Chief Executive's Report

Business model summary

Supply@ME Capital PLC (the "Company" or "SYME") and its operating subsidiaries (together, the "Group") provide its innovative fintech platform (the "Platform") for use by manufacturing and trading companies to access Inventory Monetisation© ("IM") solutions enabling their businesses to generate cashflow, via a non-credit approach and without incurring debt.  This is achieved by their existing eligible inventory being added to the Platform and then monetised via purchase by third party Inventory Funders ("IM Transactions").  The inventory to be monetised can include warehoused goods waiting to be sold to end-customers or goods that are part of a typical import/export transaction. SYME announced in August 2021 the launch of a global IM programme which will be focused on both inventory in transit monetisation and warehoused goods monetisation. This programme will be focused on creditworthy companies and not those in distress or otherwise seeking to monetise illiquid inventories.

The Business Model Canvas: a unique Inventory Monetisation business model

The Group's Business Model Canvas ("BMC") envisages the unique value proposition to be "IM specialists", promoting, via a dedicated regulated structure (see below), an innovative service model which allows corporates (our clients) across the globe to improve their IM activities, freeing up extra-value from the goods handled. Hence, this value proposition includes the objective of the Group to be inventory analysis tech-champions for both in-transit and warehoused goods, supporting the investments in IM Transactions, through the Platform (as specified below).

The Group's BMC considers, within its journey, a key player: the Inventory Funders. By providing, a dedicated, regulated structure aimed at aligning each IM Transaction with corporates, we believe that Inventory Funders are now seeing the investment as a new 'real asset' asset class, complex but investable, considering the projected risk/reward profile. Our prospective Inventory Funders are typically investors with appetite for a new asset class or alternative investment opportunities, such as debt and credit funds, hedge funds or asset-based lenders.

The IM Transactions are delivered - through a global programme sponsored by the Company - via segregated, regulated alternative 'real asset' funds which use fund administration services provided by APEX Group[1].

As of today, the Group's global inventory programme has four funds (segregated portfolios, or each, an "SP"):

·      In-transit goods transactions:

o  CEMP - US Dollar (USD) Trade Flow Fund SP (in-transit transactions denominated in USD);

o  CEMP - Euro (EUR) 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 law of England & Wales and UK tax law).

The other key partners are, effectively, the rest of the eco-system supporting the execution of each IM 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 Platform: the key role of the data ingestion and services and the new Web3 route

The Platform comprises, among the two offerings "in-transit goods" and "warehoused goods" monetisation, a unique combination of software modules, exponential technology components (such as Artificial Intelligence ("AI"), Internet of Things and Blockchain), dedicated legal and accounting frameworks and business rules/ methodologies delivered via a hybrid ICT architecture.

Specifically, the ICT architecture adopts two cloud environments (Microsoft Azure for warehoused goods monetisation and Amazon Web Services for the in-transit model delivered by TradeFlow) plus an external integration with distributed ledger frameworks.

The Platform's roadmap 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 IM provided by the Fund). Accordingly, data ingestion services have a critical role in the overall Platform operations and, with reference to the offering of the Group, these cover the key function requested by banks which want to work with SYME via the White-label route.

On 28 June 2022, the Group announced the execution of a strategic alliance agreement (the "VeChain Agreement") with the VeChain Foundation ("VeChain"), a blockchain enterprise service provider focused on supply chain and sustainability, to fund the first inaugural IM transaction and kick off the "Web3"[3] stream.

The objective of the VeChain Agreement is to create a sustainable Web3 environment that will allow direct participation in the IM journey combining traditional finance with the blockchain space, linking the digital assets community to the real economy. SYME aims to build up an "IM Platform 3.0" with an expected roadmap of Web3 features, including the issuance of NFTs, digital ownership and B2B marketplaces, decentralised finance (DEFI) and, overall, a governance protocol.

The Revenue Model

The Group has clarified and fine-tuned its overall business model, which is now clearly focused on the pure FinTech element of the business, being the Group's Platform and its supporting infrastructure, including exponential technology components, the legal and accounting framework and structured business rules/ methodologies. In this respect, 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. The Company considers it to be an enabler of each transaction. For this reason, the Group officially launched its 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 within its TradeFlow+ system.

