REG - Active Energy Group - Audited results for the year ended 31/12/2022
05/06/2023 07:00
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RNS Number : 5748B Active Energy Group PLC 05 June 2023
05 June 2023
Active Energy Group Plc
("Active Energy" or the "Company")
Audited results for the year ended 31 December 2022
Active Energy (AIM: AEG, OTCQB: ATGVF), the international biomass based
renewable energy business, is pleased to announce the publication of its
audited results for the year ended 31 December 2022.
Operational Highlights:
· Expansion of the Company's sales function in USA and Europe:
o first order for CoalSwitch® from Carolina Stalite for CoalSwitch® fuel;
and
o written indications of interest of the supply of up to 10,000 tonnes of
fuel for clients in the UK in 2023.
· Extension of IP protection, including the award of the Malaysian
Patent for future CoalSwitch® production in the South East Asian Region.
· In March 2022, the Group achieved Chain of Custody and Controlled
Wood Certification compliant with the Forest Stewardship Council®("FSC®")
standards for its CoalSwitch® fuel.
· Completion of the Karbone Renewable Energy Credit and Environmental
Attribute Report published in November 2022, demonstrating CoalSwitch® could
qualify for significant production and consumption subsidies from individual
US states, ranging up to $90 per ton.
· Positive results received following the completion of the independent
study by LifeCycle Analysis in California on the carbon impact of CoalSwitch®
production published in June 2022, showing a reduction of Co2 by 99% relative
to coal.
· Appointment of Michelle Fagan as the Company's interim Chief
Financial Officer in November 2022.
Financial Highlights:
· Sale of the Lumberton Site completed on 30 June 2022 with:
o gross consideration of US $4.65million; and
o net cash proceeds of US$3.92million received.
· Operating Loss for the year of US$1,343,745 (2021: US$5,881,768).
· Cash at bank as at 31 December 2022 US$2,614,472 (2021:
US$1,940,871).
· Basic and diluted loss per share from continuing operations of $0.35
cents (2021 Restated: $4.57 cents).
Activities post the year end:
· Permit awarded to the Company's engineering partner, Player Design
International ("PDI") at the Ashland Reference Facility (announced on 24 May
2023):
o final engineering and construction to commence and first fuel production
and deliveries expected to commence in Q3 2023;
o PDI confirms that full scale production volumes from Ashland are
anticipated to remain at a target rate of 35,000 tons per annum.
· Annual renewal of Custody and Controlled Wood certification with the
Forest Stewardship Council standards for its CoalSwitch® fuel production from
Ashland.
· Appointment of Steve Schaar as Chief Operating Officer for the Group
to focus on the specific development of CoalSwitch® production facilities in
the United States and Canada.
· Patents and Trademarks for CoalSwitch® awarded in the US, Canada,
Europe (including the UK) and additional trademark applications have commenced
throughout Asia, including Japan.
Michael Rowan, CEO, Active Energy Group, said:
"In 2022, Active Energy focussed on three key areas necessary to both prepare
for and execute a growth strategy, being: i) product and production
development; ii) market development; and iii) building for growth. The most
important recent development was the issue of the permit to allow completion
of the Ashland Reference Facility. PDI has confirmed fuel production will
commence in Q3 2023, allowing Active Energy to make its first customer
deliveries of CoalSwitchÒ.
"Active Energy significantly expanded its sales pipeline in 2022, investing in
a new sales and marketing team in the U.S. and U.K. and analysing key new
markets for CoalSwitchÒ fuel. The initial letters of intent received total
circa 10,000 tonnes, and current indications of interest received exceed
annualised production estimates for the Ashland Reference Plant. In addition,
the work with Karbone, the financial services platform focused on
decarbonisation markets, concluded that CoalSwitchÒ is likely to be eligible
for several US subsidies, incentives and carbon credits that will make
CoalSwitchÒ even more cost competitive with coal, reducing additional
barriers toward market adoption.
"The Company added depth and breadth to the team with the addition of an
interim Chief Financial Officer and a Chief Operating Officer and these hires
represent another step change for the Company. We plan to further expand the
US team in 2023. The balance sheet at 31 December 2022 reflected control of
cash and costs and this discipline is being maintained as we continue to
actively expand our technology and business development efforts in the coming
months.
"Active Energy is now well prepared for growth and, with the current level of
customer engagement, we look forward to reporting on significant commercial
progress in 2023 and beyond."
Enquiries:
Active Energy Group Plc Michael Rowan (Chief Executive Officer) info@aegplc.com
Michelle Fagan (Chief Financial Officer)
Steve Schaar (Chief Operating Officer)
Allenby Capital Limited Nick Naylor/James Reeve/Daniel Dearden-Williams (Corporate Finance) Office: +44 (0)20 3328 5656
Nominated Adviser and Broker Amrit Nahal (Sales/Corporate Broking)
Camarco Tom Huddart / Emily Hall / Lily Pettifar aeg@camarco.co.uk
Financial PR Adviser Office: +44 (0)20 3757 4980
Scoville PR John Williams jwilliams@scovillepr.com
US PR Adviser
Website LinkedIn Twitter
www.aegplc.com www.linkedin.com/company/activeenergy https://twitter.com/aegplc (https://twitter.com/aegplc)
@aegplc
About Active Energy Group:
Headquartered in London with operations in the United States, Active Energy
Group plc (AIM: AEG, OTCQB:ATGVF) is a biomass-based renewable energy company
focused on the production and development of next generation biomass products
that have the potential to transform coal fired power and heavy industries and
the existing renewable biomass industry.
AEG has developed a proprietary technology which transforms waste biomass
material into high-value renewable fuels. Its patented product CoalSwitch® is
a leading drop-in biomass renewable fuel that can be blended and co-fired with
coal at any ratio without requiring significant plant modification or wholly
replacing existing biomass fuels. In 2022 Active Energy's partner, Player
Design Inc commenced the process for building a production facility for
Coalswitch® at PDI's facility at Ashland, Maine. Under a "take or pay"
arrangement Active Energy will purchase CoalSwitch® from PDI for sale to the
Company's prospective customers in the US and Europe.
CHAIRMAN'S LETTER
The last 12 months have seen Active Energy Group continue to make progress
toward its goal of becoming one of the leading manufacturers of next
generation biomass pellets, focused primarily on new technologies for black
pellet production. Whilst awaiting the issuance of the permit for the
construction and operation of the first CoalSwitch® production facility at
Ashland, the Company has used the time to invest in additional product
development, establish the Company's marketing operations and strengthen the
management team.
The Company has seen a substantial increase in the number of commercial
enquiries for CoalSwitch® fuel, driven primarily by sales teams in the US and
in the UK and aided by an increasing market demand for an improved biomass
pellet, accommodating revised environmental regulation in the US and
elsewhere, and continuing market supply issues requiring alternative long-term
sources of biomass supply.
Active Energy has obtained first orders for CoalSwitch®, which the Board
believes will lead to long term off take contracts for the fuel and create
future joint venture production opportunities, both in the US and
internationally.
Looking into 2023, the Company has to focus upon several key milestones,
including: i) working with PDI to obtain production of commercial volumes of
CoalSwitch® from the Ashland Reference Facility; ii) delivering this fuel to
identified prospective customers in the US and internationally; and iii)
commence planning to expand production of CoalSwitch®, principally through
partnerships with other parties, thereby establishing CoalSwitch® as the
market standard for next generation biomass fuels in the coming years. In
order to achieve these milestones Active Energy has started building a US
based management team and this will continue in 2023.
Companies and utilities around the world are being pressed to reduce
emissions. By converting lower value wood waste into high-value biomass fuel
that can either co-fire with coal or replace existing biomass pellets,
CoalSwitch® offers a turnkey, cost-effective and scalable solution. The Board
believes that CoalSwitch® represents a transformational opportunity for
biomass as a cleaner fuel helping global sustainability goals.
The Board remains confident about the future for Active Energy Group, and I
remain grateful for the ongoing support of all our stakeholders and look
forward to the future with confidence.
James Leahy
Non-executive Chairman
5 June 2023
CHIEF EXECUTIVE OFFICER'S STATEMENT
Executive Summary
Active Energy Group plc ("Active Energy" or the "Company") spent 2022
strategically focussed on three key areas: Product and Production Development;
Market Development; and Building for Growth.
1. Product and Production Development: We knew at the beginning of 2022
that it could take some time for our production partner Player Design, Inc.
("PDI") to complete production design and engineering, receive the required
permits to complete construction, install the requisite equipment and operate
the first production plant. We are pleased to report that as of 24 May 2023,
the relevant Permit has been granted and PDI is moving forward on construction
at the Ashland Reference Facility and commencing future CoalSwitch®
production.
2. Market Development: We spent the past year driving leads and customer
interest by investing in new sales leaders in the U.S. and U.K. and via direct
marketing, event sponsorship and thought leadership. We also developed a
strategy to obtain carbon credits and renewable energy incentives in the US to
make CoalSwitch® cost-comparable to coal, helping to eliminate a barrier to
adoption.
3. Building for Growth: We added depth and breadth to the team with the
addition of a Chief Financial Officer and a US based Chief Operating Officer;
extended our patent and IP portfolio; and secured a listing on the US Stock
exchange. In 2023 we will continue to invest in building our US based
management team. We also sold our Lumberton facility and associated
litigation proceeded toward closure. We continued to develop and improve the
core CoalSwitch® production technology.
As we proceed through the second quarter, we remain positive on our prospects.
Fuel production is expected to commence in the third quarter of the current
year, which will drive customer testing and orders and the process of market
adoption for black pellets can accelerate. New regulations in the U.S.
continue to drive coal users to seek new and cleaner options and concerns
about the sustainability of using plantation trees for biomass are not
abating.
We believe we have the right product, the right team, and the right time for
commercialization.
1. Product and Production Development
Working with PDI, the Company spent the past year focussed on engineering and
design, permits, certifications and other regulatory requirements needed to
manufacture and sell CoalSwitch®.
Construction and Operational Permit for the Ashland Reference Plant
Construction of the Ashland Reference Facility has commenced and Active Energy
announced that the appropriate permit had been awarded to PDI by the
Department of Environmental Protection in the State of Maine on 24(th) of May
2023.
Active Energy, in close discussion with PDI, has made every effort to provide
the clearest timetable toward production. However, we recognise that this
timeline has extended beyond the expectations that we initially set and then
updated.
With this permit in place, construction activities have now commenced, and the
key manufacturing components will be delivered to Ashland shortly. PDI has
confirmed to the Company that CoalSwitch® deliveries to Active Energy's
customers should commence in Q3 2023. The Company continues to receive
requests, both from the US and internationally, to visit operations at the
Ashland Reference Facility at the earliest opportunity.
Since the first CoalSwitch® production in mid-2021, Active Energy has been
working with PDI to improve the production process. PDI successfully produced
samples of CoalSwitch® fuel in the summer of 2021 using the original steam
treatment process under Active Energy's patented technology. Since then, the
CoalSwitch® production process has been developed to enable PDI to increase
volumes efficiently and to create an economic production process.
Improving Production Technology
Throughout 2022 and in 2023 to date, PDI has been developing CoalSwitch®
production operations at Ashland, Maine. PDI has developed a new production
reactor, and, with Active Energy's assistance, the pro-forma design and
development of these reactors was completed during 2022. The revised
configuration utilises some of the Company's existing CoalSwitch® technology
and develops the steam explosion production technology to accommodate
increased production volumes of black pellets. This process has involved not
only designing a revised engineering configuration but also substantial work
on the environmental impact (resulting in PDI working closely with the
Department of Environmental Protection in Maine).
Forest Stewardship Council Standards
Post the period end, Active Energy has also renewed its Chain of Custody
("CoC") and Controlled Wood certification with the Forest Stewardship
Council®("FSC®") standards for its CoalSwitch® fuel production in Maine
thereby maintaining a significant component of Active Energy's sustainability
criteria.
ENplus A1 Certificate for CoalSwitch®
Throughout 2022 and in 2023, Active Energy delivered test quantities of fuel
for independent analysis by European customers and independent laboratories
alike. Active Energy will continue to ensure that the CoalSwitch® program
attains all the relevant industry standard certifications, which in the UK
will include ENplus A1 certification. To date, the UK results have all
consistently demonstrated CoalSwitch®'s improved pellet performance goals,
namely the premium heating value properties, the lower emissions and less ash
content and the improved material handling qualities which the industry is
seeking. The Company is aiming to obtain final approvals once new CoalSwitch®
supplies become available during Q3 2023.
