REG - i(x) Net Zero PLC - Final Results
13/06/2023 07:00
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RNS Number : 5283C i(x) Net Zero PLC 13 June 2023
13 June 2023
i(x) Net Zero PLC
("i(x) Net Zero" or the "Company")
Final Results for the Year Ended 31 December 2022
i(x) Net Zero PLC (AIM: IX.), the investing company which focuses on the
Energy Transition, is pleased to announce the audited final results for the
year ended 31 December 2022 ("FY 2022"). All amounts are in USD unless
otherwise stated.
Financial and Investment Highlights
· Fair value of investments in i(x)'s portfolio companies ("Portfolio
NAV") as at 31 December 2022 increased by 5.10% to $63.84 million (31 December
2021: $60.74 million);
· Portfolio NAV per share, including cash of $7.48 million (£6.19
million), as at 31 December 2022 of $0.90 per share (£0.75 per share) (31
December 2021: $0.80 per share (£0.59 per share);
· Loss of $5.08 million from continuing operations before non-cash
deferred tax provision and share-based compensation(1) (2021: Profit $35.98
million);
· As at 31 December 2022, the Company had no borrowings and cash of
$7.48 million (31 December 2021: no borrowings and cash of $2.13 million); and
· In 2022, i(x) made portfolio investments of $1.60 million (2021:
$4.37 million).
Corporate and Portfolio Highlights
· In February 2022, the Company raised gross proceeds of $14.48 million
(c.£10.68 million) through the placing of 14,056,811 ordinary shares and its
enlarged issued share capital was admitted to trading on AIM;
· In September 2022, WasteFuel announced the launch of its Methanol
Module, a new technology that will significantly accelerate the use of organic
waste to produce green methanol;
· In November 2022, WasteFuel embarked upon a partnership with Averda
Holdings International Ltd ("Averda"), a leading end-to-end waste management
company, to develop the first commercial scale municipal waste-to-renewable
biomethanol plant in the Middle East.;
· i(x) agreed to make a $1.5 million accretive follow-on investment in
Enphys Management Company to further enable Enphys to meet its goal of
becoming the regional sustainable energy champion in Latin America. The
investment comprised an initial payment of $0.5 million made in H1 2022, and
10 monthly payments of $0.1 million each, which commenced in July 2022. The
value of the Company's total holding in Enphys has increased by $4.6 million
during the year.
· Context Labs announced a partnership with Williams (NYSE: WMB), a
Fortune 500 American energy company with operations across the natural gas
value chain for large-scale enterprise-wide deployment of its Decarbonization
as a Service™ ("DaaS(TM)") platform;
· Carbon Engineering's strategic partner, Occidental (NYSE: OXY) and
its subsidiary 1PointFive announced it plans to begin detailed engineering and
early site construction for its first large-scale Direct Air Capture (DAC)
plant in Ector County, Texas. Also, Carbon Engineering has signed an agreement
with its US development partner, 1PointFive, to begin planning and engineering
for DAC facilities at a second site in the U.S., in Kleburg County, Texas.
This site is expected to provide access for the potential construction of
multiple DAC facilities that would be capable of collectively removing up to
30 million tonnes of carbon dioxide from the atmosphere annually for dedicated
sequestration, creating one of the largest DAC projects in the world;
· In November 2022, Carbon Engineering announced that it has received
millions of dollars in equity investments from Airbus and Air Canada to
further the development of its DAC technology;
· SLI's 15 storey apartment building at 303 Battery in Seattle, the
world's first net zero energy high-rise apartment building, completed the
placement of the top floor panels which 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;
· MultiGreen Properties was awarded Certified B Corporation™ status
in recognition of its meeting the highest standards of verified social and
environmental performance; and
· i(x) Net Zero was awarded the LSE Green Economy Mark, in recognition
of the role it plays in helping decarbonise industries in their transition to
their net zero goals.
(1) Loss of $5.08 million from continuing operations before non-cash deferred
tax provision and share-based compensation is derived as operating loss before
financing activities of $6.83 million excluding share-based compensation
expense of $1.75 million
Events Subsequent to subsequent to FY2022
The following are key developments subsequent to 2022 year end:
- In January 2023, the Company announced the appointment of Pär
Lindström, the Company's Chief Investment Officer, as its Chief Executive
Officer, replacing Steve Oyer, who stepped down from the Board, with
immediate effect. Pär will continue in his role as Chief Investment Officer
of the Company;
- In March 2023, the Company announced that its investee
company, Sustainable Living Innovations, Inc. ("SLI"), entered into a
non-binding Letter of Intent in relation to a proposed business combination
with NYSE listed Churchill Capital Corp V ("Churchill V"). i(x) Net Zero has
an indirect 0.1% interest in SLI which is held though MultiGreen SLI
Partners, LP and, as of 31 December 2022, i(x) Net Zero carried its
investment in SLI at an NAV of $0.74 million;
- In April 2023, the Company announced the appointment of Jonathan
Carpenter Stearns as CFO and Executive Director of the Company. Mr. Stearns
brings over 40 years of C-suite level experience as CFO, CEO and CIO in the
operating management of emerging growth companies. In addition, Mr. Stearns
has significant experience in portfolio management, complex financial
structuring and strategic consulting with both public and private companies
located in the US and Europe. Previously Mr. Stearns was a Managing Director
with AIG in its private capital group and started his career at JP Morgan.
- In April 2023, following a period of strategic and operational
review, the Board of Directors set ambitious NAV targets for the executive
management team, in order to drive growth in the business and diversify the
Company's portfolio of investments. The Company is accelerating its pursuit of
this strategy with a more streamlined approach to operations. The Directors
have introduced a near term target of reducing operating expenditure to 2% of
NAV, down more than 50% from the 2022 operating expenditure.
- In April 2023, the Company announced that its wholly owned
subsidiary, i(x) investments LLC entered into a new secured $7.5 million 2
year term loan facility with European Depositary Bank S.A. ("EDB") ("Loan").
The Loan, once drawn, bears interest at 10.5% coupon (subject to periodic
change in line with EDB's USD Base rate) and which is payable quarterly. The
Loan can be utilised for the purposes of the financing of investments and
general working capital purposes. The Loan is guaranteed by the Company.
- In April 2023, the Company issued a total of 6,324,545 options to
subscribe for new Ordinary Shares in the Company ("Options") under the 2022
i(x) Net Zero Plc Equity Incentive Plan (the "EIP"). The Options all have an
exercise price of 20p, being a 142.4 per cent premium to the previous day's
closing share price on AIM of 8.25p at the time of the grant.
- Following issuance of 6,820,618 new ordinary shares in respect to
2022 bonus shares and CEO bonus shares to Mr Lindström, CEO, in April 2023,
the Company has 85,877,429 Ordinary Shares in issue. Mr. Lindstrom may not
sell, transfer, or otherwise transact in these shares until such time as the
risk of forfeiture with respect to the bonus shares has lapsed. This
forfeiture risk will expire if and when the Company's Net Asset value reaches
and exceeds $120 million within the 24 month period following their issue.
- MultiGreen continues to build on positive recent developments in
developing its project in Henderson, NV. However, increased costs, restricted
access to capital and deteriorating local markets provide a challenged
environment for all of MultiGreen's projects. Consequently, the value of our
investment in MultiGreen was reduced by $2.55 million as of year end 2022. We
will continue to monitor this investment closely as it weathers these
turbulent real estate markets.
For further information visit https://ixnetzero.com/
(https://url.avanan.click/v2/___https:/ixnetzero.com/___.YXAzOml4bmV0emVybzphOm86N2IwNzI5ZjFjNmRmYzY5Yjg5ODRhOGZiZWRiYWVmOTk6NjoyMjBhOjRmMGM4Yjg2ZmVkOWZiMzQwN2MwYjQ5ZDVjM2Q0N2I5ZjdmYjRmNDZmYTQ1NjM4Y2NkYTkwYmVjZGEyZTA4YWM6cDpU)
or contact:
i(x) Net Zero Via Buchanan below
Pär Lindström - Chief Executive Officer
Canaccord Genuity Limited +44 20 7523 8000
Nominated Adviser & Broker
Max Hartley
Harry Pardoe
Buchanan
Helen Tarbet +44 7872 604 453
Simon Compton +44 7979 497 324
Notes to Editors
About i(x) Net Zero PLC
i(x) Net Zero PLC is an AIM quoted investing company that seeks to provides
its shareholders with the opportunity to create long-term capital growth with
positive, scalable, measurable and sustainable impact on the environment and
on the communities it serves.
In accordance with its belief that the world's biggest problems are also the
biggest market opportunities, i(x) Net Zero focuses on two critical areas in
which it aims to make a positive impact: (i) Energy Transition and (ii)
Sustainability in the Built Environment.
