28 June 2024
i(x) Net Zero
PLC
("i(x)
Net Zero" or the "Company")
Final Results for the Year
Ended 31 December 2023
i(x) Net Zero PLC (AIM: IX.), the
investing company which focuses on the Energy Transition, is
pleased to announce the audited final results for the year
ended 31 December 2023 ("FY 2023"). 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 2023 increased by
125.9% to $144.22 million (31 December 2022: $63.84
million);
·
Portfolio NAV per share, including cash of $5.62
million (£4.42 million), as at 31 December 2023 of $1.74 per share
(£1.37 per share) (31 December 2022: $0.90 per share (£0.75 per
share);
·
Profit of $78.58 million from continuing
operations before non-cash deferred tax provision and share-based
compensation (2022: Loss $5.08 million);
·
As at 31 December 2023, the Company had $3.75
million of borrowings and cash of $5.62 million (31 December 2022:
no borrowings and cash of $7.48 million); and
·
In 2023, i(x) made portfolio investments of $1.85
million (2022: $1.60 million).
Corporate and Portfolio Highlights
·
In January 2023, the Company announced the
appointment of Pär Lindström, the Company's Chief Investment
Officer, as its Chief Executive Officer and in April 2023, the
Company announced the appointment of Jonathan Carpenter Stearns as
CFO and Executive Director of the Company.
·
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.
·
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.
·
In July 2023, portfolio company WasteFuel
announced a $10m investment from bp, the global energy company to
assist WasteFuel's plans to develop a global network of plants to
convert municipal and agricultural waste into bio-ethanol, a
biofuel which could play a significant role in decarbonising
hard-toabate sectors like shipping.
·
In August 2023, the Company announced a
conditional agreement for the sale of Carbon Engineering to
Occidental Petroleum Corporation, the international energy company
at a 7.2x realized multiple of invested capital.
·
In September 2023, the Company completed a
$600,000 investment into Citron Energy Inc, a US based alternative
fuels business to increase the size of the portfolio and bring
innovative cleantech technology to decarbonise industrial
production and support the circular economy in the US.
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
|
|
|
|
|
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Buchanan
|
|
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Helen Tarbet
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+44 7872 604
453
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Simon Compton
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+44 7979 497
324
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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 Company continued to see
growth in asset values during the course of 2023, as well as
further improvements to global policy incentives for sustainable
investing and the move towards
decarbonisation. Nonetheless,
stock market conditions remain challenging for smaller growth
companies with NAV discounts widening during the period under
review for many market participants.
Over the last twelve months we
have not seen any real improvement in the liquidity of i(x) Net
Zero shares which has contributed to volatility in the market
price. The share price has recovered from lows, while remaining
significantly below the price set at listing, and continues to
trade at a significant discount to NAV.
The Board remains convinced that
the landscape of opportunity to combine attractive investment
returns with positive impact remains compelling, with global
momentum now building in the key transitions that net zero
commitments require. However the ability of the company to deploy
meaningful capital is currently restrained by the balance sheet,
and the Board continues to take a conservative view on the ability
of the company to access capital in current market
conditions.
Despite these challenging macro
conditions which we hope to be cyclical in nature, the new senior
executive team made significant progress during the year in
realising value from the portfolio, adding a new investment and
seeing significant new investment into the flagship
WasteFuel
business from bp.
In addition there has been a
reduction in operating costs and further work done on the
assessment of opportunities to optimise the current portfolio which
is tracking broadly in line with expectations.
During the year, the fair value of
investments in i(x)'s portfolio companies increased by 125.9% to
$144.22 million with Portfolio NAV per share, including cash of
$5.62 million (£4.42 million), as at 31 December 2023 of $1.74 per
share (£1.37 per share).
I would like to thank my follow
board members and the executive team, for their continued
commitment to increasing NAV and shareholder value in very
difficult circumstances.
Nick Hurd
Chairman
27 June 2024
Chief Executive's Statement
The goal of our business remains
the same, as we look to generate superior risk adjusted financial
returns while enhancing access to growing businesses that are
working on net zero strategies."
This is being achieved via
investing in a portfolio that provides access to the longterm
secular trend of capital flowing towards sustainable finance and
ESG-related investing.It has been another challenging year - with
continued uncertainty characterising global capital markets
which
resulted in hesitancy on the part
of investors and capital providers who have been seeking safe haven
returns.
However, in the face of these
challenges, the team has delivered meaningful progress against the
challenges we set ourselves when we took up our leadership
positions at the start of 2023. In April 2023, we announced our
intention to prioritise the growth of the net asset value of the
Company's investments by identifying and seeking to execute
profitable investment realisations from the existing portfolio and
by sourcing high growth investment opportunities while also
reducing costs and operating expenditure, all of which have been
achieved in the period under review. We continue to see high growth
in our target markets and are working hard to secure capital, for
both our balance sheet and external sources, to be available for us
to expand and to fund selective investments.
Consistent with past successes,
the Group will seek out investment targets with the following
characteristics:
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;
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;
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.
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 during
2023.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 2023.
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, nonfossil
fuels to help reduce the carbon emissions of the transportation
sector with a particular focus on municipal solid waste to energy
for trucks, planes and ships. Utilising WasteFuel technology, a
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.
In mid-2023 WasteFuel secured a
$10 million investment from bp, to further assist
WasteFuel's
plans to develop a global network
of plants to convert municipal and agricultural waste into
bio-methanol, a biofuel which could play a significant role in
decarbonising hard-to-abate sectors like shipping. This investment
by bp was at a price which dramatically increased the NAV of the
Company's holding in WasteFuel by $84.38 million to a total
reported NAV of $131.50m as at December 31, 2023.
WasteFuel intends to develop
multiple bio-methanol plants around the world in collaboration with
local strategic partners including waste companies, with the first
project expected to be in the GCC. Ever since bp's funding,
WasteFuel has continued to proceed its projects in the GCC, with
two of them leading the way. Bp and WasteFuel have entered a
memorandum of understanding to offtake the produced bio-methanol
and, working together, to help optimize and improve biomethanol
yields and economics.
WasteFuel has a proven track
record of working with global partners as it pursues its plans for
a global network of biomethanol plants converted from waste. In
2022 WasteFuel entered a commercial-scale bio-methanol partnership
with A.P. Moller - Maersk, the global container logistics company.
WasteFuel also has continued to develop its projects in the GCC, to
develop the first commercial scale municipal waste-to renewable
methanol plant in the Middle East.
WasteFuel Featured on TIME and
Statista's 2024 List of America's Top GreenTech Companies.
WasteFuel also strengthened its management team with the
appointment of Peter Jorgensen from Maersk (and previously Maersk
board member of WasteFuel) as CFO. Peter is working 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 renewables 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 $1.5M
million (including $1.1 million in 2023 and $0.4 million the first
5 months of 2024) 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. Enphys remains in talks with a leading and
well-established advanced biofuels company in Latin America and has
until 8 December 2024 to consummate an initial business
combination.
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. While having 1,100+
units currently under construction, the challenges in the regional
banking market in the US, restricted access to capital,
deteriorating local markets, provide a
challenged environment for all of
MultiGreen's projects. Consequently, to be conservative we have
reduced the value of our investment in MultiGreen to zero as of
year end 2023. 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 2024. 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 year, SLI continued development of the
Downtown Emergency Service Center (DESC), a non-profit housing
organisation in Seattle, for
a 5 storey 124-unit energy
efficient permanent supportive apartment building as a solution for
long term homelessness. SLI is also planning to expand its assembly
plant locations on the West Coast of the US and plans eventually to
move eastwards to serve additional markets. 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"). Unfortunately turbulence in the public market for
new issuances and acquisitions prevented this combination from
being consummated. Consequently, while SLI has continued to develop
its pipeline of projects, it has had to reduce its
corporate expenses significantly
and slow the pace of its developments. I(x) did participate in a
bridge round to provide capital, investing $150,000 to allow the
company to complete one project and to undertake the process of
raising capital for the completion of its current
pipeline.
Citron Energy Since the
Company's investment in November 2023, Citron has advanced the
development of multiple projects in the US. The near term
opportunity to conclude multi-year offtake and supply contracts has
been accelerated by the increasing awareness of the need
to
address carbon footprint and GHG
emissions for industries including cement and lime production as
well as an increasing focus on net zero recycling and limited space
for new landfills. With equipment sources in place and site
development activities well advanced and confirmed interest by
equity and debt providers, Citron expects to accelerate the
development of its project pipeline over the near term.
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
itsstrategic 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. Following
completion of the sale of Carbon Engineering Ltd. to Occidental
Petroleum Corporation in November last year at a 7.2x realized
multiple of invested capital, the Company received the first
tranche of the proceeds
in November 2023 and expects the
second tranche in November this year and a final payment in
November 2025. Occidental's $1.1bn purchase of Carbon Engineering
was a landmark moment for carbon capture sequestration (CCS)
startups, marking the first major acquisition of a
carbon
removals company, with the
transaction regarded as one of the leading Energy Transition deals
of the year in 2023, showing the strength and investment acumen of
i(x) Net Zero.
