors) to maintain production of the current mass
spectrometer machines, commercialise PFAS and ProteinID
technologies and continue existing trading relationships, but in a
very different position than expected at the start of 2023. The
acquisition of the trade and assets of Modern Water is also
expected to provide the company with an additional cash-positive
revenue stream.
Revenues and gross margins grew in 2022, despite the dramatic
shortfall of electronic components available for orders of mass
spectrometer units. Only 5 units were shipped in 2022 before year
end compared to 19 in 2021. The supply chain has since improved and
production restarted in May 2023, with 5 units shipped by the end
of 2023. As of year end 2023, there is a prospective equipment
sales pipeline of approximately 19 units in addition to service and
spares revenue. It is unlikely that all of these prospective sales
will become firm orders, however the Board aims to deliver a reset
cost base, excluding any 'plc' costs in the event that the Company
raises sufficient funds to remain public admitted to trading on
AIM, consistent to outsource the manufacture of a similar or
greater level of unit sales to those in 2022 and 2023.
Based on the firm commitments received to date, the directors
believe Microsaic to be in a good position to rebuild its trade and
grow as an enlarged and reset Company over the next 12 months and
future years.
The Strategic Report was approved by the Board of Directors on
15 January 2024 and signed on its behalf by:
Bob Moore
Executive Chairman
DIRECTORS' REPORT
The Directors present their report for the year ended 31
December 2022.
Principal activity, business review and business risks
The principal activity of the Company continued to be the
commercialisation and development of miniaturised micro-engineering
equipment, originally for mass spectrometry instruments but now to
include integration of AI and Internet of Things analytical sensors
for existing and new clients to generate recurring shared revenues
for monitoring across biologic bio-processing, environmental and
human health and likely to extend to aviation, the food industry
and oil & gas sectors. A review of the business is contained
within the Strategic Report.
Results and dividends
The results for the Company are given in the statement of
comprehensive income. The Company is currently making losses and
has retained losses which have to be recovered before it can pay a
dividend. Therefore, the Directors do not recommend the payment of
a dividend (2021: GBPnil).
Business Development & Sales
Revenues are made through OEM and distribution sales channels
with direct and collaboration partners currently in place, covering
North America, Europe, China, Southeast Asia and Japan.
Research and development ("R&D")
R&D is important for the Company's success and has led to
the filing of over 80 patents to date. The Company conducts
periodic reviews of its patent portfolio to align it with current
business strategy. After the most recent review in 2023, the active
patent portfolio has reduced to 51 patents with 7 additional
patents applications in the filing process.
During 2022, R&D projects and R&D expenses totalled GBP
783,544 (2021: GBP 752,257 ) or 26.8 % (2021: 25.0%) of the total
of cost of sales and operating expenses excluding share-based
payments. C urrent plans are to continue focusing on commercial
development associated projects that are demanded from new and
existing clients to optimise resources through collaborations and
joint ventures.
Directors
Between 1 January 2022 and 31 December 2022, the following
Directors held office:
Gerard Brandon, Non-Executive Chairman (Age 61) (1)
Nigel Burton, Non-Executive Director (Age 65)
Bob Moore, Independent Non-Executive Director (Age 66) (2)
Glenn Tracey, Chief Executive Officer (Age 50) (3)
(1) Resigned as a Director on 25 September 2023. Age at date of
resignation.
(2) Appointed as a Director on 15 March 2022. Appointed as
Non-Executive Chairman 25 September 2023.
(3) Resigned as a Director on 31 March 2022. Age at date of
resignation.
On 28 January 2022, it was announced that Glenn Tracey was
stepping down to pursue a non-competitive opportunity and he
resigned as a Director on 31 March 2022. On 15 March 2022, Bob
Moore was appointed as Independent Non-Executive Director.
Directors' interests
The Directors' interests in the shares of the Company are:
Ordinary shares Ordinary shares Ordinary shares
of 0.01p of 0.01p of 0.25p
at 31 October 2023 at 31 December at 31 December
2022 2021
Number % Number % Number %
------------------- ------------------ ------------ ------------------ ------------ ------------ ------------
Gerard Brandon(1) 190,000,000 2.99 190,000,000 2.99 140,000,000 2.30
Dr Nigel Burton 300,500,000 4.72 300,500,000 4.72 65,500,000 1.08
Bob Moore - - - - - -
------------------- ------------------ ------------ ------------------ ------------ ------------ ------------
490,500,000 7.71 490,500,000 7.71 205,500,000 3.38
------------------- ------------------ ------------ ------------------ ------------ ------------ ------------
(1) This figure includes 50,000,000 shares by a person closely
associated with Gerard Brandon.
Significant shareholdings
Shareholders, excluding Directors, having a beneficial interest
of 3% or more of the Company's shares:
Ordinary shares of 0.01p
each
at 31 October 2023
Shareholder Number %
----------------------------- ------------------- ------
Unicorn Asset Management 750,000,000 11.79
Premier Miton Investors 454,815,410 7.15
Intuitive Investments Group 192,000,000 3.02
Employees
The Board regards the expertise and contributions of its
employees as critical to its future success. Executive management
regularly update employees on the progress of the business. The
Board seeks to remunerate its employees fairly and has adopted a
flexible working hours policy to cater for employee needs. Full and
fair consideration is given to applications for employment received
regardless of age, gender, colour, ethnicity, disability,
nationality, religious beliefs or sexual orientation.
The Board would like to thank all its employees for their
contributions to date.
Company share ownership plans
The Company operates two Employee Share Option Schemes ("ESOS"),
an approved scheme and an unapproved scheme.
The ESOS were formed to enable the incentivisation of employees
to be aligned to the performance of the Company. Under the ESOS the
Company grants employees options to acquire the Company's ordinary
shares subject to:
-- Vesting periods (normally three years for new grants) and an
exercise period of up to ten years from the date of grant;
-- The exercise price is normally the market price of the
ordinary shares at the close of business the day before the date of
grant unless the award is linked to an equity fundraise; and
-- Performance and time-based vesting conditions as appropriate.
Options are granted up to the maximum amount allowed under the
limits of the Enterprise Management Incentive ("EMI") Scheme -
these options are called 'Approved Options'. The EMI Scheme is
subject to the provisions of Schedule 5 of the Income Tax (Earnings
and Pensions) Act 2003 and has tax advantages for the employee and
employer. There is an unapproved scheme, which has no tax
advantages, for those awards which do not qualify under the
Approved Option scheme.
No options were awarded in 2022. In the prior year on 4 and 5
February 2021, the Company cancelled all existing options which
were all out-of-the-money and replaced them with options over 1,125
billion ordinary shares of 0.1p each following the share capital
restructuring and fund raise. Options awarded to staff and
Directors are detailed in note 25. Following completion of the
recently announced redundancy programme, all share options have
expired.
Management of risk
The management of operational risk is covered in the Strategic
Report while financial risk is detailed under note 28 Financial
Instruments.
Health and safety and the environment
The Company is committed to providing a safe environment for its
staff and other parties for whom it has a responsibility. It has
set up systems and processes to ensure compliance with health and
safety legislation and the Board reviews an update on health and
safety matters at each main Board meeting.
The Company is also mindful of its corporate responsibilities
concerning the impact of its activities on the environment and
seeks to minimise this impact where practicable.
Quality management system
The Company's mission is to deliver miniaturised
micro-electronic equipment and Internet of Things designed to
analyse data, using AI analytical services, demanded by clients
that include, but are not exclusively related to miniaturised
micro-electronic instruments that provide innovative compact
detection with high quality and reliability.
The Company's quality policy applies to the development,
marketing and support of our products. In all its activities the
Company is strongly focused on commitment to the requirements of
its customers including:
-- Management of risks to prevent operational and product
problems that may adversely impact customer satisfaction and the
interests of other parties; and
-- Management of any externally provided products and services
to ensure that they meet specified requirements including changing
needs.
To help management achieve its policy, the business management
system has been developed using a process approach including a
Plan-Do-Check cycle, risk-based thinking, and a fundamental
commitment to the continual improvement of the system and its
effectiveness and integration into the Company's activities.
The Company's Quality Management System is based on ISO
9001:2015. This standard puts considerable emphasis on risk
management and management involvement within the quality management
system.
Directors' indemnity and insurance
The Company has granted an indemnity to its Directors and
Officers under which the Company indemnifies them, subject to the
terms of the deed of indemnity, against costs, charges, losses,
damages and liabilities incurred by them in the performance of
their duties. The Company also maintains Directors and Officers
liability insurance against the consequences of actions brought
against them in relation to their duties for the Company.
Related party transactions
The interests of the Directors are shown in the Directors'
Report while their remuneration is detailed in the Directors'
Remuneration Report. Other related party transactions involving the
Directors during the 2022 financial year are included in note 28,
with additional information included in compliance with AIM Rule 19
included therein and elsewhere including in the Chairman's
Statement and the Strategic Report.
Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and Accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Company financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and the profit or loss of the Company for
that period.
In preparing the financial statements the Directors are required
to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and accounting estimates that are reasonable and prudent; and
-- State whether international accounting standards in
conformity with the requirements of the Companies Act 2006 have
been followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Statement of disclosure to auditors
So far as each Director is aware, there is no relevant audit
information of which the Company's auditors are unaware.
Additionally, the Directors have taken all the steps that they
should have taken to make themselves aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information.
Auditors
Saffery LLP has expressed its willingness to remain in office as
auditors of the Company, and a resolution for its re-appointment
will be proposed at the forthcoming Annual General Meeting.
Future developments
An indication of likely future developments in the business of
the Company are included in the Strategic Report.
This Directors' Report was approved by the Board of Directors on
15 January 2024 and signed on its behalf:
Bob Moore
Executive Chairman
Company number 03568010
DIRECTORS' REMUNERATION COMMITTEE REPORT
For the year ended 31 December 2022
Dear Shareholders
Dr Burton chairs the Remuneration Committee. Bob Moore joined
the Committee on 15 March 2022 at the time of his appointment to
the Board.
Gerard Brandon was acting CEO and Executive Chairman from when
the former Chief Executive, Glenn Tracey, left the Board on 31
March 2022. Following the year end Mr Brandon resigned on 25
September 2023 Dr Nigel Burton continued as a Non-executive
Director and Bob Moore joined the Board as Senior Independent
Non-Executive Director on 15 March 2022, and was appointed
Executive Chairman following Mr Brandon's resignation.
This report has been prepared with reference to the Quoted
Companies Alliance guide "Remuneration Committee Guide for Small
and Mid-Size Quoted Companies." The Company has sought to comply
with the overarching principles of the guidance, although not all
recommended disclosures have been included on the basis that they
are not relevant to the current circumstances of the Company.
This report sets out the Company's policy on the remuneration of
Executive and Non-executive Directors, together with details of
Directors' remuneration packages and service contracts.
Remuneration policy
The remuneration policy for Executive Directors, determination
of their individual remuneration packages and their performance
appraisals have been delegated to the Board's Remuneration
Committee.
Remuneration of the Executive Directors
In setting the remuneration for the Executive Directors, the
Remuneration Committee considers several factors including:
-- Basic salaries and benefits available to Executive Directors of comparable companies;
-- Need to pay Executive Directors a competitive salary in line
with the nature and complexity of their work;
-- Need to attract and retain Executive Directors of an appropriate calibre;
-- Need to ensure Executive Directors' commitment to the
continued success of the Company by means of incentive schemes;
and
-- Need for the remuneration awarded to reflect performance.
The remuneration of the Executive Directors consists of basic
salary. There are no other payments currently in place. A
discretionary bonus scheme based on performance against individual
and business objectives did not operate during the year (2021
bonus: Nil).
Remuneration of the Non-executive Chairman and Non-executive
Directors
The Chairman of the Remuneration Committee discusses the
remuneration of the Non-executive Directors with the Executive
Directors. The remuneration is then discussed and agreed by the
Board (excluding Directors with a conflict of interest) following
recommendation by the Remuneration Committee, having a view to
rates paid in comparable organisations. The Non-executive Directors
do not receive any pension, bonus or other Company benefits.
Share options and shares
There are no new share options granted to the Directors during
2022.
Details of the shares held by Directors are listed in the
Directors' Report.
Implementation of the remuneration policy in 2022
The following long term warrant awards were part of the
reorganisation of the Company t o incentivise the new Directors
appropriately. These warrants are exercisable at the placing price
of 0.1 pence per ordinary share for 5 years from 5 February 2021,
provided that the ordinary shares have traded at a Volume Weighted
Average Price (VWAP) at or above a 50% premium to the placing price
for 20 consecutive business days, at any time since their issue, or
on a change of control of the Company. The vesting conditions were
met in March 2021 and these options and warrants became exercisable
in full at that point. On 11 February 2022 Dr Burton exercised all
of his warrants.
Director Number of Number of
Options Warrants
Gerard Brandon (lapsed on resignation on 25
September 2023) 250,000,000
------------
Dr Nigel Burton (warrants exercised 11 February
2022) 200,000,000
------------
In line with their service agreements, Gerard Brandon and Dr
Nigel Burton have taken their annual fees of GBP50,000 and
GBP35,000 respectively, for the first two years of their
appointment, in shares at the price of 0.1 pence per share being
the placing price of the equity fundraising completed in February
2021, subject to payment of all necessary employee taxes and
national insurance contributions. Since February 2023, fees have
been paid in cash monthly in arrears.
Directors' notice periods
Details of the Director's notice periods as per their service
contract are as follows:
Contract date Term Notice period
--------------- ---------------- ----------------- --------------
Nigel Burton 5 February Three years(1) 3 months
2021
Gerard Brandon 5 February Three years(2) 3 months
2021
Bob Moore 15 March 2022 Twelve months(3) 3 months
--------------- ---------------- ----------------- --------------
(1) Notice cannot be given by the Directors during the first two
years of their appointment except to the end of the period to which
their fees have been paid in advance.
(2) Mr Brandon resigned on 25 September 2023.
(3) The initial term is the earlier of 12 months or the first
AGM. Subject to re-election at AGM the appointment is anticipated
to last at least 3 years.
Directors' emoluments
Directors' remuneration in 2022 is detailed below. Non-cash
payments represent life assurance premiums.
