Last checked at 16 Mar 2016 07:00
Microsaic Systems plc
("Microsaic", "Microsaic Systems" or the "Company")
Audited Financial Results for the year ended 31 December 2015
16 March 2016
Microsaic Systems plc (AIM: MSYS), the developer of chip-based scientific instruments, announces its audited financial results for the year ended 31 December 2015.
Jim Ramage, Microsaic CEO, commented:
"The strategic changes that Microsaic implemented during 2015 have meant that the positive trend in performance seen in the second half of the year is continuing into 2016. We have good visibility on sales for the first half of the year, with ten 4000 MiD® instruments already sold or on order, bringing the total to 112 units ordered or sold into the analytical research market globally since launch. Further sales growth is expected following the anticipated launch of a new product developed with an OEM partner in 2015 and the signing of a new distribution contract in Q1 2016 for North America.
"In addition, we continue to look for ways to improve the gross profit of our products, ensuring that new OEM partners pay a larger share of the pre-launch costs and so reduce the loss from operations. Further significant cost efficiencies have also been identified without affecting the medium- and long-term potential of the business. Our cash profile is significantly improved and remains positive into 2017.
"We believe the Company has an exceptional core product, and excellent prospects for success. During 2016 we will look to maximise sales to existing customers and continue to look for additional applications and appropriate OEM channels where the key features of our product - compactness, simple deployability and serviceability - will create real competitive advantage."
Key points during 2015
Extensive technical development undertaken to maintain Microsaic's competitive advantage in miniaturised mass spectrometry instrumentation, in particular, around the single quad technology, which forms the basis of the flagship 4000 MiD® instrument.Sales performance in the first half of 2015 below expectations with six 4000 MiD® units sold leading to contract renegotiations with partner.Improved sales performance announced in the second half of the year with 17 units sold.Experienced CEO appointed (Jim Ramage, an existing Microsaic director) and new Finance Director (Bevan Metcalf) appointed to the Board in December 2015.
Since the year end
Sales in 2016 expected to continue the positive trend from the second half of 2015, with ten units sold or on order as of 16 March 2016 (compared with 23 in the whole of 2015: 6 in 1H, 17 in 2H), bringing total number of instruments sold or on order to 112.Review of sales and marketing strategy completed and recommendations are currently being implemented. A review of company cash flow and its management has resulted in the cash runway now extending into 2017, without affecting the potential of the company and without taking into account any meaningful sales of triple quad products or sales other than through our four current sales channels.Agreement signed with a new distributor of the Company's own brand products in North America. Review of manufacturing requirements and facilities underway with the objective to develop a more flexible approach. An OEM (original equipment manufacturer) who took delivery of two proof-of-concept instruments during 2015 is currently evaluating these with a number of its trusted customers.On track to complete development of first triple quad MS prototype in mid-2016 followed by preliminary testing with selected partners. Additional innovative application areas are being evaluated for the 4000 MiD® single quad. Further OEM contracts are expected through 2016 and 2017.
Financial Summary
Product revenue down 38% to £0.62 million (2014: £1.01m)Consumable and service revenue up 20% to £0.16m (2014: £0.13m)Total comprehensive loss of £3.52m (2014: Loss £3.00m)Placing of 9,979,770 ordinary shares raising £3.29m before costsCash at 31 December 2015 of £3.61m (2014: £4.55m)
The Chairman's statement, CEO's review, financial information and notes to the financial statements that follow have been extracted from the Company's Annual Report.
The Annual Report will be sent to shareholders on or around 20 April 2016, approximately four weeks before the AGM, which is scheduled to be held on 20 May 2016. A further announcement will be made in due course with regard to the Notice of the AGM.
Enquiries:
Microsaic Systems plc | via Citigate Dewe Rogerson |
Colin Nicholl, Chairman |
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Jim Ramage, CEO |
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Numis Securities Limited | +44 (0)20 7260 1000 |
Stuart Skinner (Nominated Adviser) Tom Ballard (Broker) |
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Citigate Dewe Rogerson (Financial PR) | +44 (0)20 7282 2948/1068 |
Mark Swallow, Marine Perrier |
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About Microsaic Systems
Microsaic Systems plc is a high technology company developing and marketing next generation mass spectrometry (MS) instruments for the analysis of gaseous, liquid and solid samples. Microsaic has successfully miniaturised mass spectrometry into a desktop instrument by integrating the key MS components onto patented chip technologies (called ionchip®, spraychip® and vac-chip™). Microsaic's MS products retain the functionality of larger, conventional MS systems but are substantially smaller, lighter, consume less energy and have lower running costs. The Microsaic 4000 MiD® is the world's smallest MS system.
