Consolidated statement of cash flows

 

		Year ended 31 December 2023 US$'000		Year ended 31 December 2022 US$'000
	Note
Cash flows from operating activities
Loss before income tax		(3,479)		(2,479)
Depreciation of property, plant and equipment	14	1		-
Amortisation of intangible assets		6		2
Share based payment expense		572		379
Finance expense	10	131		67
		(2,769)		(2,031)
(Increase) / decrease in inventories	15	(360)		24
Increase in trade and other receivables	16	(1,038)		(76)
Increase in trade and other payables	18	1,580		111
Net cash used in operating activities		(2,587)		(1,972)
Cash flows from investing activities
Purchase of intangible assets	13	(180)		(116)
Payments to acquire property, plant and equipment	14	(9)		-
Net cash used in investing activities		(189)		(116)
Cash flows from financing activities
Issue of shares		73		-
Proceeds from borrowings		2,723		1,652
Investment by non-controlling interests		-		509
Net cash from financing activities		2,796		2,161
Increase in cash and cash equivalents	17	20		73
Cash and cash equivalents at beginning of year		91		18
Effect of foreign exchange rate changes		6		-
Cash and cash equivalents at end of year		117		91

 

 

Notes to the consolidated financial statements

 

1.    General information

 

MicroSalt Plc (the "Company") is a private company limited by shares and registered and incorporated in England and Wales. The registered office is 12 New Fetter Lane, London, United Kingdom, EC4A 1JP.

 

The principal activity of the Company together with its subsidiary undertaking (the "Group") is that of the development and sale of low sodium salt and snack foods.

 

2.    Accounting policies

 

2.1       Basis of preparation

 

The consolidated financial statements are for the year ended 31 December 2023. They have been prepared in accordance with UK-adopted International Accounting Standards ("IFRS"). The prior year consolidated information for year ended 31 December 2022 was included in the historical financial information in the admission document to AIM, which was deemed to be the first-year accounts under IFRS. The adoption of IFRS did not lead to changes in the recognition of measurement of transactions or balances, and consequently no reconciliation required under IFRS 1 was presented in the historical financial information. These are the first company financial statements prepared under IFRS, the adoption of IFRS did not lead to changes in the recognition of measurement of transactions or balances, and consequently no reconciliation required under IFRS 1 has been included.

 

The financial statements have been prepared under the historical cost convention. The measurement bases and principal accounting policies of the Group are set out below.

 

New standards, amendments and interpretations

 

Standards and interpretations adopted during the year

 

Information on new standards, amendments and interpretations that are relevant to the Group annual report and accounts is provided below:

 

·      Deferred Tax related to Assets and Liabilities arising from a Single Transaction - amendments to IAS 12

·      Disclosure of Accounting Policies - amendments to IAS 1 and IFRS Practice Statement 2

·      Definition of Accounting Estimates - amendments to IAS 8

 

The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these new standards and amendments and they did not have a material impact.

 

Standards, amendments and interpretations that are not yet effective

 

Certain new standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. These standards, amendments or interpretations are not expected to have a material impact on the Group.

 

2.2       Going concern

 

The Directors have assessed the ability of the Group to continue as a going concern using cash flow forecasts. The Group meets its day to day working capital requirements through financing provided by Tekcapital PLC primarily via the issue of convertible loan notes and subsequent to the year end, cash raised from the admission to AIM. The Directors are satisfied that there are sufficient resources to continue in business for the foreseeable future and for at least 12 months from the date of signing these financial statements.

Notes to the consolidated financial statements (continued)

 

2.  Accounting policies (continued)

 

Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. They are mindful of the ongoing conflict in Russia and Ukraine and rising costs of inflation but are confident they have appropriate plans in place to mitigate any such risk in relation to this. Therefore, the financial statements continue to be prepared on the going concern basis.

 

2.3       Revenue recognition

IFRS 15 "Revenue from Contracts with Customers" is a principle-based model of recognising revenue from contracts with customers. The model comprises five steps with revenue being recognised when control over goods and services are transferred to the customer.

