REG - Active Energy Group - Interim results for the six months ended 30 June
26/09/2023 07:00
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RNS Number : 5914N Active Energy Group PLC 26 September 2023
26 September 2023
Active Energy Group Plc
('Active Energy', the 'Company' or the 'Group')
Interim results for the six months ended 30 June 2023
Active Energy (AIM: AEG, OTCQB: ATGVF), a producer of sustainably-sourced,
energy-dense clean carbon products and technologies, is pleased to announce
its unaudited interim results for the six months ended 30 June 2023.
HIGHLIGHTS
Operational highlights
· Added industry skills and significant experience to senior
leadership team in the US driving the future growth of the Company:
o In March 2023, 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.
o In July 2023, appointment of Barron Hewetson as Chief Technology Officer
to focus on the future development of CoalSwitch® products and production
methods.
· Continued focus on increasing the intellectual property ("IP")
portfolio with Patents and Trademarks for CoalSwitch® awarded in the US,
Canada, Europe (including the UK) and additional trademark applications have
commenced in the US and throughout Asia.
· Accelerated the development of CoalSwitch® product types and
manufacturing methods to meet future customer demands for sustainably sourced,
energy-dense clean carbon products.
· Developed commercial relationships to provide a shortlist of new
potential commercial partners and locations in the US and worldwide for
additional CoalSwitch® production.
· Continued development of sales pipeline with a strategic focus on
certain industries for the future use of CoalSwitch® production.
· Progressed towards first production of CoalSwitch® via
confirmation that permits were granted in May 2023 to Player Design, Inc
("PDI") through its associated entity Player Holdings, LLC for the
construction and operation of a CoalSwitch® reference facility in Ashland,
Maine (the "Ashland Reference Facility").
· PDI has confirmed that first production of CoalSwitch® is
targeted to commence in November 2023 at the Ashland Reference Facility.
Financial highlights
· Operating loss from continuing operations of US$1.6 million for
the period (H1 2022: US$1.3 million).
· Net cash position of US$1.2 million (H1 2022: US$3.9 million).
Post period end activity and Outlook
· The new management team has been actively developing new
production partnerships in the US and internationally with the aim to expand
CoalSwitch® production volumes.
· Active Energy has been developing new opportunities for
CoalSwitch®, both in terms of future derivatives of CoalSwitch® fuel and
improved production processes, as the Group focusses on larger scale
production goals for CoalSwitch® fuel by 2025.
· PDI's confirmation of the additional delays toward production
from the Ashland Reference Facility has been disappointing. However, the
delays have not impeded the interest from future customers for CoalSwitch®,
who remain eager for fuel at the earliest opportunity.
· Active Energy joined the International Biomass Torrefaction and
Carbonization Council ("IBTC") working alongside many of the key global
players in the biomass supply chain.
Michael Rowan, CEO of Active Energy, said:
"Despite the recent confirmation by PDI of the delays in completion of
construction of the Ashland Reference Facility, the new executive team,
assembled in the first half of 2023, has already developed a new and expanded
technology roadmap designed to create new opportunities for CoalSwitch® fuel.
"Specifically, the roadmap includes modifications and upgrades to the existing
proven technology as well as the addition of new technologies that will
improve efficiencies, create new product offerings, and expand the depth and
breadth of the clean carbon products that Active Energy could produce to meet
customer needs. The creation of this additional IP will also open up new
opportunities to partner with industry leaders worldwide for future
CoalSwitch® production.
"The world needs sustainably sourced, energy-dense clean carbon products, like
CoalSwitch®, and technologies to meet Net Zero goals, mandates, and
regulations. We believe that CoalSwitch®, with its planned technology
developments and expanding in-house expertise can help deliver on the future
needs of customers globally.
"Through 2023 Active Energy has been preparing for growth and, with the
current level of customer engagement, we look forward to reporting on
significant commercial progress and product development in the remainder of
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)
Barron Hewetson (Chief Technology 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 aeg@camarco.co.uk
US PR Adviser
Website LinkedIn Twitter
www.aegplc.com www.linkedin.com/company/activeenergy https://twitter.com/aegplc (https://twitter.com/aegplc)
@aegplc
CHIEF EXECUTIVE's Statement
Introduction
The first half of 2023 has seen a significant step change in activity for
Active Energy Group. The Group's strategy remains to commercialize
CoalSwitch®, a proprietary production technology which, in the first instance
transforms lower value wood waste products into higher-value renewable fuels
that can either co-fire with coal to produce immediate environmental and
emissions benefits or replace existing biomass feedstock supplies.
