Unaudited interim results

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU, WHICH IS PART OF DOMESTIC LAW OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND ("UK") PURSUANT TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

30 September 2024

Supply@ME Capital plc

(the "Company", "Supply@ME" or "SYME" and, together with its subsidiaries, the "Group")

Unaudited interim results for the six months ended 30 June 2024 and extension to the draw down period under the Top-Up Shareholder Loan Agreement

SYME, the fintech business which provides an innovative fintech platform (the "Platform") for use by manufacturing and trading companies to access Inventory Monetisation© ("IM") solutions enabling their businesses to generate cashflow, announces its unaudited results for the six months ended 30 June 2024 ("H1 2024") and entry into a deed of amendment to the Top-Up Shareholder Loan Agreement which extends the final draw date from 30 June 2025 through to 31 December 2025 ("Extension Deed of Amendment") - details of which are set out in Appendices 1 and 2 to this announcement, respectively.

Financial summary from the H1 2024 interim results:

·    Group operating loss from continuing operations of £1.4 million in H1 2024 compared to £2.3 million in the six months ended 30 June 2023 ("H1 2023").

·    This reduction of £0.9 million in the operating loss is due to a significant focus on cost saving efforts by the Company which largely commenced in the second half of 2023, together with a lower level of corporate activities than took place during H1 2023.

·    New equity funding executed during May 2024 resulted in gross proceeds received of £1.6 million.

·    The AvantGarde Group S.p.A ("TAG") has continued to make progress with payments to the Group in connection with the amounts owed in line with the various contractual funding arrangements in place between itself and the Company. During H1 2024, a total of £1.2 million was received by the Group from TAG demonstrating TAG's continued performance against its contractual commitments to the Group, albeit on a delayed basis.

Operational Highlights

·   The client company pipeline KPI has increased from £330.7 million as at 19 April 2024 to £391.0 million as at 20 September 2024, this represents the potential value of warehoused goods inventory to be monetised rather than pipeline revenue expected to be earned by the Group.

·    £124.0 million (32%) of the current pipeline KPI number as at 20 September 2024 is supported by signed letters of interest or term sheets, this compares to 9% of the pipeline number reported at 19 April 2024.

·    Growth of the pipeline KPI has been focused on Italian client companies, which comprise 97% of the above pipeline KPI number reported at 20 September 2024.

·    Progress has been made in increasing the efficiency and client experience of our due diligence processes, particularly for those clients with 'generic goods' (finished goods, which these client companies purchase and resell as part of their business model).

·   The monitoring and reporting capabilities of the Group have been developed through improvements made to the monitoring module and the strategic alliance with p-Chip Corporation ("p-Chip").

·    Tools to manage and monitor the processes supporting the trading of inventory using the Supply@ME Platform have also been developed.

·    Discussions have commenced with the Italian neo banking group with regard to a programme of plain-vanilla inventory financing transactions using the Supply@ME Platform, in addition to continued consideration of the delivery of Inventory Monetisation transactions as previously announced on 29 April 2024.

·   The roll out of the security token framework is currently on hold, awaiting further interest from inventory funders interested in digital assets. This is due to the high costs associated with the launch of this type of funding framework .

·    Supply@ME, Banco BPM S.p.A ("BBPM") and the existing client of BBPM (being a leading producer of the famous Italian cheeses within the agrifood supply chain) ("WL Client Company") continue to work closely together towards the delivery of the White-Label transaction announced on 3 January 2024. Delays have occurred whilst the parties collaborate to propose a scalable solution in relation to the remarketing framework. This framework is required to mitigate against the risk of unsold inventory that could potentially arise from IM transactions with client companies within the agrifood supply chains.

·    There have been a number of team changes to date during 2024 which are outlined below.

Summary of H1 2024 financial results

The below unaudited financial summary is taken of the Group's condensed consolidated financial statements for the six month period ended 30 June 2024. The numbers in this summary and the financial review section (included in Appendix 1 to this announcement) have been rounded to the nearest million or thousand as appropriate.

Unaudited consolidated financial summary:

¹ Adjusted operating loss is the operating (loss) from continuing operations before impairment charges and fair value adjustments.

² The discontinued operations reported in the comparative interim six month period ended 30 June 2023 relates to the operations of the TradeFlow Capital Management Pte. Ltd. ("TradeFlow") and its subsidiaries (the "TradeFlow Group"). The disposal of 81% of the TradeFlow operations (the "TradeFlow Restructuring") was completed on 30 June 2023.

Operational Pipeline KPI

The pipeline KPI shown above represents the current potential value of warehoused goods inventory to be monetised rather than pipeline revenue expected to be earned by the Group. As such, this provides a good indicator of the level of demand for the Group's warehoused goods monetisation services. This pipeline represents the value as at the most practical date possible prior to the issue of this interim report (being 20 September 2024). The Company expects that the increase of the pipeline will be reflected in new due diligence activities over the coming months and, accordingly, additional due diligence fees for the Group's subsidiaries. In the case of positive due diligence outcomes, such pipeline would then be expected to move into IM phase at which stage the Group's subsidiaries will be able to charge its IM fees (including origination fees, fees for the usage of the Platform and IM servicing fees).