The Company uses a multi-strategy investment approach, providing the companies
in which it invests with the expertise and catalytic capital to help them
grow. To date, i(x) Net Zero has invested in biofuels, direct air capture
(carbon removal), renewable energy, sustainable workforce housing and net zero
construction technology.
i(x) Net Zero is a signatory to the UN Principles for Responsible Investing.
The Company has received the London Stock Exchange's Green Economy Mark.
Chairman's Statement
The last twelve months have been challenging for the company. Market
conditions have not favoured small growth companies like i(x) and the stock
has suffered from low levels of liquidity. The Board assumes that access to
capital will continue to be a challenge over the next 12-24 months. However we
remain convinced that the growing momentum of the global transition to net
zero presents an extraordinary opportunity to both create shareholder value
and deliver positive impact.
We have taken decisive action to change the leadership team and put the
company on a more sustainable path in relation to its cost base. Specifically,
the Directors have introduced a near term target of reducing operating
expenditure to 2% of NAV, down more than 50% from the 2022 operating
expenditure.
The executive team has been successful in improving the liquidity position of
the company through a new line of credit and is now actively looking at
opportunities to optimise the current portfolio and make new investments to
support the energy transition
During the year, the fair value of investments in i(x)'s portfolio companies
increased by 5.10% to $63.84 million with Portfolio NAV per share, including
cash of $7.48 million (£6.19 million), as at 31 December 2022 of $0.90 per
share (£0.75 per share).
I would like to thank my follow board members and the executive team, past and
present, for their commitment to increasing NAV and shareholder value in very
difficult circumstances .
Nick Hurd
Chairman
12 June 2023
Chief Executive's Statement
Success for i(x) is defined as generating superior risk adjusted financial
returns while enhancing access and scale to businesses working on net zero
strategies. This is being achieved via investing in a portfolio that provides
access to the long-term secular trend of capital flowing towards sustainable
finance and ESG-related investing.
It has been a challenging year - with volatile external markets resulting in a
scarcity of capital and reduction in valuations. However, it is a year that we
feel we have navigated well. We have refocused and enhanced the management
team and re-sized our cost base to better match current market conditions and
opportunities. While there will be challenges in such a dynamic market,
especially for smaller, growth stage companies such as ourselves, there are
also opportunities given more rational levels of valuations for both listed
and unlisted targets and expected timing of technology development. With a
robust deal flow and continued high growth in our target markets, we are
confident that capital, both from our balance sheet and external sources, will
be available to fund selective investments. Consistent with past successes,
the Group will seek out investment targets with the following characteristics:
o Companies with proven business models that are ready to scale yet find it
challenging to access capital including listed and unlisted growth companies
in our target markets with depressed equity valuations;
o Companies that have technologies that are proven at scale and
profitability in certain developed markets but require capital and expertise
to expand into other markets like the US or Western Europe;
o Companies that are operating in our core markets and achieving scalable,
positive ESG impact with near term paths to revenue and operating cash flow
and long-term profitability profiles.
The global policy-making environment favours and supports our approach. In
August 2022, the US Congress passed the "Inflation Reduction Act of 2022,"
which includes key legislation aimed at tackling climate change. This historic
and significant piece of legislation allocates approximately $369 billion to
reducing greenhouse gas emissions and incentivises expanded production and use
of domestic clean energy.
The sustainable fuel, renewable power, battery development and carbon capture
industries are expected to benefit from these tax credits and associated
incentives, which the Company expects will lead to further increased demand
for the products and services provided by the Company's portfolio companies,
and to act as a powerful driver of their further growth.
Elsewhere in the world, governments continue to enact legislation and offer
incentives for companies and industries to reduce their carbon emissions. The
transition to net zero is widely seen as a key part of the innovative
technology and processes that i(x)'s portfolio companies provide.
Having reduced our operational expenditure, strengthened our team, and
enhanced our financial liquidity by adding a new line of credit, we believe we
have put in place the necessary building blocks to execute a focused
acquisition strategy on growth capital for proven business models and
technology with the aim of building our NAV and creating stronger momentum as
we progress in 2023 and beyond.
Operational Review
I am pleased to report that after a challenging twelve months during 2022, the
new management team has been working to reposition and restructure the
business. This has led to a renewed focus on improving net asset value,
lowering the cost base and opportunistically obtaining liquidity from its
existing investments.
The table below shows the change in the Net Asset Value of the Company's
portfolio companies in the year to 31 December 2022.
$m $m $m
Investee Company Equity interest (31/12/2022) Audited Portfolio NAV as at (31/12/2022) Audited Portfolio NAV as at 31/12/2021 Increase/
(Decrease) during 2022
WasteFuel Global, LLC 36.2% 46.91 46.82 0.09
Enphys Management Company, LLC 14.5% 10.34 5.73 4.62
MultiGreen Properties, LLC 10.4% 2.26 4.81 (2.55)
Sustainable Living Innovations 0.1% 0.74 0.50 0.24
Carbon Engineering Ltd 0.5% 2.58 2.38 0.20
Context Labs B.V. 0.5% 0.51 0.50 0.01
Simple Agreement for Future Equity (SAFE) with WasteFuel Global, LLC 0.25 - 0.25
Convertible note of MultiGreen Properties, LLC 0.25 - 0.25
Total 63.84 60.74 3.10
The Board of Directors has set ambitious NAV targets for the executive
management team, in order to drive growth in the business and diversify the
Company's portfolio of investments, while the Company will accelerate its
pursuit of this strategy with a more streamlined and lower cost approach to
operations.
Portfolio Review
The following are brief descriptions of each of our investee companies:
WasteFuel Global, LLC ("WasteFuel") is focused on developing renewable,
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.
During the period, the launch of WasteFuel Methanol Module was announced, a
new technology that will significantly accelerate the use of organic waste to
produce green ethanol. The Methanol Module is designed to facilitate the
production of up to 100 metric tons per day of fuel grade methanol from a
variety of waste sources, including landfill gas and biogas from anaerobic
digestion. The Company has filed a provisional patent application for the
novel approach and unique configuration.
WasteFuel Marine's business line has embarked upon a commercial-scale
bio-methanol partnership with A.P. Moller - Maersk ("Maersk"), the global
container logistics company. Maersk intends to buy a minimum of 30,000 tons
per year of WasteFuel's green bio-methanol, which is generated from municipal
waste, to fulfil the demand of Maersk's 12 new green methanol powered ships
starting from the second half of 2025.
In November 2022, WasteFuel embarked upon a partnership with Averda Holdings
International Ltd ("Averda"), a leading end-to-end waste management company,
to develop the first commercial scale municipal waste-to-renewable
biomethanol plant in the Middle East. Under the terms of the agreement, which
was announced on the first day of the COP27 Climate Conference
in Egypt, Averda will collect and provide the plant with waste feedstock
which cannot be otherwise re-used and recycled. Utilising WasteFuel
technology, the plant will produce renewable biomethanol that is expected to
help shipping companies reduce their CO2 emissions and other greenhouse gases
by up to 90% compared with conventional fuels. The location of the plant is
currently being researched, and is expected to be in Jebel Ali, United Arab
Emirates.
WasteFuel also strengthened its management team with the appointment of Marc
Chennault as full time CFO. Marc will work closely with WasteFuel CEO, Trevor
Neilson, to drive forward the company's growth and to take full advantage of
the significant demand for its sustainable fuel products and services.
Enphys Management Company, LLC ("EMC") is i(x) Net Zero's partnership with the
Latin America Investment Group, a business development and investment group.
EMC pursues private and public opportunities focused on renewables and energy
transition in Latin America and has a direct ownership in Enphys Acquisition
Sponsor, LLC ("EAS"), the sponsor company of Enphys Acquisition Corp. ("EAC"),
a NYSE-listed SPAC targeting renewable energy businesses in Latin America, in
which EMC also has an ownership. Its strategy is to create a regional champion
in the Americas for alternative energy through the aggregation of existing,
cash-flow positive wind and solar assets. Latin America provides a rapidly
growing energy market where alternative energy production is often the lowest
cost source. This provides Enphys the opportunity to execute at scale and
become a significant publicly traded leader in energy transition.
i(x) Net Zero invested an additional $1.5 million (including $0.5 million paid
in H1 2022 and 10 monthly payments of $0.1 million each commencing in July
2022 and finishing in April 2023) in cash in Enphys to enable the company to
actively pursue merger opportunities as announced at its listing. In
conjunction with this investment, the Company renegotiated the terms of its
existing equity interest in Enphys, converting its shares into participating
preferential shares, which carry rights over other Enphys share classes.
Together, the $1.5 million investment and the renegotiated terms of the
existing equity interest, increased the value of the Company's investment in
Enphys by $4.6 million. Enphys continues to focus on finding a merger
opportunity in 2023 creating a large renewables energy group that will be a
regional champion for sustainability in the Americas.
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 net zero energy operator of multi-family projects in the US
by 2025. The company is delivering on its mission to provide attainable,
tech-enabled rental apartments in supply-constrained US markets.
