TIDMIX.
RNS Number : 5283C
i(x) Net Zero PLC
13 June 2023
13 June 2023
i(x) Net Zero PLC
("i(x) Net Zero" or the "Company")
Final Results for the Year Ended 31 December 2022
i(x) Net Zero PLC (AIM: IX.), the investing company which
focuses on the Energy Transition, is pleased to announce the
audited final results f or the year ended 31 December 2022 ("FY
2022"). All amounts are in USD unless otherwise stated.
Financial and Investment Highlights
-- Fair value of investments in i(x)'s portfolio companies
("Portfolio NAV") as at 31 December 2022 increased by 5.10% to
$63.84 million (31 December 2021: $60.74 million);
-- Portfolio NAV per share, including cash of $7.48 million
(GBP6.19 million), as at 31 December 2022 of $0.90 per share (
GBP0.75 per share) (31 December 2021: $0.80 per share (GBP0.59 per
share);
-- Loss of $5.08 million from continuing operations before
non-cash deferred tax provision and share-based compensation(1)
(2021: Profit $35.98 million) ;
-- As at 31 December 2022, the Company had no borrowings and
cash of $7.48 million (31 December 2021: no borrowings and cash of
$2.13 million); and
-- In 2022, i(x) made portfolio investments of $1.60 million (2021: $4.37 million).
Corporate and Portfolio Highlights
-- In February 2022, the Company raised gross proceeds of $14.48
million (c.GBP10.68 million) through the placing of 14,056,811
ordinary shares and its enlarged issued share capital was admitted
to trading on AIM;
-- In September 2022, WasteFuel announced the launch of its
Methanol Module, a new technology that will significantly
accelerate the use of organic waste to produce green methanol;
-- In November 2022, WasteFuel embarked upon a partnership with
Averda Holdings International Ltd ("Averda"), a leading end-to-end
waste management company, to develop the first commercial scale
municipal waste-to-renewable biomethanol plant in the Middle
East.;
-- i(x) agreed to make a $1.5 million accretive follow-on
investment in Enphys Management Company to further enable Enphys to
meet its goal of becoming the regional sustainable energy champion
in Latin America. The i nvestment comprised an initial payment of
$0.5 million made in H1 2022, and 10 monthly payments of $0.1
million each, which commenced in July 2022. The value of the
Company's total holding in Enphys has increased by $4.6 million
during the year.
-- Context Labs announced a partnership with Williams (NYSE:
WMB), a Fortune 500 American energy company with operations across
the natural gas value chain for large-scale enterprise-wide
deployment of its Decarbonization as a Service(TM) ("DaaS(TM) ")
platform;
-- Carbon Engineering's strategic partner, Occidental (NYSE:
OXY) and its subsidiary 1PointFive announced it plans to begin
detailed engineering and early site construction for its first
large-scale Direct Air Capture (DAC) plant in Ector County, Texas.
Also, Carbon Engineering has signed an agreement with its US
development partner, 1PointFive, to begin planning and engineering
for DAC facilities at a second site in the U.S., in Kleburg County,
Texas. This site is expected to provide access for the potential
construction of multiple DAC facilities that would be capable of
collectively removing up to 30 million tonnes of carbon dioxide
from the atmosphere annually for dedicated sequestration, creating
one of the largest DAC projects in the world;
-- In November 2022, Carbon Engineering announced that it has
received millions of dollars in equity investments from Airbus and
Air Canada to further the development of its DAC technology;
-- SLI's 15 storey apartment building at 303 Battery in Seattle,
the world's first net zero energy high-rise apartment building,
completed the placement of the top floor panels which is expected
to be completed before year-end, in line with SLI's targeted 13-15
month construction cycle from the pouring of the foundation;
-- MultiGreen Properties was awarded Certified B Corporation(TM)
status in recognition of its meeting the highest standards of
verified social and environmental performance; and
-- i(x) Net Zero was awarded the LSE Green Economy Mark, in
recognition of the role it plays in helping decarbonise industries
in their transition to their net zero goals.
(1) Loss of $5.08 million from continuing operations before
non-cash deferred tax provision and share-based compensation is
derived as operating loss before financing activities of $6.83
million excluding share-based compensation expense of $1.75
million
Events Subsequent to subsequent to FY2022
The following are key developments subsequent to 2022 year
end:
- In January 2023, the Company announced the appointment of Pär
Lindström, the Company's Chief Investment Officer, as its Chief
Executive Officer, replacing Steve Oyer, who stepped down from the
Board, with immediate effect. Pär will continue in his role as
Chief Investment Officer of the Company;
- In March 2023, the Company announced that its investee
company, Sustainable Living Innovations, Inc. ("SLI"), entered into
a non-binding Letter of Intent in relation to a proposed business
combination with NYSE listed Churchill Capital Corp V ("Churchill
V"). i(x) Net Zero has an indirect 0.1% interest in SLI which is
held though MultiGreen SLI Partners, LP and, as of 31 December
2022, i(x) Net Zero carried its investment in SLI at an NAV of
$0.74 million;
- In April 2023, the Company announced the appointment of
Jonathan Carpenter Stearns as CFO and Executive Director of the
Company. Mr. Stearns brings over 40 years of C-suite level
experience as CFO, CEO and CIO in the operating management of
emerging growth companies. In addition, Mr. Stearns has significant
experience in portfolio management, complex financial structuring
and strategic consulting with both public and private companies
located in the US and Europe. Previously Mr. Stearns was a Managing
Director with AIG in its private capital group and started his
career at JP Morgan.
- In April 2023, following a period of strategic and operational
review, the Board of Directors set ambitious NAV targets for the
executive management team, in order to drive growth in the business
and diversify the Company's portfolio of investments. The Company
is accelerating its pursuit of this strategy with a more
streamlined approach to operations. The Directors have introduced a
near term target of reducing operating expenditure to 2% of NAV,
down more than 50% from the 2022 operating expenditure.
- In April 2023, the Company announced that its wholly owned
subsidiary, i(x) investments LLC entered into a new secured $7.5
million 2 year term loan facility with European Depositary Bank
S.A. ("EDB") ("Loan"). The Loan, once drawn, bears interest at
10.5% coupon (subject to periodic change in line with EDB's USD
Base rate) and which is payable quarterly. The Loan can be utilised
for the purposes of the financing of investments and general
working capital purposes. The Loan is guaranteed by the
Company.
- In April 2023, the Company issued a total of 6,324,545 options
to subscribe for new Ordinary Shares in the Company ("Options")
under the 2022 i(x) Net Zero Plc Equity Incentive Plan (the "EIP").
The Options all have an exercise price of 20p, being a 142.4 per
cent premium to the previous day's closing share price on AIM of
8.25p at the time of the grant.
- Following issuance of 6,820,618 new ordinary shares in respect
to 2022 bonus shares and CEO bonus shares to Mr Lindström, CEO, in
April 2023, the Company has 85,877,429 Ordinary Shares in issue.
Mr. Lindstrom may not sell, transfer, or otherwise transact in
these shares until such time as the risk of forfeiture with respect
to the bonus shares has lapsed. This forfeiture risk will expire if
and when the Company's Net Asset value reaches and exceeds $120
million within the 24 month period following their issue.
- MultiGreen continues to build on positive recent developments
in developing its project in Henderson, NV. However, increased
costs, restricted access to capital and deteriorating local markets
provide a challenged environment for all of MultiGreen's projects.
Consequently, the value of our investment in MultiGreen was reduced
by $2.55 million as of year end 2022. We will continue to monitor
this investment closely as it weathers these turbulent real estate
markets.
For further information visit https://ixnetzero.com/ or contact:
i(x) Net Zero Via Buchanan below
Pär Lindström - Chief Executive
Officer
Canaccord Genuity Limited
Nominated Adviser & Broker +44 20 7523 8000
Max Hartley
Harry Pardoe
Buchanan
Helen Tarbet +44 7872 604 453
Simon Compton +44 7979 497 324
Notes to Editors
About i(x) Net Zero PLC
i(x) Net Zero PLC is an AIM quoted investing company that seeks
to provides its shareholders with the opportunity to create long-
term capital growth with positive, scalable, measurable and
sustainable impact on the environment and on the communities it
serves.
In accordance with its belief that the world's biggest problems
are also the biggest market opportunities, i(x) Net Zero focuses on
two critical areas in which it aims to make a positive impact: (i)
Energy Transition and (ii) Sustainability in the Built
Environment.
The Company uses a multi-strategy investment approach, providing
the companies in which it invests with the expertise and catalytic
capital to help them grow. To date, i(x) Net Zero has invested in
biofuels, direct air capture (carbon removal), renewable energy,
sustainable workforce housing and net zero construction technology
.
i(x) Net Zero is a signatory to the UN Principles for
Responsible Investing.
The Company has received the London Stock Exchange's Green
Economy Mark.
Chairman's Statement
The last twelve months have been challenging for the company.
Market conditions have not favoured small growth companies like
i(x) and the stock has suffered from low levels of liquidity. The
Board assumes that access to capital will continue to be a
challenge over the next 12-24 months . However we remain convinced
that the growing momentum of the global transition to net zero
presents an extraordinary opportunity to both create shareholder
value and deliver positive impact.
We have taken decisive action to change the leadership team and
put the company on a more sustainable path in relation to its cost
base. Specifically, the Directors have introduced a near term
target of reducing operating expenditure to 2% of NAV, down more
than 50% from the 2022 operating expenditure.
The executive team has been successful in improving the
liquidity position of the company through a new line of credit and
is now actively looking at opportunities to optimise the current
portfolio and make new investments to support the energy
transition
During the year, the fair value of investments in i(x)'s
portfolio companies increased by 5.10% to $63.84 million with
Portfolio NAV per share, including cash of $7.48 million (GBP6.19
million), as at 31 December 2022 of $0.90 per share (GBP0.75 per
share).
I would like to thank my follow board members and the executive
team, past and present, for their commitment to increasing NAV and
shareholder value in very difficult circumstances .
Nick Hurd
Chairman
12 June 2023
Chief Executive's Statement
Success for i(x) is defined as generating superior risk adjusted
financial returns while enhancing access and scale to businesses
working on net zero strategies. This is being achieved via
investing in a portfolio that provides access to the long-term
secular trend of capital flowing towards sustainable finance and
ESG-related investing.
It has been a challenging year - with volatile external markets
resulting in a scarcity of capital and reduction in valuations.
However, it is a year that we feel we have navigated well. We have
refocused and enhanced the management team and re-sized our cost
base to better match current market conditions and opportunities.
While there will be challenges in such a dynamic market, especially
for smaller, growth stage companies such as ourselves, there are
also opportunities given more rational levels of valuations for
both listed and unlisted targets and expected timing of technology
development. With a robust deal flow and continued high growth in
our target markets, we are confident that capital, both from our
balance sheet and external sources, will be available to fund
selective investments. Consistent with past successes, the Group
will seek out investment targets with the following
characteristics:
o Companies with proven business models that are ready to scale
yet find it challenging to access capital including listed and
unlisted growth companies in our target markets with depressed
equity valuations;
o Companies that have technologies that are proven at scale and
profitability in certain developed markets but require capital and
expertise to expand into other markets like the US or Western
Europe;
o Companies that are operating in our core markets and achieving
scalable, positive ESG impact with near term paths to revenue and
operating cash flow and long-term profitability profiles.
The global policy-making environment favours and supports our
approach. In August 2022, the US Congress passed the "Inflation
Reduction Act of 2022," which includes key legislation aimed at
tackling climate change. This historic and significant piece of
legislation allocates approximately $369 billion to reducing
greenhouse gas emissions and incentivises expanded production and
use of domestic clean energy.
The sustainable fuel, renewable power, battery development and
carbon capture industries are expected to benefit from these tax
credits and associated incentives, which the Company expects will
lead to further increased demand for the products and services
provided by the Company's portfolio companies, and to act as a
powerful driver of their further growth.
Elsewhere in the world, governments continue to enact
legislation and offer incentives for companies and industries to
reduce their carbon emissions. The transition to net zero is widely
seen as a key part of the innovative technology and processes that
i(x)'s portfolio companies provide.
Having reduced our operational expenditure, strengthened our
team, and enhanced our financial liquidity by adding a new line of
credit, we believe we have put in place the necessary building
blocks to execute a focused acquisition strategy on growth capital
for proven business models and technology with the aim of building
our NAV and creating stronger momentum as we progress in 2023 and
beyond.
Operational Review
I am pleased to report that after a challenging twelve months
during 2022, the new management team has been working to reposition
and restructure the business. This has led to a renewed focus on
improving net asset value, lowering the cost base and
opportunistically obtaining liquidity from its existing
investments.
The table below shows the change in the Net Asset Value of the
Company's portfolio companies in the year to 31 December 2022.
$m $m $m
Audited Audited
Equity Portfolio Portfolio Increase/
interest NAV as at NAV as (Decrease)
Investee Company (31/12/2022) (31/12/2022) at 31/12/2021 during 2022
WasteFuel Global, LLC 36.2% 46.91 46.82 0.09
Enphys Management Company,
LLC 14.5% 10.34 5.73 4.62
MultiGreen Properties, LLC 10.4% 2.26 4.81 (2.55)
Sustainable Living Innovations 0.1% 0.74 0.50 0.24
Carbon Engineering Ltd 0.5% 2.58 2.38 0.20
Context Labs B.V. 0.5% 0.51 0.50 0.01
Simple Agreement for Future
Equity (SAFE) with WasteFuel
Global, LLC 0.25 - 0.25
Convertible note of MultiGreen
Properties, LLC 0.25 - 0.25
Total 63.84 60.74 3.10
The Board of Directors has set ambitious NAV targets for the
executive management team, in order to drive growth in the business
and diversify the Company's portfolio of investments, while the
Company will accelerate its pursuit of this strategy with a more
streamlined and lower cost approach to operations.