2. Market Development
At its AGM in July 2022, the Company announced that, while PDI would focus on
the engineering development activities for the CoalSwitch® program, Active
Energy would focus on market development activities, both in the US and
internationally.
Hiring experienced sales leaders
Since mid-2022, the number of market enquiries for a 'black pellet
alternative' for biomass fuels has increased dramatically as the biomass
industry urgently seeks alternate sustainable solutions. Over the last 12
months, Active Energy has created a market presence which will secure a future
pipeline of fuel orders ahead of first production volumes from the Ashland
Reference Facility. To achieve this, since July 2022, Active Energy has hired
dedicated sales personnel both in the UK and the US to secure orders for
CoalSwitch®. The Company has hired experienced personnel not only from the
biomass industry but also from traditional fossil fuel industries to assist in
marketing and sales activities which have to not only promote CoalSwitch®
fuel but also create the future market.
Marketing activities in Europe
In the UK and Europe, the biomass industry has an established presence and the
consumption and performance of traditional 'white pellet' biomass is well
known. Active Energy's sales strategy has focused toward these established
white pellet consumers and the sales team has had to demonstrate the economic
and environmental benefits of CoalSwitch® against these existing biomass
fuels.
To date, the Company obtained indications of interest for the supply of up to
10,000 tonnes of fuel from various parties in the UK seeking the fuel as an
alternate and improved heating supply source. Initial conversations with
prospective customers in the UK have indicated a future pipeline in excess of
50,000 tonnes of CoalSwitch® fuel, more than the Ashland Reference Facility
could currently supply. During 2022, the Company also signed various
Non-Disclosure Agreements with a range of European utilities who wish to
assess the proprietary qualities of CoalSwitch® for long-term supply
contracts and who also confirmed their desire to visit the Ashland Reference
Facility in 2023.
As a result of the Company's marketing activities, it has also created an
opportunity to sell MaineFlame pressed logs in the UK. This product, which
is primarily focussed for domestic use, is currently produced at Ashland by
PDI. As CoalSwitch® marketing activities have progressed in the UK, future
customers have requested if Active Energy could additionally supply the
pressed logs. During Q1 2023, the Company obtained the relevant authorisations
and completed product testing to permit sales of the fuel in the UK. With
first orders having already been delivered, Active Energy expects the revenues
from these activities to be modest, but profit margins are healthy, and the
immediate sales have provided an additional boost to the Company's credibility
with future CoalSwitch® customers in the UK.
Marketing activities in North America
Unlike Europe, North America does not have an established base of biomass
consumers. As a result, Active Energy has had to not only initiate efforts to
sell CoalSwitch® fuel, but also create new market opportunities aligned to
the current consumption of fossil fuels. The focus has been to develop a
market for co-firing CoalSwitch® with coal.
During 2022, the first orders for fuel were obtained and a sales pipeline was
established. Active Energy's first US CoalSwitch® fuel order came from
Carolina Stalite ("Stalite"), an aggregates producer based in North Carolina.
Stalite remains eager for fuel deliveries at the earliest opportunity during
2023. Their interest extends beyond fuel deliveries and early-stage
discussions have been established for a future production joint venture in
closer proximity to their existing manufacturing facilities.
The sales activities and potential customer interest have also focussed beyond
the conventional power generation industry and include various heavy
industries including cement, pulp and paper industries where local and
national emissions regulations continue to expand. Active Energy remains
confident of future commercial success and prospective customers on the US
East Coast are finalising terms for initial test volumes of fuel at identified
facilities. Active Energy's sales team have been required to educate
prospective clients, local regulators and address production, consumption and
emissions concerns. The fact that the US sales team is now experienced and
knowledgeable on many of these issues is providing the Company with a
competitive advantage.
The approval of the Inflation Reduction Act in Washington DC in August 2022
provided a significant boost for the sustainability agenda in the US. During
Q4 2022, the US sales team received a notable increase in commercial enquiries
on the benefits of co-firing CoalSwitch® with coal and, once the Ashland
Reference Facility is in operation, the Company anticipates a further increase
in commercial enquiries and orders for fuel.
In addition to developing the sales pipeline for CoalSwitch® fuel in the US,
Active Energy has also received enquiries from parties wishing to acquire a
CoalSwitch® production licence or work on a joint venture basis to develop
the additional CoalSwitch® production facilities. In recent weeks, the
Company has also received enquiries to further develop the CoalSwitch®
production technology to further improve the fuel quality and to accommodate
larger scale production volumes from existing lumber production facilities.
Active Energy is now actively working with these prospective partners and such
arrangements will involve future licensing and production royalty revenues for
the Company, as well as additional CoalSwitch® revenues.
Once CoalSwitch® fuel is in production at the Ashland Reference Facility,
Active Energy believes that demand from prospective customers will increase
and the process of commercial negotiations, appropriate testing at specific
facilities and determining fuel supplies under long term contract will
commence. There is no question that all the pre-marketing activities of the
last 12 months has allowed the Company to develop this sales pipeline and has
provided the Board with increasing confidence that future sales volumes will
accelerate rapidly once first production commences.
International marketing activities
In addition to marketing activities in Europe and North America, during 2022
Active Energy continued its sales activities in Japan through its partners
based in Tokyo. Samples of fuel were delivered throughout 2022 into Japan to
various customers for initial test analysis. The results have been consistent
with the global results from the CoalSwitch® Program. In South Africa,
commercial production partners continue to work on opportunities to address
immediate environmental concerns in regard to its current coal supplies and
consumption. In each instance, a process of fuel verification (confirmed by
independent testing) has been completed and the Company is now in discussions
on future commercial arrangements.
Secured guidance on availability of credits and incentives in the US.
During Q4 2022, the Company appointed Karbone, a financial services platform
focussed on renewable energy and decarbonisation markets, to analyse the
economic value of CoalSwitch® in its production and future use. The Karbone
analysis report demonstrated that the consumption of CoalSwitch® creates
opportunities for subsidies in the US and Canada in terms of Renewable Energy
Credits (RECs) and Regional Greenhouse Gas Incentives (RGGIs) credits and the
creation of carbon credits marketable in the Voluntary Carbon Markets (VCM).
The Karbone analysis shows that CoalSwitch® could qualify for significant
subsidies from individual US states of up to $90 per ton in consumption which
makes CoalSwitch® cost competitive with coal consumption in the US. This has
opened up significant new commercial sales opportunities for CoalSwitch®
sales in the US and Canada. Further projects are being finalised with Karbone
and these activities continue alongside existing collaboration with Brigham
Young University and the University of Utah on future co-firing test projects
and new customer projects.
3. Building for Growth
The Company also took several key steps to prepare for growth and scale
expected after commencement of commercial production, including technology
development, IP extension and senior management team additions.
Readied Technology for Commercialization
The Board are pleased with the technology developments that have been achieved
and with the underlying engineering and regulatory work that has been
completed whilst PDI and the Company awaited issuance of the permit.
The new reactor will initially run toward a production target double that of
the initial CoalSwitch® production reactors and once operational, PDI plans
to increase the scale of production volumes through Q3 and Q4 so as to achieve
its initial goal of an annualised target production rate of 35,000 tons per
year. Upon initial analysis, PDI has informed the Company that it believes
that the Ashland Reference Facility could increase toward higher production
volumes, but this will be reviewed through the initial production phase in H2
2023.
Production of CoalSwitch® from the Ashland Reference Facility will allow
Active Energy to demonstrate an operational production facility to identified
and prospective customers of the fuel alike and show prospective joint venture
production partners or licensees the benefits of the revised CoalSwitch®
production process.
Strengthened management team
In November 2022, Michelle Fagan was appointed as the Company's interim Chief
Financial Officer. Michelle has been working with the Company's management
team since October 2020 and has 24 years' experience as a finance
professional.
In March 2023, the Company appointed Steve Schaar as Chief Operating Officer
to focus on the development of CoalSwitch® production in the United States.
Steve has more than 25 years' experience of operations, project development,
programme management and new product launches from a broad range of
industries.
The Company is in discussions with a number of senior executives within the
biomass sector in the US and intends to make further hires in the coming
months to strengthen its US operations. This investment is in response to
the significant number of opportunities that the Company has in the US and the
developing market environment. The Board believes that the future growth of
Active Energy will require further investment in a US management team.
Extended IP Protection
During 2022, Active Energy continued to develop and extend its intellectual
property portfolio for CoalSwitch® and production know-how. On the 3 June
2022, the Company was awarded the Malaysian Patent for future CoalSwitch®
production in the region to complement the existing patent awards in North
America. More importantly, the CoalSwitch® trademark has now been registered
and approved on all territories including US, Canada, Europe (including the
UK) and additional trademark applications have commenced throughout Asia,
including Japan.
In Japan, Active Energy has a pending new trademark application for CoalSwitch
under application No. 2023-047762, and in Canada the CoalSwitch mark has been
officially registered by the Canadian Intellectual property Office. A new EU
IPO trademark application for the mark CoalSwitch has also been filed claiming
priority to Active Energy's UK trademark registration.
The award of the Trademarks and Patents remain an important step for Active
Energy as it grows its intellectual property portfolio through the continued
development of its CoalSwitch® technology but also create brand awareness for
the future of black pellet.
US$ quotation for Active Energy's shares in the US
The Company successfully completed its listing on OTCQB (Ticker: ATGVF) in the
US in August 2022, which will provide enhanced investor benefits, including
easier trading access for investors located in the US, greater liquidity due
to a broader pool of potential investors and an increased corporate profile in
the US.
Completion of the Sale of Lumberton Site
On 31 March 2022, the Company announced that it had entered into a sale and
purchase agreement with Phoenix LLC for the sale of the Lumberton Site for
gross cash proceeds of US$4.65million. The transaction closed successfully by
30 June 2022 and the net proceeds of US$3.92 million were delivered to Active
Energy. Active Energy continues to work with commercial partners in North
Carolina to look for future opportunities for CoalSwitch® production.
Going concern
The Directors have given careful consideration to the appropriateness of the
going concern basis in the preparation of the Annual Report and Accounts for
the year ended 31 December 2022. Further details of the Company's current
financial position and material uncertainties which may affect the Company's
ability to continue operating as a going concern are to be found in the
Financial Review and in Note 1 of the Financial Statements. The Directors are
confident that the funding required for the Group to continue as a going
concern will be secured within a period of twelve months from the date of
approval of the Financial Statements and have therefore prepared the Financial
Statements on a going concern basis.
Post period end and outlook
The final approvals for PDI to complete the construction of and commence
operations at the Ashland Reference Facility in May 2023 marked the next key
stage for the development and introduction of CoalSwitch® as the next
generation biomass fuel. It is a better pellet than current biomass fuel
supplies and through all the work done over many years, Active Energy is
actively addressing the obvious sustainability concerns for biomass focussing
on utilising low value waste feedstocks and producing a high-grade fuel which
demonstrates improved burn and emissions test results.
Fuel deliveries to customers are now expected to commence in Q3 2023 and that
will further increase prospective customer interest. Deliveries to traditional
coal intensive industries, not known for their use of biomass, creates new
markets and commercial opportunities for CoalSwitch® and for Active Energy.
Given the increasing regulatory environment, particularly in the US, this
should prove to be an opportune time for Active Energy.
In recent months, notably with the hire of Steve Schaar, the level of
commercial and technology expertise within Active Energy has increased
significantly. Steve has brought an immense operational knowledge to Active
Energy and the Company is actively developing new market opportunities.
Operations at the Ashland Reference Facility will prove to be just the
start of the progress toward a production goal of 500,000 tons of CoalSwitch®
fuel by 2025, with the Company involved at a number of production sites
throughout North America.
It is expected that the CoalSwitch® production technologies will also be
developed to provide complimentary technologies that will further enable
improved black pellet fuel performance and ensure production to larger scale
volumes to accommodate current market demand. These technologies will be IP
protected, and Active Energy will seek to license this technology to
additional production centres both inside and outside the US.
Most importantly, biomass is currently being re-reviewed for its
sustainability criteria. The application of this criteria means that white
pellet consumption is increasingly under question and investigation. The
market opportunity for Active Energy to become a premium supplier of black
pellet and develop its black pellet production technologies has never been
greater. CoalSwitch® should become the market standard for black pellet fuel.
I would like to thank all my colleagues and commercial partners for all their
work and commitment toward the CoalSwitch® program in 2022 and look forward
to achieving commercial success in 2023.
