Preliminary Results

RNS Number : 9865B

Microsaic Systems plc

25 April 2012

Microsaic Systems plc

("Microsaic", "Microsaic Systems" or the "Company")

Preliminary Results for the year ended 31 December 2011

25 April 2012

Microsaic Systems plc (AIM: MSYS), the developer of chip-based scientific instruments, announces its preliminary results for the year ended 31 December 2011 and an update on trading since the year end.

Highlights

· Microsaic Systems is the first company to have successfully developed chip-based mass spectrometry (MS) systems, and launched its first breakthrough product - the Microsaic 3500 MiD - in January 2011 at a major international trade show.

· The Company is in commercial discussions with six major companies who have confirmed a strong interest in OEM sales channels. Technical milestones have been reached successfully and further customisation of our platform for certain of these partners' respective applications continues.

· As planned, the Company has started to implement its strategy for direct marketing and sales of the 3500 MiD, targeting niche, growth markets. Enthusiasm for the product is high and sales leads continue to grow.

· Successful admission to the AIM market of the London Stock Exchange, and institutional placing of £4.0 million (gross) took place in April 2011 to fund the development and commercialisation of miniaturised mass spectrometer products based on the Company's patented chip-based technologies.

Financial Summary

· Revenues of £267,999 for 2011 (£196,737 for 7 months to 31 December 2010)

· Cash and cash equivalents of £1,818,319 at 31 December 2011 compared to £674,212 at 31 December 2010

· Loss for year of £1,899,253 (£806,632 for 7 months to 31 December 2010)

Eric Yeatman, Chief Executive of Microsaic Systems plc, commented:

"Microsaic Systems has made significant progress during 2011. We are delighted with the level of interest we have received in our first product, the 3500 MiD, from direct customers and potential partners, based on the key attributes of this powerful yet compact analytical system, and are making good progress towards OEM partnering deals. We are entering an exciting period for Microsaic Systems and believe we are well placed to realise our vision and deliver value to shareholders."

Contacts

Microsaic Systems

Eric Yeatman, CEO

Via Citigate Dewe Rogerson

Numis Securities Limited

Stuart Skinner (Nominated Adviser)

James Serjeant (Broker)

+44 (0)20 7260 1000

Citigate Dewe Rogerson

Chris Gardner, Mark Swallow

+44 (0)20 7282 2995/2948

+44 (0)7903 737703

About Microsaic Systems

Microsaic Systems develops and sells chip-based scientific instruments for the chemical identification of substances. The Company's products are based on the 'gold-standard' scientific technique of mass spectrometry.

Microsaic Systems has developed a miniaturised mass spectrometer based on its patented, chip-based technologies (ionchip®, spraychip® and vac-chip™), that is smaller, lighter, quieter, more energy efficient and cheaper to run than conventional mass spectrometer systems.

Mass spectrometry is used across many industry sectors, including government, energy, utilities, pharmaceutical, diagnostics and healthcare, environmental, food and drink, security and defence, and industrial chemicals - a combined market of $3.3 billion in 2010.

Microsaic Systems was established in 2001 by a team including founders from Imperial College London, and was admitted to AIM in April 2011 under the symbol MSYS.

Chairman's and Chief Executive's statement

The year 2011 has been a momentous one for Microsaic Systems, one in which the Company has taken significant steps in its evolution, and recorded a number of important commercial and technological achievements. The Company launched its first major product, began manufacturing and direct product sales, and took substantial steps towards volume sales through OEM (Original Equipment Manufacturer) channels.

In January 2011, we launched our 3500 MiD product at Lab Automation 2011 in Palm Springs, USA, a major trade fair for laboratory instruments. The 3500 MiD is a breakthrough product in mass spectrometry - the method of choice for analysing the chemical composition of liquids, solids and gases - and represents the culmination of over a decade of research and development by the Company. Mass spectrometers provide unrivalled accuracy in detection, but are not applied in many major laboratories and production facilities because of their excessive size, cost, and support requirements. The 3500 MiD is the first compact mass spectrometer for liquid analysis; its advantages in size, power consumption, and ease of use and maintenance make it suitable as a personalised tool for chemists in the pharmaceutical and other industries, rather than as a centrally provided service as mass spectrometers have been conceived until now. The revolutionary nature of our product was recognised at Lab Automation by its winning the prestigious New Product Award.

