Registered Number:
FOR THE YEAR ENDED 28 FEBRUARY 2023
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMPANY INFORMATION
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONTENTS
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 28 FEBRUARY 2023
M Squared Lasers Limited and subsidiaries (“Group”) are private companies limited by shares incorporated in the United Kingdom (registered in Scotland), United States of America and Germany. The directors, in preparing this strategic report, have complied with s414C of the Companies Act 2006. This strategic report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to M Squared Lasers Limited and its subsidiary undertakings (see Note 14) when viewed as a whole.
Principal Activities The Group focuses on the development and production of photonics and quantum technologies and it is on a mission to harness the power of light to change the world. The Group is innovation led and by harnessing its ability to produce the world’s purest light it seeks to produce technology which will result in society leading innovation and address some of society’s greatest challenges. The Group’s technology has transformative, real world applications that can help global approaches to the climate emergency, greatly improve biomedical imaging, realise the next generation of semiconductors, and practically unlock the coming quantum age. The Group continues to export in excess of 90% of its products and services overseas, including North America, Europe, China and Japan. The Group had an average of 68 employees in the financial year 2022/23 ("FY23"), and 100 employees in the prior year ("FY22"). The Group has its headquarters in Glasgow, Scotland, alongside offices in England, the USA and Germany. Business Review The Group’s turnover for FY23 was £17.8m. In FY22 the Group recorded turnover of £22.9m. This was a very positive achievement given the continued challenges in global markets due to COVID, particularly its impact in China, and the indirect impact of the ongoing war in Ukraine on the Group’s operational activities. In Scotland, all Covid-19 related legal restrictions, including the wearing of face coverings, were removed in March 2022 and the majority of international travel restrictions were gradually lifted over the remainder of the calendar year. The Group experienced some recovery in customer activities, particularly in new order placement, however, the continued COVID restrictions in China, which applied until January 2023, had a negative impact on sales into that market and impacted our ability to source certain components. The conflict in Ukraine, which began on 24 February 2022, when Russian military forces entered the country, has had a significant indirect negative impact on the Group’s trading performance. In particular, the resultant increased activity in the defence sector restricted our ability to source certain components and required us to seek out alternative sources and to strategically increase inventory levels to safeguard production. The resurgence in defence sector activity caused by the conflict also resulted in the Group experiencing higher than normal staff attrition in certain areas and a general tightening in the labour market for certain skills extended the time taken to hire replacements. The issues created by the extended Covid restrictions in China and the impacts of the Ukraine war contributed to a net £3.3m reduction in turnover generated from our core sales activities (e.g. to sectors other than the space sector), compared to FY22. In part as a strategic response to these challenges, but also recognising the opportunities created by the timing of various satellite programmes, the Group successfully expanded the level of its commercial activities in the space sector during FY23 and experienced strong growth in that sector. During FY23, the Group generated almost £5m of turnover from the space sector which was a more than three-fold increase by comparison to the previous year. Our activities in this sector are further discussed later in this review. The Group experienced a £3.6m increase in the level of accrued income recorded on the 28 February 2023 balance sheet compared with the previous year end position, which was largely due to production backlogs caused by workforce gaps during the period. In this report, the Group consolidation has been prepared and reported at the level of M Squared Lasers Limited. The consolidation of the ultimate parent company, M Squared Technologies Group Limited has also been prepared and reported separately, in the form of the M Squared Technologies Group Limited annual report and financial statements.