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 has continued to successfully
deliver on a number of projects including the EQT, Williams, Jonah
Energy and Carbon GeoCapture projects. There were advances in
discussions with Microsoft and Dell and a collaboration began with
EEMDL, a multidisciplinary research and education center with a
mission to be the global data and analytics hub to support improved
greenhouse gas emissions accounting across energy supply
chains.
Financial Review
The Group delivered a significant
improvement in the fair value of investments in its portfolio
companies ("Portfolio NAV") which increased by 125.9% or, $80.38
million, to $144.22 million
as at 31 December 2023 (31
December 2022: $63.84 million). The annual increase in
Portfolio
NAV over the period of $80.4
million (2022: $3.1 million) comprises primarily unrealized gains
of $81.1 million (2022: $1.5 million). The majority of unrealized
gains relates to an increase in fair value of WasteFuel by $84.38m
offset by a decrease in fair value of MultiGreen Properties,
LLC
of $2.55 million, which was
reduced to zero. WasteFuel NAV increased as a result of the $10
million investment by bp plc on 30 June 2023. MultiGreen NAV was
reduced to zero due to increased costs, restricted access to
capital and deteriorating local markets providing a challenged
environment for MultiGreen's projects. As at 31 December 2023,
Portfolio NAV per share, including cash of $5.62 million (£4.42
million), was $1.74 per share (£1.37 per share) (31
December 2022: $0.90 per share
(£0.75 per share)).
Profit from continuing operations
before non-cash deferred tax provision and share-based compensation
was $78.58 million in 2023. (2022: loss $5.08 million) (This $78.58
million profit is derived as operating profit before financing
activities of $79.31 million minus share-based compensation credit
of $0.73 million). During 2023, stock options were granted to
management
employees under the 2022 Company's
Equity Incentive Plan. In connection with this outstanding options
were forfeited which resulted in a non-cash share-based
compensation credit of $0.73
million being recognized (2022:
$1.75 million expense).
General and administrative
expenses decreased by $2.69 million to $5.56 million (2022: $8.25
million), largely due to the cost-cutting program enacted by the
new executive team along with non-cash sharebased compensation
credit. As a result of the corporate inversion and resulting IPO
transaction in 2022, 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 2023,
non-cash deferred tax expense of $16.69 million (2022: $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 profit amounted to $62.6
million in 2023 (2022: $18.13 million net loss) primarily as a
result of the increase in the WasteFuel NAV, net of deferred tax
expense. As at 31 December 2023 the
Company had $3.75 million
borrowings, cash of $5.62 million (31 December 2022: no borrowings
and cash of $7.48 million) and net current assets of $6.73 million
(31 December 2022: $6.68 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"). This facility
was increased in November 2023 to $11.75 million. The Loan bears
interest at approximately 10.5% coupon (subject to periodic change
in line with EDB's USD Base rate and more recently approximately
10.82%) 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 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 debtsecurities 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 £5.0
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 (£0.76 per share
($1.02 per share)) amounting to
$6.8 million at any time during the three year term
following
the Company's admission to trading
on AIM.
Discussions with Lion Point are
taking place with a view to settling the option. 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 ownedsubsidiary 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 transferredto 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,
combined with its first exit which was very successful, i(x) Net
Zero is now 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 a 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 growth targets for the executive management team,
building on FY 2023 strong increase in NAV and reduction of
operating expenditure. We believe that these targets, and company's
focus to generate strong returns, should enhance shareholder value
over the near and longer term.
Pär Lindström
Chief Executive Officer and Chief
Investment Officer
27 June 2024
i(x) Net Zero Plc
Consolidated Statement of Comprehensive
Income
For The Year Ended 31 December 2023
(Expressed in US dollars)
|
|
Notes
|
2023
|
2022
|
|
Net unrealised gain from
investments
|
|
81,105,546
|
1,499,970
|
|
Net realised gain/(loss) on
investments
|
|
3,767,329
|
(86,165)
|
|
Dividend income
|
|
-
|
2,645
|
|
Investment return
|
|
84,872,875
|
1,416,450
|
|
Expenses and other income
|
|
(5,558,528)
|
(8,246,839)
|
|
OPERATING PROFIT/(LOSS) BEFORE FINANCING
ACTIVITIES
|
|
79,314,347
|
(6,830,389)
|
|
Finance income
|
10
|
168,990
|
-
|
|
Finance cost
|
10
|
(236,157)
|
(27,495)
|
|
Net financing activities
|
|
(67,167)
|
(27,495)
|
|
PROFIT/(LOSS) BEFORE TAX
|
|
79,247,180
|
(6,857,884)
|
|
Tax provision
|
18
|
(16,685,451)
|
(11,271,318)
|
|
PROFIT/(LOSS) AFTER TAX
|
|
62,561,729
|
(18,129,202)
|
|
Earnings/(loss) per share:
|
|
|
|
|
Basic
|
6
|
0.75
|
(0.23)
|
|
Diluted
|
6
|
0.71
|
(0.23)
|
Notes:
a)
There is no other comprehensive income or loss for the years ended
31 December 2023 and 2022.
The accompanying notes
are an
integral part
of these
financial statements.
|
i(x) Net Zero Plc
Consolidated Statement of Financial Position 31 December
2023
|
|
|
(Expressed in US dollars)
|
|
|
Notes
|
31 December
|
31 December
|
|
|
|
2023
|
2022
|
|
ASSETS
Non-Current assets
|
|
|
|
|
Investments, at fair value
|
4
|
144,217,045
|
63,840,722
|
|
Receivable from deemed
distributions
|
4
|
2,064,901
|
-
|
|
Right-of-use asset
|
|
27,639
|
349,277
|
|
Furniture and equipment Loan
origination costs, net
|
|
- 106,563
|
1,839
-
|
|
Security deposit
|
|
82,942
|
82,942
|
|
Total Non-Current Assets
|
|
146,499,090
|
64,274,780
|
|
Current assets
Receivable from deemed
distributions
|
4
|
1,962,123
|
-
|
|
Trade and other receivables
|
|
51,383
|
66,838
|
|
Prepaid expenses and other current
assets
|
|
127,631
|
135,806
|
|
Cash and cash equivalents
|
17
|
5,620,810
|
7,479,832
|
|
Total Current Assets
|
|
7,761,947
|
7,682,476
|
|
Total Assets
|
|
154,261,037
|
71,957,256
|
LIABILITIES
Current liabilities
|
Accounts payable and accrued
expenses
|
1,002,804
|
612,788
|
|
Lease liability
|
32,051
|
364,336
|
|
Security deposit payable
|
-
|
24,601
|
|
Total Current Liabilities
|
1,034,855
|
1,001,725
|
|
Non-current liabilities Deferred
tax liability
|
18
|
27,292,192
|
11,271,318
|
|
Loan payable Lease liability
|
8
|
3,751,875
-
|
-
32,051
|
|
Total Non-Current Liabilities
|
|
31,044,067
|
11,303,369
|
|
Total Liabilities
|
|
32,078,922
|
12,305,094
|
|
EQUITY
Share capital and premium
|
5
|
76,621,844
|
75,921,844
|
|
Share options reserve
|
|
1,018,283
|
1,750,059
|
|
Retained earnings
|
|
44,541,988
|
(18,019,741)
|
|
Total Equity
|
|
122,182,115
|
59,652,162
|
|
Total Liabilities and Equity
|
|
154,261,037
|
71,957,256
|
The financial statements were
authorised for issue by the board of directors on 27 June 2024 and
were signed on its behalf by:
Par Lindström
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
Page 1 of 2
For the Year Ended 31 December 2023
|
(Expressed in US
dollars)
|
|
|
|
Share Capital and Premium
|
Share Option
Reserve
|
Retained Earnings
|
Total
|
|
At 1 January 2023
|
75,921,844
|
1,750,059
|
(18,019,741)
|
59,652,162
|
|
Comprehensive profit for the
year
|
-
|
-
|
62,561,729
|
62,561,729
|
|
Share bonus (Note 5)
|
700,000
|
-
|
-
|
700,000
|
|
Share
option credit (Note 7)
|
-
|
(731,776)
|
-
|
(731,776)
|
|
At 31 December 2023
|
76,621,844
|
1,018,283
|
44,541,988
|
122,182,115
|
i(x) Net Zero Plc
Consolidated Statement of Changes in Shareholders' Equity
Page 2 of 2
For the Year Ended 31 December 2022
|
(Expressed in US
dollars)
|
|
|
|
Members' Capital
|
Share Capital and
|
Share Options
|
Retained Earnings
|
Total
|
|
|
|
Premium
|
Reserve
|
|
|
|
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
|
|
|
|
|
|
|
(1 January 2022 -
|
|
|
|
|
|
|
8 February 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
|
-
|
-
|
-
|
|
Subscription for i(x) Net
|
|
|
|
|
|
|
Zero shares, net of
|
|
|
|
|
|
|
expenses
|
-
|
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
|
-
|
75,921,844
|
1,750,059
|
(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.