The Group also continued to refine the BMC and the revenue model through discussion with potential IM funders over the past year, in particular regarding the introduction of an equity (first loss) line in the capital structure of each IM transaction. This was addressed with the launch of the Fund compartments, which can work as an equity provider and/or on a standalone basis (for example, the Fund also have the option to directly deliver an IM transaction). The Fund leverages the existing fund structuring arrangements and track record of TradeFlow providing a further synergy following the Company's acquisition of the Singapore-based business in July 2021.

As such, the Group is now focused on establishing and growing the following active, and future, revenue streams:

·      "Captive" IM platform servicing ("C.IM"): revenue generated through the use of the Platform to facilitate IM transactions performed by the Fund and its IM funders. This revenue is generated by the Group's operating subsidiaries. Revenue is expected to be earned in relation to the following activities:

o  origination and due diligence (pre-IM); and

o  monitoring, controlling and reporting (post-IM).

When fully delivered, this stream is expected to generate revenues of approximately 1-3% of the gross value of the inventories monetised.

·     "White-label" IM platform servicing ("WL.IM"): revenue to be generated through the use of the Platform by third parties who choose to employ the self-funding model. When delivered, this stream is expected to generate recurring software-as-a-service revenues of approximately 0.5-1.5% of the value of each IM transaction (the amount of funding provided).

·     Investment Advisory ("IA"): 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 ("AUM") for which TradeFlow acts as an investment advisor. Additionally, TradeFlow could receive a further performance incentive fee of up to 15% of the profits generated by the Fund, based on performance.

Update on the Group's Operational KPIs

Summary                                    

Warehoused Goods monetisation

Client company origination

Origination of client companies with inventory suitable for Inventory Monetisation continued steadily in our core focus regions of Italy and the United Kingdom. Pipeline of client companies grew from £164.8m as at 24 May 2022 to £329.8m as at 23 September 2022. The need for inventory solutions with a quality platform and backend from day one is driving significant opportunities for client company origination and for self-funding/ White-label opportunities with global banks.

We are also diligently working on building quality portfolios of client companies to attract additional Inventory Funders.

As we on-board new client customers and increase our pipeline of Inventory Funders, we expect the due diligence revenue to significantly improve. In addition, we are still not fully utilising our PR, marketing and events campaigns which are expected to significantly raise awareness of the Platform and SYME capabilities to address a growing need in the global market.

Italy

The Group's origination team works with a select panel of originators and local business introducers. There is a strong pipeline of opportunities in Italy. We expect to see the flow of originated client companies to increase following the announcement of the first Inventory Monetisation and as we renew contracts with existing and new originators.

United Kingdom

Origination in the UK has significantly grown with client companies originated through the strong relationships held with a wide eco-system of introducers. There are a number of opportunities now available to deploy in Q4 2022 and Q1/Q2 2023. In 2023 we will continue to engage with the current eco-system of originators and leverage of the first IM transactions as client companies gain confidence in the platform.

Middle East and North Africa (MENA)

While business in Europe continues to be our core focus, progress was made on a number of fronts to lay the groundwork for future IM transactions in MENA jurisdictions, including the UAE, supported by a select panel of local partners and brokers in the region.

United States

The set up of the US go to market strategy continues to be built upon the SYME' partnership with Anthony Brown of The Trade Advisory. Mr Brown is providing strategic advice to our Executive Directors in relation to seizing the unique opportunity to develop the Inventory Monetisation service in the United States and also exploring potential strategic alliances with vertical software providers on inventory data analytics/ inventory optimisation.

Inventory funding routes

We continue to attract a selection of high-quality prospective global funders, including banks and asset-based lenders.

The Group had hoped the initial IM transactions would be further progressed by 30 June 2022. However, due to the innovative nature of our model and the calibre of the Inventory Funders we are in discussions with, the Group requires time to complete the robust due diligence procedures of such Inventory Funders.

Additionally, each Inventory 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.

Italy

We continue to be in discussion with a number of local Italian banks and Inventory Funders who could have appetite for the existing pipeline.

In addition, discussions are at an advanced phase with potential funders of White-label agreements. In this regard, the new regulation on pegno non possessorio (as previously indicated by the Company, a new digital pledge framework over the inventory and, in general, all the assets of a borrower) is expected to be the trigger to finalise the White-label alliances. It's anticipated that this new regulation will be published by the end of the current year.

Separately, in order to allow cross-border asset managers to invest in IM transactions, following the expiration on 30 June 2022 of the extraordinary Covid measure "Garanzia Italia", the Company continues to work closely with the Italian Government's SACE Guarantee, in order to develop a bespoke guarantee covering the risk that the Stock Company will not be able to repay the loans (or notes) provided by the Inventory Funders.

