TIDMSYME
RNS Number : 3115N
Supply @ME Capital PLC
31 May 2022
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UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014
WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN UNION
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31 May 2022
Supply@ME Capital plc
(The "Company" or "SYME")
2021 Annual Financial Report
Supply@ME Capital plc, the fintech business which provides an
innovative Platform for use by manufacturing and trading companies
to access Inventory Monetisation(c) solutions enabling their
businesses to generate cashflow, announces its final results for
the year ended 31 December 2021.
The 2021 Annual Financial Report has been uploaded and is
available on the National Storage Mechanism and is also available
on the Company's website, www.supplymecapital.com .
A hard copy version of the full Annual Report and Accounts for
the year ended 2021 will be dispatched to those shareholders who
have elected to receive paper communications in due course and a
PDF version will be published on the Supply@ME website next
week.
Consolidated Financial Summary
2021 2020
GBPm GBPm
Total revenue 0.5 1.1
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Gross (loss)/profit (0.3) 0.4
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Adjusted operating
loss(1) (4.4) (1.4)
------- ------
(Loss) before tax (12.2) (2.8)
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Total assets 10.6 3.3
------- ------
Net (liabilities) (1.4) (0.5)
------- ------
(1) Adjusted operating loss is the operating (loss) before
deemed cost of listing, acquisition related costs and impairment
charges.
Operational Highlights
In-transit monetisation
---------------
2021 Q1 2022
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Net growth in capital under
management 4% 17%
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The increase in the net growth in Q1 2022 is a combined increase
from the existing TradeFlow USD and EURO funds. The movement was
due to the volatility seen in other asset classes over this period,
and the removal of travel restrictions and COVID-19 controls in
many parts of the world, both of which resulted in a rise of new
investors looking for fixed income alternative investments.
Warehoused Goods monetisation
----------
Pipeline GBP164.8m
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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).
Alessandro Zamboni, CEO, Supply@ME Capital Plc, said : "2021 was
a formative year for Supply@ME. Across the Group, we have built
significant value into the business by way of technological
improvements, recruiting new talent, strengthening our internal
processes and the acquisition of TradeFlow Capital Management Ltd.
Achieving these important milestones has laid the foundations for
sustained growth going forward."
David Bull, Non-Executive Director, Supply@ME Capital Plc, said:
"Throughout 2021, the entire team at Supply@ME worked tremendously
to seize opportunities and further progress the business, despite
the challenging conditions wrought by a global pandemic followed by
a supply chain crisis. The numbers in 2021 are reflective of a
period of building, testing, learning and futureproofing. Now, with
an enhanced leadership team and significant investment into the
proprietary business model and platforms, I look forward to the new
dimension the business will add to the global supply chain finance
landscape as it continues to grow."
Notes
Supply@ME Capital PLC and its operating subsidiaries (together
the "Group") provide an innovative fintech platform (the
"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
warehouse goods waiting to be sold to end-customers or
goods/commodities 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 warehouse goods monetisation.
This program will be focused on creditworthy companies and not
those in distress or otherwise seeking to monetise illiquid
inventories.
Contacts
Alessandro Zamboni, CEO, Supply@ME Capital plc,
investors@supplymecapital.com
Paul Vann, Walbrook PR Limited, +44 (0)20 7933 8780;
paul.vann@walbrookpr.com
Brian Norris, Cicero/AMO, +44 (0)20 7947 5317;
brian.norris@cicero-group.com
Management Report
Chief Executive Officer's Statement
The need for Supply@ME, and the need for the services which this
business offers, is even greater now than when we launched on the
London Stock Exchange in 2020. 2021 was a year of global crisis and
disruption. Business confidence for many fell to new lows and the
focus was on surviving COVID-19. Supply chains have had to be
rebuilt stronger: "just in time" has given way to "just in case".
This did not happen overnight. Local driver shortages have
exacerbated global problems. Supply@ME has learnt considerably from
the experiences of the past two years, and as a result we believe
the future is very bright.
What We Built
Business confidence in 2021 stymied our progress in some areas.
Like many of our shareholders and partners, I expected us to have
completed several inventory monetisations by the year end. However,
the impact that COVID-19 had on business priorities for our
partners, and which multiple lockdowns had on the speed of decision
making, was significant. While we could not control this, our
business and offering are stronger with the benefit of additional
time and the feedback we have been able to incorporate into the
Platform. For Supply@ME, 2021 was a formative year.
We Secured Funding and Additional Investment
The proceeds from the two funding arrangements entered into
during 2021 allowed the Company to complete the acquisition of
TradeFlow (our first M&A deal), as well as to continue the
important investment into the assets of the Group, including the
intellectual property rights over the platform, and to invest in
recruiting our new leadership team. The recent Capital Enhancement
Plan, announced in April 2022, was fully subscribed by the longterm
investor Venus Capital SA ("Venus Capital") which proved that
professional investors believe in the inventory monetisation
business model. We also intend to enable existing shareholders of
the Company to acquire new ordinary shares on the same terms as
Venus Capital. This combination of retail and institutional
investment will provide the Group with both commercial and
financial support for the next phase of the Group's
development.
We Built Our Leadership Team
The Group's unwavering approach is to build a scalable business
which exemplifies the strong regulatory requirements required of a
listed company. In this regard, we believe shareholders are in good
hands thanks to the experience and dedication of our Executive
Directors, Alessandro Zamboni, John Collis and Thomas (Tom) James
and our leadership team comprising our Chief Financial Officer, our
Chief People Officer, our Group Head of Enterprise Risk Management,
our Group Head of Operations and Transformation and our Group Head
of Origination. Further information on our executive directors and
members of our leadership team can be found on page 51 and 23,
respectively, in the Company's full Annual Report & Accounts
2021. Additionally, the Company learned from, and leveraged, the
deep corporate governance experience of our previous Chairman,
James (Jim) Coyle. The Board and the Nomination committee are now
focused on evaluating potential candidates for the Chair and
Non-Executive Director positions with capabilities and experience
that will complement those of the existing executive and
Non-Executive Directors in order to future proof the Board as the
Group enters its next stage of development.
We Completed the Acquisition of TradeFlow
The addition of TradeFlow to our Group provides the ability to
offer an unrivalled inventory monetisation journey, allowing us to
offer a unique, and end-to-end, inventory monetisation journey from
exporters to importers, followed by a unique warehouse goods
monetisation service. With a broader footprint and customer base in
Singapore, TradeFlow gives us a clear launch pad for the Asian
marketplace and links to key trading hubs globally.
We Clarified the Business Model
We distinguished the pure FinTech business from the inventory
funding structure as the provider of each inventory monetisation
transaction. Details of the current business model can be found on
page 14 in the Company's full Annual Report & Accounts 2021
including those activities that are expected to be delivered by the
Group in their capacity as inventory servicer, and those that are
expected to be delivered by segregated stock (trading) companies
which will be owned by the Global Inventory Fund (the "Fund").
While the TradeFlow acquisition complemented the existing business
model, the value of what Supply@ ME has built, in terms of the
technology and talent, also became apparent. Our proprietary
Platform has an intrinsic value and has generated significant
interest from other operators, from banks to debt funders, to
improve or facilitate their own inventory backed or based
facilities. Accordingly, we launched our White-label initiative at
the end of August 2021. We have also invested heavily, both in
terms of time and resources, upgrading the underpinning
architecture and how it can avail of TradeFlow's technology within
its TradeFlow+ system. Our discussions with potential inventory
funders regarding the introduction of an equity line into the
capital structure of each inventory monetisation led to, and was
addressed by, the launch of the Fund as announced in August 2021.
This Fund can serve as an equity partner as well as on a standalone
basis. The Fund also leverages the funding structure of TradeFlow
Capital, a further benefit to, and justification for, the
acquisition.
What We Learned
As the impact of COVID-19 crystallised for many businesses, the
minds of Chief Financial Officers (CFOs) at companies of every size
have increasingly turned to how to survive and thrive in the 'new
normal'. There is a universal need to find alternative solutions to
manage the risks which the pandemic has brought about. Some of
these are obvious and indeed are the same which Supply@ME was
created to address. Businesses in every country in which we
operate, or may wish to operate, are retaining more inventory for
longer. Monetising this inventory and alleviating the increased
cost holds an obvious and growing appeal.
However, there are also new risks which have arisen and gained
prominence. Supply@ME is well placed to support businesses to find
solutions to many of these. From working on the digitisation of
operations to inventory cost optimisation and understanding client
and supplier risk, the experience of the past two years has
emphasised the depth of services which our platform can offer.
Monetisation at the core will be combined with other services to
bring us closer to our clients. There is clear evidence that the
service developed by Supply@ME offers not only a means to allow
corporates to sell goods but also a real commercial partnership
which allows our clients to better manage their data, using this to
monetise their inventory, optimise their supply chain, and so
further receive value from the same information generated.
There is much more to come, and we will continue to adopt a
'test and learn' approach. We are now eager to put these lessons
into practice.
Future Plans - Looking Ahead
There is now a new era of digitalisation and digitisation of
supply chains. The speed at which we have reached this point has
been accelerated by the recent geo-political crisis and the rise of
new technology and business paradigms (such as Web 3.0).
It is clear that corporates need to improve their processes.
They are having to set new objectives for their supply chains with
greater focus on resiliency, risk management and efficiency -
optimising inventory management and, enhancing the cash position as
a key indicator for credit evaluation. In our experience, corporate
treasurers are moving from a reactive approach to a more proactive
and dynamic view.
For in-transit transactions, we are observing progress towards a
new vision of a modernised global trade finance ecosystem, with
networks and players focussed on digitalising parts of the trade
and finance processes, providing a framework for digitally
connecting and facilitating interoperation among these networks
through sets of shared standards, processes, protocols, and guiding
principles. An integral part of this new vision is the
"interoperability layer", a global framework of standards and
policies that enables participants in the trade ecosystem to
seamlessly connect to both present and future networks.
Our Group wants to play the key role in this huge target
addressable market promoting its unique business proposition:
-- Through our Platform, as an enabler of an innovative
commercial model which allows each Corporate to manage new
strategic objectives for their supply chain management (resiliency,
cash optimisation, inventory efficiency and digitisation of the
trade process regarding both international and domestic trade
deals); and
-- For investors, generating a unique opportunity in the
alternative capital markets, presenting an attractive risk/reward
proposition within an innovative asset class aimed at supporting
the real economy.
We believe this can be achieved along global supply chains, both
during the export-to-import in-transit journey and during the
warehoused goods days-in-inventory phase, when goods are stored and
enabling CFOs to more efficiently manage the core assets of their
business.
This can be realised and scaled, by leveraging our unique
business model, underpinned by the technology and the market
expertise that our team has. The positive results achieved
regarding client companies' origination activities and inventory
funding routes expansion are further evidence of this.
It is fair to say the financial results for the year ended 31
December 2021 do not provide the full picture of the vast amount of
work that the Supply@ME team have undertaken to continue to develop
the Group and the Platform for future success.
Alessandro Zamboni
Chief Executive Officer and Executive Director
The Market
The traditional supply chain funding model came under acute and
intense pressure during the global pandemic. But the last two years
has reinforced the viability of Supply@ME's innovative fintech
solutions as COVID-19 and recent geo-political unrest expedited
technological advancement in areas such as treasury, risk
management and demand planning, in the face of unprecedented supply
chain disruption.
Additionally, the era of companies acting as conventional
creditors to meet the needs of the market is over. At Supply@ME, we
are building a new inventory monetisation model that gives firms
the opportunity to adopt non-credit approaches to free up digitally
value from their inventories.
Our market analysis can therefore be viewed through a number of
prisms: how CFOs will leverage digitalisation, new methods being
used by corporates to manage their resiliency, the future global
trade finance ecosystem and the alternative asset investment
industry.
The Changing Market
Large Enterprises
The role of today's CFO or treasurer has been rethought in
recent times and now encompasses a comprehensive approach to
managing enterprise liquidity. CFOs and Treasurers now place a
premium on speed and flexibility for evaluating liquidity financing
alternatives. Bank-independent technology solutions are becoming
the preferred model. Further, seamless integration with enterprise
resource planning (ERP) systems and the ability to make swift
decisions (for instance, access to financing short-term
investments) based on underlying cash positions, are now priorities
for large enterprises.
Building a new trusted data environment, which includes a
Clients ERP data transfers, the Inventory Monetisation model
invented by Supply@ME aims to create a new commercial approach to
allow CFOs and treasurers to unlock value from their inventory.
Small and Medium Enterprises (SMEs)
At the same time as Supply@ME first listed on the London Stock
Exchange, in March 2020, SMEs began to be negatively impacted by
the outbreak of the COVID-19 pandemic. According to the OECD report
Financing SMEs and Entrepreneurs 2022, over 50% of SMEs reported a
significant drop in revenue and risked being put out of business in
less than three months. However, the SME sector has rebounded, as
we emerge from the global pandemic with new lending sources
emerging as a result of government monetary policy and a renewal in
business confidence.
But it is no secret that traditional banks could be doing more
to serve the SME sector. There is a perceived lack of appetite to
lend to these businesses, with the complexity of this lending
outweighing the potential returns. Many business owners have been
pushed to dip into their personal finances or forgo debt
altogether. However, as businesses begin to bounce back from the
impact of Covid-19 and the supply chain crisis, many are looking to
invest in their operations to expedite recovery. The alternative
finance sector is growing to meet this demand. Supply@ME's
Inventory Monetisation service offers an improved alternative to
traditional financing. Supply@ME has created a new way to support
SME needs, through a unique non-credit approach.
Digital Evolution
In retrospect, the recent supply chain crisis may not have been
a matter of if, but when. The "just in time" logistics model was
always vulnerable to shock, but previous models relied on such a
shock being easily correctable or highly unlikely. Companies'
ability to forecast demand and determine how to meet it has been
further challenged by the increasingly global scope of supply
chains.
As companies begin to shift from this previous system to a more
high-tech, digitised supply chain, companies like Supply@ME have a
role to play. The unprecedented shift to new technologies forms a
cornerstone of our business model - as the digital maturity of more
companies increases, our system will slot in alongside them.
Resilience - The New Risk Management
Following the shocks to the existing supply chain structure, the
business world has begun to pivot from risk management to
resilience. McKinsey found in a 2020 survey that "just over
threequarters of respondents said they planned to improve
resilience through physical changes to their supply chain
footprints". Repeating the survey in 2021, McKinsey found "an
overwhelming majority (92 percent) said that they had done so".
The survey also revealed a shift in strategy. Many of the
companies surveyed were planning a multi-branch approach to improve
supply chain resilience. These steps included increases in the
inventory of critical products, components, and materials,
diversifying supply bases by relocating supply and production
networks. As companies shift their supply chains to this new focus
on resilience, they will need access to capital and to improve
their inventory data analytics capabilities. Supply@ME's Inventory
Monetisation service can facilitate this shift.
