TIDMMYX TIDMMYXR
RNS Number : 3610M
MyCelx Technologies Corporation
16 September 2019
16 September 2019
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). This inside
information is now considered to be in the public domain.
MYCELX TECHNOLOGIES CORPORATION (AIM: MYX)
Half Year Results Statement
MYCELX Technologies Corporation ("MYCELX" or the "Company"), the
clean water technology company providing patented solutions for the
Oil and Gas market and commercial industrial markets worldwide, is
pleased to announce its interim unaudited results for the six
months ended 30 June 2019 for which highlights are set out
below.
Financial
-- Revenue of $9.1 million (2018 H1: $12.2 million)
-- EBITDA of $1.1 million (2018 H1: $2.7 million)
-- Profit before tax of $450,000 (2018 H1: profit before tax of $2.1 million)
-- Gross profit margin of 55.0% (2018 H1: 51.4%)
Operational
The Company experienced a strong first quarter in 2019 but, as
previously announced, has also encountered delays in previously
anticipated project bids.
Post Period
o Nigeria: Achieved second equipment sale into Nigeria to treat
produced water
o Australia: First sale of media to treat hydrocarbons and PFAS
contamination; a new market for the Company
-- Underpins revised 2019 financial guidance
Corporate
-- Appointment of Tom Lamb as a Non-Executive Director and
Chairman of the Compensation Committee
-- Following the delay in project bids management took swift
action to reduce costs across the Group
Outlook
-- Ongoing opportunities in oil and gas despite slower conversion in Saudi Arabia in H2
o Commence pilot trial in H2 2019 in Saudi Arabia with
petrochemical producer
o Strong demand for product offering witnessed in Nigeria -
leverage initial sales with other domestic producers
-- Allocate resources to leverage opportunities in additional
core technology applications with near term revenue
expectations
o MYCELX has invested in further commercialisation of its
commercial and industrial applications over the past two years by
investing in successful customer trials and establishing
distribution platforms to sell into these markets
o Key applications include pool and spa, air filtration and new
technology for agri-business sectors, where MYCELX's core
technology brings distinct advantages for removal of oil and other
contaminants from water
Commenting on these results, Connie Mixon, CEO, said:
"MYCELX remains well placed to respond to market opportunities
in its core market in H2. However, given the challenges currently
facing the oil and gas market in the Middle East, we now expect
revenue in 2019 to be at the lower end of our current forecast.
As we move into H2, we continue to progress our footprint in the
Middle East and expand our scope of activity into new and
established commercial and industrial markets to which our unique
technology brings distinct advantages. These markets are expected
to generate incremental high margin media sales to the business in
the near term."
For further information please contact:
MYCELX Technologies Corporation
Connie Mixon, CEO Tel: +1 888 306 6843
Kim Slayton, CFO
Numis Securities Limited
John Prior Tel: +44 20 7260 1000
James Black, Emily Morris, Alamgir Ahmed
Celicourt
Mark Antelme Tel: +44 20 8434 2754
Jimmy Lea
Chairman's and Chief Executive Officer's Statement
MYCELX is pleased to report the results for the first half of
2019. The Company delivered revenue for the period of $9.1 million,
which whilst down year on year, is still up considerably from 2017
and 2016. The Company also reported a net profit for the period,
but due to the current environment of the oil and gas market in the
Middle East, MYCELX now anticipates full year revenue at the lower
end of its guidance.
The Company has a strong track record of reducing costs and
optimizing value from its assets. As such, following the dip in bid
activity, management took decisive action to reduce expenses
associated with the delayed project bids. The measures taken
quickly eliminated excess costs. However, the Company continues to
have an appropriate headcount, enabling it to take advantage of
advanced opportunities in its core markets, whilst also affording
the business the flexibility to develop new applications and enter
new markets as it looks to expand its global footprint.
Partly due to global macro conditions, a number of the projects
MYCELX had expected to be bidding on in Q2 moved to later this year
or into 2020. In particular, one of the Company's key clients has
not been immune to the effects of the current macro-economic
pressures.
During the period, MYCELX continued to execute its strategy of
remaining close to existing and target customers and conducting
trials with potential customers. This high level of engagement has
been a core component of the Company's success in recent years and
one which management expects to yield new contract wins in the
future. We also continue to work closely with strategic partners in
targeted regions such as onshore North America, Saudi Arabia and
Australia. These relationships are expected to lead to new sales
orders in the near to medium term.
In H1, MYCELX continued to implement its plan of formalizing
distributorships with marketing and sales platforms to broaden and
accelerate the distribution of its commercial and industrial
product lines. Whilst oil and gas remains the core market for the
Company, given its size and suitability to our product offering,
the Company sees strategic benefit in leveraging a targeted suite
of proven products that should help insulate the Company to some
extent from the cyclicality of the oil and gas industry.
Post-period end, Brian Rochester, who has acted as a
Non-Executive Director and as Chairman of the Compensation
Committee of the Company since 1998, decided to step down. Brian
has played a pivotal role in the Company's development over the
last decade and we would like to thank him for his significant
contribution to the business during that time. He will be sorely
missed by the Board and we wish him all the best with his future
endeavors. We are however pleased that Tom Lamb has decided to join
us as a Non-Executive Director. He has assumed the role of Chairman
of the Compensation Committee and has become a member of the Audit
and Nomination Committees. Tom brings with him a wealth of
strategic and operating expertise in the industrial and technology
sectors and his track record of leading international businesses
and helping companies achieve their growth ambitions will be of
paramount importance to MYCELX in the next stage of the Company's
development.
Operational Review
Post-period end, we were pleased to build on our recent push
into Nigeria and announce the sale of a second installation to a
domestic producer. We continue to believe our offering is well
suited to the region, as producers require higher quality water and
regulators are searching for a new standard in water treatment.
MYCELX's patented offering ticks all the boxes and exceeds both
parties' requirements. The Company continues to engage with the
Department of Petroleum Resources in Nigeria, as it seeks final
approval to be the first water treatment system to reach the
organisations stringent requirements for discharge in shallow
water.
In addition, MYCELX has also sold media to treat hydrocarbons
and PFAS contaminated water in Australia.
Financial
Total revenue during the period was impacted by the slowdown in
bidding activity during the first half of the year, decreasing by
25% to $9.1 million compared to $12.2 million in the first half of
2018. Revenue from equipment sales and leases decreased by 19% to
$2.2 million in the first half of 2019 (2018 H1: $2.7 million),
while revenue from consumable filtration media and service
decreased 27% to $6.9 million (2018 H1: $9.5 million).