Year Year
Share- to 31 to 31
Salaries Non-cash Pension based December December
& fees payments contributions payments 2022 2021
GBP GBP GBP GBP GBP GBP
------------------- --------- ------------------ --------------- ---------- ---------- ----------
Gerard Brandon(1) - - - 50,000 50,000 420,129
Nigel Burton - - - 35,000 35,000 331,599
Bob Moore(2) 23,750 - - - 23,750 -
Glenn Tracey(3) 36,308 155 2,363 - 38,826 323,692
Others(4) - - - - - 290,477
TOTAL 60,058 155 2,363 85,000 147,576 1,365,897
------------------- --------- ------------------ --------------- ---------- ---------- ----------
(1) Resigned as a Director on 25 September 2023.
(2) Appointed as a Director on 15 March 2022.
(3) Resigned as a Director on 31 March 2022.
(4) Relates to directors who resigned in 2021.
The share-based payments charge in the year relates to fees paid
in shares for Messrs Brandon and Burton.
Directors' share options
Share options and warrants over the Company's ordinary shares
held by the Directors at the year-end were as follows (note that
these subsequently lapsed on 25 September 2023 following Mr
Brandon's resignation):
At 31 December At 31 December Performance Exercise Exercise period
2022 2022 Conditions price
0.01p ordinary Pence
shares Vested
Number Number
---------------- ---------------- --------------- ------------ --------- ----------------
5 February
2021 -
4 February
Gerard Brandon 250,000,000 250,000,000 Yes 0.1p 2026.
TOTAL 250,000,000 250,000,000
--------------- ---------------
The Company's share price started the year at 0.150 pence and
ended the year at 0.033 pence, with a close high and low over the
year of 0.195 pence and 0.033 pence respectively (with an intra-day
high and low over the year of 0.220 pence and 0.030 pence
respectively).
The share-based payment charge in relation to the share option
grants to Directors and lapsed options during the year was GBPnil
(2021: GBP995,214).
The Directors' Remuneration Report was approved by the Board of
Directors on 15 January 2024 and signed on its behalf by:
Dr Nigel Burton
Chairman of the Remuneration Committee
DIRECTORS' FINANCE & AUDIT COMMITTEE REPORT
For the year ended 31 December 2022
Introduction
This report details how the Finance & Audit Committee ("the
Committee") has met its responsibilities under its terms of
reference. The Committee is a sub-committee of the Board. As
Non-executive Directors, the members of the Committee are, together
with the Board as a whole, responsible for the integrity and
probity of the Company. The work of the Committee is aimed at
supporting the creation of long-term value for shareholders.
The Committee continues to act as an oversight sub-committee of
the Board, considering and challenging but not itself performing
the relevant processes. The ultimate responsibility for reviewing
and approving the Annual Report and Accounts and interim financial
statements remains with the Board.
The Committee does not believe there is a requirement for an
internal audit function due to the Company's size and level of
complexity.
Role and Responsibilities
The Board has established a Finance & Audit Committee to
monitor the integrity of the Company's nancial statements and the e
ectiveness of the Company's internal nancial controls. The
Committee's role and responsibilities are set out in the terms of
reference which are available from the Company's website. The terms
of reference are reviewed regularly and amended where appropriate.
During the year, the Committee worked with management and the
external auditors in ful lling these responsibilities.
The Committee report deals with the key areas in which it plays
an active role and has responsibility. These areas are as
follows:
i. Financial reporting and related primary areas of judgement;
ii. The external audit process;
iii. Risk management and internal controls; and
iv. Whistleblowing procedures.
The members of the Finance & Audit Committee are Dr Nigel
Burton and, until his resignation after the year end on 25
September 2023, Gerard Brandon, with Bob Moore joining on 15 March
2022 at the time of his appointment to the Board. Dr Burton became
Chairman of the Committee, following the resignation of Peter Grant
and has appropriate relevant nancial experience. The Board
considers that the Committee has an appropriate and experienced
blend of commercial, nancial and industry expertise to enable it to
ful l its duties.
Financial Reporting and External Audit Process
The Chairman of the Committee participated in the Audit Planning
meeting held in November 2022 with the external auditors to plan
the financial audit, discussed potential key audit matter(s) and
along with the Committee reviewed the Audit Strategy Document.
The Board as a whole, reviewed the going concern paper prepared
by management including detailed financial forecasts for the period
2023 to 2024, related assumptions, risks and opportunities,
sensitivities, and areas for mitigation. The outcome of the Board's
discussions on going concern is explained in more detail in note 3
.
The Committee has satis ed itself that the 2022 Annual Report
and Accounts have been prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006, are fair, balanced and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
Risk Management and Internal Controls
The Board considered as part of its review of risks those risks
detailed in the Strategic Report including mitigating actions. At
the date of this report, the Company continues to be a going
concern. The key risk facing the Company is the very challenging
working capital position. As announced on 3 November 2023 and
explained above, the Company has implemented a significant cost
reduction exercise and is expecting to raise sufficient funds to
provide additional working capital, including to remain on AIM.
Another key responsibility of the Committee is to review the
Company's internal control systems, including internal nancial
controls. The Finance Director reviewed and updated the Company's
Financial Procedures Manual to ensure it was in line with current
practice. There were no reported instances of fraud during the
year.
The Company's auditors are encouraged to raise comments on
internal control in their management letter following the annual
audit. The points raised and actions arising are monitored through
to completion by the Finance & Audit Committee.
Whistleblowing
The Committee had no whistleblowing incidents reported during
2022. Dr Nigel Burton has been appointed Primary Designated Officer
during the year and Gerard Brandon as Alternative Designated
Officer.
Committee Meetings
The Committee met twice in the year. Both meetings related to
the Annual Report and Accounts which the external auditors
attended.
Auditors Fees and Non-Audit Services
The Committee reviewed and agreed to the proposed audit fee of
GBP31,065 (2021: GBP29,500). Fees for other audit related services
during the year amounted to GBP4,300 (2021: GBP1,575). These fees
included the review of 2022 interims and the provision of
information around accounting standards.
Auditor Independence
The Committee satisfied itself on the auditors' independence. Mr
Roger Weston is undertaking his fifth audit of the Company in the
capacity of partner in charge, and he will rotate off the audit
this year to maintain independence. No non-audit services have been
provided in the current financial year.
The Report of the Finance & Audit Committee was approved by
the Board of Directors on 15 January 2024 and signed on its behalf
by:
Dr Nigel Burton
Chairman of the Finance & Audit Committee
CORPORATE GOVERNANCE REPORT
For the year ended 31 December 2022
Board composition
Gerard Brandon was acting CEO and Executive Chairman from when
the former Chief Executive, Glenn Tracey, left the Board on 31
March 2022. Following the year end Mr Brandon resigned on 25
September 2023 Dr Nigel Burton continued as a Non-executive
Director and Bob Moore joined the Board as Senior Independent
Non-Executive Director on 15 March 2022, and was appointed
Executive Chairman following Mr Brandon's resignation. Their
biographies are detailed under Principle 6 in this Report.
Board Committees
The Finance & Audit and Remuneration Committees are chaired
by Dr Nigel Burton, and Bob Moore is a member of both committees,
as was Mr Brandon until his resignation. Bob Moore was the Senior
Independent Non-Executive Director until his appointment as
Executive Chairman following Mr Brandon's resignation.
Chairman's Corporate Governance Statement
The full corporate governance statement is published and
maintained up to date on the Company's website at
(http://www.microsaic.com/investors/governance-new). This extract
from that statement is included in the Annual Report & Accounts
as required by the Quoted Companies Alliance's ("QCA") Corporate
Governance Code for small and mid-size quoted companies (2018) (the
"2018 Code").
The Board is committed to maintaining high standards of
corporate governance and, with effect from 26 September 2018, the
Board adopted the 2018 Code.
The 2018 Code sets out ten broad principles of corporate
governance. It states what are considered to be appropriate
corporate governance arrangements for growing companies and
requires companies to provide an explanation about how they are
meeting the principles through certain prescribed disclosures.
The Chairman leads the Board and is responsible for its overall
effectiveness in directing the Company. He manages the Board agenda
and ensures that all Directors receive accurate, timely and clear
information and effectively contribute their various talents and
experience in the development and implementation of the Company's
strategy. He ensures that the nature and extent of the significant
risks which the Company is willing to embrace in the implementation
of its strategy are challenged and determined by the Board. The
Chairman is responsible for ensuring that the Board implements,
maintains and communicates effective corporate governance processes
and for promoting a culture of openness and debate designed to
foster a positive governance culture throughout the Company.
The Board has considered how each principle is applied and
provides below an explanation of the approach taken in relation to
each principle and how they support the Company's medium to
long-term success.
The Board agenda is regularly reviewed to ensure that all
matters which the Board should consider are addressed. This allows
for presentations from the Management Team so that the Board
benefits from their input.
The Company includes a Remuneration Committee Report and a
Finance & Audit Committee Report in its Annual Report and
Accounts.
Following the Board changes in September 2023, provided that the
Company remains public, the Board intends to recruit a further
independent Non-Executive Director and at least one executive
director. The Head of Finance and Company Secretary role was
contracted to Anthony Clayden of Strategic Finance Director
Limited, although in November 2023 he was replaced in both roles by
John Mottram.
Save in respect of Principle 5 in consideration of the
independence of the Non-executive Directors, which is considered in
more detail below, the Board considers that it does not depart from
any of the principles of the 2018 Code.
PRINCIPLES TO DELIVER GROWTH
PRINCIPLE 1: Establish a strategy and business model which
promote long-term value for shareholders.
Strategy:
Microsaic's strategic aim is to capitalise on its strengths in
point of need detection systems, and access high-growth and
emerging Life Science and Environmental applications, as well as
niches in traditional small molecule markets. The Company intends
to achieve its strategy with a business model built on customer
focus, collaborations, and technology innovation subject to the
available resources.
Business Model:
The Company's business model is described in the Strategic
Report.
Challenges:
Staying relevant to future customer needs
Customer needs evolve rapidly. Future product specifications are
driven by end-user requirements. This will inform Microsaic's
product strategy as its Mass Spectrometer detectors move from
customer laboratories into production and front-line operating
environments. Microsaic aims to ensure that its strategic product
development remains focused on meeting demanding biopharmaceutical
applications.
Remaining innovative in an advancing technological landscape
Microsaic has successfully developed and implemented advanced
technology with over 80 patents to date. This has led to a solid
foundation serving scientists in the laboratory in small molecule
drug discovery, and increasingly in life and environmental science
markets. The Company conducts periodic reviews of its patent
portfolio to align it with current business strategy. After the
most recent review in 2023, the active patent portfolio has reduced
to 51 patents with 7 additional patents applications in the filing
process.
The Company has recently made significant cost reductions and
has focused product development on applications with larger
biological molecules, such as peptides and small proteins.
The Company has extended its product capabilities further into
Life Science applications, and will invest in these applications
subject to available resources.
PRINCIPLE 2: Seek to understand and meet shareholder needs and
expectations. See the website for further disclosures concerning
how the Company seeks to engage with shareholders and how
successful this has been.
PRINCIPLE 3 : Consider wider stakeholder and social
responsibilities and their implications for long-term success. See
the website for further disclosures.
PRINCIPLE 4 : Embed effective risk management, considering both
opportunities and threats, throughout the organisation.
The Board aims to ensure that the Company's risk management
framework identifies and addresses all relevant risks in order to
execute and deliver the strategy.
The Directors recognise their responsibility for the Company's
systems of internal control and have established systems to ensure
that an appropriate and reasonable level of oversight and control
is provided. The Company's systems of internal controls are
designed to help the Company meet its business objectives by
appropriately managing and wherever possible mitigating risks faced
by the Company. The controls can only provide reasonable, not
absolute, assurance against material misstatement or loss.
The Company's Management Team, which reports into the Executive,
meets regularly to review commercial, technical, operational, and
financial risks facing the business. These risks are assessed
according to their nature and magnitude based on the seriousness of
the risk and the likelihood of the risk occurring. The
effectiveness of the controls implemented to minimise the risks are
also reviewed. The aim of these reviews is to provide reasonable
assurance that material risks are identified, and appropriate
action is taken at an early stage. From this review the Company
maintains its internal risk register which is reviewed annually by
the Board.
The annual budget is reviewed and approved by the Board.
Financial results, with comparisons to budget, and latest forecasts
are reported monthly to the Board together with a report on
operational achievements, objectives and issues encountered.
Significant variances from plan are discussed at Board meetings and
actions set in place to address them.
Measures continue to be taken to review and improve internal
controls and risk management procedures. The Company has a
Financial Procedures Manual which includes approval levels for
authorisation of expenditure, potential fraud scenarios, payment
approval process, expenses guidelines etc. This is updated as
necessary.
The Company's auditors are encouraged to raise comments on
internal control in their management letter following the annual
audit. The points raised and actions arising are monitored through
to completion by the Finance & Audit Committee.
PRINCIPLES TO MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
PRINCIPLE 5: Maintain the Board as a well-functioning, balanced
team led by the Chairman.
The Board currently consists of one Executive Chairman, and one
Non-Executive Director. An independent Non-Executive Director, Bob
Moore, was appointed in March 2022, although following the
resignation of the former Executive Chairman Mr Brandon on 25
September 2023, Mr Moore was appointed as Executive Chairman.
Assuming the proposed fundraising and acquisition completes, Mr
Moore will be replaced by a Non-executive Chairman and he will
assume the role of Chief Executive until further notice.
Mr John Mottram replaced Mr Anthony Clayden as Head of Finance
(non-board level) in November 2023. Glenn Tracey, CEO, resigned on
31 March 2022 and the then Chairman stepped into an executive role
until his resignation in September 2023.
The Company held 8 Board meetings during 2022 (2021: 19).
The Company has an equal opportunity policy to recruitment at
Board level and within the Company at large and seeks diversity as
opportunities arise, within the framework of selecting the most
suitable person, based on relevant skills, abilities, experience
and location, as required for the role.
The principal role of the Chairman of the Board is to manage and
provide leadership to the Board of Directors of the Company. The
Chairman is accountable to the Board and acts as a direct liaison
between the Board and the management of the Company. The Chairman
acts as the communicator for Board decisions where appropriate.
Given the Chairman's current capacity as an Executive Chairman,
the other NED provides the appropriate level of challenge to both
the Chairman and management. The recent changes resulting from the
resignation of Mr Brandon will be addressed by the recruitment of
further directors to achieve the appropriate Board and management
structure.
The Chairman is responsible for the effective leadership,
operation and governance of the Board and its Committees. He
ensures that all Directors contribute effectively to the
development and implementation of the Company's strategy, while
ensuring that the nature and extent of the significant risks the
Company is willing to embrace in the implementation of its strategy
are determined and challenged.
