Notes to the Parent Company Statement of Cash Flows

For the year ended 31 May 2023

A. Cash generated from operations

The reconciliation of profit/(loss) for the year to cash generated from operations is set out below: 2023 2022 £'000 £'000
Profit/(loss) for the year			1,582		(126)
Adjustments for:
Depreciation			402		115
Amortisation of intangible assets			276		171
Share based payments			213		120
Net interest costs			782		556
Tax credit			(1,903)		(754)
			1,352		82
Working capital movements
Increase in inventories			(89)		(185)
Increase in trade and other receivables			(4,077)		(176)
Increase/(decrease) in trade and other payables			2,816		(295)
Decrease in provisions			-		(1,174)
Cash used in operations			2		(1,748)
B. Analysis of net debt
	At 1 June 2021	Cash flow		Non-cash changes		At 31 May 2022
	£'000	£'000		£'000		£'000
Loans	(5,799)	768		65		(4,966)
Lease liabilities	(203)	50		25		(128)
Liabilities arising from financing activities	(6,002)	818		90		(5,094)
Cash and cash equivalents	1,072	4,583		-		5,655
Net debt	(4,930)	5,401		90		561
	At 1 June 2022 £'000	Cash flow £'000		Non- cash changes £'0000		At 31 May 2023 £'000
Loans	(4,966)	832		(33)		(4,167)
Lease liabilities	(128)	324		(2,446)		(2,250)
Liabilities arising from financing activities	(5,094)	1,156		(2,479)		(6,417)
Cash and cash equivalents	5,655	(2,752)		-		2,903
Net debt	561	(1,596)		(2,479)		(3,514)

Notes to the Consolidated Financial Statements

For the year ended 31 May 2023

1. General information

EnSilica plc is a public limited company incorporated in the United Kingdom, listed on the Alternative Investment Market ('AIM') of the London Stock Exchange. The Company is domiciled in the United Kingdom and its registered office is 100 Park Drive, Milton Park, Abingdon, OX14 4RY. The consolidated financial statements comprise the Company and its subsidiaries (together referred to as the 'Group').

The Company is a leading fabless design house focused on custom ASIC design and supply for OEMs and system houses, as well as IC design services for companies with their own design teams. The Company has world-class expertise in supplying custom RF, mmWave, mixed signal and digital ICs to its international customers in the automotive, industrial, healthcare and communications markets. The Company also offers a broad portfolio of core IP covering cryptography, radar and communications systems. EnSilica has a track record in delivering high quality solutions to demanding industry standards. The Company is headquartered near Oxford, UK and has design centres across the UK, India, Brazil and a sales office in Germany.

In July 2022 the Company launched a subsidiary in Munich, Germany that has the purpose of acting as the sales office to further enhance and capitalise on the Group's opportunities.

Basis of preparation

The consolidated financial statements of the Company have been prepared in accordance with UK-adopted International Accounting Standards ("IFRS") as issued by the International Accounting Standards Board (IASB) and the Companies Act 2006.

The financial information has been prepared under the historical cost convention unless otherwise specified within these accounting policies. The financial information and the notes to the financial information are presented in thousands of pounds sterling ('£'000'), the functional and presentation currency of the Group, except where otherwise indicated.

The principal accounting policies adopted in preparation of the financial information are set out below. The policies have been consistently applied to all periods presented, unless otherwise stated.

Judgements made by the Directors in the application of the accounting policies that have a significant effect on the financial information and estimates with significant risk of material adjustment in the next year are discussed in note 2.

2. Accounting policies

Going concern

As part of its normal business practice, the Company regularly prepares both annual and longer-term plans which are based on the directors' expectations. The assumptions around project sales, staffing and purchases are based on management's expectations and are consistent with the Company's experience since June 2022. As at 31 May 2023 the Company's financing arrangements consisted of a loan of £2.7 million from SME Alternate Financing and a Coronavirus Business Interruption Loan (CBIL) for £1.7 million used to mitigate delays caused by Covid-19. The Company held a cash balance of £3.1 million at that date. The possible continuing and future impact of the Russia/Ukraine war on the Company has been considered in the preparation of the financial statements.

The Directors are satisfied that the Company has adequate resources to continue in business for the foreseeable future (being a minimum period of 12 months from the date of signing the balance sheet), and accordingly continue to adopt the going concern basis in preparing the accounts.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 May 2023. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

· Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

· Exposure, or rights, to variable returns from its involvement with the investee

· The ability to use its power over the investee to affect its returns generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

- The contractual arrangement(s) with the other vote holders of the investee

- Rights arising from other contractual arrangements

- The Group's voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

Revenue recognition

Revenue, in accordance with IFRS15 is recognised at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring control of goods or services to a customer. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty.

The following principles are applied to each area of revenue as set out below:

· Identify the contract with a customer

· Identify the performance obligations in the contract

· Determine the transaction price

· Allocate the transaction price to the performance obligations in the contract

· Recognise revenue when the Company satisfies performance obligations

Services

Design services are provided specifically for each customer and may be either consultancy services only in respect of IC design or design services as part of a design and supply model involving a contract for the initial non-recurring engineering costs of development (NRE). When the outcome of a contract can be measured reliably, the Company recognises both income and costs over a period of time by reference to the percentage of completion of the contract as this is considered the most appropriate measurement of performance of the obligations. If the outcome cannot be reliably measured, all costs are expensed, and revenue is only recognised to the extent that it is probable that costs are recoverable.

Sale of goods

Revenue from the sale of goods is recognised at a point in time when control over the goods has passed to the buyer, usually on dispatch of the goods when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity as the Company fulfils its performance obligation.

Licensing and similar income

Income in respect of a licensing arrangement for the use of IP is recognised on a straight line basis over the period of the agreement or where typically linked to the delivery of design services, recognised by reference to the underlying arrangement and delivery of services.

Invoicing of revenue is undertaken in accordance with the terms of the agreement with the customer. If amounts recognised in respect of revenue for completed performance obligations have not been invoiced at the financial position date, accrued income is recognised. When an invoice is due for payment at the statement of financial position date but the associated performance obligations have not been fulfilled the amounts due are recognised as trade receivables and a deferred income contract liability is recognised for the value of the performance obligations that have not been provided.