Portfolio Review
The following are brief descriptions of each of our investee
companies:
WasteFuel Global, LLC ("WasteFuel") is focused on developing
renewable, non-fossil fuels to help reduce the carbon emissions of
the transportation sector with a particular focus on waste to
energy for trucks, planes and ships.
During the period, the launch of WasteFuel Methanol Module was
announced, a new technology that will significantly accelerate the
use of organic waste to produce green ethanol. The Methanol Module
is designed to facilitate the production of up to 100 metric tons
per day of fuel grade methanol from a variety of waste sources,
including landfill gas and biogas from anaerobic digestion. The
Company has filed a provisional patent application for the novel
approach and unique configuration .
WasteFuel Marine's business line has embarked upon a
commercial-scale bio-methanol partnership with A.P. Moller - Maersk
("Maersk"), the global container logistics company. Maersk intends
to buy a minimum of 30,000 tons per year of WasteFuel's green
bio-methanol, which is generated from municipal waste, to fulfil
the demand of Maersk's 12 new green methanol powered ships starting
from the second half of 2025.
In November 2022, WasteFuel embarked upon a partnership with
Averda Holdings International Ltd ("Averda"), a leading end-to-end
waste management company, to develop the first commercial scale
municipal waste-to-renewable biomethanol plant in the Middle East.
Under the terms of the agreement, which was announced on the first
day of the COP27 Climate Conference in Egypt, Averda will collect
and provide the plant with waste feedstock which cannot be
otherwise re-used and recycled. Utilising WasteFuel technology, the
plant will produce renewable biomethanol that is expected to help
shipping companies reduce their CO2 emissions and other greenhouse
gases by up to 90% compared with conventional fuels. The location
of the plant is currently being researched, and is expected to be
in Jebel Ali, United Arab Emirates.
WasteFuel also strengthened its management team with the
appointment of Marc Chennault as full time CFO. Marc will work
closely with WasteFuel CEO, Trevor Neilson, to drive forward the
company's growth and to take full advantage of the significant
demand for its sustainable fuel products and services.
Enphys Management Company, LLC ("EMC") is i(x) Net Zero's
partnership with the Latin America Investment Group, a business
development and investment group. EMC pursues private and public
opportunities focused on renewables and energy transition in Latin
America and has a direct ownership in Enphys Acquisition Sponsor,
LLC ("EAS"), the sponsor company of Enphys Acquisition Corp.
("EAC"), a NYSE-listed SPAC targeting renewable energy businesses
in Latin America, in which EMC also has an ownership. Its strategy
is to create a regional champion in the Americas for alternative
energy through the aggregation of existing, cash-flow positive wind
and solar assets. Latin America provides a rapidly growing energy
market where alternative energy production is often the lowest cost
source. This provides Enphys the opportunity to execute at scale
and become a significant publicly traded leader in energy
transition.
i(x) Net Zero invested an additional $1.5 million (including
$0.5 million paid in H1 2022 and 10 monthly payments of $0.1
million each commencing in July 2022 and finishing in April 2023 )
in cash in Enphys to enable the company to actively pursue merger
opportunities as announced at its listing. In conjunction with this
investment, the Company renegotiated the terms of its existing
equity interest in Enphys, converting its shares into participating
preferential shares, which carry rights over other Enphys share
classes. Together, the $1.5 million investment and the renegotiated
terms of the existing equity interest, increased the value of the
Company's investment in Enphys by $4.6 million . Enphys continues
to focus on finding a merger opportunity in 2023 creating a large
renewables energy group that will be a regional champion for
sustainability in the Americas.
MultiGreen Properties, LLC ("MultiGreen") is a developer of
sustainable, multi-family properties that aims to supply affordable
workforce rental housing by reducing construction costs and
duration. MultiGreen intends to become the first net zero energy
operator of multi-family projects in the US by 2025. The company is
delivering on its mission to provide attainable, tech-enabled
rental apartments in supply-constrained US markets.
While it is executing on its pipeline of developments at scale
with 1,106 units currently under construction, the challenges in
the regional banking market in the US and continued uncertainty
around local economies has meant that ViaVerde, its multi-phase
development in Albuquerque, New Mexico has faced some delays in
Phase I leasing, which now due to commence in June 2023. MultiGreen
continues to build on positive recent developments in developing
its project in Henderson, NV. However, increased costs, restricted
access to capital and deteriorating local markets provide a
challenged environment for all of MultiGreen's projects.
Consequently, the value of our investment in MultiGreen reduced to
$2.26 million as of year end 2022. We will continue to monitor this
investment closely as it weathers these turbulent real estate
markets.
Sustainable Living Innovations ("SLI") is a construction
technology and product development company producing panelised
buildings to address housing affordability, while delivering a new
standard in sustainable living. SLI continues to capture market
share as a leader in delivering net zero buildings at scale. Its
factory-assembled and cost-effective steel panel technology
addresses both the inflationary pressure on material costs and
supply chain issues.
SLI is due to complete its 15-storey apartment complex in
Seattle ready for occupancy in 2023. This will be the world's first
multi-family tower designed to meet the net zero energy criteria
set by the International Living Future Institute's Living Building
Challenge .
During the period, SLI broke ground with Downtown Emergency
Service Center (DESC), a non-profit housing organization in
Seattle, for a 5 storey 124-unit energy-efficient permanent
supportive apartment building as a solution for long term
homelessness. SLI is also expanding its assembly plant locations on
the West Coast of the US and plans eventually to move eastwards to
serve additional markets.
In May 2022, i(x) Net Zero participated in SLI's US$53 million
accelerated growth round, which will allow the company to expand
into other US markets. The company completed its conversion from a
limited liability company to a C Corporation, which triggered a 50
per cent. increase in i(x) Net Zero's share ownership in SLI due to
the preference rights it acquired when it made its initial
investment.
In March 2023, SLI signed a non-binding letter of Intent in
relation to a proposed business combination with NYSE listed
Churchill Capital Corp V ("Churchill V"). With the signing of this
LOI, i(x) is actively considering a follow on investment that would
allow SLI to complete the combination and cover the costs
associated with its underlying projects development.
Carbon Engineering Ltd. ("Carbon Engineering") has developed a
proprietary Direct Air Capture ("DAC") technology that removes
carbon dioxide directly from the atmosphere for sequestration and
storage. With its DAC and carbon-to-value proposition, it
represents the next generation of industrial scale decarbonisation.
The company has a clear path to global opportunity and is focused
on licensing its technology to industrial partners to build and
operate.
The company, through its strategic partner 1PointFive, an
initiative with Occidental Petroleum's (NYSE: OXY) Low Carbon
Ventures business, anticipates building and operating 70 DAC
facilities by 2035, each with an expected capacity of up to 1
million tonnes per year. The partnership announced it plans to
begin detailed engineering and early site construction in Q3 2022,
for its first large-scale DAC plant in Ector County, Texas. Upon
completion and becoming operational in late 2024, the first DAC
plant will be the world's largest of its kind, expected to capture
up to 500,000 metric tons of carbon dioxide per year with the
capability to scale up to 1 million metric tons per year.
Also, Carbon Engineering has signed an agreement with its US
development partner, 1PointFive, to begin planning and engineering
for DAC facilities at a second site in the U.S., in Kleburg County,
Texas. This site is expected to provide access for the potential
construction of multiple DAC facilities that would be capable of
collectively removing up to 30 million tonnes of carbon dioxide
from the atmosphere annually for dedicated sequestration, creating
one of the largest DAC projects in the world.
In November 2022, Carbon Engineering announced that it has
received millions in equity investments from Airbus and Air Canada
to further the development of its DAC technology.
Context Labs B.V. ("Context Labs") is an impact software company
whose blockchain technology platform enables the harvesting and
processing of data to help businesses track their carbon emissions
and their compliance with regulatory frameworks.
Context Labs secured a multi-year partnership with Williams, a
Fortune 500 American energy company with operations across the
natural gas value chain for large-scale enterprise-wide deployment
of its Immutably(TM)-based Decarbonization as a Service(TM)
("DaaS(TM) ") platform. The Context Labs solution will target
Williams' facilities, along with its upstream and downstream
ecosystem partners representing 30 per cent. of the natural gas in
the United States, to facilitate Williams' energy transition and
affirm its commitment to provide transparency and strong governance
regarding its decarbonisation ambitions.
During the period, Context Labs announced the launch of its
CLEAR Path(TM) Platform, which converges advanced machine
learning/AI and blockchain technologies to form new empirical
data-driven registry capabilities, ensuring that data for
environmental attributes and differentiated commodities are
transparent, trusted and traceable.
The company also announced the appointment of distinguished
American writer on business management practices, Thomas J. Peters,
to join the business as an Advisor and member of the Board of
Directors.
Financial Review
The Group continued delivering an improvement in the fair value
of investments in its portfolio companies ("Portfolio NAV") which
increased by 5.10% or, $3.10 million, to $63.84 million as at 31
December 2022 (31 December 2021: $60.74 million).
The annual increase in Portfolio NAV over the period of $3.10
million (2021: $40.80 million) comprises unrealised gains of $1.50
million (2021: $40.80 million) due to the change in fair value of
portfolio investments and $1.60 million of additions to investments
(2021: $4.10 million). The majority of unrealised gains relates to
an increase in fair value of Enphys Management Company, LLC of
$3.52 million offset by a decrease in fair value of MultiGreen
Properties, LLC of $2.55 million.
Enphys NAV rose as a result of the Company's investment of $1.10
million combined with the renegotiating of its investment terms
which increased Company's equity interest in Enphys and increased
the Company's NAV by $4.62 million. MultiGreen NAV was reduced due
to increased costs, restricted access to capital and deteriorating
local markets providing a challenged environment for MultiGreen's
projects.
As at 31 December 2022, Portfolio NAV per share, including cash
of $7.48 million (GBP6.19 million), was $0.90 per share (GBP0.75
per share) (31 December 2021: $0.80 per share (GBP0.59 per
share)).
Loss from continuing operations before non-cash deferred tax
provision and share-based compensation was $5.08 million in 2022.
(2021: profit $35.98 million) (This $5.08 million loss is derived
as operating loss before financing activities of $6.83 million
minus share-based compensation of $1.75 million).
During 2022, stock options were granted to management employees
under the 2022 Company's Equity Incentive Plan and non-cash
share-based compensation of $1.75 million was recognised (2021:
nil).
General and administrative expenses increased by $3.42 million
to $8.25 million (2021: $4.83 million), largely due to non-cash
share based compensation expense, IPO bonus and costs related to
running i(x) as a publicly traded company.
As a result of the corporate inversion and resulting IPO
transaction, i(x) Net Zero PLC is being treated as a U.S. domestic
corporation for all purposes of the U.S. tax code as of the date of
the transaction and there will be non-cash deferred tax
implications related to the Company's temporary difference in the
book and tax basis of its assets, the most material of which is the
difference between the tax basis and the fair value of the
Company's investments.
For 2022, non-cash deferred tax expense of $11.27 million was
recognised in the statement of profit or loss. This deferred tax
expense would not have been recognised by i(x) investments LLC, if
the IPO transaction did not occur.
Net loss amounted to $18.13 million in 2022 primarily as a
result of non-cash deferred tax provision and share-based
compensation and an increase in general and administrative expenses
(2021: net profit of $35.75 million).
The Company continues to be in a strong financial position and
as at 31 December 2022 had no borrowings, cash of $7.48 million (31
December 2021: no borrowings and cash of $2.13 million) and net
current assets of $6.68 million (31 December 2021: $2.77 million).
In April 2023, the Company announced that its wholly owned
subsidiary, i(x) investments LLC entered into a new secured $7.5
million 2 year term loan facility with European Depositary Bank
S.A. ("EDB") ("Loan").
The Loan, once drawn, bears interest at 10.5% coupon (subject to
periodic change in line with EDB's USD Base rate) and which is
payable quarterly. The Loan can be utilised for the purposes of the
financing of investments and general working capital purposes. The
Loan is guaranteed by the Company.
In February 2022, the Company raised gross proceeds of
approximately $14.48 million (GBP10.68 million) ($12.13 million
(c.GBP9.0 million) net)) through the placing of 14,056,811 ordinary
shares at 76 pence per share and its enlarged share capital was
admitted to trading on AIM. During the period from the beginning of
2021 and until the listing, i(x) investments, LLC, the Company's
predecessor, had capital contributions of approximately $1.64
million.
In January 2022, Lion Point Capital, LP, on behalf of funds
managed by it, ("Lion Point") and the Company entered into a
strategic relationship to identify and pursue certain transactions
together, with an initial focus on opportunities in Energy
Transition. Lion Point is a global special situations investment
firm that seeks to invest in equity and debt securities of
undervalued public and private companies.
At the time of the Company's IPO, Lion Point Master, LP ("Lion
Point Master") entered into a subscription agreement and subscribed
for $6.8 million (approximately GBP5.0 million) in ordinary shares
of the Company at the placing price as part of the fundraising.
Lion Point Master was granted a put option and pursuant to the put
option, the Company is obliged to repurchase Lion Point Master's
holding of 6,672,161 Ordinary Shares at the placing price (GBP0.76
per share ($1.02 per share)) amounting up to $6.8 million at any
time during the three year term following the Company's admission
to trading on AIM.