In-Transit Risks
The 2021 Suez Canal obstruction now seems like a minor footnote
in the issues that supply chains have faced over the last few
years, yet it highlights to the world the wider issue of in-transit
risk. The last 12 months have reminded shippers that relying on
just-in-time supply from container shipping can be risky.
Companies might begin to increase inventories and safety
buffers, both at departure and arrival ports. With this added cost,
many businesses might also realise that the funds locked up in
their inventory could be put to better use elsewhere in their
business. While the outlook for containerised logistics and global
supply chains remains uncertain, businesses can turn to in-transit
inventory monetisation to unlock the liquidity tied up with
increased stock levels.
Risk Response Strategies
The frequency and magnitude of supply chain disruptions have
been increasing dramatically in the decade preceding the war in
Ukraine.
Executive teams have placed a new weight on key supply chain
actions, to protect their businesses in the short term and
transform their resilience over the next decade.
With the winding down of government support, companies are more
aware than ever of the need to keep track of accessible liquidity.
Financial institutions oil the wheels of trade, for example around
40 percent of global goods traded is supported by
bank-intermediated trade finance. Despite trade finance's critical
role, however, gaps in coverage have been recognized for some time,
particularly for the SMEs that serve an increasingly important role
in global trade.
This process has been exacerbated by the impact of the COVID-19
pandemic and is expected to continue without high-level
intervention. As trade and supply chains grow more complex, SMEs
face greater challenges in accessing liquidity.
In this regard, we think that the alternative investments market
combined with state-of-the art fintech providers can be the
solution. Supply@ME will play a key role in this space in the
coming years.
The Growth of Alternate Asset Classes
Hedge Funds
The robust growth of the hedge fund sector has continued in
2022. So far this year, taking advantage of increased economic
volatility and risk management, the hedge fund industry comfortably
outperformed the S&P Total Return Index. In 2021, according to
HFR, hedge funds delivered global annual returns of 10.3%, the
second year in succession a double-digit return was recorded.
Furthermore, total hedge fund assets now exceed $4 trillion.
Accordingly, Supply@ME's business model and inventory
monetisation services are well-suited to the hedge fund asset
class, reinforced by the opportunity to leverage TradeFlow's
experience in structuring and advising hedge funds.
Private Debt
The private debt market has also emerged from the global
pandemic in a stronger condition.
Private debt funds raised a record amount of capital with fewer,
yet larger, funds closing. Aggregate capital increased 14% in 2021
to $193.4 billion across 202 funds, down from 2020's 255 funds
closed. Indeed, there has been a notable increase in the number of
funds gathering commitments of more than $1 billion - and even as
much as $10 billion - by some of private capital's largest
managers.
Among investors surveyed by Preqin in November 2021, 36% said
they looked to private debt for a reliable income stream, while 37%
were attracted to its high risk-adjusted returns, a unique
combination across private capital.
The upsurge in private debt capital and the attractive
risk/returns projected by the funds advised by TradeFlow bode well
for Supply@ME's future performance.
Digital assets
As an investable asset, trade finance has desirable attributes,
including typically low default rates, attractive yields (compared
with traditional instruments), short-term durations and self
liquidating disposition. However, institutional investors, to date,
have not embraced at-scale trade finance as an investable asset.
Indeed, the trade finance market tends to be illiquid and
non-transparent for reasons including technology limitations -
resulting in the lack of a transparent electronic market - and
limited risk assessment expertise among institutional investors. A
key first step toward bringing liquidity to the trade finance
market has been the recent expansion of the "trade as an asset"
concept - the notion of transforming trade finance transactions
into instruments readily exchangeable on securities markets. The
model of the creation of a digital representation of assets (such
as "tokenisation") could expand the market considerably and the
Supply@ME Platform is ready to take advantage of this
opportunity.
The New Way Of Corporates To Manage Their Resiliency
Resilience: The New Risk-Management Paradigm
The discussion so far has focused on non-financial risk in a
continuously changing world. Non-financial risk is found to be
deeply embedded in corporate operations. As the 21st-century
business environment becomes ever more volatile and disruptive,
companies are beginning to question standard risk-management
approaches. The thought leaders among them are now calling for new
approaches that go beyond risk management, toward corporate
resilience. Resilience is still an emerging approach.
In a 2020 McKinsey survey, just over three-quarters of
respondents said they planned to improve resilience through
physical changes to their supply chain footprints. By 2021, an
overwhelming majority (92 percent) said that they had done so. But
the survey revealed significant shifts in footprint strategy. Last
year, most companies planned to pull multiple levers in their
efforts to improve supply chain resilience, combining increases in
the inventory of critical products, components, and materials with
efforts to diversify supply bases while localising or regionalising
supply and production networks. In practice, companies were much
more likely than expected to increase inventories, and much less
likely either to diversify supply bases (with raw material supply
being a notable exception) or to implement nearshoring or
regionalization strategies. In this regard, only 2 percent of
companies have visibility into their supply base beyond the second
tier.
In-Transit Risks: Navigating the Current Disruption in
Containerised Logistics
We believe container freight rates will remain elevated
throughout most of 2022 while the containerised logistics
disruption persists. Container demand is driven by end consumer
spending on goods, shippers' desire to continue stocking inventory,
and an economic re-opening that may shift spend back to
services.
In the short term, manufacturers may have little option when it
comes to changing their current suppliers and existing
manufacturing footprint, but in the medium term they could
cultivate alternative suppliers. Some successful strategies could
evaluate near-shoring options, or use suppliers in India and South
America that reduce exposure to the main Transpacific trade lane.
Manufacturers can also rethink product design, particularly to
limit highly customisable components that are complex to source.
Assessing products and redesigning packaging is often a quick win
and can help to improve efficiency in container space
utilisation.
Shippers can also re-evaluate their overall supply chain design
and strategy. The last 12 months have reminded shippers that
relying on just-in-time supply from container shipping can be
risky.
Companies may need to increase inventories and safety buffers,
both at departure and at arrival ports. This adds costs to the
supply chain, which may lead to broader redesigns in product
sourcing and manufacturing. While the outlook for containerised
logistics and global supply chains remains uncertain, there are
actions that shippers could consider to bolster supply-chain
resilience and aid recovery. The future may be uncertain, but
shippers' ability to react is controllable and known.
The Business Model Canvas: An unprecedent inventory monetisation
business model
The Business Model Canvas ("BMC") of the Group envisages the
unique value proposition to be "inventory monetisation
specialists", promoting, via a dedicated structure, an innovative
service model which allows corporates (our clients) across the
globe to improve their inventory management activities, freeing up
extra-value from the goods handled (such as capital locked into the
warehouse or referred to an import/export transaction, efficiencies
across the supply chain served or new sales channels). Hence, this
value proposition includes the objective of the Group to be
inventory analyst' tech-champions for both the in-transit &
warehoused goods and sides.
Key partners
-- Inventory Funders (investors in alternative asset class and Asset based Lenders ('ABLs'))
-- Asset management servicers
-- Arrangers
-- Commercial Banks
-- Insurance Companies
-- External Rating Agency
-- External technology factories & vertical components providers
Key activities
-- Inventory Monetisation servicing
-- White-label platform delivered as a service
-- Investment Advisory
Key resources
-- Our People
-- Platform - state of the art technology
-- Legal & accounting framework
Cost structure
-- People
-- Technology - internal team and external partners
-- Accounting and Legal - inventory monetisation is a unique service model
-- PR and Marketing
-- Administrative expenses such as local subsidiaries
Revenue streams
-- "Captive" inventory monetisation platform servicing
(generated through the use of the Platform to facilitate inventory
monetisation transactions and to carry out origination and due
diligence services)
-- "White-label" inventory monetisation platform servicing
(generated through delivery to Banks and Funds of the use of the
Platform following a software as a service model)
-- Investment Advisory fee (generated by TradeFlow in its
capacity as investment advisor to the funds)
Value proposition
-- Inventory monetisation scientists non-credit approach
alternative funding routes end to end experience - import/ export
and warehoused goods
-- Inventory analysis tech champions
-- New asset class to invest
Customer relationships
-- Inventory management optimisation
-- Improving supply-chain risk management & working capital efficiency
Customer Segments
-- Import/export businesses
-- SME/Mid-Cap
-- Commercial Banks customer base (including Large Corporates)
-- International Associations/ Trade finance marketplaces
Channels
-- Originators (eco-system of external sales force/ introducers)
-- Corporate finance advisers
-- Commercial Bank
The BMC of the Group also considers another key player: the
Inventory Funders. By providing, a dedicated, regulated structure
aimed at aligning each Inventory Monetisation transaction with
corporates, we believe that Inventory Funders are now seeing the
investment as a new asset class - complex but investable,
considering the risk/reward projected. Our prospective Inventory
Funders are typically investors with appetite for a new asset class
or alternative investment opportunities, being debt and credit
funds, hedge funds or asset-based lenders.
The other key partners are, effectively, the rest of the
eco-system supporting the execution of each inventory monetisation
transaction (in-transit & warehoused goods). We see an
important role for Commercial Banks, considering the potential
interest of these type of banks in our White-label proposition
(where the bank uses the Platform to deliver inventory-backed
financial products - studied and developed by themselves - directly
to their clients).
The key activities delivered: inventory monetisation platform
providers and asset management experts
Our activities are split between those of Asset Managers and the
FinTech service based business, and the activities delivered
respectively by the subsidiaries of Supply@ME Capital plc, whether
warehoused inventory monetisation in Italy or the United Kingdom,
or investment advisory provided by TradeFlow.
In more detail, the Inventory Monetisation transactions are
delivered - through a global programme sponsored by the Company -
by segregated, regulated alternative funds which use fund
administration services provided by APEX Group(1) .
As of today, the Global Inventory programme has 4 funds (SP -
segregated portfolios):
-- In transit goods transactions:
o CEMP - USD Trade Flow Fund SP (in-transit transactions
denominated in USD)
o CEMP - Euro Trade Flow Fund SP (in-transit transactions
denominated in EUR)
-- Warehoused goods transactions(2) :
o Global Inventory Fund 1 SP (transactions regulated by the
Italian law)
o Global Inventory Fund 2 SP (transactions regulated by the UK
and UK common law).
(1) Apex Group - Single Source Financial Solution Provider.
(2) As announced by the Company in the RNS of 6 August 2021.
We distinguish the activities of the servicers (TradeFlow -
acting as an Investment Advisory Company(3) using its unique ICT
system(4) - and local Supply@ME subsidiaries - acting as Inventory
Servicers leveraging our Platform) and the Funders. Each Inventory
Monetisation transaction can involve multiple types of investors
depending on the risk appetite:
-- Equity investors (typically Hedge Fund and Family Offices)
may be interested in direct subscription to the 4 Funds. The Funds
can be aligned to each inventory monetisation transaction (whether
in-transit or warehoused goods) and, additionally, achieve leverage
through the debt issuance programme as below;
-- Debt Investors (whether Debt and Credit Funds, Asset Based
Lenders, or Family Offices) may be interested to subscribe:
o The Senior Notes programme of the two active TradeFlow Funds.
In this regard, the Company announced in the RNS published on 9
August 2021, that the TradeFlow Capital funds received. Leveraging
the global investor network of the Company, the funds have already
secured investors subscribing for the full, initial $40 million
issuance);
o The notes/loans borrowed directly by the so named "Stock
(trading) Companies" established for each jurisdiction in order to
deploy the inventory - warehoused goods - monetisation
transactions
-- For investors interested in a Shariah compliant asset class,
the Global Inventory programme will launch a dedicated compartment
arranged by Reyl-Intesa Sanpaolo(5) , as announced by the Company
in the RNS of 23 November 2021
(3) TradeFlow is a Registered Fund Management Company regulated
by the Monetary Authority of Singapore and Member of the
Alternative Investment Management Association.
(4) TradeFlow is a Corporate Member of the Singapore FinTech
Association and FinTech Certified by the SFA.
(5) REYL Innovative Banking.
The role of the Platform is essential with reference to the
funding structure represented above. In this regard, Inventory
Funders (in particular Commercial Banks and Debt and Credit Funds)
could also use the Platform to improve their self-funding strategy
(where the Inventory Monetisation service is offered directly to
the existing customer base or eligible, already identified,
prospects).
The framework above also clarifies the difference between the
role of TradeFlow and other Supply@ME subsidiaries, acting as
servicers without any direct inventory risk in their balance-sheet,
and the Funds which are the commercial counterparties of the
Corporates for each inventory monetisation transaction. In this
regard, it could be envisaged that, in order to promote the Funds
sponsored by the Company, Supply@ME Capital plc may have a minor
exposure in the Funds subscribing the shares.
Our Platform
We consider our "Platform" to be a unique combination of
software modules, exponential technology components (such as
Artificial Intelligence, Internet of Things and Blockchain),
dedicated legal and accounting frameworks and business
rules/methodologies delivered via a hybrid ICT architecture.
We firmly believe in our innovative business model, supported by
the Platform, driven by the subject matter experts of our
Group.
More specifically, the ICT architecture envisages the use of 2
cloud environments (Microsoft Azure for warehoused goods
monetisation and AWS for the in-transit model delivered by
TradeFlow) plus an external integration with distributed ledger
frameworks (in this regard, the Group has worked with SIA S.p.A. to
develop the specific software and infrastructure modules and now is
also in discussion with other blockchain global protocols.
The clients of our Platform are:
-- Global Inventory Funds and their Stock Companies;
-- Inventory Funders (acting as lenders);
-- TradeFlow Capital (acting as Investment Advisory Company of
the Funds sponsored by the Company);
-- Corporates, as commercial counterparties of the Stock Company or directly of the Funds; or
-- Banks, as White-label users of the Platform as a service
(underpinning their inventory based and/or backed financial
products directly provided by the Banks to their clients).
The Platform road map envisages that data sources have a key
role for the Platform, triggering the value-added service provided
by the Group (whether inventory data analysis or inventory
monetisation provided by the Funds sponsored by the Company).
Accordingly data ingestion services have a critical role in the
overall Platform operations. Additionally, the inventory register
and trading modules are able to produce the innovative data
analysis and support the creation of the security package in favour
of the inventory funders involved in each Inventory
Monetisation.
The monitoring component of the Platform is constructed by
business rules (which support the creation of specific key risk and
performance indicators) and are expected to be underpinned by
software modules able to enable the user to visualise early
warnings, trigger inspections (to report digitally) and track the
action plan/ remediation plan agreed with the corporate client. The
Platform's road-map further envisages the adoption of IoT
frameworks in order to improve the effectiveness and the efficiency
of the monitoring and inspections activities.
TradeFlow uses a dedicated suite (TradeFlow+) made of multiple
software modules reflecting the expertise of the team in the trade
finance space, delivering a unique non-credit approach aimed at
monetising inventory in-transit (import/export transactions where
the buyer is supported to optimise its supply chain
relationship).
The high level of automation ensured by the TradeFlow+ suite
allows TradeFlow to efficiently manage its operations, leveraging
exponential technologies (such as Artificial Intelligence for the
documentation analysis during the client onboarding and the
Internet of Things to support the vessel tracking phase).