Entry into the Extension Deed of Amendment

On 28 September 2023, the Company and TAG entered into an English law governed top-up unsecured shareholder loan agreement, pursuant to which TAG (an entity ultimately beneficially wholly-owned and controlled by Alessandro Zamboni, Chief Executive Officer of the Company) agreed to provide the Company with a further facility of up to £3,500,000 to cover the Company's working capital and growth needs up to 30 June 2025 (the "Top-Up Shareholder Loan Agreement").

On 30 September 2024, the Company and TAG entered into an English law governed deed of amendment, which extended the final draw date under the Top-Up Shareholder Loan Agreement from 30 June 2025 to 31 December 2025 (the "Extension Deed of Amendment").

The entry by the Company and TAG into the Extension Deed of Amendment constituted a material related party transaction for the purposes of DTR 7.3 and was, accordingly, voted upon by the independent Directors (excluding Alessandro Zamboni, who, constituted a "related party" (as such term is defined in IFRS)), and the independent Directors consider the material related party transaction in respect of the Extension Deed of Amendment to be fair and reasonable from the perspective of the Company and its Shareholders who are not a related party.

Alessandro Zamboni, CEO, Supply@ME Capital plc, said:

"Over the last six months the team has focused on improving processes, particularly those that have been the focus of discussions with potential inventory funders, for example monitoring and tracking of inventory once it has been monetised and ensuring the operational resilience of the Platform. The alliance with p-Chip is a concrete example. These evolutions will help the business move forward in developing a business line of pure technology which can be offered to banks who wish to provide inventory-based financial products to their clients. The increases to the pipeline KPI number, has been driven largely from Italian client companies and this continues to demonstrate that there is a need for off-balance sheet facilities, in particular for capital-intensive supply chains. I am looking forward to the completion of the first White-Label transaction which will improve the confidence of our various stakeholders in our innovative IM model, and will create the basis for stable partnerships with commercial and investment banks".

- Ends -

For the purposes of UK MAR, the person responsible for arranging release of this announcement on behalf of SYME is Alessandro Zamboni, CEO.

Enquiries

Alessandro Zamboni, CEO, Supply@ME Capital plc, [email protected]

APPENDIX 1 - CEO REPORT AND INTERIM FINANCIAL STATEMENTS

Chief Executive's report

Delivery Model and Platform Updates

Supply@ME provides its innovative fintech Platform for use by manufacturing and trading companies to access IM solutions enabling their businesses to generate cashflow without incurring debt. This is achieved by their existing eligible inventory being added to the Platform and then monetised via purchase by an independent stock (trading) company, who are in turn is funded by a third party inventory funders ("IM Transactions"). 

The Group, through its subsidiaries, provides the following pre and post inventory monetisation services from which it generates revenues:

·    Pre-Inventory Monetisation activities carried out directly with the client company wishing to have their inventory monetised, including due diligence in respect of the client company itself and its potential eligible inventory, and origination of the IM contracts between the client companies and the relevant independent stock company; and

·    Post-Inventory Monetisation activities carried out directly with the relevant independent stock company including the usage of the Supply@ME Platform under a Software as a Service ("SaaS") contract and the support and administration activities such as the monitoring, controlling, and reporting on the inventory monetised. 

The elements of the model can be flexed and adapted based on the requirements of the inventory funders, particularly in the case of White-Label partners. For example the level of due diligence required on a particular client company may vary if it is already a client of a White-Label inventory funder, or they may not require the use of a stock company in a particular structure, in which case some of the post-inventory monetisation fees (such as the SaaS license fee) may be charged directly to the White-Label inventory funder rather than to the relevant independent stock company. 

Pre-Inventory Monetisation Activities

During the first half of 2024, the Supply@ME team have been focused on increasing the efficiency and client experience of our due diligence processes. Inventory assessment of a company with generic goods, once the client company has shared all required data, can now be delivered significantly faster than previously due to process refinements. This has been achieved through using the unique abilities of Supply@ME to analyse a client company's business, and inventory, in a more efficient and targeted manner, to meet the requirements of the Inventory Monetisation business model.

As outlined in the 2023 Annual Report and Accounts, generic goods as referenced here are finished goods which client companies purchase and resell as part of their business model.  

Post Inventory Monetisation Activities

Post Inventory monetisation activities within the Supply@ME business model have also been improved to date during 2024. This has been achieved by the build out of Group's monitoring and reporting capabilities through the development of the monitoring module, the scoping and building out of the formal workflow associated with the trading of inventory using the Platform, and the formation of the strategic alliance with p-Chip[1] which was announced by the Company on 21 May 2024.

The monitoring module is capable of digesting and conducting automated multi-dimension analysis of the inventory data exported from the client company's Enterprise Resource Planning ("ERP") system to allow for comparison to Key Performance Indicators ("KPIs") and Key Risk Indicators ("KRIs"). These KPIs and KRIs are identified by the Group's internal monitoring team using the in-depth knowledge of the client's business model and the eligible inventory items gained during the due diligence process. Additionally, the KPIs & KRIs are agreed with the director of the independent stock company to ensure any specific requirement of the inventory funder are also fulfilled. The overall goal of monitoring activities is to enable Supply@ME to provide data to the stock company director and the inventory funder, if applicable, to make data driven decisions on a monthly basis with respect to the items of inventory already monetised and which the client company may request to be monetised in the future. The Platform is able to provide this data at a detailed level, for example, at the individual stock keeping unit ("SKU") level of inventory.

