Company number 03568010 (England and Wales)
Microsaic Systems plc
Annual Report and Accounts
31 December 2021
Microsaic Systems plc Annual Report and Financial Statements 2021
1
CORPORATE INFORMATION AND ADVISORS
Directors:
Gerard Brandon (Executive Chairman)
Nigel Burton (Non‐executive Director)
Robert Moore (Independent Non‐executive Director)
Company Secretary:
Strategic Finance Director Limited
Company number:
Registered office:
Auditors:
03568010
GMS House
Boundary Road
Woking
Surrey
GU21 5BX
Saffery Champness LLP
Chartered Accountants
71 Queen Victoria Street
Bankers:
Solicitors:
London
EC4V 4BE
HSBC Bank plc
95 Gloucester Road
London
SW7 4SX
Dorsey & Whitney Europe LLP
199 Bishopsgate
London
EC2M 3UT
Nominated Adviser and Joint Broker: Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Joint Broker:
Turner Pope Investment (TPI) Limited
8 Frederick’s Place
London
EC2R 8AB
Registrars: Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
Company website:
www.microsaic.com
Microsaic Systems plc Annual Report and Financial Statements 2021
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CONTENTS
Chairman’s Statement
Strategic Report
Governance
Directors’ report
Directors’ remuneration committee report
Directors’ finance & audit committee report
Corporate governance report
Financial Statements
Independent auditors’ report
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Pages
4
7
18
23
27
29
37
42
43
44
45
46
Microsaic Systems plc Annual Report and Financial Statements 2021
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CHAIRMAN’S STATEMENT
For the year ended 31 December 2021
Dear Shareholders,
Following my appointment as Chairman on 5 February 2021, it is my pleasure to present the Company’s
annual report and accounts for the year ended 31 December 2021.
Our Business
Microsaic Systems plc (“Microsaic” or the “Company”) was established in 2001 to develop and
commercialise point‐of‐need, micro‐engineering technologies to miniaturise mass spectrometry (“MS”),
lower the footprint of equipment by up to 90 per cent. compared to standard MS, and to offer online
solutions to bio‐processing in pharmaceutical manufacturing. To date, more than 180 units have been
supplied and installed with companies such as Merck, which has published scientific reviews of the micro‐
engineered technologies.
In the 19 years since the Company’s inception, £30 million has been invested towards the development of
state‐of‐the‐art compact mass spectrometry. Following completion of the fundraise in February 2021, a
further capital injection of £5.5 million (before expenses) was obtained. In connection with this fundraise,
there were a number of changes to Microsaic’s board of directors (the “Board” or the “Directors”) which
led to a review of the Company’s business model. Throughout the year, transitioning the focus towards
commercial delivery of services, in addition to mass spectrometer equipment sales, has opened additional
avenues of income. Supported by a robust patent portfolio in cutting‐edge technology, the team of experts
in physics, micro‐electronic engineering, software architecture and organic chemical laboratory support,
we have seen a return to higher sales coming out of the pandemic period, as we head into 2022. Moving
on from the disappointing performance in 2020, the transformation of the Company’s business model is
making a significant impact on the prospects of the business.
Results
2021 has seen a fundamental shift in the strategic business model which is already showing encouraging
results and momentum. The new partnership, co‐operation, collaboration and commercial development
agreements signed during the year have transformed the business. Revenue increased by 357% over the prior
year, and also surpassed 2019 levels by 5%, whilst employee headcount was lower in 2021 than 2020. The
Company headed into 2022 with shared revenues from partners and increased service opportunities. Moving
on from the disappointing performance in 2020, the transformation of the Company’s business model is
making a significant impact on the prospects of the business. This can be seen in the operational highlights in
the Strategic Report on page 7.
Financial Highlights:
Total revenues increased 357% on the previous year to £0.91m (2020: £0.20m);
Orders exceeded £1m, the largest increase since 2013, with the backlog of £125k of orders at the year‐
end anticipated to be shipped during 2022 (2020: order backlog £nil);
Other operating income of £67k (2020: £97k);
Operating expenses reduced to £2.50m (2020: £2.73m);
Adjusted EBITDA loss of £1.77m (2020: £2.17m) (EBITDA before share‐based payments and professional
fees relating to corporate activities)
Loss before tax of £3.40m (2020: £2.59m) after providing for:
o Share‐based payments of £1.36m (2020: £52k)
o Depreciation of £161k (2020: £167k) and amortisation of £38k (2020: £41k);
o Professional fees of £66k (2020: £149k) relating to corporate activities;
February 2021: oversubscribed fundraising with gross proceeds of £5.5 million raised; and
Cash and cash equivalents at 31 December 2021 of £3.46m (2020: £0.40m).
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Post‐year end events:
March 2022: Appointment of Robert Moore to the Board, Glenn Tracey stepped down from his role as
CEO.
April 2022: Multi‐year Manufacturing Framework Services Agreement (“MFSA”) with DeepVerge plc
(“DeepVerge”) was signed to provide the design, assembly, quality and project management functions for
a range of Modern Water equipment, including the addition of a range of “Sentinel” sensors to make use
of Artificial Intelligence (“AI”) and Internet of Things (“IoT”) in a further iteration of DeepVerge, Modern
Water’s Microtox®PD device worth an initial £400,000. The MFSA provides for additional iterations and
upgrades to other equipment with an estimated total contract value of the order of £1m, subject to
agreement on additional Scope of Work statements, and anticipated delivery over the period until the
end of 2023.
Corporate governance
I believe that good corporate governance is important to support our future growth. The Board has extensive
experience in publicly listed companies as well as running businesses in the healthcare and environmental
sectors and is committed to maintaining the highest standards where possible. An independent Non‐
Executive Director, Robert Moore, was appointed in March 2022 and we are exploring other candidates to
bring additional balance to the Board.
Outlook
The fresh injection of funding and the new Board has quickly resulted in strategic changes which have
presented multiple growth opportunities. The business model has moved on from equipment‐only sales
and transformed into a collaborative offering for new products and services with a focus on design, build
and commission services with a revenue sharing commercial strategy being established, supported by AI
data analysis services. Out‐sourced production and in‐licensing of AI technologies have helped reduce
development costs, increased revenues and built on the expertise and experience of a highly skilled team
of micro‐engineering equipment technology specialists.
Table of abbreviations:
SPE
LC
GC
MS
MiDex
Solid Phase Extraction
Liquid Chromatography
Gas Chromatography
Mass Spectrometry
Point of need bioprocessing MS
Microsaic Systems plc Annual Report and Financial Statements 2021
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The partnerships and alliances, derived from the new business model have increased the capacity of our
micro‐engineering MS equipment to provide surveillance against contaminants and threats for existing
clients and our partners clients in the pharma, environmental and life science sectors.
The new services offered under the revised strategy gives the Microsaic team the ability to fully exploit the
data generated from existing and adapted MS equipment, something that had not previously been utilised.
AI‐driven data analytics offers our distribution partners in the environmental and life science sectors
additional ongoing shared revenue streams from our CE‐marked equipment and consumables. Predictive
services for quality control in real‐time are already adding value for existing and new clients coming online
to manage their production risk in active pharmaceutical ingredients, and to detect contaminants in the
environment. We will soon add the capability to provide medical diagnosis at point of care. Microsaic has
moved on from just selling equipment and consumables, to focusing on generating sustainable, recurring
revenues. Notwithstanding the continuing global uncertainties in managing through the current and any
future pandemic, we now have improved visibility, months ahead, and are more secure in our expectations
of growth from a solid footing.
Gerard Brandon
Executive Chairman
27 May 2022
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STRATEGIC REPORT
For the year ended 31 December 2021
Progress during 2021
2021 revenues were £0.9m, an increase of 357% on the prior year (2020: £0.2m), with orders for the year
exceeding £1m, representing a significant milestone for the Company. Following the effects of COVID‐19,
sales in the first half (£0.5m) were predominantly a roll‐over from delayed orders in 2020, but with stronger
order intake in the second half indicating newly secured instrument and service business in Environmental
and Human Health.
Gross margin was 44% (2020: 50%), falling due to a change in product mix. Product gross margins averaged
31% (2020: 37%) and consumables 63% (2020: 56%). Services to customers are provided by in house staff
and their costs are included in operating expenses and are not included in the gross margin.
Operational Highlights
February: Over‐subscribed placing of £5.5m (gross proceeds), new board and structural change to
commercially focused and collaboration‐based business model.
Five key commercial hires to focus on:
o acceleration of revenues on environmental detection of water contamination and in human
health markets,
o delivering real‐time on‐site monitoring,
o data analytics with connected Internet of Things ("IoT"), and
o AI and support services.
March: commercial agreement with DeepVerge. Microsaic products and services deployed
internationally in applications such as water monitoring of chemicals and pathogens, and in support of
DeepVerge's rapidly growing Labskin division.
May: Collaboration with Swansea University to combine real‐time monitoring of environmental water
using AI in determining the link between environmental chemical pollution and human health.
July: World first demonstration by Microsaic of real‐time monitoring of on‐line production of
biotherapeutic drugs (vaccines and anti‐cancer treatments) using Process Analytical Technology within
a micro‐engineered MS solution.
August: launched a miniaturised mass spectrometer platform to achieve triple quadrupole limits of
detection for real‐time monitoring and identification of Chemicals of Emerging Concern (“CECs”) in
water and soil.
September: signed an agreement with Jiangsu Henzhihe Technologies Co. Ltd. ("HZH"), acting as the
manufacturer, integrator and service centre in support of distribution and prospective OEM
partnerships in China.
October: launch and immediate roll‐out of compact MS technology integrated with autosampler and
separation technology, wrapped in closed‐loop (automated) control software, for use in the scale‐up
and operation of drug manufacturing.
November: Microsaic’s point of need platform to include Gas Chromatography (“GC”) capability,
extending the Companies existing liquid chromatography (“LC”) capability to offer a platform for the
automated detection of organic chemicals in both non‐volatile and volatile compounds such as
therapeutics, antibiotics, pesticides, petrochemicals, and personal care products.
Strategic Progress
Post the placing in February 2021, the Board repositioned the Company’s business model and strategy,
transitioning from selling capital‐based scientific instrumentation to scientists, towards solving real world
problems in the Environmental and Human Health sectors. The Board believes this transition will establish
higher levels of end‐user engagement, and the shift in the business model is already leading to a greater
proportion of recurring revenue through workflows, software, and services.
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Progress on this strategy has been made in 2021 contributing towards the Company’s increased order book,
particularly in H2 2021, and the Board believes this progress will yield significant sales growth in 2022 and
beyond, despite the challenging business environment.
Transition from capital instrument sales to complete workflows in Human and Environmental Health
The Company launched a complete workflow for the bioprocessing industry, targeted at contract
research and manufacturing organisations ("CRMO"), integration partners and biopharmaceutical
companies who manufacture biologic vaccines and therapeutics for major diseases such as chronic
autoimmune diseases. Biopharmaceuticals is a well‐established and rapidly growing sector (valued at
circa $200 billion in a 2020 report1), which faces significant challenges around process robustness. This
is particularly apparent within upstream processing, which relies on fundamental biology and carries
inherent product variability. Continuous point‐of‐need MS would provide timely and critical safety and
quality assurance, as adverse effects would be identified earlier in the process and mitigated
upstream. The analytical instrumentation market in upstream bioprocessing alone was projected to be
worth circa $390 million in 20202. The Company believes that its compact, easy‐to‐use, MS technology
is well‐positioned to access a share of this market, working with bioprocessing instrument providers,
CRMOs and end‐users in biopharmaceutical manufacturing alike.
Microsaic's platform now offers automated detection of organic chemicals in both non‐volatile and
volatile compounds such as therapeutics, antibiotics, pesticides, petrochemicals, and personal care
products. The platform can be used in Human Diagnostics where measurements are increasingly being
made in the doctor's clinic or during surgery, with applications including the real time monitoring of
Therapeutic Drugs. Microsaic's technologies can also detect contaminants in soil and water in minutes
and is well suited to front line environmental monitoring of CECs at the point of need. The latest
addition to Microsaic's platform is the integration of the Company's compact MS technology with GC
and extends Microsaic's existing applications in LC". This combination will provide an extensive range
of analysis required by end‐users for chemical detection, for use in a combined market estimated to be
worth over $1 billion3.
Driving the value of data, through collaborations in software and AI in Environmental Health
Collaboration with DeepVerge. Microsaic is participating in the front line water analysis portfolio of
Modern Water (a division of DeepVerge) by adding a new portable real‐time sewage monitoring
capability, particularly for monitoring "organics" such as drugs of abuse and active pharmaceutical
ingredients ("APIs"). Both companies are engaged in a collaboration to deliver complete solutions, with
a backbone of analytics delivered to end users powered by powerful AI techniques.
Collaboration with Swansea Medical School. The detection platform will combine environmental
sample preparation and epigenetic approaches with Microsaic's miniaturised MS. Through partnership
with stakeholders in the environmental sector, this collaboration is designed to better inform pollution
remediation, improve management processes for reduced emission and promote safer handling of
PFAS chemicals. The partnership will include the application of AI methodology to real‐time water
detection.
Increasing the proportion of recurring revenue through scientific services
In October 2021, Microsaic launched its services business, providing a suite of solutions, which provide
knowledge, applications and services, including environmental, bioprocessing optimisation and analytics
and workflow solutions, and emerging translational medicine. Markets span industries, including
Pharmaceuticals/Biopharmaceuticals, Food Safety, Environmental and Clinical, and this business will
further augment the Company’s transition towards offering complete solutions to end‐users in Human and
Environmental Health.
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Partnership progress with DeepVerge plc
In October 2021, Deepverge increased orders for pathogen monitoring equipment for shipment in 2021 to
partners and customers based in the UK, India, and China, which included upgrades to DeepVerge Modern
Water Microtox®PD4 units, and Microsaic mass spectrometer units. Configurations of the Microsaic
equipment were included in these orders to DeepVerge for the integrated detection of PFAS (Per‐ and
Polyfluoroalkyl Substances or 'forever chemicals’). This monitoring capability forms part of broader
integrated solutions offered by DeepVerge for monitoring toxicity and heavy metal pollutants as well as the
prevalence of SARS‐CoV‐2 as part of the ongoing pandemic response.
Operations
The Company received orders exceeding £1m in 2021, sales of £0.9m with the backlog of orders expected
to ship during early 2022. The main reason for this backlog was due to global supply constraints, mainly
resulting from COVID‐19. The Company is working hard to mitigate any risks to its key supply chain such
that any future impact will be minimal.
Strategic Focus
Microsaic serves Human Health, Environmental Health and Diversified markets with equipment and design
services for mass detection technology, which can be used at the point of need to drive better informed,
faster decisions in real time and to solve real‐world problems.
Typical point of need markets and applications include process analytical technology for the manufacture
of high value biologic drugs, food contamination screening as well as cannabinoid screening. The Company
is also developing a longer‐term capability in point of care diagnostics.
Microsaic’s technology can also be used in standard laboratory settings, for example in the established
pharmaceutical, academic and chemical industries.
Business Model
The Company has moved from revenues in 2021 derived from the sale of its MS instruments, consumables
and spare parts to deliver solutions for end‐users, and in 2022 now operates a revenue sharing, hardware,
software and micro‐engineering design services business model. Working with collaboration partners is
reducing the Company’s reliance on equipment sales (which depend on lengthy sales cycles) and in 2022
Microsaic has quickly moved towards a recurring revenue‐based model, which is expected to increase the
proportion of revenues from AI and analytical electronic sensor‐based Internet of Things. These revenue
streams are in addition to premium services relating to 24/7 operation and support and data analytics, in
particular Industry 4.0 smart technology for the bioprocessing industry, which are also expected to form an
increasing proportion of revenues. Other equipment developed in collaboration with partners, will shift
towards the integration of sensors and analysers to solve specific problems for a range of industries, which
our partners already operate in.
Product Overview
The Company’s existing products use miniaturised chip‐based technology and are designed to deliver
application versatility, ease of deployment and provide users with real‐time information to make decisions
in a quicker and more cost‐effective manner.
Throughout 2021, Microsaic introduced our In‐Field Screening solution for real‐time monitoring. This was
largely focused on the environmental market and monitoring of PFAS (Perfluoroalkyl and Polyfluoroalkyl
Substances) and other CECs (Chemicals of Emerging Concern). This real‐time monitoring solution can be
utilised in other markets as diverse as water, pharmaceuticals, chemicals, academia, and food and
beverage.
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Microsaic’s technology development has pivoted towards more dedicated solutions to solve specific
problems in Human and Environmental Health and Diversified Industries.
Stakeholder Engagement
Section 172 of the Companies Act 2006 (“S.172”) recognises that companies are run for the benefit
shareholders, but that the long‐term success of a business is dependent on maintaining relationships with
stakeholders and considering the external impact of the Company’s activities.
Microsaic’s key stakeholders are our employees, partners (including distributors, OEMs and collaborators
on new products), and our key suppliers such as our manufacturing contractor and key R&D subcontractors.
By working with all stakeholder groups, the Company can unlock the potential of the business and maximise
the value created. The key principles and values adopted by the Company are detailed under Principle 8 of
the QCA Corporate Governance Code.