Additionally, the suite can also produce mandatory reports
regarding the performance of each import/export transaction. We
consider this to be important given the vision of the Company to
allow, in the future, third-parties operators (such as new Trade
Finance Funds or international trading desks of commercial Banks)
to adopt the suite through White-label agreements.
In this regard, the whole Platform road-map considers the
importance of the opportunity presented by the White-label service
model. Considering the market outlook and the increasing appetite
of Banks, Funds and FinTech platforms to extend their product
offering, the Group wants to play a key role in the inventory
backed/based financial product engineering also allowing new
partners to use specific components of the Platform "as a service".
However, the Inventory Monetisation facility (in transit and
warehoused goods) will remain the unique, distinct and proprietary
product of the Company.
Finally, the Group continues to study and explore opportunities
to adopt blockchain and digital tokenisation into our systems, to
support the delivery and the scalability of the business model.
Building the eco-system of partners and channels
Client company origination
Origination of client companies(1) with inventory suitable for
inventory monetisation continued steadily in our core focus regions
of Italy and the United Kingdom. Demand for the inventory
monetisation service remains strong, despite the respective
business challenges in each region as a result of COVID-19 and
global supply chain difficulties throughout 2021.
Once lockdown restrictions had begun to ease worldwide, pressure
on supply chains intensified. Heavy goods vehicle drivers were in
short supply, flight and shipping schedules were severely
disrupted, parts shortages led to goods not being produced, and
worker illness meant entire factories had to be shut down; goods
simply were not reaching their next destination on time - if at
all. No part of the supply chain was spared, and difficulties
continue to the present day.
As businesses look to recover from the pandemic, the supply
chain model has undergone a marked shift from 'just in time' goods
delivery to 'just in case', whereby companies will hold a surplus
of stock and parts just in case of future disruption. Facilitating
such a shift will require significantly more working capital. We
are readying our business to help existing and potential client
companies adapt to the new world order, underpinned by our
innovative inventory monetisation platform. As such, the expected
value of warehoused goods inventory monetisation transactions
across our Group's current global pipeline totals GBP164.8
million.(*)
(*) It is important to note that the monetary value represents
the potential value of inventory to be monetised by client
companies rather than the pipeline revenue expected to be earned by
the Group. However, this does provide a good indicator of the level
of demand for the Group's current and future services. These
pipeline numbers also do not include any client companies that have
been lost due to either failing to meet eligibility criteria or
delays in obtaining funding. A full review of the pipeline was
conducted in 2021 and some of these lost client companies can be
expected to be re-onboarded once the first inventory monetisation
has been completed.
(1) The number of companies originated refers to those with
which we were in active dialogue with and had progressed toward
inventory monetisation via our innovative platform as of 31
December 2021. The status of these companies in the origination
pipeline was either "on hold" and awaiting a match with a suitable
inventory funder, or "active" and progressed into our thorough due
diligence procedures. The final stage, once client companies with
inventory to monetise are matched with suitable funders and passed
rigorous due diligence assessments, will see client companies enter
the transaction phase.
Italy
Italy was the busiest region for potential client company
origination activity in 2021 by some margin and we originated a
total of 43 client companies. Of those, 21 companies were
considered to be active and represent approximately GBP111 million
of potential inventory ready to be monetised.
We work with a select panel of originators, or business
introducers, in Italy. The number of client companies originated
was largely due to the strength of our local relationships, having
worked closely with our panel of brokers and external advisors.
Some business was also instigated due to our growing, positive
reputation and, on some occasions, companies were introduced to
Supply@ME by client companies already in the pipeline.
United Kingdom
In the United Kingdom, we originated a total of 6 potential
client companies by the year-end, of which 4 progressed to active
status. Active client companies represented approximately GBP28
million of potential inventory to be monetised.
To note, we appointed as Group Head of Origination Nicola Bonini
to lead dedicated origination activity in the United Kingdom.
Nicola took up her role in September 2021, therefore the client
origination numbers in the United Kingdom largely represent an
exceptional effort from Nicola and her team beginning in the final
quarter of 2021.
The United Kingdom market faced a raft of challenges to ordinary
business activity, not least the disruption to trading caused by
COVID-19 and the impacts of the supply chain crisis.
Government schemes such as the Coronavirus Business Interruption
Loan Scheme (CBILS) gave a much-needed lifeline to SMEs. CBILS
provided up to GBP5 million emergency funding to help businesses
recover from lost revenue and cashflow disruption due to the
pandemic - which, in 2021, included the third national lockdown
from 6 January, with legal restrictions not lifting until 19th
July.
Against this unprecedented backdrop of uncertainty, the vast
majority of businesses suitable for inventory monetisation were not
considering alternative funding; they were focused on surviving the
pandemic, not striving for new growth.
Middle East and North Africa (MENA)
While business in Europe continues to be our core focus, GBP26
million (sterling equivalent) of client companies were originated
in the MENA region in 2021. Progress was made on a number of fronts
to lay the groundwork for future inventory monetisation
transactions in MENA jurisdictions, including the UAE, supported by
a select panel of local partners and brokers in the region.
Building on the partnership that began in 2020, Supply@ME
continued to work with iMass Investments, to support a number of
client origination and inventory funding activities, including an
agreement with Lenovo Financial Services META LLC ("LFS"). As
announced in the RNS of 11 January 2021, LFS is able to market the
Supply@ME platform to its customer base in the Middle East, Turkey
and Africa regions (excluding South Africa), as a complementary
product to LFS' existing offering.
Additionally, Supply@ME received confirmation in January 2021
that the authorisation process for the Group's Shariah-compliant
Inventory Monetisation Platform was successfully completed. Sheikh
Dr. Mohamed Elgari and Sheikh Yusuf Talal DeLorenzo in their
capacity as members of Sharia Scholar Board confirmed in an
official communication that "following a review in compliance with
the AAOIFI Shariah standards, The Sharia Scholar Board hereby
approves the Inventory Monetisation Structure as acceptable within
the principles of Shariah."
United States
Supply@ME continued to explore the possibility of launching its
inventory monetisation service to client companies in the United
States throughout 2021.
Following the RNS of 22 October 2020, the Company built upon its
partnership with Anthony Brown of the consulting company, Epicirean
Brands, trading as The Trade Advisory (the "Trade Advisory") during
the 2021 reporting period. Anthony Brown continues to provide
strategic advice to our Board of Directors in relation to seizing
the unique opportunity to develop our Inventory Monetisation
service in the United States.
Inventory monetisation funding routes
We continued to attract a selection of high-quality prospective
funders - including banks and asset-based lenders - to the platform
throughout 2021, working closely with local partners and
brokers.
The Group had hoped inventory monetisation transactions would be
further along in their progression by year-end. However, due to the
innovative nature of our model and the calibre of the banks with
which we are in discussions, the due diligence procedures are
robust and, therefore, require time to complete accurately. In
accordance with the RNS of 11 November 2021, the Board feels
inaugural transactions must be focused on accuracy rather than
speed.
Additionally, each funder has its own specific requirements and
appetites for clients and inventory they are prepared to fund. Our
origination team is working diligently to align client company
inventories with the investment appetites of our strong panel of
prospective inventory funders.
The Board continues to focus on the delivery of the first
inaugural Inventory Monetisation transaction which is expected to
generate a snowball effect among the rest of prospective Inventory
Funders identified.
Italy
The Italian subsidiary was in discussion with 8 banks in
relation to funding inventory via our innovative platform at
year-end, including the first Inventory Funder for the inaugural
Italian inventory monetisation transaction, as stated in the
Trading Update of 31 December 2021.
In addition, we were in discussion with one potential funder of
a White-label agreement in 2021.
Separately, we were working closely with the Italian
Government's SACE Guarantee, in order to study a new bespoke
guarantee which would commence following the expiry of the current
scheme, which is due to expire in 2022.
United Kingdom
As mentioned in the Trading Update of 31 December 2021, we
undertook an increased programme of marketing activity in the
United Kingdom, which raised significant awareness among potential
client companies and Inventory Funders. As such, our number of
originators, or business introducers increased from 3 to 59 during
the reporting period. Originators include asset-based lenders,
banks, accountants, advisors and other asset-based platforms.
This dramatic increase in originators is a testament to the
strength of the proposition we are building and the confidence of
the prospective funders, which include large global banks and major
accountancy firms.
In total, this resulted in us entering discussions with four
potential inventory monetisation funders in the UK and five banks
in initial conversations to complete inventory monetisation
transactions via a White-label agreement.
MENA
Further to the RNS announcement of 23 November 2021, we
continued to work alongside the Shariah fund arranger Intesa
Sanpaolo Private Bank (Suisse) Morval SA to provide funding for our
Shariah-compliant Inventory Monetisation platform in the Middle
East.
In parallel, we leveraged our partnership with I-MASS LLC in
order to explore further inventory funding alliances in the region,
including with a local challenger bank.
In total, we entered discussions with three potential funders of
inventory monetisation transactions in the MENA region.
United States
As a result of our ongoing partnership with Anthony Brown of the
consulting company The Trade Advisory we entered discussions with
three potential inventory monetisation transaction funders and one
potential funder of a White Label transaction.
As stated above, we continue to explore the possibilities around
launching a platform in the United States, buoyed by strong
interest and a unique opportunity to deliver the company's
innovative inventory monetisation platform in the region.
The Revenue Model
We clarified and fine-tuned our overall business model,
distinguishing the pure FinTech business (our Platform being our
people and our software) from the inventory funding structure. In
this regard:
-- the Platform has, by definition, an intrinsic value and
accordingly can also 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.
For this reason, we officially launched our White-label initiative
at the end of August 2020, invested further time in upgrading ICT
architecture, selected and started new tech streams, while
leveraging and understanding the components used by TradeFlow
Capital within its TradeFlow+ system.
-- the areas of improvement suggested by inventory funders in
the last year regarding the introduction of an equity (first loss)
line in the capital structure of each inventory monetisation
transaction was addressed with the launch of the Global Inventory
Fund (the "Fund"), which can work as equity provider and/or on a
standalone basis (the Fund could deliver by itself a inventory
monetisation transaction). The Global Inventory Fund leverages the
current funding structure of TradeFlow Capital - another reason, in
our opinion, that supports the acquisition of the Singapore-based
business.
As such, we are now focused on establishing and growing the
following active, and future, revenue streams:
-- "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
Fund and its Inventory Funders. This revenue is generated by the
Group's Supply@ME operating subsidiaries, and in the future is
expected to be supplemented by Tijara Pte Ltd, a technology
subsidiary company of TradeFlow. Revenue will be earned in relation
to the following activities:
o origination and due diligence (preinventory monetisation);
and
o monitoring, controlling and reporting (post-inventory
monetisation).
During the year ended 31 December 2021, the Group recognised
GBP0.3m of C.IM revenue relating to due diligence 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).
-- "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-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 31December 2021.
-- Investment Advisory ("IA"): this is the revenue stream
currently being generated by TradeFlow in its capacity as
investment advisor to its well-established funds, as well as its
anticipated role as investment advisor to the Fund going forward.
This stream is expected to generate recurring revenues of
approximately 1.25% of Assets Under Management for which TradeFlow
acts as advisor. Additionally, TradeFlow could receive a further
performance incentive fee of up to 15% of the profits generated by
the Fund, based on performance. During the year ended 31 December
2021, the Group recognised GBP0.2m of IA revenue, representing
TradeFlow's addition to the Group's revenue from 1 July to 31
December 2021.
Financial Review
2021 2020 Movement
GBPm GBPm GBPm
Revenue 0.5 1.1 (0.6)
-------- -------- ---------
Operating (loss) before deemed cost
of listing,
acquisition related costs and impairment
charges (4.4) (1.4) (3.0)
-------- -------- ---------
Deemed cost of listing, acquisition
related costs and impairment charges (6.4) (1.4) (5.0)
-------- -------- ---------
Operating (loss) (10.8) (2.8) (8.0)
-------- -------- ---------
Finance costs (1.3) - (1.3)
-------- -------- ---------
(Loss) before tax (12.2) (2.8) (9.4)
-------- -------- ---------
Income tax (0.3) (0.1) (0.1)
-------- -------- ---------
(Loss) for the year (12.5) (2.9) (9.6)
-------- -------- ---------
Earnings per share (EPS) Pence Pence
(0.04) (0.01)
-------- -------- ---------
Revenue by segment
2021 2020 Movement
GBPm GBPm GBPm
Inventory Monetisation 0.3 1.1 (0.8)
------ ------ ---------
Investment Advisory 0.2 - 0.3
------ ------ ---------
Total revenue 0.5 1.1 (0.6)
------ ------ ---------
The Investment Advisory revenue has been rounded down to GBP0.2m
in order to ensure the table adds to the rounded total revenue
figure.
Revenue by service line 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
consolidated financial statements.
Inventory Monetisation segment
For the year ended 31 December 2021, the Group recognised
GBP0.3m (2020: GBP1.1m) revenue from its inventory monetisation
segment relating solely to due diligence services provided by the
Group's Italian operating subsidiary. 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. The
GBP1.1m of revenue recognised by the inventory monetisation segment
in the prior year related solely to an origination contract entered
into with related party, 1AF2 S.r.l. In connection with this
contract, 1AF2 S.r.l contracted with the Group to perform due
diligence on those companies that it had originated. During the
current year, the Group recognised a further GBP0.2m revenue on
this related party contract, with the remainder of the revenue
recognised arising from due diligence services provided to third
party client companies. Further details of this and other related
party transactions are set out in note 29 to the Group's
consolidated financial statements.
The reduction of GBP0.8m in the revenue recognised by the
inventory monetisation segment during the year end 31 December 2021
is the result of the delays experienced by the Group in
facilitating the first inventory monetisation transaction and
increased time and effort being spent on the development of the
Platform and the associated operational processes and
procedures.
Investment Advisory segment
Investment segment revenue arises from investment advisory
services provided by the Group's wholly owned subsidiary,
TradeFlow, in its capacity as investment advisor to its
well-established USD fund and its newer EUR fund during the six
month period from the date of acquisition (being 1 July 2021)
through to year end. As TradeFlow was not owned by the Group during
the prior financial year, no such revenues were recognised. In line
with IFRS 15 ("Revenue from Contracts with Customers") the Group
recognised these revenues when the investment advisory services
have been delivered and the Group's performance obligation has been
satisfied.
Geographical revenue breakdown
The Group's inventory monetisation operations are currently
predominately located in Italy, while the investment advisory
operations are predominately located in Singapore.
Operating loss
During the year the Group has primarily focused on refining and
developing the business model through investing heavily, utilising
both internal time and resources, on activities such as upgrading
the architecture of the internally generated Platform.
Additionally, significant amounts of time and effort have been
spent:
-- on building a solid base for effective internal controls and governance processes;
-- completing the Group's acquisition of TradeFlow during the year; and
-- on post-acquisition integration activities.
All of these activities are expected to give the Group a strong
foundation as it enters the next stage of development.