While it is executing on its pipeline of developments at scale with 1,106
units currently under construction, the challenges in the regional banking
market in the US and continued uncertainty around local economies has meant
that ViaVerde, its multi-phase development in Albuquerque, New Mexico has
faced some delays in Phase I leasing, which now due to commence in June 2023.
MultiGreen continues to build on positive recent developments in developing
its project in Henderson, NV. However, increased costs, restricted access to
capital and deteriorating local markets provide a challenged environment for
all of MultiGreen's projects. Consequently, the value of our investment in
MultiGreen reduced to $2.26 million as of year end 2022. We will continue to
monitor this investment closely as it weathers these turbulent real estate
markets.
Sustainable Living Innovations ("SLI") is a construction technology and
product development company producing panelised buildings to address housing
affordability, while delivering a new standard in sustainable living. SLI
continues to capture market share as a leader in delivering net zero buildings
at scale. Its factory-assembled and cost-effective steel panel technology
addresses both the inflationary pressure on material costs and supply chain
issues.
SLI is due to complete its 15-storey apartment complex in Seattle ready for
occupancy in 2023. This will be the world's first multi-family tower designed
to meet the net zero energy criteria set by the International Living Future
Institute's Living Building Challenge
(https://url.avanan.click/v2/___https:/cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fliving-future.org%2Flbc%2F&esheet=52765337&newsitemid=20220629005270&lan=en-US&anchor=Living+Building+Challenge&index=1&md5=a337223e49d2b1c8f3e7958ed5a15680___.YXAzOml4bmV0emVybzphOm86YTY3YzAyYmRjMWQ4NGQ1ZmQ0ZjdlZjdhNWRiMDQ1YmY6Njo1ZmE5OmFlZjBkYjE4OTdlZGQzNTNiOTc5ZmY3Njg2NWRhZDQ4MjllMTkwMWRkNjExZDA1OWY2MzA5NDA2MGJkYjFlNzM6cDpU)
.
During the period, 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. SLI is also expanding its assembly plant locations on
the West Coast of the US and plans eventually to move eastwards to serve
additional markets.
In May 2022, i(x) Net Zero participated in SLI's US$53 million accelerated
growth round, which will allow the company to expand into other US markets.
The company 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.
In March 2023, SLI signed a non-binding letter of Intent in relation to a
proposed business combination with NYSE listed Churchill Capital Corp V
("Churchill V"). With the signing of this LOI, i(x) is actively considering
a follow on investment that would allow SLI to complete the combination and
cover the costs associated with its underlying projects development.
Carbon Engineering Ltd. ("Carbon Engineering") has developed a proprietary
Direct Air Capture ("DAC") technology that removes carbon dioxide directly
from the atmosphere for sequestration and storage. With its DAC and
carbon-to-value proposition, it represents the next generation of industrial
scale decarbonisation. The company has a clear path to global opportunity and
is focused on licensing its technology to industrial partners to build and
operate.
The company, through its strategic partner 1PointFive, an initiative with
Occidental Petroleum's (NYSE: OXY) Low Carbon Ventures business, anticipates
building and operating 70 DAC facilities by 2035, each with an expected
capacity of up to 1 million tonnes per year. The partnership announced it
plans to begin detailed engineering and early site construction in Q3 2022,
for its first large-scale DAC plant in Ector County, Texas. Upon completion
and becoming operational in late 2024, the first DAC plant will be the world's
largest of its kind, expected to capture up to 500,000 metric tons of carbon
dioxide per year with the capability to scale up to 1 million metric tons per
year.
Also, Carbon Engineering has signed an agreement with its US development
partner, 1PointFive, to begin planning and engineering for DAC facilities at a
second site in the U.S., in Kleburg County, Texas. This site is expected to
provide access for the potential construction of multiple DAC facilities that
would be capable of collectively removing up to 30 million tonnes of carbon
dioxide from the atmosphere annually for dedicated sequestration, creating one
of the largest DAC projects in the world.
In November 2022, Carbon Engineering announced that it has received millions
in equity investments from Airbus and Air Canada to further the development of
its DAC technology.
Context Labs B.V. ("Context Labs") is an impact software company whose
blockchain technology platform enables the harvesting and processing of data
to help businesses track their carbon emissions and their compliance with
regulatory frameworks.
Context Labs secured a multi-year partnership with Williams, a Fortune 500
American energy company with operations across the natural gas value chain for
large-scale enterprise-wide deployment of its Immutably™-based
Decarbonization as a Service™ ("DaaS(TM)") platform. The Context Labs
solution will target Williams' facilities, along with its upstream and
downstream ecosystem partners representing 30 per cent. of the natural gas in
the United States, to facilitate Williams' energy transition and affirm its
commitment to provide transparency and strong governance regarding
its decarbonisation ambitions.
During the period, Context Labs announced the launch of its CLEAR Path™
Platform, which converges advanced machine learning/AI and blockchain
technologies to form new empirical data-driven registry capabilities, ensuring
that data for environmental attributes and differentiated commodities are
transparent, trusted and traceable.
The company also announced the appointment of distinguished American writer on
business management practices, Thomas J. Peters, to join the business as an
Advisor and member of the Board of Directors.
Financial Review
The Group continued delivering an improvement in the fair value of investments
in its portfolio companies ("Portfolio NAV") which increased by 5.10% or,
$3.10 million, to $63.84 million as at 31 December 2022 (31 December 2021:
$60.74 million).
The annual increase in Portfolio NAV over the period of $3.10 million (2021:
$40.80 million) comprises unrealised gains of $1.50 million (2021: $40.80
million) due to the change in fair value of portfolio investments and $1.60
million of additions to investments (2021: $4.10 million). The majority of
unrealised gains relates to an increase in fair value of Enphys Management
Company, LLC of $3.52 million offset by a decrease in fair value of MultiGreen
Properties, LLC of $2.55 million.
Enphys NAV rose as a result of the Company's investment of $1.10 million
combined with the renegotiating of its investment terms which increased
Company's equity interest in Enphys and increased the Company's NAV by $4.62
million. MultiGreen NAV was reduced due to increased costs, restricted access
to capital and deteriorating local markets providing a challenged environment
for MultiGreen's projects.
As at 31 December 2022, Portfolio NAV per share, including cash of $7.48
million (£6.19 million), was $0.90 per share (£0.75 per share) (31 December
2021: $0.80 per share (£0.59 per share)).
Loss from continuing operations before non-cash deferred tax provision and
share-based compensation was $5.08 million in 2022. (2021: profit $35.98
million) (This $5.08 million loss is derived as operating loss before
financing activities of $6.83 million minus share-based compensation of $1.75
million).
During 2022, stock options were granted to management employees under the 2022
Company's Equity Incentive Plan and non-cash share-based compensation of $1.75
million was recognised (2021: nil).
General and administrative expenses increased by $3.42 million to $8.25
million (2021: $4.83 million), largely due to non-cash share based
compensation expense, IPO bonus and costs related to running i(x) as a
publicly traded company.
As a result of the corporate inversion and resulting IPO transaction, i(x) Net
Zero PLC is being treated as a U.S. domestic corporation for all purposes of
the U.S. tax code as of the date of the transaction and there will be non-cash
deferred tax implications related to the Company's temporary difference in the
book and tax basis of its assets, the most material of which is the difference
between the tax basis and the fair value of the Company's investments.
For 2022, non-cash deferred tax expense of $11.27 million was recognised in
the statement of profit or loss. This deferred tax expense would not have been
recognised by i(x) investments LLC, if the IPO transaction did not occur.
Net loss amounted to $18.13 million in 2022 primarily as a result of non-cash
deferred tax provision and share-based compensation and an increase in general
and administrative expenses (2021: net profit of $35.75 million).
The Company continues to be in a strong financial position and as at 31
December 2022 had no borrowings, cash of $7.48 million (31 December 2021: no
borrowings and cash of $2.13 million) and net current assets of $6.68 million
(31 December 2021: $2.77 million). In April 2023, the Company announced that
its wholly owned subsidiary, i(x) investments LLC entered into a new secured
$7.5 million 2 year term loan facility with European Depositary Bank S.A.
("EDB") ("Loan").
The Loan, once drawn, bears interest at 10.5% coupon (subject to periodic
change in line with EDB's USD Base rate) and which is payable quarterly. The
Loan can be utilised for the purposes of the financing of investments and
general working capital purposes. The Loan is guaranteed by the Company.
In February 2022, the Company raised gross proceeds of approximately $14.48
million (£10.68 million) ($12.13 million (c.£9.0 million) net)) through the
placing of 14,056,811 ordinary shares at 76 pence per share and its enlarged
share capital was admitted to trading on AIM. During the period from the
beginning of 2021 and until the listing, i(x) investments, LLC, the Company's
predecessor, had capital contributions of approximately $1.64 million.
In January 2022, Lion Point Capital, LP, on behalf of funds managed by it,
("Lion Point") and the Company entered into a strategic relationship to
identify and pursue certain transactions together, with an initial focus on
opportunities in Energy Transition. Lion Point is a global special situations
investment firm that seeks to invest in equity and debt securities of
undervalued public and private companies.