Employee benefits

The EnSilica Group operates a defined contribution pension scheme. Contributions are recognised in the Statement of Comprehensive Income in the year in which they become payable in accordance with the rules of the scheme.

Short term employee benefits including holiday pay are recognised as an expense in the period in which the service is rendered.

Share based payment

The Company operates an equity-settled share-based compensation plan in which the Company receives services from employees as consideration for share options. The fair value is established at the point of grant using an appropriate pricing model and then the cost is recognised as an expense in administrative expenses in the statement of comprehensive income, together with a corresponding increase directly in equity over the period in which the services are fulfilled. This is the estimated period to vesting in respect of employees. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest.

Taxation

The taxation expense or credit comprises current and deferred tax recognised in the profit for the financial period or in other comprehensive income or equity if it arises from amounts recognised in other comprehensive income or directly in equity. Current tax is provided at amounts expected to be paid (or recovered) in respect of the taxable profits for the period using tax rates and laws that have been enacted or substantively enacted by the reporting date.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset and where the deferred tax balances relate to the same taxation authority.

Non-recurring items

The Company classifies certain one-off charges or credits that have a material impact on the Company's financial results as 'non-recurring items'. These are disclosed separately to provide further understanding of the financial performance of the Company.

Government grants

Grants are accounted under the accruals model, and grants of a revenue nature are recognised in the Statement of Comprehensive Income in the same period as the related expenditure. Government grants relate to the receipt of Coronavirus Job Retention Scheme income, to innovation grants and to the interest free period on Coronavirus Business Interruption loans.

Foreign exchange

Transactions denominated in foreign currencies are translated into sterling at the rates ruling on the date of the transaction. Monetary assets or liabilities denominated in foreign currencies at the Statement of Financial Position date are translated at the rate ruling on that date and all translation differences are charged or credited in the Statement of Comprehensive Income.

On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in a separate equity reserve.

Intangible assets - research and development expenditure

Intangible assets are represented by capitalised development costs including proprietary intellectual property developed by the business for both its own use and for licensing to third parties.

An internally generated intangible asset arising from development (or the development phase) of an internal project is recognised if, and only if, all of the following have been demonstrated:

· It is technically feasible to complete the development such that it will be available for use, sale or licence;

· There is an intention to complete the development;

· The method by which probable future economic benefits will be generated is known;

· The Company is able to sell or use the product;

· There are adequate technical, financial and other resources required to complete the development;

· There are reliable measures that can identify the expenditure directly attributable to the project during its development.

The amount recognised is the expenditure incurred from the date when the project first meets the recognition criteria listed above. Where the above criteria are not met, development expenditure is charged to the consolidated income statement in the period in which it is incurred. The capitalisation of development costs is subject to a degree of judgement in respect of the viability of new technology and know-how, supported by the results of testing and customer trials and by forecasts for the overall value and timing of sales which may be impacted by other future factors which could impact the assumptions made.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and impairment losses. An impairment review is undertaken annually, and amortisation commences once management consider that the asset is available for use, i.e., when it is judged to be in the location and condition necessary for it to be capable of operating in the manner intended by management and the cost amortised over the estimated useful life of the know-how based on expected customer product cycles and lives. This is typically 5 to 10 years, and the charge is reported within administrative expenses in the consolidated statement of comprehensive income. During the year under review the policy to charge amortisation was changed to match the level of revenue. This method allocated the charge in a more representative manner, with larger charges made in years where most revenue was recognised, but still over the same time period. The prior year charge would not have been materially affected by this change, and hence no adjustment was made to reflect this.

As part of the impairment review, consideration is also made regarding the validity of impairment provisions made in previous periods, and to whether the provision is still warranted in the period under review.

Research expenditure is recognised as an expense in the period in which it is incurred.

Financial assets

Financial assets, including trade and other receivable balances are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Such assets are subsequently carried at amortised cost using the effective interest method. Cash and cash equivalents comprise cash held at bank which is available on demand.

The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. The Company measures loss allowances at an amount equal to lifetime expected credit loss (ECL), which is estimated using past experience of the Company's historical credit losses experienced over the three year period prior to the period end. Historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Company's customers, such as inflation rates. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.

To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and ageing. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.

The Company recognises loss allowances for expected credit losses on financial assets measured at amortised cost to the extent that these are material. The Company has determined that there is no material impact of ECLs on the financial information.

Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Financial liabilities

Financial liabilities, including trade and other payables and bank borrowings are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.

Borrowings are initially stated at the fair value of the consideration received after deduction of wholly attributable issue costs. Borrowings are subsequently stated at amortised cost using the effective interest method.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Leases

The Company as lessee

The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.

The incremental borrowing rate depends on the term, currency and start date of the lease and is determined based on a series of inputs including: the risk-free rate based on government bond rates; a country-specific risk adjustment; a credit risk adjustment based on bond yields; and an entity-specific adjustment when the risk profile of the entity that enters into the lease is different to that of the Company and the lease does not benefit from a guarantee from the Company.

Lease payments included in the measurement of the lease liability comprise:

· Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable.

· Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date. The amount expected to be payable by the lessee under residual value guarantees.

· The exercise price of purchase options, if the lessee is reasonably certain to exercise the options.

· Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease liability is presented as a separate line in the consolidated statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

· The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

· The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

· A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The Company did not make any such adjustments during the years presented.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Company incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

Variable rents that do not depend on an index or rate are not included in the measurement the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line "Other expenses" in profit or loss.

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Company has not used this practical expedient. For contracts that contain a lease component and one or more additional lease or non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

Property, plant and equipment

Property, plant and equipment assets are stated at cost less depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment assets at rates calculated to write off the cost of each asset on a straight line basis over its expected useful life, as follows:

Asset class Depreciation method rate

Leasehold improvements Over the period of the lease

Computer Software 5 years straight line on cost

Office Equipment 4 years straight line on cost

Computer Equipment 3 years straight line on cost
Inventories

Inventories are valued at the lower of purchase cost and net realisable value, after due regard for any slow moving items. Net realisable value is based on selling price less anticipated costs to completion and selling costs. Cost is based on the cost of purchase on a weighted average basis. Work in progress and finished goods include labour and attributable overheads.