The Group recorded an operating loss before deemed cost of
listing, acquisition related costs and impairment charges during
the year of GBP4.4m (2020: GBP1.4m loss). This increase of GBP3.0m
is largely due to the following factors:
-- an increase in staff and contractor costs of GBP1.2m as the
Group built out the leadership team and has been focused on
developing its ICT architecture alongside the inventory
monetisation legal & accounting framework;
-- an increase of professional fees of GBP0.5m arising from a
focus on improving the internal controls and governance processes;
and
-- the fact that the prior year contained costs for
approximately nine months, following the reverse take-over that
completed in March 2020, compared to a full 12 months of costs in
the currently financial year.
Deemed cost of listing, acquisition related costs and impairment
charges
2021 2020
GBPm GBPm
Deemed cost of listing - 1.4
------ ------
Transaction costs 2.0 -
------ ------
Amortisation of intangible assets 0.4 -
arising on acquisitions
------ ------
Acquisition related earn-outs 1.4 -
------ ------
Impairment charges 2.6 -
------ ------
Total 6.4 1.4
------ ------
The acquisition related costs arise due to business combinations
in accordance with IFRS 3 ("Business Combinations") and include the
following in the current financial year:
-- Transaction costs of GBP2.0m. Of this total, GBP1.9m
represented the fair value of 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 GBP0.1m related to legal fees that were directly
associated with the acquisition;
-- Amortisation of intangible assets arising on acquisition of
GBP0.4m. These costs related to the intangible assets recognised by
the Group in connection with the TradeFlow acquisition, which have
a fair value of GBP6.9m. The GBP0.4m represents the amortisation
charge for these assets for the six month period from acquisition
on 1 July 2021; and
-- Acquisition related earn-out costs of GBP1.4m. 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 profit and loss. The GBP1.4m recognised for the year
ended 31 December 2021 represents the proportion of the total fair
value of the future earn-out payments that are linked to the
services provided in the current financial year.
The impairment charges of GBP2.6m in the current financial year
have arisen due to the following two factors:
Firstly, in connection with the initial TradeFlow goodwill
recognised. As at 31 December 2021, 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. In carrying out this test, the
Directors applied what they consider to be prudent assumptions
concerning reductions to forecast revenue levels and the weighted
average cost of capital ("WACC") used as the discount rate. 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 31 December 2021 by
GBP0.8m and as such an impairment charge has been recognised for
this amount; and
Secondly, in connection with the Group's internally developed IM
platform. As at 31 December 2021, management carried out an
impairment test in line with IAS 36 ("Impairment of Assets") on
this intangible asset. This followed the conclusion that indicators
of impairment were present, including the current year losses being
generated by the Group's Italian operating subsidiary, to which the
asset relates. In carrying out this test, the Directors considered
discounted cash flows and a weighted average cost of capital
("WACC") as the discount rate. Under this methodology the
recoverable amount of the investment did not require an impairment
to be made. However, as noted in 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 discounted cash flows
arising from the use of the Internally developed IM Platform
intangible asset. As such, the Directors have prudently decided to
impair the full carrying amount of this asset of GBP1.8m as at 31
December 2021.
In the prior year the Group incurred deemed costs of listing of
GBP1.4m relating to the reverse acquisition.
Acquisition of TradeFlow
On 1 July 2021 the Group acquired TradeFlow for total
consideration, as defined by IFRS 3 ("Business Combinations"), of
GBP7.1m, split between cash consideration of GBP4m and equity
consideration of GBP3.1m.
As part of the terms of the agreement to acquire TradeFlow,
acquisition related earn-out payments were included. Together with
the initial cash payment and issue of equity, these components 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. As these earn-out payments have
substantive post-acquisition service conditions attached to them,
the Directors have concluded that IFRS 3 ("Business Combinations")
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.
Following the acquisition, a purchase price fair value exercise
was completed which identified intangible assets of GBP6.9m, and
goodwill of GBP2.2m, both of which have been recognised in the
Group's consolidated balance sheet at the date of acquisition. As
described above the goodwill has subsequently been impaired by
GBP0.8m, leaving a balance of GBP1.4m as at 31 December 2021.
Details of those intangible assets identified during the purchase
price fair value exercise are set out in the table below:
2021
GBPm
Customer relationships 4.8
------
Brand (TradeFlow) 0.2
------
CTRM software 1.4
------
AI software 0.4
------
Total acquired intangible assets 6.9
------
Deferred tax liability arising on recognition
of acquired intangible assets (1.2)
------
Total acquired intangible assets (net of deferred
tax liability) 5.7
------
Other net liabilities acquired (0.8)
------
Total identifiable net assets acquired 4.9
------
TradeFlow contributed GBP0.2m of revenue and (GBP0.5m) to the
Group's operating loss for the period between the date of
acquisition, being 1 July 2021, and the 31 December 2021. As a
preliminary assessment, had the acquisition of TradeFlow been
completed on the first day of the financial year, Group revenues
would have been approximately GBP0.3m higher and Group operating
loss would have been approximately GBP0.6m higher.
Group Funding Facilities utilised during the year
During the year the Group secured two different funding
facilities. The proceeds of both have been used to support the
Group's working capital and growth requirements and cover the cash
consideration element of the TradeFlow acquisition. Further details
of these two facilities are set out below:
Negma convertible Mercator
loan notes funding
GBPm Facilities
GBPm
At 1 January 2021 - -
------------------ ------------
Net cash inflows (5.0) (6.6)
------------------ ------------
Fair value of warrant instruments
issued in connection with funding
facilities - 0.5
------------------ ------------
Amortisation of finance costs (0.6) (0.5)
------------------ ------------
Cash repayments 2.0 -
------------------ ------------
Non cash repayments 3.6 0.9
------------------ ------------
As at 31 December 2021 - (5.7)
------------------ ------------
Negma convertible loan notes
On 16 June 2021, the Company entered into a subscription
agreement with Negma Group Limited for an initial tranche of
Convertible Loan Notes with a par value of GBP5.6m and for which
the Group received GBP5.0m in cash. As shown in the table, GBP3.6m
of this was settled via the conversion of the loan notes into
equity and GBP2.0 was settled in cash, leaving the facility totally
repaid at year end. During the current financial year the Group
recognised total finance costs of GBP0.6m in relation to these
convertible loan notes.
Mercator funding facilities
On 29 September 2021, the Company entered into a loan note
facility with Mercator Capital Management Fund LP ("Mercator"),
with a total draw down of GBP7.0m or GBP6.6m net of capitalised
finance costs. These loan note facilities had a term of 12 months
and require monthly repayments to be made either in cash or via the
issue of a convertible loan note at the Company's discretion.
During the period to 31 December 2021, all repayments had been
settled through the issue of convertible loan note and all of these
had been converted to equity.
In connection with the Mercator loan note facility, the Company
also issued share warrants, details of which are set out in note 28
to the consolidated financial statements. The fair value of these
warrants was also capitalised and this, together with the other
capitalised finance costs, will be recognised over the term of the
loan notes using the effective interest rate method. The total of
the finance costs recognised in the current financial year is
GBP0.5m.
The Mercator convertible loan notes do not have any interest
costs in addition to that of the Mercator loan notes, however an
additional amount of finance costs of GBP0.1m have been recognised
during the current financial year as a result of:
-- additional commitment fees of GBP25,000; and
-- the recognition of the fair value of the warrants issued in
connection with the convertible loan notes. This fair value was
GBP88,000.
Both costs have been fully recognised in the income statement
during the current year given the liability to which they relate
has been extinguished by 31 December 2021.
Cashflow
The Group increased its net cash balance by GBP1.1m (2020:
GBP0.4m) due to net proceeds from the financing activities of
GBP9.6m which assisted the funding of the acquisition of Tradeflow
(net of the cash acquired) of GBP3.5m and increased investment in
the Platform of GBP1.0m. This offset by an outflow from operating
activities of GBP3.9m.
2021 2020
GBPm GBPm
Net cash flow from operating activities (3.9) (0.9)
------ ------
Cash flows from investing activities (4.6) (0.9)
------ ------
Net cash flows from financing activities 9.6 2.2
------ ------
Net increase in cash and cash equivalents 1.1 0.4
------ ------
Cash and cash equivalents at 1 January 0.6 0.1
------ ------
Cash and cash equivalents at 31
December 1.7 0.6
------ ------
Net liabilities
As at 31 December 2021 the Group's net liabilities were GBP1.4m
(2020: net liabilities of GBP0.5m). The movement in net assets is
primarily explained as follows:
-- a net increase of GBP5.9m from the acquisition of TradeFlow,
representing a net asset fair value of GBP4.9m, together with
initial goodwill of GBP2.2m, offset by amortisation charges of
GBP0.4m and impairment charges of GBP0.8m;
-- a decrease of a net amount of GBP1.2m in the net book value
of the Group's internally developed IM Platform intangible asset,
representing additions during the year of GBP1.0m from internally
generated assets, offset against an amortisation charge in the year
of GBP0.4m and impairment charges of GBP1.8m;
-- an increase in borrowings of GBP5.7m relating to the Mercator loan notes.
Going concern
The Board's assessment of going concern and the key
considerations relating to this are set out in the Directors'
Report and note 2 to the consolidated financial statements.
Related Parties
The main related party agreements in place during the year
related to shared service agreements with The AvantGarde Group
S.p.A ("TAG") and Eight Capital Partners Plc, along with due
diligence services provided to 1AF2 S.r.l (now a part of TAG) by
the Group.
See note 29 of the consolidated financial statements for further
details of the Group's related parties.
Subsequent events
Note 31 of the consolidated financial statements sets out the
details of subsequent events following 31 December 2021, including
details of the Company's capital enhancement plan and renegotiation
of the Mercator funding facilities announced on 27 April 2022.
Principal Risks and Uncertainties
The Board confirms that throughout 2021 a robust assessment of
the principal risks facing the Company was completed. A
comprehensive list of Group-wide risks and emerging risks was
reviewed and monitored throughout the year. The most significant
risks and uncertainties we face are listed in the table below,
categorised by principal risk.
Strategic Risk
Strategic risk is defined as the failure to build a sustainable,
diversified and profitable business that can successfully adapt to
environment changes due to the inefficient use of Group's available
resources.
Key Risks Management of risk
STRATEGIC COMPETITION
The Company's business model The Company acknowledges the
is that of an innovative Platform risk, but believes it is able
for inventory monetisation, to more readily adapt to changing
aiming to capitalise upon market market conditions than larger
developments where supply chains entrants.
may be placed under pressure,
leading suppliers to hold increased
amounts of inventory in order
to supply both on and offline
retailers, with a resultant
restriction on available working
capital. However, the Company
is aware of certain larger key
entrants to related markets
that may be able to offer related
products on a larger scale,
which could affect the Company's
forecast revenues and profit
margins.
-------------------------------------------------------------------
FUTURE DEVELOPMENT AND STRATEGY
Certain aspects of the Company's This is acknowledged through
operations remain unproven in the Company's strategic plan,
operation, which could affect which recognises the uncertainty
the Company's forecast revenues of returns from an evolving
and profit margins. business model.
-------------------------------------------------------------------
FUNDING RISK
The risk that demand from Corporates We carefully manage this matching
for Inventory Monetisation transactions by:
- which generates revenue for * Building long-term relationships with investors
the Company via the Platform (Investors in the Global Inventory programme and
consumption - cannot be met Inventory Funders) and developing a forward-looking
by the Global Inventory Funds pipeline of new investors/ inventory funders;
and TradeFlow Funds when and
where they fall due or can only
be met at an uneconomic price. * actively managing concentration risk and diversifying
This risk varies with the economic sources of funding;
attractiveness of Global Inventory
programme as an investment,
the level of diversification * leveraging a seasoned team of arrangers and placing
of funding sources and the level agents
of resilience of these funding
sources through economic cycles.
-------------------------------------------------------------------
GLOBAL ECONOMIC RISKS
The recovery from COVID-19 is The Company acknowledges the
uncertain; however, the impact risk, but believes it is able
on supply chains may prove positive to more readily adapt to changing
for the Company's business. market conditions than larger
Nonetheless, the Board appreciates entrants.
the inherent uncertainly posed
by the current geo-political
crises.
-------------------------------------------------------------------
EQUITY DILUTION RISK
The Company is not currently The Company remains engaged
profitable. Despite strong confidence with several key stakeholders
in its business plan and forecasts, in respect of funding strategies.
the Directors recognise that
this may cause limitations in
the Company's funding options,
or those which are dilutive
to shareholders.
-------------------------------------------------------------------
Operational Risk
Operational risk is the risk of loss resulting from inadequate
or failed internal processes, people and systems or from external
events.
Key Risks Management of risk
EMPLOYEE AND KEY MAN RISK
Loss of certain key executives Through their contractual agreements,
could lead to a reduced ability Executive Directors remain highly
to effectively run the Company, incentivised to remain with
while loss of the leadership the Company. The Long Term Incentive
team could materially hamper Plan being put to shareholders
the Company's move to profitability at the AGM will also support
and increased operational efficiency. retention of key members of
the team.
----------------------------------------
BUSINESS CONTINUITY RISK
As an expanding Company, business The Company is engaged with
continuity plans inherently third parties in relation to
will lack visibility in terms business continuity planning.
of any new subsidiaries.
----------------------------------------
Regulatory, Reputation and Conduct Risk
Regulatory, reputation and conduct risk is defined as engaging
in activities that detract from Group's goal of being a trusted and
reputable Company with products, services and processes designed
for customer success and delivered in a way that will not cause
customer detriment or regulatory censure.
Key Risks Management of risk
DATA PROTECTION
The Company undergoes data protection The Company is engaged with
assessments, predominantly under third parties in relation to
Regulation (EU) 2016/679 (General addressing data protection issues
Data Protection Regulation) in the jurisdictions within
and the Data Protection Act which it operates.
2018, but the Board recognises
that operating in multiple jurisdictions
leaves it at risk of breach
of individual jurisdictional
legislation.
------------------------------------
FINANCIAL RISK MANAGEMENT
The Board monitors the internal The Board are apprised of the
risk management function across Company's risk register on at
the Group and advises on all least a quarterly basis, and
relevant risk issues. There respond appropriately.
is regular communication with
internal departments, external
advisors and regulators. The
Company's policies on financial
instruments and the risks pertaining
to those instruments are set
out in the accounting policies
in notes 2 and 25 of the Company's
consolidated financial statements.
------------------------------------
The strategic report can be seen in full on page 4 to page 48
within the Company's full Annual Report & Accounts 2021, which
will be uploaded and will be available on the National Storage
Mechanism and on the Company's website.
The strategic report is approved by the Board of Directors and
signed on its behalf by:
Alessandro Zamboni
Chief Executive Officer
Directors' responsibilities pursuant to DTR 4
The Directors confirm that to the best of their knowledge:
-- the Group consolidated financial statements have been
prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and the
requirements of UK adopted International Accounting Standards and
give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Group; and
-- the Annual Report includes a fair review of the development
and performance of the business and the position of the Group, and
the parent Company, together with a description of the principal
risks and uncertainties that they face.