For Microsaic, engagement with our key stakeholders is part of how we operate as a business. Actively
seeking to understand the concerns and aspirations of our employees, how we can better engage with
them, how we can work more closely with the partners who distribute our products and those that we
collaborate with, plus the challenges faced by our manufacturing partner and other suppliers.
Compared to 2020, this year was less challenging and enabled the Company to focus on its growth. A key
priority in 2021 was redefining the commercial focus, targeting solutions to meet the requirements of
existing clients and investigating markets to capitalise on the value of the new business model. Microsaic is
now sufficiently capitalised to take advantage of the opportunities available to a commercial focused
business and face‐to‐face engagement restricted during the pandemic lock‐down with shareholders and
stakeholders was eased. The Directors continue to engage with shareholders and key stakeholders keeping
them up to date on progress.
The key decisions made by the Board during the year are outlined below:
In February 2021, new directors were appointed to the Board. The incumbent CEO and CFO remained
and implemented the new business model. In contrast to the previous year, additional staff were hired
to meet the demand for new services being offered after a successful fundraise was completed on 5
February 2021 raising £5.5 million before expenses.
Under S.172, a company’s directors have a duty to discharge their responsibilities having regard to:
a) the likely consequences of any decision in the long term – the focus of the Board during 2021 was the
reorganisation and adjustment to a more commercial focus with emphasis on delivery of solutions, beyond
equipment sales.
b) the interests of the company’s employees – following the fund raise in February 2021, all employees who
had agreed to a temporary 20 per cent. reduction during the pandemic had their salaries restored.
c) the need to foster the company’s business relationships with suppliers, customers and others – customers
were treated fairly during the year. Suppliers continued to be paid on time.
d) the impact of the company’s operations on the community and the environment – there was no adverse
impact on the community or environment from the decisions made by the Board during the year.
e) the desirability of the company maintaining a reputation for high standards of business conduct – the
Company acted in a professional manner during 2021 liaising with key stakeholders and followed the
principles and values of the Company as outlined on pages 29 to 36 of the Corporate Governance Report.
Microsaic Systems plc Annual Report and Financial Statements 2021
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f) the need to act fairly as between members of the company – the Board treated shareholders fairly and
made sure it kept them up to date through regular press releases. Significant shareholders were given the
opportunity, through a market soundings exercise to invest in the Company. The strategic review process
was undertaken for the benefit of shareholders and other key stakeholders.
Performance Measurement
The ongoing performance of the Company is managed and monitored using several key financial and non‐
financial performance indicators as detailed below:
Revenue
Products
Consumables and spare parts
Service and support income
Total
Year to 31
December
2021
£
617,613
230,832
58,431
906,876
Year to 31
December
2020
£
83,397
105,135
9,726
198,258
Increase/
(Decrease)
%
641
120
501
357
The Company’s revenue performance strengthened in 2021 following the impact of the COVID‐19
pandemic, and increased by 357% to £0.91m (2020: £0.20m). Restrictions on travel to support partners and
customers have only recently been lifted. Revenue comprises the sale of products, consumables and spare
parts, and service and support income. The Board reviews trading results and monitors cash on a regular
basis.
Profit/(Loss) & Cash Metrics
Year to 31
December
2021
£
Year to 31
December
2020
£
Loss from operations before share‐based payments,
interest, and tax
(2,034,235)
(2,531,746)
Net cash used in operating and investing activities
(1,937,263)
(2,126,275)
Cash and cash equivalents
3,464,876
397,069
Increase/
(Decrease)
%
(15)
(9)
773
The Company’s profitability is monitored against budget on a monthly basis. The 15 per cent. reduction in
the loss from operations before share‐based payments was the result of growth in revenue whilst keeping
operating costs consistent and a reduction in corporate transaction related costs following the
restructuring. The Company monitors its cash position closely, and forecasts are updated on a regular basis.
The year‐end cash position was in line with the Board’s expectations.
Non‐financial key performance indicators measure a number of key areas, including commercial and
operational targets, such as number of sales orders, unit production, new products transferred to
manufacturing, number of collaborations, agreements signed with new customers and quality measures
from the Company’s ISO 9001:2015 system. Key points to note are:
Sales orders for MS instruments were significantly above last year;
Microsaic worked with its manufacturing partner to increase production levels;
On the customer front, two new partner agreements were entered into during the year;
The Company was able to continue with two important partner collaborations, albeit delayed, both in
bioprocessing; and
Microsaic Systems plc Annual Report and Financial Statements 2021
11
ProteinID was successfully transferred to manufacturing, although significantly later than originally
planned while work on the launch of our LC‐MS family of products was placed on hold. Progress on the
latter has been delayed due to the worldwide supply chain shortages of electronic components. It is
anticipated that it will be resumed towards the end of 2022, with sales commencing during Q2 2023.
Financial Results ‐ 2021
Profit and Loss
Total revenue of £906,876 increased 357 per cent. compared to the prior year (2020: £198,258) which had
been impacted by the COVID‐19 pandemic, and ahead of 2019 revenues of £872,125. Product revenues of
£617,613 (2020: £83,397) and service revenues of £58,431 (2020: £9,726) increased by 641 per cent. and
501 per cent. respectively. Consumables revenue of £230,832 (2020: £105,135) increased by 120 per cent.
Gross profit in 2021 of £395,984 (2020: £99,910) rose by 296 per cent. over last year following a significant
increase in product revenues, as customer investment decisions were postponed due to the COVID‐19
pandemic. The gross margin of 44 per cent (2020: 50 per cent.) is reduced on the last year predominantly
due to an increased proportion of lower margin unit sales compared to higher margin consumables.
Other operating income of £67,283 (2020: £96,626) relates to a mix of Coronavirus Job Retention Scheme
grant, co‐development income and insurance claim income (2020: solely Coronavirus Job Retention Scheme
grant).
Total operating expenses (excluding share‐based payments) of £2,497,502 (2020: £2,728,282), fell by 8 per
cent. chiefly due to the reduction of corporate transaction professional fees as the restructuring completed
early in 2021, new Non‐executive Directors fees and Brokers fees being settled in shares and a reduction in
research and development expenses. Corporate transactions‐related professional fees of £65,789 fell by
£83,575 as the restructuring and fundraise completed early in the year during February 2021.
The main increase in expenditure compared to 2020 relates to payroll costs increased by £137,950 to
£1,545,368. This reflected increasing staffing levels (after redundancies in 2020) and the restoration of staff
salaries to pre‐pandemic levels (reversing in full an agreed temporary 20 per cent. reduction during the
pandemic in 2020).
The loss from operations for the year before share‐based payments fell by 20 per cent. over last year to
£2,034,235 (2020: £2,531,746).
Share based payments of £1,363,764 are £1,311,523 higher than the prior year (2020: £52,241). This follows
the cancellation of options and the issue of new options as part of the restructuring in February 2021,
together with Non‐executive Directors fees and Brokers fees settled in shares
Finance costs of £4,604 were less than the prior year (2020: £10,775). The majority of this cost relates to
interest on the lease liability.
Finance income of £6,237 increased compared with the prior year (2020: £4,393) due to higher cash
balances offset by reduced interest rates.
The tax credit on ordinary activities in the year was £267,785 (2020: £217,711). In 2020, expenditure on
R&D projects had been scaled back in line with the contingency plan to mitigate the impact of the COVID‐
19 pandemic. The R&D tax credit claim is £50,074 higher than in 2020 as there was a return to higher levels
of staff time on eligible R&D.
The total comprehensive loss for the year of £3,128,581 is a 32 per cent. increase over the prior year (2020:
£2,372,658). The increase in the total comprehensive loss by £755,923 was due chiefly to the share‐based
Microsaic Systems plc Annual Report and Financial Statements 2021
12
payments increase of £1,311,523 over the prior year which was partially offset by a £296,074 improvement
in gross profit and other operating costs reduced by£107,753. The basic loss per share fell by 89 per cent.
from 0.52 pence in 2020 to 0.056 pence per share in 2021. The weighted average number of shares in issue
increased by 1,013 per cent. (refer to note 10) as a result of the fund raise on 5 February 2021 (refer to note
18).
Balance Sheet
Total non‐current assets increased £259,313 to £506,625 (2020: 247,312). The increase is due to a
substantial increase in investment in plant and equipment and the renewal of the Woking lease.
Current assets at £4,648,511 are up £3,289,414 over last year (2020: £1,359,097). The increase is mainly
due to a substantially higher cash balance of £3,464,876 (up £3,067,807) as well as higher trade and other
receivables (up £458,077) and corporation tax receivable (up £49,217), partly off‐set by lower inventories
(down £285,687). The increase in cash reflects the fund‐raise in February 2021, the increase in trade
receivables and lower inventories reflects the increased sales in 2021 compared to 2020. The lower
inventories also relate to supply chain issues arising from the COVID‐19 pandemic.
Total assets at £5,155,136 are £3,548,727 higher than last year (2020: £1,606,409), mainly due to the higher
level of current assets at the year‐end given the increased cash balance.
Total equity at £4,573,220 is £3,330,240 above last year due to the share issue net of costs in February 2021
of £3,700,132 (adjusted for cash costs and the fair value of broker warrants) plus the movement on share‐
based payment reserve of £2,564,443 offset by the reduction in retained reserves of £2,934,335. The
increase in the share‐based payments reserve is due to fair value of broker warrants in relation to the
February 2021 share issue and new options net charge amounting to £1,255,681 off‐set by share‐based
option credits in respect of unvested cancelled options of £194,246.
Current liabilities comprise trade and other payables and lease liability due within 12 months of the year
end. Trade and other payables at £354,611 (2020: £185,927) are £168,684 more than last year and mainly
reflects an increase in trade payables (up £167,460), with lower level of accruals and deferred income
(down £32,817) offset by higher other payables, taxes and social security (up £34,041). The lease liability of
£71,187 mainly represents the Company’s leasehold property in Woking which expires in September 2023.
Total non‐current liabilities at £156,118 are £30,986 more than last year. This is mainly due to the increase
in the lease liability by £55,061 reflecting the Company having renewed its Woking lease in September 2021
offset by a reduction in provisions of £24,075 reflecting lower estimated warranty claims.
Total liabilities of £581,916 are £218,487 more than in the prior year due to the increase in current and
non‐current liabilities as set out above.
Cash Flow
Net cash used in operating activities in 2021 of £1,609,283 is £440,327 lower than last year reflecting the
reduction by £497,511 in the loss from operations before share‐based payments for the year. The R&D tax
credit receipts fell by £103,016 offset by improvements in working capital movements of £155,045.
Net cash used in investing activities of £327,980 compares with £76,665 in 2020. The main movements in
the year were an increase in the purchases of property, plant and equipment of £235,882 and intangible
assets of £1,564 and interest received lower by £13,869.
Net cash generated by financing activities amounted to £5,005,070 and relates to the net proceeds of the
fund raise in February 2021 offset by payment of lease commitments (chiefly in relation to the Woking site)
during the year.
Microsaic Systems plc Annual Report and Financial Statements 2021
13
The net increase in cash for the year of £3,067,807 resulted in a cash balance as at 31 December 2021 of
£3,464,876.
Going Concern
The Company’s resilience has improved following the equity fundraise completed in February 2021 when
the Company successfully raised £5.5 million (before expenses), with improved trading performance, a
revised business strategy and the additional Manufacturing Framework Services Agreement (“MFSA”)
signed with DeepVerge for an initial value worth £400,000 (with no capital costs for Microsaic). The MFSA
provides for additional iterations and upgrades to other equipment which could generate further contracts
and income for the Company in the first half of 2023. With the recent advent of new service revenue streams,
the plans and prospects for the business are modest in projecting the pace and quantum of new revenue
and the Company is expected to continue to be loss making in the short‐term. Having taken this careful
approach, the Board believes that the Company has sufficient cash to cover the anticipated working capital
requirements for at least the next 12 months from the date of signing of the Annual Report and Accounts.
Therefore, the Directors have adopted the going concern basis of reporting in preparing the financial
statements. The Board’s assessment of the going concern basis is explained in more detail in note 3 to the
financial statements, including sensitivities and contingency plans.
Risk Management
The Company manages risk from an operational perspective, where it assesses and weighs up the potential
risks to the business and how it can mitigate these risks. The Board has identified the following risks and
associated mitigating actions as follows:
Description
Risk
Unable to grow
sales required to
achieve sustainable
profitability
Sales growth is
too slow to
achieve targets
COVID‐19
pandemic has
material impact on
sales
Unable to raise
additional funds if
required in the
future
Low or little
demand from
affected markets
and less
opportunity to
visit potential
customers
Inability to
continue as a
going concern
Risk rating
pre‐
mitigation
HIGH
MEDIUM
MEDIUM
Risk rating
post‐
mitigation
MEDIUM
MEDIUM
MEDIUM
Mitigating actions
Pursuing a new strategy involving
services and investing in business
development to promote these
as well as developing new sales
channels.
Continue dialogue remotely with
partners. Increase collaborations
regarding the development of
new products and expand sales
channels. Ensure staff have a safe
and protected work
environment.
Communicate effectively with
shareholders and potential
investors. Ensure the business
plan is implemented effectively
with the focus on expanding
sales channels and growing
revenues, whilst adjusting
variable costs in line with actual
revenues.
Reliance on third
party
manufacturing
facilities
A replacement
manufacturer is
necessary
MEDIUM Work closely with our
LOW
manufacturing partner and hold
regular review meetings. Ensure
contingency plans are prepared
and reviewed.
Microsaic Systems plc Annual Report and Financial Statements 2021
14
Description
Risk
Retention and
recruitment of key
employees
Loss of competitive
advantage in
miniaturised mass
spectrometry
Loss of key
employees and
subsequent
difficulty in
recruiting
suitable
replacements
Competitors
developing
competing
products
Risk rating
pre‐
mitigation
LOW
MEDIUM
Risk rating
post‐
mitigation
LOW
Mitigating actions
Ensure the Company’s
remuneration package is
competitive and aligned to
performance. Retain key staff by
investing in their development.
LOW
The Company continues to
innovate, invest in IP, and focus
on its core strengths around
point of care, ease of use and
simplicity of maintenance. The
Company believes the market is
large enough for competitors to
co‐exist.
From the analysis above there are three main risks facing the business:
1. Although some countries have weathered the COVID‐19 pandemic better than others, the global health
crisis continues to slow the potential for improved revenues overseas, particularly in the APAC region.
However, the new business model saw sales of units increase supported by services utilising in‐house
expertise and experience which do not require travel to support installations. Restrictions on
international travel to and from partner countries has eased and we will continue to monitor the
situation very closely. The Company will follow government guidelines in the UK and abroad to plan
international visits to customers. Restrictions on working from home have eased and while we
encourage staff to go into the premises, we remain open to a flexible approach to ensure the health
and safety of our employees as a priority.
2. Failing to grow the sales required to achieve sustainable profitability is a clear risk. To mitigate this,
soon after the funds raised in February 2021 the Company altered the business model to create a
substantial uplift in revenues from multiple sales channels in products and services to provide solutions
to clients, generating recurring revenues through design, prototype and preparation of blueprint for
transfer to manufacture of third‐party equipment. Investment in business development has already
delivered positive results bringing in £400,000 in design and development contracts after year end and
the additional iterations and upgrades to generate further contracts and income for the Company into
2023. Should these not materialise as estimated, the Directors have prepared mitigating actions which
would be undertaken if necessary as set out in note 3.
3. The inability to continue as a going concern. This has been mitigated by the successful fundraise in
February 2021 where the Company raised £5.5 million before expenses, the developing strategic
relationship with DeepVerge plc and the introduction of new services during 2022. The Board’s
assessment of the going concern basis is summarised in more detail in note 3.
Microsaic Systems plc Annual Report and Financial Statements 2021
15
Key events and progress post year end
Multi‐year Manufacturing Framework Service Agreement with DeepVerge plc for a range of Modern
Water equipment, including the addition of a range of “Sentinel” sensors to make use of Artificial
Intelligence and Internet of Things is a further iteration of DeepVerge, Modern Water’s Microtox®PD
device with a value to Microsaic of £400,000 with an estimated total contract value of the order of £1m,
subject to agreement on additional Scope of Work statements, and anticipated delivery over the period
until the end of 2023.
Signing of agreement with DeepVerge
On 24 March 2021, Microsaic signed a non‐exclusive Framework Services Agreement with DeepVerge for
the distribution of its products across the geographic markets addressed by DeepVerge. This agreement
does not restrict Microsaic from developing and engaging with its existing or other new partners.
DeepVerge offers Microsaic the opportunity of increasing volumes substantially, from an established global
sales platform, and an extended reach into markets beyond that for standard laboratory use of MS.
Under the terms of the agreement, DeepVerge has committed to allocate resources up to a value of
£150,000 to assemble a pilot facility for Microsaic’s systems at DeepVerge’s York laboratories, to provide
access for potential customers and clients of DeepVerge to verify and validate the technology in numerous
application settings beyond those historically targeted by Microsaic.