At each reporting date, inventories are assessed for impairment. If inventory is impaired, the carrying amount is reduced to its net realisable value. The impairment loss is recognised immediately in the Statement of Comprehensive Income.

Share capital and reserves

Financial instruments issued by the company are treated as equity only to the extent that they do not meet the definition of a financial liability. The parent company's ordinary shares are classified as equity instruments.

The cumulative currency differences reserve represents translation differences in respect of the net assets of overseas subsidiaries.

Retained earnings comprises opening retained earnings and total comprehensive income for the year, net of dividends paid.

New or revised accounting standards and interpretations

At the date of authorisation of these financial statements, the company has not early adopted the following amendments to Standards and Interpretations that have been issued but are not yet effective:

Standard or Interpretation	Effective for accounting periods commencing on or after
Annual improvements to IFRS standards 2018-2020: Amendments to IAS 1: Classification of Liabilities as Current or Non-Current	01 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies	01 January 2023
Amendments to IAS 8: Definition of Accounting Estimates	01 January 2023
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction	01 January 2023

The application of these standards is not expected to have a material impact on the amounts reported in these financial statements.

Critical accounting estimates and judgements

The preparation of the financial information under IFRS requires the use of certain critical accounting assumptions and requires management to exercise its judgement and to make estimates in the process of applying the Company's accounting policies.

Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable in the circumstances. The key estimates and judgements used in the preparation of this financial information that could result in a material change in the carrying value of assets or liabilities within the next twelve months are as follows:

Intangible assets - capitalisation, impairment and amortisation of development expenditure

Judgement

The capitalisation of development costs is subject to a degree of judgement in respect of the timing when the commercial viability of new technology and know-how is reached, supported by the results of testing and customer trials, and by forecasts for the overall value and timing of sales which may be impacted by other future factors which could impact the assumptions made. In making their judgements, the Directors considered the carrying values that are shown in note 12.

Estimation

Amortisation commences once management consider that the asset is available for use, i.e. when it is judged to be in the location and condition necessary for it to be capable of operating in the manner intended by management and the cost is amortised over the estimated useful life of the know-how based on experience of and future expected customer product cycles and lives. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments and economic utilisation.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm's length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles with indefinite useful lives recognised by the Group. The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and further explained in Note 12.

Revenue

Estimation

In accordance with the policy on revenue recognition, management are required to judge the percentage of completion of the contract in order to recognise both income and costs. The overall recognition of revenue will depend upon the nature of the project and whether it is billed on a time and materials basis, or, on a project milestone basis where invoices can only be raised on completion of specific, pre-agreed objectives. The company maintains complete and accurate records of employees' time and expenditure on each project which is regularly assessed to determine the percentage completion, and thereby whether it is appropriate to recognise any profits.

The level of management judgement is based on a strong track record of successful completion of projects and accurate forecasting of the time required together with the hindsight period available to support the balance sheet date assumptions made.

Adjusting items

The Company has chosen to present an adjusted measure of profit and earnings per share, which excludes certain items which are separately disclosed due to their size, nature or incidence, and are not considered to be part of the normal operating costs of the Company. These costs include IPO preparation costs. The Company believes adjusting for these items provides additional useful information to users of the financial statements to enable a better understanding of the Company's underlying financial performance. The classification of items as adjusting requires significant management judgement.

Treatment of costs incurred in relation to the IPO

The decision of how to split the costs incurred on an equity raise via IPO requires judgement given that, whilst costs incurred on an equity raise should be recognised against equity in share premium, costs that relate to a stock market listing should be recognised as an expense in the consolidated statement of comprehensive income.

3. Analysis of revenue

The Board continues to define all the Company's trading as operating in the integrated circuit design market and considers all revenue to relate to the same, one operating segment. Revenue is defined as per the accounting policies.

Revenue in respect of the supply of products is recognised at a point in time. Design and related services including income for the use of IP are recognised over the period when services are provided.

2023 2022 £'000 £'000
Recognised at a point in time
Supply of products	2,856	1,769
Recognised over time
NRE	8,175	6,250
Consultancy design services	9,400	7,073
Licensing related income	45	201
	17,620	13,524
	20,476	15,293
By destination:
UK	1,831	2,808
Rest of Europe	11,817	4,721
Rest of the World	6,828	7,764
Total revenue	20,476	15,293

The nature of the design services and projects is such that there will be significant customers as a proportion of revenue in any one year but that these may be different customers from year to year. Revenue in respect of two customers amounted to £5.7 million and £5.4 million representing 28% and 27% of the revenue for the year ended 31 May 2023 (2022: two different customers amounted to £3.6 million at 36% and 19% respectively). The Group's non-current assets comprising investments, tangible and intangible fixed assets and the net assets by geographical location are:

Non-current assets £'000		31 May 2023 Net assets Non-current assets £'000 £'000		31 May 2022 Net assets £'000
United Kingdom	14,892	14,967	8,804	11,301
India	34	1,199	67	817
Brazil	73	67	87	35
Germany	-	(270)	-	-
	14,999	15,963	8,958	12,153

4. Alternative performance measures

These items are included in normal operating costs of the business, but are significant cash and non-cash expenses that are separately disclosed because of their size, nature or incidence. It is the Company's view that excluding them from operating profit gives a better representation of the underlying performance of the business in the year.

The Company's primary results measure, which is considered by the directors of EnSilica plc to better represent the underlying and continuing performance of the Company, is Adjusted EBITDA as set out below. EBITDA is a commonly used measure in which earnings are stated before net finance income, amortisation and depreciation as a proxy for cash generated from trading.

2023 2022 £'000 £'000
Operating profit before interest	825	6
Compensation for loss of office	85	-
IPO costs	-	699
Adjusted Operating profit before interest	910	705
Depreciation	454	160
Amortisation of intangible assets	276	171
Adjusted EBITDA	1,640	1,036
Profit for the year	1,792	149
Compensation for loss of office	85	-
IPO costs	-	699
Adjusted Profit for the year	1,877	848

Compensation for loss of office

Compensation for loss of office covers the non-recurring costs in relation to the termination of employment of a Director as described in the Remuneration Committee report.

