National Storage Mechanism | Additional information

RNS Number : 8234Z

Microsaic Systems plc

16 January 2024

Microsaic Systems plc

("Microsaic", "Microsaic Systems" or the "Company")

Interim Results for the six months ended 30 June 2023

Microsaic Systems plc (AIM: MSYS), the developer of micro-electronic instruments and analytical solutions, is pleased to announce its unaudited interim results for the six months ended 30 June 2023. The extensive research and development work behind our novel ProteinID, PFAS (forever chemicals) and acrylamide detection technologies has concluded with working test units following the period end. Building on our transition from unit (4500 MiD®) product mass spectrometer sales only to customer-centric service solutions in science and engineering services, the Company is now focusing on commercial testing, sales and servicing of these exciting new technologies.

A copy of these interim results is being made available on the Company's website at https://www.microsaic.com/investors/, and hard copies will be sent to shareholders who have requested communications in that format.

Highlights

· Unaudited revenues of £139k: a decrease of 81% on H1 2022 (£735k)

· EBITDA adjusted loss of £1,023k which is 55% higher than H1 2022 (£661k)

· Total comprehensive loss of £1,079k an increase of 53% compared to H1 2022 (£705k)

· Cash at 30 June 2023 was £587k (H1 2022: £2.56m)

· An agreement was signed with a new global technology distributor Avantor (via VWR International Ltd)

· Orders for 8 Units received for manufacture in H2 2023

Post Period Events

· Technical issues with the testing of key components from suppliers holding up the manufacturing process are being resolved with up to 10 units now in final test or being manufactured in H2 2023

· Unit orders shipped in H2 (including one demonstration unit) increased to 6 with sales revenue invoiced at £262k by year end

· July 2023: The DeepVerge plc announcement on 26 June 2023 about its dire financial position resulted in the outstanding debt of circa £1.3m to the Company not being settled. As a result, the Company's annual audited accounts could not be finalised and trading on AIM was then temporarily suspended on 3 July pending publication of the Company's annual audited accounts

· September 2023: Gerry Brandon resigned as Executive Chairman on 25 September and was replaced by Bob Moore who was previously a non-executive director of the Company

· October 2023: notice of redundancy was issued to all staff and notice given to close the Woking premises before year end

· December 2023: After private financing initiatives failed to complete and after considering delisting from AIM and putting the Company into administration the Board engaged Turner Pope Investments to raise sufficient capital with the objective of restoration of its shares to trading on AIM and make an asset acquisition. A targeted acquisition saw the Company enter into an Exclusivity Agreement with DeepVerge plc to acquire certain assets of its Modern Water business. This is part of the Company's growth strategy to offer a wider range of technologies and a more comprehensive service by enhancing our equipment manufacturing and supply capabilities.

· January 2024: The Company announced it has executed an Acquisition Agreement with DeepVerge plc and its subsidiary, Innovenn UK Limited, to acquire certain assets comprising the Modern Water business for a total consideration of £100,000 payable at completion. The Company also announced that Turner Pope Investments has successfully secured conditional funding commitments to raise gross proceeds of circa £2.1 million through a placing of 169,000,000 New Ordinary Shares. Net proceeds of the Placing (being £1.8 million) are to be deployed to satisfy the acquisition and support the capital needs of the Company as enlarged by the acquired Modern Water business which will be restarted under Microsaic's ownership.

Outlook

· The Board looks forward to the conclusion of commercial testing of our novel ProteinID and PFAS detection technologies during 2024 and increased production of our core 4500 MiD® units. Assuming the refinancing of the Company and acquisition of Modern Water technology and assets is completed, the Company intends to deploy these acquired technologies together with our existing and newly developed products in a growing worldwide market.

Bob Moore, Acting Executive Chairman of Microsaic Systems plc, commented:

"2023 has been a very difficult year for the Company and a total reset of the business has been required as a result. Nevertheless, the research and development work by our talented technical team and substantial investment over many years has resulted in novel detection technologies that are now ready for commercial testing and deployment into the market. We look forward to collaborating with large original equipment manufacturers (OEMs) to realise the potential of our products through their extensive sales and marketing channels."