The Group's revenue consists of product sales. Revenue is recognised when the Group delivers a product to the customer. Payment of the transaction price is due immediately when the customer purchases the product and takes delivery or in the case of certain business to business transactions on credit terms.

 

Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and sales taxes or duty.

 

2.4       Basis of consolidation

 

The consolidated financial statements present the results of the Company and its subsidiaries as if they form a single entity.

 

Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When changes in ownership in a subsidiary do not result in a loss of control, the non-controlling shareholders' interests are initially measured at the non-controlling interests' proportionate share of the subsidiaries net assets. Subsequent to this, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity.

 

When necessary, adjustments are made to the financial information of subsidiaries to bring their accounting policies in line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

2.5       Other operating income and grants

 

Other operating income represents all other income received by the Group. This includes R&D Expenditure Credits which are a form of government grant.

 

Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received, and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the statement of profit or loss and other comprehensive income over the period necessary to match them with the costs that they are intended to compensate.

 

The grant income received has been accounted for in accordance with IAS 20 'Accounting for Government Grants and Disclosure of Government Assistance' and is shown in other operating income in the statement of profit or loss and other comprehensive income whilst research and development expenditure is shown gross of grant income.

 

2.6       Finance expense

 

Finance expense comprises of interest payable on convertible loan notes which are expensed in the period in which they are incurred and reported in finance costs.

Notes to the consolidated financial statements (continued)

 

2      Accounting policies (continued)

 

2.7       Foreign currency translation

 

The functional currency of the Company is GB Pounds Sterling. For the purposes of the consolidated Interim Financial Information, the results and financial position of the Company and its subsidiary are presented in US Dollars which is the Group's presentational currency.

 

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the end of the reporting period. All differences are taken to the statement of profit or loss and other comprehensive income.

 

Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are included in the statement of comprehensive income for the period.

 

The assets and liabilities of the Group are expressed in US Dollars using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as other comprehensive income and are transferred to the Group's translation reserve.

 

2.8       Current and deferred taxation

 

The tax expense for the period comprises current and deferred tax.  Tax is recognised in the statement of comprehensive income, except that a charge attributable to an item of income or expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

 

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the UK where the Group operates and generates taxable income.

Deferred tax balances are recognised in respect of all temporary differences that have originated but not reversed by the reporting date, except:

 

-       The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and

-       Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.

 

Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.

 

2.9       Property, plant and equipment

 

Items of property, plant and equipment are stated at historical cost less accumulated depreciation.

 

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

 

Plant and equipment

-

20 per cent straight-line

 

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

 

 

Notes to the consolidated financial statements (continued)

 

2.    Accounting policies (continued)

 

2.10     Intangible assets

 

Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.

 

Amortisation is charged to the administrative expenses in the statement of profit or loss and other comprehensive income on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date.

 

Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows on a straight-line basis:

 

Intellectual property and patents

-

Length of the trademark/patent

 

The estimated useful lives are based upon management's best estimate of the expected life of the asset. Useful lives are reconsidered if circumstances relating to the asset change or if there is an indication that the initial estimate requires revision.

 

2.11    Inventories

 

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

 

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

 

2.12    Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short term highly liquid deposits which are subject to an insignificant risk of changes in value.

 

 

 

Notes to the consolidated financial statements (continued)

 

2.    Accounting policies (continued)

 

2.13    Financial assets

 

The Group classifies its financial assets at amortised cost.  Management determines the classification of its financial assets at initial recognition.

 

The Group's financial assets held at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold their assets in order to collect contractual cash flows and the contractual cash flows are solely payments of the principal and interest.

They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime ECLs. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime ECL for the trade receivables. For trade receivables, which are reported net; such provisions are recorded 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.

2.14    Financial liabilities

 

The Group measures its financial liabilities at amortised cost. All financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provision of the instrument.

The Group's financial liabilities held at amortised cost comprise trade payables and other short-dated monetary liabilities, and borrowings in the consolidated statement of financial position.

Trade payables and other short-dated monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

 

Borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument.  Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position.

 

For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

 

Unless otherwise indicated, the carrying values of the Group's financial liabilities measured at amortised cost represents a reasonable approximation of their fair values.