Activities are ongoing with respect to the promotion of capital funding for the Global Inventory Fund 2 SP. These activities are currently being managed by Devonshire Warwick Capital LLP[4].

United Kingdom

As mentioned in the Group's Annual Report and Accounts for the year ended 31 December 2021, we undertook an increased programme of marketing activity in the UK, which raised significant awareness among potential client companies and Inventory Funders. Originators include asset-based lenders, banks, accountants, advisors and other asset-based platforms.

This 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.

This has resulted in a number of on-going conversations with Inventory Funders for both single name transactions and portfolios of client companies for both Inventory Monetisation and self-funding/ White-label.

Across both the UK and Italian markets, capital raise promotion activities are continuing for the Global Inventory Fund 2 SP. These activities are currently being managed by Devonshire Warwick Capital LLP[5].

MENA

We continue to work alongside the Shariah fund arranger Intesa Sanpaolo-Reyl[6] to structure the funding route for our Shariah-compliant IM platform in the Middle East. In this regard, discussions are underway with reference to the opportunity to launch a dedicated Fund or to deploy Over-The-Counter, single-name, transactions. In parallel, we leveraged our partnership with I-MASS LLC  to explore further inventory funding alliances in the UAE, including with a local new challenger bank. Additionally, the Company is involved in a White-label tender by a bank operating in Saudi Arabia.

United States

Leveraging our ongoing partnership with Anthony Brown and consulting company Epicirean Brands and The Trade Advisory, we continue to discuss with specific potential Inventory Funders and White-label partners how to structure the first IM transaction in US.

The Company also engaged a "Big 4" firm to conduct a dedicated assessment regarding the application of the Inventory Monetisation framework under the US GAAP.

While we see a number of opportunities in this region our intention is to concentrate, for now, on the core markets.

In-transit monetisation

TradeFlow has continued to focus on three key areas of activity during the six month period ended 30 June 2022.  These are fund management, Fintech software as a service (SaaS) development and strategic developments in technology/ fund management, and alliances with Port operators and Logistics partners who share our digitalisation vision.

In respect of the fund management business, its relationship with the International Chamber of Commerce (ICC) continues to progress and it remains on track to launch an ICC endorsed fund to support SME trade in 2022. In the last few months, TradeFlow management has worked together with the Group in the execution of the first IM transaction. The existing TradeFlow Fund covering in-transit cargo transactions are on track to make target returns for its investors. 

TradeFlow's partnership with the Singapore Institute of Technology continues to progress with its Research project contract to develop an AI system for enhanced predictive analytics around logistics and shipping. This contract commenced as planned in Q1 2022 and will continue into 2023.

TradeFlow's operational KPIs continue to be met and the growth of its AUM in H1 2022 was 75%. This follows Q1 2022 growth figure for AUM of 17% and the half year total represents a continued strong endorsement of the Investment Advisory strategy. TradeFlow management expect AUM growth to continue in line with its predicted amounts over H2 2022 and into 2023.

Future prospects

Following the announcement made by the Company in the RNS of 12 September 2022 regarding the execution of the inaugural IM transaction, the Group is now focussed on the completion of further IM deals, as well as leveraging the traditional funding routes.

As outlined in the Group's previous announcements, the VeChain Agreement envisages a second phase of IM transactions and developments. As such, the Group has already started to explore opportunities to work together with the most mature decentralised finance frameworks available in the market. Discussions are currently underway with specific protocols. Additionally, it is expected that phase 2 of the VeChain Agreement implementation could also involve further investors, part of the VeChain community, unlocking further features of the VeChainThor blockchain services.

The plans described above, together with the development of the White-label business line, require further investment in technology. For this reason, the Company, in line with the aims of its capital enhancement plan announced in the RNS of 27 April 2022 (the "Capital Enhancement Plan"), is working to secure lower cost and more traditional bank credit facilities to support some or all of the funding needs required to execute the Group's Platform roadmap.

Finally, the announcement of the inaugural IM transaction leads the way for the Group, as it delivers new IM transactions, to build a track record of financial performance underpinning the management of the Group's strategy. In this regard the Company intends to evaluate, with the support of external corporate brokers and advisers, how to communicate updated revenue guidance to the market, once the factors outside of our control have stabilised, thereby reducing the risk of specific objectives and milestones not being achieved, due to external volatility.