Enquiries:


Microsaic Systems plc Bob Moore, Acting Executive Chairman	+44 (0) 20 3657 0050 via TPI

Singer Capital Markets (Nominated Adviser & Joint Broker) Aubrey Powell / Angus Campbell / Oliver Platts	+44 (0)20 7496 3000

Turner Pope Investments (TPI) Limited (Joint Broker) Andy Thacker / James Pope	+44 (0) 20 3657 0050

About Microsaic Systems

Microsaic has over 20 years' experience in microelectronics and development of instrumentation. The Co mpany has an extensive and innovative patent portfolio in industry-leading technology designed and developed for "Industry 4.0" application serving markets in diversified Industries, Human and Environmental Health. Microsaic's very energy efficient micro system solutions have enabled analytical detection and characterisation at the point-of-need, whether within a mobile testing capability, conventional laboratory setting, or within a bioprocessing facility for continuous detection of data at multiple steps in the process workflow.

Microsaic's products and solutions are commercially available through global markets via a network of regional and local partners, targeting its core laboratory, manufacturing and point-of-need applications.

Chairman's Statement

We would like to thank our existing shareholders and new investors for the support they have shown for the refinancing of the Company and its growth plans which include the acquisition of the Modern Water business, both in early 2024.

We are delighted that the Company has been able to remain solvent after a total reset and by retaining our admission to trading on AIM the Company now has the necessary financing to complete the acquisition and provide capital to invest in and develop the enlarged business. The assets acquired are complementary to the existing Microsaic business model. Using the acquired assets we intend to restart the manufacture of the MicroTox® bio-reagents for water testing in the near term. Post acquisition we will seek positive cash generation from these new activities and look to benefit from growth opportunities and potential synergies over the longer term.

Microsaic's cost base has been dramatically reduced and we will now operate a much leaner, more efficient outsourced manufacturing and servicing model for our existing and acquired testing machine technologies. 2024 will prove to be a busy year. The objective is to reset and redesign the Company around a new and much more efficient cost model based on the integration of the enlarged business to optimise growth of sales, solutions and services income to be generated by the combined entities.

STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2023


		6 months	6 months	Year to 31
		to 30 June	to 30 June	December
		2023	2022	2022
	Notes	Unaudited	Unaudited	Audited

		£	£	£
Revenue	4	139,404	734,914	1,567,697
Cost of sales	5	(145,494)	(301,538)	(618,330)
Gross profit		(6,090)	433,376	949,367
Other operating income		-	-	-
Research and development expenses		(312,637)	(219,491)	(404,043)
Impairment of related party debt		-	-	(1,130,169)
Other operating expenses		(852,726)	(914,819)	(1,731,749)
Total operating expenses		(1,165,363)	(1,134,310)	(3,265,961)
Loss from operations before share-based payments		(1,171,453)	(700,394)	(2,316,594)
Share-based payments	11	-	(126,002)	(234,749)
Loss from operations after share-based payments		(1,171,453)	(826,936)	(2,551,343)
Financial cost		(873)	(4,104)	(7,013)
Finance income		12,592	7,083	23,423
Loss before tax		(1,159,734)	(823,957)	(2,534,933)
Tax on loss on ordinary activities		81,207	119,246	246,224
Total comprehensive loss for the period		(1,078,527)	(704,711)	(2,288,709)

Loss per share attributable to the equity holders of
the Company
Basic and diluted loss per ordinary shares	6	(0.017)p	(0.011)p	(0.036)p

Note that the above revenues in the 6 months to 20 June 2023 include £65,826 to DeepVerge plc subsidiaries (1H 2022: £546,718, FY22 £1,248,828). Although DeepVerge made payments to cover the revenues in the period, on 26 June 2023, DeepVerge announced that it would no longer be able to support its subsidiaries and was anticipating a sale or liquidation of these assets. The results above, subsequent performance in 2023 and expectations or forecasts for 2024 and beyond therefore need to be considered on the basis that no further payments and no further revenues are expected to be received from DeepVerge.

STATEMENT OF FINANCIAL POSITION (UNAUDITED)