Michael Rowan
Chief Executive Officer
5 June 2023
FINANCE REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2022
The Consolidated Financial Statements for the year ended 31 December 2022
("Current Year") is compared to the year ended 31 December 2021 ("Prior
Year").
Financing
The Group started 2022 with a restructured balance sheet, following the
actions taken during 2021, and did not raise debt or equity finance during the
year. The Group had net cash of US$2.6m at the end of the year (2021: US$1.9m)
and is well positioned to seek additional funding to expand operations at the
Ashland Reference Facility, develop complementary CoalSwitch® production
technologies and commercialise CoalSwitch®.
Subsequent events
Since the period year end, the Company has continued to work with PDI to
progress towards the commencement of fuel production at the Ashland Reference
Facility. PDI has confirmed the award of a construction and operational permit
on 24 May 2023 and final engineering and construction activities have
commenced. Active Energy has a 'take or pay' contract with PDI for all
production from the Ashland Reference Facility for the next 3 years.
Fundraising activities through 2022
There were no fundraising activities, either of equity or debt, during 2022.
Performance
In the first half of 2022, the Company sold the Lumberton site property and
ceased all operations at Lumberton by 30 June 2022. The Board agreed that
moving the equipment from Lumberton to Ashland and building the CoalSwitch®
plant at Ashland was the best strategy available at the time.
During the second half of 2022, the Company invested in establishing a sales
and marketing operations in both the United States and the United Kingdom.
During the year the Company completed a series of independent laboratory
analyses of the CoalSwitch® fuel in the United States, United Kingdom,
Europe, and Japan and incurred appropriate costs in such exercise.
The Company incorporated tight financial controls and treasury management to
its finance department during late 2022 to ensure use of funds is kept in line
with enhancing shareholder's investment and this has continued to date. The
financial focus as the company moves toward first stages of production from
Ashland will be to focus on enhancing shareholders return on investment in the
most efficient and effective way it possibly can.
Continuing operations
Impairment charges of US$1,000,000 (2021: US$2,000,000) relate to one of the
reactors which is being used for Research and Development at Ashland.
Administrative costs were consistent with the prior year at US$2,855,199
(2021: US$2,904,311). The net finance income of US$24,173 (2021: net finance
costs of US$303,712) represents interest received on deposited funds less
interest payable on borrowings.
Discontinued operations
The termination of the saw log and sawmill businesses at Lumberton during 2022
and the disposal of the Lumberton property was completed on 30 June 2022 and
resulted in net cash proceeds of $3.92 million to the Group.
The overall operational loss for the year was US$1,343,745 (2021:
US$5,881,768) with a basic and diluted loss per share of 0.83 cents (2021:
5.74 cents). Net finance income was interest receivable on cash held on
deposit less interest payable on borrowings.
Financial position
Non-current assets
The Lumberton property was sold during the year along with certain associated
plant and equipment.
Additions to plant and equipment of US$231,087 and to intellectual property of
US$730,213 primarily relate to future activities, including design and
engineering for the forthcoming Ashland Reference Facility, which is now under
construction.
Current assets
Trade and other receivables of US$905,924 (2021: US$1,628,959) consist mainly
of US$774,668 of project advances to Player Design Inc. for the development of
the Ashland facility.
Current liabilities
Trade and other payables were US$1,199,796 (2021: US$1,222,030). The largest
reduction is due to stringent cost management reducing the trade payables due
at year end significantly. Trade payables was $428,106 in 2022 and $775,709 in
2022.
Non-current liabilities
Loans and borrowings, related to COVID 19 Government loans, decreased slightly
to US$133,940 (2021: US$143,931) due to repayments on the UK government
guaranteed loan, which is repayable over 5 years. Repayments on the US
government loan commenced in December 2022.
Cashflow
Operating cash outflows were US$2,554,563 (2021: US$5,618,404). The reduced
outflow results from the cessation of sawmill and saw log operations during
2021 and Q1 2022 along with reductions in working capital and cost management
measures.
The net cash inflow from investing activities of US$3,037,257 (2021: net
outflow of US$4,375,624) comprises proceeds of US$3,767,471 from the disposal
of the Lumberton Site less cash of US$730,714 expended on the creation of
intellectual property and know how in relation to the new Ashland Reference
Facility.
Cash and cash equivalents of US$2,614,472 were on hand at December 2022 year
end (2021: US$1,940,871).
Going concern
The Financial Statements have been prepared on a going concern basis. Note 1
of the Financial Statements sets out the material uncertainties relating to
the Company's ability to continue as a going concern.
Subsequent to the balance sheet date Player Design Inc. has been granted the
permits required to construct and operate CoalSwitch® production at the plant
in Ashland. However, there is uncertainty around the timing of production
which could affect both the Group's future cash requirements and the timing of
revenue cash generation from sales of CoalSwitch®.
The Directors have concluded that additional funding may be required to
execute the Board's strategy of commercialising CoalSwitch®. While there can
be no guarantee that funding will be available on terms that are acceptable to
the Company, or at all, the Directors are confident that the Company will be
able to secure sufficient equity finance at the required time.
The financial statements do not include any adjustments that would arise if
the Company were to be unable to continue as a going concern.
Section 172 Statement
The Directors are well aware of their duty under Section 172 of the Companies
Act 2006 to act in the way which they consider, in good faith, would be most
likely to promote the success of the Company for the benefit of its members as
a whole and, in doing so, to have regard (amongst other matters) to:
· The likely consequences of any decision in the long term;
· The interests of the Company's employees;
· The need to foster the Company's business relationships with
suppliers, customers and others;
· The impact of the Company's operations on the community and
the environment;
· The desirability of the company maintaining a reputation for
high standards of business conduct; and
· The need to act fairly between members of the Company.
The Board recognises that the long-term success of the Group requires positive
interaction with its stakeholders, including shareholders, customers,
suppliers, governmental and regulatory authorities. The Directors seek to
actively identify and positively engage with key stakeholders in an open and
constructive manner. The Board believes that this strategy enables our
stakeholders to better understand the activities, needs and challenges of the
business and enables the Board to better understand and address relevant
stakeholder views which will assist the Board in its decision making and to
discharge its duties under Section 172 of the Companies Act 2006.
Further corporate governance matters related to this Section 172 Statement can
be found on page 28.
Michelle Fagan
Interim Chief Financial Officer
5 June 2023
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Restated
2022 2021
CONTINUING OPERATIONS Note US$ US$
REVENUE 3 - -
GROSS LOSS - (517,238)
Impairment charges 4 (1,000,000) (2,000,000)
Administrative expenses (2,855,384) (2,904,311)
Other income - 361,237
OPERATING LOSS 6 (3,855,384) (5,060,312)
Net finance income/(costs) 7 24,173 (303,712)
Foreign exchange gains 3,269,176 685,920
LOSS BEFORE TAXATION (562,035) (4,678,104)
Taxation 8 - -
LOSS FROM CONTINUING OPERATIONS (562,035) (4,678,104)
LOSS FROM DISCONTINUED OPERATIONS 9 (781,710) (1,203,664)
LOSS FOR THE YEAR - ATTRIBUTABLE TO THE PARENT COMPANY (1,343,745) (5,881,768)
Basic and diluted loss per share (US cents) - continuing operations 10 (0.35) (4.57)
Basic and diluted loss per share (US cents) - discontinued operations 10 (0.48) (1.17)
Basic and diluted loss per share (US cents) - all operations 10 (0.83) (5.74)
OTHER COMPREHENSIVE LOSS
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of operations (3,426,765) (2,239,354)
Total other comprehensive loss (3,426,765) (2,239,354)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (4,770,510) (8,121,122)
The notes on pages 51 to 86 form part of these financial statements.
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Group Group Company Company
2022 2021 2022 2021
NON-CURRENT ASSETS Note US$ US$ US$ US$
Intangible assets 11 8,064,585 5,659,024 - -
Property, plant & equipment 12 4,772,530 11,512,953 1,015 2,573
Investment in subsidiaries 13 - - 5,732,103 6,417,741
Long term loans 14 - - 21,444,342 25,296,460
Other financial assets 15 823,744 922,275 823,744 922,275
13,660,859 18,094,252 28,001,204 32,639,049
CURRENT ASSETS
Inventory 16 - 27,250 - -
Trade and other receivables 17 905,924 1,628,959 131,197 432,041
Cash and cash equivalents 18 2,614,472 1,940,871 2,545,913 1,915,571
3,520,396 3,597,080 2,677,110 2,347,612
TOTAL ASSETS 17,181,255 21,691,332 30,678,314 34,986,661
CURRENT LIABILITIES
Trade and other payables 19 1,199,796 1,222,030 351,255 602,062
Loans and borrowings 21 13,724 14,013 11,920 13,015
1,213,520 1,236,043 363,175 615,077
NON-CURRENT LIABILITIES
Deferred taxation 20 - 147,349 - -
Loans and borrowings 21 133,940 143,931 30,085 47,029
133,940 291,280 30,085 47,029
TOTAL LIABILITIES 1,347,460 1,527,323 393,260 662,106
NET ASSETS 15,833,795 20,164,009 30,285,054 34,324,555
EQUITY
Share capital - Ordinary Shares 23 786,867 786,867 786,867 786,867
Share capital - Deferred Shares 23 18,148,898 18,148,898 18,148,898 18,148,898
Share premium 55,349,883 55,349,883 55,349,883 55,349,883
Merger reserve 2,350,175 2,350,175 2,350,175 2,350,175
Foreign exchange reserve (5,851,094) (2,424,329) (5,744,107) (2,004,424)
Own shares held reserve (268,442) (268,442) (268,442) (268,442)
Convertible debt/warrant reserve 690,937 1,165,911 690,937 1,165,911
Retained earnings (55,373,429) (55,449,600) (41,029,157) (41,204,313)
Revaluation reserve - 504,646 - -
TOTAL EQUITY 15,833,795 20,164,009 30,285,054 34,324,555
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 not to present the parent company's income statement. The
parent company's loss after tax for the year was $740,114 (2021: $2,075,511).
The financial statements were approved and authorised for issue by the
Directors on 5 June 2023 and were signed on their behalf by:
Michael Rowan
Chief Executive Officer
Company Number
03148295
The notes on pages 51 to 86 form part of these financial statements.
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share capital Share premium Merger reserve Foreign exchange reserve Own shares held reserve Convertible debt and warrant reserve Retained earnings
Revaluation Reserve Total equity
US$ US$ US$ US$ US$ US$ US$ US$ US$
At 31 December 2020 18,368,334 18,711,637 2,350,175 (184,975) (268,442) 3,701,803 (49,899,736) 504,646 (6,716,558)
Loss for the year - - - - - - (5,881,768) - (5,881,768)
Other comprehensive income - - - (2,239,354) - - - - (2,239,354)
Total comprehensive income - - - (2,239,354) - - (5,881,768) - (8,121,122)
Issue of share capital 334,391 13,087,809 - - - - - - 13,422,200
Conversion of CLN 233,040 23,550,437 - - - (2,843,734) - - 20,939,743
Share based payments and warrants - - - - - 307,842 331,904 - 639,746
At 31 December 2021 18,935,765 55,349,883 2,350,175 (2,424,329) (268,442) 1,165,911 (55,449,600) 504,646 20,164,009
Loss for the year - - - - - - (1,343,745) - (1,343,745)
Other comprehensive income - - - (3,426,765) - - - - (3,426,765)
Total comprehensive income - - - (3,426,765) - - (1,343,745) - (4,770,510)
Realisation of revaluation reserve - - - - - - 504,646 (504,646) -
Share based payments and warrants - - - - - (474,974) 915,270 - 440,296
At 31 December 2022 18,935,765 55,349,883 2,350,175 (5,851,094) (268,442) 690,937 (55,373,429) - 15,833,795
The purpose and nature of each of the above reserves is described in Note 25.