Lion Point has also granted the Company a call option to
purchase $6.8 million of common shares of Suniva, Inc, which has
one of the largest solar cells manufacturing facilities in North
America.
Further details are set out in paragraph 5.6 of Part 1 and
paragraphs 18.1(j), (k) and (l) of Part 7 of the Company's
Admission document dated 4 February 2022, which is available on the
Company's website https://ixnetzero.com/ .
Prior to its IPO, the Company undertook a reorganisation in
which i(x) Merger LLC, a wholly owned subsidiary of the Group
merged with i(x) investments, LLC, with i(x) investments continuing
as the surviving entity and as a wholly owned subsidiary of the
Company.
Prior to the reorganisation of the Group, i(x) Financial
Services, LLC ("i(x) Financial Services"), (a wholly owned
subsidiary of i(x) investments), i(x) Securities, LLC (a wholly
owned subsidiary of i(x) Financial Services) and certain other
assets held by i(x) investments were transferred to i(x)
Sustainable Holdings, LLC, an entity owned by the shareholders of
the Company. This transaction was reflected as an equity
distribution of $1.62 million assets.
Outlook
While the growing global trend towards decarbonisation continues
apace with the backing of government legislation and corporate
commitments, the Company has grappled with a challenging twelve
months. With the necessary changes to lower its expense and more
tightly focus its investment strategy to those opportunities in the
energy transition and technology enhancements to the built
environment behind it, i(x) Net Zero is now well positioned to
selectively expand its portfolio of investee companies.
In order to achieve its stated ambition, the Company will look
to pursue strategic acquisitions that meet its strict investment
criteria. It has already identified a number of exciting
opportunities and plans to consider further investment in its
existing portfolio. This may include near-term opportunities to
participate in capital raises, negotiated add on investments, as
well as replicating its success via new platforms in scaling
technology and new market penetration.
The Company also remains eager to explore an investment in, or
other potential alliance with, a renewables and circular economy
platform that has a mission and purpose that is similar to the
Company's, namely to build profitable businesses that support the
achievement of the UN Sustainable Development Goals.
The Board of Directors have set ambitious NAV and profitability
targets for the executive management team, including a near term
target of reducing operating expenditure to 2% of NAV and growing
NAV by more than 50% over the course of 2023. We believe that these
targets, while challenging, should enhance shareholder value over
the near and longer term.
Pär Lindström
Chief Executive Officer and Chief Investment Officer
12 June 2023
i(x) Net Zero Plc
Consolidated Statement of Comprehensive Income
For the Years Ended 31 December 2022
(Expressed in U.S. dollars)
Notes 2022 2021
------------- ------------
Dividend and other income 9 $2,645 $561
Net changes in fair value on financial
assets
at fair value through profit or
loss 10 1,413,805 40,852,816
General and administrative expenses (8,246,839) (4,832,105)
-------------- --------------
OPERATING (LOSS)/PROFIT BEFORE
FINANCING ACTIVITIES (6,830,389) 36,021,272
-------------- --------------
Finance cost 11 (27,495) (43,220)
-------------- --------------
(LOSS)/PROFIT FROM CONTINUING
OPERATIONS BEFORE TAX (6,857,884) 35,978,052
Tax provision - deferred tax expense 17 (11,271,318) -
-------------- --------------
(LOSS)/PROFIT FROM CONTINUING
OPERATIONS AFTER TAX (18,129,202) 35,978,052
-------------- --------------
DISCONTINUED OPERATIONS (b)
(Loss) from discontinued operations 7 - (226,665)
-------------- --------------
(LOSS)/PROFIT AFTER TAX $(18,129,202) $35,751,387
============== ==============
BASIC AND DILUTED (LOSS)/EARNINGS
PER SHARE (c) 5 $(0.23) $0.45
============= ============
Notes:
a) There is no other comprehensive income or loss for the years ended 31 December 2022 and 2021.
b) Discontinued operations represent i(x) Financial Services,
LLC and its subsidiary, i(x) Securities, LLC. These entities were
spun off from i(x) investments, LLC in a reorganization which
occurred prior to the merger of i(x) investments, LLC with a
subsidiary of i(x) Net Zero, PLC, as described in Note 1 to the
financial statements.
c) For 2021, earnings per share was calculated based on the
total number of shares issued and outstanding during 2022, as there
were no shares issued prior to February 9, 2022.
The accompanying notes are an integral part of these financial
statements.
i(x) Net Zero Plc
Consolidated Statement of Financial Position
31 December 2022
(Expressed in US dollars)
Notes 2022 2021
------ ------------- ------------
ASSETS
Current assets
Cash and cash equivalents 2 $7,479,832 $ 2,134,764
Assets held for disposal 7 - 1,216,841
Accounts receivable 2 66,838 40,374
Prepaid expenses and other current
assets 135,806 1,549,716
Cash Advances for future investments 2 - 86,165
------------- ------------
Total Current Assets 7,682,476 5,027,860
------------- ------------
Non-Current assets
Investments at fair value 3 63,840,722 60,740,752
Right-of-use asset 19 349,277 653,426
Furniture and equipment, net of
accumulated 2 1,839 15,311
Depreciation
Security deposits 82,942 82,942
Member tax advance - 11,500
------------- ------------
Total Non-Current Assets 64,274,780 61,503,931
------------- ------------
Total Assets $71,957,256 $66,531,791
============= ============
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $612,788 $1,872,513
Lease liability 19 364,336 335,946
Security deposit payable 24,601 49,202
------------- ------------
Total Current Liabilities 1,001,725 2,257,661
------------- ------------
Non-Current liabilities
Deferred tax liability 17 11,271,318 -
Lease liability 19 32,051 396,386
------------- ------------
Total Non-Current Liabilities 11,303,369 396,386
------------- ------------
Total Liabilities 12,305,094 2,654,047
------------- ------------
Shareholders' Equity
Share Capital, no par value (authorised,
issued and outstanding - 79,056,811
ordinary shares) 77,671,903 -
Members' capital - 63,877,744
Retained earnings (18,019,741) -
------------- ------------
Total Shareholders' Equity 59,652,162 63,877,744
Total Liabilities and Shareholders'
Equity $71,957,256 $66,531,791
============= ============
The financial statements were authorized for issue by the board
of directors on 12 June 2023 and were signed on its behalf by:
________________________________ ______________________________
Par Lindstrom Jonathan Stearns
Chief Executive Officer Chief Financial Officer
Company number - 138730
The accompanying notes are an integral part of these financial
statements.
i(x) Net Zero Plc
Consolidated Statement of Changes in Shareholders' Equity
For the Year Ended 31 December 2022
(Expressed in U.S. dollars)
Members' Share Capital Retained
and
Capital Other Reserves Earnings Total
------------- --------------- -------------- ---------------
At 1 January 2021 $22,976,372 $- $- $22,976,372
Capital contributions 5,149,985 - - 5,149,985
Net Income for the -
period (1 January
2021
31 December 2021 35,751,387 - - 35,751,387
-------------- ---------------- --------------- --------------
At 31 December
2021 $63,877,744 $- $- $63,877,744
============== ================ =============== ==============
At 1 January 2022 $63,877,744 $- $- $63,877,744
Capital contributions 1,644,981 - - 1,644,981
Distribution of
assets held for
disposal to i(x)
Sustainable Holdings,
LLC (1,216,841) - - (1,216,841)
Distribution of
cash to i(x)
Sustainable Holdings,
LLC (400,000) - - (400,000)
Net loss for the
period (January
1, 2022 - February
8, 2022 (109,461) - - (109,461)
-------------- ---------------- --------------- --------------
At 9 February 2022 $63,796,423 $- $- $63,796,423
============== ================ =============== ==============
Conversion from
members' capital
to shareholders'
Equity (63,796,423) 63,796,423 - -
Subscriptions for
i(x) Net Zero
shares,
net of expenses
(Note 4) - 12,125,421 - 12,125,421
Net loss for the
period (9 February
2022 -
31 December 2022 - - (18,019,741) (18,019,741)
Share option expense - 1,750,059 - 1,750,059
-------------- ---------------- --------------- --------------
At 31 December
2022 $- $77,671,903 $(18,019,741) $59,652,162
============== ================ =============== ==============
The consolidated statement of changes in shareholders' equity is
presented as changes in members' capital up to the date of the
acquisition of i(x) investments, LLC, accounted for under merger
principles as disclosed in Note 2.
The accompanying notes are an integral part of these financial
statements.
i(x) Net Zero Plc
Consolidated Statement of Cash Flows
For the Year Ended 31 December 2022
(Expressed in U.S. Dollars)
Notes 2022 2021
------
CASH FLOWS FROM OPERATING ACTIVITIES
FROM CONTINUING OPERATIONS
(Loss)/Profit after taxes $(18,129,202) $35,978,052
Adjustments for:
Depreciation expense 2 13,472 14,784
Loss on cash advances for future investments 86,165 -
Amortisation of right-of-use asset 19 304,149 288,424
Net changes in fair value on financial
assets at fair
value through profit or loss (1,499,970) (40,852,816)
Bonus expense paid in shares 1,000,000 -
Incentive stock option grant expense 6 1,750,059 -
Cash advances for future investments - 238,773
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable (26,464) 56,041
Decrease (increase) in prepaid expenses
and other current assets 1,413,910 (1,463,959)
(Increase) decrease in security deposits (24,601) 4,600
Increase in member tax advance 11,500 (11,500)
Increase (decrease) in accounts payable
and
accrued expenses (1,259,725) 1,685,329
Increase in deferred tax liability 11,271,318 -
Increase (decrease) in professional
fees payable - 49,202
Net Cash Used in Operating Activities
-
Continuing Operations (5,089,389) (4,013,070)
---------------- ---------------
FROM DISCONTINUED OPERATIONS
Profit (loss) attributable to members - (226,665)
Adjustments for:
Advisory fees - -
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable - 36,823
Increase in prepaid expenses and other
current assets - (6,441)
Increase in accounts payable and accrued
expenses - 151,344
Increase in loan payable - 10,630
---------------- ---------------
Net Cash Used in Operating Activities
-
Discontinued Operations - (34,309)
---------------- ---------------
Net Cash Used in Operating Activities (5,089,389) (4,047,379)
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments 3 (1,600,000) (4,369,955)
Cash from discontinued operation transferred
to disposal group - (534,276)
Purchase of furniture and equipment - (3,902)
---------------- ---------------
Net Cash Used in Investing Activities (1,600,000) (4,908,133)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
FROM CONTINUING OPERATIONS
IPO Proceeds, net of expenses 12,125,421 -
Distribution to i(x) Sustainable Holdings, (400,000) -
LLC
Purchase of i(x) Net Zero shares (1,000,000) -
Capital contributions 1,644,981 5,149,985
Decrease in lease liability (335,945) (262,978)
---------------- ---------------
Net Cash Provided by Financing Activities
-
Continuing Operations 12,034,457 4,887,007
---------------- ---------------
Net Increase (Decrease) in Cash
and Cash Equivalents 5,345,068 (4,068,505)
SH AND CASH EQUIVALENTS
Beginning of year 2,134,764 6,203,269
----------- -----------
End of year $7,479,832 $2,134,764
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Non-cash investing activity - assets
transferred to
disposal group
Cash advances for future investment 7 $- $390,770
Investments 7 - 250,000
Noncash net assets of discontinued
operation - 41,795
Non-cash financing activity
Share-based compensation 1,750,059 -
Distribution of assets held for disposal 1,216,841 -
Bonus expense paid in shares 1,000,000 -
----------- -----------
$3,966,900 $682,565
=========== ===========
The accompanying notes are an integral part of these financial
statements.
i(x) Net Zero Plc
Schedule of Investments
31 December 2022
(Expressed in US dollars)
Principal
Amount/Shares/
Units/Percent
Ownership Description Fair Value
----------------- ----------------------------------------------- ---------------
Private Operating Companies (percentage of shareholders' equity)
United States
Limited Liability Company Interests
Biofuel Developer (78.6%)
10,380,581 Wastefuel Global, LLC $46,908,475
Real estate development (3.8%) 2,260,000
---------------
1,228,063 MultiGreen Properties, LLC
Total Limited Liability Company Interests 49,168,475
---------------
(cost $4,069,597) (82.4%)
Limited Partnership Interest
Building technology
Sustainable Living Innovations (FKA Multigreen
SLI Partners, LP) (1.2%) 742,000
---------------
Total Limited Partnership Interests
(cost $500,000) (1.2%) 742,000
Simple Agreement
for Future
Equity (SAFE)
Biofuel Developer (.4%)
Wastefuel Global, LLC 250,000
---------------
Total SAFE (cost $250,000) (.4%) 250,000
Convertible
Note
Real estate development (.4%)
MultiGreen Properties, LLC 250,000
---------------
Total Convertible Note (cost $250,000)
(.4%) 250,000
Total United States (cost $5,069,597)
(84.5%) $50,410,475
===============
Canada
Common Shares
Carbon Capture Technology (4.3%)
21,876 Carbon Engineering, Ltd. (1) 2,579,223
---------------
Total Common Shares - Canada (cost $1,005,809) 2,579,223
Cayman Islands
Limited Liability Company Interest
Renewable Energy (17.3%)
Enphys Management Company 10,340,024
Total Limited Liability Company Interests
- 10,340,024
----------------------------------------------- ---------------
Cayman Islands (cost $4,470,000)
Netherlands
Convertible Note - (8% due April 2022)
499,955 Software/Information Technology (.9%)
Context Labs, BV 511,000
Total Convertible Note - Netherlands
(cost $499,955)
---------------
Total Investments (cost $11,045,361)
(107%) $63,840,722
===============
(1) Shares of Carbon Engineering, Ltd. are held indirectly through
investments in RCM Carbon Engineering Partners, LLC (12,490 common
shares) and C12 Equity Ltd. (9,273 common shares).