 

 

 

Notes to the consolidated financial statements (continued)

 

2.    Accounting policies (continued)

 

2.15    Impairment of assets

 

Assets that are subject to depreciation or amortisation are assessed at each reporting date to determine whether there is any indication that the assets are impaired.

Where there is any indication that an asset may be impaired, the carrying value of the asset is tested for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Non-financial assets that have been previously impaired are reviewed at each reporting date to assess whether there is any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased.

2.16    Equity instruments

 

Equity is the residual interest in the assets of the Company after deducting all liabilities and comprises the following:

 

·        "Share capital" represents the nominal value of equity shares;

·        "Share premium" represents the excess value of equity shares above the nominal value;

·        "Share-based payment reserve" represents the cumulative fair value of options;

·        "Capital contribution reserve" represents non-cash contributions from equity holders;

·        "Accumulated losses" represents retained earnings less retained losses;

·        "Translation reserve" represents the Cumulative gains and losses on translating the net assets of the Company to the presentation currency of the Group" and

·        "Non-controlling interests" represents the cumulative net profits/(losses) in relation to non-controlling interests.

 

2.17    Convertible loan notes

 

Convertible loan note instruments issued by the Group are assessed to whether the transaction price relates to both the underlying financial instrument and the warrants issued representing the same economic arrangement, and therefore fair value of the whole arrangement. The Group assesses whether the underlying financial instrument (loan notes) and the conversion feature should be classified as a liability or equity instrument. As part of this assessment, the Group considers whether the conversion feature is closely related to the host contract, requiring a separate assessment of the host contract and the conversion feature. It was determined that the conversion feature was not closely related to the host contract, meeting the criteria for recognition as a separate embedded derivative.

 

Loan note: It was determined that the Group does not have an unconditional right to avoid delivering cash or another financial asset to settle the contractual obligation, meeting the criteria to be recognised as a financial liability.

 

Conversion feature: There is an obligation to convert the loan notes into variable number of ordinary shares of MicroSalt Inc. on conversion events. The conversion feature is at market price as there is no discount against future equity placement offered. Therefore, the conversion feature is not a derivative because the value of the conversion feature does not change in response to the share price, and as such the conversion feature is a financial liability.

 

Therefore, the fair value of the overall transaction price is initially recognised as a financial liability and subsequently measured at amortised cost.

 

 

Notes to the consolidated financial statements (continued)

 

2.    Accounting policies (continued)

 

2.18    Share-based payments

 

Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period with a corresponding adjustment to equity. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met.

 

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

 

The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Group keeping the scheme open or the employee maintaining any contributions required by the scheme).

 

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the  fair value of the original share-based payment at date of grant.

 

3.    Significant accounting judgements, estimates and assumptions

 

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires the Group management to exercise judgement and use assumptions in applying the Group's accounting policies. The resulting accounting estimates calculated using these judgements and assumptions will, by definition, seldom equal the related actual results but are based on historical experience and expectations of future events. Management believe that the estimates utilised in preparing the financial statements are reasonable and prudent.

Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The judgements and key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are discussed below:

Key accounting estimates and judgements

Share-based payments

 

In order to calculate the value of employee share options as required by IFRS 2, the Group makes estimates principally relating to the assumptions used in its option-pricing model. This is a key estimate used to value the share options in issue at the balance sheet date.

Notes to the consolidated financial statements (continued)

 

4.    Revenue from contracts with customers  

 

All Group revenue was generated from the sale of goods in the USA and recognised at the date the goods were delivered. 4 customers make up 10% or more of revenue in the period ended 31 December 2023 (2023: 3).

 

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Customer 1	132		159
Customer 2	107		-
Customer 3	66		180
Customer 4	29		145

 

5.    Other operating income

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
R&D expenditure tax credit	48		23
Other income	72		7
	120		30

 

6.    Segmental reporting

 

Factors that management used to identify the Group's reportable segments:

 

The Chief Operating Decision Maker ("CODM") has been identified as the Directors. The CODM reviews the Group's internal reporting in order to assess performance and allocate resources. The CODM has determined that there is one single operating segment, the development and sale of low sodium salt and snack foods.