Gross profit decreased by 19% to $5.0 million in the first half
of 2019, compared to $6.2 million in the first half of 2018, and
gross profit margin increased in the first half of 2019 to 55%
(2018 H1: 51%).
Total operating expenses for the first half of 2019, including
depreciation and amortisation, increased by 10% to $4.5 million
(2018 H1: $4.1 million). The largest component of operating
expenses was selling, general and administrative expenses
('SG&A'), which increased by approximately $300,000, or 8%, to
$4.2 million (2018 H1: $3.9 million). The increase to SG&A was
due to additional staff added in 2018 to support the rapid growth
during that year. The expense reductions from prior in the year are
expected to reduce total SG&A year over year.
EBITDA was $1.1 million for the first half of 2019, compared to
$2.7 million for the first half of 2018. EBITDA is defined as net
profit before interest expense, provision for income taxes, and
depreciation and amortisation of fixed and intangible assets,
including depreciation of leased equipment which is included in
cost of goods sold. The Company recorded profit before tax of
$450,000 for the first half of 2019, compared to $2.1 million for
the first half of 2018. Basic profit per share was nil for the
first half of 2019, compared to basic profit per share of 8 cents
for the first half of 2018.
As of 30 June 2019, total assets were $26.8 million with the
largest assets being property and equipment of $8.1 million,
accounts receivable of $6.6 million, $5.8 million of inventory and
$4.0 million of cash and cash equivalents, including restricted
cash.
Total liabilities as of 30 June 2019 were $3.9 million and
stockholders' equity was $22.8 million, resulting in a
debt-to-equity ratio of 17%.
The Company ended the period with $4.0 million of cash and cash
equivalents, including restricted cash, compared to $5.5 million in
total at 30 June 2018. The Company experienced an operating cash
outflow of approximately $2.7 million in the first half of 2019,
compared to an operating cash outflow of $12,000 for the first half
of 2018. However, the Company received a customer payment of $2.4
million on 1 July 2019 right after the end of the period. The
Company's net cash position was $2.3 million at 30 June 2019. Net
cash is defined as cash and cash equivalents plus restricted cash
less the balance on the line of credit and the current and long
term note payable.
Outlook
Whilst market activity was subdued during H1, the Company
continues to experience slower conversion of opportunities in its
core market in H2. We anticipate an increase in activity prior to
year end, but due to challenges faced by key customers in the
Middle East timing is difficult to predict. It is positive to note
that we expect to commence a pilot trial with a petrochemical
producer in Saudi Arabia during H2. We see strong demand for our
product offering in Nigeria, where we have leveraged our current
installation to secure an additional sale in H2. We have developed
strategic partnerships who are working with our Middle East
business development team to capitalise on our success in the Niger
Delta and capture the increasing opportunities in country.
With our expanded distribution network, we expect our push into
the commercial and industrial markets to yield results in the near
term. The Company will execute a companywide marketing plan to
increase our technology's visibility in our core oil and gas market
as well as the complimentary commercial and industrial market
sectors. We firmly believe the focused marketing plan will result
in greater exposure and opportunities over the coming months.
We strive to be the industry leader in clean water technology
and believe the foundations we have laid to date will enable us to
reach the next stage of our growth trajectory. Finally, we would
like to thank all our stakeholders for their continued support and
we look forward to updating you on the Company's progress
throughout the rest of 2019.
Tim Eggar Connie Mixon
Chairman Chief Executive Officer
16 September 2019
MYCELX TECHNOLOGIES CORPORATION
Statements of Operations
(USD, in thousands, except share data)
Six Months Six Months Year
Ended Ended Ended
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited)
-------------- ------------ -------------------
Revenue 9,066 12,160 26,952
Cost of goods sold 4,099 5,913 12,892
Gross profit 4,967 6,247 14,060
-------------- ------------ -------------------
Operating expenses:
Research and development 49 - -
Selling, general and administrative 4,233 3,895 9,264
Depreciation and amortisation 193 244 438
-------------- ------------ -------------------
Total operating expenses 4,475 4,139 9,702
-------------- ------------ -------------------
Operating profit 492 2,108 4,358
Other expense
Loss on disposal of equipment (2) - (3)
Interest expense (40) (43) (85)
-------------- ------------ -------------------
Profit before income taxes 450 2,065 4,270
Provision for income taxes (363) (527) (1,200)
-------------- ------------ -------------------
Net profit 87 1,538 3,070
============== ============ ===================
Profit per share-basic 0.00 0.08 0.16
============== ============ ===================
Profit per share-diluted 0.00 0.08 0.15
============== ============ ===================
Shares used to compute basic profit per share 19,178,664 18,798,242 18,802,981
============== ============= ===============
Shares used to compute diluted profit per
share 20,521,456 20,007,048 20,003,251
============== ============= ===============
The accompanying notes are an integral part of the financial
statements.
MYCELX TECHNOLOGIES CORPORATION
Balance Sheets
(USD, in thousands, except share data)
As of As of As of
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited)
-------------------- -------------------- ----------------
ASSETS
Current Assets
Cash and cash equivalents 3,522 4,974 4,866
Restricted cash 525 525 525
Accounts receivable - net 6,600 5,316 8,225
Unbilled accounts receivable 20 410 20
Inventory - net 5,807 3,717 4,708
Prepaid expenses 218 327 228
Other assets 27 44 42
-------------------- -------------------- ----------------
Total Current Assets 16,719 15,313 18,614
Property and equipment - net 8,145 8,343 8,536
Intangible assets - net 786 809 788
Operating lease asset - net 1,389 - -
Total Assets 27,039 24,465 27,938
==================== ==================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 469 1,786 2,912
Payroll and accrued expenses 566 1,081 1,950
Deferred revenue - 269 125
Operating lease obligations - 454 - -
current
Note payable - current 95 91 86
Other current liabilities 167 55 153
-------------------- -------------------- ----------------
Total Current Liabilities 1,751 3,282 5,226
Operating lease obligations - long-term 766 - -
Note payable - long-term 1,691 1,786 1,739
-------------------- -------------------- ----------------
Total Liabilities 4,208 5,068 6,965
-------------------- -------------------- ----------------
Stockholders' Equity
Common stock, $0.025 par value, 100,000,000
shares authorised, 19,443,750 shares
issued and outstanding at 30 June 2019,
18,807,617 shares issued and outstanding
at 30 June 2018, and 18,807,617 shares
issued and outstanding at 31 December
2018.