Following this product launch and our other marketing activities, customer interest in the product has rapidly developed, and we have been able to build initial relationships with six potential OEM partners. Our strategy to achieve volume sales is to establish OEM relationships with market leaders in a number of parallel application areas, giving us access to their established sales channels while giving them a compelling addition to their product ranges. Following initial negotiations, and demonstrations at our premises, two of these potential partners ordered and took delivery of 3500 MiD systems and have since conducted successful trials at their own facilities. Two others have commissioned development work from us to adapt the system to their needs, and in both cases initial feasibility work was successfully concluded and further work has been commissioned and commenced. A fifth will take delivery of a system shortly.

Our direct sales strategy has also made important advances. In August we appointed a sales and marketing manager, Samantha Dunnage, and have since added staff in our customer support and application development functions. We have carried out demonstrations of the 3500 MiD at the facilities of a number of key lead customers, have received our first direct sales orders, and have delivered systems to customers in the UK, US and continental Europe. Overall, enthusiasm for the product is very high, and our sales leads continue to grow.

The focus for our product development has been on robustness, reliability and manufacturability. We have made significant improvements in product manufacturing during the year, as well as enhancements to hardware and software to meet specific customer requirements and applications. The Company also received CE certification for the 3500 MiD.

The Company took up occupation of additional premises during July to meet our requirement for expanded manufacturing capacity. The premises were fitted out and are now in use. As planned, the next phase of manufacturing outsourcing has commenced with subcontracting of electronic assemblies and other modules. The production process is completed with final system assembly and testing in our Woking facility.

The Company continued to strengthen its portfolio of intellectual property protecting its core technology assets with a total of five patents granted during the period, including three US patents. This takes the total number of patents granted to 45, with 48 pending.

A major milestone for Microsaic in 2011 was our admission to AIM in April, and our associated fundraising. We were pleased with the response of the market to our initial public offering, and are grateful for the consistent support shown by our shareholders then and since.

In December, our previous CEO Alan Finlay stepped down. Alan played a major role in the Company's development and success to date, and the Board would like once again to express its great appreciation for his contribution. We also take this opportunity to express our thanks to Peter Selway, who after 11 years as non-executive Director will be retiring during the current financial year.

Microsaic's technology remains unique in the marketplace - no comparable product has emerged from competitors, and the need for our highly deployable systems is more compelling than ever. With the 3500 MiD, 2011 saw a truly personal mass spectrometer introduced to the market for the first time. The Board believes 2012 will see the Company begin to deliver this capability to users in greater quantities.

Financial results

In April 2011 the Company re-registered as a public limited company and was admitted to AIM, a market of the London Stock Exchange. The preparations for listing involved a capital reconstruction. A bonus issue of 289 ordinary shares of 1p was made for each 1p ordinary share held, followed by a subdivision of each 1p ordinary share into four ordinary shares of 0.25p each. A capital reduction resolution was passed by the shareholders at the same time which enabled the remaining balance on the share premium account to be transferred to retained earnings.

As part of the admission, which was the first to be achieved by a technology business in 2011, the Company raised £4m gross of new funds. The Board was delighted with the response to the offer from new institutional investors as well as from existing shareholders. Costs of the share issue and flotation amounted to £755,005.

The 2011 results reflect the activities undertaken during the year, including the Company's admission to AIM. The loss for the year after tax was £1,899,253 (7 months to 31 December 2010: £806,632) on revenues of £267,999 (7 months to 31 December 2010: £196,737).

Revenue for the year comprised initial product sales revenue for the 3500 MiD and development funding from contracts with our partners and grant-funded projects. Our focus in 2011 has been on product development and building a sales pipeline, and therefore grant-funded project activity has decreased from 2010 levels. Investment in product development was increased, primarily on our first generation products and software, but also on future products. Research and development expenditure for the year was £1,314,851.

Operating expenditure was £1,090,718 for the year and reflects increased marketing expenditure as we unveiled the product at several trade fairs and recruited staff to assist with product applications and sales. Following the Company's listing there has also been a rise in administrative spend to support its status as a public company.

Following the progress made by the Company to date and the progress anticipated in the near term, the Directors have every expectation of securing suitable additional funding as may be required, and consequently have adopted the going concern basis in preparing the financial statements.

