TIDMSYME
RNS Number : 9155X
Supply @ME Capital PLC
28 April 2023
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28 April 2023
Supply@ME Capital plc
(the "Company", " Supply@ME " or "SYME" and, together with its
subsidiaries, the "Group")
2022 Annual Report and Accounts and Financing
SYME, the fintech business which provides an innovative fintech
platform (the "Platform") for use by manufacturing and trading
companies to access Inventory Monetisation(c) ("IM") solutions
enabling their businesses to generate cashflow, is pleased to
announce its 2022 Annual Report and Accounts providing the Group's
final results for the year ended 31 December 2022 and Financing -
details of which are set out in Appendices 1 and 2 to this
announcement .
2022 Annual Report and Accounts highlights:
The below consolidated financial summary of the Group's income
statement is presented distinguishing the continuing operations
(being the Group's Inventory Monetisation segment) and the
discontinued operations consisting in TradeFlow Capital Management
Pte ltd and its subsidiaries (the "TradeFlow Group"). The
consolidate financial summary of the Group's balance sheet includes
the total assets and liabilities from both continuing and
discontinued operations.
Consolidated financial summary:
2022 2021
GBPm GBPm
Continuing operations
------ -------
Revenue from continuing operations 0.1 0.3
------ -------
Adjusted operating loss(1) (4.6) (4.0)
------ -------
(Loss) before tax from continuing operations (7.7) (7.0)
------ -------
(Loss) from discontinued operations(2) (2.2) (5.1)
------ -------
Total loss for the year (9.9) (12.5)
------ -------
Total assets 8.3 10.5
------ -------
Net (liabilities) (2.0) (1.4)
------ -------
(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 year's income statement has been represented to aid
comparability in line with the standard. Revenue from discontinued
operations for the year ended 31 December 2022 was GBP0.6m (for the
year ended 31 December 2021: GBP0.2m).
Operational matters:
As at 21 April 2023 As at 24 May 2022
Warehoused Goods monetisation pipeline GBP374.6m GBP164.8m
-------------------- ------------------
The pipeline KPI 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 Groups warehoused goods monetisation
services. This pipeline represents the value as at most practical
date possible prior to the issue of this annual report (being 24
May 2022).
Financing highlights:
-- A Subscription by our strategic, long-term shareholder and
partner, Venus Capital, for up to 4,500,000,000 Subscription Shares
at a Subscription Price of 0.05 pence - a premium of 5% to the
closing price per share on 27 April 2023. This is within the
existing shareholder authorities and prospectus headroom.
-- The issuance of up to 2,250,000,000 New Warrants to Venus
Capital, each exercisable into one New Warrant Share, at a price of
0.065 pence, on the same terms as those issued in connection with
the Capital Enhancement Plan.
-- An agreement with Venus Capital to extend the final exercise
date of outstanding Venus Capital Warrants from 31 December 2025 by
12 months to 31 December 2026.
-- A commitment by the Company in due course to convene a
general meeting of holders of Open Offer Warrants in order to seek
a special resolution to approve the extension of the final exercise
date of all outstanding 268,985,037 Open Offer Warrants from 31
December 2025 for 12 months to 31 December 2026.
-- The Company has undertaken with Venus Capital that it will
not before the first anniversary of the Subscription Agreement
allot, issue or agree (conditionally or otherwise) to allot or
issue, any new shares or other securities convertible or
exchangeable into shares save pursuant to Subscription Agreement or
pursuant to its existing obligations to do so in relation to
exercise of outstanding warrants, earn-out obligations and staff
incentive schemes.
-- TAG Unsecured Working Capital Loan Agreement to provide up to
GBP2,800,000 as flexible facility aimed at supporting the Group
working capital and growth capital needs up to 31 January 2024.
Alessandro Zamboni, CEO of SYME, said: "2022 has given us the
ability to prove out the Supply@ME model. The importance of
completing our first inventory monetisation cannot be overstated.
It opens the gates to corporates globally, and is highly
scalable.
The time and effort invested in making this first transaction a
reality was enormous - I can't thank my colleagues enough for their
hard work, ingenuity and persistence in that regard. I understand
that the delays have been frustrating for our shareholders, and we
share these frustrations. While the achievement of visible
milestones has not always been as swift as we would have liked, our
progress is now evident. We have never lost sight of the need to
create value and we will do everything we can to repay the trust
placed in us in 2023 and beyond.
The Financing announced today, the Subscription element of which
was priced at a premium of 5% to the closing price per share on 27
April 2023 from our strategic, long-term shareholder and partner,
Venus Capital S.A., demonstrates the Board's commitment to its
Capital Enhancement Plan strategy of steering clear of highly
dilutive convertible loan facilities, and will enable us to
maintain our singular focus on completing inventory monetisation
transactions and building our deal pipeline in the year ahead.
In keeping with the Board's desire to keep the interests of
shareholders aligned, we will in due course convene a general
meeting of holders of Open Offer Warrants in order to seek a
special resolution to approve the extension of the final exercise
date of all outstanding 268,985,037 Open Offer Warrants from 31
December 2025 for 12 months to 31 December 2026."
Albert Ganyushin, Chairman, SYME, said: "The first monetisation
in Italy was crucial to providing potential partners with the
reassurance that this is a model that works. This should now allow
us to forge ahead with the White Label proposition, providing banks
and other financial institutions with access to our technology and
platform for them to deploy with their customer bases. Shareholders
will, understandably, also want to see progress in our financial
performance. While this will not be immediately visible, it will
naturally follow the business developments that have taken place
this year. Supply@ME has made progress in proving its concept, with
a successful initial transaction, and has learned from the
challenges which all start-up businesses face. The business is now
actively pursuing clear opportunities for growth, with the support
and backing of blue-chip global businesses."
Legal notices:
An electronic copy of the 2022 Annual Report and Accounts will
shortly be available for inspection on the Company's website at
https://www.supplymecapital.com/investors/ and will be submitted to
the National Storage Mechanism maintained by the Financial Conduct
Authority ("FCA") and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism . A hard
copy version of the 2022 Annual Report and Accounts will be
dispatched to those shareholders who have elected to receive paper
communications in due course.
The Supplementary Prospectus is a regulatory requirement under
the Prospectus Regulation Rules of FCA, following the announcement
of the publication of the 2022 Annual Report and Accounts and the
Financing. The Supplementary Prospectus is supplemental to, and
should be read in conjunction with, the Prospectus. An electronic
copy of the Supplementary Prospectus will be made available for
inspection on the Company's website at
https://www.supplymecapital.com/investors/ and will be submitted to
the National Storage Mechanism maintained by the FCA and will be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
For the purposes of UK MAR, the person responsible for arranging
release of this announcement on behalf of SYME is Alessandro
Zamboni, CEO.
Contact information:
Alessandro Zamboni, CEO, Supply@ME Capital plc,
investors@supplymecapital.com
MHP Group, SupplyME@mhpgroup.com
Notes:
SYME and its operating subsidiaries provide its Platform for use
by manufacturing and trading companies to access inventory trade
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. The
inventory to be monetised can include warehoused goods waiting to
be sold to end-customers or goods that are part of a typical
import/export transaction. SYME announced in August 2021 the launch
of a global Inventory Monetisation programme which will be focused
on both inventory in transit monetisation and warehoused goods
monetisation. This programme will be focused on creditworthy
companies and not those in distress or otherwise seeking to
monetise illiquid inventories.
APPIX 1 - 2022 ANNUAL REPORT AND ACCOUNTS
Highlights
While 2021 was the year in which the various components that
make up the Supply@ME Capital Plc platform and model came together,
2022 was when we proved the concept worked. We facilitated the
first inventory monetisation transaction and forged a partnership
that provides the funding to complete several more. We overcame the
hurdle that has held the business back, namely, reluctance to
finalise transactions with a platform that did not have a clear
track record. This applied to both corporates and funders.
There is now momentum, we have a clear pipeline of inventory to
monetise in our core markets. Funder discussions have become more
focused and interest from potential client companies has increased
significantly.
Our platform has been enhanced and we have continued to add
additional expertise to our team. Our business is now being tested
and refined through the experiences of third parties, both
corporates and funders, and while our processes will continue to be
enhanced, this is no longer the primary focus. We are now building
on the lessons learned, to realise the opportunities presented
following the proof of concept, and grow the business. Progress
will not always be as fast as we would like, but it will now be
more discernible to external stakeholders. The investments we have
made in our technology and capabilities are beginning to generate
clear returns. While these have not yet been reflected in our
financial results, the rapid expansion of our pipeline is
indicative of the heightened interest in the services we offer.
Chairman's Statement
Dear Shareholders,
I am proud to share my first statement as the Chair of
Supply@ME. I will start, as is tradition, by talking about why I
joined.
The vision Alessandro and his team have for Supply@ME is
compelling. When I started to get under the skin of the issue which
Supply@ME is committed to solving it seems so simple yet, at least
until this year, it has not been achieved anywhere with any
satisfaction. The problem is common across every business that
retains physical goods - historically, inventory has been an
unattractive asset to fund for financial institutions. It has been
perceived as high risk and liable to fraud due to an inability to
effectively monitor stock levels.
Traditional inventory financing options, which heavily discount
the value of inventory, are offered with multiple covenants, or are
linked to a receivables facility. This impacts businesses' ability
to generate cash flow until goods are sold. Supply@ME sought to
combine three elements to solve this long-standing problem for
businesses and enable them to unlock capital trapped in unsold
inventory:
-- Use of advanced monitoring technology on a unit basis gives
financial institutions and other funders greater risk transparency
and as a result they can provide funding at a more competitive
level;
-- Unique accounting, legal and technology framework enables
clients to sell eligible inventory as a true legal sale transaction
without incurring debt; and
-- Unparalleled understanding of this market issue and a drive
to solve this common, but complex, problem efficiently, with use of
modern dedicated technology resulting in an effective funding
solution.
With a potential addressable market worth trillions, the
potential for Supply@ME was clear, the business just needed to
prove it.
The second, equally compelling reason, was the people which the
business has attracted. The calibre is impressive. I felt that if
anyone could provide a solution to a decades old problem, it was
the team Supply@ME has assembled. They have built an experienced
panel of Directors and advisors in the appropriate areas of
expertise, who each have an acute focus on governance matters.
Since I have joined this process has continued.
The Board has been strengthened with the appointment of
Alexandra Galligan and we will continue to expand our headcount to
reflect the broadening needs of the business and as more and more
revenue streams come online.
John Collis and Tom James will be missed as Board members. Yet a
restructuring of our relationship with TradeFlow and clear
demarcation between the fund and fintech business was essential and
will enable both businesses to realise their full potential.
I was fortunate to join in time to be a part of the key moments
for the business which have seen Supply@ME transition to a new
stage where it is positioned for scaling. A key indication of this
development was the signing of our loan facility with Banco BPM.
Enhancing our capital position was a crucial stepping stone in
lowering the cost of capital for the Group. As part of the broader
plan to re-capitalise the Company to lower the cost of capital and
minimise dilution to the shareholders, we have also completed
equity financing with Venus and repaid and closed the Mercator
facility during 2022.
Also announced on 28 April 2023, the Company has agreed new
equity subscription agreement with gross proceeds of up to GBP2.2m
and has entered into a unsecured working capital loan agreement
with the AvantGarde Group S.p.A ("TAG") of up to GBP2.8m. Both
these facilities are essential to support the working capital and
growth needs of the Group over the coming months. The unsecured
working capital loan agreement with TAG represents a material
related party transaction for the purposes of the Disclosure and
Transparency Rules and as such the independent Directors consider
this transaction to be fair and reasonable from the perspective of
the Company and its Shareholders who are not a related party.
2022 has been a year punctuated by milestones for Supply@ME,
which highlight the progress being made. The first monetisation in
Italy was crucial to providing potential partners with the
reassurance that this is a model that works. This should now allow
us to forge ahead with the white-label proposition, shareholders
will, understandably, also want to see progress in our financial
performance. While this will not be immediately visible, it will
naturally follow the business developments that have taken place
this year. Supply@ME has made progress in proving its concept, with
a successful initial transaction, and has learned from the
challenges which all start-up businesses face. The business is now
aggressively pursuing clear opportunities for growth, with the
support and backing of blue-chip global businesses.
Expansion in our core markets of Italy and the UK will continue
and we are now targeting the facilitation of monetisations in our
next tier of growth geographies. Success in 2023 will be the
strengthening of our core markets and the addition of new
territories. We will also judge ourselves on the uptake of our
white-label proposition and the completion of agreements for its
use.
I joined Supply@ME because it is an exciting, unique, fintech
start-up, led by an experienced and ambitious leadership team, that
opens up inventory as a new asset class and solves a problem for
businesses that would otherwise hinder their growth. In the coming
months, I believe we can begin to shed our start-up tag. It is an
exciting time for Supply@ME and I am looking forward to the
challenges and opportunities to come as we scale.
Albert Ganyushin, Chairman, Supply@ME
CEO Statement
Dear Shareholders,
As the world learned to live with Covid-19, businesses will have
begun 2022 hoping that the worst was behind them. Sadly, for many,
this has not been the case.
Inflation and energy prices have meant that costs have continued
to rise. As 'just in time' has given way to the more cautious 'just
in case' stocking approach, hedging against now common disruptions
in supply chains, holding more inventory means more costs. The
value of what Supply@ME offers has become even more pronounced. Any
business which holds non-perishable stock, from heavy manufacturing
and chemicals to high fashion and luxury goods, can improve their
cash flow and unlock much needed working capital.
In last year's report, I talked about the lessons we had
learned. Many of these involved adjusting to the significantly
altered supply chain landscape and focusing on how we could best
support businesses. I am immensely proud that, this year, our
development reached a new stage, putting what we learned into
practice.
2022 has given us the ability to prove the Supply@ME model. The
importance of completing our first inventory monetisation cannot be
overstated. It opens the gates to corporates globally. The time and
effort invested in making this first transaction a reality was
enormous. I understand that the delays have been frustrating for
our shareholders, and we share these frustrations. Supply@ME's
model is highly innovative; it provides a much-needed solution to a
longstanding problem which has impeded the growth of many
businesses. However, encouraging uptake of any innovation takes
time.
While 2021 was a formative year for our business, much of this
year was spent educating our potential partners and markets,
significantly improving the understanding and confidence in the
service we offer. Our business and proposition has grown every day.
This progress is incremental and cannot always be quantified or
communicated in a manner that would be perceptible to external
stakeholders, yet, when we take a step back, the milestones
achieved provide clear evidence of how far the business has come
and its potential in the months and years ahead.
The first and most obvious achievement was the inaugural
inventory monetisation using our Platform. We have refined every
aspect of our business processes to streamline onboarding and
monitoring. The monetisation of EUR1.6 million of inventory with
funding from the VeChain Foundation enabled us to put the Platform
and our systems to the test. The fact that this monetisation
occurred with funds from an NFT issuance is a testament to the
agility and scalability of our model.
As we observed in early 2023, it also opened a new source of
funding, cryptocurrencies, alongside more traditional markets.
Supply@ME was founded to help businesses grow by providing access
to its Platform in order to facilitate funding to the monetisation
of their inventory. We are now doing this in Italy and over time
will add more and more countries and clients.
The problem Supply@ME solves is common across every business
that retains physical goods and, in time, we want to provide the
means for businesses globally to improve their working capital
positions by facilitating access to funding based exclusively on
the value of their inventory. To achieve that goal, we needed to
prove that the model worked. VeChain and our initial client enabled
us to do that.
Securing the wider partnership with the VeChain Foundation was,
arguably, as pivotal as our first inventory monetisation
transaction. This, combined with the work underway to agree the
first commitment by a consortium of European Investors to fund a
dedicated new transaction, completes our initial phase of
development. We have proven the offer to client companies and
secured the backing of funders both traditional and non. This
endorsement of our business model has been crucial in developing
further conversations with potential funders. For Supply@ME to
realise its ambitions, we needed the ability to scale through a
committed pool of funders with appetites aligned to our growing
pipeline of potential client companies.
The impact this progress has had on discussions with potential
corporate clients has been immense. They have changed the tone of
conversations with potential partners and businesses can now see
how the platform performs. Supply@ME offers a significantly more
cost-effective option for businesses than traditional financing,
without businesses incurring debt. For corporates, it is not
overstating to say that it had appeared too good to be true. There
was, understandably, scepticism until they saw the process in
action. Those doubts have now been removed. Supply@ME now has a
clear trajectory aimed at working with stable of funders with an
appetite to monetise the inventory of businesses in the UK and
Italy, with new geographies expected to be added in the future. Our
pipeline of corporates is more robust than ever and with clear
proof of concept in our initial target markets, we are now primed
to realise our business' potential.
The first monetisation was made possible through the Global
Inventory Fund created with TradeFlow. Since joining the Supply@ME
Group, Tom James and John Collis have been instrumental in the
Group's development and I am grateful for their support. Changes in
the fund management industry and feedback from potential funders
highlighted the need to restructure the relationship between the
Supply@ME platform and TradeFlow. This will benefit both businesses
and enable us and TradeFlow to realise our full potential.
Anyone who has followed Supply@ME will know that management's
faith in our model has never wavered. While the achievement of
visible milestones has not always been as swift as we would have
liked, our progress is now clear. I am truly grateful for the
dedication of the Supply@ME team, the support of our growing list
of partners and of our shareholders. We have never lost sight of
the need to create value and we will do everything we can to repay
the trust placed in us in 2023 and beyond.
Alessandro Zamboni, CEO
Investment Case
Supply@ME has worked tirelessly to create a solution that can
capitalise on a growing market opportunity. The business is now
better placed than ever to do so, with a concept that is proven
following the execution of the first inventory monetisation
transaction. We are committed to delivering shareholder value and
ensuring the shareholders benefit as the business scales.
Reasons to invest
1. Novel and innovative solution
We have created a novel solution for creditworthy companies to
optimise inventory management and improve cash flow.
Our platform enables on-boarding of eligible clients who then
use the platform to facilitate a legal true-sale transaction of
eligible inventories with the ability to request to repurchase as
required, in order to release value from their inventory and
satisfy their working capital needs.
A data and analytics driven technology solution embedded in the
platform enables selection, monitoring and management of eligible
inventories on a unit basis and provides the digital knowledge base
for successful funding transactions facilitated by the
platform.
2. Clear gap in the market
Inventory financing is a very large market opportunity worth
trillions but it is also a naturally difficult one for traditional
banks to address due to information asymmetry issues and
complexity.
This makes it an attractive market for a disruptive fintech
company aiming to use technology to solve the problem of inventory
funding and we are one of the first movers in a market where the
current funding solutions are not fit for purpose.
The small number of alternative, non-bank, funding solutions
focus predominantly on larger ticket investment grade companies and
do not rely on a technology platform, which impedes their ability
to access smaller transactions and scale.
3. Scale of opportunity and ability to grow
At Supply@ME we have created a highly scalable, global business.
We've built a team of subject matter experts and our inventory
analytics specialists able to manage complex due diligence
processes, using proprietary techniques.
We have an exciting pipeline of monetisation opportunities,
which demonstrates the strong level of demand for the Group's
warehoused goods monetisation services.
4. Solid foundations built
We have spent the time over the last five years investing in the
platform and solution, building solid foundations from which to
grow.
This initial hard work and heavy lifting has now been completed,
positioning Supply@ME for future growth.
5. Concept proven and multi market ready
With the completion of the inaugural Inventory Monetisation
transaction in September 2022, we now have a fully proven concept
and clear demonstration that the model is working.
With a transaction now completed in Italy, we are ready to
expand, with our White-Label proposition providing banks and other
financial institutions with access to our technology and
platform.
Business Model Canvas: Our Value Proposition
Inventory Funders
Supply@ME creates a market
For existing and potential funders, we are opening up a new
asset class and offering access to an untapped alternative to
receivables, with strong returns. Corporates across the globe are
taking 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 cash flow and the demand for funding to alleviate
this has never been greater. 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
underwriting their inventories via the Supply@ME platform.
It offers diversification
Supply@ME offers investors further diversification through an
asset class which has limited correlation with other types of
securities. Real assets have historically exhibited a lower
correlation to a wide variety of investment alternatives, with
returns varying depending on the type of real asset. The
performance drivers for real assets are fundamentally different
from other types of securities. By expanding into asset classes
with lower correlations, such as the warehoused goods in funded
business' inventories, investors may benefit from greater
diversification. Real assets have also exhibited a greater ability
to hedge inflation than the broader equity and fixed income
markets. Finally, real assets typically offer stronger returns
during periods when inflation is rising.
And overcomes the fraud risk which has prevented the growth of
this asset class to date
Supply@ME's proprietary technology enables real time monitoring
of stock levels and whereabouts, mitigating the fraud risk which
has prevented the development of this asset class. Traditional
financial institutions are not specialists in inventory.
Historically, the risk of fraud due to infrequent and imprecise
monitoring combined with the unattractive prospect of disposing of
unsold inventory has reduced engagement with this asset, with
lenders offering restrictive terms and unattractive rates. However,
the need for a commercial facility for inventory is clear.
Supply@ME has developed systems and technology which remove the
barriers to entry and provide certainty and security for
funders.
Client Companies
Supply@ME solves a problem for client companies and facilitates
growth
The problem which Supply@ME solves is common across every
business that retains physical goods - historically, inventory has
been an unattractive asset to fund for financial institutions. It
has been perceived as high risk and liable to fraud due to the
reasons stated above. Supply@ME is providing a means for businesses
globally to improve their capital positions by providing access to
funding based exclusively on the value of their inventory. In turn,
businesses can deploy these funds to facilitate growth.
Flexible
Any business which retains physical goods can avail and benefit.
Supply@ME can fund a portion of a business' inventory or the
entirety. The process can be completed and funds released within 40
days and a typical contract lasts for three years across three
annual sales cycles. It is intended to offer funders certainty
through seamless integration with a business' existing stock
monitoring systems, without creating friction or delaying processes
for the businesses which hold the stock. Furthermore, Supply@ME's
sophisticated monitoring tools mean it does not need to take
physical ownership of any stock; stock remains in the warehouse of
the funded business.
Cost-effective
Supply@ME offers a significantly more cost-effective option for
businesses than traditional financing, without businesses incurring
debt.
Traditional inventory financing options heavily discount the
value of the inventory, are offered with multiple covenants, or are
only available on receivables. This has impacted businesses'
ability to generate cash flow until goods are sold. The Supply@ME
solution can offer 80-90% of the value of the stock with fewer
conditions. As a legal true sale of the inventory, Supply@ME's
solution also means that businesses do not incur debt, further
improving their capital positions.
Straightforward
We have invested heavily in our inventory monitoring technology
to ensure that it plugs seamlessly into existing systems and
enhances monitoring.
Traditional financial institutions are not specialists in
inventory. Historically, the risk of fraud due to infrequent and
imprecise monitoring combined with the unattractive prospect of
disposing of unsold inventory has reduced engagement with this
asset, with lenders offering restrictive terms and unattractive
rates. However, the need for a commercial facility for inventory is
clear. Supply@ME has developed systems and technology which remove
the barriers to entry and provide certainty and security for
funders.
For shareholders
Supply@ME has proven its concept, with a successful initial
transaction, and has learned from the challenges which all start-up
businesses face. The business is now aggressively pursuing clear
opportunities for growth, with the support and backing of global
businesses.
The completion of the inaugural inventory monetisation
transaction was a watershed moment, providing irrefutable proof of
concept and removing the barrier which had prevented many
corporates from engaging. This prompted a significant increase in
interest, with many corporates renewing engagement, particularly in
the UK and Italy. The business is now on a clear growth
trajectory.
Supply@ME has first mover advantage, few competitors in its
target geographies, and has spent several years familiarising
corporates in multiple sectors with how the Supply@ME platform
works. This has enabled the business to build a pipeline of client
companies in multiple countries.
We have also attracted a highly experienced panel of directors
and advisors in the appropriate areas of expertise, who each have
an acute focus on governance matters.
As the business has grown and adapted, it has attracted an
increasingly high calibre of people - including Albert Ganyushin
(former Euronext and NYSE), Alexandra Galligan, Amy Benning, Nicola
Bonini, Mark Kavanagh, Stuart Nelson and Alice Buxton - recognised
experts in their respective fields. Their experience has
contributed to our significant progress, providing market knowledge
and know how to the business.
Country Breakdown
Core Markets
Italy
As the awareness of our Inventory Monetisation Platform, and its
associated offer grows, following the inaugural Italian
transaction, there is increasing interest from larger corporates,
with greater levels of monetisable inventory. Discussions have also
been reignited from businesses, which had first been introduced to
Supply@ME before the pandemic and with the success of our first
Inventory Monetisation (IM), have got back in contact. Our pipeline
of Italian corporates is growing and we are developing the options
to facilitate further IMs with VeChain and also with traditional
Inventory Funders.
The publication of the Pegno non Possessorio (the "PNP
Regulation") in the Official Journal of the Italian Republic in
January is providing increased opportunities for our self-funding
and white-label business model.
We also expect the PNP Regulation will create further
opportunity for traditional Inventory Funders to invest in IM
transactions considering the proposed improvements to the legal
enforceability of guarantees over the inventory, through the
arrangement of self-funding and/or white-label agreements, which
leverage the Platform.