IPO Costs

Attributable costs relating to the IPO performed during the prior year were recognised within the consolidated statement of comprehensive income as an exceptional cost. These costs were excluded from the adjusted results of the Company since the costs are one-off in nature and will not repeat in future years.

5. Operating profit

The operating profit is stated after charging: 2023 2022 £'000 £'000
Depreciation of property, plant and equipment	164	106
Depreciation of right-of-use assets	290	54
Amortisation of intangible assets	276	171
Cost of inventory sold	1,863	1,717
Research and development costs	4,603	3,133
Share based payments	213	120
Foreign exchange (gains)/losses	50	(40)
Research and development expenditure credit	(8)	14
Total government grants received	(8)	14
Development expenditure was also capitalised in each year as shown in note 12.
Auditor's remuneration:
Audit of the Company and Company financial statements - current year	80	53
- previous year	11	-
Non-audit services	20	83
Total Fees payable to the Company's auditor	111	136
6. Information regarding directors and employees
Employees
The aggregate remuneration of employees comprised:
2023 2022
£'000 £'000
Wages and salaries	8,727	6,601
Social security costs	989	679
Other pension costs	1,042	777
Share based payments	213 10,95311	46
Total	10,971	8,103
Average number of employees
The monthly average number of employees in the year was:
2023 2022
Administration	16	10
Marketing	6	5
Research, development and technical	146	102
Total	168	117

6. Information regarding directors and employees - continued

Directors' remuneration

2023 2022 £'000 £'000
Directors' remuneration - aggregate emoluments	825	378
Company pension contributions in respect of 3 (2022:2) directors	66	12
Share based payments	146	-
	1,037	390
Remuneration of the highest paid director	231	140
Company pension contributions	20	5
Share based payments	-	-
	251	145

Key management is defined as those persons having authority and responsibility for planning, directing, and controlling the activities of the Company, and was considered to be only the executive directors with compensation as disclosed above.

7. Interest income

2023 2022 £'000 £'000
Bank interest receivable	7	25
	7	25
8. Interest expense
2023 2022
£'000 £'000
Interest on bank and other borrowings	565	461
Lease liability financing charges	201	15
Interest on conversion of convertible loan note	-	47
Other interest	19	42
	785	565
9. Taxation on profit
2023 2022
£'000 £'000
Current taxation
UK corporation tax credit	2,064	1,293
Foreign tax charge	(159)	(71)
	1,905	1,222
Deferred taxation
Origination and reversal of timing differences	160	(539)
Charge due to change in tax rate	-	-
	160	(539)
Tax credit on profit	1,745	683

Factors affecting the tax credit for the year

The tax credit on the profit/(loss) for the year differs from applying the standard rate of corporation tax in the UK of 20% (2022: 19%). The differences are reconciled below:

2023 2022 £'000 £'000
Profit/(loss) before taxation	47	(534)
Corporation tax at standard rate (2023:20%, 2022 19%)	9	(102)
Factors affecting charge for the year:
Disallowable expenses	164	135
Allowances and enhanced deductions	(966)	-
Research and development allowances	(1,940)	(1,205)
Reduced rate on surrender of R&D losses for tax credit	762	360
RDEC expenditure credit	(62)	-
Foreign tax charges	85	-
Deferred tax	160	-
Share options	43	-
Charge due to change in tax rate	-	129
Tax credit on profit/(loss)	(1,745)	(683)

10. Earnings per share

2023 2022
Profit used in calculating EPS (£'000)	1,792	149
Number of shares for basic EPS ('000s)	75,833	75,232
Basic earnings per share (pence)	2.36	0.20
Number of shares for diluted EPS ('000s)	77,874	76,106
Diluted earnings per share (pence)	2.30	0.20
Adjusted Earnings per share
2023 2022
Adjusted Profit used in calculating EPS (£'000)	1,877	848
Number of shares for basic EPS ('000s)	75,833	75,232
Adjusted basic earnings per share (pence)	2.47	1.13
Number of shares for diluted EPS ('000s)	77,874	76,106
Adjusted diluted earnings per share (pence)	2.41	1.11

There are 424,440 of exercisable share options over ordinary shares respectively which are potentially dilutive to profit.

As part of the company's 2022 long term incentive plan, share options over 6,684,300 Ordinary shares and warrants over 450,000 Ordinary shares are potentially dilutive to profit.

11. Property, plant and equipment

		Right-of-use property	Leasehold improvements		Office equipment	Right-of-use equipment	Computer equipment		Total
Group		£'000	£'000		£'000	£'000	£'000		£'000
Cost At 1 June 2021	194			-	56	174		321		745
Additions	-			-	142	-		134		276
Exchange adjustments	19			-	-	-		-		19
At 31 May 2022	213			-	198	174		455		1,040
Depreciation At 1 June 2021	(112)			-	(46)	(100)		(225)		(483)
Charge for the year	(29)			-	(23)	(25)		(83)		(160)
Exchange adjustments	(15)			-	-	-		-		(15)
At 31 May 2022	(156)			-	(69)	(125)		(308)		(658)
Net book value At 31 May 2022	57			-	129	49		147		382

Cost
At 1 June 2022	213		-	198		174	455	1,040
Additions	1,825		240	45		423	110	2,643
Exchange adjustments	-		-	(3)		-	(2)	(5)
At 31 May 2023	2,038		240	240		597	563	3,678
Depreciation
As at June 2022	(156)		-	(69)		(125)	(308)	(658)
Charge for the year	(211)		(24)	(43)		(79)	(97)	(454)
Exchange adjustments	-		-	-		-	-	-
At 31 May 2023	(367)		(24)	(112)		(204)	(405)	(1,112)
Net book value
At 31 May 2023	1,671		216	128		393	158	2,566

Company	Right-of-use property £'000	Leasehold improvements £'000	Office equipment £'000	Right-of-use equipment £'000		Computer equipment £'000	Total £'000
Cost At 1 June 2021	-	-	52	126	347		525
Additions	-	-	96	-	78		174
At 31 May 2022	-	-	148	126	425		699
Depreciation		-
At 1 June 2021	-	-	(43)	(92)	(221)		(356)
Charge for the year	-	-	(19)	(26)	(70)		(115)
At 31 May 2022	-	-	(62)	(118)	(291)		(471)
Net book value At 31 May 2022	-	-	86	8	134		228