Another focus during the first half of 2024 is the development of tools to manage and monitor the Supply@ME processes supporting trading of inventory using the Platform. This includes workflows related to the step-by-step processes to deliver the inventory monetisation trading processes. These processes are automated (where possible) to reduce human error and encompass the required tasks to deliver our unique trading services.

Additionally, following the announcement made on 21 May 2024, the Company continues to work with p-Chip to formalise and finalise a strategic alliance aimed at establishing a framework for collaboration between the parties to study the integration of the respective technologies. p-Chip is an innovative identity solutions Company based in Chicago, specialising in the development and application of micro transponder technology for tracking physical products and materials.

The agreement between the two companies aims to deliver, through the co-development of ad hoc intellectual property:

-      the integration of p-Chip's indexing platform (hardware and software) with Supply@ME processes and systems;

-      the development of several use cases, pilot programmes and go-to-market strategies.

The combination of p-Chip's technology with the Platform will further strengthen the role of Supply@ME, as the Platform and inventory service provider within the Inventory Monetisation transactions, by further developing the ability to monitor and inspect, with improved accuracy and new anti-fraud enhancements, each inventory item monetised.

Business Lines Update

Open Market Inventory Monetisation

Open Market IM transactions are those originated by the Group from its internal pipeline and which are funded by the independent stock company through use of funds from third party investors.

On 29 April 2024, the Company announced that it had entered into an agreement with Société Financière Européenne S.A. ("SFE") and an Italian neo banking group aimed at deploying an Inventory Monetisation programme. In particular, the Italian neo banking group, through its investment banking division, acting as arranger and, following the necessary internal approvals, was expected to fund the senior notes and part of the junior notes issued by securitisation special purpose entities formed directly by the bank. Progress has been made regarding the analysis of the IM model and how the securitisation vehicle can fund the programme.

The Italian neo banking group has recently also commenced discussions with the Group regarding first prioritising a programme of plain-vanilla inventory financing transactions using the Supply@ME Platform. This proposal has been made by the banking group considering the expected increase in appetite of some Italian corporates regarding inventory-backed financing facilities that will leverage the Italian legislation pegno non possessorio (the "PNP Regulation"). By taking advantage of this expected increase in demand, the aim is to speed up the first transactions by the neo banking group using the Platform. Following this, the volumes (including both the number of transactions and value of inventory) would be expected to scale and the bank also plans to evaluate the possibility to promote this unique inventory financing facility via their digital marketplaces.

In parallel, the neo banking group will continue to work with Supply@Me with regard to deploying an IM transaction programme as outlined in the RNS of 29 April 2024, however they have recently indicated a preference to prioritise the programme of plain-vanilla inventory financing activities as set out above. More details will be provided in due course.

Additionally, to date during 2024 there has been an increase in funders interested in discussing the potential of leveraging Supply@ME's unique business model to access the relatively untapped asset of inventory. Momentum with these potential inventory funders is supported by the structures and processes established by Supply@ME in particular around the Company's ability to effectively identify and monitor inventory suitable for the requirements of specific inventory funders. Progress in turning this increased interest into formal commitments is taking time due to this being an innovative and a new asset class. Despite this, Supply@ME perceives confidence from potential inventory funders to be growing, albeit that most new inventory funders are interested to first test the inventory monetisation process with an initial single-name transaction or by funding an initial small portfolio with just a few client companies that meet their requirements.

Digital Assets & Tokenisation

On the 5 April 2024 the Company advised the market of the commitment achieved from an asset manager specialised in digital assets to subscribe the first tranche of an overall security token issuance to a value of USD$5 million. The intent being to structure a security token framework with the CH Trading Hub, owned by SFE, which will allow a first security token issuance up to USD$100 million to be subscribed in tranches, largely by institutional investors who are active in the digital asset markets.

Research since this announcement has highlighted that the digital asset market is still in its infancy, with global governance protocols still being developed and regulations evolving. This currently leads to high costs associated with the launch of any new product. As such, at this stage further commitments and subscription to the targeted security token above the initial USD$5 million, are required to further develop this business line and ensure its profitability for all parties involved. The Group will provide further updates as they become available.

White Label

The Group's first White-Label IM agreement with BBPM was announced by the Company on 3 January 2024. The commitment provided by BBPM is to fund an initial IM transaction with an inventory value to be monetised up to €10million of the WL Client Company.

Supply@ME, BBPM and the WL Client Company are still working towards delivery of this programme. The time since the agreement has been signed has been focused on ensuring a sustainable and scalable remarketing solution for the above transaction and, more extensively, to establish a scalable IM product considering the important demand for off balance sheet working capital facilities requested by the capital intensive agrifood supply chain. The establishment of the remarketer for this specific transaction has taken longer than anticipated due to the desire to establish a remarketer relationship with a cheese producer of a similar credit worthiness as the client company.