The notes on pages 51 to 86 form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share capital Share premium Merger reserve Foreign exchange reserve Own shares held reserve Convertible debt and warrant reserve Retained earnings
Total equity
US$ US$ US$ US$ US$ US$ US$ US$
At 31 December 2020 18,368,334 18,711,637 2,350,175 (124,920) (268,442) 3,701,803 (39,460,706) 3,277,881
Loss for the year - - - - - - (2,075,511) (2,075,511)
Other comprehensive income - - - (1,879,504) - - - (1,879,504)
Total comprehensive income - - - (1,879,504) - - (2,075,511) (3,955,015)
Issue of share capital 334,391 13,087,809 - - - - - 13,422,200
Conversion of CLN 233,040 23,550,437 - - - (2,843,734) - 20,939,743
Share based payments and warrants - - - - - 307,842 331,904 639,746
At 31 December 2021 18,935,765 55,349,883 2,350,175 (2,004,424) (268,442) 1,165,911 (41,204,313) 34,324,555
Loss for the year - - - - - - (740,114) (740,114)
Other comprehensive income - - - (3,739,683) - - - (3,739,683)
Total comprehensive income - - - (3,739,683) - - (740,114) (4,479,797)
Share based payments and warrants - - - - - (474,974) 915,270 440,296
At 31 December 2022 18,935,765 55,349,883 2,350,175 (5,744,107) (268,442) 690,937 (41,029,157) 30,285,054
The purpose and nature of each of the above reserves is described in Note 25.
The notes on pages 51 to 86 form part of these financial statements.
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Group Group Company Company
Note 2022 2021 2022 2021
US$ US$ US$ US$
Cash (outflow) from operations 26 (2,554,563) (5,618,404) (711,370) (3,416,684)
Income tax paid - - - -
Net cash (outflow) from operating activities (2,554,563) (5,618,404) (711,370)
(3,416,684)
Cash flows from investing activities
Purchase of intangible assets (730,213) - - -
Advances to acquire property, plant and equipment - (800,000) - -
Purchase of property, plant and equipment - (3,957,944) - (2,979)
Sale of property, plant and equipment 3,767,471 382,320 - -
Net cash inflow/(outflow) from investing activities 3,037,258 (4,375,624) - (2,979)
Cash flows from financing activities
Issue of equity share capital, net of share issue costs - 12,722,200 - 12,722,200
Redemption of CLN - (1,571,222) - (1,571,222)
Intercompany loans received/(advanced) - - 1,150,373 (6,617,719)
Unsecured debt repaid (13,652) (1,040,400) (13,174) (8,547)
Unsecured debt proceeds - 885,234 - -
Principal elements of lease payments - (57,900) - -
Net cash (outflow)/inflow from financing activities (13,652) 10,937,912 1,137,199 4,524,712
Net increase in cash and cash equivalents 469,043 943,884 425,829 1,105,049
Cash and cash equivalents at beginning of the year 1,940,871 999,631 1,915,571 811,901
Exchange gains/(losses) on cash and cash equivalents 204,558 (2,644) 204,513 (1,379)
Cash and cash equivalents at end of the year 17 2,614,472 1,940,871 2,545,913 1,915,571
The notes on pages 51 to 86 form part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES
General information
Active Energy Group plc is a public limited company, limited by shares,
incorporated in England and Wales, and quoted on the AIM market of the London
Stock Exchange. Its registered office address is 27/28 Eastcastle Street,
London, W1W 8DH. The principal activity of the Group is described in the
Strategic Report.
Basis of preparation
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied to
all the years presented, unless otherwise stated. Certain prior year
disclosures have been restated to account for discontinued operations in
accordance with the requirements of IFRS 5.
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK Endorsement Board.
Active Energy Group plc transitioned to UK-adopted International Accounting
Standards in its consolidated financial statements on 1 January 2021. This
change constituted a change in accounting framework however there was no
impact on recognition, measurement or disclosure as a result of the change in
framework.
Both the Company financial statements and the Group financial statements
(collectively the "Financial Statements") have been prepared and approved by
the Directors in accordance with International Financial Reporting Standards
("IFRS") as adopted by the UK, and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The Financial Statements have
been prepared on the historical cost basis, as modified by the revaluation of
property, plant and equipment, available for sale financial assets and certain
financial assets and liabilities, including derivative financial instruments,
held at fair value through profit and loss.
The preparation of financial statements in compliance with IFRS requires the
use of accounting estimates. It also requires management to exercise judgement
in the most appropriate application of the Group's accounting policies. The
areas where significant judgements and estimates have been made in preparing
the financial statements and their effects are disclosed at the end of this
note.
Going concern
In preparing the financial statements the Directors are required to make an
assessment of the Company's ability to continue as a going concern and whether
it is appropriate to prepare the financial statements on a going concern
basis.
Subsequent to the balance sheet date Player Design Inc. has been granted the
permit required to construct and operate CoalSwitch® production at the plant
in Ashland. However, there is uncertainty around the timing to finalise
construction which could affect both the Group's future cash requirements and
the timing of revenue cash generation from sales of CoalSwitch®.
The Directors have prepared cash flow forecasts to estimate the Group's future
cash requirements, and the resources available to it, and these indicate that
the Company should have sufficient cash resources to continue in operation for
the foreseeable future. These forecasts involve a number of assumptions, the
most significant of which are:
· the timing of completion of the Ashland plant and the commencement of
CoalSwitch® production.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
· the level and timing of revenue generated by sales of CoalSwitch®
· the successful disposal of surplus assets and the timing of disposal
proceeds
· the value and timing of pending tax credit claims
The Directors have concluded that additional funding may be required to
execute the Board's strategy of commercialising CoalSwitch®. While there can
be no guarantee that funding will be available on terms that are acceptable to
the Company, or at all, the Directors are confident that the Company will be
able to secure sufficient equity finance at the required time.
The Board are of the opinion that the factors set out above constitute
material uncertainties in relation to the Company's ability to continue as a
going concern.
The financial statements do not include any adjustments that would arise if
the Company were to be unable to continue as a going concern.
Restatement of prior period
The statement of comprehensive income for the year ended 31 December 2021 has
been restated to report the 2021 loss from operations discontinued during 2022
within the loss from discontinued operations line (see note 9). The overall
loss for the year ended 31 December 2021, the total comprehensive loss for the
year and net assets at 31 December 2021 are unaffected.
The Company consolidated its Ordinary Shares during 2022 and consequently the
loss per share and share options and warrants disclosures for the year ended
31 December 2021 have been restated to reflect the consolidated share capital
(see notes 10 and 24). The loss for the year ended 31 December 2021 and net
assets at 31 December 2021 are unaffected.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
New and amended standards which are effective for these Financial Statements
A number of amended standards became mandatory and are effective for annual
periods beginning on or after 1 January 2022 including amendments to IFRS 16
(Covid-19 related rent concessions), IAS 16 (proceeds before intended use) and
IAS 37 (onerous contracts), and the Annual Improvements Cycle 2018-2020. These
have not had a material impact on the financial statements.
New and amended standards which are not yet effective for these Financial
Statements
There are a number of new and amended standards and interpretations that are
not mandatory for the year ended 31 December 2022 and have not been early
adopted in these financial statements. These will be adopted in the period
when they became mandatory unless otherwise indicated.
Ref Title Summary Application date (accounting periods commencing)
IAS1 Presentation of Financial Statements Amendments: classification of liabilities as current or non-current 1 January 2023
Amendments: requirement to disclose 'material' accounting policies instead of
'significant' accounting policies
1 January 2023
Amendments: clarification of the impact of post balance sheet date conditions
on the classification of liabilities as non-current
1 January 2024
IAS8 Accounting Policies, Changes in Accounting Estimates and Errors Amendments: definition of accounting estimates and clarification of the 1 January 2023
treatment of changes in accounting estimates
IAS12 Income Taxes Amendments: clarification of how deferred tax is accounted for on certain 1 January 2023
transactions
IFRS16 Leases Amendments: clarification of the measurement of sale and leaseback 1 January 2024
transactions that qualify as sales transactions under IFRS15
IFRS17 Insurance contracts Replaces IFRS 4 'Insurance Contracts' 1 January 2023
These new and amended standards are not expected to have a material impact on
the Group.
Basis of consolidation
The financial information incorporates the results of the Company and entities
controlled by the Company (its subsidiaries). Control is achieved when the
Group has power over relevant activities, is exposed, or has rights, to
variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. The consolidated
financial statements present the financial results of the Company and its
subsidiaries (the Group) as if they formed a single entity. Where necessary,
adjustments are made to the results of subsidiaries to bring the accounting
policies used into line with those used by the Group. All intra-Group
transactions, balances, income and expenses are eliminated on consolidation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
In the Company's statement of financial position, investments in subsidiaries
are stated at cost less provisions for any permanent diminution in value.
Total comprehensive income of non-wholly owned subsidiaries is attributed to
owners of the parent and to the non-controlling interests in proportion to
their relative ownership interests, except when cumulative losses of the
subsidiary result in negative equity, whereafter total comprehensive income is
attributed to the Group.
Revenue recognition
Revenue is recognised in accordance with the requirements of IFRS 15 'Revenue
from Contracts with Customers'. The Company recognises revenue to depict the
transfer of promised goods and services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. This core principle is delivered in a
five-step model framework: 1. Identify the contract(s) with the customer; 2.
Identify the performance obligations in the contract; 3. Determine the
transaction price; 4. Allocate the transaction price to the performance
obligations in the contract; and 5. Recognise revenue when (or as) the entity
satisfies a performance obligation.
Revenue is recognised when control of the products has been transferred to the
customer. Control is considered to have transferred once products have been
received by the customer unless shipping terms dictate otherwise. Revenues
exclude intra-group sales and value added taxes and represent net invoice
value less estimated rebates, returns and settlement discounts. The net
invoice value is measured by reference to the fair value of the consideration
received or receivable by the Group for goods supplied. In the case of income
from licencing activities, revenue is recognised as and when the relevant
performance obligations defined by the licence agreement have been satisfied.
This may be on initial grant of the licence if the grant is itself the
performance obligation. Alternatively, the performance obligation may be
dependent on certain further events, such as production under the terms of the
licence, in which case revenue will be recognised as this occurs.
Goodwill and business combinations
On acquisition, the assets and liabilities and contingent liabilities of
subsidiaries are measured at their fair values at the date of acquisition. Any
excess of cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired
(i.e. discount on acquisition) is credited to the income statement in the
period of acquisition.
When the consideration transferred by the Group in a business combination
includes assets or liabilities from a contingent consideration arrangement,
the contingent consideration is measured at its acquisition date fair value
and included as part of the consideration paid. Changes in the fair value of
the consideration that qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against goodwill.
Goodwill arising on consolidation is recognised as an intangible asset and
reviewed for impairment at least annually by comparing the carrying value of
the asset to the recoverable amount. Any impairment is recognised immediately
in profit or loss and is not subsequently reversed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
Impairment of non-financial assets (excluding inventories, investment
properties and deferred tax)
Impairment tests on goodwill and other intangible assets with indefinite
useful economic lives are undertaken annually at the financial year end. Other
non-financial assets are subject to impairment tests whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable
amount (i.e. the higher of value in use and fair value less costs to sell),
the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual
asset, the impairment test is carried out on the smallest group of assets to
which it belongs for which there are separately identifiable cash flows; its
cash generating units ("CGUs"). Goodwill is allocated on initial recognition
to each of the Group's CGUs that are expected to benefit from the synergies of
the combination giving rise to the goodwill. Impairment charges are included
in profit or loss, except to the extent they reverse gains previously
recognised in other comprehensive income. An impairment loss recognised for
goodwill is not reversed.
Intangible assets
Externally acquired intangible assets with a finite useful life are initially
recognised at cost and subsequently amortised on a straight-line basis over
their useful economic lives and tested for impairment annually. Externally
acquired intangible assets with an infinite life are not amortised but are
tested for impairment annually.
Intangible assets are recognised on business combinations if they are
separable from the acquired entity or give rise to other contractual/legal
rights. The amounts ascribed to such intangibles are arrived at by using
appropriate valuation techniques.
Internally generated intangible fixed assets are recognised if they meet the
requirements set out by International Accounting Standards. Specifically,
· the asset must be separately identifiable that is to say that either it
is capable of being separated or divided from the entity and sold,
transferred, licensed, rented or exchanged; or it arises from contractual or
other legal rights, regardless of whether those rights are transferable or
separable from the entity or from other rights and obligations;
· the cost of the asset can be measured reliably;
· the technical feasibility of completing the intangible asset;
· the Group intends and is able to complete the intangible asset and use
or sell it;
· the intangible asset will generate probable future economic benefits;
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
Intangible assets (continued)
· there are available and adequate technical, financial, and other
resources to complete and to use or sell the intangible asset; and
· Expenditure attributable to the intangible asset is measurable.