Disclosure of information to the auditor
Each Director at the date of approval of this annual report
confirms that:
-- so far as the Directors are aware, there is no relevant audit
information of which the Group's and Company's auditor is unaware;
and
-- all the Directors have taken all the steps that they ought to
have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditor is
aware of that information.
External Auditor
The auditor, Crowe U.K. LLP, will be proposed for re-appointment
at the forthcoming Annual General Meeting.
2021 AGM
The Notice of Annual General Meeting for 2021 will be circulated
to all the shareholders at least 21 working days before the AGM and
it will also be made available on our corporate website
www.supplymecapital.com. The voting on the resolutions will be
announced via the Regulatory News Service.
Post balance sheet events
Details of post events since the reporting date can be found in
note 31 to the Group's consolidated Financial Statements.
Statement of Directors' Responsibilities
The Directors acknowledge their responsibilities for preparing
the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the Group consolidated financial statements
in accordance with International Accounting Standards in conformity
with the requirements of the Companies international accounting
standards in conformity with the requirements of UK adopted
International Accounting Standards. Under company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and of the Group's results for that period.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements and other
information included in the annual reports may differ from
legislation in other jurisdictions.
The Report of the Directors set out from page 96 to page 101 in
the Company's full Annual Report & Accounts 2021 is approved by
the Board of Directors and signed on its behalf by:
Alessandro Zamboni
Chief Executive Officer and Executive Director
30 May 2022
Financial Statements
The final results announcement for the year ended 31 December
2021 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 2021 Annual Report. The
accounting policies adopted in this announcement are consistent
with the Annual Report for the year ended 31 December 2021.
The financial information has been extracted from the financial
statements for the year ended 31 December 2021, which have been
approved by the Board of Directors and on which the auditors have
reported without qualification. The audit report included a
material uncertainty relating to going concern. Full details can be
seen in the 2021 Annual Report.
Consolidated Statement of Comprehensive Income for the Year
Ended 31 December 2021
Year ended Year ended
31 December 31 December
Note 2021 2020
GBP 000 GBP 000
Revenue 4 538 1,147
Cost of sales (804) (739)
------------- -------------
Gross (loss)/profit (266) 408
Administrative expenses 8 (4,165) (1,904)
Other operating income 7 - 53
----------------------------------------------- ----- ------------- -------------
Operating loss before deemed cost of listing
and acquisition related costs and impairment
charge 4 (4,431) (1,443)
Deemed cost of listing 8 - (1,376)
Transaction costs 8 (2,009) -
Amortisation of intangible assets arising on
acquisition 8 (391) -
Acquisition related earn-out payments 8 (1,410) -
Impairment charges 8 (2,573) -
----------------------------------------------- ----- ------------- -------------
Operating loss (10,814) (2,819)
Finance costs 6 (1,341) -
------------- -------------
Loss before tax (12,155) (2,819)
Income tax 12 (332) (145)
Loss for the year (12,487) (2,964)
============= =============
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translating foreign
operations 6 2
Total comprehensive loss for the year (12,481) (2,962)
============= =============
Loss attributable to:
Owners of the company (12,481) (2,962)
============= =============
Pence Pence
Earnings per share
Basic and diluted 14 (0.04) (0.01)
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
2021
As at 31 December As at 31
2021 December 2020*
Note GBP 000 GBP 000
Non-current assets
Intangible assets and goodwill 15 7,895 1,236
Tangible assets 17 2
Deferred tax asset 13 - 422
----------------- ---------------
Total non-current assets 7,912 1,660
----------------- ---------------
Current assets
Trade and other receivables 16 896 1,113
Cash and cash equivalents 1,727 552
----------------- ---------------
Total current assets 2,623 1,665
----------------- ---------------
Total assets 10,535 3,325
----------------- ---------------
Current liabilities
Trade and other payables 20 3,500 3,373
Derivative financial instruments - 24
Loan notes 18 5,732 -
----------------- ---------------
Total current liabilities 9,232 3,397
----------------- ---------------
Net current liabilities (6,609) (1,732)
Non-current liabilities
Long-term borrowings 18 1,284 22
Provisions 21 340 358
Deferred tax liabilities 13 1,104 -
Total non-current liabilities 2,728 380
Net liabilities (1,425) (452)
================= ===============
Equity attributable to owners of the
parent
Share capital 17 5,486 5,420
Share premium 18,171 11,820
Share-based payment reserve 28 2,018 -
Other reserves (10,891) (13,986)
Retained losses (16,209) (3,706)
----------------- ---------------
Total equity (1,425) (452)
================= ===============
To more accurately reflect the nature of certain items in the
balance sheet, the prior year comparatives include a
reclassification of bank borrowings of GBP22,000 from Trade and
other payables to Long-term borrowings. In addition, the prior year
comparative deferred tax asset balance of GBP422,000 has been
reclassified from Trade and other receivables to non-current assets
to comply with IAS 1 ("Presentation of Financial Statements".
The above consolidated statement of financial position should be
read in conjunction with the accompanying notes. The consolidated
financial statements on pages 48 to 75 were approved and authorised
for issue by the Board on 30 May 2022 and signed on its behalf
by:
......................................... .........................................
Alessandro Zamboni David Bull
CEO and Executive Director Independent Non-Executive Director
and Chair of Audit Committee
Supply@ME Capital plc
Registration number: 039369
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 earnings Total
Note GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 January 2020 148 - - - - - 3 (708) (557)
Forex retranslation - - - - - - - (34) (34)
-------- -------- --------- ------------ -------- --------- -------- --------- --------
At 1 January 2020
after forex
retranslation 148 - - - - - 3 (742) (591)
Loss for the year - - - - - - - (2,964) (2,964)
Forex retranslation
difference - - (8) - - - 10 - 2
Loss for the year and
total
comprehensive income - - (8) - - - 10 (2,964) (2,962)
Transfer to reverse
takeover
reserve (148) - - - - 148 - - -
Recognition of plc
equity
at acquisition date 4,767 9,597 - - - (13,505) - - 859
Reverse takeover of
Supply@ME
S.r.l. 646 - - - 223,832 (224,478) - - -
Issue of shares for
cash 7 2,234 - - - - - - 2,241
Cost of share issues - (11) - - - - - - (11)
Legal reserve - - 12 - - - - - 12
At 31 December 2020 5,420 11,820 4 - 223,832 (237,835) 13 (3,706) (452)
-------- -------- --------- ------------ -------- --------- -------- --------- --------
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 2021
Share-based Reverse
Share Share Other payment Merger takeover Forex Retained
capital premium reserves reserve reserve reserve reserve earnings 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 17 66 6,351 - - 3,073 - - - 9,490
Issue of
warrants 28 - 608 - - - - 608
Credit to
equity for
acquisition
related
earn-out
payments 27 - 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 Cash Flows for the Year Ended 31
December 2021
Year ended Year ended
31 December 31 December
2021 2020*
GBP 000 GBP 000
Cash flows from operating activities
Loss for the year (10,814) (2,819)
Adjustments for non-cash costs relating
deemed cost of listing and acquisition
related costs and impairment charge
Deemed cost of listing in reverse acquisition - 1,376
Acquisition related transaction costs 1,900 -
Acquisition related earn-out payments 1,410 -
Amortisation of intangible assets arising
on acquisition 391 -
Impairment charges 2,573
6,274 1,376
Other non-cash adjustments (70) 16
Other depreciation and amortisation 396 203
Increase to provisions 52 40
Decrease/(increase) in accrued income (46) -
Decrease/(increase) in trade receivables 505 (717)
Increase/(decrease) in trade and other
payables 77 296
Other decreases/(increases) in net
working capital (158) 686
------------ ------------
Net cash flows from operations (3,784) (919)
Finance costs paid in cash (2) -
Income taxes paid in cash (89) (19)
Other collections - 6
------------ ------------
Net cash flow from operating activities (3,875) (932)
------------ ------------
Cash flows from investing activities
Cash from reverse acquisition of Abal
plc - 93
Acquisition of property, plant and
equipment (7) (2)
Acquisition of intangible assets (1,020) (1,026)
Cash consideration on acquisition of
Tradeflow, net of cash acquired (3,523) -
------------ ------------
Net cash flows from investing activities (4,550) (935)
------------ ------------
Cash flows from financing activities
Increase/(decrease) in long-term borrowings - 22
Net cash inflow from Mercator loan
notes 6,629 -
Other finance costs paid in cash (25) -
Cash inflow from Negma convertible
loan notes 5,000 -
Cash repayment to Negma convertible
loan notes (2,016) -
Proceeds from issue of ordinary shares,
net of allowable issue costs - 2,230
------------ ------------
Net cash flows from financing activities 9,588 2,252
------------ ------------
Net increase in cash and cash equivalents 1,163 385
Foreign exchange differences to cash
and cash equivalents on consolidation 12 24
Cash and cash equivalents at 1 January 552 143
Cash and cash equivalents at 31 December 1,727 552
------------ ------------
*In addition, to better reflect the nature of certain cash flow
items the prior year comparatives include the a reclassification of
bank borrowings of GBP22,000 from Trade and other payables to
Long-term borrowings.
Significant non-cash transactions
During the year, the Group issued 3,313,496,990 ordinary shares
in the Company. 2,000,496,990 new ordinary shares were admitted to
trading during the year in connection with convertible loan notes
that were converted to equity at the discretion of the subscriber
during the year. These convertible loans were issued to extinguish
in exchange for GBP4,501,000 principal value of convertible loan
notes. 813,000,000 new ordinary shares were admitted to trading
during the year as part of the consideration package for the
Company's acquisition of TradeFlow Capital Management Pte. Ltd
("TradeFlow"). 500,000,000 new ordinary shares were admitted to
trading during the year as consideration for support with the
TradeFlow acquisition. Further details of share issues can be found
in note 17. Further details of the convertible loan note facilities
can be found in note 19. Further details of the acquisition of
TradeFlow can be found in note 27.
The reconciliation of the movement in net debt is set out in
note 26.
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 2021
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 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
At the 31 December 2021 the Group had cash balances of
GBP1,727,000 (31 December 2020: GBP552,000) and net current
liabilities of GBP6,609,000 (31 December 2020: net current
liabilities GBP1,732,000). The Group has posted a loss for the year
ended 31 December 2021 after tax of GBP12,481,000 (2020: loss
GBP2,962,000) and retained losses were GBP16,209,000 (31 December
2020: losses GBP3,706,000).
The current liabilities as at 31 December 2021 of GBP9,232,000
included GBP5,732,000 relating to the outstanding balance of loan
notes which the Group issued on 29 September 2021. As outlined in
the note 31, following the 31 December 2021, GBP2,035,000 of this
balance has been repaid through the issue of new convertible loan
notes, of which a principal amount of GBP1,357,000 has been
converted into new ordinary shares in the Company at the request of
the convertible loan note holder following the period end date, but
prior to the issue of these annual consolidated financial
statements. The remaining GBP678,000 has been repaid in cash
following the amendment deed signed with the lender on 26 April
2022 (refer to note 31 for further details on any post balance
sheet events). In addition to the above, GBP395,000 included within
current liabilities is in relation to deferred income held on the
balance sheet as at 31 December 2021 and a further GBP293,000
relates to refundable client deposits which are expected to be
returned to the customers following 31 December 2021.
On the 26 April 2022, the Company agreed a new equity funding
facility which provides a binding commitment with a new investor,
Venus Capital SA ("Venus Capital"), to invest up to GBP7,500,000 in
exchange for multiple tranches of new ordinary shares to be issued
by the Company over a period with a long stop date of 31 December
2023 (the "Capital Raise Plan"). These tranches have been
structured as follows:
-- New ordinary shares issued from 26 April to date - at the
date of these consolidated financial statements being issued, the
Company has issued 3,320,000,000 of new ordinary shares to Venus
Capital in exchange for GBP1,660,000;
-- Additional mandatory tranches to the value of GBP2,090,000; and
-- Additional optional tranches (where the exercise is at the
option of the Company) to the value of GBP3,750,000.
It should be noted that the issue of the new ordinary shares
under the Capital Raise Plan is subject the necessary
authorisations from shareholders which the Company is planning to
require at the General Meeting to be held in conjunction with the
2021 Annual General Meeting.
Additionally, the Capital Raise Plan also saw the Company enter
into an agreement with Venus Capital regarding a loan facility of
up to GBP1,950,000 commencing from June 2022, including GBP450,000
to cover the arrangement fees relating to the Capital Raise Plan,
which would be repayable in shares and which would have a maturity
date of 31 December 2025 and an 10% per annum interest rate.
The key objective of the Capital Raise Plan is to allow the
outstanding loan notes to be repaid in cash rather than via further
convertible loan note issues. To assist with this, on the 26 April
2022, the Company also signed an amendment letter in respect of
these loan notes. This amendment gave the Company to ability to
meet this objective.
Taking into account the factors above and in order to consider
their assessment of the Group as a going concern, the Directors
have reviewed the forecast cashflows for the next 12 months. The
cashflow forecasts take into account that the Group meets its day
to day working capital requirement through its cash resources and
are based on the enlarged Group, including TradeFlow. The Directors
have prepared the forecast using their best estimates, information
and judgement at this time, including the Capital Raise Plan and
loan note amendment announced on the 27 April 2021. The Directors
have also considered the expected cashflows arising from
TradeFlow's investment advisory services ("IA" revenue stream) 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.
Despite the facts outlined above, there is currently an absence
of a historical track record relating to inventory monetisation
transactions being facilitated by the Group's Platform, the Group
generating the full range of fees from the use of its Platform and
the Group being cash flow positive. As such the Directors have
prudently identified uncertainty in the cash flow model. This
uncertainty arises with respect to both the future timing and
growth rates of the forecast cashflows arising from the Group's
multiple revenue streams referred to above. In this regard, if
these future revenues are not secured as the Directors envisage, it
is possible that the Group will have a shortfall in cash and
require additional funding during the forecast period. In addition
certain cashflows in relation to the financing transactions noted
above have not yet occurred and the issue of new ordinary shares
under the Capital Raise Plan is subject to the authorisation from
shareholders in the General Meeting. On the basis of the above, 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 and exclude, where applicable, deemed
cost of listing, 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 which arise due to
the reverse takeover, as disclosed in note 3 and items that are
charged to the consolidated statement of comprehensive income in
accordance with IFRS 3 ("Business Combinations"). 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 2021.
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 23 March 2020, the Company, completed a reverse acquisition
of Supply@ME S.r.l., a company registered in Italy. Further
information about this transaction is disclosed in note 3.
On 1 July 2021 the Company completed the acquisition of the
entire share capital of TradeFlow by way of cash and share
consideration. As such from this date TradeFlow became a fully
owned subsidiary of the Company and will form part of the Group's
consolidated financial performance and position from the date of
acquisition.
