Last checked at 16 Jan 2024 07:00
16 January 2024
Microsaic Systems plc
("Microsaic", "Microsaic Systems" or the "Company")
Interim Results for the six months ended 30 June 2023
Microsaic Systems plc (AIM: MSYS), the developer of micro-electronic instruments and analytical solutions, is pleased to announce its unaudited interim results for the six months ended 30 June 2023. The extensive research and development work behind our novel ProteinID, PFAS (forever chemicals) and acrylamide detection technologies has concluded with working test units following the period end. Building on our transition from unit (4500 MiD®) product mass spectrometer sales only to customer-centric service solutions in science and engineering services, the Company is now focusing on commercial testing, sales and servicing of these exciting new technologies.
A copy of these interim results is being made available on the Company's website at https://www.microsaic.com/investors/, and hard copies will be sent to shareholders who have requested communications in that format.
Highlights
· Unaudited revenues of £139k: a decrease of 81% on H1 2022 (£735k)
· EBITDA adjusted loss of £1,023k which is 55% higher than H1 2022 (£661k)
· Total comprehensive loss of £1,079k an increase of 53% compared to H1 2022 (£705k)
· Cash at 30 June 2023 was £587k (H1 2022: £2.56m)
· An agreement was signed with a new global technology distributor Avantor (via VWR International Ltd)
· Orders for 8 Units received for manufacture in H2 2023
Post Period Events
· Technical issues with the testing of key components from suppliers holding up the manufacturing process are being resolved with up to 10 units now in final test or being manufactured in H2 2023
· Unit orders shipped in H2 (including one demonstration unit) increased to 6 with sales revenue invoiced at £262k by year end
· July 2023: The DeepVerge plc announcement on 26 June 2023 about its dire financial position resulted in the outstanding debt of circa £1.3m to the Company not being settled. As a result, the Company's annual audited accounts could not be finalised and trading on AIM was then temporarily suspended on 3 July pending publication of the Company's annual audited accounts
· September 2023: Gerry Brandon resigned as Executive Chairman on 25 September and was replaced by Bob Moore who was previously a non-executive director of the Company
· October 2023: notice of redundancy was issued to all staff and notice given to close the Woking premises before year end
· December 2023: After private financing initiatives failed to complete and after considering delisting from AIM and putting the Company into administration the Board engaged Turner Pope Investments to raise sufficient capital with the objective of restoration of its shares to trading on AIM and make an asset acquisition. A targeted acquisition saw the Company enter into an Exclusivity Agreement with DeepVerge plc to acquire certain assets of its Modern Water business. This is part of the Company's growth strategy to offer a wider range of technologies and a more comprehensive service by enhancing our equipment manufacturing and supply capabilities.
· January 2024: The Company announced it has executed an Acquisition Agreement with DeepVerge plc and its subsidiary, Innovenn UK Limited, to acquire certain assets comprising the Modern Water business for a total consideration of £100,000 payable at completion. The Company also announced that Turner Pope Investments has successfully secured conditional funding commitments to raise gross proceeds of circa £2.1 million through a placing of 169,000,000 New Ordinary Shares. Net proceeds of the Placing (being £1.8 million) are to be deployed to satisfy the acquisition and support the capital needs of the Company as enlarged by the acquired Modern Water business which will be restarted under Microsaic's ownership.
Outlook
· The Board looks forward to the conclusion of commercial testing of our novel ProteinID and PFAS detection technologies during 2024 and increased production of our core 4500 MiD® units. Assuming the refinancing of the Company and acquisition of Modern Water technology and assets is completed, the Company intends to deploy these acquired technologies together with our existing and newly developed products in a growing worldwide market.
Bob Moore, Acting Executive Chairman of Microsaic Systems plc, commented:
"2023 has been a very difficult year for the Company and a total reset of the business has been required as a result. Nevertheless, the research and development work by our talented technical team and substantial investment over many years has resulted in novel detection technologies that are now ready for commercial testing and deployment into the market. We look forward to collaborating with large original equipment manufacturers (OEMs) to realise the potential of our products through their extensive sales and marketing channels."