Overall, as outlined in the BMC shown in the  Annual Report and Accounts for the year ended 31 December 2021, the Group will continue to work on its market positioning as inventory data & tech specialists, which we regard as our core capability and competitive advantage, to deliver IM transactions in multiple jurisdictions, boosting the confidence among current and future potential Inventory Funders.

Financial review

Revenue by segment

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 Groups Annual Report and Accounts for the year ended 31 December 2021.

Inventory Monetisation

For the period ended 30 June 2022, the Group recognised £nil (period ended 30 June 2021: £0.3m) of Inventory Monetisation revenue. In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised these revenues when the due diligence services have been delivered and the Group's performance obligation has been satisfied. During the current interim period, the Group has continued to carry out, and charged for due diligence activities, however as at 30 June 2022 these activities were still in the process of being fully delivered to the relevant client companies.

The reduction of £0.3m in the inventory monetisation revenue during the period end 30 June 2022 is primarily the result of the majority of the Group's efforts being focused on finalisation of the strategic alliance with VeChain, alongside the efforts required to identify the most suitable client company to participate in the inaugural IM transaction and to flex the established processes and procedures to meet the requirement of the VeChain Agreement.

Of the £0.3m of inventory monetisation revenue recognised in the prior six month period, £0.2m related 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 diligences on those companies that it had originated for the Group.

Investment Advisory

Investment advisory 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 growing EUR fund. As TradeFlow was not owned by the Group during the prior six month period ending 30 June 2021, 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 were predominately located in Italy during the current six month period ended 30 June 2022, while the investment advisory operations are predominately located in Singapore.

Operating loss before acquisition related costs and impairment charges

In line with the activities carried out in FY21, the first half of 2022 saw the Group continue to focus on refining and developing the business model, with significant amount of time and effort having been spent on the recently achieved milestones of securing a strategic alliance agreement with VeChain and finalising the contractual commitment package to deploy the inaugural IM transaction. Given the Group's innovative IM Platform and business model, the execution of both these commitments required discussions and negotiations that ran longer than the Company had originally expected.

The Group recorded an operating loss before acquisition related costs and impairment charges during the six month period ended 30 June 2022 of £2.5m (period ended 30 June 2021: £1.5m loss). This increase is largely due to an increase in staff and contractor costs of £1.0m as the Group built out both its leadership, business operation and finance teams and, as the Group focused on developing evolutions of its ICT architecture during the second half of 2021 and the first half of 2022. Additionally, the Group acquired TradeFlow in July 2021 and therefore the prior period comparative figures do not contain any costs relating the TradeFlow business.

The investment in staff and contractor costs are expected to give the Group a strong foundation as it enters the next stage of development.

Acquisition related costs and impairment charges

The acquisition related costs that have arisen in H1 22 are the result of the TradeFlow acquisition that was completed in July 2021. This has bee accounted for as a business combination in accordance with IFRS 3 ("Business Combination") and further details of this accounting can be found in the Group's 2021 Annual Report and Accounts. The following acquisition related costs have been accounted for in the six month period ended 30 June 2022:

-      Amortisation of intangible assets arising on acquisition of £0.4m. These costs related to the intangible assets recognised by the Group in connection with the TradeFlow acquisition, which had an initial fair value of £6.9m. The £0.4m represents the amortisation charge arising on these assets for the six month period to 30 June 2022; and

-      Acquisition related earn-out costs of £0.8m. Elements of the consideration payable for the TradeFlow acquisition require post-acquisition service obligations to be performed by the earn-out shareholders over a three-year period. While these legally form part of the consideration costs under IFRS 3 ("Business Combinations"), they must be accounting for as deemed remuneration through the statement of comprehensive income. The £0.8m recognised for the six month period ended 30 June 2022 represents the proportion of the total fair value of the future earn out payments that are linked to the services provided during this period.

The impairment charges of £0.9m recognised in the six month period ended 30 June 2022 have arisen due to the following two factors:

-      Firstly, in connection with the initial TradeFlow goodwill recognised. As at 30 June 2022, management carried out an impairment test in line with IAS 36 ("Impairment of Assets") on the TradeFlow Cash Generated Unit ("CGU"). This followed the conclusion that indicators of impairment were present, including under performance against forecast for the H1 22 period. In carrying out this test, the Directors applied what they consider to be reasonable assumptions concerning reductions to forecast revenue levels, increases to the operating loss / decreases to the operating profit, 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 30 June 2022 by £0.8m 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 30 June 2022, 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 prior year and current period 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 interim 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 £0.1m as at 30 June 2022.