At the time of the Company's IPO, Lion Point Master, LP ("Lion Point Master")
entered into a subscription agreement and subscribed for $6.8 million
(approximately £5.0 million) in ordinary shares of the Company at the placing
price as part of the fundraising. Lion Point Master was granted a put option
and pursuant to the put option, the Company is obliged to repurchase Lion
Point Master's holding of 6,672,161 Ordinary Shares at the placing price
(£0.76 per share ($1.02 per share)) amounting up to $6.8 million at any time
during the three year term following the Company's admission to trading on
AIM.
Lion Point has also granted the Company a call option to purchase $6.8 million
of common shares of Suniva, Inc, which has one of the largest solar cells
manufacturing facilities in North America.
Further details are set out in paragraph 5.6 of Part 1 and paragraphs 18.1(j),
(k) and (l) of Part 7 of the Company's Admission document dated 4 February
2022, which is available on the Company's website https://ixnetzero.com/
(https://ixnetzero.com/) .
Prior to its IPO, the Company undertook a reorganisation in which i(x) Merger
LLC, a wholly owned subsidiary of the Group merged with i(x) investments, LLC,
with i(x) investments continuing as the surviving entity and as a wholly owned
subsidiary of the Company.
Prior to the reorganisation of the Group, i(x) Financial Services, LLC ("i(x)
Financial Services"), (a wholly owned subsidiary of i(x) investments), i(x)
Securities, LLC (a wholly owned subsidiary of i(x) Financial Services) and
certain other assets held by i(x) investments were transferred to i(x)
Sustainable Holdings, LLC, an entity owned by the shareholders of the Company.
This transaction was reflected as an equity distribution of $1.62 million
assets.
Outlook
While the growing global trend towards decarbonisation continues apace with
the backing of government legislation and corporate commitments, the Company
has grappled with a challenging twelve months. With the necessary changes to
lower its expense and more tightly focus its investment strategy to those
opportunities in the energy transition and technology enhancements to the
built environment behind it, i(x) Net Zero is now well positioned to
selectively expand its portfolio of investee companies.
In order to achieve its stated ambition, the Company will look to pursue
strategic acquisitions that meet its strict investment criteria. It has
already identified a number of exciting opportunities and plans to consider
further investment in its existing portfolio. This may include near-term
opportunities to participate in capital raises, negotiated add on investments,
as well as replicating its success via new platforms in scaling technology and
new market penetration.
The Company also remains eager to explore an investment in, or other potential
alliance with, a renewables and circular economy platform that has a mission
and purpose that is similar to the Company's, namely to build profitable
businesses that support the achievement of the UN Sustainable Development
Goals.
The Board of Directors have set ambitious NAV and profitability targets for
the executive management team, including a near term target of reducing
operating expenditure to 2% of NAV and growing NAV by more than 50% over the
course of 2023. We believe that these targets, while challenging, should
enhance shareholder value over the near and longer term.
Pär Lindström
Chief Executive Officer and Chief Investment Officer
12 June 2023
i(x) Net Zero Plc
Consolidated Statement of Comprehensive Income
For the Years Ended 31 December 2022
(Expressed in U.S. dollars)
Notes 2022 2021
Dividend and other income 9 $2,645 $561
Net changes in fair value on financial assets
at fair value through profit or loss 10 1,413,805 40,852,816
General and administrative expenses (8,246,839) (4,832,105)
OPERATING (LOSS)/PROFIT BEFORE
FINANCING ACTIVITIES (6,830,389) 36,021,272
Finance cost 11 (27,495) (43,220)
(LOSS)/PROFIT FROM CONTINUING
OPERATIONS BEFORE TAX (6,857,884) 35,978,052
Tax provision - deferred tax expense 17 (11,271,318) -
(LOSS)/PROFIT FROM CONTINUING
OPERATIONS AFTER TAX (18,129,202) 35,978,052
DISCONTINUED OPERATIONS (b)
(Loss) from discontinued operations 7 - (226,665)
(LOSS)/PROFIT AFTER TAX $(18,129,202) $35,751,387
BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE (c) 5 $(0.23) $0.45
Notes:
a) There is no other comprehensive income or loss for the years ended 31
December 2022 and 2021.
b) Discontinued operations represent i(x) Financial Services, LLC and its
subsidiary, i(x) Securities, LLC. These entities were spun off from i(x)
investments, LLC in a reorganization which occurred prior to the merger of
i(x) investments, LLC with a subsidiary of i(x) Net Zero, PLC, as described in
Note 1 to the financial statements.
c) For 2021, earnings per share was calculated based on the total number
of shares issued and outstanding during 2022, as there were no shares issued
prior to February 9, 2022.
The accompanying notes are an integral part of these financial statements.
i(x) Net Zero Plc
Consolidated Statement of Financial Position
31 December 2022
(Expressed in US dollars)
Notes 2022 2021
ASSETS
Current assets
Cash and cash equivalents 2 $7,479,832 $ 2,134,764
Assets held for disposal 7 - 1,216,841
Accounts receivable 2 66,838 40,374
Prepaid expenses and other current assets 135,806 1,549,716
Cash Advances for future investments 2 - 86,165
Total Current Assets 7,682,476 5,027,860
Non-Current assets
Investments at fair value 3 63,840,722 60,740,752
Right-of-use asset 19 349,277 653,426
Furniture and equipment, net of accumulated 2 1,839 15,311
Depreciation
Security deposits 82,942 82,942
Member tax advance - 11,500
Total Non-Current Assets 64,274,780 61,503,931
Total Assets $71,957,256 $66,531,791
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $612,788 $1,872,513
Lease liability 19 364,336 335,946
Security deposit payable 24,601 49,202
Total Current Liabilities 1,001,725 2,257,661
Non-Current liabilities
Deferred tax liability 17 11,271,318 -
Lease liability 19 32,051 396,386
Total Non-Current Liabilities 11,303,369 396,386
Total Liabilities 12,305,094 2,654,047
Shareholders' Equity
Share Capital, no par value (authorised,
issued and outstanding - 79,056,811
ordinary shares) 77,671,903 -
Members' capital - 63,877,744
Retained earnings (18,019,741) -
Total Shareholders' Equity 59,652,162 63,877,744
Total Liabilities and Shareholders' Equity $71,957,256 $66,531,791
The financial statements were authorized for issue by the board of directors
on 12 June 2023 and were signed on its behalf by:
________________________________
______________________________
Par Lindstrom
Jonathan Stearns
Chief Executive
Officer
Chief Financial Officer
Company number - 138730
The accompanying notes are an integral part of these financial statements.
i(x) Net Zero Plc
Consolidated Statement of Changes in Shareholders' Equity
For the Year Ended 31 December 2022
(Expressed in U.S. dollars)
Members' Share Capital and Retained
Capital Other Reserves Earnings Total
At 1 January 2021 $22,976,372 $- $- $22,976,372
Capital contributions 5,149,985 - - 5,149,985
Net Income for the period (1 January 2021 -
31 December 2021 35,751,387 - - 35,751,387
At 31 December 2021 $63,877,744 $- $- $63,877,744
At 1 January 2022 $63,877,744 $- $- $63,877,744
Capital contributions 1,644,981 - - 1,644,981
Distribution of assets held for disposal to i(x)
Sustainable Holdings, LLC (1,216,841) - - (1,216,841)
Distribution of cash to i(x)
Sustainable Holdings, LLC (400,000) - - (400,000)
Net loss for the period (January 1, 2022 - February 8, 2022
(109,461) - - (109,461)
At 9 February 2022 $63,796,423 $- $- $63,796,423
Conversion from members' capital to shareholders'
Equity (63,796,423) 63,796,423 - -
Subscriptions for i(x) Net Zero shares, net of expenses
(Note 4) - 12,125,421 - 12,125,421
Net loss for the period (9 February 2022 -
31 December 2022 - - (18,019,741) (18,019,741)
Share option expense - 1,750,059 - 1,750,059
At 31 December 2022 $- $77,671,903 $(18,019,741) $59,652,162
The consolidated statement of changes in shareholders' equity is presented as
changes in members' capital up to the date of the acquisition of i(x)
investments, LLC, accounted for under merger principles as disclosed in Note
2.
