THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU, WHICH IS PART OF UNITED KINGDOM DOMESTIC LAW 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.

1 May 2024

Supply@ME Capital plc

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

2023 Annual Report and Accounts

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, is pleased to announce its 2023 Annual Report and Accounts providing the Group's final results for the year ended 31 December 2023.

2023 Annual Report and Accounts Highlights:

The below consolidated financial summary of the Group's income statement items are presented distinguishing the continuing operations (being the Group's Inventory Monetisation segment) and the discontinued operations consisting of TradeFlow Capital Management Pte Ltd. and its subsidiaries (the "TradeFlow Group"). The results of the TradeFlow Group were consolidated by the Group up to 30 June 2023, at which point the Group completed the disposal of an 81% stake in the TradeFlow Group. Following the 30 June 2023, the TradeFlow Group was no longer consolidated by the Group and instead the fair value of the Group's remaining 19% stake was recognised as an investment in the consolidated statement of financial position, with the gain on sale of the 81% stake being recognised in the Group's statement of comprehensive income.

The consolidated financial summary of the Group's balance sheet items includes the total assets and liabilities from both continuing and discontinued operations as at 31 December 2022, but only the total assets and liabilities from continuing operations as at 31 December 2023.

Consolidated financial summary:

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

Operational matters:

The pipeline KPI represents the current potential value of warehoused goods inventory to be monetised rather than pipeline revenue expected to be earned by the Group (being the Company and its subsidiaries). 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 practicable date possible prior to the issue of this annual report (being 19 April 2024) and has been calculated on a consistent basis as the prior year comparative. It should be noted that of the current pipeline figure of £330.7 million, there is one single client that accounts for approximately 57% of the total pipeline.

As referenced in the business, trading and funding update announcement issued by the Company on 29 February 2024, the Group is in the process of conducting a full review of its pipeline and is progressing with requesting a formal letter of interest from each client company in its pipeline for which there is currently not a signed term sheet in place. At the date of this announcement, approximately 9% of the £330.7 million current pipeline figures are supported by either signed term sheets or the signed new letter of interest. This percentage is expected to grow as the new process becomes fully embedded.

Alessandro Zamboni, CEO of SYME, said: "I am pleased to report that SYME has made tangible progress during 2023, and following the announcements we have made already in 2024 regarding the commitment for the first White-Label transaction and the opportunity to commence work with the investment banking industry, we are excited about what lies ahead in 2024. The first two successfully executed Inventory Monetisation transactions confirm our model is an effective solution for our corporate clients. Additionally, I believe the Inventory Monetisation transactions are a safe asset class for inventory funders, and those who have already joined us on our journey are receiving attractive returns on their investments. This leads me to conclude the Group is better positioned now than ever before in terms of commercial opportunities despite the challenges we have experienced with our corporate funding in recent months.

The team are now prioritising the completion of the first White-Label transaction, the implementation of the security token and the IM securitisation programmes. Alongside this, we are focused on ensuring our corporate funding is sufficient to implement these priorities as the Group moves towards the breakeven. Looking further ahead, we hope to be able to generate sufficient returns for our loyal shareholders which includes both institutional and retail investors."

Albert Ganyushin, Chairman, SYME, said: "The progress with the White-Label IM in partnership with a leading commercial bank, tokenisation backed by leaders in digital asset finance and now the agreement with a neo bank to fund companies from our Italian pipeline, clearly demonstrates the market relevance of our innovative product, which is evidently gaining traction with leading players in their respective market segments. The team managed to overcome many challenges in 2023 and put in place foundations for SYME to start delivering in 2024 on its tremendous potential of reaching a large addressable market."

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

Legal notices:

An electronic copy of the 2023 Annual Report and Accounts will shortly be available for inspection on the Company's website at https://www.supplymecapital.com/investors/ and will be submitted to the National Storage Mechanism maintained by the Financial Conduct Authority ("FCA") and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. A hard copy version of the 2023 Annual Report and Accounts will be dispatched to those shareholders who have elected to receive paper communications in due course.

Forward looking statements and other important information:

This document contains forward looking statements, which are statements that are not historical facts and that reflect Supply@ME's beliefs and expectations with respect to future events and financial and operational performance. These forward looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other factors, which may be beyond the control of Supply@ME and which may cause actual results or performance to differ materially from those expressed or implied from such forward looking statements.  Nothing contained within this document is or should be relied upon as a warranty, promise or representation, express or implied, as to the future performance of Supply@ME or its business. Any historical information contained in this statistical information is not indicative of future performance.

The information contained in this document is provided as of the dates shown.  Nothing in this document should be construed as legal, tax, investment, financial, or accounting advice, or solicitation for or an offer to invest in Supply@ME.

Contact information:

Alessandro Zamboni, CEO, Supply@ME Capital plc, investors@supplymecapital.com

Notes:

SYME and its operating subsidiaries provide its Platform for use by manufacturing and trading companies to access inventory trade solutions enabling their businesses to generate cashflow, via a non-credit approach and without incurring debt. This is achieved by their existing eligible inventory being added to the Platform and then monetised via purchase by third party inventory funders. The inventory to be monetised can include warehouse goods waiting to be sold to end-customers or goods/commodities that are part of a typical import/export transaction.

2023 ANNUAL REPORT AND ACCOUNTS

Highlights  

During 2022 Supply@ME demonstrated that the concept of Inventory Monetisation works. Building on this progress, during 2023 and early 2024 the business has continued to learn and develop its track record. This had been demonstrated by the first traditional monetisation of inventory in Italy and the signing of agreement for monetisation of inventory in the UK. The strategic partnership with a group of private investors and subject matter experts of working capital solutions to launch an independent Swiss-based trading business ("CH Trading Hub") and the secured commitment of USD$5 million from an asset manager specialised in digital assets to start the overall US$100 million security token issuance also demonstrates progress. In addition, the Group has successfully agreed the first White-Label commitment with Banco BPM S.p.A ("BBPM") to fund up to €10 million of an existing client's inventory, launching a new revenue stream for the Company. This is complimented by the recent announcement of the relationship between Supply@ME and an Italian neo bank to provide funding, initially for €35 million as part of an overall programme up to €135 million, of inventory in relation to the Supply@ME Italian client pipeline.

This announcement, together with the full Annual Report and Accounts for the year ended 31 December 2023, explains the foundations which have been established to enable delivery of the business model to clients with a wide range of inventory through the development of methodologies across varying business models. It will also highlight the opportunities available through the development of our delivery model in collaboration with the CH Trading Hub and the possibilities available through traditional and non-traditional funding routes. Taking these factors together, the Board believes this outlines why the Group's current financial performance does not demonstrate its longer-term potential. 