The Board believes that the advice, behaviour and character of
its Chairman and Non-executive Directors are always in the best
interests of the Company and its shareholders. In addition, the
skills and business judgement which they possess and regularly
exercise contributes to the efficient and effective running of the
Company.
The Company appreciates that circumstances which might or might
appear to affect a Director's judgement may well include financial
dependence on the Company and whether the Director is, or
represents, a major shareholder. The Chairman and Non-Executive
Director are financially independent of the Company as they have
other sources of income, although Dr Burton became a significant
shareholder during 2022 following his exercise of his warrants. Mr
Brandon and Mr Moore do not represent significant shareholders;
however, Mr Brandon did have a material interest in share warrants
of the Company as detailed below until his resignation on 25
September 2023. Dr Burton is also a Director of DeepVerge plc and
Mr Brandon was also a Director of Deepverge until December 2022,
which although not a shareholder of the Company, was strategically
important to the future success of Microsaic throughout 2022 and
until it's well-publicised difficulties emerged in April and June
2023. Under the QCA Guidelines the independence of Mr Brandon
whilst Chairman and Dr Burton as a Non-Executive Director could be
challenged under the following areas, but in all cases the Board
believes that they act in an independent manner and where a
conflict of interest could arise or be perceived to arise, they
abstain from voting. Bob Moore was appointed as Senior Independent
Non-Executive Director in March 2022, and remained in that role
until his appointment to replace Mr Brandon as Executive Chairman
in September 2023 .
Name and position Potential issue Comments
Gerard Brandon Held a material This award was required to attract
Chairman (until interest of 250 a Chairman of the appropriate
25 September million share warrants calibre to the Company. The
2023) in the Company. award was approved by shareholders
at a General Meeting.
Former Director
of DeepVerge plc DeepVerge plc was strategically
important to the success of
the Company in 2022 and early
Temporary Executive 2023.
Director capacity
Elevated senior management to
develop and implement strategy
and consulting with the Non-Executive
Directors who had oversight
during the period.
========================= ========================================
Dr Nigel Burton Significant shareholder The warrants were awarded to
Non-Executive in the Company attract a Non-Executive Director
Director following the exercise of the appropriate calibre to
of warrants. the Company. The award was approved
by shareholders at a General
Meeting
Director of DeepVerge
plc DeepVerge plc was strategically
important to the success of
the Company in 2022 and early
2023.
The Board recognises the importance of good governance
arrangements.
The Board has an established Finance & Audit Committee and
Remuneration Committee. The Company believes it is currently too
small to have a separate Nominations Committee, so this role is
taken on by the Board of Directors as a whole.
Details and links to the terms of reference of the Finance &
Audit Committee and Remuneration Committee are set out under
Principle 9 on the website.
Details of Directors and their time commitment are set out under
Principle 6 below. The attendance of the Directors at the regular
Board and Committee Meetings during the year ended 31 December 2022
were as follows.
Name Position during Regular Finance Remuneration
2022 Board Meetings & Audit Committee
Committee
Gerard Brandon(1) Executive Chairman 8 ( 8 ) 1 ( 2 ) 0 ( 0 )
========================= ================= ============ ==============
Glenn Tracey(3) Chief Executive 3 (3) n/a n/a
Officer
========================= ================= ============ ==============
Nigel Burton Non-Executive Director 8 ( 8 ) 2 ( 2 ) 0 ( 0 )
========================= ================= ============ ==============
Bob Moore(2) Non-Executive Director 5 ( 5 ) 1 ( 2 ) 0 ( 0 )
========================= ================= ============ ==============
(1) Resigned as a Director on 25 September 2023. Age at date of
resignation.
(2) Appointed as a Director on 15 March 2022. Appointed as
Non-Executive Chairman 25 September 2023.
(3) Resigned as a Director on 31 March 2022. Age at date of
resignation.
Numbers in brackets denote the total number of meetings that
each Director was eligible to attend during the year.
PRINCIPLE 6: Ensure that between them the Directors have the
necessary up-to-date experience, skills and capabilities.
Biographical details of the Board of Directors, their skills,
suitability and availability are set out below.
Gerard Brandon, Executive Chairman
Term of office: Appointed a Director on 5 February 2021,
resigned on 25 September 2023. Gerard was also a member of the
Finance & Audit Committee and the Remuneration Committee until
his resignation.
Background and suitability for the role: Gerard Brandon is Chief
Executive Officer of Cellulac plc and was CEO of DeepVerge plc
until November 2022. In 1996 he became founder and CEO of Alltracel
Pharmaceuticals plc ("Alltracel"), where he built a team which
oversaw numerous patents granted on refined cellulose. Alltracel
was admitted to trading on AIM in 2001. In 2004, he was appointed
as a Managing Partner for Farmabrand Private Equity. In March 2020,
he was appointed as a Non-executive Chairman to Modern Water plc,
which was subsequently acquired by DeepVerge plc (formerly
Integumen plc) in November 2020. Gerard is a Fellow of the Ryan
Academy of Entrepreneurs in Dublin.
Dr Nigel Burton, Non-executive Director
Term of office: Appointed a Director on 5 February 2021 at a
General Meeting of the Company. Dr Burton is also Chairman of the
Finance & Audit Committee and the Remuneration Committee.
Background and suitability for the role: Nigel is currently a
Non-Executive Director of BlackRock Throgmorton Trust plc and
several AIM quoted companies including eEnergy Group plc and
Location Sciences plc. Nigel was a Non-Executive Director of
DeepVerge plc until becoming interim CEO in November 2022. He spent
over 14 years as an investment banker at leading City institutions
including UBS Warburg and Deutsche Bank, including as the Managing
Director responsible for the energy and utilities industries. Nigel
also spent 15 years as Chief Financial Officer or Chief Executive
Officer of a number of private and public companies.
Mr Robert (Bob) Moore, Executive Chairman (formerly
Non-Executive Director)
Term of office: Appointed a Director on 15 March 2022 by the
Board of directors of the Company. Mr Moore is also a member of the
Finance & Audit Committee and the Remuneration Committee. Mr
Moore was Senior Independent Non-Executive until 25 September 2023,
when he replaced Mr Brandon following his resignation.
Background and suitability for the role: Bob is a UK qualified
lawyer and brings over 35 years' commercial and legal experience to
the Board. Bob has acted as Head of International Legal Affairs at
Enterprise Oil plc (a UK FTSE 100 company prior to its acquisition
by Shell in 2002) and as co-founder and Commercial Director of
Granby Oil & Gas plc, which was traded on AIM from 2005 until
its sale in 2008. Bob subsequently co-founded, and is Managing
Director of, private oil and gas exploration company Ardent Oil Ltd
(operating in the UK, Denmark through its parent company in
Luxembourg). Bob also acts as Non-Executive Chairman of Mobile
Streams plc, an AIM quoted company, having been appointed to the
role in July 2021.
The Company uses external advisers.
The Board has retained the services of the following
advisers:
-- Singer Capital Markets as Nominated Adviser and Joint Broker;
-- Turner Pope Investments as Joint Broker;
-- Saffery LLP for annual audit;
-- Dorsey and Whitney Europe LLP as solicitors for the Company;
-- Neville Registrars Ltd as the Company's registrar; and
-- Menzies LLP for ongoing advice on Corporation tax, VAT and PAYE.
PRINCIPLE 7: Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement.
Board Evaluation Process
The Board believes that, in addition to dealing with any matters
as they arise, it is appropriate to carry out a formal evaluation
of the performance of the Board each year. This is intended to
ensure that the Board remains effective, well-informed and able to
make high quality and timely decisions for the benefit of all
stakeholders in the Company.
The usual evaluation involves each Director completing an
evaluation questionnaire which covers effectiveness from multiple
angles including: Board structure and committees; Board
arrangements, frequency and time; content of Board meetings; Board
culture; Board evaluation and succession; and individual
contributions. The completed questionnaires are anonymised and
collated independently into a summary, and comments and any areas
of concern are highlighted for discussion with the Board.
No formal evaluation process took place in 2022.
Succession Planning
As is common with many small AIM quoted companies, the Company
does not have internal candidates to succeed the Executive
Directors. This will be kept under review, especially when
recruiting for senior roles as vacancies arise. However, the Board
does not believe it is appropriate to recruit additional Directors
or senior personnel solely for the purpose of Board succession
planning.
Training of Directors
It is recognised that there continues to be more regulation of
which Directors need to be aware. The Board will continue to ensure
that Directors receive appropriate support to keep up to date.
PRINCIPLE 8: Promote a culture that is based on ethical values
and behaviours.
The Company is committed to achieving the highest possible
ethical standards in conducting its business. The Company expects
all employees and Directors to maintain the same high standards. To
achieve these ends, Microsaic encourages freedom of expression and
speech whilst not accepting prejudice of any kind.
Ethics is based on a set of principles and clear moral and
ethical values. The Company takes its principles and values very
seriously and expects staff at all levels to look to these
principles and values for guidance.
Principles:
The Board has adopted the following four principles:
1. Management must lead by example. Good ethics should be most
noticeable at the top. Every employee must be accountable to the
same rules.
2. Corporate values must be implemented throughout the Company.
Every forum and medium should be used to spread the message and,
most of all, the Company must practice what it preaches.
3. Meetings with staff (both one on one and group) to discuss
the values and what they mean to each employee must be undertaken
when implementing a value system. This will help to get everyone in
the Company on the same page and committed.
4. The values of the Company must endure changes in leadership.
The longer ethical values last, the more ingrained they will
become.
Values
The Company conducts its business around seven core values:
1. Integrity - applying high ethical standards and being honest.
The Company will conduct its business with honesty to all
stakeholders and will uphold high moral principles.
2. Mutual respect, empathy and trust in dealing with others . An
environment of mutual respect, empathy and trust is necessary to
promote integrity. Trust in the workplace is critical to
organisational success.
3. Innovation - a passion to experiment and deliver new
solutions . A focus on research and development is very important
to the future success of the Company. The Company is continually
looking to deliver innovative solutions and has a collaborative
approach to meeting customer needs.
4. Teamwork - drives high performance. Microsaic relies heavily
on teamwork. A team approach is more efficient, faster, benefits
from multi-skills especially in problem solving, increases learning
opportunities and encourages a sense of belonging, which often
translates to a greater sense of ownership and accountability for
the work.
5. Quality - we take pride in everything we do . The Company is
strongly focused on quality from the products it produces to the
processes it operates. The Company is ISO 9001:2015 compliant.
6. Customer focus - go the extra mile for our customers. The
Company assigns the highest priority to customer satisfaction. We
listen to our customers and create solutions for unmet customer
needs.
7. Shareholder value - striving to deliver value to shareholders
. The key objective of the Company is achieving sustainable
profitability. Every employee understands how they fit into the
profitability picture. Everyone's common goal is to build a strong,
profitable Company that will endure and provide a reasonable return
to shareholders.
PRINCIPLE 9: Maintain governance structures and processes that
are fit for purpose and support good decision-making by the
Board.
See the website for further disclosures at
https://www.microsaic.com/investors/governance-new/
PRINCIPLE 10: Communicate how the Company is governed and is
performing by maintaining a dialogue with shareholders and other
relevant stakeholders.
The following committee reports are included in these Annual
Report & Accounts as shown below. They include details of the
work of those committees:
-- The Directors' Remuneration Committee Report ;and
-- The Directors' Finance & Audit Committee Report.
The Corporate Governance Report was approved by the Board of
Directors on 15 January 2024 and signed on its behalf by:
Bob Moore
Executive Chairman
INDEPENT AUDITORS' REPORT TO THE MEMBERS OF MICROSAIC SYSTEMS
PLC
For the year ended 31 December 2022
Opinion
We have audited the financial statements of Microsaic Systems
plc for the year ended 31 December 2022 which comprise the
statement of comprehensive income, the statement of financial
position, the statement of changes in equity, the statement of cash
flows and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK-adopted
international accounting standards.
In our opinion, the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 31 December 2022 and its loss for the year then
ended;
-- have been properly prepared in accordance with UK-adopted
international accounting standards; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Our approach to the audit
We tailored the scope of our audit to ensure that we obtained
sufficient evidence to support our opinion on the financial
statements as a whole, taking into account the structure of the
Company, the accounting processes and controls, and the industry in
which it operates.
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at areas where the Directors
made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Except for the matter described in the material uncertainty
related to going concern section, we have determined that there are
no other key audit matters to be communicated in our report.
Our application of materiality
We apply the concept of materiality in planning and performing
our audit, in evaluating the effect of misstatements and in forming
our opinion. Our overall objective as auditor is to obtain
reasonable assurance that the financial statements as a whole are
free from material misstatement, whether due to fraud or error. We
consider materiality to be magnitude by which misstatements,
including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial
statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatement below this level will
not necessarily be evaluated as immaterial as we also take account
of the qualitative nature of identified misstatements, and the
circumstances of their occurrence, when evaluating their effect on
the financial statements as a whole.
Based on our professional judgement, and taking into account the
possible metrics used by investors and other readers of the
accounts, we applied a materiality of GBP55,000 (2021: GBP50,000).
This is based on 2.5% of operating expenditure in the draft
financial statements at the planning stage of the audit for the
year ended 31 December 2022. Performance materiality was set at 65%
of materiality.
Our triviality level was set at GBP2,000 and any uncorrected
audit differences below this level were not reported to management,
unless warranted under qualitative grounds.
Material uncertainty relating to going concern
We draw attention to note 3 in the financial statements, which
indicates that the company's ability to continue as a going concern
is dependent upon successful completion of a fundraise, this to
provide the Company with sufficient working capital and to finance
its proposed reduced cost base, as well as providing sufficient
cash to complete and develop a proposed acquisition of trade and
assets.