The Client Company Origination Update

In the 2023 Annual Report and Accounts the pipeline KPI figure was £330.7m as at 19 April 2024, noting that within this number there is one single client that accounts for approximately 57% of the total pipeline. This pipeline KPI represents the potential value of warehoused goods inventory to be monetised rather than pipeline revenue expected to be earned by the Group. As such, it provides an indicator of the level of demand for the Group's warehoused goods monetisation services.

It was also outlined in the 2023 Annual Report and Accounts and the funding update of 28 February 2024, that the Group has been conducting a full review of its pipeline and is progressing with requesting a formal letter of interest ("LOI") from each client company in its pipeline for which there is currently not a signed term sheet in place. This process has commenced in order to allow the Group to focus on those client companies within its pipeline who have signed one of these two documents and to demonstrate a level of commitment from both sides to move forwards with the onboarding process. As at 19 April 2024 approximately 9% of the £330.7m pipeline figures was supported by either signed term sheets or the new signed letter of interest.

For the purpose of this interim report both comparisons will be shared. The total pipeline KPI figure as at 20 September 2024 is £391.0m, this pipeline is comprised of 25 different client companies and it is worthy of note that the single client referenced above now comprises 21% of the total pipeline as at 20 September 2024. The client companies making up the total pipeline KPI figure come from a variety of different industries.

Of the total pipeline KPI number £124.0 million (32%) of the inventory is supported by either a letter of interest or signed term sheet. This demonstrates client companies progressing through the Supply@ME process towards either the signing of a term sheet, commencement of the due diligence process and finally Inventory Monetisation. Consideration should be given to the fact that throughout the sales and onboarding process there maybe reasons client companies do not continue in the process and/or the volume of eligible inventory reduces. For example, they may be unable to supply the detail of ERP inventory data required to support the level of analysis underpinning the Supply@ME due diligence service or, once this ERP data is supplied and analysed, the volume of eligible inventory SKUs may reduce hence decreasing the value of inventory in the Supply@ME pipeline in relation to this client company.

Italy

During the first half of 2024, the main focus of client company origination has continued to be Italy. The eco-system of originator's who look to support their clients with funding solutions is being further developed, especially given the relationships the Company is developing with inventory funders and the preferences they are expressing for client companies with specific types of inventory. Over time this will be further honed and developed.

This focus on Italy is demonstrated by £381.1 million, (97%) of the overall pipeline KPI figure and 100% of the LOIs and term sheets signed, is inventory from Italian companies, as at 20 September 2024. There is breadth to the inventory types and business models within these client companies. As outlined in the 2023 Annual Report and Accounts there are a number of client company business models which are targets for the Supply@ME model.

Generic Goods: Client companies who trade finished goods, so purchase and resell specific goods.

Orders Based Model: Client companies who create or manufacture products "to order".

Maturing Goods: Client companies with goods that mature over time and whose price appreciates or gathers wealth as they mature, typically in the agri-food sector such as cheese, wine or cured meats.

Manufacturing: Where a client company takes raw materials and transforms them into finished goods, Supply@ME has developed a methodology to identify eligible items that includes both the raw materials (before transformation) and the finished goods (after transformation).

UK

The focus on Italy as outlined above has impacted on the value of the UK pipeline. This focus has partly been driven by the interest demonstrated by inventory funders with whom the Company is discussing the model, and balancing their preferences in terms of client companies to fund with the constraints Supply@ME has around costs. As such, the Group has needed to be strategic and specific in its focus. As such, the UK pipeline as at 20 September 2024 currently comprises of less than 1% of the overall pipeline number.

The ability for Supply@ME to deliver in the UK has been advanced through development of the UK compliant standard legal framework and the establishment of the UK based stock company.

Once a larger amount of the Italian pipeline has been monetised, it is anticipated that interest from UK based companies will increase.

Rest of Europe

The Group is able to deliver Inventory Monetisation transaction in France, facilitated through development of the French compliant standard legal framework and the establishment of a French based stock company. Of the overall pipeline KPI number as at 20 September 2024, £8.4 million (2%) of the inventory to be monetised is in France. When there is an inventory funder identified with appetite for this exposure, client company and the associated return, focus will return to progressing with this client.

As opportunities to expand into other areas of Europe arise, Supply@Me will consider setting up the necessary frameworks to allow the IM model to be used in other European jurisdictions.

Team changes

During the first half of 2024 there has been a reduction in the Group's overall cost base, some of which has been supported by reduced staff costs. The departure of Nicola Bonini, previous Group Head of Origination, in January 2024 has led to an increase in the prioritisation of generating a strong sustainable client base in Italy, given this is where the members of our sales and marketing team are currently based. A greater focus has been placed on the originator eco-system and support of an external contractor to build the pipeline, which assists in the cash constrained environment as originators are rewarded on a commission basis.

Stuart Nelson has retired on 30 September 2024. His responsibilities as Head of Enterprise Risk Management have been redistributed within the Leadership Team. This includes the other members of the Leadership Team taking responsibility for risk in their respective specialist areas, with the risk being assessed and reviewed regularly, including changes to risk levels, along with current and potential mitigants.

