Supply@me Cap Regulatory News (SYME)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU, WHICH IS PART OF DOMESTIC LAW OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND ("UK") PURSUANT TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

29 September 2023

Supply@ME Capital plc (the "Company", "Supply@ME" or "SYME" and, together with its subsidiaries, the "Group")

Unaudited interim results for the six months ended 30 June 2023 and entry into Top-Up Shareholder Loan Agreement and Side Letter Agreement

SYME, the fintech business which provides an innovative fintech platform (the "Platform") for use by manufacturing and trading companies to access Inventory Monetisation© ("IM") solutions enabling their businesses to generate cashflow, announces its unaudited results for the six months ended 30 June 2023 ("H1 2023") and entry into Top-Up Shareholder Loan Agreement and Side Letter Agreement - details of which are set out in Appendices 1 and 2 to this announcement, respectively.

Highlights from the H1 2023 interim results:

Operational Highlights

Summary of H1 2023 financial results

The below unaudited consolidated financial summary of the Group's income statement is presented to distinguish the continuing operations (being the Group's IM segment) and the discontinued operations consisting of TradeFlow and its subsidiaries (the "TradeFlow Group"). The unaudited consolidated financial summary of the Group's balance sheet includes the total assets and liabilities from both continuing and discontinued operations as at 31 December 2022, however, no longer includes the assets and liabilities of the TradeFlow Group as at 30 June 2023, following SYME's disposal of 81% of the TradeFlow Group on 30 June 2023.

Consolidated financial summary:

1 Adjusted operating loss is the operating (loss) from continuing operations before impairment charges.

2 Discontinued operations relate to the operations of the TradeFlow Group, and these have been presented in line with IFRS 5 ("Non-current Assets Held for Sale and Discontinued Operations"). The prior period's income statement has been restated to aid comparability in line with the standard. Revenue from discontinued operations in H1 2023 was £0.7m (H1 2022: £0.2m).

Operational KPI

The pipeline KPI shown above represents the current potential value of warehoused goods inventory to be monetised rather than pipeline revenue expected to be earned by the Group (being the Company and its subsidiaries). As such, this provides a good indicator of the level of demand for the Group's warehoused goods monetisation services. This pipeline represents the value as at most practical date possible prior to the issue of this interim report (being 22 September 2023). The Company expects that the increase of the pipeline will be reflected in new due diligence activities over the coming months and, accordingly, additional due diligence fees for the Group's subsidiaries. In the case of positive due diligence outcomes, such pipeline would then be expected to move into IM phase at which stage the Group's subsidiaries will be able to charge its IM fees (including origination fees, fees for the usage of the Platform and IM servicing fees).

Entry into Top-Up Shareholder Loan Agreement and Side Letter Agreement

On 28 September 2023, the Company and TAG entered into an English law governed top-up unsecured shareholder loan agreement (the "Top-Up Shareholder Loan Agreement"), pursuant to which The AvantGarde Group S.p.A. (an entity ultimately beneficially wholly-owned and controlled by Alessandro Zamboni, Chief Executive Officer of the Company) ("TAG") agreed to provide the Company with a further facility of up to £3,500,000 to cover the Company's working capital and growth needs up to 30 June 2025 (the "Top-Up Facility").

As disclosed in the Company's second supplementary prospectus published on 30 June 2023 (the "Secondary Supplementary Prospectus"), the Company entered into an English law governed share purchase agreement with Dr. Thomas (Tom) James and John Collis, former Directors (the "Buyers") on 30 June 2023, pursuant to which, the Company sold 81% of the issued share capital of TradeFlow Capital Management Pte. Limited. The £2,000,000 TAG Amount (as defined in the Second Supplementary Prospectus) was novated from the Buyers to TAG on the terms of an English law governed debt novation deed entered into between the Company, the Buyers and TAG on 30 June 2023 (the "Debt Novation Deed"). Pursuant to the Debt Novation Deed, TAG agreed with the Company to settle the TAG Amount in three tranches: £500,000 on 30 June 2023 (which, as at the date of this announcement, has been paid to the Company by TAG); £1,000,000 on 30 September 2023; and £500,000 on 31 January 2024. On 28 September 2023, the Company and TAG entered into an English law governed side letter agreement ("Side Letter Agreement"), cast as a deed, in relation to the outstanding TAG Amount, pursuant to which TAG agreed to pay to the Company £1,000,000 on 31 October 2023, and £500,000 on 31 January 2024.

TAG has agreed to pay a 15% per annum compounding rate of interest on the £1,000,000 of principal amount of the TAG Amount for the period of 30 September 2023 to 31 October 2023, and shall incur a 15% per annum compounding rate of interest on any outstanding principal amount of the TAG Amount following the agreed payment dates.

The entry by (i) the Company and TAG into the Top-Up Shareholder Loan Agreement and (ii) the Company and TAG into the Side Letter Agreement each constituted a material related party transaction for the purposes of DTR 7.3 and were, accordingly, voted upon by the independent Directors (excluding Alessandro Zamboni, who, in each case, constituted a "related party" (as such term is defined in IFRS)), and such independent Directors consider each such material related party transaction in respect of the Top-Up Shareholder Loan Agreement and the Side Letter Agreement to be fair and reasonable from the perspective of the Company and its Shareholders who are not a related party.

Alessandro Zamboni, CEO, Supply@ME Capital plc, said:

"The past six months have been productive for Supply@ME, with our team working tirelessly on several key development workstreams. I am delighted with the progress we have made. We've started to build our track record on IMs which have unlocked a significant increase in engagement and interest in the Supply@ME Platform, both in our core markets and further afield. Our pipeline is strong and the experience we have gained continues to streamline the onboarding process. The launch of the Swiss Trading Hub will be a key development which provides the long-term framework for Inventory Monetisations and sends a clear and positive message to potential Inventory Funders, in both traditional and digital asset classes.

"We have also made further significant progress in building the fundamentals for a scalable business model. The security token framework is close to being launched - which is in line with future trends of the crypto bond market - and, critically, on the formalisation of our first white label partnership together with a first transaction, which we expect to prove an effective working relationship from day one. The new agreed funding facility gives us a clear platform from which to pursue the exciting opportunities that lie ahead.

"The SYME Board and I are positive about the prospects for the Group, given the operational and strategic progress being made, and we look forward to providing further business updates to the market in due course."

- Ends -

For the purposes of UK MAR, the person responsible for arranging release of this announcement on behalf of SYME is Alessandro Zamboni, CEO.