Given the inherent uncertainty of a fundraise, along with other
matters as set forth in note 3, we concur with the directors'
assessment that a material uncertainty exists that may cast
significant doubt on the company's ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors' assessment of the entity's
ability to continue to adopt the going concern basis of accounting
included the following:
-- Obtained and critically assessed for arithmetical accuracy
and consistency the directors' formal going concern assessment;
-- Reviewed the projected cashflows and other available evidence
to assess the ability of the company to continue in operation for
at least 12 months from the date of signing this report;
-- Identified the key assumptions within the forecast, being the
existence and timing of sales opportunities and the completeness of
forecast costs, and challenged management on the appropriateness of
these;
-- Performed a sensitivity analysis on these key assumptions
underlying the directors' going concern assessment;
-- Obtained corroborating evidence for the existence of the
sales pipeline and likelihood of conversion through review of
correspondence with sales prospects;
-- Critically reviewed the provided business case for the
proposed acquisition, and stress tested the forecasts to identify
the cash requirements over the next twelve months
-- Obtained representations and underlying evidence from third
party brokers regarding the plausibility of the Company raising the
required funding;
-- Discussed events after the reporting date with the directors
to assess their impact on the going concern assumption, including
comparison of the post year end cash balances to forecast
positions; and
-- Reviewed the disclosures relating to going concern included
within these financial statements to ensure they are consistent
with the requirements of UK-adopted international accounting
standards, and that they present a true and fair view to readers of
the financial statements.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic Report and the
Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the Strategic Report and the Directors' Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the Strategic Report or
the Directors' Report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the
accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors' Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The specific
procedures for this engagement and the extent to which these are
capable of detecting irregularities, including fraud are detailed
below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the company's financial
statements to material misstatement and how fraud might occur,
including through discussions with the directors, discussions
within our audit team planning meeting, updating our record of
internal controls and ensuring these controls operated as intended.
We evaluated possible incentives and opportunities for fraudulent
manipulation of the financial statements. We identified laws and
regulations that are of significance in the context of the company
by discussions with directors and updating our understanding of the
sector in which the company operates.
Laws and regulations of direct significance in the context of
the company include The Companies Act 2006, and UK Tax legislation,
the AIM Rules for Companies and UK Tax legislation, particularly
with reference to Research Development Expenditure Credits.
Audit response to risks identified:
We considered the extent of compliance with these laws and
regulations as part of our audit procedures on the related
financial statement items including a review of financial statement
disclosures. We reviewed the company's records of breaches of laws
and regulations, minutes of meetings and correspondence with
relevant authorities to identify potential material misstatements
arising. We discussed the company's policies and procedures for
compliance with laws and regulations with members of management
responsible for compliance.
During the planning meeting with the audit team, the engagement
partner drew attention to the key areas which might involve
non-compliance with laws and regulations or fraud. We enquired of
management whether they were aware of any instances of
non-compliance with laws and regulations or knowledge of any
actual, suspected or alleged fraud. We addressed the risk of fraud
through management override of controls by testing the
appropriateness of journal entries and identifying any significant
transactions that were unusual or outside the normal course of
business. We assessed whether judgements made in making accounting
estimates gave rise to a possible indication of management bias. At
the completion stage of the audit, the engagement partner's review
included ensuring that the team had approached their work with
appropriate professional scepticism and thus the capacity to
identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of it.
Also, the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through
collusion.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
.........................................
Roger Weston (Senior Statutory Auditor)
for and on behalf of Saffery LLP
Chartered Accountants
Statutory Auditors
71 Queen Victoria Street
London
EC4V 4BE
15 January 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2022
Year to 31 Year to 31
Notes December December
2022 2021
RESTATED
GBP GBP
-------------------------------------------- -------- ------------ ------------
Revenue 5 1,567,697 906,876
Cost of sales (618,330) (526,225)
-------------------------------------------- -------- ------------ ------------
Gross profit 949,367 380,651
Other operating income 6 - 67,283
Professional fees - Corporate transactions - (65,789)
Impairment of related party debt 28 (1,130,169)
Other operating expenses (2,135,792) (2,416,380)
Total operating expenses 7 (3,265,961) (2,482,169)
-------------------------------------------- -------- ------------ ------------
Loss from operations before share-based
payments (2,316,594) (2,034,235)
Share-based payments 25 (234,749) (1,363,764)
-------------------------------------------- -------- ------------ ------------
Loss from operations after share-based
payments 7 (2,551,343) (3,397,999)
Financial cost 8 (7,013) (4,604)
Finance income 8 23,423 6,237
-------------------------------------------- -------- ------------ ------------
Loss before tax (2,534,933) (3,396,366)
Tax on loss on ordinary activities 9 246,224 267,785
-------------------------------------------- -------- ------------ ------------
Total comprehensive loss for the
year (2,288,709) (3,128,581)
-------------------------------------------- -------- ------------ ------------
Loss per share attributable to
the equity holders of the Company
Basic and diluted loss per ordinary
share (pence) 10 (0.036)p (0.056)p
-------------------------------------------- -------- ------------ ------------
The notes form part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
31 December 31 December
Notes 2022 2021
GBP GBP
------------------------------- -------- ------------- -------------
ASSETS
Non-current assets
Intangible assets 11 69,160 74,405
Property, plant and equipment 12 380,272 305,687
Right of use assets 13 54,005 126,533
Total non-current assets 503,437 506,625
------------------------------- -------- ------------- -------------
Current assets
Inventories 14 274,045 283,902
Trade and other receivables 15 594,364 631,948
Corporation tax receivable 9 514,009 267,785
Cash and cash equivalents 1,241,480 3,464,876
Total current assets 2,623,898 4,648,511
------------------------------- -------- ------------- -------------
TOTAL ASSETS 3,127,335 5,155,136
------------------------------- -------- ------------- -------------
EQUITY AND LIABILITIES
Equity
Share capital 19 1,731,413 1,702,913
Share premium 21 28,262,518 28,006,018
Share-based payment reserve 2,400,796 2,888,707
Retained losses (29,675,468) (28,024,418)
Total equity 2,719,259 4,573,220
------------------------------- -------- ------------- -------------
Current liabilities
Trade and other payables 16 236,445 354,611
Lease liability 13 52,918 71,187
------------------------------- -------- ------------- -------------
Total current liabilities 289,363 425,798
------------------------------- -------- ------------- -------------
Non-current liabilities
Provisions 17 115,385 99,960
Lease liability 13 3,328 56,158
------------------------------- -------- ------------- -------------
Total non-current liabilities 118,713 156,118
------------------------------- -------- ------------- -------------
Total liabilities 408,076 581,916
------------------------------- -------- ------------- -------------
TOTAL EQUITY AND LIABILITIES 3,127,335 5,155,136
------------------------------- -------- ------------- -------------
The financial statements were approved for issue by the Board of
Directors on15 January 2024 and signed on its behalf by:
Bob Moore
Executive Chairman
Company number 03568010
The notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Share
-based Total
Share Share payment Retained
Notes capital premium reserve Losses equity
GBP GBP GBP GBP GBP
---------------------------- ------ ---------- ------------ ---------- ------------- ------------
At 1 January
2021 1,140,913 24,867,886 324,264 (25,090,083) 1,242,980
---------------------------- ------ ---------- ------------ ---------- ------------- ------------
Total comprehensive
loss for the year - - - (3,128,581) (3,128,581)
Transaction with
owners:
Shares issued--
placing 19 562,000 5,058,000 - - 5,620,000
Share issue costs 21 - (1,919,868) 1,503,008 - (416,860)
Transfer in respect
of lapsed share
options - - (194,246) 194,246 -
Share-based payments-share
options 25 - - 1,255,681 - 1,255,681
At 31 December
2021 1,702,913 28,006,018 2,888,707 (28,024,418) 4,573,220
---------------------------- ------ ---------- ------------ ---------- ------------- ------------
Total comprehensive
loss for the year - - - (2,288,709) (2,288,709)
Transaction with
owners:
Shares issued 19 28,500 256,500 - - 285,000
Transfer in respect
of directors warrants
exercised 19 (300,075) 300,075 -
Transfer in respect
of lapsed share
options - - (337,584) 337,584 -
Share-based payments
options 25 - - 149,748 - 149,748
At 31 December
2022 1,731,413 28,262,518 2,400,796 (29,675,468) 2,719,259
---------------------------- ------ ---------- ------------ ---------- ------------- ------------
The notes form part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
Year to 31 Year to 31
December December
2022 2021
GBP GBP
Cash flows from operating activities
Cash absorbed by operations 31 (2,133,332) (1,827,851)
Corporation tax received - 218,568
Net cash used in operating activities (2,133,332) (1,609,283)
--------------------------------------- ---- ------------ ------------
Cash flows from investing activities
Purchases of intangible assets 11 (26,880) (28,883)
Purchases of property, plant and
equipment 12 (208,495) (305,334)
Interest received 23,423 6,237
Net cash used in investing activities (211,952) (327,980)
--------------------------------------- ---- ------------ ------------
Cash flows from financing activities
Proceeds from share issues 200,000 5,500,000
Share issue costs - (416,860)
Repayment of lease liabilities 13 (78,112) (78,070)
Net cash generated by / (used in)
financing activities 121,888 5,005,070
--------------------------------------- ---- ------------ ------------
Net (decrease) / increase in cash
and cash equivalents (2,223,396) 3,067,807
Cash and cash equivalents at the
beginning of the year 3,464,876 397,069
Cash and cash equivalents at the
end of the year 1,241,480 3,464,876
--------------------------------------- ---- ------------ ------------
The notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2022
The principal activity of the Company continues to be the
research, development and commercialisation of miniaturised mass
spectrometry instruments that are designed to improve the
efficiency of pharmaceutical R&D. The Company is incorporated
as a public limited company (plc) in England and its registered
address is 1-7 Park Road, Caterham, Surrey, CR3 5TB. The Company
has no subsidiaries, so the financial information relates to the
Company only.
1. Accounting policies
The following principal accounting policies have been used
consistently in the preparation of these financial statements.
Basis of preparation
These financial statements have been prepared in accordance with
UK-adopted international accounting standards (IFRS) in conformity
with the requirements of the Companies Act 2006.
The financial statements have been prepared in sterling, which
is the functional currency of the company. Monetary amounts in
these financial statements are rounded to the nearest GBP.
These financial statements have been prepared under the
historical cost basis.
Revenue recognition
IFRS 15 provides a single, principles based five-step model to
be applied to all contracts with customers. The five-step framework
includes:
1) Identify the contract(s) with a customer;
2) Identify the performance obligations in the contract;
3) Determine the transaction price;
4) Allocate the transaction price to the performance obligations in the contract; and
5) Recognise revenue when the entity satisfies a performance obligation.
The Company recognises revenue from the following four
sources:
1) Sale of products;
2) Sale of consumables and spare parts;
3) Product support services; and
4) Consultancy services.
All revenues and trade receivables arise from contracts with
customers. Revenue is measured based on the consideration which the
Company expects to be entitled in a contract with a customer and
excludes amounts collected on behalf of third parties. The sale of
products, consumables and spare parts is recognised when the sole
performance obligation is met which is usually on delivery to the
customer. For product support services and consultancy services
revenue, the performance obligation is satisfied over the duration
of the service period and revenue is recognised in line with the
satisfaction of the performance obligation.
Sale of products
The Company sells compact mass spectrometers (Microsaic 4500 MiD
(R) ) mainly through OEMs and Distributors. A small proportion of
its sales are direct to the customer. Discounts are offered and
agreed as part of the contractual terms. Terms are generally Ex
Works so control passes when the customer collects the goods.
Payment terms are generally 30 days from the date of invoice.
Sales of consumables and spare parts
The Company sells consumables and spare parts mainly through
OEMs and Distributors. Terms are generally Ex Works so control
passes when the customer collects the goods. Discounts are offered
and agreed as part of the contractual terms. Payment terms are
generally 30 days from the date of invoice.
Product support services revenue
Product support services to our OEMs and Distributors includes
training their sales and service teams and servicing the products
from time to time. Discounts are offered and agreed as part of the
contractual terms. Terms are Ex Works so control passes when the
customer receives the service. Payment terms are generally 30 days
from the date of invoice.
Usually, t here is no obligation on the Company for returns,
refunds or similar arrangements. Also, the Company does not
manufacture specific items to a customer's specification and no
financing component is included in the terms with customers.
The Company provides assurance warranties which are 15 months
from the date of shipment for OEMs and Distributors. These
warranties confirm that the product complies with agreed-upon
specifications. The Company is looking to provide service
warranties in the future to direct Europe customers, where the
revenue from such warranties will be recognised over the period of
the service agreement.
Consultancy services revenue
Consultancy services comprises science and engineering
consultancy, laboratory services and monitoring services. These
services are delivered over a period of time usually in accordance
with a master services agreement and/or statement of works with an
agreed outcome at the end of the project or project phase. Payment
terms are generally 30 days from the date of invoice.
Consultancy services revenue is recognised by reference to the
stage of completion of the project or project phase at the balance
sheet date as follows:
-- Where there are defined project or project phase milestones,
the revenue is recognised in full on completion of the project or
project phase and on a time basis for the stage of completion where
the project or project phase is not completed at the balance sheet
date. The stage of completion is recognised as the proportion of
time spent on the project or project phase compared with the total
time anticipated to complete the project or project phase;
and/or
-- Where the project is defined with the client in terms of time
spent, the revenue is recognised on the basis of consulting time
spent on the project by the Company at the time-based rates agreed
with the client.
Cost of sales
With effect from 1 January 2022, the company has changed the
accounting policies for the presentation of cost of sales, to
better reflect the costs associated with the new revenue streams.
The financial impact of this change is set out in note 32, and the
new policies applied are as follows:
Cost of sales of products
The cost of sales of mass spectrometers and related equipment is
the bought in purchase cost of the product or the transfer value
from stock value if a unit has been previously written down.
Usually, the sale is made on an Ex-Works basis but if it were not
the cost of delivery to the customer is also included in cost of
sales.
Cost of sales of consumables and spare parts
The cost of sales of consumable and spare parts is the bought in
purchase cost of the consumable or spare part or the transfer value
from stock value if an item has been previously written down.
Usually, the sale is made on an Ex-Works basis but if it were not
the cost of delivery to the customer is also included in cost of
sales.
Cost of sales of product support services
The cost of sales of product support services income is the
time-based apportionment of the employment costs of the relevant
staff spent on the delivery of the product support services income
plus any related costs of fulfilment such as travel expenses and
any externally incurred direct costs. For the purposes of cost of
sales, the employment costs are considered to be salaries, pensions
and employers national insurance but cost of sales does not include
share-based payments nor any apportionment of training or
overheads.
Cost of sales of consultancy services
The cost of sales of consultancy services (comprising science
and engineering consultancy, laboratory services and monitoring
services) is the time-based apportionment of the employment costs
of the relevant staff spent on the delivery of this revenue plus
any related costs of fulfilment such as travel expenses and any
externally-incurred direct costs. For the purposes of cost of
sales, the employment costs are considered to be salaries, pensions
and employers national insurance but does not include share-based
payments nor any apportionment of training or overheads.