Page 1
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
Business Review (continued)
In FY23, the Group's order book expanded across all business segments, establishing a favourable opening position in our core areas for FY24 and beyond. This growth positions us strategically to capitalise on developing markets such as semiconductors, metrology, life sciences, and notably in the groundbreaking field of quantum technology. The Group's long-standing strategy of identifying and commercialising research and development (R&D) is well recognised. We maintain strong partnerships with key global technology companies and government entities, addressing significant technological and scientific challenges. A substantial portion of group resources is dedicated to R&D, both in existing and new product domains. This effort is spearheaded by our Innovation business unit, which not only bolsters the business but also generates cash flow through customer partnerships, engineering services, end-user support, and grant funding. As a global leader in frontier science and deep technology, the Group continues to advance significantly in various core growth areas and further expands and develops its broad Intellectual Property (IP) portfolio. Our current focus and growth areas include: Advancements in Quantum Technology: The Group has made notable progress in making quantum technology a practical reality. This advancement is supported by partnerships, such as with the UK and Scottish governments and the University of Strathclyde (Square project), to enhance quantum computing capabilities. Our efforts in 'ultra-cold matter' sensing, time-keeping, and quantum computing have positioned us as both a supplier and integrator in key global programmes. We continue to develop our expertise in quantum accelerometers, quantum gravimeters, and the optical lattice clock. The Square project has advanced to state-of-the-art levels in neutral atom quantum computing, whilst our internal engineering and product development programme culminated in the launch of the Maxwell Neutral Atom Quantum Computing platform at the UK National Quantum Technologies Showcase in November 2022. At the Showcase, we also demonstrated our Atom Interferometer Accelerometer system which was deployed in field trials during the year. The Group successfully secured orders for various 'Quantum Modules' and OEM sub-assemblies for commercial cold matter quantum computers, as emerging start-up companies in this field are increasingly adopting our laser platforms. Earth Observation for Climate Change, Pollution and Global Food Security missions in the Space Industry: The Group has solidified its role in supporting the crucial Earth observation segment of the space industry. The current year’s activities focused on calibration systems to enable global CO2 emission measurement and sustainable agriculture. Our precision light sources, covering an unprecedented spectral range, are instrumental in mapping atmospheric pollution and climate change gases. These sources have also been expanded to other missions, with significant deliveries and developments achieved with leading customers in FY23 and FY22 now moving forward in the end user missions. Powering Advanced Manufacturing for Industry: FY23 witnessed the expansion of our precision light laser products into new manufacturing domains, including strong uptake in semiconductors and novel metrology applications. This expansion has enhanced the precision of manufacturing processes, improved yields, increased uptime, and reduced ownership costs, while also significantly lowering energy consumption and CO2 emissions often by many hundred-fold against previous generations of technology.
Page 2
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
Advancements in Biological Imaging & Healthcare:
Our advanced imaging product lines have evolved to offer standard products to solve some of biological imaging's hardest problems and at higher resolution imaging performance, pushing the boundaries in life sciences, including neuroscience, cancer biology, organoid biology, human reproductive IVF processes and plant biology. Investment in Strategic Partnerships: The Group's investment in strategic partnerships is pivotal in this high-barrier field. Our track record in forming multifaceted partnerships, aligned with common objectives, has made us a preferred partner for numerous global 'blue chip' corporations as they prepare for a 'quantum-ready' future, or develop precision optical systems for advanced manufacturing processes or metrology. During the year the company was successful in achieving UK funding for Innovation Acceleration to allow more Quantum end-user activities in FY24 especially in the application of novel Quantum Computing use-cases. Financial Key Performance Indicators The Group tracks EBITDA as a primary financial KPI. EBITDA performance for FY23 was £5.1m (FY22 £5.5m), representing a 28% Return on Revenue (FY22: 32%) which is calculated by dividing EBITDA by Turnover. The Profit before Tax in FY23 was £1.9m (FY22: £2.6M). EBITDA was calculated as follows: Research and Development: The Group’s Innovation business unit continues to develop a number of new laser based photonic solutions, aimed at addressing global issues in the fields of physical, biological and chemical sciences. The progress made in development of certain innovation programs was such that the directors, in line with previous reporting periods, consider it appropriate to capitalise £1,411,828 (FY22: £1,746,843) of related expenditure as an intangible asset with amortisation in the year of £2,296,592 (FY22: £2,023,233).
Page 3
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
COVID-19
The directors have given due consideration to the impact of the worldwide COVID-19 pandemic on future operations and the impact this has had since March 2020. Financial Exposure The Group’s principal financial assets are cash balances, trade and other debtors. The Group’s credit risk is primarily attributable to its trade debtors. The directors are of the opinion that the Group has no concentration of credit risk, with exposure spread over a large number of customers, many of whom are long established research institutions, government bodies and ‘blue chip’ organisations. The directors retain overall responsibility for the Group’s system of internal financial control, which is designed to give reasonable assurance against material financial misstatement or loss. Financial controls have been established which the directors believe enable them to meet their responsibility for the integrity and accuracy of the Group’s accounting records. The directors consider that the current global economic conditions create uncertainty, particularly over movements in exchange rates between GBP (the Group’s reporting currency) and the principal currencies in which the Group trades globally, and the impact that could have on financial and trading performance. Interest Rate Risk The Group has a mix of borrowings (with interest rates which can be fixed or floating), providing a certain degree of interest rate risk mitigation. The directors regularly reviewed interest rates throughout the year to determine the optimum risk mitigation strategy. Credit Risk The Group monitors credit risk closely and considers that its current policies of credit checks meets its objectives of managing exposure to credit risk. All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are reviewed on a regular basis and provision is made for doubtful debts when necessary, although this is considered a rare occurrence. Liquidity Risk The Group manages its cash and borrowing requirements in order to minimise interest expense, whilst ensuring the Group has sufficient liquid resources to meet the operating needs of the business. Currency Risk The Group is exposed in its trading operations to the risk of changes in foreign currency exchange rates. The main currencies in which the Group operates are GBP, Euro and the US dollar. The Group considers that it has a natural hedge in that many of its key suppliers’ invoice in the same currency as its main customers. However, this is reviewed on a regular basis and the use of foreign currency hedging would be considered if the directors concluded that foreign currency fluctuations could have a material impact.