Client companies originated in Italy of GBP equivalent GBP162.5
mil as at 21 April 2023 (43% of the current pipeline)
United Kingdom
Origination in the UK has continued to grow with client
companies ready for on-boarding and progressing through the due
diligence process. Client companies have been sourced through
Supply@ME's strong relationships held with a global eco-system of
introducers which have also enabled the growth in a wider European
portfolio of client companies; including opportunities in France
and Germany. There are several larger ticket opportunities to
monetise inventory subject to the appropriate structure and funding
being in place. As the Company continues to onboard the existing
pipeline and build its track record, this will unlock further
related client company opportunities.
Client companies originated through the UK of GBP equivalent
GBP212.1 mil as at 21 April 2023 (57% of the current pipeline)
Future Markets
Middle East and North Africa (MENA)
The focus of our pipeline, at the moment, is on European
markets. However, we continue to view the MENA region, particularly
the UAE as a key growth market in the longer term. Following last
year's successful transaction between TradeFlow and Cargoes Finance
by DP World, we are in discussion towards a first transaction in
relation to the core Supply@ME offering. Additionally, we remain in
contact with a bank operating in Saudi Arabia regarding a
white-label tender, though that has been delayed for operational
reasons due to the bank's business priorities.
Finally, with the objective of prioritising the traditional
funding routes and optimising its capability plan, the Company
temporarily placed the Shariah project on hold, waiting for the
optimal time to go to market.
United States
The Company intends to conclude the project started with a Big 4
consultancy firm aimed at conducting a dedicated assessment
regarding the application of the IM framework under the US GAAP. We
continue to work with Anthony Brown, consulting company Epicirean
Brands and The Trade Advisory, to engage with potential Inventory
Funders and white-label partners on how best to structure the first
IM transaction in US.
Revenue Streams
During 2022 we have continued to enhance our business model,
with continued differentiation of the pure fintech business (our
Platform being our people and our software) from the inventory
funding structure. The Platform has, an intrinsic value and can be
used by other operators (such as banks or other debt funders) to
improve inventory backed or based facilities. We consider it to be
an enabler of each transaction. We continue to focus on growing the
following active, and future, revenue streams from the Groups
continuing operations:
C.IM
"Captive" inventory monetisation platform servicing ("C.IM"):
this is revenue generated through the use of the Platform to
facilitate inventory monetisation transactions performed by the
Global Inventory Funding route and its Inventory Funders. This
revenue is generated by the Group's Supply@ME operating
subsidiaries. Revenue will be earned in relation to the following
activities:
> origination and due diligence (pre-inventory monetisation);
and
> monitoring, controlling and reporting (post-inventory
monetisation). During the year ended 31 December 2022, the Group
recognised GBP0.1m of C.IM revenue relating to due diligence fees,
origination fees, IM Platform usage fees and IM service fees. When
fully delivered, this stream is expected to generate revenues of
approximately 1-3% of the gross value of the inventories monetised
(purchase price plus VAT).
WL.IM
"White-label" inventory monetisation platform servicing
("WL.IM"): this is the revenue to be generated through the use of
the Platform by third parties who choose to employ the self-funding
model. When delivered, this stream is expected to generate
recurring software-as-a-service revenues of approximately 0.5-1.5%
of the value of each Inventory Monetisation transaction (the amount
of funding provided). No WL.IM revenue was recognised by the Group
during the year ended 31 December 2022.
Over the last two years of test marketing and exploration it has
become clear there is a need for any regulated asset management
structure involved in transactions to be separate from the core
Supply@Me business. This segregation unlocks the opportunity to
work with a broader range of asset managers. It also leads to the
conclusion that once the TradeFlow buy back is complete the
Investment Advisory ("IA") revenue stream will be discontinued.
Supply@ME's focus remains on maintaining, growing and converting
a pipeline of corporates with monetisable stock, whilst attracting
new Inventory Funders, starting with smaller transactions, to build
a track record, and then moving to monetisations of larger values
of inventory.
With the inaugural IM completed and others in process of being
arranged, the foundations of positive track record are being laid
by Supply@ME with the expectation that it would become
progressively easier to attract new Inventory Funders to IM
transactions. The appetite of Inventory Funders has also driven the
Supply@ME origination team to assess potential IM amounts over
GBP/EUR/USD 10m and, subject to the appropriate structure and
funding being in place, there are a number of larger ticket
opportunities at various stages of discussion and included in the
pipeline.
The market need for inventory solutions with a proven technology
platform and infrastructure from day one is continuing to drive
forward opportunities for Supply@ME's client company origination
and for self-funding opportunities with global and local banks. As
client companies are onboarded to the Platform this allows for the
generation of due diligence fees and, once the client companies
have signed binding IM agreements, origination fees.
Supply@ME has continued to work diligently to build quality
portfolios of client companies to attract additional Inventory
Funders. Leveraging the first IM transaction made in 2022,
Supply@ME, as the provider of the Platform and inventory servicer,
is now working on the following funding routes:
Inventory Funders via the Global Inventory Fund ("GIF")
In addition to the existing Cayman-based structure serviced by
APEX Group, advised by TradeFlow, SYME is evaluating the option of
sponsoring the creation of an independent inventory trading
business (consisting of a group of operating stock companies across
the targeted jurisdictions) and, in the future, a European
structure together with a market-leading fund service provider and
to build, progressively, a multi-asset management model where the
Group can also cooperate with further European and UK authorised
asset managers.
Special situations / deals
Supply@ME also recognises the importance of allowing initial
traditional Inventory Funders to build up a bespoke funding
structure on top of the stock companies (trading companies which
deliver the IM transactions by using the Platform). This route can
be built through dedicated securitisation issuances or similar
direct investing structures, which are still being considered.
Direct partnerships with banks
Global and local banks have expressed an interest in using the
Platform to directly serve their clients. Supply@ME has developed
two alternative approaches for such banks, including the
"self-funding" model (where a bank will be able to use the
Platform, including the legal and accounting framework provided by
Supply@ME, to fund companies that are already clients of such bank)
or the "white-label" model (where a bank will only use the
technology components of the Platform to fund directly such bank's
existing clients).
Token route
As per the RNS of 21 December 2022, the Company aims to involve
multiple liquidity providers to deploy new IM transactions
(including crypto asset managers and direct investors through
liquidity pools partnerships) in line with the goals of Phase Two
of the Strategic Agreement with VeChain Foundation ("VeChain"). In
this regard, Supply@ME is compiling, from its global pipeline, a
portfolio of potential client companies with up to approximately
US$50m of inventory to be monetised across such portfolio. This
reflects the residual commitment of US$8.5m budgeted by VeChain
and, the objective to raise additional capital from the VeChain
community and other crypto/digital assets investors.
Financial review
2022 2021 Movement
GBP m GBP m GBPm
Continuing operations
Revenue from continuing operations 0.1 0.3 (0.2)
Operating loss from continuing
operations before impairment charges (4.6) (4.0) (0.6)
Impairment charges (1.1) (1.8) 0.7
-------- ------- ---------
Operating (loss) from continuing
operations (5.7) (5.8) 0.1
Finance costs (2.0) (1.2) (0.8)
-------- ------- ---------
(Loss) before tax from continuing
operations (7.7) (7.0) (0.7)
Income tax - (0.4) 0.4
-------- ------- ---------
(Loss) after tax from continuing
operations (7.7) (7.4) (0.3)
Loss from discontined operations (2.2) (5.1) 2.9
-------- ------- ---------
Total loss for the year (9.9) (12.5) 2.6
======== ======= =========
Movement
Pence Pence Pence
Total earning/(loss) per share
(EPS) (0.023) (0.37) 0.014
======== ======= =========
The Group's consolidated financial statements for the year ended
31 December 2022 ("FY22") have been prepared in line with
International Financial Reporting Standards ("IFRS"). Given the
activities that commenced in the second half of 2022 with respect
to the proposed restructuring the Company's ownership with
TradeFlow (the "TradeFlow Restructuring"), and the fact that as at
31 December 2022 agreement in principle had been reached with
respect to the specific proposal in place at this time, 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 prior year income statement has been represented
to aid comparability in line with the standard.
Subsequent to the agreement in principle referred to above, on
24 March 2023, the Company announced the TradeFlow directors, being
Tom James and John Collis, provided written notice of their
intention to exercise their rights to buy back 100% of the share
capital of TradeFlow (the "Buy Back"), pursuant to certain earn-out
arrangements entered into in connection with the Company's
acquisition of TradeFlow, the completion of which was announced on
6 July 2021. As a result of the exercise of the Buy Back, the
details of the TradeFlow Restructure now need to be renegotiated,
and a new independent valuation of the TradeFlow operations needs
to be completed. As at the date of these consolidated financial
statements, these activities had not been completed and were still
ongoing.
Revenue from continuing operations
2022 2021 Movement
GBP000 GBP000 GBP000
Revenue
Due Diligence fees 102 279 (177)
Inventory Monetisation fees 36 - 36
------- ------- ---------
Total revenue from continuing
operations 138 279 (141)
======= ======= =========
The table above provides a break down of the Group's revenue
from inventory monetisation activities during the current financial
year. 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
consolidated financial statements.
During FY22, the Group recognised GBP0.1m ( for the year ended
31 December 2021 ("FY21"): : GBP0.3m) of Inventory Monetisation
revenue, of which the majority related to due diligence fees. In
line with IFRS 15 ("Revenue from Contracts with Customers") the
Group recognised these revenues when the due diligence services
have been delivered and the Group's performance obligation has been
satisfied. During the current financial year, the Group has
continued to carry out, and charge for due diligence activities,
and the GBP0.1m recognised reflects the value of those due
diligence activities completed during FY22.
The reduction in the due diligence fees recognised during FY22
is primarily the result of the majority of the Group's efforts in
the first half of the year, being focused on the finalisation of
the strategic alliance with VeChain, alongside the efforts required
to identify the most suitable client company to participate in the
inaugural IM transaction and to flex the established processes and
procedures to meet the requirements of the VeChain Agreement. This
resulted in no due diligence revenue being recognised in the first
half of 2022.
As a result of the completion of the of the inaugural IM
transaction which was facilitated using the Group's IM Platform,
new revenues were recognised for the first time in respect of
origination fees, IM Platform usage fees and IM service fees. 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.
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.
While the new IM revenue items were not significant in terms of
value during FY22, the ability of the Group to successfully
facilitate the first IM transaction was a significant business
milestone.
Operating loss from continuing operations before impairment
charges
During the year ended 31 December 2022 the Group continued to
focus on refining and developing the business model, with
significant amount of time and effort having been spent on the
achieved milestones of securing a strategic alliance agreement with
VeChain and finalising the contractual commitment package to deploy
the inaugural IM transaction. Given the Group's innovative IM
Platform and business model, the execution of both these
commitments required discussions and negotiations that ran longer
than the Company had originally expected.
The Group recorded an operating loss from continuing operations
before impairment charges for FY22 of GBP4.6m (FY21: GBP4.0m loss).
This increase is largely due to:
-- An increase in staff and contractor costs of GBP0.9m in FY22
as the Group built out its leadership, business operations and
finance teams. The majority of the build out took place during the
second half of FY21 or early in FY22, with the full year impact of
the costs being seen for the first time in FY22. Additionally, the
Group focused on developing its ICT architecture during 2022 with
the support of specific contractors. The investment in staff and
contractor costs is expected to give the Group a strong foundation
as it enters the next stage of development and growth.
-- An increase in professional and legal fees of GBP0.4m in FY22
as the Group undertook the Capital Enhancement Plan which required
the preparation and publication certain regulatory documents
associated with the open offer and share issues. Additionally,
certain professional and legal fees were incurred during the second
half of 2022 in respect of the TradeFlow Restructuring.
-- These increases were offset by a decrease in the amortisation
of the internally developed IM Platform of GBP0.3m following this
being fully impaired as at 31 December 2021.
Impairment charges from continuing operations
2022 2021
GBP000 GBP000
Impairment charges from continuing operations 1.1 1.8
------- -------
1.1 1.8
======= =======
The impairment charges of GBP1.1m recognised during FY22 from
continuing operations relate to the impairment of the Group's
internally developed IM platform at 31 December 2022 following an
impairment test in line with IAS 36 ("Impairment of Assets"). This
followed the conclusion that indicators of impairment were present,
which included the prior and current year losses being generated by
the assets held by the Group's Italian operating subsidiaries. In
line with the going concern statement, set out in note 2 to the
consolidated 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 GBP1.1m as at 31 December 2022.
Discontinued Operations
The revenue and operating loss of the TradeFlow operations for
the year ended 31 December 2022 are shown in the table below. It
should be noted that as TradeFlow was acquired by the Group in July
2021, the prior year figures include the six months of results that
were consolidated by the Group, whereas the current year figures
include a full year of results.
2022 2021
GBP000 GBP000
Revenue from discontinued operations 629 259
Operating (loss) from discontinued
operations before acquisition
relation costs and impairment
charges (1,054) (438)
Transaction costs - (2,009)
Amortisation of intangible assets
arising on acquisition (846) (391)
Acquisition related earn-out payments 710 (1,410)
Impairment charges (765) (800)
--------------------------------------- -------- --------
Operating (loss) from discontinued
operations (1,955) (5,048)
TradeFlow's investment advisory revenue arises 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 are recognised when the investment advisory services
have been delivered and the Group's performance obligation has been
satisfied.
The acquisition related costs in FY22 arose in connection with
the TradeFlow acquisition that was completed in July 2021. Further
details are set out below:
- Amortisation of intangible assets arising on acquisition of
GBP0.8m. These costs related to the intangible assets recognised by
the Group in connection with the TradeFlow acquisition, which had
an initial fair value of GBP6.9m. The GBP0.8m represents the
amortisation charge arising on these assets for the year ended 31
December 2022; and
- Acquisition related earn-out costs of (GBP0.7m). Elements of
the consideration payable for the TradeFlow acquisition require
post-acquisition service obligations to be performed by the
earn-out shareholders over a three-year period. While these legally
form part of the consideration costs under IFRS 3 ("Business
Combinations"), they must be accounting for as deemed remuneration
through the statement of comprehensive income. The credit of
GBP0.7m recognised in the income statement for the year ended 31
December 2022 represents the reversal of amounts previously
recognised in the income statement in relation to the FY22 and FY23
earn-out payments, slightly offset by the additional amount in
respect of FY21 earn-out payments recognised in the current
financial year. The reversal reflects the fact that the earn-out
milestone targets were not met in FY22 and managements expectation
that these targets will be met in 2023 is now remote.
The discontinued operations impairment charge relates to the
goodwill recognised on the TradeFlow acquisition. As at 30 June
2022, management carried out an impairment test in line with IAS 36
("Impairment of Assets") on the TradeFlow Cash Generated Unit
("CGU"). This followed the conclusion that indicators of impairment
were present, including under performance against forecast for the
first half of 2022. The result of this impairment test was that the
recoverable amount of the TradeFlow CGU was determined to be lower
than the net invested capital value held on the balance sheet at 30
June 2022 by GBP0.8m and as such an impairment charge has been
recognised for this amount.
An additional impairment assessment was carried out as at 31
December 2022, however due to the classification as discontinued
operation, this assessment was carried out in accordance with IFRS
5 ("Non-current Assets Held for Sale and Discontinued Operations").
This required management to consider the fair value of the
TradeFlow operations, being what would be the agreed price between
two market participants. As the details of the Buy Back are still
being considered and finalised as at the date of these financial
statements, management considered the specifics set out in the
TradeFlow Restructuring share purchase agreement that had been
agreed in principle as at 31 December 2022. Taking this into
consideration, no additional impairment charges were recognised as
at 31 December 2022.
Group Funding Facilities utilised during the year
Capital Enhancement Plan
During FY22, the Company entered into a subscription agreement
with Venus Capital S.A. ("Venus Capital"), which raised GBP6.7m
through the issue of new equity capital. This new equity capital
enabled the Company to settle the outstanding loan notes and
convertible loan notes with Mercator Capital Management Fund LP
("Mercator") in cash rather than by the further conversion of the
convertible loan notes into new ordinary shares. During the year
ended 31 December 2022, the Company issued a total of
14,350,000,000 new ordinary shares to Venus in line with the
mandatory and optional equity tranches outlined in the subscription
agreement.
In connection with the Capital Enhancement Plan, the Company
also executed a convertible loan note agreement with Venus Capital,
under which the Company, issued to Venus Capital convertible loan
notes worth GBP1.9m during FY22. These convertible loan notes were
split as GBP0.4m to cover the fees associated with the Venus
Capital subscription and convertible loan note agreements, and
GBP1.5m covering a working capital funding facility which was
received in cash during the second half of FY22. As at 31 December
2022, the full GBP1.9m of this convertible loan note liability had
been extinguished through the issue of 3,897,484,385 new ordinary
shares. The conversion to new ordinary shares was at a fixed price
of 0.05pence. The interest expense recognised in respect of these
convertible loan notes in FY22 was GBP0.1m.
The subscription agreement with Venus Capital also required the
Company to issue warrants in connection with the equity share
issues made under the Venus Capital subscription agreements. During
the year ended 31 December 2022 a total of 8,175,000,000 share
warrants were issued by the Company to Venus Capital. These share
warrants had a total fair value of GBP4.8m. As at 31 December 2022,
all of these share warrants remain outstanding.
The Capital Enhancement Plan also included the Open Offer made
by the Company to its existing retail shareholders during the
second half of 2022. The Open Offer provided the ability for
existing retail shareholder to purchase additional new ordinary
shares on the same conditions agreed with Venus Capital. The Open
Offer resulted in the issue of 641,710,082 new ordinary shares and
raised GBP0.3m for the Company. The Open Offer also required the
issue of warrants to the retail shareholders and during the year
ended 31 December 2022 a total of 320,855,008 share warrants were
issued by the Company to retail shareholders. These share warrants
had a total fair value of GBP0.3m. As at 31 December 2022, a total
of 271,347,008 share warrants remained outstanding.
The total share issues costs incurred in connection with the
Capital Enhancement Plan during FY22 was GBP5.6m including GBP5.1m
relating to the fair value of the warrants issued, GBP0.4m relating
the fees charged by Venus Capital and GBP0.1m of other share issue
costs. This has been accounted for as a GBP4.0m reduction to share
premium and a GBP1.6m reduction to retaining losses during FY22.
The reduction to share premium amount has been limited to the
increase to share premium recorded during the same period in
respect of the various equity issues making up the Capital
Enhancement Plan.
Mercator funding facilities
Prior to the cash repayment of outstanding loan note and
convertible loan balance with Mercator Capital Management LP
("Mercator") following the execution of the Capital Enhancement
Plan, the Group continued to make monthly repayments under the loan
note facility through the issue of a convertible loan note.
The movement in loan note liability to Mercator during the
current financial year are set out in the table below:
Mercator loan
notes
GBPm
Loan note liability at 1 January 2022 5.7
Amortisation of finance costs during the period
(recognised in the income statement) 1.1
Less: settlements made via issue of convertible
loan notes (4.6)
Less: repayments made in cash (2.2)
Loan note liability at 31 December 2022 -
==============
In connection with the drawdown of the Mercator loan note
facility during 2021, the Company also issued share warrants
representing 20% of the total amounts drawn down. The fair value of
these warrants was capitalised at the time of issue and this,
together with the other capitalised finance costs relating to the
loan note facility and are being recognised over the term of the
loan notes using the effective interest rate method. The total of
these finance costs recognised during FY22 is GBP1.1m.
Following the issue of GBP4.6m of convertible loan notes to
Mercator in lieu of cash repayments during the year, these were
subsequently settled as follows:
a) the conversion of GBP1.3m in principal amount of convertible
loan notes into 1,400,898,372 new ordinary shares; and
b) a repayment in cash of GBP3.4m in principal amount of convertible loan notes.
The movement in convertible loan note liability to Mercator
during the current financial year are set out in the table
below:
Mercator convertible
loan notes
GBPm
Convertible loan note liability at 1 January -
2022
Monthly loan note settlements made via issue
of convertible loan notes 4.6
Finance costs satisfied via the issue of convertible
loan notes 0.1
Less: convertible loan notes converted into
ordinary shares (1.3)
Less: convertible loan notes repaid in cash (3.4)
---------------------
Convertible loan note liability at 31 December -
2022
=====================
The Mercator convertible loan notes do not have any interest
costs in addition to that of the Mercator loan notes, however
finance costs of GBP0.8m were recognised during the current
financial year as a result of:
-- Additional commitment fees and late payment interest charges
of GBP0.5m, or which GBP0.4m was paid in cash and the remaining
GBP0.1m was settled through the issue of convertible loan notes;
and
-- The fair value of the warrants of GBP0.2m issued in
connection with the convertible loan notes.
Both costs have been fully recognised in the income statement
during FY22 given the liability to which they relate has been
extinguished by 31 December 2022. This amount, together with the
finance costs of GBP1.1m in respect of the Mercator loan notes,
resulted in a total finance cost of GBP1.9m in respect of the
Mercator funding facilities during the year ended 31 December
2022.
TradeFlow long term borrowings
On the 1 April 2022, TradeFlow entered into a new long term loan
facility with its existing finance provider, and in connection with
this, chose to settle its existing unsecured loan note facility
ahead of its maturity date on the 23 October 2022. The key terms of
the new long term loan facility are set out below;
- A principal amount of US$3.8m;
- A maturity date of 31 March 2026;
- An additional redemption premium cost of US$0.2m which is
payable at the time the principal is repaid; and
- Interest at a fixed rate of 7.9% per annum.
Finance costs recognised during the year ended 31 December 2022
relating to TradeFlow long term borrowings total GBP0.2m and
relates to accrued monthly interest amounts and the recognition of
the redemption premium costs over the expected life of the loan
using the effective interest rate method. The early settlement of
the existing unsecured loan note facility accounted for additional
finance costs of GBP0.1m being recognised in relation to the
acceleration of the redemption premium cost due on repayment of the
principal of the existing loan note facility.
Other long term funding
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:
- EUR1 million in principal amount;
- 275 basis points over Euribor interest rate; and
- 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.
The proceeds of this loan have been used to support the
continued investment into the Group's IM Platform, the ownership of
which was transferred to Supply@ME Technologies S.r.l prior to the
execution of the Banco BPM Facility.
Cash flow
The Group decreased its net cash balance by GBP1.1m (year ended
31 December 2021: GBP1.1m increase) due to proceeds from the
Capital Enhancement Plan share issues of GBP7.0m, the proceeds from
the Venus Capital convertible loan notes of GBP1.5m, and net
proceeds from the TradeFlow and Banco BPM Facility long term
borrowing of GBP2.3m, offset by the following items:
-- Repayments made on the Mercator loan note and convertible loan note facilities of GBP5.6m;
-- Additional finance costs paid in cash related to the Mercator
loan note and convertible loan note facilities of GBP0.4m;
-- Share issues cost paid in cash of GBP0.2m;
-- Net outflows from operating activities of GBP4.5m (year ended
31 December 2021: GBP3.9m net outflow) as the Group's operating
expenses increased primarily due to growing headcount, together
with spend on IT contractor specialists and professional and legal
fees; and
-- Increased investment in the Group's IM Platform of GBP1.2m
(year ended 30 December 2021: GBP4.6m).
2022 2021
GBP000 GBP000
Net cash flow from operating activities (4.5) (3.9)
Net cash flow from investing activities (1.2) (4.6)
Net cash flow from financing activities 4.6 9.6
------- -------
Net increase in cash and cash equivalents (1.1) 1.1
Cash and cash equivalents at 1 January
2022 1.7 0.6
------- -------
Cash and cash equivalents as at 31
December 2022 0.6 1.7
======= =======
Net liabilities
As at 31 December 2022 net liabilities were GBP2.0m (31 December
2021: net liabilities of GBP1.4m). The GBP0.6m increase in net
liabilities reflects:
-- A decrease in the Group's intangible assets and goodwill of
GBP1.5m due to amortisation of GBP0.9m and impairment charges of
GBP1.8m during the year ended 31 December 2022. This was offset by
additions to the Group's IM Platform of GBP1.2m during the
period;
-- A decrease in amounts outstanding under the Mercator loan
note and convertible loan facilities of GBP5.7m in aggregate. This
is due to the settlement activities described above;
-- An increase in long terms borrowings of GBP2.6m, due to a
GBP1.8m increase in TradeFlow long term borrowing following the
loan refinancing, and an GBP0.8m increase in borrowings as a result
of the new Banco BPM Facility; and
-- A GBP2.2m decrease in working capital primarily due to the
overall net cash outflows from operations.
Going Concern
The Board's assessment of going concern and the key
considerations thereto are set out in the Directors' Report and
note 2 to the consolidated financial statements for the year ended
31 December 2022.
Related Parties
Note 28 to the to the consolidated financial statements for the
year ended 31 December 2022 contains details of the Group's related
parties.
Subsequent events
Note 30 of the to the consolidated financial statements for the
year ended 31 December 2022 contains details of all subsequent
events.
Financial Statements
The final results announcement for the year ended 31 December
2022 is prepared in accordance with UK adopted International
Accounting Standard and does not include all the information
required for full annual financial statements. This announcement
should be read in conjunction with the 2022 Annual Report and
Accounts. The accounting policies adopted in this announcement are
consistent with the Annual Report and Accounts for the year ended
31 December 2022.
The financial information has been extracted from the financial
statements for the year ended 31 December 2022, which have been
approved by the Board of Directors and on which the auditors have
reported on with a qualified opinion. The audit report was
qualified on the basis that: "During the year, the classification
and presentation requirements of IFRS 5 (Non-current Assets Held
for Sale and Discontinued Operations) were met for the group's
wholly owned subsidiary TradeFlow Capital Management Pte. Limited
("TradeFlow"). Subsequent to the year-end on 24 March 2023, the
TradeFlow option holders provided written notice to the company of
their intention to exercise their right to acquire 100% of the
share capital under the original share purchase agreement (see note
27 for details). The fair value to be calculated under the terms of
the share purchase agreement is to be determined by a third party
valuer and has not yet been finalised.