Property, plant and equipment
Property, plant and equipment is stated at cost, or deemed cost, less
accumulated depreciation and any recognised impairment loss. Cost includes the
purchase price and all directly attributable costs. Depreciation is provided
at the following annual rates in order to write off each asset over its
estimated useful life:
Plant and equipment
- 2 to 10 years straight line
Furniture and office equipment - 2 to 5 years straight
line
Buildings
- 25 to 50 years straight line
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period. Property is depreciated and
is reviewed by means of an independent property valuer on a three-year basis,
unless indicators of impairment exist, in which case an independent valuation
will be performed. Land is not depreciated.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of
cost and net realisable value. Cost is determined using the first-in,
first-out (FIFO) method. Cost comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their
present location and condition. Net realisable value is the estimated selling
price in the ordinary course of business, less applicable selling expenses.
Inventory consists of raw materials and finished timber products.
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision maker has been identified as the management team including the
Executive Directors.
Financial assets and liabilities
The Group classifies its financial assets at inception into three measurement
categories; 'amortised cost', 'fair value through other comprehensive income'
("FVOCI") and 'fair value through profit and loss' ("FVTPL"). The Group
classifies its financial liabilities, other than financial guarantees and loan
commitments, as measured at amortised cost. Management determines the
classification of its investments at initial recognition. A financial asset or
financial liability is measured initially at fair value. At inception
transaction costs that are directly attributable to its acquisition or issue,
for an item not at fair value through profit or loss, are added to the fair
value of the financial asset and deducted from the fair value of the financial
liability.
Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount
at which the financial asset or liability is measured at initial recognition,
minus principal payments, plus or minus the cumulative amortisation using the
effective interest method of any difference between the initial amount
recognised and maturity amount, minus any reduction for impairment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Fair value measurement
Fair value is the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm's length transaction
on the measurement date. The fair value of assets and liabilities in active
markets are based on current bid and offer prices respectively. If the market
is not active the group establishes fair value by using appropriate valuation
techniques. These include the use of recent arm's length transactions,
reference to other instruments that are substantially the same for which
market observable prices exist, net present value and discounted cash flow
analysis.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or where the group has transferred
substantially all of the risks and rewards of ownership. In a transaction in
which the group neither retains nor transfers substantially all the risks and
rewards of ownership of a financial asset and it retains control over the
asset, the group continues to recognise the asset to the extent of its
continuing involvement, determined by the extent to which it is exposed to
changes in the value of the transferred asset. There have not been any
instances where assets have only been partly derecognised. The group
derecognises a financial liability when its contractual obligations are
discharged, cancelled or expire.
Impairment
The Group assesses at each financial position date whether there is objective
evidence that a financial asset or group of financial assets is impaired. If
there is objective evidence (such as significant financial difficulty of the
obligor, breach of contract, or it becomes probable that debtor will enter
bankruptcy), the asset is tested for impairment. The amount of the loss is
measured as the difference between the asset's carrying amount and the present
value of the estimated future cash flows (excluding future expected credit
losses that have not been incurred) discounted at the financial asset's
original effective interest rate (that is, the effective interest rate
computed at initial recognition). The carrying amount of the asset is reduced
through use of an allowance account.
Taxation
Current taxes are based on the results shown in the Financial Statements and
are calculated according to local tax rules, using tax rates enacted or
substantively enacted by the year-end date.
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the consolidated statement of financial position
differs from its tax base, except for differences arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
· investments in subsidiaries and jointly controlled entities where the
Group is able to control the timing of the reversal of the difference and it
is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available to utilise the difference.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the reporting date and are expected
to apply when the deferred tax liabilities/assets are settled/recovered.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
Taxation (continued)
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· the same taxable group company; or
· different Group entities which intend either to settle current tax
assets/liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts
of deferred tax assets or liabilities are expected to be settled/recovered.
Foreign currencies
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which they
operate (their "functional currency"). The Company and Consolidated financial
statements are presented in United States Dollar ("US Dollar", "US$"), which
is the Group's presentation currency as the Group's activities are ultimately
linked to the US Dollar. The Company's functional currency is Pounds Sterling.
Transactions entered into by Group entities in a currency other than their
functional currency are recorded at the rates ruling when the transactions
occur. Foreign currency monetary assets and liabilities are translated at the
rates ruling at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised
immediately in profit or loss.
On consolidation, the results of overseas operations are translated into the
Group's presentation currency, US Dollars, at rates approximating to those
ruling when the transactions took place. All assets and liabilities of
overseas operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the reporting date.
Differences arising on translating the opening net assets at opening rate and
the results of overseas operations at actual rate are recognised in other
comprehensive income and accumulated in the foreign exchange reserve. Exchange
differences recognised in the statement of comprehensive income of Group
entities' separate financial statements on the translation of long-term
monetary items forming part of the Group's net investment in the overseas
operation concerned are reclassified to the foreign exchange reserve on
consolidation.
On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign exchange reserve relating to that operation up to
the date of disposal are transferred to the consolidated statement of
comprehensive income as part of the profit or loss on disposal. The key
US$/GBP exchange rates used to prepare the accounts were as follows: rate at
31 December 2022: 1.2056; average for year-ended 31 December 2022: 1.237; rate
at 31 December 2021: 1.350.
Convertible debt
The obligations associated with the issue of the Company's convertible debt
are allocated into their liability and equity components. The amount initially
attributed to the debt component equals the discounted cash flows using a
market rate of interest that would be payable on a similar debt instrument
that does not include an option to convert. Subsequently, the debt component
is accounted for as a financial liability measured at amortised cost until
extinguished on conversion or maturity of the bond. The remainder of the
proceeds are allocated to the conversion option and are recognised in the
"Convertible debt reserve" within shareholders' equity, net of income tax
effects.
Where the proceeds from the convertible debt have been used to finance
construction of property, plant and equipment, or to invest in intangible
assets, then the associated borrowing costs are allocated to the relevant
asset in accordance with the requirements of IAS23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
There were no outstanding convertible debt instruments as at 31 December 2022
as these were all converted in the prior year.
Leased assets
Leased assets are recognised as a right-of-use asset and a corresponding
liability at the date at which the leased asset is available for use by the
Group. The right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease payments made
at or before the commencement date, plus any initial direct costs incurred
and an estimate of costs required to remove or restore the underlying asset,
less any lease incentives received. The right-of-use asset is depreciated over
the shorter of the asset's useful life and the lease term on a straight-line
basis. The initial measurement of the corresponding lease liability is at the
present value of the lease payments that are not paid at the lease
commencement date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group's incremental
borrowing rate. The lease payments include fixed payments, less any lease
incentive receivable, variable leases payments based on an index or rate, and
amounts expected to be payable by the lessee under residual value guarantees.
The lease liability is subsequently measured at amortised cost using the
effective interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, if there is a
change in the Group's estimate of the amount expected to be payable under a
residual value guarantee or if the Group changes its assessment of whether it
will exercise a purchase, extension or termination option. When the lease
liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset or is recorded in profit or loss if
the carrying amount of the right-of-use asset has been reduced to zero.
Share-based payments
Where employees receive remuneration in the form of shares or share options,
the fair value of the share-based employee compensation arrangement at the
date of the grant is recognised as an employee benefit expense in the
consolidated income statement. The total expense to be apportioned over the
vesting period of the benefit is determined by reference to the fair value
(excluding the effect of non-market-based vesting conditions) at the date of
the grant. The assumptions underlying the number of awards expected to vest
are subsequently adjusted for the effects of non-market-based vesting to
reflect the conditions prevailing at the year-end date. Fair value is measured
using a valuation tool (Monte Carlo or Black Scholes). The expected life used
in the model has been adjusted, based on management's best estimate, for the
effects of the non-transferability, exercise restrictions and behavioural
considerations.
Where equity instruments are granted to persons other than employees, the
consolidated income statement is charged with the fair value of goods and
services received; except where that fair value cannot be estimated reliably,
in which case they are measured at the fair value of the equity instruments
granted, measured at the date the entity obtains the goods or the counterparty
renders the service.
Own shares held
Consideration paid/received for the purchase/sale of shares held in escrow or
in trust for the benefit of employees is recognised directly in equity. The
nominal value of such shares held is presented within the "own shares held"
reserve. Any excess of the consideration received on the sale of the shares
over the weighted average cost of the shares sold is credited to retained
earnings.
Neither the purchase nor sale of own shares leads to a gain or loss being
recognised in the Group consolidated income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision for impairment
in the Company financial statements.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with International
Financial Reporting Standards requires management to make estimates and
judgements that affect the reported amounts of assets and liabilities as well
as the disclosure of contingent assets and liabilities at the year-end date
and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Management's consideration
of going concern is discussed elsewhere in the accounting policies note. The
other significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were as
follows:
Impairment of goodwill, intangible fixed assets, property plant and equipment
and other assets
Intangible assets relate solely to CoalSwitch® and PeatSwitch patents,
trademarks, and know-how. The Group has property plant and equipment in the
form of the CoalSwitch® production equipment. The CoalSwitch® reactors
damaged as a result of the component failure at Ashland have been impaired
with the remaining CoalSwitch® production equipment subjected to a value in
use assessment to determine whether further impairment was required. The use
of these methods similarly requires the estimation of future cash flows and
the choice of a discount rate in order to calculate the present value of the
estimated future cash flows. Furthermore, these methods require an assessment
of various strategies to develop and monetise these assets as well as an
assessment of the success of these strategies. Actual outcomes will vary.
Share-based payments
In determining the fair value of LTIP awards and other equity settled
share-based payments, and the related charge to the income statement, the
Group makes assumptions about future events and market conditions. In
particular, judgements must be made as to the fair value of each award
granted. The fair value is determined using a valuation model which is
dependent on further estimates, including the Group's future dividend policy,
the timing with which options will be exercised and the future volatility in
the price of the Group' shares. Such assumptions are based on publicly
available information and reflect market expectations and advice taken from
qualified personnel. Different assumptions about these factors could
materially affect the reported value of share-based payments.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. ACCOUNTING POLICIES (continued)
Critical accounting judgements and key sources of estimation uncertainty
(continued)
Recognition of development costs within intangible fixed assets
The Group undertakes certain development activity which is recognised within
intangible fixed assets if it meets certain criteria laid down by
international accounting standards. This means that management is required to
assess various factors associated with these assets to determine whether the
asset is separately identifiable, that it is probable that future economic
benefits attributable to it will arise; the technical feasibility of
completing the asset; that the Group intends and is able to complete the
asset; and there are available and adequate technical, financial, and other
resources to complete the asset. All these matters involve technical and
economic judgement and changes to these assessments can result in significant
variations in the carrying value and amounts charged to the consolidated
statement of comprehensive income in specific periods.
Recoverability of intercompany loans
The Active Energy Group plc company balance sheet includes various loans to
subsidiaries. Certain of these loans have been impaired on the basis that the
counterparty is unlikely to generate sufficient future cash flows to repay the
loan. This is based on an assessment of the assets (including goodwill) of the
counterparty and its ability to monetise those assets in the future. Actual
results will vary.
2. SEGMENTAL INFORMATION
The Group reports three business segments:
· "CoalSwitch®" denotes the Group's renewable wood pellet
business.
· "Wood processing" at the Lumberton site denotes the Group's
sawmill and saw log activities and the Lumberton property. The sawmill and
sawlog activities ceased during 2021 and are reported as discontinuing
operations. The results of these operations are not included in the segmental
reporting.
· "Corporate and other" denotes the Group's corporate and other
costs.
The business segments are aligned to the Group's strategy as disclosed in the
Strategic Report.
Factors that management used to identify the Group's reportable segments
The Group's reportable segments are strategic business units that offer
different products or services.