Cost
At 1 June 2022	-	-	148	126	425	699
Additions	1,825	241	41	423	103	2,633
At 31 May 2023	1,825	241	189	549	528	3,332
Depreciation
At 1 June 2022	-	-	(62)	(118)	(291)	(471)
Charge for the year	(183)	(24)	(35)	(79)	(81)	(402)
At 31 May 2023	(183)	(24)	(97)	(197)	(372)	(873)
Net book value
At 31 May 2023	1,643	217	92	352	156	2,459

12. Intangible assets

Group and Company	Development costs £'000	Software £'000	Intellectual property £'000	Total £'000
Cost At 1 June 2020	7,471	-	-	7,471
Additions	1,672	123	-	1,795
At 31 May 2021	9,143	123	-	9,266
Amortisation and impairment At 1 June 2020	(627)	-	-	(627)
Charge for the year	(110)	(4)	-	(114)
Impairment in the year	(2,019)		-	(2,019)
At 31 May 2021	(2,756)	(4)	-	(2,760)
Net book value
At 31 May 2021	6,387	119	-	6,506
Cost At 1 June 2021	9,143	123	-	9,266
Additions	2,241	-	-	2,241
At 31 May 2022	11,384	123	-	11,507
Amortisation and impairment
At 1 June 2021	(2,756)	(4)	-	(2,760)
Charge for the year	(148)	(23)	-	(171)
Impairment in the year	-	-	-	-
At 31 May 2022	(2,904)	(27)	-	(2,931)
Net book value
At 31 May 2022	8,480	96	-	8,576
Cost At 1 June 2022	11,384	123	-	11,507
Additions	4,094	-	39	4,133
At 31 May 2023	15,478	123	39	15,640
Amortisation and impairment
At 1 June 2022	(2,904)	(27)	-	(2,931)
Charge for the year	(248)	(24)	(4)	(276)
Impairment in the year	-	-	-	-
At 31 May 2023	(3,152)	(51)	(4)	3,207
Net book value
At 31 May 2023	12,326	72	35	12,433

Capitalised development expenditure relates to developed intellectual property in respect of circuit and chip design.

The recoverable amount of a cash generating unit (CGU) is assessed using a value in use model across each individual project that forms the intellectual property that has been capitalised. The value in use for each portion is dependent on the envisaged life cycle of the CGU using a discount factor of 11.50% (2022:10%), being the cost of capital for the CGU.

13. Investments in subsidiaries

Company	31 May 2023 £'000	31 May 2022 '£000
Investments in subsidiaries at 1 June	68	-
Investment in EnSilica Do Brasil Sociedade Unipessoal Limitada	-	68
Investment in EnSilica GMBH	21	-
EnSilica India Private Limited	-	-
Total	89	68

Name	Country of incorporation	Nature of business	Proportion of Ordinary shares directly held
EnSilica India Private Limited Registered office: No.2064, 2nd floor, Siri Iris, 24th Main, 1st Sector, HSR layout, Bangalore, 560 102	India	Semiconductor design consultants	99.99%
EnSilica ADAS Limited Registered office: Building 3 115 Olympic Avenue, Milton Park, Abingdon, Oxfordshire, United Kingdom, OX14 4SA	UK	Semiconductor design consultants (dormant)	100.00%
EnSilica Do Brasil Sociedade Unipessoal Limitada Registered office: 6681 Av Ipiranga, Sala 1009 Preio 99, Partenon, Porto Alegre, Rio Grande do Sul, Brasil	Brazil	Semiconductor design consultants	100.00%
EnSilica Germany GMBH Registered Office: c/o Steuerberaterin Renate Schnürch, Nymphenburger Straße 1, 80335 Munich	Germany	Semiconductor design sales office	100.00%

On 18 July 2022 the company invested 25,000 Euros in consideration for a 100% interest in the share capital of EnSilica GMBH, with a registered office situated at EnSilica Germany GmbH, c/o Steuerberaterin Renate Schnürch, Nymphenburger Straße 1, 80335 Munich

14. Inventories

31 May 2023 Group and Company £'000				31 May 2022 £'000
Raw materials and consumables	304			215
No impairment losses have been recorded in respect of inventory in the period.
15. Trade and other receivables
31 May 2023				31 May 2022
Group			£'000
Current
Trade receivables	3,893			1,541
Other receivables	807			458
Prepayments	483			248
Accrued income	1,842			1,010
Total	7,025			3,257
Analysis of expected credit losses is included in note 22.

Company	31 May 2023 £'000		31 May 2022 £'000
Current
Trade receivables	3,893		1,297
Other receivables	497		357
Receivable from subsidiary undertakings	271		245
Prepayments	483		245
Accrued income	1,842		1,010
Total	6,985		2,909
Analysis of expected credit losses is included in note 22.
16. Cash and cash equivalents
Group	31 May 2023 £'000		31 May 2022 £'000
Cash at bank and in hand	3,095		5,742
Company
Cash at bank and in hand	2,903		5,655
17. Borrowings
Group and Company		31 May 2023 £'000	31 May 2022 £'000
Current
Bank loans	883		800
Non-current
Bank loans	3,284 4,1674		4,166
Total	4,167		4,966

A bank loan of £1,657,000 (2022: £2,068,000) is secured by fixed and floating charges over the assets of the group and bears interest at rates of 8% over SONIA or 10% if higher. It is repayable in monthly instalments over the period to August 2026.

A loan of £2,662,000 (2022: £3,088,000) is unsecured and bears interest at a fixed rate of 13%. It is being repaid by quarterly instalments over the period to October 2027.

The loan liabilities are stated net of unamortised loan issue costs as at 31 May 2023 of £152,000 (2022: £189,000) which are being amortised over the period to the loan repayment dates.