|
i(x) Net Zero Plc
Consolidated Statements of Cash Flows For the Year Ended 31
December 2023
|
|
|
(Expressed in US dollars)
|
|
|
Notes
|
2023
|
2022
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) after taxes
|
|
62,561,729
|
(18,129,202)
|
|
Adjustments for:
|
|
|
|
|
Interest expense
|
|
236,157
|
-
|
|
Depreciation expense
|
|
1,839
|
13,472
|
|
Bad debt expense
|
|
165,299
|
-
|
|
Finance income
|
|
(61,852)
|
-
|
|
Increase in foreign tax
liability
|
|
457,577
|
-
|
|
Foreign tax paid
|
|
207,000
|
-
|
|
Interest income
|
|
(235,471)
|
-
|
|
Foreign currency gain
|
|
(5,819)
|
-
|
|
Other expense related to deemed
distributions
|
|
1,002
|
-
|
|
Amortisation of right-of-use
asset
|
|
321,638
|
304,149
|
|
Amortisation of loan facility
fees
Loss on cash advances for future
investments
|
|
175,313
-
|
- 86,165
|
|
Unrealised gain from investments
|
4
|
(81,105,546)
|
(1,499,970)
|
|
Realised gain on distribution of
proceeds
|
|
(3,767,329)
|
-
|
|
Bonus expense paid in shares
|
5
|
700,000
|
1,000,000
|
|
Incentive stock option grant
expense/(credit)
|
7
|
(731,776)
|
1,750,059
|
|
Increase in deferred tax
liability
|
|
16,020,874
|
11,271,318
|
|
Changes in operating assets and
liabilities Increase in trade and other receivables
|
|
(149,844)
|
(26,464)
|
|
Decrease in prepaid expenses
|
|
|
|
|
and other current assets
|
|
8,175
|
1,413,910
|
|
Decrease in security deposit
payable
|
|
(24,601)
|
(24,601)
|
|
Decrease in member tax advance
Increase/(Decrease) in accounts payable
and accrued expenses
|
|
-
390,016
|
11,500
(1,259,725)
|
|
Net Cash Used in Operating
Activities
|
|
(4,835,619)
|
(5,089,389)
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from deemed distributions
|
|
1,957,090
|
-
|
|
Purchases of investments
|
|
(1,850,000)
|
(1,600,000)
|
|
Net Cash Used in Investing Activities
|
|
107,090
|
(1,600,000)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
IPO Proceeds, net of expenses
|
|
-
|
12,125,421
|
|
Distribution to i(x) Sustainable
Holdings, LLC
|
|
-
|
(400,000)
|
|
Purchase of i(x) Net Zero
shares
|
|
-
|
(1,000,000)
|
|
Capital contributions
|
|
-
|
1,644,981
|
|
Proceeds from loan facility
borrowings
|
8
|
3,751,875
|
-
|
|
Interest paid - loans
|
|
(226,151)
|
-
|
|
Payment of loan facility
fees
|
|
(281,875)
|
-
|
|
Decrease in lease liability
|
|
(374,342)
|
(335,945)
|
Net
Cash Provided by Financing
activities
2,869,507
12,034,457
Net Increase (Decrease) in
Cash and
Cash Equivalents
(1,859,022)
5,345,068
|
CASH AND CASH EQUIVALENTS
|
|
|
Beginning of year
|
7,479,832
|
2,134,764
|
|
End of year
|
5,620,810
|
7,479,832
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Non-cash financing activity
|
Share-based compensation
|
7
|
(731,776)
|
1,750,059
|
|
Distribution of assets held for
disposal
|
|
-
|
1,216,841
|
|
Bonus expense paid in shares
|
7
|
700,000
|
1,000,000
|
|
|
|
(31,776)
|
3,966,900
|
i(x) Net Zero Plc
Notes to Consolidated Financial
Statements 31 December 2023
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 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 £0.76 per share, resulting in
total share capital of £10,683,000 ($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 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 ("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
Preparation
The Company's consolidated
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 consolidated 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 amendments to
accounting standards that are relevant to the Company were adopted
by the Company for annual periods commencing on or after 1 January
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.
Amendments to IAS 12: Deferred Tax
related to Assets and Liabilities arising from a Single
Transaction: The
amendments provide a temporary exception to the requirements
regarding deferred tax assets and liabilities related to pillar two
income taxes.
Amendments to IFRS 17: Insurance
Contracts: The amendments are aimed at
helping companies implement the Standard and making it easier for
them to explain their financial performance.
These new standards and amendments
did not have an impact on the financial statements of the
Company.
At the date of authorization of
these financial statements, the following Standards and
Interpretations, which have not yet been applied in these financial
statements, were in issue but not yet effective:
IFRS S1 General Requirements to
Disclosure of Sustainability-related Financial Information
and IFRS S2 Climate-related
Disclosures
IAS7 and IFRS 7 Supplier Finance
Arrangements: Amendments which address the
disclosure requirements to enhance the transparency of supplier
finance arrangements and their effects on a company's liabilities,
cash flows and exposure to liquidity risk
IFRS 16 Leases:
Amendments which add to requirements explaining
how a company accounts for a sale and leaseback after the date of
the transaction.
IFRS 18 Presentation and
Disclosure in Financial Statements
IFRS 19 Subsidiaries without
Public Accountability: Disclosures
Amendments to IAS 1 Non-current
Liabilities with Covenants: Clarify the
criteria for classifying liabilities with covenants as current or
non-current.
Enhancements to the SASB
standards:
Amendments to IAS 21: The Effects
of Changes in Foreign Exchange Rates: require disclosure of information that enables users of
financial statements to understand the impact of a currency not
being exchangeable.
Going Concern
The consolidated financial
statements have been prepared on a going concern basis which
assumes that the Company will continue to operate for the
foreseeable future. As part of their going concern review the
directors have prepared detailed cash flows for a period of 12
months from the date of the approval of these financial statements.
In preparing these forecasts, the Directors have made certain
assumptions based upon their view of the best estimate of the
future developments of the business.
The cash flow includes certain
important assumptions in its estimates over the next 12
months:
- A lower operating cost base
- Increased finance costs due to additional bank facilities
utilized
The Directors continue to closely
control expenditure and the directors and senior management
continue to be fully supportive of the group and being mindful that
cash liquidity is a constraint, they are validating their support
by agreeing that should liquidity requirements require, that they
will defer at least 50% of their salaries and all forms of
remuneration commencing at any time as the Board determines from
the date of this report and for up to twelve (12) months from the
date of this report.
The assumptions also include the
decision by management to cancel the admission of its company
shares to trading on AIM (Delist) and the Directors are working on
several scenarios to meet its obligations related to the Lion Point
Capital (Lion Point) put option which expires by the end of January
2025 and address the risk of the put option being exercised prior
to its expiration date. In addition, the Company, based on
productive discussions, assumes the approval of an extension of its
loan facility with European Depositary Bank S.A. ("EDB") will be
finalized in the near term.
Post year end, Management has
actively sought alternative financing arrangements including
additional debt financing which has progressed to an advanced stage
and the disposal of certain of its investments. The loan agreement
with EDB has certain covenants attached pertaining to the net
assets of the Company and based on the assumptions above the
directors believe these covenants have been maintained.
For the above reasons, there
exists a material uncertainty relating to going concern. However,
the Directors continue to adopt the going concern basis of
accounting in preparing the annual financial statements. The
financial statements do not include any adjustments that would
result from the going concern basis of preparation being
inappropriate or where certain events or conditions in the forecast
do not materialise.
Foreign Currency
The consolidated 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 LLC ('i(x)
investments'), as at and for the year ended 31 December 2023. 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 and 2023 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 2023.
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 (100% interest acquired on 9
February 2022). 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 merger reserve was created on
the acquisition of i(x) investments by the Company in 2022.
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 2023 and 2022,
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 judgement 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, deemed distributions (an amount
designated by a corporation as a distribution of dividends but that
shall not be distributed during the year in which the designation
is made) 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 receivables
financial assets, or available-for-sale financial assets, as
appropriate. The Group classifies all its financial assets other
than investments as trade and receivables. The classification
depends on the purpose for which the financial assets 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 value 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 borrowings
(see note 8 for further information) and 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.
The balances in the accompanying
consolidated statements of financial position 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 2023 and 2022.
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.
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.
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 or the date of receipt where this
is deemed more prudent. 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.
Income is measured at the fair
value of the consideration received or receivable in the normal
course of business. The Company recognises income when the amount
of income can be reliably measured and when it is probable that the
future economic benefits will flow into the Company.