i(x) Net Zero Plc
Schedule of Investments
31 December 2021
(Expressed in US dollars)
Principal
Amount/Shares/
Units/Percent
Ownership Description Fair Value
--------------- ----------------------------------------------- ---------------
Private Operating Companies (percentage of members' capital)
United States
Limited Liability Company Interests
Biofuel Developer (74.5%)
10,380,581 Wastefuel Holdings, LLC $46,822,213
Real estate development (7.7%)
1,228,063 MultiGreen Properties, LLC 4,810,000
---------------
Total Limited Liability Company Interests
(cost $4,069,597) (82.2%) 51,632,213
---------------
Limited Partnership Interest
Building technology (.8%)
MultiGreen SLI Partners, LP 500,000
---------------
Total Limited Partnership Interests
(cost $500,000) (.8%) 500,000
---------------
Total United States (cost $4,569,597)
(83%) $52,132,213
===============
Canada
Common Shares
Carbon Capture Technology (3.8%)
21,763 Carbon Engineering, Ltd. (1) 2,383,698
---------------
Total Common Shares - Canada (cost $1,005,809) 2,383,698
---------------
Cayman Islands
Limited Liability Company Interest
Renewable Energy (9.1%) 5,724,886
Enphys Management Company
----------------------------------------------- ---------------
Total Limited Liability Company Interests
-
----------------------------------------------- ---------------
Cayman Islands (cost $3,370,000) 5,724,886
---------------
Netherlands
Convertible Note - (8% due April 2022)
499,955 Software/Information Technology (.8%)
Context Labs, BV 499,955
---------------
Total Convertible Note - Netherlands
(cost $499,955) 499,955
---------------
Total Investments (cost $9,455,361)
(96.7%) $60,740,752
===============
(1) Shares of Carbon Engineering, Ltd. are held indirectly
through investments in RCM Carbon Engineering Partners, LLC (12,490
common shares) and C12 Equity Ltd. (9,273 common shares).
i(x) Net Zero Plc
Notes to Consolidated Financial Statements
31 December 2022
1. Organisation and Nature of Business
i(x) Net Zero, PLC (the "Company") is a company incorporated and
domiciled in Jersey, British Isles with Company Number 138730. The
Company's shares are admitted to trading on the AIM market of the
London Stock Exchange (ticker: IX). The Company is an investment
company that provides its shareholders with an opportunity to
create long-term capital growth with sustainable impact on the
environment and communities it serves. The Company was founded as
i(x) investments, LLC ("i(x) investments"), a limited liability
company formed in the United States of America under the laws of
the State of Delaware on 6 October 2015. The registered address of
the Company is 3rd Floor, 44 Esplanade Street, Helier, Jersey JE4
9WG.
On 9 February 2022, the Company completed its initial public
offering ("IPO") on the AIM market. The Company issued 14,056,811
ordinary shares at no par value in the IPO. The shares were issued
at GBP0.76 per share, resulting in total share capital of
GBP10,683,000 ($14,481,736) from the IPO. In addition, the members'
capital in i(x) investments was converted to 65,000,000 shares in
the Company as of the date of the IPO, bringing the total shares
issued and outstanding as of 9 February 2022 to 79,056,811.
Prior to the IPO, the Company undertook a reorganisation in
which i(x) Merger LLC, a wholly owned subsidiary of the Company
merged with i(x) investments, with i(x) investments continuing as
the surviving entity and as a wholly owned subsidiary of the
Company. Prior to the reorganisation of the Company, i(x) Financial
Services, LLC ("i(x) Financial Services"), (a wholly owned
subsidiary of ix investments), i(x) Securities, LLC (a wholly owned
subsidiary of i(x) Financial Services) and certain other assets
held by i(x) investments were transferred to i(x) Sustainable
Holdings, LLC ("i(x) Sustainable Holdings"), an entity owned by the
members of i(x) investments, prior to the reorganisation.
The Company is governed in accordance with Companies (Jersey)
Law 1991.
2. Summary of Significant Accounting Policies and Key Accounting Estimates
Basis of Presentation
The Company's financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") and IFRIC interpretations issued by the International
Accounting Standards Board ("IASB") and with those parts of the
Companies (Jersey) Law 1991 applicable to companies preparing their
financial statements under IFRS. The financial statements have been
prepared on the historical cost basis, as modified by the
revaluation of financial assets and financial liabilities at fair
value through profit or loss. The Company reports cash flows from
operating activities using the indirect method.
New Accounting Standards, Interpretations and Amendments
The following new standards and amendments to existing standards
which are relevant to the Company were adopted by the Company for
annual periods commencing on or after 1 January 2021:
Amendments to IFRS 3 - Business Combinations: The amendment
updates IFRS 3 so that it refers to the 2018 Conceptual Framework
instead of the 1989 Framework and adds other requirements to
identify the liabilities assumed by an acquirer in a business
combination.
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate
Benchmark Reform - Phase 2: the amendments relate to the
modification of financial assets, financial liabilities and lease
liabilities, specific hedge accounting requirements and disclosure
requirements applying IFRS 7.
These new standards and amendments did not have an impact on the
financial statements of the Company.
The following new amendments to accounting standards that are
relevant to the Company are effective for annual periods beginning
on or after January 1, 2023:
Amendments to IAS 1: Presentation of Financial Statements: The
amendments require that an entity discloses its material accounting
policies, instead of significant accounting policies. Further
amendments to the standard explain how an entity can identify
material accounting policies.
Amendments to IAS 1: Classification of Liabilities as Current or
Non-Current: The amendments affect only the presentation of
liabilities as current or non-current in the statement of financial
position and not the amount or timing of recognition of any asset,
liability, income or expenses, or the information disclosed about
those items.
Amendments to IAS 8: Accounting Policies, Changes in Accounting
Estimates and Errors - Definition of Accounting Estimates: The
amendments replace the definition of a change in accounting
estimates with a definition of accounting estimates. Under the new
definition, accounting estimates are monetary amounts in financial
statements that are subject to measurement uncertainty. Entities
develop accounting estimates if accounting policies require items
in financial statements to be measured in a way that involves
measurement uncertainty. The amendments clarify that a change in
accounting estimate that results from new information or new
developments is not the correction of an error.
The Directors are considering the new standards effective for
periods beginning on or after 1 January 2023, however, at this time
they are not expected to have a significant impact on the
Company.
Going concern
The Company's financial statements have been prepared on a going
concern basis. The financial position of the Company, its cash
flows, liquidity position and borrowing facilities are described in
these financial statements and related notes. In addition, Note 2
to the financial statements describes the Company's significant
accounting policies, and Note 18 describes the principal risks that
the Company is exposed to, including liquidity risk, fair value
estimation risk and credit risk.
In order to assess the going concern of the Company, the
Directors have prepared cash flow forecasts for the Company. These
cash flow forecasts show the Company expects to have sufficient
headroom over available banking facilities. The Company has
obtained banking facilities sufficient to facilitate the growth
forecast in future periods. No matters have come to the attention
of the Directors to suggest that future renewals may not be
forthcoming on acceptable terms.
After making enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the
financial statements.
The financial statements do not include any adjustments that
would result if the forecast were note achieved.
Group reorganisation accounting
The Company acquired its 100% interest in i(x) investments on 9
February 2022 by way of a reverse merger. This is a business
combination involving entities under common control and the
consolidated financial statements are issued in the name of ix Net
Zero, PLC but they are a continuance of those of ix investments.
Therefore, the assets and liabilities of ix investments have been
recognised and measured in these consolidated financial statements
at their pre combination carrying values. The retained earnings and
other equity balances recognised in these consolidated financial
statements are the retained earnings and other equity balances of
the Company and i(x) investments. The equity structure appearing in
these consolidated financial statements (the number and the type of
equity instruments issued) reflect the equity structure of the
Company including equity instruments issued by the Company to
effect the consolidation.
The consolidated financial statements therefore present the
combined results and financial position of the group for the whole
reporting period and the comparative information represents that of
i(x) investments.
Judgments and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Company's accounting policies and making any
estimates. Changes in assumptions might have a significant impact
on the financial statements in the period in which the assumptions
changed. Management believes that the underlying assumptions are
appropriate and that the Company's financial statements are fairly
presented. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are
significant to the financial statements, are disclosed in Note 2
under Fair Value Estimation. Other areas where management has made
assumptions and estimates that are significant to the financial
statements include share-based compensation, leases, tax provisions
and debtor recoverability.
As of 31 December 2021, management determined that the transfer
of the Company's broker/dealer subsidiary should be treated as a
discontinued operation.
Foreign Currency
The financial statements are presented in the functional
currency of US Dollars, since the majority of its revenue and
operating expenditure is denominated in this currency. Foreign
currency transactions are translated into the functional currency
using the rates of exchange prevailing at the dates of the
transactions. At each end of each reporting period, monetary assets
and liabilities that are denominated in foreign currencies, if any,
are translated at the rates prevailing on the reporting end date.
Gains and losses arising on translation, if any, are included in
other income in the statement of comprehensive income for the
period.
Assessment as an Investment Entity
Management of the Company has determined that it meets the
definition of an investment entity within IFRS 10 and, therefore,
is required to measure its subsidiaries held as investments at fair
value through profit and loss rather than consolidate them.
Management of the Company considered exit strategies and all the
Company's activities to conclude whether the following criteria are
satisfied:
-- The entity obtains funds from one or more investors for the
purpose of providing those investors with investment services;
-- The entity commits to its investors that its business purpose
is to invest funds solely for returns from capital appreciation,
investment income or both;
-- The entity measures and evaluates the performance of
substantially all of its investments on a fair value basis.
Management determined that the Company meets the definition of
investment entity in accordance with IFRS 10, Consolidated
Financial Statements, as all of the above criteria are met by the
Company.
The Company was established to obtain funds from its investors
and with a view to manage the investments made from those
funds.
-- The only sources of profit for the Company are capital
appreciation and investment income. The Company aims to maximise
value of its investments and to monetise this value through
dividend inflow, interest revenue and disposal of investments at
the right time and at the right price. The Company does not obtain
any other benefit from its investments that are not available to
other parties that are not related to the respective investee.
In addition to the above, while assessing whether the Company
meets the definition of investment entity, management considered
the following typical characteristics of the investment entity (as
indicated in IFRS 10):
-- investment entity has more than one investment;
-- investment entity has more than one investor;
-- investment entity has investors that are not related parties of the entity;
-- investment entity has ownership interests in the form of equity or similar interests.
The Company has all of the above typical characteristics of an
investment entity.
Management has concluded that the Company meets the definition
of an investment entity. This conclusion will be reassessed on an
annual basis, if any of these criteria or characteristics
change.
Basis of Consolidation and Control of Subsidiary Entity
The consolidated financial statements of the Company comprise
the financial statements of ix Net Zero PLC and its subsidiary,
i(x) investments, as at and for the period ended 31 December 2022.
The Company consolidates the accounts of all subsidiaries which are
deemed to be providing investment related services, as defined by
IFRS 10, to the Company. All of the services provided by i(x)
investments during 2022 were attributable to performing investment
related services for the Company. Accordingly, the statement of
financial position of the Company was reported on a consolidated
basis as of 31 December 2022.
As of 31 December 2021 the statement of financial position of
the Company includes the unconsolidated accounts of the Company.
The Company's subsidiary, i(x) Financial Services is not
consolidated with the Company due to the Company's plan to
distribute i(x) Financial Services and certain other assets, to a
newly formed entity as described in Note 7. The assets to be
distributed are reported as assets held for disposal on the
statement of financial position as of 31 December 2021. These
assets were distributed to a newly formed entity on 2 February
2022, and are no longer included in the i(x) Net Zero balance sheet
at 31 December 2022. The statement of comprehensive income for the
year ended 31 December 2021 is not consolidated and reflects the
profit or loss from i(x) Financial Services as a discontinued
operation.
Subsidiaries are entities controlled by the consolidated group
of companies (the "Group"). Where the Group has control over an
investee, it is classified as a subsidiary. The Group controls an
investee if all three of the following elements are present: power
over an investee, exposure to variable returns from the investee,
and the ability of the investor to use its power to affect those
variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these
elements of control. Subsidiaries are fully consolidated from the
date that control commences until the date that control ceases.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with policies adopted by the Group.
Intergroup balances and any unrealised gains or losses or income
expenses arising from the intergroup transactions are eliminated in
preparing the consolidated financial statements.
The subsidiary consolidated in these consolidated financial
statements, i(x) investments, was acquired via group reorganisation
and as such merger accounting principles have been applied. i(x)
investments' financial figures are included for their entire
financial period rather than from the date the Company took control
of them. The assets and liabilities of i(x) investments have been
recognised and measured in these consolidated financial statements
at their pre-combination carrying values. i(x) investments prepares
their accounts to 31 December, under FRS101. There are no
deviations from the accounting standards implemented by the
Company.
The current period merger reserve was created on the acquisition
of i(x) investments by the Company. Ordinary shares in the Company
were issued to acquire the entire share capital of i(x)
investments. Under section 612 of the Companies Act 2006, the
premium on these shares has been included in a merger reserve.