486 470 470
Additional paid-in capital 42,299 40,500 40,544
Accumulated deficit (19,954) (21,573) (20,041)
-------------------- -------------------- ----------------
Total Stockholders' Equity 22,831 19,397 20,973
-------------------- -------------------- ----------------
Total Liabilities and Stockholders' Equity 27,039 24,465 27,938
==================== ==================== ================
The accompanying notes are an integral part of the financial
statements.
MYCELX TECHNOLOGIES CORPORATION
Statements of Stockholders'
Equity
(USD, in thousands)
Additional
Common Stock Paid-in Accumulated
Capital Deficit Total
Shares $ $ $ $
--------- ---- ----------- ------------ -------
Balances at 31 December 2017 18,788 470 40,456 (23,111) 17,815
Issuance of common stock, net
of offering costs 20 - 8 - 8
Stock-based compensation expense - - 36 - 36
Net profit for the period - - - 1,538 1,538
--------- ---- ----------- ------------ -------
Balances at 30 June 2018 (unaudited) 18,808 470 40,500 (21,573) 19,397
Stock-based compensation expense - - 44 - 44
Net profit for the period - - - 1,532 1,532
--------- ---- ----------- ------------ -------
Balances at 31 December 2018 18,808 470 40,544 (20,041) 20,973
Issuance of common stock, net
of offering costs 636 16 1,615 - 1,631
Stock-based compensation expense - - 140 - 140
Net profit for the period - - - 87 87
--------- ---- ----------- ------------ -------
Balances at 30 June 2019 (unaudited) 19,444 486 42,299 (19,954) 22,831
========= ==== =========== ============ =======
The accompanying notes are an integral part of the financial
statements.
MYCELX TECHNOLOGIES CORPORATION
Statements of Cash Flows
(USD, in thousands)
Six Months Six Months Year
Ended Ended Ended
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited)
------------------------ ---------------- ---------------
Cash flow from operating activities
Net profit 87 1,538 3,070
Adjustments to reconcile net profit
to net cash (used in) provided by operating
activities:
Depreciation and amortisation 632 637 1,239
Loss from disposition of equipment 2 - 3
Stock compensation 140 36 80
Change in operating assets and liabilities:
Accounts receivable - net 1,625 (2,880) (5,789)
Unbilled accounts receivable - (12) 378
Inventory - net (1,111) (680) (2,082)
Prepaid expenses 10 (73) 26
Prepaid operating leases (169) - -
Other assets 15 (11) (9)
Accounts payable (2,443) 804 1,930
Payroll and accrued expenses (1,384) 511 1,380
Deferred revenue (125) 77 (67)
Other current liabilities 14 41 139
Net cash (used in) provided by operating
activities (2,707) (12) 298
------------------------ ---------------- ---------------
Cash flow from investing activities
Payments for purchases of property
and equipment (205) (132) (492)
Payments for purchases of intangible
assets (24) (17) (23)
------------------------ ---------------- ---------------
Net cash used in investing activities (229) (149) (515)
------------------------ ---------------- ---------------
Cash flow from financing activities
Net proceeds from stock issuance 1,631 8 8
Payments on notes payable (39) (44) (96)
Net cash provided by (used in) financing
activities 1,592 (36) (88)
------------------------ ---------------- ---------------
Net decrease in cash and cash equivalents (1,344) (197) (305)
------------------------ ---------------- ---------------
Cash and cash equivalents, beginning
of period 4,866 5,171 5,171
Cash and cash equivalents, end of period 3,522 4,974 4,866
======================== ================ ===============
Supplemental disclosures of cash flow information:
Cash payments for interest 34 43 92
Cash and non-cash payments for income taxes 434 538 1,128
Non-cash movements of inventory and fixed
assets 12 (133) (459)
Management considered the effect of exchange rate changes on cash and
cash equivalents held or due in foreign currency and deemed it immaterial
to the statement of cash flows.
The accompanying notes are an integral part of the financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
1. Nature of business and basis of presentation
Basis of presentation - These interim financial statements have
been prepared using recognition and measurement principles of
Generally Accepted Accounting Principles in the United States of
America ("U.S. GAAP").
The interim financial statements for the six months ended 30
June 2019 and 2018 have not been audited.
Nature of business - MYCELX Technologies Corporation ("MYCELX"
or the "Company") was incorporated in the State of Georgia on 24
March 1994. The Company is headquartered in Duluth, Georgia with
operations in Houston, Texas, Saudi Arabia, and the United Kingdom.
The Company provides clean water technology equipment and related
services to the oil and gas, power, marine and heavy manufacturing
sectors and the majority of its revenue is derived from the Middle
East and United States.
2. Summary of significant accounting policies
Use of estimates - The preparation of financial statements in
conformity with U.S. GAAP requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the amounts reported in the financial statements and
accompanying notes. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised. The
primary estimates and assumptions made by management relate to the
useful lives of property and equipment, volatility used in the
valuation of the Company's share-based compensation and valuation
allowance on deferred tax assets. Although these estimates are
based on management's best knowledge of current events and actions
the Company may undertake in the future, actual results ultimately
may differ from the estimates and the differences may be material
to the financial statements.
Revenue recognition - The Company's revenue consists of
filtration media product, equipment leases and equipment sales.
These sales are based on mutually agreed upon pricing with the
customer prior to the delivery of the media product and equipment.
The Company recognises revenue when it satisfies a performance
obligation by transferring control over a product or service to a
customer.
Revenue from filtration media sales is billed and recognised
when products are shipped to the customer. Revenue from equipment
leases is recognised over time as the equipment is available for
customer use and is typically billed monthly. Revenue from services
is recognised at the point the service is provided and is typically
billed monthly. Revenue from long-term contracts related to
construction of equipment is recognised over time, usually a period
less than one year, as value and control of the asset is
transferred to the customer. Revenue on sales in which equipment is
pre-fabricated and stocked in inventory is recognised upon shipment
of the equipment to the customer.
Sales tax charged to customers is presented on a net basis
within the consolidated statements of operations and therefore
recorded as a reduction of net revenues. Shipping and handling
costs associated with outbound freight after control over a product
has transferred to a customer are accounted for as a fulfillment
cost and are included in cost of revenues.