Additionally, this agreement opens the opportunity for collaboration in several areas:
DeepVerge will incorporate AI software and services into Microsaic’s technology. This fits in with
Microsaic’s strategy in bioprocessing, where AI enables faster decision making from complex data sets;
DeepVerge will utilise and integrate Microsaic’s technology into Labskin products and services, in
pursuit of human and environmental health applications. Microsaic’s technology is ideally suited for
screening applications and especially for protein detection (e.g., with Microsaic’s MiD® ProteinID
technology); this collaboration will also progress both companies’ respective strategies in point of care
diagnostics, where the Directors believe that combining the technologies could have a synergistic
effect;
Certain Microsaic employees will be located at DeepVerge’s sites in the UK, to assist with particular
collaborations (e.g., Labskin’s facility at York); and
Microsaic will collaborate with Modern Water Group (part of DeepVerge) to develop solutions for point
of need water quality and pathogen testing.
The Framework Services Agreement with DeepVerge constituted a related party transaction under Rule 13
of the AIM Rules for Companies, by virtue of Microsaic and DeepVerge having two directors in common. At
the time of entering into the agreement, the Independent Directors, being Glenn Tracey and Bevan Metcalf,
confirmed that they considered, having consulted with the Company's nominated adviser, that the terms
of the Framework Services Agreement were fair and reasonable insofar as the Company's shareholders are
concerned. Additional orders received under this agreement were similarly assessed as being consistent
with the terms of the FSA and therefore also fair and reasonable. In 2022 the FSA was amended to include
additional new products and provide for other new items to be added to the agreement, subject always to
the review by the respective companies’ nominated advisers.
Microsaic Systems plc Annual Report and Financial Statements 2021
16
Outlook
The Board is targeting significant scale up of the business in 2022 which will be underpinned by:
The roll‐out of Microsaic’s scientific and micro‐engineering design services business, in particular
implementation of Framework Agreements for high‐value design, prototype and blueprint preparation
for mass production of sensor‐based Internet of Things clients (via DeepVerge);
The extension of Microsaic’s detection platform in both LC and GC applications in Human and
Environmental Health real‐time monitoring;
The expansion of Microsaic’s revenues through its partners, particularly through its collaborations in
water detection with DeepVerge; and
Significant OEM partnership deals, and strategic interest in the Company
If 2021 was about turnaround, then 2022 is about significant business inflection. We have worked tirelessly
in 2021, putting in place the necessary building blocks in and around our technology, extending our business
model to cover services, workflows and software.
The COVID‐19 era has demonstrated the resilience of humans and ingenuity of our scientists, and the ability
for us to respond quickly with solutions for real‐world problems. Real‐time detection is a central facet of
advancing this human endeavour. Microsaic is exceptionally well placed with its capabilities in real‐time
detection.
I am absolutely delighted with how Microsaic has emerged following the COVID‐19 pandemic, stronger than
how we entered it. I am very optimistic about our future.
The Strategic Report was approved by the Board of Directors on 27 May 2022 and signed on its behalf by:
Gerard Brandon
Executive Chairman
Notes
1 2020 Global Life Sciences Outlook, Deloitte
2 Report on upstream bioprocessing analytical instrumentation, TDA consultants 2019
3 SDI Report
4 Microtox® PD has been designed to be retrofitted into existing Modern Water equipment to detect and identify a range of
infectious viruses and bacteria including SARS‐CoV‐2, E. coli, Legionella and Cryptosporidium, on a single chip, using AI, in real‐
time
Microsaic Systems plc Annual Report and Financial Statements 2021
17
DIRECTORS’ REPORT
The Directors present their report for the year ended 31 December 2021.
Principal activity, business review and business risks
The principal activity of the Company continued to be the commercialisation and development of
miniaturised micro‐engineering equipment, originally for mass spectrometry instruments but now to
include integration of AI and Internet of Things analytical sensors for existing and new clients to generate
recurring shared revenues for monitoring across biologic bio‐processing, environmental and human health
and likely to extend to aviation, the food industry and oil & gas sectors. A review of the business is contained
within the Strategic Report.
Results and dividends
The results for the Company are given in the statement of comprehensive income set out on page 42. The
Company is currently making losses and has retained losses which have to be recovered before it can pay a
dividend. Therefore, the Directors do not recommend the payment of a dividend (2020: £nil).
Business Development & Sales
Revenues are made through OEM and distribution sales channels with direct and collaboration partners
currently in place, covering North America, Europe, China, Southeast Asia and Japan.
Research and development (“R&D”)
R&D is important for the Company’s success and has led to the filing of over 80 patents to date. During the
year, R&D projects and R&D expenses totalled £738,145 (2020: £777,597) or 28.3 per cent. (2020: 28.5 per
cent.) of total operating expenses excluding share‐based payments. Current plans are to invest in
commercial development associated projects that are demanded from new and existing clients to optimise
resources through collaborations and joint ventures.
Directors
Between the 1 January 2021 and 31 December 2021, the following Directors held office:
Gerard Brandon, Non‐executive Chairman (Age 60)1
Peter Grant, Non‐executive Chairman (Age 65)2
Nigel Burton, Non‐executive Director (Age 64)1
Eric Yeatman, Non‐executive Director (Age 58)2
Glenn Tracey, Chief Executive Officer (Age 50)3
Bevan Metcalf, Finance Director and Company Secretary (Age 64)4
1Appointed as a Director on 5 February 2021.
2Resigned as a Director on 5 February 2021.
3Resigned as a Director on 31 March 2022.
4Resigned as a Director and Company Secretary on 17 December 2021 (upon his retirement).
On 5 February 2021, Gerard Brandon and Dr Nigel Burton were appointed to the Board as Non‐executive
Chairman and Non‐executive Director respectively, replacing Peter Grant and Eric Yeatman who resigned
as part of the reorganisation. Their biographies are detailed in the Corporate Governance Report.
On 22 October 2021, Bevan Metcalf’s retirement was announced, and he resigned as a Director and
Company Secretary on 17 December 2021.
Post year end on 28 January 2022, it was announced that Glenn Tracey was stepping down to pursue a non‐
competitive opportunity and he resigned as a Director on 31 March 2022. Also post year end on 15 March
2022, Robert Moore was appointed as Independent Non‐executive Director.
Microsaic Systems plc Annual Report and Financial Statements 2021
18
Directors’ interests
The Directors’ interests in the shares of the Company are:
Ordinary shares of 0.01p
Ordinary shares of 0.01p Ordinary shares of 0.25p
at 31 March 2022
at 31 December 2021
at 31 December 2020
Number
%
Number
Gerard Brandon1
190,000,000
2.99 140,000,000
Dr Nigel Burton
Robert Moore
300,500,000
‐
4.72
‐
65,500,000
‐
%
2.30
1.08
‐
Number
%
‐
‐
‐
‐
‐
‐
490,500,000
7.71 205,500,000
3.38
‐
‐
1 This figure includes 50,000,000 shares by a person closely associated with Gerard Brandon.
Significant shareholdings
Shareholders, excluding Directors, having a beneficial interest of 3% or more of the Company’s shares:
Shareholder
Unicorn Asset Management
Hargreaves Lansdown Asset Management
Interactive Investor
Jarvis Investment Management
Premier Miton Investors
ISPartners Investment Solutions
Halifax Share Dealing
Barclays Wealth
Intuitive Investments Group
Ordinary shares of 0.01p each
at 31 March 2022
Number
750,000,000
711,327,347
520,095,997
495,791,678
482,129,838
362,125,000
239,526,327
193,693,535
192,000,000
%
11.79
11.18
8.18
7.79
7.58
5.69
3.77
3.04
3.02
Employees
The Board regards the expertise and contributions of its employees as critical to its future success. Executive
management regularly update employees on the progress of the business. The Board seeks to remunerate
its employees fairly and has adopted a flexible working hours policy to cater for employee needs. Full and
fair consideration is given to applications for employment received regardless of age, gender, colour,
ethnicity, disability, nationality, religious beliefs or sexual orientation.
The Board would like to thank all its employees for their continued contribution.
Company share ownership plans
The Company operates two Employee Share Option Schemes (“ESOS”), an approved scheme and an
unapproved scheme.
The ESOS were formed to enable the incentivisation of employees to be aligned to the performance of the
Company. Under the ESOS the Company grants employees options to acquire the Company’s ordinary
shares subject to:
Vesting periods (normally three years for new grants) and an exercise period of up to ten years from
the date of grant;
Microsaic Systems plc Annual Report and Financial Statements 2021
19
Company share ownership plans (continued)
The exercise price is normally the market price of the ordinary shares at the close of business the day
before the date of grant unless the award is linked to an equity fundraise; and
Performance and time‐based vesting conditions as appropriate.
Options are granted up to the maximum amount allowed under the limits of the Enterprise Management
Incentive (“EMI”) Scheme ‐ these options are called ‘Approved Options’. The EMI Scheme is subject to the
provisions of Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003 and have tax advantages for
the employee and employer. There is an unapproved scheme, which has no tax advantages, for those
awards which do not qualify under the Approved Option scheme.
On 4 and 5 February 2021, the Company cancelled all existing options which were all out‐of‐the‐money.
Options held by Peter Grant, former Chairman (3,500,000), Glenn Tracey, CEO (4,800,000) and Bevan
Metcalf, FD (4,620,000) on 31 December 2020 were cancelled in February 2021. Options held by staff
amounting to 3,690,000, were also cancelled in February 2021.
These cancelled options were replaced with options over 1,125 billion ordinary shares of 0.1p each
following the share capital restructuring and fund raise. This included options and warrants over 675 million
ordinary shares of 0.1p each for the directors. No options were awarded in 2020. Options awarded to staff
and Directors are detailed in note 25.
Management of risk
The management of operational risk is covered in the Strategic Report while financial risk is detailed under
note 28 Financial Instruments.
Health and safety and the environment
The Company is committed to providing a safe environment for its staff and other parties for whom it has
a responsibility. It has set up systems and processes to ensure compliance with health and safety legislation
and the Board reviews an update on health and safety matters at each main Board meeting.
The Company is also mindful of its corporate responsibilities concerning the impact of its activities on the
environment and seeks to minimise this impact where practicable.
Quality management system
The Company’s mission is to deliver miniaturised micro‐electronic equipment and Internet of Things
designed to analyse data, using AI analytical services, demanded by clients that include, but are not
exclusively related to miniaturised mass spectrometry instruments that provide innovative compact
detection with high quality and reliability.
The Company’s quality policy applies to the development, marketing and support of our products. In all its
activities the Company is strongly focused on commitment to the requirements of its customers including:
Management of risks to prevent operational and product problems that may adversely impact
customer satisfaction and the interests of other parties; and
Management of any externally provided products and services to ensure that they meet specified
requirements including changing needs.
To help management achieve its policy, the business management system has been developed using a
process approach including a Plan‐Do‐Check cycle, risk‐based thinking, and a fundamental commitment to
the continual improvement of the system and its effectiveness and integration into the Company’s
activities.
Microsaic Systems plc Annual Report and Financial Statements 2021
20
Quality management system (continued)
The Company’s Quality Management System is based on ISO 9001:2015. This standard puts considerable
emphasis on risk management and management involvement within the quality management system.
Directors’ indemnity and insurance
The Company has granted an indemnity to its Directors and Officers under which the Company indemnifies
them, subject to the terms of the deed of indemnity, against costs, charges, losses, damages and liabilities
incurred by them in the performance of their duties. The Company also maintains Directors and Officers
liability insurance against the consequences of actions brought against them in relation to their duties for
the Company.
Related party transactions
The interests of the Directors are shown in the Directors’ Report while their remuneration is detailed in the
Directors’ Remuneration Report. Other related party transactions involving the Directors during the 2021
financial year are included in note 28.
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law
the Directors have prepared the Company financial statements in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006. Under company law the
Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and the profit or loss of the Company for that period.
In preparing the financial statements the Directors are required to:
Select suitable accounting policies and then apply them consistently;
Make judgements and accounting estimates that are reasonable and prudent; and
State whether international accounting standards in conformity with the requirements of the
Companies Act 2006 have been followed, subject to any material departures disclosed and explained
in the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the financial statements comply with the Companies Act
2006. They are responsible for safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Statement of disclosure to auditors
So far as each Director is aware, there is no relevant audit information of which the Company’s auditors are
unaware. Additionally, the Directors have taken all the steps that they should have taken to make
themselves aware of any relevant audit information and to establish that the Company’s auditors are aware
of that information.
Microsaic Systems plc Annual Report and Financial Statements 2021
21
Auditors
Saffery Champness LLP has expressed its willingness to remain in office as auditors of the Company, and a
resolution for its re‐appointment will be proposed at the forthcoming Annual General Meeting.
Future developments
An indication of likely future developments in the business of the Company are included in the Strategic
Report.
This Directors’ Report was approved by the Board of Directors on 27 May 2022 and signed on its behalf:
Gerard Brandon
Executive Chairman
Company number 03568010
Microsaic Systems plc Annual Report and Financial Statements 2021
22
DIRECTORS’ REMUNERATION COMMITTEE REPORT
For the year ended 31 December 2021
Dear Shareholders
2021, much like 2020, was a challenging year for the Company because of the many impacts of the COVID‐
19 pandemic. Directors and staff took a temporary 20 per cent. reduction in their remuneration, effective
from 1 April 2020 to 31 January 2021, with full payment restored with effect from 1 February 2021 following
the successful placing in February 2021.
As part of the placing process, Gerard Brandon and Dr Nigel Burton were appointed to the Board with Peter
Grant and Eric Yeatman stepping down from the Board. Both Mr Brandon and Dr Burton sit on the
Remuneration Committee and Dr Burton chairs the Committee. Robert Moore joined the Committee on 15
March 2022 at the time of his appointment to the Board.
This report has been prepared with reference to the Quoted Companies Alliance guide “Remuneration
Committee Guide for Small and Mid‐Size Quoted Companies.” The Company has sought to comply with the
overarching principles of the guidance, although not all recommended disclosures have been included on
the basis that they are not relevant to the current circumstances of the Company.
This report sets out the Company’s policy on the remuneration of Executive and Non‐executive Directors,
together with details of Directors’ remuneration packages and service contracts.
Remuneration policy
The remuneration policy for Executive Directors, determination of their individual remuneration packages
and their performance appraisals have been delegated to the Board’s Remuneration Committee.
Remuneration of the Executive Directors
In setting the remuneration for the Executive Directors, the Remuneration Committee considers several
factors including:
Basic salaries and benefits available to Executive Directors of comparable companies;
Need to pay Executive Directors a competitive salary in line with the nature and complexity of their
work;
Need to attract and retain Executive Directors of an appropriate calibre;
Need to ensure Executive Directors’ commitment to the continued success of the Company by means
of incentive schemes; and
Need for the remuneration awarded to reflect performance.
The remuneration of the Executive Directors consists of basic salary, share options, life assurance and a
contributory personal pension of 7.5 per cent. of basic salary.
Given the challenging circumstances, a discretionary bonus scheme based on performance against
individual and business objectives did not operate during the year (2020 bonus: Nil).
As mentioned above the Executive Directors agreed to a temporary 20 per cent. reduction in their salary
and benefits from 1 April 2020 to 31 January 2021, with full remuneration reinstated and new options
packages introduced in tandem with the placing.
Microsaic Systems plc Annual Report and Financial Statements 2021
23
Remuneration of the Non‐executive Chairman and Non‐executive Directors
The Chairman of the Remuneration Committee discusses the remuneration of the Non‐executive Directors
with the Executive Directors. The remuneration is then discussed and agreed by the Board (excluding
Directors with a conflict of interest) following recommendation by the Remuneration Committee, having a
view to rates paid in comparable organisations. The Non‐executive Directors do not receive any pension,
bonus or other Company benefits.
Share options and shares
Options held by Peter Grant, former Chairman (3,500,000), Glenn Tracey, CEO (4,800,000) and Bevan
Metcalf, former Finance Director (4,620,000) on 31 December 2020, were cancelled in February 2021. All
cancelled options were significantly out‐of‐the‐money and were cancelled prior to the issue of new options
to Glenn Tracey and Bevan Metcalf. As outlined below, new share options were awarded to the Executive
Directors to fully re‐incentivise them and align their interests with shareholders.
Details of the shares held by Directors are listed in the Directors’ Report.
Implementation of the remuneration policy in 2021
The following long term option and warrant awards were part of the reorganisation of the Company to
incentivise the new Board appropriately. These options and warrants will be exercisable at the placing price
of 0.1 pence per ordinary share for 5 years from 5 February 2021, provided that the ordinary shares have
traded at a Volume Weighted Average Price (VWAP) at or above a 50 per cent. premium to the placing price
for 20 consecutive business days, at any time since their issue, or on a change of control of the Company.
The vesting conditions were met in March 2021 and these options and warrants became exercisable in full
at that point.
Director
Glenn Tracey
Bevan Metcalf
Gerard Brandon
Dr Nigel Burton
Number of
Options
Number of
Warrants
150,000,000
75,000,000
250,000,000
200,000,000
In line with their service agreements, Gerard Brandon and Dr Nigel Burton have taken their annual fees of
£50,000 and £35,000 respectively, for the first two years of their appointment, in shares at the price of 0.1
pence per share being the placing price of the equity fundraising completed in February 2021, subject to
payment of all necessary employee taxes and national insurance contributions. Thereafter, fees will be paid
in cash monthly in arrears.