On 30 September 2024, Enrico Camerinelli will depart the board of directors of the Company (the "Board"). Enrico has been a valuable Non-Executive Director since March 2020 and departs the Board in order to be free to pursue other interests and opportunities. The Board does not intend to replace Enrico at this time in view of maintaining control over costs and considering that after Enrico's departure the Board will still consist of a majority of independent directors. An additional change made to the governance procedures of the Company is Alexandra Galligan joining the Disclosure Committee as a result of feedback from shareholders at the 2023 Annual General Meeting.

Corporate Funding

Details of the progress of the TAG funding and new equity funding received during the six month period 30 June 2024 can be found in the Financial Review section of this interim report.

Outlook

The goal for the Group is to start generating a greater level of consistent revenue flow. In the coming months, Supply@ME will look to finalise the first transaction with BBPM aligned to the White-Label go to market strategy. The discussions with the Italian neo banking group with regard to initial inventory financing transactions being delivered using the Supply@ME Platform will continue with the aim of further progress with this banking group during the remainder of 2024. It is expected that the Italian client company pipeline will start to be serviced through the increased interest of inventory funders set out above.

Financial review

The Group's unaudited condensed consolidated interim financial statements for the six month period ended 30 June 2024 ("H1 2024") have been prepared in line with International Accounting Standard IAS 34 ("Interim Financial Reporting"). In the comparative period for the six month ended 30 June 2023 ("H1 2023"), the operations of TradeFlow Capital Management Pte. Limited ("TradeFlow") continued to be classified as discontinued operations and assets held for resale in line with the requirements of IFRS 5 ("Non-current Assets Held for Sale and Discontinued Operations") from 1 January 2023 until the date of completion of the disposal of the Company's 81% stake in the ownership of TradeFlow (the "TradeFlow Restructuring"), being 30 June 2023.

Revenue from continuing operations

The table above provides a break down of the Group's revenue from Inventory Monetisation activities during H1 2024. Revenue is recognised in accordance with IFRS 15 ("Revenue from Contracts with Customers") and more details on the Group's revenue recognition policies can be found in the note 2 to the Group's consolidated financial statements for the year ended 31 December 2023 (the "2023 Annual Report").

During H1 2024, the Group recognised £39,000 (H1 2023: £77,000) of Inventory Monetisation revenue, which it split 33% (H1 2023: 52%) related to due diligence fees, and the remaining 67% (H1 2023: 48%) relating to Inventory Monetisation fees.

In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised the due diligence revenues when the due diligence services have been delivered and the Group's performance obligation has been satisfied. During H1 2024, the Group has continued to carry out, and charge for due diligence activities, and the £13,000 recognised as revenue reflects the value of those due diligence activities completed during H1 2024 (H1 2023: £40,000).

Following the announcement of the first Italian IM transactions during 2022 and 2023, which were facilitated using the Group's Platform, the Group recognised Inventory Monetisation fees of £26,000 during H1 2024 (H1 2023: £26,000). These fees related to the following activities:

1)   IM Platform usage fees - usage of the Group's IM Platform, under a Software as a Service ("SaaS") contract, by the independent stock (trading) company to facilitate the purchase of the inventory from the client company. In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised these revenues over the time period they related to; and

2)   IM service fees - the support and administration activities, such as the monitoring of the inventory purchased, that the Group performs in connection with the use of the Group's IM Platform. In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised these revenues over the time period they related to.

There were no origination fees recognised during H1 2024 (H1 2023: £11,000 which were also included in the Inventory Monetisation fee category in the table above).

These revenues are expected to grow in future accounting periods in line with expected growth in both the number of IM transactions that are facilitated using the Group's IM Platform and, the quantum of inventory monetised by the independent stock (trading) companies per transaction, increases.

Operating loss from continuing operations before impairment charges and fair value adjustments

During H1 2024, the Group has continued to focus on improving the processes and workflows required for due diligence, monitoring and reporting of the inventory monetised over the Platform, as well as to support the sale and purchase of the inventory using the Platform. A significant amount of time and effort has also been spent in discussions and collaborations with BBPM and the WL Client Company in order to finalise the framework needed to deliver the Group's first White-Label IM transaction and wider White-Label go-to-market strategy. In addition, the Group has been working with a number of different potential inventory funders who have shown interest in the Group's business model and to gain a detailed understanding / explore options for funding this new asset class. These activities have been set out in more detail within the Chief Executive's report section of this interim report.

The Group recorded an operating loss from continuing operations before impairment charges and fair value adjustments for H1 2024 of £1,339,000 (H1 2023: £1,981,000 loss). The major contributing factors that resulted in the reduction of the operating loss from continuing operations before impairment charges and fair value adjustments of £642,000 are described below:

·    an aggregate decrease in the loss from gross profit and administration expenses of £893,000 from £1,473,000 recognised in H1 2024, compared to £2,366,000 recognised in the H1 2023. This decrease largely resulted from focused cost saving efforts that were implemented during 2023, in particular in the second half of the year when the Group experienced cash flow pressures as a result of delayed contractual funding amounts due to the Group. In particular:

-      the professional and legal fees reduced by £766,000 during H1 2024 compared to H1 2023 as management made an effort to bring certain activities in house, together with the fact that there were less corporate activities undertaken compared to the same period in 2023, which saw the completion of the TradeFlow Restructuring on 30 June 2023, fund raising activities, and the issue of two supplementary prospectus during the first half of 2023;

-      staff costs reduced by £40,000 during H1 2024 compared to H1 2023 as certain staff members who left during the period were not replaced; and

-      contractor costs reduced by £153,000 in H1 2024 compared to H1 2023 as the Group ended certain agreements with contractors during the second half of 2023 as the specific activities that were being worked on came to an end.