Mass spectrometry is a 'gold-standard' analytical technique used across many industry sectors, including pharmaceutical, diagnostics and healthcare, government, energy, utilities, environmental, food and drink, security and defence, and industrial chemicals - a combined market estimated to grow to $2.5 billion by 2017. Microsaic aims to introduce compact, deployable MS products, based on its core technology, into a series of these target markets.
Microsaic Systems was established in 2001 by a team including founders from Imperial College London, and was admitted to AIM in April 2011 under the symbol MSYS. www.microsaic.com
CHAIRMAN'S STATEMENT
for the year ended 31 December 2015
I am pleased to present the Company's Audited Financial Results for the year ended 31 December 2015.
Delivering on our strategic aims
We announced to shareholders in September 2015 a disappointing set of results for the first six months of 2015 in that our product sales through our main Original Equipment Manufacturer (OEM) channel were substantially below expectations. The issues had been identified early in 2015 and referred to in the Annual Report for 2014. New contract terms for this customer have been agreed and the Company is now moving forward on a non-exclusive basis. This had a negative short term impact on the Company's finances in the year and led to the Board asking shareholders for their support in raising funds. This support was forthcoming and the Company raised £3.29m (before expenses) in October 2015.
In December a number of changes to the executive team were announced with Colin Jump, Chief Executive Officer (CEO) and Andrew Darby, Finance Director (FD) resigning from the Board and subsequently leaving the Company. The Company appointed Jim Ramage as CEO (previously a non-executive Director of the Company) and Bevan Metcalf as FD. Both have extensive commercial experience and they will provide strong leadership skills as the Company moves forward. We thank Colin and Andrew for their efforts while with the Company, wish them well in the future, and welcome Jim and Bevan to their new roles. We also announced that Glenn Tracey, Chief Operating Officer (COO), would join the Board in December and Christopher Buckley will join the Board in April 2016. In addition, the Board instigated a series of operational reviews of the Company's strategy. These reviews are summarized in the CEO's report.
Your Board announced in December that product sales had recovered substantially in the second 6 months of the year with 17 units sold, which is in line with the second half of 2014, compared with 6 units in the first six months.
Although product sales recovered in the second half of the year, full year product sales at £622,599 were down a disappointing 38% on 2014. Consumable sales at £146,612 were up 43% on 2014 with the second half performance of 2015 up 59% on the first half, demonstrating the annuity value of this growing revenue stream.
This positive trend in unit sales in the second half of 2015 is continuing into 2016. Unit orders for the 4000 MiD® in 2016 currently stand at 10 units (23 in the whole of 2015: 6 in 1H, 17 in 2H), bringing the total numbers of units sold into the global market to over 100. We expect this growth to continue based on new product launches and a new distributor engaged for North America. Consumable sales also continue to grow.
The impact on cash flow of this improved sales trend, together with reductions in overheads and other cash flow improvements is that we believe our cash runway now extends into 2017, without impacting the medium to long term potential of the company. Our expectations take no account of meaningful sales of triple quad units or sales other than through our four current 'live' sales distribution routes. We shall be focusing on developing these existing customer relationships in 2016 plus identifying and developing new customers to broaden and deepen the sales structure.
We continue to believe that the Company has an exceptional core product with a strong competitive advantage, and excellent prospects for success. There continues to be a growing interest for Microsaic products from potential partners in different parts of the world and we look forward to updating you on progress over the coming year.
Financial results
Microsaic generated revenues of £0.78m in 2015 (2014: £1.14m) down 32% over last year. The loss before tax of £3.88m (2014: loss of £3.16m), is as a result of disappointing first half unit sales numbers and additional research and development (R&D) expenditure, especially on the triple quad. The investment in R&D is a reflection of our ongoing commitment to the future growth of the Company.