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,
certain new standards, amendments and interpretations to existing
standards have been published by the International Accounting
Standards Board but are not yet effective in the UK and have
not been adopted early by the Group. The most significant of
these are as follows, which are effective for the periods beginning
after 1 January 2022:
* Amendments to IFRS 3 Business Combinations Reference
to the Conceptual Framework
* Amendments to IAS 16 Property, Plant and Equipment -
Proceeds before Intended Use
* Amendments to IAS 37 Provisions, Contingent
Liabilities, Contingent Assets Onerous Contracts -
Cost of Fulfilling a Contract
* Annual Improvements 2018-202
* Amendments to IAS 1 Classification of Liabilities as
Current
* Amendments to IAS 1 Disclosure of Accounting policies
* Amendments to IAS 8 Definition of Accounting
Estimates
* Amendments to IAS 12 Deferred Tax related to Assets
and Liabilities arising from a Single Transaction
* IFRS 17 Insurance Contracts
All relevant standards, amendments and interpretations to existing
standards will be adopted in the Group's accounting policies
in the first period beginning on or after the effective date
of the relevant pronouncement of adoption by the UK Accounting
Standards Endorsement Board.
The directors do not anticipate that the adoption of these standards,
amendments and interpretations will have a material impact on
the Group's consolidated financial statements in the periods
of initial application.
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
Group's Italian subsidiary, Supply@Me Srl, 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 case 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 FY21, this contractual arrangement accounted for 33% of
the Group's total revenue (2020: 100%).
b) Investment Advisory ("IA") fees: This revenue arises from
investment advisory services provided by the Groups 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
relates, 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, where the C.IM revenue comprises entirely due
diligence fee revenue, the cost of sales includes both the costs of
the work force who are engaged in that process 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
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.
This has resulted in a reclassification of the deferred tax asset
as at 31 December 2020 from Trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and other
short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk
of change in value.
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 FY21 and FY20
below:
2021 2020
Closing Average Closing Average
SGD 1.8195 1.8487 - -
EUR 1.1907 1.1592 1.1118 1.1250
USD 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.
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.
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 instruments 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
current 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 for the fair value of those
notes that have been converted into 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 and warrants issued in connection with
the cost of issuing loan notes and convertible notes during the
current year.
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 equity-settled
share-based transactions are set out in note 28.
The fair value determined at the grant date of the
equity-settled share-based payments relating to the earn-out
payments are expensed over the vesting period on a straight-line
basis, based on the Group's estimate of equity instruments that
will eventually vest. At each balance sheet date, the Group revises
its estimate of the number of equity instruments expected to vest
as a result of the effect of non-market-based vesting conditions.
The impact of the revision of the original estimates, if any, is
recognised in income statement such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
equity reserves.
The fair value determined at the grant date of the
equity-settled share-based payments relating to the warrants issued
are net off against the fair value of the loan notes or
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 consolidated statement of
comprehensive income using the effective interest method. In
respect of the share-based payments, the fair value is not revised
at subsequent reporting dates.
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 and
warrants issued in connection with the cost of issuing loan notes
and convertible notes during the current year.
"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 earnings" 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 results
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.
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.
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.
Business combinations
The share purchase agreements governing the acquisition of
TradeFlow included an option for the selling shareholders, who
remained directors of Tradeflow following the acquisition, to
repurchase and give the ability for these selling shareholders to
veto certain actions in relation to the TradeFlow business for the
first 24 months of ownership. The Directors consider these clauses
to be protective in nature and not substantive and are in place to
protect these selling shareholders during the earn-out period.
Furthermore, the Directors have assessed the option clauses to be
unlikely during the year and at the balance sheet date. Therefore,
the Directors have concluded that Supply@ME Capital plc has control
over TradeFlow.
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 be 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 2021:
Decreasing useful life Increasing useful life
by 3 years by 3 years
Approximate increase Approximate decrease
in amortisation (GBP000) in amortisation (GBP000)
Customer relationships 56 35
Brand (TradeFlow) 31 8
CTRM software 214 54
AI software 64 16
Total 365 112
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 27) 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
recognised in the income statement in the current year would have
been approximately minus GBP65,000. If the expected volatility
rates were adjusted by minus 10%, then the impact on the fair value
recognised in the income statement in the current year would have
been approximately plus GBP54,000.
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 charge by approximately
GBP3.3 million.
Valuation of share warrants issued
During the year the Company issued share warrants in connection
with the loan notes and certain convertible loan notes that were
also issued during the year ended 31 December 2021. As these share
warrants were issued as a cost of securing the 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 model (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 model was 97% and was based the actual volatility of the
Company's share price from the date of the RTO. If the expected
volatility rate was adjusted by plus 10%, then the impact on the
fair value in the current year would have been approximately plus
GBP71,000. If the expected volatility rate was adjusted by minus
10%, then the impact on the fair value in the current year would
have been approximately minus GBP76,000.
3 Reverse acquisition during the year ended 31 December 2020
On 23 March 2020, the Company acquired through a share for share
exchange the entire share capital of Supply@ME S.r.l, whose
principal activity is an early-stage business that delivers an
innovative technology platform for inventory monetisation that
enables a wide range of manufacturing and trading customers to
improve their working capital position by releasing capital from
their inventory stock.
Although the transaction resulted in Supply@ME S.r.l. becoming a
wholly owned subsidiary of the Company, the transaction constitutes
a reverse acquisition as the previous shareholders of Supply@ME
S.r.l. own a substantial majority of the Ordinary Shares of the
Company and the executive management of Supply@ME S.r.l. became the
executive management of Supply@ME Capital plc, previously Abal
Group plc.
In substance, the shareholders of Supply@ME S.r.l. acquired a
controlling interest in the Company and the transaction has
therefore been accounted for as a reverse acquisition. As the
Company's activities prior to the acquisition were purely the
maintenance of the AIM Listing, acquiring Supply@ME S.r.l and
raising equity finance to provide the required funding for the
operations of the acquisition it did not meet the definition of a
business in accordance with IFRS 3 for the purpose of these
consolidated financial statements of the Group.
Accordingly, in these consolidated financial statements, the
reverse acquisition did not constitute a business combination and
was accounted for in accordance with IFRS 2 "Share-based Payments"
and the associated IFRIC guidance. Although, the reverse
acquisition is not a business combination, the Company has become a
legal parent and is required to apply IFRS 10 and prepare
consolidated financial statements. The Directors have prepared
these consolidated financial statements using the reverse
acquisition methodology, but rather than recognising goodwill, the
difference between the equity value given up by the Supply@ME
S.r.l.'s shareholders and the share of the fair value of net assets
gained by the Supply@ME S.r.l. shareholders is charged to the
statement of comprehensive income as a share-based payment on
reverse acquisition and represents in substance the cost of
acquiring a main market listing.
In accordance with reverse acquisition accounting principles,
these consolidated financial statements represent a continuation of
the consolidated statements of Supply@ME S.r.l. and include:
-- The assets and liabilities of Supply@ME S.r.l. at their
pre-acquisition carrying value amounts and the results for both
years; and
-- The assets and liabilities of the Company as at 23 March 2020
and its results from the date of the reverse acquisition (23 March
2020) to 31 December 2021.
On 23 March 2020, the Company issued 32,322,246,220 ordinary
shares to acquire the whole of the share capital of Supply@ME
S.r.l. The prospectus dated 4(th) March 2020 had an issue price of
GBP0.006945 per share of the Company's share capital to be issued
and therefore valued the investment in Supply@ME S.r.l. at
GBP224,478,000.
Because the legal subsidiary, Supply@ME S.r.l., was treated on
consolidation as the accounting acquirer and the then legal Parent
Company, Supply@ME Capital plc, was treated as the accounting
subsidiary, the fair value of the shares deemed to have been issued
by Supply@ME S.r.l. was calculated at GBP859,000 based on an
assessment of the purchase consideration for a 100% holding of
Supply@ME Capital plc, being its entire share capital of
101,094,276 Ordinary Shares at the last listing price of
GBP0.0085.
The fair value of the net assets of Supply@ME Capital plc at
acquisition was as follows:
GBP 000
Cash and cash equivalents 93
-------------------
Receivables 50
-------------------
Payables (660)
-------------------
Total Net Liabilities (517)
===================
The difference between the deemed cost (GBP859,000) and the fair
value of the net liabilities assumed per above of GBP517,000
resulted in GBP1,376,000 being expensed within "reverse acquisition
expenses" in accordance with IFRS 2, Share-Based Payments,
reflecting the economic cost to Supply@ME S.r.l. shareholders of
acquiring a quoted entity.
The reverse acquisition reserve which arose from the reverse
takeover is made up as follows:
GBP'000
Pre-acquisition equity(1) (14,881)
---------------------
Supply@ME S.r.l. equity at acquisition(2) 148
---------------------
Investment in Supply@ME S.r.l.(3) (224,478)
---------------------
Reverse acquisition expense(4) 1,376
---------------------
(237,835)
=====================
Notes:
1. Recognition of pre-acquisition equity of Supply@ME Capital plc as at 23 March 2020.
2. Supply@ME S.r.l. had issued equity of GBP148,000. As these
consolidated financial statements present the capital structure of
the legal parent entity, the equity of Supply@ME S.r.l. is
eliminated.
3. The value of the shares issued by the Company in exchange for
the entire share capital of Supply@ME S.r.l. The above entry is
required to eliminate the balance sheet impact of this
transaction.
4. The reverse acquisition expense represents the difference
between the value of the equity issued by the Company, and the
deemed consideration given by Supply@ME S.r.l. to acquire the
Company.
4 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 manage the
Group as two operating segments being inventory monetisation
(comprising 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 and the provision of due diligence
services.
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.
As the business continues to grow, it is expected that the
operating segments may need to be monitored and updated to reflect
the needs and requirement of the chief operating decision
maker.
Year ended 31 December Inventory Investment Consolidated
2021 Monetisation Advisory Head office 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.
Inventory Investment Consolidated
As at 31 December 2021 Monetisation Advisory Head office 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.
5 Deemed cost of listing
2021 2020
GBP 000 GBP 000
Deemed cost of listing - share-based payment - 1,376
======== ========
As explained in note 3, the reverse acquisition of Supply@ME
S.r.l. does not meet the requirements of IFRS 3 Business
Combinations so has been accounted for under IFRS 2 ("Share-Based
Payments").
The amount of GBP1,376,000 represents the deemed cost of
acquisition over the net assets of Supply@ME S.r.l. that were
acquired. Under IFRS 2, the deemed costs of obtaining the listing
have been expensed to profit and loss.
6 Finance costs
2021 2020
GBP 000 GBP 000
Interest expense - loan notes / convertible loan notes 1,252 -
Interest expense - long-term borrowings 89 -
Total finance costs 1,341 -
======== ========
7 Other operating income
2021 2020
GBP 000 GBP 000
Write back of payables - 53
- 53
======== ========
8 Operating loss
The Group's operating loss for the year has been arrived at after charging (crediting):
2021 2020
GBP 000 GBP 000
Amortisation of internally developed IM platform (note 15) 391 234
Depreciation 5 1
Staff costs (note 10) 1,728 745
Short-term lease costs 43 -
Professional and legal fees 1,825 1,327
Contractor costs 180 -
Insurance 123 66
Training and recruitment costs 75 -
In addition to the above, the Group incurred the following costs
relating the deemed cost of listing in the prior year, acquisition
related costs and impairment charges as detailed below:
2021 2020
GBP 000 GBP 000
Deemed cost of listing (note 5) - 1,376
Transaction costs (note 27) 2,009 -
Amortisation of intangible assets arising on acquisition (note 15) 391 -
Acquisition related earn-out payments (note 27) 1,410 -
Impairment charges (note 15) 2,573 -
--------- ---------
Total deemed cost of listing, acquisition related costs and impairment charges 6,383 1,376
========= =========
9 Auditors' remuneration
During the year, the Group obtained the following services from the Group's auditor, at the
costs detailed below:
2021 2020
GBP 000 GBP 000
Fees payable to the Company's auditors for the audit of the consolidated financial
statements 75 27
Fees payable to the Company's auditors and its associates for other services to the Group:
Audit of the Companies subsidiaries 29 10
Audit fees relating to prior periods 30 -
--------- ---------
Total audit fees 134 37
========= =========
Non-audit services - -
--------- ---------
Total audit and non-audit related services 134 37
========= =========
10 Staff costs
The aggregate payroll costs (including directors' remuneration)
were as follows:
2021 2020
GBP 000 GBP 000
Wages, salaries and other short term employee
benefits 1,476 633
Social security costs 166 95
Post-employment benefits 86 1
Redundancy costs - 16
Total staff costs 1,728 745
======== ========
The average number of persons employed by the Group (including
executive directors) during the year, analysed by category was as
follows:
2021 2020
No. No.
Executive directors 2 1
Finance, Risk and HR 2 1
Sales and marketing 4 3
Legal 2 2
Operations and Platform development 9 7
Total average number of people employed 19 14
==== ====
11 Key management personnel
Key management compensation (including directors):
2021 2020
GBP 000 GBP 000
Wages, salaries and short-term employee
benefits 890 361
Social security costs 60 -
Post-employment benefits 60 -
-------- --------
Total key management compensation 1,010 361
======== ========
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 (2020: none), however the Chief
Executive Officer received cash in lieu of payments to a defined
contribution pension scheme of GBP49,310 during the year (2020:
none). This was allowable under his directors employment contract.
Of the GBP49,310, GBP21,560 that was paid during FY21 but which
related to base salary earned in FY20. The remaining GBP27,750
related to base salary earned in FY21.
The Directors' emoluments are detailed in the Remuneration
Report of the Annual Report and Accounts for the year ended 31
December 2021.
12 Income tax
Tax charged in the income statement:
2021 2020
GBP 000 GBP 000
Current Taxation
UK Corporation tax - -
Foreign taxation paid/(receivable) by subsidiaries 332 145
-------- --------
332 145
======== ========
The tax on loss before tax for the period is more than (2020
- less than) the standard rate of corporation tax in the UK
of 19% (2020 - 19%).
The differences are reconciled below:
2021 2020
GBP 000 GBP 000
Loss before tax 12,155 2,819
======== ========
Corporation tax at standard rate - 19% (2,309) (536)
Effect of expenses not deductible in determining
taxable profit (tax loss) 929 593
Increase in tax losses carried forward
which were unutilised in the current year 616 38
Tax adjustments in respect of foreign subsidiaries
(timing differences) 1,096 50
Total tax charge 332 145
13 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 2020 - 283 283
Foreign exchange movement - 17 17
Additions - 142 142
Credit / (charge) to income - (20) (20)
------------------ ------------------- --------
As at 31 December 2020 - 422 422
Foreign exchange movement - (28) (28)
------------------ ------------------- --------
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)
================== =================== ========
The deferred tax liability arises on the acquisition of
TradeFlow 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 deferred tax asset represents an aggregate of the following
short-term timing differences:
As at 31 As at 31
December 2021 December 2020
GBP 000 GBP 000
Short-term timing differences
Arising on revenue recognition timing differences - 383
Arising on amortisation costs timing differences - 36
Arising on IAS 19 timing differences - 3
-------------- --------------
Total short term deferred tax timing differences - 422
============== ==============
In line with IAS 1 ("Presentation of Financial Statements") the
prior year comparative deferred tax asset balance of GBP422,000 has
been reclassified from Trade and other receivables to non-current
assets.