AS AT 30 JUNE 2023


		30 June	30 June	31 December
		2023	2022	2022
	Notes	Unaudited	Unaudited	Audited

		£	£	£
ASSETS
Non-current assets
Intangible assets		60,546	66,637	69,160
Property, plant and equipment		286,609	296,342	380,272
Right of use assets		38,018	90,554	54,005
Total non-current assets		385,173	453,533	503,437
Current assets
Inventories		283,771	255,346	274,045
Trade and other receivables		448,392	1,112,605	594,364
Corporation tax receivable		342,519	387,032	514,009
Cash and cash equivalents		587,024	2,562,741	1,241,480
Total current assets		1,661,706	4,317,724	2,623,898
TOTAL ASSETS		2,046,879	4,771,257	3,127,335
EQUITY AND LIABILITIES
Equity
Share capital		1,731,413	1,731,413	1,731,413
Share premium		28,262,518	28,262,518	28,262,518
Share-based payment reserve		2,316,048	2,817,181	2,400,796
Retained losses		(30,669,247)	(28,616,601)	(29,675,468)
Total Equity		1,640,732	4,194,511	2,719,259
Current liabilities
Trade and other payables		218,984	379,382	236,445
Lease liability		17,929	73,699	52,918
Total current liabilities		236,913	453,081	289,363
Non-current liabilities
Provision	9	148,649	105,045	115,385
Lease liability		20,584	18,620	3,328
Total non-current liabilities		169,233	123,665	118,713
Total liabilities		406,146	576,746	408,076
TOTAL EQUITY AND LIABILITIES		2,046,879	4,771,257	3,127,335

STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

AS AT 30 JUNE 2023


			Share
			based
	Share	Share	payment	Retained	Total
	capital	premium	reserve	Losses	equity
	£	£	£	£	£

At 1 January 2022	1,702,913	28,006,018	2,888,707	(28,024,418)	4,573,220
Total comprehensive loss for the period	-	-	-	(704,711)	(704,711)
Transactions with owners
Shares issued	28,500	256,500	-	-	285,000
Transfer in respect of lapsed share options	-	-	(112,528)	112,528	-
Share based payments share options	-	-	41,002	-	41,002
At 30 June 2022	1,731,413	28,262,518	2,817,181	(28,616,601)	4,194,511

At 1 July 2022	1,731,413	28,262,518	2,817,181	(28,616,601)	4,194,511
Total comprehensive loss for the period	-	-	-	(1,583,998)	(1,583,998)
Transactions with owners
Transfer in respect of directors warrants exercised	-	-	(300,075)	300,075	-
Transfer in respect of lapsed share options	-	-	(225,056)	225,056	-
Share based payments-share options	-	-	108,746	-	108,746
At 31 December 2022	1,731,413	28,262,518	2,400,796	(29,675,468)	2,719,259

At 1 January 2023	1,731,413	28,262,518	2,400,796	(29,675,468)	2,719,259
Total comprehensive loss for the period	-	-	-	(1,078,527)	(1,078,527)
Transactions with owners
Transfer in respect of lapsed share options	-	-	(84,748)	84,748	-
Share based payments share options	-	-	-	-	-
At 30 June 2023	1,731,413	28,262,518	2,316,048	(30,669,247)	1,640,732


STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2023
		6 months	6 months	Year to 31
		to 30 June	to 30 June	December
		2023	2022	2022
	Notes	Unaudited	Unaudited	Audited
		£	£	£
Cash flows from operating activities
Cash absorbed by operations	12	(870,893)	(997,506)	(2,133,332)
Corporation tax received		252,697	-	-
Net cash used in operating activities		(618,196)	(997,506)	(2,133,332)
Cash flows from investing activities
Purchases of intangible assets		(5,307)	(6,331)	(26,880)
Purchases of property, plant and equipment		(23,397)	(65,019)	(208,495)
Interest received		12,592	5,850	23,423
Net cash used in investing activities		(16,112)	(65,500)	(211,952)
Cash flows from financing activities
Proceeds from share issues		-	200,000	200,000
Share issue costs		-	-	-
Repayment of lease liabilities		(20,148)	(39,130)	(78,112)
Net cash from/(used in) financing activities		(20,148)	160,870	121,888
Net increase/(decrease) in cash and cash equivalents		(654,456)	(902,136)	(2,223,396)
Cash and cash equivalents at beginning of the year		1,241,480	3,464,876	3,464,876
Cash and cash equivalents at the end of the period		587,024	2,562,741	1,241,480

NOTES TO THE INTERIM FINANCIAL INFORMATION (UNAUDITED)

1. Nature of Operations

Microsaic Systems plc (the "Company") is registered in England and Wales. The Company's registered office is 1-7 Park Road, Caterham, Surrey CR3 5TB, with effect from 11 January 2024. The Company has no subsidiaries, so the financial information relates to the Company only. Microsaic is a high technology company developing compact, chip-based mass spectrometers that are designed to improve the efficiency of pharmaceutical R&D.

2. Basis of preparation

The interim financial statements of the Company for the six months ended 30 June 2023, which are unaudited, have been prepared in accordance with the accounting policies set out in the annual report and accounts for the year ended 31 December 2022, which were prepared under International Financial Reporting Standards ("IFRS").