Shareholders
The Board is grateful for the support of our shareholders during the year, which allowed the Company to raise further funds of £3.29m (before expenses) in October 2015. These funds will provide the essential working capital required by the Company to finance its continuing growth and evolution.
Staff
On behalf of the Board, I would like to express my gratitude to our staff for their hard work, loyalty and for continuing to innovate, which is vital to the future success of the Company.
Outlook
The Company made progress in developing its sales channels in 2015, and our focus in 2016 will be to maintain the growth in unit sales seen over recent periods and moving towards profitability. The development of existing and new clients and the use of new technologies and new products will continue. The control of costs and tight cash flow management are key objectives in extending the cash runway into 2017.
Your Board looks forward to 2016 as being a year of further change and further progress.
Colin Nicholl
Chairman
STRATEGIC REPORT - CHIEF EXECUTIVE'S REVIEW
for the year ended 31 December 2015
After nearly six years as a member of the Board, I am excited to have taken on the post of CEO. I believe the Company has an exceptional core product, and excellent prospects for success. In my first weeks as CEO, with the support of the Board, the Company has undertaken a strategic review, focused on:
The approach to segmenting markets. While the planned segmentation strategy was correct, there was still a potential for too great a dependency on certain OEM's where exclusivity has been or is being granted for specific markets. Hence a review of existing contracts, and those still in negotiation has taken place. This is described further in the post-period review below.The Company's cost base. A great deal of development work has been undertaken in 2014 and 2015 and various overheads had increased significantly. As a result of our review, cost savings have now been identified and measures implemented to reduce cash burn from previous levels going forward. Product development. The R&D programme has been refocused to ensure it is addressing features to optimize specific market opportunities in a cost-effective way.User training and service programmes. Ensuring sales training and user and service educational programmes and support materials were fit for purpose and optimize the potential of the Company's products. The Company serves two types of customer across a range of applications - those familiar with mass spectrometers and those who are not.
Commercial strategy
The main route to market for our products is through OEM partnerships with companies that have established global sales and service channels that can deliver synergistic benefits for end users.
We must recognise that the process of combining our product with that of our OEM partner takes a significant period of time - time to design and prototype the interface; time to develop the software to control the combined scientific instrument; time to pass all quality and regulatory hurdles and finally time to train salesforces and engineers to handle a completely new product into a somewhat unfamiliar market. This is a rigorous process of building competitive advantage for Microsaic that only commences after the R&D work has been done and the application(s) identified. The introduction of OEM products takes time and consumes significant resources - but if done well will builds significant barriers to entry for our competitors. This Microsaic has been doing.
In addition to OEMs the Company has signed distribution agreements for Microsaic stand-alone branded products in key regions. These distribution arrangements have the benefit of no engineering investment to combine our technology with our partners as they sell our product "as is". This means that the product introduction program followed with our OEM partners is drastically reduced for distributors with the focus shifting to training our partners' salesforce and service engineers.
We look forward to building our relationship with our existing and new distributors during 2016.
Our strategy is therefore to combine these two routes to market (OEM plus distributor) to optimise our competitive strength and growth rate. This approach implies that during the introduction phase we will be selling products in smaller volumes to a larger number of OEM customers and distributors, each in different formats. However, this has proved problematic for our production route in 2015. As a result we have agreed an arrangement to bring to an end our current outsourced manufacturing contract for the 4000 MiD® in the summer of 2016 and will engage a new manufacturing partner or partners who have the flexibility to economically accommodate our variability in product type and number. The search for a replacement is underway and a short list has been prepared.