-      When the Group has sufficient cash balances in the future, management will look to increase some of the above costs again in order to support and drive growth and expansion.

-      The decreases set out above were partially higher interest and penalty costs incurred across the Group due to late payments being made as a result of the delayed revenue generation and contractual funding being received by the Group.

·    A decrease of £251,000 in other operating income recognised during H1 2024 of £134,000 compared to £385,000 recognised in H1 2023. The explanation for this decrease is set out as follows:

-      The majority of the H1 2023 other operating income arose as a result of a settlement agreement reached with an existing supplier to reduce the total amount payable by the Group in exchange for payment of a lower agreed amount by a specific date. The difference in the previous amount owed and the agreed final settlement amount resulted in a gain recognised in the income statement of £376,000 in this period. There was no similar balance recorded in H1 2024; and

-      Instead, the other operating income recognised in H1 2024 related to £134,000 of interest income accrued from late payments received from TAG in respect of the various contractual funding arrangements currently in place with the Group. These funding arrangements with TAG are set out in more detail in notes 3 and 24 to the interim financial statements that form part of this interim report.

Impairment charges and fair value adjustments from continuing operations

The impairment charges from continuing operations of £31,000 recognised during H1 2024 (H1 2023: £349,000) relate to the impairment of the Group's internally developed IM platform as at 30 June 2024 in line with the requirements of IAS 36 ("Impairment of Assets"). This followed the conclusion that indicators of impairment were present, which included the losses that continued to be generated by the assets held by the Group's Italian operating subsidiaries. In line with the going concern statement, set out in note 4 to the unaudited condensed consolidated interim financial statements for the six month period ended 30 June 2024, there is currently a material uncertainty with respect to both the future timing and growth rates of the forecast cash flows arising from the use of the internally developed IM Platform intangible asset. As such, the Directors have prudently decided to continue to impair the full carrying amount of this asset of £31,000 as at 30 June 2024 (31 December 2023: £349,000). The reduction in the impairment charges in H1 2024 compared to H1 2023, is consistent with the general cost control being exercised by the Group, particularly since the second half of 2023, and the fact that no contractual frameworks for new geographical regions have needed to be developed during the first six months of 2024 together with the standard Italian contractual framework now being in a more stable state.

The fair value adjustment to the investment in TradeFlow of £47,000 recognised during H1 2024 (H1 2023: £nil) reflects the worsening of the net liability position of TradeFlow from 31 December 2023 to 30 June 2024, being the date at which the last fair value adjustment was recorded, and the current period end balance sheet date of 30 June 2024. The quantum of the fair value adjustment has been determined with reference to the change in value of the net liabilities of TradeFlow between these two dates.

Taxation

The income tax credit of £97,000 recognised in H1 2024 represents a Research & Development Tax Credit claimed by the Company under the UK SME tax credit scheme during the first half of 2024, but which was received in cash post 30 June 2024. This tax credit related to the financial year ended 31 December 2022 and the related claim was submitted and finalised in the six month period ended 30 June 2024. The Company is in the process of assessing a further claim related to the financial year ended 31 December 2023, however, as this is yet to be finalised and submitted the impact has not been recognised in these interim financial statements for the six month period ended 30 June 2024.  

The income tax expense for the period ended 30 June 2023 primarily represents a tax charge of £21,000 arising in respect of the gain on settlement of outstanding creditor balance that has been referred to above.

Discontinued Operations included in H1 2023

As detailed above, the TradeFlow operations have been classified as discontinued operations and assets held for resale in line with the requirements of IFRS 5 ("Non-current Assets Held for Sale and Discontinued Operations") in the comparative six month period ended 30 June 2023. Following the date of completion of the TradeFlow Restructuring, being 30 June 2023, the Company's ownership in TradeFlow reduced from 100% to 19%. As a result, from this date, the results of the TradeFlow operations are no longer included within the Group's consolidated financial income statement and the assets and liabilities of TradeFlow, including the intangible assets acquired on the acquisition of TradeFlow in July 2021, are no longer included with the consolidated assets and liabilities of the Group. 

Instead, following 30 June 2023, the fair value of the remaining 19% ownership in TradeFlow is recognised as an investment in the Group's balance sheet. As at 30 June 2024, this remaining investment in TradeFlow had a fair value of £237,000 (31 December 2023: £284,000). This decrease of £47,000 has been detailed above.

Details of the results and net cash flows from the TradeFlow operations which were included in the comparative six month period ended 30 June 2023 are set out in detail in note 26 to the 2023 Annual Report and Accounts. Details of the profit on disposal of the 81%  of TradeFlow as at 30 June 2023 are set out in note 22 to the condensed consolidated interim financial statements for the six month period ended 30 June 2024.