However, Active Energy's routes to the commercialization of its next
generation solution, CoalSwitch®, (the "CoalSwitch® Program") are
multiplying as increasing Net Zero commitments are being made by companies and
countries. Aligned to that, biomass fuel itself is under increasing focus and
Active Energy continues to believe that CoalSwitch® has the operational and
environmental benefits to become a leading fuel of the future.
In July 2022, the Board and PDI agreed to split responsibilities on the
CoalSwitch® Program, with PDI becoming responsible for the engineering and
production of CoalSwitch® and Active Energy taking responsibility for
marketing and sales. Commercial arrangements for the sale of fuel from the
Ashland Reference Facility were established between the Company and PDI within
a Take or Pay agreement. Whilst these arrangements remain in place, during the
latter half of 2022, it became apparent to the Board that Active Energy had to
expand its senior management team in the US to acquire relevant expertise in
both fuel production and product development in-house and to assist PDI.
Alongside this, the political environment changes in the US during the second
half of 2022 with the notable approval of the Inflation Reduction Act ("IRA')
meant that Active Energy was seeing increasing enquiries from potential
customers for the development of alternative low carbon technologies that can
help dramatically reduce emissions for 'hard to decarbonize' industries. The
Board became aware that, whilst the development of the Ashland Reference
Facility by PDI would result in CoalSwitch® becoming available for customers'
initial orders in the short term, the indicative production volumes from the
Ashland Reference Facility may quickly become insufficient to accommodate the
anticipated needs of Active Energy's future customers.
In each instance, Active Energy needed additional expertise to not only
support PDI (if required) but also provide a new perspective and additional
industry experience toward the CoalSwitch® Program and to develop fuels
toward meeting the ever-increasing demands of future customers, both in the US
and internationally.
Strengthened Leadership Team
To execute on this strategy, Active Energy is extremely encouraged that it was
able to hire both a Chief Operating Officer and Chief Technology Officer to
help drive and execute the future strategy.
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 (including senior
management roles at two of Enviva's largest production plants), project
development, program management and new product launches from a broad range of
industries.
This appointment was followed shortly after, in July 2023, by the appointment
of Barron Hewetson as the Company's Chief Technology Officer. Barron joined
Active Energy from Enviva Biomass Inc. At Enviva, he served in a number of
roles, most recently as the Director of Innovation and Product Management.
During his time in that role, Barron diversified Enviva's production portfolio
by negotiating contracts in new industry sectors and assisted in contract
negotiations totaling over $12.5 billion.
Both Steve and Barron have already made a significant impact for Active Energy
to achieve both existing and new goals under the CoalSwitch® Program. The
Company is in discussions with a number of additional senior executives within
the biomass sector in the US and intends to make further hires at the
appropriate time. The Board believes that the future growth of Active Energy
will require further investment in a US management team and corporate
infrastructure in the coming months.
Operational review during the period
1. CoalSwitch® Program & Product Development
The energy market requires a scalable solution to produce next generation
fuels in the volumes required by customers and which can also accommodate the
current volumes demanded for traditional carbon intensive fuels, such as coal.
CoalSwitch® offers a new pathway for heavy, hard-to-decarbonize industries in
the US and globally, who remain under pressure to reduce emissions and
pollution. CoalSwitch® provides a unique ability to achieve these goals
without requiring costly, complex, and yet-to-be-proven mitigation
technologies. In this regard, Active Energy has particularly focused its
marketing activities on the pulp & paper and cement industries. Testing
conducted with industry partners earlier this year has confirmed that
CoalSwitch® can be burnt in existing furnaces without the need for additional
capital expenditure and produce emissions improvements.
It has been clear to Active Energy's Board that there is significant demand
for sustainably sourced, energy-dense clean carbon products and technologies.
To meet that demand, Active Energy needs to accelerate production of
CoalSwitch® and create variants of the fuel. Under the guidance of the Chief
Technology Officer, Active Energy is developing its CoalSwitch® fuels to meet
specific customer specifications that are now being presented to Active Energy
in commercial discussions.
To that end, Active Energy will now refer to the CoalSwitch® product line
going forward as three separate technologies which can produce fuel to meet
specific customer requirements: -
CoalSwitch® Program:
CoalSwitch® 1.0: This production process refers to the original manufacturing
process which successfully produced fuel at Ashland in 2021. This process is
based on a small-scale static reactor producing small volumes of fuel and
which Active Energy may continue to use for future research and development
activities.
CoalSwitch® 2.0: This revised production process is the basis of the Ashland
Reference Facility currently under construction by PDI and to be operated by
its operating company, Maineflame Inc. This facility should be able to produce
increased volumes of CoalSwitch® fuel utilizing steam technologies.