Since the end of the year
A continuation of the recovery in unit sales seen in the second half of 2015, into the first half of 2016.An agreement with a new distributor of the Company's own brand products in North America was completed. A review of overhead costs and company cash flow and its management has resulted in our cash runway now extending into 2017, without affecting the potential of the company and without taking into account any meaningful sales of triple quad products or sales other than through our current sales channels.Sales training programmes have been undertaken in Q1 with one distributor and one OEM partner. A review of our manufacturing requirements and facilities is underway with the objective to develop a flexible approach. Importantly we shall retain the control of technical information surrounding our core chip technology. An OEM partner who took delivery of two proof of concept instruments during the year is currently evaluating these with a number of their trusted customers. Following these evaluations they will decide how best to proceed with the commercial exploitation of our combined product.As announced in our trading update on February 24, 2016 we have sought and obtained an agreement to terminate our development contract with our OEM partner for the triple quad product. We aim to finalise the development of our first triple quad prototype in the middle of 2016 and begin preliminary testing with selected partners for defined applications. These actions will enable your Company to pursue a strategy of multiple outlets into each application area and hence reduce our dependency on any one international market participant. We will therefore have greater influence on the Company's destiny.A number of innovative application areas are being evaluated for the 4000 single quad and early stage contacts are being made with appropriate companies to be partners for these. As a result further OEM contracts are expected through 2016 and 2017.We have completed a review of sales and marketing strategy, training and client literature. The results are in the process of being implemented during the coming months.
R&D
The 4000 MiD® is one of the easiest MS on the market to maintain and with which to produce data. But as we work to reach areas where no other MS has reached we must continue to develop the product hardware and our user and service training capability.
Towards the end of 2015 we have switched our R&D focus from developing new analytical solutions to improving the product's robustness in the hands of a wider range of new users, while at the same time extending the product specification in ways that will enable the extension of the range of applications and some selective price increases. These are essential prerequisites for expanding the market for MS.
Performance Measurement
The ongoing performance of the Company is managed and monitored using a number of key financial performance indicators as detailed below.
The Company's revenues are monitored as follows:
Revenue metrics |
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| Year to 31 December 2015 | Year to 31 December 2014 | Inc/(Dec) |
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| £ | £ | % |
Products |
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| 622,599 | 1,010,062 | (38) |
Consumables |
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| 146,612 | 102,333 | 43 |
Revenues comprise sales of products, consumables and service income associated with delivering the products. The growth in consumable revenue reflects the growing user base.
The Company's profit/(loss) and cash are monitored as follows:
Profit/(Loss) & Cash Metrics |
| Year to 31 December 2015 | Year to 31 December 2014 | Inc/(Dec) | |
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| £ | £ | % |
Loss from operations before share based payments, interest & tax |
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(3,816,284) |
(3,108,280) |
23 |
Cash used in operating and investing activities |
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(4,019,302) |
(2,878,993) |
40 |
Cash and cash equivalents at year end |
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3,607,591 |
4,548,545 |
(21) |
The Company's profitability is monitored through monthly forecasting, which tracks where the business is and where it is forecast to be at a certain date. The cash position is monitored on a daily basis and forecasts are updated quarterly.
Progress of the Company's R&D programmes is reviewed on a monthly basis by the senior management team with progress communicated to the Board.
Financial Results
2015 has been a difficult year for Microsaic. Sales did not grow as expected in our main OEM channel, principally due to differences in contract renewal expectations.
Revenue |
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| Year to 31 December 2015 | Year to 31 December 2014 | Inc/(Dec) |
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| £ | £ | % |
Products |
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| 622,599 | 1,010,062 | (38) |
Consumables |
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| 146,612 | 102,333 | 43 |
Services |
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| 13,602 | 30,818 | (56) |
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| 782,813 | 1,143,213 | (32) |
Revenues decreased by 32% to £0.78m (2014: £1.14m). Product sales decreased by 38%, while consumables increased by 43%, reflecting a growing user base. The number of units sold during the year amounted to 23 with 17 being sold in the second half year.
The gross profit for 2015 amounted to £0.30m and was 31% down on 2014 due to lower volumes. The percentage gross profit for 2015 at 39% is in line with 2014 (39%). The Company is focussed on improving the gross profit through measured price increases and manufacturing cost reduction programmes.
Other operating income included the final grant income in relation to the ROSFEN European Union sponsored project and development income from a partner, both for the triple quad. Total other operating income in 2015 amounted to £0.22m, 35% above last year.
Operating expenses were £4.34m in 2015 (2014: £3.71m). The increase in operating expenses was due to the Company's investment in R&D (£0.75m higher than 2014), and additional lease charges (£0.06m higher than 2014) due to the new training and demonstration facility at Milton Park, Abingdon.
Therefore, the loss for the year, before share-based payments, tax and interest, was £3.82m (2014: Loss £3.11m).