Other operating income
Other operating income includes grant income, insurance income
arising from a claim and income from development contracts. The
Company's management assesses the contracts at each balance sheet
date, including the costs to completion, which are subject to
estimation uncertainty. Grant income is recognised when there is
reasonable assurance that the grant will be received, and the
Company will comply with any attached conditions. Grants are
recognised in the profit or loss in line with the expenditure they
are intended to compensate and are shown gross of the underlying
expense. The Company received CJRS grants during the prior year,
which has been recognised in line with the corresponding payroll
expenditure. There are no unfulfilled conditions attached to the
grant that the Company is aware of.
Segmental reporting
The Company currently has one business segment, being the
research, development and commercialisation of scientific
instruments. This is undertaken wholly within the United Kingdom.
Revenue by geographical market is analysed in note 5.
Intangible assets
Trademarks and patents are stated at historic cost of
registration less accumulated amortisation and any accumulated
impairment losses. Amortisation is charged to operating expenses
and calculated to write off the cost in equal annual instalments
over five years, which is a prudent estimate of their useful
economic lives.
Certain software is stated at historic cost less accumulated
amortisation and any accumulated impairment losses. Amortisation is
charged to operating expenses and calculated to write off the cost
in equal annual instalments over three years, which is considered
to be a prudent estimate of its useful economic life.
Property, plant and equipment
Items of property, plant and equipment are stated at cost of
acquisition or production costs less accumulated depreciation and
impairment losses. Depreciation is charged to the statement of
comprehensive income on a straight-line basis to write-off the
carrying value of each asset to residual value over its estimated
useful economic life as follows:
Plant and equipment - 33.3% on a straight line basis
Fixtures and fittings - 33.3% on a straight line basis
Software - 33.3% on a straight line basis
Pensions
The Company has an auto-enrolment pension scheme for employees.
Contributions are charged to the statement of comprehensive income
in the period they are payable.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is based on the first-in first-out principle and
includes expenditure incurred in acquiring the inventories and
bringing them to their present location and condition. The cost of
finished goods and work in progress comprises raw materials, direct
labour and other direct costs. Net realisable value is the
estimated selling price in the ordinary course of business less
applicable selling expenses. The inventory provision is based on
identifying slow moving stock items from recent historic and
anticipated future sales and providing where appropriate for those
items which may be surplus to anticipated or identifiable
demand.
Provisions
Provisions are established where the Directors have identified
an obligation which is probable and where the amount can be
estimated reliably.
Taxation
Current taxes are based on the results of the Company and are
calculated according to local tax rules using the tax rates that
have been enacted by the balance sheet date.
The Company recognises research and development tax credits
receivable in cash as a current asset under the heading corporation
tax receivable. Any difference to amounts received are dealt with
as adjustments to prior period tax.
Deferred tax is provided in full using the balance sheet
liability method for all taxable temporary differences arising
between the tax bases of assets and liabilities and their carrying
values for financial reporting purposes. Deferred tax is measured
using currently enacted or substantially enacted tax rates.
Deferred tax assets are recognised to the extent the temporary
difference will reverse in the foreseeable future and that it is
probable that future taxable profit will be available against which
the asset can be utilised.
Foreign currency translation
Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at the rates of exchange
ruling at the balance sheet date. Transactions in foreign
currencies are recorded at the rate ruling at the date of
transaction, or forward contract rate, if applicable. All
differences are taken to the statement of comprehensive income.
Financial instruments
Financial assets and financial liabilities are recognised in the
Company's statement of financial position when the Company becomes
a party to the contractual provisions of the instrument. Examples
of the Company's financial instruments include:
Cash and cash equivalents
The fair value of cash and cash equivalents is considered to be
their carrying amount due to their short-term maturity.
Trade receivables
The Company's trade receivables do not carry a significant
financing element as defined by IFRS 15. Therefore, trade
receivables are recorded at transaction price (e.g., invoice amount
excluding costs collected on behalf of third parties) and
throughout the life of the receivable at an amount equal to
lifetime expected credit losses ("ECL"). The Company has applied a
simplified "provision matrix" for calculating expected credit
losses as a practical expedient. The percentage ranges are applied
to the receivable balance.
Current 1-30 days 31-60 61-90 91-120 121-150 151-180 181 days
past due days past days past days past days past days past + past
due due due due due due
0%-1% 1%-2% 1%-2% 1%-2% 2%-5% 5%-10% 10%-20% 10%-50%
---------- ----------- ----------- ----------- ----------- ----------- ---------
Other points:
-- The Company determines whether trade receivables are impaired
through regular meetings between finance and business
development.
-- The credit situation of new customers is reviewed before the
first shipment. If possible, a credit report is obtained. If there
is any concern over the credit worthiness of the customer, the
Company may ask the customer to pay an amount in advance or enter
into a confirmed letter of credit (Non-UK/Europe) etc.
-- Trade receivables are considered low risk at initial
recognition but this changes if they have an overdue invoice(s).
Depending on the value of the shipment, the customer may be placed
on hold until the overdue amount is paid. Discussions as to why an
invoice is overdue are held promptly between finance and business
development and the customer.
-- The provision is monitored at customer level by business development and finance.
-- If the Company is having ongoing dialogue with the customer
regarding their overdue balance the debt will not be written off.
It may be that a payment plan can be agreed or more time is given
to the customer to sell the product. If the customer is not
actively engaging with the Company legal action may be taken.
-- Forward looking information from business development is
taken into account when preparing the provision matrix including
geographical risk, changes in customer circumstances and
macro-economic factors.
Under IFRS 9 impairment for receivables including trade
receivables is assessed using an expected loss model. For trade
receivables this focuses on the risk that, and an extent to which,
a receivable will default. Accordingly, the Company calculates the
allowance for credit losses by considering the cash shortfalls it
would incur in various default scenarios and multiplying the
shortfalls by the probability of each scenario occurring. The
Company only has short-term receivables and has adopted a
"simplified approach" in assessing impairment.
The Company has applied a simplified "provision matrix" for
calculating expected losses as a practical expedient (e.g., for
trade receivables), as the Directors believe that this is
consistent with the general principles for measuring expected
losses. The provision matrix is based on an entity's historical
default rates over the expected life of the trade receivables and
is adjusted for forward-looking estimates.
In preparing the provision matrix the Company looks at the
geographic base of its trade receivables and whether they are
existing or new customers. Finally, management considered forward
looking information that may affect the default rates applied in
the matrix.
The risk profile of related party debts are considered to differ
from the wider trade receivables pool, and so the above provision
matrix percentages are not applied to the amounts owed by DeepVerge
subsidiaries.
In the light of the adjusting post balance sheet event set out
in note 30, it is the opinion of the directors that conditions at
the year-end were such that the expected credit loss on those debts
is equal to the amount unpaid at 26 June 2023, less reclaimable
VAT.
Financial liability and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Company after deducting all
its liabilities.
Bank borrowings
The Company had no bank borrowings at 31 December 2022 and
2021.
Trade payables
Trade payables are not interest bearing and are stated at their
nominal value.
Equity instruments
Equity instruments issued by the Company are recorded at the
value of the proceeds received net of direct issue costs including
the fair value of any warrants issued in lieu of issue costs. The
Company has no derivative financial assets or investments in equity
instruments.
Leases
For all leases, the Company recognises a right of use asset and
corresponding lease liability on the balance sheet, which are
depreciated and amortised respectively over the lease term.
However, where leases are low value or of less than 12 months old,
the Company has taken advantage of the practical expedient allowing
the expense to be recognised on a straight line basis over the
lease term.
Research and development
Expenditure on research is recognised as an expense in the
period in which it is incurred.
Development costs incurred on specific projects are capitalised
when all the following conditions are satisfied:
-- Completion of the intangible asset is technically feasible so
that it will be available for use or sale;
-- The Company intends to complete the intangible asset and use or sell it;
-- The Company has the ability to use or sell the intangible asset;
-- The intangible asset will generate probable future economic
benefits. Among other things, this requires that there is a market
for the output from the intangible asset or for the intangible
asset itself, or, if it is to be used internally, the asset will be
used in generating such benefits;
-- There are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset; and
-- The expenditure attributable to the intangible asset during
its development can be measured reliably.
Costs incurred which do not meet all of the above criteria are
expensed as incurred. No development costs have been capitalised to
date.
Share-based payments
In accordance with IFRS 2 "Share-based payments", the Company
reflects the economic cost of awarding shares and share options to
Directors, employees and advisors by recording an expense in the
statement of comprehensive income equal to the fair value of the
benefit awarded; fair value being determined by reference to option
pricing models. The expense is recognised in the statement of
comprehensive income over the vesting period of the award.
The fair value of warrants issued to advisors as remuneration
for their services in a fundraising will be charged to share
premium over the vesting period of the award.
2. Adoption of new and revised standards
During the financial year, the Company adopted the following new
IFRSs (including amendments thereto) and IFRIC interpretations,
that became effective for the first time.
Standard Effective date,
annual period
beginning on or
after
Reference to the Conceptual Framework (Amendments 1 January 2022
to IFRS 3 Business Combinations)
-----------------
Property, Plant and Equipment: Proceeds before 1 January 2022
Intended Use (Amendments to IAS 16)
-----------------
Onerous Contracts - Cost of Fulfilling a Contract 1 January 2022
(Amendments to IAS 37 Provisions, Contingent
Liabilities and Contingent Assets)
-----------------
Annual improvements 2018-2020 cycle 1 January 2022
-----------------
Their adoption has not had any material impact on the
disclosures or amounts reported in the financial statements.
Standards issued but not yet effective
At the date of authorisation of these financial statements, the
following standards and interpretations relevant to the Company and
which have not been applied in these financial statements, were in
issue but were not yet effective.
Standard Effective date,
annual period
beginning on or
after
IFRS 17 - Insurance Contracts 1 January 2023
-----------------
Amendments to IFRS 17 - Insurance Contracts; 1 January 2023
and Extension of the Temporary Exemption from
Applying IFRS 9 (Amendments to IFRS 4 Insurance
Contracts)
-----------------
Disclosure of Accounting Policies (Amendments 1 January 2023
to IAS 1 Presentation of Financial Statements
and IFRS Practice Statement 2 Making Materiality
Judgements)
-----------------
Definition of Accounting Estimates (Amendments 1 January 2023
to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors)
-----------------
Deferred Tax related to Assets and Liabilities 1 January 2023
arising from a Single Transaction (Amendments
to IAS 12 Income Taxes)
-----------------
The Directors are evaluating the impact that these standards
will have on the financial statements of Company, but at this stage
the impact is not expected to be material.
At the date of authorisation of these financial statements, the
following standards and interpretations relevant to the Company and
which have not been applied in these financial statements, have not
been endorsed for use in the UK and will not be adopted until such
time as endorsement is confirmed.
Standard Effective date,
annual period beginning
on or after
Classification of Liabilities as Current or Non-Current, 1 January 2024
Non-current Liabilities with Covenants: amendments
to IAS 1
-------------------------
Lease Liability in a Sale and Leaseback (Amendments 1 January 2024
to IFRS 16)
-------------------------
The Directors are evaluating the impact that these standards
will have on the financial statements of Company, but at this stage
the impact is not expected to be material.
3. Going concern
The Company is loss making and has raised funds in the past by
issuing equity in discrete tranches. The most recent fundraise was
completed on 5 February 2021 where the Company raised GBP5.2
million after expenses from new and existing shareholders.
The Company's trading performance improved in 2022, with higher
sales and reduced losses. However, excluding revenues from
DeepVerge, revenues were only GBP318,869, significantly below the
prior year. Only 5 units were shipped in 2022 before year end
compared to 19 in 2021. The supply chain has since improved and
production restarted in May 2023, with 7 units expected to be
shipped by the end of 2023. As of year end 2023, there is a
prospective equipment sales pipeline of approximately 19 units in
addition to service and spares revenue. It is unlikely that all of
these prospective sales will become firm orders. The board has
enacted plan to enable to company to operate on a much reduced cost
base. In particular, this has unfortunately necessitated the
redundancy of all Microsaic staff, to be completed in early 2024.
Going forward, the Company will outsource more of the manufacturing
cycle, including the sourcing of components and shipping, to its
existing manufacturing partner. Through the use of contractors, the
Company will continue to assist with the testing and installation
of units, as well as the development of designs. The board have
prepared cashflow forecasts based on this new operating model to
cover the next 12 months.
Alongside this new operating model, it is the intention of the
board to acquire the trade and assets relating to the Microtox(R)
brand and Modern Water business. Cashflow forecasts have been
prepared covering the next 12 months, and it is the opinion of the
directors that the acquired trade can be cash positive over that
period. In preparing these forecasts, the Directors have made
assumptions regarding the level of sales and costs based on
historical trading performance, and an expectation that the
business will be able to resume production of reagents within a few
months of acquisition.
Factoring in those forecasts, the Board has conducted a thorough
assessment of the Company's cash reserves and working capital
requirements from the date of approval of the financial statements.
As at 8 January 2024, the cash and bank balances had fallen to
GBP148k. The Board acknowledges that, in the absence of additional
funding, the company will not have sufficient working capital to
continue in operations beyond January 2024 and that a fundraise is
required to allow the Company to transition to reduced cost base
operations and complete the proposed acquisition. As such, the
Board has commenced a fundraising exercise, and obtained sufficient
firm commitments to meet the cash requirements of its forecasts.
The completion of the fundraise is dependent upon the restoration
of the company's shares to trading on AIM and the company entering
into an acquisition agreement for the trade and assets of the
Microtox(R) brand and Modern Water business. As such. there is a
material uncertainty regarding the going concern status of the
Company.
Stakeholders should be aware of the material uncertainty
surrounding the need for additional funding and the associated
risks involved. Assuming the acquisition proceeds, the directors
have assessed a cash requirement for a plausible downside scenario
covering 12 months from the date of approval of the financial
statements at minimum gross proceeds of GBP1.0 million, and have
determined the amount to be raised through the proposed fundraise
sufficient to meet these requirements. The Company will actively
monitor and assess its financial position to ensure that it can
meet the demands of its plans effectively.