Page 4
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
The directors are satisfied with the Group’s position at the end of the period and remain confident in the Group’s continuing ability to generate growth and to access financial support from its shareholders.
The end-markets for the Group’s products, particularly in the field of quantum technology, continue to be well funded by many national governments and the directors expect there to be scope for further growth in the business. The Group intends to maintain its investments within the valuable R&D projects that have underpinned its growth so far. The directors would like to record their thanks and appreciation to all members of staff for their ongoing support and commitment provided during the reporting period.
This report was approved by the board and signed on its behalf.
Page 5
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DIRECTORS' REPORT
FOR THE YEAR ENDED 28 FEBRUARY 2023
The directors present their report and the financial statements for the year ended 28 February 2023.
The profit for the year, after taxation, amounted to £1,151,225 (2022 - £1,568,125).
Existence of branches outside the UK
The Company has no branches, as defined in section 1046(3) of the Companies Act 2006, outside the UK other than its subsidiaries listed in Note 14. Post balance sheet events Recognising the significance of the combined effects of the impact of the Ukraine war and the extended lock down of the China market, coming soon after the Covid pandemic, the Directors entered discussions with the Parent Company’s largest institutional shareholder, the Scottish National Investment Bank (‘SNIB’) to agree terms for subscription for additional equity investment in the Group. The details of the investment are as disclosed at Note 2.3. Going concern At the Balance sheet date the Group has net current liabilities of £2,987,716. Included within current liabilities are amounts owed to the immediate parent company of £8,567,397. The Directors have confirmed the continuing support of the parent company and that this balance will not be called up on to be repaid within the coming 12 month period. The Group is funded by its shareholders, bank term loans, working capital facility and cash flow arising from its trading activities. The directors have prepared detailed forecasts of Group profitability and cash flow incorporating appropriate downside sensitivities. These forecasts have been used to assess the adequacy of funding resources available within the Company’s parent group. These forecasts show that there can be reasonable certainty that the Company and Group will have sufficient funding resources available to them throughout the assessment period and beyond. The following events are reflected in these forecasts and are relevant to the going concern assessment. Subsequent to the year end, the Directors of M Squared Technologies Group Limited ('the Parent Company') entered discussions with the Parent Company’s largest institutional shareholder, the Scottish National Investment Bank (‘SNIB’) to agree terms for subscription for additional equity investment in the overall Group. In consideration of a £7,720,576 investment made by SNIB received in two tranches on 4 September 2023 and 28 September 2023, the Parent Company issued shares to SNIB under a new class of A Preferred Ordinary Shares. Concurrent with receipt of the first tranche, BGF Investments LP (‘BGF’) paid the Parent Company an amount of £284,459 in consideration for subscription of BGF Warrant Shares in accordance with the BGF Warrant Instrument which was issued on 13 November 2020. The Parent Company financial statements disclose the amendments agreed between the company and its senior lenders to reprofile the term loan facilities. This amendment was agreed on 28 February 2023 and the amended repayment profile of the term loan is reflected in these financial statements. Taking the above factors into account, the directors have made an informed judgement, at the time of approving the financial statements, that there is a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. As a result, the directors have continued to adopt the going concern basis of accounting in preparing the annual financial statements.
Page 6
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 28 FEBRUARY 2023
The directors who served during the year were:
The Group has made qualifying third-party indemnity provisions for the benefit of its directors which were made during the year and remain in force at the date of this report.
Under section 487(2) of the Companies Act 2006, Anderson Anderson & Brown Audit LLP will be deemed to have been reappointed as auditor 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board and signed on its behalf.
Page 7
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 28 FEBRUARY 2023
The directors are responsible for preparing the Group strategic report, the Directors' report and the consolidated financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Page 8
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF M SQUARED LASERS LIMITED
We have audited the financial statements of M Squared Lasers Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 28 February 2023, which comprise the Consolidated statement of comprehensive income, the Consolidated Balance Sheet, the Company Balance Sheet, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Page 9
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF M SQUARED LASERS LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditor's report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Group strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group strategic report or the Directors' report.
Page 10
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF M SQUARED LASERS LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
We obtained an understanding of the legal and regulatory frameworks within which the company operates, focusing on those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements.