Measurement of operating segment profit or loss
The Group evaluates segmental performance on the basis of profit or loss from
operations calculated in accordance with IFRS but excluding the results from
discontinued operations in accordance with IFRS 5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2. SEGMENTAL INFORMATION (continued)
2022 2022 2022 2022
CoalSwitch® Wood processing Corporate Total
& Other
US$ US$ US$ US$
Revenue - - - -
Operating (loss) (1,659,253) - (2,196,131) (3,855,384)
Profit/(loss) before tax (1,659,274) - 1,097,239 (562,035)
Profit/(loss) for the year (1,659,274) - 1,097,239 (562,035)
Total Assets 13,649,225 49,589 3,482,441 17,181,255
Total Liabilities 640,768 332,861 373,831 1,347,460
Other segmental information:
Additions to Intangibles 730,213 - - 730,213
Additions to PPE 231,087 - - 231,087
Depreciation and amortisation - - 1,318 1,318
Impairment charges 1,000,000 - - 1,000,000
Restated Restated
2021 2021 2021 2021
CoalSwitch® Wood processing Corporate Total
& Other
US$ US$ US$ US$
Revenue - - - -
Operating segment (loss)/profit (2,952,909) 18,388 (1,743,583) (4,678,104)
(Loss)/profit before tax (2,952,909) 18,388 (1,743,583) (4,678,104)
(Loss)/profit for the year (2,952,909) 18,388 (1,743,583) (4,678,104)
Total Assets 13,971,415 4,447,457 3,272,460 21,691,332
Total Liabilities 355,952 501,047 670,324 1,527,323
Other segmental information:
Additions to Intangibles 400,000 - - 400,000
Additions to PPE 3,942,465 12,500 2,979 3,957,944
Depreciation and amortisation - - 1,264 1,264
Impairment charges 2,000,000 - - 2,000,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2. SEGMENTAL INFORMATION (continued)
Non-current assets are located as follows:
2022 2021
US$ US$
United Kingdom 824,759 924,848
United States 12,836,100 17,169,404
13,660,859 18,094,252
3. REVENUE
2022
2021
Group US$ US$
Continuing operations - -
Discontinued operations:
Sales of product - 528,062
Other income - 116,852
- 644,914
Sawmill and saw log activities ceased during 2021 and are accounted for as
discontinued operations (see Note 9). All revenue was generated in the USA.
4. IMPAIRMENT CHARGES
2022
2021
US$ US$
Property, plant and equipment 1,000,000 2,000,000
1,000,000 2,000,000
All impairment charges relate to continuing operations. See note 12 for more
information.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
5. EMPLOYEE COSTS AND DIRECTORS
The following table analyses group wages and salaries before any allocations
to property, plant and equipment or intangible assets.
2022 2021
Group US$ US$
Continuing operations
Directors' fees and salaries 607,172 733,051
Social security costs 77,421 89,544
684,593 822,595
Share based payments - directors 339,375 314,530
Share based payments - others 18,746 8,387
1,042,714 1,145,512
Discontinued operations
Wages and salaries 106,699 416,071
Social security costs 9,323 37,076
116,022 453,147
Share based payments - others - 8,987
116,022 462,134
1,158,736 1,607,646
The average monthly number of employees during the year was as follows:
2022 2021
Continuing operations
Directors 5 5
Administration 2 2
Discontinued operations
Production 1 12
8 19
Directors' and key management personnel remuneration
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group. These are
considered to be the directors of the Company.
2022 2021
US$ US$
Directors' emoluments 607,172 730,891
Termination benefits 48,726 -
Share based payments 339,375 314,530
995,273 1,045,421
The emoluments of the highest paid Director for the year, excluding non-cash
share-based payments, were $230,104 (2021: $240,787).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
6. OPERATING LOSS
2022 Restated
2021
Group US$ US$
The operating loss is stated after charging:
Continuing operations
Impairment charges 1,000,000 2,000,000
Depreciation 1,318 1,264
Loss on disposal of fixed assets - 6,064
Auditor's remuneration - parent company and consolidation 68,663 58,133
Auditor's remuneration - subsidiaries 34,610 35,086
Auditor's remuneration - taxation services 6,495 5,504
Auditor's remuneration - other services 2,023 3,715
Share based payments 358,121 630,759
Discontinued operations
Loss on disposal of fixed assets 455,140 -
Depreciation 18,556 172,643
Depreciation on Right-of-Use Assets - 72,511
Auditor's remuneration - 9,288
Share based payments - 8,987
7. NET FINANCE INCOME/(COSTS)
2022
2021
Group US$ US$
Continuing operations
Finance income
Interest income 28,412 -
28,412 -
Finance costs
Interest on convertible loan - (164,400)
Other loan interest and charges (4,239) (139,312)
(4,239) (303,712)
24,173 (303,712)
Discontinued operations
Finance costs
Right-of-use lease interest - (22,265)
Other loan interest and charges (6,662) (7,322)
(6,662) (29,587)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
8. TAXATION
Restated
2022 2021
Group US$ US$
Continuing operations
Current tax - -
Deferred tax - -
Total income tax expense - -
Discontinued operations
Total income tax (credit) (1,395) (2,790)
Factors affecting the tax charge
The tax on the Group assessed for the year is higher than the standard rate of
corporation tax in the UK. The difference is explained below:
Restated
2022 2021
US$ US$
Loss before taxation (1,345,140) (5,884,558)
Standard rate of corporation tax 19% 19%
Loss before tax multiplied by standard rate of corporation tax (255,577) (1,118,066)
Effects of:
Non-deductible expenses 353,655 492,956
Different tax rates in overseas jurisdictions (7,519) (9,492)
Tax credit included within loss from discontinued operations 1,395 2,790
Losses (used)/not recognised (91,954) 631,812
Tax expense/(credit) - -
The Group's tax loss position can be summarised as follows:
2022 2021
US$ US$
Tax losses brought forward at 1 January 43,437,711 35,969,354
Taxable (profit)/loss for the year (517,596) 3,466,886
Adjustment in respect of prior periods (2,630,178) 4,001,471
Tax losses carried forward at 31 December 40,289,937 43,437,711
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
9. DISCONTINUED OPERATIONS
During 2021 the Group discontinued its sawmill and saw log operations under the wood processing operating segment. During 2022 the Group sold the Lumberton property that was used for these operations. The results of these businesses are disclosed as a single line item in the Consolidated Statement of Income in accordance with IFRS5.
The analysis between continuing and discontinued operations is as follows:
Year ended 31 December 2022 Continuing operations Discontinued operations Total
US$ US$ US$
Revenue - - -
Gross loss - (321,292) (321,292)
Impairment charges (1,000,000) - (1,000,000)
Administrative expenses (2,855,384) (14,700) (2,870,084)
Loss on disposal of PPE - (455,140) (455,140)
Other income - 14,689 14,689
Operating loss (3,855,384) (776,443) (4,631,827)
Finance income/(costs) 3,293,349 (6,662) 3,286,687
Loss before taxation (562,035) (783,105) (1,345,140)
Taxation - 1,395 1,395
Loss for the year (562,035) (781,710) (1,343,745)
Cash outflows from operating activities (2,261,629) (292,934) (2,554,563)
Cash inflows from investing activities (730,212) 3,767,469 3,037,257
Cash outflows from financing activities (13,174) (478) (13,652)
Restated Restated
Year ended 31 December 2021 Continuing Discontinued Total
operations operations
US$ US$ US$
Revenue - 644,914 644,914
Gross loss (517,238) (851,211) (1,368,449)
Impairment charges (2,000,000) - (2,000,000)
Administrative expenses (2,904,311) (372,203) (3,276,514)
Other income 361,237 46,547 407,784
Operating loss (5,060,312) (1,176,867) (6,237,179)
Finance income/(costs) 382,208 (29,587) 352,621
Loss before taxation (4,678,104) (1,206,454) (5,884,558)
Taxation - 2,790 2,790
Loss for the year (4,678,104) (1,203,664) (5,881,768)
Cash outflows from operating activities (5,440,031) (178,373) (5,618,404)
Cash outflows from investing activities (4,305,224) (70,400) (4,375,624)
Cash inflows from financing activities 10,937,912 - 10,937,912
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
10. LOSS PER SHARE
Restated
2022 2021
US$ US$
Loss for the year:
Continuing operations (562,035) (4,678,104)
Discontinued operations (781,710) (1,203,664)
Total operations (1,343,745) (5,881,768)
Weighted number of Ordinary Shares in issue 161,863,136 102,450,087
Basic and diluted loss per share (US cents):
Continuing operations (0.35) (4.57)
Discontinued operations (0.48) (1.17)
Total operations (0.83) (5.74)
On 4 July 2022 the Company's Ordinary Shares were consolidated on a 1 for 35
basis and the weighted average number of shares in issue in 2022 has been
adjusted to reflect this. The weighted average number of shares and loss per
share for 2021 have been restated on the basis of the consolidated share
capital and to reflect the apportionment of the 2021 loss relating to the
operations discontinued in 2022.
11. INTANGIBLE ASSETS
Group Goodwill Intellectual Timber Total
property licences
US$ US$ US$ US$
Cost
At 31 December 2020 567,668 5,259,386 6,503,975 12,331,029
Additions - 400,000 - 400,000
Written off (567,668) - (6,503,975) (7,071,643)
At 31 December 2021 - 5,659,386 - 5,659,386
Additions - 730,213 - 730,213
Transferred from PPE - 1,675,348 - 1,675,348
At 31 December 2022 - 8,064,947 - 8,064,947
Accumulated amortisation
At 31 December 2020 567,668 362 6,503,975 7,072,005
Released on assets written off (567,668) - (6,503,975) (7,071,643)
At 31 December 2021 - 362 - 362
At 31 December 2022 - 362 - 362
Net book value
At 31 December 2022 - 8,064,585 - 8,064,585
At 31 December 2021 - 5,659,024 - 5,659,024
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
11. INTANGIBLE ASSETS (continued)
Goodwill
Goodwill arising on the acquisition of Renewable Logistics Systems LLC ("RLS")
in 2019 was fully impaired in 2020. The associated sawmill and saw log
operations ceased during 2021 and accordingly the goodwill was written off in
2021.
Intellectual property
Intellectual property comprises costs incurred to secure the rights and
knowledge associated with the CoalSwitch® and PeatSwitch technologies. These
assets are accounted for as indefinite life assets and assessed for impairment
at each balance sheet date. Recoverability of the intellectual property assets
is dependent on successfully commercialising CoalSwitch® which is subject to
uncertainties including: the capital costs required to construct a
CoalSwitch® facility; feedstock pricing; market conditions and product sales
prices; production efficiencies; logistics costs; and the ability of the Group
to access sufficient financial resources to develop the product to economic
maturity and profitability. Management assessed each of these assumptions,
benchmarked them against available industry data and consulted with an
industry expert. The key assumption in estimating the recoverable amount is
considered to be the future selling price of the CoalSwitch® product.
The recoverable amount of the intellectual property has been estimated based
on a value in use calculation. The calculation uses a discounted cash flow
model covering a three year period and extrapolated to five years assuming no
further growth, with a discount rate of 12.5%. The estimated recoverable
amount exceeds the carrying value of the assets of the cash generating unit
and management have therefore concluded that the intellectual property assets
are not impaired.
Timber licences
Canadian and Ukrainian timber licences were fully impaired in 2020. Following
the sale of AE Ukraine and the revoking of the Newfoundland commercial cutting
permit, these intangibles were written off in 2021.
12. PROPERTY, PLANT AND EQUIPMENT
Group Land & Buildings Plant and equipment Furniture and office equipment Total
US$ US$ US$ US$
Cost
At 31 December 2020 4,281,829 6,573,255 10,349 10,865,433
Additions - 3,954,965 2,979 3,957,944
Disposals - (872,079) - (872,079)
Transfers 210,220 (337,444) - (127,224)
Foreign exchange movements - - (158) (158)
At 31 December 2021 4,492,049 9,318,697 13,170 13,823,916
Additions - 375,357 - 375,357
Disposals (4,492,049) (247,192) - (4,739,241)
Transferred to intangible assets - (1,675,348) - (1,675,348)
Foreign exchange movements - - (1,405) (1,405)
At 31 December 2022 - 7,771,514 11,765 7,783,279
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
12. PROPERTY, PLANT AND EQUIPMENT (continued)
Group Land & Buildings Plant and equipment Furniture and office equipment Total
US$ US$ US$ US$
Accumulated depreciation
At 31 December 2020 165,977 246,366 9,449 421,792
Depreciation for the year 128,366 116,788 1,264 246,418
Impairment charge - 2,000,000 - 2,000,000
Disposals - (229,907) - (229,907)
Transfers (96,343) (30,881) - (127,224)
Foreign exchange movements - - (116) (116)
At 31 December 2021 198,000 2,102,366 10,597 2,310,963
Charge for the year 18,000 556 1,318 19,874
Impairment charge - 1,000,000 - 1,000,000
Disposals (216,000) (102,922) - (318,922)
Foreign exchange movements - - (1,166) (1,166)
At 31 December 2022 - 3,000,000 10,749 3,010,749
Net book value
At 31 December 2022 - 4,771,514 1,016 4,772,530
At 31 December 2021 4,294,049 7,216,331 2,573 11,512,953
The additions to plant and equipment in both 2021 and 2022 represent
expenditure on assets under construction.