Contractual funding facilities agreed with TAG

During H1 2024, TAG continued to perform against its contractual funding commitments to the Group, albeit on a delayed basis. A total of £1,220,000 was received by the Group from TAG during H1 2024 including:

·    The remaining £550,000 that was due to the Company in respect of the TAG unsecured working capital facility that was initially agreed on 28 April 2023, and subsequently amended on 30 June 2023 (H1 2023: £nil). Following this, the full amount of £800,000, that had been drawn down by the Company during 2023, had been fulfilled by TAG. This facility was repaid by the Company in March 2024, through the issue of 1,500,000,000 new ordinary shares issued to TAG in exchange for the repayment of the principal amount due. These new ordinary shares issued had a fixed subscription price of 0.053 pence per share; and

·    Amounts totalling £670,000 that were due to the Company in respect of the £2,000,000 receivable that was assumed by TAG as a result of the TradeFlow Restructuring completed on 30 June 2023 (H1 2023: £nil). Of this amount, £570,000 was received in cash and the remaining £100,000 was received by way of offset against amounts owed by the Group to TAG including an amount of £58,000 that had been accrued as at 31 December 2023. It should be noted that the amounts offset were based on the total invoice amount including VAT, compared to the amounts accrued and recognised as expenses which exclude VAT.

It should be noted that late payment interest is also still due to be paid by TAG. The total late payment interest due from TAG which was outstanding as at 30 June 2024 was £136,000.

The delays in the payments due to the Group from TAG has continued to put cash flow pressures on the Group to date during 2024. The Board is continuing to closely monitor the payments received from TAG and the representations made to them by TAG, via Alessandro Zamboni. These representations include information as to the expected timing of the continued future fulfilment of the amounts due to the Group from TAG under the contractual funding commitments currently in place, and the actions that TAG itself is putting in place to allow them to demonstrate their ongoing commitment to support the Company and to provide the contractual payments. The delayed contractual payments resulted from TAG experiencing delays in receiving expected funding.

New Equity Subscription Agreement 

In addition to the TAG funding outlined above, on 14 May 2024, the Company entered into a new equity subscription agreement with a UK investment firm, pursuant to which the UK investment firm committed to subscribe for 9,000,000,000 new ordinary shares of nominal value £0.00002 each (the "Subscription Shares"), on behalf of its private clients, at 0.01725 pence per Subscription Share (the "New Equity Subscription Agreement"). The issue of the Subscription Shares raised gross proceeds of £1,552,500 (or £1,428,300 net of an 8% commission charge). These Subscription Shares were admitted to standard segment of the Official List of the Financial Conduct Authority and to trading on the main market for listed securities of the London Stock Exchange on 28 May 2024.  

Cash flow

The Group increased its net cash balance (prior to any foreign exchange differences on consolidation) by £399,000 during H1 2024 (H1 2023: £465,000 decrease) due to a combination of the following cash inflows and outflows:

·    cash inflow of £1,429,000, net of commission, during H1 2024 as receipts from the issue of new ordinary shares during H1 2024 under the New Equity Subscription Agreement referred to above;

·    inflows of £670,000 during H1 2024 from TAG in relation to the repayment of the outstanding cash consideration that was due, and which had been assumed by TAG, as a result of the TradeFlow Restructuring; and

·    cash inflows from long-term borrowing £447,000, net of repayments, predominantly due to amounts received under the amended TAG unsecured working capital facility agreed during 2023, less the cash repayments made during H1 2024 in relation to the other long-term bank borrowings held by the Group.

These net cash inflows were then offset by the following items:

·    net outflows from operating activities of £2,132,000 (H1 2023: £2,143,000 net outflow); and

·    net outflows due to net movements in non-current assets of £15,000 during H1 2024, being the increased investment in the Group's IM Platform of £34,000 (H1 2023: £388,000) offset by the write off of other non-current assets of £19,000 (H1 2023: £nil);

Net liabilities

As at 30 June 2024 net liabilities were £2,792,000 (31 December 2023: net liabilities of £3,807,000).

The £1,015,000 decrease in net liability position at 30 June 2024 compared to 31 December 2023 is due to the following:

·    the increase in cash and cash equivalents of £399,000 during H1 2024 as a result for the factors referred to in the cash flow section above;

·    an increase in the trade and other receivables of £138,000 as at 30 June 2024. The largest single movement related to the £97,000 Research & Development Tax Credit claimed by the Company under the UK SME tax credit scheme during the first half of 2024, but which was received in cash post 30 June 2024;

·    a decrease in trade and other payables of £730,000 as at 30 June 2024, largely as a result of an effort to settle a number of the balances outstanding at 31 December 2023 using the cash inflows received during H1 2024; and

·    A decrease in long-term borrowings of £370,000 as at 30 June 2024, due to the repayment of the TAG unsecured working capital facility during H1 2024, the balance of which was £250,000 as at 31 December 2023, and the continued repayment of the long-term loan facility in place with Banco BPM S.p.A via the Group's subsidiary, Supply@ME Technologies S.r.l.