Chairman's Statement    

Dear Shareholders,

I am pleased to share this statement after my first full year as Chair of Supply@ME. The reasons I joined the Company continue to hold true, the passion and enthusiasm of the team and desire to help Supply@ME with its mission of unlocking barriers for investors to be able to fund inventory and ultimately help businesses access a new type of working capital solution. 

The unique solution which Supply@ME offers is starting to gain traction in the market which is demonstrable by the tangible progress made during 2023 of the first traditional Inventory Monetisation being executed in Italy. A further such transaction was also fully contracted with the first UK Company during 2023, albeit there has been a delay in execution of this transaction largely as a result of the IM being managed alongside an existing floating charge facility which has required the client company to gain specific waivers from existing lenders. While this has resulted in delay to completing the deal, it nonetheless serves as further proof an IM transaction model can work in the UK, including alongside existing financing facilities. To deliver the first IM transactions the Group has connected through its IM Platform the client company, inventory funder and stock company to facilitate the execution of the IM transactions. This in itself requires confidence from all stakeholders in the accountancy, legal and technology frameworks and internal processes designed to facilitate Inventory Monetisation transactions over the Platform. I look forward to seeing both the client and inventory funder base grow as the model begins to scale.

The increased interest in tokenisation of assets is an area of opportunity for Supply@ME, which will be discussed in more detail in this year's Annual Report and Accounts. The viability of tokenisation of inventory had already been demonstrated by the Group's strategic partnership with VeChain Foundation ("VE Chain") and was further solidified by the progress made in structuring a security token framework with the CH Trading Hub, owned by Société Financière Européenne S.A. ("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.

A significant milestone for the Company has been the signing of the first White-Label commitment from BBPM to fund up to €10 million of inventory of an existing client of the bank. This in my view will open up an additional market for the Supply@ME Platform and will create the opportunity for the Group to work closely with a range of established financial institutions and their existing client base using the Group's unique model. The agreement with BBPM also recognises the deep expertise of the team as inventory servicing specialists.

Despite the positive steps set out above, 2023 has not been without it challenges, the Board and team have invested a significant amount of time focusing on ensuring the Group has sufficient funding to realise its potential, potential which is not representative of either the financial results or the diminishing share price during 2023. I would like to take the opportunity to thank our shareholders for their continued support and appreciation of the potential of our unique product.

I am excited about the prospects for 2024, we have a market relevant product, which is gaining recognition and interest, a strong team who have pulled together to weather some challenging waters and I look forward to seeing the Supply@ME Group reach its large addressable market.

Albert Ganyushin, Chairman, Supply@ME   

CEO Statement  

Dear Shareholders, 

In 2022 we proved the Supply@ME model through conducting the first IM transaction using funds from a non-fungible tokens ("NFT") issuance. From the work that the team and I have conducted during 2023 and to date in 2024, I strongly believe there continue to be huge opportunities for the applicability for our model through tokenisation which will be discussed in this year's Annual Report and Accounts.

Following the inaugural IM transaction, we continued the progress into 2023 and have taken the IM model to institutional investors. Firstly, through the Open Market Inventory Monetisations taking place that were announced during 2023, and the agreement with the Italian neo bank recently announced. Secondly, by the accumulation of work conducted during the year which resulted in the signing of the White-Label commitment from BBPM to deliver inventory funding to an existing client of BBPM through our IM Platform. The significance of the engagement of institutional investors and highly reputable banks in these transactions cannot be understated. It demonstrates the credibility of the model we have been working to develop.

We made changes to our business model during 2023 in recognition of the evolution of the regulation of the fund management industry and to cater to the needs of potential inventory funders who wanted to see a segregated structure of the Platform provider, the Supply@ME Group and the investment adviser, previously TradeFlow Capital Management Pte. Limited ("TradeFlow") and their Cayman-based global inventory fund ("GIF"). This separation came about as the result of the disposal of the 81% stake in the TradeFlow business which was completed on 30 June 2023 (the "TradeFlow Restructuring"). The TradeFlow Restructuring is expected to create value for shareholders by eliminating any perception of conflicts of interest between the two businesses and providing both businesses with greater commercial opportunities through the clear differentiation of responsibilities of the individual entities.

During 2023 and early 2024 Supply@ME has developed an alternative IM infrastructure through collaboration with a group of private investors and subject matter experts of working capital solutions to launch, the CH Trading Hub, to replace the GIF. The CH Trading Hub, owned by SFE, is assuming control of the independent stock companies from the GIF to manage the overall trading businesses using the Platform and the associated inventory servicer activities provided by the Group. This structure is designed to enable us to scale the offering of the Group as specialist inventory servicer with a stable partner in the CH Trading Hub. We share more detail about this structure in the Our Delivery Model section of this announcement.

Additionally, the CH Trading Hub will handle the token route. In this regard, the Group is studying together with VE Chain how to implement the phase 2 within the strategic agreement signed and it is working with the CH Trading Hub to launch a security token framework which will allow up to US$100m to be issued and subscribed, mostly by institutional investors active in the digital asset markets. The security token is expected to be issued by a vehicle sponsored by SFE and be tradeable on authorised digital asset exchanges. The first tranche of this can be seen by the recent announcement of a secured  commitment of USD$5 million from an asset manager specialised in digital assets.

Despite the positive steps set out above, 2023 was a challenging year for the Company from a funding perspective, which has impacted the team. I want to take this opportunity to thank the Board and the Supply@ME team for their ongoing support and commitment to our unique product. I am proud of how the team has collaborated to navigate these challenges and the unwavering commitment shown to creating our Inventory Monetisation product.

I am excited to take the Group forward into 2024, we are focused on continuing to evolve the processes, technologies and methodologies which support our various client's business models and inventory types and ultimately create a new market for inventory funding. Whether that be through Open Market Inventory Monetisations, tokenisation of inventory as an asset and democratisation of the sale of this through digital asset exchanges, or White-Label transactions with financial institutions, the progress that is being steadily made should start to show through the expansion of our track record and our ability to first breakeven, and then to scale.

Alessandro Zamboni, CEO  

Our delivery model

During 2023 we have continued to enhance our business operating model with continued development of our FinTech IM Platform, including not only the underlying software but also the supporting processes, methodologies, and legal framework. 

The inventory funding framework evolved further in 2023 through the launch of an independent CH Trading Hub. The CH Trading Hub, owned by SFE has purchased certain independent stock companies, to meet the needs of specific IM transactions, and is in the process of assuming control of the existing independent stock companies from the GIF. The CH Trading Hub will also incorporate new independent stock companies as required in the future.