It was agreed by the Committee that the Executive Director’s remuneration would be increased to their
March 2020 levels on 1 February 2021.
Microsaic Systems plc Annual Report and Financial Statements 2021
24
Directors’ notice periods
Details of the Director’s notice periods as per their service contract are as follows:
Nigel Burton
Gerard Brandon
Contract date
5 February 2021
5 February 2021
Term
Three years1
Three years1
Twelve months2
Notice period
3 months
3 months
Robert Moore
15 March 2022
1Notice cannot be given by the Directors during the first two years of their appointment except to the end of the
period to which their fees have been paid in advance.
2The initial term is the earlier of 12 months or the first AGM. Subject to re‐elections at AGM the appointment is
anticipated to last at least 3 years.
3 months
Directors’ emoluments
Directors’ remuneration in 2021 is detailed below. Non‐cash payments represent life assurance premiums.
Salaries &
fees
£
Non‐cash
payments
£
Pension
contributions
£
Share‐
based
payments
£
Year to 31
December
2021
£
Year to 31
December
2020
£
‐
‐
131,570
115,777
‐
‐
575
1,427
‐
‐
9,292
18,033
420,129
331,599
182,255
80,245
420,129
331,599
323,692
215,482
15,000
‐
‐
(54,983)
(39,983)
2,450
‐
‐
‐
‐
‐
112,528
114,978
‐
‐
‐
‐
135,168
131,634
64,201
23,800
12,699
Gerard Brandon1
Nigel Burton1
Glenn Tracey3
Bevan Metcalf4
Peter Grant2
Eric Yeatman2
Other5
264,797
TOTAL
1Appointed as a Director on 5 February 2021.
2Resigned as a Director on 5 February 2021.
3Resigned as a Director on 31 March 2022.
4Resigned as a Director and Company Secretary on 17 December 2021.
5Relates to a director who resigned in 2020.
2,002
27,325
1,071,773
1,365,897
367,322
The share‐based payments charge in the year relates to options awarded in February 2021 to Messrs
Brandon, Burton, Tracey, Metcalf and Yeatman less credits for cancellation of all previous options of all
directors (including Mr Grant).
The 750 million options and warrants (replacing all previous options) granted to Directors vested during the
year as the performance criterion that the Company’s ordinary shares traded at a Volume Weighted
Average Price at or above a 50 per cent. premium to the placing price for 20 consecutive business days, was
achieved.
Microsaic Systems plc Annual Report and Financial Statements 2021
25
Directors’ share options
Share options and warrants over the Company’s ordinary shares held by the Directors at the year‐end
were as follows:
At 31
December
2020
At 31
December
2021
At 31
December
2021
Performance
Conditions
Exercise
price
Exercise period
Vested
Pence
0.01p
ordinary
shares
Number
‐
‐
‐
0.25p
ordinary
shares
Number
100,000
200,000
1,000,000
2,500,000
‐
‐
‐
‐ 150,000,000 150,000,000
‐ 250,000,000 250,000,000
‐ 200,000,000 200,000,000
4,800,000 600,000,000 600,000,000
Glenn
Tracey
Gerard
Brandon
Nigel
Burton
Yes
47.75p
No
23.5p
Yes
5p
Yes
Yes
Yes
Yes
1.55p
0.1p
0.1p
0.1p
17 April 2015 ‐ 17 April 2025.
Cancelled February 2021.
13 January 2016 ‐ 13 January
2026. Cancelled February 2021.
14 September 2016 ‐ 14
September 2026. Cancelled
February 2021.
12 June 2019 ‐ 12 June 2029.
Cancelled February 2021.
5 February 2021 –
4 February 2026.
5 February 2021 –
4 February 2026.
5 February 2021 –
4 February 2026.
The Company’s share price started the year at 0.20 pence and ended the year at 0.15 pence, with a close
high and low over the year of 0.39 pence and 0.14 pence respectively (with an intra‐day high and low over
the year of 0.44 pence and 0.13 pence respectively).
The share‐based payment charge in relation to the share option grants to Directors and lapsed options
during the year was £995,214 (2020: £51,753).
The Directors’ Remuneration Report was approved by the Board of Directors on 27 May 2022 and signed
on its behalf by:
Dr Nigel Burton
Chairman of the Remuneration Committee
Microsaic Systems plc Annual Report and Financial Statements 2021
26
DIRECTORS’ FINANCE & AUDIT COMMITTEE REPORT
For the year ended 31 December 2021
Introduction
This report details how the Finance & Audit Committee (“the Committee”) has met its responsibilities under
its terms of reference. The Committee is a sub‐committee of the Board. As Non‐executive Directors, the
members of the Committee are, together with the Board as a whole, responsible for the integrity and
probity of the Company. The work of the Committee is aimed at supporting the creation of long‐term value
for shareholders.
The Committee continues to act as an oversight sub‐committee of the Board, considering and challenging
but not itself performing the relevant processes. The ultimate responsibility for reviewing and approving
the Annual Report and Accounts and interim financial statements remains with the Board.
The Committee does not believe there is a requirement for an internal audit function due to the Company’s
size and level of complexity.
Role and Responsibilities
The Board has established a Finance & Audit Committee to monitor the integrity of the Company’s financial
statements and the effectiveness of the Company’s internal financial controls. The Committee’s role and
responsibilities are set out in the terms of reference which are available from the Company’s website. The
terms of reference are reviewed regularly and amended where appropriate. During the year, the
Committee worked with management and the external auditors in fulfilling these responsibilities.
The Committee report deals with the key areas in which it plays an active role and has responsibility. These
areas are as follows:
Financial reporting and related primary areas of judgement;
i.
ii. The external audit process;
iii. Risk management and internal controls; and
iv. Whistleblowing procedures.
The members of the Finance & Audit Committee are Dr Nigel Burton and Gerard Brandon with Robert
Moore joining on 15 March 2022 at the time of his appointment to the Board. Dr Burton became Chairman
of the Committee, following the resignation of Peter Grant and has appropriate relevant financial
experience. The Board considers that the Committee has an appropriate and experienced blend of
commercial, financial and industry expertise to enable it to fulfil its duties.
Financial Reporting and External Audit Process
The Chairman of the Committee participated in the Audit Planning meeting held in December 2021 with
the external auditors to plan the financial audit, discussed potential key audit matter(s) and along with the
Committee reviewed the Audit Strategy Document.
The Board as a whole, reviewed the going concern paper prepared by management including detailed
financial forecasts for the period 2022 to 2023, related assumptions, risks and opportunities, sensitivities,
and areas for mitigation. The outcome of the Board’s discussions on going concern is explained in more
detail in note 3.
The Committee has satisfied itself that the 2021 Annual Report and Accounts have been prepared in
accordance with international accounting standards in conformity with the requirements of the Companies
Act 2006, are fair, balanced and provide the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
Microsaic Systems plc Annual Report and Financial Statements 2021
27
Risk Management and Internal Controls
The Board considered as part of its review of risks those risks detailed in the Strategic Report including
mitigating actions. Following the successful fundraise in February 2021 the Company continues to be a
going concern. The key risk still facing the Company is the ongoing impact of the COVID‐19 pandemic on
the results of the business.
Another key responsibility of the Committee is to review the Company’s internal control systems, including
internal financial controls. The Finance Director reviewed and updated the Company’s Financial Procedures
Manual to ensure it was in line with current practice. There were no reported instances of fraud during the
year.
The Company’s auditors are encouraged to raise comments on internal control in their management letter
following the annual audit. The points raised and actions arising are monitored through to completion by
the Finance & Audit Committee.
Whistleblowing
The Committee had no whistleblowing incidents reported during 2021. Dr Nigel Burton has been appointed
Primary Designated Officer during the year and Gerard Brandon as Alternative Designated Officer.
Committee Meetings
The Committee met twice in the year. Both meetings related to the Annual Report and Accounts which the
external auditors attended.
Auditors Fees and Non‐Audit Services
The Committee reviewed and agreed to the proposed audit fee of £22,150 (2020: £20,750). Fees for other
audit related services during the year amounted to £1,575 (2020: £2,070). These fees included the review
of 2021 interims and the provision of information around accounting standards.
Auditor Independence
The Committee satisfied itself on the auditors’ independence. Mr Roger Weston is undertaking his fourth
audit of the Company, in the capacity of partner in charge and no non‐audit services have been provided in
the current financial year.
The Report of the Finance & Audit Committee was approved by the Board of Directors on 27 May 2022 and
signed on its behalf by:
Dr Nigel Burton
Chairman of the Finance & Audit Committee
Microsaic Systems plc Annual Report and Financial Statements 2021
28
CORPORATE GOVERNANCE REPORT
For the year ended 31 December 2021
Restructuring of the Company
On 4 February 2021, shareholders passed resolutions at a General Meeting appointing Gerard Brandon and
Dr Nigel Burton to the Board of the Company as Non‐executive Chairman and Non‐executive Director
respectively, with effect from 5 February 2021. Their biographies are detailed under Principle 6 in this
Report.
The Finance & Audit and Remuneration Committees are chaired by Dr Nigel Burton, and Gerard Brandon
and Robert Moore are members of both committees. Dr Nigel Burton will assume the responsibilities of
Senior Non‐executive Director.
As anticipated in the Circular published on 19 January 2021, Peter Grant, Non‐executive Chairman and Eric
Yeatman, Non‐executive Director, stepped down from the Board with effect from 5 February 2021.
Chairman’s Corporate Governance Statement
The full corporate governance statement is published and maintained up to date on the Company’s website
at (http://www.microsaic.com/investors/governance‐new). This extract from that statement is included in
the Annual Report & Accounts as required by the Quoted Companies Alliance’s (“QCA”) Corporate
Governance Code for small and mid‐size quoted companies (the “Code”).
The Board is committed to maintaining high standards of corporate governance and, with effect from 26
September 2018, the Board adopted the Code.
The Code sets out ten broad principles of corporate governance. It states what are considered to be
appropriate corporate governance arrangements for growing companies and requires companies to
provide an explanation about how they are meeting the principles through certain prescribed disclosures.
The Chairman leads the Board and is responsible for its overall effectiveness in directing the
Company. He manages the Board agenda and ensures that all Directors receive accurate, timely and clear
information and effectively contribute their various talents and experience in the development and
implementation of the Company’s strategy. He ensures that the nature and extent of the significant risks
which the Company is willing to embrace in the implementation of its strategy are challenged
and determined by the Board. The Chairman is responsible for ensuring that the Board implements,
maintains and communicates effective corporate governance processes and for promoting a culture of
openness and debate designed to foster a positive governance culture throughout the Company.
The Board has considered how each principle is applied and provides below an explanation of the approach
taken in relation to each principle and how they support the Company’s medium to long‐term success.
The Board agenda is regularly reviewed to ensure that all matters which the Board should consider are
addressed. This allows for presentations from the Management Team so that the Board benefits from their
input.
The Company includes a Remuneration Committee Report and a Finance & Audit Committee Report in its
Annual Report and Accounts.
The evaluation of the Board’s effectiveness due to have been carried out in January 2021 was postponed
until January 2022 considering the restructuring of the Board carried out in February 2021. Although the
process was started in early 2022, it was agreed that it was appropriate to suspend the process until the
Board is further strengthened with the expected appointment of an additional Non‐executive Director and
both a new CEO and a new Finance Director.
Microsaic Systems plc Annual Report and Financial Statements 2021
29
Save in respect of Principle 5 in consideration of the independence of the Non‐executive Directors, which
is considered in more detail below, the Board considers that it does not depart from any of the principles
of the Code.
PRINCIPLES TO DELIVER GROWTH
PRINCIPLE 1: Establish a strategy and business model which promote long‐term value for shareholders.
Strategy:
Microsaic’s strategic aim is to capitalise on its strengths in point of need MS detection, and access high‐
growth and emerging Life Science and Environmental applications, as well as niches in traditional small
molecule markets. The Company intends to achieve its strategy with a business model built on customer
focus, collaborations, and technology innovation.
Business Model:
The Company’s business model is described on page 7 of the Strategic Report.
Challenges:
Staying relevant to future customer needs
Customer needs evolve rapidly. Future product specifications are driven by end‐user requirements. This
will inform Microsaic’s product strategy as its MS detectors move from the customer’s laboratory into
production, and front‐line operating environments. Microsaic will ensure that its strategic product
development will remain focused on meeting demanding biopharmaceutical applications.
Remaining innovative in an advancing technological landscape
Microsaic has successfully developed and implemented advanced technology at the core of its design with
over 80 patents to date. This has led to a solid foundation serving scientists in the laboratory in small
molecule drug discovery, and increasingly in support of its endeavours in life and environmental science
markets.
The Company continues to invest in product development projects, which the Board believes will be
attractive to the growing market for laboratory‐based applications with larger biological molecules, such as
peptides and small proteins.
The Company has extended its product capabilities further into Life Science applications, such as
bioprocessing, potentially significantly reducing the cost of analysis and the cost of poor quality.
PRINCIPLE 2: Seek to understand and meet shareholder needs and expectations. See the website for further
disclosures concerning how the Company seeks to engage with shareholders and how successful this has
been.
PRINCIPLE 3: Consider wider stakeholder and social responsibilities and their implications for long‐term
success. See the website for further disclosures.
PRINCIPLE 4: Embed effective risk management, considering both opportunities and threats, throughout
the organisation.
The Board aims to ensure that the Company’s risk management framework identifies and addresses all
relevant risks in order to execute and deliver the strategy.
The Directors recognise their responsibility for the Company’s systems of internal control and have
established systems to ensure that an appropriate and reasonable level of oversight and control
Microsaic Systems plc Annual Report and Financial Statements 2021
30
is provided. The Company’s systems of internal controls are designed to help the Company meet its
business objectives by appropriately managing and wherever possible mitigating risks faced by the
Company. The controls can only provide reasonable, not absolute, assurance against material misstatement
or loss.
into the Executive, meets regularly to review
The Company’s Management Team, which reports
commercial, technical, operational, and financial risks facing the business. These risks are assessed
according to their nature and magnitude based on the seriousness of the risk and the likelihood of the risk
occurring. The effectiveness of the controls implemented to minimise the risks are also reviewed. The aim
of these reviews is to provide reasonable assurance that material risks are identified, and appropriate action
is taken at an early stage. From this review the Company maintains its internal risk register which is
reviewed annually by the Board.
The annual budget is reviewed and approved by the Board. Financial results, with comparisons to budget,
and latest forecasts are reported monthly to the Board together with a report on operational achievements,
objectives and issues encountered. Significant variances from plan are discussed at Board meetings and
actions set in place to address them.
Measures continue to be taken to review and improve internal controls and risk management procedures.
The Company has a Financial Procedures Manual which includes approval levels for authorisation of
expenditure, potential fraud scenarios, payment approval process, expenses guidelines etc. This is updated
as necessary.
The Company’s auditors are encouraged to raise comments on internal control in their management letter
following the annual audit. The points raised and actions arising are monitored through to completion by
the Finance & Audit Committee.
PRINCIPLES TO MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
PRINCIPLE 5: Maintain the Board as a well‐functioning, balanced team led by the Chairman.
The Board currently consists of one Executive Chairman, and two Non‐executive Directors. Bevan Metcalf,
the previous Financial Director retired on 17 December 2021. To help with a smooth transition, the
Company has appointed Mr Anthony Clayden, as Interim Head of Finance (non‐board level), until a
permanent successor is appointed. Glenn Tracey, CEO, resigned on 31 March 2022 and the Chairman has
stepped into an executive role temporarily until a suitable replacement is appointed. A formal search
process to identify an additional independent Non‐executive Director is well advanced.
The Company held 19 Board meetings during 2021. (In 2020 the Company faced several challenges including
the COVID‐19 pandemic, and ensuring that the Company remained a going concern, holding 39 meetings
during the year.)
The Company has an equal opportunity policy to recruitment at Board level and within the Company at
large and seeks diversity as opportunities arise, within the framework of selecting the most suitable person,
based on relevant skills, abilities, experience and location, as required for the role.
The principal role of the Chairman of the Board is to manage and provide leadership to the Board of
Directors of the Company. The Chairman is accountable to the Board and acts as a direct liaison between
the Board and the management of the Company, ordinarily through the Chief Executive Officer. The
Chairman acts as the communicator for Board decisions where appropriate.
Given the Chairman’s current capacity as an Executive Chairman until the CEO successor is appointed, the
other NEDs including the recently appointed independent NED provide the appropriate level of challenge
Microsaic Systems plc Annual Report and Financial Statements 2021
31
to both the Chairman and management. The Chairman has elevated the role of the senior management
team within the Company who now report to him and together developed the new services strategy in
consultation with and being rolled out by this team.
The Chairman is responsible for the effective leadership, operation and governance of the Board and its
Committees. He ensures that all Directors contribute effectively to the development and implementation
of the Company’s strategy, while ensuring that the nature and extent of the significant risks the Company
is willing to embrace in the implementation of its strategy are determined and challenged.