The Company's contracts with the customers state the final terms
of the sales, including the description, quantity, and price of
media product, equipment (sale or lease) and the associated
services to be provided. The Company's contracts are generally
short-term in nature and in most situations, the Company provides
products and services ahead of payment and has fulfilled the
performance obligation prior to billing.
The Company believes the output method is a reasonable measure
of progress for the satisfaction of its performance obligations,
which are both satisfied over time and at a point in time, as it
provides a faithful depiction of (1) performance toward complete
satisfaction of the performance obligation under the contract and
(2) the value transferred to the customer of the services performed
under the contract.
The Company's contracts with customers often include promises to
transfer multiple products and services. Determining whether
products and services are considered distinct performance
obligations that should be accounted for separately versus together
may require significant judgment. Judgment is required to determine
stand-alone selling price ('SSP') for each distinct performance
obligation. The Company develops observable SSP by reference to
stand-alone sales for identical or similar items to similarly
situated clients at prices within a sufficiently narrow range. In
situations where an observable SSP does not exist, the residual
method is applied and requires significant judgment.
All equipment sold by the Company is covered by the original
manufacturer's warranty. The Company does not offer an additional
warranty and has no related obligations.
Unbilled accounts receivable represents revenue recognised in
excess of amounts billed. Deferred revenue represents billings in
excess of revenue recognised. Contract retentions are recorded as a
component of accounts receivable.
See Note 14 for disaggregation of revenue by geographic region.
Timing of revenue recognition for each of the periods presented is
shown below:
30 June 30 June 31 December
2019 2018 2018
US$000 US$000 US$000
Equipment leases recognised
over time 1,967 2,300 5,503
Consumable filtration media,
equipment sales and service
recognised at a point in time 7,099 9,860 21,449
---------- ---------- --------------
Total revenue 9,066 12,160 26,952
========== ========== ==============
Cash and cash equivalents - Cash and cash equivalents consist of
short-term, highly liquid investments which are readily convertible
into cash within 90 days of purchase. At 30 June 2019, all of the
Company's cash and cash equivalent balances were held in checking
and money market accounts. The Company maintains its cash in bank
deposit accounts which, at times, may exceed federally insured
limits. At 30 June 2019 and 2018, and 31 December 2018, cash in
non-U.S. institutions was $4,000, $47,000 and $13,000,
respectively. The Company has not experienced any losses in such
accounts.
Restricted cash - The Company classifies as restricted cash all
cash whose use is limited by contractual provisions. At 30 June
2019 and 2018, and 31 December 2018, restricted cash included
$500,000 cash on deposit in a money market account as required by a
lender (see Note 9) and $25,000 in a Certificate of Deposit to
secure the Company's corporate credit card.
Trade accounts receivable - Trade accounts receivable are stated
at the amount management expects to collect from outstanding
balances. The Company provides credit in the normal course of
business to its customers and performs ongoing credit evaluations
of those customers and maintains allowances for doubtful accounts,
as necessary. Accounts are considered past due based on the
contractual terms of the transaction. Credit losses, when realised,
have been within the range of the Company's expectations and,
historically, have not been significant. The allowance for doubtful
accounts at 30 June 2019 and 2018, and 31 December 2018 was
$300,000, $150,000 and $300,000, respectively.
Inventories - Inventories consist primarily of raw materials and
filter media finished goods as well as equipment to house the
filter media and are stated at the lower of cost or net realisable
value. Equipment that is in the process of being constructed for
sale or lease to customers is also included in inventory
(work-in-progress). The Company applies the FIFO method (first in;
first out) to account for inventory. Manufacturing work-in-progress
and finished products inventory include all direct costs, such as
labour and material, and those indirect costs which are related to
production, such as indirect labour, rents, supplies, repairs and
depreciation costs. A valuation reserve is recorded for slow moving
or obsolete inventory items to reduce the cost of inventory to its
net realisable value.
Prepaid expenses and other current assets - Prepaid expenses and
other current assets include non-trade receivables that are
collectible in less than 12 months, security deposits on leased
space and various prepaid amounts that will be charged to expenses
within 12 months. Non-trade receivables that are collectible in 12
months or more are included in long-term assets.
Property and equipment - All property and equipment are valued
at cost. Depreciation is computed using the straight-line method
for financial reporting over the following useful lives:
Buildings 39 years
Leasehold improvements 1-5 years
Office equipment 3-10 years
Manufacturing equipment 5-15 years
Research and development equipment 5-10 years
Purchased software 1-5 years
Equipment leased to customers 3-10 years
Expenditures for major renewals and betterments that extend the
useful lives of property and equipment are capitalised.
Expenditures for maintenance and repairs are charged to expense as
incurred. Depreciation expense includes depreciation on equipment
leased to customers and is included in cost of goods sold.
Intangible assets - Intangible assets consist of the costs
incurred to purchase patent rights and legal and registration costs
incurred to internally develop patents. Intangible assets are
reported net of accumulated amortisation. Patents are amortised
using the straight-line method over a period based on their
contractual lives which approximates their estimated useful
lives.
Impairment of long-lived assets - Long-lived assets to be held
and used, including property and equipment and intangible assets
with definite useful lives, are assessed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If the total of the
expected undiscounted future cash flows is less than the carrying
amount of the asset, a loss, if any, is recognised for the
difference between the fair value and carrying value of the assets.
Impairment analyses, when performed, are based on the Company's
business and technology strategy, management's views of growth
rates for the Company's business, anticipated future economic and
regulatory conditions, and expected technological availability. For
purposes of recognition and measurement, the Company groups its
long-lived assets at the lowest level for which there are
identifiable cash flows, which are largely independent of the cash
flows of other assets and liabilities. No impairment charges were
recorded in the six months ended 30 June 2019 and 2018, and the
year ended 31 December 2018.
Research and development costs - Research and development costs
are expensed as incurred. Research and development expense for the
six months ended 30 June 2019 and 2018, and the year ended 31
December 2018 was approximately $49,000, $nil and $nil,
respectively.
Advertising costs - The Company expenses advertising costs as
incurred. Advertising expense for the six months ended 30 June 2019
and 2018, and the year ended 31 December 2018 was approximately
$nil, and is recorded in selling, general and administrative
expenses.
Rent expense - The Company records rent expense on a
straight-line basis for operating lease agreements that contain
escalating rent clauses. The deferred rent liability included in
other current liabilities in the accompanying balance sheet
represents the cumulative difference between rent expense
recognised on the straight-line basis and the actual rent paid.