The advantages to the Supply@ME Group of this new collaboration with the CH Trading Hub are detailed below:

-      Firstly, the CH Trading hub is located in Switzerland which is traditionally an important trading hub (in particular for raw materials and commodities) and a region establishing itself as a global leader in the custody of digital assets partly through its creation of a digital asset ecosystem that allows for innovation and diversity within a clear regulatory framework[1]. These characteristics are more desirable to potential inventory funders compared to the previous location of the GIF, being the Cayman Islands. The CH Trading Hub has already seen increased interest from potential inventory funders as a result of this new structure.

-      Secondly, this change responds to an evolution in the regulation of the fund management industry. In particular, the Monetary Authority of Singapore, Singapore's financial regulator, had advised that TradeFlow should separate its licensed fund management activities from the rest of the TradeFlow business. Potential inventory funders had also provided feedback that the segregation of the Platform provider and the investment adviser would help to eliminate any perceived conflicts of interest between these two roles. The completion of the TradeFlow Restructuring on 30 June 2023 resulted in the clear differentiation of the responsibility of both Supply@ME and TradeFlow, and lead to the opportunity to collaborate with a group of private investors and subject matter experts in working capital solutions to launch the CH Trading Hub.

The intention is that the CH Trading Hub, through its ownership of the independent stock companies, will act as an asset (inventory) management group and invest its equity capital to build up a dedicated internal structured financing team and provide, when needed, equity capital for specific IM transactions. The CH Trading Hub also has ownership of a dedicated securitisation company authorised in Luxembourg which it intends to leverage to help facilitate the access of inventory funders to the IM transaction, through both the traditional and token financing routes.

As a result of the above, the CH Trading Hub is working closely with the Group to maximise the opportunity for the IM Platform and to constitute an Inventory Monetisation infrastructure which can be used by both banks for their White-Label offering, and investment banks, security token arrangers and other inventory funders to adopt and implement ad-hoc Inventory Monetisation programmes. In the case of the White-Label offering it allows banks to leverage their already wide client base, and in the case of other potential inventory funders it allows them to work closely with Supply@ME to access its pipeline of client companies who have already expressed interest in unlocking their working capital through Inventory Monetisation.

In a typical Open Market IM transaction (being an IM transaction from the pipeline originated by the Group and funded by third-party investors), Supply@ME acts as the due diligence provider and originator in respect of the client company, and as the IM Platform provider and inventory servicer in respect of the independent stock company. For each Open Market IM transaction, the Group generates revenues from the following activities:

-      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 full IM contracts with the relevant stock company; and

-      Post-Inventory Monetisation activities carried out directly with the relevant 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.

This 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 stock company.

During 2023, the Supply@ME platform has further developed its White-Label offering. Coupled with security protocols and other Platform modules the Group has a clear understanding of the costs and timelines to deliver modules for a White-Label partner which will sit within a ring-fenced set of Microsoft Azure resources. This is in part due to the Group establishing its own dedicated Microsoft Azure cloud environment which allows for multi-tenancy, meaning that true White-Label capabilities exist in deploying a 'just tech' solution to any partners should they wish to proceed directly and not through an independent stock company.

White-Label partners, with training and support from the Supply@ME team, can acquire the necessary Platform modules and manage their own Inventory Monetisation solutions using their own personnel and entity structures as agreed with each White-Label partner. In this scenario, the Supply@ME team will be able to provide on-going training and Platform module support to provide an optimal solution for any White-Label partner with the adaptability to meet their individual requirements.  

Pre-Inventory Monetisation activities:

Due Diligence and Origination

The Group works both directly, and with an ecosystem of partners, to identify client companies who are interested in Inventory Monetisation, detail of 2023 client company pipeline can be seen above.

After initial discussions with the client the appropriate inventory model is applied, and the Supply@ME team then, with secure data sharing and collaboration of the client, carry out an early-stage in-depth analysis of sales history, historical inventory data, and future projected sales which then allows an initial value of eligible monetisable inventory to be determined. During this stage, the Group's inventory analysis expertise is used to assess this data on a granular level which includes breaking the initial eligible inventory down to an individual Stock Keeping Units ("SKUs") level.

With our Customer Relationship Management ("CRM") Module, we track each client's progress through the origination phase, assigning tasks to individuals as necessary and tracking completion off those tasks. This module also gives greater oversight on pipeline activities and prioritisation, and understanding of inventory attrition rates as the client progresses through the due diligence process. With our secure data sharing tool, we ensure bank level security when a client is sharing data with us, and provide user only access that is truly necessary. With our e-signature tool, we can adhere to all the necessary jurisdiction guidelines around e-signatures, including ID verification using government issued ID documents. 

This detailed assessment further filters out and identifies typical ineligible inventory items according to the Supply@ME Inventory due diligence parameters (or "Risk Appetite"). Further consideration is also given to inventory turns, forecast and historical sales, margins, seasonality, rates of obsolescence, and criticality of the SKU to the client. The selected SKUs chosen meet the Group, the stock company, and the inventory funder's Risk Appetite.

The result of this detailed analysis in a list of qualifying SKUs that are considered as eligible items for a potential Inventory Monetisation transaction. Alongside this, an in depth analysis is then completed on the client's business (e.g. credit analysis) and processes including, for example, how they track and store inventory, manage orders, and deliver orders etc. Additionally, analysis is carried out in terms of potential remarketers that can be used to mitigate the risk for the inventory funders of the disposal of any unsold goods, where required. Each deal is then run through the stock company's cashflow model to ensure sustainability parameters are not breached.

Once the above due diligence analysis is complete this is shared with the client and with any potential inventory funders. Once a specific inventory funder accepts a specific client company, the process moves from the due diligence to the contracting phase, and it is here that the formal commercial contract between the client company and the relevant stock company governing the IM transaction are negotiated and finalised.

Lastly, once the contracts are signed by the stock company and the client company, training is given on the Trading Module to ensure a best in class user experience for the client in uploading their first, and subsequent files. The client is then ready to carry out their first IM.

Post-Inventory Monetisation activities

Platform and Inventory Service Provider

The Supply@ME IM Platform is crucial to the overall IM transaction as it is through this software technology that the inventory being monetised is recorded, monitored and reported on. In order to have usage of the Platform, the relevant stock company will pay a licence fee to the Group. In addition to the usage of the Platform, the stock company also relies on the Group's expertise in monitoring, controlling, and reporting on the eligible inventory items post monetisation as part of the inventory servicer activities provided. To facilitate these activities, throughout the course of a contract the client company must provide inventory data extracted from their Enterprise Resource Planning ("ERP") system which allows the Group to carefully monitor the inventory monetised (via inventory analytics) and to identify anomalies to be queried with the client company.