Having taken this careful approach through a review of the
Company cost base, proposed fundraise and proposed acquisition, the
Board believes that the enlarged Company will have enough cash to
cover its anticipated working capital requirements for at least the
next 12 months from the date of signing of the Annual Report and
Accounts. On this basis, the Directors have concluded that it is
appropriate to prepare the financial statements on a going concern
basis, subject to the above material uncertainty.
4. Critical accounting estimates and judgements
Accounting estimates and judgements are continually evaluated
and are based on past experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates could, by definition,
differ from the actual outcome.
The estimates and assumptions that have a risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are summarised
below:
Carrying value of trade receivables
The Company's policies for calculating expected credit losses on
trade receivables are set out in note 1.
An area of significant judgment in the year is the expected
credit loss arising on the debts owed by Deepverge plc and its
subsidiaries, totalling GBP1,511,198. On 26 June 2023, DeepVerge
plc announced that it would no longer be in a position to support
its subsidiaries, and was anticipating a sale or liquidation of
those assets. As such, no recovery of the remaining GBP1,351,894
owed is expected.
It is the judgement of the directors that the conditions leading
to this situation would have been present at 31 December 2022. As
such, this has been recognised as an adjusting event after the
reporting date, and impairment of GBP1,130,169 recognised; being
the outstanding debt less VAT recoverable.
Share-based payments
The calculation of the share-based payment expense utilises
assumptions and estimates (for example volatility, future exercise
rates etc) which may differ from actual results. Details of the
assumptions are set out in note 25. The Company uses the Black
Scholes Option pricing model to determine a theoretical option call
price. If there are market related conditions (e.g., realising
certain share price targets before vesting) then the Company uses
external advisers to apply more advanced modelling techniques. In
terms of inputs volatility is the most difficult input to estimate
and is probably the key input where management has had to use its
discretion.
Carrying value of inventories
It is the intention of the directors that the Company will move
away from purely the sale of goods as its primary revenue stream,
instead developing new lines of service revenue. As such, there is
a risk that the inventory holding may not recover its full carrying
value.
The directors believe that all inventories held at 31 December
2022 will ultimately be sold above their purchase price. However,
in light of the uncertainty in these forecasts, and the potential
for stock turnover days to significantly increase, a provision of
GBP61,987 (2021: GBP90,139) has been made for stock obsolescence.
There is significant uncertainty in this estimate, but the
directors believe it is an appropriate estimate for potential
future write off of inventories.
The detailed breakdown of inventories can be seen in note
14.
These assumptions are reviewed at each balance sheet date and
amended if required.
5. Revenue
Throughout 2022, the Company operated in one business segment,
that of research, development and commercialisation of mass
spectrometry instruments. Products are sold ex-works: The
attribution of revenue is based on the country or group of
countries to where the goods are shipped. In 2022 our largest
customers had the following revenues as a percentage of total
revenues:
Customer number 1 - 79.7% (Note that this customer is DeepVerge
and, as disclosed elsewhere in the report, although modest revenues
were achieved in early 2023, no further revenues have been or are
expected to be received since then).
The geographical analysis of revenue (by shipment destination)
was as follows:
Year to Year to
31 December 31 December
2022 2021
GBP GBP
------- ------------- -------------
UK 1,354,872 532,364
USA 103,752 187,673
EU 67,646 71,887
China 30,631 106,076
ROW 10,796 8,876
1,567,697 906,876
------- ------------- -------------
The analysis of revenue by product or service was as
follows:
Year to Year to
31 December 31 December
2022 2021
GBP GBP
--------------------- ------------- -------------
Equipment units 206,915 617,613
Consumables 11,942 36,983
Service spares 107,717 193,849
Accessories 17,738 -
Product support 54,803 58,431
Consulting services 1,168,582 -
1,567,697 906,876
--------------------- ------------- -------------
5. Other operating income
Year to Year to
31 December 31 December
2022 2021
GBP GBP
---------------------------------------- -------------- -------------
Coronavirus Job Retention Scheme Grant - 20,829
Co-development income - 26,204
Insurance claims - 20,250
---------------------------------------- -------------- -------------
- 67,283
------------------------------------------------------- -------------
6. Expenses by nature
Year to Year to
31 December 31 December
2022 2021
RESTATED
Loss from operations after share-based payments
is stated after charging/(crediting): GBP GBP
-------------------------------------------------- ------------- -------------
Amortisation and impairment of intangible
assets 30,487 38,241
Depreciation of right of use assets 72,528 70,499
Impairment of related party debt 1,130,169 -
Expected credit losses (excluding impairment
of related party debt) (2,754) (46,746)
Movement in inventory provision (28,152) 32,535
Inventory items expensed 313,047 616,282
Staff benefit expense 1,519,276 2,807,699
Depreciation of property, plant and equipment 178,102 90,628
Provision for warranty (415) (24,075)
Research and development expenses 783,544 752,257
Professional fees (including audit fees detailed
below) 220,990 161,791
Pension costs 144,038 173,051
Exchange loss/(gain) 1,198 1,216
Directors' emoluments (before pensions and
share based payments) 60,213 266,799
-------------------------------------------------- ------------- -------------
7. Expenses by nature (continued)
Year to Year to
31 December 31 December
2022 2021
GBP GBP
--------------------------------------------- ------------- -------------
Services provided by the Company's auditors
Fees payable to the Company's auditors for
the audit of the financial statements 31,065 22,150
Fees payable in respect of prior years 7,350 -
Fees payable to the Company's auditors for
other services
* Audit related services 4,300 1,575
--------------------------------------------- ------------- -------------
42,715 23,725
--------------------------------------------- ------------- -------------
8. Finance income and Finance cost
Year to Year to
31 December 31 December
2022 2021
GBP GBP
-------------------------- ------------- -------------
Bank interest receivable 23,423 6,237
-------------------------- ------------- -------------
Interest cost under IFRS 16 (7,013) (4,433)
Other interest - (171)
----------------------------- -------- --------
(7,013) (4,604)
----------------------------- -------- --------
9. Tax on loss on ordinary activities
Year to Year to
31 December 31 December
2022 2021
Domestic current period tax GBP GBP
-------------------------------------------------- ------------- -------------
UK corporation tax (246,224) (267,785)
-------------------------------------------------- ------------- -------------
Tax on loss on ordinary activities (246,224) (267,785)
-------------------------------------------------- ------------- -------------
Factors affecting the current tax credit for Year to Year to
the period: 31 December 31 December
2022 2021
GBP GBP
-------------------------------------------------- ------------- -------------
Loss before tax (2,534,933) (3,396,366)
-------------------------------------------------- ------------- -------------
Loss before tax multiplied by standard rate
of UK corporation tax of 19% (2021: 19%) (481,637) (645,310)
Effects of:
Expenses not deductible for tax purposes 29,173 251,679
Fixed asset differences (6,689) (39,228)
Additional deduction for R&D expenditure (193,535) (116,399)
R&D Expenditure Credit - 484
Movement in deferred tax not recognised 317,880 279,259
Capital gain - 1,730
Other tax adjustments, reliefs and transfers (7,600) -
Surrender of tax losses for R&D tax credit 81,097 -
refund
Adjustments to tax charge in respect of previous 15,087 -
periods
-------------------------------------------------- ------------- -------------
Current tax credit (246,224) (267,785)
-------------------------------------------------- ------------- -------------
The Company has estimated tax losses of GBP26,930,453 (2021:
GBP25,056,703) available for carry forward against future trading
profits. Deferred tax is detailed in note 18.
10. Basic and diluted loss per ordinary share
Year to Year to
31 December 31
2022 December
2021
---------------------------------------------------- -------------- --------------
Loss after tax attributable to equity shareholders
GBP (2,288,709) (3,128,581)
Weighted average number of ordinary 0.01p
shares for the purpose of basic and diluted
loss per share 6,324,666,516 5,537,461,036
Basic and diluted loss per ordinary share (0.036)p (0.056)p
---------------------------------------------------- -------------- --------------
The basic loss per share reduced by 36% from 0.056p per share to
0.036p per share. This reflects the decrease in the loss after tax
to equity shareholders and the increased weighted average shares
outstanding in the year ended 31 December 2022 compared to year
ended 31 December 2021.
Potential ordinary shares are not treated as dilutive as the
Company is loss making, therefore the weighted average number of
ordinary shares for the purposes of the basic and diluted loss per
share are the same.
11. Intangible assets
Intangible assets comprise patents, trademarks and software
owned by the Company. The cost is amortised on a straight-line
basis over their estimated useful life.
Year ended 31 December 2022: GBP
------------------------------ ---------
Cost
At 1 January 2022 621,179
Additions 26,880
Disposals (20,546)
At 31 December 2022 627,513
------------------------------- ---------
Amortisation
At 1 January 2022 546,774
Charge for the year 30,487
Disposals (18,908)
At 31 December 2022 558,353
------------------------------- ---------
Net book value
At 31 December 2022 69,160
------------------------------- ---------
Year ended 31 December 2021 GBP
----------------------------- --------
Cost
At 1 January 2021 592,296
Additions 28,883
At 31 December 2021 621,179
------------------------------ --------
Amortisation
At 1 January 2021 508,533
Charge for the year 38,241
At 31 December 2021 546,774
------------------------------ --------
Net book value
At 31 December 2021 74,405
------------------------------ --------
12. Property, plant and equipment
Year ended 31 December 2022:
Plant and Fixtures Total
equipment and fittings
GBP GBP GBP
--------------------- ----------- -------------- ----------
Cost
At 1 January 2022 1,066,414 178,307 1,244,721
Additions 208,495 - 208,495
Transfers 44,192 - 44,192
Disposals (42,583) - (42,583)
At 31 December 2022 1,276,518 178,307 1,454,825
--------------------- ----------- -------------- ----------
Plant and Fixtures Total
equipment and fittings
GBP GBP GBP
--------------------- ----------- -------------- ----------
Depreciation
At 1 January 2022 760,727 178,307 939,034
Charge for the year 178,102 - 178,102
Disposals (42,583) - (42,583)
At 31 December 2022 896,246 178,307 1,074,553
--------------------- ----------- -------------- ----------
Net book value
At 31 December 2022 380,272 - 380,272
--------------------- ----------- -------------- ----------
Year ended 31 December 2021:
Plant and Fixtures Total
equipment and fittings
GBP GBP GBP
--------------------- ----------- -------------- ----------
Cost
At 1 January 2021 850,596 178,307 1,028,903
Additions 305,334 - 305,334
Disposals (64,246) - (64,246)
Transfers (25,270) - (25,270)
At 31 December 2021 1,066,414 178,307 1,244,721
--------------------- ----------- -------------- ----------
Depreciation
At 1 January 2021 736,472 178,286 914,758
Charge for the year 90,607 21 90,628
Disposals (64,246) - (64,246)
Transfers (2,106) - (2,106)
At 31 December 2021 760,727 178,307 939,034
--------------------- ----------- -------------- ----------
Net book value
At 31 December 2021 305,687 - 305,687
--------------------- ----------- -------------- ----------
Transfers from plant and equipment were moved to stock and then
sold to a customer.
13. Lease reporting
Right of use lease assets
Property Equipment Total
GBP GBP GBP
--------------------------- --------- ---------- --------
Cost
At 1 January 2022 318,696 9,961 328,657
Additions - - -
Disposals - - -
At 31 December 2022 318,696 9,961 328,657
--------------------------- --------- ---------- --------
Depreciation
At 1 January 2022 201,459 665 202,124
Charge for the year 69,466 3,062 72,528
Disposals - - -
--------------------------- --------- ---------- --------
At 31 December 2022 270,925 3,727 274,652
--------------------------- --------- ---------- --------
Carrying amount
At 31 December 2022 47,771 6,234 54,005
--------------------------- --------- ---------- --------
Property Equipment Total
GBP GBP GBP
--------------------- --------- ---------- --------
Cost
At 1 January 2021 179,763 8,441 188,204
Additions 138,933 9,961 148,894
Disposals - (8,441) (8,441)
At 31 December 2021 318,696 9,961 328,657
--------------------- --------- ---------- --------
Depreciation
At 1 January 2021 133,816 4,984 138,800
Charge for the year 67,643 2,856 70,499
Disposals - (7,175) (7,175)
--------------------- --------- ---------- --------
At 31 December 2021 201,459 665 202,124
--------------------- --------- ---------- --------
Carrying amount
At 31 December 2021 117,237 9,296 126,533
--------------------- --------- ---------- --------
Lease liability Property Equipment Total
GBP GBP GBP
-------------------------------- --------- ---------- ---------
At 1 January 2022 118,093 9,252 127,345
Repayment of lease liabilities (75,000) (3,112) (78,112)
Additions - - -
Interest on lease liabilities 6,782 231 7,013
Disposals - - -
At 31 December 2022 49,875 6,371 56,246
-------------------------------- --------- ---------- ---------
Property Equipment Total
GBP GBP GBP
-------------------------------- --------- ---------- ---------
At 1 January 2021 49,831 3,636 53,467
Repayment of lease liabilities (74,997) (3,073) (78,070)
Additions 138,933 9,961 148,894
Interest on lease liabilities 4,326 107 4,433
Disposals - (1,379) (1,379)
At 31 December 2021 118,093 9,252 127,345
-------------------------------- --------- ---------- ---------
Lease liability maturity
analysis
2022 2021
Property Equipment Property Equipment
Gross lease payments
due: GBP GBP GBP GBP
--------- ------------ ----------- -----------
Within one year 51,666 3,220 75,000 3,279
Between two and five
years - 3,448 51,666 6,609
--------- ------------ ----------- -----------
51,666 6,668 126,666 9,888
Less future financing
charges (1,791) (297) (8,573) (636)
49,875 6,371 118,093 9,252
--------- ------------ ----------- -----------
14. Inventories
Year to Year to
31 December 31 December
2022 2021
GBP GBP
--------------------------- ------------- -------------
Raw materials 266,853 177,212
Finished goods 69,179 196,829
---------------------------
Subtotal 336,032 374,041
--------------------------- ------------- -------------
Provision for inventories (61,987) (90,139)
Total 274,045 283,902
--------------------------- ------------- -------------
During 2022, continuing component shortages in the supply chain
largely prevented the manufacture of complete mass spectrometers,
with only two being manufactured during the year. Consequently, the
balance of sales of these products was met from inventories and
some obsolete units were written off which together reduced the
stock of finished goods over the year. In contrast, raw materials
increased as key components were purchased in bulk when available
in the supply chain so that once all components become available it
became possible to resume manufacture of complete mass
spectrometers during 2023.