 

7.    Operating loss

 

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Amortisation of intangible assets	6		2
Research and development expense	81		95
Trade debtor written off	-		15
Share-based payment expense	572		379
Inventory recognised as an expense	81		441
Expected credit losses	(3)		11

 

 

Notes to the consolidated financial statements (continued)

 

8.    Auditors' remuneration

During the year the Group obtained the following services from the Group's auditors:

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Fees payables for the audit of the Group and Company's annual accounts	45		-
Fees payables for all other pre-IPO non-audit services	208		-
	253		-

 

9.    Employees and directors

 

	2023		2022
	US$'000		US$'000
Wages and salaries	276		123
Social security costs	72		26
Share-based payment expense	572		379
	920		528

 

The average monthly number of employees and Directors during the year was as follows:

 

	2023		2022
	Number		Number
Management and administration	5		3
	5		3

 

Directors' remuneration is as follows:

	2023		2022
	US$'000		US$'000
Directors' emoluments, including salaries and fees	221		123
Social security costs	18		26
Share-based payment expense	572		262
	811		411

 

Key management personnel include all of the Directors, who together have authority and responsibility for planning, directing, and controlling the activities of the Group's business. There are no key management personnel other than the Directors of the Group.

The remuneration of the highest paid Director who served during the year was Rick Guiney which consisted of base salary of US$150,000 (2022: US$150,000), paid by MicroSalt Inc.

 

 

 

Notes to the consolidated financial statements (continued)

 

10.  Finance expense

 

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Finance costs:
Interest on convertible loans	131		67
	131		67

 

11.  Taxation

 

Analysis of tax expense

 

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2023 or for the year ended 31 December 2022.

 

Factors affecting the tax expense

 

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained below:

 

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Loss on ordinary activities before tax	(3,479)		(2,479)
Tax using the Group's domestic tax rates	(817)		(471)
Effects of:
Deferred tax adjustment - remeasurement of current year losses at future tax rate	(52)		-
Unutilised tax losses carried forward	869		471
Total taxation credit	-		-

The main rate of UK corporation tax for the year ended 31 December 2022 and up to 1 April 2023 was 19%. From 1 April 2023, the main rate of UK corporation tax increased to 25%, resulting in an effective tax rate of 23.5% for the year ended 31 December 2023.

 

Notes to the consolidated financial statements (continued)

 

12.  Basic and diluted loss per share

 

Basic and diluted loss per share is calculated by dividing the result attributable to equity holders by the weighted average number of ordinary shares in issue. Loss per share is presented based on the number of shares outstanding in the Company.

 

	31 Dec		31 Dec
	2023		2022
Loss used in calculating basic and diluted loss per share (US$)	(3,479,000)		(1,940,000)
Weighted average number of shares	8,895,498		11,643
Basic and diluted loss per share (US$)	(0.39)		(166.61)

 

The diluted earnings per share is identical to the basic loss per share as the exercise of warrants and options would be anti-dilutive.

 

The weighted average number of shares for both periods presented has been adjusted for the effect of the 3200:1 share subdivision and subsequent 1:520 share consolidation.

 

13.  Intangible assets

	Patent		Trademark		Total
	US$'000		US$'000		US$'000
Cost
At 1 January 2022	38		-		38
Additions	116		-		116
At 31 December 2022	154		-		154
Amortisation
At 1 January 2022	5		-		5
Charge for the period	2		-		2
At 31 December 2022	7		-		7
Net book amount
At 31 December 2022	147		-		147
Cost
At 1 January 2023	154		-		154
Additions	149		31		180
At 31 December 2023	303		31		334
Amortisation
At 1 January 2023	7		-		7
Charge for the period	6		-		6
At 31 December 2023	13		-		13
Net book amount
At 31 December 2023	290		31		321

 

Notes to the consolidated financial statements (continued)

 

14.  Property, plant and equipment

 

The Group had no items of property, plant and equipment in the year ended 31 December 2022.