In the case of the eligible order-based inventory models the Supply@ME team has developed a methodology to analyse the inventory SKUs required to satisfy orders received by the client company and which are used for internal client projects required to deliver these orders. The Group's monitoring team set Key Performance Indicators ("KPIs") and Key Risk Indicators ("KRIs") based on the in-depth knowledge of the client's business model and selected eligible SKUs gained during the due diligence process. This allows them to quickly, robustly, and efficiently monitor and assess the performance of each SKU as up to date data is received from the client company. The data used to complete the monitoring activities includes detailed information on the client company's sales, inventory movements, end customer orders, and supplier purchase orders. This continuous monitoring process enables the Group to understand and report to the stock company (who own the goods as a result of the Inventory Monetisation) if the client company is adhering to the operating cycles and behaviours observed during the due diligence phase. Data driven discussions are held with the client around any anomalies detected and if necessary, remediation strategies are agreed. Following this, the monitoring and reporting cycle begins again. In our live clients we have seen evidence of minor anomalies due to unexpected client behaviours. Once we held the data driven discussions with the clients, they refined some of their processes to behave as per the expectations of our legal frameworks. It is reassuring that our monitoring procedures can identify these kinds of anomalies, and even more so that the clients amend their behaviours appropriately. This leads to a lasting value add relationship between Supply@ME, the stock company, and the clients.

The Platforms "data factory" module facilitates the level of data ingestion required, automated application of key business rules and the creation of a unique inventory data-lake to design and develop advanced inventory data analytic metrics such as seasonality, obsolescence risk, critical components, margin and sales trends, and to some extent, client behaviours. Together this enables the Group to effectively monitor and identify anomalies in the inventory data being collected for monitoring and reporting purposes. During 2023 the data ingestion module has continued to be stress tested through live client data being available and evolving our inventory models and the adaptation of our Platform to match the requirements of these models. The Group also provides administrative support in the facilitation of the client company's buybacks of the inventory monetised, and refills of new eligible inventory items over the course of the IM transaction contract.

As a result of the granular level of data ingestion and storage available through the Platform, Supply@ME is able at any time to provide an up-to-date picture of the inventory monetised (and therefore owned) by the relevant stock company, together with any receivable amounts owed to the relevant stock companies. This seeks to provide our traditional funding partners with the necessary reassurance and transparency needed for such IM transactions.

As the Group's business scales up, the focus will be on how to augment the existing technology to allow the activities referred to above to be completed in the most efficient and effective way. This will be particularly important as the volume of data being collected, monitored, and reported on increases with each new IM transaction that is facilitated over the Platform, and as the business seeks to refine and improve its existing processes. Those improvements and advancements to the Platform made over the past year are detailed below. 

How we adapt to scale the business 

"One size does not fit all" where Inventory Monetisation is concerned. Supply@ME's business model has been developed further during 2023, and to date in 2024, and adapted for a range of client company inventory models and inventory funder's appetite for different inventory types. Understanding the needs of a range of businesses and building this into the Group's processes and methodologies will enable faster scaling as the Supply@ME business model will meet the needs of a broader base of client companies and inventory funder requirements.  Each client company and hence every inventory model presented to the Group has unique features that need to be carefully considered and evaluated to ensure the correct eligible inventory items are selected for monetisation. This requires the Supply@ME team to:

-      Understand the business industry within which the client company operates, alongside the individual business model;

-      Work together with the client company to ensure the data required to accurately assess and monitor the eligible inventory items can be supplied in the required format and within the required timeframes;

-      Identify the appropriate inventory model and monitoring approach to use, or determine if a new approach will be required;

-      Use its inventory analysis expertise to select which SKUs qualify as eligible inventory to be monetised. This will largely be focused on reducing the risk to the relevant stock company of being left with unsold inventory;

-      Prepare the client company due diligence report which includes explanations regarding any ineligible inventory items identified through the process; 

-      Liaise with the relevant stock company to identify potential inventory funders;

-      Liaise with the client company and relevant stock company to originate the formal contractual arrangement between the two parties;

-      Provide training to the relevant parties on the use of the Platform to allow for the monetisation of the eligible inventory items (which is facilitated using the Platform); and

-      Continuously monitor the eligible inventory to allow for reporting to the relevant stock company over the performance of the inventory selected and to ensure remediation strategies can be applied by the stock company if necessary.

Currently, the business model of a client company will be initially categorised into one of the inventory models set out below. The Supply@ME team has developed specialist inventory analysis expertise for each of these models based on the characteristics of the industry and inventory.

Generic Goods

Client companies who trade finished goods, so purchase and resell specific goods, are a tried and tested client model for the Group and hence can move through the onboarding and due diligence process swiftly.

Orders Based Model

Client companies who create or manufacture products "to order" can be serviced by Group's "orders-based model". The Supply@ME team has developed a methodology to analyse the inventory SKUs required to satisfy orders received by the client company and which are used for internal client project required to deliver these orders. 

Maturing Goods

The Group has recently implemented a new methodology for goods that mature over time and whose price appreciates or gathers wealth as they mature. These goods are typically in the agri-food sector such as cheese or wine, and leverage available external price matrices to benchmark the current value of the maturing products. This methodology is core to the BBPM White-Label binding term sheet commitment announced in the RNS of 3^rd January 2024. The Group also plans to develop methodologies that will allow it to assess the inventory value for goods that appreciate during the maturation process but for which external pricing matrices are not available. This will open up the market to a broader base of companies whose goods mature, for example cheese, wine and 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). This model is being further developed to account for more complex manufacturing scenarios.

The Group's ability to scale

The key to scaling the Supply@ME business is largely linked to automation of the core elements of our delivery model. This will allow the Group to effectively service the different client company business models in the most efficient way possible, which will in turn enable us to grow our pipeline of eligible client companies in order to meet the varying appetite of inventory funders. During 2023 progress has been made through the clear identification of the key serviceable client business models and the development of the associated internal processes required to allow client companies to access the benefits of the Supply@ME Platform. The Group sees the key to its ability to further scale as becoming:

-      best in class in inventory analytics for each of these different models;

-      building automation through our due diligence processes making it fast and easy for client companies to receive feedback on eligible inventory items and enabling them to establish if Inventory Monetisation is viable for their inventory; and

-      building automation and technological scalability in our monitoring and reporting activities to proactively detect, report and mitigate risks for the relevant stock company.

Pipeline

The outcome of the recent lending survey conducted by the European Central Bank clearly indicates that corporates are trying to optimise their cost of funding, considering the high level of interest rates which impacts their net profits. This trend also reflects the current Supply@ME pipeline, where some client companies decided to review the use of the Inventory Monetisation facility or to wait for better market conditions before proceeding. Also, some potential client companies were excluded from the pipeline due to the deterioration of their financial and/or business outlook.