The stock provision reduced overall. Some older raw materials
were written off during the year, whilst the overall provision for
raw materials increased in respect of slow-moving items. This was
offset, however, as older units of now superseded finished goods
were also written off during 2022, which substantially reduced the
remaining provision for finished goods to a negligible level.
15. Trade and other receivables
Year to Year to
31 December 31 December
2022 2021
GBP GBP
-------------------------------------- ------------- -------------
Amounts falling due within one year
Trade receivables 1,518,977 327,061
Provision for expected credit losses (1,130,178) (2,762)
Other receivables 205,565 307,649
Other taxes and social security - -
-------------------------------------- ------------- -------------
594,364 631,948
-------------------------------------- ------------- -------------
Year to Year to
31 December 31 December
2022 2021
GBP GBP
-------------------------- ------------- -------------
Not past due 266,927 299,160
1 to 30 days past due 145,494 901
31 to 60 days past due 137,000 -
61 to 90 days past due 120,000 -
91 to 120 days past due 216,775 -
121 to 150 days past due 147,043 -
151 to 180 days past due 77,160 -
Over 180 days past due 408,578 27,000
-------------------------- ------------- -------------
1,518,977 327,061
-------------------------- ------------- -------------
Year to Year to
31 December 31 December
2022 2021
GBP GBP
----------------------------------------------- ------------- -------------
Provision for expected credit losses on trade
receivables:
Balance brought forward (2,762) (68,587)
Written back to P&L during the year - 68,587
Provided during the year (1.127,416) (2,762)
Balance carried forward (1,130,178) (2,762)
----------------------------------------------- ------------- -------------
The provision for expected credit losses on trade receivables is
mandatorily measured at an amount equal to the lifetime expected
credit losses. The Company's approach to calculating the lifetime
expected credit losses is described in note 1.
16. Trade and other payables
Year to Year to
31 December 31 December
2022 2021
GBP GBP
------------------------------------- ------------- -------------
Amounts falling due within one year
Trade payables 99,456 230,494
Other taxes and social security 43,613 43,514
Other payables 11,961 30,979
Accruals and deferred income 81,415 49,624
------------------------------------- ------------- -------------
236,445 354,611
------------------------------------- ------------- -------------
17. Provisions
Dilapidations Warranties TOTAL
GBP GBP GBP
----------------------------------- -------------- ----------- --------
Balance at 1 January 2022 75,779 24,181 99,960
Provided for/(reduced) during the
year 15,840 (415) 15,425
Balance at 31 December 2022 91,619 23,766 115,385
----------------------------------- -------------- ----------- --------
Dilapidations Warranties TOTAL
GBP GBP GBP
----------------------------------- -------------- ----------- ---------
Balance at 1 January 2021 75,779 48,256 124,035
Provided for/(reduced) during the
year - (24,075) (24,075)
Balance at 31 December 2021 75,779 24,181 99,960
----------------------------------- -------------- ----------- ---------
The provision for anticipated dilapidations is in respect of the
Company's leasehold premises at Woking. The amount carried forward
of GBP91,619 is based on the potential future cost which could be
incurred at the end of the lease.
The Company provides OEMs and distributors with a 15-month
warranty on Mass Spectrometer products. The provision represents
the anticipated cost of servicing those warranty claims. The
provision is based on historical costs including product,
replacement parts and the cost-of-service engineers that may have
to be incurred over the warranty period. One unit (2021: Nil) was
replaced during the year rather than being repaired, as this was
considered to be more efficient. The provision for warranty at the
end of the year was GBP23,766 (2021: GBP24,181).
18. Deferred tax
Deferred taxation provided in the financial GBP GBP
statements:
--------------------------------------------- ------------- --------------
Year to Year to
31 December 31 December
2022 2021
GBP GBP
--------------------------------------------- ------------- --------------
Accelerated capital allowances 95,068 61,741
Tax losses carried forward (95,068) (61,741)
- -
--------------------------------------------- ------------- --------------
A deferred tax asset in respect of tax losses has only been
recognised to the extent of the deferred tax liability in respect
of accelerated capital allowances at a tax rate of 25% (2021: 25%).
The Company has estimated tax losses of GBP26,930,453 (2021:
GBP25,056,703) available for carry forward against future trading
profits. The additional deferred tax asset that would arise on
these losses if it were recognised at 25% is GBP6,637,545 (2021:
GBP6,202,435).
19. Share capital
The total share capital of the Company comprises Ordinary and
Deferred shares as follows:
2022 2022 2021 2021
Allotted, called up and Number GBP Number GBP
fully paid:
Ordinary shares of 0.01p
each 6,361,365,146 636,137 6,076,365,146 607,637
Deferred shares of 0.24p
each 456,365,146 1,095,276 456,365,146 1,095,276
As at 31 December 6,817,730,292 1,731,413 6,532,730,292 1,702,913
-------------------------- ------------- --------- ------------- ---------
The Ordinary share capital of the Company comprises:
2022 2022 2021 2021
Allotted, called up and Number GBP Number GBP
fully paid:
Ordinary shares of 0.01p
(0.25p) each as at 1
January 6,076,365,146 607,637 456,365,146 1,140,913
Effect of share split
and deferment - - - (1,095,276)
Issue of ordinary share
capital of 0.01p each 285,000,000 28,500 5,620,000,000 562,000
As at 31 December 6,361,365,146 636,137 6,076,365,146 607,637
-------------------------- ------------- ------- ------------- -----------
19. Share capital (continued)
In the year ended 31 December 2022 there were a total of
285,000,000 newly issued shares. Of these, 200,000,000 were
subscribed by Nigel Burton in February 2022 through the exercise of
200,000,000 share warrants. Additionally, 85,000,000 newly issued
shares represented Non-Executive Directors' fees for the second
year settled in shares in respect of Gerard Brandon (50,000,000
shares) and Dr Nigel Burton (35,000,000 shares).
During the prior year (in February 2021), the Company undertook
a share reorganisation and split each ordinary share of 0.25p each
into one (1) ordinary share of 0.01p each and twenty-four (24)
deferred shares of 0.01p each followed by the immediate
consolidation of every twenty-four (24) deferred shares of 0.01
pence each into one (1) deferred share of 0.24 pence.
Each ordinary share of 0.01p each carries the same rights as the
ordinary shares of 0.25p each did before the share reorganisation.
That is, each ordinary share has the right to one vote and is
entitled to participate in any distribution made by the Company
including the right to receive a dividend, and on a winding up of
the Company. The ordinary shares are not redeemable or liable to be
redeemed at the option of the Company or the shareholder.
Each deferred share of 0.24p has no right to receive notice of,
or attend or vote at, any general meeting of the Company, no right
to participate in the profits of the Company whether by dividend,
other distribution, return of capital (whether or not upon a
winding up) or otherwise, save that, upon a return of capital upon
a winding up, the holders of deferred shares shall be entitled to
the return of the nominal value of each deferred share held after
GBP10,000,000 has been returned on each ordinary share, nor are the
deferred shares redeemable or liable to be redeemed at the option
of the Company or the shareholder.
In addition, the Company issued 5,620,000,000 ordinary shares of
0.01p each as follows:
-- 5,000,000,000 ordinary shares of 0.01p each to raise GBP5.0
million before expenses at the placing price of 0.1 pence per new
ordinary share;
-- 500,000,000 ordinary shares of 0.01p each to raise GBP500,000
to the Company's Broker Turner Pope at the Placing Price of 0.1
pence per new ordinary share to meet additional demand for the
shares;
-- 35,000,000 ordinary shares of 0.01p each at the placing price
of 0.1 pence per new ordinary share in respect of the first year of
fees due to Turner Pope for the provision of its broking services
to the Company; and
-- 85,000,000 ordinary shares of 0.01p each at the placing price
of 0.1 pence per new ordinary share in settlement of the
Non-executive Directors' first year's fees in respect of Gerard
Brandon (50,000,000 shares) and Dr Nigel Burton (35,000,000
shares).
The Deferred share capital of the Company comprises:
2022 2022 2021 2021
Allotted, called up and Number GBP Number GBP
fully paid:
Deferred shares of 0.24p
each as at 1 January 456,365,146 1,095,276 - -
Effect of share split on
4 February 2021 to deferred
shares of 0.24p each - - 456,365,146 1,095,276
----------- ---------
As at 31 December 456,365,146 1,095,276 456,365,146 1,095,276
------------------------------ ----------- --------- ----------- ---------
20. Reserves
The share premium account represents the excess over the nominal
value for shares allotted less issue costs. The share option
reserve represents accumulated charges made under IFRS 2 in respect
of share-based payments. Where share options that have vested
expire, lapse or are exercised, the amounts within the share-based
payments reserve relating to those options are transferred to
retained earnings as shown in the Statement of Changes in
Equity.
21. Share premium
Year to Year to
31 December 31 December
2022 2021
GBP GBP
------------------------------------- ------------- -------------
Opening balance brought forward 28,006,018 24,867,886
Share issue in the year 256,500 5,058,000
Share issue costs - Cash - (416,860)
Share issue costs - Broker Warrants - (1,503,008)
------------------------------------- ------------- -------------
Closing balance carried forward 28,262,518 28,006,018
------------------------------------- ------------- -------------
The movement on share premium in the year relates to 285,000,000
newly issued shares as described in note 19.
For the prior year, the fundraising in February 2021 raised a
total of GBP5.5 million (before expenses) at a placing price of
0.1p per share. The placing raised GBP5.0 million and the broker
warrant GBP0.5 million, before expenses. The share premium on the
fundraising was the placing price of 0.1p per share less the
nominal value of 0.01p per share multiplied by the number of shares
issued. The cash costs amounted to GBP416,860 including broker
commissions and fees, legal fees etc. In addition, 997,000,000
broker warrants were issued to Turner Pope Investments (TPI) Ltd at
a fair value of GBP1,503,008.
At the same time as the fundraising in February 2021,
120,000,000 ordinary shares of 0.01p were issued in lieu of fees in
respect of the first year of fees due to Turner Pope Investments
(TPI) for the provision of its broking services to the Company and
of the first year of fees for the Non-executive Directors. Further
details of the prior year's share issues are set out in note
19.
22. Commitments
Year to Year to
31 December 31 December
2022 2021
GBP GBP
-------------------------------------------------- ------------- -------------
Contracted for but not provided in the financial
statements 651,944 781,990
-------------------------------------------------- ------------- -------------
The commitment above relates to purchase orders placed on, and
related contractual arrangements and obligations, with third-party
manufacturers.
23. Directors' emoluments
Year to Year to
31 December 31 December
2022 2021
GBP GBP
----------------------------------------- ------------- -------------
Salaries and fees 60,058 264,797
Non-cash payments 155 2,002
Pension costs 2,363 27,325
Employment related share-based payments 85,000 1,071,773
----------------------------------------- ------------- -------------
147,576 1,365,897
----------------------------------------- ------------- -------------
In the year to 31 December 2022, one Executive Director that
served during the year accrued benefits under the Company's
auto-enrolment pension scheme. The employment related share-based
payments comprise directors fees paid in share options to two
directors.
There are no key management personnel other than the Directors.
The highest paid Director, Mr Gerard Brandon, received emoluments
of GBP50,000 as disclosed in the Directors' Remuneration Report,
which included a share-based payment charge of GBP50,000.
There was an unrealised gain of GBP30,000 on the exercise of
200,000,000 warrants by Dr Nigel Burton during the year.
24. Employees
Year to Year to
31 December 31 December
2022 2021
Number Number
-------------------- ------------- -------------
Directors 3 4
Other staff 19 18
Average Headcount 22 22
-------------------- ------------- -------------
Year to Year to
31 December 31 December
2022 2021
GBP GBP
----------------------------------------- ------------- -------------
Employment costs (including Directors)
Wages and salaries 985,734 1,123,317
Social security costs 133,630 160,902
Termination payments 21,125 18,189
Pension costs 144,038 173,051
Employment related share-based payments 234,749 1,332,240
----------------------------------------- ------------- -------------
1,519,276 2,807,699
----------------------------------------- ------------- -------------
25. Share-based payments
The share-based payments charge comprises Year to Year to
31 December 31 December
2022 2021
GBP GBP
------------------------------------------- ------------- -------------
Directors' fees settled in shares 85,000 76,559
Vesting of share options 149,749 1,255,681
------------------------------------------- ------------- -------------
Employment related share-based payments 234,749 1,332,240
Brokers' fees settled in shares - 31,524
234,749 1,363,764
------------------------------------------- ------------- -------------
The Directors' fees settled in shares in respect of the
financial years ended 31 December 2022 and 31 December 2021 and
Broker's fees settled in shares in respect of the year ended 31
December 2021 are both in respect of fees incurred. The Directors'
fees relate to annual fees. The Broker's fees were settled in
advance at the placing date of 5 February 2021 with a valuation of
0.1p per ordinary share of 0.01p nominal value, which aligned with
the placing price.
Share option schemes
The Company operates an EMI and an unapproved share option
scheme as a means of encouraging ownership and aligning interests
of staff and shareholders. The table below shows the number of
options outstanding and exercisable at 31 December 2022 and 31
December 2021 and the weighted average exercise price.
Year to 31 December Year to 31 December
2022 2021
Number of Weighted Number of Weighted
options average options average exercise
exercise price
price
------------------------------ -------------- ----------- -------------- -------------------
Outstanding at the beginning
of the year 1,125,000,000 0.1p 17,475,000 5.1p
Granted during the year - - 1,125,000,000 0.1p
Forfeited/expired during
the year (320,000,000) 0.1p (17,475,000) (5.1p)
Exercised during the
year (200,000,000) 0.1p - -
------------------------------ -------------- ----------- -------------- -------------------
Outstanding at 31 December 605,000,000 0.1p 1,125,000,000 0.1p
------------------------------ -------------- ----------- -------------- -------------------
Exercisable at 31 December 325,000,000 0.1p 750,000,000 0.1p
------------------------------ -------------- ----------- -------------- -------------------
200,000,000 of options were exercised on 11 February 2022 at an
exercise price of 0.1p when the market price was 0.115p on that
date.
In the prior year, Staff and Directors agreed to cancel existing
options prior to the award of new options as these options were all
out-of-the-money. Existing options held by Directors and staff
amounting to 13,110,000 were cancelled on 4 February 2021. A
further 3,500,000 options held by Peter Grant were cancelled on 5
February 2021, and 865,000 options related to previous leavers.