18. Lease liabilities

The Company has entered into lease contracts in respect of property in the jurisdictions from which it operates, and the use of equipment which are typically for terms of 3 to 5 years. In respect of options to extend the initial period these are factored into the liabilities where the Company plans to use these for a longer period. For property leases, it is customary for lease contracts to be reset periodically to market rental rates. Leases of equipment comprise only fixed payments over the lease terms.

Right of use assets, additions and amortisation are included in note 11. Interest expenses relating to lease liabilities are included in note 8.

The amounts relating to leases were as follows:
Group	31 May 2023 £'000	31 May 2022 £'000
Short term lease expense	257	100
Cash outflow for capitalised leases	169	109
Total cash outflow from leases	426	209
Company
Short term lease expense		233	90
Cash outflow for capitalised leases		130	72
Total cash outflow from leases		363	162

The maturity of lease liabilities were as follows:

Group	31 May 2023 £000	31 May 2022 £'000
Within 1 year	171	88
1-2 years	193	105
2-5 years	1,911	-
Total	2,275	193
Company
Within 1 year	146	40
1-2 years	193	47
2-5 years	1,911	41
Total	2,250	128
19 Trade and other payables
31 May 2023 31 May 2022
Group £'000 £'000
Current
Trade payables	2,388	919
Taxation and social security	281	227
Other payables	161	75
Accruals	1,293	1,156
Contract liabilities	600	14
Total	4,723	2,391
31 May 2023 31 May 2022
Company £'000 £'000
Current
Trade payables	3,324	1,620
Taxation and social security	236	200
Other payables	-	8
Accruals	1,483	1,018
Contract liabilities	600	14
Total	5,643	2,860

The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.

In the year ended 31 May 2023 £14,000 of revenue was recognised in respect of contract liabilities at 31 May 2022 (year ended 31 May 2022: £859,000 in respect of liabilities at 31 May 2021).

20. Provisions

	31 May 2023	31 May 2022
At 31 May 2022	140	95
Foreign exchange revaluation	(6)
Gratuity redeemed	(3)	(7)
Provided in year	68	52
Overseas employee provisions	199	140

The provision relates to the liability under the Government of India Gratuity Act in respect of payments to employees on cessation of service in respect of death or disability or otherwise after more than 5 years' service.

21. Deferred tax liabilities

	Intangible assets	Accelerated capital allowances	Tax losses	Other	Total
	£'000	£'000	£'000	£'000	£'000
At 31 May 2021	1,596	64	(173)	(313)	1,174
Charge/(credit) for the year	524	15	-	-	539
Debited to equity in the year		- -	- -	(1,713)	(1,713)
At 31 May 2022	2,120	79	(173)	(2,026)	-
Charge/(credit) for the year	952	-	-	(792)	160
At 31 May 2023	3,072	79	(173)	(2,818)	160

Deferred tax has been recognised at an average rate of 25% (2022: 25%).

22. Financial Instruments

Financial risk management

The determination of financial risk management policies and the treasury function is managed by the CFO. Policies are set to reduce risk as far as possible without unduly affecting the operating effectiveness of the Company.

The Company's activities expose it to a variety of financial risks, the most significant being credit risk, liquidity risk and interest rate risk together with a degree of foreign currency risk as discussed below.

Categories of financial instruments

The Group has the below categories of financial instruments:

Recognised at amortised cost	31 May 2023 £'000	31 May 2023 £'000
Cash and bank balances	3,095	5,742
Trade receivables - net	3,893	1,541
Accrued income	1,842	1,010
Other receivables	807	457
Total financial assets	9,637	8,750
Trade payables	2,388	919
Other payables	1,454	1,231
Bank loans	4,167	4,966
Total financial liabilities	8,009	7,116

There were no assets or liabilities at 31 May 2023 or 2022 that were recognised and measured at fair value in the financial information

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss for the Company. Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents, trade accounts receivable and accrued income.

The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high-credit quality in order to limit the exposure of each cash deposit to a minimal level.

Trade receivables

Trade accounts receivable are derived primarily from design income and have 0-45 day payment terms, most commonly 30 days. The largest customer accounts for 31% of the balance at 31 May 2023 (2022: 25%) of the trade receivable balance as a result of the invoices relating to design projects with a significant element being in advance of the design services being carried out. Credit risk with respect to accounts receivable is otherwise dispersed across a number of customers. Collateral is not required for accounts receivable. The credit worthiness of customers with balances in trade receivables not yet due has been assessed as high.

The ageing of trade receivables according to their original due date is detailed below:

	31 May 2023 £'000	31 May 2022 £'000
Not yet due	3,452	1,179
1-30 days past due date	454	229
Over 30 days past due date	(13)	133
Total	3,893	1,541
The expected credit loss on balances is considered immaterial.

Other receivables and accrued income are considered to bear similar risks to trade receivables. Hence any expected credit loss on other financial assets is considered to be immaterial.

Liquidity risk

The Company funds its business through bank and other loans and from cash generated from operations including the payment terms with customers to fund larger design projects. Details of the Company's borrowings are discussed in note 17. The Company monitors and manages cash within its banking facilities to mitigate any liquidity risk it may face. The following table shows the Company's contractual maturities of financial liabilities based on undiscounted cash flows including interest charges and the earliest date on which the Company is obliged to make repayment:

At 31 May 2022	Less than one year £'000	1-2 years £'000	2-5 years £'000	More than 5 years £'000	Total £'000
Trade and other payables	2,151	-	-	-	2,151
Bank loans	1,383	1,390	3,722	396	6,891
Lease liabilities	98	71	54	-	223
Total	3,632	1,461	3,776	396	9,265
	Less than one year	1-2 years	2-5 years	More than 5 years	Total
At 31 May 2023	£'000	£'000	£'000	£'000	£'000
Trade and other payables	2,388	-	-	-	2,388
Bank loans	1,390	1,390	3,327	-	6,107
Lease liabilities	389	398	1,197	1,408	3,392
Total	4,167	1,788	4,524	1,408	11,887

Interest rate risk

The bank loan of £1.657 million is subject to interest at rates of 8% over SONIA if this exceeds 10%. A 1% increase in interest rates would therefore have a £16,570 impact per annum on finance costs at current base rates.

The other bank loan bears interest at a fixed rate of 13%. A 1% increase in interest rates would therefore have had no impact on finance costs at current base rates.