 

	Plant & equipment		Total
	US$'000		US$'000
Cost
At 1 January 2023	-		-
Additions	9		9
At 31 December 2023	9		9
Depreciation
At 1 January 2023	-		-
Charge for the period	1		1
At 31 December 2023	1		1
Net book amount
At 31 December 2023	8		8

 

 

15.  Inventory

	2023		2022
	US$'000		US$'000
Raw materials	279		15
Finished goods and goods for resale	289		193
	568		208

 

 

 

Notes to the consolidated financial statements (continued)

 

16.  Trade and other receivables

 

	2023		2022
	US$'000		US$'000
Trade receivables	224		116
Other receivables	307		80
Prepayments	728		25
	1,259		221

 

Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally due for settlement immediately or within 30 days for certain credit customers and therefore are all classified as current. Trade receivables are non-interest bearing. The carrying amount of trade and other receivables approximates fair value.

 

Prepayments include US$690,000 of deferred costs in relation to the IPO of the Company on AIM, which completed 1 February 2024.

 

Analysis of trade receivables based on age of invoices:

 

	< 30 days past due US$'000	31 - 60 days past due US$'000	61 -90 days past due  US$'000	> 90 days past due US$'000	Total gross US$'000	ECL US$'000	Total net US$'000
31 December 2023	145	10	44	33	232	(8)	224
31 December 2022	9	7	58	53	127	(11)	116

 

The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECL) which uses a lifetime expected loss allowance for all trade receivables. The ECL balance has been determined as US$8,000 (2022: US$11,000) based on historical data available to management in addition to forward looking information utilising management knowledge. The ECL is based on 90% of trade receivables over 60 days past due being recoverable and therefore an ECL of 10% of trade receivables has been recognised. Based on the analyses performed there is no material impact on the transition to ECL from previous methods of estimating the provision for doubtful accounts.

 

17.  Cash and cash equivalents

 

	2023		2022
	US$'000		US$'000
Cash at bank	117		91
	117		91

 

 

 

Notes to the consolidated financial statements (continued)

 

18.  Trade and other payables

 

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Amounts falling due in one year:
Trade payables	974		142
Other payables	667		1
Accruals	104		22
	1,745		165

 

Other payables include amounts owed to related parties (see note 25).

 

19.  Borrowings

 

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Current
Convertible loan notes	2,524		170
	2,524		170

 

On 1 June 2022, the Group issued convertible loan notes ("CLNs") with a principal amount of US$2,000,000 of which US$2,000,000 was drawn and outstanding at 31 December 2023 (2022: US$141,000). The Group issued further CLNs on 1 March 2023 and 1 October 2023, with principal amounts of US$2,000,000 each, of which US$909,000 and US$Nil were drawn down at 31 December 2023, respectively.

 

The CLNs incur interest of 10% per annum and are repayable four years after commencement or can be converted into ordinary shares of MicroSalt Inc. upon certain conversion events at the option of the noteholder. During the year ended 31 December 2023, US$500,000 (2022: US$409,000) was converted into ordinary shares of MicroSalt Inc.

 

 

Notes to the consolidated financial statements (continued)

 

20.  Share capital

 

	31 Dec		31 Dec		31 Dec		31 Dec
	2023		2023		2022		2022
	Shares		US$		Shares		US$
Allotted, called up and fully paid
Opening number of £0.01 ordinary shares	1,892		26		1,892		26
Subdivision into £0.000003125 ordinary shares	6,052,508		-		-		-
Issue of ordinary share	1		-		-		-
Consolidation of shares into £0.001625 ordinary shares	(6,042,758)		-		-		-
Issue of ordinary shares	35,234,086		72,900		-		-
Closing number of £0.001625 ordinary shares	35,245,729		72,296		1,892		26

 

All issues are for cash unless otherwise stated.

 

On 15 June 2023, the Company performed a share subdivision to issue 3,200 new ordinary shares for every existing 1 share. Subsequently, on 30 September 2023, the Company performed a share consolidation to issue 1 share for every existing 520 shares.

 

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Share premium
Opening balance	1,121		1,121
Issue of shares	2,452		-
Cancellation of share premium	(3,573)		-
Closing balance	-		1,121

 

On 29 June 2023, the Company cancelled the share premium account of the Company, and the amount of the share premium account was transferred to distributable reserves. The Cancellation of Reserve was carried out by way of the solvency statement procedure under section 641(1)(a) of the Companies Act.