The Chief Executive Officer is responsible for the management of the Company, providing executive
leadership and for implementing the Company’s strategy.
The Board believes that the advice, behaviour and character of its Chairman and Non‐executive Director
are always in the best interests of the Company and its shareholders. In addition, the skills and business
judgement which they possess and regularly exercise contributes to the efficient and effective running of
the Company.
The Company appreciates that circumstances which might or might appear to affect a Director’s judgement
may well include financial dependence on the Company and whether the Director is, or represents, a major
shareholder. The Chairman and Non‐executive Director are financially independent of the Company as they
have other sources of income. Mr Brandon and Dr Burton do not represent significant shareholders;
however, they do have a material interest in share warrants of the Company as detailed below. They are
also Directors of DeepVerge plc which, although not a shareholder of the Company, is strategically
important to the future success of Microsaic. Under the QCA Guidelines the independence of the Chairman
and Non‐executive Director could be challenged under the following areas, but in all cases the Board
believes that the Chairman and Non‐executive Director always act in an independent manner and where a
conflict of interest could arise or be perceived to arise, they abstain from voting:
Name and position
Potential issue
Comments
Gerard Brandon
Chairman
Holds a material interest
of 250 million share
warrants in the
Company.
This award was required to attract a Chairman
of the appropriate calibre to the Company. The
award was passed by shareholders at a General
Meeting. The performance condition, prior to
vesting, was based on the Company’s shares
trading at a VWAP at or above a 50 per cent.
premium to the placing price for 20 consecutive
business days at any time since their issue.
Director of DeepVerge
plc
DeepVerge plc is strategically important to the
future success of the Company.
Temporary Executive
Director capacity
Involving the elevated senior management to
develop and implement strategy and consulting
with the Non‐executive Directors who have
oversight during this period.
Microsaic Systems plc Annual Report and Financial Statements 2021
32
Name and position
Potential issue
Comments
Dr Nigel Burton
Non‐executive
Director
Held a material interest
of 200 million share
warrants in the
Company. These were
exercised on 13 February
2022
This was required to attract a Non‐executive
Director of the appropriate calibre to the
Company. The award was passed by
shareholders at a General Meeting. The
performance condition, prior to vesting, was
based on the Company’s shares trading at a
VWAP at or above a 50 per cent. premium to
the placing price for 20 consecutive business
days at any time since their issue.
Director of DeepVerge
plc
DeepVerge plc is strategically important to the
future success of the Company.
The Board recognises the importance of good governance arrangements. Currently, the Board does not
include two independent Non‐executive Directors. A process is underway to appoint a second independent
Non‐executive Director with relevant experience.
The Board has an established Finance & Audit Committee and Remuneration Committee. The Company
believes it is currently too small to have a separate Nominations Committee, so this role is taken on by the
Board of Directors as a whole.
Details and links to the terms of reference of the Finance & Audit Committee and Remuneration Committee
are set out under Principle 9 on the website.
Details of Directors and their time commitment are set out under Principle 6 below. The attendance of the
Directors at the regular Board and Committee Meetings during the year ended 31 December 2021 were as
follows.
Name
Position
Regular Board
Meetings
Finance &
Audit
Committee
Remuneration
Committee
Peter Grant1
Non‐executive Chairman
5 (5)
Gerard Brandon2 Non‐executive Chairman
11 (13)
Glenn Tracey
Chief Executive Officer
19 (19)
Bevan Metcalf3
Finance Director
19 (19)
Eric Yeatman1
Non‐executive Director
5 (5)
Nigel Burton2
Non‐executive Director
11 (13)
‐
2(2)
n/a
n/a
‐
2(2)
‐
1(1)
n/a
n/a
‐
1(1)
1Peter Grant and Eric Yeatman resigned as Directors on 5 February 2021.
2Gerard Brandon and Nigel Burton were appointed Directors on 5 February 2021.
3Bevan Metcalf resigned as a Director upon his retirement on 17 December 2021
Numbers in brackets denote the total number of meetings that each Director was eligible to attend during
the year.
Microsaic Systems plc Annual Report and Financial Statements 2021
33
PRINCIPLE 6: Ensure that between them the Directors have the necessary up‐to‐date experience, skills and
capabilities.
Biographical details of the Board of Directors, their skills, suitability and availability are set out below.
Gerard Brandon, Executive Chairman
Term of office: Appointed a Director on 5 February 2021. Gerard is also a member of the Finance & Audit
Committee and the Remuneration Committee.
Background and suitability for the role: Gerard Brandon is Chief Executive Officer of both DeepVerge plc
and Cellulac plc. In 1996 he became founder and CEO of Alltracel Pharmaceuticals plc ("Alltracel"), where
he built a team which oversaw numerous patents granted on refined cellulose. Alltracel was admitted to
trading on AIM in 2001. In 2004, he was appointed as a Managing Partner for Farmabrand Private Equity.
In March 2020, he was appointed as a Non‐executive Chairman to Modern Water plc, which was
subsequently acquired by DeepVerge plc (formerly Integumen plc) in November 2020. Gerard is a Fellow of
the Ryan Academy of Entrepreneurs in Dublin.
Dr Nigel Burton, Non‐executive Director
Term of office: Appointed a Director on 5 February 2021 at a General Meeting of the Company. Dr Burton
is also Chairman of the Finance & Audit Committee and the Remuneration Committee.
Background and suitability for the role: Nigel spent over 14 years as an investment banker at leading City
institutions including UBS Warburg and Deutsche Bank, including as the Managing Director responsible for
the energy and utilities industries. Nigel also spent 15 years as Chief Financial Officer or Chief Executive
Officer of a number of private and public companies.
Mr Robert Moore, Non‐executive Director
Term of office: Appointed a Director on 15 March 2022 by the Board of directors of the Company. Mr Moore
is also a member of the Finance & Audit Committee and the Remuneration Committee.
Background and suitability for the role: Robert is a UK qualified lawyer and brings over 35 years' commercial
and legal experience to the Board. Robert has acted as Head of International Legal Affairs at Enterprise Oil
plc (a UK FTSE 100 company prior to its acquisition by Shell in 2002) and as co‐founder and Commercial
Director of Granby Oil & Gas plc, which was listed on AIM from 2005 until its sale in 2008. Robert
subsequently co‐founded, and is Managing Director of, private oil and gas exploration company Ardent Oil
Ltd (operating in the UK, Denmark and Luxembourg). Robert also acts as Non‐executive Chairman of Mobile
Streams plc, an AIM listed company, having been appointed to the role in July 2021.
The Company uses external advisers.
The Board has retained the services of the following advisers:
Singer Capital Markets as Nominated Adviser and Joint Broker;
Turner Pope Investments as Joint Broker;
Saffery Champness LLP for annual audit;
Dorsey and Whitney Europe LLP as solicitors for the Company;
Neville Registrars Ltd as the Company’s registrar; and
Menzies LLP for ongoing advice on, Corporation tax, VAT and PAYE.
Microsaic Systems plc Annual Report and Financial Statements 2021
34
PRINCIPLE 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement.
Board Evaluation Process
The Board believes that, in addition to dealing with any matters as they arise, it is appropriate to carry out
a formal evaluation of the performance of the Board each year. This is intended to ensure that the Board
remains effective, well‐informed and able to make high quality and timely decisions for the benefit of all
stakeholders in the Company.
The usual evaluation involves each Director completing an evaluation questionnaire which covers
effectiveness from multiple angles including: Board structure and committees; Board arrangements,
frequency and time; content of Board meetings; Board culture; Board evaluation and succession; and
individual contributions. The completed questionnaires are anonymised and collated independently into a
summary, and comments and any areas of concern are highlighted for discussion with the Board.
The last evaluation was carried out in January 2020. This process has been suspended during the current
period and in the absence of a replacement CEO and Finance Director and will be resumed following their
appointment.
The evaluation of the Board’s effectiveness due to have been carried out in January 2021 was postponed
until January 2022 in light of the restructuring of the Board carried out in February 2021. Although the
process was started in early 2022, it was agreed that it was appropriate to suspend the process until the
Board is further strengthened with the expected appointment of an additional Non‐executive Director and
both a new CEO and a new Finance Director.
Succession Planning
As is common with many small AIM quoted companies, the Company does not have internal candidates to
succeed the existing Executive Directors. This will be kept under review, especially when recruiting for
senior roles as vacancies arise. However, the Board does not believe it is appropriate to recruit additional
Directors or senior personnel solely for the purpose of Board succession planning.
Training of Directors
It is recognised that there continues to be more regulation of which Directors need to be aware. The Board
will continue to ensure that Directors receive appropriate support to keep up to date.
PRINCIPLE 8: Promote a culture that is based on ethical values and behaviours.
The Company is committed to achieving the highest possible ethical standards in conducting its business.
The Company expects all employees and Directors to maintain the same high standards. To achieve these
ends, Microsaic encourages freedom of expression and speech whilst not accepting prejudice of any kind.
Ethics is based on a set of principles and clear moral and ethical values. The Company takes its principles
and values very seriously and expects staff at all levels to look to these principles and values for guidance.
Principles:
The Board has adopted the following four principles:
1. Management must lead by example. Good ethics should be most noticeable at the top. Every employee
must be accountable to the same rules.
2. Corporate values must be implemented throughout the Company. Every forum and medium should be
used to spread the message and, most of all, the Company must practice what it preaches.
Microsaic Systems plc Annual Report and Financial Statements 2021
35
3. Meetings with staff (both one on one and group) to discuss the values and what they mean to each
employee must be undertaken when implementing a value system. This will help to get everyone in
the Company on the same page and committed.
4. The values of the Company must endure changes in leadership. The longer ethical values last, the more
ingrained they will become.
Values
The Company conducts its business around seven core values:
1.
Integrity – applying high ethical standards and being honest. The Company will conduct its business
with honesty to all stakeholders and will uphold high moral principles.
2. Mutual respect, empathy and trust in dealing with others. An environment of mutual respect, empathy
and trust is necessary to promote integrity. Trust in the workplace is critical to organisational success.
Innovation – a passion to experiment and deliver new solutions. A focus on research and development
is very important to the future success of the Company. The Company is continually looking to
deliver innovative solutions and has a collaborative approach to meeting customer needs.
3.
4. Teamwork – drives high performance. Microsaic relies heavily on teamwork. A team approach is more
efficient, faster, benefits from multi‐skills especially
learning
opportunities and encourages a sense of belonging, which often translates to a greater sense of
ownership and accountability for the work.
in problem solving,
increases
5. Quality – we take pride in everything we do. The Company is strongly focused on quality from the
products it produces to the processes it operates. The Company is ISO 9001:2015 compliant.
6. Customer focus – go the extra mile for our customers. The Company assigns the highest priority to
customer satisfaction. We listen to our customers and create solutions for unmet customer needs.
7. Shareholder value – striving to deliver value to shareholders. The key objective of the Company is
achieving sustainable profitability. Every employee understands how they fit into the profitability
picture. Everyone’s common goal is to build a strong, profitable Company that will endure and provide
a reasonable return to shareholders.
PRINCIPLE 9: Maintain governance structures and processes that are fit for purpose and support good
decision‐making by the Board.
See the website for further disclosures at https://www.microsaic.com/investors/governance‐new/
PRINCIPLE 10: Communicate how the Company is governed and is performing by maintaining a dialogue
with shareholders and other relevant stakeholders.
The following committee reports are included in these Annual Report & Accounts as shown below. They
include details of the work of those committees:
The Directors’ Remuneration Committee Report ‐ pages 23 to 26; and
The Directors’ Finance & Audit Committee Report ‐ pages 27 to 28.
The Corporate Governance Report was approved by the Board of Directors on 27 May 2022 and signed on
its behalf by:
Gerard Brandon
Executive Chairman
Microsaic Systems plc Annual Report and Financial Statements 2021
36
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MICROSAIC SYSTEMS PLC
For the year ended 31 December 2021
Opinion
We have audited the financial statements of Microsaic Systems plc for the year ended 31 December 2021
which comprise Statement of Comprehensive Income, the Statement of Financial Position, the Statement
of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including
significant accounting policies. The financial reporting framework that has been applied in their preparation
is applicable law and UK‐adopted international accounting standards.
In our opinion, the financial statements:
give a true and fair view of the state of the Company’s affairs as at 31 December 2021 and its loss for
the year then ended;
have been properly prepared in accordance with UK‐adopted international accounting standards; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Our approach to the audit
We tailored the scope of our audit to ensure that we obtained sufficient evidence to support our opinion
on the financial statements as a whole, taking into account the structure of the Company, the accounting
processes and controls, and the industry in which it operates.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement
in the financial statements. In particular, we looked at areas where the Directors made subjective
judgements, for example in respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Microsaic Systems plc Annual Report and Financial Statements 2021
37
Key Audit Matter
in
the preparation of
Going concern
The going concern assumption is a fundamental
principle
financial
statements.
Given the historic operating
losses and the
inherent uncertainty of sale forecasts, it was
concluded at the planning stage that there was a
risk of material uncertainty in the going concern
assessment. As such, significant audit time was
devoted
the going concern
assessment, and the going concern assumption is
considered to be a key audit matter.
testing of
to
How our scope addressed this matter
Our audit procedures included the following:
reviewing projected cashflows and other
available evidence to assess the ability of the
Company to continue in operation for at least
12 months from the date of signing this report;
reconciled projections to the audited financial
statements, management accounts and bank
statements;
performed a sensitivity analysis on key
assumptions underlying the directors’ going
concern assessment, including the forecast
revenue streams and levels of sales, gross
margin achieved and cost base required to
service sales;
considered the impact of the agreements
signed with DeepVerge plc both in the year and
post year end on potential cashflows and
operations.
Additional procedures considered are set out
below in the section Conclusions relating to going
concern
Based on our procedures, we concluded that there
is no material uncertainty in relation to going
concern and that the continued adoption of the
going concern basis of accounting in these financial
statements remains appropriate.
Our application of materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, as set
out below. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if
any, both individually and in aggregate on the financial statements as a whole.
We have applied a materiality of £50,000 (2020: £50,000). This is based on 2% of operating expenditure for
the year ended 31 December 2021. Performance materiality was set at 80% of materiality.
Our triviality level was set at £2,500 which is 5% of planning materiality, and any uncorrected audit
differences below this level were not reported to management, unless warranted under qualitative
grounds.
Microsaic Systems plc Annual Report and Financial Statements 2021
38
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’
assessment of the Company’s ability to continue to adopt the going concern basis of accounting included:
obtaining, critically appraising and assessing for arithmetical accuracy the directors’ formal going
concern assessment;
reviewing projected cashflows and other available evidence, including bank statements and the
Company’s framework agreement and scheme of works with Deepverge plc, to assess the ability of the
Company to continue in operation for at least 12 months from the date of signing this report;
performing a sensitivity analysis on key assumptions underlying the directors’ going concern
assessment;
discussion of events after the reporting date with the directors to assess their impact on the going
concern assumption, including comparison of the post year end cash balances and financial
performance to forecast positions.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the Company's ability to
continue as a going concern for a period of at least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in
the relevant sections of this report.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit
or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course
of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
Microsaic Systems plc Annual Report and Financial Statements 2021
39
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been
received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 21, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non‐compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The specific procedures for this engagement and the extent to which these
are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the Company’s financial statements to material misstatement and how
fraud might occur, including through discussions with the directors, discussions within our audit team
planning meeting, updating our record of internal controls and ensuring these controls operated as
intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial
statements. We identified laws and regulations that are of significance in the context of the Company by
discussions with directors and updating our understanding of the sector in which the Company operates.
Laws and regulations of direct significance in the context of the Company include The Companies Act 2006,
the AIM Rules for Companies and UK Tax legislation, particularly with reference to Research Development
Expenditure Credits.
Audit response to risks identified:
We considered the extent of compliance with these laws and regulations as part of our audit procedures
on the related financial statement items including a review of financial statement disclosures. We reviewed
the company’s records of breaches of laws and regulations, minutes of meetings and correspondence with
Microsaic Systems plc Annual Report and Financial Statements 2021
40
relevant authorities to identify potential material misstatements arising. We discussed the company’s
policies and procedures for compliance with laws and regulations with members of management
responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas
which might involve non‐compliance with laws and regulations or fraud. We enquired of management
whether they were aware of any instances of non‐compliance with laws and regulations or knowledge of
any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of
controls by testing the appropriateness of journal entries and identifying any significant transactions that
were unusual or outside the normal course of business. We assessed whether judgements made in making
accounting estimates gave rise to a possible indication of management bias. At the completion stage of the
audit, the engagement partner’s review included ensuring that the team had approached their work with
appropriate professional scepticism and thus the capacity to identify non‐compliance with laws and
regulations and fraud.
There are inherent limitations in the audit procedures described above and the further removed non‐
compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely we would become aware of it. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through
collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
…………………………………..