With respect to the group financial statements, we were unable
to obtain sufficient appropriate audit evidence regarding the fair
value of the disposal group at 31 December 2022 and any resulting
impact on the statement of comprehensive income.
With respect to the parent company balance sheet, we were unable
to obtain sufficient appropriate evidence regarding the carrying
value of the investment in the Tradeflow subsidiary in the parent
company balance sheet and any impact it may have on retained
earnings.
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
and company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed pubic
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified opinion. ";
The audit report also included a material uncertainty relating
to going concern. Full details of the audit report can be seen in
the 2022 Annual Report and Accounts.
Consolidated Statement of Comprehensive Income for the Year
Ended 31 December 2022
Year ended Year ended
31 December 31 December
Note 2022 2021
GBP 000 GBP 000
Continuing operations
Revenue 3 138 279
Cost of sales (338) (804)
------------- -------------
Gross (loss)/profit (200) (525)
Administrative expenses 6 (4,460) (3,468)
Other operating income 5 9 -
--------------------------------------- ----- ------------- -------------
Operating loss from continuing
operations before impairment charges 3 (4,651) (3,993)
Impairment charges 6 (1,078) (1,773)
--------------------------------------- ----- ------------- -------------
Operating loss from continuing
operations (5,729) (5,766)
Finance costs 6 (1,982) (1,255)
------------- -------------
Loss before tax from continuing
operations (7,711) (7,021)
Income tax 10 - (399)
Loss after tax from continuing
operations (7,711) (7,420)
============= =============
Discontinued operations
Loss from discontinued operations 27 (2,167) (5,067)
------------- -------------
Total loss for the year (9,878) (12,487)
============= =============
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss
Exchange differences on translating
foreign operations (539) 6
Total comprehensive loss for
the year (10,417) (12,481)
============= =============
Loss attributable to:
Owners of the company (10,417) (12,481)
============= =============
Earnings/(loss) per share Pence Pence
Basic and diluted loss per share
- continuing operations 12 (0.018) (0.022)
Basic and diluted loss per share
- discontinued operations 12 (0.005) (0.015)
Basic and diluted loss per share
- total 12 (0.023) (0.037)
The above consolidated statement of comprehensive income should
be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position as at 31 December
2022
As at 31 December As at 31
2022 December 2021
Note GBP 000 GBP 000
Non-current assets
Intangible assets and goodwill 13 - 7,895
Tangible assets 7 17
Other non-current assets 19 -
Total non-current assets 26 7,912
----------------- --------------
Current assets
Trade and other receivables 14 1,219 896
Cash and cash equivalents 257 1,727
----------------- --------------
1,476 2,623
----------------- --------------
Assets of disposal group held for
sale 27 6,844 -
----------------- --------------
Total current assets 8,320 2,623
----------------- --------------
Total assets 8,346 10,535
----------------- --------------
Current liabilities
Trade and other payables 18 4,587 3,500
Loan notes 16 - 5,732
----------------- --------------
4,587 9,232
----------------- --------------
Liabilities of disposal group held
for sale 27 4,561 -
----------------- --------------
Total current liabilities 9,148 9,232
----------------- --------------
Net current liabilities (828) (6,609)
----------------- --------------
Non-current liabilities
Long-term borrowings 16 748 1,284
Provisions 19 468 340
Deferred tax liabilities 11 7 1,104
Total non-current liabilities 1,223 2,728
Net liabilities (2,025) (1,425)
================= ==============
Equity attributable to owners of the
parent
Share capital 15 5,897 5,486
Share premium 25,269 18,171
Share-based payment reserve 26 5,871 2,018
Other reserves (11,413) (10,891)
Retained losses (27,649) (16,209)
----------------- --------------
Total equity (2,025) (1,425)
----------------- --------------
The above consolidated statement of financial position should be
read in conjunction with the accompanying notes. The consolidated
financial statements on pages 100 to 151 of the 2022 Annual Report
and Accounts were approved and authorised for issue by the Board on
28 April 2023 and signed on its behalf by:
Alessandro Zamboni David Bull
Chief Executive Officer and Executive Director Independent
Non-Executive Director and Chair of Audit Committee
Supply@ME Capital Plc
Company registration number: 03936915
Consolidated Statement of Changes in Equity for the Year Ended
31 December 2021
.
Share-based Reverse
Share Share Other payment Merger takeover Forex Retained
capital premium reserves reserve reserve reserve reserve losses Total
Note GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 January
2021 5,420 11,820 4 - 223,832 (237,835) 13 (3,706) (452)
Loss for the
year - - - - - - - (12,487) (12,487)
Forex
retranslation
difference - - - - - - 5 1 6
Loss for the
year and
total
comprehensive
income - - - - - - 5 (12,486) (12,481)
Issuance of
new shares 25 66 6,351 - - 3,073 - - - 9,490
Issue of
warrants 25 - 608 - - - - 608
Credit to
equity for
acquisition
related
earn-out
payments 25 - 1,410 - - - - 1,410
Legal reserve
movement - - 17 - - - - (17) -
At 31 December
2021 5,486 18,171 21 2,018 226,905 (237,835) 18 (16,209) (1,425)
--------- --------- -------- ----------- --------- --------- --------- -------- --------
The above consolidated statement of changes in equity should be
read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity for the Year Ended
31 December 2022
Share-based Reverse
Share Share Other payment Merger takeover Forex Retained
capital premium reserves reserve reserve reserve reserve losses Total
Note GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 January
2022 5,486 18,171 21 2,018 226,905 (237,834) 18 (16,209) (1,425)
Loss for the
year - - - - - - - (9,878) (9,878)
Forex
retranslation
difference - - - - - - (539) - (539)
Loss for the
year and
total
comprehensive
income 5,486 18,171 21 2,018 226,905 (237,834) (521) (26,087) (11,841)
Issuance of
new shares 15 406 10,396 - - - - - - 10,802
Costs incurred
in connection
with the
issuance of
new ordinary
shares - (4,024) - - - - - (1,605) (5,629)
Credit to
equity for
issue of
warrants 26 - - - 5,292 - - - - 5,292
Exercise of
Open Offer
Warrants 15 1 31 - (40) - - - 40 32
Credit to
equity for
prior year
acquisition
related
earn-out
payments - - - 172 - - - - 172
Settlement of
prior year
acquisition
related
earn-out
payments 15 4 695 - (699) - - - - -
Debit to
equity for
current year
and future
acquisition
related
earn-out
payments - - - (883) - - - - (883)
Equity settled
employee
share based
payment
schemes - - - 11 - - - - 11
Pension plan
actuarial
gain or loss - - 16 - - - - - 16
Subsidiaries
disposed of
during the
year - - - - - - - 3 3
At 31 December
2022 5,897 25,269 37 5,871 226,905 (237,834) (521) (27,649) (2,025)
--------- --------- -------- ----------- --------- --------- --------- -------- --------
The above consolidated statement of changes in equity should be
read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows for the Year Ended 31
December 2022
Year ended Year ended
31 December 31 December
2022 2021
GBP 000 GBP 000
Cash flows from operating activities
Loss before interest and tax for the
year from continuing operations (5,729) (5,766)
Loss before interest and tax for the
year from discontinued operations (1,955) (5,048)
Total loss before interest and tax (7,684) (10,814)
Adjustments for non-cash acquisition
related costs and impairment charges
Acquisition related transaction costs - 1,900
Acquisition related earn-out payments (710) 1,410
Amortisation of intangible assets arising
on acquisition 846 391
Impairment charges 1,843 2,573
(5,705) 6,274
Other non-cash adjustments (134) (70)
Other depreciation and amortisation 51 396
Increase to provisions 110 52
Decrease/(increase) in accrued income (38) (46)
Decrease/(increase) in trade receivables (44) 505
Increase in trade and other payables 1,158 77
Other decreases/(increases) in net
working capital 337 (158)
------------ ------------
Net cash flows from operations (4,265) (3,784)
Finance costs paid in cash (14) (2)
Income taxes paid in cash (276) (89)
Net cash flow from operating activities (4,555) (3,875)
------------ ------------
Cash flows from investing activities
Acquisition of property, plant and
equipment (4) (7)
Acquisition of intangible assets (1,175) (1,020)
Increase in other non-current assets (18) -
Cash consideration on acquisition of
Tradeflow, net of cash acquired - (3,523)
------------ ------------
Net cash flows from investing activities (1,197) (4,550)
------------ ------------
Cash flows from financing activities
Cash inflow from convertible loan notes 1,500 5,000
Net cash inflow from new long-term
borrowings 2,334 -
C ash inflow from issue of new ordinary
shares 7,013 -
Net cash inflow from Mercator loan
notes - 6,629
Other finance costs paid in cash (425) (25)
Cash repayment of loan notes and convertible
loan notes (5,572) (2,016)
Cost of share issue paid in cash (231) -
Net cash flows from financing activities 4,619 9,588
------------ ------------
Net (decrease)/increase in cash and
cash equivalents (1,133) 1,163
Foreign exchange differences to cash
and cash equivalents on consolidation (13) 12
Cash and cash equivalents at 1 January 1,727 552
Cash and cash equivalents at 31 December 581 1,727
------------ ------------
Significant non-cash transactions
During the year, the Group issued 20,553,126,359 new ordinary
shares in the Company. Of this total, 5,511,908,277 new ordinary
shares were not issued in exchange for cash:
1. 1,400,898,372 new ordinary shares were admitted to trading
during the year to fulfil the conversion of Mercator Capital
Management Fund LP ("Mercator") convertible loan notes. These new
ordinary shares were issued to extinguish GBP1,356,666 principal
value of convertible loan notes that had previously been issued to
Mercator;
2. 213,525,520 new ordinary shares were issued to settle the
acquisition related earn-out payments for the financial year ended
31 December 2021. The fair value of these acquisition related
earn-out payments that had been recorded as the share-based payment
reserve was GBP699,000;
3. 3,897,484,385 new ordinary shares were issued to fulfil the
conversion of Venus Capital S.A. ("Venus Capital") convertible loan
notes issued during the year. These new ordinary shares were issued
to extinguish GBP1,917,500 principal value of convertible loan
notes that had previously been issued to Venus.
Further details of share issues can be found in note16. Further
details of the convertible loan note facilities can be found in
note 17.
The reconciliation of the movement in net debt is set out in
note 24.
The above consolidated statement of cash flows should be read in
conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022
1 General information
Supply@ME Capital plc is a public limited company incorporated
in England and Wales. The address of its registered office is 27/28
Eastcastle Street, London, W1W 8DH, United Kingdom. Supply@ME
Capital's shares are listed on the Standard List of the main market
of the London Stock Exchange.
These consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standards.
The financial statements of the Group, consisting of Supply@ME
Capital plc (the "Company") and its subsidiaries (the "Group"), are
presented in Pounds Sterling and all values are rounded to the
nearest thousand pounds (GBP'000) except when otherwise stated.
These consolidated nancial statements have been prepared in
accordance with the accounting policies set out below, which have
been consistently applied to all the years presented.
2 Accounting policies
Going concern
As at 31 December 2022 the Group had a cash and cash equivalents
balance from continuing operations of GBP257,000. In addition, cash
balances from discontinued operations were GBP324,000 as at 31
December 2022. These total combined cash and cash equivalent
balances of GBP581,000 compared to a consolidated cash balance
GBP1,727,000 as at 31 December 2021. The Group's consolidated net
current liabilities of GBP828,000 as at 31 December 2022, compared
to a consolidated net current liability position of GBP6,609,000 as
at 31 December 2021. The Group has posted a total comprehensive
loss for the year ended 31 December 2022 of GBP10,417,000 (2021:
comprehensive loss of GBP12,481,000) and retained losses as at 31
December 2022 were GBP27,649,000 (31 December 2021: retained losses
GBP16,209,000).
During the year, the Company continued to source additional
funds with the primary aim of allowing it to repay the outstanding
loan note and convertible loan note balances that were outstanding
with Mercator Capital Management Fund LP ("Mercator").
Additionally, the focus was to move to a more stable source of
funding to support the working capital needs of the Group and the
continued investment into the Group's Inventory Monetisation
Platform. These new sources of funding included both a subscription
of new equity into the Company and traditional bank financing from
Banco BPM, the third largest banking group in Italy. Further
details of the cash inflows as a result of the new funding sources,
and the cash outflows due to the repayment of the Mercator funding
facility can be found in consolidated statement of cash flows and
in the various notes to these consolidated financial
statements.
Following the 31 December 2022, the Company has been continuing
to explore additional options of funding to support the ongoing
working capital needs of the Group while a track record of positive
revenue generation is established. As at the date of issue of these
consolidation financial statements, the Company also announced the
following binding commitments:
1) A new unsecured working capital loan agreement of up to
GBP2,800,000 from the AvantGarde Group S.p.A ("TAG") (the "TAG
Working Capital facility") which will be received in tranches up to
31 January 2024 and shall be repayable on 1 February 2028; and
2) A new equity subscription agreement with irrevocable
commitments to subscribe for 4,500,000,000 new ordinary shares in
the Company at a price of 0.05 pence per share, providing the
Company with gross proceeds of GBP2,250,000 (the "Subscription
Agreement").
Further details of each of the TAG Working Capital facility and
the Subscription Agreement can be found in note 30 to these
consolidated financial statements.
Taking into consideration the factors above and in order to
consider their assessment of the Group as a going concern, the
Directors have reviewed the forecast cash flows for the next 12
months from approval of these consolidated financial statements.
The cash flow forecasts take into account that the Group meets its
day to day working capital requirements through its available and
committed cash resources. The Directors have prepared the forecast
using their best estimates, information and judgement at this time,
including the TAG Working Capital facility and the Subscription
Agreement referred to above. The Directors have also considered the
expected cash flows arising from TradeFlow's investment advisory
services as well as from the use of the Group's innovative Platform
to facilitate inventory monetisation transactions ("C.IM" revenue
stream). This reflects the fact that the Directors expect the Group
to fully operationalise the business model in the near future,
following the completion of the first IM transaction in 2022, and
that currently TradeFlow still currently remains a fully owned
subsidiary of the Group.
Despite the facts outlined above, there continues to be 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 cash flows arising from the Group's
multiple 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
the cash inflows arising from the TAG Working Capital facility and
the Subscription Agreement have not yet been fully received. These
amounts have been factored into the cash flow forecast in line with
the contractual commitments received from the various
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. These such loans will allow the
Group to access a lower cost of capital.
As such the Directors consider it appropriate to prepare these
annual consolidated financial statements on a going concern basis
and have not included the adjustments that would result if the
Company and Group were unable to continue as a going concern.
Adjusted performance measures
Management believes that adjusted performance measures provide
meaningful information to the users of the accounts on the
operating performance of the business. Accordingly, the adjusted
measure of operating profit from continuing operations excludes,
where applicable, transaction costs, amortisation of intangible
assets arising on acquisitions, acquisition related earn-out
payments and impairment charges. These terms are not defined terms
under IFRSs and may therefore not be comparable with similarly
titled profit measures reported by other companies. They are not
intended to be a substitute for, or superior to, GAAP measures. The
items excluded from adjusted results are those items that are
charged to the consolidated statement of comprehensive income in
accordance with IFRS 3 ("Business Combinations") or which arise due
to the impairment of the Group's intangible assets or investments.
They are not influenced by the day-to-day operations of the
Group.
Basis of consolidation
The Group nancial statements consolidate those of the Company
and its subsidiary undertakings drawn up to 31 December 2022.
Subsidiaries are entities over which the Group has control. Control
comprises an investor having power over the investee and is
exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
On 1 July 2021 the Company completed the acquisition of the
entire share capital of Tradeflow Capital Management Pte. Ltd.
("TradeFlow") by way of cash and share consideration. As such from
this date TradeFlow became a fully owned subsidiary of the Company
and formed part of the Group's consolidated financial performance
and position from the date of acquisition.
During the second half of 2022, the Directors began the process
of the proposed restructuring the Company's ownership with
TradeFlow ("TradeFlow Restructuring") and as a result the TradeFlow
business has been classified as held for sale / a discontinued
operation as at 31 December 2022 in line with IFRS 5 "Non-current
Assets Held for Sale and Discontinued Operations". This is due to
the fact that TradeFlow was available for immediate sale in its
present condition and it was highly probable that that sale would
be completed.
Supply@ME Technologies S.r.l. was incorporated by the Company in
Italy on 25 March 2022 for the purpose of holding the Group's
intellectual property rights relating to the Platform together with
future developments in a dedicated entity. On 9 September 2022,
Supply@ME S.r.l. assigned the intellectual property rights to
Supply@ME Technologies S.r.l. As both Supply@ME S.r.l and Supply@ME
Technologies S.r.l are 100% owned subsidiaries of the Company, this
was an intragroup reassignment.
On the 10 August 2022, Supply@ME S.r.l. sold one of it's 100%
owned subsidiaries, Supply@ME Stock Company 1 S.r.l. to Cayman
Emerging Manager Platform (3) SPC - Global Inventory Monetisation
Fund 1 S.P. for consideration of EUR1,000. Prior to the sale, Stock
Company 1 S.r.l. was a non-trading entity. As at 31 December 2022,
Supply@ME S.r.l. continued to own Supply@ME Stock Company 2 S.r.l.
and Supply@ME Stock Company 3 S.r.l., both of which are also
non-trading entities.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated.
Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of
impairment.
New and revised accounting standards and interpretations
Management has concluded that to date there has been no impact
on the results or net assets of the Company as a result of adopting
new or revised accounting standards.
New standards, interpretations and amendments not yet
effective
At the date of authorisation of the Group's financial statements
there have been no new standards, amendments or interpretations to
existing standards that have been published by the International
Accounting Standards Board.
Business Combinations
The acquisition of subsidiaries and businesses are accounted for
using the acquisition method under IFRS 3 "Business
Combinations".
Measurement of consideration
The consideration for each acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred to former owners and equity instruments
issued by the Group in exchange for control of the acquiree.
Acquisition related earn-out payments (deemed remuneration)
In accordance with the IFRS Interpretations Committee's
interpretation of paragraph B55 of IFRS 3 ("Business
Combinations"), the cost of the business combination excludes
consideration which requires post-acquisition service obligations
to be performed by the selling shareholders.
In the event that the deemed remuneration is to be equity
settled under IFRS 2 ("Share-Based Payments"), the fair value is
determined at the grant date and then charged to the consolidated
statement of comprehensive income over the period of the service
obligations.
Fair value assessment
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. Where the
fair value of the assets and liabilities at acquisition cannot be
determined reliably in the initial accounting, these values are
considered to be provisional for a period of 12 months from the
date of acquisition. If additional information relating to the
condition of these assets and liabilities at the acquisition date
is obtained within this period, then the provisional values are
adjusted retrospectively. This includes the restatement of
comparative information for prior periods.
Intangible assets arising on business combinations are
recognised initially at fair value at the date of acquisition.
Subsequently they are carried at cost less accumulated amortisation
and impairment charges.
Goodwill
Goodwill arises where the consideration of the business
combination exceeds the Group's interest in the net fair value of
the identifiable assets, liabilities and contingent liabilities
recognised. This is recognised as an asset and is tested annually
for impairment. The identifiable assets and liabilities acquired
are incorporated into the consolidated financial statements at
their fair value to the Group.
Transaction costs
Transaction costs associated with the acquisition are recognised
in the consolidated statement of comprehensive income as incurred
and separately disclosed due to the nature of this expense.
Intangible assets
Goodwill
Goodwill arising on consolidation is recognised as an asset.
Following initial recognition, goodwill is subject to impairment
reviews, at least annually, and measured at cost less accumulated
impairment losses. Any impairment is recognised immediately in the
consolidated statement of comprehensive income and is not
subsequently reversed.
Other intangible assets
a) Internally developed Inventory Monetisation ("IM") platform
The core activity of the existing Supply@ME business is the
creation and marketing of a software-driven secure platform (the
"IM Platform") that can be used for the facilitation, recording and
monitoring of IM transactions between third party client companies
and segregated trading companies (known as stock companies). The
software modules which form part of the IM Platform can also be
used, through a White-label model, by third party banks in order
for them to deploy their own inventory backed financial products.
The internally generated IM Platform includes not only the software
but also:
-- the methodologies and business policies underpinning each IM transaction
-- the legal and accounting frameworks required to support each IM transaction
-- the technical infrastructure (cloud environment, distributed
ledger technology) used to support each IM transaction.
Associated with this core activity are significant product
development requirements to address compliance with legal,
regulatory, accounting, valuation and insurance criteria. The three
main categories of cost are: Software and infrastructure
development, intellectual property (IP) related costs and
professional fees related to the development of legal and
accounting infrastructure.
These costs are capitalised and initially measured at cost and
are amortised over their estimated useful economic lives,
considered to be 5 years, on a straight-line basis. Amortisation of
this internally developed IM platform is charged within cost of
sales in the consolidated statement of comprehensive income.
Amortisation methods and useful lives are reviewed at each
reporting date and adjusted if appropriate. The carrying amount is
reduced by any provision for impairment where necessary.
b) Acquired intangible assets
Intangible assets arising on business combinations are
recognised initially at fair value at the date of acquisition.
Subsequently they are carried at cost less accumulated
amortisation. Amortisation of acquired intangible assets is charged
within administrative expenses in the consolidated statement of
comprehensive income but is excluded from the adjusted operating
profit measures as described above.
The estimated useful lives of the acquired intangible assets are
set out below:
Customer relationships 13 years
Brand (TradeFlow) 5 years
Commodity Trade Risk Management ("CTRM")
software 5 years
Artificial Intelligence and back-office
("AI") software 5 years
Amortisation methods and useful lives are reviewed at each
reporting date and adjusted if appropriate. The carrying amount is
reduced by any provision for impairment where necessary.
Impairment
At each balance sheet date, the Group reviews the carrying
amounts of its intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of any impairment loss.
Where the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. Recoverable
amount is the higher of fair value less costs to sell and value in
use.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a discount rate that
reflects current market assessments of the time value and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its' carrying
amount, the carrying amount of the asset (or cash-generating unit)
is reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount
of the asset (or cash-generating unit) is 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
asset (or cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately.
Revenue recognition
Revenue for the Group is measured at the fair value of the
consideration received or receivable. The Group recognises revenue
when the performance obligation is satisfied, the amount of revenue
can be reliably measured and it is probable that future economic
benefits will flow to the entity. Currently all the Group's
revenues are recognised at a point in time when the relevant
performance obligation has been satisfied.
The Group recognises revenue from the following activities:
a) Captive inventory monetisation platform servicing ("C.IM") - Due diligence fees:
This revenue arises from due diligence services performed by the
Group in relation to the potential client companies. This due
diligence covers topics such as the client's financial information,
operations, credit rating and analysis of its inventory.
Given the stage of the Group's development, and the evolution of
the Group's contracting arrangements, the due diligence revenues
recognised by the Group to date have been limited. Further details
are provided below:
Historical contractual arrangements - Prior to June 2020, the
Group's contractual arrangements required the client to make a down
payment intended to remunerate the Group for the due diligence
services being provided. However, these agreements did not clearly
identify the Group's performance obligation and such down payments
were also refundable under certain circumstances and up to the
point when the Platform was able to be used for the first time by
the client companies.
Due to the above circumstances, these down payments have not
been recognised as revenue under IFRS 15 ("Revenue from Contracts
with Customers") until the specific performance obligation, being
the use of the Group's Platform for the first time, has been
satisfied by the Group. Until such time, these amounts have been
recognised as deferred income in the balance sheet, or as other
payables in the case where a refund has been requested (due to the
current delays being experienced by the Group), but not yet paid as
at the balance sheet date.
Current contractual arrangements - Post June 2020, the Group
updated its contractual arrangements to specifically identify a
separate performance obligation in relation to the completion of
the due diligence services being provided by the Group, also
considering the actual benefits the client companies can directly
obtain from such activities, even in the case where the inventory
monetisation transaction does not take place. In these contracts,
the due diligence fees are paid in advance by the client companies,
and the revenue is recognised when the Group has successfully
fulfilled its performance obligation, being the completion of the
due diligence service and communication to the client in this
respect through the issuance of a detailed due diligence report.
Prior to the completion of the performance obligation, the due
diligence fees received are held on the balance sheet as deferred
income.
In order to conclude if the performance obligations have been
successfully fulfilled,
management currently assess this on a client-by-client basis to
ensure that the control of the due diligence has been transferred
to the client company. In developing this accounting policy
management have made the assessment that the due diligence services
result in a distinct beneficial service being provided to client
companies as the information provides insight into their business
which can also be used for alternative purposes as well (such as
client companies business and operational optimisation). This is
also referred to the critical accounting judgements and sources of
estimation uncertainty note.
Specific contractual arrangements with related party originator
- During 2020, the Group entered into an origination contract with
1AF2 S.r.l in connection with the identification of potential
client companies. Also, during 2020, 1AF2 S.r.l merged with The
AvantGarde Group S.p.A ("TAG"). As set out in the related party
note to these accounts (note 29), both 1AF2 S.r.l and TAG are
related parties of the Group.