 

Notes to the consolidated financial statements (continued)

 

21.  Share-based payments

 

The Group operates an equity settled share-based remuneration scheme for employees. Options are granted for nil consideration and carry no dividend or voting rights. The terms and conditions of the grants are detailed below:

 

Date of grant	No. of options ('000)	Exercise price	Vesting conditions	Expected life of options	Share price at grant date	Expected option life	Risk free interest rate
1 January 2022	56,000	US$0.2500	Time-based1	3 years	US$1.00	1 year	0.87%
24 February 2022	1,000,000	US$0.2500	Time-based2	4 years	US$1.00	3 years	1.06%
1 August 2022	400,000	US$0.3225	Time-based3	3 years	US$1.29	3 years	2.87%
27 October 2022	804,800	US$0.3225	Exit event5	3 years	US$1.29	3 years	3.45%
18 November 2022	1,600,000	US$0.5450	Time-based2	5 years	US$2.18	3 years	3.26%

 

¹100% of the share options vest in one annual instalment 12 months after the grant date.

²2.78% of the share options vest in equal monthly instalments over 36 months from the grant date.

³33.33% of the share options vest 12 months after the grant date, 33.33% of the share options vest 24 months after the grant date and the remaining 33.33% of share options vest 36 months after the grant date.

⁴50% of the share options vest six months after the grant date and 50% of the share options vest 12 months after the grant date.

⁵These options vest on an exit event, such as a sale, takeover or IPO.

 

The number of options and exercise price above have been adjusted for the effect of a 3200:1 share subdivision and subsequent 1:520 share consolidation which occurred in the year.

 

All options granted have an expected volatility of 80%.

 

On 30 September 2023, all of the options held with MicroSalt Inc. were cancelled and reissued with the Company on the same terms as the existing agreements. As such, the fair value of the options has not increased as a result of the modification and therefore no adjustment has been made to share-based payment expense in the year.

 

Details of the number of share options granted, exercised, lapsed and outstanding at the end of each period as well as the weighted average exercise prices in US$ ("WAEP") are as follows:

 

	2023 No.		2023 WAEP		2022 No.		2022 WAEP
Outstanding at the beginning of the year	6,710,684		0.37		1,969,884		0.07
Granted during the year	-		-		4,740,800		0.42
Outstanding at the end of the year	6,710,684		0.37		6,710,684		0.37
Exercisable at the end of the year	4,569,024		0.37		2,036,376		0.32

 

The number of share options and WAEP have been adjusted in both periods presented for the effect of the 3200:1 share subdivision and subsequent 1:520 share consolidation.

Notes to the consolidated financial statements (continued)

 

22.  Non-controlling interests

 

MicroSalt Inc. is a  91.75% owned subsidiary as at 31 December 2023 and had historically been considered a material non-controlling interests ("NCI"). The Company no longer considers the NCI to be material to the Company, and therefore no NCI has been disclosed for the year ended 31 December 2023.

 

23.  Financial instruments

 

The Group's financial instruments comprise cash and cash equivalents, trade and other receivables, trade and other payables, accruals, and convertible loan note liabilities, that arise directly from its operations.

 

Financial assets

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Trade receivables	232		116
Other receivables	990		80
Cash at bank	117		91
	1,339		287

 

Financial liabilities

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Trade payables	974		142
Other payables	667		1
Accruals	104		22
Convertible loan note liabilities	2,524		170
	4,269		335

 

The carrying values of the Group's financial liabilities measured at amortised cost represents a reasonable approximation of their fair values.

 

Financial risk management

 

The Group is exposed through its operation to the following financial risks: credit risk, interest rate risk, foreign exchange risk and liquidity risk. Risk management is carried out by the Directors. The Group uses financial instruments to provide flexibility regarding its working capital requirements and to enable it to manage specific financial risks to which it is exposed.

 

The Group finances its operations through a mixture of debt finance, cash and liquid resources and various items such as trade debtors and trade payables which arise directly from the Group's operations.