Income taxes - The provision for income taxes for interim and
annual periods is determined using the asset and liability method,
under which deferred tax assets and liabilities are calculated
based on the temporary differences between the financial statement
carrying amounts and income tax bases of assets and liabilities
using currently enacted tax rates. The deferred tax assets are
recorded net of a valuation allowance when, based on the weight of
available evidence, it is more likely than not that some portion or
all of the recorded deferred tax assets will not be realised in
future periods. Decreases to the valuation allowance are recorded
as reductions to the provision for income taxes and increases to
the valuation allowance result in additional provision for income
taxes. The realisation of the deferred tax assets, net of a
valuation allowance, is primarily dependent on the ability to
generate taxable income. A change in the Company's estimate of
future taxable income may require an addition or reduction to the
valuation allowance.
The benefit from an uncertain income tax position is not
recognised if it has less than a 50 percent likelihood of being
sustained upon audit by the relevant authority. For positions that
are more than 50 percent likely to be sustained, the benefit is
recognised at the largest amount that is more-likely-than-not to be
sustained. An uncertain income tax position is not recognised if it
has less than a 50 percent likelihood of being sustained. Where a
net operating loss carried forward, a similar tax loss or a tax
credit carry forward exists, an unrecognised tax benefit is
presented as a reduction to a deferred tax asset. Otherwise, the
Company classifies its obligations for uncertain tax positions as
other non-current liabilities unless expected to be paid within one
year. Liabilities expected to be paid within one year are included
in the accrued expenses account.
The Company recognises interest accrued related to tax in
interest expense and penalties in selling, general and
administrative expenses. During the six months ending 30 June 2019
and 2018, and the year ended 31 December 2018 the Company
recognised no interest or penalties.
Earnings per share - Basic earnings per share is computed using
the weighted average number of common shares outstanding during the
period. Diluted earnings per share is computed using the weighted
average number of common and potentially dilutive shares
outstanding during the period. Potentially dilutive shares consist
of the incremental common shares issuable upon conversion of the
exercise of common stock options. Potentially dilutive shares are
excluded from the computation if their effect is antidilutive.
Fair value of financial instruments - The Company uses the
framework in ASC 820, Fair Value Measurements and Disclosures, to
determine the fair value of its financial assets. ASC 820
establishes a fair value hierarchy that prioritises the inputs to
valuation techniques used to measure fair value and expands
financial statement disclosures about fair value measurements.
The hierarchy established by ASC 820 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).
The three levels of the fair value hierarchy under ASC 820 are
described below:
-- Level 1: 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: Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly.
-- Level 3: Unobservable inputs for the asset or liability.
There were no significant transfers into or out of each level of
the fair value hierarchy for assets measured at the fair value for
the six months ended 30 June 2019 and 2018, and the year ended 31
December 2018.
All transfers are recognised by the Company at the end of each
reporting period.
Transfers between Levels 1 and 2 generally relate to whether a
market becomes active or inactive. Transfers between Levels 2 and 3
generally relate to whether significant relevant observable inputs
are available for the fair value measurement in their entirety.
The Company's financial instruments as of 30 June 2019 and 2018,
and 31 December 2018 include cash and cash equivalents, accounts
receivable, accounts payable, the line of credit, and the note
payable. The carrying values of cash and cash equivalents, accounts
receivable, accounts payable, and the line of credit approximate
fair value due to the short-term nature of those assets and
liabilities. The Company believes it is impractical to disclose the
fair value of the note payable as it is an illiquid financial
instrument.
Foreign currency transactions - From time to time the Company
transacts business in foreign currencies (currencies other than the
United States Dollar). These transactions are recorded at the rates
of exchange prevailing on the dates of the transactions. Foreign
currency transaction gains or losses are included in selling,
general and administrative expenses.
Share-based compensation - The Company issues equity-settled
share-based awards to certain employees, which are measured at fair
value at the date of grant. The fair value determined at the grant
date is expensed, based on the Company's estimate of shares that
will eventually vest, on a straight-line basis over the vesting
period. Fair value for the share awards representing equity
interests identical to those associated with shares traded in the
open market is determined using the market price at the date of
grant. Fair value is measured by use of the Black Scholes valuation
model (see Note 11).
Recently issued accounting standards - In May 2014, the
Financial Accounting Standards Board ('FASB') and International
Accounting Standards Board issued their converged standard on
revenue recognition Accounting Standards Update ('ASU') 2014-09,
'Revenue from Contracts with Customers (Topic 606)', as
subsequently amended. This ASU replaces nearly all existing U.S.
GAAP guidance on revenue recognition. The standard prescribes a
five-step model for recognising revenue, the application of which
will require significant judgement. ASU No. 2014-09, as amended,
was effective for the Company beginning 1 January 2018. The Company
applied Topic 606 using the cumulative effect method, recognising
the cumulative effect of initially applying Topic 606 as an
adjustment to the opening balance of equity at 1 January 2018 for
all open contracts at 31 December 2017. Based on the analysis
completed by the Company, there was no impact to the beginning
equity account at 1 January 2018.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic
842)", which requires lessees to recognise on the balance sheet the
assets and liabilities for the rights and obligations created by
the leases with lease terms of more than 12 months. The
recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee will continue to primarily
depend on its classification as a finance or operating lease.
However, unlike prior U.S. GAAP, which required only capital leases
be recognised on the balance sheet, the new standard requires both
types of leases to be recognised on the balance sheet. The new
standard also requires disclosures about the amount, timing, and
uncertainty of cash flows arising from leases. These disclosures
include qualitative and quantitative requirements, providing
additional information about the amounts recorded in the financial
statements. The Company adopted this ASU under a modified
retrospective approach on 1 January 2019. This resulted in the
recognition of an Operating Lease Right of Use Asset and an
Operating Lease Liability of $960K.
Recent accounting pronouncements pending adoption not discussed
above are either not applicable or are not expected to have a
material impact on the Company.