The accompanying notes are an integral part of these financial statements.
i(x) Net Zero Plc
Consolidated Statement of Cash Flows
For the Year Ended 31 December 2022
(Expressed in U.S. Dollars)
Notes 2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES
FROM CONTINUING OPERATIONS
(Loss)/Profit after taxes $(18,129,202) $35,978,052
Adjustments for:
Depreciation expense 2 13,472 14,784
Loss on cash advances for future investments 86,165 -
Amortisation of right-of-use asset 19 304,149 288,424
Net changes in fair value on financial assets at fair
value through profit or loss (1,499,970) (40,852,816)
Bonus expense paid in shares 1,000,000 -
Incentive stock option grant expense 6 1,750,059 -
Cash advances for future investments - 238,773
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable (26,464) 56,041
Decrease (increase) in prepaid expenses and other current assets 1,413,910 (1,463,959)
(Increase) decrease in security deposits (24,601) 4,600
Increase in member tax advance 11,500 (11,500)
Increase (decrease) in accounts payable and
accrued expenses (1,259,725) 1,685,329
Increase in deferred tax liability 11,271,318 -
Increase (decrease) in professional fees payable - 49,202
Net Cash Used in Operating Activities -
Continuing Operations (5,089,389) (4,013,070)
FROM DISCONTINUED OPERATIONS
Profit (loss) attributable to members - (226,665)
Adjustments for:
Advisory fees - -
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable - 36,823
Increase in prepaid expenses and other current assets - (6,441)
Increase in accounts payable and accrued expenses - 151,344
Increase in loan payable - 10,630
Net Cash Used in Operating Activities -
Discontinued Operations - (34,309)
Net Cash Used in Operating Activities (5,089,389) (4,047,379)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments 3 (1,600,000) (4,369,955)
Cash from discontinued operation transferred to disposal group - (534,276)
Purchase of furniture and equipment - (3,902)
Net Cash Used in Investing Activities (1,600,000) (4,908,133)
CASH FLOWS FROM FINANCING ACTIVITIES
FROM CONTINUING OPERATIONS
IPO Proceeds, net of expenses 12,125,421 -
Distribution to i(x) Sustainable Holdings, LLC (400,000) -
Purchase of i(x) Net Zero shares (1,000,000) -
Capital contributions 1,644,981 5,149,985
Decrease in lease liability (335,945) (262,978)
Net Cash Provided by Financing Activities -
Continuing Operations 12,034,457 4,887,007
Net Increase (Decrease) in Cash
and Cash Equivalents 5,345,068 (4,068,505)
SH AND CASH EQUIVALENTS
Beginning of year 2,134,764 6,203,269
End of year $7,479,832 $2,134,764
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Non-cash investing activity - assets transferred to
disposal group
Cash advances for future investment 7 $- $390,770
Investments 7 - 250,000
Noncash net assets of discontinued operation - 41,795
Non-cash financing activity
Share-based compensation 1,750,059 -
Distribution of assets held for disposal 1,216,841 -
Bonus expense paid in shares 1,000,000 -
$3,966,900 $682,565
The accompanying notes are an integral part of these financial statements.
i(x) Net Zero Plc
Schedule of Investments
31 December 2022
(Expressed in US dollars)
Principal
Amount/Shares/
Units/Percent
Ownership Description Fair Value
Private Operating Companies (percentage of shareholders' equity)
United States
Limited Liability Company Interests
Biofuel Developer (78.6%)
10,380,581 Wastefuel Global, LLC $46,908,475
Real estate development (3.8%) 2,260,000
1,228,063 MultiGreen Properties, LLC
Total Limited Liability Company Interests 49,168,475
(cost $4,069,597) (82.4%)
Limited Partnership Interest
Building technology
Sustainable Living Innovations (FKA Multigreen SLI Partners, LP) (1.2%) 742,000
Total Limited Partnership Interests (cost $500,000) (1.2%) 742,000
Simple Agreement for Future Equity (SAFE)
Biofuel Developer (.4%)
Wastefuel Global, LLC 250,000
Total SAFE (cost $250,000) (.4%) 250,000
Convertible Note
Real estate development (.4%)
MultiGreen Properties, LLC 250,000
Total Convertible Note (cost $250,000) (.4%) 250,000
Total United States (cost $5,069,597) (84.5%) $50,410,475
Canada
Common Shares
Carbon Capture Technology (4.3%)
21,876 Carbon Engineering, Ltd. (1) 2,579,223
Total Common Shares - Canada (cost $1,005,809) 2,579,223
Cayman Islands
Limited Liability Company Interest
Renewable Energy (17.3%) 10,340,024
Enphys Management Company
Total Limited Liability Company Interests - 10,340,024
Cayman Islands (cost $4,470,000)
Netherlands
Convertible Note - (8% due April 2022)
499,955 Software/Information Technology (.9%)
Context Labs, BV 511,000
Total Convertible Note - Netherlands (cost $499,955)
Total Investments (cost $11,045,361) (107%) $63,840,722
(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) Net Zero Plc
Schedule of Investments
31 December 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 $4,569,597) (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
Enphys Management Company
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%)
Context Labs, BV 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) Net Zero Plc
Notes to Consolidated Financial Statements
31 December 2022
1. Organisation and Nature of Business
i(x) Net Zero, PLC (the "Company") is a company incorporated and domiciled in
Jersey, British Isles with Company Number 138730. The Company's shares are
admitted to trading on the AIM market of the London Stock Exchange (ticker:
IX). The Company is an investment company that provides its shareholders with
an opportunity to create long-term capital growth with sustainable impact on
the environment and communities it serves. The Company was founded as i(x)
investments, LLC ("i(x) investments"), a limited liability company formed in
the United States of America under the laws of the State of Delaware on 6
October 2015. The registered address of the Company is 3rd Floor, 44
Esplanade Street, Helier, Jersey JE4 9WG.
On 9 February 2022, the Company completed its initial public offering ("IPO")
on the AIM market. The Company issued 14,056,811 ordinary shares at no par
value in the IPO. The shares were issued at £0.76 per share, resulting in
total share capital of £10,683,000 ($14,481,736) from the IPO. In addition,
the members' capital in i(x) investments was converted to 65,000,000 shares in
the Company as of the date of the IPO, bringing the total shares issued and
outstanding as of 9 February 2022 to 79,056,811.
Prior to the IPO, the Company undertook a reorganisation in which i(x) Merger
LLC, a wholly owned subsidiary of the Company merged with i(x) investments,
with i(x) investments continuing as the surviving entity and as a wholly owned
subsidiary of the Company. Prior to the reorganisation of the Company, i(x)
Financial Services, LLC ("i(x) Financial Services"), (a wholly owned
subsidiary of ix investments), i(x) Securities, LLC (a wholly owned subsidiary
of i(x) Financial Services) and certain other assets held by i(x) investments
were transferred to i(x) Sustainable Holdings, LLC ("i(x) Sustainable
Holdings"), an entity owned by the members of i(x) investments, prior to the
reorganisation.
The Company is governed in accordance with Companies (Jersey)
Law 1991.
2. Summary of Significant Accounting Policies and Key Accounting
Estimates
Basis of Presentation
The Company's financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and IFRIC interpretations
issued by the International Accounting Standards Board ("IASB") and with those
parts of the Companies (Jersey) Law 1991 applicable to companies preparing
their financial statements under IFRS. The financial statements have been
prepared on the historical cost basis, as modified by the revaluation of
financial assets and financial liabilities at fair value through profit or
loss. The Company reports cash flows from operating activities using the
indirect method.
New Accounting Standards, Interpretations and Amendments
The following new standards and amendments to existing
standards which are relevant to the Company were adopted by the Company for
annual periods commencing on or after 1 January 2021:
Amendments to IFRS 3 - Business Combinations: The amendment
updates IFRS 3 so that it refers to the 2018 Conceptual Framework instead of
the 1989 Framework and adds other requirements to identify the liabilities
assumed by an acquirer in a business combination.
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate
Benchmark Reform - Phase 2: the amendments relate to the modification of
financial assets, financial liabilities and lease liabilities, specific hedge
accounting requirements and disclosure requirements applying IFRS 7.
These new standards and amendments did not have an impact on the financial
statements of the Company.
The following new amendments to accounting standards that are relevant to the
Company are effective for annual periods beginning on or after January 1,
2023:
Amendments to IAS 1: Presentation of Financial Statements: The amendments
require that an entity discloses its material accounting policies, instead of
significant accounting policies. Further amendments to the standard explain
how an entity can identify material accounting policies.
Amendments to IAS 1: Classification of Liabilities as Current or
Non-Current: The amendments affect only the presentation of liabilities as
current or non-current in the statement of financial position and not the
amount or timing of recognition of any asset, liability, income or expenses,
or the information disclosed about those items.
Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and
Errors - Definition of Accounting Estimates: The amendments replace the
definition of a change in accounting estimates with a definition of accounting
estimates. Under the new definition, accounting estimates are monetary
amounts in financial statements that are subject to measurement uncertainty.
Entities develop accounting estimates if accounting policies require items in
financial statements to be measured in a way that involves measurement
uncertainty. The amendments clarify that a change in accounting estimate
that results from new information or new developments is not the correction of
an error.
The Directors are considering the new standards effective for periods
beginning on or after 1 January 2023, however, at this time they are not
expected to have a significant impact on the Company.