The laws and regulations we considered in this context were the Companies Act 2006 and Taxation legislation.
We identified the greatest risk of material impact on the financial statements from irregularities including fraud to be:
∙Management override of controls to manipulate the company’s key performance indicators to meet targets;
∙Timing and completeness of revenue recognition;
∙Management judgement applied in calculating provisions; and
∙Compliance with relevant laws and regulations which directly impact the financial statements and those that the company needs to comply with for the purpose of trading.
Our audit procedures to respond to these risks included:
∙Reviewed internal documentation and correspondence with regulators for evidence or irregularities;
∙Testing the timing and completeness of revenue;
∙Consideration of the assumptions applied whether the calculation of provision were appropriate;
∙Testing of journal entries and other adjustments for appropriateness;
∙Evaluating the business rationale of significant transactions outside the normal course of business;
∙Enquiries of management about litigation and claims and inspection of relevant correspondence; and
∙Reviewing legal and professional fees to identify indications of actual or potential litigation, claims and any non-compliance with laws and regulations.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor's report.
Page 11
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF M SQUARED LASERS LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
81 George Street
EH2 3ES
Page 12
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 13
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED BALANCE SHEET
AS AT 28 FEBRUARY 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 21 to 44 form part of these financial statements.
Page 14
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMPANY BALANCE SHEET
AS AT 28 FEBRUARY 2023
Page 15
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMPANY BALANCE SHEET (CONTINUED)
AS AT 28 FEBRUARY 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 21 to 44 form part of these financial statements.
Page 16
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 17
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 18
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 19
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 20
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
M Squared Lasers Limited is a limited liability company incorporated in Scotland. The registered office is Venture Building, 1 Kelvin Campus, West of Scotland Science Park, Maryhill Road, Glasgow, G20 0SP.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of comprehensive income in these financial statements.
For their respective years ended 28 February 2023 the following subsidiaries are entitled to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies: Solus Technologies Limited (SC303447) and M Squared Life Limited (SC522938).
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.
Page 21
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
At the Balance sheet date the Group has net current liabilities of £2,987,716 Included within current liabilities are amounts owed to the immediate parent company of £8,567,397. The Directors have confirmed the continuing support of the parent company and that this balance will not be called up on to be repaid within the coming 12 month period.
The Group is funded by its shareholders, bank term loans, working capital facility and cash flow arising from its trading activities. The directors have prepared detailed forecasts of Group profitability and cash flow incorporating appropriate downside sensitivities. These forecasts have been used to assess the adequacy of funding resources available within the Company’s parent group. These forecasts show that there can be reasonable certainty that the Company and Group will have sufficient funding resources available to them throughout the assessment period and beyond. The following events are reflected in these forecasts and are relevant to the going concern assessment. Subsequent to the year end, the Directors of M Squared Technologies Group Limited ('the Parent Company') entered discussions with the Parent Company’s largest institutional shareholder, the Scottish National Investment Bank (‘SNIB’) to agree terms for subscription for additional equity investment in the overall Group. In consideration of a £7,720,576 investment made by SNIB received in two tranches on 4 September 2023 and 28 September 2023, the Parent Company issued shares to SNIB under a new class of A Preferred Ordinary Shares. Concurrent with receipt of the first tranche, BGF Investments LP (‘BGF’) paid the Parent Company an amount of £284,459 in consideration for subscription of BGF Warrant Shares in accordance with the BGF Warrant Instrument which was issued on 13 November 2020. The Parent Company financial statements disclose the amendments agreed between the company and its senior lenders to reprofile the term loan facilities. This amendment was agreed on 28 February 2023 and the amended repayment profile of the term loan is reflected in these financial statements. Taking the above factors into account, the directors have made an informed judgement, at the time of approving the financial statements, that there is a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. As a result, the directors have continued to adopt the going concern basis of accounting in preparing the annual financial statements.
Page 22
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
Page 23
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
In the research phase of an internal project it is not possible to demonstrate that the project will generate future economic benefits and hence all expenditure on research shall be recognised as an expense when it is incurred. Intangible assets are recognised from the development phase of a project if and only if certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits and that its cost can be reliably measured. The capitalised development costs are subsequently amortised on a straight line basis over their useful economic lives, which is deemed as 7 years.
If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
Page 24
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
Grants of a revenue nature are recognised in the Consolidated statement of comprehensive income in the same period as the related expenditure.
Defined contribution pension scheme
The Group contributes to a defined contribution scheme for its employees. A defined contribution scheme is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations. The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability on the Balance sheet. The assets of the scheme are held separately from the Group in independently administered funds.