3. Accounts receivable
Accounts receivable and their respective allowance amounts at 30
June 2019 and 2018, and 31 December 2018:
30 June 30 June 31 December
2019 2018 2018
US$000 US$000 US$000
Accounts receivable 6,900 5,466 8,525
Less: allowance for doubtful
accounts (300) (150) (300)
---------- ---------- --------------
Total receivable - net 6,600 5,316 8,225
========== ========== ==============
4. Inventories
Inventories consist of the following at 30 June 2019 and 2018,
and 31 December 2018:
30 June 30 June 31 December
2019 2018 2018
US$000 US$000 US$000
Raw materials 1,389 864 1,341
Work-in-progress 79 145 -
Finished goods 4,339 2,708 3,367
---------- ---------- --------------
Total inventory - net 5,807 3,717 4,708
========== ========== ==============
5. Property and equipment
Property and equipment consists of the following at 30 June 2019
and 2018, and 31 December 2018:
30 June 30 June 31 December
2019 2018 2018
US$000 US$000 US$000
Land 709 709 709
Building 2,724 2,724 2,724
Leasehold improvements 277 354 361
Office equipment 707 697 699
Manufacturing equipment 943 782 898
Research and development
equipment 552 514 496
Purchased software 222 222 222
Equipment leased to customers 9,729 9,069 9,674
15,863 15,071 15,783
Less: accumulated depreciation (7,718) (6,728) (7,247)
---------------- ------------------------- --------------
Property and equipment -
net 8,145 8,343 8,536
================ ========================= ==============
During the six months ended 30 June 2019 and 2018, and the year
ended 31 December 2018, the Company removed property, plant and
equipment and the associated accumulated depreciation of
approximately $135,000, $2,000 and $58,000, respectively, to
reflect the disposal of property, plant and equipment.
Depreciation expense for the six months ended 30 June 2019 and
2018, and the year ended 31 December 2018 was approximately
$606,000, $592,000 and $1,167,000, respectively, and includes
depreciation on equipment leased to customers. Depreciation expense
on equipment leased to customers included in cost of goods sold for
the six months ended 30 June 2019 and 2018, and the year ended 31
December 2018 was $439,000, $393,000 and $801,000,
respectively.
6. Intangible assets
During 2009, the Company entered into a patent rights purchase
agreement with a shareholder. The agreement provided for the
immediate payment of $28,000 in 2009 with the possibility of an
additional $72,000 based on profits on the sales of a particular
product. During 2010, the Company paid $22,000 based on profits on
the sales of the product and paid the remaining $50,000 in 2011.
The patent is amortised utilising the straight-line method over a
useful life of 17 years which represents the legal life of the
patent from inception. Accumulated amortisation on the patent was
approximately $55,000, $48,000 and $51,000 as of 30 June 2019 and
2018, and 31 December 2018, respectively.
In addition to the purchased patent, the Company has internally
developed patents. Internally developed patents include legal and
registration costs incurred to obtain the respective patents. The
Company currently holds various patents and numerous pending patent
applications in the United States, as well as numerous foreign
jurisdictions outside of the United States.
Intangible assets as of 30 June 2019 and 2018, and 31 December
2018 consist of the following:
Weighted 30 June 30 June 31 December
Average 2019 2018 2018
Useful lives US$000 US$000 US$000
Internally developed
patents 15 years 1,318 1,288 1,294
Purchased patents 17 years 100 100 100
1,418 1,388 1,394
Less accumulated amortisation (632) (579) (606)
-------------------- --------------------- ---------------------
Intangible assets
- net 786 809 788
==================== ===================== =====================
Approximate aggregate future amortisation expense is as
follows:
Year ending 31 December (USD, in
thousands)
2019 25
2020 51
2021 50
2022 49
2023 41
Thereafter 209
Amortisation expense for the six months ended 30 June 2019 and
2018, and the year ended 31 December 2018 was approximately
$26,000, $45,000 and $72,000, respectively.
7. Income taxes
The components of income taxes shown in the consolidated
statements of operations are as follows:
30 June 30 June 31 December
2019 2018 2018
US$000 US$000 US$000
------------------- ------------------- ------------------
Current:
Federal - - -
Foreign 363 524 1,185
State - - 15
------------------- ------------------- ------------------
Total current provision 363 524 1,200
------------------- ------------------- ------------------
Deferred:
Federal - - -
Foreign - - -
State - - -
------------------- ------------------- ------------------
Total deferred provision - - -
------------------- ------------------- ------------------
Total provision for income taxes 363 524 1,200
=================== =================== ==================
The provision for income tax varies from the amount computed by
applying the statutory corporate federal tax rate of 21 percent,
primarily due to the effect of certain nondeductible expenses,
foreign withholding tax, and changes in valuation allowances.
A reconciliation of the differences between the effective tax
rate and the federal statutory tax rate is as follows:
30 June 30 June 31 December
2019 2018 2018
---------- ---------- --------------
Federal statutory income tax rate 21.0% 21.0% 21.0%
State tax rate, net of federal benefit 0.2% - 0.5%
Valuation allowance (4.0%) (18.4%) (16.7%)
Other (0.1%) 2.7% 1.5%
Foreign withholding tax 63.6% 20.1% 21.8%
---------- ---------- --------------
Effective income tax rate 80.7% 25.4% 28.1%
========== ========== ==============
The significant components of deferred income taxes included in
the balance sheets are as follows:
30 June 30 June 31 December
2019 2018 2018
US$000 US$000 US$000
----------------------- --------------------- ---------------------
Deferred tax assets
Net operating loss 3,883 4,266 3,971
Equity compensation 323 292 297
Research and development credits 159 159 159
Allowance for bad debts 64 32 64
Accrued liability 6 2 4
Inventory valuation reserve - - 93
Other 92 26 22
Total gross deferred tax asset 4,527 4,777 4,610
Deferred tax liabilities
Property and equipment (672) (568) (738)
Total gross deferred tax liability (672) (568) (738)
Net deferred tax asset before valuation
allowance 3,855 4,209 3,872
Valuation allowance (3,855) (4,209) (3,872)
----------------------- --------------------- ---------------------
Net deferred tax asset (liability) - - -
======================= ===================== =====================
Deferred tax assets and liabilities are recorded based on the
difference between an asset or liability's financial statement
value and its tax reporting value using enacted rates in effect for
the year in which the differences are expected to reverse, and for
other temporary differences as defined by ASC-740, Income Taxes. At
30 June 2019, the Company has recorded a valuation allowance of
$3.9 million for which it is more likely than not that the Company
will not receive future tax benefits due to the uncertainty
regarding the realisation of such deferred tax assets.
As of 30 June 2019, the Company has approximately $17.5 million
of gross U.S. federal net operating loss carry forwards and $5.2
million of gross state net operating loss carry forwards that will
begin to expire in the 2024 tax year.
