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30 May 2024
MicroSalt PLC
("MicroSalt", "the Company" or the "Group")
Final Results for the year ended 31 December 2023
and Notice of Annual General Meeting
MicroSalt Plc, (AIM: SALT) a company commercialising a patented technology to produce full-flavour low-sodium salt, is pleased to announce its first set of full year results following the successful admission of the Company to the AIM market of the London Stock Exchange in February 2024.
Highlights:
· 2023 marked significant progress for Microsalt's efforts with larger-volume B2B customers and the launch of Microsalt® salt-shakers
· Initial purchase orders totalling 29 mT of Microsalt was received from Customer B, the Mexican business of one of the largest beverage and snack food companies in the world, who launched an existing popular product using MicroSalt in their market in Q4 2023
· Partnership announced with Customer A, a US Fortune 500 pharmacy/food retailer, for the development and sale of low-sodium solutions across the retailer's extensive line of private branded snack offerings. This is expected to lead to placement of several of their snacks using MicroSalt® in lieu of traditional salt, beginning with 800 stores in Q4 2023 with the potential to expand across more than 7,000 store locations in the medium term
· FY 2023 revenue of US$ 0.6m (2022: US$ 0.6m) and net loss of US$ 3.5m (2022: US$2.5m) reflecting efforts focused on R&D and preparation for the launch of the first two major food manufacturing customers within the Company's B2B solution
· 2024 set to be a key year where MicroSalt is expected to receive recurring commercial volume purchase orders for its bulk product, whilst acknowledging the rollout of MicroSalt across new and/or further B2B product lines has been slower than hoped during the current year to date
· Strong pipeline with significant volume customer prospects at advanced stages with a range of national and multi-national companies with scope for MicroSalt to be nominated as a supplier on larger product lines once established with these key customers
· Important R&D projects to be undertaken in 2024 focused on three new iterations of MicroSalt to expand its effectiveness across additional food formulas and environments
Rick Guiney, CEO of MicroSalt commented:
"This has been a transformational year for MicroSalt and with continued evidence of the timeliness and essential nature of its products as it emerged as a recognised and preferred choice for product reformulation globally. Our geographic outreach is expanding all the time, now with inroads into Asia, Australia, South Africa, the UK, Germany, Canada and Latin America with a resultant boost to our sales pipeline. Furthermore, our consumer products including SaltMe crisps and MicroSalt shakers have successfully provided a low-sodium alternative for households worldwide, cementing our brand as an essential, generation-spanning choice. I am delighted that we can look ahead with the utmost confidence and in eager anticipation of further successes awaiting us".
Notice of Annual General Meeting
The Annual General Meeting ("AGM") of MicroSalt Plc will be held at the offices of Bird & Bird LLP, 12 New Fetter Lane, London EC4A 1JP on 21 June 2024 at 12.30 p.m. (British Summer Time). The annual report and the formal notice of the 2023 AGM will be posted to shareholders on 30 May 2024.
The notice of AGM will be available to review on the Company's website at: www.microsalt.co
For more information, please visit www.microsaltinc.co, follow on X @microSaltPLC or contact:
MicroSalt plc | Via Flagstaff PR |
Rick Guiney, CEO | |
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Zeus (Nominated Adviser and Broker) David Foreman / James Edis (Investment Banking) Dom King (Corporate Broking), Rupert Woolfenden (Sales) | +44 (0)20 3829 5000 |
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Flagstaff PR (Financial PR) | +44 (0)20 7129 1474 |
Tim Thompson / Alison Allfrey / Anna Probert microsalt@flagstaffcomms.com | |
Notes to Editors
MicroSalt® produces a patented full-flavour, low-sodium salt for food manufacturers and consumers.
MicroSalt is a major potential disruptor in the food market, thanks to its micron sized particles which deliver the same sense of saltiness to a wide range of foods but with approximately 50% less sodium. Excess sodium consumption is a significant contributor to cardiovascular disease and MicroSalt's solution meets the rising demand for healthier alternatives to traditional salt. The WHO has set a target for reducing global sodium intake by 30% by 2025, which it estimates will save 7 million lives by 2030.