Recoverability of the plant and equipment assets is dependent on successfully
commercialising CoalSwitch®; which is subject to uncertainties including: the
capital costs required to construct a CoalSwitch® production facility;
feedstock pricing; market conditions and product sales prices; production
efficiencies; logistics costs; and the ability of the Group to access
sufficient financial resources to develop the product to economic maturity and
profitability. Management assessed each of these assumptions, benchmarked them
against available industry data and consulted with an industry expert. The key
assumption in estimating the recoverable amount is considered to be the future
selling price of the CoalSwitch® product.
The recoverable amount of the plant and equipment has been estimated based on
a value in use calculation. The calculation uses a discounted cash flow model
covering a three year period and extrapolated to five years assuming no
further growth, with a discount rate of 12.5%. The estimated recoverable
amount exceeds the carrying value of the assets of the cash generating unit
and management have therefore concluded that the plant and equipment assets
are not impaired.
The $1,000,000 impairment charge relates to a reactor that has been taken out
of service and is being used for research and development purposes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
12. PROPERTY, PLANT AND EQUIPMENT (continued)
Company - office equipment
2022 2021
US$ US$
Cost
At 1 January 13,170 10,349
Additions - 2,979
Foreign exchange movements (1,407) (158)
At 31 December 11,763 13,170
Accumulated depreciation
At 1 January 10,597 9,449
Charge for the year 1,318 1,264
Foreign exchange movements (1,167) (116)
At 31 December 10,748 10,597
Net book value 1,015 2,573
13. INVESTMENTS IN SUBSIDIARIES
2022 2021
US$ US$
Cost
At 1 January 11,554,112 5,992,561
Additions - 10,200,000
Disposals - (4,496,618)
Foreign exchange movements (1,234,383) (141,831)
At 31 December 10,319,729 11,554,112
Impairment provision
At 1 January 5,136,371 4,496,618
Impairment charge - 1,295
Transfer from long term loans - 5,200,000
Disposals - (4,496,618)
Foreign exchange movements (548,745) (64,924)
At 31 December 4,587,626 5,136,371
5,732,103 6,417,741
Net book value
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
13. INVESTMENTS IN SUBSIDIARIES (continued)
At 31 December 2022 the Group held share capital and had a controlling
interest in each of the following companies:
Subsidiary undertaking Country of incorporation Nature of business Percentage Holding Dissolution
Date
2022 2021
Advanced Biomass Solutions Limited United Kingdom Biomass for energy development 100 100
Lumberton Energy Holdings LLC United States Property Holding Company 100 100
Active Energy Renewable Power LLC United States Biomass for energy development 100 100
CSW2Maine LLC United States Biomass for energy development 100 100
Timberlands Newfoundland & Labrador Inc Canada Biomass for energy development 100 100 9 August 2022
AEG Trading Limited United Kingdom Wood chip distribution 100 100 24 January 2023
Timberlands International Limited United Kingdom Biomass for energy development 100 100 24 January
2023
Nikofeso Holdings Limited Cyprus Wood chip distribution - 100 23 September 2022
Renewable Energy Systems United States Wood processing and distribution 100 100 29 August
2022
Active Energy Services UK Limited (formerly AEG CoalSwitch® Limited) (5) United Kingdom Corporate Services - 89 28 June
2022
AEG CoalSwitch® USA LLC United States Biomass for energy development 100 100 01 March
2020
( )
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
14. INTERCOMPANY LOANS
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
Carrying value at beginning of the year - - 25,296,460 23,204,528
Loans (received)/advanced during the year - - (1,150,373) 7,153,319
Capitalised as investments in subsidiaries (see note 13) - - - (10,200,000)
Impairment provision transferred to investments in subsidiaries - - - 5,200,000
Interest accrued - - - 164,400
Foreign exchange movements - - (2,701,745) (225,787)
Carrying value at end of the year - - 21,444,342 25,296,460
Long term loans are loans made to subsidiaries of the Company and are
repayable on demand.
15. OTHER FINANCIAL ASSETS
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
Fair value at beginning of the year 922,275 931,312 922,275 931,312
Foreign exchange movements (98,531) (9,037) (98,531) (9,037)
Fair value at end of the year 823,744 922,275 823,744 922,275
Other financial assets consist of an unquoted equity instrument which is
valued at fair value through other comprehensive income and classified as a
non-current asset. The instrument is denominated in Pounds Sterling.
This asset is valued according to Level 3 inputs as defined by IFRS 13 and is
therefore subject to management's judgement of unobservable inputs. The asset
is currently held at its historic cost which represents management's best
estimate of its fair value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
16. INVENTORY
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
Raw materials - 27,250 - -
Total Inventory - 27,250 - -
17. TRADE AND OTHER RECEIVABLES
The carrying value of trade and other receivables, after deduction of
appropriate allowances for irrecoverable amounts, approximates to their fair
value. These assets are not interest bearing and are received over a short
period of time with an insignificant risk of changes in fair value.
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
Project advances 774,669 1,190,315 - -
Prepayments 73,461 83,529 73,461 76,926
Other receivables 57,794 355,115 57,736 355,115
Total 905,924 1,628,959 131,197 432,041
Trade and other receivables that have not been received within the payment
terms are classified as overdue. There were no trade and other receivables
overdue at 31 December 2022 or 31 December 2021 and accordingly there were no
impairment provisions at either date. An analysis of the Group's trade and
other receivables by currency is provided in note 27.
18. CASH AND CASH EQUIVALENTS
Group Company Company
Group
2022 2021 2022 2021
US$ US$ US$ US$
Cash at bank 2,614,472 1,940,871 2,545,913 1,915,571
Cash and cash equivalents are defined as cash at bank, demand deposits and
other short-term highly liquid investments that are readily convertible to a
known amount of cash and are subject to an insignificant risk of changes in
value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
19. TRADE AND OTHER PAYABLES
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
Trade payables 428,106 775,709 170,975 345,196
Accruals and deferred income 587,106 232,639 145,696 194,217
Social security and other taxes 34,584 63,682 34,584 62,649
Other payables 150,000 150,000 - -
1,199,796 1,222,030 351,255 602,062
The carrying value of trade and other payables approximates to their fair
value. Payments occur over a short period and the risk of changes in value is
insignificant. The full balance of the trade and other payables becomes due
and payable within three months of the reporting date. These are classified as
financial liabilities on the balance sheet and are measured at amortised cost.
The amounts shown are undiscounted and represent the contractual cash flows.
An analysis of the Group's trade and other payables classified as financial
liabilities by currency is provided in note 27.
20. DEFERRED TAXATION
Deferred tax is calculated on temporary differences under the liability method
using tax rates applicable in the respective Group entities' jurisdiction.
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
Carrying value at beginning of the year 147,349 150,139 - -
Reversal of temporary differences (147,349) (2,790) - -
- 147,349 - -
The deferred tax provision at 31 December 2021 related to the revaluation of
land and buildings which were sold during 2022.
A deferred tax asset has not been recognised in respect of the Group's tax
losses due to uncertainties around the Group's ability to utilise the losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
21. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
Group Book value Fair value Book value Fair value
2022 2022 2021 2021
US$ US$ US$ US$
Non-Current
Other loans 133,940 133,940 143,931 143,931
Current
Other loans 13,724 13,724 14,013 14,013
Total loans and borrowings 147,664 147,664 157,944 157,944
Company Book value Fair value Book value Fair value
2022 2022 2021 2021
US$ US$ US$ US$
Non-Current
Other loans 30,085 30,085 47,029 47,029
Current
Other loans 11,920 11,920 13,015 13,015
Total loans and borrowings 42,005 42,005 60,044 60,044
Convertible debt
Convertible Debt was converted In February 2021 and all obligations were
extinguished. There is no further debt.
Other loans
Other loans comprise a bank loan to the Company guaranteed by the UK
government and a loan to a subsidiary from the US government. The loans are
repayable over 5 and 30 years respectively, with interest rates of 2.5% p.a.
and 3.75% p.a. respectively. The US government loan is secured against the
assets of the subsidiary by way of a floating charge.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
21. LOANS AND BORROWINGS (continued)
The following table analyses the maturity of the other loans. The amounts
shown are undiscounted and represent contractual cash flows.
Group 0-1 year 1-2 years 2-5 years >5 years Total
US$ US$ US$ US$ US$
At 31 December 2022 13,724 14,095 23,924 95,921 147,664
At 31 December 2021 14,013 15,400 40,324 88,207 157,944
Company 0-1 year 1-2 years 2-5 years >5 years Total
US$ US$ US$ US$ US$
At 31 December 2022 11,920 12,221 17,864 - 42,005
At 31 December 2021 13,015 13,346 33,683 - 60,044
The carrying value of loans and borrowings approximates to fair value.
22. RIGHT-OF-USE ASSETS AND LIABILITIES
Group 2022 2021
US$ US$
Non-current asset - plant and equipment
At 1 January - 326,299
Additions - -
Depreciation - (72,511)
Disposals - (253,788)
Net book value - plant and equipment - -
Lease liability
At 1 January - 339,308
Additions - -
Interest expense on leases - 22,265
Lease payments - (57,900)
Lease termination - (303,673)
Total lease liability - -
Current lease liability - -
Non-current lease liability - -
Total lease liability - -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
23. CALLED UP SHARE CAPITAL
2022 2022 2021 2021
Number US$ Number US$
Ordinary shares
At 1 January 5,665,209,745 786,867 1,541,178,043 219,436
Issue of shares 15 - 4,124,031,702 567,431
Share consolidation (5,503,346,624) - - -
161,863,136 786,867 5,665,209,745 786,867
31 December
Deferred shares of £0.0099 each
At 1 January 1,287,536,163 18,148,898 1,287,536,163 18,148,898
At 31 December 1,287,536,163 18,148,898 1,287,536,163 18,148,898
Total share capital 18,935,765 18,935,765
All shares have been allotted, called up and fully paid. The Ordinary Shares
of £0.0001 each were consolidated into Ordinary Shares of £0.0035 each on 4
July 2022 (see below).
At the Company's Annual General Meeting on 4 July 2022, shareholders approved
a 1 for 35 share consolidation of the Company's Ordinary Shares. Following the
share consolidation, the Company had 161,863,136 Ordinary Shares of £0.0035
each.
During 2021 the Company issued 4,124,031,702 Ordinary Shares and received net
proceeds of US$12.7m.
The Deferred Shares have not been admitted to trading on the Alternative
Investment Market, carry no voting rights and are purchasable for an aggregate
sum of £1.
24. SHARE OPTIONS AND WARRANTS
On 4 July 2022 the Company's Ordinary Shares were consolidated on a 1 for 35
basis and corresponding adjustments have been made to the number and exercise
price of the share options and warrants in issue. All share options and
warrants disclosures for 2021 within this note have been restated to reflect
the effect of the share consolidation.
From time to time the Company has entered into share option and warrant
arrangements under which the holders are entitled to subscribe for a
percentage of the Company's Ordinary Share capital. Options under the LTIP and
JSOP are detailed below. All other options and warrants vest immediately. The
number of warrants and share options exercisable at 31 December 2022 was
5,768,463 (2021: 6,482,749). During the year 714,286 (2021: nil) options and
warrants expired.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
24. SHARE OPTIONS AND WARRANTS (continued)
The movements of warrants and share options during the year was as follows:
Restated Restated
2022 2022 2021 2021
Weighted Weighted
Average Number of Average Number of
Exercise Warrants Exercise Warrants
Price and Share Price and Share
(British pence) Options (British pence) Options
At 1 January 103.95 6,482,749 124.95 3,098,571
Expired 35.00 (714,286) - -
Granted - - 85.05 3,384,178
At 31 December 112.68 5,768,463 103.95 6,482,749
At 31 December 2022, the weighted average remaining contractual life of
warrants and share options exercisable was 4.95 years (2021: 5.38 years).
There were no share options issued under the LTIP in 2022 (2021: 2,470,556)
issued. No warrants were issued in 2022 (2021: 913,622 issued). No options
were granted in 2022; the weighted average exercise price of the options and
warrants granted in 2021 was 85.05 pence).
A charge of $358,121 (2021: $639,746) has been recognised in the Statement of
Comprehensive Income in respect of equity settled share based payments.