Going concern
The Company's financial statements have been prepared on a going concern
basis. The financial position of the Company, its cash flows, liquidity
position and borrowing facilities are described in these financial statements
and related notes. In addition, Note 2 to the financial statements describes
the Company's significant accounting policies, and Note 18 describes the
principal risks that the Company is exposed to, including liquidity risk, fair
value estimation risk and credit risk.
In order to assess the going concern of the Company, the Directors have
prepared cash flow forecasts for the Company. These cash flow forecasts show
the Company expects to have sufficient headroom over available banking
facilities. The Company has obtained banking facilities sufficient to
facilitate the growth forecast in future periods. No matters have come to
the attention of the Directors to suggest that future renewals may not be
forthcoming on acceptable terms.
After making enquiries, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing the financial statements.
The financial statements do not include any adjustments that would result if
the forecast were note achieved.
Group reorganisation accounting
The Company acquired its 100% interest in i(x) investments on 9 February 2022
by way of a reverse merger. This is a business combination involving entities
under common control and the consolidated financial statements are issued in
the name of ix Net Zero, PLC but they are a continuance of those of ix
investments. Therefore, the assets and liabilities of ix investments have been
recognised and measured in these consolidated financial statements at their
pre combination carrying values. The retained earnings and other equity
balances recognised in these consolidated financial statements are the
retained earnings and other equity balances of the Company and i(x)
investments. The equity structure appearing in these consolidated financial
statements (the number and the type of equity instruments issued) reflect the
equity structure of the Company including equity instruments issued by the
Company to effect the consolidation.
The consolidated financial statements therefore present the combined results
and financial position of the group for the whole reporting period and the
comparative information represents that of i(x) investments.
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. Other areas
where management has made assumptions and estimates that are significant to
the financial statements include share-based compensation, leases, tax
provisions and debtor recoverability.
As of 31 December 2021, management determined that the transfer of the
Company's broker/dealer subsidiary should be treated as a discontinued
operation.
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 comprehensive income for the period.
Assessment as an Investment Entity
Management of the Company has determined that it meets the definition of an
investment entity within IFRS 10 and, therefore, is required to measure its
subsidiaries held as investments at fair value through profit and loss rather
than consolidate them. Management of the Company considered exit strategies
and all the Company's activities to conclude whether the following criteria
are satisfied:
· The entity obtains funds from one or more investors for the purpose
of providing those investors with investment services;
· The entity commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation, investment income
or both;
· The entity measures and evaluates the performance of substantially
all of its investments on a fair value basis.
Management determined that the Company meets the definition of investment
entity in accordance with IFRS 10, Consolidated Financial Statements, as all
of the above criteria are met by the Company.
The Company was established to obtain funds from its investors and with a view
to manage the investments made from those funds.
· The only sources of profit for the Company are capital appreciation
and investment income. The Company aims to maximise value of its investments
and to monetise this value through dividend inflow, interest revenue and
disposal of investments at the right time and at the right price. The Company
does not obtain any other benefit from its investments that are not available
to other parties that are not related to the respective investee.
In addition to the above, while assessing whether the Company meets the
definition of investment entity, management considered the following typical
characteristics of the investment entity (as indicated in IFRS 10):
· investment entity has more than one investment;
· investment entity has more than one investor;
· investment entity has investors that are not related parties of the
entity;
· investment entity has ownership interests in the form of equity or
similar interests.
The Company has all of the above typical characteristics of an investment
entity.
Management has concluded that the Company meets the definition of an
investment entity. This conclusion will be reassessed on an annual basis, if
any of these criteria or characteristics change.
Basis of Consolidation and Control of Subsidiary Entity
The consolidated financial statements of the Company comprise the financial
statements of ix Net Zero PLC and its subsidiary, i(x) investments, as at and
for the period ended 31 December 2022. The Company consolidates the accounts
of all subsidiaries which are deemed to be providing investment related
services, as defined by IFRS 10, to the Company. All of the services
provided by i(x) investments during 2022 were attributable to performing
investment related services for the Company. Accordingly, the statement of
financial position of the Company was reported on a consolidated basis as of
31 December 2022.
As of 31 December 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 7. The assets to be
distributed are reported as assets held for disposal on the statement of
financial position as of 31 December 2021. These assets were distributed to
a newly formed entity on 2 February 2022, and are no longer included in the
i(x) Net Zero balance sheet at 31 December 2022. The statement of
comprehensive income for the year ended 31 December 2021 is not consolidated
and reflects the profit or loss from i(x) Financial Services as a discontinued
operation.
Subsidiaries are entities controlled by the consolidated group of companies
(the "Group"). Where the Group has control over an investee, it is classified
as a subsidiary. The Group controls an investee if all three of the
following elements are present: power over an investee, exposure to variable
returns from the investee, and the ability of the investor to use its power to
affect those variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these elements of
control. Subsidiaries are fully consolidated from the date that control
commences until the date that control ceases. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with
policies adopted by the Group. Intergroup balances and any unrealised gains
or losses or income expenses arising from the intergroup transactions are
eliminated in preparing the consolidated financial statements.
The subsidiary consolidated in these consolidated financial statements, i(x)
investments, was acquired via group reorganisation and as such merger
accounting principles have been applied. i(x) investments' financial figures
are included for their entire financial period rather than from the date the
Company took control of them. The assets and liabilities of i(x) investments
have been recognised and measured in these consolidated financial statements
at their pre-combination carrying values. i(x) investments prepares their
accounts to 31 December, under FRS101. There are no deviations from the
accounting standards implemented by the Company.
The current period merger reserve was created on the acquisition of i(x)
investments by the Company. Ordinary shares in the Company were issued to
acquire the entire share capital of i(x) investments. Under section 612 of the
Companies Act 2006, the premium on these shares has been included in a merger
reserve.
Valuation of Assets and Liabilities
The Company's investments consist of investments in private operating
companies. These investments are valued by the Company's management at the
end of each financial reporting period at fair value. As of 31 December 2022
and 2021, 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.
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
On initial recognition, financial assets are classified as either financial
assets at fair value through income statement, held-to-maturity, loans and
receivables financial assets, or available-for-sale financial assets, as
appropriate. The Group classifies all its financial assets as trade and
receivables. The classification depends on the purpose for which the financial
assets were acquired.
Trade receivables and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as loans and
receivables financial assets. Loans and receivables financial assets are
measured at amortised cost using the effective interest method, less any
impairment loss. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the recognition of
interest would be immaterial.
The Group's loans and receivables financial assets comprise other receivables
(excluding prepayments) and cash and cash equivalents included in the
Statement of Financial Position.
Financial Liabilities
Financial liabilities are recognised when, and only when, the Group becomes a
party to the contracts which give rise to them and are classified as financial
liabilities at fair valued are classified as financial liabilities at fair
value through the profit and loss or loans and payables as appropriate. The
Group's loans and payables comprise trade and other payables (excluding other
taxes and social security costs and deferred income). When financial
liabilities are recognised initially, they are measured at fair value plus
directly attributable transaction costs and subsequently measured at amortised
cost using the effective interest method other than those categorised as fair
value through income statement.
Fair value at the income statement category comprises financial liabilities
that are either held for trading or are designated to eliminate or
significantly reduce a measurement or recognition inconsistency that would
otherwise arise. Derivatives are also classified as held for trading unless
they are designated as hedges. There were no financial liabilities classified
under this category. The Group determines the classification of its
financial liabilities at initial recognition and re-evaluates the designation
at each financial year end. A financial liability is de-recognised when the
obligation under the liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from the same
party on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as a
de-recognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognised
in the income statement.
Financial Assets and Liabilities at Fair Value through Profit or Loss
The Company classifies all of its investment portfolio as financial assets at
fair value through profit or loss. The portfolio of financial assets is
managed and performance is evaluated on a fair value basis. The Company is
primarily focused on fair value information, and it uses that information to
assess the assets' performance and to make decisions. The Company has not
taken the option to irrevocably designate any equity securities as fair value
through other comprehensive income. The contractual cash flows of the
Company's debt securities are solely principal and interest, but these
securities are neither held for the purpose of collecting contractual cash
flows nor held both for collecting contractual cash flows and for sale. The
collection of contractual cash flows is only incidental to achieving the
objective of the Company's business model. Consequently, all investments are
measured at fair value through profit or loss. The Company recognises net
changes in fair value on financial assets at fair value through profit or loss
on the statement of comprehensive income. 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 statement of
comprehensive income.
Income and expense are recognised on an accrual basis. Transactions for
private obligations are recorded on the date when the terms of the transaction
are fully negotiated and known. Realised gains and losses from investment
transactions are determined using the specific identification method.
Dividend income and expense are recorded on the ex-dividend date. 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 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.
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 statement of comprehensive income in
revenue, in the period in which they arise.
Cash and Cash Equivalents
Cash consists primarily of cash in an operating account maintained with First
Republic Bank ("FRB"). 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 held funds
in a money market account at CNB as of 31 December 2021 and considered these
funds to be cash equivalents. For further details, pertaining to the
investment in the money market account, please see Note 18.