The current tax credit for the year is estimated at £0.36m which is made up of a prior year adjustment of £0.09m and an estimated £0.27m from the current year R&D tax credit claim.
The total comprehensive loss for the year amounted to £3.52m (2014: Loss £3.00m). The basic loss per share of 5.39p compares with a loss per share of 5.47p in 2014.
Total assets at £5.20m are £0.45m below last year. The main reasons for the fall in total assets were lower cash balances at £3.61m (down £0.94m on last year); partly off-set by higher inventories at £0.6m (up £0.36m above last year) due to a lower level of sales.
Total liabilities at £0.75m were £0.09m below 2014 due to lower trade and other payables.
Equity at £4.45m was £0.36m below last year, with the increase in share capital and share premium of £2.95m off-set by the comprehensive loss for the year of £3.52m. The increase in share capital and share premium was principally due to the placing made by the Company in October 2015, of 9,979,770 ordinary shares to new and existing shareholders. This represented a 15.7% increase in the Company's issued share capital. The gross proceeds raised from the share issue amounted to £3.29m. The share based payments reserve increased by £7k: with share options granted in the year of £0.08m; share warrants over ordinary shares of 1,467,303 granted to Numis Securities Ltd, of £0.13m; and lapsed and exercised share options totalling £0.21m transferred to retained earnings.
As with previous years, the going concern basis has continued to be adopted in preparing the financial statements. Following the progress made by the Company to date and the progress anticipated in the near term, the Directors have a reasonable expectation that the Company will have access to adequate funds to continue operations for at least 12 months. Further details are provided in note 3.
Outlook
Sales began to recover in the second half of 2015. With the market launch of the product developed for an OEM partner in 2015 and the signing of a new distribution contract in Q1 2016 with a distributor for North America we expect further sales growth in 2016.
In addition we will be looking for ways to improve the gross profit of our products, ensure that new OEM partners pay a larger share of the pre-launch costs and so reduce the loss from operations.
During 2016 we will look to maximise sales to existing customers and continue to look for additional applications and appropriate OEM channels where the key features of our product - compactness, simple deployability and serviceability - will create real competitive advantage.
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2015
| Notes | Year to 31 December 2015 |
| Year to 31 December 2014 |
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| Restated |
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| £ |
| £ |
Revenue |
| 782,813 |
| 1,143,213 |
Cost of sales |
| (478,270) |
| (700,180) |
Gross profit |
| 304,543 |
| 443,033 |
Other operating income |
| 218,782 |
| 162,568 |
Other operating expenses |
| (4,339,609) |
| (3,713,881) |
Loss from operations before share based payments |
| (3,816,284) |
| (3,108,280) |
Share based payments |
| (82,636) |
| (55,850) |
Loss from operations after share based payments |
| (3,898,920) |
| (3,164,130) |
Finance income |
| 14,654 |
| 5,596 |
Loss before tax |
| (3,884,266) |
| (3,158,534) |
Tax on loss on ordinary activities |
| 359,421 |
| 154,414 |
Total comprehensive loss for the year |
| (3,524,845) |
| (3,004,120) |
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Loss per share attributable to the equity holders of the Company |
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Basic and diluted loss per ordinary share | 3 | (5.39)p |
| (5.47)p |
STATEMENT OF FINANCIAL POSITION
as at 31 December 2015
| Notes | 31 December 2015 |
| 31 December 2014 |
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| £ |
| £ |
ASSETS |
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Non-current assets |
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Intangible assets |
| 102,304 |
| 116,565 |
Property, plant and equipment |
| 175,242 |
| 128,272 |
Total non-current assets |
| 277,546 |
| 244,837 |
Current assets |
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Inventories | 4 | 600,268 |
| 241,175 |