Enquiries

Investors & analysts:

Alessandro Zamboni, CEO, Supply@ME Capital plc, investors@supplymecapital.com

Media:

MHP Group, Supplyme@mhpgroup.com

APPENDIX 1 - CEO REPORT AND INTERIM FINANCIAL STATEMENTS

Chief Executive's report

Business model summary

The Group provide its innovative fintech Platform for use by manufacturing and trading companies to access IM solutions enabling their businesses to generate cashflow, via a non-credit approach and without incurring debt. This is achieved by their existing eligible inventory being added to the Platform and then monetised via purchase by third party Inventory Funders ("IM Transactions"). 

The completion of the TradeFlow Restructuring on June 2023 was an important step for the Group. When we acquired TradeFlow in July 2021, we had a clear goal to support businesses at every stage of the inventory lifecycle. We remain committed to this and will continue to explore opportunities to integrate in-transit and cross-border inventory programmes. John Collis and Tom James made a valuable contribution to our business and our board, but this was a necessary restructuring which removes any potential or perceived conflict of interest. It will enable both businesses to better realise their potential by providing greater commercial opportunities through the clear differentiation of responsibilities of the individual entities. With the completion of the TradeFlow Restructuring we can now redouble our efforts and focus on our core business lines.

Business model canvas: structural market drivers making business more and more relevant

Corporates in our core markets and globally have taken a multilayered approach to improving their supply chain resilience. These steps have included increasing inventory levels, with the incumbent cost of storing this inventory also increasing. The impact on cashflow and the demand for funding to alleviate this has never been greater. The dual drivers of inflation and climate linked changes to seasonality of inventories has also prompted reassessments and crystalised focus. There is now an abundance of highly profitable, long-established manufacturing and trading businesses which present an opportunity for investors, particularly those comfortable with receivables, to generate strong returns by monetising their inventories via the Platform.

Traditional financial institutions are not specialists in inventory. Historically, the difficulties in evaluating the inventories and the risk of fraud due to infrequent and imprecise monitoring combined with the unattractive prospect of disposing of unsold inventory have reduced engagement with this asset class, with lenders offering restrictive terms and unattractive rates. However, the need for a commercial facility for inventory is clear. Supply@ME has developed the systems and technology which remove the barriers to entry and provide certainty and security for Inventory Funders. We also have now begun to establish a track record of completed IM transactions supported by different funding routes.

Supply@ME's onboarding process for clients has been honed and is now demonstrably straightforward. We have, and are continuing to, invest heavily in our inventory ingestion, rule processing, and monitoring technology and expertise to ensure that it plugs seamlessly into existing systems and enhances monitoring.

We are confident in our ability to attract and convert client companies in our core markets and to add to this list of countries. For Inventory Funders, we are now progressing several paths and have commenced discussions to secure a cornerstone funder. This type of partnership will unlock a new level of momentum for the business. In tandem with this, the completion of the next stage of the security token framework will, alongside traditional funding, ensure we are increasingly well placed to furnish the demand in our pipeline.

New funding structure

Supply@ME's acquisition of TradeFlow Capital had, as one of its central goals, the creation of an independent trading business, the Stock Companies, owned by a regulated fund, which would use Supply@Me's IM Platform to facilitate the IM transactions. The regulated fund GIF also served to raise equity capital for IM Transactions. The restructuring of our relationship with TradeFlow was driven by an evolution in the regulation of the fund management industry, in particular, the direction from the Monetary Authority of Singapore, that TradeFlow should separate its licensed fund management activities from the rest of its business.

Since then, Supply@ME has been collaborating with a group of private investors and subject matter experts in working capital solutions, to launch an independent Swiss-based trading business ("CH Trading Hub") to replace the GIF, previously advised by TradeFlow.

Switzerland is traditionally an important trading hub (in particular for raw materials and commodities) and one of the more advanced jurisdictions regarding the regulation over the digital asset industry.

The CH Trading Hub, owned by Société Financière Européenne S.A. ("SFE"), will invest its equity capital to build up a dedicated internal structured financing team. It is expected that SFE will assume the control of the independent Stock Companies from the GIF once this restructure is completed, to manage the overall trading businesses using the platform and the services provided by the Group from this point.

Finally, the CH Trading Hub will handle the token route including progressing the strategic agreement with VeChain. In this regard, the Group is working with the CH Trading Hub on the launching of a security token framework which will see up to US$100m issued which is expected to be subscribed mostly by institutional investors active in the digital asset markets. The security token will be issued by a vehicle sponsored by SFE and it will be tradeable on authorised digital asset exchanges.

Updates to the Platform

Over the past six months, the Group has continued to improve its Platform to ensure that it is and will continue to be best-in-class and that it has the capabilities to scale with the business and diversification of the required monetisation portfolios, both in terms of geographies and industries.

We have continued to leverage the enhanced expertise we brought onto our team via key hires in 2022, and to leverage and further build out the vital partnerships with our software factory and information and commercial technology ("ICT") partners.

To that end the key areas of more recent development can be broken down into five modules.

1. Onboarding Module

In order to more efficiently & effectively manage the pipeline of client prospects for Inventory Monetisation, a dedicated Onboarding Module has been implemented. This module allows:

With the above information, it allows the Platform to represent clients to prospective Inventory Funders and finalise the commercial agreements governing the IM transaction.

2. Data Module

Data and analyses are core to our business model and what makes the Platform distinct.

As previously discussed in the Annual Report and Accounts for the year ended 31 December 2022, the 'data factory' software module allows for the required level of data ingestion we have envisaged alongside API management and the automated application of key business rules. We have continued to enhance this module, utilising "Test & Learn" methodologies that have enabled us to augment our analysis models and interact with our key partners more effectively.

The inventory data-lake continues to be enhanced, hitting key milestones, to enable advanced inventory data analytic metrics such as seasonality, obsolescence risk, critical components, margin and sales trends, inventory risk scores, and to enable robust and accurate monitoring and reporting.

3. Trading Module

Leveraging the feedback from the first IM transactions with existing clients, we continue to improve both our processes (from efficiency and client focussed points of view), security protocols, and user experience of the Trading Module.

4. Monitoring & Reporting Module

We have achieved key checkpoints in developing the key controls and KPIs that need to be monitored for each Inventory Monetisation and believe that these are key to providing Inventory Funders comfort against the risk of potential fraud.

We continue to build out the suite of reports for the various audiences, such as Client Companies, Stock Companies, Inventory Funders, in a robust and auditable manner.