Group Funding Facilities utilised during the year

Capital Enhancement Plan

On 27 April 2022, the Company announced its Capital Enhancement Plan pursuant to which it would enter into a subscription agreement with Venus Capital S.A ("Venus") and undertake an open offer to existing shareholders, in order to raise up to £7.5m in new equity capital. This new equity capital will enable the Company, at its election, to settle the outstanding loan notes and convertible loan notes with Mercator Capital Management Fund LP ("Mercator") in cash rather than by the conversion of the convertible loan notes held into new ordinary shares. During the six month interim period ended 30 June 2022, the Company issued a total of 3,320,000,000 new ordinary shares to Venus in line with the first two mandatory tranches outlined in the subscription agreement. This raised a total of £1.7m.

In connection with the Capital Enhancement Plan, the Company also executed a convertible loan note agreement with Venus, under which the Company, at its discretion, could issue to Venus convertible loan notes up to £1.95m in aggregate principal amount. These convertible loan notes were split up to £0.45m for the purposes of covering the fees associated with the Venus subscription and convertible loan note agreements, and up to £1.5m covering a working capital funding facility. As at 30 June 2022, the Company had the obligation to issue the £0.2m of convertible loans to Venus in connection with the fees incurred on the first two new ordinary share issues described above, and the prepaid debt arrangement fee relating to the working capital loan note facility. This obligation has been recognised as at 30 June 2022.

The subscription agreement with Venus also required the Company to issue one warrant to Venus for every two shares issued in connection with the first two new ordinary share issues to Venus during the six month period ended 30 June 2022. This resulted in a total of 1,660,000,000 share warrants to be issued. Additionally, an amount of 3,250,000,000 share warrants were to be issued to Venus in connection with the signing of the subscription agreement on 26 April 2022. While these share warrants were issued on the 19 July 2022, following the approval of additional share headroom at the AGM held on 30 June 2022, the fair value of these warrants, being £3.0m has been accounted for during the six month period ended 30 June 2022 given the obligation to issue these arose prior to the end of the period.

As set out above, the total share issues costs incurred during the six month period 30 June 2022 in respect of the Capital Enhancement Plan was £3.2m. This has been accounted for as a £1.6m reduction to share premium and a £1.6mreduction to retaining earnings during the current period. The reduction to share premium amount has been limited to the increase to share premium recorded during the same period in respect of the first two mandatory tranche shares issues.

Mercator funding facilities

During the period the Group continued to make monthly repayments under the loan note facility entered into with Mercator Capital Management LP ("Mercator") on 29 September 2021. The Mercator loan note facility had a term of 12 months and required monthly repayments to be made either in cash or via the issue of a convertible loan note at the Company's discretion.

During the six months ended 30 June 2022, all but one repayment, being a total of £3.4m, was settled through the issue of convertible loan notes to Mercator, with the remaining repayment of £0.6m being settled in cash.

The movement in loan note liability to Mercator during the current financial period are set out in the table below:

In connection with the drawdown of the Mercator loan note facility during 2021, the Company also issued share warrants representing 20% of the total amounts drawn down. The fair value of these warrants was capitalised at the time of issue and this, together with the other capitalised finance costs relating to the loan note facility, and are being recognised over the term of the loan notes using the effective interest rate method. The total of these finance costs recognised in the current six month interim period ended 30 June 2022 is £0.9m.

Following the issue of £3.4m of convertible loan notes to Mercator in lieu of cash repayments during the six month period ended 30 June 2022, £1.5m remained outstanding as at 30 June 2022, following:

a)   the conversion of £1.4m in principal amount of convertible loan notes into new ordinary shares during the six month period ended 30 June 2022; and

b)   a repayment in cash of £0.6m in principal amount of convertible loan notes during the six month period ended 30 June 2022.

The movement in convertible loan note liability to Mercator during the current financial period are set out in the table below:

The Mercator convertible loan notes do not have any interest costs in addition to that of the Mercator loan notes, but finance costs of £0.5m were recognised during the current financial year as a result of:

·     Additional commitment fees and late payment interest charges of £0.3m, or which £0.2m was paid in cash and the remaining £0.1m was settled through the issue of convertible loan notes; and

·      The fair value of the warrants of £0.2m issued in connection with the convertible loan notes.