Currency risk

The Company operates from the UK with sterling being its functional currency and has a degree of exposure to foreign currency risk, with this predominantly being income and expenses in US dollars together with Indian rupees in respect of both income and operational activity in the Indian subsidiary. The impact of a 10% fluctuation in all foreign exchange rates moving in the same direction against GBP has been assessed to be an overall impact of approximately £99,000 as mitigated by some matching of income and expenses together with the relatively short payment terms for accounts receivable (including the USD balance at 31 May 2023).

The net underlying foreign currency balances, comprising overseas assets and liabilities, cash, receivables and payables in the UK, in the Company statement of financial position by underlying currency at the year-end were:	USD £'000	Euro £'000	INR £'000	Total £'000
At 31 May 2021	1,644	892	605	3,141
At 31 May 2022	1,453	352	388	2,193
At 31 May 2023	2,612	1,482	352	4,446

Capital management

The Company's capital comprises share capital and retained earnings. The Company's objectives when maintaining capital are:

To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The capital structure of the Company consists of shareholders equity as set out in the consolidated statement of changes in equity. The longer term funding requirements for development have been financed from term bank debt. All working capital requirements are financed from existing cash resources.

The Company sets the amount of capital it requires in proportion to risk in conjunction with the retained earnings. The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

23. Share capital

Allotted, called up and fully paid	At 31 May 2023 £'000	At 31 May 2022 £'000
1,700,000 A ordinary shares of £0.001 each	-	-
273,000 B ordinary shares of £0.001 each	-	-
78,115,158 (2022:75,231,809) ordinary shares of £0.001 each	78	75
59,190 (2022: 59,190) Deferred shares of £1.00 each	59	59
	137	134

On 14 March 2023, the Company announced a retail offer to existing shareholders to raise £2.0 million before expenses via a placing of 2,857,143 new Ordinary shares. The new Ordinary shares are credited as being fully paid, rank pari passu and carry rights to dividends, distribution of capital upon winding up and the right to receive notice of, attend, speak and vote at a general meeting.

Subsequently, on 15 March 2023, the Company announced a supplementary retail offer to raise up to £0.5 million before expenses via a placing at 70 pence per new Ordinary share. The results of the offer led to the issuance of 26,206 new Ordinary shares, raising £18,344.20 before expenses. The new Ordinary shares are credited as being fully paid, rank pari passu and carry rights to dividends, distribution of capital upon winding up and the right to receive notice of, attend, speak and vote at a general meeting.

24. Share based payment

In the previous year, options were granted in May 2022 to directors and employees under the new 2022 LTIP scheme over 6,461,500 ordinary shares at an exercise price of £0.50 per share. These are subject to performance conditions in respect of earnings per share for the year ending 31 May 2025. The share based payment charges for these options was calculated at a fair value of 18 pence each using a Black Scholes share pricing model with 50% volatility, 2% risk free rate and 3.5 year vesting period assumptions.

Options were also granted in May 2022 over 200,000 ordinary shares to non-executive directors at an exercise price of £0.50 subject only to a 4 year vesting period. A fair value of 19 pence per share has been calculated using a Black Scholes share pricing model with 50% volatility, 2% risk free rate and 4 year vesting period assumptions.

In the current year options were granted in December 2022 to employees under the new 2022 LTIP scheme over 395,800 ordinary shares at an exercise price of £0.895 subject to a 2.5 year vesting period. These are subject to performance conditions in respect of earnings per share for the year ending 31 May 2025 where the percentage of the amount of option that will vest depends on the following sliding scale:

Earnings per share	Options to vest
Less than 2p	0%
2p	25%
Greater than 2p but less than 5p	25 to 75% pro rate
Between 5-6.5p	75 to 100% pro rate
Greater than 6.5p	100%

The options have an expiry on the tenth anniversary of the date of the grant.

The share based payment charges for these options have been calculated at a fair value of 29 pence each using a Black Scholes share pricing model with 50% volatility, 4% risk free rate and vesting period assumptions of between 2.5 and 3 years.

A separate scheme operates in respect of the non-executive directors that are not subject to a performance period and will vest 33.33% on the second anniversary of the date of the grant and 66.67% on the fourth anniversary of the date of the grant, with a similar 10 year lifespan from date of grant.

At 31 May 2023 none of the share options had vested, and none remained exercisable at the year-end date.

A share based payment charge of £213,000 (2022: £46,000) has been recognised in the statement of comprehensive income.

	Average Exercise Price	D options Number	2022 LTIP scheme Number	Non-executive options Number
Share options outstanding at 31 May 2021	£0.001	811,000	-	-
Exercised in May 2022	£0.001	(718,000)	-	-
Remaining options aligned to new ordinary share structure	£0.001	331,440	-	-
Share options granted during the year	£0.50	-	6,461,500	200,000
Share options outstanding at 31 May 2022	£0.47	424,440	6,461,500	200,000
Options lapsing in the year	£0.50	-	(373,000)
Share options granted during the year	£0.895	-	395,800	-
Share options outstanding at 31 May 2023	£0.49	424,440	6,484,300	200,000

The weighted average exercise price for all options is £0.49 at 31 May 2023 (£0.47 per share at 31 May 2022) and the average remaining vesting period was estimated at 2 years at 31 May 2023 (2022: 3 years).

There are also arrangements in place under which employees have an option to buy existing shares from certain shareholders at £0.50 per share. These will not impact the company nor dilute shareholdings and are considered outside the scope of share based payment accounting.

During the previous year, warrants were issued to the listing advisers over 450,000 ordinary shares at an exercise price of £0.50, exercisable in the 3 years following the date of admission to AIM. The share based payment of £74,000 in respect of the services was calculated at a fair value of 17 pence per share using a Black Scholes model with 50% volatility, 2% risk free rate and immediate vesting period assumption, and relates to expenses that have been charged to the share premium account with no impact on the income statement.

The weighted average exercise price for the warrants is £0.50 at 31 May 2023.