Income which is expected to be
received over time is recognized as the performance obligations of
a contractual agreement are satisfied by the parties to such
agreement.
Investment return
Investment return represents the
sum of realised gains and losses on the disposal of investment
portfolio assets and the unrealised gains and losses on the
revaluation of these, together with and any related investment
income received and receivable.
Realised gains and losses on the
disposal of investments is the difference between the fair value of
the consideration received less any directly attributable costs on
the sale and the fair value of the investments at the start of the
accounting period or acquisition date if later.
Unrealised gains and losses on the
revaluation of investments is the movement in carrying value of
investments between the start of the accounting period or
acquisition date if later and the end of the accounting period.
Dividends from investments are recognised when the shareholders'
rights to receive payment have been established.
Interest income
Interest income is recognized as
interest accrues using the effective interest rate method.
Other income
All other income is recognised as
other income in the period to which it relates.
Taxation
Taxation for the year comprises
current and deferred tax. Tax is recognised in the income statement
except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. The Company may be
subject to withholding taxes in relation to income from
investments, or investment realisation proceeds or gains, and such
amounts will be accounted for as incurred. Current income tax is
calculated on the basis of the tax rates and laws enacted or
substantively enacted at the statement of financial position date
in the countries where the Company operates and generates taxable
income. Management periodically evaluates positions taken in tax
returns in regard to situations in which applicable tax regulations
are subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax
authorities. The current income tax rate in Jersey is
0%.
Deferred income tax is provided in
full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements in accordance with
IAS 12 - 'Income Taxes'. Deferred tax liabilities are generally
recognised for all taxable temporary differences, and deferred tax
assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary
differences can be utilised.
Such assets and liabilities are
not recognised if the temporary difference arises from goodwill or
from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects
neither the taxable nor the accounting profit or loss. Deferred tax
assets and liabilities are calculated using tax rates and laws that
have been
substantively enacted at the
reporting date.
Deferred tax assets and
liabilities are offset when there is a legally enforceable right to
set off current tax assets against current tax liabilities and when
they relate to income taxes levied by the same taxation authority
and the Company intends to settle its current tax assets and
liabilities on a net basis.
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.
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.
Cash and Cash Equivalents
Cash and cash equivalents include
cash in hand, deposits held on call with banks, other short-term
highly liquid investments with maturities of three months or less.
Further details on the Company's cash and cash equivalent balances
is available in Note 17.
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 Payments
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 payment 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 Company 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 IFRS 8 - "Operating Segments", the
Company had only one reportable segment, being i(x) investments,
during the year ended 31 December 2023 and the period from 9
February 2022 to 31 December 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.
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. Information on
the reorganization is available in note 1.
3.
Judgements 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 judgement 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 judgement or complexity, or areas where assumptions and
estimates have the most significance to the carrying value of
assets and liabilities in the financial statements are the unquoted
investments at fair value on the basis of accounting policies
disclosed in Note 2 under Fair Value Estimation and note
4.
Wastefuel is the Group's largest
fair value investment and is held at a value of $131.5m in the
financial statements. If this valuation was to increase or decrease
by 10% it would lead to a $13.15m change in the fair value of the
investment in the statement of financial position and an equivalent
movement in the income statement. Management has sought to mitigate
the risks associated with this uncertainty by engaging an expert
third party to produce independent valuation reports.
The deferred tax liability also
has a significant impact on the financial statements. Given the
high degree of complexity regarding the calculation of these
figures expert US tax advisors were engaged to make the
calculations but it cannot be guaranteed that any final tax charge,
if any, will be the same as that calculated.
Management has also made
assumptions and estimates that are significant in relation to
share-based compensation. The share-based compensation figures were
calculated by an expert third party using the Black-Scholes model
where the fair value of the services was not able to be directly
calculated.
For further information on the
going concern basis used for these financial statements please
refer to note 2.
4.
Investments in Private Operating Companies
Following are the schedules of
investments as of 31 December 2023 and 31 December 2022:
31 December 2023
|
Principal Amounts/Shares/
|
|
|
Units
|
Description
|
Fair Value ($)
|
|
Private Operating
|
|
|
Companies
|
|
United States Common Shares
|
Biofuel Developer
10,380,581
Wastefuel Global, Inc.
131,190,437
Total Common Shares (cost $231,900)
131,190,437
Preferred Shares
24,005
-
Biofuel Developer Wastefuel
Global, Inc.
Alternative Fuels Citron Energy,
Inc
310,379
600,000
Total Preferred Shares (cost $850,000)
910,379
Limited Liability Company Interests
Real estate development
1,228,063
MultiGreen Properties, LLC
-
Total Limited Liability Company Interests
(cost $3,837,697)
-
Limited Partnership Interest
|
Building technology
Sustainable Living Innovations
(FKA Multigreen SLI Partners,
|
|
|
LP)
|
737,000
|
|
Total Limited Partnership Interests (cost $500,000)
|
737,000
|
Convertible Note
Building technology
150,000
Sustainable Living Innovations(FKA Multigreen SLI Partners,
150,000
|
|
LP)
|
|
|
Real estate development
|
|
250,000
|
MultiGreen Properties,
LLC
|
-
|
|
|
Total Convertible Note (cost $400,000)
|
150,000
|
|
|
Total United States (cost $5,819,597)
|
132,987,816
|
|
Canada Common
Shares
|
|
|
|
|
Carbon Capture Technology
|
|
|
21,876
|
Carbon Engineering, Ltd.
(1)
|
-
|
|
|
Total Common Shares - Canada (cost $1,005,809)
|
-
|
Cayman Islands
Limited Liability Company Interest
Renewable Energy
|
38,150
|
Enphys Management Company
|
10,757,229
|
|
|
Total Limited Liability Company Interests - Cayman Islands
(cost $5,570,000)
|
10,757,229
|
|
Netherlands
|
|
|
|
Preferred Class B1 Shares
|
|
|
|
|
Software/Information Technology
|
|
|
499,955
|
Context Labs, BV
|
472,000
|
|
|
Total Preferred Class B1 Shares - Netherlands (cost
|
|
|
|
$499,955)
|
472,000
|
|
|
Total Investments (cost $11,889,552)
|
144,217,045
|
31 December 2022
Principal Amount/Shares/
Units
Description
Fair Value ($)
Private Operating Companies United States
Limited Liability Company Interests
Biofuel Developer
10,380,581
Wastefuel Global, LLC
46,908,475
|
1,228,063
|
Real estate development MultiGreen
Properties, LLC
|
2,260,000
|
|
|
Total Limited Liability Company Interests (cost
$4,069,597)
|
49,168,475
|
Limited Partnership Interest
|
Building technology
Sustainable Living Innovations
(FKA Multigreen SLI Partners,
|
|
|
LP)
|
742,000
|
|
Total Limited Partnership Interests (cost $500,000)
|
742,000
|
|
Biofuel Developer
|
|
|
Wastefuel Global, LLC
|
250,000
|
|
Total SAFE (cost $250,000)
|
250,000
|
|
Real estate development
|
|
|
MultiGreen Properties,
LLC
|
250,000
|
|
Total Convertible Note (cost $250,000)
|
250,000
|
|
Total United States (cost $5,069,597)
|
50,410,475
|
|
Carbon Capture Technology Carbon
Engineering, Ltd. (1)
|
2,579,223
|
|
Total Common Shares - Canada (cost $1,005,809)
|
2,579,223
|
|
|
Simple Agreement
for Future Equity (SAFE)
Convertible Note
Canada Common
Shares
21,876
Cayman Islands
Limited Liability Company Interest
Renewable Energy
Enphys Management Company
10,340,024
Total Limited Liability Company Interests -
10,340,024
Cayman Islands (cost $4,470,000)
Netherlands
Preferred Class B1 Shares
Software/Information Technology
499,955
Context Labs, BV
511,000
Total Preferred Class B1 Shares - Netherlands (cost
$499,955)
511,000
Total Investments (cost $11,045,361)
63,840,722
(1) Shares of Carbon Engineering,
Ltd. were held indirectly through investments in RCM Carbon
Engineering Partners, LLC (12,490 common shares) and C12 Equity
Ltd. (9,273 common shares) until disposal in November
2023.