Trade and other receivables |
| 445,745 |
| 515,396 |
Corporation tax receivable |
| 267,374 |
| 100,000 |
Cash and cash equivalents |
| 3,607,591 |
| 4,548,545 |
Total current assets |
| 4,920,978 |
| 5,405,116 |
TOTAL ASSETS |
| 5,198,524 |
| 5,649,953 |
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|
EQUITY AND LIABILITIES |
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Equity |
|
|
|
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Share capital | 5 | 183,413 |
| 158,133 |
Share premium |
| 15,714,258 |
| 12,790,887 |
Share based payment reserve |
| 445,258 |
| 438,662 |
Retained earnings |
| (11,897,647) |
| (8,578,539) |
Total Equity |
| 4,445,282 |
| 4,809,143 |
Current liabilities |
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|
|
|
Trade and other payables |
| 607,985 |
| 774,143 |
Non-Current liabilities |
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Provisions | 6 | 145,257 |
| 66,667 |
Total liabilities |
| 753,242 |
| 840,810 |
TOTAL EQUITY AND LIABILITIES |
| 5,198,524 |
| 5,649,953 |
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2015
| Notes | Share capital | Share premium | Share based payment reserve | Retained earnings | Total equity |
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| £ | £ | £ | £ | £ |
At 1 January 2014 |
| 131,271 | 8,629,494 | 382,812 | (5,574,419) | 3,569,158 |
Shares issued |
| 26,862 | 4,446,495 | - | - | 4,473,357 |
Share issue costs |
| - | (285,102) | - | - | (285,102) |
Transfer in respect of lapsed share options |
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- |
- |
- |
- |
- |
Total comprehensive loss for the year |
| - | - | - | (3,004,120) | (3,004,120) |
Share based payments-share options |
| - | - | 55,850 | - | 55,850 |
At 31 December 2014 |
| 158,133 | 12,790,887 | 438,662 | (8,578,539) | 4,809,143 |
Shares issued |
| 25,280 | 3,302,180 | - | - | 3,327,460 |
Share issue costs |
| - | (378,809) | 129,697 | - | (249,112) |
Transfer in respect of lapsed and exercised share options |
| - | - |
(205,737) |
205,737 |
- |
Total comprehensive loss for the year |
| - | - | - | (3,524,845) | (3,524,845) |
Share based payments-share options |
| - | - | 82,636 | - | 82,636 |
At 31 December 2015 |
| 183,413 | 15,714,258 | 445,258 | (11,897,647) | 4,445,282 |
STATEMENT OF CASH FLOWS
for the year ended 31 December 2015
| Notes | Year to 31 December 2015 |
| Year to 31 December 2014 |
|
| £ |
| £ |
Total comprehensive loss for the year |
| (3,524,845) |
| (3,004,120) |
Amortisation of intangible assets |
| 48,349 |
| 49,256 |
Depreciation of property, plant and equipment |
| 126,581 |
| 121,820 |
Loss on disposal of property, plant and equipment |
| - |
| 7,977 |
Provision for leasehold dilapidations |
| 9,000 |
| - |
Provision for bad and doubtful debts |
| 1,989 |
| - |
Share based payments |
| 82,636 |
| 55,850 |
General inventory provision |
| (8,226) |
| - |
Tax on loss on ordinary activities |
| (359,421) |
| (154,414) |
Interest received |
| (14,654) |
| (5,596) |
Increase in inventories |
| (350,867) |
| (36,334) |
Decrease/(Increase) in trade and other receivables |
| 71,111 |
| (100,176) |
(Decrease)/Increase in trade and other payables |
| (96,568) |
| 128,247 |
Cash used in operations |
| (4,014,915) |
| (2,937,490) |
Taxation received |
| 192,047 |
| 134,414 |
Net cash used in operating activities |
| (3,822,868) |
| (2,803,076) |
Cash flows from investing activities |
|
|
|
|
Purchases of intangible assets |
| (34,088) |
| (33,990) |
Purchases of property, plant and equipment |
| (173,551) |
| (47,523) |
Interest received |
| 11,205 |
| 5,596 |
Net cash used in investing activities |
| (196,434) |
| (75,917) |
Cash flows from financing activities |
|
|
|
|
Proceeds from share issues |
| 3,327,460 |
| 4,473,357 |
Share issue costs |
| (249,112) |
| (285,102) |
Net cash from financing activities |
| 3,078,348 |
| 4,188,255 |
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
| (940,954) |
| 1,309,262 |
Cash and cash equivalents at beginning of the year |
| 4,548,545 |
| 3,239,283 |
Cash and cash equivalents at the end of the year | 3,607,591 |
| 4,548,545 | |
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
These financial statements have been prepared under the historical cost basis except where financial instruments are required to be carried at fair value under IFRS.