 

a)    Foreign exchange risk

 

The Group operates internationally and is exposed to currency risk arising on cash and cash equivalents, receivables and payables denominated in a currency other than the respective functional currencies of the Group entities, which are primarily US Dollars and Sterling. The Group's manages foreign currency risk by, where possible, settling liabilities denominated in a currency other than its functional currency with cash already denominated in that currency.

Notes to the consolidated financial statements (continued)

 

23.   Financial instruments (continued)

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Net foreign currency liabilities
GBP	208		-

 

Sensitivity analysis

 

A 10% strengthening of sterling against the Group's primary currencies at 31 December 2023 would have decreased equity and profit or loss by the amounts shown below:

	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Effect on equity	21		-
Effect on profit or loss	21		-

 

A 10% weakening of sterling against the Group's primary currencies at 31 December 2023 would have an equal but opposite effect on the amounts shown above.

 

b)    Interest rate risk

 

Interest rate risk is the risk that the fair value of future cash flows associated with the instrument will fluctuate due to changes in market interest rates. The Group's only interest-bearing borrowings are at a fixed interest rate of 10%, therefore interest rate risk exposure for the Group is minimal.

 

It is the Group's policy to settle payables within the credit terms allowed and the Group does therefore not incur interest on overdue balances.

 

c)     Credit risk

 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. In order to minimise the risk, the Group endeavours only to deal with companies which are demonstrably creditworthy and this, together with the aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk is the carrying value of its financial receivables, trade and other receivables and cash and cash equivalents as disclosed in the note above.

The receivables age analysis is evaluated on a regular basis for potential doubtful debts, considering historic, current and forward-looking information. No impairments to trade receivables, have been made to date. Further disclosures regarding trade and other receivables are provided within note 16.

Credit risk also arises on cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with minimum rating "B+" are accepted. Currently the financial institution whereby the Group holds significant levels of cash is JP Morgan Chase Bank, N.A. which is rated AA-.

 

 

Notes to the consolidated financial statements (continued)

 

23.   Financial instruments (continued)

 

d)    Liquidity risk

 

The Group seeks to maintain sufficient cash balances. Management review cash flow forecasts on a regular basis to determine whether the Group has sufficient cash reserves to meet future working capital requirements and to take advantage of business opportunities.

 

A maturity analysis of the Group's total liabilities is shown below:

 

	Group
	31 Dec		31 Dec
	2023		2022
	US$'000		US$'000
Within 1 year:
Trade and other payables	1,641		143
Accruals	104		22
Later than 1 year and less than 5 years	1,745		165
Convertible loan note liabilities	2,524		170
After 5 years	2,524		170
Total including interest cash flows	4,269		335
Less: interest cash flows	(131)		(67)
Total principal cash flows	4,138		268

 

24.  Related party disclosures

 

Key management personnel remuneration is disclosed in note 9 above.

 

		Transaction amount				Balance owed
Related party relationship	Type of transaction	2023 US$'000		2022 US$'000		2023 US$'000		2022 US$'000
Tekcapital plc	Convertible loan notes issued	2,723		1,652		2,524		170
Tekcapital Europe Ltd	Related party loan	590		52		642		52

 

 

Notes to the consolidated financial statements (continued)

 

25.  Changes in liabilities from financing activities

 

	At 1 January  2022 US$'000		Financing cash flows US$'000		Interest US$'000		Non-cash changes US$'000		At 31 December 2022   US$'000
Convertible loan notes	860		1,652		67		(2,409)		170
Total liabilities from financing activities	860		1,652		67		(2,409)		170

 

 

	At 1 January  2023 US$'000		Financing cash flows US$'000		Interest US$'000		Non-cash changes US$'000		At 31 December 2023   US$'000
Convertible loan notes	170		2,723		131		(500)		2,524
Total liabilities from financing activities	170		2,723		131		(500)		2,524

 

The non-cash changes in both years relate to capital contributions from the ultimate controlling party.

 

26.  Events after the reporting date

 

On 1 February 2024, the Company completed its IPO on the AIM Market of London Stock Exchange plc raising approximately £3.1m (US$3.9m).