For this reason, in order to support the inventory funding processes managed by the CH Trading Hub, to date during 2024 a new process has been introduced where client companies are asked to sign a Letter of Intent ("LoI"), which going forward will be the catalyst to inclusion in our pipeline numbers, this new operational KPI is referenced below.

For the purpose of the Annual Report and Accounts for the year ended 31 December 2023 and this announcement, we include reference to the pipeline KPI used in previous years which represents the current potential value of warehoused goods inventory to be monetised rather than the pipeline revenue to be earned by the Group as well as this new measure which is underpinned by those client companies who have signed an LoI or term sheet ("New LoI pipeline number"). The new LoI process has been very recently introduced and the associated numbers are currently low, we anticipate being able to provide a stronger indication of the pipeline in our next market update.

Country Breakdown

Italy

As the track record of transactions and awareness of our Inventory Monetisation Platform, and its ability to facilitate Open Market IM's, continues to grow following the inaugural Italian transaction in September 2022 with VE Chain and further traditional funding IM transaction in 2023, there is interest from small and large businesses, with differing levels of monetisable inventory. The success of our first IM reignited discussions with businesses which had first been introduced to Supply@ME before the pandemic. Our pipeline of Italian opportunities continues to evolve, and we are developing the options to facilitate further IMs with other inventory funders via the CH Trading Hub.

The new Italian legislation pegno non possessorio (the "PNP Regulation") was published in January 2023 and came into effect in June 2023 introducing the concept of "security interest" (a concept widely adopted across Europe and the UK) into Italian law, allowing entrepreneurs to access financing of their inventory more easily, without having to sell, transform or otherwise dispose of their business assets. The first traditional IM transaction in Italy leveraged this regulation. Supply@ME anticipates it will create further opportunity for traditional inventory funders to invest in IM transactions considering the proposed improvements to the legal enforceability of guarantees over the inventory, through the arrangement of white-label agreements, as happened with BBPM as per the Company' announcement made on 3 January 2024. Additionally, the recent announcement with regards the Supply@ME's commitments with the Italian neo bank will enable the Company to make solid progress in the Italian market.

Client companies from Italy included in the overall pipeline KPI have inventory equivalent to £318.6 million as at 19 April 2024 (£162.5 million at 21 April 2023). It is worthy of note that 59% of this number is comprised of the inventory of one large corporate Italian client. The New LoI pipeline number is £19.2 million.

United Kingdom

Origination in the UK has slowed in line with the market indications that corporates are trying to optimise their cost of funding and the availability of dedicated inventory funding programmes by the CH Trading Hub. As Supply@ME continues to onboard the existing pipeline and build its track-record, this will unlock further related client company opportunities in UK. Client companies from the UK included in the overall pipeline KPI have inventory equivalent to £1.8 million as at 19 April 2024, (£212.1 million as at 21 April 2023). The New LoI pipeline number is £1.8 million.

Europe (excluding UK and Italy)

Client companies have typically been sourced through Supply@ME's strong relationships held with a global eco-system of introducers which have also enabled the growth in a wider European portfolio of client companies; including opportunities in France and Germany. There are several larger ticket opportunities to monetise inventory subject to the appropriate structure and funding being in place. Supply@ME has opportunistically engaged a company with inventory in warehouses in other European countries and currently £10.3 million of the pipeline for both the historical method of reporting and the New LoI pipeline number is located in other European location. Further details will be announced in due course.

Financial review

The Group's consolidated financial statements for the year ended 31 December 2023 ("FY23") have been prepared in line with UK adopted International Accounting  Standards ("IAS"). The TradeFlow operations 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 TradeFlow Restructuring, being 30 June 2023.

As shown in the financial summary above, the TradeFlow (discontinued) operations contributed a loss of £185,000 (inclusive of the profit of £718,000 recognised in connection with the TradeFlow disposal) in FY23, compared to a loss of £2,167,000 from discontinued operations for the year ended 31 December 2022 ("FY22"). 

Revenue from continuing operations

The table above provides a breakdown of the Group's revenue from Inventory Monetisation activities during FY23. 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 FY23 consolidated financial statements included within this Annual Report and Accounts.

During FY23, the Group recognised £158,000 (FY22: £138,000) of Inventory Monetisation revenue, which it split 59% related to due diligence fees (FY22: 74%), and the remaining 41% relating to Inventory Monetisation fees (FY22: 26%).

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 FY23, the Group has continued to carry out, and charge for due diligence activities, and the £94,000 recognised as revenue reflects the value of those due diligence activities completed during FY23.

Following the announcement of the first Italian IM transactions during 2022 and 2023, which were facilitated using the Group's IM Platform, the Group recognised Inventory Monetisation fees of £64,000 during FY23. These fees related to the following activities:

1)   Origination fees - the origination of the contracts between the client company wishing to have their inventory monetised and the independent stock (trading) company that purchased the inventory from the client company. In line with IFRS 15 ("Revenue from Contracts with Customers") the Group recognised these revenues at the point in time they are due to be received from the client;

2)   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

3)   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.

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 the first half of 2023, the Group was focused on securing the binding commercial agreements in terms of the first IM transactions to use traditional funding in both Italy and the UK. While the binding contract for the latter of these two IM transactions was agreed in July 2023, there has been a delay in the completion of the initial inventory purchased which has largely been the result of the IM being managed alongside an existing floating charge facility which has required this client company to gain specific waivers from their current lender. While this has resulted in delays to this deal, it has proven that an IM transaction model is able to work alongside existing financing facilities.

During the second half of 2023, the Group continued to make important progress to enhance its business operating model with continued differentiation of the IM Platform including, not only the underlying software, but also the supporting processes, methodologies and legal framework. Alongside this, the Group has worked on developing a new inventory funding framework through the launch of CH Trading Hub, has spent considerable time and effort securing its first commitment which will launch the Group's White-Label go-to-market strategy, and has been working with various investment banks and digital asset providers to explore and develop a wider variety of inventory funding routes. All these activities have continued into 2024 as outlined in more detail in the Annual Report and Accounts for the year ended 31 December 2023 and in this announcement.

The Group recorded an operating loss from continuing operations before impairment charges and fair value adjustments for FY23 of £3,625,000 (FY22: £4,651,000 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 £1,026,000 are described below:

-      An aggregate decrease in the loss from gross profit and administration expenses of £537,000 from £4,123,000 recognised in the year ended 31 December 2023, compared to £4,660,000 recognised in the prior year ended 31 December 2022. This decrease largely resulted from focused cost saving efforts that were implemented throughout 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 £643,000 during FY23 as management made an effort to bring certain activities in house, staff costs reduced by £211,000 during FY23 as certain staff members who left during the year were not replaced, either at all or immediately, and contractor costs reduced by £59,000 during FY23 as the Group ended certain agreements with contractors as 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 costs again in order to support and drive growth and expansion. The decreases set out above were partially offset by:

·    higher LTIP costs in FY23 as a result of a full 12 month of charges in relation to the October 2022 LTIP grants, compared to just two months of charges in FY22, and seven month of charges of the May 2023 LTIP grants; and

·    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.