The FASB issued Interpretation ASC-740-10-25, Income Taxes, an
interpretation of ASC-740 which clarifies the accounting for income
taxes by prescribing the minimum recognition threshold a tax
position is required to meet before being recognised in the
financial statements. Under ASC-740, the impact of an uncertain
income tax position on the income tax return must be recognised at
the largest amount that is more likely than not to be sustained
upon audit by the relevant taxing authority. ASC-740 also provides
guidance on derecognition, measurement, classification, interest
and penalties, accounting in interim periods, disclosure and
transition. ASC-740 applies to all tax positions related to income
taxes.
As a result of the adoption and implementation of ASC-740, a tax
position is recognised as a benefit only if it is 'more likely than
not' that the tax position would be sustained in a tax examination,
with a tax examination being presumed to occur. The amount
recognised is the largest amount of tax benefit that has a greater
than 50 percent likelihood of being realised on examination. For
tax positions not meeting the 'more likely than not' test, no tax
benefit is recorded. The Company recognises interest and penalties
related to tax positions in income tax expense. At 30 June 2019 and
2018, and 31 December 2018, there was no accrual for uncertain tax
positions or related interest.
The Company's tax years 2015 through 2018 remain subject to
examination by federal, state and foreign income tax
jurisdictions.
8. Line of credit
In October 2014, the Company entered into a bank line of credit
that allows for borrowings up to $500,000. The line of credit is
revolving and is payable on demand. In November 2018, the maximum
borrowing capacity was increased to $1,875,000. The facility renews
annually and is secured by the assignment of a deposit account held
by the lender and second deed to the property owned by the Company
in Duluth, Georgia. The line of credit carries a floating rate of
interest equal to the lender's Prime Rate and is subject to change
any time the Prime Rate changes. Under terms of the line of credit,
the Company is required to maintain a minimum cash balance and a
specified cash flow coverage ratio, as those terms are defined, and
the Company was in compliance as of 30 June 2019. There was no
balance on the line of credit at 30 June 2019 and 2018, and 31
December 2018. The interest rate on 30 June 2019 and 2018, and 31
December 2018 was 5.50 percent, 4.50 percent and 5.50 percent,
respectively. There was no interest expense related to this loan
for the six months ended 30 June 2019 and 2018, and the year ended
31 December 2018.
9. Note payable
On 27 March 2013, the Company entered into a term loan agreement
with a lender for the purchase of property and a building for its
manufacturing operations and corporate offices. The note is secured
by the property and building. The Company borrowed proceeds of
$2,285,908 at a fixed interest rate of 4.45 percent. The loan has a
ten year term with monthly payments based on a 20 year
amortisation. In addition, there is a one-time payment at the end
of the term of the note of approximately $1,400,000. In accordance
with the terms of the agreement, the Company is required to keep
$500,000 in a deposit account with the lending bank. As of 30 June
2019 and 2018, and 31 December 2018, the Company had restricted
cash of $500,000 related to the loan agreement. Future maturities
of long-term debt are as follows as of 30 June 2019:
Year ending 31 December (USD, in
thousands)
2019 47
2020 97
2021 102
2022 106
2023 1,434
1,786
10. Public offering of common stock
Authorised shares and shares issuance
In March 2019, the Company issued an additional 603,633 shares
of common stock for 230 pence per share. The Company incurred costs
in the issuance of these shares of approximately $229,000. The
Company received net proceeds of approximately $1,631,000.
11. Stock compensation
In July 2011, the Company's shareholders approved the Conversion
Shares and the Directors' Shares, as well as the Plan Shares and
Omnibus Performance Incentive Plan ("Plan"). This included the
termination of all outstanding stock incentive plans, cancellation
of all outstanding stock incentive agreements, and the awarding of
stock incentives to Directors and certain employees and
consultants. The Company established the Plan to attract and retain
Directors, officers, employees and consultants. The Company
reserved an amount equal to 10 percent of the Common Shares issued
and outstanding immediately following the Public Offering.
Upon the issuance of these additional shares, an award of share
options was made to the Directors and certain employees and
consultants, and a single award of restricted shares was made to a
former Chief Financial Officer. In addition, additional stock
options were awarded in each year subsequent. The awards of stock
options and restricted shares made upon issuance were in respect of
85 percent of the Common Shares available under the Plan,
equivalent to 8.5 percent of the Public Offering. The total number
of shares reserved for stock awards and options under this Plan is
1,944,375 with 1,324,542 shares allocated as of 30 June 2019. The
shares are all allocated to employees, executives and
consultants.
The options granted to Non-Executive Directors, unless otherwise
agreed, vest contingent on continuing service with the Company at
the vesting date and compliance with the covenants applicable to
such service.
Employee options vest over three years with a third vesting
ratably each year, partially on issuance and partially over the
following 24 month period, or if there is a change in control.
Vesting accelerates in the event of a change of control. Options
granted to Non-Executive Directors and one executive vest partially
on issuance and will vest partially one to two years later. The
remaining Non-Executive Director options expired at the end of
2016.
As discussed in Note 2, the Company uses the Black Scholes
valuation model to measure the fair value of options granted. Since
the Company does not have a sufficient trading history from which
to calculate its historical volatility, the Company's expected
volatility is based on a basket of comparable companies' historical
volatility. As the Company's initial options were granted in 2011,
the Company does not have sufficient history of option exercise
behavior from which to calculate the expected term. Accordingly,
the expected terms of options are calculated based on the short-cut
method commonly utilised by newly public companies. The risk free
interest rate is based on a blended average yield of two and five
year United States Treasury Bills at the time of grant. The
assumptions used in the Black Scholes option pricing model for
options granted in 2018 and 2018 were as follows:
Number Risk-Free
of Options Interest Expected Exercise Fair Value
Granted Grant Date Rate Term Volatility Price Per Option
-------- -------------- ------------- ------------ ------------- ------------- ----------- --------------
2018 150,000 30/11/2018 2.90% 5.72 years 53.00% $3.03 $1.57
2019 10,000 28/02/2019 2.58% 6 years 72.00% $3.20 $2.08
The Company assumes a dividend yield of 0.0%.