Under this origination contract it was the originators
responsibility to carry out the due diligence services. However,
given the Group already had this expertise the originator chose to
contract with the Group to perform the due diligence services on
their behalf. In this case the Group acts as a service provider to
the originator, with the completion of single due diligence
activities the identified performance obligation.
This specific contract stipulated a fee to cover the performance
of due diligence services for a specific number of clients. This
fee was paid at the date the contract was signed. Management's
judgement was that the provision of each of the individual due
diligence reviews represented a distinct performance obligation
under IFRS 15 ("Revenue from Contracts with Customers").
As such, the fees received in advance were held on the balance
sheet as deferred income, and the revenue was recognised in line
with the completion of each of the due diligence reviews,
specifically where the performance obligation had been satisfied
being the completion and communication of the due diligence
results.
During FY22, this contractual arrangement did not generate any
revenue for the Group (2021: 33% of Group Revenue).
b) Captive inventory monetisation platform servicing ("C.IM") - Origination fees:
This revenue arises from 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. Given the stage of the Group's
development, and the evolution of the Group's contracting
arrangements, as at 31 December 2022, the Group had only
facilitated one IM transaction over its IM Platform and therefore
had received origination fees from just one client company. The
non-refundable origination fees received from the client company
relates to the fee payable to the Group at the point in time the
client company enters into binding contracts with the stock
(trading) company to purchase its inventory. Management have
considered the activities it is required to carry out in exchange
for the receipt of these origination fees and have concluded that
they do not relate to any specific transfer of asset from the Group
to the client company. As a result, management concluded there is
no separately identifiable performance obligation carried out by
the Group associated with this fee and have recognised the
non-refundable origination fee as revenue at the point in time that
the fee becomes receivable from the client company. This is
consistent with the fact that there are no performance obligations
that remain to be completed by the Group relating to this fee at
this point in time.
c) Captive inventory monetisation platform servicing ("C.IM") -
IM Platform usage fees: This revenue arises from usage of the
Group's IM Platform by the independent stock (trading) company to
facilitate the purchase of the inventory from the client company.
Given the stage of the Group's development, and the evolution of
the Group's contracting arrangements, as at 31 December 2022, the
Group had facilitated one IM transaction over its IM Platform and
therefore had received IM Platform usage fees from the independent
stock (trading) company in respect of one IM transaction only.
Management concluded that the usage of the IM Platform granted by
the Group to the stock (trading) company represented a Software as
a Service ("Saas") contract and as such the annual IM Platform
usage fees are recognised over time in line with the time period
covered by the contract as required by IFRS 15 ("Revenue from
Contracts with Customers"). As the annual IM Platform usage fees
are received by the Group at the beginning of the annual period,
any unrecognised amounts are held on the balance sheet as deferred
income.
d) Captive inventory monetisation platform servicing ("C.IM") -
IM service fees: This revenue arises as a result of the service
fees charged by the Group to the independent stock (trading)
company as remuneration for the support and administration
activities, such as the monitoring of the inventory purchased, the
Group performs in connection with the use of the Group's IM
Platform. Given the stage of the Group's development, and the
evolution of the Group's contracting arrangements, as at 31
December 2022, the Group had facilitated one IM transaction over
its IM Platform and therefore had received IM service fees from the
independent stock (trading) company in respect of one IM
transaction only. Management concluded that the support and
administration activities performed in exchange for these fees
represent separately identifiable performance obligation and as
such the annual fees are recognised over time in line with the time
period covered by the contract as required by IFRS 15 ("Revenue
from Contracts with Customers") . As the service fees are received
following the year end of the independent stock (trading) company,
these fees are accrued up to the point the fees are received and
then any unrecognised amounts are held on the balance sheet as
deferred income.
e) Investment Advisory ("IA") fees: This revenue arises from
investment advisory services provided by the Group's wholly owned
subsidiary, TradeFlow, in its capacity as investment advisor of the
Global Inventory Fund (more specifically, at the date of this
report to its well-established CEMP - USD/ EUR Trade Flow Funds
Segregated Portfolios). Investment Advisory fees are generated on a
monthly basis through investment advisory agreements and are
generally based on an agreed percentage of the valuation of Assets
Under Management ("AUM") during the relevant period. Investment
Advisory fees are recognised as the service is provided and it is
probable that the fee will be collected. As these fees are
generally received following the particular period to which they
relate, any amounts that have been recognised as revenue but not
yet received, are recorded on the balance sheet as accrued
income.
Cost of Sales
Cost of sales represents those costs that can be directly
related to the sales effort. At this early stage in the Group's
development, the cost of sales includes both the costs of the work
force who are engaged in the due diligence related processes, and
the amortisation of the costs relating to the internally developed
IM platform. Management regard both as the direct costs associated
with generating the C.IM revenue; in line with similar fintech
companies.
Leases
The Group has entered into short term lease contracts (as
defined by IFRS 16 "Leases") in respect of one property only and as
such, at this time, the Group does not have any material lease
arrangements that would be required to be accounted for under IFRS
16 ("Leases"). For these leases the costs are recognised in the
consolidated statement of comprehensive income in the period which
is covered by the term of the lease.
Property, Plant and equipment
Recognition and measurement
All property, plant and equipment is stated at cost less
accumulated depreciation and impairment. The costs of the plant and
equipment is the purchase price plus any incidental costs of
acquisition. Depreciation commences at the point the asset is
brought into use.
If there is any indication that an asset's value is less than
it's carrying amount an impairment review is carried out. Where
impairment is identi ed an asset's value is reduced to re ect
this.
The residual values and useful economic lives of plant and
equipment are reviewed by management on an annual basis and revised
to the extent required.
Depreciation
Depreciation is charged to write off the cost, less estimated
residual values, of all plant and equipment equally over their
expected useful lives. It is calculated at the following rates:
-- Computers and IT equipment at 33% per annum.
Tax
The tax expense for the period comprises current tax. Tax is
recognised in pro t or loss, except that a charge attributable to
an item of income or expense recognised as other comprehensive
income is also recognised directly in other comprehensive
income.
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the consolidated
nancial statements and the corresponding tax bases used in the
computation of taxable pro t and is accounted for using the
statement of nancial position method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable pro ts will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable pro t nor the
accounting pro t.
The carrying amount of any deferred tax assets is reviewed at
each statement of nancial position date and reduced to the extent
that it is no longer probable that suf cient taxable pro ts will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised based on tax rates that have been enacted or substantively
enacted at the statement of nancial position date. Deferred tax and
current tax are charged or credited to pro t or loss, except when
it relates to items charged or credited in other comprehensive
income or directly to equity, in which case the deferred tax is
also recognised in other comprehensive income or equity
respectively.
In line with IAS 1 "Presentation of Financial Statements" the
deferred tax assets have been classified as non-current assets.
Cash and cash equivalents
Cash and other short-term deposits in the Statement of Financial
Position comprise cash at banks and in hand and short-term deposits
with an original maturity of three months or less and where there
is an insignificant risk of changes in value. In the consolidated
cash flow statement, cash and cash equivalents consist of cash and
cash equivalents as defined above.
Functional and presentational currencies
The consolidated financial statements are presented in pounds
sterling (GBP), the Company's functional currency.
Foreign currency
The main currencies for the Group are the euro (EUR), pounds
sterling (GBP), US dollars (USD) and Singapore dollars (SGD).
Foreign currency transactions and balances
Items included in the consolidated financial statements of each
of the Group's subsidiaries are measured using their functional
currency. The functional currency of the parent and each subsidiary
is the currency of the primary economic environment in which the
entity operates.
Foreign currency transactions are translated into the functional
currency using the average exchange rates in the month. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at the reporting period end
exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the profit and loss.
Share capital, share premium and brought forward earnings are
translated using the exchange rates prevailing at the dates of the
transactions.
See applicable exchange rates to GBP used during FY22 and FY21
below:
2022 2021
Closing Average Closing Average
SGD 1.6218 1.7221 1.8195 1.8487
EUR 1.1276 1.1780 1.1907 1.1592
USD 1.2102 1.2495 1.3477 1.3775
Consolidation of foreign entities:
On consolidation, results of the foreign entities are translated
from the local functional currency to pounds sterling, the
presentational currency of the Group, using average exchange rates
during the period. All assets and liabilities are translated from
the local functional currency to pounds sterling using the
reporting period end exchange rates. The exchange differences
arising from the translation of the net investment in foreign
entities are recognised in other comprehensive income and
accumulated in a separate component of equity.
Employee benefits
Short-term employee benefits
The Group accounts for employee benefits in accordance with IAS
19 ("Employee Benefits").
Short-term employee benefits are expensed as the related service
is provided. A liability is recognised for the amount expected to
be paid if the Group has a present legal or constructive obligation
to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Defined contribution pension obligations
The Group accounts for retirement benefit costs in accordance
with IAS 19 ("Employee Benefits").
Contributions to the Group's defined contributions pension
scheme are charged to profit or loss in the period in which they
become payable.
Financial assets
Classification
Financial assets currently comprise trade and other receivables,
cash and cash equivalents.
Recognition and measurement
Loans and receivables
Loans and receivables are mainly contractual trade receivables
and are non-derivative nancial assets with xed or determinable
payments that do not have a signi cant nancial component and are
not quoted in an active market. Accordingly, trade and other
receivables are recognised at undiscounted invoice price. A reserve
for credit risk is made at the beginning of each transaction and
adjusted subsequently through pro t and loss.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 ("Financial Instruments")
using the lifetime expected credit losses. During this process the
probability of the non-payment of trade receivables is assessed.
This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit
loss for the trade receivables. For trade receivables, which are
reported net, such provisions are reported in a separate provision
account with the loss being recognised within administrative
expenses in the consolidated statement of comprehensive income. On
confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the
associated provision.
Financial liabilities
Classification
Financial liabilities comprise trade and other payables, loan
notes, long-term borrowings, convertible loan notes and derivative
financial instruments.
Recognition and measurement
Trade and other payables
Trade and other payables are initially recognised at fair value
less transaction costs and thereafter carried at amortised
cost.
Derivative financial instruments
The Group's derivative nancial instrument is a historic
convertible loan note that was both issued and then cleared in the
past by a debt for equity swap, and warrants were issued with
options to acquire shares that are accounted for at fair value,
with changes in value taken through pro t and loss. The release of
the fair value discount on the debt for equity swap has been taken
to the income statement as these warrants expired during the prior
financial year.
Loan note and long-term borrowings
Interest bearing loan notes and long-term borrowings are
initially recorded at the proceeds received, net of direct issue
costs (including commitment fees, introducer fees and the fair
value of warrants issued to satisfy issue costs). Finance charges,
including direct issue costs, are accounted for on an amortised
cost basis to the consolidated statement of comprehensive income
using the effective interest method and are added to the carrying
amount of the instrument to the extent that they are not settled in
the period in which they arise. The carrying value of the loan
notes have been adjusted to take for the fair value of principal
repayments made since inception.
Convertible loan notes
Convertible loan notes issued by the Group are recorded at the
fair value of the convertible loan notes issued, net of direct
issue costs including commitment fees. Finance charges, including
direct issue costs, are accounted for on an amortised cost basis to
the consolidated statement of comprehensive income using the
effective interest method and are added to the carrying amount of
the instrument to the extent that they are not settled in the
period in which they arise. The carrying value of the convertible
loan notes have been adjusted to take into account of the fair
value of those notes that have been converted into new ordinary
shares since inception.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event, it is probable
that the Group will be required to settle the obligation and the
amount can be reliably estimated.
Share-based payments
Equity-settled share-based payments relate to the acquisition
related earn-out payments, warrants issued in connection with the
cost of issuing loan notes, convertible notes and new ordinary
shares during the relevant year.
Share warrants
Certain equity-settled share-based payments relate to the
warrants issued in connection with the cost of issuing loan notes,
convertible loan notes and new equity. These equity-settled
share-based payments are measured at the fair value of the equity
instruments at the grant date. The fair value excludes the effect
of non-market-based vesting conditions. Details regarding the
determination of the fair value of these equity-settled share-based
transactions are set out in note 26.
The fair value determined at the grant date of the
equity-settled share-based payments relating to the warrants issued
in connection with the issue of loan notes or convertible loan
notes are netted off against the fair value of the underlying loan
notes, convertibles loan notes to which they directly relate. The
fair value is then expensed together with the other related finance
costs on an amortised cost basis to the Group's income statement
using the effective interest method.
The fair value determined at the grant date of the
equity-settled share-based payments relating to the warrants issued
in connection with the issue of equity are netted off against the
amount of share premium that is recognised in respect of the share
issue to which they directly relate. Any amounts in excess of the
share premium recognised, are netted off against retained
losses.
In respect of the share-based payments, the fair value is not
revised at subsequent reporting dates, however, the fair value is
released from the share-based payment reserve at the point in time
that any of the warrants are exercised by the third party
holder.
Employee share schemes
Grants made to certain employees of the Group will result in a
charge recognised in the Group's income statement. Such grants will
be measured at fair value at the date of grant and will be expensed
on a straight-line basis over the vesting period, based on the
Group's estimate of the shares that will eventually vest. Vesting
assumptions are reviewed during each period to ensure they reflect
current expectations.
Full details of the Group's share-base payments refer to note
26.
Acquisition related earn-out payments
In addition, the Group recognises a share-based payment reserve
in connection with acquisition related earn-out payments arising
from the acquisition of TradeFlow. The fair value of these earn-out
payments has been measured using the same methods as outlined
above. Given the service conditions related to these payments are
linked to one of the Group's current subsidiaries, the share-based
payment expense is recognised within the consolidated financial
statements as an increase to the share-based payment reserve and
through the Group's income statement. The fair value determined at
the grant date of these equity-settled share-based payments are
recognised over the vesting period on a straight-line basis, based
on the estimate of equity instruments that will eventually vest.
Vesting assumptions are reviewed during each period to ensure they
reflect current expectations and any changes required to true-up
the related share-based payment reserve are recognised through the
Group's income statement in the relevant period.
Discontinued Operations
The Group classifies non-current assets and disposal groups as
held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through
continuing use. Non-current assets and disposal groups classified
as held for sale are measured at the lower of their carrying value
and fair value less costs to sell. Costs to sell are the
incremental costs directly attributable to the disposal of an asset
(disposal group), excluding finance costs and income tax
expense.
The criteria for held for sale classification is regarded as met
only when the sale is highly probable and the asset or disposal
group is available for immediate sale in its present condition.
Actions required to complete the sale should indicate that it is
unlikely that significant changes to the sale will be made or that
decisions to sell will be withdrawn. Management must be committed
to the plan to sell the asset and the sale expected to be completed
within one year from the date of the classification.
Property, plant and equipment and intangible assets are not
depreciated or amortised once classified as held for sale. Assets
and liabilities classified as held for sale are presented
separately in the balance sheet.
A disposal group qualifies as a discontinued operation if it is
a component of an entity that either has been disposed or, is
classified as held for sale, and:
-- Represents a separate major line of business or geographical area of operations
-- Is part of a single co-ordinated plan to dispose of a
separate major line of business or geographical area of operations.
Discontinued operations are excluded from the results of continuing
operations and are presented as a single amount as profit or loss
after tax from discontinued operations in the income statements.
All other notes in the financial statements include amounts for
continuing operations, unless otherwise mentioned.
The Board considered that in light of the TradeFlow
Restructuring that commenced during the second half of 2022, the
TradeFlow operations meet the criteria to be classified as held for
sale at 31 December 2022 as at this date the details of the
TradeFlow Restructuring had all been agreed in principle between
the parties and was expected to be completed post year end together
with the publication of the 2022 Annual Report and Accounts. As a
result the TradeFlow operations were available for immediate sale
in its present condition and it was highly probable that that sale
would be completed within 12 months of 31 December 2022.
On 24 March 2023, the Company announced the TradeFlow directors,
being Tom James and John Collis, provided written notice of their
intention to exercise their rights to buy back 100% of the share
capital of TradeFlow (the "Buy Back")pursuant to certain earn-out
arrangements entered into in connection with the Company's
acquisition of TradeFlow, the completion of which was announced on
6 July 2021 ("Completion"). As a result of the exercise of the Buy
Back, the details of the TradeFlow Restructure, that had been
agreed in principle prior to year end, now need to be renegotiated,
and a new independent valuation of the TradeFlow operations needs
to be completed. As at the date of these consolidated financial
statements, these activities had not been completed and were still
ongoing.
Equity
"Share capital" represents the nominal value of equity shares
issued.
"Share premium" represents the excess over nominal value of the
fair value of consideration received for equity shares net of
expenses of the share issue.
"Other reserves" represents legal reserves in respect of
Supply@ME S.r.l. In accordance with Article 2430 of the Italian
Civil Code, Supply@ME S.r.l., a limited liability company
registered in Italy, with a corporate capital of euro 10,000 or
above shall annually allocate as a legal reserve an amount of 5% of
the annual net profit until the legal reserve will be equal to 20%
of corporate capital.
"Share-based payment reserve" represents the credit adjustments
to equity in respect of the fair value of outstanding share-based
payments including acquisition related earn-out payments, warrants
issued in connection with the cost of issuing loan notes,
convertible notes and new equity, and employee share schemes.
"Merger relief reserve" represents the excess of the value of
the consideration shares issued to the shareholders of Supply@ME
S.r.l. upon the reverse takeover over the fair value of the assets
acquired.
"Reverse takeover reserve" represents the accounting adjustments
required to reflect the reverse takeover upon consolidation.
Specifically, removing the value of the "investment" in Supply@ME
S.r.l., removing the share capital of Supply@ME S.r.l. and bringing
in the pre-acquisition equity of Supply@ME Capital plc.
"FX reserves" represents foreign currency translation
differences on consolidation of subsidiaries reporting under a
different functional currency to the parent company.
"Retained losses" represents retained losses of the Group. As a
result of the reverse takeover, the consolidated figures include
the retained losses of the Group only from the date of the reverse
takeover together with the brought forward losses of Supply@ME
S.r.l.
Critical accounting judgements and sources of estimation
uncertainty
The preparation of financial information in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires the Directors to exercise their judgement in the process
of applying the accounting policies which are detailed above. These
judgements are continually evaluated by the Directors and
management and are based on experience to date and other factors,
including reasonable expectations of future events that are
believed to be reasonable under the circumstances.
The key estimates and underlying assumptions concerning the
future and other key sources of estimation uncertainty at the
statement of financial position date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial period, are reviewed on
an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods
A number of these key estimates and underlying assumptions have
been considered for the first time this financial year as a result
of specific transactions outlined in these consolidated financial
statements. The Directors have evaluated the estimates using
historical experience and other methods considered reasonable
specific to the circumstances. The Directors have also but also in
consultation with third-party experts where appropriate. These
estimates will be evaluated on an ongoing basis as required.
The Group believes that the estimates and judgements that have
the most significant impact on the annual results under IFRS are as
set out below:
Judgements
Internally developed intangible assets
The cost of an internally generated IM platform comprises all
directly attributable costs necessary to create, produce, and
prepare the asset to be capable of operating in the manner intended
by management. During the period judgement was required to
distinguish those costs that were capable of being capitalised
under IAS 38 ("Intangible assets") and that costs that related to
research activities, the cost of which has been recognised as an
expense during the relevant period.
The Directors noted that the plan giving rise to the IM Platform
asset remains, with an unchanged technical feasibility and the
identification of a growing market. Additionally, the IM platform
is now utilised following the facilitation of the first IM
transaction announced during 2022. Despite this, management
considered the material uncertainties with respect to both the
future timing and growth rates of the forecast discounted cash
flows arising from the use of the IM Platform following the delays
experienced in the delivery of the business plan to date. This has
resulted in an impairment of internally generated IM Platform as at
31 December 2022.
Revenue recognition - assessment of performance obligations
-- The Directors are required to make a judgement as to if the
due diligence services represent a distinct performance obligation
under IFRS 15 ("Revenue from Contracts with Customers"). The Board
and management have concluded that this is indeed the case due to
the distinct beneficial service being provided to client companies
through the delivery of the due diligence report which provide
insight and information into the business.
-- The Directors are required to make a judgement as to if the
receipt of non-refundable origination fees received from the client
companies represent a distinct performance obligation under IFRS 15
("Revenue from Contracts with Customers"). The Board and management
have concluded that no separately identifiable performance
obligation is carried out by the Group associated with this
fee.
Accounting for acquisition related earn-out payments
The terms of the agreement to acquire TradeFlow included
acquisition related earn-out payments that, together with the
initial cash payment and issue of equity, form the total legal
consideration agreed between the parties. The acquisition related
earn-out payments are determined by reference to pre-determined
revenue milestone targets in each of the 2021, 2022 and 2023
financial years. These payments may be forfeited by the selling
shareholders should they, in certain circumstances, no longer
remain employed prior to the end of each earn-out period. Under the
IFRS Interpretations Committee's interpretation of paragraph B55 of
IFRS 3 ("Business Combinations"), the Directors have concluded that
the inclusion of the substantive post-acquisition service
conditions requires the fair value of these earn-out payments to be
accounted for as a charge to the income statement (as deemed
remuneration) rather than as consideration.
Discontinued operations
The Board considered that in light of the TradeFlow
Restructuring that commenced during the second half of 2022, the
TradeFlow operations meet the criteria to be classified as held for
sale at 31 December 2022 as at this date the details of the
TradeFlow Restructuring had all been agreed in principle between
the parties and was expected to be completed post year end together
with the publication of the 2022 Annual Report and Accounts. As a
result the TradeFlow operations were available for immediate sale
in its present condition and it was highly probable that that sale
would be completed within 12 months of 31 December 2022. As
disclosed above the final terms of the sale are still being
finalised following the triggering of the Buy Back. On this basis,
the fair value less costs to sell used in these consolidated
financial statement has been determined by reference to the
specific terms and conditions of the Tradeflow Restructuring that
had been agreed in principle prior to the triggering of the Buy
Back.
Estimates
Intangible assets in a business combination
On the acquisition of a business the identifiable intangible
assets may include customer relationships, brands and internally
generated software. The fair value of certain of these assets is
determined by discounting estimated future net cash flows generated
by the asset where no active market for the asset exists. The use
of different assumptions for the expectations of future cash flows
and the discount rate would change the valuation of the intangible
assets, with a resultant impact on the goodwill or gain on
acquisition recognised.
On acquisition the Group recognised intangible assets of
GBP6,888,000, representing customer relationships (GBP4,829,000),
Brand ("TradeFlow") (GBP205,000), CTRM software (GBP1,429,000) and
AI software (GBP425,000).
Customer relationships
The most significant intangible asset recognised is
relationships with customers, in this case being potential
investors to the Global Inventory programme (more specifically, at
the date of this report to its well-established CEMP - USD/ EUR
Trade Flow Funds Segregated Portfolios) for which TradeFlow acts as
an investment advisor. A model was used that present valued the
earnings forecast to be generated by the investor relationships,
net of a reasonable return on other assets also contributing to
that stream of earnings. The significant assumptions used in this
model were as follows:
Discount rate - 25%
Annual customer attrition rate - 5%
If the discount rate was adjusted by 2.5% the impact on the
value of the asset would be approximately plus or minus GBP769,000
and GBP605,000 respectively. If the annual customer attrition rate
was adjusted by 2.5% the impact on the value of the asset would be
approximately plus or minus GBP989,000 and GBP824,000
respectively
Brand
The brand has been valued by present valuing the saved costs by
owning the brand rather than paying a royalty to licence the brand.
The significant assumptions used in this model were as follows:
Discount rate - 25%
Royalty rate - 1%
If the discount rate was adjusted by 2.5% the impact on the
value of the asset would not be impacted. If the royalty rate was
adjusted by 1% the impact on the value of the asset would be
approximately plus or minus GBP220,000.
CTRM software
CTRM software has been valued by present valuing the saved costs
by owning the software rather than paying a royalty to licence the
software. The significant assumptions used in this model were as
follows:
Discount rate - 25%
Royalty rate - 7%
If the discount rate was adjusted by 2.5% the impact on the
value of the asset would be approximately plus or minus GBP110,000.
If the royalty rate was adjusted by 1% the impact on the value of
the asset would be approximately plus or minus GBP220,000.
AI software
AI software has been valued with reference to the costs that
would have to be expended in order to recreate the asset. The cost
assumptions were based on historical costs and as such there we no
significant judgemental or subjective assumptions.
Useful Economic Lives of Acquired Intangibles
On acquisition, the useful economic lives of acquired
intangibles, which are key estimates, are assessed by management.
The estimated useful lives of the acquired intangible assets are
set out below:
Customer relationships 13 years
Brand (TradeFlow) 5 years
CTRM software 5 years
AI software 5 years
These useful economic lives have been based on the following
factors:
-- Customer relationships - the period over which 95% of the
value of the customer relationships is expected to be achieved.
-- Brand, CTRM software and AI software - the specific
characteristics of the asset, its life to date and benchmarking to
market data for comparable acquisition transactions.