LTIPs, options and warrants outstanding at 31 December 2022 and 2021 were
exercisable as follows:
Restated Restated
Exercise price range (British pence, US cents in brackets) 2022 2021
Number Number
17.50p (23.10 cents) 428,571 428,571
35.00p (46.20 cents) - 571,429
35.00p (44.10 cents) - 142,857
45.15p (61.95 cents) 609,081 609,081
52.50p (70.70 cents) 214,286 214,286
67.90p (92.75 cents) 304,540 304,540
70.35p (98.70 cents) 1,235,278 1,235,278
105.00p (141.75 cents) 384,287 384,287
123.20p (172.55 cents) 1,235,278 1,235,278
157.50p (219.80 cents) 585,714 585,714
175.00p (236.25 cents) 57,143 57,143
210.00p (283.15 cents) 128,571 128,571
297.50p (415.10 cents) 585,714 585,714
At 31 December 5,768,463 6,482,749
The above disclosures relate to both the Company and the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
24. SHARE OPTIONS AND WARRANTS (continued)
LTIP awards
In February 2021, the Company implemented its Long Term Incentive Plan
("LTIP") to incentivise the Company's Executive Directors, certain other
Directors, and members of the Senior Management team.
Awards under the LTIP take the form of premium priced options over the
Company's Ordinary Shares which are exercisable from the third anniversary of
the date of grant (subject to several market standard specific exceptions).
LTIP options have an expiry date of ten years from the award date. The LTIP
allows for up to 7% of the Company's issued share capital to be allocated to
participants and includes malus and clawback clauses.
The Group measures the fair value of LTIP awards using the Black Scholes
valuation model. The share-based payment expense is recorded over the vesting
period of the option. Share based payment expenses are recognised in the
income statement in accordance with the provisions of IFRS2.
At the inception of the scheme, 2,470,556 LTIP options were granted to
directors and other participants. No further awards were granted during 2021
or 2022. Half of the options have an exercise price of 70.44p (a premium of
75% to the share price on 25 February 2021) and the remaining options are
exercisable at a price of 123.27p (a premium of 75% to the exercise price of
the first tranche).
JSOP awards
Under the Joint Share Ownership Plan ("JSOP"), shares in the Company were
jointly purchased at fair market value by the sole participating employee and
the trustees of the JSOP Trust, with such shares held in the JSOP Trust. For
accounting purposes, the awards are valued as employee share options. There is
only one participant in the JSOP and the Company no longer utilises the JSOP
to incentivise employees.
The company awarded JSOP shares in 2013 and has made no further awards since.
The JSOP share based payment charge was expensed during the vesting period and
there was no associated share based payment charge in 2022 or 2021. At 31
December 2022 and 31 December 2021 there were 400,000 fully vested shares held
in the JSOP Trust. No JSOP shares were sold during either year.
The JSOP trust holds the shares of the JSOP until such time as the JSOP shares
are vested and the participating employee exercises their rights under the
JSOP. The JSOP trust is granted an interest bearing loan by the Company in
order to fund the purchase of its interest in the JSOP shares. The loan held
by the trust is eliminated on consolidation in the financial statements of the
Group. The Company funded portion of the share purchase price is deemed to be
held in treasury until such time as the shares are transferred to the employee
and is recorded as a reduction in equity in both the Group and Company
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
25. RESERVES
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share premium Amounts subscribed for share capital in excess of nominal value.
Merger reserve Difference between fair value and nominal value of shares issued to acquire
interests of more than 90% in subsidiaries.
Foreign exchange reserve Gains and losses arising from retranslating the net assets of overseas
operations into US Dollars.
Own shares held reserve Cost of own shares held by the employee benefit trust, the JSOP trust or the
company as shares held in escrow.
Convertible debt/warrant reserve Equity component of the convertible loan and warrants issued that do not form
part of a share based payment.
Revaluation reserve Surpluses arising on the revaluation of property, plant, and equipment.
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income.
26. NOTE SUPPORTING THE STATEMENT OF CASH FLOWS
Reconciliation of loss before taxation to cash outflows from operating
activities:
Group 2022 2021
US$ US$
Loss for the year (1,343,745) (5,881,768)
Adjustments for:
Share based payment expense 358,121 639,746
Depreciation 19,874 246,418
Gain on redemption of Loans/CLNs - (407,776)
Impairment of PPE and intangible assets 1,000,000 2,000,000
Gain on disposal of right of use assets - (49,885)
Loss on disposal of PPE 212,626 6,064
Foreign currency translations (3,456,479) (1,261,221)
Finance expenses 9,473 162,531
Income tax (1,395) (2,790)
(3,201,525) (4,548,681)
Decrease in inventories 27,250 210,256
Decrease/(increase) in trade and other receivables 641,946 (258,204)
(Decrease) in trade and other payables (22,234) (1,021,775)
Net cash (outflow) from operating activities (2,554,563) (5,618,404)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
26. NOTE SUPPORTING THE STATEMENT OF CASH FLOWS (continued)
2022 2021
Company
US$ US$
Loss for the year (740,114) (2,075,511)
Adjustments for:
Share based payment expense 358,121 639,746
Depreciation 1,318 1,264
Gain on redemption of loans/CLNs - (361,229)
Foreign currency translations (381,967) (608,102)
Finance expenses 5,474 3,102
(757,168) (2,400,730)
Decrease/(Increase) in trade and other receivables 300,844 (432,041)
(Decrease) in trade and other payables (255,046) (583,913)
Net cash (outflow) from operating activities (711,370) (3,416,684)
Cash to net debt reconciliation:
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
Cash and cash equivalents 2,614,472 1,940,871 2,545,913 1,915,571
Borrowings (147,664) (157,944) (42,005) (60,044)
Net Cash/(debt) 2,466,808 1,782,927 2,503,908 1,855,527
Cash and liquid investments 2,614,472 1,940,871 2,545,913 1,915,571
Fixed rate instruments (147,664) (157,944) (42,005) (60,044)
Net Cash/(debt) 2,466,808 1,782,927 2,503,908 1,855,527
Net Debt Reconciliation:
Group Cash and cash equivalents
Unsecured
loans Total Debt Net Debt
US$ US$ US$ US$
Net cash/(debt) at 1 January 2022 1,940,871 (157,944) (157,944) 1,782,927
Cash flows 469,042 4,179 4,179 473,221
Foreign exchange movements 204,559 6,101 6,101 210,660
Net cash/(debt) at 31 December 2022 2,614,472 (147,664) (147,664) 2,466,808
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
26. NOTE SUPPORTING THE STATEMENT OF CASH FLOWS (continued)
Net Debt Reconciliation:
Company Cash and cash equivalents
Unsecured loans
Total Debt Net Debt
US$ US$ US$ US$
Net cash/(debt) at 1 January 2022 1,915,571 (60,044) (60,044) 1,855,527
Cashflows 425,831 11,939 11,939 437,770
Foreign exchange movements 204,511 6,100 6,100 210,611
Net cash/(debt) at 31 December 2022 2,545,913 (42,005) (42,005) 2,503,908
27. FINANCIAL INSTRUMENTS
The Group's treasury policy is to avoid transactions of a speculative nature.
In the course of trading the Group is exposed to a number of financial risks
that can be categorised as market, credit, and liquidity risks. The board
reviews these risks and their impact on the activities of the Group on an
ongoing basis.
The principal financial instruments used by the Group, from which financial
instrument risk arises, are:
· Trade and other receivables
· Cash and cash equivalents
· Trade and other payables
· Available-for-sale financial assets
· Loans and borrowings
A summary of the financial instruments held is provided below.
Financial assets Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
At amortised cost:
Cash and cash equivalents 2,614,472 1,940,871 2,545,913 1,915,571
Amounts due from group companies - - 21,444,342 25,296,460
Other receivables 38,366 355,115 38,308 355,115
2,652,838 2,295,986 24,028,563 27,567,146
At fair value:
Financial investments 823,744 922,275 823,744 922,275
Total financial assets 3,476,582 3,218,261 24,852,307 28,489,421
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
27. FINANCIAL INSTRUMENTS (continued)
Financial liabilities Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
At amortised cost:
Trade payables 428,106 775,709 170,975 345,196
Other current liabilities 150,000 150,000 - -
Loans and Borrowings 147,664 157,944 42,005 60,044
Total financial liabilities 725,770 1,083,653 212,980 405,240
Fair value measurement
The fair value measurement of the Group's financial and non-financial assets
and liabilities utilises market observable inputs and data as far as possible.
Inputs used in determining fair value measurements are categorised into
different levels based on how observable the inputs used in the valuation
technique utilised are (the 'fair value hierarchy'):
Level 1: Quoted prices in active markets for identical items (unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest
level of the inputs used that has a significant effect on the fair value
measurement of the item.
Transfers of items between levels are recognised in the period they occur.
Market Risk
Currency risk
The Group's financial risk management objective is broadly to seek to make
neither profit nor loss from exposure to currency or interest rate risks. The
Group is exposed to transactional foreign exchange risk and takes profits and
losses as they arise as, in the opinion of the directors, the cost of hedging
against fluctuations would be greater than the potential benefits.
The Group's cash and cash equivalents are denominated in the following
currencies:
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
US Dollars 2,062,984 25,607 1,996,724 764
UK Pounds Sterling 551,456 1,915,136 549,157 1,914,679
Euros 32 128 32 128
2,614,472 1,940,871 2,545,913 1,915,571
The Group's trade and other receivables are denominated in the following
currencies:
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
US Dollars 774,727 1,531,393 - 334,475
UK Pounds Sterling 131,197 97,566 131,197 97,566
905,924 1,628,959 131,197 432,041
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
27. FINANCIAL INSTRUMENTS (continued)
The Group's trade and other payables are denominated in the following
currencies:
Group Group Company Company
2022 2021 2022 2021
US$ US$ US$ US$
US Dollars 848,541 617,297 - 13,609
UK Pounds Sterling 351,255 599,934 351,255 583,654
Euros - 4,799 - 4,799
1,199,796 1,222,030 351,255 602,062
The effect of a 5 per cent strengthening of the US Dollar at the reporting
date on the foreign currency denominated net financial instruments carried at
that date would, all other variables held constant, have been a reduction in
net assets of $15,782 (2021: $67,054). A 5 per cent weakening of the US Dollar
would, on the same basis, have increased net assets by the same amount.
Interest rate risk
The Group and Company finance their operations through a mixture of equity and
loans. The remaining debt consists of government issued or guaranteed debt
with fixed rates of interest.
Credit risk
Operational
The Group did not generate any revenue during the period and its exposure to
credit risk is therefore limited. The Group does not enter into derivative
contracts to manage credit risk. Further information on trade and other
receivables is presented in note 17.
Financial
Financial risk relates to non-performance by banks in respect of cash deposits
and is mitigated by the selection of institutions with a strong credit rating.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and
payments to its suppliers. The Group retains operational liquidity risk as it
starts to commercialise CoalSwitch®. During this period there is a risk that
the Group will encounter difficulties in meeting its financial obligations as
they fall due.
The Group's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they fall due. The Group finances its
operations through a mix of equity and debt instruments. The Group's objective
is to provide funding for future growth. The Group's policies aim to ensure
sufficient liquidity is available to meet foreseeable needs through the
preparation of short and long term forecasts. Further details of the
Directors' going concern assessment are set out in note 1.
The Group had loans of $147,664 at 31 December 2022 (2021: $157,944). No
personal guarantees were in place.
Capital risk management
The Group's objective when managing capital is to establish and maintain a
capital structure that safeguards the Group as a going concern and provides a
return to shareholders.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
28. RELATED PARTY DISCLOSURES
As at 31 December 2022 all fees complied with directors' contractual
obligations and were paid up to date. Details of directors' remuneration are
set out in the Directors' Remuneration Report.
During 2022 the Group paid $53,539 (2021: $43,342) to INJ London Limited for
sales and marketing services. This company is owned by Max Aitken, a director
of the Company.
During 2021 the Group paid $2,327 to Zimmfor Management Services for an
assessment of carbon credits related to CoalSwitch®. This company is owned by
Jason Zimmermann, a director of the Company.
Transactions between the Company and its subsidiaries have been eliminated on
consolidation. These transactions, which were incurred in the ordinary course
of business and under normal commercial terms, were as follows:
2022 2021
US$ US$
Sale of property, plant and equipment - 588,392
Allocation of management time and expenses 65,826 205,650
Interest charges - 164,400
The Company's intercompany receivable balances at the year end were as
follows:
2022 2021
US$ US$
Amounts due from Group companies 21,444,342 25,296,460
29. CAPITAL COMMITMENTS
The Group had no capital commitments at 31 December 2022 or 31 December 2021.
30. SUBSEQUENT EVENTS
There have been no disclosable events since the balance sheet date.
31. ULTIMATE CONTROLLING PARTY
The company has no overall controlling party.
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