Both costs have been fully recognised in the income statement during the six month period ended 30 June 2022 given the liability to which they relate has been extinguished by 30 June 2022. This amount, together with the finance costs of £0.9m in respect of the loan notes, resulted in a total finance costs of £1.4m in respect of the Mercator funding facilities during the six month period ended 30 June 2022.

It should be noted that to assist with the key objective of the Capital Enhancement Plan, the Company and Mercator signed an amendment agreement on 26 April 2022. This agreement stipulated that following the April monthly loan note repayment, the Company would no longer have the obligation to issue further warrants to Mercator in connection with the convertible loan note facility.

Trade Flow long term borrowings

On the 1 April 2022, TradeFlow entered into a new long term loan facility with its existing finance provider, and in connection with this, chose to settle its existing unsecured loan note facility ahead of its maturity date on the 23 October 2022. The key terms of the new long term loan facility are set out below;

-       A principal amount of US$3.8m;

-       A maturity date of 31 March 2026;

-      An additional redemption premium cost of US$0.2m which is payable at the time the principal is repaid; and

-       A simple interest at a fixed rate of 7.9% per annum.

Finance costs recognised during the six month period ended relating to TradeFlow long term borrowings totals £0.1m and relates to accrued monthly interest amounts and the recognition of the redemption premium costs over the expected life of the loan using the effective interest rate method. The early settlement of the existing unsecured loan note facility accounted for additional finance costs of £0.1m being recognised during the current six month period relating to the acceleration of the redemption premium cost due on repayment of the principal of the existing loan note facility.

Cashflow

The group decreased its net cash balance by £0.8m (period ended 30 June 2021: £3.6m increase) due to proceeds from the Capital Enhancement Plan share issues of £1.6m and net proceeds from the TradeFlow long term borrowing refinancing of £1.4m, offset by the following items:

·    Repayments made on the Mercator loan note and convertible loan note facilities of £1.6m, including £1.4m of principal amounts and £0.2m of additional interest charges;

·      Net outflows from operating activities of £2.1m (period ended 30 June 2021: £0.8m net outflow) as the Group's operating expenses increased primarily due to growing headcount and spend on IT contractor specialists; and

·      Increased investment in the Group's IM Platform of £0.1m (period ended 30 June 2021: £0.5m).

Net liabilities

As at 30 June 2022 net liabilities were £4.0m (31 December 2021: net liabilities of £1.4m). The £2.6m increase in net liabilities reflects:

·     A decrease in the Group's intangible assets and goodwill of £1.2m due to amortisation of £0.4m and impairment charges of £0.9m during the six month period ended 30 June 2022. This was slightly offset by additions to the Group's IM Platform of £0.1m during the period;

·    A decrease in amounts outstanding under the Mercator loan note and convertible loan facilities of £1.6m in aggregate. This is due to the £1.4m repayments in respect of the loan note and convertible loan note facilities being made in cash, along with the conversion of an additional £1.4m of convertible loan notes into new ordinary shares during the period. These movements are offset by additional amortised interest of £0.9m and additional interest costs cover through the issues of convertible loan notes to Mercator of £0.1m;

·    An increase in long terms borrowings of £1.8m largely due to the increase in TradeFlow long term borrowing following the refinancing during the current interim period ended 30 June 2022; and

·      A £1.3m decrease in working capital primarily due to the overall net cash outflows from operations.

Going Concern

The Board's assessment of going concern and the key considerations thereto are set out in the note 4 to the unaudited interim financial statements for the year ended 30 June 2022.

Related Parties

Note 21 of the to the unaudited interim financial statements for the year ended 30 June 2022 contains details of the Group's related parties.

Subsequent events

Note 22 of the to the unaudited interim financial statements for the year ended 30 June 2022 contains of the subsequent events following 30 June 2022.

Directors' Responsibility Statement

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

The Directors confirm that, to the best of their knowledge, the interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting", as issued by the International Accounting Standards Board as contained in UK - adopted international accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4 R.

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

In accordance with the FSA's Disclosure and Transparency Rule 4.2.9(2), the Directors confirm that these interim condensed consolidated financial statements have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

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

By Order of the Board

Alessandro Zamboni

Chief Executive Officer

SUPPLY@ME CAPITAL PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2022

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

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