The following tables present the
changes in assets classified in Level 3 of the fair value hierarchy
for the years ended 31 December 2023 and 31 December
2022:
|
31 December 2023
|
|
|
|
Limited Liability
|
|
Simple Agreement
|
|
|
|
Common
|
Preferred
|
Convertible
|
Company
|
Limited
|
For Future
|
|
|
Stock
|
Stock
|
Note
|
Interests
|
Partnerships
|
Equity (SAFE)
|
Totals
|
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
Balance at 31 December
|
|
|
|
|
|
|
|
|
2022
|
2,579,223
|
511,000
|
250,000
|
59,508,499
|
742,000
|
250,000
|
63,840,722
|
|
Realised gain
|
3,767,329
|
-
|
-
|
-
|
-
|
-
|
3,767,329
|
|
Purchases of investments
|
600,000
|
-
|
150,000
|
1,100,000
|
-
|
-
|
1,850,000
|
|
Unrealised gain/(loss)
|
84,281,962
|
21,379
|
(250,000)
|
(2,942,795)
|
(5,000)
|
-
|
81,105,546
|
|
Deemed distributions
|
(6,346,552)
|
-
|
-
|
-
|
-
|
-
|
(6,346,552)
|
|
Conversion to shares
|
46,908,475
|
250,000
|
-
|
(46,908,475)
|
-
|
(250,000)
|
-
|
|
Balance at 31 December
2023
|
131,790,437
|
782,379
|
150,000
|
10,757,229
|
737,000
|
-
|
144,217,045
|
|
31 December 2022
|
|
|
|
Limited
|
|
Simple
|
|
|
|
|
|
|
Liability
|
|
Agreement
|
|
|
|
Common
|
Preferred
|
Convertible
|
Company
|
Limited
|
For Future
|
|
|
|
Stock
|
Stock
|
Note
|
Interests
|
Partnerships
|
Equity (SAFE)
|
Totals
|
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
Balance at 31 December
2021
|
2,383,698
|
499,955
|
-
|
57,357,099
|
500,000
|
-
|
60,740,752
|
|
Purchases 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
|
511,000
|
250,000
|
59,508,499
|
742,000
|
250,000
|
63,840,722
|
The following tables summarize the
methods and significant assumptions used to measure investments
categorized in Level 3 of the fair value hierarchy and whose values
were determined by management as of 31 December 2023 and 31
December 2022:
Preferred Stock
|
Software/Information
Technology
|
511
|
Market approach
|
Recent transaction cost
- capital raise (50%
weight)
|
46.56/share
|
|
|
|
Option Pricing
|
Risk free rate -
|
|
|
|
|
Method
|
4%, volatility -
|
|
|
|
|
(backsolve)
|
202.1% ;time to
|
|
|
|
|
|
liquidity event - 5 years
(50%
|
|
|
|
|
|
weight)
|
|
|
Total Preferred Stock
|
511
|
|
|
|
|
Limited Partnership Interest
|
|
|
|
|
|
Building technology
|
742
|
Transaction cost
|
Transaction cost
|
225/unit
|
|
Simple Agreement For
|
|
|
|
|
|
Future Equity (SAFE)
Biofuel Developer
|
250
|
Transaction cost
|
Transaction cost
|
N/A
|
|
Convertible Note
|
|
|
|
|
|
Real Estate Development
|
250
|
Transaction cost
|
Transaction cost
|
N/A
|
|
Total
|
63,841
|
|
|
|
Note:
The per unit price of Wastefuel
Global in the most recent capital raise was given a 90% weight in
the 31 December 2023 and 2022 valuations. 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 judgement. The unobservable inputs are
presented in the Level 3 valuation table
as of
31 December
2023 and
2022.
WasteFuel Global, Inc.
("Wastefuel")
Effective 30 June 2023, WasteFuel
finalized an agreement with BP p.l.c. ("BP"), the multi- national
energy company, to secure a $10 million investment in Wastefuel.
The $10 million investment, which was the lead investment in
Wastefuel's Series B investment round, resulted in a material
increase in the fair value attributable to the Company's holding in
WasteFuel. Following BP's investment, the fair value of the
Company's equity and preferred interest in WasteFuel is $131.5
million, an increase of 180% from the last reported audited fair
value ($46.91 million as at 31 December 2022). This increase in the
fair value of Wastefuel was included in the Company's H1 2023
results. In addition, effective 30 June 2023, Wastefuel was
reorganized from a limited liability company to a
corporation.
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.
Mr Lindström is a director of
Wastefuel and has a holding of 25,000 ordinary shares (0.08%).
Carbon Engineering Ltd.
In August 2023, the Company
announced that a conditional agreement was reached for the sale of
Carbon Engineering Ltd. ("Carbon Engineering"), to Occidental
Petroleum Corporation ("Occidental"), the international energy
company.
The acquisition saw Occidental
acquire the outstanding shares in Carbon Engineering for a total
cash consideration of $1.1 billion, payable in three approximately
equal annual payments with the first made at closing in November
2023. Following the sale, Carbon Engineering became a wholly owned
subsidiary of Occidental.
i(x) Net Zero held an indirect
circa 0.45% interest in Carbon Engineering through two special
purpose vehicles ("SPVs"). The Company's indirect interest equated
to approximately $7.2 million, and subject to the distribution of
the proceeds over the three years following completion by those
SPVs, this will generate a 7.2x return on the Company's initial
investment of $1 million before taxes and any costs of the SPVs. On
this basis the sale price represents a 2.8x multiple on the
previous holding value of the Company's investment in Carbon
Engineering, of $2.6 million.
The Company realised a net gain on
its investments in the two SPVs of $3.8 million. On 17 November
2023, the Company received the first annual distribution payments
from the SPVs in connection with the Carbon Engineering
acquisition. The total amount received was $1,957,090, representing
30% of the total gross proceeds expected to be distributed by the
SPV's, net of Canadian taxes withheld and administrative expenses.
In addition, the Company recorded receivables as of 31 December
2023 totalling $4,027,024 representing the estimated deemed
distributions expected to be received in 2024 and 2025, of
which
$1,962,123 is expected to be
received in November 2024 and $2,064,901 is expected to be received
in November 2025.
Citron Energy Inc.
In September 2023, the Company
announced that it has added an additional company to its portfolio
via a $600,000 investment into Citron Energy Inc. ("Citron
Energy"), a U.S. based alternative fuels business.
Citron Energy aims to replace the
use of fossil fuels by processing non-recyclable municipal and
commercial waste into a combustible fuel. The use of CitronFuel
will allow the replacement of coal as well as helping to reduce
landfill usage and significantly lower CO2 emissions. The Company's
$600,000 investment is in the form of a subscription for new shares
in Citron Energy and i(x) Net Zero has an equity interest of
approximately 32.2% in Citron Energy.
Enphys
In August 2023, the Company
announced that it had committed to invest an additional $2.5
million into Enphys Management Company ("EMC") and that its wholly
owned subsidiary i(x) Investments LLC has entered into a revised
EMC LLC Agreement with LAIG Investments.
The investment, the cost of which
will be spread over the next four years and immediately took the
Company's ownership in Enphys to 30.0%. 10% of the issued capital
in EMC is subject to pro-rata clawback if payments by the Company
are either stopped or not made when due in accordance with the
revised terms and a further portion subject to additional clawback
if a minimum of $1 million is not funded in full, provided that the
Company will retain at least a 20% interest in EMC.
The obligation with regards to the
second tranche funding of $1.5 million is conditional upon Enphys
Acquisition Corp. consummating its initial acquisition of an
operating company and concluding its de-SPAC process. If the
obligation is triggered similar provisions for clawback as for the
first tranche of $1 million will apply.
In addition, if before 5 August
2025 EMC's fair market value falls below $25 million and EMC issues
additional equity securities, the Company will benefit from anti
dilution provisions to ensure that the value of its equity interest
does not fall below the amount contributed.
The new funding, being made from
the Company's existing cash resources, will provide additional
support to EMC for budgeted working capital, certain other approved
costs and investments into new assets as it initially progresses
towards a merger opportunity for its SPAC, Enphys Acquisition Corp,
with the intention of forming a major renewables energy group that
can be a regional champion for sustainability in the Americas and
later expanding its assets under management with new assets and new
investment structures.
Following this announcement Enphys
Acquisition Corp. (NYSE: NFYS, "EAS", EMC is the sponsor of EAS and
has a direct ownership in EAS) has filed a preliminary proxy
statement in connection with an extraordinary general meeting of
shareholders of EAS for the purpose of, among other things,
extending the time by which it has to consummate an initial
business combination from 8 June 2024 to 8 December 2024 (the
"Extension"), as well as other documents filed by EAS with the U.S.
Securities and Exchange Commission. The Extension was approved by
EAS shareholders in June 2024.
EAS has also signed a non-binding
letter of intent for a business combination with a leading and
well-established advanced biofuels company in Latin
America.
Mr Lindström is a director of
EMC.
5.
Share Capital
The Company has 85,877,429
ordinary shares, at no par value, authorised, issued and
outstanding as of 31 December 2023.
14,056,811 ordinary shares were
issued upon completion of the Company's IPO on 9 February 2022. In
addition, the members' capital in i(x) investments was converted to
65,000,000 Ordinary shares in the Company on the same date,
bringing the total shares issued and outstanding as of 9 February
2022 to 79,056,811.
6,820,618 Ordinary shares were
issued and admitted to trading on AIM on 26 April 2023 in relation
to the CEO Bonus Shares, as described below under CEO Bonuses.
Total Voting Rights
Following the 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.