5. Web3 Module

The Group continues to leverage its relationship with VeChain and to enhance on the Web3 solution. Integrating the technology to the Platform ready for Web3 will help us to introduce the IM as a new asset class to a broader range of investors. It also means the Group is able to harness the developments in this nascent sector at pace, including the ability to explore the issuance of non-fungible tokens (NFTs), participating in digital ownership and business-to-business (B2B) marketplaces, decentralised finance and tokenised governance protocol. In this space, the Group and the CH Trading Hub will continue to explore further collaborations with digital asset investment banks and exchanges.

Update on the Group's Operational KPIs

Client company origination

Origination of client companies with inventory suitable for Inventory Monetisation has seen a significant increase both in the quality of businesses we are engaging and the strength of initial discussions. The first IM Transactions already have positively changed the tone and we are now operating at a more optimal level at each stage of client engagement. Our business in Italy is at a more advanced stage, however the impact of the UK IM has been significant, and we expect business in that market to follow a similar timeline as we have already experienced in Italy.

Pipeline of client companies now stands at £404.5m as at 22 September 2023. The drivers for inventory solutions are also diversifying, with supply chain frustrations, the impact of inflation and climate all prompting enquiries. We are confident in the appeal of the Platform to client companies in our core markets and also expect to expand, the list of territories in which we operate, due to a combination of market factors and demand from potential clients.

Italy

The group now has the track record of two IM Transactions, in markedly different sectors, being industrial vehicles and tyre retreading, which serves to emphasise the value of our Platform to a deeper pool of prospective clients. Our existing businesses are also now vital advocates and reference points for those wishing to engage with Inventory Monetisation. The benefits of this are significant. This third-party endorsement of our unique and innovative model is also helping us to attract larger businesses with significant portfolios of monetisable inventory.

The Group is now in advanced stages of formalising a White-Label IM agreement with the WL Inventory Funder to execute an initial IM transaction with an inventory value to be monetised of up to €10m, which involves an existing client of the WL Inventory Funder. This White-Label IM agreement (which remains subject to contract) will allow the Group to scale its revenue in Italy, leveraging the balance sheet and the client base of the WL Inventory Funder in specific supply chains. This first transaction will likely see us expanding the IM footprint in the agrifood sector, focusing on those goods which retain long-term value and high demand.

Formalising our first White Label partnership, much like our first IM Transaction, has required significant discussion and due diligence, including the involvement of a Big 4 consultancy firm. It is a new product for our partners and their customer base, without precedent, but we are confident that completing our initial white label agreement will provide a template for similar partnerships in Italy, the UK and other territories.

United Kingdom

Our first IM transaction using traditional funding in the UK represented a key milestone, providing proof of concept in the market, a tangible track record and a template for IMs being managed within an existing floating charge facility, confirming the ability to work alongside existing financing arrangements as a commercial facility. Since the announcement of this transaction, momentum has increased, and we feel confident in our stated goal of securing white label and self-funding agreements. Origination in the UK has also been gathering pace and we have a strong growing pipeline of prospective clients. The triggers which prompt businesses to contact us have also broadened and we are seeing a growing number of businesses affected by supply chain issues and climate related impacts seeking to offset increased costs. In the UK, the next milestones will be aligning long-term funding partnerships and White Label alliances.

Outlook

In the coming months Supply@ME will look to finalise its first White Label Partnership in Italy, implement the security token funding route and secure the backing of international Inventory Funders. These three initiatives will form the basis of the next phase of growth for our business, as we target the Group's revenue growth and opening the scale-up momentum. The new CH Trading Hub will provide the backbone for these initiatives and future transactions, providing a new layer of long-term certainty for Inventory Funders and corporates. This is a formative period for the business, and we are confident in our ability to deliver against these stated objectives to ultimately deliver greater value for our clients, investors and shareholders.

Financial review

The Group's unaudited condensed consolidated interim financial statements for the six-month period ended 30 June 2023 ("H1 2023") have been prepared in line with International Accounting Standard IAS 34 ("Interim Financial Reporting"). The TradeFlow operations continued to be classified as discontinued operations and assets held for resale in line with the requirements of IFRS 5 ("Non-current Assets Held for Sale and Discontinued Operations") from 1 January 2023 until the date of completion of the TradeFlow Restructuring, being 30 June 2023. The prior period income statement has been restated to aid comparability in line with the standard.

As shown in the financial summary above, the TradeFlow operations contributed a loss of £185,000 (inclusive of the gain of £718,000 recognised in connection with the TradeFlow Restructuring) in H1 2023.

Revenue from continuing operations

The table above provides a break down of the Group's revenue from Inventory Monetisation activities during H1 2023. Revenue is recognised in accordance with IFRS 15 ("Revenue from Contracts with Customers") and more details on the Group's revenue recognition policies can be found in the note 2 to the Group's condensed consolidated financial statements for the year ended 31 December 2022 (the "2022 Annual Report").

During H1 2023, the Group recognised £77,000 (H1 2022: nil) of Inventory Monetisation revenue, which it split 52% related to due diligence fees, and the remaining 48% relating to Inventory Monetisation fees.

In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised the due diligence revenues when the due diligence services have been delivered and the Group's performance obligation has been satisfied. During H1 2023, the Group has continued to carry out, and charge for due diligence activities, and the £40,000 recognised as revenue reflects the value of those due diligence activities completed during H1 2023.

Following the announcement of the first Italian IM transactions during 2022 and H1 2023, which were facilitated using the Group's Platform, the Group recognised Inventory Monetisation fees of £37,000. These fees related to the following activities:

1) Origination fees - the origination of the contracts between the client company wishing to have their inventory monetised and the independent Stock (trading) Company that purchased the inventory from the client company. In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised these revenues at the point in time they are due to be received from the client;

2) IM Platform usage fees - usage of the Group's IM Platform, under a Software as a Service ("SaaS") contract, by the independent Stock (trading) Company to facilitate the purchase of the inventory from the client company. In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised these revenues over the time period they related to; and

3) IM service fees - the support and administration activities, such as the monitoring of the inventory purchased, that the Group performs in connection with the use of the Group's IM Platform. In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised these revenues over the time period they related to.

These revenues are expected to grow in future accounting periods in line with expected growth in both the number of IM transactions that are facilitated using the Group's IM Platform and, the quantum of inventory monetised by the independent Stock (trading) Companies per transaction, increases.