This report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 and has not been audited. The financial information for the full preceding year is based on the statutory accounts for the year ended 31 December 2022. Those statutory accounts have been published and will shortly be filed with the Registrar of Companies. The auditor's report on those statutory accounts was unqualified.

As permitted, this interim report has been prepared in accordance with the AIM Rules for Companies and not in accordance with IAS 34 "Interim Financial Reporting" and therefore it is not fully compliant with IFRS.

The interim financial statements are presented in pounds sterling.

3. Critical accounting estimates and judgements

Accounting estimates and judgements are continually evaluated and are based on past experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates could, by definition, differ from the actual outcome.

Estimates and adjustments that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities are set out in the annual report and accounts for the year ended 31 December 2022, and no additional items have been identified.

4. Revenues

IFRS 15 provides a single, principles based, five-step model to be applied to all contracts with customers. The five-step framework includes:

Identify the contract(s) with a customer;

Identify the performance obligations in the contract; Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract; and Recognise revenue when the entity satisfies a performance obligation.

The Company recognises revenue from the following four sources:

Sale of products;

Sale of consumables and spare parts; Product service and product support; and Consultancy services.

All revenues and trade receivables arise from contracts with customers. Revenue is measured based on the consideration which the Company expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The sale of products, consumables and spare

parts is recognised when the sole performance obligation is met which is usually on delivery to the customer. For product service, product support and consultancy services revenue, the performance obligation is satisfied over the duration of the service period and revenue is recognised in line with the satisfaction of the performance obligation.

Sale of products

The Company sells compact mass spectrometers (Microsaic 4500 MiD®) mainly through OEMs and Distributors. A small proportion of its sales are direct to the customer. Discounts are offered and agreed as part of the contractual terms. Terms are generally Ex Works so control passes when the customer collects the goods. Payment terms are generally 30 days from the date of invoice.

Sales of consumables and spare parts

The Company sells consumables and spare parts mainly through OEMs and Distributors. Terms are generally Ex Works so control passes when the customer collects the goods. Discounts are offered and agreed as part of the contractual terms. Payment terms are generally 30 days from the date of invoice.

Product service and product support revenue

Service and support to our OEMs and Distributors includes training their sales and service teams and servicing the products from time to time. Discounts are offered and agreed as part of the contractual terms. Terms are Ex Works so control passes when the customer receives the service. Payment terms are generally 30 days from the date of invoice.

Usually, there is no obligation on the Company for returns, refunds or similar arrangements. Also, the Company does not manufacture specific items to a customer's specification and no financing component is included in the terms with customers.

The Company provides assurance warranties which are 15 months from the date of shipment for OEMs and Distributors. These warranties confirm that the product complies with agreed-upon specifications. The Company is looking to provide service warranties in the future to direct customers in Europe, where the revenue from such warranties will be recognised over the period of the service agreement.

Consultancy services revenue

Consultancy services comprise science and engineering consultancy, laboratory services and monitoring services. These services are delivered over a period of time usually in accordance with a master services agreement and/or statement of works with an agreed outcome at the end of the project or project phase.

Consultancy services revenue is recognised by reference to the stage of completion of the project or project phase at the balance sheet date as follows:

· Where there are defined project or project phase milestones, the revenue is recognised in full on completion of the project or project phase and on a time basis for the stage of completion where the project or project phase is not completed at the balance sheet date. The stage of completion is recognised as the proportion of time spent on the project or project phase compared with the total time anticipated to complete the project or project phase; and/or

· Where the project is defined with the client in terms of time spent, the revenue is recognised on the basis of consulting time spent on the project by the Company at the time-based rates agreed with the client.

The geographical analysis of revenues (by location of shipment) was as follows:


	6 months	6 months	Year to 31
	to 30 June	to 30 June	December
	2023	2022	2022
	Unaudited	Unaudited	Audited
	£	£	£
UK	11,251	634,200	1,354,872
USA	2,185	50,703	103,752
EU	71,636	29,610	67,646
China	54,332	12,122	30,631
ROW	-	8,279	10,796
	139,404	734,914	1,567,697

The product group analysis of revenues was as follows:
	6 months	6 months	Year to 31
	to 30 June	to 30 June	December
	2023	2022	2022
	Unaudited	Unaudited	Audited
	£	£	£
Product/Unit	47,087	165,011	206,915
Consumables and spares	13,596	67,586	137,397
Service and support income	78,721	502,317	1,223,385
	139,404	734,914	1,567,697

Note that the above revenues in the 6 months to 20 June 2023 include £65,826 to DeepVerge subsidiaries (1H 2022: £546,718, FY22 £1,248,828). However, on 26 June 2023, DeepVerge plc announced that it would no longer be able to support its subsidiaries and was anticipating a sale or liquidation of these assets. The results above, subsequent performance in 2023 and expectations or forecasts for 2024 and beyond therefore need to be considered on the basis that no further payments and no further revenues are expected to be received from DeepVerge.