Page 25
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.
Research and Development
Research expenditure is written off as incurred. Development expenditure is also written off, except where the directors are satisfied as to the technical, commercial and financial viability of individual projects. In such cases, the identifiable expenditure is capitalised as an intangible asset and amortised over the period during which the Group is expected to benefit. This period is over 7 years on a straight line basis. Provision is made for any impairment.
Patents and Trademarks
Separately acquired patents and trademarks are included at cost and amortised in equal annual instalments over a period of 5 years and 10 years respectively which is their estimated useful economic life. Provision is made for any impairment.
Page 26
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a first in, first out basis.
At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
Page 27
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
Provisions are charged as an expense to profit or loss in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance sheet.
Page 28
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
The Group has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
The Group has elected to apply the recognition and measurement provisions of IFRS 9 Financial Instruments (as adopted by the UK Endorsement Board) with the disclosure requirements of Sections 11 and 12 and the other presentation requirements of FRS 102.
Financial instruments are recognised in the Group's Balance sheet when the Group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.
Other financial assets
Other financial assets, which includes investments in equity instruments which are not classified as subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the recognised transaction price. Such assets are subsequently measured at fair value with the changes in fair value being recognised in the profit or loss. Where other financial assets are not publicly traded, hence their fair value cannot be measured reliably, they are measured at cost less impairment.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting date.
Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.
If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.
Financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the Group after the deduction of all its liabilities.
Page 29
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
2.Accounting policies (continued)
Basic financial liabilities, which include trade and other payables, bank loans, other loans and loans due to fellow group companies are initially measured at their transaction price after transaction costs. When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.
Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Other financial instruments
Derivatives, including forward exchange contracts, futures contracts and interest rate swaps, are not classified as basic financial instruments. These are initially recognised at fair value on the date the derivative contract is entered into, with costs being charged to the profit or loss. They are subsequently measured at fair value with changes in the profit or loss.
Debt instruments that do not meet the conditions as set out in FRS 102 paragraph 11.9 are subsequently measured at fair value through the profit or loss. This recognition and measurement would also apply to financial instruments where the performance is evaluated on a fair value basis as with a documented risk management or investment strategy.
Derecognition of financial instruments
Derecognition of financial assets
Financial assets are derecognised when their contractual right to future cash flow expire, or are settled, or when the Group transfers the asset and substantially all the risks and rewards of ownership to another party. If significant risks and rewards of ownership are retained after the transfer to another party, then the Group will continue to recognise the value of the portion of the risks and rewards retained.
Derecognition of financial liabilities
Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.
Page 30
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Capitalisation of development expenditure During the year £1,411,828 (2022 - £1,746,843) of development expenditure was capitalised. The directors assess the technical, commercial and financial viability of individual projects. The directors prepared market research reports and technical feasibility project proposals in order to satisfy themselves that these projects had reached the required development stage and requirements for capitalisation. The assets are amortised over 7 years on a straight line basis. Key source of estimation uncertainty - impairment of intangible assets Determining whether intangible assets are impaired requires an estimation of the future cash generation relative to carrying value of the intangible assets. Based on current market knowledge, the directors consider there was no impairment during the year (2022 - £NIL). The carrying amount of intangible assets (excluding development costs) at the balance sheet date was £2,019,757 (2022 - £1,974,292).
The whole of the turnover is attributable to the Group's principal activity and represents the sale of goods and related services. A geographical analysis of turnover is not included as the directors believe it would be prejudicial to the Group's interests.
Page 31
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 32
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 33
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 34
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
11.Taxation (continued)
Deferred tax balances have been calculated based on the expected future tax rate substantively enacted at the balance sheet date. On 3 March 2021 it was announced by the UK Government that the corporation tax rate in the UK will increase to 25% effective from 1 April 2023. Deferred tax has been provided for at 25% as this is the rate that was substantively enacted at the balance sheet date.
Page 35
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 36
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
12.Intangible assets (continued)
Page 37
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 38
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
13.Tangible fixed assets (continued)
Page 39
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 40
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 41
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 42
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
Page 43
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2023
The Group contributes to a defined contribution pension scheme for its employees. At the balance sheet date the Group had outstanding pension contributions of £61,615 (2022 - £70,669).
26.Other financial commitments
At the Balance Sheet date, the Company had guarantees in place with customers of £1,111,293.
The immediate and ultimate parent company is M Squared Technologies Group Limited, a company incorporated in Scotland and having its registered office at Venture Building, 1 Kelvin Campus, West of Scotland Science Park, Glasgow, G20 0SP, United Kingdom.
Page 44
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|