Enquiries:
Microsaic Systems plc Bob Moore, Acting Executive Chairman | +44 (0) 20 3657 0050 via TPI |
|
|
Singer Capital Markets(Nominated Adviser & Joint Broker) Aubrey Powell / Angus Campbell / Oliver Platts | +44 (0)20 7496 3000 |
|
|
Turner Pope Investments (TPI) Limited(Joint Broker) 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 Co mpany has an extensive and innovative patent portfolio in industry-leading technology designed and developed for "Industry 4.0" application serving markets in diversified Industries, Human and Environmental Health. Microsaic's very energy efficient micro system solutions have enabled analytical detection and characterisation at the point-of-need, whether within a mobile testing capability, conventional laboratory setting, or within a bioprocessing facility for continuous detection of data at multiple steps in the process workflow.
Microsaic's products and solutions 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
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 which include the acquisition of the Modern Water business, both in early 2024.
We are delighted that the Company has been able to remain solvent after a total reset and by retaining our admission to trading on AIM the Company now has the necessary financing to complete the acquisition and provide capital to invest in and develop the enlarged business. The assets acquired are complementary to the existing Microsaic business model. Using the acquired assets we intend to restart the manufacture of the MicroTox® bio-reagents 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 outsourced manufacturing and servicing model for our existing and acquired testing machine technologies. 2024 will prove to be a busy year. The objective is to reset and redesign the Company around a new and much more efficient cost model based on the integration of the enlarged business to optimise growth of sales, solutions and services income to be generated by the combined entities.
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)FOR THE SIX MONTHS ENDED 30 JUNE 2023
6 months | 6 months | Year to 31 | ||
to 30 June | to 30 June | December | ||
2023 | 2022 | 2022 | ||
Notes | Unaudited | Unaudited | Audited | |
£ | £ | £ | ||
Revenue | 4 | 139,404 | 734,914 | 1,567,697 |
Cost of sales | 5 | (145,494) | (301,538) | (618,330) |
Gross profit | (6,090) | 433,376 | 949,367 | |
Other operating income | - | - | - | |
Research and development expenses | (312,637) | (219,491) | (404,043) | |
Impairment of related party debt | - | - | (1,130,169) | |
Other operating expenses | (852,726) | (914,819) | (1,731,749) | |
Total operating expenses | (1,165,363) | (1,134,310) | (3,265,961) | |
Loss from operations before share-based payments | (1,171,453) | (700,394) | (2,316,594) | |
Share-based payments | 11 | - | (126,002) | (234,749) |
Loss from operations after share-based payments | (1,171,453) | (826,936) | (2,551,343) | |
Financial cost | (873) | (4,104) | (7,013) | |
Finance income | 12,592 | 7,083 | 23,423 | |
Loss before tax | (1,159,734) | (823,957) | (2,534,933) | |
Tax on loss on ordinary activities | 81,207 | 119,246 | 246,224 | |
Total comprehensive loss for the period | (1,078,527) | (704,711) | (2,288,709) | |
Loss per share attributable to the equity holders of | ||||
the Company | ||||
Basic and diluted loss per ordinary shares | 6 | (0.017)p | (0.011)p | (0.036)p |
Note that the above revenues in the 6 months to 20 June 2023 include £65,826 to DeepVerge plc subsidiaries (1H 2022: £546,718, FY22 £1,248,828). Although DeepVerge made payments to cover the revenues in the period, on 26 June 2023, DeepVerge announced that it would no longer be able to support its subsidiaries and was anticipating a sale or liquidation of these assets. The results above, subsequent performance in 2023 and expectations or 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.