CEO Bonuses
The CEO Bonus in respect of the
year ended 31 December 2023 was accrued in 2023 in the amount of
$410,000. In February 2024, the Company announced that Mr.
Lindström, the Company's CEO, agreed to apply his annual bonus to
subscribe for new ordinary shares in the Company at the previous
day's closing price of 21p per share. As a result, Mr. Lindström
received 1,550,293 new ordinary shares in the Company. These shares
were admitted to trading on AIM London Stock Exchange on 20
February 2024.
In December 2022, the Company
agreed to pay to Mr. Lindström an incentive bonus of
$200,000 (£160,772) in respect of
the year ended 31 December 2022 and, 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 (£401,929). In total, these bonuses represent
approximately 170% of Mr. Lindström's 2023 annual base salary. In
order to preserve the Company's cash resources and to demonstrate
his commitment to the Company, Mr. Lindström agreed to apply both
of these bonuses to subscriptions of new ordinary shares at the
previous day's closing price of 8.25p per share. This resulted in
the issuance of 6,820,618 new ordinary shares to Mr. Lindström
("Bonus Shares"). The Bonus Shares represent 8.7% of the issued
share capital prior to the issuance of these shares. Both of these
bonuses were recorded in 2023 and are included in general and
administrative expenses for the year from 1 January to 31 December
2023. The shares subscribed for by Mr. Lindström pursuant to each
of these bonus schemes were subject to a risk of forfeiture if the
Company's Net Asset Value ("NAV") did not meet the hurdle of $120
million within the 24-month period following their issue ("NAV
Hurdle"). The forfeiture risk expired when the Company's Net Asset
Value ("NAV") exceeded $120 million during the period from 1
January to 30 June 2023. The Bonus Shares were admitted to trading
on AIM London Stock Exchange on 26 April 2023.
6.
Earnings per Share
Basic earnings per share is
calculated by dividing the earnings attributable to 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/(loss) attributable to
the ordinary Shareholders
31
December 2023
31 December 2023
31 December 2022
Basic
and
Basic
Diluted
Diluted
of the Company
62,561,729
62,561,729
(18,019,741)
Weighted average number
of shares
83,728,467
88,129,654
79,056,811
Earnings/(loss) per share
0.75
0.71
(0.23)
7.
Share Based Payments
Pursuant to the Company's Equity
Incentive Plan for 2022 (the "Incentive Plan"), share options
("Options") were granted to management employees during 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.
In February 2023, 2,703,967
Options were forfeited, resulting in a reversal of expense
previously recorded by the Company for these Options of $1,145,141.
Also, effective 22 April 2023, 2,166,157 Options were surrendered
and replaced with new options (the "New Options") and 4,158,388
additional New Options were granted to management employees. The
total number of New Options granted during the year from 1 January
to 31 December 2023 was 6,324,545. The New Options 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 New Options vest over a
period of three years, with a third vesting on each of the three
successive anniversaries of the date of grant. The New Options
granted on 22 April 2023 are expected to be fully vested as of 22
April 2026.
The aggregate fair value of the
options granted on 22 April 2023 was $293,360, which was determined
using the Black Scholes options pricing model. The expected
volatility used to determine the fair values of the options was 60%
and the annual risk-free rate used in the determination of the fair
values of the options was 3.57%.
Details of the stock options
outstanding during the years from 1 January to 31 December 2023 and
2022 are as follows:
|
|
Period from 1 January
|
Period from 1 January
|
|
2023 to
|
2023 to
|
|
31
|
31
|
|
December
|
December
|
|
2023
|
2023
|
|
|
Expense/
|
|
|
Credit
|
|
|
Recognised
|
|
Number of
|
During the
|
|
Options
|
Period
|
|
Beginning of
|
|
|
|
Period
|
4,870,124
|
-
|
|
Forfeited
|
(2,703,967)
|
(1,145,141)
|
|
Surrendered
|
(2,166,157)
|
(604,918)
|
|
Options
granted during
|
|
|
|
the period
|
6,324,545
|
1,018,283
|
|
End of period
|
6,324,545
|
(731,776)
|
|
|
Period from
1 January
|
Period from
1 January
|
|
2022 to
|
2022 to
|
|
31
December
|
31
December
|
|
2022
|
2022
|
|
|
Expense/
|
|
|
Credit Recognised
|
|
Number of
|
During the
|
|
Options
|
Period
|
|
Beginning of
|
|
|
|
Period Options
|
-
|
-
|
|
granted during
|
|
|
|
the period
|
5,779,227
|
2,091,220
|
|
Forfeited
|
(909,153)
|
(341,161)
|
|
Surrendered
|
-
|
-
|
|
End of period
|
4,870,124
|
1,750,059
|
The weighted average exercise
price of the options surrendered and forfeited during 2023 was 76p
per share.
The weighted average exercise
price of the options granted during 2023 was 20p per share.
The weighted average exercise
price of the options granted and forfeited during 2022 was 76p per
share.
The (credit)/expense recognised
for the years ended 31 December 2023 and 2022, was
$(731,776) and $1,750,059,
respectively. These amounts are included in expenses and other
income on the accompanying consolidated statement of comprehensive
income.
The unvested amount of the
Company's stock options as of 31 December 2023 was
$918,325.
On 14 February 2024 the Company
announced that Mr Stearns had been awarded share options over
1,058,737 shares at an exercise price of 21p per share. This grant
was equivalent to 80% of his 2023 salary of $350,000. An expense of
$280,000 was therefore accrued in the 2023 accounts in relation to
this.
8.
Borrowings
In April 2023, the Company's
wholly owned subsidiary, i(X) investments, LLC entered into a
secured $7.5 million 2-year term loan facility with European
Depositary Bank S.A. ("EDB") ("Loan"). Amounts drawn down on the
loan facility originally bore interest at 10.5% (subject to
periodic change in line with EDB's USD Base rate) which is payable
quarterly. The interest rate at the end of 2023 had increased to
10.82%. 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 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 $125 million and that of
WasteFuel below $100 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 has pledged $4.0 million
as security in a deposit account with EDB. The Company will be able
to invest this security deposit in certain money market 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 at EDB with an 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.
On 3 November 2023, the Company
announced that i(x) investments, LLC had entered into a restated
and amended secured two-year term loan facility increasing the loan
facility by $4.25 million ("Increased Facility Amount") from $7.5
million to $11.75 million.
The Increased Facility Amount
included a revision to the events of default such that aggregate
NAV of the Company must be above $125 million and $100 million in
respect of WasteFuel.
The amount of the loan drawn down
as of 31 December 2023 was $3,751,875. This amount is recorded on
the consolidated statement of financial condition as Loan Payable.
Interest paid on the amount drawn down was $226,151 during the year
from 1 January to 31 December 2023.
9.
Commitments and
Contingencies
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 £5.0 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
was obliged to repurchase 6,672,161 Ordinary Shares of Lion Point
Master's Ordinary Shares at the Placing Price (£0.76 per share
($1.02 per share)) amounting to $6.8 million at any time during the
three-year term following the Company's admission to trading on
AIM. As of December 31, 2023, the put option has not been exercised
by Lion Point.
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/.
10. Finance Activities
2023
2022
Finance income
61,852
-
Interest income
107,138
27,495 Total Finance Income
168,990
27,495
Loan interest
226,151
-
Lease
interest
10,006
27,495 Total Finance Costs
236,157
27,495
11. Directors' Emoluments
2023
2022
Salaries
754,914
981,479
Bonus
1,450,000
1,489,000
Other payables
71,016
-
Severance
539,583
-
Share-based compensation
(343,149)
1,361,432
Director fees
287,719
423,968
Benefits
99,966
79,416
Payroll taxes
165,176
111,512
401K Contribution
19,041
25,687
Total Directors' Emoluments
3,044,266
4,472,494
The highest amount of compensation
paid to a director in 2023 was $898,762 (excluding bonuses relating
to 2022 amounting to $700,000, but recorded in 2023). All bonuses
recorded in 2023, with the exception of the signing bonus of
$60,000 for Mr Stearns, were non-cash settled.
There was a total of 7 paid
directors during the year (2022: 7).
12. Staff Employment Costs
2023
2022
Salaries
510,822
572,894
Bonus
-
284,776
Share-based compensation
(388,627)
388,627
Benefits
118,813
141,254
Payroll taxes
65,665
52,458
401K Contribution
25,896
24,514
Total Staff Employment
Costs
332,569
1,464,523
13. Number of Employees
The average monthly number of
employees (including Directors) during the year was:
Year Ended
Year Ended
31
December
2023
31
December
2022
Number of employees
8
11
14. Employee Benefits
Defined Contribution Plans
The expense for the defined
contribution plan for the years ended 31 December 2023 and 31
December 2022, respectively was $33,897 and $6,150 and was included
in expenses and other income. These amounts were accrued as of 31
December 2023 and 2022, respectively.