Colin Nicholl - Chairman

Eric Yeatman - Chief Executive

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2011

Restated

Year to 7 months to

31 Dec 2011 31 Dec 2010

Note £ £

Revenue		267,999	196,737
Cost of sales		(1,314,851)	(700,372)
Gross loss		(1,046,852)	(503,635)
Operating expenses		(1,090,718)	(394,877)
Loss from operations		(2,137,570)	(898,512)
Finance income		28,605	6,752
Loss before tax		(2,108,965)	(891,760)
Tax on loss on ordinary activities	6	209,712	85,128
Total comprehensive loss for the period		(1,899,253)	(806,632)

Loss per share attributable to the equity shareholders of the Company Basic and diluted loss per ordinary share	7	(5.47)p	(3.22)p

All operations are continuing operations.

The current reporting period is the year ended 31 December 2011 and the previous reporting period was the seven months ended 31 December 2010. Therefore the amounts presented in the financial statements for current and prior periods are not entirely comparable.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2011

Share Share option Retained Total

capital premium reserve earnings equity

£ £ £ £ £

At 1 June 2010	216	4,904,283	-	(3,227,867)	1,676,632
Adjustment for adoption of IFRS	-	-	822,834	(822,834)	-
At 1 June 2010 restated	216	4,904,283	822,834	(4,050,701)	1,676,632
Total comprehensive loss for the period	-	-	-	(806,632)	(806,632)
Share based payments - share options	-	-	5,319	-	5,319
At 31 December 2010 restated	216	4,904,283	828,153	(4,857,333)	875,319
Bonus issue	62,323	(62,323)	-	-	-
Capital reduction	-	(4,841,960)	-	4,841,960	-
Shares issued	34,142	3,969,258	-	-	4,003,400
Share issue and initial public offering costs	-	(755,005)	-	-	(755,005)
Share options exercised	-	-	(202,121)	202,121	-
Total comprehensive loss for the year	-	-	-	(1,899,253)	(1,899,253)
Share based payments - share options	-	-	21,658	-	21,658
At 31 December 2011	96,681	3,214,253	647,690	(1,712,505)	2,246,119

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2011

Restated

31 Dec 2011 31 Dec 2010

Note £ £

Assets

Non-current assets
Intangible assets		137,372		129,942
Property, plant and equipment		87,494		103,567
Total non-current assets		224,866		233,509

Current assets
Inventories		149,125		7,307
Trade and other receivables		311,441		184,236
Corporation tax receivable		190,000		220,128
Cash and cash equivalents		1,818,319		674,212
Total current assets		2,468,885		1,085,883
Total assets		2,693,751		1,319,392

Equity and liabilities

Equity
Share capital	8	96,681		216
Share premium		3,214,253		4,904,283
Share option reserve		647,690		828,153
Retained earnings		(1,712,505)	(4,857,333)
Total equity		2,246,119		875,319

Current liabilities
Trade and other payables		447,632		444,073

Total equity and liabilities		2,693,751		1,319,392

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2011

Restated

Year to 7 months to

31 Dec 2011 31 Dec 2010

£ £

Loss from operations	(2,137,570)	(898,512)
Amortisation of intangible assets	52,463	25,382
Depreciation of property, plant and equipment	55,929	42,524
Share based payments	21,658	5,319
(Increase)/Decrease in inventories	(141,818)	2,906
(Increase)/Decrease in trade and other receivables	(127,205)	20,957
Increase in trade and other payables	3,559	266,976
Cash used in operations	(2,272,984)	(534,448)
Taxation received	239,840	-
Net cash used in operating activities	(2,033,144)	(534,448)

Cash flows from investing activities
Purchases of intangible assets	(59,893)	(34,048)
Purchases of property, plant and equipment	(39,856)	(15,730)
Interest received	28,605	6,752
Net cash used in investing activities	(71,144)	(43,026)

Cash flows from financing activities
Proceeds from share issues	4,003,400	-
Share issue and initial public offering costs	(755,005)	-
Net cash from financing activities	3,248,395	-

Net increase in cash and cash equivalents	1,144,107	(577,474)
Cash and cash equivalents at the beginning of the period	674,212	1,251,686
Cash and cash equivalents at the end of the period	1,818,319	674,212

NOTES TO THE PRELIMINARY FINANCIAL INFORMATION

1. General information

The 2011 financial statements are the first full year financial statements to be prepared in accordance with International Financial Reporting Standards ("IFRS") and the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. This preliminary financial information is also prepared on this basis.

The preliminary financial information set out in this report does not constitute statutory accounts as defined by section 434 of the Companies Act 2006 and has not been audited.