The following are the balances in cash and cash equivalents:
2022 2021
Cash $7,479,832 $1,133,917
Cash equivalents - 1,000,847
Total $7,479,832 $2,134,764
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 2022 and 2021, the Company determined that $86,165
and $133, 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 $0 and $86,165
as of 31 December 2022 and 2021, respectively, and is reflected on the
Company's statements of financial position.
Accounts Receivable
The following is an aging of the accounts receivable balance as of 31 December
2022 and 2021:
Accounts Neither More
Receivable Carrying Impaired 61-90 91-120 Than
Balance Amount Nor Past Due Days Days 120 Days
31 December 2022 $66,838 $26,278 $- $- $40,560
31 December 2021 40,374 - - - 40,374
Prepaid Expenses
Prepaid expenses consist primarily of prepaid insurance premiums as of 31
December 2022. Prepaid expenses as of 31 December 2021, include primarily
expenses incurred in connection with the initial public offering of i(x) Net
Zero, PLC ("i(x) Net Zero"). Total prepaid expenses as of 31 December 2021
amounted to $1,549,716. These expenses were accrued as of 31 December 2021
and deducted from the equity of the i(x) Net Zero upon completion of the
IPO. The total of these expenses 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.
2022 2021
Property, Plant and Equipment
Cost, 1 January $83,531 $79,629
Purchases - 3,902
Cost, 31 December 83,531 83,531
Accumulated depreciation, 1 January 68,220 53,436
Depreciation expense for the year 13,472 14,784
Accumulated depreciation, 31 December 81,692 68,220
Property, Plant, and Equipment
Net of Accumulated Depreciation $1,839 $15,311
Current Liabilities
The balances in the accompanying statements of financial position
(consolidated as of 31 December 2022) for accounts payable and accrued
expenses, professional fees payable and the current portion of the lease
liability are due and payable within one year from 31 December 2022 and 2021,
respectively.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of 31 December 2021, include expenses
incurred in connection with the initial public offering of i(x) Net Zero.
These expenses were accrued as of 31 December 2021 and deducted from the
equity of the i(x) Net Zero upon completion of the IPO. The total of these
expenses amounted to $1,416,000.
Lease Accounting
The Company accounts for leases by recognising a right-of-use asset and a
lease liability. Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with the discount
rate determined by reference to the rate inherent in the lease unless this
rate is not readily determinable, in which case the Company's incremental
borrowing rate on commencement of the lease is used. Right-of- use assets
are initially measured at the amount of the lease liability, reduced for any
lease incentives received, and increased for lease payments made at or before
commencement of the lease, initial direct costs incurred and the amount of any
provision where the Company is contractually required to dismantle, remove or
restore the leased asset. Subsequent to initial measurement, lease
liabilities increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining term of the
lease. The Company applies IAS 36 to determine whether a right-of-use asset
is impaired and accounts for any identified impairment loss in accordance with
IAS 36.
The Company has a lease agreement with lease and non-lease components. Such
non-lease components are accounted for separately.
The Company has elected not to recognise right-of-use assets and liabilities
for short-term leases that have a lease term of 12 months or less, or leases
of low value assets. These lease payments are expensed on a straight-line
basis over the lease term.
Share Capital
The Company records the proceeds from the issuance of ordinary shares as share
capital, at no par value. Incremental costs directly attributable to the
issuance of new ordinary shares or options are deducted, net of any tax, from
the proceeds.
Share-Based Compensation
Stock options granted to employees, which are settled in equity, are valued at
fair value at the date of grant. The fair value of such options is charged
to expense over the vesting period and the expense is reported in general and
administrative expenses on the consolidated statement of comprehensive
income. The shareholders' equity reserve account is credited by the amount
of share-based compensation charged to expense.
Payroll and Benefits Expense
Short-term Benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary
benefits are accrued in the year in which the associated services are rendered
by employees of the Company.
Defined Contribution Plans
The Company operates a defined contribution pension scheme for eligible
employees. The assets of the scheme are held separately from those of the
Company. The annual contributions payable are charged to the consolidated
statement of comprehensive income and they become payable in accordance with
the rules of the scheme.
401K Plan
The Company has a 401K Plan (the "Plan") for all eligible employees. The
Plan permits each participant to contribute up to the federal contribution
limits and allows the Partnership to make discretionary contributions. The
discretionary contributions are recorded as an expense and are included in
general and administrative expenses in the consolidated statement of
comprehensive income.
Fair Value Estimation
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date in the principal market or, in its absence, the most
advantageous market to which the Company has access at that date. The fair
value of a liability reflects its non-performance risk
When available, the Company measures the fair value of an instrument using the
quoted price in an active market for that instrument. A market is regarded
as active if transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information on an ongoing
basis. If there is no quoted price in an active market, then the Company uses
valuation techniques that maximise the use of relevant observable inputs and
minimise the use of unobservable inputs. The chosen valuation technique
incorporates all of the factors that market participants would take into
account in pricing a transaction.
The Company measures fair value using the following fair value hierarchy that
reflects the significance of the inputs used in making the measurements.
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements).
· Level 1: Assets and liabilities with inputs that reflect
unadjusted quoted prices in active markets for identical assets or liabilities
that the Company has the ability to access at the measurement date.
· Level 2: Assets and liabilities with inputs other than quoted
prices included within Level 1, that are observable either directly or
indirectly, including quoted market prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that
are considered less active or other valuation techniques in which all
significant inputs are directly or indirectly observable from market data.
· Level 3: Assets and liabilities with inputs that are
unobservable. Level 3 includes all instruments for which the valuation
technique includes inputs not based on observable data and the unobservable
inputs have a significant effect on the instrument's valuation. The
valuation technique used is dependent on the level of data, the circumstances
and the availability of observable inputs and may include discounted cash flow
analysis, market comparables and option pricing models.
· Level 3 instruments include investments in private operating
companies, which comprise 100% of the Company's investment portfolio. The
Company's management determines the fair value of these investments using
valuation techniques applicable to Level 3 investments. Typically, the
Company's best estimate of fair value at inception is the transaction price,
excluding transaction costs. When evidence supports a change to the carrying
value from the transaction price, adjustments are made to reflect expected
exit values in the investment's principal market under current market
conditions.
In estimating the value of Level 3 investments, the inputs generally used by
the Company's management include the original transaction price, completed or
pending third-party transactions in the underlying investment or comparable
issuers, subsequent rounds of financing, recapitalizations and other
transactions across the capital structure, offerings in the equity or debt
capital markets, and changes in financial ratios or cash flows. The Company
also considers specific events which may impact the fair value of investee
companies, including the following:
· Corporate, political or operating events that may have a material
impact on the investee company's prospects and therefore, its fair value.
· The investee company is placed into receivership or bankruptcy.
· The investee company is unlikely to continue as a going concern.
· Management changes at the investee company that may have a positive
or negative impact on the investee company's ability to achieve its objectives
and build value for shareholders.
Level 3 investments may also be adjusted to reflect illiquidity and/or
non-transferability, with the amount of such discount estimated by the
Company's management in the absence of market information. The fair value
measurement of Level 3 investments does not include transaction costs that may
have been capitalised as part of the security's cost basis. Assumptions used
by the Company's management due to the lack of observable inputs may
significantly impact the resulting fair value and therefore the Company's
results of operations.
Segmental Reporting
An operating segment is a component of an entity that engages in business
activities from which it may earn revenues and incur expenses, whose operating
results are regularly reviewed by the entity's chief operating decision maker
to make decisions about resources to be allocated to the segment and assess
its performance, and for which discrete financial information is available.
Operating segments for the Company are reported based on the financial
information provided to the Board, which is used to make strategic
decisions. The Directors are of the opinion that under IFRS8 - "Operating
Segments", the Company had only one reportable segment, being i(x)
investments, during the period from February 9, 2022 to December 31, 2022.
Prior to the reorganisation of the Company, i(x) investments had two operating
segments, which were i(x) investments and i(x) Securities, LLC, a
broker/dealer (refer to Note 7, Assets Held for Disposal and Discontinued
Operations). The Board assesses the performance of operating segments based on
financial information which is measured and presented in a manner consistent
with that in the financial statements.