|
STATEMENT OF FINANCIAL POSITION (UNAUDITED) AS AT 30 JUNE 2023
|
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)AS AT 30 JUNE 2023
Share | ||||||
based | ||||||
Share | Share | payment | Retained | Total | ||
capital | premium | reserve | Losses | equity | ||
£ | £ | £ | £ | £ | ||
At 1 January 2022 | 1,702,913 | 28,006,018 | 2,888,707 | (28,024,418) | 4,573,220 | |
Total comprehensive loss for the period | - | - | - | (704,711) | (704,711) | |
Transactions with owners | ||||||
Shares issued | 28,500 | 256,500 | - | - | 285,000 | |
Transfer in respect of lapsed share options | - | - | (112,528) | 112,528 | - | |
Share based payments share options | - | - | 41,002 | - | 41,002 | |
At 30 June 2022 | 1,731,413 | 28,262,518 | 2,817,181 | (28,616,601) | 4,194,511 | |
At 1 July 2022 | 1,731,413 | 28,262,518 | 2,817,181 | (28,616,601) | 4,194,511 | |
Total comprehensive loss for the period | - | - | - | (1,583,998) | (1,583,998) | |
Transactions with owners | ||||||
Transfer in respect of directors warrants exercised | - | - | (300,075) | 300,075 | - | |
Transfer in respect of lapsed share options | - | - | (225,056) | 225,056 | - | |
Share based payments-share options | - | - | 108,746 | - | 108,746 | |
At 31 December 2022 | 1,731,413 | 28,262,518 | 2,400,796 | (29,675,468) | 2,719,259 | |
At 1 January 2023 | 1,731,413 | 28,262,518 | 2,400,796 | (29,675,468) | 2,719,259 | |
Total comprehensive loss for the period | - | - | - | (1,078,527) | (1,078,527) | |
Transactions with owners | ||||||
Transfer in respect of lapsed share options | - | - | (84,748) | 84,748 | - | |
Share based payments share options | - | - | - | - | - | |
At 30 June 2023 | 1,731,413 | 28,262,518 | 2,316,048 | (30,669,247) | 1,640,732 |
STATEMENT OF CASH FLOWS (UNAUDITED)FOR THE SIX MONTHS ENDED 30 JUNE 2023
|
| |||
|
| 6 months | 6 months | Year to 31 |
|
| to 30 June | to 30 June | December |
|
| 2023 | 2022 | 2022 |
Notes | Unaudited | Unaudited | Audited | |
£ | £ | £ | ||
Cash flows from operating activities |
| |||
Cash absorbed by operations | 12 | (870,893) | (997,506) | (2,133,332) |
Corporation tax received | 252,697 | - | - | |
Net cash used in operating activities |
| (618,196) | (997,506) | (2,133,332) |
Cash flows from investing activities | ||||
Purchases of intangible assets |
| (5,307) | (6,331) | (26,880) |
Purchases of property, plant and equipment |
| (23,397) | (65,019) | (208,495) |
Interest received | 12,592 | 5,850 | 23,423 | |
Net cash used in investing activities | (16,112) | (65,500) | (211,952) | |
Cash flows from financing activities | ||||
Proceeds from share issues |
| - | 200,000 | 200,000 |
Share issue costs |
| - | - | - |
Repayment of lease liabilities | (20,148) | (39,130) | (78,112) | |
Net cash from/(used in) financing activities | (20,148) | 160,870 | 121,888 | |
Net increase/(decrease) in cash and cash equivalents | (654,456) | (902,136) | (2,223,396) | |
Cash and cash equivalents at beginning of the year |
| 1,241,480 | 3,464,876 | 3,464,876 |
Cash and cash equivalents at the end of the period |
| 587,024 | 2,562,741 | 1,241,480 |
NOTES TO THE INTERIM FINANCIAL INFORMATION (UNAUDITED)
1. Nature of Operations
Microsaic Systems plc (the "Company") is registered in England and Wales. The Company's registered office is 1-7 Park Road, Caterham, Surrey CR3 5TB, with effect from 11 January 2024. The Company has no subsidiaries, so the financial information relates to the Company only. Microsaic is a high technology company developing compact, chip-based mass spectrometers that are designed to improve the efficiency of pharmaceutical R&D.
2. Basis of preparation
The interim financial statements of the Company for the six months ended 30 June 2023, which are unaudited, have been prepared in accordance with the accounting policies set out in the annual report and accounts for the year ended 31 December 2022, which were prepared under International Financial Reporting Standards ("IFRS").
This report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 and has not been audited. The financial information for the full preceding year is based on the statutory accounts for the year ended 31 December 2022. Those statutory accounts have been published and will shortly be filed with the Registrar of Companies. The auditor's report on those statutory accounts was unqualified.
As permitted, this interim report has been prepared in accordance with the AIM Rules for Companies and not in accordance with IAS 34 "Interim Financial Reporting" and therefore it is not fully compliant with IFRS.
The interim financial statements are presented in pounds sterling.
3. 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.
Estimates and adjustments that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities are set out in the annual report and accounts for the year ended 31 December 2022, and no additional items have been identified.
4. Revenues
IFRS 15 provides a single, principles based, five-step model to be applied to all contracts with customers. The five-step framework includes:
Identify the contract(s) with a customer;
Identify the performance obligations in the contract; Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and Recognise revenue when the entity satisfies a performance obligation.
The Company recognises revenue from the following four sources:
Sale of products;
Sale of consumables and spare parts; Product service and product support; and 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 service, product support 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®) 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 service and product support revenue
Service and support 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, there 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 customers in Europe, where the revenue from such warranties will be recognised over the period of the service agreement.