Valuation of Assets and Liabilities
The Company's investments consist of investments in private
operating companies. These investments are valued by the Company's
management at the end of each financial reporting period at fair
value. As of 31 December 2022 and 2021, the fair values of these
investments were determined by the Company's management, as
described under Fair Value Estimation.
The fair value of all other assets and liabilities held by the
Company are determined at their fair value as reasonably determined
in good faith by the Company's management.
Although the Company's management uses its best judgment in
determining the fair value of its investments, there are inherent
limitations in any such process. The fair value presented is not
necessarily indicative of an amount the Company could realise in a
current transaction and the differences could be material.
Financial Assets and Liabilities
Financial assets include cash and cash equivalents, investments,
cash advances for future investments, accounts receivable, prepaid
expenses and other assets.
Financial liabilities include accounts payable and accrued
expenses, and professional fees payable.
Financial Assets
On initial recognition, financial assets are classified as
either financial assets at fair value through income statement,
held-to-maturity , loans and rece i vab l e s financial a ss et s ,
or available-for-sale financial a ss et s , a s appropriate . T he
Group cla ss ifie s all i t s financial a ss et s a s trade and
rece i vable s. T he cla ss ification depend s on the purpo s e for
which the financial a ss et s were acquired.
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as loans and receivables financial assets. Loans and
receivables financial assets are measured at amortised cost using
the effective interest method, less any impairment loss. Interest
income is recognised by applying the effective interest rate,
except for short-term receivables when the recognition of interest
would be immaterial.
The Group's loans and receivables financial assets comprise
other receivables (excluding prepayments) and cash and cash
equivalents included in the Statement of Financial Position.
Financial Liabilities
Financial liabilities are recognised when, and only when, the
Group becomes a party to the contracts which give rise to them and
are classified as financial liabilities at fair valued are
classified as financial liabilities at fair value through the
profit and loss or loans and payables as appropriate. The Group's
loans and payables comprise trade and other payables (excluding
other taxes and social security costs and deferred income). When
financial liabilities are recognised initially, they are measured
at fair value plus directly attributable transaction costs and
subsequently measured at amortised cost using the effective
interest method other than those categorised as fair value through
income statement.
Fair value at the income statement category comprises financial
liabilities that are either held for trading or are designated to
eliminate or significantly reduce a measurement or recognition
inconsistency that would otherwise arise. Derivatives are also
classified as held for trading unless they are designated as
hedges. There were no financial liabilities classified under this
category. The Group determines the classification of its financial
liabilities at initial recognition and re-evaluates the designation
at each financial year end. A financial liability is de-recognised
when the obligation under the liability is discharged, cancelled or
expires.
When an existing financial liability is replaced by another from
the same party on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as a de-recognition of the original
liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the
income statement.
Financial Assets and Liabilities at Fair Value through Profit or
Loss
The Company classifies all of its investment portfolio as
financial assets at fair value through profit or loss. The
portfolio of financial assets is managed and performance is
evaluated on a fair value basis. The Company is primarily focused
on fair value information, and it uses that information to assess
the assets' performance and to make decisions. The Company has not
taken the option to irrevocably designate any equity securities as
fair value through other comprehensive income. The contractual cash
flows of the Company's debt securities are solely principal and
interest, but these securities are neither held for the purpose of
collecting contractual cash flows nor held both for collecting
contractual cash flows and for sale. The collection of contractual
cash flows is only incidental to achieving the objective of the
Company's business model. Consequently, all investments are
measured at fair value through profit or loss. The Company
recognises net changes in fair value on financial assets at fair
value through profit or loss on the statement of comprehensive
income. The Company's accounting policies for measurement and fair
value estimation of financial assets are discussed under
Measurement and Fair Value Estimation in the notes to the
consolidated financial statements.
Recognition
The Company recognises financial assets and financial
liabilities on the date it becomes a party to the contractual
provisions of the instrument.
Purchases and sales of financial assets are recognised on the
trade date. From this date any gains and losses arising from
changes in fair value of the financial assets or financial
liabilities are recorded in the statement of comprehensive
income.
Income and expense are recognised on an accrual basis.
Transactions for private obligations are recorded on the date when
the terms of the transaction are fully negotiated and known.
Realised gains and losses from investment transactions are
determined using the specific identification method.
Dividend income and expense are recorded on the ex-dividend
date. Interest expense is recognised as incurred. Interest and
dividends have not been accrued for securities or other obligations
when the Company's management believes there is substantial doubt
of collection.
Revenue is measured based on the consideration to which the
Company expects to be entitled in a contract with a customer and
excludes amounts collected on behalf of third parties. The Company
recognises revenue when it transfers control of a product or
service to a customer.
Measurement
Financial assets and financial liabilities are measured
initially at cost which is the fair value of the consideration
given or received.
All recognised financial assets that are within the scope of
IFRS 9 are required to be subsequently measured at amortised cost
or fair value based on the entity's business model for managing the
financial assets and the contractual cash flow characteristics of
the financial assets.
Subsequent to initial recognition, all financial assets and
financial liabilities are measured at fair value and accounted for
through profit or loss. Gains and losses arising from changes in
the fair value of the financial assets or financial liabilities at
fair value through profit or loss are presented in the consolidated
statement of comprehensive income in revenue, in the period in
which they arise.
Cash and Cash Equivalents
Cash consists primarily of cash in an operating account
maintained with First Republic Bank ("FRB"). Such balances may
exceed the Federal Deposit Insurance Corporation ("FDIC") insurance
limit on an overnight basis.
The Company considers all highly liquid investments with a
maturity of three months or less when acquired to be cash
equivalents. The Company held funds in a money market account at
CNB as of 31 December 2021 and considered these funds to be cash
equivalents. For further details, pertaining to the investment in
the money market account, please see Note 18.
The following are the balances in cash and cash equivalents:
2022 2021
----------- -----------
Cash $7,479,832 $1,133,917
Cash equivalents - 1,000,847
----------- -----------
Total $7,479,832 $2,134,764
=========== ===========
Cash Advances for Future Investments
The Company may pay direct expenditures on behalf of a private
operating company which the Company's management expects to invest
in, in the future. When such expenditures are paid, they are
recorded as cash advances for future investment on the Company's
statements of financial position. Such expenditures may be
reimbursable by the private operating company that they were paid
on behalf of, or they may be converted to equity or debt securities
issued by the private operating company in future periods. If the
Company determines that such expenditures are not collectible from
the private operating company or will not be converted to equity or
debt securities, then the Company recognises a loss on such
expenditures in the year in which such loss is determined. In 2022
and 2021, the Company determined that $86,165 and $133,
respectively, of expenditures paid on behalf of private operating
companies were uncollectible and recorded a loss on such
expenditures. These losses are reported on the Company's statements
of profit and loss in net changes in fair value on financial assets
at fair value through profit or loss. The balance in cash advances
for future investments was $0 and $86,165 as of 31 December 2022
and 2021, respectively, and is reflected on the Company's
statements of financial position.
Accounts Receivable
The following is an aging of the accounts receivable balance as
of 31 December 2022 and 2021:
Accounts Neither More
Receivable Carrying Impaired 61-90 91-120 Than
Balance Amount Nor Past Days Days 120 Days
Due
------------- --------- --------- ------ ------- ---------
31 December
2022 $66,838 $26,278 $- $- $40,560
31 December
2021 40,374 - - - 40,374
Prepaid Expenses
Prepaid expenses consist primarily of prepaid insurance premiums
as of 31 December 2022. Prepaid expenses as of 31 December 2021,
include primarily expenses incurred in connection with the initial
public offering of i(x) Net Zero, PLC ("i(x) Net Zero"). Total
prepaid expenses as of 31 December 2021 amounted to $1,549,716.
These expenses were accrued as of 31 December 2021 and deducted
from the equity of the i(x) Net Zero upon completion of the IPO.
The total of these expenses amounted to $1,416,000.
Property, Plant and Equipment
Property, plant and equipment consists of office furniture and
equipment. These assets are carried at cost, net of accumulated
depreciation. Depreciation is charged to operations over the
estimated useful life of the furniture and equipment, primarily
three to five years, utilising the straight-line method.
2022 2021
-------- --------
Property, Plant and Equipment
Cost, 1 January $83,531 $79,629
Purchases - 3,902
-------- --------
Cost, 31 December 83,531 83,531
-------- --------
Accumulated depreciation, 1 January 68,220 53,436
Depreciation expense for the year 13,472 14,784
-------- --------
Accumulated depreciation, 31 December 81,692 68,220
-------- --------
Property, Plant, and Equipment
Net of Accumulated Depreciation $1,839 $15,311
======== ========
Current Liabilities
The balances in the accompanying statements of financial
position (consolidated as of 31 December 2022) for accounts payable
and accrued expenses, professional fees payable and the current
portion of the lease liability are due and payable within one year
from 31 December 2022 and 2021, respectively.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of 31 December 2021,
include expenses incurred in connection with the initial public
offering of i(x) Net Zero. These expenses were accrued as of 31
December 2021 and deducted from the equity of the i(x) Net Zero
upon completion of the IPO. The total of these expenses amounted to
$1,416,000.
Lease Accounting
The Company accounts for leases by recognising a right-of-use
asset and a lease liability. Lease liabilities are measured at the
present value of the contractual payments due to the lessor over
the lease term, with the discount rate determined by reference to
the rate inherent in the lease unless this rate is not readily
determinable, in which case the Company's incremental borrowing
rate on commencement of the lease is used. Right-of- use assets are
initially measured at the amount of the lease liability, reduced
for any lease incentives received, and increased for lease payments
made at or before commencement of the lease, initial direct costs
incurred and the amount of any provision where the Company is
contractually required to dismantle, remove or restore the leased
asset. Subsequent to initial measurement, lease liabilities
increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made.
Right-of-use assets are amortised on a straight-line basis over the
remaining term of the lease. The Company applies IAS 36 to
determine whether a right-of-use asset is impaired and accounts for
any identified impairment loss in accordance with IAS 36.
The Company has a lease agreement with lease and non-lease
components. Such non-lease components are accounted for
separately.
The Company has elected not to recognise right-of-use assets and
liabilities for short-term leases that have a lease term of 12
months or less, or leases of low value assets. These lease payments
are expensed on a straight-line basis over the lease term.
Share Capital
The Company records the proceeds from the issuance of ordinary
shares as share capital, at no par value. Incremental costs
directly attributable to the issuance of new ordinary shares or
options are deducted, net of any tax, from the proceeds.
Share-Based Compensation
Stock options granted to employees, which are settled in equity,
are valued at fair value at the date of grant. The fair value of
such options is charged to expense over the vesting period and the
expense is reported in general and administrative expenses on the
consolidated statement of comprehensive income. The shareholders'
equity reserve account is credited by the amount of share-based
compensation charged to expense.
Payroll and Benefits Expense
Short-term Benefits
Wages, salaries, paid annual leave and sick leave, bonuses and
non-monetary benefits are accrued in the year in which the
associated services are rendered by employees of the Company.
Defined Contribution Plans
The Company operates a defined contribution pension scheme for
eligible employees. The assets of the scheme are held separately
from those of the Company. The annual contributions payable are
charged to the consolidated statement of comprehensive income and
they become payable in accordance with the rules of the scheme.
401K Plan
The Company has a 401K Plan (the "Plan") for all eligible
employees. The Plan permits each participant to contribute up to
the federal contribution limits and allows the Partnership to make
discretionary contributions. The discretionary contributions are
recorded as an expense and are included in general and
administrative expenses in the consolidated statement of
comprehensive income.
Fair Value Estimation
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal market
or, in its absence, the most advantageous market to which the
Company has access at that date. The fair value of a liability
reflects its non-performance risk
When available, the Company measures the fair value of an
instrument using the quoted price in an active market for that
instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume
to provide pricing information on an ongoing basis. If there is no
quoted price in an active market, then the Company uses valuation
techniques that maximise the use of relevant observable inputs and
minimise the use of unobservable inputs. The chosen valuation
technique incorporates all of the factors that market participants
would take into account in pricing a transaction.
The Company measures fair value using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements.
The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements).
-- Level 1: Assets and liabilities with inputs that reflect
unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the
measurement date.
-- Level 2: Assets and liabilities with inputs other than quoted
prices included within Level 1, that are observable either directly
or indirectly, including quoted market prices for similar
instruments in active markets, quoted prices for identical or
similar instruments in markets that are considered less active or
other valuation techniques in which all significant inputs are
directly or indirectly observable from market data.
-- Level 3: Assets and liabilities with inputs that are
unobservable. Level 3 includes all instruments for which the
valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the
instrument's valuation. The valuation technique used is dependent
on the level of data, the circumstances and the availability of
observable inputs and may include discounted cash flow analysis,
market comparables and option pricing models.
-- Level 3 instruments include investments in private operating
companies, which comprise 100% of the Company's investment
portfolio. The Company's management determines the fair value of
these investments using valuation techniques applicable to Level 3
investments. Typically, the Company's best estimate of fair value
at inception is the transaction price, excluding transaction costs.
When evidence supports a change to the carrying value from the
transaction price, adjustments are made to reflect expected exit
values in the investment's principal market under current market
conditions.
In estimating the value of Level 3 investments, the inputs
generally used by the Company's management include the original
transaction price, completed or pending third-party transactions in
the underlying investment or comparable issuers, subsequent rounds
of financing, recapitalizations and other transactions across the
capital structure, offerings in the equity or debt capital markets,
and changes in financial ratios or cash flows. The Company also
considers specific events which may impact the fair value of
investee companies, including the following:
-- Corporate, political or operating events that may have a
material impact on the investee company's prospects and therefore,
its fair value.