Operating loss from continuing operations before impairment charges

During H1 2023, the Group was focused on securing the binding commercial agreements in terms of the first IM transactions to use traditional funding in both Italy and the UK, the latter of these being announced in early July 2023. In conjunction with this, efforts have also been directed to building and continually reevaluating the Group's Inventory Monetisation pipeline following the announcement of the inaugural IM transactions. In addition, progress has made in terms of the Group's White-Label initiative, and in terms of securing new sources of inventory funding. Further details of this progress has been set out earlier in this announcement.

The Group recorded an operating loss from continuing operations before impairment charges for H1 2023 of £1,981,000 (H1 2022: £1,963,000 loss). There have been two main changes in the components to this figures that largely offset each other including:

Impairment charges from continuing operations

The impairment charges from continuing operations of £349,000 recognised during H1 2023 relate to the impairment of the Group's internally developed IM platform as at 30 June 2023 in line with the requirements of IAS 36 ("Impairment of Assets"). This followed the conclusion that indicators of impairment were present, which included the losses continued to be generated by the assets held by the Group's Italian operating subsidiaries. In line with the going concern statement, set out in note 4 to the unaudited condensed consolidated interim financial statements, there is currently a material uncertainty with respect to both the future timing and growth rates of the forecast cash flows arising from the use of the internally developed IM Platform intangible asset. As such, the Directors have prudently decided to continue to impair the full carrying amount of this asset of £349,000 as at 30 June 2023.

Discontinued Operations

The revenue and operating loss of the TradeFlow operations for the period from 1 January 2023 through to the date on which the TradeFlow Restructuring was completed, being 30 June 2023, are shown in the table below. As detailed above, the TradeFlow operations have been classified as discontinued operations and assets held for resale in line with the requirements of IFRS 5 ("Non-current Assets Held for Sale and Discontinued Operations"). The comparatives show the revenue and operating loss of the TradeFlow operations for H1 2022.

TradeFlow's investment advisory revenue arose from investment advisory services provided in TradeFlow's capacity as investment advisor to its well-established USD fund and its growing EUR fund. In line with IFRS 15 ("Revenue from Contracts with Customers") these revenues were recognised when the investment advisory services have been delivered and TradeFlow's performance obligation has been satisfied.

Further details of the costs recognised in H1 2023 set out in the table above are detailed below:

As shown above there were no additional acquisition related earn-out costs recognised during H1 2023 which reflected the fact that as part of the TradeFlow Restructuring all future potential earn-out payments were offset against the initial cash consideration value.

Additionally, following the finalisation of the TradeFlow Restructuring on 30 June 2023, the assets and liabilities of TradeFlow, including the intangible assets arising as part of the original TradeFlow acquisition in July 2021, are no longer consolidated by the Group. As such no further impairment charges relating to the discontinued operations were recognised during H1 2023. Instead, a calculation was undertaken to calculate any gain or loss arising on as a result of the change in ownership structure of the TradeFlow operations. The details of this calculation set out in below and in further detail can be found in note 21 to unaudited condensed consolidated interim financial statements for the six-month period ended 30 June 2023.

New equity funding

On 28 April 2023, the Company and Venus Capital entered into a new equity subscription agreement, pursuant to which Venus Capital committed to subscribe for 4,500,000,000 new ordinary shares (the "Subscription Shares") at £0.0005 per Subscription Share (the "Subscription Agreement") over two separate tranches, both of which took place in May 2023. The total gross proceeds received by the Group in relation to this Subscription Agreement was £2,250,0000 or £2,137,500 net of the £112,500 commission that was charged be Venus Capital in connection with the subscription of the Subscription Shares. An additional £112,500 was paid to Venus Capital in respect of agreed costs and expenses incurred by Venus Capital in connection with the Subscription Agreement.

The Subscription Agreement required new warrants to be issued to Venus Capital at a ratio of one warrant for every two Subscription Shares issued. This resulted in an obligation for the Group to issue 2,250,000,000 new warrants to Venus Capital ("New Venus Warrants") which existed at 30 June 2023. The New Venus Warrants are each exercisable into one new ordinary share at a price equal to £0.00065 pence per share up to a final exercise date of 31 December 2026. As at 30 June 2023, the obligation to issue these share warrants to Venus Capital has been recognised within equity as "warrants to be issued" within the share-based payment reserve. These share warrants had a total fair value of £1,717,000. As at 30 June 2023, all of these share warrants remain outstanding.

The total share issue costs incurred in connection with the Subscription Agreement during H1 2023 were £1,972,000 including £1,717,000 relating to the fair value of the warrants issued, £225,000 relating the commission and other fees charged by Venus Capital and £30,000 of other share issue costs. This has been accounted for as a £1,972,000 reduction to share premium during H1 2023 given there was sufficient share premium created on the issue of the Subscription Shares.

New debt financing

On the 28 April 2023, the Company and The AvantGarde Group S.p.A ("TAG"), the Group's major shareholder, entered into a fixed term unsecured working capital loan agreement (the "TAG Unsecured Working Capital facility"). This agreement was subsequently amended on 30 June 2023 in conjunction with the TradeFlow Restructuring. Under the amended TAG Unsecured Working Capital facility, TAG shall provide, subject to customary restrictions, a facility of up to £800,000 to cover the Company's interim working capital and growth needs.

The due date for repayment by the Company of amounts (if any) drawn under the TAG Unsecured Working Capital facility is 1 February 2028. Any sums drawn under the TAG Unsecured Working Capital facility will attract a non-compounding interest rate of 10% per annum, and any principal amount (excluding accrued interest) outstanding on 1 February 2028 will attract a compounding interest rate of 15% per annum thereafter. Interest will be due to be paid annually on 31 March of each relevant calendar year.

On 30 June 2023, the Company issued a draw down notice to TAG under the amended TAG Unsecured Working Facility for the full £800,000 available. As at 30 June 2023, no funds had been received from TAG in respect of this facility, however subsequent to 30 June 2023, and prior to the release of these unaudited condensed consolidated interim financial statements, TAG had provided £245,000 of the £800,000 that had been drawn down by the Company.

Cash flow

The Group decreased its net cash balance by £465,000 (H1 2022: £797,000 decrease) due to a combination of the following cash inflows and outflows:

These net cash inflows were then offset by the following items:

Net liabilities

As at 30 June 2023 net liabilities were £2,108,000 (31 December 2022: net liabilities of £2,025,000).