2. Going concern
The Company is engaged in the research, development and the commercialisation of scientific instruments. In common with other research based companies Microsaic raises finance in discrete tranches to fund its working capital and research and development activities. Although the Company is focussed on increasing revenue from its product sales it may have to raise funds in 2016. Based on current discussions the Directors have a reasonable expectation that the required new funds will be secured from existing and new investors. On this basis the Directors have concluded that it is appropriate to prepare the financial statements on a going concern basis. However, whilst the Directors are confident that they are taking all the necessary steps to ensure the required funding will be available, there can be no certainty that this will be the case. These conditions indicate the existence of a material uncertainty which may cast significant doubt over the Company's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments that may be necessary should the Company be unsuccessful in raising the required finance.
3. Basic and diluted loss per ordinary share
| Year to 31 December 2015 | Year to 31 December 2014 |
Loss after tax attributable to equity shareholders | (3,524,845) | (3,004,120) |
Weighted average number of ordinary 0.25p shares for the purpose of basic and diluted loss per share |
65,378,437 |
54,968,708 |
Basic and diluted loss per ordinary share | (5.39)p | (5.47)p |
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.
4. Inventories
| Year to 31 December 2015 | Year to 31 December 2014 |
| £ | £ |
Raw materials | 273,521 | 221,080 |
Work in progress | 277,464 | 27,523 |
Finished goods | 74,283 | 25,798 |
Subtotal | 625,268 | 274,401 |
General provision* | (25,000) | (33,226) |
Total | 600,268 | 241,175 |
* During the year charges against last year's provision amounted to £22,841. The provision was increased by £14,615 at year end to give a total provision of £25,000 which relates to materials that may not be used in production. Stock at the 31 December 2014 was used in the cost of production during 2015.
5. Share capital
| Number | £ |
Allotted, called up and fully paid ordinary shares of 0.25p each |
|
|
Ordinary shares as at 31 December 2014 | 63,253,376 | 158,133 |
Ordinary shares issued for cash in the year | 10,111,770 | 25,280 |
Ordinary shares as at 31 December 2015 | 73,365,146 | 183,413 |
Following adoption of new articles of association in April 2011, the Company does not have a stated authorised share capital. The Company has one class of share, ordinary shares of 0.25p each, with each share carrying one vote and equal rights to discretionary dividends.
The Company issued the following ordinary shares of 0.25p each for cash during the year:
| Shares issued |
Issue price | Cash consideration |
| Number | pence | £ |
Exercise of options - January 2015 | 132,000 | 25.86 | 34,135 |
Placing - October 2015 | 9,979,770 | 33.00 | 3,293,325 |
| 10,111,770 |
| 3,327,460 |
6. Provisions
| Dilapidations | Warranties | TOTAL |
| £ | £ | £ |
Balance at 1 January 2015 | 66,667 | - | 66,667 |
Movement during the year | 9,000 | 69,590 | 78,590 |
Balance at 31 December 2015 | 75,667 | 69,590 | 145,257 |
The provision for anticipated dilapidations is in respect of the Company's leasehold property, whose lease expires in September 2016.
The Company provides customers with a 15 month warranty on MS product sales. The provision above is the anticipated cost of servicing those warranty claims. Warranty claims are serviced by Microsaic's own staff. Therefore, the main charge against the provision will be staff remuneration costs, travel, credit notes to customers and replacement parts.
7. Subsequent events
On 14 January 2016 the Company announced that share options were granted to Directors on 13 January 2016 over 920,000 ordinary shares of 0.25 pence, representing approximately, 1.1% of the share capital of the Company.
The allocation to Directors is as follows:
Director | Position | Options Granted | Total Options Held |
Jim Ramage | Chief Executive Officer | 500,000 | 500,000 |
Glenn Tracey | Chief Operating Officer | 200,000 | 300,000 |
Bevan Metcalf | Finance Director | 120,000 | 120,000 |
These share options were granted under the Microsaic Systems Enterprise Management Incentive Scheme with an exercise price of 23.5 pence per ordinary share, being the closing mid-market price of the Company's shares on 12 January 2016. The options granted to Mr. Ramage will vest on 1 January 2017. The options granted to Mr. Tracey and Mr. Metcalf will vest on the third anniversary of the date of grant.