Each year, cardiovascular disease costs the UK £19 billion - if the average salt intake was reduced by one gram per day, it has been estimated that 4,147 lives and £288 million would be saved each year in the UK. As a nation, the UK consumes 183 million kilograms of salt each year, and 70% of the typical person's sodium intake is hidden in processed foods.
Operational since 2018, MicroSalt uses a patent-protected technology which helps create high barriers to entry within the reduced-sodium salt market.
The Directors believe that MicroSalt is well positioned to capture growth in the low sodium market, which is expected to grow exponentially, and that there is also scope to enter the larger salt market.
Chair's Statement
I am delighted to announce, on behalf of the Board, MicroSalt's first set of full year results following the successful admission of the Company to the AIM market of the London Stock Exchange in February 2024. I would like to take this opportunity to thank our longer-term shareholders for their ongoing support, in particular Tekcapital plc for their early-stage funding and advice, and to welcome all our new shareholders. I would also like to thank our employees, suppliers, customers, and everyone who has and is supporting the business and in delivering its successful IPO.
Strategy
MicroSalt is a company focused on commercialising a patented technology to produce full-flavour, low-sodium salt for food manufacturers and consumers. The food industry is focused on developing and providing better-for-you products that taste great and reduce sodium intake. The reason for this is that excess sodium consumption contributes to cardiovascular disease, a leading cause of premature death globally. To address this problem, MicroSalt has developed a patented process for producing micron-sized salt crystals that provide all of the flavour of salt with roughly half of the sodium for topical food applications. MicroSalt has developed what we believe to be the world's smallest edible salt crystals with its patented MicroSalt®. With MicroSalt®, companies can make full flavour snacks and prepared meals with the same saltiness as traditional foods yet with half of the sodium. MicroSalt® dissolves faster, is all natural, non-GMO, Kosher and does not contain any of the additives or salt substitutes found in other sodium reduction products.
Board and Governance
As a Board, we are committed to promoting the highest standards of corporate governance and ensuring effective communication with shareholders. We remain focused on ensuring the Company delivers on its long-term growth strategy and is run in a sustainable and socially responsible manner with a strong level of governance oversight from the Board of Directors.
Outlook
We are excited about 2024 as the year where we see MicroSalt receiving recurring commercial volume purchase orders for its bulk product. The Group currently has various significant volume customer prospects at advanced stages with a range of national and multi-national companies. The nature and size of these existing and potential customers businesses is that once MicroSalt has been nominated as a supplier on one product line, we expect further nominations across multiple other, and likely much larger product lines of that customer.
We also anticipate more investment into growth of our MicroSalt® shakers and its establishment as the generational salt used at home.
Judith Batchelar
Chair
Chief Executive Officer's statement
Introduction
The Company's mission is to reduce excess sodium consumption which significantly contributes to hypertension and heart disease, by providing a full-flavour salt with approximately 50% less sodium than traditional salt for food manufacturers and consumers.
To achieve this, the Group has developed a patent protected and scalable manufacturing process that produces a salt crystal that is approximately 100 times smaller than traditional salt. Due to its micron sized particles, MicroSalt has improved adhesion to food (compared with traditional salt crystals) and dissolves much faster on the tongue, thereby delivering the same sense of saltiness as traditional snacks but using approximately half the amount of sodium.
2023 was without doubt, a pivotal year for MicroSalt, marked by foundational efforts and strategic growth. It was indeed a year of building-akin to preparing a snowball before letting it roll downhill. As we promote our vision of a healthier future through reduced sodium in today's diets, we are discovering more and more possibilities and commercial opportunities.
Our leadership team's steadfast commitment has continually affirmed that our products are timely and essential. In 2023, MicroSalt emerged as a recognised and preferred choice for product reformulation globally. Our outreach initiatives have extended across continents, with inroads in Asia, Australia, South Africa, the UK, Germany, Canada, and Latin America, all of which have boosted our sales pipeline. Moreover, our consumer products, including SaltMe Potato Chips and MicroSalt Shakers, have successfully provided a low-sodium alternative for households worldwide, cementing our brand as an essential, generation-spanning choice.