Exercise price	Ordinary shares
Exercisable at 01 June 2022 brought forward	450,000
Warrants issued over Ordinary shares in year	Nil
Exercisable at 31 May 2023	450,000

25. Share premium
	31 May 2023 31 May 2022
Group and Company	£'000 £'000
At 1 June	6,900	-
Conversion of loan notes into ordinary shares	-	1,419
Issue of new shares	2,015	5,988
Expenses relating to share issue	(163)	(507)
Total	8,752	6,900

The net proceeds of the Fundraising are to be used primarily to develop further the Company's depth and strength of offering. As well as providing the Company with funds it will enhance both transparency and the international profile of the Company with customers, allow the Company to access equity capital to fund growth and support potential M&A opportunities, and enable the Company to attract, recruit and retain key employees.

Share issue costs relate to commissions charged and other directly attributable costs of the fundraise exercise.

26. Post balance sheet events

There have been no events since the year end that warrant specific mention in the Company's financial statements at 31 May 2023.

27. Related party transactions

During the year the company undertook transactions with the following related parties:

		2023		2022
Name	Services	Transactions during the year £'000	Balance owing/(owed) at 31 May 2023 £'000	Transactions during the year £'000	Balance owing/(owed) at 31 May 2022 £'000
EnSilica India Private Limited	Semiconductor design services	1,282	Nil	1,428	Nil
EnSilica Do Brasil Sociedade Unipessoal Limitada	Semiconductor design services	1,187	Nil	614	Nil
EnSilica GMBH	Semiconductor sales services	271	(271)	-	-
Non-Executive Directors services prior to Company appointment:
Hexameter Services Limited	Consultancy services - D Tilston	Nil	Nil	14	Nil
Janet Collyer	Consultancy services	Nil	Nil	14	Nil

Details of Directors' remuneration for services during the year is separately disclosed as part of the remuneration committee report.

28. Non-controlling interests

A non-controlling interest exists for the Company's subsidiary EnSilica India Private Limited, where 1 shareholder holds 1 share in the Company, representing 0.002% of the issued share capital.

The summarised results of the company are shown below: 2023 2022 £'000 £'000
Current assets	1,460	1,236
Non-current assets	34	67
Current liabilities	(95)	(319)
Non-current liabilities	(199)	(167)
	1,200	817
Equity attributable to owners of the Company	1,200	817
Non-controlling interests		-
Revenue	1,536	2,251
Expenses	1,108	(1,940)
Profit for the year	428	311
Profit attributable to the owners of the Company	428	311
Profit attributable to the non-controlling interests	-	-
Profit for the year	428	311

29. Reserves

Retained earnings

Retained earnings includes all current and prior year retained profits and losses attributable to the owners of the parent company.

Currency translation reserve

The currency translation reserve includes all translation differences that arise from the conversion of the financial statements of the Company's foreign subsidiary entities into pound sterling (£).

Share premium account

The share premium account includes the amount by which a share has been issued in excess of its nominal value. The account has also been used to offset costs in relation the raising of funds via a share issue (note 25).

Glossary of Terms

5G	The fifth generation technology standard for broadband cellular networks, which cellular phone companies began to deploy worldwide in 2019.
Analog	A type of signal in an electronic circuit that takes on a continuous range of values rather than only a few discrete values
ADAS	Advanced driver-assistance systems
AGM	Annual General Meeting of the Company's shareholders
AI	Artificial Intelligence
ASIC	An application-specific integrated circuit is an integrated chip, custom-designed for a specific application
ASSP	Applications Specific Standard Part
Beamforming	Beamforming or spatial filtering is the technique used in antenna for directional signal transmission or reception. This is achieved by combining elements in an array of elements in such a way that signals at particular angles experience constructive interference whilst others experience destructive interference. Beamforming is used in Radar, 5G antenna and satellites, it allows the focusing of one or more beams to improve the sensitivity of the system.
CAGR	Compound Annual Growth Rate, a method of assessing the average growth of a value over time.
CEO	Chief Executive Officer
CFO	Chief Financial Officer
Chip	Electronic integrated circuit
CMOS	complementary metal-oxide semiconductor
Digital	A type of signal used to transit information that has only discrete levels of some parameter ("usual voltage").
DSE	Display Screen Equipment
EBIT	Earnings before interest and taxes (also known as operating profit)
EBITDA	Earnings before depreciation, amortisation, interest and taxes
ESG	Environmental, Social and Governance
Fabless	A company that design and delivers semiconductors by outsourcing the fabrication ("manufacturing") process.
Foundry	A manufacturing plant where silicon wafers are produced.
Group	The Company and its subsidiaries
IC	Integrated Circuit. An electronic device with numerous components on a single chip.
IFRS	International Financial Reporting Standards
IP	Intellectual Property
IPO	Initial Public Offering
Ka or Ka-band	A portion of the microwave part of the electromagnetic spectrum defined as frequencies in the range 26.5 to 40 gigahertz (GHz).
KPIs	Key performance indicators, a range of indicators to assess performance, to ensure performance is aligned to strategy and to ensure continued alignment with shareholder interests.
LTIP	Long Term Incentive Plan
Mixed Signal	A combination of analog and digital signals being generated, controlled or modified on the same chip.
mmWave	Millimetre wave; the band of radio frequencies in the electromagnetic spectrum from 30 to 300 gigahertz (GHz) often used for Satellite, 5G and Radar systems. These are also microwave frequency bands.
NRE	Non-Recurring engineering cost
OEM	Original equipment manufacturer; such as car manufacturers or complex products which include sub-systems from other suppliers.
OSAT	Outsourced semiconductor assembly and test
QCA	The Quoted Companies Alliance
R&D	Research and development
RF	Radio frequency
SIG	Special Interest Group
Semiconductor	A base material halfway between a conductor and an insulator, which can be physically altered by mixing in certain atoms. Semiconductors form the basis for present-day electronics.
SoC	System-on-Chip. An integrated circuit with all the necessary electronic circuits and parts for a given system.
Tape-Out	A major milestone in every ASIC project lifecycle representing the transition between the design phase and the manufacturing phase. It means the design phase is completed and you are ready to send out the design files to the Fab for mask generation and production.
Wafer	A slice of silicon from a 4, 5, 6 or 8 inch diameter silicon bar and used as the foundation on which to build semiconductor products