We have outlined below a sensitivity analysis detailing the
impact of changing the useful economic lives of each of the
acquired intangibles would have on the amortisation charged to
profit or loss for the year ended 31 December 2022:
Decreasing useful life Increasing useful life
by 3 years by 3 years
Approximate increase Approximate decrease
in amortisation (GBP000) in amortisation (GBP000)
Customer relationships 81 100
Brand (TradeFlow) 58 19
CTRM software 406 130
AI software 121 39
Total 666 287
Valuation of acquisition related earn-out payments
The acquisition related earn-out payments described above, are
able to be settled in either cash or equity. The contracts
governing the acquisition of TradeFlow however contain conflicting
terms with respect to which party has the right to decide whether
to settle the earn-out payments in cash or shares. After taking
legal advice, management have concluded that the choice is at the
discretion of the Company, and that it is the Company's current
intention to settle these payments in equity, capturing them within
the scope of IFRS 2 ("Share-based payments").
As such the Directors were required to determine the fair value
of the equity-settled share-based payments at the date on which
they were granted. This valuation needed to take into account the
following market conditions related to these earn-out awards:
-- The number of shares to be issued will be determined using
the Volume Weighted Average Price ("VWAP") over the 20 dealing days
to the end of the relevant financial year subject to a floor of 1p.
In addition, the number of shares will be enhanced by 50% if the
VWAP is greater than 1p; and
-- That 50% of any earn-out shares may not be sold for 12 months
following the award but are not contingent on continued
employment.
Judgement was required in determining the most appropriate
inputs into the valuation model (refer to detail in note 26) used
and the key judgemental input was the expected volatility rate of
the Company's share price over the relevant period and the
assumption applied in the model was 90%, with 162% applied for any
required holding period. This assumption reflects the Company's
actual volatility from the date of listing through the grant date,
and the Company's actual volatility for a 12 month period prior to
the grant date, respectively. Given the Group's early stage of
development, it was concluded that the Group's actual volatility
was the most appropriate rate to use. If the expected volatility
rates were adjusted by plus 10%, then the impact on the fair value
credit recognised in the income statement in the current year would
have been approximately minus GBP61,000. If the expected volatility
rates were adjusted by minus 10%, then the impact on the fair value
credit recognised in the income statement in the current year would
have been approximately plus GBP51,000. These calculations assume
that the volatility rates had also been adjusted by similar
percentages in the prior year given that the current year fair
value credit resulted partly from an adjustment to charges
recognised in the prior year.
If management had reached the alternative conclusion that the
choice to settle in either cash or shares is at the discretion of
the TradeFlow shareholder, they would have been accounting for
under IFRS 2 ("Share-based payments"). The impact would be to
increase the acquisition related earn-out credit recognised in the
current financial year by approximately GBP1.9 million. Similar to
above, these calculations assume that the alternative conclusion
had been reached in the prior year given that the current year fair
value credit resulted partly from an adjustment to charges
recognised in the prior year.
Valuation of share warrants issued
During the year the Company issued share warrants in connection
with the loan notes, certain convertible loan notes and new equity
that were also issued during the year ended 31 December 2022. As
these share warrants were issued as a cost of securing the debt and
equity funding facility they fall into the scope of IFRS 2
("Share-based payments"). As such the Directors were required to
determine the fair value of the equity-settled share-based payments
at the date on which they were granted. Judgement was required in
determining the most appropriate inputs into the valuation models
(Black Scholes) used and the key judgemental input was the expected
volatility rate of the Company's share price over the relevant
period and the assumption applied in the models were betwe en 97% -
88% and were based the actual volatility of the Company's share
price from the date of the RTO to the date at which the relevant
valuation model was run.
The fair value cost of those share warrants that were issued
connection with debt funding were recognised in the consolidated
income statement. If the expected volatility rate was adjusted by
plus 10%, then the impact on the fair value recognised in the
income statement in the current year would have been approximately
plus GBP23,000 (2021: GBP71,000). If the expected volatility rate
was adjusted by minus 10%, then the impact on the fair value
recognised in the income statement in the current year would have
been approximately minus GBP24,000 (2021: GBP76,000).
The fair value cost of those share warrants that were issued
connection with equity funding during the current year were
recognised as debits to eq uity on the consolidated balance sheet.
If the expected volatility rate was adjusted by plus 10%, then the
impact on the fair value recognised as the initial debit to equity
in the current year would have been approximately plus GBP307,000.
If the expected volatility rate was adjusted by minus 10%, then the
impact on the fair value recognised as the initial debit to equity
in the current year would have been approximately minus
GBP328,000.
3 Segmental reporting
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 is continually developing. Prior to the acquisition of
TradeFlow on 1 July 2021, the Board considered that the Group
operated in a single business segment of due diligence and all
activities were undertaken in Italy.
Following the acquisition, the Board of Directors managed the
Group as two operating segments being inventory monetisation
(currently comprising largely of the Group's Italian operating
subsidiary) and investment advisory (comprising the TradeFlow
operations), alongside the head office costs (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
transaction that took place during 2022.
Following the work carried out in respect of the TradeFlow
Restructuring, and the announcement on the 24 March 2023 regarding
the 100% buy back option exercised by the TradeFlow directors, the
TradeFlow operations have been classified as a discontinued
operation under IFRS 5 ("Non-current assets held for sale and
discontinued operations"). As such the Group has reverted back to a
single segment from its continuing operations for financial the
year ended 31 December 2022, being inventory monetisation,
alongside the head office costs (largely compromising the
Company).
The key metrics assessed by the Board of Directors include
revenue and adjusted operating profit (before deemed cost of
listing, acquisition related costs and impairment charges) which is
presented below. Revenue is presented by basis of recognition and
by service line, in accordance with IFRS 15.
Consolidated
Group -
Year ended 31 December Inventory Head continuing
2022 Monetisation office operations
GBP 000 GBP 000 GBP 000
Revenue from continuing
operations
Due Diligence fees 102 - 102
Inventory monetisation
fees 36 - 36
Revenue from continuing
operations 138 - 138
===================== ======== =============
Operating loss from continuing
operations before impairment
charges (1,308) (3,343) (4,651)
===================== ======== =============
All the Group's revenue from due diligence fees is recognised at
a point in time. Of the revenue generated from inventory
monetisation fees, GBP20,000 is generated from origination fees
which is recognised at a point in time, and the remaining GBP16,000
is generated from usage of the Group's IM Platform and services
provided by the Group in connection with the IM transaction. This
GBP16,000 of revenue is recognised over time and the amount
recognised in the current financial year relates to the performance
obligations satisfised prior to 31 December 2022.
Consolidated
Group -
Inventory continuing
As at 31 December 2022 Monetisation Head office operations
GBP 000 GBP 000 GBP 000
Balance sheet
Assets 635 867 1,502
Liabilities (4,773) (1,037) (5,810)
Net assets / (liabilities) (4,138) (170) (4,308)
============== ============ =============
Geographical analysis
The Group's inventory monetisation operation is currently
predominately located in Europe, while the investment advisory
operations (classified as a discontinued operation) are currently
predominately located in Singapore.
Comparative segmental reporting
Year ended 31 December 2021 Inventory Monetisation Investment Advisory Head office Consolidated Group
GBP 000 GBP 000 GBP 000 GBP 000
Revenue
Due Diligence fees 279 - - 279
Investment Advisory fees - 259 - 259
---------------------- -------------------- ----------- ------------------
Revenue by operating segment 279 259 - 538
====================== ==================== =========== ==================
Operating loss before deemed cost of
listing and acquisition related costs
and impairment
charges (1,071) (407) (2,953) (4,431)
====================== ==================== =========== ==================
All the Group's revenue is recognised at a point in time.
As at 31 December 2021 Inventory Monetisation Investment Advisory Head office Consolidated Group
GBP 000 GBP 000 GBP 000 GBP 000
Balance sheet
Assets 802 181 9,552 10,535
Liabilities (4,363) (1,526) (6,071) (11,960)
Net assets / (liabilities) (3,561) (1,345) 3,481 (1,425)
====================== =================== =========== ==================
The Company completed the acquisition of TradeFlow in 1 July
2021 and therefore the above tables include the results from this
date and the assets / (liabilities) only as at 31 December
2021.
Geographical analysis
The Group's inventory monetisation operation is currently
predominately located in Europe, while the investment advisory
operations are currently predominately located in Singapore.
4 Finance costs
2022 2021
GBP 000 GBP 000
Interest expense - loan notes / convertible loan notes 1,969 1,252
Interest expense - long-term borrowings 13 89
Total finance costs 1,982 1,341
======== ========
5 Other operating income
2022 2021
GBP 000 GBP 000
Interest receivable 6 -
Other operating income 3 -
9 -
======== ========
6 Operating loss
The Group's operating loss from continuing operations for the year has been arrived at after
charging (crediting):
2022 2021
GBP 000 GBP 000
Amortisation of internally developed IM platform (note 13) 47 391
Depreciation 4 2
Staff costs (note 8) 2,061 1,402
Professional and legal fees 2,194 1,772
Contractor costs 274 44
Insurance 100 123
Training and recruitment costs 4 75
In addition to the above, the Group incurred the following costs
from continuing operations relating to impairment charges as
detailed below:
2022 2021
GBP 000 GBP 000
Impairment charges (note 13) 1,078 1,773
-------- ----------------------
Total impairment charges 1,078 1,773
======== ======================
The following acquisition related costs and impairment charges have been recognised in the
discontinued operations:
2022 2021
GBP 000 GBP 000
Transaction costs (note 25) - 2,009
Amortisation of intangible assets arising on acquisition (note 13) 846 391
Acquisition related earn-out payments (note 26) (710) 1,410
Impairment charges (note 13) 765 800
-------- ----------------------
901 4,610
======== ======================
7 Auditors' remuneration
During the year, the Group obtained the following services from the Group's auditor, at the
costs detailed below:
2022 2021
GBP 000 GBP 000
Fees payable to the Company's auditors for the audit of the consolidated
financial statements 100 75
Fees payable to the Company's auditors and its associates for other services
to the Group:
Audit of the Companies subsidiaries 34 29
Audit fees relating to prior periods 24 30
======== ======================
Total audit fees 158 134
Non-audit assurance services 25 -
-------- ----------------------
Total audit and non-audit assurance related services 183 134
======== ======================
8 Staff costs
The aggregate payroll costs (including directors' remuneration)
included within continuing operations were as follows:
2022 2021
GBP 000 GBP 000
Wages, salaries and other short term employee
benefits 1,783 1,164
Social security costs 203 153
Post-employment benefits 76 86
Total staff costs 2,061 1,402
======== ========
The aggregate payroll costs (including directors' remuneration)
included within discontinued operations were as follows:
2022 2021
GBP 000 GBP 000
Wages, salaries and other short term employee
benefits 680 312
Social security costs 27 13
Total staff costs - discontinued operations 706 325
======== ========
The average number of persons employed by the Group (including
executive directors) during the year, analysed by category was as
follows:
2022 2021
No. No.
Executive directors 3 2
Finance, Risk and HR 5 2
Sales and marketing 4 4
Legal 1 2
Operations and Platform development 13 9
Total average number of people employed 26 19
==== ====
9 Key management personnel
Key management compensation (including directors):
2022 2021
GBP 000 GBP 000
Wages, salaries and short-term employee
benefits 1,521 890
Social security costs 111 60
Post-employment benefits 42 60
-------- --------
Total key management compensation 1,674 1,010
======== ========
Key management personnel consist of the Company leadership team
and the Directors.
No retirement benefits are accruing to Company Directors under a
defined contribution scheme (2021: none), however the Chief
Executive Officer received cash in lieu of payments to a defined
contribution pension scheme of GBP12,420 during the year (2021:
GBP49,310). This was allowable under his director's employment
contract.
The Directors' emoluments are detailed in the Remuneration
Report of the Annual Report and Accounts for the year ended 31
December 2022.
10 Income tax
Tax charged in the income statement:
2022 2021
GBP 000 GBP 000
Current Taxation
UK Corporation tax - -
Foreign taxation paid/(receivable) by subsidiaries
- continuing operations - 399
Foreign taxation paid/(receivable) by subsidiaries
- discontinued operations (67)
-------- --------
- 332
======== ========
The tax on loss before tax for the period is more than (2021
- more than) the standard rate of corporation tax in the UK
of 19% (2021 - 19%).
The differences are reconciled below:
2022 2021
GBP 000 GBP 000
Loss before tax 9,877 12,155
======== ========
Corporation tax at standard rate - 19% (1,877) (2,309)
Effect of expenses not deductible in determining
taxable profit (tax loss) 817 929
Increase in tax losses carried forward
which were unutilised in the current year 1,612 616
Tax adjustments in respect of foreign subsidiaries
(timing differences) - 1,096
Over provision of tax in prior years (1) -
Income not taxable (452) -
Deferred tax not recognised (131) -
Differences between UK and foreign tax
legislation 31
Total tax charge (1) 332
11 Deferred tax
The following are the deferred tax (liabilities)/assets have
been recognised by the Group and movements thereon during the
current and prior year:
Deferred tax Deferred tax
liability arising asset arising
on acquired on short-term
intangible timing differences
assets GBP 000 Total
GBP 000 GBP 000
As at 1 January 2021 - 394 394
Arising on acquisition of TradeFlow (1,171) - (1,171)
Additions - 24 24
Credit / (charge) to income 67 (254) (187)
Impairment - (164) (164)
------------------ ------------------- --------
As at 31 December 2021 (1,104) - (1,104)
As at 1 January 2022 (1,104) - (1,104)
Credit / (charge) to income 144 - 144
Reclassified to assets of disposal
group held for sale 960 - 960
------------------ ------------------- --------
As at 31 December 2022 - - -
================== =================== ========
The deferred tax liability arises on the acquisition of
TradeFlow in 2020 and in particular on the fair value uplift that
was applied to the acquired intangible assets. This deferred tax
liability will be released in line with the amortisation profile of
the acquired intangible assets. The balance as at 31 December 2022
has been reclassified to assets of disposal group held for
sale.
The deferred tax asset previously recognised related to short
term timing differences arising from revenue recognition,
amortisation costs and IAS 19 timing differences. As at 31 December
2022 the Directors reviewed the carrying amount of all deferred tax
assets to determine whether sufficient future taxable income will
be generated to permit the use of the existing deferred tax assets.
In order to be prudent, and to follow a consistent approach used to
determine the impairment of the Group's internally generated IM
platform asset (refer to note 13 for further details), the
Directors reached the conclusion to impair the full carrying value
of the deferred tax assets as at the year-end date. No further
deferred tax assets have been recognised in the current financial
year due to the fact that the Group's track record of successful IM
facilitation is still being established.
In addition, unrecognised deferred tax assets, relating to tax
losses carried forward across the Group have not been recognised
due to uncertainty over the timing and extent of future taxable
profits. The losses can be carried forward indefinitely and have no
expiry date. The total approximate tax losses carried forward
across the Group as at 31 December 2022 were GBP16.8 million, being
GBP13.7 million relating to continuing operations and GBP3.1
million relating to discontinued operations.
12 Earnings per share
The calculation of the basic earnings/(loss) per share (EPS) is
based on the total loss for the year of GBP9,878,000 (2021 - loss
GBP12,487,000) and on a weighted average number of ordinary shares
in issue of 43,240,915,594 (2021 - 33,921,396,568). The basic EPS
is (0.023) pence (2021 - (0.037) pence).
The calculation of the basic earnings/(loss) per share (EPS)
from continuing operations is based on the total loss for the year
from continuing operations of GBP7,711,000 (2021 - loss
GBP7,420,000) and on a weighted average number of ordinary shares
in issue of 43,240,915,594 (2021 - 33,921,396,568). The basic EPS
from continuing operations is (0.018) pence (2021 - (0.022)
pence).
The calculation of the Basic earnings/(loss) per share (EPS)
from discontinued operations is based on the total loss for the
year discontinued operations of GBP2,167,000 (2021 - loss
GBP5,067,000) and on a weighted average number of ordinary shares
in issue of 43,240,915,594 (2021 - 33,921,396,568). The basic EPS
from discontinued operations is (0.005) pence (2021 - (0.015)
pence).
The Company has share warrants and employee share scheme options
in issue as at 31 December 2022, which would dilute the earnings
per share if or when they are exercised in the future. Further
details of these share warrants and employee share scheme options
can be found in note 26.
No dilution per share was calculated for 2022 and 2021 as with
the reported loss they are all anti-dilutive.
13 Intangible assets
Internally
Customer CTRM developed
Relation-ships Brand Software AI Software Goodwill IM platform
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 Total
Cost or valuation
At 1 January 2021 - - - - - 1,524 1,524
Arising of acquisition
of
Tradeflow 4,829 205 1,429 425 2,199 - 9,087
Additions - - - - - 1,020 1,020
--------------- -------- --------- ----------- -------- ------------ -------
At 31 December
2021 4,829 205 1,429 425 2,199 2,544 11,631
Additions - - - - - 1,125 1,125
Reclassified to
assets of disposal
group held for
sale (4,829) (205) (1,429) (425) (2,199) - (9,087)
--------------- -------- --------- ----------- -------- ------------ -------
At 31 December
2022 - - - - - 3,669 3,669
--------------- -------- --------- ----------- -------- ------------ -------
Amortisation
At 1 January 2021 - - - - - 380 380
Amortisation charge 186 20 143 43 - 391 783
--------------- -------- --------- ----------- -------- ------------ -------
At 31 December
2021 186 20 143 43 - 771 1,163
Amortisation charge 401 44 309 92 - 47 893
Reclassified to
assets of disposal
group held for
sale (587) (64) (452) (135) - (1,238)
At 31 December
2022 - - - - - 818 818
Impairment
At 1 January 2021 - - - - - - -
Impairment charge - - - - 800 1,773 2,573
--------------- -------- --------- ----------- -------- ------------ -------
At 31 December
2021 - - - - 800 1,773 2,573
Impairment charge 765 1,078 1,843
Reclassified to
assets of disposal
group held for
sale - - - - (1,565) - (1,565)
--------------- -------- --------- ----------- -------- ------------ -------
At 31 December
2022 - - - - - 2,851 2,851
Net Book Value
At 31 December
2022 - - - - - - -
=============== ======== ========= =========== ======== ============ =======
At 31 December
2021 4,643 185 1,286 382 1,399 - 7,895
=============== ======== ========= =========== ======== ============ =======
The following intangible assets arose on the acquisition of
TradeFlow during the prior period; 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 disposal
group held for sale at this date.
Impairment assessment - Internally developed IM Platform
The Directors considered the continued current year 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 an impairment indicators and therefore,
in accordance to IAS 36 ("Impairment of Assets"), considered if as
at 31 December 2022, this intangible asset required further
impairment of the additions during the year or if some so the prior
year impairment could be reversed.
The full going concern statement, set out in note 2, 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 one inventory
monetisation transaction, 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 at 31 December
2022. 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 Directors considered the underperformance of TradeFlow
compared to the forecast for the year ended 31 December 2022
(included in the independent valuation report prepared for the
purposes of the acquisition) to be an impairment indicator. In
particular, the Directors noted that the earn-out milestone target,
which had been set in line with the forecast referred to above, for
the year ended 31 December 2022 had not been achieved. Therefore,
in accordance with IAS 36 ("Impairment of Assets") and IFRS 5
("Non-current Assets Held for Sale and Discontinued Operations"),
management have considered the need for further impairment during
the current financial year.
During the preparation of the interim financial statements this
included a full IAS 36 ("Impairment of Assets") impairment test
being carried out using an updated cash flow forecast that the
TradeFlow CGU is expected to generate during the period to FY25 in
its current conditions. This reforecast has been prepared by the
Directors of TradeFlow and factored in reduced revenues, higher
operating losses for the first two years of the reforecast and
lower operating profits for the remaining periods. This reforecast
is considered to be based on a set of reasonable assumptions given
the current expectations for TradeFlow's growth and development in
the future.
The Directors prudently applied a 25% discount rate in order to
be consistent with the approach followed at 31 December 2021 and
also to be consistent with the independent purchase price
accounting exercise carried out in respect of the TradeFlow
acquisition in the prior financial year. Using these assumptions,
the recoverable amount has been identified as the value in use,
equal to the sum of the discounted future cash flows (including a
terminal value and terminal value growth rates of 2.5%) that the
TradeFlow CGU will be able to generate according to management
estimates in its current condition. This recoverable amount of the
TradeFlow CGU was determined to be lower than its carrying amount
on the balance sheet at 30 June 2022 by GBP765,000.
As such, in accordance with IAS 36 ("Impairment of Assets"), an
impairment charge of GBP765,000 has been recognised against the
value of the goodwill initially recognised in line with IFRS 3
("Business Combinations"). This impairment charge has also been
recognised in the profit and loss in the current financial
year.
As described earlier in these consolidated financial statements,
during the second half of 2022, the Directors began the process of
the TradeFlow Restructuring, and as detailed in notes 2 and 27 the
TradeFlow operations have been classified as a discontinued
operation as at 31 December 2022 in accordance with IFRS 5
("Non-current Assets Held for Sale and Discontinued Operations").
When carrying out the impairment assessment of the TradeFlow CGU as
at 31 December 2022, management was required to consider the fair
value less cost to sell of the TradeFlow operations, which given
the classification as a discontinued operation, is assumed to be
the agreed price between two market participants.
Further to the TradeFlow Restructuring activities, on the 24
March 2023, that the TradeFlow Directors had provided written
notice to the Board of their intention to exercise their rights to
buy back 100% of the share capital of TradeFlow, pursuant to
certain earn-out arrangements entered into in connection with the
Company's acquisition of TradeFlow (the "Buy Back"), the completion
of which was announced on 6 July 2021.
Given the proximity of this Buy Back announcement to the date of
publication of these consolidated financial statements, details of
the Buy Back are still being considered and finalised as at the
date of these financial statements. As such, management instead
considered the specifics set out in the TradeFlow Restructuring
share purchase agreement that had been agreed in principle between
the Company and the TradeFlow directors, Tom James and John Collis,
who together acted as the buyers (the "Buyers"), prior to the Buy
Back being exercised (the "TradeFlow SPA"). These specifics
included that the:
a) TradeFlow SPA set out the total legal consideration for the
81% of the TradeFlow business and required an amount of
GBP2,000,000 to be payable to the Company by the TradeFlow
directors as a result of the TradeFlow Restructuring;
b) Based on the amount agreed in a) above, the estimated fair
value of 100% of the TradeFlow CGU is assumed to be
GBP2,469,000;
c) This value was compared to the net asset value of the
TradeFlow operations in the consolidated financial statements as at
31 December 2022. This net asset value was GBP2,311,000.
As the estimated fair value of the TradeFlow CGU exceeded the
net asset value of the TradeFlow operations in the consolidated
Group financial statements as at 31 December 2022, no additional
impairment charges were recognised during the second half of
2022.
14 Trade and other receivables
As at 31 December 2022 As at 31 December 2021
GBP 000 GBP 000
Trade receivables 7 13
Contract assets - 84
Other receivables 1,179 727
Prepayments 33 72
---------------------- ----------------------
Total trade and other receivables 1,219 896
====================== ======================
15 Share capital
Allotted, called up and fully paid shares
As at 31 December As at 31 December
2022 2021
No. 000 GBP 000 No. 000 GBP 000
Equity - -
Ordinary shares of GBP0.00002
each 56,621,568 1,132 36,068,442 721
Deferred
shares
of
GBP0.04000
each 63,084 2,523 63,084 2,523
2018
Deferred
shares
of
GBP0.01000
each 224,194 2,242 224,194 2,242
------------ -------- ------------ --------
56,908,846 5,897 36,355,720 5,486
------------ -------- ------------ --------
Reconciliation of allotted, called up and full paid
2022 2021
No. 000 GBP 000 No. 000 GBP 000
------------------------------------------------------------------------- ------------ ------- ----------- -------
Ordinary shares as at 1 January 36,355,720 5,486 33,042,223 5,420
------------------------------------------------------------------------- ------------ ------- ----------- -------
New ordinary shares issued to fulfil the conversion of Mercator Capital
Management Fund LP
convertible loan notes 1,400,898 28 680,791 14
------------------------------------------------------------------------- ------------ ------- ----------- -------
New ordinary shares issued to Venus Capital S.A. in connection with the
Capital Enhancement
Plan 14,350,000 287
------------------------------------------------------------------------- ------------ ------- ----------- -------
New ordinary shares issued to settle the FY21 acquisition related
earn-out payments 213,526 4
------------------------------------------------------------------------- ------------ ------- ----------- -------
New ordinary shares issued in connection with Open Offer completed during
the year 641,710 13
------------------------------------------------------------------------- ------------ ------- ----------- -------
New ordinary shares issued to fulfil the conversion of Open Offer
warrants 49,508 1
------------------------------------------------------------------------- ------------ ------- ----------- -------
New ordinary shares issued to fulfil the conversion of Venus Capital S.A.
convertible loan
notes 3,897,484 78
------------------------------------------------------------------------- ============ ======= =========== =======
New ordinary shares issued to fulfil the conversion of Negma Group
Limited convertible loan
notes 1,319,706 26
------------------------------------------------------------------------- ------------ ------- ----------- -------
New ordinary shares issued as consideration for acquisition of TradeFlow 813,000 16
------------------------------------------------------------------------- ============ ======= =========== =======
New ordinary shares issued as consideration for support with the
TradeFlow acquisition 500,000 10
------------------------------------------------------------------------- ------------ ------- ----------- -------
Total at 31 December 56,908,846 5,897 36,355,720 5,486
------------------------------------------------------------------------- ============ ======= =========== =======
New shares allotted during the current financial year
New ordinary shares issued to fulfil the conversion of Mercator
Capital Management Fund LP ("Mercator") convertible loan notes
-- On 13 January 2022, the Company allotted 594,664,101 new
ordinary shares as a result of the conversion of GBP678,333 of the
convertible loan notes issued and subscribed by Mercator.