-- The investee company is placed into receivership or bankruptcy.
-- The investee company is unlikely to continue as a going concern.
-- Management changes at the investee company that may have a
positive or negative impact on the investee company's ability to
achieve its objectives and build value for shareholders.
Level 3 investments may also be adjusted to reflect illiquidity
and/or non-transferability, with the amount of such discount
estimated by the Company's management in the absence of market
information. The fair value measurement of Level 3 investments does
not include transaction costs that may have been capitalised as
part of the security's cost basis. Assumptions used by the
Company's management due to the lack of observable inputs may
significantly impact the resulting fair value and therefore the
Company's results of operations.
Segmental Reporting
An operating segment is a component of an entity that engages in
business activities from which it may earn revenues and incur
expenses, whose operating results are regularly reviewed by the
entity's chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its
performance, and for which discrete financial information is
available. Operating segments for the Company are reported based on
the financial information provided to the Board, which is used to
make strategic decisions. The Directors are of the opinion that
under IFRS8 - "Operating Segments", the Company had only one
reportable segment, being i(x) investments, during the period from
February 9, 2022 to December 31, 2022. Prior to the reorganisation
of the Company, i(x) investments had two operating segments, which
were i(x) investments and i(x) Securities, LLC, a broker/dealer
(refer to Note 7, Assets Held for Disposal and Discontinued
Operations). The Board assesses the performance of operating
segments based on financial information which is measured and
presented in a manner consistent with that in the financial
statements.
3. Investments in Private Operating Companies
The following table presents information about the Company's
assets measured at fair value as of 31 December 2022 and 2021:
Level 3
Level 3 Consolidated
2022 2021
------------ ------------
Investments at Fair Value
Common Stock $2,579,223 $2,383,698
Convertible Note 761,000 499,955
Limited Liability Company Interests 59,508,499 57,357,099
Limited Partnerships 742,000 500,000
Simple Agreement for Future Equity
(SAFE) 250,000 -
------------ ------------
Total Investments at Fair Value,
31 December $63,840,722 $60,740,752
============ ============
The following tables present the changes in assets classified in
Level 3 of the fair value hierarchy for the years ended 31 December
2022 and 2021:
Limited Simple
Liability Agreements
Common Convertible Company Limited For Future
2022 Stock Note Interests Partnerships Equity Totals
(SAFE)
----------- ------------- ------------ ------------- ------------
Balance at 31
December
2021 $2,383,698 $499,955 $57,357,099 $500,000 $- $60,740,752
Purchase of
investments - 250,000 1,100,000 - 250,000 1,600,000
Unrealised gain 195,525 11,045 1,051,400 242,000 - 1,499,970
----------- ------------- ------------ ------------- ----------- ------------
Balance at 31
December
2022 $2,579,223 $761,000 $59,508,499 $742,000 $250,000 $63,840,722
=========== ============= ============ ============= =========== ============
Limited
Liability
Common Convertible Company Limited
2021 Stock Note Interests Partnerships Totals
----------- ------------ ------------ ------------- ------------
Balance at 31
December 2020 $1,338,151 $50,000 $14,379,697 $- $15,767,848
Purchase of investments - 499,955 3,370,000 500,000 4,369,955
Transfer to assets
held
for disposal (200,000) (50,000) - - (250,000)
Unrealised gain 1,245,547 - 39,607,402 - 40,852,949
----------- ------------ ------------ ------------- ------------
Balance at 31
December 2021 $2,383,698 $499,955 $57,357,099 $500,000 $60,740,752
=========== ============ ============ ============= ============
During the years ended 31 December 2022 and 2021 there were no
transfers of securities between Levels.
The following tables summarise the methods and significant
assumptions used to measure investments categorised in Level 3 of
the fair value hierarchy and whose values were determined by
management as of 31 December 2022 and 2021:
Fair Value
at
31 December Valuation Unobservable
2022
(in thousands) Technique Input Average
----------------- -------------------- ---------------------- ---------------
Investments
Common Stock
Carbon Capture 2,579 Equity Roll N/A $118.51/sh
Technology Forward
Total Common
Stock 2,579
Limited Liability
Company Interests
Biofuel Developer 46,909 Market Approach Recent transaction $4.52/unit
(1) - capital
raise (90%
weight)
Option pricing Risk free
method (backsolve) rate - 3.9%,
volatility
- 139.2%;
time to
liquidly
event -
5 years
(10% weight)
Real Estate 2,260 Income Approach Discount $1.84
Development - Discounted rate - 75% unit
Cash flow
Renewable Energy 9,640 Options Risk free
Pricing rate - 4%,
Method (Management volatility
Company) - 4.4%;
time to
liquidity
event -
5 years
Monte Carlo Risk free
Simulation rate - 4.32%,
(Founders' volatility
shares owned - 4.44%;
indirectly term to
by management maturity
company) - 1.3 years
(lockup
period)
700 Transaction Transaction N/A
cost cost
Total Renewable
Energy 10,340
Recent transaction
cost - capital
Software/Information raise (50%
Technology 511 Market approach weight) $46.56
Option Pricing Risk free
Method (backsolve) rate - 4%,
volatility
- 202.1%;time
to liquidity
event -
5 years
(50% weight)
Total Limited
Liability Company
Interests 60,020
Limited Partnership
Interest
Building technology 742 Transaction Transaction $225/unit
cost cost
Simple Agreement
For Future Equity
(SAFE)
Biofuel Developer 250 Transaction Transaction N/A
cost cost
Convertible
Note
Real Estate 250 Transaction Transaction N/A
Development cost cost
Total 63,841
Fair Value
at
31 December Valuation Unobservable
2021
(in thousands) Technique Input Average
--------------- ------------------ ------------------ -----------
Investments
Common stock Implied value
of
Carbon Capture 2,384 Market Approach equity 109.53/sh
Technology
Total Common
Stock 2,384
Limited Liability
Company Interests
Biofuel Developer 46,822 Market Approach Recent transaction 4.51/unit
(1) - capital
raise (90%
weight)
Option Pricing Risk free
Method (backsolve) rate - 1.3%,
volatility
- 137.9%;
time to liquidity
event - 5
years (10%
weight)
Real Estate Development 4,810 Income Approach Discount 3.92/unit
- Discounted rate - 15%
Cash Flow
Renewable Energy 5,025 Options Risk free
Pricing rate - 1.3%,
Method (Management volatility
Company) - 20%; expected
life of option
- 5 years
Monte Carlo Risk free
Simulation rate - .85%,
(Founders' volatility
shares owned - 10%; term
indirectly to maturity
by management - 2.3 years
company) (lockup period)
700 Transaction Transaction N/A
cost cost
Total Renewable
Energy 5,725
Software/Information 500 Transaction Transaction N/A
Technology cost cost
Total Limited
Liability Company
Interests 57,857
Limited Partnership
Interest
Building technology 500 Transaction Transaction N/A
cost cost
Total 60,741
(1) The investment in Biofuels represents the Company's interest
in Wastefuel Global, LLC ("Wastefuel Global"). In January 2021,
Wastefuel Holdings, LLC was reorganized into Wastefuel Global, LLC
and the Company contributed its interest in Wastefuel Holdings to
the new company, in exchange for 10,841,000 units of the new
company.
The per unit price of Wastefuel Global in the most recent
capital raise was given a 90% weight in the 31 December 2022 and 31
December 2021 valuations and a 10% weight was ascribed to the
backsolve method, which is a method that derives the equity value
for a company from a transaction involving the company's own
securities. The rights and preferences of each class of equity,
market interest rates, industry sector volatility data, and an
estimated time period to a liquidity event are all considered and
included in an option pricing model under the backsolve method. The
weighting of these two valuation methods and the unobservable
inputs used in the valuation were based on management judgment. The
unobservable inputs are presented in the Level 3 valuation table as
of 31 December 2022 and 31 December 2021, in Note 3 above.
On a semi-annual basis, the Company's management reviews the
fair value calculation for each Level 3 security and assesses,
among other things, the reasonableness of the pricing models, the
inputs to the pricing models and the significant assumptions
developed internally or by independent valuation experts.
4. Share Capital
The Company has 79,056,811 ordinary shares, at no par value,
authorised, issued and outstanding as of 31 December 2022. The
ordinary shares were issued upon completion of the Company's IPO on
9 February 2022, as disclosed in Note 1, Organisation and Nature of
Business.
Incremental costs directly attributable to the issue of new
ordinary shares or options are included in shareholders' equity as
a deduction, net of tax, from the proceeds. The gross and net
proceeds from the IPO are as follows:
Amount Shares
------------ ------------
Gross proceeds from IPO $14,481,736 $14,056,811
Less: IPO expenses (2,356,315) -
------------ ------------
Proceeds, net of expenses from
IPO $12,125,421 $14,056,811
============ ============
5. Earnings per Share
Basic earnings per share is calculated by dividing the earnings
attributable shareholders by the weighted average number of
ordinary shares outstanding during the period. Fully diluted
earnings per share is calculated based on the weighted average
number of shares assuming all stock options are exercised. Due to
losses in the year from 1 January 2022 to 31 December 2022, the
effect of stock options on earnings per share is anti-dilutive and
therefore stock options are not included in the calculation of
diluted earnings per share. Earnings per share are set out
below:
2022 2021
---------------- ---------------
Earnings attributable
to the ordinary
shareholders of
the
Company $(18,019,741) $35,751,387
Weighted average
number of shares 79,056,811 79,056,811
---------------- ---------------
Basic and diluted
loss per share $(0.23) $0.45
================ ===============
For 2021, earnings per share was calculated based on the total
number of shares issued and outstanding during 2022, as there were
no shares issued prior to 9 February 2022.
6. Share-Based Compensation
Pursuant to the Company's Equity Incentive Plan for 2022 (the
"Incentive Plan"), stock options were granted to management
employees during the year from 1 January 2022 to 31 December 2022.
Each management employee was granted the option to purchase shares
of the Company's stock in accordance with each employee's Stock
Option Grant. The options are exercisable at GBP0.76 per share and
the options expire ten years from the grant date, as specified in
each employee's Stock Option Grant. The shares subject to the
Incentive Plan vest over three years and will only vest upon the
Company's achievement of a total shareholder return compound growth
per annum target for the Performance Period of 8% or more. The
Performance Period is the period of three years from the date the
Company's shares were admitted for trading on the AIM market.
Options are forfeited if an employee leaves the Company before the
options vest.
Details of the share options outstanding during the year from 1
January 2022 to 31 December 2022 are as follows:
Period from
1 January 2022
to 31 December
2022
-----------------
Outstanding at beginning of period -
Granted during the period 5,779,277
Forfeited during the period (909,153)
Exercised during the period -
Expired during the period -
-----------------
Outstanding at end of period 4,870,124
=================
The aggregate fair value of the options granted as of the dates
granted was $4,303,000, which was determined using the Black
Scholes options pricing model. The expected volatility used to
determine the fair values of the options granted ranged from 123.4%
to 125.2% and the average expected volatility was 124.4%. The
risk-free rates used in the determination of the fair values of the
options ranged from 1.86% to 2.85% and the average risk-free rate
was 2.38%.
The expense recognised for the period from 1 January 2022 to 31
December 2022 was
$1,750,059 and is included in general and administrative
expenses on the consolidated statement of comprehensive income.
7. Assets Held for Disposal and Discontinued Operations
In June 2021, i(x) investments adopted a plan to spin off and
distribute i(x) Financial Services and its subsidiary, i(x)
Securities, LLC, and certain other assets, to the unitholders of
i(x) investments, pending completion of the IPO transaction. A s
described in Note 1, Organisation and Nature of Business, these
subsidiaries and other assets were transferred to i(x) Sustainable
Holdings, an entity owned by the members of i(x) investments prior
to the reorganization of the Company.
The following table sets out the assets and liabilities as of 31
December 2021, which were transferred from i(x) investments to i(x)
Sustainable Holdings:
I(x) Financial I(x) Investments
Services,
LLC LLC Total
--------------- ----------------- -----------
Current Assets
Cash and cash equivalents $534,276 $- $534,276
Cash advances for future
investments - 390,770 390,770
Accounts receivable 337,727 - 337,727
Prepaid expenses and other
assets 26,763 - 26,763
Noncurrent Assets
Investments - 250,000 250,000
--------------- ----------------- -----------
Total Assets 898,766 640,770 1,539,536
--------------- ----------------- -----------
Current Liabilities
Accounts payable 220,820 - 220,820
Loans payable 101,875 - 101,875
--------------- ----------------- -----------
322,695 - 322,695
--------------- ----------------- -----------
Members' Capital $576,071 $640,770 $1,216,841
=============== ================= ===========
In addition to the above, $400,000 was transferred from i(x)
investments to i(x) Sustainable Holdings in January 2022 based upon
the Transfer Agreement, as amended, between i(x) investments and
i(x) Sustainable Holdings.
i(x) Financial Services and i(x) Securities, LLC represent a
discontinued business. The loss from this discontinued business
amounted to $226,665 in 2021. The business was discontinued as an
operating segment of i(x) investments as of 31 December 2021.
8. Commitments and Contingencies
In the normal course of business, the Company enters into
contracts that contain a variety of representations and warranties,
and which provide indemnifications. The Company's maximum exposure
under these arrangements is unknown, as this would involve future
claims that may be made against the Company that have not yet
occurred. However, based on experience, the Company expects the
risk of loss to be remote.