By way of reminder, our primary B2B opportunities during 2023 existed with:
· Customer A, a US Fortune-500 pharmacy/food retailer;
· Customer B, the Mexican business of Customer C; and
· Customer C, one of the largest beverage/snack companies in the world; and
· Customer D, one of the largest global bakery companies.
Looking ahead, we approach the future with utmost confidence and eagerly anticipate the successes that await us.
Financial summary
The Company's revenue of US$0.6m (2022: US$0.6m) and net loss of US$3.5m (2022: US$2.5m) are both reflective of efforts focused on R&D and preparation for the launch of the first two major food manufacturing customers within the Company's B2B solution. Translation of our B2B pipeline of opportunities was always going to take time, but commercial purchase orders were received from Customer B, with 29 mT of MicroSalt being delivered to them in late 2023. Accordingly, most of the revenue in 2023 was D2C (Direct to Consumer). With initial B2B orders received in the latter part of 2023 and multiple other B2B opportunities in various stages of testing/customer acceptance procedures, combined with IPO readiness preparation, the Company did not invest significantly into its D2C sales throughout the year.
Inventories increased to US$0.6m (2022: US$0.2m), predominantly due to an increase in raw materials, again in preparation for the expected bulk orders from the Company's first two major food manufacturing B2B customers (Customers A and B).
Trade and other receivables increased to US$1.3m (2022: US$0.2m), predominantly due to US$0.7m of deferred costs in relation to the IPO being included in prepayments at year end.
Trade and other payables increased to US$1.7m (2022: US$0.2m), predominantly due to increases in trade payables and amounts owed to related parties.
Borrowings also increased to US$2.5m (2022: US$0.2m), predominantly due to increases in convertible loan notes.
Operations summary
A key focus of the business during 2023 was of our larger-volume B2B opportunities with a number of multinational FMCG companies and food manufacturers. The majority of these opportunities have now passed through the R&D phase as well as production testing and then consumer testing. In particular, the Group is now an approved supplier of Customer B and Customer C, which although separate entities, operate under the same group. Customer B launched an existing popular product now using MicroSalt in the Mexican market in the fourth quarter of 2023. In 2023, 29 mT of MicroSalt was delivered to Customer B. Customer B also provided annualised volume targets, albeit on a non-binding basis. Furthermore, the Company began negotiating a purchasing agreement and joint development agreement with Customer C which is expected to be executed in the second half of 2024.
Other selected milestones achieved during 2023 include:
• Partnership announced with Customer A for the development and execution of low-sodium solutions across the retailer's extensive line of private branded snack offerings. This will lead to placement of several of their snacks using MicroSalt® in lieu of traditional salt, beginning with 800 stores in Q4 2023 with the potential to expand across more than 7,000 store locations in the medium term;
• Agreement with supermarket chain, Giant Food of Maryland LLC, one of the most respected food retailers in the mid-Atlantic United States, to carry MicroSalt's new saltshakers across its 160 stores;
• Continued sales expansion of SaltMe! crisps and MicroSalt shakers with new placements in over 400 additional U.S. retail stores.
• Agreement with US Salt LLC for the distribution and delivery of MicroSalt's low-sodium solutions.
Sales and marketing
MicroSalt attended a number of US based and international food shows, which has been the core focus of its sales and outreach efforts. In 2024, the Company plans to attend at least 12 food shows globally, including events in Frankfurt, Paris, Shanghai, Dubai, and Stockholm. These are in addition to the major industry events in the US market The Company also invests actively into brand awareness and social media campaigns relevant especially to its D2C business. The Company also appointed the U.K. celebrity chef Jack Stein as a Brand Ambassador.
Intellectual property
Subsequent to the year end, in May 2024 the United States Patent and Trademark Office granted and issued MicroSalt's patent entitled 'Low Sodium Salt Composition'.