The largely stable net liability position at 30 June 2023 compared to 31 December 2022 is due to the following:

This increase in assets compared to 31 December 2022 was then offset by:

Going Concern

The Board's assessment of going concern and the key considerations thereto are set out in the note 4 to the unaudited condensed consolidated interim financial statements for the six-month period ended 30 June 2023.

Related Parties

Note 22 to the unaudited condensed consolidated interim financial statements for the six-month period ended 30 June 2023 contains details of the Group's related parties.

Subsequent events

Note 23 to the unaudited condensed consolidated interim financial statements for the six-month period ended 30 June 2023 contains details of all subsequent events.

Directors' Responsibility Statement

The Directors are responsible for preparing the unaudited condensed consolidated interim financial statements in accordance with applicable law and regulations. A list of current directors is maintained on the Group's website: https://www.supplymecapital.com.

The Directors confirm that, to the best of their knowledge, the unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 ("Interim Financial Reporting"), as issued by the International Accounting Standards Board as contained in UK - adopted International Financial Reporting Standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4 R of the FCA's Disclosure Guidance and Transparency Rules ("DTRs").

The Directors further confirm that the unaudited condensed consolidated interim financial statements include a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

In accordance with the DTR Rule 4.2.9(2)R, the Directors confirm that these unaudited interim condensed consolidated financial statements have not been audited or reviewed by auditors pursuant to the Financial Reporting Council guidance on Review of Interim Financial Information.

The Directors have shared all the relevant working papers with their advisers.

By Order of the Board

Alessandro Zamboni

Chief Executive Officer

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2023 

The above unaudited condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 

The above unaudited condensed consolidated statement of financial position should be read in conjunction with the accompanying notes. 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2022

\* The "other reserves" balance in the unaudited condensed consolidated statement of financial position represents an aggregate of other reserves, the merger relief reserve, the reverse takeover reserve and the foreign currency reserve. 

The above unaudited condensed consolidated statement of changes in equity should be read in conjunction with the accompany notes. 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2023

\* The "other reserves" balance in the unaudited condensed consolidated statement of financial position represents an aggregate of other reserves, the merger relief reserve, the reverse takeover reserve and the foreign currency reserve. 

The above unaudited condensed consolidated statement of changes in equity should be read in conjunction with the accompany notes. 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2023

The above unaudited condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes 

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2023

1 Company information 

Supply@ME Capital plc (the "Company") is a public limited company incorporated in England and Wales. The address of its registered office 27/28 Eastcastle Street, London, W1W 8DH, United Kingdom. Supply@ME Capital's ordinary shares are admitted to listing on the standard segment of the Official List of the Financial Conduct Authority and to trading on the main market for listed securities of the London Stock Exchange plc.

These unaudited condensed consolidated interim financial statements of the Company and its subsidiaries (the "Group") have been approved for issue by the board of directors of the Company (the "Board") on 28 September 2023. 

2 Basis of preparation 

Accounting convention 

These unaudited interim financial statements for the half-year reporting period ended 30 June 2023 has been prepared in accordance with Accounting Standard IAS 34 ("Interim Financial Reporting"). 

The interim report does not include all the notes of the type normally included in annual unaudited financial statements. Accordingly, this report is to be read in conjunction with the annual report and accounts for the year ended 31 December 2022 (the "2022 Annual Report") and any public announcements made by the Company during the interim reporting period.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period with the exception of the estimation of income tax (refer to note 9 for further details). 

New and amended standards adopted by the group 

No new or amended standards became applicable for the current reporting period that impacted the Group. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting any new or amended standards in the current interim reporting period. 

3 Significant changes in the current reporting period 

Below provides a summary of the significant changes that occurred during the six month period ended 30 June 2023. 

New Equity Subscription Agreement 

On 28 April 2023, the Company and Venus Capital S.A. ("Venus Capital") entered into a new equity subscription agreement, pursuant to which Venus Capital committed to subscribe for 4,500,000,000 new Ordinary Shares (the "Subscription Shares") at £0.0005 per Subscription Share (the "Subscription Agreement"). The issue of the Subscription Shares was made over two tranches (in line with the Subscription Agreement) as set out below: 

In addition to the £112,500 of commission chargeable by Venus Capital (as set out above): 

The fees referred to above were agreed through the commission and fee letter signed with Venus Capital and the new warrant instrument agreement, both of which were also dated 28 April 2023. 

In connection with the above, the final exercise date of the existing 8,175,000,000 warrants issued to Venus Capital during 2022 in connection with the Capital Enhancement Plan was extended from 31 December 2025 for 12 months to 31 December 2026, through a deed of amendment to the existing warrant instruments dated 28 April 2023. 

As at 30 June 2023, the Group had a total of 10,425,000,000 warrants outstanding with Venus Capital, including 8,175,000,000 previously issued to Venus Capital during 2022 and 2,250,000,000 to be issued to Venus Capital as at 30 June 2023. During the six-month period ended 30 June 2023, no warrants held by Venus Capital have been converted. 

Extension to the expiry date of the warrants issued in connection with the Open Offer carried out on 17 August 2022 

On 22 July 2022, the Group announced the Open Offer, giving existing shareholders the opportunity to subscribe for up to 641,710,082 new ordinary shares in the Group on the basis of one Open Offer share for every 66 existing ordinary shares held at an offer price of 0.05 pence per Open Offer share.?The Open Offer closed on 17 August 2022 and on 18 August 2022, the Group announced it would allot and issue 641,710,082 new ordinary shares to those qualifying shareholders and that this would raise £320,855 gross (and £269,855 net of fees and expenses) for the Group.? 

In addition to the new ordinary share that were issued, the Group also issued 320,855,008 warrants to the qualifying shareholders on the basis of one warrant for every two ordinary shares received as a result of the Open Offer (the "Open Offer Warrants"). These warrants were able to be exercised at any time up to 31 December 2025 and have an exercise price of 0.065 pence per warrant.? 

In line with the extension to the expiry date of the existing 8,175,000,000 warrants held by Venus Capital, the shareholders who participated in the Open Offer were asked if they would like to vote to extend the expiry date of the Open Offer Warrants from 31 December 2025 by 12 months to 31 December 2026. This resolution was successfully passed at the Group's 2023 Annual General Meeting, and a deed of amendment to the existing Open Offer warrant instrument was signed, on 23 June 2023. As at 30 June 2023, the Group had 235,751,597 Open Offer Warrants outstanding. During the six month period ended 30 June 2023, 35,595,411 Open Offer Warrants were converted into new ordinary shares raising £23,137 for the Group. 