CoalSwitch® 3.0: The recent focus has been to further improve both the fuel
quality and production processes with the next stage of CoalSwitch® fuel
development. Active Energy has been working with Omega Thermal Solutions Group
LLC, based in the US, to develop a new manufacturing process to create a
variant of CoalSwitch® fuel focusing on a torrefaction production process
with improved performance metrics, such as higher fixed carbon results that
will enable Active Energy Group to participate in expanded markets such as
soil amendments, air filtration, ferro silicon and the metallurgical steel
industries. The anticipated scale of production volumes will also increase
significantly.
Active Energy anticipates that each of these technologies will obtain
appropriate IP protection in the US and internationally, and Active Energy
will subsequently seek to license the relevant technology platforms to
additional production partners both inside and outside the US.
Since Q1 2023, the management team have been focused on these product and
production improvements and, led by Steve Schaar, Active Energy is currently
in discussions with various commercial partners in the US to establish
additional production facilities either on a proprietary or a joint venture
basis. Steve has brought an immense operational knowledge to Active Energy and
the Company is actively developing these skills toward new market
opportunities. A shortlist of potential partners throughout the US has already
been developed, each partner looking at decarbonization and Active Energy is
focused on delivering a number of those partnerships in the near term.
2. CoalSwitch® production facilities
The strategy for Active Energy is to build out production operations, either
on a proprietary basis or on a joint venture basis with existing operators, on
both a small-scale and large-scale basis. During H1 2023, Active Energy
commenced several commercial discussions with operating partners to produce
CoalSwitch® fuel. These conversations are ongoing, nonetheless, the variant
of fuel creating the greatest level of commercial interest is currently
CoalSwitch® 3.0, with its higher heating value and capacity to be produced on
a continuous basis at greater production volumes.
The Ashland Reference Facility
The Ashland Reference Facility is being constructed by and will be operated by
the Company's commercial partner, PDI, and its affiliates. AEG is responsible
for sales of CoalSwitch® produced from the Ashland Reference Facility a under
its take-or-pay agreement with PDI and entered into in June 2022. During H1
2023, PDI informed Active Energy of a series of delays in both component
manufacture and permits. Whilst the permits were granted in May 2023, PDI has
recently advised AEG that it now anticipates that construction of the Ashland
Facility will not be completed and ready to commence production, during Q3
2023, as PDI had previously indicated to the Company. In light of this, a
renegotiation of the existing take-or-pay agreement is underway between the
parties to reflect the delays in production.
The Company understands that, while the key components are on site, the latest
delays in completion of construction relate to continuing delays in receipt of
certain other components and associated equipment for the plant. The Company
has been informed that PDI continues to plan for operations at the Ashland
Facility to commence as soon as possible and that PDI remains hopeful of
commencement of production later in November 2023.
Active Energy remains wholly supportive of PDI's efforts and is working with
PDI to support and ensure that production of CoalSwitch® fuel will commence
at the earliest opportunity.
3. Market development
Active Energy has been focused on market development activities, both in the
US and internationally. 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 is expected to
secure a future pipeline of fuel orders.
In the US, the first orders for fuel have been obtained and a future sales
pipeline is being established. This includes the first US CoalSwitch® fuel
order from Carolina Stalite ("Stalite"), an aggregates producer based in North
Carolina.
The sales activities and potential customer interest have also focused beyond
the conventional power generation industry and include various heavy
industries including the cement and pulp & paper industries, where local
and national emissions regulations continue to expand. An active sales program
continues in anticipation of first fuel deliveries from the Ashland Reference
Facility and Active Energy remains confident of future commercial success with
prospective customers on the US East Coast now finalizing terms for initial
test volumes of fuel at identified facilities.
To date, the Company has also obtained indications of interest for the supply
of up to 10,000 tonnes of fuel from various parties based in the UK seeking
the CoalSwitch® fuel as a supply alternate with improved heating performance
properties. Marketing with future customers in the UK has indicated a future
pipeline in excess of 50,000 tonnes of CoalSwitch® fuel per annum. Additional
market interest has been received from Europe, Japan, and South-East Asia.
4. Continued extension of IP Protection
As Active Energy continues to develop and expand its product portfolio, it has
become more important to ensure appropriate IP protection. In the period under
review, Active Energy was awarded multiple patents for turning forest waste
into clean energy. This included two Patents from the United States Patent and
Trademark Office and one from the Canadian Patent Office. Post period end, a
further CoalSwitch® production patent was awarded by the US Patent and
Trademark Office.
In addition, Active Energy received trademarks from the United States Patent
and Trademark Office, the UK Intellectual Property Office, the European Union
Intellectual Property Office and the Canadian Patent and Trademark Office for
the CoalSwitch® brand.
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® technologies. The increasing brand awareness
for CoalSwitch® is further assisting Active Energy in all its marketing
activities.
Post period end activities and outlook
Active Energy is actively addressing all the obvious sustainability concerns
for biomass fuels focusing on utilizing low value waste feedstocks and
producing high-grade fuels which can be co-fired and consistently demonstrate
improved burn and emissions test results.
Post-period end, Active Energy's activities have accelerated substantially
both in terms of product development, including the development of the various
CoalSwitch® production technologies, but also in respect of future production
opportunities in the US and internationally. The level of engagement from
prospective commercial partners seeking joint venture co-operation with Active
Energy has provided the Board with encouragement that Active Energy's
corporate strategy is the right one.
In September 2023, Active Energy was elected to join IBTC, an organization
promoting the sustainable production of vital torrefied or carbonized
technology products on a global scale, with an aim to efficiently replace
carbon-emitting fuels such as coal. The organization aligns wholly with Active
Energy's energy mission to increase the awareness and education around
cleaner, carbon neutral fuels and their benefits.
Whilst the delays at the Ashland Reference Facility are frustrating, Active
Energy remains wholly supportive of PDI in its efforts and anticipates that
the new production and sales opportunities for CoalSwitch® will prove all the
hard work and effort over the last two years will be commercially successful.
I would like to thank all my colleagues and commercial partners for all their
work and commitment toward the CoalSwitch® program and look forward to
achieving commercial success in the remainder of 2023 and 2024.
Michael Rowan
CEO
26 September 2023
FINANCIAL REVIEW
Performance
The operating loss for the period was US$1.6 million (H1 22: US$1.3 million),
comprising administrative expenses.
The loss for the period includes unrealized foreign exchange losses of US$1.1
million (H1 22: gains of US$3.2 million), resulting from the weakening US
Dollar relative to Sterling.
The basic and diluted loss per share were 1.67 cents (H1 22: earnings per
share of 0.82 cents).
Cash Flows
The Group reports a cash position at 30 June 2023 of US$1.2 million (31
December 2022: US$2.6 million).
Operating cash outflows of US$1.2 million (H1 22: US$1.4 million) reflect the
Group's efforts to reduce expenditure and preserve available cash resources.
Investing inflows in H1 22 of US$3.8 million comprised property sale proceeds.
There were no investing cash flows in H1 23.
Aside from minor loan repayments of US$9k (H1 22: US$7k) there were no
financing cash flows during the period.
Going concern
The interim financial statements have been prepared on a going concern basis.
Note 3 to the interim financial statements expands on the directors'
considerations relating to the Group's ability to continue as a going concern.
At 30 June 2023 the Group had cash of US$1.2 million (31 December 2022: US$2.6
million).
PDI has been granted the permits required to construct and operate the Ashland
Reference Facility. Uncertainty around the timing of production still remains
which directly affects the timing of revenue cash generation from sales of
CoalSwitch® and therefore the Group's future cash requirements. PDI has
advised that production is expected to commence in November 2023.
The Board has concluded that additional funding will likely be required to
execute the Board's strategy of commercializing CoalSwitch®. While there can
be no guarantee that funding will be available on terms that are acceptable to
the Company, or at all, the Directors remain positive that the Company will be
able to secure sufficient equity finance at the required time.
The financial statements do not include any of the adjustments that would
arise if the Company were to be unable to continue as a going concern.
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge the unaudited
interim financial statements have been prepared in accordance with IAS 34
'Interim Financial Reporting'.
A list of the current Directors is available on the Company's website:
www.aegplc.com
Michelle Fagan
CFO
26 September 2023
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
30 June 2023
Restated
30 June 2022
Unaudited Unaudited
Note US$ US$
CONTINUING OPERATIONS
REVENUE 7 - -
GROSS PROFIT - -
Administrative expenses (1,598,916) (1,324,274)
OPERATING LOSS (1,598,916) (1,324,274)
Net finance income/(costs) 5 18,175 (2,780)
Foreign exchange (losses)/gains (1,115,188) 3,154,251
(LOSS)/PROFIT BEFORE TAXATION (2,695,929) 1,827,197
Taxation - -
(LOSS)/PROFIT FROM CONTINUING OPERATIONS 7 (2,695,929) 1,827,197
LOSS FROM DISCONTINUED OPERATIONS 7 (1,358) (505,938)
(LOSS)/PROFIT FOR THE PERIOD - attributable to parent 7 (2,697,287) 1,321,259
Basic and diluted (loss)/earnings per share (US cents):
- Continuing operations 6 (1.67) 1.13
- Discontinued operations 6 - (0.31)
- Total operations 6 (1.67) 0.82
OTHER COMPREHENSIVE INCOME/(LOSSES)
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of operations 1,155,425 (3,281,270)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (1,541,862) (1,960,011)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
30 June 2023 31 December 2022
Unaudited Audited
Note US$ US$
NON-CURRENT ASSETS
Intangible assets 9 8,064,585 8,064,585
Property, plant, and equipment 10 4,772,122 4,772,530
Other financial assets 861,917 823,744
13,698,624 13,660,859
CURRENT ASSETS
Trade and other receivables 11 896,875 905,924
Cash and cash equivalents 13 1,241,681 2,614,472
2,138,556 3,520,396
TOTAL ASSETS 15,837,180 17,181,255
CURRENT LIABILITIES
Trade and other payables 12 1,317,379 1,199,796
Loans and borrowings 13 15,570 13,724
1,332,949 1,213,520
NON-CURRENT LIABILITIES
Loans and borrowings 13 126,431 133,940
126,431 133,940
TOTAL LIABILITIES 1,459,380 1,347,460
NET ASSETS 14,377,800 15,833,795
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
Share capital - Ordinary shares 14 786,867 786,867
Share capital - Deferred shares 18,148,898 18,148,898
Share premium 55,349,883 55,349,883
Merger reserve 2,350,175 2,350,175
Foreign exchange reserve (4,695,669) (5,851,094)
Own shares held reserve (268,442) (268,442)
Convertible debt / warrant reserve 690,937 690,937
Retained earnings (57,984,849) (55,373,429)
TOTAL EQUITY 14,377,800 15,833,795
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
Share capital Share premium Merger reserve Foreign exchange reserve Own shares held reserve Convertible debt and warrant reserve Restated
Retained earnings
Restated Restated
Revaluation Reserve
Total equity
US$ US$ US$ US$ US$ US$ US$ US$ US$
(Unaudited)
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
Total comprehensive loss - - - (3,281,270) - - 1,321,259 - (1,960,011)
Realization of revaluation reserve - - - - - - 504,646 (504,646) -
Share based payments - - - - - - 188,062 - 188,062
At 30 June 2022 18,935,765 55,349,883 2,350,175 (5,705,599) (268,442) 1,165,911 (53,435,633) - 18,392,060
(Unaudited)
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
Total comprehensive loss - - - 1,155,425 - - (2,697,287) - (1,541,862)
Share based payments - - - - - - 85,867 - 85,867
At 30 June 2023 18,935,765 55,349,883 2,350,175 (4,695,669) (268,442) 690,937 (57,984,849) - 14,377,800
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
Restated
30 June 2023 30 June 2022
Unaudited Unaudited
Note US$ US$
Cash flows from operating activities
(Loss)/profit for the period (2,697,287) 1,321,259
Adjustments for:
Non-cash and non-operating items 1,411,862 (2,572,980)
Working capital decrease/(increase) 126,632 (157,222)
Net cash outflow from operating activities 19 (1,158,793) (1,408,943)
Cash flows from investing activities
Purchase of property, plant, and equipment - (1,412)
Proceeds on sale of property, plant, and equipment - 3,767,469
Net cash inflow from investing activities - 3,766,057
Cash flows from financing activities
Loans repaid (9,436) (6,918)
Net cash outflow from financing activities (9,436) (6,918)
Net (decrease)/increase in cash and cash equivalents (1,168,229) 2,350,196
Cash and cash equivalents at beginning of the period 2,614,472 1,940,871
Exchange losses on cash and cash equivalents (204,562) (193,853)
Cash and cash equivalents at end of the period 1,241,681 4,097,214
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
1. GENERAL INFORMATION
Active Energy Group plc ("AEG") is a renewable energy company focused on the
production and development of next generation biomass products that have the
potential to transform the traditional coal fired-power industry and the
existing renewable biomass industry. The Company is quoted in London (AIM:
AEG) and trades on the OTCQB Venture Market in the USA (OTCQB: ATGVF").
The Company is incorporated in England and Wales (Company number 03148295) and
the address of the registered office is 27-28 Eastcastle Street, London, W1W
8DH, United Kingdom.
2. BASIS OF PRESENTATION
The Group and Company's annual financial statements are prepared and approved
by the Directors in accordance with International Financial Reporting
Standards ("IFRS") as adopted in the UK, and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS.
The condensed consolidated interim financial statements for the half year
reporting period ended 30 June 2023 have been prepared in accordance with the
UK-adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
The interim financial statements do not include all the information and
disclosures required in the annual financial statements and should be read in
conjunction with the Group's consolidated financial statements for the year
ended 31 December 2022. The interim financial statements are presented in US
Dollars, except as otherwise indicated. The interim financial statements have
been prepared on a going concern basis, under the historical cost convention,
except for the revaluation of certain financial instruments.
The interim financial statements are unaudited and do not constitute full
statutory accounts under Section 434 of the Companies Act 2006. The financial
information in respect of the year ended 31 December 2022 has been extracted
from the statutory accounts which have been delivered to the Registrar of
Companies. The Group's independent auditor's report on those accounts was
unqualified and did not contain a statement under section 498(2) or 498(3) of
the Companies Act 2006. The auditor's report on those accounts highlighted a
material uncertainty in relation to going concern. The auditor did not qualify
their report in respect of this matter. The financial information for the half
years ended 30 June 2023 and 30 June 2022 is unaudited. The financial
information for the year ended 31 December 2022 is audited.
The accounting policies applied by the Group in the interim financial
statements are the same as those applied by the Group in its financial
statements for the year ended 31 December 2022.
The preparation of financial statements in compliance with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise judgment in the most appropriate application of the Group's
accounting policies. The areas where significant judgments and estimates have
been made in preparing these interim financial statements are not materially
different from those disclosed in the financial statements for the year ended
31 December 2022.
These interim financial statements were approved by the Board of Directors on
26 September 2023.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
3. GOING CONCERN
In preparing the interim 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 interim financial statements on a
going concern basis.
In May 2023 Player Design, Inc. were granted the permits required to construct
and operate the CoalSwitch® reference plant in Ashland, Maine. Player Design
have advised that production of CoalSwitch® should commence in November 2023
but there remains uncertainty around the timing and there have been previously
announced delays in construction of the plant. As a consequence, there is
uncertainty around when cash will be generated from sales of the CoalSwitch®
product.
The Company's cash flow forecasts include a number of key assumptions:
· the timing of the completion of the Ashland plant and commencement of
CoalSwitch® production
· the level and timing of revenue generated by sales of CoalSwitch®
· the successful disposal of surplus assets and the timing of receipt of
the disposal proceeds
· the value and timing of receipt of pending tax credit claims
An independent assessment of the assets that are surplus to the construction
of the Ashland facility has been commissioned and the directors await this
report to consider whether a market exists to dispose of these assets at a
reasonable price. A tax credit claim has been submitted to the UK tax
authorities and a response is anticipated within four to six weeks of the
release of these interim financial statements.
The directors have concluded that additional funding is likely to be required
in order to execute the Board's strategy of commercializing 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 remain positive that
the Company will be able to secure sufficient equity finance at the required
time.
However, 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 of the adjustments that would
arise if the Company were to be unable to continue as a going concern.
4. Basis of consolidation
The financial information incorporates the results of AEG and entities
controlled by AEG (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 interim financial
statements present the financial results of AEG 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 INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
5. NET FINANCE GAINS/(COSTS)
30 June 30 June
2023 2022
Unaudited Unaudited
Continuing operations
Interest receivable 20,162 -
Loan interest (1,987) (2,780)
Net finance cost of continuing operations 18,175 (2,780)
Discontinued operations
Loan interest and charges - (5,543)
Net finance cost of discontinued operations - (5,543)
Total operations 18,175 (8,323)
6. LOSS/EARNINGS PER SHARE
30 June Restated
30 June
2023 2022
Unaudited Unaudited
Weighted average ordinary shares in issue (Number) 161,863,136 161,863,136
(Loss)/profit for the period (US$):
Continuing operations (2,695,929) 1,827,197
Discontinued operations (1,358) (505,938)
Total operations (2,697,287) 1,321,259
(1.67) 1.13
Basic (loss)/earnings per share (US cents):
Continuing operations
Discontinued operations - (0.31)
Total operations (1.67) 0.82
7. DISCONTINUED OPERATIONS
During 2021 the Group discontinued its sawmill and saw log operations under
the wood processing operating segment. During 2022 the Group sold the
Lumberton property that was used for these operations. The results of these
businesses are disclosed as a single line item in the Condensed Consolidated
Statement of Income in accordance with IFRS5.
The analysis between continuing and discontinued operations is as follows:
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
7. DISCONTINUED OPERATIONS (CONTINUED)
Six months to 30 June 2023 (Unaudited) Continuing Discontinued Total
operations operations
US$ US$ US$
Revenue - - -
Gross loss - - -
Administrative expenses (1,598,916) (923) (1,599,839)
Operating loss (1,598,916) (923) (1,599,839)
Net finance income/(costs) 18,175 - 18,175
Foreign exchange losses (1,115,188) (435) (1,115,623)
Loss before taxation (2,695,929) (1,358) (2,697,287)
Taxation - - -
Loss for the period (2,695,929) (1,358) (2,697,287)
Cash outflows from operating activities (1,157,870) (923) (1,158,793)
Cash outflows from investing activities - - -
Cash outflows from financing activities (9,436) - (9,436)
Six months to 30 June 2022 (Unaudited) Continuing Restated Restated
operations Discontinued
operations Total
US$ US$ US$
Revenue - - -
Gross loss - - -
Administrative expenses (1,324,274) (46,650) (1,370,924)
Loss on disposal of PPE - (455,140) (455,140)
Operating loss (1,324,274) (501,790) (1,826,064)
Net finance costs (2,780) (5,543) (8,323)
Foreign exchange gains 3,154,251 - 3,154,251
Profit/(Loss) before taxation 1,827,197 (507,333) 1,319,864
Taxation - 1,395 1,395
Profit/(Loss) for the period 1,827,197 (505,938) 1,321,259
Cash outflows from operating activities (1,337,753) (71,190) (1,408,943)
Cash (outflows)/inflows from investing activities (1,412) 3,767,469 3,766,057
Cash outflows from financing activities (6,918) - (6,918)
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
8. SEGMENTAL INFORMATION
The Group reports three business segments:
· "CoalSwitch®" denotes the Group's renewable wood pellet
business.
· "Wood processing" denotes the Group's sawmill and saw log
activities and the Lumberton property. The Sawmill and saw log activities
ceased during 2021 and are reported as discontinued 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. The Group's reportable segments are strategic business units
that offer different products or services.
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.
Six months to 30 June 2023 CoalSwitch Wood Corporate Total
(Unaudited) processing & Other
US$ US$ US$ US$
Revenue - - - -
Operating loss (455,920) - (1,142,996) (1,598,916)
Loss before tax (457,273) - (2,238,656) (2,695,929)
Tax credit/(charge) - - - -
Loss for the period (457,273) - (2,238,656) (2,695,929)
Total Assets 13,692,476 - 2,144,704 15,837,180
Total Liabilities 865,295 1,532 592,553 1,459,380
Other segmental information:
Capital Expenditure: - - - -
Additions to Intangibles - - - -
Depreciation & amortization - - 445 445
Six months to 30 June 2022 CoalSwitch Wood processing Corporate Total
(Unaudited) & Other
US$ US$ US$ US$
Revenue - - - -
Operating loss (194,341) - (1,129,933) (1,324,274)
(Loss)/profit before tax (194,362) - 2,021,559 1,827,197
Tax credit/(charge) - - - -
(Loss)/profit for the period (194,362) - 2,021,559 1,827,197
Total Assets 14,405,844 170,573 4,921,052 19,497,469
Total Liabilities 312,927 264,171 528,311 1,105,409
Other segmental information:
Capital Expenditure 325,357 - 1,414 326,771
Additions to Intangibles 430,214 - - 430,214
Depreciation & amortization - - 709 709
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
9. INTANGIBLE ASSETS
Intellectual
property
US$
Cost
At 31 December 2021 5,659,386
Additions 730,213
Transferred from PPE 1,675,348
At 31 December 2022 (audited) 8,064,947
Additions -
At 30 June 2023 (unaudited) 8,064,947
Accumulated amortization
At 31 December 2021 362
Amortization charge -
At 31 December 2022 (audited) 362
Amortization charge -
At 30 June 2023 (unaudited) 362
Net book value
At 30 June 2023 (unaudited) 8,064,585
At 31 December 2022 (audited) 8,064,585
Intellectual property comprises costs incurred to secure the rights and
knowledge associated with the CoalSwitch® and PeatSwitch technologies.
The recoverability of the intellectual property assets is dependent on
successfully commercializing CoalSwitch®, which is subject to a number of
uncertainties including the ability of the Group to access financial resources
to develop and bring the product to economic maturity and profitability.
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 two and a half 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.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
10. PROPERTY, PLANT AND EQUIPMENT
Land & Buildings Plant and equipment Furniture and office equipment Total
US$ US$ US$ US$
Cost
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)
Transfers to Intangible Assets - (1,675,348) - (1,675,348)
Foreign exchange differences - - (1,405) (1,405)
At 31 December 2022 (audited) - 7,771,514 11,765 7,783,279
Foreign exchange differences - - 545 545
At 30 June 2023 (unaudited) - 7,771,514 12,310 7,783,824
Accumulated depreciation
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 charges - 1,000,000 - 1,000,000
Disposals (216,000) (102,922) - (318,922)
Foreign exchange differences - - (1,166) (1,166)
At 31 December 2022 (audited) - 3,000,000 10,749 3,010,749
Charge for the period - - 445 445
Foreign exchange differences - - 508 508
At 30 June 2023 (unaudited) - 3,000,000 11,702 3,011,702
Net book value
At 30 June 2023 (unaudited) - 4,771,514 608 4,772,122
At 31 December 2022 (audited) - 4,771,514 1,016 4,772,530
Plant and equipment additions relate to the CoalSwitch® production facility
in Maine. Following the sale of the Lumberton property CoalSwitch® equipment
has been relocated to Maine.