Consultancy services revenue
Consultancy services comprise 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.
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.
The geographical analysis of revenues (by location of shipment) was as follows:
6 months | 6 months | Year to 31 | |
to 30 June | to 30 June | December | |
2023 | 2022 | 2022 | |
Unaudited | Unaudited | Audited | |
£ | £ | £ | |
UK | 11,251 | 634,200 | 1,354,872 |
USA | 2,185 | 50,703 | 103,752 |
EU | 71,636 | 29,610 | 67,646 |
China | 54,332 | 12,122 | 30,631 |
ROW | - | 8,279 | 10,796 |
139,404 | 734,914 | 1,567,697 | |
The product group analysis of revenues was as follows:
| |||
6 months | 6 months | Year to 31 | |
to 30 June | to 30 June | December | |
2023 | 2022 | 2022 | |
Unaudited | Unaudited | Audited | |
£ | £ | £ | |
Product/Unit | 47,087 | 165,011 | 206,915 |
Consumables and spares | 13,596 | 67,586 | 137,397 |
Service and support income | 78,721 | 502,317 | 1,223,385 |
139,404 | 734,914 | 1,567,697 | |
Note that the above revenues in the 6 months to 20 June 2023 include £65,826 to DeepVerge subsidiaries (1H 2022: £546,718, FY22 £1,248,828). 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 results above, subsequent performance in 2023 and expectations or 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.
5. Cost of sales
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 service and product support income
The cost of sales of service and support income is the time-based apportionment of the employment costs of the relevant staff spent on the delivery of the service and support 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 does not include share-based payments nor any apportionment of training or overheads.
Cost of sales of consultancy services revenue
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.
6. Loss per share
6 months | 6 months | Year to 31 | |
to 30 June | to 30 June | December | |
2023 | 2022 | 2022 | |
Unaudited | Unaudited | Audited | |
Comprehensive loss attributable to equity | (1,078,527) | (704,711) | (2,288,709) |
shareholders (£) | |||
Weighted average number of ordinary 0.01p | |||
(2022: 0.01p) shares for the purpose of basic | 6,324,666,516 | 6,287,359,621 | 6,324,666,516 |
and diluted loss per share | |||
Basic and diluted loss per ordinary share (p) | (0.017)p | (0.011)p | (0.036)p |
The basic loss per share has marginally increased when compared with H1 2022. This was due to a 56% increase in the comprehensive loss, arising mainly from the 81% reduction in revenues.
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.
7. EBITDA Adjusted Loss
A key indicator of performance for the Company is Adjusted EBITDA Loss (Loss of earnings before interest, tax, depreciation, amortisation and other items such as share-based payments and exceptional one-off expenditure). Detailed below is the Adjusted EBITDA Loss for the period:
6 months | 6 months | Year to | |
to 30 June | to 30 June | 31-Dec | |
2023 | 2022 | 2022 | |
Unaudited | Unaudited | Unaudited | |
£ | £ | £ | |
Comprehensive loss for period | (1,078,527) | (704,711) | (2,288,709) |
Adjust for: | |||
Tax on loss on ordinary activities | (81,207) | (119,246) | (246,224) |
Depreciation of property, plant and equipment | 95,250 | 74,364 | 178,102 |
Depreciation of right of use assets | 37,797 | 35,980 | 72,528 |
Amortisation of Intangibles | 13,921 | 14,099 | 30,487 |
Net finance cost/(income) | (10,176) | (2,979) | 16,410 |
Share-based payments (excluding fee shares) | - | 41,002 | 234,749 |
EBITDA Adjusted Loss | (1,022,942) | (661,491) | (2,002,657) |
|
8. Employees and employment related costs
| 6 monthsto 30 June | 6 monthsto 30 June | Year to 31December |
2023 Unaudited | 2022 Unaudited | 2022 Audited | |
Staff Numbers | |||
Directors | 2 | 3 | 3 |
Other staff | 21 | 19 | 19 |
Average Headcount | 23 | 22 | 22 |
£ |
£ |
£ | |
Employment costs (including Directors) | |||
Wages and salaries | 526,258 | 514,539 | 985,734 |
Social security costs | 57,000 | 74,710 | 133,630 |
Termination payments | 4,854 | 21,125 | 21,125 |
Pension costs | 70,954 | 77,578 | 144,038 |
Employment related share-based payments | 21,277 | 82,943 | 234,749 |
680,343 | 770,895 | 1,519,276 |
9. Provisions
Dilapidations | Warranties | TOTAL | |
£ | £ | £ | |
Balance at 1 January 2023 | 91,619 | 23,766 | 115,385 |
Provided for/(reduced) during the period | 25,907 | 7,357 | 33,264 |
Balance at 30 June 2023 | 117,526 | 31,123 | 148,649 |
The dilapidations provision has been updated for the estimated impact of inflation.