The preliminary financial information for the seven month period ended 31 December 2010 is based on the statutory accounts for that period restated for the adoption of IFRS. Those statutory accounts have been delivered to the Registrar of Companies and the auditors' report on those accounts was unqualified and did not contain statements under section 498(2) or section 498(3) of the Companies Act 2006.

The preliminary financial information for the year ended 31 December 2011 is based on the statutory accounts for that period. Those statutory accounts will be delivered to the Registrar of Companies in due course. The auditors have reported on those accounts and their report was unqualified, however it included a reference to an emphasis of matter with regard to going concern, and their report did not contain statements under section 498(2) or section 498(3) of the Companies Act 2006.

2. Restatement

Following the adoption of the IFRS, the comparative financial information for the period ended 31 December 2010 has been restated for the implementation of IFRS 2 - Share Based Payments. The Company made no transitional elections.

3. Basis of preparation

The financial information has been prepared on the historical cost basis, except where financial instruments are required to be carried at fair value under IFRS.

4. Going concern

The financial information have been prepared on a going concern basis, which assumes that sufficient funds will be available for the Company to continue in operational existence for at least 12 months.

The Company has been developing its technologies for the market place as such has been absorbing funds. The Company is now in the early commercialisation phase of its development, and the financing of operations in the future will be from employment of existing cash reserves, revenue from sales of its products and other sources of funding as required.

Initial sales of the products have begun, and the build up of sales enquiries provides confidence over the revenue stream that this will generate. The recent progress made by the Company also gives the Directors confidence that the Company will be able to secure any additional suitable funding as and when required.

Although there remain uncertainties associated with both the amount of sales revenue and the availability of additional equity funding, after considering these and making relevant enquiries, the Directors have a reasonable expectation that the Company will have access to adequate resources to be able to continue in operation existence for at least twelve months, and consequently they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

5. Segmental reporting

The Company currently has one business segment, being the research, development and commercialisation of scientific instruments. This is undertaken wholly within the United Kingdom, and therefore a segmental analysis of turnover, profits/losses on ordinary activities before tax and net assets has not been presented. The Company is managed on the basis of its performance as a whole and not by any segments.

6. Tax

The Company has recognised taxation receivable in relation to R&D tax credits claimed for the period to 31 December 2010 and expected to be claimed for the year to 31 December 2011.

7. Loss per share

Restated

Year to 7 months to

31 Dec 2011 31 Dec 2010

Loss after tax attributable to equity shareholders	£(1,899,253)	£(806,632)
Weighted average number of ordinary 0.25p shares for the purpose of basic and diluted loss per share*	34,712,966	25,015,400
Basic and diluted loss per ordinary share	(5.47)p	(3.22)p

Potential ordinary shares are not treated as dilutive as the Company is loss making, therefore the weighted average number of ordinary shares for the purposes of the basic and diluted loss per share are the same.

*The weighted average numbers of shares have been adjusted to reflect the bonus issue and share sub-division in April 2011.

8. Share capital

Number £

Allotted, called up and fully paid
Ordinary shares of 1p each as at 31 December 2010	21,565	216
Bonus issue of ordinary shares of 1p each	6,232,285	62,323
Ordinary shares of 1p each before subdivision	6,253,850	62,539
Share subdivision into ordinary shares of 0.25p each	25,015,400	62,539
Ordinary shares of 0.25p each issued for cash	13,657,100	34,142
Ordinary shares of 0.25p each as at 31 December 2011	38,672,500	96,681

Following adoption of new Articles of Association in April 2011, the Company does not have a stated authorised share capital. Previously the authorised share capital was £100,000 comprising 10,000,000 ordinary shares of 1p each.

In April 2011 the Company made a bonus issue of 289 ordinary shares of 1p each for each 1p ordinary share held. Subsequently, each 1p ordinary share was subdivided into four ordinary shares of 0.25p each. The Company has just this one class of shares, with each share carrying one vote and equal rights to discretionary dividends.

9. Share based payments

The Company operates approved and unapproved share option schemes as a means of encouraging ownership and aligning interests of staff and external shareholders.

These share based payments have been measured at their fair value at the date of grant and the fair value expensed to the statement of comprehensive income on a straight line basis over the vesting period. Fair value has been measured using the Black-Scholes model.

Restated

Year to 7 months to

31 Dec 2011 31 Dec 2010