These increases in assets / decreases in liabilities compared to 31 December 2023 were then offset by:

·    the decrease in the receivable from related party of £563,000 as at 30 June 2024 compared by 31 December 2023, largely due to the repayments totalling £670,000 received from TAG during H1 2024 in relation to the outstanding cash consideration that was due, and which had been assumed by TAG, as a result of the TradeFlow Restructuring. This was partially offset by the increase in interest receivable from TAG as a result of continued late payments against the contractually agreed payment dates;

·    the decrease in the fair value of the remaining 19% investment in TradeFlow of £47,000 as at 30 June 2024. This fair value adjustment reflects the worsening of the net liability position of TradeFlow from 31 December 2023 to 30 June 2024; and

·    other small movements which net to an overall increase in net liabilities of £12,000 as at 30 June 2024.

Going Concern

The Board's assessment of going concern and the key considerations thereto are set out in the note 4 to the unaudited condensed consolidated interim financial statements for the six month period ended 30 June 2024.

Related Parties

Note 24 to the unaudited condensed consolidated interim financial statements for the six month period ended 30 June 2024 contains details of the Group's related parties.

Subsequent events

Note 25 to the unaudited condensed consolidated interim financial statements for the six month period ended 30 June 2024 contains details of all material subsequent events post 30 June 2024.

Principal Risks and Uncertainties

Principal risks and uncertainties which could have a material impact on the long-term performance of the Company and its subsidiaries were set out in the Annual Report and Accounts for the year ending 31 December 2023 and remain valid at the date of this report.

The impact, likelihood, vulnerability and speed of onset of each risk is regularly reviewed, scored and ranked. The results of this assessment of current risks and changes are then reported to and discussed at the Audit Committee and reported to the Board, who have ultimate responsibility in this area.

The risks and uncertainties at the date of this report where the impact continues to be assessed as 'major' and the likelihood of the event occurring is assessed as either 'possible', 'likely' or 'frequent' were:

Strategic Risk

Future development and strategy 

It has been assessed that there is no change to the classification of this risk since the 2023 Annual Report and Accounts. As the business model becomes more established it is expected that this risk will reduce. Since the 2023 Annual Report and Accounts there has been continued interest in the IM model from both client companies seeking novel working capital solutions and inventory funders interested in a new asset class.

Inventory funding Risk

It has been assessed there is no change to the classification of this risk since the 2023 Annual Report and Accounts. Funders interested in providing capital for inventory monetisation transactions is crucial to the Supply@ME's business model. Despite there being no concrete announcements in this area the team are in conversations with multiple inventory funders as outlined elsewhere in this interim report.

Financial Risk

Group funding risk

The ability for the Company to continue to fund its operations whilst on its journey to break even and beyond remains a key risk, and a risk which it is viewed has increased since the 2023 Annual Report and Accounts. Required increases in revenue flow are not yet present and there have been significant delays in the flow of funding from the TAG contractual funding facilities that are currently in place. In addition, the current share price makes it more challenging to find meaningful and prudent funding options for the Group at this time.

Additionally, it has also been assessed that the following risks have increased in either their likelihood of occurrence or their potential impact on the business since the publication of the 2023 Annual Report and Accounts:

Commercial legal risk and corporate legal and regulatory risk have both increased due to the cost constrained environment that the Group is currently operating within, leading to reduced use of external lawyers. Once the funding position of the Company improves this risk is expected to reduce again.

Talent and diversity risk has increased, there have been some senior departures to date during 2024 which have been outlined in the Team Changes section of this interim report above. Also, the cost constrained environment is impacting the tools available to reward and retain the current employees. However, this view is slightly tempered with the level of commitment to the Group of the remaining team and an increase in engagement scores in the most recent employee engagement survey.

It is considered that business continuity risk has reduced due to a significant amount of work conducted in this area during H1 2024.

Directors Responsibility Statement

The Directors are responsible for preparing the unaudited condensed consolidated interim financial statements for the six month period ended 30 June 2024 in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge, the unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 ("Interim Financial Reporting"), as issued by the International Accounting Standards Board as contained in UK-adopted International Financial Reporting Standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, or the undertakings included in the consolidation as a whole, as required by DTR 4.2.4R of the FCA's Disclosure Guidance and Transparency Rules ("DTRs").

The Directors further confirm that the unaudited condensed consolidated interim financial statements include a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R namely:

·    an indication of important events that have occurred during the six month period ended 30 June 2024 and their impact on the condensed consolidated interim financial statements for this period, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·    material related party transactions in the six month period ended 30 June 2024 and any material changes in the related party transactions described in the last annual report

In accordance with the DTR Rule 4.2.9(2)R, the Directors confirm that these unaudited interim condensed consolidated financial statements have not been audited or reviewed by auditors pursuant to the Financial Reporting Council guidance on Review of Interim Financial Information.

The current directors are listed below all of whom were directors during the whole of the period, except as noted:

Albert Ganyushin

Alessandro Zamboni

Alexandra Galligan

David Bull

Enrico Camerinelli (resigned 30 September 2024)

By Order of the Board

Alessandro Zamboni

Chief Executive Officer

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2024 

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

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