The AvantGarde Group S.p.A ("TAG") unsecured Working Capital loan agreement 

On the 28 April 2023, the Company and TAG, the Group's major shareholder, entered into a fixed term unsecured working capital loan agreement (the "TAG Unsecured Working Capital facility"). Under the TAG Unsecured Working Capital facility, TAG shall provide, subject to customary restrictions, a facility of up to £2,800,000, in tranches up to 31 January 2024, to cover the Company's interim working capital and growth needs.

The due date for repayment by the Company of amounts (if any) drawn under the TAG Unsecured Working Capital facility is 1 February 2028. Any sums drawn under the TAG Unsecured Working Capital facility will attract a non-compounding interest rate of 10% per annum, and any principal amount (excluding accrued interest) outstanding on 1 February 2028 will attract a compounding interest rate of 15% per annum thereafter. Interest will be due to be paid annually on 31 March of each relevant calendar year.

TradeFlow Restructuring  

On 30 June 2023 the Company announced that had entered into relevant commercial agreement to restructure the ownership of TradeFlow Capital Management Pte. Limited ("TradeFlow") (the "TradeFlow Restructuring") to better serve the needs of the Group's client companies and funders of both businesses, and to create value for the Company's shareholders by eliminating any perception of conflicts of interest between the two businesses and providing both businesses with greater commercial opportunities through the clear differentiation of responsibilities of the individual entities. 

In the months prior to the finalisation of the TradeFlow Restructuring, the Board noted an evolution in the regulation of the fund management industry. The Monetary Authority of Singapore, Singapore's financial regulator, has approved that TradeFlow should separate its licensed fund management activities from the rest of the TradeFlow business. In light of these market developments, the Company and TradeFlow have mutually agreed that it is in the best interests of Group's shareholders to separate the Platform (fintech business) from the fund management activities (regulated business), in order to clarify the Group's market position and improve the growth prospects for both businesses.

The key highlights of the TradeFlow Restructuring are set out below: 

The accounting for the TradeFlow Restructuring has been reflected in the unaudited interim financial statements for the six months ended 30 June 2023. The gain arising on the restructuring of the TradeFlow operations recorded in the unaudited condensed consolidated statement of comprehensive income was £718,000, and the value of the retained 19% investment in TradeFlow has been valued at £352,000 as at 30 June 2023. The TradeFlow operations contributed a loss of £185,000 (inclusive of the gain arising on the restructuring of the TradeFlow operations referred to above) in the current interim period ended 30 June 2023. Refer to note 21 to these interim financial statements for further details. 

Settlement of outstanding debt with a significant creditor 

On 2 May 2023, the Group entered into a settlement agreement with an existing creditor of Supply@Me Srl, a wholly owned subsidiary of the Group. This settlement agreement reduced the total amount that was owed by the Group, to this supplier, in exchange for payment of the new agreed amount by a specific date. The total amount owed to this specific creditor prior to the settlement agreement being signed was €1,130,250. This amount was reduced to €700,000 as a result of the negotiations proceeding the signing of the settlement agreement. This resulted in a gain of €420,250 or £376,000 which has been recorded as other operating income in the condensed consolidated statement of comprehensive income for the six months ended 30 June 2023. 

4 Going Concern 

At the 30 June 2023 the Group had cash and cash equivalents from continuing operations of £97,000 (31 December 2022: £257,000 cash and cash equivalents from continuing operations, £324,000 cash and cash equivalents from discontinued operations) and net consolidated current liabilities of £1,305,000 (31 December 2022: £828,000). The Group has posted a total comprehensive loss for the six-month period ended 30 June 2023 of £2,146,000 (six-month period ended 30 June 2022: total comprehensive loss £6,447,000) and retained losses were £30,395,000 as at 30 June 2023 (31 December 2022: losses £27,649,000).

During the six-month period the Company continued to source additional funding with the primary aim of allowing it to meet its working capital and growth needs as it focuses on scaling up the Group's business model and the continued investment into the Group's Platform. In sourcing this new funding, the focus has been on creating a more stable source of Group funding. These new sources of funding were announced in conjunction with the issue of the 2022 Annual Report on 28 April 2023 and included:

Further details of these two sources of funding, including the amendment made to the TAG Unsecured Working Capital facility as part of the TradeFlow Restructuring on 30 June 2023, are set out in note 3 to these condensed consolidated interim financial statements. 

In addition following the 30 June 2023, the Company has been continuing to explore additional options of funding to support the Group while a positive revenue track record is established. As at the date of issue of these interim financial statements, the Company also announced the binding commitment in respect of a top up unsecured shareholder loan agreement with TAG, dated 28 September 2023 ("TAG Top-Up Shareholder Loan Agreement"). Details of this include: 

Taking into account the factors above and in order to consider their assessment of the Group as a going concern, the Directors have reviewed the forecast cashflows for the next 12 months. The cashflow forecasts take into account that the Group meets its day to day working capital requirement through its cash resources. The Directors have prepared the forecast using their best estimates, information and judgements at this time, including the outstanding funding contracted to be receivable from the amended TAG Unsecured Working Capital and the TAG Top-Up Shareholder Loan Agreement, and the £1.5million still be receivable in connection with the TradeFlow Restructuring. The Directors have also considered the expected cashflows arising from due diligence fees and fees projected to be received from the use of the Group's innovative Platform to facilitate inventory monetisation transactions.

Despite the facts outlined above, there is currently an absence of a historical track record relating to multiple inventory monetisation transactions being facilitated by the Group's Platform and the Group being cash flow positive. As such the Directors have prudently identified uncertainty in the cash flow model. This uncertainty arises with respect to both the future timing and growth rates of the forecast cashflows arising from the Group's inventory monetisation revenue streams. In this regard, if these future revenues are not secured as the Directors envisage, it is possible that the Group will have a shortfall in cash and require additional funding during the forecast period. In addition, certain cashflows in relation to the funding agreements noted above have not yet been fully received. These amounts have been factored into the cash flow forecasts in line with contractual commitments received from the counterparties. As such there is a risk that these cash flows might not be received or might not reach the Group in the time frame expected despite the various contractual commitments in place.

On the basis of the factors identified in the above paragraph, the Directors believe there are material uncertainties which may cast significant doubt upon the entities ability to continue as a going concern.