The following table summarises the Company's stock option
activity for the six months ended 30 June 2019:
Weighted-Average Weighted-Average Average Grant
Exercise Remaining Contractual Date Fair
Stock Options Shares Price Term (in years) Value
------------------------------ ------------ ------------------- ------------------------- ----------------
Outstanding at 31 December
2018 1,347,042 $2.43 5.9 $1,536,406
Granted 10,000 $3.20 6.0 $20,800
Exercised (32,500) $1.29
------------------------------ ------------
Outstanding at 30 June
2019 1,324,542 $2.46 5.9 $1,534,881
------------------------------ ------------
Exercisable at 30 June
2019 1,197,875 $2.50 5.9
------------------------------ ------------
A summary of the status of unvested options as of 30 June 2019
and changes during the six months ended 30 June 2019 is presented
below:
Weighted-Average
Fair Value at Grant
Unvested Options Shares Date
-------------------------------- ------------ -----------------------
Unvested at 31 December 2018 216,667 $1.14
Granted 10,000 $2.08
Vested (100,000) $1.57
-------------------------------- ------------
Unvested at 30 June 2019 126,667 $0.87
-------------------------------- ------------
As of 30 June 2019, total unrecognised compensation cost of
$105,000 was related to unvested share-based compensation
arrangements awarded under the Plan.
12. Commitments and contingencies
Operating leases - During 2019, the Company adopted ASU 2016-02
Leases (Topic 842). The Company has operating leases for its
offices, yards and warehouses and is applying the provisions of ASU
2016-02 to these leases. The Company is following a modified
retrospective approach in the adoption of this ASU resulting in the
recognition of an Operating Lease Right of Use (ROU) Asset and an
Operating Lease Liability at 1 January 2019 of $960,000. This
adjustment is based on the present value of future minimum rental
payments of the leases.
As of 30 June 2019, the Operating Lease ROU Asset has a balance
of $1,389,000, net of accumulated amortisation of $188,000 and an
Operating Lease Liability of $1,220,000, which are included in the
accompanying balance sheet. The weighted average discount rate used
for leases accounted for under ASU 2016-02 is 5.25 percent, which
is based on the Company's incremental borrowing rate.
The Company's leases do not include any options to renew. The
Company's leases mature at various dates through May 2024 and have
a weighted average remaining life of 3.51 years.
Future maturities under the Operating Lease Liability are as
follows for the years ended 31 December:
(USD, in thousands)
2019 140
2020 512
2021 380
2022 133
2023 122
2024 51
-----
Total future maturities 1,338
Portion representing interest (118)
-----
1,220
=====
Total lease expense for the six months ended 30 June 2019 and
2018, and the year ended 31 December 2018 was approximately
$210,000, $150,000 and $320,000, respectively.
The Company has elected to apply the short-term lease exception
to all leases of one year or less and is not separating lease and
non-lease components when evaluating leases. Total costs associated
with short-term leases was $11,000 for the six months ended 30 June
2019.
Legal - From time to time, the Company is a party to certain
legal proceedings arising in the ordinary course of business. In
the opinion of management, there are no current legal proceedings
or other claims outstanding which could have a material adverse
effect on the results of operations or financial position of the
Company.
13. Related party transactions
The Company has held a patent rights purchase agreement since
2009 with a shareholder as described in Note 6.
14. Segment and geographic information
ASC 280-10, Disclosures About Segments of an Enterprise and
Related Information (ASC 280-10), establishes standards for
reporting information about operating segments. ASC 280-10 requires
that the Company report financial and descriptive information about
its reportable operating segments. Operating segments are
components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief
operating decision maker ('CODM') in deciding how to allocate
resources and in assessing performance. The Company's CODM is the
Chief Executive Officer ('CEO'). While the CEO is apprised of a
variety of financial metrics and information, the business is
principally managed on an aggregate basis as of 30 June 2019. For
the six months ended 30 June 2019, the Company's revenues were
generated primarily in the Middle East and the United States
('U.S.'). Additionally, the majority of the Company's expenditures
and personnel either directly supported its efforts in the Middle
East and the U.S., or cannot be specifically attributed to a
geography. Therefore, the Company has only one reportable operating
segment.
Revenue from customers by geography is as follows:
Six months Six months Year ended
ended 30 June ended 30 June 31 December
(USD, in thousands) 2019 2018 2018
Middle East 6,870 10,706 23,066
United States 1,607 1,159 2,465
Other 589 295 1,421
----------------- ----------------- ---------------
Total 9,066 12,160 26,952
================= ================= ===============
Equipment leased to customers by geography is as follows:
Six months Six months Year ended
ended 30 June ended 30 June 31 December
(USD, in thousands) 2019 2018 2018
Middle East 7,946 6,971 7,602
United States 1,186 1,723 1,726
Other 597 375 346
----------------- ----------------- ---------------
Total 9,729 9,069 9,674
================= ================= ===============
15. Concentrations
At 30 June 2019, one customer with four contracts with four
separate plants represented 93 percent of accounts receivable.
During the six months ended 30 June 2019, the Company received 85
percent of its gross revenue from two customers, one with four
contracts with four separate plants.
At 30 June 2018, one customer with four contracts with three
separate plants represented 90 percent of accounts receivable.
During the six months ended 30 June 2018, the Company received 88
percent of its gross revenue from one customer with four contracts
with three separate plants.
At 31 December 2018, one customer with seven contracts with six
plants represented 89 percent of accounts receivable. During the
year ended 31 December 2018, the Company received 85 percent of its
gross revenue from one customer with six separate plants.
16. Subsequent events
The Company discloses material events that occur after the
balance sheet date but before the financials are issued. In
general, these events are recognised in the financial statements if
the conditions existed at the date of the balance sheet, but are
not recognised if the conditions did not exist at the balance sheet
date. Management has evaluated subsequent events through 16
September 2019, the date the interim results were available to be
issued, and no events have occurred which require further
disclosure.
Forward Looking Statements
This release contains certain statements that are or may be
"forward-looking statements". These statements typically contain
words such as "intends", "expects", "anticipates", "estimates" and
words of similar importance. All the statements other than
statements of historical facts included in this announcement,
including, without limitation, those regarding the Company's
financial position, business strategy, plans and objectives of
management for future operations (including development plans and
objectives relating to the Company's products and services) are
forward-looking statements. By their nature, forward-looking
statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future
and therefore undue reliance should not be placed on such
forward-looking statements. There are a number of factors that
could cause the actual results, performance or achievements of the
Company to be materially different from future results, performance
or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous
assumptions regarding the Company's present and future business
strategies and the environment in which the Company will operate in
the future and such assumptions may or may not prove to be correct.
Forward-looking statements speak only as at the date they are made.
Neither the Company nor any other person undertakes any obligation
(other than, in the case of the Company, pursuant to the AIM Rules
for Companies) to update publicly any of the information contained
in this announcement, including any forward-looking statements, in
the light of new information, change in circumstances or future
events.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LELFFKKFXBBV
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