401K Plan
During 2023 and 2022, the Company
made discretionary contributions of $11,040 and
$50,201, respectively, to the
Plan, all of which was paid during the year. The discretionary
contributions are recorded as an expense and are included in
expenses and other income in the consolidated statement of
comprehensive income.
15. Audit Expenses
2023
2022
Audit Fees
94,870
60,000
|
16.
|
Trade and Other Receivables
|
|
|
|
|
2023
|
2022
|
|
|
Accounts receivable Interest
receivable
|
-
51,383
|
66,838
-
|
|
|
Total Trade and Other Receivables
|
51,383
|
66,838
|
The following is an aging of the
receivables from deemed distributions as of 31 December 2023 and
2022 (see also note 4):
|
Deemed Distribution
|
|
Neither
Impaired
|
|
|
More
|
|
Receivables
|
Carrying
|
Nor
Past
|
61-90
|
91-120
|
Than
|
|
Balance
|
Amount
|
Due
|
Days
|
Days
|
120 Days
|
|
31 December 2023
|
4,027,024
|
4,027,024
|
-
|
-
|
4,027,024
|
|
31 December 2022
|
-
|
-
|
-
|
-
|
-
|
17. Cash and cash equivalents
Cash consists primarily of cash
held in an operating account at First Republic Bank ("FRB"). Such
balances may exceed the Federal Deposit Insurance Corporation
("FDIC") insurance limit on an overnight basis. The Company also
holds cash in an operating account at European Depository Bank SA
("EDB") as described in Note 8.
Cash equivalents is comprised of
funds invested in a short-term, highly liquid investment with a
maturity of three months or less held at European Depository Bank
SA ("EDB"). These funds are held as a security deposit in
connection with a loan facility agreement (discussed in Note 8). In
addition to the $4.0 million security deposit, the balance includes
reinvested interest of $50,805. For further details, pertaining to
the investments in cash equivalents, please refer to Note
19.
The following are the balances in
cash and cash equivalents as of 31 December 2023 and 2022:
|
2023
|
2022
|
|
Cash
|
1,570,005
|
7,479,832
|
|
Cash equivalents - restricted
|
4,050,805
|
-
|
|
Total
|
5,620,810
|
7,479,832
|
18. 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 2023,
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 $30,117,872 at
the Company's effective federal and state tax rates of 21% and
1.79%, respectively.
The following are the deferred tax
assets and liabilities of the Company as of 31 December
2023:
|
|
Total
|
Federal
|
State
|
|
Deferred Tax Asset
|
3,193,689
|
2,443,733
|
749,956
|
|
Valuation Allowance
|
(368,009)
|
97,825
|
(465,834)
|
|
Deferred Tax Asset, net
|
2,825,680
|
2,541,558
|
284,122
|
|
Deferred Tax Liability
|
30,117,872
|
27,716,070
|
2,401,803
|
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. The provision for income taxes consisted of
the following:
|
2023
|
2022
|
|
Current: Federal
|
-
|
-
|
|
State
|
-
|
-
|
|
Foreign
|
664,577
|
-
|
|
Domestic
|
-
|
-
|
|
Total current income tax
expense
|
664,577
|
-
|
|
Deferred:
|
|
-
|
|
Federal
|
16,055,301
|
9,118,320
|
|
State
|
(34,427)
|
2,152,998
|
|
Foreign
|
-
|
-
|
|
Domestic
|
-
|
-
|
|
Total deferred income tax
expense
|
16,020,874
|
11,271,318
|
|
Total Provision for Income
Taxes
|
16,685,451
|
11,271,318
|
|
The effective tax rate is
calculated as
|
21.0%
|
-164.4%
|
A reconciliation of the statutory
rate of 21% in 2023 and 2022 to the effective income tax expense
for each year follows:
|
2023
|
2022
|
|
Profit/(Loss) before income
taxes
|
79,247,180
|
(6,857,884)
|
|
Statutory tax rate
|
21%
|
21%
|
|
Income tax (benefit) at statutory
rate
|
16,641,907
|
(1,440,156)
|
|
State tax benefit (expense), net
of federal benefit
|
(97,812)
|
(255,946)
|
|
Stock compensation
|
-
|
107,880
|
|
Other
|
607
|
225
|
|
Deferred True Ups
|
(227,260)
|
12,859,315
|
|
Valuation Allowance
|
368,009
|
-
|
|
Total Income Tax Expense
|
16,685,451
|
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:
|
2023
|
2022
|
|
Net Operating Loss Carryforward
|
2,242,617
|
2,033,297
|
|
ROU Liability
|
-
|
-
|
|
Stock compensation
|
130,458
|
-
|
|
Foreign tax credit
|
664,577
|
-
|
|
Other
|
156,038
|
152,087
|
|
Total deferred income tax assets
|
3,193,690
|
2,185,384
|
|
Investment Gain
|
(30,084,855)
|
(13,341,296)
|
|
ROU Asset
|
(6,194)
|
(86,384)
|
|
Other
|
(26,823)
|
(29,022)
|
|
Deferred income tax liabilities
|
(30,117,872)
|
(13,456,702)
|
|
Def income tax assets before
valuation allowance
|
(26,924,182)
|
(11,271,318)
|
|
Less valuation allowance
|
(368,009)
|
-
|
|
Net Deferred Tax Liability
|
(27,292,192)
|
(11,271,318)
|
A reconciliation of deferred tax
assets and liabilities from 31 December 2022 to 31 December 2023
follows:
|
Deferred Tax Asset
Balance as of 31 December 2022
|
2,185,384
|
|
Net operating loss carryforward
|
209,289
|
|
Stock compensation
|
130,458
|
|
Foreign tax credit
|
664,577
|
|
Other
|
3,981
|
|
Balance as of 31 December 2023
|
3,193,690
|
|
Less valuation allowance
|
(368,009)
|
|
Net Balance as of 31 December
|
2,825,680
|
|
2023
|
|
|
Deferred Tax Liability
Balance as of 31 December 2022
|
(13,456,702)
|
|
Investment gain/loss
|
(16,743,559)
|
|
ROU asset
|
80,189
|
|
Other
|
2,199
|
|
Balance as of 31 December 2023
|
(30,117,872)
|
The Company has U.S. gross net
operating loss carryforwards totaling $7.947 million as of 31
December 2023. Utilization of the 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
the Company's 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 of such net operating losses.
There were no unrecognized tax
benefits as of 31 December 2023 and 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 2023, 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 2020 through
2023.
19. Financial Instruments
with Off-Balance
Sheet Risk
and Management
of Market
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 2023, 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.
|
Investment/Input
|
Base
Case
|
Change
in Input
|
Change
in Fair Value of Investment
($000) (1)
|
|
Wastefuel Global, LLC
|
|
|
|
|
Weight assigned to option pricing
method
|
10%
|
+5%
|
1,973
|
|
|
|
-5%
|
(1,973)
|
|
(1) Based on fair value as of 31
December 2023
|
|
|
|
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.
Foreign currency
risk
The Group holds minimal non-US
dollar cash balances and normally settles non-US dollar denominated
invoices at the spot rate prevailing at the time of settlement.
Financial assets and liabilities are materially all US dollar
denominated.
The Group has a small proportion
of expenses settled in GBP comprising auditor's fees, listing
related advisory fees and a small proportion of professional fees.
Management believes the foreign exchange exposure related to
settling these expenses is minimal.
One receipt of funds in US dollars
was briefly exposed to Canadian dollar risk whilst the funds were
being transferred from an investee company to a Canadian indirect
investment holding company and finally to the Group. Management do
not believe the foreign exchange exposure risk is material as the
movement of funds took place over a short period of time, thus
minimizing exposure to foreign exchange risk.
Management do not consider the
impact of possible exchange rate movements based on current market
conditions to be material to the net result for the
year.
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 trade and other receivables, 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 receivables attributable to deemed distributions
from investments which amounted to $4,027,024 and $0 as of 31
December 2023 and 2022 respectively, and trade and other
receivables which amounted to $51,383 and $66,838 as of 31 December
2023 and 2022, respectively. The carrying amounts of these
receivables are considered to be reasonable approximations of their
fair value. The receivable from deemed distributions as of 31
December 2023 is expected to be collected
within two years. The balance in
trade and other receivables is expected to be collected within one
year. The Company will receive the sums owed from intermediary
companies that held the Company's interest in Carbon Engineering
prior to disposal. The risk of default is primarily mitigated by
shareholder agreements being in place with the debtors, along with
regular communication and the monitoring of the financial condition
of the primary debtors. Management considers the risk of default on
primarily all trade and other receivables to be low because the
primary debtors have a strong capacity to meet their contractual
obligations in the near term. The Company recorded an allowance for
bad debts totaling $165,299 as of 31 December 2023.