The Company has non-binding commitments to invest $2.475 million
in Enphys Management Company over the 18-month period beginning in
January 2022. The total amount funded through 31 December 2022,
plus non-binding commitments over the next 2 years totals $6.0
million. In addition, i(x) Net Zero has agreed to invest an
additional $1.5 million in cash in Enphys Management Company, LLC
("EMC"). The investment comprises an initial payment of $500,000
and 10 monthly payments of $100,000 each commencing in July 2022
and finishing in April 2023, each of which was funded from i(x) Net
Zero's existing cash resources. Following the initial payment, i(x)
Net Zero's holding in EMC increased by 3.5% to 14.5%. This
investment also indirectly increased i(x) Net Zero's stake in
Enphys Acquisition Corp ("EAC"). The Company expects this
additional investment to be accretive to its net asset value.
In January 2022, Lion Point Capital, LP, on behalf of funds
managed by it, ("Lion Point") and the Company entered into a
strategic relationship to identify and pursue certain transactions
together, with an initial focus on opportunities in Energy
Transition. At the time of the Company's IPO, Lion Point Master, LP
("Lion Point Master") entered into a subscription agreement and
subscribed for $6.8 million (approximately GBP5.0 million) in
ordinary shares of the Company at the placing price as part of the
fundraising. Lion Point Master was granted a put option and
pursuant to the put option, the Company is obliged to repurchase
6,672,161 Ordinary Shares of Lion Point Master's Ordinary Shares at
the Placing Price (GBP0.76 per share ($1.02 per share)) amounting
up to $6.8 million at any time during the three-year term following
the Company's admission to trading on AIM. Lion Point has also
granted to the Company a call option to purchase $6.8 million of
common shares of Suniva, Inc. Further details are set out in
paragraph 5.6 of Part 1 and paragraphs 18.1(j), (k) and (l) of Part
7 of the Company's Admission document dated 4 February 2022, which
is available on the Company's website https://ixnetzero.com/.
9. Revenue
2022 2021
---------- --------
Dividend income $2,645 $378
Other income - 183
---------- --------
Total Revenue $2,645 $561
---------- --------
10. Net Changes in Fair Value on Financial Assets at Fair Value through Profit or Loss
2022 2021
----------- ------------
Net unrealised gain from investments $1,499,970 $40,852,949
Net realised loss from cash advances
for future investment (86,165) (133)
----------- ------------
Total Net Changes in Fair Value
on
Financial Assets at Fair Value
Through Profit or Loss $1,413,805 $40,852,816
=========== ============
11. Finance Costs
2022 2021
-------- --------
Lease interest $27,495 $43,220
======== ========
12. Directors' Emoluments
2022 2021
------------ -----------
Salaries $981,479 $914,018
Bonus 1,489,000 -
Share-based compensation 1,361,432 -
Consulting fees - 444,167
Director fees 423,968 -
Benefits 79,416 55,378
Payroll taxes 111,512 74,535
401K Contribution 25,687 26,363
------------ -----------
Total Directors' Emoluments $4,472,494 $1,514,461
============ ===========
The highest amount of compensation paid to a director in 2022
was $1,461,790.
13. Staff Employment Costs
2022 2021
----------- ---------
Salaries $572,894 $282,741
Bonus 284,776 -
Share-based compensation 388,627 -
Benefits 141,254 46,788
Payroll taxes 52,458 33,532
401K Contribution 24,514 4,874
----------- ---------
Total Staff Employment Costs $1,464,523 $367,935
=========== =========
14. Number of Employees
The average monthly number of employees (including Directors)
during the year was:
Year Ended Year Ended
31 December 31 December
2022 2021
------------ --------------
Number of employees 11 8
------------ --------------
15. Employee Benefits
Defined Contribution Plans
The expense for the defined contribution plan for the year ended
31 December 2022 was $6,150 and was included in general and
administrative expenses. This amount was accrued as of 31 December
2022.
401K Plan
During 2022, the Company made discretionary contributions of
$50,201 to the Plan, all of which was paid during the year. The
discretionary contributions are recorded as an expense and are
included in general and administrative expenses in the consolidated
statement of comprehensive income.
16. Operating Expenses
2022 2021
--------- ---------
Audit Fees $60,000 $226,906
========= =========
Operating Lease Expense $304,149 $288,424
17. Income Taxes
The results of the corporate inversion and resulting IPO
transaction result in i(x) Net Zero being treated as a U.S.
domestic corporation for all purposes of the U.S. tax code under
Internal Revenue Code Section 7874(b) as of the date of the
transaction. As a result of the transaction, there are deferred tax
implications related to the Company's temporary difference in the
book and tax basis of its assets, the most material of which is the
difference between the tax basis and the fair value of the
Company's investments. As of 31 December 2022, the U.S. federal and
state corporate deferred tax impact of the above referenced
transaction on the investments listed on the Company's schedule of
investments at fair value is projected to result in a deferred tax
liability of approximately $11,271,000 at the Company's effective
federal and state tax rates of 21% and 3.29%, respectively.
The Company recognizes a deferred tax asset for the tax benefit
of a net operating loss that, in the judgement of the Company's
management, is more likely than not of being realised in a future
year. The tax benefit of a net operating loss will be realised if
it can be offset against taxable income in a future year.
Currently, federal net operating losses carryforward indefinitely
and the carryforward periods in the states where the Company files
income tax returns is 20 years. A valuation allowance is
established for any portion of a deferred tax asset that is not
likely to be realised in a future year. The valuation allowance is
evaluated and adjusted annually by management for changes in the
estimated amount of deferred tax assets that are not likely to be
realised in future years, based on evidence currently
available.
The Company also recognizes deferred income tax liabilities for
the tax effect of temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial
statements.
Deferred tax assets and liabilities are determined based on
enacted tax laws and income tax rates expected to be in effect at
the time the deferred tax assets and liabilities are expected to
affect taxable income.
A balance sheet approach is used to determine the deferred
income tax provision or benefit to be recognised in the Company's
statements of operations. The current year provision or benefit is
determined based on the difference between the prior and current
year balances in the deferred tax asset and deferred tax liability
accounts. The change in valuation allowance for the deferred tax
asset is determined using the same approach.
The following are the deferred tax liabilities of the Company as
of 31 December 2022:
Total Federal State
------------ ----------- -----------
Deferred Tax
Liability $11,271,318 $9,118,320 $2,152,998
============ =========== ===========
There were no deferred tax assets as of 31 December 2022.
Income (loss) from continuing operations before income taxes is
comprised as follows:
2022 2021
------------- -----
Domestic $(6,857,884) $-
Foreign - -
------------- -----
Total $(6,857,884) $-
============= =====
Income (loss) from discontinued operations before income taxes
is comprised as follows:
2022 2021
----- -----
Domestic $- $-
Foreign - -
----- -----
Total $- $-
===== =====
The provision for income taxes consisted of the following:
2022 2021
------------ -----
Current:
Federal
State $- $-
Foreign - -
Domestic -
Total current income tax - -
expense
------------ -----
- -
Federal
State $9,118,320 $-
Foreign 2,152,998 -
Domestic - -
Total deferred income - -
tax expense
------------ -----
11,271,318 -
------------ -----
Provision for Income Taxes $11,271,318 -
============ =====
The effective tax rate -164.4% -
is calculated as
A reconciliation of the statutory rate of 21% in 2022 and 2021
to the effective income tax expense for each year follows:
2022 2021
--------------- ----------
Losses before income taxes $(6,857,884) $-
Statutory tax rate 21% 21%
Income tax (benefit) at (1,440,156) -
statutory rate
State tax benefit (expense),
net
of federal benefit (255,946) -
Stock compensation 107,880 -
Other 225 -
Deferred True Ups 12,859,315 -
Valuation Allowance - -
--------------- ----------
Total Income Tax Expense $11,271,318 $-
=============== ==========
The tax effects of temporary differences and carryforwards that
give rise to deferred income tax assets and liabilities consisted
of the following:
2022 2021
---------------- ------------
Net Operating Loss Carryforward $2,033,297 $-
ROU asset - -
Stock compensation - -
Other 152,087 -
---------------- ------------
Total deferred income 2,185,384 -
tax assets
Investment Gain/Loss (13,341,296) -
ROU liability (86,384) -
Other (29,022) -
---------------- ------------
Deferred income tax liabilities (13,456,702) -
---------------- ------------
Def income tax assets
before
valuation allowance (11,271,318) -
Less valuation allowance - -
---------------- ------------
Net Deferred Tax Liability $(11,271,318) $-
The Company has U.S. gross net operating loss carryforwards
totaling $12.684 million as of 31 December 2022. Utilization of our
net operating losses may be subject to limitations upon certain
ownership changes as provided by the Internal Revenue Code and
similar state provisions. Sections 382 and 383 of the Internal
Revenue Code of 1986 subject the future utilization of net
operating losses and certain other tax attributes, such as research
and experimental tax credits, to an annual limitation in the event
of certain ownership changes, as defined. The Company may be
subject to the net operating loss utilization provision of Section
382 of the Internal Revenue Code. The effect of an ownership change
would be the imposition of an annual limitation of the use of NOL
carryforwards attributable to periods before the change. The amount
of the annual limitation depends upon the value of the Company
immediately before the change, changes to the Company's capital
during a specified period prior to the change, and the federal
published interest rate. Although the Company has not completed an
analysis under Section 382 of the Code, it is likely that the
utilization of the NOLs will be limited. The Company has not
performed an IRC 382 analysis for the net operating losses for any
of its corporate subsidiaries.
The Company is subject to income taxes in the U.S. as the
statute of limitations for adjustments to our historic tax
obligations will vary from jurisdiction to jurisdiction. Further
operating losses may be subject to adjustment after the expiration
of the statute of limitations for the year such net operating
losses.
There were no unrecognized tax benefits as of 31 December
2022.
Accounting for Uncertainties in Income Taxes
The Company's management periodically evaluates positions taken
in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation, and establishes
provisions, where appropriate, on the basis of amounts expected to
be paid to the tax authorities. The Company's management has
determined that there are no uncertain tax positions and, as a
result, has identified no matters that require further disclosure
in the financial statements. As of 31 December 2022, the tax years
that remain subject to examination by United States federal and
state tax jurisdictions under the statute of limitations, are the
calendar years 2019 through 2022.
18. Financial Instruments with Off-Balance Sheet Risk and Certain Concentration Risks
The Company's investment activities expose it to various types
of risk, both on and off balance sheet, which are associated with
the financial instruments and markets in which it invests. These
financial instruments expose the Company in varying degrees to
elements of liquidity, fair value estimation, credit, market,
interest rate, counterparty, and currency risk. The principal risks
that the Company is exposed to are as follows:
Fair value estimation risk
As of 31 December 2022, 100% of the Company's investments
comprise investments in private operating companies which have been
fair valued by the Company's management in accordance with the
policies set out in Note 2 to the consolidated financial
statements. The analysis below is provided to illustrate the
sensitivity of the fair value of investments to an individual
input, while all other variables remain the same. The Company's
Board considers these changes in inputs to be within reasonable
expected ranges. This is not intended to imply the likelihood of
change or that possible changes in value would be restricted to
this range.
Change in
Fair
Value of
Base Change Investment
Investment/Input Case in Input ($000) (1)
--------------------------- ------ ---------- ------------
Wastefuel Global, LLC
Weight assigned to option
pricing method 10% +10% 86
-10% (86)
(1) Based on fair value
as of 31 December 2022
Liquidity risk
The market for less liquid investments may be more volatile than
the market for highly liquid securities. Investments in relatively
illiquid securities may restrict the ability of the Company to
dispose of its investments at a price and time that it wishes. If
the Company was forced to dispose of an illiquid investment at an
inopportune time, it might be forced to do so at a substantial
discount to fair value, resulting in a loss to the Company.
Liquidity risk could affect the Company's ability to meet the
obligations associated with its financial liabilities. The Company
manages its liquidity requirements through capital raising and by
investing excess cash in a money market fund which is highly
liquid. The money market fund is described below under Other
Risks.
Credit risk
The Company's exposure to credit risk is associated with default
risk on the value of debt held and with counterparty
nonperformance. The Company is exposed to credit risk on accounts
receivable balances, convertible notes, cash and cash equivalents
held in financial institutions and at brokerage firms.
The Company is subject to the risk of default on its accounts
receivable balance, which amounted to $66,838 as of 31 December
2022. The carrying amount of these receivables is considered to be
a reasonable approximation of their fair value and the balance as
of 31 December 2022 is expected to be collected within one year.
The Company manages the risk of default by monitoring the primary
debtor's financial condition and maintains a high degree of
visibility into the debtor's financial records, revenue prospects
and potential capital resources. Management considers the risk of
default on these receivables to be low because the primary investee
company has a strong capacity to meet its contractual obligations
in the near term. Accordingly, no loss allowance has been
recognised based on 12-month expected credit losses, as any such
impairment would be insignificant to the Company.
As of 31 December 2022, the Company held a convertible note with
a fair value of $250,000, issued by one of its investee companies.
The convertible note was subject to default and counterparty
nonperformance risks. The Company monitors the debtor's business
with respect to assessing potential impairment in the note's value.