Options and warrants over 1,125 million ordinary shares were
awarded to Directors, staff and a consultant on 5 February 2021 at
the time of the fundraising. The new options granted are
exercisable at the placing price of 0.1p for five years from the 5
February 2021.
Details of options in issue at the year-end are:
Date of grant Exercise Latest exercise Estimated Number of Number of
price date fair value options 31 options 31
December December
2022 2021
--------------- --------- ---------------- ------------ ------------ --------------
February 2021 0.1p February 2026 0.150p 325,000,000 750,000,000
February 2021 0.1p February 2026 0.153p 280,000,000 375,000,000
--------------- --------- ---------------- ------------ ------------ --------------
605,000,000 1,125,000,000
--------------- --------- ---------------- ------------ ------------ --------------
The weighted average share price at the date of grant for share
options was 0.25 pence. The options outstanding at 31 December 2022
were all granted at an exercise price of 0.1p with an exercise
period of five years from the date of grant and a remaining
contractual life of 3 years and 1 month.
The 375 million options granted to staff during the prior year
have no performance conditions associated with them but there is a
two-year holding period before the options can vest.
The 750 million options and warrants granted during the prior
year to Directors and a consultant vested during the year, as the
performance criterion that the Company's ordinary shares traded at
a Volume Weighted Average Price at or above a 50% premium to the
placing price for 20 consecutive business days, was achieved. The
share-based payment charge was estimated at GBP1,125,281 and this
was recognised in full in 2021.
The fair value of the 375 million options granted to staff in
February 2021 was estimated at 0.153p per share and for the 750
million options granted to Directors was estimated at 0.150p per
share on the measurement date.
The estimated fair values of the share options were calculated
by applying the Black Scholes or Monte Carlo models in all cases
except for the 750 million options granted to Directors. In respect
of the 750 million options granted to the Directors, a binomial
model was used since the options were significantly in the money at
the grant date and there was a very high probability of achieving
the share price hurdle condition.
In line with the application guidance in IFRS 2, the Directors
considered the most appropriate method of calculating volatility to
be the use of the historical volatility of comparable listed
companies. The model inputs are detailed below.
The model inputs using Black Scholes were:
Date of grant Exercise Share price Risk free Expected Gross dividend
price rate volatility yield
--------------- --------- ------------ ---------- ------------ ---------------
February 2021 0.10p 0.25p 0.03% 29% -
The expected volatility for the February 2021 grant is based on
the 5-year volatility of comparable companies.
Total expenses of GBP85,000 (2021: GBP1,332,280) related to
equity settled share-based payment transactions were recognised in
the Statement of Comprehensive Income the year comprising charges
in respect of directors' fees settled in shares. For the prior
year, the figure comprised new options granted totalling
GBP1,385,700 plus directors' fees settled in shares totalling
GBP76,599 less credits in respect of cancelled options that had not
vested totalling GBP130,019.
In respect of cancelled options that had vested, GBP337,584
(2021: GBP194,246) was transferred from share-based payment reserve
to the retained losses reserve. In respect of exercised options,
GBP300,075 (2021: GBPNil) was transferred from share-based payment
reserve to the retained losses reserve.
26. Warrants
Broker warrants to subscribe for up to 997,000,000 ordinary
shares, which represented 20 per cent of the placing shares, were
granted to Turner Pope Investments (TPI) Ltd as part of the
fundraising in February 2021. The broker warrants are capable of
exercise for a period of two years from 5 February 2021. The lapsed
subsequent to the year end as set out in note 30. The fair market
value of the warrants charged to share based payment reserved was
calculated at GBP1,503,008 based on the following inputs:
Date of grant Exercise Share price Risk free Expected Gross dividend
price rate volatility yield
--------------- --------- ------------ ---------- ------------ ---------------
February 2021 0.1p 0.25p 0.03% 33% -
The expected volatility for the February 2021 grant is based on
the 2-year volatility of comparable companies.
27. Financial instruments
The Company's financial instruments comprise cash and various
trade receivables and trade payables that arise directly from its
operations. No trading in financial instruments is undertaken. The
main risks arising from the Company's financial instruments are
liquidity, currency and interest rate. The Board oversees the
management of these risks, which are summarised below.
Liquidity risk
The Company finances its operations from equity funding provided
by shareholders and revenues generated by the business. The Company
seeks to manage liquidity risk to ensure enough funds are available
to meet working capital requirements.
The Company invests its cash reserves in bank and money market
deposits as a liquid resource to fund its operations. The Company's
strategy for managing cash is to balance interest income with
counterparty risk ensuring the availability of cash to match the
profile of the Company's cash flows.
In reviewing the Company as a going concern, as outlined in note
3, management prepared alternative business scenarios where
performance falls below management expectation. Contingency plans
and mitigating actions have been identified in case actual results
differ from the Company's business plans. The business scenarios
include exploration of the use of export trade financing, short
term debt, letters of credit, performance/surety bonds on larger
orders and equity funding options. Reduction of overhead by staff
reduction, suspend discretionary spend on projects under
development and initiate contingency plans to address the potential
need for additional resources to achieve cashflow positive. There
can be no guarantee that the commercial objectives of the Company
will be achieved.
Inflationary risk
The Company faces a risk in the current higher inflationary
environment that slow paying trade debtors and cash balances will
erode in value due to the impact of inflation. In respect of cash
balances, this in slightly offset by higher interest rates on term
deposits. Further, as expenses exceed revenue this increases the
risk of widening losses, although this could be potentially offset
by the Company's ability to grow revenue more than the
corresponding increase in costs.
Interest rate risk
The Company does not face any significant interest rate risk as
it has no borrowings. Surplus funds are invested to maintain a
balance between accessibility of funds, competitive rates, and
counterparty risk while investing funds safely.
Credit risk
The Company manages its credit risk in cash and cash equivalents
by spreading surplus funds between creditworthy financial
institutions. The Company is also exposed to credit risk
attributable to trade and other receivables. The maximum credit
risk in respect of the financial assets at each period end is
represented by the balance outstanding on trade and other
receivables. The Company monitors the credit worthiness of its
customers on a regular basis.
Prior to the RNS of 26 June 2023 issued by DeepVerge, management
had actively engaged to manage the outstanding debts. A repayment
plan was in place to pay down the debt, and services provided in
2023 were settled in line with the standard payment terms.
Credit control with related parties is managed by direct
communication with the counterparty and all significant
transactions required the approval of the Board of Directors of the
Company.
Foreign currency risk
The majority of the Company's transactions are denominated in
pounds sterling. The Company has no long-term commitments to
purchase goods or services in foreign currencies. Purchases
denominated in foreign currency are expensed at the exchange rate
prevailing at the date of the transaction and represents an
immaterial proportion of the Company's total expenditure.
The only assets and liabilities denominated in foreign
currencies relate to trade receivables and trade payables with
overseas counterparties together with small balances of US dollar
and Euro currencies to settle these liabilities. The risks and sums
involved are immaterial.
Fair values
The Directors consider that there is no material difference
between the book value and the fair value of the financial
instruments on 31 December 2022 and 31 December 2021.
Capital management
The Company's capital base comprises equity attributable to
shareholders. As the Company's focus has been on establishing
itself as a successful supplier of equipment design and engineering
services, the primary objective in managing cash spend has been to
achieve progress on product development and commercialisation in a
cost-efficient manner and in managing liquidity risk to ensure the
Company continues as a going concern.
28. Related party transactions
Microsaic and DeepVerge plc ("DeepVerge") had two directors in
common at the start of 2022: Gerard Brandon and Nigel Burton.
Gerard Brandon was, until his resignation on 25 September 2023,
Executive Chairman of Microsaic and was CEO of DeepVerge until 3
November 2022 and resigned from the Board of DeepVerge on 7
November 2022. Nigel Burton is a Non-executive Director of
Microsaic and was a Non-executive Director of DeepVerge until
becoming interim CEO on 3 November 2022.
Microsaic traded with two subsidiaries of DeepVerge during the
year, Innovenn UK Limited and Rinocloud Limited, which for the
purposes of this note are combined as a total. In summary for the
year ended 31 December 2022, revenue from DeepVerge sales totalled
GBP1,248,828 (2021: GBP385,593) and purchases from DeepVerge
totalled GBP0 (2021: GBP210,600).
At 31 December 2022, GBP1,511,198 (2021: GBP247,412) inclusive
of VAT was owed by DeepVerge to Microsaic relating to the supply of
goods and services recognised as revenues for the year ended 31
December 2022. The Company had expected to receive material
payments from DeepVerge beginning in December 2022, but in the
absence of these and given the increasing levels of overdue
payments from DeepVerge, the Company sought to reach a formal
agreement with DeepVerge, as first announced in the RNS dated 18
April 2023,. However, given the circumstances of DeepVerge's
financial position (per note 30), it was not possible to obtain
written agreement although DeepVerge made initial payments in line
with the informally agreed plan - hence the outstanding balance
reduced from GBP1.5m to approximately GBP1.4 m gross in early
2023.
As described in note 30, subsequent to the year-end DeepVerge
issued an RNS casting significant doubt on its ability to settle
this debt. As outlined above, it is the opinion of the directors
that the conditions leading to this were in existence at 31
December 2022, and so a provision for expected credit losses of
GBP1,130,169 (2021: GBP0) has been recognised against this debt.
This represents the amount of outstanding debt at 26 June 2023,
less recoverable VAT.
At 31 December 2022, GBP65,610 (2021: GBP65,610) was owed by
Microsaic to DeepVerge. This remains unpaid by Microsaic.
On 14 February 2022, Dr Nigel Burton, Non-executive Director,
exercised warrants relating to 200 million Ordinary Shares,
reflecting an investment of GBP200,000 in Microsaic.
On 12 January 2024 Microsaic entered into an acquisition
agreement for the trade and assets of the Microtox business of
Modern Water, as set out in note 3.
29. Control
As at 31 December 2022, no individual shareholder had a
controlling interest in the Company.
30. Events after the Reporting Date
Adjusting events subsequent to 31 December 2022:
-- On 26 June 2023, the related party DeepVerge announced that
it would no longer support the ongoing costs of its subsidiaries
and is seeking to realise whatever value is possible through the
sale of one or more of the Labskin, Modern Water and Glanaco
business units and DeepVerge's shares were suspended. As at 26 June
2023, the balance owed by DeepVerge to Microsaic stood at
GBP1,351,894. Following the deduction of VAT on the amount
outstanding of GBP221,725, which has since been recovered from HMRC
as bad debt relief, the net of VAT potential bad debt GBP1,130,169.
As the likelihood of any further receipts from DeepVerge is highly
uncertain, this amount of GBP1,130,169 has been charged in full
within expected credit losses as at 31 December 2022.
Non-adjusting events subsequent to 31 December 2022:
-- On 5 February 2023, the Broker warrants to subscribe for up
to 997,000,000 ordinary shares at an exercise price of 0.1p as set
out in note 26 lapsed unexercised;
30. Events after the Reporting Date (continued)
-- On 25 September 2023 it was announced that Gerry Brandon,
Executive Chairman, had resigned and left the Company and the Board
with immediate effect, to be replaced as Executive Chairman by Bob
Moore, who joined the Company as a Non-Executive Director in March
2022.
-- As announced on 3 November 2023, and explained in further
detail in the shareholder circular dated 4 December 2023, the
Company has begun a very significant cost reduction exercise which
is expected to result in the Company remaining as an operating
business, with access to sufficient resources (including external
contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading
relationships. Ongoing activities are expected to include recently
redesigned PFAS and ProteinID technologies which have undergone
internal testing ahead of commercial field trials, and which the
Company now expects to bring to market through partnership
agreements in 2024.
31. Cash absorbed by operations
Year to 31 Year to 31
December December
2022 2021
GBP GBP
----------------------------------------- ------------ ------------
Total comprehensive loss for the
year (2,288,709) (3,128,581)
Adjustments for:
Amortisation of intangible assets 30,487 38,241
Depreciation of right of use assets 72,528 70,499
Depreciation of property, plant
and equipment 178,102 90,628
Transfer of property, plant and
equipment to cost of goods (44,192) 23,164
(Profit)/Loss on the disposal of
assets 1,638 (113)
Decrease in provision for warranty (415) (24,075)
Increase in provision for dilapidations 15,840 -
(Decrease)/Increase in provision
for expected credit losses 1,127,416 (65,825)
Share-based payments 234,749 1,363,764
Increase/(Decrease) in inventory
provision (28,152) 32,535
Tax on loss on ordinary activities (246,224) (267,785)
Interest on lease liability 7,013 4,433
Interest received (23,423) (6,237)
Movements in working capital
Decrease /(Increase) in inventories 38,008 253,152
(Increase)/Decrease in trade and
other receivables (1,089,832) (398,083)
Increase/(Decrease) in trade and
other payables (118,166) 168,684
Accrued furlough income - 17,748
------------------------------------------ ------------ ------------
Cash absorbed by operations (2,133,332) (1,827,851)
------------------------------------------ ------------ ------------
32. Prior period restatement
As set out in the Accounting Policies (Note 1) for Cost of
Sales, from 1 January 2022 new policies were adopted. Accordingly,
for the year to 31 December 2021, Cost of Sales and other operating
expenses have been restated to reclassify the amount GBP15,233 from
operating expenses to cost of sales. There was no effect on the
loss after tax.
The previous policy for cost of sales included external direct
costs but did not include an apportionment of staff costs. Under
the new policy, includes a time-based apportionment of staff costs
in respect of providing services to customers. With the
introduction of new service-based revenue stream, this better
reflects the matching of income and expenditure arising from
contracts with customers.
As a result of the changes, updates to the disclosures in note 7
Expenses by Nature have also been updated. Research &
Development expenses, which were previously shown on the face of
the Statement of Comprehensive Income, are now split between
Administrative Expenses and Cost of Sales, and so disclosed in
total in note 7. Similarly, as Cost of Sales no longer solely
includes the cost of inventories sold, note 7 discloses the cost of
inventory items expensed. Comparative disclosures have been made in
line with the current year disclosures.
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END
FR BFMMTMTABMMI
(END) Dow Jones Newswires
January 16, 2024 02:00 ET (07:00 GMT)
Microsaic Systems (LSE:MSYS)
過去 株価チャート
から 10 2024 まで 11 2024
Microsaic Systems (LSE:MSYS)
過去 株価チャート
から 11 2023 まで 11 2024