-- On 28 February 2022, the Company allotted 489,787,922 new
ordinary shares as a result of the conversion of GBP500,000 of the
convertible loan notes issued and subscribed by Mercator.
-- On 29 March 2022, the Company allotted 316,446,349 new
ordinary shares as a result of the conversion of GBP178,333 of the
convertible loan notes issued and subscribed by Mercator.
New ordinary shares issued to Venus Capital S.A. ("Venus") in
connection with the Capital Enhancement Plan
On 27 April 2022, the Company announced its Capital Enhancement
Plan pursuant to which it would enter into a subscription agreement
with Venus and undertake an open offer to existing shareholders, in
order to raise up to GBP7,500,000 in new equity capital (the
"Capital Enhancement Plan"). This new equity capital enabled the
Company to settle the outstanding loan notes and convertible loan
notes with Mercator in cash rather than by the conversion of the
convertible loan notes into new ordinary shares. During the
currentl financial year ended 31 December 2022, the following share
issues were made to Venus in line with subscription agreement dated
26 April 2022, and the subsequent amendment agreement dated 21 July
2022 and the side letter agreement dated 3 October 2022:
-- On 26 April 2022, the Company issued 2,770,000,000 of new
ordinary shares to Venus in exchange for GBP1,385,000.
-- On 10 May 2022, the Company issued 550,000,000 of new
ordinary shares to Venus in exchange for GBP275,000.
-- On 18 July 2022, the Company issued 1,350,000,000 of new
ordinary shares to Venus in exchange for GBP675,000.
-- On 5 September 2022, the Company issued 950,000,000 of new
ordinary shares to Venus in exchange for GBP475,000.
-- On 11 October 2022, the Company issued 8,730,000,000 of new
ordinary shares to Venus in exchange for GBP4,365,000. As at 31
December 2022 GBP500,000 of this amount is included with other
receivables.
New ordinary shares issued in connection with the TradeFlow FY21
acquisition related earn-out payment
-- On 19 July 2022, the Company issued 213,525,520 of new
ordinary shares in settlement of the TradeFlow acquisition related
earn-out for FY21.
New ordinary shares issued in connection with Open Offer
completed on 17 August 2022
-- On 18 August 2022, the Company issued 641,710,082 of new
ordinary shares as a result of an Open Offer issue in exchange for
GBP306,029.
New ordinary shares issued to fulfil the conversion of Open
Offer warrants
Further to the issue of new ordinary shares on the 18 August
2022 as a result of the Open Offer, the Company also issued
320,855,008 warrants to certain qualifying shareholders who
participated in its open offer (the "Open Offer Warrants").
Following the issue of the Open Offer Warrants, certain holders
have elected to exercise their Open Offer Warrants and this
resulted in the following share issues during the current financial
year:
-- On 2 September 2022, the Company issued 5,064,230 of new
ordinary shares as an Open Offer Warrant conversion.
-- On 17 September 2022, the Company issued 8,058,388 of new
ordinary shares as an Open Offer Warrant conversion.
-- On 27 September 2022, the Company issued 1,608,176 of new
ordinary shares as an Open Offer Warrant conversion.
-- On 11 October 2022, the Company issued 30,897,410 of new
ordinary shares as an Open Offer Warrant conversion.
-- On 21 October 2022, the Company issued 2,190,452 of new
ordinary shares as an Open Offer Warrant conversion.
-- On 7 November 2022, the Company issued 615,335 of new
ordinary shares as an Open Offer Warrant conversion.
-- On 26 November 2022, the Company issued 512,454 of new
ordinary shares as an Open Offer Warrant conversion.
-- On 8 December 2022, the Company issued 561,555 of new
ordinary shares as an Open Offer Warrant conversion.
New ordinary shares issued to fulfil the conversion of Venus
convertible loan notes
In connection with the Capital Enhancement Plan, the Company
also issued convertible loan note to the value of GBP1,917,500 to
Venus during the year. Further details of the Venus convertible
loan notes can be found in note 8 to these financial statements.
The Venus convertible loan notes were settled through the issue of
the following new ordinary shares:
-- On 6 October 2022, the Company issued 3,048,986,302 of new
ordinary shares to Venus Capital for the conversion of Tranche B
convertible loan notes with a principal value of GBP1,500,000.
-- On 11 October 2022, the Company issued 848,498,083 of new
ordinary shares to Venus Capital the conversion of Tranche A
convertible loan notes with a principal value of GBP417,500.
Rights, preferences and restrictions
Ordinary shares have the following rights, preferences, and
restrictions:
The Ordinary shares carry rights to participate in dividends and
distributions declared by the Company and each share carries the
right to one vote at any general meeting. There are no rights of
redemption attaching to the Ordinary shares.
Deferred shares have the following rights, preferences, and
restrictions:
The deferred shares carry no rights to receive any dividend or
distribution and carry no rights to vote at any general meeting. On
a return of capital, the Deferred shareholders are entitled to
receive the amount paid up on them after the Ordinary shareholders
have received GBP100,000,000 in respect of each share held by them.
The Company may purchase all or any of the Deferred shares at an
appropriate consideration of GBP1.
2018 Deferred shares have the following rights, preferences, and
restrictions:
The deferred shares carry no rights to receive any dividend or
distribution and carry no rights to vote at any general
meeting.
16 Loan notes and Long-Term Borrowings
Loan notes
On 29 September 2021, the Company announced it had entered a
loan note facility with Mercator Capital Management Fund LP
("Mercator"). The new loan note facility consisted of a short-term
loan with the following key terms:
* Initial draw down of GBP5 million, with a further
GBP2 million available within 60 days subject to
certain conditions precedent which were subsequently
met;
* 12-month term, with an interest rate of 10%;
* The principal and interest to be repaid on a monthly
basis; and
* Warrants will be issued representing 20% of both
tranches. The warrants will have a term of 3 years
from issue and an exercise price of 130% of the
lowest closing VWAP over the ten trading days
immediately preceding the issue of the warrants.
The loan note facility was linked to a convertible loan note
facility also entered into with Mercator, which was able be
used should the Company elect not to repay any of the interest
or principal relating to the loan notes in cash. The Mercator
convertible loan note facility was for the same aggregate value
as the loan facility including interest, being GBP7.7 million,
and was able to be drawn in tranches equal to the monthly loan
repayments. Further details of the Mercator convertible loan
notes can be found in note 17.
To assist with the key objective of the Capital Enhancement
Plan, which was to enable the Company, at its election, to settle
the outstanding Mercator loan notes and convertible loan notes
in cash rather than by the conversion into new ordinary shares
of the Company, the Company and Mercator signed an amendment
agreement on 26 April 2022 (the "Mercator Amendment"). To assist
with the final settlement of the outstanding Mercator loan notes
and convertible loan notes, the Company and Mercator signed
a further Addendum Deed on 3 October 2022 (the "Addendum Deed").
Pursuant to both the original agreement dated 29 September 2021,
the Mercator Amendment and the Addendum Deed, the Group repaid
the following monthly instalments of the loan note liability
over the year ended 31 December 2022:
* The January, February and March monthly repayments of
GBP678,333 per month were settled through the issue
of convertible loan notes, in lieu of cash repayments,
to Mercator.
* The April monthly repayment was paid in cash on 10
June 2022, in accordance with the Mercator Amendment
referred to above. This was for an amount of
GBP678,333, plus an additional late payment interest
charge of GBP72,767.
* The May and June monthly payments were settled
together on the 10 June 2022 through the issue of
convertible loan notes to the value of GBP1,502,198,
in lieu of cash repayments, to Mercator. This
combined repayment was in accordance with the
Mercator Amendment and included additional late
payment interest charges of GBP145,532.
* In line with the Mercator Amendment, each of the July,
August and September monthly repayments were made
through a part issue of convertible loan notes of
GBP400,000 each and through a part cash payment of
GBP278,333 each. Each of these monthly repayments
incurred additional interest charges in line with the
Mercator Amendment. The total additional interest for
these three months totalled GBP86,000.
* In October 2022, the Company exercised the repayment
option that was agreed as part of the Addendum Deed
entered into on 3 October 2022. Under this option the
Company, made the final October monthly payment of
GBP678,333 in cash. This payment incurred an addition
interest charge of GBP20,000.
The settlements in lieu of cash were made in order to allow
the Group to preserve cash for working capital requirements
and to facility further new strategic initiatives.
The loan notes were initially recorded at the proceeds received,
net of direct issue costs (including commitment fees, introducer
fees and the fair value of warrants issued to satisfy issue
costs). The finance charges, including direct issue costs, are
accounted for on an amortised cost basis using the effective
interest method. The effective interest rate applied was 47.5%.
The additional late payment interest charges have been recorded
as finance costs in the periods in which they were incurred
and have not been included in the effective interest rate calculation.
Further details on the fair value of the warrants are set out
in note 26.
The movement in the loan notes during the current financial
year are set out in the table below:
2022 2021
GBP 000 GBP 000
Loan note liability at 1 Jan 5,732 -
Initial drawdown net of commitment, introducer
fees and fair value of warrants issued
in connection with the loan notes - 4,209
Second drawdown net of commitment and introducer
fees - 1,900
Amortisation of finance costs during the
period (recognised in the income statement) 1,051 540
Less: repayments made via issue of convertible
loan notes (4,592) (917)
Less: repayments made via cash (2,191) -
-------- --------
Loan note liability at 31 December - 5,732
======== ========
Long-Term Borrowings
As at 31 December 2022 As at 31 December 2021
GBP 000 GBP 000
Unsecured loan notes - 1,263
Other bank borrowings (non-current
portion) 748 21
Total long-term borrowings 748 1,284
====================== ======================
TradeFlow entered into an unsecured loan note subscription agreement on 23 October 2020 and
this was recognised by the Group from the date of acquisition. This loan note was for a principal
amount of USD 1,700,000. The terms of this agreement require the principal to be repaid as
one lump sum on the 23 October 2023 along with an additional cost of issue of USD 300,000.
As at 31 December 2022 TradeFlow is disclosed as a discontinued operation under IFRS 5 ("Non-current
assets Held for Sale and Discontinued Operations") and as such equivalent liability have been
disclosed in aggregate as liabilities of disposal group held for sale (refer to note 27 for
more information).
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) EUR1 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 EUR52,000 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.
17 Convertible loan notes
As at 31 December 2022, the convertible loan note liability
was nil (31 December 2021:nil). However, during the current
financial year, the Company entered into two different convertible
loan arrangements. These are set out below:
Mercator convertible loan notes
As set out in Note 16 the loan note facility the Company entered
into with Mercator is linked to a convertible loan note facility
also with Mercator.
The Mercator convertible loan notes contain the following key
terms:
-- They were each to be issued at par value;
-- Each convertible loan note had a 12-month term, a conversion
price of 85% of the lowest 10 day closing VWAP prior to the
issue of the conversion notice and was able to be convertible
at the holders request;
-- Warrants are to be issued for 20% of each tranche. The warrants
will have a term of 3 years from issue and an exercise price
of 130% of the lowest closing VWAP over the ten trading days
immediately preceding the request to issue a new tranche. Under
the terms of amendment Mercator Amendment no further warrants
were required to be issued on the monthly repayments due following
April 2022.
During the year ended 31 December 2022, the Company issued convertible
loan notes to Mercator to the value of GBP4,737,000 which included
the monthly repayments of GBP4,592,000 made by way of convertible
loan notes (as set out in Note 6 above) and the additional interest
charge due on the May and June repayments of GBP145,532.
Of the GBP4,737,000 of convertible loan notes issued during
the year, GBP3,381,000 was repaid in cash and the remaining
GBP1,357,000 was converted into ordinary shares in the Company.
The Mercator convertible loan notes did not have any annual
interest costs in addition to the loan notes but did have costs
relating to commitment fees and late payment interest charges
of GBP571,000 and the fair value of the warrants of GBP236,000
associated with issue of the convertible loan notes. All these
costs have been recognised in the income statement in the current
year given the liability to which they relate has been extinguished
(2021: GBP113,000). Further details on the fair value of the
warrants are set out in note 23 to the Group consolidated financial
statements.
The movement in Mercator convertible loan note liability during
the current financial period is set out in the table below:
GBP '000
Mercator convertible loan note liability at -
1 January 2022
Monthly loan note repayments made via issue
of convertible loan notes 4,592
Financial costs satisfied via the issue of
convertible loan notes 145
Less convertible loan notes converted into
ordinary shares (1,356)
Less convertible loan notes repaid in cash (3,381)
--------
Mercator convertible loan note liability at -
31 December 2022
========
Venus convertible loan notes
In connection with the Capital Enhancement Plan announced by
the Company on 26 April 2022, the Company executed a new convertible
loan note agreement with Venus Capital S.A. ("Venus"), under
which the Company, at its discretion, could issue to Venus convertible
loan notes up to GBP1,950,000 in aggregate principal amount.
These convertible loan notes were split into two tranches being:
1. The Tranche A Venus convertible loan notes up to the value
of GBP417,500 which could be issued by the Company to cover
the fees associated with the Venus equity subscription (GBP342,500)
and convertible loan agreements (GBP75,000). The former fees
were required to be paid by the Company, proportionally, in
line with when new ordinary shares were issued to Venus under
the Capital Enhancement Plan. The obligation to pay the later
fees arose at the point the Company executed of the working
capital facility which is referred to below; and
2. The Tranche B Venus convertible loan notes which could be
issued by the Company to receive a working capital facility
of up to GBP1,500,000.
In order to preserve the Company's cash balance, the full GBP417,500
of fees were settled by the issue of the Tranche A convertible
loan notes to Venus between the period the 19 July 2022 and
the 10 October 2022. These convertible loan notes are repayable
in shares with a maturity date of 31 December 2025 and incur
a 10% per annual interest rate. The cost of the Tranche A Venus
convertible loan notes associated with the Venus equity subscription
(GBP342,500) was offset against the share premium in accordance
with IAS 32 ("Financial Instruments"). The cost of the Tranche
A Venus convertible loan notes associated with the arrangement
of the working capital facility with Venus (GBP75,000) was recorded
as finance costs in the income statement given these directly
related to the cost of drawing down on this financing facility.
These costs were recognised in line with the draw down of the
working capital facility.
Additionally, during July and August 2022, the Company drew
down a total of GBP1,500,000 Tranche B convertible loan notes
from Venus in the form of the working capital facility. These
convertible loan notes were also repayable in shares with a
maturity date of 31 December 2025 and incur a 10% per annual
interest rate.
The settlement of both the Tranche A and Tranche B Venus convertible
loan notes took place in October 2022 as follows:
a. On 3 October 2022, the Company and Venus entered into the
side letter agreement, pursuant to which and conditional on
the admission subject to the Prospectus issued on the 3 October
2022, GBP1,500,000 in principal amount of Tranche B Venus convertible
loan notes, plus accrued interest of GBP25,000, were converted
into 3,048,986,302 new ordinary shares which were issued to
Venus at a price of 0.05 pence per share on the 6 October 2022;
and
b. On the 10 October 2022, in line with the side letter agreement
referred to above, and conditional on the secondary admission
subject to the Prospectus issued on the 3 October 2022, GBP417,500
in principal amount of Tranche A Venus convertible loan notes,
plus accrued interest of GBP7,000, (including GBP61,500 in principal
amount of Tranche A Venus CLNs to be issued and immediately
converted, not attracting interest) converted into 848,498,083
new ordinary shares which were issued to Venus at a price of
0.05 pence per share on the 11 October 2022.
Both interest costs referred to above have been recognised in
the income statement during the current financial period. As
at 31 December 2022, there were no amounts outstanding under
the Venus convertible loan note facility (31 December 2021:
nil).
GBP '000
Venus convertible loan note liability at 1 January -
2022
Tranche A Venus convertible loan notes 418
Tranche B Venus working capital convertible loan
notes 1,500
Interest cost associated with Tranche A and B convertible
loan notes 32
Repayment of Venus convertible loan notes via the
issue of new ordinary share (1,950)
---------
Venus convertible loan note liability at 31 December -
2022
=========
Historical convertible loan notes
In addition to the above, the Company also had historical convertible
loan notes and associated derivative financial instruments that
expired during the financial year ended 31 December 21 resulting
in a credit to the income statement in the prior year in respect
of the outstanding fair value of GBP24,000. There were no amounts
recorded in the income statement in the current financial year.
18 Trade and other payables
As at 31 December 2022 As at 31 December 2021
GBP 000 GBP 000
Trade payables 2,209 1,086
Other payables 747 588
Current portion of long term borrowings 158 -
Social security and other taxes 977 994
Accruals 402 437
Contract liabilities 94 395
---------------------- ----------------------
4,587 3,500
====================== ======================
19 Provisions
Provision Provision
Post-employment for risks for VAT
benefits and charges and penalties Total
GBP 000 GBP 000 GBP 000 GBP 000
At 1 January 2021 32 36 267 335
Released to profit and
loss - - (58) (58)
Provided for in the
year 26 51 - 77
Payments (11) - - (11)
Actuarial (gain)/loss (3) - - (3)
---------------- ------------- --------------- ---------
At 31 December 2021 44 87 209 340
---------------- ------------- --------------- ---------
Forex retranslation
adjustment 2 5 12 19
At 1 January 2022 46 92 221 359
Released to profit and
loss - (19) (20) (39)
Provided for in the
year 22 12 144 178
Payments (8) - - (8)
Actuarial (gain)/loss (22) - - (22)
---------------- ------------- --------------- ---------
At 31 December 2022 38 85 345 467
================ ============= =============== =========
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 31 December 2022, the Group has
included a provision relating to a potential VAT liability,
including penalties, in respect of these advance payments of
GBP201,000 (31 December 2021: GBP209,000). The reduction in the
provision during the year represents the fact that some of these
payments have been refunded, at the customer's request, and
therefore the potential VAT liability has been removed.
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 31 December 2022, however there is a
contingent asset of GBP143,000 as at 31 December 2022 (31 December
2021: GBP149,000) in respect of this.
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 31 December 2022 that meet the criteria for a provision to be
recognised.
An additional amount of GBP144,000 was added to the provision
during the current financial year 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.
20 Pension and other schemes
Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The
assets of the scheme are recognised as being held separately from
those of the Group and Company and will be paid over to an
independently administered fund. The pension cost charge represents
contributions payable by the Group to the fund.
The total pension charge for the year represents contributions
payable by the Group to the scheme and amounted to GBP76,000 (2021:
GBP86,000).
Contributions totalling GBP9,000 (2021: GBP21,000) were payable
to the scheme at the end of the year and are included in creditors.
This has been paid post year end.
21 Capital commitments
There were no capital commitments for the Group at 31 December
2022 or 31 December 2021.
22 Contingent liabilities
There were no contingent liabilities for the Group at 31
December 2022 or 31 December 2021.
23 Financial instruments
Financial assets
Carrying value Fair value
As at 31 December As at 31 December As at 31 December
2022 2021 2022 As at 31 December 2021
GBP 000 GBP 000 GBP 000 GBP 000
Financial assets at
amortised cost:
Cash and cash
equivalents 257 1,727 257 1,727
Trade receivables 7 13 7 13
Other receivables 1,179 727 1,179 727
1,443 2,467 1,443 2,467
===================== ===================== ===================== ======================
Valuation methods and assumptions: The directors believe due to
their short term nature, the fair value approximates to the
carrying amount.
Financial liabilities
Carrying value Fair value
As at 31 December 2022 As at 31 December 2021 As at 31 December 2022 As at 31 December 2021
GBP 000 GBP 000 GBP 000 GBP 000
Financial liabilities
at amortised cost:
Loan notes - 5,732 - 5,732
Long-term borrowings 906 1,284 906 1,284
Trade payables 2,209 1,086 2,209 1086
Other payables 747 588 747 588
---------------------- ---------------------- ---------------------- ----------------------
3,862 8,690 3,862 8,690
====================== ====================== ====================== ======================
Valuation methods and assumptions: The directors believe that
the fair value of trade and other payables approximates to the
carrying value.
There are no financial liabilities that are carried at fair
value through the profit and loss as at 31 December 2022 (31
December 2021:nil).
Risk management
The Group is exposed through its operations to the following
nancial risks: credit risk, foreign exchange risk, and liquidity
risk.
In common with all other businesses, the Group is exposed to
risks that arise from its use of nancial instruments. This note
describes the Group's objectives, policies and processes for
managing these risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these nancial statements. There have been no substantive
changes in the Group's exposure to nancial instrument risks, its
objectives, policies and processes for managing those risks or the
methods used to measure them from previous periods unless otherwise
stated in this note.
Principal nancial instruments
The principal nancial instruments used by the Group, from which
nancial instrument risk arises, were as follows:
- trade receivables;
- cash at bank; and
- trade and other payables.
General objectives, policies and processes
The board had overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it had delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's nance function. The board received monthly reports from the
Chief Financial Of cer through which it reviewed the effectiveness
of the processes put in place and the appropriateness of the
objectives and policies it had set. The overall objective of the
board was to set polices that sought to reduce risk as far as
possible without unduly affecting the Group's competitiveness and
exibility. Further details regarding these policies are set out
below.
Interest rate risk
At present the directors do not believe that the Group has
significant interest rate risk and consequently does not hedge
against such risk. Cash balances earn interest at variable
rates.
The Group's interest generating financial assets from continuing
operations as at 31 December 2022 comprised cash and cash
equivalents of GBP257,000 (2021: GBP1,727,000). Interest is paid on
cash at floating rates in line with prevailing market rates.
The Group's interest generating financial liabilities from
continuing operations as at 31 December 2022 comprised long term
borrowings of GBP906,000 (2021 - loan notes of GBP5,732,000 and
long term borrowings of GBP1,284,000).
Sensitivity analysis
At 31 December 2022, had the LIBOR 1 MONTH rate of 0.01609 (2021
- 0.01047) increased by 1% with all other variables held constant,
the increase in interest receivable on financial assets would
amount to approximately GBPnil (2021 - GBPnil). Similarly, a 1%
decrease in the LIBOR 1 MONTH rate with all other variables held
constant would result in a decrease in interest receivable on
financial assets of approximately GBPnil (2021 - GBPnil).
Credit risk and impairment
Credit risk is the risk of nancial loss to the Group if a
customer or a counterparty to a nancial instrument fails to meet
its contractual obligations. The Group is mainly exposed to credit
risk from credit sales. It is Group policy, implemented locally, to
assess the credit risk of new customers before entering contracts.
Such credit ratings take into account local business practices. The
Group has a credit policy under which each new customer is analysed
individually for creditworthiness before the Group's standard
payment and delivery terms and conditions are offered.
Credit risk also arises from cash and cash equivalents and
deposits with banks and nancial institutions. To manage this, the
Group has made sure that they use reputable banks.
The Group's Chief Financial Of cer monitors the utilisation of
the credit limits regularly.
The Group's maximum exposure to credit by class of individual
financial instrument is shown in the table below:
Carrying Maximum Carrying Maximum
value exposure value exposure
as at as at as at as at
31 December 31 December 31 December 31 December
2022 2022 2021 2021
GBP 000 GBP 000 GBP 000 GBP 000
Cash and cash equivalents 257 257 1,727 1,727
Trade receivables 7 7 13 13
------------- ------------- ------------- -------------
264 264 1,740 1,740
============= ============= ============= =============
As at 31 December 2022, the assets held by the Group are not
past due or impaired.
Trade receivables are all considered to be low risk and have
been fully repaid since year end.
Foreign exchange risk
Foreign exchange risk arises because the Group has operations
located in various parts of the world whose functional currency is
not the same as the functional currency in which the Group
operates. Although its global market penetration reduces the
Group's operational risk, in that it has diversified into several
markets, the Group's net assets arising from such overseas
operations are exposed to currency risk resulting in gains or
losses on retranslation into sterling. Only in exceptional
circumstances would the Group consider hedging its net investments
in overseas operations as generally it does not consider that the
reduction in foreign currency exposure warrants the cash flow risk
created from such hedging techniques.
The Group's policy is, where possible, to allow Group entities
to settle liabilities denominated in their functional currency
(primarily Euros or Pound Sterling) with the cash generated from
their own operations in that currency. Where Group entities have
liabilities denominated in a currency other than their functional
currency (and have insufficient reserves of that currency to settle
them) cash already denominated in that currency will, where
possible, be transferred from elsewhere within the Group.
Currency profile
Financial assets
- Cash and cash equivalents Sterling: GBP229,000 (2021 -
GBP1,585,000)
- Cash Euro: GBP28,000 (2021 - GBP92,000)
- Cash US Dollar: GBPnil (2021 - GBP44,000)
- Cash Singapore Dollar: GBP324,000 (2021 - GBP5,000)- Trade
receivables Sterling: GBPnil (2021 - GBPnil)
- Trade receivables Euro: GBP7,000 (2021 - GBP13,000)
- Trade receivables Singapore Dollar: GBP1,000 (2021 -
GBP4,000)
Financial liabilities
- Trade payables Sterling: GBP482,000 (2021 - GBP193,100)
- Trade payables Euro: GBP1,727,000 (2021 - GBP879,000)
- Trade payables Singapore Dollar: GBP6,000 (2021 -
GBP14,000)
TradeFlow financial assets and liabilities have been included
within the currency disclosures above. TradeFlow financial assets
and liabilities form part of the of the assets/liabilities held for
disposal groups within the statement of financial position.
Sensitivity analysis
At 31 December 2022, if Sterling had strengthened by 10% against
the below currencies with all other variables held constant, loss
before tax for the year would have been approximately
- EUR: GBP60,000 higher (2021 - GBP131,000 higher).
- Singapore Dollar: GBP69,000 higher (2021 - GBP51,000
higher)
Conversely, if the below currencies had weakened by 10% with all
other variables held constant, loss before tax for the year would
have been approximately:
- EURO: GBP60,000 lower (2021 - GBP131,000 lower).
- Singapore Dollar: GBP60,000 lower (2021 - GBP51,000 lower)
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due.
The board receives rolling 12-month cash flow projections on a
regular basis as well as information regarding cash balances. At
the statement of financial position date, these projections
indicated that the Group expects to have sufficient liquid
resources to meet its obligations under all reasonably expected
circumstances.
There were no undrawn facilities at 31 December 2022 or 31
December 2021.
Between 3 and 12 Between 1 and 2 Between 2 and 5
At 31 December 2022 Up to 3 months months years years Over 5 years
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
Liabilities
Long-term
borrowings - 158 189 559
Trade and other
payables 2,209 747 - - -
Social security and
other taxes 977 - - - -
Total liabilities 3,186 905 189 559 -
=============== ==================== ==================== ==================== =============
Between 3 and 12 Between 1 and 2 Between 2 and 5
At 31 December 2021 Up to 3 months months years years Over 5 years
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
Liabilities
Loan notes 1,493 4,239 - - -
Loans and
borrowings - 2 1,269 13
Trade and other
payables 1,674 - - - -
Social security and
other taxes 994 - - - -
Total liabilities 4,161 4,241 1,269 13 -
=============== ==================== ==================== ==================== =============
Capital risk management
The Group's capital management objectives are to ensure the
Group is appropriately funded to continue as a going concern and to
provide an adequate return to shareholders commensurate with risk.
The Group defines capital as being total shareholder's equity. The
Group's capital structure is periodically reviewed and, if
appropriate, adjustments are made in the light of expected future
funding needs, changes in economic conditions, financial
performance and changes in Group structure. As explained in notes
16 and 17, the Group has currently entered into external debt
finance by way of loan notes, long term borrowings and convertible
loan notes.
The Group adheres to the capital maintenance requirements as set
out in the Companies Act.
Capital for the reporting periods under review is summarised as
follows:
- Net liabilities: (GBP2,025,000) (2021: (GBP1,425,000))
- Cash and cash equivalents: GBP257,000 (2021: 1,727,000)
24 Net debt
The Group reconciliation of the movement in net debt is set out
below:
Convertible loan notes Total long-term Total
Cash at bank Loan notes borrowings
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 January 2022 1,727 (5,732) - (1,284) (5,289)
Net cash flows (1,133) - (1,500) (2,403) (5,036)
Convertible loan
notes issued as repayment
of loan notes, share
issue costs and/or
interest - - (5,187) - (5,187)
Amortisation of finance
costs - (1,051) - (356) (1,407)
Cash repayments made
during the year - 2,191 3,381 5,572
Repayment of convertible
loan notes via share
issues - - 3,306 3,306
Repayment of loan notes
via issue of convertible
loan notes - 4,592 - - 4,592
Reclassification of
disposal group held for
sale - - 3,171 3,171
Foreign exchange (13) - - (34) (47)
As at 31 December 2022 581 - - (906) (325)
============= =========== ======================= ========================== ========
Cash at Convertible Long-term Total
bank Loan notes loan notes borrowings
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 January 2021 552 - - (22) 530
Net Cash flows 686 (6,629) (5,000) - (10,943)
Fair value of warrants - 520 - - 520
Amortisation of finance
costs - (540) (600) - (1,140)
Cash repayments - - 2,016 2,016
Non cash repayments - 917 3,584 - 4,501
Arising on acquisition 477 - - (1,229) (752)
Foreign exchange 12 - - (33) (21)
As at 31 December
2021 1,727 (5,732) - (1,284) (5,289)
======= ========== =========== =========== ========
25 Business combinations
On 1 July 2021, the Group completed the acquisition of the
entire issued share capital of TradeFlow Capital Management Pte.
Ltd ("TradeFlow"). TradeFlow is a leading Singapore-based
fintech-powered commodities trade enabler focused on small and
medium size entities. The Board approved the acquisition by the
Group to complement its global offering of its "warehouse goods"
inventory monetisation platform with the TradeFlow offering of
monetising "in-transit" inventory (in particular, commodities). It
was also expected the acquisition generate a number of attractive
synergy benefits for Group from both a funding and customer
origination perspective.
TradeFlow owns 85% of the issued share capital of Tijara Pte.
Limited and 50% of the issued share capital of TradeFlow Capital
Management Systems Pte. Limited. Both of these companies are at
very early-stage of their development and their results and
balances as at both 31 December 2021 and 31 December 2022 are
immaterial to the Group.
The net asset amounts in respect of the identifiable assets
acquired and liabilities which have recognised in the financial
statements are set out in the table below. These are based on a
fair valuation of the acquired identifiable net assets as at the
acquisition date. The assets and liabilities recognised as a result
of the acquisition on 1 July 2021 are:
Fair value
Book Value Adjustment Fair Value
GBP 000 GBP 000 GBP 000
Net assets / (liabilities)
acquired
Cash and cash equivalents 477 - 477
Accrued income 47 - 47
Trade and other receivables 6 - 6
Property, plant and equipment 9 - 9
Trade and other payables (137) - (137)
Long-term borrowings (1,229) - (1,229)
Intangible assets
Customer relationships 4,829 4,829
Brand - "TradeFlow" 205 205
CTRM Software 1,429 1,429
AI Software 425 425
Deferred tax liability (1,171) (1,171)
Total identifiable net (liabilities)
/ assets acquired (827) 5,717 4,890
================ ============== ==============
Satisfied by:
Consideration under IFRS 3:
GBP'000
Cash consideration 4,000
Equity instruments (813,000,000 new ordinary shares) 3,089
---------------
Total consideration 7,089
===============
Goodwill recognised on acquisition 2,199
Consideration accounted as deemed remuneration
Acquisition related earn-out recognised in the prior
financial year 1,410
Acquisition related earn-out recognised in the current
financial year (710)
Acquisition related earn-out expected to be recognised
in future periods -
700
===============
The goodwill arising is attributable to:
-- the significant amount of knowledge, experience and expertise
acquired through the TradeFlow workforce, and in particular the
earn-out shareholders;
-- the anticipated future profit from growth opportunities; and
-- synergies expected to be realised with the Group.
The goodwill arising from the acquisition has been allocated to
the TradeFlow Cash Generated Unit ("CGU"). Fair value adjustments
of GBP6,888,000 have been recognised for acquisition-related
intangible assets and related deferred tax of GBP1,171,000 as at 1
July 2021. Details of intangible assets recorded can be found in
note 13
As detailed above, elements of the consideration payable for
this acquisition require post-acquisition service obligations to be
performed by the earn-out shareholders over a three-year period.
These amounts are accounted for as deemed remuneration (see notes 2
and 27) as required by IFRS 3 ("Business Combinations").
Transaction costs of GBP2,009,000 have been charged to the
statement of comprehensive income during the year ended 31 December
2021. Of these costs, GBP1,900,000 represented the fair value of
500,000,0000 new ordinary shares issued as consideration to third
party intermediaries who either introduced TradeFlow to the Company
or who provided due diligence activities in respect of the
TradeFlow business, market, sector and geographic location. The
remaining GBP109,000 related to legal fees that were directly
associated with the acquisition.
During the second half of 2022, the Directors began the process
of the proposed restructuring the Company's ownership with
TradeFlow ("TradeFlow Restructuring") and as a result the TradeFlow
business has been classified as held for sale / a discontinued
operation as at 31 December 2022 in line with IFRS 5 ("Non-current
Assets Held for Sale and Discontinued Operations"). This is due to
the fact that TradeFlow was available for immediate sale in its
present condition and it was highly probable that sale would be
completed. Further details are set out in note 27.
26 Share-based payments
Share warrants issued to Mercator
As explained in note 17, during the year the Group entered into a funding facility with Mercator
which included the Group issuing loan notes in exchange for funding. These loan notes linked
to a convertible loan note facility, which was able to be used should the Group elect not
to repay any of the interest or principal relating to the loan notes in cash. Both the loan
note and convertible loan note agreements required share warrants to be issued representing
20% of the face value of any loan notes or convertible loans issued. The warrants have a term
of 3 years from issue and an exercise price of 130% of the lowest closing VWAP over the ten
trading days immediately preceding the issue of the warrants. Under the terms of amendment
agreement signed with Mercator dated 26 April 2022, no further warrants were required to be
issued on the monthly repayments due following April 2022.
The total number of share warrants issued during the current financial year was 439,040,922,
which together with the total of 522,791,511 issued in the prior financial year takes the
total number of share warrants issued to Mercator as at 31 December 2022 to 961,832,433 (31
December 2021: 522,791,511). Details of the outstanding share warrants issued to Mercator
are set out in the table below.
Date of issue Principal value of warrants issued Number of warrants Exercise price Fair value (GBP000) Amount recognised in during FY22 Amount recognised in during FY21
(GBP 000) (GBP 000) (GBP 000)
1 October 2021 1,400 443,726,030 GBP0.00316 520 343 177
1 November 2021 92 29,197,856 GBP0.00314 42 - 42
1 December 2021 92 49,867,625 GBP0.00184 46 - 46
4 January 2022 136 77,763,767 GBP0.00174 83 83 -
2 February 2022 136 79,179,799 GBP0.00171 54 54 -
4 March 2022 136 105,948,198 GBP0.00128 44 44 -
10 June 2022 149 176,149,157 GBP0.00085 55 55 -
Total 2,141 961,832,433 844 579 265
As these share warrants were issued as a cost of securing the funding facility they are classified
as share-based payments. As such, the Directors were required to determine the fair value
of the equity-settled share-based payments at the date on which they were granted. The fair
value was determined using a Black Sholes model and the key judgemental assumptions have been
detailed in note 2.
The total fair value of the above share warrants issued during the current financial year
is GBP236,000 (2021:GBP608,000). In the prior year, a fair value amount of GBP520,000 related
to warrants that were issued in connection with the loan notes and this fair value was netted
off the initial proceeds received on the balance sheet. This amount is being amortised to
the income statement using the effective interest rate method and GBP343,000 was recognised
in the income statement for the period ended 31 December 2022 (2021: GBP177,000). The remaining
GBP236,000 (2021: GBP88,000) related to those warrants issued in connection with the convertible
loan notes, this amount was expensed fully in the income statement in the current year given
the liability to which they relate has been extinguished (2021: GBP88,000).
Share warrants issued to Venus under Capital Enhancement Plan
As set out in note 1, on the 27 April 2022, the Group announced it had entered into a subscription
agreement with Venus in connection with the Capital Enhancement Plan. The subscription agreement
specified that the Group was required to issue one warrant for every two shares issued in
connection with the mandatory tranches of the new shares issues. This was a total of 2,950,000,000
share warrants. The subscription agreement specified that the Group was required to issue
one warrant for every five shares issued in connection with the optional tranches of the new
shares issues. This was a total of 1,500,000,000 share warrants Additionally, an amount of
3,250,000,000 share warrants were to be issued to Venus in connection with the signing of
the subscription agreement on 26 April 2022. As such the Group issued a total of 8,175,000,000
share warrants to Venus during the year ended 31 December 2022, and as at the year end date,
these all remain outstanding. The warrants issued to Venus can be exercised at any time up
to 31 December 2025 and have an exercise price of 0.065 pence per warrant.
As these share warrants were issued as a cost of issuing new ordinary shares to Venus they
fall into of scope of IFRS 2 ("Share-based payments"). As such, the Directors were required
to determine the fair value of the equity-settled share-based payments at the date on which
they were granted. The fair value was determined using a Black-Sholes model and the key judgemental
assumptions have been detailed in note 2.
The total fair value of the above share warrants to be issued to Venus at 31 December 2022
is GBP4,795,000 (31 December 2021: nil). Given this amount directly related to the cost of
issuing new ordinary shares to Venus, an amount of GBP3,204,000 has been offset against the
share premium balance as at 31 December 2022 (31 December 2021: nil) in accordance with IAS
32 "Financial Instruments". This amount was offset against the related share premium that
was created in connection with the relevant issue of ordinary share to Venus. The remaining
fair value amount of GBP1,591,000 has been recognised in retained losses.
Share warrants issued to retail shareholders under the Open Offer
On 22 July 2022, the Group announced the Open Offer, giving existing shareholders the opportunity
to subscribe for up to 641,710,082 new ordinary share in the Group on the basis of one Open
Offer share for every 66 existing ordinary shares held at an offer price of 0.05 pence per
Open Offer share. The Open Offer closed on 17 August 2022 and on 18 August 2022, the Group
announced it would allot and issue 641,710,082 new ordinary shares to those qualifying shareholders
and that this would raise GBP320,855 gross (and GBP269,855 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 warrants issued to Venus can be exercised
at any time up to 31 December 2025 and have an exercise price of 0.065 pence per warrant.
As these share warrants were issued as a cost of issuing the new Open Offer ordinary shares
they fall into of scope of IFRS 2 ("Share-based payments"). As such, the Directors were required
to determine the fair value of the equity-settled share-based payments at the date on which
they were granted. The fair value was determined using a Black-Sholes model and the key judgemental
assumptions have been detailed in note 2.
The total fair value of the above share warrants to be issued in connection with the Open
Offer was GBP261,000 (31 December 2021: nil). Given this amount directly related to the cost
of issuing new Open Offer ordinary shares, the amount of GBP247,000 has been offset against
the share premium balance as at 31 December 2022 (31 December 2021: nil) in accordance with
IAS 32 "Financial Instruments". This amount was offset against the related share premium that
was created in connection with Open Offer share issue. The remaining fair value amount of
GBP14,000 has been recognised in retained losses.
Subsequent to the issue of the Open Offer warrants, and prior to 31 December 2022, an amount
of 51,869,971 of these warrants have been converted in exchange for new ordinary shares and
as at 31 December 2022 there is a balance of 268,985,037 Open Offer warrants which remained
outstanding. On the exercise of the Open Offer warrants, the fair value amount is reclassified
from the share-based payment reserve to retained losses.
A summary of the share warrants outstanding as at 31 December 2022 is detailed in the table
below:
Number of warrants Number of warrants
outstanding at 31 December outstanding at 31 December
2022 2021
Share warrants issued to
Mercator 961,832,433 522,791,511
Share warrants issued to
Venus 8,175,000,000 -
Share warrants issued to
retail shareholders 268,985,037 -
Total 9,405,817,470 522,791,511
=========================== ============================
A summary of the fair value of the share warrants issued during
the period are detailed in the table below:
FY 2022 FY 2021
(GBP 000) (GBP 000)
Share warrants issued to Mercator 236 608
Share warrants issued to Venus 4,795 -
Share warrants issued to retail shareholders 261 -
Total 5,292 608
=========== ===========
Acquisition related earn-out payments
In addition, the Group recognised a share-based payment reserve
in connection with acquisition related earn-out. Given the service
conditions related to these payments the Group records this amount
as a share-based payment expense through the income statement
and through the share-based payment reserve.
The terms of the TradeFlow acquisition included related earn-out
payments that, together with the initial cash payment and issue
of equity, form the total legal consideration agreed between the
parties. Further details are set out below.
This acquisition related earn-out payments are determined by reference
to pre-determined revenue milestone targets in each of the 2021,
2022 and 2023 financial years. These payments may be forfeited
by the selling shareholders should they, in certain circumstances,
no longer remain employed prior to the end of each earn-out period.
As such, under the IFRS Interpretations Committee's interpretation
of paragraph B55 of IFRS 3 ("Business Combinations"), the fair
value of these earn-out payments have been accounted as a charge
to the income statement (as deemed remuneration) rather than as
consideration.
The terms of the agreements also allow this acquisition related
earn-out payments to be settled in either cash or equity at the
discretion of the Company. As it is the Company's current intention
to settle these payments in equity, they have been fair valued
at the grant date in line with IFRS 2 ("Share-based payments").
When the Company settles the earn-out payment in shares, the number
of shares to be issued will be determined using the Volume Weighted
Average Price ("VWAP") over the 20 dealing days to the end of
the relevant financial year subject to a floor of 1p. In addition,
the number of shares will be enhanced by 50% if the VWAP is greater
than 1p. Finally, 50% of any earn-out shares may not be sold for
12 months following the award but are not contingent on continued
employment. The 2021 earn-out payment was settled through the
issue of new ordinary shares on the 18 July 2022.
Considering the factors above, the fair value of the earn-out
payments at grant date (being 1 July 2021) has been estimated
using a Monte Carlo simulation model. These earn-out payments,
to be settled by way of equity, have market conditions associated
with them including the future share price. As part of the valuation,
a further discount has been applied to the 50% which are subject
to lock in provisions, and this discount factor has been calculated
using a Finnerty model, being a variant of the Black Scholes model.
The key judgemental assumptions associated with this valuation
have been detailed in note 2. The models above have assumed the
non-market conditions surrounding these earn-out payments / awards
will be met and as such the impact of the revision of the original
estimates, if any, will be recognised in the income statement
such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to equity reserves.
The expense recognised in the income statement during the year
ended 31 December 2021 was GBP1,410,000. This reflected managements
best estimate at the time of the earn-out payments that would
be required to be settled in relation to FY21, FY22 and FY23.
During the preparation of these consolidated financial statements,
management concluded the continued underperformance of TradeFlow
compared to the forecast for the year ended 31 December 2022 (included
in the independent valuation report prepared for the purposes
of the Acquisition) resulted in the FY22 acquisition related earn-out
targets of TradeFlow not being achieved. This led the Directors
to revise their IFRS 2 judgements in connection with the FY22
acquisition related earn-out payments and the likelihood of FY23
acquisition related earn-out targets being met is now considered
to be remote.
As a result the Directors revised their IFRS 2 judgements in respect
of the acquisition related earn-out payments to be made in connection
with the FY22 and FY23 revenue targets of TradeFlow. This resulted
in an amount of GBP833,000 being reversed from the share-based
payment reserve in relation to the FY22 and FY23 acquisition related
earn-out payments. As the FY21 acquisition related earn-out payment
was settled during the current financial year, an additional amount
was added to the share-based payment reserve of GBP172,000 which
covered the amounts to be recognised in FY22 in line with the
estimated vesting date of March 2022. The net amount that was
recognised in the income statement during the year ended 31 December
2022 was GBP710,000. As this relates to the TradeFlow operations,
it has been recognised through the loss from discontinued operations
in the current year.
The settlement of the FY21 acquisition related earn-out payment
occurred in July 2022 when the Group had sufficient equity headroom
to issue the Tom James and John Collis, the directors of TradeFlow,
with 213,525 of new ordinary shares. The fair value of the FY21
acquisition related earn-out payments that was recognised in the
year ended 31 December 2021 was GBP699,000. At the point this
was settled in shares, the relevant share-based payment reserve
was released and the corresponding increase in share capital and
share premium was recognised.
Employee share scheme awards
On 31 October 2022, the Group awarded an LTIP conditional on performance
conditions, being the achievement of specified Total Shareholder
Return ("TSR") (market condition) performance, as well as continued
employment. The TSR performance related to a three year period
over the 2022, 2023 and 2024 financial years and the required
TSR performance is set out in the table below with the adjusted
share price measurement period being the average closing mid-market
price of a share over a three month period ending on the last
dealing day of the performance period:
Adjusted share price Percentage of TSR award
per share vesting
Below 0.6945 pence 0%
------------------------
Equal to 0.6945 pence 25%
------------------------
1 penny or greater 100%
------------------------
Vesting is on a straight-line basis between target levels.
The vesting date of these share awards is 31 October 2025, and
the continued employment covers up until this date. The share
awards issued to the Chief Executive Officer are subject to an
additional 2 years holding period following the vesting date.
For those share schemes with market related vesting conditions,
the fair value is determined using the Monte Carlo model at the
grant date. The following table lists the inputs to the model
used for the awards granted in the year ended 31 December 2022
based on information at the date of grant:
LTIP awards (granted on 31 October TSR element
2022)
Share price at date of grant 0.08 pence
-------------
Award price 0.002 pence
-------------
Volatility 116.38%
-------------
Life of award 3 years
-------------
Risk free rate 3.34%
-------------
Dividend yield 0%
-------------
Fair value per award 0.0245 pence
-------------
The additional holding period applicable to the share awards issued
to the Chief Executive Officer have been valued using the Finnerty
model. The following table lists the inputs to the model used
for the awards granted in the year ended 31 December 2022 based
on information at the date of grant:
LTIP awards (granted on 31 October TSR element
2022) additional
holding period
Share price at date of grant 0.08 pence
----------------
Award price 0.08 pence
----------------
Volatility 116.73%
----------------
Life of holding period 2 years
----------------
Risk free rate 3.60%
----------------
Dividend yield 0%
----------------
Fair value per award with holding period 0.0208 pence
----------------
These awards will be equity-settled by award of ordinary shares.
The total share-based payment charge recognised in the consolidated
income statement for the year ended 31 December 2022 is GBP11,000
(2021: nil). As all social security charges with respect to the
share awards will be the responsibility of the employee, no expense
has been recognised by the Group in respect of these charges.
The following table summarised the movements in the number in
share awards issued by the Company: 2022 2021
Outstanding at 1 January - -
------------ -----
Conditionally awarded in year 874,783,094 -
------------ -----
Exercised - -
------------ -----
Forfeited or expired in year - -
------------ -----
Outstanding at 31 December 874,783,094 -
------------ -----
Exercisable at the end of the year - -
------------ -----
All of the outstanding share awards as at 31 December 2022 related
to the share awards issued on the 31 October 2022.
27 Discontinued Operations
During the second half of 2022, the Directors began the process
of the TradeFlow Restructuring, and as detailed in notes 2 and 3,
the Board considered the TradeFlow operations meet the criteria to
be classified as held for sale at 31 December 2022 in accordance
with IFRS 5 ("Non-current Assets Held for Sale and Discontinued
Operations"). This is due to the fact that as at this date the
details of the TradeFlow Restructuring had all been agreed in
principle between the parties and was expected to be completed post
year end together with the publication of the 2022 Annual Report
and Accounts. As a result the TradeFlow operations were available
for immediate sale in its present condition and it was highly
probably that that sale would be completed at 31 December 2022.
With the classification as discontinued operations, the TradeFlow
operations have been excluded from the segmental reporting note
(note 3).
Further to the TradeFlow Restructuring activities, on the 24
March 2023, that the TradeFlow Directors, being Tom James and John
Collis, had provided written notice to the Board of their intention
to exercise their rights to buy back 100% of the share capital of
TradeFlow, pursuant to certain earn-out arrangements entered into
in connection with the Company's acquisition of TradeFlow (the "Buy
Back"), the completion of which was announced on 6 July 2021. As a
result of the exercise of the Buy Back, the details of the
TradeFlow Restructure, that had been agreed in principle prior to
year end, now need to be renegotiated, and a new independent
valuation of the TradeFlow operations needs to be completed. Given
the proximity of this Buy Back announcement to the date of
publication of these consolidated financial statements, details of
the Buy Back are still being considered and finalised as at the
date of these financial statements.
The results of the TradeFlow operations for the year are
presented below:
2022 2021
GBP000 GBP000
Revenue 629 259
-------- --------
Administration expenses (1,705) (697)
-------- --------
Other operating income 22
-------- --------
Operating loss before acquisition
relation costs and impairment
charges (1,054) (438)
-------- --------
Transaction costs (note 25) - (2,009)
-------- --------
Amortisation of intangible assets
arising on acquisition (note 25) (846) (391)
-------- --------
Acquisition related earn-out payments
(note 26) 710 (1,410)
-------- --------
Impairment charges (note 13) (765) (800)
-------- --------
Operating loss (1,955) (5,048)
-------- --------
Finance costs (refer below) (356) (86)
-------- --------
Loss before tax (2,311) (5,134)
-------- --------
Deferred tax credit (note 11) 144 67
-------- --------
Loss for the year (2,167) (5,067)
-------- --------
The major classes of assets and liabilities of the TradeFlow
operations as held for sale as at 31 December 2022 are as
follows:
31 December
2022
GBP000
Assets
------------
Intangible assets (note 13) 6,283
------------
Tangible assets 4
------------
Trade and other receivables 101
------------
Contract assets 132
------------
Cash and cash equivalents 324
------------
Assets of disposal group held
for sale 6,844
------------
Liabilities
------------
Trade and other payables 429
------------
Long term borrowings (refer below) 3,171
------------
Deferred tax liability (note 11) 960
------------
Liabilities of disposal group
held for sale 4,560
------------
Net assets 2,284
------------
The net cash flows from the TradeFlow operations were as
follows:
2022 2021
GBP000 GBP000
Net cash flows from operating
activities (1,228) (387)
-------- --------
Net cash flows from investing -
activities (1)
-------- --------
Net cash flows from financing -
activities 1,517
-------- --------
Net cash inflows/(outflows) 288 (387)
-------- --------
Financial instruments
Financial assets
Carrying Fair value
value
---------- ---------------
As at 31 As at 31
December December 2022
2022
---------- ---------------
GBP 000 GBP 000
---------- ---------------
Financial assets at amortised
cost:
---------- ---------------
Cash and cash equivalents 324 324
---------- ---------------
Trade receivables 1 1
---------- ---------------
Other receivables 29 29
---------- ---------------
354 354
---------- ---------------
Financial liabilities
Carrying Fair value
value
--------------- ---------------
As at 31 As at 31
December 2022 December 2022
--------------- ---------------
GBP 000 GBP 000
--------------- ---------------
Financial liabilities at
amortised cost:
--------------- ---------------
Loan notes - -
--------------- ---------------
Long-term borrowings 3,171 3,171
--------------- ---------------
Trade payables 6 6
--------------- ---------------
Other payables 196 196
--------------- ---------------
3,372 3,372
--------------- ---------------
TradeFlow long term borrowings
On 1 April 2022, TradeFlow settled the outstanding unsecured
loan notes earlier than the original maturity date of 23 October
2023. This involved the settlement of the principal amount of
USD$1,700,000, the additional redemption premium cost of USD
$300,000 and accrued interest of USD $100,000. These loan term
borrowings were replaced by a new long term loan facility, with the
same third party, for USD $3,800,000, which has a maturity date of
31 March 2026. The new long term borrowings bears a simple fixed
interest rate of 7.9% per annum and has an additional redemption
premium cost of USD$200,000 which is payable at the time the
principal is repaid. In accordance with IFRS 9 ("Financial
Instruments") the new long term loan facility resulted in a
substantial modification to the previous loan note facility.
Both the unsecured loan notes and the new loan facility include
a redemption premium cost which is payable together with the
settlement of the principal amount of the facility. This redemption
premium cost is recognised over the expected life of the facility
using the effective interest rate method. Due to the early
settlement of the unsecured loan notes this resulted in the
unrecognised portion of the redemption premium cost being
accelerated. This contributed an additional finance cost of
GBP128,000 during the year ended 31 December 2022.
As at 31 December 2022, the Group has recognised outstanding
monthly accrued interest on the new long term loan facility of
GBP186,000 within trade and other payables. An additional amount of
GBP30,000 relating to the amortisation of the redemption premium
cost has been recognised as part of the unsecured loan balance at
31 December 2022.
28 Related Party Transactions
During the year to 31 December 2022, the following are treated
as related parties:
Alessandro Zamboni
Alessandro Zamboni is the Chief Executive Officer of the Group
and is also the sole director of The AvantGarde Group S.p.A as well
as holding numerous directorships across companies including
RegTech Open Project S.p.A. Both of these entities are related
parties due the following transactions that took place over the
current or prior financial year.
The AvantGarde Group S.p.A ("TAG") and its subsidiaries
As at 31 December 2022 TAG held 22.5% of the Company's total
ordinary shares issued in Supply@ME Capital plc (as at 31 December
2021: 35.3%).
As announced in the RNS issued on 24 December 2020, 1AF2 S.r.l.
and TAG previously merged. Alessandro Zamboni was also a director
of 1AF2 S.r.l. During 2020, the Group entered into an origination
contract with 1AF2 S.r.l. in connection with the identification of
potential client companies. Under this origination contract it was
the related party's responsibility to carry out due diligence
services. However, given the Group already had this expertise they
chose to contract with the Group to perform the due diligence
services on their behalf.
This specific contract stipulated a fee to cover the performance
of due diligence services for a specific number of clients. This
fee was paid at the date the contract was signed. As such, the fees
received in advance were held on the balance sheet as deferred
income, and the revenue was recognised in line with the completion
of each of the due diligence reviews. During the period ended 31
December 2022, nil (period ended 31 December 2021 GBP175,000) of
the Group's revenue related to client companies originated by TAG
(previously 1AF2 S.r.l) as referred to above, and for which the
Group was contracted to carry out due diligence services. This
revenue was recognised in line with the Group's revenue recognition
policy set out in note 2.
In addition to the above, following the reverse takeover in
March 2020, the Group entered into a Master Service Agreement with
TAG in respect of certain shared service to be provided to the
Group. During the period ended 31 December 2022, the Group incurred
expenses of GBP70,000 (period ended 31 December 2022: GBP129,000)
to TAG in respect of this agreement.
Following the above transactions with TAG the Group has a net
amount receivable of GBP9,000 as at 31 December 2022 (net amount
payable of GBP64,000 as at 31 December 2021).
The TAG Group includes other companies which the Group had
entered into transactions with. These companies include the Future
of Fintech S.r.l. and RegTech Open Project S.p.A ("RTOP"), a
regulatory technology company focussed on the development of an
integrated risk management platform for Banks, Insurance Companies
and Large Corporations. Alessandro Zamboni is also the sole
director of both these companies.
In July 2022, the Company entered into an agreement with RTOP,
pursuant to which RTOP was engaged to build and create a number of
modules for the Company, including "data factory" (i.e., data
ingestion and business rule application), and, during the year
ended 31 December 2022, GBP270,000 has been paid by the Company to
RTOP pursuant to that agreement. As at 31 December 2022 there is an
outstanding amount accrued by the Group of GBP58,000 to RTOP in
relation to this specific agreement.
As at 31 December 2021 there is an outstanding amount owed by
the Group of GBP5,000 to RTOP in relation historical amounts owing
for regulatory technology professional services provided to the
Group.
As at 31 December 2022 there were no outstanding amounts between
the Group and Future of Fintech as the amount that had been
outstanding had been fully provided against (31 December 2021:
amount owed to the Group of GBP6,000 in relation to severance pay
accrued by former employees which had been transferred to the
Group).
Eight Capital Partners Plc
David Bull is an Independent Non-Executive Director and audit
committee chair was the CEO of Eight Capital Partners PLC from 22
June 2021 until 12 August 2022. Following the reverse takeover in
March 2020, the Company entered into a Master Service Agreement
with Eight Capital Partners Plc in respect of certain shared
service to be provided to the Group. During the year, this
agreement was terminated and the Group paid GBP3,000 (2021:
GBP72,000) to Eight Capital Partners Plc in respect of this
agreement. As at 31 December 2022 there was no amount outstanding
amount owed by the Group (31 December 2021: GBP8,000).
Westcott Hill Limited
Albert Ganyushin was appointed as the Independent Chair of the
Company on 6 June 2022. Albert is also a director of Westcott Hill
Limited. Prior to his appointment Albert carried out a strategic
review of the Group focusing on the long-term business objectives
and its governance requirements. This strategic review was
contracted by the Company with Westcott Hill Limited and the Group
recorded an expense of GBP12,000 in relation to this review. As at
31 December 2022 there was no amount outstanding amount owed by the
Group (31 December 2021: nil).
29 Controlling party
At 31 December 2022 the Directors do not believe that a
controlling party exists.
30 Subsequent events
Board restructuring
On 15 March 2023 Andrew Thomas. a Non-Executive Director at the
time, resigned from the Board of Directors of the Group in order to
focus on his other business interests.
On 16 March 2023, Alexandra Galligan was appointed to the Board
of Directors as a new independent Non-Executive Director.
On 23 March 2023 Dr Tom James and John Collis resigned from the
Board of Directors of the Group.
Shares issued post year relating to Open Offer Warrant
Conversions
-- On 10 January 2023, the Company announced the exercise of
67,471 Open Offer Warrants by certain Qualifying Shareholders, and
the issue of 67,471 Open Offer Warrant Shares.
-- On 30 January 2023, the Company announced the exercise of
1,800,019 Open Offer Warrants by certain Qualifying Shareholders,
and the issue of 1,800,019 Open Offer Warrant Shares.
-- On 2 March 2023, the Company announced the exercise of
494,481 Open Offer Warrants by certain Qualifying Shareholders, and
the issue of 494,481 Open Offer Warrant Shares.
TradeFlow Buy Back
On the 24 March 2023, that the TradeFlow Directors, being Tom
James and John Collis, had provided written notice to the Board of
their intention to exercise their rights to buy back 100% of the
share capital of TradeFlow, pursuant to certain earn-out
arrangements entered into in connection with the Company's
acquisition of TradeFlow (the "Buy Back"), the completion of which
was announced on 6 July 2021. As a result of the exercise of the
Buy Back, the details of the TradeFlow Restructure, that had been
agreed in principle prior to year end, now need to be renegotiated,
and a new independent valuation of the TradeFlow operations needs
to be completed. Given the proximity of this Buy Back announcement
to the date of publication of these consolidated financial
statements, details of the Buy Back are still being considered and
finalised as at the date of these consolidated financial
statements.
TAG unsecured Working Capital loan agreement
On the 28 April 2023, the Company and TAG entered into a fixed
term unsecured working capital loan agreement (the "TAG Working
Capital facility"). Under the TAG Working Capital facility, TAG
shall provide, subject to customary restrictions, a facility of up
to GBP2,800,000, 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 Working Capital facility shall be 1 February
2028. Any sums drawn under the Working Capital facility shall
attract a non-compounding interest rate of 10% per annum, and any
principal amount (excluding accrued interest) outstanding on 1
February 2028 shall 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.
New Equity Subscription Agreement
On the 28 April 2023, the Company and Venus Capital entered into
a new subscription agreement, pursuant to which Venus Capital
committed to subscribe for 4,500,000,000 new Ordinary Shares (the
"Subscription Shares") at GBP0.0005 per Subscription Share (the
"Subscription Agreement"). The issue of the Subscription Shares
will be over two tranches as set out below:
-- an initial tranche of 3,375,000,000 Subscription Shares for
gross proceeds of GBP1,687,500 gross (or GBP1,603,125 net of a 5%
commission chargeable by Venus Capital) expected to be admitted to
a Standard Listing and to trading on the Main Market on or around
10 May 2023; and
-- a second tranche of up to 1,125,000,000 Subscription Shares
for proceeds of up to GBP562,500 gross (or up to GBP534,375 net a
5% commission chargeable by Venus Capital), for which admission to
a Standard Listing and to trading on the Main Market may be sought
by the Company until a long stop date of 31 May 2023.
In additional to the commission chargeable by Venus Capital set
out above:
-- GBP112,500 will be paid to Venus Capital in respect of agreed
costs and expenses incurred by Venus Capital in connection with the
Subscription Agreement; and
-- New warrants will be issued to Venus at a ratio of one
warrant for every two Subscription shares issued under the
Subscription Agreement. The new warrants are each exercisable into
one new Ordinary Share at a price equal to 0.065 pence per share up
to a final exercise date of 31 December 2026
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 in
connection with the Capital Enhancement Plan have been extended
from 31 December 2025 for 12 months to 31 December 2026, through a
deed of amendment to the existing warrant instruments.
Other corporate activities
Discussions are currently ongoing with a significant creditor of
the Group regarding a reduction to the total amount owed and
included in the financial statements as at 31 December 2022 of
GBP1.0m. To date no agreement has been reached.
APPIX 2 - FINANCING
Subscription Agreement
The Company and Venus entered into an English law governed
subscription agreement dated 28 April 2023 (the "Subscription
Agreement"), pursuant to which Venus irrevocably committed to
subscribe for up to 4,500,000,000 new Ordinary Shares (the
"Subscription Shares") in aggregate at GBP0.0005 per Subscription
Share (the "Subscription Price") (the "Subscription"),
comprising:
-- an initial tranche ("Initial Tranche") of 3,375,000,000
Subscription Shares for proceeds of GBP 1,687,500 gross (or
GBP1,603,125 net of a 5% commission chargeable by Venus ("Share
Commission"), detailed below), expected to be admitted to a
Standard Listing and to trading on the Main Market on or around 10
May 2023 ("Primary Subscription Admission"), which will represent
approximately 5.63% of the number of Ordinary Shares to be in issue
on Primary Subscription Admission, at which point it is expected
that Venus will hold 11,275,000,000 Ordinary Shares equating to
18.79% of the issued Ordinary Shares to be in issue on Primary
Subscription Admission; and
-- a Secondary Tranche ("Secondary Tranche") of up to
1,125,000,000 Subscription Shares for proceeds of up to GBP 562,500
gross (or up to GBP534,375 net of Share Commission), for which
admission to a Standard Listing and to trading on the Main Market
may be sought by the Company until a long stop date of 31 May 2023
("Secondary Subscription Admission"), which will represent
approximately 1.84% of the number of Ordinary Shares to be in issue
on Secondary Subscription Admission, subject to a restriction
applicable to Venus (and any persons acting in concert with it (or
deemed or presumed to be so acting)) to remain below the 30%
mandatory bid threshold under Rule 9. [i]
Pursuant to the Subscription Agreement, the Company shall pay
GBP112,500 to Venus in respect of agreed costs and expenses
incurred by Venus in connection therewith.
The Company has undertaken with Venus that it will not before
the first anniversary of the Subscription Agreement allot, issue or
agree (conditionally or otherwise) to allot or issue, any new
shares or other securities convertible or exchangeable into shares
save pursuant to Subscription Agreement or pursuant to its existing
obligations to do so in relation to exercise of outstanding
warrants, earn-out obligations and staff incentive schemes .
The Subscription Shares will, on issue, rank pari passu in all
respects with the Existing Ordinary Shares.
Pursuant to the Subscription Agreement, the Company gave certain
customary representations, warranties and undertakings in favour of
Venus, and Venus provided a customary sanctions confirmation to the
Company.
Venus does not have any statutory right of withdrawal upon the
publication of any supplementary prospectus to the Prospectus dated
3 October 2022.
The Subscription is not being underwritten.
The Subscription Shares were not contemplated by the Prospectus
and are therefore an additional issue of Ordinary Shares that was
not known at the time of the publication of the Prospectus.
Venus Commission and Fee Letter
Subject to an English law governed letter agreement between the
Company and Venus dated 28 April 2023 (the "Venus Commission and
Fee Letter"), the Company agreed in connection with the structuring
of the Subscription to pay to Venus:
-- a Share Commission equal to 5% of the aggregate subscription
price at which the Subscription Shares are issued, to the extent
issued; and
-- to the extent that the Company decides that it does not
require any portion of the proceeds from the Secondary Tranche ,
the Company shall be required to pay Venus a break fee of GBP56,250
or the pro rata proportion thereof.
New Warrant Instrument
Pursuant to a warrant instrument executed by the Company as a
deed poll on 28 April 2023 (the "New Warrant Instrument"), the
Company agreed to issue up to 1,687,500,000 warrants to Venus in
respect of the Initial Tranche and up to 562,500,000 warrants to
Venus in respect of the Secondary Tranche (if applicable) (the "New
Warrants").
The New Warrants are each exercisable into one new Ordinary
Share ("New Warrant Shares") at a price equal to 0.065 pence per
share up to a final exercise date of 31 December 2026.
The New Warrants are freely transferrable.
Definitions
Unless the context requires otherwise, each of the following
expressions has the following meanings in this section entitled
"New Warrant Instrument":
" Allotment Date " the date of the allotment and issue of any New Warrant Shares subject to a notice of
exercise
delivered to the Company or receipt by the Company in cleared funds of the aggregate
Subscription
Price, whichever is the later.
" Certificate " a certificate evidencing the Subscription Rights for the time being vested in the relevant
Warrant Holder in the form, or substantially in the form, set out in the New Warrant
Instrument.
" Conditions " the terms and conditions attached to the New Warrants set out in the second schedule to the
Certificate, as the same may from time to time be altered in accordance with the provisions
of this New Warrant Instrument.
" Final Exercise Date " 31 December 2026.
" Notice of Exercise " a notice of exercise of a New Warrant in the form set out in the first schedule to the
Certificate.
" Special Resolution " a resolution passed at a meeting of the Warrant Holders by a majority of not less than 75%
of the votes cast upon a show of hands or, if a poll is demanded, by a majority of not less
than 75% of the votes cast on a poll.
" Subscription Period " the period from the date of issue of the New Warrants until the earlier of the date that no
further Subscription Rights are exercisable or the Final Exercise Date.
" Subscription Price " 0.065 pence per New Warrant Share, being the price which the relevant Warrant Holder is
required
to pay the Company on subscription of a New Warrant Share, fully paid, upon exercising the
Subscription Rights.
" Subscription Rights " the rights for the time being conferred by the New Warrants to subscribe for New Warrant
Shares
which are constituted by virtue of the provisions of the New Warrant Instrument.
" Warrant Holder " in relation to a New Warrant the person in whose name such New Warrant is registered for
the
time being in the Warrant Register.
" Warrant Register " the register of persons for the time being entitled to the benefit of the Warrants to be
maintained
pursuant to the provisions of the New Warrant Instrument.
Constitution and form of the New Warrant
The New Warrant Instrument confers the right on the Warrant
Holder to exercise each New Warrant in cash at the Subscription
Price for one New Warrant Share at any time during the Subscription
Period.
Pursuant to the New Warrant Instrument, no application will be
made for the New Warrants to be listed or dealt on any recognised
investment exchange (as that term is defined in FSMA) .
Certificates
The Company shall maintain the Warrant Register in accordance
with the conditions of the New Warrant Instrument. Entitlement to
the Subscription Rights and other rights attaching to the New
Warrants shall be evidenced by the issue to the relevant Warrant
Holder of a Certificate. Where a Warrant Holder has transferred, or
exercised its Subscription Rights in respect of, some of the New
Warrants comprised in a Certificate only, it shall be entitled to
receive a new Certificate for the balance of such New Warrants.
Subscription Price
The Subscription Price for each Warrant Share shall be 0.065
pence, which shall not be subject to any adjustment.
Exercise
Subscription Rights shall be exercisable at any time from time
to time during the Subscription Period in whole or in part or
parts.
The exercise of Subscription Rights shall be effected by the
delivery to the Registrars of the original Certificate and a duly
completed Notice of Exercise and the requisite remittance of the
Subscription Price. Once lodged, a Notice of Exercise will be
irrevocable except with the consent of the Company. Compliance must
also be made with any statutory requirements for the time being
applicable.
The date of the allotment and issue of any New Warrant Shares
subject to a Notice of Exercise shall be the Allotment Date.
Within 5 Business Days of delivery to the registrars of a valid
Notice of Exercise for less than the number of New Warrants the
Warrant Holder holds, as evidenced by the accompanying Certificate,
the Registrars will issue the Warrant Holder with a new Certificate
for the balance of New Warrants not subscribed for.
Each New Warrant will immediately be cancelled once the
Subscription Rights attaching thereto have been exercised and New
Warrant Shares allotted pursuant to such exercise.
New Warrant Shares allotted will be credited as fully paid and
rank pari passu in all respects with the Ordinary Shares, save
that, as is customary, they will not rank for any dividends or
other distributions declared in respect of a record date falling on
or before the Allotment Date.
If, at the time of issue of the New Warrant Shares, the Ordinary
Shares (or any of them) are quoted on the Official List of the FCA
or permission has been granted for dealings therein on any other
recognised stock exchange in any part of the world, the Company
will apply to such body for permission to deal in or for quotation
or admission of such New Warrant Shares and shall use its
reasonable endeavours to secure such permission, quotation or
admission, as the case may be.
Any Subscription Rights not exercised prior to the expiry of the
Subscription Period and the New Warrants attached to such
Subscription Rights will lapse and terminate immediately on such
expiry without further notice and shall be of no further force or
effect whatsoever.
Winding up
If an effective resolution is passed on or before the last day
of the Subscription Period for the voluntary winding up of the
Company, then the Company shall give notice to the Warrant Holders
stating that such a resolution has been passed and a Warrant Holder
shall be entitled at any time within three months after receipt of
such notice to be treated as if such Warrant Holder had,
immediately before the date of passing of the winding up
resolution, exercised such Warrant Holder's New Warrants.
The Warrant Holder shall be entitled to receive out of the
assets which would otherwise be available in the liquidation to the
Shareholders such an amount receivable out of the assets which
would otherwise be available in the liquidation to the Shareholders
had the Warrant Holder been a holder of and paid for the Ordinary
Shares to which the Warrant Holder would have become entitled by
virtue of such exercise, after deduction from such sum an amount
equal to the moneys which would have been payable in respect of
such shares if the New Warrants had been exercised.
The right to exercise the New Warrants will not be permitted in
the case of a voluntary winding up for the purpose of
reconstruction, amalgamation or merger on terms sanctioned by a
Special Resolution of the Warrant Holders in which case the Warrant
Holders will be entitled to a substituted warrants of the value of
the New Warrant immediately prior to such voluntary winding up.
Takeovers
If at any time an offer or invitation is made by the Company to
the Shareholders for the purchase by the Company of any of its
Ordinary Shares, the Company shall simultaneously give notice
thereof to each Warrant Holder who shall be entitled, at any time
whilst such offer or invitation is open for acceptance, to exercise
its Subscription Rights to the extent that such rights have not
been exercised or lapsed prior to the record date of such offer or
invitation so as to take effect, in so far as is reasonably
practicable, as if it had exercised its rights immediately prior to
the record date of such offer or invitation.
If at any time an offer is made to all Shareholders (or all
Shareholders other than the offeror and/or any company controlled
by the offeror and/or persons acting in concert with the offeror)
to acquire the whole or any part of the issued share capital of the
Company and the Company becomes aware that as a result of such
offer the right to cast a majority of the votes which may
ordinarily be cast on a poll at a general meeting of the Company
has or will become vested in the offeror and/or such persons or
companies as aforesaid. Further, to the extent that any
Subscription Rights not been exercised within one month after such
offer shall lapse and no longer be exercisable.
Transfer and transmission of New Warrants
Each New Warrant will be registered and will, subject to
applicable laws or regulations, be transferable by instrument of
transfer in any usual or common form.
The provisions and restrictions governing transfer of Ordinary
Shares in the Articles shall apply to the transfer of New Warrants,
and accordingly no transfer of New Warrants may be registered
unless a transfer of Ordinary Shares would be permitted. When a
Warrant Holder transfers part only of its holding of the New
Warrants the old certificate shall be cancelled and a new
certificate for the balance of such New Warrants issued without
charge.
No beneficial interest in any New Warrant shall be disposed of
without the presentation for registration of a transfer and
certificate in respect of such New Warrant in accordance with these
particulars.
Modification of rights
A modification of the New Warrant Instrument including all or
any of the rights attached to the New Warrants (including the
Subscriptions Rights) therein may from time to time be altered or
abrogated. Such modifications may only be effected by way of a deed
poll executed by the Company and save in the case of a modification
of a minor nature, with the prior sanction of a Special Resolution
of the Warrant Holders.
Deed of Amendment to Venus Warrant Instrument
Pursuant to a deed of amendment to the Venus Warrant Instrument
executed by the Company as a deed poll on 28 April 2023 (the "Deed
of Amendment to the Venus Warrant Instrument"), the Company
committed to extend the final exercise date of all outstanding
8,175,000,000 Venus Warrants from 31 December 2025 for 12 months to
31 December 2026.
Pursuant to the terms of the Venus Warrant Instrument, holders
of the Venus Warrants received the Deed of Amendment to the Venus
Warrant Instrument in accordance with paragraphs 17 and 18 of
Schedule 3 of the Venus Warrant Instrument, and provided a written
special resolution confirming, inter alia, agreement to the
extension of the final exercise date of all outstanding
8,175,000,000 Venus Warrants from 31 December 2025 for 12 months to
31 December 2026.
The Company shall in due course convene a general meeting of
holders of Open Offer Warrants in order to seek a special
resolution (i.e., a resolution by a majority of not less than 75%
of the votes cast upon a show of hands or, if a poll is demanded,
by a majority of not less than 75% of the votes cast on a poll) to
approve the extension of the final exercise date of all outstanding
268,985,037 Open Offer Warrants from 31 December 2025 for 12 months
to 31 December 2026.
TAG Unsecured Working Capital Loan Agreement
On 28 April 2023, the Company and TAG entered into an English
law governed fixed term unsecured working capital loan agreement,
cast as a deed, which comprises a material related party
transaction for the purposes of DTR 7.3 and was, accordingly, voted
upon by the independent Directors (excluding Alessandro Zamboni,
who constituted a "related party" (as such term is defined in
IFRS)) (the "TAG Unsecured Working Capital Loan Agreement"), and
such independent Directors consider such material related party
transaction in respect of the TAG Unsecured Working Capital Loan
Agreement to be fair and reasonable from the perspective of the
Company and its Shareholders who are not a related party.
Pursuant to the TAG Unsecured Working Capital Loan Agreement,
TAG shall provide, subject to customary restrictions, a facility of
up to GBP 2,800,000 to cover the Company's interim working capital
needs in tranches up to 31 January 2024 (the "TAG Unsecured Working
Capital Loan Facility" and, together with the Subscription, and the
entry into the Venus Commission and Fee Letter, the New Warrant
Instrument, the Deed of Amendment to the New Warrant Instrument,
the "Financing").
The due date for repayment by the Company of amounts (if any)
drawn under the TAG Unsecured Working Capital Loan Agreement shall
be 1 February 2028. Any sums drawn under the TAG Unsecured Working
Capital Loan Agreement shall attract a non-compounding interest
rate of 10% per annum, and any principal amount (excluding accrued
interest) outstanding on 1 February 2028 shall attract a
compounding interest rate of 15% per annum thereafter.
Pursuant to the TAG Unsecured Working Capital Loan Agreement,
the Company gave certain customary warranties and undertakings to
TAG, and TAG gave certain customary warranties to the Company.
[i] In each case, assuming that no additional Ordinary Shares
are issued by the Company between the date of this Supplementary
Prospectus and Primary Subscription Admission or Secondary
Subscription Admission, as applicable
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END
FR SEDFFAEDSEIL
(END) Dow Jones Newswires
April 28, 2023 09:51 ET (13:51 GMT)
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