Roger Weston (Senior Statutory Auditor)
for and on behalf of Saffery Champness LLP
Chartered Accountants
Statutory Auditors
71 Queen Victoria Street
London
EC4V 4BE
27 May 2022
Microsaic Systems plc Annual Report and Financial Statements 2021
41
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
Revenue
Cost of sales
Gross profit
Other operating income
Research and development expenses
Professional fees – Corporate transactions
Other operating expenses
Total operating expenses
Loss from operations before share‐based payments
Share‐based payments
Loss from operations after share‐based payments
Financial cost
Finance income
Loss before tax
Tax on loss on ordinary activities
Total comprehensive loss for the year
Loss per share attributable to the equity holders of
the Company
Notes
Year to 31
December 2021
£
Year to 31
December 2020
£
5
6
7
25
7
8
8
9
906,876
(510,892)
395,984
198,258
(98,348)
99,910
67,283
96,626
(738,145)
(65,789)
(1,693,568)
(2,497,502)
(2,034,235)
(1,363,764)
(3,397,999)
(4,604)
6,237
(3,396,366)
267,785
(3,128,581)
(777,597)
(149,364)
(1,801,321)
(2,728,282)
(2,531,746)
(52,241)
(2,583,987)
(10,775)
4,393
(2,590,369)
217,711
(2,372,658)
Basic and diluted loss per ordinary share (pence)
10
(0.056)p
(0.52)p
The notes on pages 46 to 70 form part of these financial statements.
Microsaic Systems plc Annual Report and Financial Statements 2021
42
STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
ASSETS
Non‐current assets
Intangible assets
Property, plant and equipment
Right of use assets
Total non‐current assets
Current assets
Inventories
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Share‐based payment reserve
Retained losses
Total equity
Current liabilities
Trade and other payables
Lease liability
Total current liabilities
Non‐current liabilities
Provisions
Lease liability
Total non‐current liabilities
Total liabilities
Notes
31 December
2021
£
31 December
2020
£
11
12
13
14
15
9
19
21
16
13
17
13
74,405
305,687
126,533
506,625
283,902
631,948
267,785
3,464,876
4,648,511
5,155,136
83,763
114,145
49,404
247,312
569,589
173,871
218,568
397,069
1,359,097
1,606,409
1,702,913
28,006,018
2,888,707
1,140,913
24,867,886
324,264
(28,024,418)
(25,090,083)
4,573,220
1,242,980
354,611
71,187
425,798
99,960
56,158
156,118
581,916
185,927
52,370
238,297
124,035
1,097
125,132
363,429
TOTAL EQUITY AND LIABILITIES
The financial statements were approved for issue by the Board of Directors on 27 May 2022 and signed on
its behalf by:
5,155,136
1,606,409
Gerard Brandon
Executive Chairman
Company number 03568010
The notes on pages 46 to 70 form part of these financial statements.
Microsaic Systems plc Annual Report and Financial Statements 2021
43
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Notes
Share
capital
£
Share
premium
£
Share
‐based
payment
reserve
£
Retained
Losses
£
Total
equity
£
1,140,913
24,867,886
412,539
(22,857,941)
3,563,397
(2,372,658)
(2,372,658)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(140,516)
140,516
52,241
‐
52,241
1,140,913
24,867,886
324,264
(25,090,083)
1,242,980
‐
‐
562,000
5,058,000
‐
‐
(1,919,868)
1,503,008
(3,128,581)
(3,128,581)
‐
‐
5,620,000
(416,860)
‐
‐
(194,246)
194,246
‐
1,255,681
‐
1,255,681
‐
‐
‐
1,702,913
28,006,018
2,888,707
(28,024,418)
4,573,220
At 1 January 2020
Total comprehensive
loss for the year
Transaction with
owners:
Shares issued
Share issue costs
Transfer in respect of
lapsed share options
Share‐based payments‐
share options
At 31 December 2020
Total comprehensive
loss for the year
Transaction with
owners:
Shares issued ‐ placing
Share issue costs
Transfer in respect of
lapsed share options
Share‐based payments
options
At 31 December 2021
25
19
21
25
The notes on pages 46 to 70 form part of these financial statements.
Microsaic Systems plc Annual Report and Financial Statements 2021
44
STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
Cash flows from operating activities
Cash absorbed by operations
Corporation tax received
Net cash used in operating activities
Cash flows from investing activities
Purchases of intangible assets
Purchases of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from share issues
Share issue costs
Repayment of lease liabilities
Net cash generated by / (used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Year to 31
December
2021
£
31
(1,827,851)
11
12
13
218,568
(1,609,283)
(28,883)
(305,334)
6,237
(327,980)
5,500,000
(416,860)
(78,070)
5,005,070
3,067,807
397,069
3,464,876
Year to 31
December
2020
£
(2,371,194)
321,584
(2,049,610)
(27,319)
(69,452)
20,106
(76,665)
‐
‐
(97,414)
(97,414)
(2,223,689)
2,620,758
397,069
The notes on pages 46 to 70 form part of these financial statements.
Microsaic Systems plc Annual Report and Financial Statements 2021
45
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2021
The principal activity of the public limited company continues to be the research, development and
commercialisation of miniaturised mass spectrometry instruments that are designed to improve the
efficiency of pharmaceutical R&D. The Company is incorporated in England and its registered address is
GMS House, Boundary Road, Woking, Surrey, GU21 5BX. The Company has no subsidiaries, so the financial
information relates to the Company only.
1. Accounting policies
The following principal accounting policies have been used consistently in the preparation of these financial
statements.
Basis of preparation
These financial statements have been prepared in accordance with UK‐adopted international accounting
standards in conformity with the requirements of the Companies Act 2006.
These financial statements have been prepared under the historical cost basis except where financial
instruments are required to be carried at fair value under IFRS.
Revenue recognition
IFRS 15 provides a single, principles based five‐step model to be applied to all contracts with customers.
The five‐step framework includes:
1) Identify the contract(s) with a customer;
2) Identify the performance obligations in the contract;
3) Determine the transaction price;
4) Allocate the transaction price to the performance obligations in the contract; and
5) Recognise revenue when the entity satisfies a performance obligation.
The Company recognises revenue from the following three sources:
1) Sale of products;
2) Sale of consumables and spare parts; and
3) Service and support income.
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
service and support income 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.
Microsaic Systems plc Annual Report and Financial Statements 2021
46
1. Accounting policies (continued)
Service and support income
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.
Generally, 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 Europe customers, where the
revenue from such warranties will be recognised over the period of the service agreement.
Other operating income
Other operating income includes grant income, insurance income arising from a claim and income from
development contracts. The Company’s management assesses the contracts at each balance sheet date,
including the costs to completion, which are subject to estimation uncertainty. Grant income is recognised
when there is reasonable assurance that the grant will be received, and the Company will comply with any
attached conditions. Grants are recognised in the profit or loss in line with the expenditure they are
intended to compensate and are shown gross of the underlying expense. The Company received CJRS grants
during the year, which has been recognised in line with the corresponding payroll expenditure. There are
no unfulfilled conditions attached to the grant that the Company is aware of.
Segmental reporting
The Company currently has one business segment, being the research, development and commercialisation
of scientific instruments. This is undertaken wholly within the United Kingdom. Revenue by geographical
market is analysed in note 5.
Intangible assets
Trademarks and patents are stated at historic cost of registration less accumulated amortisation and any
accumulated impairment losses. Amortisation is charged to operating expenses and calculated to write off
the cost in equal annual instalments over five years, which is a prudent estimate of their useful economic
lives.
Certain software is stated at historic cost less accumulated amortisation and any accumulated impairment
losses. Amortisation is charged to operating expenses and calculated to write off the cost in equal annual
instalments over three years, which is considered to be a prudent estimate of its useful economic life.
Property, plant and equipment
Items of property, plant and equipment are stated at cost of acquisition or production costs less
accumulated depreciation and impairment losses. Depreciation is charged to the statement of
comprehensive income on a straight‐line basis to write‐off the carrying value of each asset to residual value
over its estimated useful economic life as follows:
Plant and equipment ‐ 33.3% on a straight line basis
Fixtures and fittings ‐ 33.3% on a straight line basis
Software ‐ 33.3% on a straight line basis
Microsaic Systems plc Annual Report and Financial Statements 2021
47
1. Accounting policies (continued)
Pensions
The Company has an auto‐enrolment pension scheme for employees. Contributions are charged to the
statement of comprehensive income in the period they are payable.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first‐in first‐out
principle and includes expenditure incurred in acquiring the inventories and bringing them to their present
location and condition. The cost of finished goods and work in progress comprises raw materials, direct
labour and other direct costs. Net realisable value is the estimated selling price in the ordinary course of
business less applicable selling expenses. The inventory provision is based on identifying slow moving stock
items from recent historic and anticipated future sales and providing where appropriate for those items
which may be surplus to anticipated or identifiable demand.
Provisions
Provisions are established where the Directors have identified an obligation which is probable and where
the amount can be estimated reliably.
Taxation
Current taxes are based on the results of the Company and are calculated according to local tax rules using
the tax rates that have been enacted by the balance sheet date.
The Company recognises research and development tax credits receivable in cash as a current asset under
the heading corporation tax receivable. Any difference to amounts received are dealt with as adjustments
to prior period tax.
Deferred tax is provided in full using the balance sheet liability method for all taxable temporary differences
arising between the tax bases of assets and liabilities and their carrying values for financial reporting
purposes. Deferred tax is measured using currently enacted or substantially enacted tax rates. Deferred tax
assets are recognised to the extent the temporary difference will reverse in the foreseeable future and that
it is probable that future taxable profit will be available against which the asset can be utilised.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of
exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling
at the date of transaction, or forward contract rate, if applicable. All differences are taken to the statement
of comprehensive income.
Financial instruments
Financial assets and financial liabilities are recognised in the Company’s statement of financial position
when the Company becomes a party to the contractual provisions of the instrument. Examples of the
Company’s financial instruments include:
Cash and cash equivalents
The fair value of cash and cash equivalents is considered to be their carrying amount due to their short‐
term maturity.
Trade receivables
The Company’s trade receivables do not carry a significant financing element as defined by IFRS 15.
Therefore, trade receivables are recorded at transaction price (e.g., invoice amount excluding costs
collected on behalf of third parties) and throughout the life of the receivable at an amount equal to lifetime
Microsaic Systems plc Annual Report and Financial Statements 2021
48
1. Accounting policies (continued)
expected credit losses (“ECL”). The Company has applied a simplified “provision matrix” for calculating
expected credit losses as a practical expedient. The percentage ranges are applied to the receivable
balance.
Current
1‐30 days
past due
31‐60 days
past due
61‐90 days
past due
0%‐1%
1%‐2%
1%‐2%
1%‐2%
91‐120
days past
due
2%‐5%
121‐150
days past
due
5%‐10%
151‐180
days past
due
10%‐20%
181 days +
past due
10%‐50%
Other points:
The Company determines whether trade receivables are impaired through regular meetings between
finance and business development.
The credit situation of new customers is reviewed before the first shipment. If possible, a credit report
is obtained. If there is any concern over the credit worthiness of the customer, the Company may ask
the customer to pay an amount in advance or enter into a confirmed letter of credit (Non‐UK/Europe)
etc.
Trade receivables are considered low risk at initial recognition but this changes if they have an overdue
invoice(s). Depending on the value of the shipment, the customer may be placed on hold until the
overdue amount is paid. Discussions as to why an invoice is overdue are held promptly between finance
and business development and the customer.
The provision is monitored at customer level by business development and finance.
If the Company is having ongoing dialogue with the customer regarding their overdue balance the debt
will not be written off. It may be that a payment plan can be agreed or more time is given to the
customer to sell the product. If the customer is not actively engaging with the Company legal action
may be taken.
Forward looking information from business development is taken into account when preparing the
provision matrix including geographical risk, changes in customer circumstances and macro‐economic
factors.
Under IFRS 9 impairment for receivables including trade receivables is assessed using an expected loss
model. For trade receivables this focuses on the risk that, and an extent to which, a receivable will default.
Accordingly, the Company calculates the allowance for credit losses by considering the cash shortfalls it
would incur in various default scenarios and multiplying the shortfalls by the probability of each scenario
occurring. The Company only has short‐term receivables and has adopted a “simplified approach” in
assessing impairment.
The Company has applied a simplified “provision matrix” for calculating expected losses as a practical
expedient (e.g., for trade receivables), as the Directors believe that this is consistent with the general
principles for measuring expected losses. The provision matrix is based on an entity’s historical default rates
over the expected life of the trade receivables and is adjusted for forward‐looking estimates.
In preparing the provision matrix the Company looks at the geographic base of its trade receivables and
whether they are existing or new customers. Finally, management considered forward looking information
that may affect the default rates applied in the matrix.
Financial liability and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the Company after deducting all its liabilities.
Microsaic Systems plc Annual Report and Financial Statements 2021
49
1. Accounting policies (continued)
Bank borrowings
The Company had no bank borrowings at 31 December 2021 and 2020.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Equity instruments
Equity instruments issued by the Company are recorded at the value of the proceeds received net of direct
issue costs including the fair value of any warrants issued in lieu of issue costs. The Company has no
derivative financial assets or investments in equity instruments.
Leases
For all leases, the Company recognises a right of use asset and corresponding lease liability on the balance
sheet, which are depreciated and amortised respectively over the lease term. However, where leases are
low value or of less than 12 months old, the Company has taken advantage of the practical expedient
allowing the expense to be recognised on a straight line basis over the lease term.
Research and development
Expenditure on research is recognised as an expense in the period in which it is incurred.
Development costs incurred on specific projects are capitalised when all the following conditions are
satisfied:
Completion of the intangible asset is technically feasible so that it will be available for use or sale;
The Company intends to complete the intangible asset and use or sell it;
The Company has the ability to use or sell the intangible asset;
The intangible asset will generate probable future economic benefits. Among other things, this requires
that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it
is to be used internally, the asset will be used in generating such benefits;
There are adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset; and
The expenditure attributable to the intangible asset during its development can be measured reliably.
Costs incurred which do not meet all of the above criteria are expensed as incurred. No development costs
have been capitalised to date.
Share‐based payments
In accordance with IFRS 2 “Share‐based payments”, the Company reflects the economic cost of awarding
shares and share options to Directors, employees and advisors by recording an expense in the statement
of comprehensive income equal to the fair value of the benefit awarded; fair value being determined by
reference to option pricing models. The expense is recognised in the statement of comprehensive income
over the vesting period of the award.
The fair value of warrants issued to advisors as remuneration for their services in a fundraising will be
charged to share premium over the vesting period of the award.
Microsaic Systems plc Annual Report and Financial Statements 2021
50
2. Adoption of new and revised standards
During the financial year, the Company has adopted the following new IFRSs (including amendments
thereto) and IFRIC interpretations, that became effective for the first time.
Standard
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16)
Covid 19‐Related Rent Concessions (Amendment to IFRS 16 Leases)
Effective date, annual
period beginning on or
after
1 January 2021
1 April 2021
Their adoption has not had any material impact on the disclosures or amounts reported in the financial
statements.
Standards issued but not yet effective
At the date of authorisation of these financial statements, the following standards and interpretations
relevant to the Company and which have not been applied in these financial statements, were in issue but
were not yet effective. In some cases, these standards and guidance have not been endorsed for use in the
UK and will not be adopted until such time as endorsement is confirmed.
Standard
Effective date, annual
period beginning on or
after
1 January 2022
Reference to the Conceptual Framework (Amendments to IFRS 3 Business
Combinations)
Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16)
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37
Provisions, Contingent Liabilities and Contingent Assets)
Annual improvements 2018‐2020 cycle
IFRS 17 – Insurance Contracts
Amendments to IFRS 17 – Insurance Contracts;
and Extension of the Temporary Exemption from Applying IFRS 9
(Amendments to IFRS 4 Insurance Contracts)
Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of
Financial Statements and IFRS Practice Statement 2 Making Materiality
Judgements)
Definition of Accounting Estimates (Amendments to IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors)
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12 Income Taxes)
Classification of Liabilities as Current or Non‐Current: amendments to IAS 1
1 In November 2021 it was proposed that the amendment be deferred until not earlier than 1 January 2024.
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
1 January 2023
1 January 2023
1 January 2023
1 January 20241
The Directors are evaluating the impact that these standards will have on the financial statements of
Company, but at this stage the impact is not expected to be material.
Microsaic Systems plc Annual Report and Financial Statements 2021
51
3. Going concern
The Company is loss making and has raised funds in the past by issuing equity in discrete tranches. The most
recent fundraise was completed on 5 February 2021 where the Company raised £5.2 million after expenses
from new and existing shareholders. As of 31 December 2021, the Company had £3.5 million in cash and
bank balances.
During 2022, the Company has introduced new services taking advantage of its depth of expertise in mass
spectrometry, analytical techniques and related technologies to serve existing and new markets alongside
its historic product and service offerings. Accordingly, the cash and financial projections of the business
incorporate this expansion of revenue sources and the Directors have reviewed them under various
scenarios to assess the sensitivity of the Company’s going concern position.
With the recent advent of new service revenue streams, the plans and prospects for the business are
modest in projecting new revenue and do not yet forecast break even. The key sensitivities considered
include changes to the projected sales of the various product or service lines and corresponding
adjustments to costs which could be delayed, reduced or not incurred at all if the related projected sales
were not to materialise. Accordingly, the Company monitors actual versus expected performance and
retains a contingency plan, if required, to preserve cash and bank balances.