Indicators of a lower expectation of recovery would be a default
triggered under the terms of the note, failure to demonstrate the
potential to raise capital, significant negative developments
regarding the debtor's potential revenue pipeline and failure to
engage with the Company on alternative payment arrangements,
amongst other considerations. Management considers the risk of
default and counterparty nonperformance on the note to be low based
on its monitoring of the debtor's business. There has been no
allowance recognised based on 12-month expected credit losses, as
any such impairment would be insignificant to the Company.
The Company's exposure to credit risk on cash and cash
equivalents is discussed in Note 2 with respect to cash balances
and below with respect to cash equivalents held in the Government
Fund.
Although the Company's investments are denominated in U.S.
dollars, the Company may invest in securities and hold cash
balances that are denominated in currencies other than its
reporting currency, the U.S. dollar. Consequently, the Company may
become exposed to risks that the exchange rate of the U.S. dollar
relative to other currencies may change in a manner which has an
adverse effect on the reported value of that portion of the
Company's assets which are denominated in currencies other than the
U.S. dollar. The Company may utilise options, futures, and forward
currency contracts to hedge against currency fluctuations, but
there can be no assurance that such hedging transactions will be
effective.
Market risk
Certain investments may be disposed of at a price different from
the value recorded in the accompanying financial statements since
the market price of these investments generally is more volatile
than that of more liquid investments.
As such, the Company may incur greater losses on the sale of
some portfolio investments than under more stable market
conditions. Such losses may adversely impact the Company's capital
balance. Due to market instability, it may become more difficult to
obtain market valuations from third party vendors and other market
participants for these investments. As a result, there can be no
assurance that the Company could purchase or sell these investments
at the price used to calculate the Company's capital balance.
Legal, tax and regulatory changes could occur that may adversely
affect the Company. The regulatory environment for investment
companies is evolving, and changes in the regulation of investment
companies may adversely affect the value of investments held by the
Company and the ability of the Company to pursue its investment
strategies.
In addition, if the Company is required to liquidate all or a
portion of its portfolio quickly, it may realise significantly less
than the value at which it previously recorded such
investments.
Interest rate risk
Interest rate risk arises from the effects of fluctuations in
the prevailing levels of market interest rates on the fair value of
financial assets and liabilities and future cash flows. The
financial instruments exposed to interest rate risk comprise cash
and cash equivalents and investments at fair value.
Other risks
Cash equivalents consisted of investments in the City National
Rochdale Government Money Market Fund (the "Government Fund") as of
31 December 2021, a money market fund that invests in securities
issued or guaranteed by the U.S. government or certain U.S.
government agencies or instrumentalities and repurchase agreements
collateralised by such securities. The Government Fund is a Level 1
security for fair value hierarchy purposes. An investment in the
Government Fund is not insured by the FDIC or any other government
agency and is subject to the risks associated with financial
instruments discussed in the preceding paragraphs of Note 18. The
total amount invested in the Government Fund was $0 and $1,000,847,
as of 31 December 2022 and 2021, respectively.
Financial Risk Management
Risk management is carried out by the Chief Investment Officer
under policies approved by the Board of Directors and the Audit and
Risk Committee. The Chief Investment Officer and senior management
identify, evaluate and hedge financial risks in close cooperation
with the Group ' s operating units. The Board provides written
principles for overall risk management, as well as written policies
covering specific areas, such as liquidity risk, market risk,
credit risk and other risks.
Lease Commitments
The Company leases office space at 1149 Third Street, Santa
Monica, CA. The lease commenced in December 2018 and expires in
January 2024.
2023 $374,342
2024 32,051
---------
$405,393
=========
19. Leases
The Company's lease for office space at 1149 Third Street, Santa
Monica, CA commenced in December 2018 and expires in January 2024.
Upon initial recognition of the lease liability, such amount was
measured at the present value of the contractual payments due to
the lessor, using the Company's incremental borrowing rate of 5% as
the discount rate. The amount of the initial liability and the
right of use asset was $1,549,998. For the years ended 2022,
information pertaining to this operating lease was as follows:
Supplemental Information 2022 2021
----------------------------------------- ---------- ----------
Operating lease ROU asset as of 1
January $ 653,426 $941,850
Amortisation of ROU assets for the
year ended 31 December (304,149) (288,424)
------------------------------------------ ---------- ----------
Operating lease ROU asset as of 31
December 2022 $349,277 $653,426
------------------------------------------ ========== ==========
Total operating lease costs included
in occupancy expense $304,149 $288,424
Remaining lease term 13 months 25 months
Discount rate 5.0% 5.0%
Maturities of operating lease liability
for fiscal years ending
31 December
-----------------------------------------
2022 $- $363,439
2023 374,342 374,342
2024 32,051 32,051
---------- ----------
Total lease payments 406,393 769,832
---------- ----------
Less imputed interest (10,006) (37,500)
---------- ----------
Total operating lease liability as
of 31 December 2022 $396,387 $732,332
========== ==========
Interest expense on lease liabilities for the years ended 31
December 2022 and 2021 was $27,495 and $43,220, respectively.
The Company sublet its office space in Santa Monica, California,
effective August 1, 2021. In accordance with the terms of the
sublease agreement, the subtenant is obligated to pay rent to the
Company monthly, totaling $756,000 over the remaining life of the
lease, which terminates on January 31, 2024. In addition, the
subtenant is obligated to pay the Company's share of operating
expenses which are payable to the lessor under the terms of the
original lease.
20. Related Parties
As disclosed in the Admission document, upon Admission, Steven
Oyer, the CEO and Director of i(x) Net Zero plc would have been
entitled to $2,000,000 as an investor liquidity bonus under the
terms of his service agreement. However, he voluntarily agreed to
amend his agreement. Under the amendment proposed by Steven Oyer,
he would receive a cash bonus of $1,050,000, and $700,000 of his
$2,000,000 bonus would at his direction and request instead be paid
to other members of the i(x) executive team, including the CIO,
CFO, COO and Director, Strategic Initiatives, for a total of $1.75
million in cash bonus to be paid to the executive team. The
executive team then agreed that an aggregate of $1,000,000 of the
cash bonus payments (being approximately the aggregate after-tax
amount of the cash bonus to the executive team) would be used to
fund the acquisition by the executive team of $1,000,000 of
Ordinary Shares at the Placing Price from Trevor Neilson, a former
CEO and Director of i(x) investments.
The remaining $250,000 due to Steven Oyer under his original
service agreement was paid to him via an option grant made on
Admission to purchase any time after Admission such number of
Ordinary Shares as equals $250,000 at the Placing Price. This
option grant was in addition to the incentive grant awarded to
Steven Oyer under the Company's Equity Incentive Plan on
Admission.
On 9 February 2022 the five members of the executive team
purchased 981,201 shares of i(x) Net Zero stock from Trevor
Neilson, the former CEO and Director of i(x) investments for
$1,000,000, which the Company paid on their behalf. The Company
recorded that payment as IPO bonus expense of $1,000,000. The
Company then recorded the remaining $750,000 of the aggregate cash
bonus, plus a small additional amount to cover additional employee
income tax liability, for a total of $765,182, to be paid in 2022.
The amount of the bonus that is payable as of 31 December 2022 is
$0.
A former CEO and Director of the Company, who served through
December 2020, and served as a consultant to the Company through
August 2021, was paid consulting fees totaling $444,167 in 2021.
This former CEO and Director is also a shareholder in the Company,
serves as the Chairman and CEO of an investee company and is a
shareholder in another investee company. In addition, two of the
Directors of the Company are investors in an investee company and
invested on the same terms as the Company.
21. Subsequent Events
New Loan Facility
In April 2023, the Company announced that its wholly owned
subsidiary, i(X) investments LLC has entered into a new secured
$7.5 million 2-year term loan facility with European Depositary
Bank S.A. ("EDB") ("Loan"). The Loan, once drawn, bears interest at
10.5% coupon (subject to periodic change in line with EDB's USD
Base rate) and which is payable quarterly. The Loan can be utilised
for the purposes of the financing of investments and general
working capital purposes. The Loan is guaranteed by the
Company.
i(X) Investments LLC has agreed to pay an arrangement fee equal
to 2% of the amount of the facility and a commitment fee of 1.75%
per annum on any undrawn funds, payable quarterly in arrears.
Drawdown of the Loan is conditional upon there being no event of
default and other customary provisions including delivery of
documents. The Loan is repayable together with default interest in
the event of default which, inter alia, includes a change of
control and a reduction of aggregate NAV of the Company below $50
million.
The Loan is secured by a pledge granted by the Company and its
nominee of the shares held by it including those in i(X)
Investments LLC and all other proceeds and property and assets
owned by it. In addition, as part of the Facility Agreement, i(X)
Investments LLC will pledge $4.0 million as a security at a deposit
account with EDB. The Company will be able to invest this security
deposit in certain money markets funds and other financial
instruments and generate a return on deposited funds (currently
expected to be approximately 4-5% per annum) thereby mitigating the
interest payable. In addition, i(X) Investments LLC has undertaken
to maintain a minimum cash balance in an operating account with
amount varying depending on the remaining time to facility maturity
but being zero if drawdowns are below $4 million.
In connection with the facility, i(X) Investments LLC has also
agreed to give customary undertakings, warranties and indemnities
to the Lender, the Agent and Security Agent including as to tax and
undertakings not to undertake certain corporate transactions
without consent.
Options
In April 2023, the Company issued a total of 6,324,545 options
to subscribe for new Ordinary Shares in the Company ("Options")
under the 2022 i(x) Net Zero Plc Equity Incentive Plan (the "EIP").
The Options all have an exercise price of 20p, being a 142.4 per
cent premium to the previous day's closing share price on AIM of
8.25p. The Options vest over a period of three years, with a third
vesting on each of the three successive anniversaries of the date
of grant.
On 4 February 2022, in conjunction with its IPO, the Company
issued options over Ordinary Shares representing approximately 6.3
per cent. of the Company's issued share capital under the EIP ("IPO
Options"). In conjunction with the above issuance of Options, all
remaining IPO Options that have not yet already lapsed, have been
surrendered. In total, 2,166,157 share options have been
surrendered, of which 1,375,589 were held by Par Lindstrom and
790,568 were held by Dmitri Tsvetkov.
Following the new grant of the Options, and the surrender of IPO
Options, the Company has a total of 6,324,545 options to subscribe
for new Ordinary Shares.
CEO Bonuses
In December 2022, the Company agreed to pay to Pär Lindström an
incentive bonus of $200,000 (GBP160,772) in respect of the year
ended 31 December 2022, an amount which equates to approximately
50% of his annual compensation for the year. In order to preserve
the Company's cash resources and to demonstrate his commitment to
the Company, Mr Lindström has agreed to apply this sum to a
subscription of new ordinary shares at the previous day's closing
price of 8.25p per share. This will result in the issue of
1,948,748 new ordinary shares to Mr Lindström ("2022 Bonus
Shares"). The 2022 Bonus Shares represent 2.5% of the issued share
capital prior to the issue of these shares.
Furthermore, as part of his promotion to CEO in January 2023,
the Company agreed to pay Mr Lindström a promotion bonus based on
increased responsibilities as CEO of $500,000 (GBP401,929) being
approximately 120% of his 2023 annual compensation. In order to
preserve the Company's cash resources and to demonstrate his
commitment to the Company, Mr Lindström has also agreed to apply
this sum to a subscription of new ordinary shares at previous day's
closing price of 8.25p per share. This resulted in the issue of
4,871,870 new ordinary shares to Mr Lindström ("CEO Bonus Shares").
The CEO Bonus Shares represent 6.2% of the issued share capital
prior to the issue of shares referred to in this announcement.
By way of further alignment to shareholders and the creation of
shareholder value, in respect of the 2022 Bonus Shares and CEO
Bonus Shares, the shares subscribed for by Mr Lindström pursuant to
each of these bonus schemes will be subject to a risk of forfeiture
and may not be sold or otherwise transferred until such forfeiture
risk has lapsed. Specifically, Mr. Lindstrom may not sell,
transfer, or otherwise transact in these shares until such time as
the risk of forfeiture with respect to the bonus shares has lapsed.
This forfeiture risk will expire if and when the Company's Net
Asset value reaches and exceeds $120 million within the 24-month
period following their issue ("NAV Hurdle"). If the NAV Hurdle is
not met in that time period, the bonus shares will be forfeited
back to the Company.
The 2022 Bonus Shares and the CEO Bonus Shares were admitted to
trading on AIM London Stock Exchange on 26 April 2023.
Total Voting Rights
Following issuance of 2022 Bonus Shares and CEO Bonus Shares in
April 2023, the Company has 85,877,429 Ordinary Shares in issue,
each carrying the right to one vote. No Ordinary Shares are held by
the Company in treasury. The total number of voting rights in the
Company is therefore 85,877,429.
First Republic Bank
Management of the Company became aware of multiple banks being
transferred into government receivership and the appointment of the
Federal Deposit Insurance Corporation (the "FDIC") as receiver in
March 2023. On 13 March 2023, the Company, after consulting with
the Board, transferred all funds on deposit at First Republic Bank
to their Trust account which is located at Key Bank. On 28 April
2023, the Company transferred the majority of these funds to fund
their security deposit and operating account with European
Depositary Bank S.A. On 1 May 2023, JPMorgan Chase & Co.
acquired the substantial majority of assets, and assumed certain
liabilities, of First Republic Bank from the FDIC. Subsequent to 1
May 2023, the Company transferred certain funds back to First
Republic Bank for deposit in an operating account.
There were no other subsequent events identified by the
Company's management which would require adjustment to, or
disclosure in, the financial statements.
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END
FR UOSVROAUNARR
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June 13, 2023 02:00 ET (06:00 GMT)
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