-      an increase of £489,000 in the other operating income recognised during FY23 to a total of £498,000 for the current financial year compared to £9,000 recognised in FY22. The majority of this increase arose as a result of a settlement agreement reached with an existing supplier during FY23 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 FY23 (FY22: £nil). The other two main factors contributing to the increase in other operating income in the current financial period are:

·    an increase in interest income recognised during FY23 of £25,000 compared to the prior period. This interest income was charged on late payment of contractual amounts due to the Group; and

·    an amount of £87,000 recognised during FY23 (2022: £nil) which relates to claims made in Italy for research and development tax credits relating to the 2021 and 2022 financial years. These amounts are expected to be utilised by the Group over the next three years from 2024 to 2026, in equal instalments each year, to reduce the balance of other Italian tax payables.

Impairment charges and fair value adjustments from continuing operations

The impairment charges from continuing operations of £384,000 recognised during FY23 relate to the impairment of the Group's internally developed IM platform as at 31 December 2023 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 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 2 to the Group's FY23 consolidated financial statements included within this announcement, 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 £384,000 as at 31 December 2023 (2022: £1,078,000).

The fair value adjustment to the investment in TradeFlow of £68,000 recognised during FY23 (2022: £nil) reflects the worsening of the net liability position of TradeFlow between 30 June 2023, being the date of disposal is the 81% stake in TradeFlow, and the year end balance sheet date of 31 December 2023. The quantum of the fair value adjustment has been determined with reference to the value of the change in the net liabilities of TradeFlow between these two dates.

Discontinued Operations

The revenue and operating loss of the TradeFlow operations for the period from 1 January 2023 through to the date on which the TradeFlow Restructuring was completed, being 30 June 2023, are shown in the table below. As detailed above, the TradeFlow operations 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 and up until 30 June 2023. After this point, TradeFlow was no longer consolidated by the Group and instead the Group now recognises the fair value of the remaining 19% investment in TradeFlow on its balance sheet as an investment. The comparatives show the revenue and operating loss of the TradeFlow operations for the full year ended 31 December 2022.

*Represents the results for the six-month period prior to the finalisation of the TradeFlow Restructuring on 30 June 2023. 

TradeFlow's investment advisory revenue arose from investment advisory services provided in TradeFlow's capacity as investment advisor to its well-established USD fund and its growing EUR fund. In line with IFRS 15 ("Revenue from Contracts with Customers") these revenues were recognised when the investment advisory services have been delivered and TradeFlow's performance obligation has been satisfied.

Further details of the costs recognised during the first six months of 2023 prior to the completion of the TradeFlow Restructuring on 30 June 2023 that are set out in the table above are detailed below:

-      amortisation of intangible assets arising on acquisition of £442,000 during FY23. These costs related to the intangible assets recognised by the Group in connection with the TradeFlow acquisition, which had an initial fair value of £6,888,000. The £442,000 represents the amortisation charge arising on these assets for the six month period from 1 January 2023 through to the date on which the TradeFlow Restructuring was completed, being 30 June 2023;

-      foreign currency translation loss reclassified to comprehensive income of £62,000 during FY23. This represents the cumulative foreign currency translation reserve created on consolidation in respect of the TradeFlow operations. This is reclassified to income statement at 30 June 2023 due to TradeFlow no longer being consolidated by the Group from this date; and

-      the profit on disposal of the 81% of TradeFlow of £718,000. On the 30 June 2023, the net assets of TradeFlow (representing a value of £1,634,000 at 30 June 2023) are no longer consolidated by the Group, and instead the fair value of the new 19% investment of £352,000 was recognised on the balance sheet, together with the £2,000,000 remaining cash consideration to be received. The difference between these items resulted in a profit on disposal of the 81% of TradeFlow recorded in the Group's FY23 consolidated statement of comprehensive income of £718,000.

As shown above there were no additional acquisition related earn-out costs recognised during 2023 which reflected the fact that as part of the TradeFlow Restructuring all future potential earn-out payments were offset against the initial cash consideration value.

As detailed above, following the finalisation of the TradeFlow Restructuring on 30 June 2023, the assets and liabilities of TradeFlow, including the intangible assets arising as part of the original TradeFlow acquisition in July 2021, are no longer consolidated by the Group. As such no further impairment charges relating to the discontinued operations were recognised during 2023. Instead, a calculation was undertaken to calculate any gain or loss arising on the change in ownership structure of the TradeFlow operations. The details of this calculation are set out below, and further detail can be found in note 26 to the Group's FY 23 consolidated financial statements included within this announcement.

.

With regards to the £2,000,000 remaining cash consideration that was due to the Company as a result of the TradeFlow Restructuring, this amount was assumed by The AvantGarde Group S.p.A ("TAG"), the Group's majority shareholder, from the buyers of the 81% stake in TradeFlow by way of a debt novation deed signed on 30 June 2023. The £2,000,000 was to be repaid by TAG to SYME in multiple tranches, with the final tranche being due by 31 January 2024. As at 31 December 2023 an amount of £772,000 remained outstanding from TAG in relation to this amount (31 December 2022: £nil), of which £227,000 was overdue and £500,000 was due for payment on 31 January 2024.

Subsequent to 31 December 2023, and prior to the release of the Group's FY23 consolidated financial statements included within this announcement, TAG had repaid £655,000 of the remaining amounts that were outstanding at 31 December 2023, through a combination of £569,000 cash payments and a further £86,000 offsets against amounts owed by the Group to TAG.

The Company has been charging a late fee to TAG in terms of overdue payments of this particular receivable balance, and this late fee is calculated at a compounding rate of 15% per annum on any amounts of the instalments not transferred to the Company by the relevant due date, in accordance with the contractual arrangements. During the year ended 31 December 2023, the Group recognised £11,000 of interest revenue (2022: £nil) in relation to the late payments by TAG in respect of this particular receivable balance. As at 31 December 2023, the full amount of this interest revenue remained outstanding.

To determine the accounting fair value of the retained 19% investment in TradeFlow of £352,000, management used the specifics set out in the TradeFlow share purchase agreement dated 30 June 2023. Further details of this calculation are set out in note 26 the Group's FY 23 consolidated financial statements included within this announcement. Following this calculation, management then applied a discount of 25% to this fair value to take account of the fact that the Company no longer controls the TradeFlow operations. This discount applied is a management judgement that will continue to be reassessed at each reporting date. 