Political/regulatory update
The World Health Organisation ("WHO") has set a target of reducing global sodium intake by 30% by 2025, which it estimates will save 7 million lives by 2030. WHO research also found that every US$1 spent on sodium reduction translates to US$12 in healthcare cost savings for treating cardiovascular disease. Governmental pressure continues to increase with new regulations in Canada for 2025. Additionally, local dieticians and purchasing authorities are taking action, regardless of any legal mandates, to lower sodium.
Current trading and outlook
MicroSalt made significant progress in 2023, the rollout of MicroSalt across new and/or further product lines across Customers A, B, C and D has been slower than hoped during 2024 so far. However, this statement does not reflect the significant progress regarding positive trials undertaken during this year so far, or indeed the deepening of knowledge and relationships MicroSalt has with our key B2B customers and target customers. Furthermore, we are increasingly confident of announcing further commercial volume orders with Customer B in particular, in the third quarter of 2024.
In addition to our focus on B2B sales of MicroSalt® to food manufacturing companies where the Company has made substantial progress, MicroSalt has launched its low sodium salt in saltshakers during 2023. Approximately 400 supermarkets now carry these better-for-you saltshakers. The Company also made significant progress towards finalisation of its IPO on the AIM Market of the London Stock Exchange, which completed in February 2024.
Beyond our primary focus on sales and marketing, I'm pleased to advise of several other developments during 2024, including:
- New employees, namely a new UK sales manager and a US based group financial controller;
- R&D projects focused on three new iterations of MicroSalt to expand its effectiveness across various additional food formulas and environments. We expect this should lead to entrance into additional markets and potential applications for MicroSalt both short and long term.
These are just a taster of the developments of the Group we expect to continue into the second half of 2024 and beyond.
Finally, I must recognise, on behalf of the Board, our sincere thanks to all stakeholders in the business who have supported us and are making possible the achievement of our mission and objectives. To that end, we note the strong share price performance since IPO which recently enabled the Company to exercise its right to call the outstanding warrants in the Company, granted at the time of the IPO. In our opinion, the support of our shareholders is justified, and whilst I would have liked to have announced further commercial volume orders during the year to date, we are excited about 2024 as the year where we see MicroSalt receiving recurring commercial volume purchase orders for its bulk product.
Rick Guiney
Chief Executive Officer
Consolidated statement of profit or loss and other comprehensive income
| Note | Year ended 31 December 2023 US$'000 | | Year ended 31 December 2022 US$'000 |
| ||||
| | | | |
Revenue | 4 | 574 | | 638 |
Cost of sales | | (724) | | (441) |
Gross (loss)/profit | | (150) | | 197 |
| | | | |
Other operating income | 5 | 120 | | 30 |
Administrative expenses | | (3,318) | | (2,639) |
Operating loss | | (3,348) | | (2,412) |
| | | | |
Finance expense | 10 | (131) | | (67) |
Loss before taxation | | (3,479) | | (2,479) |
Taxation | 11 | - | | - |
Loss for the year | | (3,479) | | (2,479) |
| | | | |
Loss for the year attributable to: | | | | |
Owners of the parent | | (3,479) | | (1,940) |
Non-controlling interests | | - | | (539) |
| | (3,479) | | (2,479) |
| | | | |
Other comprehensive income | | | | |
Items that may or may not be recognised in profit or loss: | | | | |
Foreign currency translation differences | | 6 | | - |
Total comprehensive income | | (3,473) | | (2,479) |
| | | | |
Total comprehensive loss attributable to: | | | | |