Arising on revenue recognition timing differences
These deferred tax assets arise due to the Group's Italian
subsidiary recognising revenue in the local tax accounts (in
accordance with local rules) ahead of the IFRS 15 revenue
recognition policy applied in the Group consolidated financial
statements. As such this generated income taxes payable in Italy
for the Group relating to revenue that will not be recognised in
the consolidated Group accounts until a later period at which time
these timing differences will be reversed.
The decrease in these short-term timing differences over the
year resulted from amounts being recognised as revenue under IFRS
15 in the current period or amounts no longer expected to be
recognised as revenue in the future due to refunds having been
requested from clients.
Arising on amortisation costs timing differences
These deferred tax assets arise due to the Group's Italian
subsidiary capitalising certain expenditure in their local tax
accounts (in accordance with local rules), that did not meet the
requirements for capitalisation under IAS 38. As such this resulted
in lower costs in the local tax accounts and these timing
differences will be reversed as these capitalised items are
amortised.
Deferred tax asset impairment assessment
As at 31 December 2021, 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 15
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.
In addition, unrecognised deferred tax assets, relating tax
losses carried forward across the Group, total approximately GBP1.2
million and 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.
14 Earnings per share
The calculation of the Basic earnings per share (EPS) is based
on the loss for the year of GBP12,487,000 (2020 - loss
GBP2,964,000) and on a weighted average number of ordinary shares
in issue of 33,921,396,568 (2020 - 27,118,800,563). The basic EPS
from continuing operations is (0.04) pence (2020 - (0.01)).
The following share warrants and future acquisition related
earn-out payments to be issued in shares were in issue at the dates
shown below and if exercised, would dilute the earnings per share
in the future.
2021 2020
No . No.
Number of shares:
Share warrants 522,791,511 11,363,636
Acquisition related earn-out share options 1,578,324,153 -
------------- ----------
Total 2,101,115,664 11,363,636
============= ==========
No dilution per share was calculated for 2021 and 2020 as with
the reported loss they are all anti-dilutive.
15 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 2020 - - - - - 606 606
Additions - - - - - 1,027 1,027
--------------- -------- --------- ----------- -------- ------------ ------
At 31 December
2020 - - - - - 1,633 1,633
Forex retranslation
adjustment - - - - - (109) (109)
--------------- -------- --------- ----------- -------- ------------ ------
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
--------------- -------- --------- ----------- -------- ------------ ------
Amortisation
At 1 January 2020 - - - - - 194 194
Amortisation charge - - - - - 203 203
--------------- -------- --------- ----------- -------- ------------ ------
At 31 December
2020 - - - - - 397 397
Forex retranslation
adjustment - - - - - (17) (17)
--------------- -------- --------- ----------- -------- ------------ ------
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
Impairment
At 1 January 2021 - - - - - - -
Impairment charge - - - - 800 1,773 2,573
--------------- -------- --------- ----------- -------- ------------ ------
At 31 December
2021 - - - - 800 1,773 2,573
Net Book Value
At 31 December
2021 4,643 185 1,286 382 1,399 - 7,895
=============== ======== ========= =========== ======== ============ ======
At 31 December
2020 - - - - - 1,236 1,236
=============== ======== ========= =========== ======== ============ ======
The following intangible assets arose on the acquisition of
TradeFlow during the current 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.
Impairment assessment - Internally developed IM Platform
The Directors considered the current year losses of the Group's
Italian subsidiary, to which the Internally developed IM platform
relates, as an impairment indicator and therefore, in accordance to
IAS 36 ("Impairment of Assets"), an impairment test on this asset
has been performed as at 31 December 2021.
This impairment test has been carried out using the Group's 2022
- 2025 Business Plan prepared by the management and approved by the
Board of Directors on 30 May 2022, and, in particular, the cash
flows the particular asset is expected to generate during the
forecasted period in its current condition. The recoverable amount
has been identified in the value in use, equal to the sum of the
discounted future cash flows (considering a terminal value) that
the asset will be able to generate according to management
estimates in its current condition.
The weighted average cost of capital ("WACC") has been used as
the discount rate, which takes into account the specific risks of
the asset and reflects the current market conditions and the cost
of money, based on a weighting between the cost of debt and the
cost of equity, calculated on the basis of the values of comparable
companies operating in the same sector. The value of the WACC thus
determined was equal to 10.64%.
The recoverable amount of the investment was higher than its
carrying amount using this methodology as at 31 December 2021.
However, as noted in the full going concern statement, set out
in note 2, there is currently an absence of a historical 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 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 this uncertainty applies 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 impair the full
carrying amount of this asset as at 31 December 2021. 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 2021
(included in the independent valuation report prepared for the
purposes of the acquisition) to be an impairment indicator. In
particular, the Directors noted that 80% of the earn-out milestone
target, which had been set in line with the forecast referred to
above, for the year ended 31 December 2021 was achieved. Therefore,
in accordance with IAS 36 ("Impairment of Assets"), an impairment
test on the TradeFlow Cash Generating Unit ("CGU") has been
performed as at 31 December 2021.
This impairment test has been carried out using the Group's 2022
- 2025 Business Plan prepared by the management and approved by the
Board of Directors on 30 May 2022, and, in particular, the cash
flows the TradeFlow CGU is expected to generate during the
forecasted period in its current conditions. In performing the
impairment test, the Directors reduced its revenue forecasts by 20%
each year over this period in order to reflect the circumstances
experienced in the current financial year. The Directors believe
this is a prudent assumption to have made given the current
expectations are for revenue to be largely in line with the
unadjusted forecasts going forward.
The Directors used WACC as the discount rate, which takes into
account the specific risks of the TradeFlow CGU forecasts, and
reflects the current market conditions and the cost of money, based
on a weighting between the cost of debt and the cost of equity,
calculated on the basis of the values of comparable companies
operating in the same sector. Given the early stage development of
the TradeFlow business, the Directors initial determined WACC to be
equal to 16.43%.
However, the Directors also noted that the independent purchase
price accounting exercise carried out in respect of the TradeFlow,
applied a discount rate of 25.00% to the forecast cashflows. This
discount rate has been determined largely by reference to the
initial rate of return, which would ensure the present value of the
future TradeFlow CGU forecasts equalled to the value of the
investment made.
In order to ensure consistency between the WACC applied in this
impairment test and the recent purchase price accounting exercise,
the Directors took the decision and subsequently adjusted the
discount rate applied in the impairment test to 25.00%. This is
also believed to be a prudent assumption.
Using the assumptions applied above, 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 1.5%) 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 31 December 2021 by GBP800,000.
As such, in accordance with IAS 36 ("Impairment of Assets"), an
impairment charge of GBP800,000 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.
16 Trade and other receivables
As at 31 December 2021 As at 31 December 2020
GBP 000 GBP 000
Trade receivables 13 489
Contract assets 84
Other receivables 727 601
Prepayments 72 23
---------------------- ----------------------
Total current trade and other receivables 896 1,113
====================== ======================
17 Share capital
Allotted, called up and fully paid shares
As at 31 December As at 31 December
2021 2020
No. 000 GBP 000 No. 000 GBP 000
Equity - -
Ordinary shares of GBP0.00002
each 36,068,442 721 32,754,945 655
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 2,2412
36,355,720 5,486 33,042,223 5,420
New shares allotted during the current financial year
On 7 July 2021, the Company allotted 1,477,705,882 new ordinary
shares. These shares were issued with the following activities:
-- 813,000,000 were issued as consideration for the acquisition of TradeFlow;
-- 500,000,000 were issued as consideration to intermediaries
and introducers which support the TradeFlow acquisition; and
-- 164,705,882 were issued in connection with the conversion of
GBP560,000 convertible loan notes held by Negma Group.
On 29 July 2021 the Company allotted 315,000,000 new ordinary
shares in connection with the conversion of GBP1,008,000
convertible loan notes held by Negma Group.
On 3 September 2021 the Company allotted 840,000,000 new
ordinary shares in connection with the conversion of GBP2,016,000
convertible loan notes held by Negma Group.
On 18 November 2021 the Company allotted 77,614,382 new ordinary
shares in connection with the conversion of GBP158,333 convertible
loan notes held Mercator Capital Management Fund LP.
On 29 November 2021 the Company allotted 221,836,063 new
ordinary shares in connection with the conversion of GBP300,000
convertible loan notes held Mercator Capital Management Fund
LP.
On 21 December 2021 the Company allotted 381,340,661 new
ordinary shares in connection with the conversion of GBP458,333
convertible loan notes held Mercator Capital Management Fund
LP.
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.
Reconciliation of allotted, called up and fully paid shares
As at 31 December As at 31 December
2021 2020
No. 000 GBP 000 No. 000 GBP 000
As at 1 January 33,042,223 5,420 - 148
Transfer to RTO reserve - - - (148)
Bring in plc share capital - 388,372 4,767
Reverse acquisition - 32,322,246 646
Issue of shares for cash - 331,604 7
Shares issued on conversion
of convertible loan notes
(note 19) 2,000,497 40 - -
Shares issued as consideration
for acquisition (note
27) 813,000 16 - -
Shares issued as consideration
for support with the
TradeFlow acquisition
(note 27) 500,000 10 - -
As at 31 December 36,355,720 5,486 33,042,223 5,420
========== ======= ========== =======
18 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 to
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 19.
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). As at 31 December 2021, the Company had made the first
two monthly repayments which had been satisfied through the
issue of convertible loan notes in order to allow the Group
to preserve cash for working capital requirements or to facilitate
further new strategic initiatives. 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%.
Further details on the fair value of the warrants are set out
in note 28.
The movement in the loan notes during the current financial
year are set out in the table below: GBP 000
Loan note liability at 1 January 2021 -
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 540
Less Repayments made via issues of convertible loan notes (917)
--------------
Loan note liability at 31 December 2021 5,732
==============
Long-Term Borrowings As at 31 December 2021 As at 31 December 2020
GBP 000 GBP 000
Unsecured loan notes 1,263 -
Other bank borrowings 21 22
Total long-term borrowings 1,284 22
====================== ======================
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 2021, the Group has recognised GBP1,263,000 (USD 1,700,000) as a long-term
liability. These TradeFlow loan notes bear a simple fixed interest rate of 8.235% per annum
which is to be paid semi-annually. As at 31 December 2021, the Group has recognised the accrued
interest that had not been paid of GBP84,000 (2020: nil) within trade and other payables.
In addition, the Group has also recognised accrued interest in respect of the cost of issue
using the effective interest rate method, resulting in additional accrued interest of GBP77,000
as at 31 December 2021.
The total interest expense recognised in the income statement for the current financial year,
from the date of acquisition of TradeFlow, in relation to this unsecured loan note was GBP86,000
(2020: nil).
19 Convertible loan notes
During the current financial year, the Company entered two different
convertible loan note arrangements. These are set out below:
Negma convertible loan notes
On 16 June 2021, the Company entered a subscription agreement
with Negma Group Ltd ("Negma"") for the issue of an initial
tranche of GBP5,600,000 of convertible loan notes, in exchange
for cash proceeds of GBP5,000,000.
The difference between the par value of the convertible loan
notes and the cash received is the effective interest charged
in relation to these instruments.
Negma issued conversion notices during the period totalling
GBP3,584,000 which resulted in the issue of 1,319,705,882 ordinary
shares (for further detail see note 17).
The remaining GBP2,016,000 convertible loan note balance was
repaid in cash following the drawdown of the initial tranche
of the loan notes referred to above.
The total interest cost of GBP600,000 in relation to these convertible
loan notes has been recognised as a finance expense during the
current period.
Mercator convertible loan notes
As set out in note 18, the Company entered a second convertible
loan note agreed with Mercator in connection with the loan note
facility described above.
The Mercator convertible loan notes contains 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.
During the year ended 31 December 2021, the Company issued convertible
loan notes to Mercator to the value of GBP916,667, however as
at 31 December 2021 these had fully been converted into 680,791,106
ordinary shares.
The Mercator convertible loan notes did not have any interest
costs in addition to the loan notes but did have costs relating
to commitment fees of GBP25,000 and the fair value of the warrants
of GBP88,000 associated with warrants. Both costs have been
recognised in the income statement in the current year given
the liability to which they relate has been extinguished (2020:
nil). Further details on the fair value of the warrants is set
out in note 28.
As at 31 December 2021, the convertible loan note liability
is nil (2020: nil).
Historical convertible loan notes
In addition to the above, the Company also had the following
historical convertible loan notes and associated derivative
financial instruments which expired during the year resulting
in a credit to the income statement in respect of the outstanding
fair value of GBP24,000.
20 Trade and other payables
As at 31 December 2021 As at 31 December 2020
GBP 000 GBP 000
Trade payables 1,086 1,062
Other payables 588 271
Social security and other taxes 994 792
Accruals 437 117
Contract liabilities 395 1,131
---------------------- ----------------------
3,500 3,373
====================== ======================
The decreased in contract liabilities over the period is a
result of:
-- GBP182,000 being recognised as revenue in the year ended 31
December 2021 in line with the due diligence performance
obligations having been satisfied during this time; and
-- A number of refunds having been requested from client
companies during the current financial year in connection with the
Group's older contracts that allowed for this. A number of these
amounts were refunded during the year, but a number were due for
repayment as at 31 December 2021 and were recorded within other
payables. Management is confident that some of these client
companies are likely to return following the first inventory
monetisation transactions being executed on the Platform.
21 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 2020 - - 207 211
Released to profit and
loss - - - (4)
Provided for in the
year 32 40 79 151
---------------- ------------- --------------- ---------
At 31 December 2020 32 40 286 358
Forex retranslation
adjustment - (4) (19) (23)
---------------- ------------- --------------- ---------
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
================ ============= =============== =========
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 2021, the Group has
included a provision relating to a potential VAT liability,
including penalties, in respect of these advance payments of
GBP209,000 (31 December 2020: GBP286,000). The reduction in the
provision during the year represents the fact that a number 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 2021, however there is a
contingent asset of GBP149,000 as at 31 December 2021 (31 December
2020: GBP204,000) 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 2021 that meet the criteria for a provision to be
recognised.
22 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 GBP86,000 (2020:
GBP1,000).
Contributions totalling GBP21,000 (2020: GBP2,000) were payable
to the scheme at the end of the year and are included in creditors.
This has been paid post year end.
23 Capital commitments
There were no capital commitments for the Group at 31 December
2021 or 31 December 2020.
24 Contingent liabilities
There were no contingent liabilities for the Group at 31
December 2021 or 31 December 2020.
25 Financial instruments
Financial assets
Carrying value Fair value
As at 31 December As at 31 December As at 31 December As at 31 December
2021 2020 2021 2020
GBP 000 GBP 000 GBP 000 GBP 000
Financial assets at amortised
cost:
Cash and cash equivalents 1,727 552 1,727 552
Trade receivables 13 489 13 489
Other receivables 727 601 727 601
2,467 1,642 2,467 1,642
=================== ==================== ==================== ====================
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 2021 As at 31 December 2020 As at 31 December 2021 As at 31 December 2020
GBP 000 GBP 000 GBP 000 GBP 000
Financial liabilities
at amortised cost:
Loan notes 5,732 - 5,732 -
Long-term borrowings 1,284 22 1,284 22
Trade payables 1,086 1,062 1086 1,062
Other payables 588 271 588 271
---------------------- ---------------------- ---------------------- ----------------------
8,690 1,355 8,690 1,355
====================== ====================== ====================== ======================
Fair value
As at 31 December 2021 As at 31 December 2020
GBP 000 GBP 000
Financial liabilities at fair value through profit and loss:
Derivative financial instruments - 24
====================== ======================
Valuation methods and assumptions: The directors believe that
the fair value of trade and other payables approximates to the
carrying value.
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 as at 31
December 2021 comprised cash at bank of GBP,1,727,000 (2020:
GBP552,000). Interest is paid on cash at floating rates in line
with prevailing market rates.
The Group's interest generating financial liabilities as at 31
December 2021 comprised loan notes of GBP5,732,000, loan term
borrowings of GBP1,284,000 (2020 - GBP22,000).
Sensitivity analysis
At 31 December 2021, had the LIBOR 1 MONTH rate of 0.01047 (2020
- 0.01913) increased by 1% with all other variables held constant,
the increase in interest receivable on financial assets would
amount to approximately GBPnil (2020 - 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 (2020 - 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 nancial 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
2021 2021 2020 2020
GBP 000 GBP 000 GBP 000 GBP 000
Cash and cash equivalents 1,727 1,727 552 552
Trade receivables 13 13 489 489
------------- ------------- ------------- -------------
1,740 1,740 1,041 1,041
============= ============= ============= =============
As at 31 December 2021, 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 Sterling: GBP1,585,000 (2020 - GBP539,000)
- Cash Euro: GBP92,000 (2020 - GBP13,000)
- Cash US Dollar: GBP44,000 (2020 - GBPnil)
- Cash Singapore Dollar: GBP5,000 (2020 - GBPnil)
- Trade receivables Sterling: GBPnil (2020 - GBPnil)
- Trade receivables Euro: GBP13,000 (2020 - GBP489,000)
Financial liabilities
- Trade payables Sterling: GBP193,100 (2020 - GBP342,000)
- Trade payables Euro: GBP879,000 (2020 - GBP720,000)
Trade payables Singapore Dollar: GBP14,0000 (2020 - GBPnil)
Sensitivity analysis
At 31 December 2021, 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: GBP131,000 higher (2020 - GBP41,000 lower).
- Singapore Dollar: 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: GBP131,000 lower (2020 - GBP41,000 higher).
- Singapore Dollar: 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 2021 or 31
December 2020.
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 - - -
Long-term
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 -
=============== ==================== ==================== ==================== =============
Between 3 and 12 Between 1 and 2 Between 2 and 5
At 31 December 2020 Up to 3 months months years years Over 5 years
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
Liabilities
Loans and
borrowings* - - 2 19 1
Trade and other
payables 1,333 - - - -
Social security and
other taxes 792 - - - -
Total liabilities 2,125 - 2 19 1
=============== ==================== ==================== ==================== =============
* To better reflect the nature of certain items the prior year
comparatives include the a reclassification of bank borrowings of
GBP22k from Trade and other payables to long-term borrowings. The
tables above also reflect the repayment profile for this
reclassified amount.
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
18 and 19, 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: (GBP1,425,000) (2020: (GBP452,000))
- Cash and cash equivalents: GBP1,727,000 (2020: GBP552,000)
26 Net debt
The Group reconciliation of the movement in net debt is set out
below:
Cash at bank Loan notes Convertible loan notes Long-term borrowings Total
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
At 1 January 2021 552 - - (22) 530
Net Cashflows 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)
============= =========== ======================= ===================== =========
Cash at bank Long-term borrowings Total
GBP 000 GBP 000
At 1 January 2020 143 - 143
Net Cashflows 385 (22) 363
Foreign exchange 24 - 24
As at 31 December 2020 552 (22) 530
============= ===================== ======
27 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 owes 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 31 December 2021 are immaterial to the Group.
The provisional 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 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 current
financial year 1,410
Acquisition related earn-out expected to be recognised
in future periods 3,126
4,536
===============
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. Details
of intangible assets recorded can be found in note 15.
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 24) as required by IFRS 3 ("Business Combinations").
Transaction costs of GBP2,009,000 have been charged to the
statement of comprehensive income as a transaction cost.
GBP1,900,000 of these costs 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
Companies Act 2006 required that when these shares were issued they
be accompanied by an independent valuers report as to the value of
the services. However, due to an error on behalf of the Company,
this was not done at the time. Despite this, the shares were issued
in good faith between company and the third parties and remain
legal and valid and the independent valuation report has now
subsequently been received by the Company and, having sought legal
advice, this and an amended share issue form will be lodged with
Companies House to rectify the situation. The remaining GBP109,000
related to legal fees that were directly associated with the
acquisition.
The acquisition contributed GBP231,000 of revenue and
(GBP522,000) to the Group's operating loss before acquisition
related costs for the period between the date of acquisition and
the balance sheet date. As a preliminary assessment, had the
acquisition of TradeFlow been completed on the first day of the
financial year, Group revenues would have been approximately
GBP259,000 higher and Group's operating loss before acquisition
related costs would have been approximately GBP590,000 higher.
28 Share-based payments
Acquisition related earn-out payments
As explained in notes 2 and 27, 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.
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 for 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 is 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 choses to issue 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.
Taking into account the factors above, value of the earn-out payments settled by way of equity
have market conditions associated with them, being the future share price, and the fair value
at grant date (being 1 July 2021) has been estimated using a Monte Carlo simulation model.
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 have been detailed in note 2. The models above have assumed
the non-market conditions surrounding these earn-out payments / awards will be meet and as
such in future periods 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 in the current financial year and the expected
expense to be recognised in future periods are set out in note 23 above.
Share warrants
As explained in notes 18 and 19, during the year the Company entered into a funding facility
with Mercator which included the Company issuing loan notes in exchange for funding. These
loan notes linked to a convertible loan note facility, 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. 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.
The total number of share warrants issued during the current financial year was 522,791,511,
details of which are set out in the table below.
As these share warrants were issued as a cost of securing the funding facility they fall into
the scope 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. Date of Principal value Number of Exercise Fair value Amount
issue of warrants warrants price (GBP000) recognised
issued in during
(GBP000) FY21(GBP000)
1 October
2021 1,400 443,726,030 GBP0.00316 520 177
1 November
2021 92 29,197,856 GBP0.00314 42 42
1 December
2021 92 49,867,625 GBP0.00184 46 46
Total 1,584 522,791,511 608 265
The total fair value of the above share warrants issued during the current financial year
is GBP608,000. Of this amount GBP520,000 related to those warrants issued in connection with
the loan notes and were 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 GBP177,000 was recognised in the income statement for the period ended 31 December 2021.
The remaining GBP88,000 related to those warrants issued in connection with the convertible
loan notes, this amount was fully in the income statement in the current year given the liability
to which they relate has been extinguished.
29 Related party transactions
During the year to 31 December 2021, the following are treated
as related parties:
Alessandro Zamboni
Alessandro Zamboni is the CEO 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 AZ company S.r.l - a
private limited company. Both of these entities are related parties
due the following transactions that took place over the current or
prior financial year.
Following historical transactions with AZ company S.r.l the
Group had an amount payable of GBP63,000 to this related party at
31 December 2020 which was paid off during the year. There were no
further transactions undertaken with AZ company S.r.l during the
current financial year with the exception of the repayment of the
amount owing at 31 December 2020 detailed above. There were no
balances outstanding with AZ company S.r.l at 31 December 2021.
The AvantGarde Group S.p.A ("TAG") and its subsidiaries
As at 31 December 2021 TAG held 35.3% of the Company's total
ordinary shares in issued in Supply@ME Capital plc (as at 31
December 2021: 38.9%).
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 year ended 31
December 2021, GBP175,000 (2020: GBP1,134,000) 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 3.
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 year ended 31 December 2021, the Group paid
GBP129,000 (2020: GBP48,000) to TAG in respect of this
agreement.
Following the above transactions with TAG the Group has a net
amount payable of GBP64,000 as at 31 December 2021 (net amount
receivable of GBP232,000 as at 31 December 2020).
The TAG Group includes other companies which the Group had
entered into transaction with. These companies include the Future
of Fintech Srl and RegTech Open Project S.p.A, 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.
As at 31 December 2021 there is an outstanding amount owed to
the Group of GBP6,000 from Future of Fintech in relation to
severance pay accrued by former employees which has been
transferred to the Group by the related party (31 December 2020:
nil).
As at 31 December 2021 there is an outstanding amount owed by
the Group of GBP5,000 to RegTech Open Project S.p.A in relation
historical amounts owing for regulatory technology professional
services provided to the Group (31 December 2020: amount owed by
the Group of GBP4,000).
Eight Capital Partners Plc
Dominic White, the previous Non-Executive Chairman, is a
director of Eight Capital Partners PLC, and David Bull, an
Independent Non-Executive Director and audit committee chair is the
CEO of Eight Capital Partners PLC. 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, the Group
paid GBP72,000 (2020: GBP60,000) to Eight Capital Partners Plc in
respect of this agreement. As at 31 December 2021 there is an
outstanding amount owed by the Group of GBP8,000 (31 December 2020:
GBP2,000). Since the year end the Master Service Agreement with
Eight Capital Partners plc has been terminated.
Epsion Capital Ltd
Epsion Capital, is a wholly owned subsidiary of Eight Capital
Partners Plc and conducted the placing for the RTO and were paid
GBP159,000 in respect of these activities. This related party has
not been used in 2021 and there were no amounts outstanding at
either 31 December 2021 or 2020.
30 Controlling party
At 31 December 2021 the Directors do not believe that a
controlling party exists.
31 Subsequent events
Issue of convertible loans and related warrants
On each of the 4 January 2022, 2 February 2022 and the 4 March
2022, the Company issued further convertible loan notes in lieu of
the monthly cash repayments in respect of the outstanding loan
notes. Each of these convertible loan notes was for a principal
amount of GBP678,333, and together totalled GBP2,035,000. In
additional, warrants to the value of 20% of the principal value
were also issued, this equated to a total number of warrants issued
of 262,891,765.
Issue of new share capital following conversion of convertible
loan notes
On 13 January 2022, the Company allotted 594,664,101 new
ordinary shares as a result of the conversion GBP678,333 of the
convertible loan notes issued and subscribed by Mercator Group.
On 28 February 2022, the Company allotted 489,787,922 new
ordinary shares as a result of the conversion GBP500,000 of the
convertible loan notes issued and subscribed by Mercator Group.
On 29 March 2022, the Company allotted 316,446,349 new ordinary
shares as a result of the conversion GBP178,333 of the convertible
loan notes issued and subscribed by Mercator Group.
Issue of new share capital following capital raise
On the 26 April 2022, the Company agreed a new equity funding
facility with provides a binding commitment with a new investor,
Venus Capital SA ("Venus Capital"), to invest up to GBP7,500,000 in
exchange for multiple tranches of new ordinary shares to be issued
by the Company over a period with a long stop date of 31 December
2023 (the "Capital Raise Plan"). These tranches have been
structured as follows:
-- New ordinary shares issued from 26 April to date - at the
date of these consolidated financial statements being issued, the
Company has issued 3,320,000,000 of new ordinary share to Venus
Capital in exchange for GBP1,660,000;
-- Additional mandatory tranches to the value of GBP2,090,000; and
-- Additional optional tranches (where the exercise is at the
option of the Company) to the value of GBP3,750,000.
It should be noted that the issue of the new ordinary shares
under the Capital Raise Plan is subject the necessary
authorisations from shareholders which the Company is planning to
require at the General Meeting to be held in conjunction with the
2021 Annual General Meeting.
Additionally, the Capital Raise Plan also saw the Company
entered into an agreement with Venus Capital regarding a loan
facility of up to GBP1,950,000 commencing from June 2022, including
GBP450,000 to cover the arrangement fees relating to the Capital
Raise Plan, which would be repayable in shares and which would have
a maturity date of 31 December 2025 and an 10% per annum interest
rate.
Restructure of Mercator funding facility
The key objective of the Capital Raise Plan is to allow the
outstanding Mercator loan notes to be repaid in cash rather than
via further convertible loan note issues. To assist with this, on
the 26 April 2022, the Company and Mercator signed an amendment
deed to the Loan Note Instrument and Convertible Loan Note
Instruments that were agreed on 29 September 2021 (the "Mercator
Amendment"). This amendment is aimed at avoiding further
conversions under the terms of the Instruments and allows the
Company:
-- to repay in cash the GBP678,333.34 of outstanding Convertible
Loan Notes issued by the Company on 4 March 2022, using the
proceeds of the first tranche of the Capital Raise. This repayment
was made on 9 May 2022 and included an additional interest charge
of 8%;
-- to repay in cash to Mercator the balance of the outstanding
Loan Note Instrument, through an updated instalment plan, in
accordance with the current terms and conditions of the Instruments
and the new conditions comprised in the Mercator Amendment.
Pursuant to the Mercator Amendment, Mercator has further agreed
that the Company is required to issue only one further tranche of
warrants related to 20% of the most recent Loan Note Instrument
monthly repayment of GBP678,333.34.
Establishment of Supply@Me technologies S.r.l
On 25 March 2022, the Company established a new 100% owned
subsidiary called Supply@ME technologies S.r.l. The new subsidiary
is currently non-operational but it is expected in the future that
the Group's Intellectual Property rights relating to the Platform
will be purchased by this new entity from another Group entity,
Supply@Me S.r.l. Following this, it is expected that all future
developments will be undertaken by this newly established
subsidiary. This will highlight the value generated by the Platform
in terms of trademarks, technology and innovative legal &
accounting frameworks. It is also envisaged that the newly
established entity will be the direct counterparty of White-label
contracts and other potential strategic partnerships which the
Group is evaluating.
New loan into TradeFlow
On 1 April 2022, TradeFlow entered into a loan agreement for USD
3,800,000, with a maturity date of 31 March 2026. The loan bears
simple interest at a fixed rate of $7.9% per annum.
The loan will be used to pay down the existing outstanding
unsecured loan notes which as at 31 December 2021 had a principal
balance of GBP1,263,000 and accrued interest of GBP77,000.
Board restructuring
On 4 March 2022, James Coyle, the Non-Executive Chairman at the
time, resigned from the Board of Directors of the Company in order
to focus on his other business interests.
On 14 April 2022, Susanne Chishti, an independent non-executive
director, resigned from the Board of Directors of the Company in
order to explore new business opportunities.
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END
FR BIGDUXUXDGDG
(END) Dow Jones Newswires
May 31, 2022 02:01 ET (06:01 GMT)
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