New equity funding

On 28 April 2023, the Company and Venus Capital S.A. ("Venus Capital") entered into a new equity subscription agreement, pursuant to which Venus Capital committed to subscribe for 4,500,000,000 new ordinary shares (the "Subscription Shares") at £0.0005 per Subscription Share (the "Subscription Agreement") over two separate tranches, both of which took place in May 2023. The total gross proceeds received by the Group in relation to this Subscription Agreement was £2,250,0000 or £2,137,500 net of the £112,500 commission that was charged be Venus Capital in connection with the issue of the Subscription Shares. An additional £112,500 was paid to Venus Capital in respect of agreed costs and expenses incurred by Venus Capital in connection with the Subscription Agreement.

The Subscription Agreement required new warrants to be issued to Venus Capital at a ratio of one warrant for every two Subscription Shares issued. This resulted in an obligation for the Group to issue 2,250,000,000 new warrants to Venus Capital ("New Venus Warrants") which existed at 31 December 2023. The New Venus Warrants are each exercisable into one new ordinary share at a price equal to £0.00065 pence per share up to a final exercise date of 31 December 2026. As at 31 December 2023, the obligation to issue these share warrants to Venus Capital has been recognised within equity as "warrants to be issued" within the share-based payment reserve. These share warrants had a total fair value of £1,717,000. As at 31 December 2023, all of these share warrants remain outstanding.

The total share issue costs incurred in connection with the Subscription Agreement during FY23 were £1,971,000 including £1,717,000 relating to the fair value of the warrants issued, £225,000 relating the commission and other fees charged by Venus Capital and £29,000 of other share issue costs. This has been accounted for as a £1,971,000 reduction to share premium during FY23 given there was sufficient share premium created on the issue of the Subscription Shares.

New debt financing

In addition to the new equity funding referred to above, the Group also needed to secure new debt financing during FY23 to support the working capital needs of the Group while it continues to fully establish the business model and create a track record of revenue generation. This has presented a number of challenges to the Group, not only due to the general challenging economic and commercial environment throughout 2023, including the high interest rate environment and its impact on economic prospects and investor sentiment, but also the start-up nature Group's business as this in itself significantly limits funding options compared with larger, more mature, UK businesses especially in the fintech sector. With these factors in mind, the Board carefully considered what options were available and concluded that entering into the following debt financing with TAG, the Group's major shareholder, were in the best interests of the Group and its shareholders. Details of the new debt financing arrangement entered into with TAG during FY23 are summarised below.

TAG Unsecured Working Facility 

On the 28 April 2023, the Company and TAG entered into a fixed term unsecured working capital loan agreement (the "TAG Unsecured Working Capital facility"). This agreement was subsequently amended on 30 June 2023 in conjunction with the TradeFlow Restructuring. Under the amended TAG Unsecured Working Capital facility, TAG agreed to provide, subject to customary restrictions, an unsecured working capital facility of up to £800,000 to cover the Group's interim working capital and growth needs.

On 30 June 2023, the Company issued a draw down notice to TAG under the amended TAG Unsecured Working facility for the full £800,000 available. As at 31 December 2023, TAG had provided £250,000 of the £800,000 that had been drawn down by the Company (31 December 2022: £nil), however subsequent to 31 December 2023, and prior to the release of Group's FY23 consolidated financial statements included within this announcement, TAG had provided the remaining £550,000 of the £800,000 that had been drawn down by the Company.

The initial due date for repayment by the Company of amounts (if any) drawn under the TAG Unsecured Working Capital facility is 1 February 2028, however on 26 March 2024, the Company and TAG signed a second deed of amendment agreement, which allowed the full outstanding amount of the amended TAG Unsecured Working Capital facility, being £800,000, to be extinguished by the issue of 1,500,000,000 new ordinary shares which were issued to TAG on 28 March 2024.

Any sums drawn under the TAG Unsecured Working Capital facility attracted a non-compounding interest rate of 10% per annum, and any principal amount (excluding accrued interest). During the year ended 31 December 2023, the Company recognised interest expense of £7,000 (2022: £nil), which all remained unpaid as at 31 December 2023, but which was settled in full as part of the repayment made on the 28 March 2024.

Top-Up Shareholder Loan Agreement 

On 28 September 2023, the Company and TAG entered into a unsecured shareholder loan agreement (the "Top-Up Shareholder Loan Agreement"), pursuant to which TAG 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.

Full details of this Top-Up Shareholder Loan Agreement are set out in note 28 to the Group's FY 23 consolidated financial statements included within this announcement. In summary, under the Top-Up Shareholder Loan Agreement the Company has the ability to draw down up to £3,500,000 in monthly instalments over the period to 30 June 2025, with the monthly drawdown amount calculated in order to ensure that the Group's projected cash balance on the last business day of the coming calendar month will not be less than £250,000 after taking into account the Group's scheduled balance of receipts and payments for the next month.

The repayment of any sum drawn down under the TAG Top-Up Shareholder Loan Agreement will be due five calendar years from the date which funds are received by the Company subject to the relevant draw down request and any sums drawn down by the Company under the TAG Top-Up Unsecured Shareholder Loan will attract a non-compounding interest rate of 10% per annum, and any principal amount (excluding accrued interest) outstanding on a relevant due date shall attract a compounding rate of 15% per annum thereafter. Interest will be due to be paid annually on 31 March of each relevant calendar year. 

As at 31 December 2023, the Group had issued draw down notices to the value of £969,000 to TAG, however these amounts had not yet been received by the Group (31 December 2022: £nil). As a result of the late payment of the amounts drawn down by TAG, the Group recognised interest income of £11,000 (2022: £nil), which all remained unpaid as at 31 December 2023.

Subsequent to 31 December 2023, and prior to the release of the Group's FY23 consolidated financial statements included within this announcement, the Company issued additional draw down notices under the Top-Up Shareholder Loan Agreement to the value of £779,000 and had received £nil from TAG.

Late payment challenges encountered by the Group during 2023

As previously communicated by the Company through its RNS announcements dated 5 December 2023 and 29 February 2024, the Group has experienced a number of cash flow pressures during the second half of 2023, and to date in 2024, as a result of a number of delayed contractual funding amounts due to the Group from TAG. The delayed contractual payments resulted from TAG experiencing delays in funding it was itself expecting. The Board has been monitoring the situation closely including requesting regular updates from TAG regarding the expected timing delays, and representation as to the mitigating actions that TAG itself has been putting in place to allow them to demonstrate their ongoing commitment to support the Company and to provide the contractual payments, albeit on a delayed payment schedule.

As detailed above, the Group has continued to receive payments from TAG following 31 December 2023 and TAG has provided further representations to the Board that it will continue to provide the outstanding amounts, and that TAG is itself in the process of securing additional facilities and arrangements to enable performance against these representations. Additionally, the Board is exploring alternative options of funding in order to meet its ongoing working capital needs and to reduce the reliance of the Group on TAG.