The Directors do however remain confident in the business model and believe the Group could be managed in a way to allow it to meet its ongoing commitments and obligations through mitigating actions including cost saving measures and securing alternative sources of funding should this be required. This includes the application by certain of the Company's subsidiaries to access specialised loans for SME businesses provided by Italian commercial banks with the support of government guarantees, which will allow the Group to access a lower cost of capital. 

As such the Directors consider it appropriate to prepare these interim condensed consolidated financial statements on a going concern basis, taking into account the material uncertainties noted above, and have not included the adjustments that would result if the Company and Group were unable to continue as a going concern.

5 Revenue and operating segments 

IFRS 8 ("Operating segments") requires the Group's operating segments to be established on the basis of the components of the Group that are evaluated regularly by the chief operating decision maker, which has been determined to be the Board of Directors. At this early stage of development, the Group's structure and internal reporting are continually developing. Prior to the acquisition of TradeFlow on 1 July 2021, the Board of Directors considered that the Group operated in a single business segment of due diligence and all activities were undertaken in Italy. 

Following the acquisition of TradeFlow, the Board of Directors managed the Group as two operating segments being inventory monetisation (largely comprising the Group's Supply@ME subsidiaries) and investment advisory (comprising the TradeFlow operations), alongside the head office costs (largely comprising the Company). To date the inventory monetisation segment has been focused on the development of the IM platform, the provision of due diligence services and the facilitation of the initial IM transactions that took place during 2022 and to date during 2023.

During the second half of 2022, the management team and the Board of Directors of the Company began work in respect of the TradeFlow Restructuring, and on 24 March 2023 the Company made an announcement regarding the 100% buy back option that had been exercised by the TradeFlow directors. As a result, the TradeFlow operations have been classified as a discontinued operation under IFRS 5 ("Non-current assets held for sale and discontinued operations") for the purposes of the consolidated annual financial statement for the year ended 31 December 2022 and these condensed consolidated interim financial statements. Further to the above, the TradeFlow Restructuring transaction was finalised on 30 June 2023 resulting in the Group reducing its ownership in TradeFlow from 100% to 19% through the disposal of 81% of the issued share capital in TradeFlow to the Buyers. 

As such, the Group has reverted back to a single segment from its continuing operations for the current interim period ended 30 June 2023, being inventory monetisation, alongside the head office costs (largely compromising the Company). This split has been shown below alongside the comparative from the prior interim period which has not been restated. 

The key metrics assessed by the Board of Directors include revenue and adjusted operating profit (before acquisition related costs and impairment charges) which are presented below. Revenue is presented by basis of IFRS 15 ("Revenue from Contracts") revenue recognition and?by service line. 

All the Group's revenue from due diligence fees is recognised at a point in time. Of the revenue generated from inventory monetisation fees, £11,000 is generated from origination fees which is recognised at a point in time, and the remaining £26,000 is generated from usage of the Group's IM Platform and services provided by the Group in connection with the IM transaction. This £26,000 of inventory monetisation fees is recognised over time and the amount recognised in the current financial period relates to the performance obligations satisfised during the six-month period ended 30 June 2023. 

Geographical analysis  

The Group's inventory monetisation operation is currently predominately located in Europe, while the investment advisory operations (classified as a discontinued operation) were predominately located in Singapore.

6 Finance costs from continuing operations 

7 Operating loss from continuing operations 

The Group's operating loss from continuing operations before impairment charges has been arrived at after charging: 

In addition to the above, the Group incurred the following costs from continuing operations relating to impairment charges as detailed below:

8 Other operating income from continuing operations

The gain arising on settlement of outstanding creditor balance relates to the settlement agreement, dated 2 May 2023, with an existing creditor of the Group. This settlement agreement reduced the total amount that was owed by the Group, to this supplier, in exchange for payment of the new agreed amount by a specific date. The total amount owed to this specific creditor prior to the settlement agreement being signed was €1,130,250. This amount was reduced to €700,000 as a result of the negotiations proceeding the signing of the settlement agreement. This resulted in a difference of €420,250 or £376,000 which has been recorded as other operating income in the condensed consolidated income statement of the Group for the six months ended 30 June 2023. 

9 Taxation from continuing operations

Income tax expense for the period to 30 June 2023 primarily represents a tax charge of £21,000 arising in respect of the gain on settlement of outstanding creditor balance as described in note 8 above, as well as the interest charged on income taxes during the six-month period ended 30 June 2023 in line with the IAS 12 ("Income Taxes").

To date any accumulated tax losses resulting from net losses in the condensed consolidated financial statement have not been recognised in the balance sheet given the Group does not have a track record of generating profits against which these accumulated losses could be offset.

10 Dividends 

During the six-month period ended 30 June 2023 the Group did not pay a dividend (six months to 30 June 2022: no dividend). 

The Directors do not foresee a dividend being payable in the next financial year as the Group will be concentrating on growing its market share and enhancing its technology and capabilities.? 

11 Earnings / (loss) per share 

The calculation of the basic earnings/(loss) per share ("EPS") is based on the loss for the six-month period of £2,561,000 (2022 - loss £6,190,000) and on a weighted average number of ordinary shares in issue of 55,136,008,130 (2022: 38,271,981,611). The basic EPS is (0.0046) pence (2022: (0.0162)).

The calculation of the basic EPS from continuing operations is based on the loss for the six-month period from continuing operations of £2,376,000 (2022 - loss £3,580,000) and on a weighted average number of ordinary shares in issue of 55,136,008,130 (2022: 38,271,981,611). The basic EPS from continuing operations is (0.0043) pence (2022 - (0.0094) pence).

The calculation of the basic EPS from discontinued operations is based on the loss for the six-month period from discontinued operations of £185,000 (2022 - loss £2,610,000) and on a weighted average number of ordinary shares in issue of 55,136,008,130 (2022: 38,271,981,611). The basic EPS from discontinued operations is (0.0003) pence (2022 - (0.0068) pence). 

The Company has share warrants and employee share scheme options in issue as at 30 June 2023, which would dilute the earnings per share if or when they are exercised in the future. A summary of these is set out below and further detail of these share warrants and employee share options can be found in note 20. 

No dilution per share was calculated for either period in the table above as with the reported loss they are all anti-dilutive. 

12 Intangible assets

The following intangible assets arose on the acquisition of TradeFlow during the year ended 31 December 2021; Customer relationships, Brand, Commodity Trade Risk Management ("CTRM") software, Artificial Intelligence and back-office ("AI") software and Goodwill. The carrying value of these assets at the date of acquisition is shown in the table above. As at 31 December 2022, the TradeFlow operations were reclassified as discontinued operations and as such the net book value of the intangible assets relating to the TradeFlow operations have been reclassified to assets of the disposal group held for sale at this date. On 30 June 2023, the Group completed the TradeFlow Restructuring and as such the assets and liabilities of TradeFlow, including the intangible assets referred to above, are no longer consolidated by the Group as of 30 June 2023. Further details are set out in note 21. 

Impairment assessment - Internally developed IM Platform  

The Directors considered the continued current period losses of the Group's Italian subsidiary, to which the Internally developed IM platform relates, and the full impairment of this intangible asset in the prior year, as impairment indicators and therefore, in accordance to IAS 36 ("Impairment of Assets"), considered if at 30 June 2023 this intangible asset required further impairment in relation to the additions made during the period, or if some so the prior impairment charges could be reversed. 

The full going concern statement, set out in note 4, noted there is currently an absence of a historical recurring track record relating to inventory monetisation transactions being facilitated by the Group's Platform, the generation of the full range of fees from the use of its Platform from more than a limited number of inventory monetisation transactions, and the Group being cash flow positive. As such the Directors have prudently identified a material uncertainty in relation to the going concern statement. The Directors have also concluded that these uncertainties also apply to the discounted cash flow model used in this impairment test also. In particular, there is uncertainty that arises with respect to both the future timing and growth rates of the forecast discounted cash flows arising from the use of the Internally developed IM Platform intangible asset.

As such, the Directors have prudently decided to continue to impair the full carrying amount of this asset as 30 June 2023. This impairment loss may subsequently be reversed and if so, the carrying amount of the asset will be increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the investment in prior years. 

Impairment assessment - TradeFlow  

The finalisation of the TradeFlow Restructuring occurred on 30 June 2023 and as a result from this date the assets and liabilities of TradeFlow, including the intangible assets acquired in connection with the acquisition of TradeFlow in July 2021, are no longer consolidated by the Group. As such the Group did not recognise any additional impairment charges with respect to the TradeFlow goodwill and other acquired intangible assets during the six-month period ended 30 June 2023. The details of the calculation of the gain arising on the restructuring of the TradeFlow operations recognised in these condensed consolidated interim financial statements can be found in note 21.

The impairment charges recognised in the prior periods resulted from impairment tests carried out by the Directors at previous balance sheet dates. These tests were required in accordance with IAS 36 ("Impairment of Assets") given the Directors had identified indicators of impairment of the TradeFlow Cash Generating Unit ("CGU") at the respective prior balance sheet dates.

13 Trade and other receivables

The receivable from related party represents the £2,000,000 due from the Group's major shareholder, TAG, that arose on the 30 June 2023 as a result of TAG assuming the obligation, by way of a debt novation deed, of the Buyers (in the TradeFlow Restructuring transaction) to pay the Company the remaining £2,000,000 due under the share purchase agreement. This receivable from TAG will be repaid by TAG in multiple tranches, with the final tranche being payable by 31 January 2024. As the final repayment date is within 12 months of the balance sheet date, this receivable has been classified as a current asset. As set out in note 23, subsequent to 30 June 2023, and prior to the release of these interim financial statements, TAG had paid the first £500,000 to the Company in respect of the outstanding £2,000,000 receivable as at 30 June 2023.  

14 Trade and other payables 

15 Long-term Borrowings

On 13 October 2022, the Company announced that its subsidiary, Supply@ME Technologies S.r.l, had entered into a new long-term loan facility with Banco BPM S.p.A (the "Banco BPM Facility"). The obligations of Supply@ME Technologies S.r.l under the Banco BPM Facility are guaranteed by the Company. The key commercial terms of the Banco BPM Facility include:

a. €1 million in principal amount;

b. 275 basis points over Euribor interest rate; and

c. a five-year repayment term (the final payment to be made on 11 October 2027), including an initial six months of interest only repayments, followed by 54 months of combined principal and interest repayments. 

Fees totalling €52,000 were incurred in connection with the arrangement of the Banco BPM Facility. These costs have been capitalised and will be spread over the term of the Banco BPM Facility. The amount include in the table above represents the non-current portion of the Banco BPM Facility. The current portion is set out in note 14 above. 

16 Provisions 

Post-employment benefits  

Post-employment benefits include severance pay and liabilities relating to future commitments to be disbursed to employees based on their permanence in the company. This entirely relates to the Italian subsidiary where severance indemnities are due to each employee at the end of the employment relationship. Post-employment benefits relating to severance indemnities are calculated by estimating the amount of the future benefit that employees have accrued in the current period and in previous years using actuarial techniques. The calculation is carried out by an independent actuary using the "Projected Unit Credit Method".  

Provision for risks and charges  

Provision for risks and charges includes the estimated amounts of penalties for payment delays referring the tax payables recorded in the Italian subsidiary financial statements which, at the closing date, are overdue.

Provision for VAT and penalties

In advance of the Group's first monetisation transaction, a number of advance payments have been received by the Group's Italian subsidiary from potential client companies in accordance with agreed contractual terms. These payments have been recognised as revenue in accordance with local accounting rules. These advance payments, for which an invoice has not yet been issued, have been made exclusive of VAT. As at 30 June 2023, the Group has included a provision relating to a potential VAT liability, including penalties, in respect of these advance payments of £195,000 (31 December 2022: £201,000).

At the point in the future when the associated monetisation transaction takes place, the potential VAT liability will be settled by the Group. At this same point in time, the Directors expect to be able to recover the VAT from the client companies as invoices in respect of the monetisation transactions are issued. The timing of these future monetisation transactions currently remains uncertain and as such no corresponding VAT receivable has been recognised as at 30 June 2023, however there is a contingent asset of £138,000 as at 30 June 2023 (31 December 2022: £143,000) in respect of this. 

An additional amount of £144,000 was added to the provision during the second half of 2022 to reflect the fact that the Italian intercompany invoice was issued late and this balance reflects potential VAT penalties that may arise due to the timing of the invoice. This balance remains provided for at 30 June 2023, however has been revalued to £139,000 as at 30 June 2023. 

From time to time, during the course of business, the Group maybe subject to disputes which may give rise to claims. The Group will defend such claims vigorously and provision for such matters are made when costs relating to defending and concluding such matters can be measured reliably. There were no cases outstanding as at 30 June 2023 that meet the criteria for a provision to be recognised. 

17 Share capital 

Allotted, called up and fully paid shares