Having taken this careful approach, the Board believes that the Company has enough cash to cover its
anticipated working capital requirements for at least the next 12 months from the date of signing of the
Annual Report and Accounts. On this basis, the Directors have concluded that it is appropriate to prepare
the financial statements on a going concern basis.
4. 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.
The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are summarised below:
Share‐based payments
The calculation of the share‐based payment expense utilises assumptions and estimates (for example
volatility, future exercise rates etc) which may differ from actual results. Details of the assumptions are set
out in note 25. The Company uses the Black Scholes Option pricing model to determine a theoretical option
call price. If there are market related conditions (e.g., realising certain share price targets before vesting)
then the Company uses external advisers to apply more advanced modelling techniques. In terms of inputs
volatility is the most difficult input to estimate and is probably the key input where management has had
to use its discretion.
Carrying value of inventories
It is the intention of the directors that the Company will move away from the sale of goods as its primary
revenue stream, instead developing new lines of service revenue. As such, there is a risk that the inventory
holding may not recover its full carrying value.
The directors believe that all inventories held at 31 December 2021 will ultimately be sold above their
purchase price. However, in light of the uncertainty in these forecasts, and the potential for stock turnover
Microsaic Systems plc Annual Report and Financial Statements 2021
52
4. Critical accounting estimates and judgements (continued)
days to significantly increase, a provision of £90,139 has been made for stock obsolescence. There is
significant uncertainty in this estimate, but the directors believe it is an appropriate estimate for potential
future write off of inventories.
The detailed breakdown of inventories can be seen in note 14.
These assumptions are reviewed at each balance sheet date and amended if required.
5. Revenue
Throughout 2021, the Company operated in one business segment, that of research, development and
commercialisation of mass spectrometry instruments. Products are sold ex‐works: The attribution of
revenue is based on the country or group of countries to where the goods are shipped. In 2021 our largest
customers had the following revenues as a percentage of total revenues:
Customer number 1 – 42.5 per cent.
Customer number 2 – 10.6 per cent.
Customer number 3 – 9.0 per cent.
Customer number 4 – 8.5 per cent.
The geographical analysis of revenue (by shipment destination) was as follows:
UK
USA
China
EU
ROW
South Korea
Japan
6. Other operating income
Coronavirus Job Retention Scheme Grant
Co‐development income
Insurance claims
Year to 31
December
2021
£
532,364
187,673
106,076
71,887
4,214
3,662
1,000
Year to 31
December
2020
£
2,225
41,346
126
57,280
5,128
83,397
8,756
906,876
198,258
Year to 31
December
2021
£
20,829
26,204
20,250
67,283
Year to 31
December
2020
£
96,626
‐
‐
96,626
Microsaic Systems plc Annual Report and Financial Statements 2021
53
7. Expenses by nature
Loss from operations after share‐based payments is stated after
charging/(crediting):
Amortisation of intangible assets
Depreciation of right of use assets
Expected credit losses
Movement in inventory provision
Inventory items expensed
Staff benefit expense
Depreciation of property, plant and equipment
Provision for warranty
Material costs including R&D
Professional fees (including audit fees detailed below)
Pension costs
Exchange loss/(gain)
Directors’ emoluments (before pensions and share based payments)
Services provided by the Company’s auditors
Fees payable to the Company’s auditors for the audit of the financial
statements
Fees payable to the Company’s auditors for other services
‐ Audit related services
8. Finance income and Finance cost
Bank interest receivable
Interest cost under IFRS 16
Other interest
Year to 31
December
2021
Year to 31
December
2020
£
38,241
70,499
(46,746)
32,535
2,249
£
40,767
87,237
64,281
17,650
(3,318)
2,807,699
1,466,342
90,628
(24,075)
50,293
161,791
173,051
1,216
266,799
80,034
(12,713)
58,071
182,069
153,476
2,897
292,140
Year to 31
December
2021
£
Year to 31
December
2020
£
22,150
20,750
1,575
23,725
2,070
22,820
Year to 31
December
2021
£
Year to 31
December
2020
£
6,237
4,393
(4,433)
(171)
(4,604)
(9,041)
(1,734)
(10,775)
Microsaic Systems plc Annual Report and Financial Statements 2021
54
9. Tax on loss on ordinary activities
Domestic current period tax
UK corporation tax receivable
Adjustment for prior periods
Current tax credit
Tax on loss on ordinary activities
Factors affecting the current tax credit for the period:
Loss before tax
Loss before tax multiplied by standard rate of UK corporation tax of
19% (2020: 19%)
Effects of:
Non‐deductible expenses
Depreciation
Capital allowances
Profit on disposal of property, plant and equipment
Research and development expenditure
RDEC
Tax losses carried forward
Previous period research and development adjustment
Chargeable gain
Current tax credit
Year to 31
December
2021
£
Year to 31
December
2020
£
(267,785)
(218,568)
‐
(267,785)
(267,785)
Year to 31
December
2021
£
857
(217,711)
(217,711)
Year to 31
December
2020
£
(3,396,366)
(2,590,369)
(645,310)
(492,170)
251,679
17,219
(54,317)
(2,130)
6,774
15,206
(13,363)
(16)
(116,399)
(94,045)
484
‐
279,259
359,046
‐
1,730
857
‐
(267,785)
(217,711)
The Company has estimated tax losses of £25,056,703 (2020: £23,587,006) available for carry forward
against future trading profits. Deferred tax is detailed in note 17.
Microsaic Systems plc Annual Report and Financial Statements 2021
55
10. Basic and diluted loss per ordinary share
Loss after tax attributable to equity shareholders £
Weighted average number of ordinary 0.25p shares for the purpose of
basic and diluted loss per share
Weighted average number of ordinary 0.01p shares for the purpose of
basic and diluted loss per share
Basic and diluted loss per ordinary share
Year to 31
December
2021
(3,128,581)
Year to 31
December
2020
(2,372,658)
‐
456,365,146
5,537,461,036
‐
(0.056)p
(0.52)p
The basic loss per share reduced by 89 per cent. from 0.52p per share to 0.056p per share. Whilst there was
an increase in the loss after tax to equity shareholders this was more than offset by the share reorganisation
and issue of equity as set out in Note 18. 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.
11. Intangible assets
Intangible assets comprise patents, trademarks and software owned by the Company. The cost is amortised
on a straight‐line basis over their estimated useful life.
Year ended 31 December 2021:
Cost
At 1 January 2021
Additions
At 31 December 2021
Amortisation
At 1 January 2021
Charge for the year
At 31 December 2021
Net book value
At 31 December 2021
Year ended 31 December 2020
Cost
At 1 January 2020
Additions
At 31 December 2020
Amortisation
At 1 January 2020
Charge for the year
At 31 December 2020
Net book value
At 31 December 2020
£
592,296
28,883
621,179
508,533
38,241
546,774
74,405
£
564,977
27,319
592,296
467,766
40,767
508,533
83,763
Microsaic Systems plc Annual Report and Financial Statements 2021
56
12. Property, plant and equipment
Year ended 31 December 2021:
Cost
At 1 January 2021
Additions
Disposals
Transfers
Plant and
equipment
£
Fixtures and
fittings
£
Total
£
850,596
305,334
(64,246)
(25,270)
178,307
1,028,903
‐
‐
‐
305,334
(64,246)
(25,270)
At 31 December 2021
1,066,414
178,307
1,244,721
Depreciation
At 1 January 2021
Charge for the year
Disposals
Transfers
At 31 December 2021
Net book value
At 31 December 2021
Year ended 31 December 2020:
Cost
At 1 January 2020
Additions
Disposals
At 31 December 2020
Depreciation
At 1 January 2020
Charge for the year
Disposals
At 31 December 2020
Net book value
At 31 December 2020
Plant and
equipment
£
Fixtures and
fittings
£
736,472
90,607
(64,246)
(2,106)
760,727
178,286
21
‐
‐
178,307
Total
£
914,758
90,628
(64,246)
(2,106)
939,034
305,687
‐
305,687
Plant and
equipment
£
Fixtures and
fittings
£
787,487
185,038
69,452
(6,343)
‐
(6,731)
Total
£
972,525
69,452
(13,074)
850,596
178,307
1,028,903
663,015
184,783
79,802
(6,345)
736,472
232
(6,729)
178,286
847,798
80,034
(13,074)
914,758
114,124
21
114,145
Transfers from plant and equipment were moved to stock and then sold to a customer.
Microsaic Systems plc Annual Report and Financial Statements 2021
57
13. Lease reporting
IFRS 16 was effective for annual reporting periods on or after 1 January 2019 and removes the distinction
between finance and operating leases for lessees. For lessees, all leases are now recorded on the balance
sheet as liabilities, at the present value of the future lease payments, along with an asset reflecting the right
of use of the asset over the lease term. This information aims to provide users of financial statements with
the basis to assess the effect leases have on the financial position, financial performance and cash flows of
an entity.
Right of use lease assets
Cost
At 1 January 2021
Additions
Disposals
At 31 December 2021
Depreciation
At 1 January 2021
Charge for the year
Disposals
At 31 December 2021
Carrying amount
At 31 December 2021
Property
Equipment
£
£
Total
£
179,763
138,933
‐
318,696
133,816
67,643
‐
201,459
8,441
9,961
(8,441)
9,961
4,984
2,856
(7,175)
188,204
148,894
(8,441)
328,657
138,800
70,499
(7,175)
665
202,124
117,237
9,296
126,533
Lease liability
Property
Equipment
At 1 January 2021
Repayment of lease liabilities
Additions
Interest on lease liabilities
Disposals
At 31 December 2021
Lease liability maturity analysis
Gross lease payments due:
Within one year
Between two and five years
Less future financing charges
£
49,831
(74,997)
138,933
4,326
‐
118,093
£
3,636
(3,073)
9,961
107
(1,379)
9,252
2021
2020
Property
Equipment
Property
Equipment
£
75,000
51,666
126,666
(8,573)
118,093
£
3,279
6,609
9,888
(636)
9,252
£
51,577
‐
51,577
(1,746)
49,831
Total
£
53,467
(78,070)
148,894
4,433
(1,379)
127,345
£
2,637
1,111
3,748
(112)
3,636
58
Microsaic Systems plc Annual Report and Financial Statements 2021
14. Inventories
Raw materials
Finished goods
Subtotal
Provision for inventories
Total
Year to 31
December
2021
£
177,212
196,829
374,041
(90,139)
283,902
Year to 31
December
2020
£
262,506
364,687
627,193
(57,604)
569,589
Inventories are lower in 2021 following a significantly higher level of sales during the year and production
challenges due to a global shortage of components. The provision increased in 2021, mainly due to a small
number of units of finished goods.
15. Trade and other receivables
Amounts falling due within one year
Trade receivables
Provision for expected credit losses
Other receivables
Other taxes and social security
Not past due
1 to 30 days past due
270 days past due
Year to 31
December
2021
£
Year to 31
December
2020
£
327,061
(2,762)
307,649
‐
631,948
Year to 31
December
2021
£
299,160
901
27,000
327,061
108,529
(68,587)
123,385
10,544
173,871
Year to 31
December
2020
£
37,849
2,506
68,174
108,529
Microsaic Systems plc Annual Report and Financial Statements 2021
59
15. Trade and other receivables (continued)
Provision for expected credit losses on trade receivables:
Balance brought forward
Written back to P&L during the year
Provided during the year
Balance carried forward
Year to 31
December
2021
Year to 31
December
2020
£
£
(68,587)
68,587
(2,762)
(2,762)
(4,306)
4,306
(68,587)
(68,587)
The provision for expected credit losses is entirely in respect of not past due invoices. For trade receivables
the loss allowance is mandatorily measured at an amount equal to the lifetime expected credit losses.
16. Trade and other payables
Amounts falling due within one year
Trade payables
Other taxes and social security
Other payables
Accruals and deferred income
17. Provisions
Balance at 1 January 2021
Provided for/(reduced) during the year
Balance at 31 December 2021
Year to 31
December
2021
Year to 31
December
2020
£
£
230,494
43,514
30,979
49,624
63,034
29,174
11,278
82,441
354,611
185,927
Dilapidations
£
75,779
‐
75,779
Warranties
£
48,256
(24,075)
24,181
TOTAL
£
124,035
(24,075)
99,960
The provision for anticipated dilapidations is in respect of the Company’s leasehold premises at Woking.
The amount carried forward of £75,779 is based on the potential future cost which could be incurred at the
end of the lease.
The Company provides OEMs and distributors with a 15‐month warranty on MS products. The provision
represents the anticipated cost of servicing those warranty claims. The provision is based on historical costs
including product, replacement parts and the cost‐of‐service engineers that may have to be incurred over
the warranty period. The provision for warranty at the end of the year is £24,181. There were no significant
claims during the year.
Microsaic Systems plc Annual Report and Financial Statements 2021
60
18. Deferred tax
Deferred taxation provided in the financial statements:
Balance at 1 January and 31 December 2021
Accelerated capital allowances
Tax losses carried forward
£
‐
Year to 31
December
2020
£
21,688
Year to 31
December
2021
£
61,741
(61,741)
(21,688)
‐
‐
A deferred tax asset in respect of tax losses has only been recognised to the extent of the deferred tax
liability in respect of accelerated capital allowances at a tax rate of 25 per cent. (2020: 19 per cent.). The
Company has estimated tax losses of £25,056,703 (2020: £23,587,006) available for carry forward against
future trading profits. The deferred tax asset that would arise on these losses if it were recognised at 25%
is £6,264,176 (2020: £4,481,531 based on 19%).
19. Share capital
The total share capital of the Company comprises Ordinary and Deferred shares as follows:
2021
2021
Allotted, called up and fully paid:
Number
Ordinary shares of 0.25p each
Ordinary shares of 0.01p each
‐
6,076,365,146
£
‐
607,637
2020
Number
456,365,146
-
Deferred shares of 0.24p each
456,365,146
1,095,276
‐
2020
£
1,140,913
-
‐
As at 31 December
6,532,730,292
1,702,913
456,365,146
1,140,913
The Ordinary share capital of the Company comprises:
Allotted, called up and fully paid:
Ordinary shares of 0.25p each as
at 1 January
Effect of share split and
deferment
Issue of ordinary share capital of
0.01p each
2021
Number
2021
£
2020
2020
Number
£
456,365,146
1,140,913
456,365,146
1,140,913
‐
(1,095,276)
5,620,000,000
562,000
‐
‐
‐
‐
As at 31 December
6,076,365,146
607,637
456,365,146
1,140,913
On 4 February 2021 the Company undertook a share reorganisation and split each ordinary share of 0.25p
each into one (1) ordinary share of 0.01p each and twenty‐four (24) deferred shares of 0.01p each followed
by the immediate consolidation of every twenty‐four (24) deferred shares of 0.01 pence each into one (1)
deferred share of 0.24 pence.
Microsaic Systems plc Annual Report and Financial Statements 2021
61
19. Share capital (continued)
Each ordinary share of 0.01p each carries the same rights as the ordinary shares of 0.25p each did before
the share reorganisation. That is, each ordinary share has the right to one vote and is entitled to participate
in any distribution made by the Company including the right to receive a dividend, and on a winding up of
the Company. The ordinary shares are not redeemable or liable to be redeemed at the option of the
Company or the shareholder.
Each deferred share of 0.24p has no right to receive notice of, or attend or vote at, any general meeting of
the Company, no right to participate in the profits of the Company whether by dividend, other distribution,
return of capital (whether or not upon a winding up) or otherwise, save that, upon a return of capital upon
a winding up, the holders of deferred shares shall be entitled to the return of the nominal value of each
deferred share held after £10,000,000 has been returned on each ordinary share, nor are the deferred
shares redeemable or liable to be redeemed at the option of the Company or the shareholder.
In addition, the Company issued 5,620,000,000 ordinary shares of 0.01p each as follows:
5,000,000,000 ordinary shares of 0.01p each to raise £5.0 million before expenses at the placing price
of 0.1 pence per new ordinary share;
500,000,000 ordinary shares of 0.01p each to raise £500,000 to the Company’s Broker Turner Pope at
the Placing Price of 0.1 pence per new ordinary share to meet additional demand for the shares;
35,000,000 ordinary shares of 0.01p each at the placing price of 0.1 pence per new ordinary share in
respect of the first year of fees due to Turner Pope for the provision of its broking services to the
Company; and
85,000,000 ordinary shares of 0.01p each at the placing price of 0.1 pence per new ordinary share in
settlement of the Non‐executive Directors’ first year’s fees in respect of Gerard Brandon (50,000,000
shares) and Dr Nigel Burton (35,000,000 shares).
The Deferred share capital of the Company comprises:
2021
2021
2020
2020
Allotted, called up and fully paid:
Deferred shares of 0.24p each as at 1
January
Effect of share split on 4 February 2021
to deferred shares of 0.24p each
Number
‐
£
‐
456,365,146
1,095,276
As at 31 December
456,365,146
1,095,276
Number
£
‐
‐
‐
‐
‐
‐
20. Reserves
The share premium account represents the excess over the nominal value for shares allotted less issue
costs. The share option reserve represents accumulated charges made under IFRS 2 in respect of share‐
based payments. Where share options that have vested expire, lapse or are exercised, the amounts within
the share‐based payments reserve relating to those options are transferred to retained earnings as shown
in the Statement of Changes in Equity.