5. Cost of sales

Cost of sales of products

The cost of sales of mass spectrometers and related equipment is the bought in purchase cost of the product or the transfer value from stock value if a unit has been previously written down. Usually, the sale is made on an Ex-Works basis but if it were not the cost of delivery to the customer is also included in cost of sales.

Cost of sales of consumables and spare parts

The cost of sales of consumable and spare parts is the bought in purchase cost of the consumable or spare part or the transfer value from stock value if an item has been previously written down. Usually, the sale is made on an Ex-Works basis but if it were not the cost of delivery to the customer is also included in cost of sales.

Cost of sales of product service and product support income

The cost of sales of service and support income is the time-based apportionment of the employment costs of the relevant staff spent on the delivery of the service and support income plus any related costs of fulfilment such as travel expenses and any externally incurred direct costs. For the purposes of cost of sales, the employment costs are considered to be salaries, pensions and employers national insurance but does not include share-based payments nor any apportionment of training or overheads.

Cost of sales of consultancy services revenue

The cost of sales of consultancy services (comprising science and engineering consultancy, laboratory services and monitoring services) is the time-based apportionment of the employment costs of the relevant staff spent on the delivery of this revenue plus any related costs of fulfilment such as travel expenses and any externally-incurred direct costs. For the purposes of cost of sales, the employment costs are considered to be salaries, pensions and employers national insurance but does not include share-based payments nor any apportionment of training or overheads.

6. Loss per share


	6 months	6 months	Year to 31
	to 30 June	to 30 June	December
	2023	2022	2022
	Unaudited	Unaudited	Audited

Comprehensive loss attributable to equity	(1,078,527)	(704,711)	(2,288,709)
shareholders (£)
Weighted average number of ordinary 0.01p
(2022: 0.01p) shares for the purpose of basic	6,324,666,516	6,287,359,621	6,324,666,516
and diluted loss per share
Basic and diluted loss per ordinary share (p)	(0.017)p	(0.011)p	(0.036)p

The basic loss per share has marginally increased when compared with H1 2022. This was due to a 56% increase in the comprehensive loss, arising mainly from the 81% reduction in revenues.

Potential ordinary shares are not treated as dilutive as the Company is loss making, therefore the weighted average number of ordinary shares for the purposes of the basic and diluted loss per share are the same.

7. EBITDA Adjusted Loss

A key indicator of performance for the Company is Adjusted EBITDA Loss (Loss of earnings before interest, tax, depreciation, amortisation and other items such as share-based payments and exceptional one-off expenditure). Detailed below is the Adjusted EBITDA Loss for the period:


	6 months	6 months	Year to
	to 30 June	to 30 June	31-Dec
	2023	2022	2022
	Unaudited	Unaudited	Unaudited

	£	£	£
Comprehensive loss for period	(1,078,527)	(704,711)	(2,288,709)
Adjust for:
Tax on loss on ordinary activities	(81,207)	(119,246)	(246,224)
Depreciation of property, plant and equipment	95,250	74,364	178,102
Depreciation of right of use assets	37,797	35,980	72,528
Amortisation of Intangibles	13,921	14,099	30,487
Net finance cost/(income)	(10,176)	(2,979)	16,410
Share-based payments (excluding fee shares)	-	41,002	234,749
EBITDA Adjusted Loss	(1,022,942)	(661,491)	(2,002,657)

8. Employees and employment related costs


	6 months to 30 June	6 months to 30 June	Year to 31 December
2023 Unaudited	2022 Unaudited	2022 Audited

Staff Numbers
Directors	2	3	3
Other staff	21	19	19
Average Headcount	23	22	22
	£	£	£
Employment costs (including Directors)
Wages and salaries	526,258	514,539	985,734
Social security costs	57,000	74,710	133,630
Termination payments	4,854	21,125	21,125
Pension costs	70,954	77,578	144,038
Employment related share-based payments	21,277	82,943	234,749
	680,343	770,895	1,519,276

9. Provisions


	Dilapidations	Warranties	TOTAL
	£	£	£
Balance at 1 January 2023	91,619	23,766	115,385
Provided for/(reduced) during the period	25,907	7,357	33,264
Balance at 30 June 2023	117,526	31,123	148,649

The dilapidations provision has been updated for the estimated impact of inflation.