Cash flow

The Group decreased its net cash balance by £575,000 (2022: £1,133,000 decrease) due to a combination of the following cash inflows and outflows during FY23:

-      cash inflow of £2,068,000, net of commission and other share issue costs, received from the issue of new ordinary shares during the first half of 2023 under the Subscription Agreement, and from existing warrant holders who chose to convert their warrants (which had been issued in conjunction with the open offer completed during 2022);

-      cash inflows from long-term borrowing from discontinued operations of £405,000 due to the new long-term borrowings secured by TradeFlow during the six-month period in 2023 prior to the completion of the TradeFlow Restructuring;

-      cash inflows from long-term borrowing from continuing operations of £139,000, net of repayments and other finance costs, predominantly due to amounts received under the amended TAG Unsecured Working facility agreed during 2023 less the cash repayments made during 2023 in relation to the long-term bank borrowings; and

-      cash inflow of £1,228,000 that have been received during the year ended 31 December 2023 from TAG in relation to the repayment of the remaining cash consideration that was due as a result of the TradeFlow Restructuring.   

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

-      net outflows from operating activities of £3,633,000 (2022: £4,555,000 net outflow);  

-      continued investment in the Group's IM Platform of £458,000 (2022: £1,175,000); and

-      removal of the opening cash balance of the TradeFlow operations of £324,000 to reflect the fact that the TradeFlow Restructuring was completed on 30 June 2023 and the TradeFlow assets and liabilities are no longer consolidated by the Group at the period end.

Net liabilities

As at 31 December 2023 net liabilities were £3,807,000 (31 December 2022: net liabilities of £2,025,000), representing an increase in the net liability of the Group of £1,782,000.

The increase in the net liability position at 31 December 2023 compared to 31 December 2022 is largely due to the following:

-      the addition of the new assets created as a result of the TradeFlow Restructuring including a) the £772,000 outstanding cash consideration receivable by the Company from TAG as at 31 December 2023 (31 December 2022: £nil), following TAG's assumption of the outstanding cash consideration payable from the buyers of TradeFlow on 30 June 2023, and b) the £284,000 investment balance relating to the fair value of the Group's remaining 19% ownership of TradeFlow as at 31 December 2023. Further details on these new assets can be found in notes 26 and 27 to the Group's FY 2023 consolidated financial statements included within this announcement.

This increase in assets compared to 31 December 2022 was then offset by:

-      the removal of the assets and liabilities relating to TradeFlow from the Group's consolidated balance sheet at 30 June 2023 to reflect the fact that the TradeFlow Restructuring was completed on this date. The value of the net asset relating to TradeFlow that were consolidated as at 31 December 2022 was £2,283,000;

-      the reduction in the cash balance from £257,000 as at 31 December 2022 to £5,000 as at 31 December 2023 reflecting a number of delayed contractual funding amounts due to the Group from TAG in the second half of 2023;

-      an increased in provisions from £468,000 as at 31 December 2022 to £575,000 as at 31 December 2023 reflecting additional interest amounts and penalties due on overdue tax and social security balances due;

-      a small increase in other working capital items primarily due to the overall net cash outflows from operations.

Going Concern

The Board's assessment of going concern, the key considerations and the material uncertainties thereto are set out in the note 2 to the Group's FY 23 consolidated financial statements included within this announcement.

Related Parties

Note 28 to the Group's FY 23 consolidated financial statements included within this announcement contains details of the Group's related parties.

Subsequent events

Note 30 to the Group's FY 23 consolidated financial statements included within this announcement contains details of all subsequent events.

Principal Risks and Uncertanities

The Group's approach to risk management is that the Board regularly considers the principal risks faced by the Group and takes a proactive approach to those risks identified, primarily through the application of the COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework. The leadership team have undertaken a bottom-up internal self-assessment approach to evaluating risks across all areas of the business in line with the COSO framework. Consideration was given to perceived risk with regard to Impact, Likelihood, Vulnerability and Velocity by internal functional experts. The identified risks were then reviewed and assessed centrally and key risks to the business are managed and mitigated. The key risks and mitigations are periodically presented to the Board and Audit Committee.

The most significant risks and uncertainties the Group faces are listed in the table below, categorised by the principal risk, together with the approach that has been taken to manage the impact of this risk on the Group, any changes to the risk profile since 2022 and an assessment of the importance of this risk considering the likelihood and impact of it post the mitigations outlined.

Strategic Risk

Strategic risk is defined as the failure to build a sustainable, diversified and profitable business that can successfully adapt to environment changes due to the inefficient use of Group's available resources.  

Business Model and Strategic Competition

Future development and strategy 

Macro global and economic risks 

Inventory Funding Risk

Technological Advancements

Commercial Legal Risk

Financial Risk

Financial risk takes into consideration risk resulting from the loss of capital. Consideration is given to liquidity, market and credit risk.

Group Funding Risk

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. 

Business Continuity Risk

Talent and Diversity Risk

Cyber Security Risk

Regulatory, Legal and Reputational Risk

Regulatory, Legal and Reputation Risk are defined as those relating to the legal and regulatory frameworks within which the Company operates. Reputational risk is linked to this as all of these areas related to the engagement in activities that detract from Group's goal of being a trusted and reputable Company.

Corporate Legal and Regulatory Risk

Data Protection

Reputational Risk

Statement of Director's responsibilities

The responsibility statement below has been prepared in connection with the annual report and financial statements for the year ended 31 December 2023. Certain parts thereof are not included within this announcement. The Directors confirm that to the best of their knowledge:

-      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

-      the strategic report, contained within the annual report and financial statements for the year ended 31 December 2023, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Supply@ME Capital PLC websites. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

This responsibility statement was approved by the Board of Directors and is signed on its behalf by:

Alessandro Zamboni

Chief Executive Officer

30 April 2024

Financial Statements

The final results announcement for the year ended 31 December 2023 is prepared in accordance with UK adopted International Accounting Standard and does not include all the information required for full annual financial statements. This announcement should be read in conjunction with the 2023 Annual Report and Accounts. The accounting policies adopted in this announcement are consistent with the Annual Report and Accounts for the year ended 31 December 2023.

The financial information has been extracted from the financial statements for the year ended 31 December 2023, which have been approved by the Board of Directors and on which the auditors have reported on without qualification.

The audit report also included a material uncertainty relating to going concern. Full details of the audit report can be seen in the 2023 Annual Report and Accounts.

Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2023

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

The above consolidated statement of financial position should be read in conjunction with the accompanying notes. These consolidated financial statements were approved and authorised for issue by the Board on 30 April 2024 and signed on its behalf by: