REG - i(x) Net Zero PLC - Final Results
07/06/2022 07:00
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RNS Number : 9084N i(x) Net Zero PLC 07 June 2022
7 June 2022
i(x) Net Zero PLC
("i(x) Net Zero", "i(x)" or the "Company")
Final Results for the Year Ended 31 December 2021
i(x) Net Zero (AIM: IX.), the investing company which focuses on Energy
Transition and Sustainability in the Built Environment, is pleased to
announce the audited final results of i(x) investments, LLC ("i(x)
investments"), the predecessor of the Company prior to its admission to
trading on AIM in February 2022, for the year ended 31 December 2021 ("FY
2021"). All amounts are in USD unless otherwise stated.
Financial and Investment Highlights
· Fair value of investments in portfolio companies ("NAV") increased by
$44.9 million from $15.8 million as at 31 December 2020 to $60.7 million as at
31 December 2021, an increase of 285%;
· Net profit increased by 670% from $4.6 million in FY 2020 to $35.8
million;
· As at 31 December 2021, the Company had no borrowings and cash of
$2.1 million (31 December 2020: no borrowings and cash of $6.2 million);
· Net assets of i(x) Financial Services, LLC and i(x) Securities, LLC
of $1.2 million were classified as assets held for disposal as at 31 December
2021 and the results of operations of these entities were classified as loss
of discontinued operations of $0.2 million (FY 2020: profit of $1.1 million);
· During FY 2021, i(x) investments became a signatory to the United
Nations Principles of Responsible Investing ("PRI"); and
· During FY 2021, i(x) investments made portfolio investments of $4.4
million (FY 2020: $2.7 million).
Events Subsequent to Year End
The following are key developments subsequent to the FY 2021 year end which
demonstrate that the Company and its investee companies are continuing to
progress with tangible accomplishments:
- In February 2022, the Company raised gross proceeds of c.£10.7
million (£9.0 million net) through the placing of 14,056,811 ordinary shares
at 76 pence per ordinary share and its shares were admitted to trading on AIM.
Cash at 31 May 2022 was $11.7 million;
- i(x) Net Zero awarded the LSE Green Economy Mark;
- NAV of the investee companies (excluding cash) at 28 March 2022
had increased to $65.4 million in conjunction with the Company's $1.5 million
accretive follow-on investment in Enphys Management Company;
- WasteFuel announced a minimum of 30k tonnes per annum green
methanol offtake agreement with Maersk to begin in 2024;
- Creation of WasteFuel Agriculture and WasteFuel Marine to further
address the opportunities in these key markets;
- Continued to build a strong leadership team at WasteFuel with the
hiring of Jeff Briggs as its new COO and Marc Chennault moving to its
full-time CFO;
- Context Labs announced a major partnership with Williams (NYSE:
WMB);
- Carbon Engineering's strategic partner, 1PointFive, announced an
agreement to sell 400,000 tonnes of carbon removal credits derived from the
Carbon Engineering plant being constructed in the Permian Basin in the U.S. to
Airbus;
- Sustainable Living Innovations ("SLI") closed its $53 million
accelerated growth round and completed its conversion from a limited liability
company to a C Corporation, which triggered a 50 per cent. increase in i(x)
Net Zero's share ownership in SLI due to the preference rights it acquired
when it made its initial investment;
- SLI's 15 storey apartment building at 303 Battery in Seattle, the
world's first net zero energy high-rise apartment building, will complete the
placement of the top floor panels in June 2022 and is expected to be completed
before year-end, in line with SLI's targeted 13-15 month construction cycle
from the pouring of the foundation; and
- SLI broke ground with Downtown Emergency Service Center (DESC), a
non-profit housing organization in Seattle, for a 5 storey 124-unit
energy-efficient permanent supportive apartment building as a solution for
long term homelessness.
Steve Oyer, Chief Executive Officer of the Company, said:
"Our performance as a private company during the year ended 31 December 2021
was very strong, as we successfully pursued our strategy of investing in
companies whose remit is to deploy capital to address the long-term issues of
energy transition and sustainability in the built environment.
"The culmination of our efforts last year came in February 2022, when i(x) Net
Zero plc's shares were admitted to trading on AIM and the Company was awarded
the LSE's coveted Green Economy Mark. The listing will enable the Company to
further leverage the significant market opportunity to deploy capital that
has the power to improve the sustainability of our planet and the communities
in which we live. Since its IPO, i(x) Net Zero has continued to successfully
pursue its strategy, with highlights including an additional $1.5 million
invested in Enphys Management Company, the announcement by WasteFuel of a
commercial-scale bio-methanol partnership with Maersk, a multi-year
partnership for Context Labs with Williams, a Fortune 500 energy company, and
the strengthening of our Board with the appointment of Dmitri Tsvetkov as its
incoming Chief Financial Officer.
"Looking ahead, i(x) Net Zero's strategy remains to be an effective driver of
its platform for growth, with a number of investment opportunities under
active consideration. We are confident and excited about what the future
holds."
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014 which is part of UK law by virtue of the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
- Ends -
For further information visit https://ixnetzero.com/ (https://ixnetzero.com/)
or contact:
i(x) Net Zero Via Buchanan below
Steve Oyer - Chief Executive Officer
Pär Lindström - Chief Investment Officer
Marc Chennault - Chief Financial Officer
Dmitri Tsvetkov - Group Finance Director (incoming Chief Financial Officer - +44 782 734 1323
effective 1 July 2022)
H & P Advisory Limited
Financial Adviser & Joint Broker +44 20 7907 8500
Neil Passmore
Ernest Bell
Andy Crispin (Sales)
Shore Capital +44 20 7408 4050
Nominated Adviser & Joint Broker
Tom Griffiths
David Coaten
Iain Sexton
Buchanan
Helen Tarbet +44 7872 604 453
Simon Compton +44 7979 497 324
Ariadna Peretz +44 7488 495 969
Notes to Editors
About i(x) Net Zero PLC
i(x) Net Zero PLC is an AIM quoted investing company that provide its
shareholders the opportunity to create long-term capital growth with
positive, scalable, measurable and sustainable impact on the environment and
on the communities it serves.
i(x) Net Zero focuses on two critical areas in which it aims to make a
positive impact: (i) Energy Transition and (ii) Sustainability in the Built
Environment. The Company uses a multi-strategy investment approach, providing
the companies in which it invests with the expertise and catalytic capital to
help them grow. To date, i(x) Net Zero has invested in biofuels, direct air
capture (carbon removal), renewable energy, sustainable workforce housing and
net zero construction technology.
i(x) Net Zero is a provisional signatory to the UN Principles for Responsible
Investing. The Company has received the London Stock Exchange's Green Economy
Mark.
Chairman's Statement
I am pleased to present i(x) investments' audited final results adjusted for
the continuing assets for the year ended 31 December 2021, a period in which
it was still a private company. i(x) investments is the predecessor of the
Company before its admission to trading on AIM on 9 February 2022. As such,
these results are not necessarily reflective of i(x) Net Zero as it is today
and the significant platform for growth we have gained from our AIM listing,
although they do provide a demonstration of our proven strategy for
shareholder value creation.
i(x) Net Zero is an investing company which focuses on Energy Transition and
Sustainability in the Built Environment. With the climate crisis now a major
priority for policy makers and communities worldwide, there is a clear and
urgent need for significant investment in technologies and companies which
will help address and mitigate climate change. i(x) Net Zero exists to provide
companies with investment, expertise and access to our networks of capital.
The i(x) Net Zero management team strongly believes that the world's biggest
problems present significant market opportunities to address climate change
and create shareholder value. The need for companies like i(x) Net Zero and
the capital we bring has never been stronger.
During the year, the fair value of investments in investee companies ("NAV")
increased by 285% to $60.7 million (31 December 2020: $15.8 million), whilst
portfolio investments of $4.4 million were made. The efficacy of our strategy
and the 2021 performance was subsequently supported post year end on 29 March
2022, when we announced an upward revision of US$3.1 million ($4.6 million
total value increase less the investment of $1.5 million) to our unaudited net
asset value, driven by our US$1.5 million investment in Enphys Management
Company, our investee company focused on renewables and energy transition in
Latin America. Two of our investee companies, WasteFuel and Context Labs, also
announced landmark partnerships.
Looking ahead, the admission of i(x) Net Zero's shares to trading on AIM has
afforded the Company a strong platform to make further investment and to
nurture opportunities for significant shareholder value creation, whilst also
addressing climate change, the most urgent challenge which faces the world
today. On behalf of the Board, I would like to thank our team and our
shareholders for their commitment and support. We look forward to the future
with confidence.
Nicholas Hurd
Chairman
7 June 2022
Chief Executive's Statement
Operational Review
The following are brief descriptions of the scope and scale of each of our
investee companies:
$m $m $m $m
Investee Company Equity interest (31/5/2022) NAV as at (31/5/2022) NAV as at 31/12/2021 NAV as at 31/12/2020 Increase/
(Decrease) during 2021
WasteFuel Global, LLC 36.17% 46.82 46.82 10.54 36.28
Enphys Management Company, LLC 14.50% 10.37 5.73 5.73
MultiGreen Properties, LLC 10.40% 4.81 4.81 3.84 0.97
Sustainable Living Innovations 0.10% 0.50 0.50 0.50
Carbon Engineering Ltd 0.45% 2.38 2.38 1.14 1.25
Context Labs B.V. 0.53% 0.51 0.50 0.50
Other - Discontinued operations 0.25 -0.25
Total 65.40 60.74 15.77 44.97
- WasteFuel Global, LLC ("WasteFuel") is focused on developing
renewable, non-fossil fuels to help reduce the carbon emissions of the
transportation sector with a particular focus on waste to energy for trucks,
planes and ships. On 19 May 2021, WasteFuel established a strategic
partnership with PrimeInfra, a leading global developer of core infrastructure
assets, to develop biorefineries to convert municipal solid waste to renewable
jet fuel in the Philippines. On 4 February 2021, NetJets Inc, a global leader
in private aviation, announced that it will purchase a minimum of 100 million
gallons of jet fuel over the next decade from WasteFuel. WasteFuel is also
working with Maersk, the Danish shipping company, to develop Renewable Natural
Gas and biomethanol projects and offtake which will be used to supply their
new fleet of green biomethanol container ships which are currently under
construction.
- Enphys Management Company, LLC ("EMC") is i(x) Net Zero's
partnership with the Latin America Investment Group, a business development
and investment group. EMC pursues private and public opportunities focused on
renewables and energy transition in Latin America and has a direct ownership
in Enphys Acquisition Sponsor, LLC ("EAS"), the sponsor company of Enphys
Acquisition Corp. ("EAC"), a NYSE-listed SPAC targeting renewable energy
businesses in Latin America, in which EMC also has an ownership. On 8 October
2021, EAC closed its upsized initial public offering on the New York Stock
Exchange with total gross proceeds raised of US$345 million. It expects to
identify and execute a business combination during the current year with one
or more businesses that predominantly operate in Latin America and whose
business strategy is aligned with energy transition and sustainability themes,
in particular renewable energy.
- MultiGreen Properties, LLC ("MultiGreen") is a developer of
sustainable, multi-family properties that aims to supply affordable workforce
rental housing by reducing construction costs and duration. MultiGreen intends
to become the first fully net zero energy operator of multi-family projects
in the US by 2025. In addition, through design and multi-phased approach,
MultiGreen has publicly committed to net zero carbon by 2030.
Since the formal launch of MultiGreen in January 2020, more than
1,000 units are fully funded and under construction with a total
construction volume of $233.3 million and with an anticipated fully occupied
value of $380 million. MultiGreen's robust pipeline includes a second phase at
its Henderson, Nevada Apex 582 project to be launched in 2022, and a 216-unit
Phase II of Sonata, the multifamily project in Albuquerque, New Mexico, to
break ground in September 2022, to be followed by three additional phases as
planned over the next five years.
MultiGreen is currently active with construction or site selection
in five of its top ten identified housing markets, which also happen to be
the fastest growing job markets and in-migration in the U.S., with a total
pipeline of projects in excess of $1 billion in construction volume.
- Sustainable Living Innovations ("SLI") is a construction
technology and product development company producing panelised buildings to
address housing affordability, while delivering a new standard in sustainable
living. In June 2021, SLI began construction of a fifteen storey, 112-unit
apartment building in Seattle, Washington. SLI will continue to design, build
and deliver net zero buildings to multiple markets in the U.S. initially and
then globally. i(x) Net Zero's strategy is to create joint ventures with SLI
and certain i(x) Net Zero shareholders and industry partners outside the U.S.
to build assembly plants for SLI's patented building systems to serve defined
geographic regions. We anticipate that this approach will be accretive to
building value for i(x) Net Zero.
SLI closed its $53 million accelerated growth round and completed its
conversion from a limited liability company to a C Corporation, which
triggered a 50 per cent. increase in i(x) Net Zero's share ownership in SLI
due to the preference rights it acquired when it made its initial investment.
- Carbon Engineering Ltd. ("Carbon Engineering") has developed a
proprietary Direct Air Capture ("DAC") technology that removes carbon dioxide
directly from the atmosphere for sequestration and storage. The company will
license the technology to industrial partners to build and operate. In 2021,
Carbon Engineering and its partner 1PointFive began the engineering and design
of a DAC facility that will permanently remove between 500,000 and one million
tonnes of CO(2) in the Permian Basin in the US; ground-breaking for this
facility is expected in the second half of 2022, with completion targeted for
2024.
- Context Labs B.V. ("Context Labs") is an impact software company
whose blockchain technology platform enables the harvesting and processing of
data to help businesses track their carbon emissions and their compliance with
regulatory frameworks. The year under review saw Context Labs close on a $28
million funding round with strategic partners, including BP Energy Partners,
KPMG LLP, Equinor Ventures and i(x) Net Zero, giving it a strong capital base
from which to build out its team and further develop its products.
Financial Review
The Company delivered a strong set of results with fair value of investments
in portfolio companies ("NAV") increasing 285%, by $44.9 million to $60.7
million as at 31 December 2021 (31 December 2020: $15.8 million) and net
profit after tax increasing by 670% to $35.8 million (FY 2020: $4.6 million).
The annual increase in NAV of $44.9 million comprises unrealised gains of
$40.8 million due to the change in fair value of portfolio investments and
$4.1 million of net additions to investments ($4.4 million gross).
The majority of unrealised gains relates to a significant increase in fair
value of WasteFuel as a result of its fundraising during Q4 2021, which
resulted in total fair value of WasteFuel of $133 million as at 31 December
2021.
General and administrative costs increased by $1.4 million to $4.8 million (FY
2020: $3.4 million), largely as a result of costs incurred in the preparation
of the AIM listing.
The Company continues to be in a strong financial position and as at 31
December 2021 had no borrowings, cash of $2.1 million (31 December 2020: no
borrowings and cash of $6.2 million) and net current assets of $2.8 million
(31 December 2020: $6.9 million).
In February 2022, the Company raised gross proceeds of approximately £10.7
million (c.£9.0 million net) through the placing of 14,056,811 ordinary
shares at 76 pence per share and was admitted to trading on AIM. Cash at 31
May 2022 was $11.7 million.
Prepaid expenses and other current assets of $1.5 million (31 December 2020:
$0.1 million) primarily relate to various costs incurred with respect to the
contemplated issuance of shares and corresponding AIM listing of i(x) Net Zero
PLC which were completed subsequent to the year end. These prepaid expenses
and other current assets were offset against the share issuance proceeds in FY
2022. Accounts payable and accrued expenses increased by $1.6 million to $1.9
million (31 December 2020: $0.3 million) due to accrual of costs relating to
the issuance of shares and admission to trading on AIM.
The Company's subsidiaries, i(x) Financial Services, LLC and i(x) Securities,
LLC were planned to be spun out immediately prior to its admission to trading
on AIM becoming effective which happened subsequent to the year end.
Therefore, net assets of these subsidiaries of $1.2 million were classified as
assets held for disposal as at 31 December 2021 in the statement of the
financial position and the results of operations of $0.2 million were
classified as loss of discontinued operations (FY 2020: profit of $1.1
million).
During FY 2021, i(x) investments, LLC had capital contributions of
approximately $5.1 million and had no capital distributions.
Outlook
i(x) Net Zero has seen a strong start to 2022, continuing the momentum of our
2021 performance.
We are allocating capital strategically to our investee companies to foster
their growth. Our investee companies continue to raise capital, expand their
development activities and grow their teams. A notable example is
WasteFuel, led by Trevor Neilson, its chairman and CEO, which has appointed
Marc Chennault, currently CFO of i(x) Net Zero, as its full time CFO, and Jeff
Briggs, who brings experience as a public company COO in the biofuels arena,
as its new COO, and also significantly increased the number of other full-time
employees on its team.
As providers of catalytic growth capital and strategic management and business
development resources to our investee companies, we believe that our strategy
will result in an uplift in the NAV of our investments in the short- and
medium-term which we expect will enable us to deliver robust returns for the
years ahead.
All of our investee companies are creating value as they increase their market
leadership and grow their core business strategies:
- WasteFuel will continue to raise capital to execute on its global
project pipeline with key strategic partners and meaningful offtake
opportunities at scale;
- WasteFuel will access new markets for sustainable transportation
fuels in new industry sectors as the momentum of consumer demand and
regulatory frameworks for decarbonisation evolve;
- Enphys expects to complete a merger opportunity in 2022 creating a
renewables juggernaut that will be a regional champion for sustainability in
the Americas;
- MultiGreen will continue to scale operationally and at the project
level as capital becomes available to execute on its proprietary pipeline of
development projects. Key initiatives are underway in supply-constrained
affordable rental markets such as Phoenix, Las Vegas, Albuquerque, Seattle,
Portland and Dallas that will yield significant development opportunities.
- SLI continues on its path to becoming a market-leading force in
net zero energy high rise rental apartment development. Key institutional
capital initiatives will enable SLI's continued ability to fund development
opportunities and build manufacturing infrastructure in targeted geographic
regions. This increased resource base will allow i(x) Net Zero and SLI to
implement non-US joint ventures as planned.
- Context Labs has garnered the resources through its capital raise
to enable it to scale its Decarbonization as a Service(TM) platform and prove
that it can win major clients globally such as Williams (NYSE: WMB). Its
strategic investors are leading them into new markets as demand for verified
ESG benchmarks is expected to continue to increase exponentially.
- Carbon Engineering has reached commercial scale opportunity with
its Direct Air Capture technology and continues to see funding and markets
open to them globally.
i(x) Net Zero's management team and Board continue to see the expansion of the
Company's comprehensive approach at scale for decarbonisation through energy
transition and sustainability in the built environment as the focus and
long-term strategy for the Company.
Steve Oyer
Chief Executive Officer
7 June 2022
i(x) investments, LLC
Statements of Financial Position
December 31, 2021 and 2020
(Expressed in US dollars)
(Consolidated)
Notes 2021
2020
ASSETS
Current assets
Cash advances for future
investments
2 $
86,165 $ 715,841
Assets held for
disposal
12
1,216,841
-
Accounts
receivable
2
40,374 374,968
Prepaid expenses and other current
assets
1,549,716 106,079
Cash and cash
equivalents
2
2,134,764 6,203,269
Total current
assets
5,027,860 7,400,157
Noncurrent assets
Investments at fair value (cost
$9,445,361
2 60,740,752
15,767,848
and $5,325,406 in 2021 and 2020,
respectively)
Right-of-use
asset
7
653,426 941,850
Furniture and equipment, net of
accumulated
2
15,311 26,193
depreciation
Security
deposits
82,942 87,542
Member tax
advance
11,500
-
Total non-current
assets
61,503,931 16,823,433
Total
Assets
$ 66,531,791 $ 24,223,590
LIABILITIES
Current liabilities
Accounts payable and accrued
expenses
$ 1,872,513 $ 251,908
Security deposit
payable
49,202
-
Lease liability
14
335,946 262,978
Total current
liabilities
2,257,661
514,886
Non-current liability
Lease
liability
14
396,386
732,332
Total
Liabilities
2,654,047 1,247,218
Members'
Capital
3
63,877,744 22,976,372
Total Liabilities and Members'
Capital $
66,531,791 $ 24,223,590
The financial statements were authorised for issue by the board of directors
on 6 June 2022 and were signed on its behalf by:
Steve Oyer
Marc Chennault
Chief Executive
Officer
Chief Financial Officer
i(x) investments, LLC
Statements of Profit or Loss
For the Years Ended December 31, 2021 and 2020
(Expressed in US dollars)
Notes 2021
2020
Revenue
5 $
561 $ 1,536,884
Net changes in fair value on financial assets
at fair value through profit or
loss
6
40,852,816 5,391,041
General and administrative
expenses
(4,832,105) (3,371,630)
OPERATING PROFIT BEFORE
FINANCING
36,021,272 3,556,295
ACTIVITIES
Finance
income
7
- 8,494
Finance
cost
7
(43,220) (49,629)
PROFIT FROM CONTINUING OPERATIONS
BEFORE
TAX
35,978,052
3,515,160
Tax
charge
-
-
PROFIT FROM CONTINUING OPERATIONS
AFTER
TAX
35,978,052
3,515,160
DISCONTINUED OPERATIONS
Profit (loss) from operations of discontinued
segment 13
(226,665) 1,128,880
PROFIT AFTER TAX ATTRIBUTABLE TO
MEMBERS
$ 35,751,387 $ 4,644,040
Notes:
1) There is no comprehensive income or loss for the years ended December
31, 2021 and 2020.
2) Discontinued operations represent i(x) Financial Services, LLC and
its subsidiary, i(x) Securities, LLC. As of December 31, 2021, the Company
planned to spin off these entities, contingent upon the merger of the Company
with a subsidiary of I(X) Net Zero, PLC, as described in Note 12.
i(x) investments, LLC
Statements of Changes in Members' Capital
For the Years Ended December 31, 2021 and 2020
(Expressed in US dollars)
(Consolidated)
2021
2020
Balance at January
1,
$ 22,976,372 $ 13,405,790
Capital
contributions
5,149,985 4,926,542
Profit attributable to
members
35,751,387 4,644,040
Balance at December
31,
$ 63,877,744 $ 22,976,372
Units issued and outstanding
at December 31,
Class
A
4,706,748
3,726,463
Class
C
3,578,036
3,578,036
Class
P
3,886,279
1,677,529
i(x) investments, LLC
Statements of Cash Flows
For the Years Ended December 31, 2021 and 2020
(Expressed in US dollars)
Notes 2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
FROM CONTINUING OPERATIONS
Profit attributable to members $ 35,978,052 $ 3,515,160
Adjustments for:
Advisory fees - (1,526,099)
Depreciation expense 2 14,784 16,409
Amortisation of right-of-use asset 14 288,424 314,817
Net changes in fair value on financial assets at fair value
through profit or loss (40,852,816) (5,391,041)
Purchases of investments 2 (4,369,955) -
Cash advances for future investments 238,773 (339,299)
Changes in operating assets and liabilities
Increase in accounts receivable 56,041 (418)
Increase in prepaid expenses and other current assets (1,463,959) (2,961)
(Increase) decrease in security deposits 4,600 (600)
Increase in member tax advance (11,500) -
Increase (decrease) in accounts payable and accrued expenses 1,685,329 (51,124)
Increase (decrease) in professional fees payable 49,202 (50,000)
Decrease in lease liability (262,978) (330,421)
Net Cash Used in Operating Activities - Continuing Operations (8,646,003) (3,845,577)
FROM DISCONTINUED OPERATIONS
Profit (loss) attributable to members (226,665) 1,128,880
Adjustments for:
Advisory fees - (1,161,381)
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable 36,823 (374,550)
Increase in prepaid expenses and other current assets (6,441) (20,322)
Increase in accounts payable and accrued expenses 151,344 64,724
Increase in loan payable 10,630 -
Net Cash Used in Operating Activities - Discontinued Operations (34,309) (362,649)
Net Cash Used in Operating Activities (8,680,312) (4,208,226)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash from discontinued operation transferred to disposal group (534,276) -
Purchase of furniture and equipment (3,902) (11,185)
Net Cash Used in investing Activities (538,178) (11,185)
CASH FLOWS FROM FINANCING ACTIVITIES
FROM CONTINUING OPERATIONS
Capital contributions 3 5,149,985 4,926,542
Net Cash Provided by Financing Activities - Continuing Operations 5,149,985 4,026,542
Net Increase (Decrease) in Cash and Cash Equivalents (4,068,505) 707,131
CASH AND CASH EQUIVALENTS
Beginning of Year 6,203,269 5,496,138
End of year $ 2,134,764 $ 6,203,269
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing activity - assets transferred to disposal group
Cash advances for future investment $ 390,770 $ -
Investments 2 250,000 -
Noncash net assets of discontinued operation 41,795 -
$ 682,565 $ -
i(x) investments, LLC
Schedules of Investments
December 31, 2021
(Expressed in US dollars)
Principal
Amount/Shares/
Units/Percent
Ownership
Description
Fair Value
Private Operating Companies (percentage of members' capital)
United States
Limited Liability Company Interests
Biofuel
Developer (74.5%)
10,380,581 Wastefuel Holdings,
LLC
$46,822,213
Real
estate development (7.7%)
1,228,063 MultiGreen Properties,
LLC
4,810,000
Total Limited Liability Company Interests
(cost $4,069,597)
(82.2%)
51,632,213
Limited Partnership Interest
Building technology (.8%)
MultiGreen SLI Partners,
LP
500,000
Total
Limited Partnership Interests (cost $500,000)
(.8%)
500,000
Total
United States (cost $4,569,5979)
(83%)
$52,132,213
Canada
Common Shares
Carbon
Capture Technology (3.8%)
21,763 Carbon Engineering, Ltd.
(1)
2,383,698
Total
Common Shares - Canada (cost
$1,005,809)
2,383,698
Cayman Islands
Limited Liability Company Interest
Renewable Energy
(9.1%)
5,724,886
Total
Limited Liability Company Interests -
Cayman Islands (cost
$3,370,000)
5,724,886
Netherlands
Convertible Note - (8% due April 2022)
499,955 Software/Information Technology
(.8%)
499,955
Total
Convertible Note - Netherlands (cost
$499,955)
499,955
Total
Investments (cost $9,455,361)
(96.7%)
$60,740,752
(1) Shares of Carbon Engineering, Ltd. are held indirectly through
investments in RCM Carbon Engineering Partners, LLC (12,490 common shares) and
C12 Equity Ltd. (9,273 common shares).
i(x) investments, LLC
Schedules of Investments
December 31, 2020
(Expressed in US dollars)
Principal
Amount/Shares/
Units/Percent
Ownership
Description
Fair Value
Private Operating Companies (percentage of members' capital)
United States
Convertible Note - (5% due September 2020)
50,000 Finance Technology
(.2%)
$ 50,000
Total
Convertible Note (cost
$50,000)
50,000
Common Stock
199,722 Finance Technology
(.9%)
200,000
Total
Common Stock (cost
$200,000)
200,000
Limited Liability Company Interests
Biofuel
Developer (45.9%)
5,978,305 Wastefuel Holdings,
LLC
10,542,000
Real
estate development (16.7%)
1,228,063 MultiGreen Properties,
LLC
3,837,697
Total
Limited Liability Company Interests
(cost $4,069,597)
(62.6%)
14,379,697
Total
United States (cost $4,319,597)
(63.7%)
14,629,697
Canada
Common Stock
Carbon
Capture Technology (4.9%)
21,763 Carbon Engineering, Ltd.
(1)
1,138,151
Total
Common Stock - Canada (cost
$1,005,780)
1,138,151
Total
Investments (cost $5,325,406)
(68.6%)
$ 15,767,848
(1) Shares of Carbon Engineering, Ltd. are held indirectly through
investments in RCM Carbon Engineering Partners, LLC (12,490 common shares) and
C12 Equity Ltd. (9,273 common shares).
i(x) investments, LL
Notes to Financial Statements
December 31, 2021 and 2020
1. Organisation and Nature of Business
i(x) investments, LLC (the "Company") is a limited
liability company formed in the United States of America under the laws of the
State of Delaware on October 6, 2015. The principal place of business of the
Company is 701 Fifth Avenue, Seattle, Washington, effective as of July 1,
2021. The Company was formerly located in Santa Monica, California. The
Company was formed for the purpose of developing an impact-investing operating
platform that provides individual and institutional investors a historic
opportunity to create economic growth and catalytic social impact. The
Company invests in critical areas of human need (renewable energy, green real
estate development, attainable and sustainable technology enabled housing,
waste to fuels and carbon to value). The Company commenced operations on
October 6, 2015.
The Company is governed in accordance with its Second
Amended and Restated Limited Liability Company Agreement (the "LLC
Agreement"), dated as of May 31, 2018, among the Members of the Company.
The direct and indirect subsidiaries of the Company are
as follows:
· i(x) Financial Services, LLC ("i(x) Financial Services") - a wholly
owned subsidiary of the Company;
· i(x) Securities, LLC ("i(x) Securities") - a broker/dealer and wholly
owned subsidiary of i(x) Financial Services, whose principal place of business
is New York City.
In June 2021, the Company adopted a plan to spin off and distribute i(x)
Financial Services and i(x) Securities to the Company's unitholders in the
fourth quarter of 2021, concurrent with the Company's reorganization plans, as
described in Note 2 and Note 12.
The Company is managed by its Board, which is comprised
of no fewer than five and no greater than seven Directors, including the Chief
Executive Officer of the Company. The Directors are in full and complete
charge of all affairs of the Company.
The Company's membership interests are not currently
traded in a public market.
2. Summary of Significant Accounting Policies and Key Accounting
Estimates
Basis of Presentation
The Company's financial statements have been prepared
on a going concern basis and in accordance with International Financial
Reporting Standards ("IFRS"), as issued by the International Accounting
Standards Board ("IASB"). The Company adopted IFRS as its reporting standard
effective January 1, 2018 and did not issue financial statements prior to this
date. The financial statements have been prepared on the historical cost
basis, as modified by the revaluation of financial assets and financial
liabilities at fair value through profit or loss. The Company reports cash
flows from operating activities using the indirect method.
Judgments and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity
with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the
Company's accounting policies and making any estimates. Changes in assumptions
might have a significant impact on the financial statements in the period in
which the assumptions changed. Management believes that the underlying
assumptions are appropriate and that the Company's financial statements are
fairly presented. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in Note 2 under Fair Value Estimation.
As of December 31, 2021, management determined that the
transfer of the Company's broker/dealer subsidiary should be treated as a
discontinued operation. Prior to December 31, 2021, the potential transfer
of the broker/dealer segment and several of the Company's investments to a
newly formed entity was treated as a contingency.
Foreign Currency
The financial statements are presented in the functional currency of US
Dollars, since the majority of its revenue and operating expenditure is
denominated in this currency. Foreign currency transactions are translated
into the functional currency using the rates of exchange prevailing at the
dates of the transactions. At each end of each reporting period, monetary
assets and liabilities that are denominated in foreign currencies, if any, are
translated at the rates prevailing on the reporting end date. Gains and losses
arising on translation, if any, are included in other income in the statement
of profit or loss for the period.
Assessment as an Investment Entity
Management of the Company has determined that it meets the definition of an
investment entity within IFRS 10 and, therefore, is required to measure its
subsidiaries held as investments at fair value through profit and loss rather
than consolidate them. Management of the Company considered exit strategies
and all the Company's activities to conclude whether the following criteria
are satisfied:
· The entity obtains funds from one or more investors for the purpose
of providing those investors with investment services;
· The entity commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation, investment income
or both;
· The entity measures and evaluates the performance of substantially
all of its investments on a fair value basis.
Management determined that the Company meets the definition of investment
entity in accordance with IFRS 10, Consolidated Financial Statements, as all
of the above criteria are met by the Company.
The Company was established to obtain funds from its investors and with a view
to manage the investments made from those funds.
· The only sources of profit for the Company are capital appreciation
and investment income. The Company aims to maximise value of its investments
and to monetise this value through dividend inflow, interest revenue and
disposal of investments at the right time and at the right price. The Company
does not obtain any other benefit from its investments that are not available
to other parties that are not related to the respective investee.
In addition to the above, while assessing whether the Company meets the
definition of investment entity, management considered the following typical
characteristics of the investment entity (as indicated in IFRS 10):
· investment entity has more than one investment;
· investment entity has more than one investor;
· investment entity has investors that are not related parties of the
entity;
· investment entity has ownership interests in the form of equity or
similar interests.
The Company has all of the above typical characteristics of an investment
entity.
Management has concluded that the Company meets the
definition of an investment entity. This conclusion will be reassessed on an
annual basis, if any of these criteria or characteristics change.
Basis of Consolidation and Control of Subsidiary Entity
As of December 31, 2021 the statement of financial
position of the Company includes the unconsolidated accounts of the Company.
The Company's subsidiary, i(x) Financial Services is not consolidated with the
Company due to the Company's plan to distribute i(x) Financial Services and
certain other assets, to a newly formed entity as described in Note 12. The
assets to be distributed are reported as assets held for disposal on the
statement of financial position as of December 31, 2021.
The consolidated statement of financial position as of
December 31, 2020 includes the accounts of the Company and its subsidiary,
i(x) Financial Services. The Company consolidates the accounts of all
subsidiaries which are deemed to be providing investment related services, as
defined by IFRS 10, to the Company. A majority of the revenues earned by
i(x) Securities, a subsidiary of i(x) Financial Services, during the year
ended December 31, 2020, were attributable to performing investment related
services for investee companies of the Company. Accordingly, the statement
of financial position of the Company was reported on a consolidated basis as
of December 31, 2020.
The statements of profit or loss for the year ended
December 31, 2021 is not consolidated and reflects the profit or loss from
i(x) Financial Services as a discontinued operation.
Valuation of Investments
The Company's investments consist of investments in
private operating companies. These investments are valued by the Company's
management at the end of each financial reporting period at fair value. As
of December 31, 2021 and 2020, the fair values of these investments were
determined by the Company's management, as described under Fair Value
Estimation.
The fair value of all other assets and liabilities held
by the Company are determined at their fair value as reasonably determined in
good faith by the Company's management.
Although the Company's management uses its best
judgment in determining the fair value of its investments, there are inherent
limitations in any such process. The fair value presented is not necessarily
indicative of an amount the Company could realise in a current transaction and
the differences could be material.
New Standards and Interpretations
The following new standard was adopted by the Company
as of January 1, 2018.
IFRS 15 Revenue from Contracts with Customers
This standard is based on the principle that revenue is recognised when
control of a good or service transfers to a customer. An entity should
recognise revenue to depict the transfer of promised goods or 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. Revenue from
contracts with customers is recognised when, or as, the entity believes it has
satisfied its performance obligations by transferring the promised goods or
services to its customers. Revenue is recognised in the amount which the
entity expects to receive in exchange for such goods or services. A distinct
good or service, referred to as a performance obligation, is transferred to a
customer when the customer obtains control of, or derives benefit from, that
good or service. Revenue from a performance obligation satisfied over time
is recognised by measuring progress towards satisfying the performance
obligation in a manner that depicts the transfer of the goods or services to
the customer. The guidance provides for a five-step process to be applied
before revenue can be recognised and provides disclosure requirements for
revenue recognition.
The following new standard was adopted by the Company
retrospectively, as of January 1, 2018.
IFRS 16 Leases
This standard, which is effective January 1, 2019, requires a lessee to
recognise a right-of-use asset representing its right to use the underlying
leased asset and a lease liability, representing its obligation to make lease
payments.
The following new standards or modifications to existing standards have been
adopted by the Company as of January 1, 2020.
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 addresses the accounting for income taxes (current and deferred) when
tax treatments involve uncertainty that affects the application of IAS 12
(often referred to as "uncertain tax positions").
The interpretation does not apply to taxes or levies outside the scope of IAS
12, nor does it specifically include requirements relating to interest and
penalties associated with uncertain tax treatments.
The interpretation specifically addresses (i) whether an entity considers
uncertain tax treatments separately; (ii) the assumptions an entity makes
about the examination of tax treatments by taxation authorities; (iii) how an
entity determines taxable profits or tax losses, tax bases, unused tax losses,
unused tax credits and tax rates; and (iv) how an entity considers changes in
facts and circumstances
Upon adoption of the interpretation, the Company considered whether it has any
uncertain tax positions arising from the investment activities. However, the
interpretation did not have any significant impact on the Company's
consolidated financial statements.
Amendments to References to the Conceptual Framework in IFRS Standards
The Conceptual Framework is not a standard, and none of the concepts contained
therein override the concepts or requirements in any standard. The purpose of
the Conceptual Framework is to assist the IASB in developing standards, to
help preparers develop consistent accounting policies where there is no
applicable standard in place and to assist all parties to understand and
interpret the standards. This will affect those entities which developed their
accounting policies based on the Conceptual Framework. The revised Conceptual
Framework includes some new concepts, updated definitions and recognition
criteria for assets and liabilities and clarifies some important concepts.
Amendments to IAS 1 and IAS 8 - Definition of Material
In October 2018, the IASB issued amendments to IAS 1, Presentation of
Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting
estimates and Errors, to align the definition of "material" across the
standards and to clarify certain aspects of the definition. The new definition
states that, "Information is material if omitting, misstating or obscuring it
could reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements, which provide financial information about a specific reporting
entity".
Amendments to IFRS 3 - Definition of a Business
In October 2018, IASB issued amendments to the definition of a business in
IFRS 3, Business Combinations. The amendments are intended to assist entities
to determine whether a transaction should be accounted for as a business
combination or as an asset acquisition.
IFRS 3 continues to adopt a market participant's perspective to determine
whether an acquired set of activities is a business. The amendments clarify
the minimum requirements for a business, remove the assessment of whether
market participants are capable of replacing any missing elements, add
guidance to help entities assess whether an acquired process is substantive,
narrow the definitions of a business and of outputs, and introduce an optional
fair value concentration test.
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate
Benchmark Reform
The amendments to IFRS 9 and IAS 39, Financial Instruments: Recognition and
Measurement, provide a number of reliefs, which apply to all hedging
relationships that are directly affected by interest rate benchmark reform. A
hedging relationship is affected if the reform gives rise to uncertainty about
the timing and/or amount of benchmark-based cash flows of the hedged item or
the hedging instrument.
These new standards and amendments did not have an impact on the financial
statements of the Company.
There are no other new standards and amendments to existing standards that are
effective for annual periods beginning on January 1, 2020 that have a material
effect on the financial statements of the Company.
The following new or amended IFRS standards have been issued by the IASB and
are not yet required to be adopted by the Company.
Amendments to IAS 1 - Classification of Liabilities as Current or Non-Current
The amendments to IAS 1 affect only the presentation of liabilities as current
or non-current in the statement of financial position and not the amount or
timing of recognition of any asset, liability, income or expenses, or the
information disclosed about those items.
Classification
Financial Assets and Liabilities
Financial assets include cash and cash equivalents, investments, cash advances
for future investments, accounts receivable, prepaid expenses and other
assets.
Financial liabilities include accounts payable and accrued expenses, and
professional fees payable.
Financial Assets and Liabilities at Fair Value through
Profit or Loss
The Company classifies all of its investment portfolio as financial assets at
fair value through profit or loss. The portfolio of financial assets is
managed and performance is evaluated on a fair value basis. The Company is
primarily focused on fair value information, and it uses that information to
assess the assets' performance and to make decisions. The Company has not
taken the option to irrevocably designate any equity securities as fair value
through other comprehensive income. The contractual cash flows of the
Company's debt securities are solely principal and interest, but these
securities are neither held for the purpose of collecting contractual cash
flows nor held both for collecting contractual cash flows and for sale. The
collection of contractual cash flows is only incidental to achieving the
objective of the Company's business model. Consequently, all investments are
measured at fair value through profit or loss. The Company recognises net
changes in fair value on financial assets at fair value through profit or loss
on the statement of profit or loss. The Company's accounting policies for
measurement and fair value estimation of financial assets are discussed under
Measurement and Fair Value Estimation in the notes to the consolidated
financial statements.
Recognition
The Company recognises financial assets and financial liabilities on the date
it becomes a party to the contractual provisions of the instrument.
Purchases and sales of financial assets are recognised on the trade date.
From this date any gains and losses arising from changes in fair value of the
financial assets or financial liabilities are recorded in the statements of
profit or loss.
Income and expense are recognised on an accrual basis. Transactions for
private obligations are recorded on the date when the terms of the transaction
are fully negotiated and known. Realised gains and losses from investment
transactions are determined using the specific identification method.
Dividend income and expense are recorded on the ex-dividend date. Interest
expense is recognised as incurred. Interest and dividends have not been
accrued for securities or other obligations when the Company's management
believes there is substantial doubt of collection.
Revenue Recognition
The Company recognised revenue from the following major
sources in 2020:
· Advisory services fees earned from private operating companies that
the Company is invested in
· Investment banking income earned by i(x) Securities, LLC
Revenue is measured based on the consideration to which the Company expects to
be entitled in a contract with a customer and excludes amounts collected on
behalf of third parties. The Company recognises revenue when it transfers
control of a product or service to a customer.
For the year ended December 31, 2020, the Company earned advisory services
fees pursuant to agreements with two private operating investee companies.
These fees were primarily paid-in-kind with shares or units of the private
operating companies. The quantity of shares or units received in payment for
advisory services is stipulated in the advisory agreements with the two
private operating companies. Shares or units received in accordance with these
agreements are valued at fair value upon receipt by the Company using the same
valuation methods used to value other investments in these operating
companies. In addition, i(x) Securities, LLC earned investment banking fees,
which were primarily derived from providing placement agent and advisory
services, primarily to one client. Private placement fees were earned only
when capital was raised and closings were effected, in accordance with the
terms of the contracts with clients. Revenue from investment banking
activities is generally recognised at the point in time that performance is
completed (the closing date of the transaction) or the contract is
cancelled. However, for certain contracts, revenue is recognised based upon
a percentage of funds raised and/or a flat fee and may include a retainer, or
partial payment, to commence services. In some circumstances, significant
judgment is required to determine the timing and measure of progress
appropriate for revenue recognition under a specific contract. Retainers and
other fees received from customers prior to recognising revenue are reflected
as contract liabilities.
Measurement
Financial assets and financial liabilities are measured
initially at cost which is the fair value of the consideration given or
received.
All recognised financial assets that are within the
scope of IFRS 9 are required to be subsequently measured at amortised cost or
fair value based on the entity's business model for managing the financial
assets and the contractual cash flow characteristics of the financial assets.
Subsequent to initial
recognition, all financial assets and financial liabilities are measured at
fair value and accounted for through profit or loss. Gains and losses
arising from changes in the fair value of the financial assets or financial
liabilities at fair value through profit or loss are presented in the
consolidated statements of profit or loss in revenue, in the period in which
they arise.
Cash and Cash Equivalents
Cash consists primarily of cash in an operating account
maintained with City National Bank ("CNB"). Such balances may exceed the
Federal Deposit Insurance Corporation ("FDIC") insurance limit on an overnight
basis.
The Company considers all highly liquid investments
with a maturity of three months or less when acquired to be cash
equivalents. The Company holds funds in a money market account at CNB and
considers these funds to be cash equivalents. For further details,
pertaining to the investment in the money market account, please see Note 11.
The following are the balances in cash and cash equivalents:
(Consolidated)
2021
2020
Cash
$
1,133,917 $ 552,800
Cash equivalents
1,000,847 5,650,469
Total $
2,134,764 $ 6,203,269
Cash Advances for Future
Investments
The Company may pay direct expenditures on behalf of a
private operating company which the Company's management expects to invest in,
in the future. When such expenditures are paid, they are recorded as cash
advances for future investment on the Company's statements of financial
position. Such expenditures may be reimbursable by the private operating
company that they were paid on behalf of, or they may be converted to equity
or debt securities issued by the private operating company in future
periods. If the Company determines that such expenditures are not
collectible from the private operating company or will not be converted to
equity or debt securities, then the Company recognises a loss on such
expenditures in the year in which such loss is determined. In 2021 and 2020,
the Company determined that $133 and $168,019, respectively, of expenditures
paid on behalf of private operating companies were uncollectible and recorded
a loss on such expenditures. These losses are reported on the Company's
statements of profit and loss in net changes in fair value on financial assets
at fair value through profit or loss. The balance in cash advances for
future investments was $86,165 and $715,841 as of December 31, 2021 and 2020,
respectively, and is reflected on the Company's statements of financial
position.
Accounts Receivable
The accounts receivable balance as of December 31, 2020 is comprised primarily
of amounts due from investment banking activities conducted in the i(x)
Securities, LLC subsidiary. The following is an aging of the accounts
receivable balance as of December 31, 2021 and 2020:
Accounts
Neither
Receivable
Carrying Impaired
61-90 91-120 More Than
Balance
Amount Nor Past Due
Days Days 120 Days
December 31, 2021 $ 40,374 $
- $
- $ - $ 40,374
December 31, 2020
(consolidated)
374,968 347,883
27,085 -
-
Prepaid Expenses
Prepaid expenses include expenses incurred in
connection with the initial public offering of I(X) Net Zero, PLC ("I(X) Net
Zero"), discussed in Note 12. These expenses were accrued as of December 31,
2021 and will be deducted from the equity of the I(X) Net Zero upon completion
of the initial public offering. The total of these expense amounted to
$1,416,000.
Property, Plant and Equipment
Property, plant and equipment consists of office
furniture and equipment. These assets are carried at cost, net of
accumulated depreciation. Depreciation is charged to operations over the
estimated useful life of the furniture and equipment, primarily three to five
years, utilising the straight-line method.
(Consolidated)
2021 2020
Property, Plant and Equipment
Cost, January
1
$ 79,629 $ 68,444
Purchases
3,902
11,185
Cost, December 31,
83,531 79,629
Accumulated depreciation, January 1
53,436 37,027
Depreciation expense for the year
14,784 16,409
Accumulated depreciation, December 31,
68,220
53,436
Property, plant and equipment,
net of accumulated
depreciation
$ 15,311 $ 26,193
Current Liabilities
The balances in the accompanying statements of financial position
(consolidated as of December 31, 2020) for accounts payable and accrued
expenses, professional fees payable and the current portion of the lease
liability are due and payable within one year from December 31, 2021 and 2020,
respectively.
Lease Accounting
The Company accounts for leases by recognising a right-of-use asset and a
lease liability. Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with the discount
rate determined by reference to the rate inherent in the lease unless this
rate is not readily determinable, in which case the Company's incremental
borrowing rate on commencement of the lease is used. Right-of- use assets
are initially measured at the amount of the lease liability, reduced for any
lease incentives received, and increased for lease payments made at or before
commencement of the lease, initial direct costs incurred and the amount of any
provision where the Company is contractually required to dismantle, remove or
restore the leased asset. Subsequent to initial measurement, lease
liabilities increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining term of the
lease.
The Company has a lease agreement with lease and non-lease components. Such
non-lease components are accounted for separately.
The Company has elected not to recognise right-of-use assets and liabilities
for short-term leases that have a lease term of 12 months or less, or leases
of low value assets. These lease payments are expensed on a straight-line
basis over the lease term.
Income Taxes
The Company is domiciled in the United States of
America (the "U.S."). Under the current laws of the U.S., the Company is not
subject to federal, state or local income taxes; such taxes are the
responsibility of individual members. Accordingly, no provision has been
made in the accompanying consolidated financial statements for any federal,
state, or local income taxes.
The Company's management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is subject to
interpretation, and establishes provisions, where appropriate, on the basis of
amounts expected to be paid to the tax authorities. The Company's management
has determined that there are no uncertain tax positions and, as a result, has
identified no matters that require further disclosure in the financial
statements. As of December 31, 2021, the tax years that remain subject to
examination by United States federal and state tax jurisdictions under the
statute of limitations, are the calendar years 2018 through 2021.
Fair Value Estimation
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal market or, in its
absence, the most advantageous market to which the Company has access at that
date. The fair value of a liability reflects its non-performance risk
When available, the Company measures the fair value of
an instrument using the quoted price in an active market for that
instrument. A market is regarded as active if transactions for the asset or
liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis. If there is no quoted price in an active
market, then the Company uses valuation techniques that maximise the use of
relevant observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that market
participants would take into account in pricing a transaction.
The Company measures fair value using the following
fair value hierarchy that reflects the significance of the inputs used in
making the measurements.
The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3
measurements).
· Level 1: Assets and liabilities with inputs that reflect
unadjusted quoted prices in active markets for identical assets or liabilities
that the Company has the ability to access at the measurement date.
· Level 2: Assets and liabilities with inputs other than quoted
prices included within Level 1, that are observable either directly or
indirectly, including quoted market prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that
are considered less active or other valuation techniques in which all
significant inputs are directly or indirectly observable from market data.
· Level 3: Assets and liabilities with inputs that are
unobservable. Level 3 includes all instruments for which the valuation
technique includes inputs not based on observable data and the unobservable
inputs have a significant effect on the instrument's valuation. The
valuation technique used is dependent on the level of data, the circumstances
and the availability of observable inputs and may include discounted cash flow
analysis, market comparables and option pricing models.
Level 3 instruments include investments in private operating companies, which
comprise 100% of the Company's investment portfolio. The Company's
management determines the fair value of these investments using valuation
techniques applicable to Level 3 investments. Typically, the Company's best
estimate of fair value at inception is the transaction price, excluding
transaction costs. When evidence supports a change to the carrying value
from the transaction price, adjustments are made to reflect expected exit
values in the investment's principal market under current market conditions.
In estimating the value of Level 3 investments, the inputs generally used by
the Company's management include the original transaction price, completed or
pending third-party transactions in the underlying investment or comparable
issuers, subsequent rounds of financing, recapitalizations and other
transactions across the capital structure, offerings in the equity or debt
capital markets, and changes in financial ratios or cash flows. The Company
also considers specific events which may impact the fair value of investee
companies, including the following:
· Corporate, political or operating events that may have a material
impact on the investee company's prospects and therefore, its fair value.
· The investee company is placed into receivership or bankruptcy.
· The investee company is unlikely to continue as a going concern.
· Management changes at the investee company that may have a positive
or negative impact on the investee company's ability to achieve its objectives
and build value for shareholders.
Level 3 investments may also be adjusted to reflect illiquidity and/or
non-transferability, with the amount of such discount estimated by the
Company's management in the absence of market information. The fair value
measurement of Level 3 investments does not include transaction costs that may
have been capitalised as part of the security's cost basis. Assumptions used
by the Company's management due to the lack of observable inputs may
significantly impact the resulting fair value and therefore the Company's
results of operations.
Investments in Private Operating Companies
The following table presents information about the Company's assets measured
at fair value as of December 31, 2021 and 2020:
_________Level 3
Consolidated
2021
2020
Investments at Fair Value
Common
Stock
$ 2,383,698 $ 1,338,151
Convertible Note
499,955 50,000
Limited Liability Company
Interests
57,357,099 14,379,697
Limited
Partnerships
500,000
-
Total Investments at Fair Value,
December
31,
$ 60,740,752 $ 15,767,848
The following tables present the changes in assets classified
in Level 3 of the fair value hierarchy for the years ended December 31, 2021
and 2020:
Common
Convertible Limited
Liability
Limited
Stock
Note Company Interests
Partnerships Totals
Balance at December 31, 2020 $
1,338,151 $ 50,000
$14,379,697 $
- $ 15,767,848
Purchase of
investments
- 499,955
3,370,000
500,000 4,369,955
Transfer to assets held for
disposal
(200,000)
(50,000)
-
-
(250,000)
Unrealised
gain
1,245,547 -
39,607,402
- 40,852,949
Balance at December 31, 2021 $
2,383,698 $ 499,955
$57,357,099 $ 500,000 $
60,740,752
Common Convertible
Limited Liability
(Consolidated)
Stock Note
Company Interests Totals
Balance at December 31, 2019
$1,292,318 $ 50,000 $
6,178,990 $ 7,521,308
Advisory fees
paid-in-kind 45,833
- -
2,641,647
2,687,480
Unrealised
gain
-
-
5,559,060
5,559,060
Balance at December 31, 2020
$1,338,151 $ 50,000
$14,379,697 $15,767,848
During the years ended December
31, 2021 and 2020 there were no transfers of securities between Levels.
The following tables summarise the methods and significant assumptions used to
measure investments categorised in Level 3 of the fair value hierarchy and
whose values were determined by management as of December 31, 2021 and 2020:
Fair Value at
December 31, 2021
Valuation Unobservable
(in thousands)
Technique
Input Average
Investments
Common stock
Carbon Capture Technology 2,384
Market Approach
Implied value of equity $109.53/sh
Total Common Stock 2,384
Limited Liability Company Interests
Biofuel Developer (1)
46,822
Market Approach Recent transaction - $4.51/unit
capital raise (90%
weight)
Option Pricing Risk free rate - 1.3%,
Method (backsolve) volatility - 137.9%;
time to liquidity event -
5 years (10% weight)
Real Estate Development
4,810
Income Approach - Discount rate - 15% $3.92/unit
Discounted Cash
Flow
Renewable Energy
5,025
Options Pricing Risk free rate - 1.3%,
Method volatility - 20%;
(Management expected life of option -
Company) 5 years
Monte Carlo Risk free rate - .85%,
Simulation volatility - 10%; term to
(Founders' shares maturity - 2.3 years
owned indirectly (lockup period)
by management
company)
700
Transaction
cost Transaction cost N/A
Total Renewable Energy 5,725
Software/Information
Technology
500
Transaction cost Transaction
cost N/A
Total Limited Liability
Company Interests 57,857
Limited Partnership Interest
Building technology
500
Transaction cost Transaction cost
N/A
Total $60,741
Fair Value at
(Consolidated) December
31, 2020 Valuation
Unobservable
(in thousands)
Technique
Input Average
Investments
Convertible Note
Finance Technology `
$ 50
Transaction Transaction
$ 50,000
cost cost
Common Stock
1,138
Market Implied value of
Carbon
Capture
Approach equity financing
Technology
round $52.29/share
Finance Technology
200
Market
Transaction cost $1.00/share
Approach plus advisory fees
paid in kind
Total Common Stock 1,338
Limited Liability Company
Interests
Biofuel Developer (1)
10,542
Market Recent transaction -
$1.76/unit
Approach capital raise (90%
weight)
Option pricing Risk free rate - .4%,
method volatility - 130%;
(backsolve) time to liquidly event -
5 years (10% weight)
Real Estate Development
3,838
Market
Transaction cost $3.13/unit
Approach
plus advisory fees
paid
in kind
Total Limited Liability
Company Interests
14,380
Total
$15,768
(1) The investment in Biofuels represents the Company's interest in
Wastefuel Holdings, LLC ("Wastefuel Holdings"). In January 2021, Wastefuel
Holdings was reorganised into Wastefuel Global, LLC ("Wastefuel Global") and
the Company contributed its interest in Wastefuel Holdings to the new company,
in exchange for 10,841,000 units of the new company. In February 2021, there
was a new round of financing for Wastefuel Global Class A Preferred units
which raised $4.2 million for Wastefuel Global. The value of the units
subscribed in February 2021 by third-party investors, in an arm's-length
transaction, was known to the Company as of December 31, 2020 and accordingly,
such value was used by the Company's management to value its interest in
Wastefuel Holdings as of December 31, 2020. The per unit price of Wastefuel
Global in the February 2021 capital raise was given a 90% weight in the
December 31, 2020 valuation and a 10% weight was ascribed to the backsolve
method, which is a method that derives the equity value for a company from a
transaction involving the company's own securities. The rights and
preferences of each class of equity, market interest rates, industry sector
volatility data, and an estimated time period to a liquidity event are all
considered and included in an option pricing model under the backsolve
method. The weighting of these two valuation methods and the unobservable
inputs used in the valuation were based on management judgment. The
unobservable inputs are presented in the Level 3 valuation table as of
December 31, 2020, in Note 2 above. The sensitivity analysis in Note 11
shows the effect on the fair value of Wastefuel Holdings of an increase in
weighting of the backsolve method to 20% and a decrease in the weighting to
zero percent.
On a semi-annual basis, the Company's management reviews the fair value
calculation for each Level 3 security and assesses, among other things, the
reasonableness of the pricing models, the inputs to the pricing models and the
significant assumptions developed internally or by independent valuation
experts
3. Capital Contributions and Distributions
The Company has authorised 16,000,000 Units which have
been designated as Class A, Class C and Class P Units. The authorised number
of units for each class are: Class A - 5,000,000 Units, Class C - 6,700,000
Units, and Class P - 4,300,000 Units. Class A units were issued to
investors; Class C units were issued to the founders of the Company; and Class
P Units were issued to employees, advisors and members of the board of
directors of the Company pursuant to Restricted Unit Grant Agreements.
Restricted Unit Grant
Agreements
Class P units were granted in consideration for
services to be provided to the Company, subject to the terms of a Restricted
Unit Grant Agreement (the "Grant Agreement"), except that certain Class P
units were granted without a Grant Agreement. Class P units vest in
accordance with the vesting schedule contained in each unitholder's Grant
Agreement, however, for those Class P units issued without a Grant Agreement,
vesting is not required. Unvested units are subject to forfeiture or
repurchase by the Company if the unitholder is no longer an employee, advisor
or member of the board of directors of the Company, as specified in the
unitholder's Grant Agreement. Upon termination of a Class P unitholder's
employment or resignation from the Company, termination of an advisor
agreement or removal or resignation from the board of directors, the Company
has the option to purchase, within ninety days, all or any portion of such
Class P unitholder's unvested units for $100 per unit (the "Repurchase
Option"). Class P units were issued with a value of zero as of the effective
date of each Grant Agreement. The Class P units were valued at zero based
upon the assessment by the Company's management of the value of the assets of
the Company net of its liabilities, which was approximately zero on the grant
date.
Class P unitholders have a right to receive
distributions in the event of a cash distribution in respect of such Class P
units, regardless of whether such units are vested or unvested. Class P
unitholder rights to receive liquidating distributions are described under in
Note 3, Distributions. The allocation of profits to Class P unitholders is
described in Note 4.
Contributions
In 2021 and 2020, the Company had capital contributions of $5,149,985 and
$4,926,542 respectively, all of which were cash contributions for Class A
units.
Distributions
In accordance with the LLC Agreement, and subject to the availability of
Distributable Cash, as defined in the LLC Agreement, members are entitled to a
quarterly distribution in an amount sufficient for each member to pay its
income taxes on its allocable share of the Company's profits for the period,
after taking into account losses in excess of profits for prior periods.
After such distributions are made to members in respect of income tax
payments, and when determined by the Company's Board, and subject to
availability of Distributable Cash, distributions are made to members in the
following order:
(1) first to the Class A and Class C members, pro rata, in an amount equal
to their unreturned capital contributions; and
(2) thereafter to all members, pro rata, subject to the allocation of
profits and losses to each member, in accordance with the LLC Agreement.
Liquidation proceeds are distributed pro rata to the Class A and C Class
unitholders up to their then remaining unreturned capital contributions.
Thereafter, liquidation proceeds are distributed to those members with
positive capital account balances, pro rata, up to such positive capital
account balances. Any remaining proceeds are distributed pro rata to all
members. There were no distributions during the years ended December 31,
2018-2020.
4. Allocation of Income, Gain, Loss and Expense
Each member's share of the Company's profits and losses is allocated in
accordance with the Company's LLC Agreement. Such profits and losses are
allocated to the members according to their respective interest in the
Company.
Profits and losses are allocated to Class A and Class C members pro rata in
accordance with their capital contributions, however, to the extent that any
allocation of losses would cause or increase a deficit balance in a Class A or
Class C Member's Adjusted Capital Account (defined in the LLC Agreement), such
losses are reallocated among such members with positive Adjusted Capital
Account Balances, pro rata, until no member has a positive Adjusted Capital
Account balance. To the extent that any losses were allocated pursuant to
this provision, then profits are allocated to the members until the aggregate
amount of profits allocated to the members is equal to the aggregate amount of
losses.
Class P unitholders are entitled to a pro rata allocation of profits, after
Class A and Class C unitholders have received distributions equal to their
unreturned capital contributions.
5. Revenue
2021 2020
Advisory fees $ - $ 1,520,095
Dividend income 378 10,785
Other income 183 6,004
Total Revenue $ 561 $ 1,536,884
6. Net Changes in Fair Value on Financial Assets at Fair Value
through Profit or Loss
2021
2020
Net unrealised gain from
investments
$40,852,949 $ 5,559,060
Net realised loss from cash
advances
for future
investment
(133) (168,019)
Total Net Changes in Fair Value on
Financial Assets at Fair Value
Through Profit or
Loss
$40,852,816 $ 5,391,041
7. Finance Income and Costs
2021 2020
Finance income
Interest income $ - $ 8,494
Total Finance Income $ - $ 8,494
Finance costs
Lease interest $ 43,220 $ 49,629
Total Finance Costs $ 43,220 $ 49,629
8. Directors' Emoluments
2021 2020
Salaries $ 914,018 $ 985,903
Consulting fees 444,167 540,000
Benefits 55,378 69,779
Payroll taxes 74,535 85,164
401K Contribution 26,363 -
Total Directors' Emoluments $ 1,514,461 $ 1,680,846
9. Staff Employment Costs
2021 2020
Salaries $ 282,741 $ 514,803
Benefits 46,788 57,115
Payroll taxes 33,532 36,237
401K Contribution 4,874 -
Total Staff Employment Costs $ 367,935 $ 608,155
10. Operating Expenses
2021 2020
Audit Fees $ 226,906 $ 60,000
Operating Lease Expense $ - $ -
11. Financial Instruments with Off-Balance Sheet Risk and Certain
Concentration Risks
The Company's investment
activities expose it to various types of risk, both on and off balance sheet,
which are associated with the financial instruments and markets in which it
invests. These financial instruments expose the Company in varying degrees
to elements of liquidity, fair value estimation, credit, market, interest
rate, counterparty, and currency risk. The principal risks that the Company
is exposed to are as follows:
Fair value estimation risk
As of December 31, 2021, 100% of the Company's
investments comprise investments in private operating companies which have
been fair valued by the Company's management in accordance with the policies
set out in Note 2 to the consolidated financial statements. The analysis
below is provided to illustrate the sensitivity of the fair value of
investments to an individual input, while all other variables remain the
same. The Company's Board considers these changes in inputs to be within
reasonable expected ranges. This is not intended to imply the likelihood of
change or that possible changes in value would be restricted to this range.
Investment/Input Base Case Change Change in Fair
in Input Value of
Investment
($000) (1)
Wastefuel Holdings, LLC
Weight assigned to option pricing method 10% +10% (1,240)
-10% 1,240
(1) Based on fair value as of December 31, 2021
Liquidity risk
The market for less liquid investments may be more
volatile than the market for highly liquid securities. Investments in
relatively illiquid securities may restrict the ability of the Company to
dispose of its investments at a price and time that it wishes. If the Company
was forced to dispose of an illiquid investment at an inopportune time, it
might be forced to do so at a substantial discount to fair value, resulting in
a loss to the Company.
Liquidity risk could affect the Company's ability to
meet the obligations associated with its financial liabilities. The Company
manages its liquidity requirements through capital raising and by investing
excess cash in a money market fund which is highly liquid. The money market
fund is described below under Other Risks.
Credit risk
The Company's exposure to credit risk is associated with default risk on the
value of debt held and with counterparty nonperformance. The Company is
exposed to credit risk on accounts receivable balances, convertible notes,
cash and cash equivalents held in financial institutions and at brokerage
firms.
The Company is subject to the risk of default on its accounts receivable
balance, which amounted to $40,374 as of December 31, 2021. The carrying
amount of these receivables is considered to be a reasonable approximation of
their fair value and the balance as of December 31, 2021 is expected to be
collected within one year. The Company manages the risk of default by
monitoring the primary debtor's financial condition and maintains a high
degree of visibility into the debtor's financial records, revenue prospects
and potential capital resources. Management considers the risk of default on
these receivables to be low because the primary investee company has a strong
capacity to meet its contractual obligations in the near term. Accordingly,
no loss allowance has been recognised based on 12-month expected credit
losses, as any such impairment would be insignificant to the Company.
As of December 31, 2020, the Company held a convertible note with a fair value
of $50,000, issued by one of its investee companies. The convertible note
was subject to default and counterparty nonperformance risks. The Company
monitors the debtor's business with respect to assessing potential impairment
in the note's value. Indicators of a lower expectation of recovery would be
a default triggered under the terms of the note, failure to demonstrate the
potential to raise capital, significant negative developments regarding the
debtor's potential revenue pipeline and failure to engage with the Company on
alternative payment arrangements, amongst other considerations. Management
considers the risk of default and counterparty nonperformance on the note to
be low based on its monitoring of the debtor's business. There has been no
allowance recognised based on 12-month expected credit losses, as any such
impairment would be insignificant to the Company.
The Company's exposure to credit risk on cash and cash equivalents is
discussed in Note 2 with respect to cash balances and below with respect to
cash equivalents held in the Government Fund.
Although the Company's investments are denominated in U.S. dollars, the
Company may invest in securities and hold cash balances that are denominated
in currencies other than its reporting currency, the U.S. dollar.
Consequently, the Company may become exposed to risks that the exchange rate
of the U.S. dollar relative to other currencies may change in a manner which
has an adverse effect on the reported value of that portion of the Company's
assets which are denominated in currencies other than the U.S. dollar. The
Company may utilise options, futures, and forward currency contracts to hedge
against currency fluctuations, but there can be no assurance that such hedging
transactions will be effective.
Market risk
Certain investments may be disposed of at a price different from the value
recorded in the accompanying financial statements since the market price of
these investments generally is more volatile than that of more liquid
investments.
As such, the Company may incur greater losses on the sale of some portfolio
investments than under more stable market conditions. Such losses may
adversely impact the Company's capital balance. Due to market instability, it
may become more difficult to obtain market valuations from third party vendors
and other market participants for these investments. As a result, there can be
no assurance that the Company could purchase or sell these investments at the
price used to calculate the Company's capital balance.
Legal, tax and regulatory changes could occur that may adversely affect the
Company. The regulatory environment for investment companies is evolving,
and changes in the regulation of investment companies may adversely affect the
value of investments held by the Company and the ability of the Company to
pursue its investment strategies.
In addition, if the Company is required to liquidate all or a portion of its
portfolio quickly, it may realise significantly less than the value at which
it previously recorded such investments.
Other risks
Cash equivalents consist of investments in the City National Rochdale
Government Money Market Fund (the "Government Fund"), a money market fund that
invests in securities issued or guaranteed by the U.S. government or certain
U.S. government agencies or instrumentalities and repurchase agreements
collateralised by such securities. The investment objective of the Government
Fund is to preserve principal and maintain a high degree of liquidity while
providing current income. The Government Fund declares a dividend daily and
distributes such dividends monthly. The Company has elected to reinvest its
monthly dividend distribution in additional shares of the Government Fund. The
Government Fund is a Level 1 security for fair value hierarchy purposes. An
investment in the Government Fund is not insured by the FDIC or any other
government agency and is subject to the risks associated with financial
instruments discussed in the preceding paragraphs of Note 11. In addition,
due to the Company's concentrated investment in the Government Fund, it is
subject to the risks of insolvency or non-performance by the Custodian. The
total amount invested in the Government Fund was $1,000,847 and $5,650,469, as
of December 31, 2021 and 2020, respectively.
Financial Risk Management
Risk management is carried out by the Chief Investment Officer under policies
approved by the Board of Directors and the Audit and Risk Committee. The
Chief Investment Officer and senior management identify, evaluate and hedge
financial risks in close cooperation with the Group's operating units. The
Board provides written principles for overall risk management, as well as
written policies covering specific areas, such as liquidity risk, market risk,
credit risk and other risks.
12. Commitments and Contingencies, Assets Held for Disposal and
Discontinued Operations
In June 2021, the Company's Board of Directors voted and approved to merge
with and into a subsidiary of newly formed i(x) Net Zero, PLC ("i(x) Net
Zero"), with i(x) Net Zero subsequently being listed on AIM, a market operated
by London Stock Exchange plc (the "IPO"). Pending completion of the IPO
transaction, the Company will transfer certain assets of the Company to a
newly formed Company, i(x) Sustainable Holdings, LLC ("i(x) Holdings") which
will be privately owned by the current unitholders of the Company and which
will not be consolidated with i(x) Net Zero. The following table sets out
the assets and liabilities as of December 31, 2021, which are expected to be
transferred from the Company to i(x) Sustainable Holdings, pending the
completion of the IPO, which did occur on February 3, 2022:
i(x) Financial i(x) investments,
Services, LLC LLC Total
Current Assets
Cash and cash equivalents $ 534,276 $ - $ 534,276
Cash advances for future investment - 390,770 390,770
Accounts receivable 337,727 - 337,727
Prepaid expenses and other assets 26,763 - 26,763
Non-current Assets
Investments - 250,000 250,000
Total Assets 898,766 640,770 1,539,536
Current Liabilities
Accounts payable 220,820 - 220,820
Loans payable 101,875 - 101,875
Total Liabilities 322,695 - 322,695
Members' Capital $ 576,071 $ 640,770 $ 1,216,841
In the normal course of business, the Company enters into contracts that
contain a variety of representations and warranties, and which provide
indemnifications. The Company's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the
Company that have not yet occurred. However, based on experience, the
Company expects the risk of loss to be remote.
The Company has non-binding commitments to invest $2.475 million in Enphys
Management Company over the 18-month period beginning in January 2022. The
total amount funded through December 31, 2021, plus non-binding commitments
over the next 2 years totals $6.0 million. In addition, i(x) Net Zero has
agreed to invest an additional $1.5 million in cash in Enphys Management
Company, LLC ("EMC"). The investment comprises an initial payment of
$500,000 and 10 monthly payments of $100,000 each commencing in July 2022,
each of which is expected to be funded from i(x) Net Zero's existing cash
resources. Following the initial payment, i(x) Net Zero's holding in EMC
will increase by 3.5% to 14.5%. However, if the Company fails to make any of
the payments agreed to, the 3.5% is subject to clawback in its entirety.
This investment also indirectly increases i(x) Net Zero's stake in Enphys
Acquisition Corp ("EAC"). The Company expects this additional investment to be
accretive to its net asset value.
In February 2021, the Company made a capital commitment for $500,000 to fund
Context Labs, BV, a privately held an impact software company, organised in
the Netherlands and headquartered in the U.S. The Company invested $250,000 in
a convertible note issued by Context Labs, BV in May 2021. The note is due in
April 2022 and bears interest at 8%, compounded annually. The note is
convertible into Series B1 preferred shares of Context Labs, BV. In
addition, the Company has committed to invest an additional $250,000 in Series
B Preferred Shares.
A novel strain of coronavirus ("COVID-19") was reported in Wuhan, China. The
World Health Organization has declared COVID-19 to constitute a "Public Health
Emergency of International Concern." The outbreak of COVID-19 has resulted in
travel and border restrictions, supply chain disruptions, lower consumer
demand and general market uncertainty. The emergence of the recent
coronavirus could lead to operational difficulties in the companies the
Company is invested in and, in turn, impact the Company's performance. Given
the uncertainty of the situation, the duration of the business disruption and
the related financial impact cannot be reasonably estimated at this time,
however the significant estimates used in the valuation of investments may be
materially impacted in 2021. The Company's management will continue to
monitor the situation and its impact on the Company.
13. Segment Information
The Company has two operating segments:
a) the primary segment is i(x) investments, LLC, which invests in
private operating companies;
b) the second operating segment is i(x) Securities, an indirect
subsidiary of i(x) investments, LLC. i(x) Securities, LLC is a broker/dealer
and provides investment banking services to its clients. During 2020, i(x)
Securities provided such services primarily to investee companies of i(x)
investments, LLC. These services consisted of placement agent and related
advisory services. The broker/dealer began providing these services in 2020.
The Company's operating segments offer different services and are managed
separately. The broker/dealer is regulated under the securities laws of the
U.S.
The Company evaluates the performance of the operating segments on the basis
of profit or loss from operations calculated in accordance with IFRS but
excluding items such as non-recurring losses.
The following is the profit or loss information for the Company by operating
segment:
Private Equity
Investments Broker Dealer (1) Total
2021
Revenue $ 40,853,377 $ 1,872,958 $ 42,726,335
Total revenue from external clients 40,853,377 1,872,958 42,726,335
Expenses 4,875,325 2,099,623 6,974,948
Total expenses 4,875,325 2,099,623 6,974,948
Profit (loss) attributable to members $ 35,978,052 $ (226,665) $ 35,751,387
% of total profit (loss) attributable to 100.6% -0.6% 100.0%
members
2020
Revenue $ 6,936,419 $ 1,613,480 $ 8,549,899
Inter-segmental revenue - (62,500) (62,500)
Total revenue from external clients 6,936,419 1,550,980 8,487,399
Expenses 3,421,259 484,600 3,905,859
Inter-segmental expense (62,500) - (62,500)
Total expenses 3,358,759 484,600 3,843,359
Profit (loss) attributable to members $ 3,577,660 $ 1,066,380 $ 4,644,040
% of total profit (loss) attributable to 77.0% 23.0% 100.0%
members
(1) Discontinued Operations
In June 2021, the Company adopted a plan to spin off and distribute i(x)
Financial Services, LLC and its subsidiary, i(x) Securities, LLC, to the
Company's unitholders, as described in Note 12.
14. Leases
The Company's lease for office space at 1149 Third Street, Santa Monica, CA
commenced in December 2018 and expires in January 2024. Upon initial
recognition of the lease liability, such amount was measured at the present
value of the contractual payments due to the lessor, using the Company's
incremental borrowing rate of 5% as the discount rate. The amount of the
initial liability and the right of use asset was $1,549,998. For the year
ended 2021, information pertaining to this operating lease was as follows:
Supplemental Information Total
Operating lease ROU asset as of December 31, 2020 $ 941,850
Amortisation of ROU asset for the year ended December 31, 2021 (288,424)
Operating lease ROU asset as of December 31, 2021 $ 653,426
Total operating lease costs included in occupancy expense 2021 $ 288,424
Remaining lease term 25 months
Discount rate 5.0%
Maturities of operating lease liability for fiscal years ending
December 31
2022 $ 363,439
2023 374,342
2024 32,051
Total lease payments 769,832
Less imputed interest (37,500)
Total operating lease liability as of December 31, 2021 $ 732,332
Interest expense on lease liabilities for the years ended December 31, 2021
was $43,220 and $49,629, respectively.
The Company sublet its office space in Santa Monica, California, effective
August 1, 2021. In accordance with the terms of the sublease agreement, the
subtenant is obligated to pay rent to the Company monthly, totaling $756,000
over the remaining life of the lease, which terminates on January 31, 2024.
In addition, the subtenant is obligated to pay the Company's share of
operating expenses which are payable to the lessor under the terms of the
original lease.
15. Related Parties
A former Director of the Company served as a consultant to the Company through
August 2021 and was paid consulting fees totaling $444,167 in 2021. These
fees are included in Director's Emoluments in Note 8. This Director is also
an investor in the Company, serves as the Chairman and Chief Executive Officer
of an investee company and is an investor in another investee company. In
addition, two of the Directors of the Company are investors in an investee
company.
16. Subsequent Events
The Company's management has evaluated the events that have occurred during
the period beginning January 1, 2022 and ending June 6, 2022 (i.e., the date
that the consolidated financial statements were available to be issued.
i(x) Net Zero completed its IPO transaction on February 3, 2022 and was
subsequently listed on AIM. Following the merger with i(x) Net Zero, the
Company became a wholly owned subsidiary of i(x) Net Zero. The results of
the inversion and resulting IPO transaction result in i(x) Net Zero being
treated as a U.S. domestic corporation for all purposes of the U.S. tax code
under Internal Revenue Code Section 7874(b) as of the date of the
transaction. As a result of the transaction, there will be deferred tax
implications related to the Company's temporary difference in the book and tax
basis of its assets, the most material of which is the difference between the
tax basis and the fair value of the Company's investments. As of December
31, 2021, the U.S. federal corporate deferred tax impact of the above
referenced transaction on the investments listed on the Company's schedule of
investments at fair value is projected to result in a deferred tax liability
of between $10,600,000 and $11,500,000 at the Company's effective federal tax
rate of 21%.
In March 2022, the Company agreed to invest an additional $1.5 million in
cash in Enphys Management Company, LLC ("EMC"), which is i(x) Net Zero's
partnership with the Latin America Investment Group ("LAIG"), a business
development and investment group that is focused on Latin
America. EMC pursues private and public opportunities focused on renewables
and energy transition in Latin America and has a direct ownership
in Enphys Acquisition Sponsor, LLC ("EAS"), the sponsor company of Enphys
Acquisition Corp. ("EAC"), a NYSE-listed SPAC targeting renewable energy
businesses in Latin America, in which EMC also has an ownership. This
investment is in line with i(x) Net Zero's commitment to accelerate the growth
of its partner companies through the disbursement of catalytic capital and
increases i(x) Net Zero's exposure to EMC, EAS and EAC's upside as they
pursue private and public opportunities focused on renewables and energy
transition in Latin America, a significant growth market. The investment
comprises an initial payment of $500,000 made in March 2022, and 10 monthly
payments of $100,000 each commencing in July 2022, each of which is
expected to be funded from i(x) Net Zero's existing cash resources.
Following the initial payment, i(x) Net Zero's holding in EMC will increase
by 3.5% to 14.5%. However, if the Company fails to make any of the payments
agreed to, the 3.5% is subject to clawback in its entirety.
Subsequent to December 31, 2021, and through February 2, 2022, the Company had
no capital contributions or distributions.
There were no other subsequent events identified by the Company's management
which would require adjustment to, or disclosure in, the financial
statements.
* * * * *
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. END FR UNVWRUKUNRARRecent news on I (X) Net Zero
See all newsREG - AIM i(x) Net Zero PLC - Cancellation - i(x) Net Zero PLC
AnnouncementREG - i(x) Net Zero PLC - Secondary Trading Following Cancellation
AnnouncementREG - i(x) Net Zero PLC - Update re Enphys Acquisition Corp
AnnouncementREG - i(x) Net Zero PLC - Results of AGM
AnnouncementREG - i(x) Net Zero PLC - HOLDING(S) IN COMPANY
Announcement