Microsaic Systems plc Annual Report and Financial Statements 2021
62
21. Share premium
Opening balance brought forward
Share issue in the year
Share issue costs – Cash
Share issue costs – Broker Warrants
Closing balance carried forward
Year to 31
December
2021
Year to 31
December
2020
£
£
24,867,886
24,867,886
5,058,000
(416,860)
(1,503,008)
‐
‐
‐
28,006,018
24,867,886
The fundraising on 5 February 2021 raised a total of £5.5 million (before expenses) at a placing price of 0.1p
per share. The placing raised £5.0 million and the broker warrant £0.5 million, before expenses. The share
premium on the fundraising was the placing price of 0.1p per share less the nominal value of 0.01p per
share multiplied by the number of shares issued. The cash costs amounted to £416,860 including broker
commissions and fees, legal fees etc. In addition, 997,000,000 broker warrants were issued to Turner Pope
Investments (TPI) Ltd at a fair value of £1,503,008.
At the same time as the fundraising on 5 February 2021, 120,000,000 ordinary shares of 0.01p were issued
in lieu of fees in respect of the first year of fees due to Turner Pope Investments (TPI) for the provision of
its broking services to the Company and of the first year of fees for the Non‐executive Directors.
Further details of the share issues are set out in note 18.
22. Commitments
Year to 31
December
2021
Year to 31
December
2020
£
£
Contracted for but not provided in the financial statements
781,990
426,595
The commitment above relates to purchase orders placed on, and related contractual arrangements and
obligations, with our third‐party manufacturers.
23. Directors’ emoluments
Salaries and fees
Non‐cash payments
Pension costs
Employment related share‐based payments
Year to 31
December
2021
Year to 31
December
2020
£
£
264,797
291,086
2,002
27,325
1,071,773
1,365,897
1,054
23,429
51,753
367,322
Microsaic Systems plc Annual Report and Financial Statements 2021
63
23. Directors’ emoluments (continued)
In the year to 31 December 2021 the two Executive Directors that served during the year accrued benefits
under the Company’s auto‐enrolment pension scheme. The employment related share‐based payments
comprise the charges arising from the grant of options on 5 February 2021 plus non‐executive directors
fees settled by the issue of 85,000,000 ordinary shares of 0.01p each for a full year in advance, reduced by
the credits to the income and expenditure statement in relation to unvested charges in respect of the
cancellation of share options granted in prior years.
There are no key management personnel other than the Directors. The highest paid Director, Mr Glenn
Tracey, received emoluments of £323,445 as disclosed in the Directors’ Remuneration Report, which
included a share‐based payment charge of £182,255.
There were no gains on the exercise of share options in the year.
24. Employees
Directors
Other staff
Average Headcount
Employment costs (including Directors)
Wages and salaries
Social security costs
Termination payments
Pension costs
Employment related share‐based payments
Year to 31
December
2021
Year to 31
December
2020
Number
Number
4
18
22
5
21
26
Year to 31
December
2021
Year to 31
December
2020
£
£
1,123,276
1,081,201
160,902
18,189
173,051
1,332,240
2,807,699
121,141
58,283
153,476
52,241
1,466,342
Microsaic Systems plc Annual Report and Financial Statements 2021
64
25. Share‐based payments
The share‐based payments charge comprises
Directors’ fees settled in shares
Share options granted
Employment related share‐based payments
Brokers’ fees settled in shares
Year to 31
December
2021
£
76,559
1,255,681
1,332,240
31,524
1,363,764
Year to 31
December
2020
£
‐
52,241
‐
52,241
The Directors’ fees settled in shares and Broker’s fees settled in shares are both in respect of paying annual
fees in advance from 5 February 2021 at the placing price of that date being a valuation of 0.1p per ordinary
share of 0.01p nominal value.
Share option schemes
The Company operates an EMI and an unapproved share option scheme as a means of encouraging
ownership and aligning interests of staff and shareholders. The table below shows the number of options
outstanding and exercisable at 31 December 2021 and the weighted average exercise price.
Year to 31 December 2021
Year to 31 December 2020
Number of
options
Weighted
average
exercise
price
Number of
options
Weighted
average
exercise price
Outstanding at the beginning of
the year
Granted during the year
17,475,000
1,125,000,000
5.1p
0.1p
18,644,000
‐
Forfeited/expired during the year
(17,475,000)
(5.1p)
(1,169,000)
Exercised during the year
‐
Outstanding at 31 December
1,125,000,000
Exercisable at 31 December
750,000,000
‐
0.1p
0.1p
‐
17,475,000
4,375,000
5.2p
‐
6.0p
‐
5.1p
9.8p
Staff and Directors agreed to cancel existing options prior to the award of new options as these options
were all out‐of‐the‐money. Existing options held by Directors and staff amounting to 13,110,000 were
cancelled on 4 February 2021. A further 3,500,000 options held by Peter Grant were cancelled on 5 February
2021, and 865,000 options related to previous leavers.
Options and warrants over 1,125 million ordinary shares were awarded to Directors, staff and a consultant
on 5 February 2021 (2020: nil), at the time of the fundraising. The new options granted are exercisable at
the placing price of 0.1p for five years from the 5 February 2021.
The 750 million options and warrants granted to Directors and a consultant vested during the year, as the
performance criterion that the Company’s ordinary shares traded at a Volume Weighted Average Price at
or above a 50 per cent. premium to the placing price for 20 consecutive business days, was achieved. The
share‐based payment charge is estimated at £1,125,281 and has been recognised in full in 2021.
Microsaic Systems plc Annual Report and Financial Statements 2021
65
25. Share‐based payments (continued)
The 375 million options granted to staff have no performance conditions associated with them but there is
a two‐year holding period before the options can vest. The share‐based payment charge is estimated at
£577,826 vesting over two years from the date of grant.
Details of options in issue at the year‐end are:
Date of grant
Exercise
price
Latest exercise date
Estimated
fair value
Number of
options 31
December
2021
Number of
options 31
December
2020
July 2012
May 2014
42.00p
July 2022
46.80p May 2024
November 2014
49.50p November 2024
April 2015
January 2016
September 2016
September 2016
January 2018
January 2018
June 2019
February 2021
February 2021
47.75p May 2025
23.50p
January 2026
5.00p September 2026
5.00p September 2026
4.05p
January 2028
4.05p
January 2028
1.55p
June 2029
0.1p February 2026
0.1p February 2026
12.1p
11.4p
11.9p
10.5p
11.7p
2.0p
0.6p
1.3p
2.2p
0.7p
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
0.150p
0.153p
750,000,000
375,000,000
190,000
90,000
100,000
100,000
395,000
2,000,000
2,000,000
2,100,000
5,500,000
5,000,000
‐
‐
1,125,000,000
17,475,000
The weighted average share price at the date of grant for share options granted in the year was 0.25 pence.
The options outstanding at 31 December 2021 were all granted at an exercise price of 0.1p with an exercise
period of five years from the date of grant and a remaining contractual life of 4 years and 1 month.
The fair value of the 375 million options granted to staff on 5 February 2021 was estimated at 0.153p per
share and for the 750 million options granted to Directors was estimated at 0.150p per share on the
measurement date.
The estimated fair values of the share options were calculated by applying the Black Scholes or Monte Carlo
models in all cases except for the 750 million options granted to Directors. In respect of the 750 million
options granted to the Directors, a binomial model was used since the options were significantly in the
money at the grant date and there was a very high probability of achieving the share price hurdle condition.
The period of exercise for all options granted up to 31 December 2020 is ten years from the date of grant
and the vesting period is normally three years from the date of grant. Prior to 2016 the expected volatility
had been determined by calculating the historical volatility of the share price over the previous year. From
September 2016, and consistent with the application guidance in IFRS 2, the Directors considered the
most appropriate method to calculating volatility to be the use of the historical volatility of comparable
listed companies. The model inputs are detailed below.
Microsaic Systems plc Annual Report and Financial Statements 2021
66
25. Share‐based payments (continued)
The model inputs using Black Scholes were:
Date of grant
July 2012
May 2014
November 2014
April 2015
January 2016
September 2016
January 2018 (staff)
January 2018 (directors)
June 2019
February 2021
Exercise
price
42.00p
46.80p
49.50p
47.75p
23.50p
5.00p
4.05p
4.05p
1.55p
0.10p
Share price
Risk free
rate
Expected
volatility
42.00p
46.80p
49.50p
47.75p
23.50p
5.12p
4.29p
4.29p
1.55p
0.25p
0.50%
2.69%
2.05%
1.58%
1.74%
0.87%
0.79%
1.29%
0.87%
0.03%
33%
16%
18%
17%
38%
30%
31%
39%
34%
29%
Gross
dividend
yield
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
The expected volatility for the February 2021 grant is based on the 5‐year volatility of comparable
companies.
Total expenses of £1,332,280 related to equity settled share‐based payment transactions were recognised
in the Statement of Comprehensive Income the year (2020: £52,241) comprising charges in respect of new
options granted totalling £1,385,700 (2020: £52,241) plus directors’ fees settled in shares totalling £76,599
less credits in respect of cancelled options that had not vested totalling £130,019 (£nil).
In respect of cancelled options that had vested, £194,246 (2020: £140,516 comprising £10,819 in respect
of cancelled staff options and £129,697 in respect of lapsed warrants per note 26) was transferred from
share‐based payment reserve to the retained losses reserve.
26. Warrants
Broker warrants to subscribe for up to 997,000,000 ordinary shares, which represented 20 per cent of the
placing shares, were granted to Turner Pope Investments (TPI) Ltd as part of the fundraising on 5 February
2021. The broker warrants are capable of exercise for a period of two years from 5 February 2021. The fair
market value of the warrants charged to share based payment reserved was calculated at £1,503,008 based
on the following inputs:
Date of grant
Exercise
price
Share price
Risk free
rate
Expected
volatility
February 2021
0.01p
0.25p
0.03%
33%
Gross
dividend
yield
‐
The expected volatility for the February 2021 grant is based on the 2‐year volatility of comparable
companies.
27. Financial instruments
The Company’s financial instruments comprise cash and various trade receivables and trade payables that
arise directly from its operations. No trading in financial instruments is undertaken. The main risks arising
from the Company’s financial instruments are liquidity, currency and interest rate. The Board oversees the
management of these risks, which are summarised below.
Microsaic Systems plc Annual Report and Financial Statements 2021
67
27. Financial instruments (continued)
Liquidity risk
The Company finances its operations from equity funding provided by shareholders and revenues
generated by the business. The Company seeks to manage liquidity risk to ensure enough funds are
available to meet working capital requirements. The Company successfully raised £5.5 million before
expenses through the issue of new shares in February 2021.
The Company invests its cash reserves in bank and money market deposits as a liquid resource to fund its
operations. The Company’s strategy for managing cash is to balance interest income with counterparty risk
ensuring the availability of cash to match the profile of the Company’s cash flows.
The £5.5 million raised in February 2021 is anticipated by the Board of Directors to take the Company
through to profitability. In reviewing the Company as a going concern, as outlined in note 3, management
prepared alternative business scenarios where performance falls below management expectation.
Contingency plans and mitigating actions have been identified in case actual results differ from the
Company’s business plans. There can be no guarantee that the commercial objectives of the Company will
be achieved.
Interest rate risk
The Company does not face any significant interest rate risk as it has no borrowings. Surplus funds are
invested to maintain a balance between accessibility of funds, competitive rates, and counterparty risk
while investing funds safely.
Credit risk
The Company manages its credit risk in cash and cash equivalents by spreading surplus funds between
creditworthy financial institutions. The Company is also exposed to credit risk attributable to trade and
other receivables. The maximum credit risk in respect of the financial assets at each period end is
represented by the balance outstanding on trade and other receivables. The Company monitors the credit
worthiness of its customers on a regular basis.
Foreign currency risk
The majority of the Company’s transactions are denominated in pounds sterling. The Company has no long‐
term commitments to purchase goods or services in foreign currencies. Purchases denominated in foreign
currency are expensed at the exchange rate prevailing at the date of the transaction and represents an
immaterial proportion of the Company’s total expenditure.
The only assets and liabilities denominated in foreign currencies relate to trade receivables and trade
payables with overseas counterparties together with small balances of US dollar and Euro currencies to
settle these liabilities. The risks and sums involved are immaterial.
Fair values
The Directors consider that there is no material difference between the book value and the fair value of the
financial instruments on 31 December 2021 and 31 December 2020.
Capital management
The Company’s capital base comprises equity attributable to shareholders. As the Company’s focus has
been on establishing itself as a successful supplier of equipment design and engineering services, the
primary objective in managing cash spend has been to achieve progress on product development and
commercialisation in a cost‐efficient manner and in managing liquidity risk to ensure the Company
continues as a going concern.
Microsaic Systems plc Annual Report and Financial Statements 2021
68
28. Related party transactions
Microsaic and DeepVerge plc (“DeepVerge”) have two directors in common: Gerard Brandon and Nigel
Burton. In particular, Gerard Brandon is Chairman of Microsaic and CEO of DeepVerge.
In March 2021, the two companies signed a three‐year technology and commercial agreement, via
DeepVerge’s subsidiary, Innovenn UK Limited, whereby Microsaic will supply its products and services on
a non‐exclusive basis across DeepVerge’s global sales, marketing and distribution channels, delivering
portable solutions for healthcare diagnostic evaluation and environmental contamination detection of
samples. This included an initial order by DeepVerge for three units with a total value of £100,000, plus a
commitment of up to £150,000 from DeepVerge for equipment and services to be installed at pilot facilities
in DeepVerge's laboratories based in York.
In July 2021, Microsaic processed a further smaller purchase order from DeepVerge under the Agreement,
supplying certain additional mass spectrometry equipment for quality and contamination detection in a
range of markets including water and soil analysis. The value of this order was approximately £72,000.
In December 2021, Microsaic received a further order from DeepVerge for additional miniaturised MS
equipment and services with a total order value of approximately £262k. Of this, £109k was pursuant to
the March 2021 agreement. Additionally, £153k of the order includes a number of units of Microsaic's newly
developed SPE‐LC Systems and related consumables which will be used for quality and contamination
detection in a range of markets including water and soil analysis.
The SPE‐LC System is expected to be used to detect CECs in water, and will be supplied to DeepVerge to
form part of DeepVerge's third generation solution of multiplex pathogen detection and the launch of its
Modern Water Mobile Services, which will facilitate auto‐sampling at wastewater sites to reduce the time
and cost of detection.
In summary for the year ended 31 December 2021, revenue from DeepVerge sales totalled £385,593 and
purchases from DeepVerge totalled £210,600. At 31 December 2021, £247,412 was owed by DeepVerge to
Microsaic in relation to the December 2021 orders and £65,610 was owed by Microsaic to DeepVerge.
29. Control
As at 31 December 2021, no individual shareholder had a controlling interest in the Company.
30. Events after the Reporting Date
Subsequent to 31 December 2021:
On 14 February 2022, Dr Nigel Burton, Non‐executive Director, exercised warrants relating to 200
million Ordinary Shares, reflecting an investment of £200,000 in Microsaic;
On 19 April 2022, Microsaic signed a new Manufacturing Services Framework Agreement (“MSFA”) with
Innovenn UK Limited, a division of DeepVerge plc (“DeepVerge”), to refine and miniaturise existing
monitoring equipment for environmental and human health diagnostics, together with an initial
contract worth £400,000. The MSFA framework sets out the terms and conditions for Microsaic to
improve and manufacture certain DeepVerge products and to provide the design, assembly, quality,
and project management functions necessary to produce and ship equipment based on DeepVerge
approved specifications, design, and quality requirements. DeepVerge is a related party and further
details regarding the relationship are set out in the Related party transactions note 28.
Microsaic Systems plc Annual Report and Financial Statements 2021
69
31. Cash absorbed by operations
Total comprehensive loss for the year
Adjustments for:
Amortisation of intangible assets
Depreciation of right of use assets
Depreciation of property, plant and equipment
Transfer of property, plant and equipment to cost of
goods
Profit on disposal of right of use assets
Decrease in provision for warranty
(Decrease)/Increase in provision for expected credit
losses
Share‐based payments
Increase/(Decrease) in inventory provision
Tax on loss on ordinary activities
Interest on lease liability
Interest received
Movements in working capital
Decrease /(Increase) in inventories
(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Accrued furlough income
Cash absorbed by operations
Year to 31
December
2021
£
(3,128,581)
Year to 31
December
2020
£
(2,372,658)
38,241
70,499
90,628
23,164
(113)
(24,075)
(65,825)
1,363,764
32,535
(267,785)
4,433
(6,237)
253,152
(398,083)
168,684
17,748
40,767
87,237
80,034
‐
(1,426)
(12,713)
64,281
52,241
17,650
(217,711)
9,041
(4,393)
(200,998)
209,838
(104,636)
(17,748)
(1,827,851)
(2,371,194)
Microsaic Systems plc Annual Report and Financial Statements 2021
70