10. Commitments

As at 30 June 2023, purchase commitments relating to purchase orders placed on, and related contractual arrangements and obligations, with our third-party manufacturers amounted to £559,800 (31 December 2022: £651,944).

11. Share-based payments


The share-based payments charge comprises	6 months	6 months	Year to
	to 30 June	to 30 June	31 December
	2023	2022	2022
	Unaudited	Unaudited	Audited
	£	£	£
Directors' fees settled in shares	-	41,941	85,000
Share options granted	-	41,002	149,749
Employment related share-based payments	-	82,943	234,749
Brokers' fees settled in shares	-	43,059	-
	-	126,002	234,749

There were no Directors' fees settled in shares in the 6 month period to 30 June 2023.

12. Cash absorbed by operations


	6 months	6 months	Year to 31
	to 30 June	to 30 June	December
	2023	2022	2022
	Unaudited	Unaudited	Audited
	£	£	£
Total comprehensive loss for the year	(1,078,527)	(704,711)	(2,288,709)

Adjustments for:
Amortisation of intangible assets	13,921	14,099	30,487
Depreciation of right of use assets	37,797	35,980	72,528
Depreciation of property, plant and equipment	95,250	74,364	178,102
Transfer of property, plant and equipment to	-	-	(44,192)
cost of goods
Profit on disposal of right of use assets	-	-	1,638
Increase/(Decrease) in provision for dilapidation	25,907	8,199	(415)
Increase/(Decrease) in provision for warranty	7,357	(3,114)	15,840
Increase/(Decrease) in provision for expected	-	4,755	1,127,416
credit losses
Share-based payments (inclusive of fees settled in shares)	-	126,002	234,749
Increase/(Decrease) in inventory provision	15,652	(14,033)	(28,152)
Tax on loss on ordinary activities	(81,207)	(119,246)	(246,224)
Interest on lease liability	2,416	4,104	7,013
Interest received	(12,592)	(5,850)	(23,423)
Cash absorbed by operations before movements in working capital	(974,026)	(579,451)	(963,342)

Movements in working capital:
(Increase)/Decrease in inventories	(25,378)	42,587	38,008
(Increase)/Decrease in trade and other receivables	145,972	(485,413)	(1,089,832)
Increase/(Decrease) in trade and other payables	(17,461)	24,771	(118,166)
Cash absorbed by operations	(870,893)	(997,506)	(2,133,332)

13. Related party transactions

During the period, Microsaic and DeepVerge plc ("DeepVerge") had two directors in common: Gerard Brandon and Nigel Burton. Gerard Brandon was Executive Chairman of Microsaic and CEO of DeepVerge until his resignation on 25 September 2023.

In the six months ended 30 June 2023, revenue from DeepVerge subsidiaries totalled £65,826 to (1H 2022: £546,718, FY22 £1,248,828). However, on 26 June 2023, DeepVerge plc announced that it would no longer be able to support its subsidiaries and was anticipating a sale or liquidation of these assets. The results above, subsequent performance in 2023 and expectations or forecasts for 2024 and beyond therefore need to be considered on the basis that no further payments and no further revenues are expected to be received from DeepVerge.

At 31 December 2022, £1,511,198 (2021: £247,412) inclusive of VAT was owed by DeepVerge to Microsaic relating to the supply of goods and services recognised as revenues for the year ended 31 December 2022. The Company had expected to receive material payments from DeepVerge beginning in December 2022, but in the absence of these and given the increasing levels of overdue payments from DeepVerge, the Company sought to reach a formal agreement with DeepVerge, as first announced in the RNS dated 18 April 2023. However, given the circumstances of DeepVerge's financial position, it was not possible to obtain written agreement although DeepVerge made initial payments in line with the informally agreed plan - hence the outstanding balance reduced from £1.5m to approximately £1.4m gross in early 2023.

On 26 June 2023 DeepVerge issued an RNS casting significant doubt on its ability to settle this debt. In preparing the accounts to 31 December 2022, given that it was the opinion of the directors that the conditions leading to this were in existence at 31 December 2022, a provision for expected credit losses of £1,130,169 (2021: £0) was recognised against this debt in the accounts to 31 December 2022. This represented the amount of outstanding debt at 26 June 2023, less recoverable VAT. No further provisions were made in relation to DeepVerge in the six months ended 30 June 2023.

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