Owners of the parent | | (3,473) | | (1,940) |
Non-controlling interests | 23 | - | | (539) |
| | (3,473) | | (2,479) |
| | | | |
Loss per share for loss attributable to the owners | | | | |
Basic and diluted loss per share (US$) | 12 | (0.39) | | (166.61) |
| | | | |
Consolidated statement of financial position
Company Number 10061337 | Note | As at 31 December 2023 US$'000 | | As at 31 December 2022 US$'000 |
| ||||
Assets | | | | |
Current assets | | | | |
Inventories | 15 | 568 | | 208 |
Trade and other receivables | 16 | 1,259 | | 221 |
Cash and cash equivalents | 17 | 117 | | 91 |
Total current assets | | 1,944 | | 520 |
| | | | |
Non-current assets | | | | |
Property, plant & equipment | 14 | 8 | | - |
Intangible assets | 13 | 321 | | 147 |
Total non-current assets | | 329 | | 147 |
| | | | |
Total assets | | 2,273 | | 667 |
| | | | |
Liabilities | | | | |
Current liabilities | | | | |
Trade and other payables | 18 | 1,745 | | 165 |
Total current liabilities | | 1,745 | | 165 |
| | | | |
Non-current liabilities | | | | |
Borrowings | 19 | 2,524 | | 170 |
Total non-current liabilities | | 2,524 | | 170 |
| | | | |
Total liabilities | | 4,269 | | 335 |
| | | | |
Net (liabilities)/assets | | (1,996) | | 332 |
| | | | |
Equity | | | | |
Share capital | 20 | 73 | | - |
Share premium | 20 | - | | 1,121 |
Share-based payment reserve | | 1,060 | | 488 |
Capital contribution reserve | | 500 | | 2,452 |
Accumulated losses | | (3,635) | | (3,999) |
Translation reserve | | 6 | | - |
| | (1,996) | | 62 |
| | | | |
Non-controlling interests | 23 | - | | 270 |
| | | | |
Total equity | | (1,996) | | 332 |
| | | | |
| | | | |
Consolidated statement of changes in equity
| Note | Share capital | | Share premium | | Share based payment reserve | | Capital contribution reserve | | Accumulated losses | | Translation reserve | | Total attributable to the company | | Non - controlling interests | | Total equity |
| | US$'000 | | US$'000 | | US$'000 | | US$'000 | | US$'000 | | US$'000 | | US$'000 | | US$'000 | | US$'000 |
| | | | | | | | | | | | | | | | | | |
At 1 January 2022 | | - | | 1,121 | | 109 | | 43 | | (2,059) | | - | | (786) | | 300 | | (486) |
Loss for the year | | - | | - | | - | | - | | (1,940) | | - | | (1,940) | | (539) | | (2,479) |
| | | | | | | | | | | | | | | | | | |
Transactions with owners | | | | | | | | | | | | | | | | | | |
Issue of ordinary share capital | 20 | - | | - | | - | | - | | - | | - | | - | | 509 | | 509 |
Capital contribution from ultimate controlling party | | - | | - | | - | | 2,409 | | - | | - | | 2,409 | | - | | 2,409 |
Share-based payments | | - | | - | | 379 | | - | | - | | - | | 379 | | - | | 379 |
| | | | | | | | | | | | | | | | | | |
At 31 December 2022 | | - | | 1,121 | | 488 | | 2,452 | | (3,999) | | - | | 62 | | 270 | | 332 |
| | | | | | | | | | | | | | | | | | |
Loss for the year | | - | | - | | - | | - | | (3,479) | | - | | (3,479) | | - | | (3,479) |
Other comprehensive income | | - | | - | | - | | - | | - | | 6 | | 6 | | - | | 6 |
| | | | | | | | | | | | | | | | | | |
Transactions with owners | | | | | | | | | | | | | | | | | | |
Issue of ordinary share capital | 20 | 73 | | 2,452 | | - | | (2,452) | | - | | - | | 73 | | - | | 73 |
Capital contribution from ultimate controlling party | | - | | - | | - | | 500 | | - | | - | | 500 | | - | | 500 |
Cancellation of share premium | | - | | (3,573) | | - | | - | | 3,573 | | - | | - | | - | | - |
Share-based payments | 21 | - | | - | | 572 | | - | | - | | - | | 572 | | - | | 572 |
Share exchange | | - | | - | | - | | - | | 270 | | - | | 270 | | (270) | | - |
| | | | | | | | | | | | | | | | | | |
At 31 December 2023 | | 73 | | - | | 1,060 | | 500 | | (3,635) | | 6 | | (1,996) | | - | | (1,996) |
| | | | | | | | | | | | | | | | | | |
Consolidated statement of cash flows
| | Year ended 31 December 2023 US$'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).
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