As of 31 December 2023, the
Company held two convertible notes. These notes, which were issued
by two of the Company's investee companies, are subject to default
and counterparty nonperformance risks. The Company monitors the
debtors' businesses with respect to assessing potential impairment
in the note's value. For one of these notes, indicators of a lower
expectation of recovery and a greater risk of default triggered by
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, resulted in the
Company determining that the convertible note was impaired as of 31
December 2023. Accordingly, the Company recorded an unrealised loss
on this convertible note in the amount of
$250,000, the face amount of the
note, as of 31 December 2023.
The Company's exposure to credit
risk on cash and cash equivalents is discussed in Note 17 with
respect to cash balances.
he Company seeks to limit the
level of credit risk on the cash balances by only depositing funds
with reputable international banking institutions.
|
|
2023
|
2022
|
|
Cash AA-
|
1,570,005
|
7,479,832
|
|
Cash equivalents
- restricted B
|
4,050,805
|
-
|
|
Total
|
5,620,810
|
7,479,832
|
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.
The group's current credit risk
grading framework comprises the following category:
•
Performing: the counterparty has a low risk of
default and does not have any past due amounts.
The basis for recognizing expected
credit losses ("ECL") is 12 month ECL. The deemed distributions
debtor has a low risk of default and does not have any past-due
amounts, as it is performing, and therefore the expected credit
loss is $nil.
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, investments at fair
value and borrowings.
Borrowings under the EDB loan
constitute by far the largest exposure to interest rate risk. The
sensitivity analysis below has been determined based on the
exposure to interest rates for borrowings and the restricted cash
security deposit for the loan at the reporting date.
A 10 per cent increase or decrease
is used when reporting interest rate risk internally and represents
management's assessment of the reasonably possible change in
interest rates.
If interest rates had been 10 per
cent higher/lower and all other variables were held constant, the
effect on the Group's profit for the year ended 31 December 2023
would have been immaterial, principally because the interest
payments on the borrowings were partially mitigated by the interest
earned on the security deposit.
The Group's sensitivity to
interest rates has increased slightly during the current year due
to the increase in EDB's USD base rate. The Group was paying
approximately 10.82% in annual interest at the end of the year,
compared to 10.5% when the loan facility was agreed in April 2023.
Management believes that it is unlikely that USD base rates will
increase further and are likely to decrease in the short to medium
term.
Classes and categories of
financial instruments and their fair values
The maximum exposure to credit
risk on the Company's financial assets is represented by their
carrying amount, as outlined in the categorisation of financial
instruments table below.
|
|
Loans and receivables
|
Financial liabilities at amortised
cost
|
Financial assets at fair value through profit
and loss
|
Total
|
|
At 31 December 2023
|
$'000
|
$'000
|
$'000
|
$'000
|
|
Investments
|
|
|
144,217
|
144,217
|
|
Cash and restricted cash
|
5,620
|
|
|
5,620
|
|
Trade and other receivables
|
4,078
|
|
|
4,078
|
|
Trade and other payables
|
|
(1,003)
|
|
(1,003)
|
|
Borrowings
|
|
(3,751)
|
|
(3,751)
|
|
Net Total
|
9,698
|
(4,754)
|
144,217
|
149,161
|
|
At 31 December 2022
Investments
|
|
|
63,841
|
63,841
|
|
Cash and restricted cash
|
7,479
|
|
|
7,479
|
|
Trade and other receivables
|
67
|
|
|
67
|
|
Trade and other payables
Borrowings
Net Total
|
7,546
|
(613)
-
(613)
|
63,841
|
(613)
-
70,774
|
The Company does not consider that
any changes in fair value of financial assets in the year are
attributable to credit risk.
With the exception of the deemed
distribution receivables (see note 16), no aged analysis of
financial assets is presented as no financial assets are past due
at the reporting date.
At 31 December 2023 and 31
December 2022, with the exception of investment portfolio
assets
, non-current trade receivables
and borrowings, all financial assets and liabilities mature for
payment within one year. Borrowings mature for payment within two
years as at 31 December 2023 (2022: not applicable).
At 31 December 2023 and 31
December 2022 all investment portfolio assets were measured at
Level 3 of the fair value hierarchy (see note 4 for further
details).
There were no transfers between
Levels of the fair value hierarchy during the current or prior
year.
Other risks
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.
20. 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 $1,549,998.
For the years ended 2023, information pertaining to this operating
lease was as follows:
|
Supplemental Information
|
2023 ($)
|
2022 ($)
|
|
Operating lease ROU asset as of 1
January
|
349,277
|
653,426
|
|
Amortisation of ROU assets for the year ended 31 December
|
(321,638)
|
(304,149)
|
|
Operating lease ROU asset as of 31 December 2023
|
27,639
|
349,277
|
|
Total operating lease costs
included in occupancy expense
|
321,638
|
304,149
|
|
Remaining lease term
|
1 month
|
13 months
|
|
Discount rate
|
5.0%
|
5.0%
|
|
Maturities of operating lease
liability for fiscal years ending 31 December
|
|
|
|
2023
|
-
|
374,342
|
|
2024
|
32,051
|
32,051
|
|
Total lease payments
|
32,051
|
406,393
|
|
Less imputed interest
|
-
|
(10,006)
|
|
Total operating lease liability as
of 31 December 2023
|
32,051
|
396,387
|
Interest expense on lease
liabilities for the years ended 31 December 2023 and 2022
was
$10,006 and $27,495, respectively.
The Company sublet its office
space in Santa Monica, California, effective 1 August 2021. In
accordance with the terms of the sublease agreement, the subtenant
is obligated to pay rent to the Company monthly, totaling $26,850
over the remaining life of the lease, which terminates on 31
January 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. As of 31 December
2023, the subtenant is in default on the sublease agreement and
owes $165,299 in rent payments. A reserve for bad debts has been
established by the Company for this amount.
21. Related Parties
The CEO Bonus in respect of the
year ended 31 December 2023 was accrued in 2023 in the amount of
$410,000. In February 2024, the Company announced that Mr.
Lindström, the Company's CEO, agreed to apply his annual bonus to
subscribe for new ordinary shares in the Company at the previous
day's closing price of 21p per share. As a result, Mr. Lindström
received 1,550,293 new ordinary shares in the Company. These shares
were admitted to trading on AIM London Stock Exchange on 20
February 2024.
In December 2022, the Company
agreed to pay to Mr. Lindström an incentive bonus of
$200,000 (£160,772) in respect of
the year ended 31 December 2022 and, 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 (£401,929). In total, these bonuses represent
approximately 170% of Mr. Lindström's 2023 annual
compensation.
In order to preserve the Company's
cash resources and to demonstrate his commitment to the Company,
Mr. Lindström agreed to apply both of these bonuses to
subscriptions of new ordinary shares at the previous day's closing
price of 8.25p per share. This resulted in the issuance of
6,820,618 new ordinary shares to Mr. Lindström ("Bonus Shares").
The Bonus Shares represent 8.7% of the issued share capital prior
to the issuance of these shares. Both of these bonuses were
recorded in 2023 and are included in general and administrative
expenses for the year from 1 January to 31 December 2023. The
shares subscribed for by Mr. Lindström pursuant to each of these
bonus schemes were subject to a risk of forfeiture if the Company's
Net Asset Value ("NAV") did not meet the hurdle of $120 million
within the 24-month period following their issue ("NAV Hurdle").
The forfeiture risk expired when the Company's Net Asset Value
("NAV") exceeded $120 million during the period from 1 January to
30 June 2023. The Bonus Shares were admitted to trading on AIM
London Stock Exchange on 26 April 2023.
On 14 February 2024 the Company
announced that Mr Stearns had been awarded share options over
1,058,737 shares at an exercise price of 21p per share. This grant
was equivalent to 80% of his 2023 salary of $350,000. An expense of
$280,000 was therefore accrued in the 2023 accounts in relation to
this.
Mr Stearns has a non-controlling
holding in Citron Energy and is the chairman of Citron Energy.
Mr Lindström has a 0.08% interest
in Wastefuel and is a director of Wastefuel. Mr Lindström is a
director of Enphys Management Company.
22. Subsequent Events
$5m was drawndown from the loan
facility in early March 2024 and a further $3m in early June
2024.
The 2023 bonuses for Mr Lindström
and Mr Stearns were paid with shares and share options respectively
in mid-February 2024 ($410k in shares to Mr Lindström and $280k in
share options to Mr Stearns) as described in notes 5 and
7.
Changes were made to the Enphys
non-binding commitment in May 2024 in relation to the extension by
which time the Enphys SPAC needs to consummate a business
combination from 8 June 2024 to 8 December 2024.
Negotiations with Lion Point in
relation to the settlement of the put option are ongoing (see note
9).
The Board announced the proposed
delisting of the Company from the AIM Market in an announcement
made simultaneously with the release of these financial
statements.
Following issuance of 2023 Bonus
Shares in February 2024 the Company has 87,427,722 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 87,427,722.
There were no other subsequent
events identified by the Company's management which would require
adjustment to, or disclosure in, the financial
statements.