10. Commitments
As at 30 June 2023, purchase commitments relating to purchase orders placed on, and related contractual arrangements and obligations, with our third-party manufacturers amounted to £559,800 (31 December 2022: £651,944).
11. Share-based payments
The share-based payments charge comprises | 6 months | 6 months | Year to |
to 30 June | to 30 June | 31 December | |
2023 | 2022 | 2022 | |
Unaudited | Unaudited | Audited | |
£ | £ | £ | |
Directors' fees settled in shares | - | 41,941 | 85,000 |
Share options granted | - | 41,002 | 149,749 |
Employment related share-based payments | - | 82,943 | 234,749 |
Brokers' fees settled in shares | - | 43,059 | - |
- | 126,002 | 234,749 |
There were no Directors' fees settled in shares in the 6 month period to 30 June 2023.
12. Cash absorbed by operations
6 months | 6 months | Year to 31 | |
to 30 June | to 30 June | December | |
2023 | 2022 | 2022 | |
Unaudited | Unaudited | Audited | |
£ | £ | £ | |
Total comprehensive loss for the year | (1,078,527) | (704,711) | (2,288,709) |
Adjustments for: | |||
Amortisation of intangible assets | 13,921 | 14,099 | 30,487 |
Depreciation of right of use assets | 37,797 | 35,980 | 72,528 |
Depreciation of property, plant and equipment | 95,250 | 74,364 | 178,102 |
Transfer of property, plant and equipment to | - | - | (44,192) |
cost of goods | |||
Profit on disposal of right of use assets | - | - | 1,638 |
Increase/(Decrease) in provision for dilapidation | 25,907 | 8,199 | (415) |
Increase/(Decrease) in provision for warranty | 7,357 | (3,114) | 15,840 |
Increase/(Decrease) in provision for expected | - | 4,755 | 1,127,416 |
credit losses | |||
Share-based payments (inclusive of fees settled in shares) | - | 126,002 | 234,749 |
Increase/(Decrease) in inventory provision | 15,652 | (14,033) | (28,152) |
Tax on loss on ordinary activities | (81,207) | (119,246) | (246,224) |
Interest on lease liability | 2,416 | 4,104 | 7,013 |
Interest received | (12,592) | (5,850) | (23,423) |
Cash absorbed by operations before movements in working capital | (974,026) | (579,451) | (963,342) |
Movements in working capital: | |||
(Increase)/Decrease in inventories | (25,378) | 42,587 | 38,008 |
(Increase)/Decrease in trade and other receivables | 145,972 | (485,413) | (1,089,832) |
Increase/(Decrease) in trade and other payables | (17,461) | 24,771 | (118,166) |
Cash absorbed by operations | (870,893) | (997,506) | (2,133,332) |
13. Related party transactions
During the period, Microsaic and DeepVerge plc ("DeepVerge") had two directors in common: Gerard Brandon and Nigel Burton. Gerard Brandon was Executive Chairman of Microsaic and CEO of DeepVerge until his resignation on 25 September 2023.
In the six months ended 30 June 2023, revenue from DeepVerge subsidiaries totalled £65,826 to (1H 2022: £546,718, FY22 £1,248,828). 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 results above, subsequent performance in 2023 and expectations or 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.
At 31 December 2022, £1,511,198 (2021: £247,412) 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, 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 £1.5m to approximately £1.4m gross in early 2023.
On 26 June 2023 DeepVerge issued an RNS casting significant doubt on its ability to settle this debt. In preparing the accounts to 31 December 2022, given that it was the opinion of the directors that the conditions leading to this were in existence at 31 December 2022, a provision for expected credit losses of £1,130,169 (2021: £0) was recognised against this debt in the accounts to 31 December 2022. This represented the amount of outstanding debt at 26 June 2023, less recoverable VAT. No further provisions were made in relation to DeepVerge in the six months ended 30 June 2023.