The recoverability of the plant and equipment assets is dependent on
successfully commercializing CoalSwitch®, which is subject to a number of
uncertainties including the ability of the Group to access financial resources
to develop and bring the product to economic maturity and profitability.
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 two and a half 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.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
11. TRADE AND OTHER RECEIVABLES
30 June 31 December
2023 2022
Unaudited Audited
US$ US$
Project advances 624,688 774,669
Prepayments 53,642 73,461
Other receivables 218,545 57,794
896,875 905,924
No impairment provisions have been made against trade and other receivables.
The carrying value of trade and other receivables approximates to fair value.
12. TRADE AND OTHER PAYABLES
30 June 31 December
2023 2022
Unaudited Audited
US$ US$
Trade payables 531,620 428,106
Social security and other taxes 3,173 34,584
Accruals and deferred income 632,586 587,106
Other payables 150,000 150,000
1,317,379 1,199,796
The carrying value of trade and other payables approximates to fair value.
13. NET CASH
30 June 31 December
2023 2022
Unaudited Audited
US$ US$
Cash and cash equivalents 1,241,681 2,614,472
Loans and borrowings - current liabilities (15,570) (13,724)
Loans and borrowings - non current liabilities (126,431) (133,940)
Loans and borrowings - total liabilities (142,001) (147,664)
2,466,808
1,099,680
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
14. SHARE CAPITAL - ORDINARY SHARES
Number of US$
shares
Allotted, called up and fully paid shares of 0.01p each
At 1 January 2022 5,665,209,745 786,867
Issue of shares 15 -
Share consolidation (5,503,346,624) -
At 31 December 2022 and 30 June 2023 161,863,136 786,867
At the Company's Annual General Meeting on 4 July 2022, shareholders approved
a 1 for 35 share consolidation. Following the share consolidation, the Company
has 161,863,136 ordinary shares of 0.35 pence each.
15. RELATED PARTY DISCLOSURES
During the six month period ended 30 June 2022 the Group paid $37,520 to INJ
London Ltd for sales and marketing services. This company is owned by Max
Aitken. There were no transactions during the six month period ended 30 June
2023.
At 30 June 2022 there were $91,667 of unpaid directors' salaries and fees
which have subsequently been paid. There were no unpaid directors' salaries or
fees at 30 June 2023.
16. CAPITAL COMMITMENTS
There were no capital commitments at 30 June 2023 (31 December 2022: Nil).
17. SUBSEQUENT EVENTS
There have been no disclosable events since the balance sheet date.
18. RESTATEMENT OF PRIOR PERIOD
The statement of comprehensive income for the six month period ended 30 June
2022 has been restated to correct an error in the accounting for the disposal
of revalued property, plant and equipment during the period. This correction
increases the loss from discontinued operations for the period by $504,646 and
therefore reduces the profit for the period by the same amount. The total
comprehensive loss for the period and net assets at 30 June 2022 are not
affected. The disposal was accounted for correctly in the financial statements
for the year ended 31 December 2022.
The Company consolidated its ordinary share capital during the second half of
2022 and consequently the loss/earnings per share for the six months ended 30
June 2022 have been restated to reflect the consolidated share capital (see
notes 6 and 14). The loss for the period ended 30 June 2022 and net assets at
30 June 2022 are unaffected.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
19. RECONCILIATION OF LOSS FOR THE PERIOD TO CASH OUTFLOWS FROM OPERATING ACTIVITIES
30 June Restated
30 June
2023 2022
Unaudited Unaudited
US$ US$
(Loss)/profit for the period (2,697,287) 1,321,259
Adjusted for:
Share based payment expense 85,867 188,062
Depreciation 445 19,265
Profit on disposal of property, plant, and equipment - 212,626
Foreign currency translations 1,323,578 (2,999,414)
Finance expenses 1,972 7,876
Income tax - (1,395)
(1,285,425) (1,251,721)
Decrease / (increase) in inventories - 27,250
Decrease in trade and other receivables 9,049 85,376
Increase/Decrease in trade and other payables 117,583 (269,848)
Net cash outflow from operating activities (1,158,793) (1,408,943)
20. COPIES OF THE INTERIM FINANCIAL STATEMENTS
Copies of the interim financial statements will be made available on the
Company's website at www.aegplc.com (http://www.aegplc.com) .
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