3. Investments in Private Operating Companies
The following table presents information about the Company's assets measured
at fair value as of 31 December 2022 and 2021:
Level 3
Level 3 Consolidated
2022 2021
Investments at Fair Value
Common Stock $2,579,223 $2,383,698
Convertible Note 761,000 499,955
Limited Liability Company Interests 59,508,499 57,357,099
Limited Partnerships 742,000 500,000
Simple Agreement for Future Equity (SAFE) 250,000 -
Total Investments at Fair Value,
31 December $63,840,722 $60,740,752
The following tables present the changes in assets classified in Level 3 of
the fair value hierarchy for the years ended 31 December 2022 and 2021:
Limited Simple
Liability Agreements
Common Convertible Company Limited For Future
2022 Stock Note Interests Partnerships Equity (SAFE) Totals
Balance at 31 December 2021 $2,383,698 $499,955 $57,357,099 $500,000 $- $60,740,752
Purchase of investments - 250,000 1,100,000 - 250,000 1,600,000
Unrealised gain 195,525 11,045 1,051,400 242,000 - 1,499,970
Balance at 31 December 2022 $2,579,223 $761,000 $59,508,499 $742,000 $250,000 $63,840,722
Limited
Liability
Common Convertible Company Limited
2021 Stock Note Interests Partnerships Totals
Balance at 31 December 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 31 December 2021 $2,383,698 $499,955 $57,357,099 $500,000 $60,740,752
During the years ended 31 December 2022 and 2021 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 31 December 2022 and 2021:
Fair Value at
31 December 2022 Valuation Unobservable
(in thousands) Technique Input Average
Investments
Common Stock
Carbon Capture Technology 2,579 Equity Roll Forward N/A $118.51/sh
Total Common Stock 2,579
Limited Liability Company Interests
Biofuel Developer (1) 46,909 Market Approach Recent transaction - capital raise (90% weight) $4.52/unit
Option pricing method (backsolve) Risk free rate - 3.9%, volatility - 139.2%; time to liquidly event - 5 years
(10% weight)
Real Estate Development 2,260 Income Approach - Discounted Cash flow Discount rate - 75% $1.84 unit
Renewable Energy 9,640 Options Pricing Method (Management Company) Risk free rate - 4%, volatility - 4.4%; time to liquidity event - 5 years
Monte Carlo Simulation (Founders' shares owned indirectly by management Risk free rate - 4.32%, volatility - 4.44%; term to maturity - 1.3 years
company) (lockup period)
700 Transaction cost Transaction cost N/A
Total Renewable Energy 10,340
Software/Information Technology 511 Market approach Recent transaction cost - capital raise (50% weight) $46.56
Option Pricing Method (backsolve) Risk free rate - 4%, volatility - 202.1%;time to liquidity event - 5 years
(50% weight)
Total Limited Liability Company Interests 60,020
Limited Partnership Interest
Building technology 742 Transaction cost Transaction cost $225/unit
Simple Agreement For Future Equity (SAFE)
Biofuel Developer 250 Transaction cost Transaction cost N/A
Convertible Note
Real Estate Development 250 Transaction cost Transaction cost N/A
Total 63,841
Fair Value at
31 December 2021 Valuation Unobservable
(in thousands) Technique Input Average
Investments
Common stock Implied value of
Carbon Capture Technology 2,384 Market Approach equity 109.53/sh
Total Common Stock 2,384
Limited Liability Company Interests
Biofuel Developer (1) 46,822 Market Approach Recent transaction - capital raise (90% weight) 4.51/unit
Option Pricing Method (backsolve) Risk free rate - 1.3%, volatility - 137.9%; time to liquidity event - 5 years
(10% weight)
Real Estate Development 4,810 Income Approach - Discounted Cash Flow Discount rate - 15% 3.92/unit
Renewable Energy 5,025 Options Pricing Method (Management Company) Risk free rate - 1.3%, volatility - 20%; expected life of option - 5 years
Monte Carlo Simulation (Founders' shares owned indirectly by management Risk free rate - .85%, volatility - 10%; term to maturity - 2.3 years (lockup
company) period)
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
(1) The investment in Biofuels represents the Company's interest in Wastefuel
Global, LLC ("Wastefuel Global"). In January 2021, Wastefuel Holdings, LLC was
reorganized into Wastefuel Global, LLC and the Company contributed its
interest in Wastefuel Holdings to the new company, in exchange for 10,841,000
units of the new company.
The per unit price of Wastefuel Global in the most recent capital raise was
given a 90% weight in the 31 December 2022 and 31 December 2021 valuations 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 31 December 2022 and 31 December 2021, in Note 3 above.
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.
4. Share Capital
The Company has 79,056,811 ordinary shares, at no par value, authorised,
issued and outstanding as of 31 December 2022. The ordinary shares were
issued upon completion of the Company's IPO on 9 February 2022, as disclosed
in Note 1, Organisation and Nature of Business.
Incremental costs directly attributable to the issue of new ordinary shares or
options are included in shareholders' equity as a deduction, net of tax, from
the proceeds. The gross and net proceeds from the IPO are as follows:
Amount Shares
Gross proceeds from IPO $14,481,736 $14,056,811
Less: IPO expenses (2,356,315) -
Proceeds, net of expenses from IPO $12,125,421 $14,056,811
5. Earnings per Share
Basic earnings per share is calculated by dividing the earnings attributable
shareholders by the weighted average number of ordinary shares outstanding
during the period. Fully diluted earnings per share is calculated based on the
weighted average number of shares assuming all stock options are exercised.
Due to losses in the year from 1 January 2022 to 31 December 2022, the effect
of stock options on earnings per share is anti-dilutive and therefore stock
options are not included in the calculation of diluted earnings per share.
Earnings per share are set out below:
2022 2021
Earnings attributable to the ordinary shareholders of the
Company $(18,019,741) $35,751,387
Weighted average number of shares 79,056,811 79,056,811
Basic and diluted loss per share $(0.23) $0.45
For 2021, earnings per share was calculated based on the total
number of shares issued and outstanding during 2022, as there were no shares
issued prior to 9 February 2022.
6. Share-Based Compensation
Pursuant to the Company's Equity Incentive Plan for 2022 (the "Incentive
Plan"), stock options were granted to management employees during the year
from 1 January 2022 to 31 December 2022. Each management employee was granted
the option to purchase shares of the Company's stock in accordance with each
employee's Stock Option Grant. The options are exercisable at £0.76 per share
and the options expire ten years from the grant date, as specified in each
employee's Stock Option Grant. The shares subject to the Incentive Plan vest
over three years and will only vest upon the Company's achievement of a total
shareholder return compound growth per annum target for the Performance Period
of 8% or more. The Performance Period is the period of three years from the
date the Company's shares were admitted for trading on the AIM market. Options
are forfeited if an employee leaves the Company before the options vest.
Details of the share options outstanding during the year from 1 January 2022
to 31 December 2022 are as follows:
Period from
1 January 2022
to 31 December 2022
Outstanding at beginning of period -
Granted during the period 5,779,277
Forfeited during the period (909,153)
Exercised during the period -
Expired during the period -
Outstanding at end of period 4,870,124
The aggregate fair value of the options granted as of the dates granted was
$4,303,000, which was determined using the Black Scholes options pricing
model. The expected volatility used to determine the fair values of the
options granted ranged from 123.4% to 125.2% and the average expected
volatility was 124.4%. The risk-free rates used in the determination of the
fair values of the options ranged from 1.86% to 2.85% and the average
risk-free rate was 2.38%.
The expense recognised for the period from 1 January 2022 to 31 December 2022
was
$1,750,059 and is included in general and administrative expenses on the
consolidated statement of comprehensive income.
7. Assets Held for Disposal and Discontinued Operations
In June 2021, i(x) investments adopted a plan to spin off and
distribute i(x) Financial Services and its subsidiary, i(x) Securities, LLC,
and certain other assets, to the unitholders of i(x) investments, pending
completion of the IPO transaction. As described in Note 1, Organisation and
Nature of Business, these subsidiaries and other assets were transferred to
i(x) Sustainable Holdings, an entity owned by the members of i(x) investments
prior to the reorganization of the Company.
The following table sets out the assets and liabilities as of 31 December
2021, which were transferred from i(x) investments to i(x) Sustainable
Holdings:
I(x) Financial I(x) Investments
Services, LLC LLC Total
Current Assets
Cash and cash equivalents $534,276 $- $534,276
Cash advances for future investments - 390,770 390,770
Accounts receivable 337,727 - 337,727
Prepaid expenses and other assets 26,763 - 26,763
Noncurrent 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
322,695 - 322,695
Members' Capital $576,071 $640,770 $1,216,841
In addition to the above, $400,000 was transferred from i(x) investments to
i(x) Sustainable Holdings in January 2022 based upon the Transfer Agreement,
as amended, between i(x) investments and i(x) Sustainable Holdings.
i(x) Financial Services and i(x) Securities, LLC represent a
discontinued business. The loss from this discontinued business amounted to
$226,665 in 2021. The business was discontinued as an operating segment of
i(x) investments as of 31 December 2021.
8. Commitments and Contingencies
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 31 December 2022, 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 and finishing
in April 2023, each of which was funded from i(x) Net Zero's existing cash
resources. Following the initial payment, i(x) Net Zero's holding in EMC
increased by 3.5% to 14.5%. This investment also indirectly increased 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 January 2022, Lion Point Capital, LP, on behalf of funds managed by it,
("Lion Point") and the Company entered into a strategic relationship to
identify and pursue certain transactions together, with an initial focus on
opportunities in Energy Transition. At the time of the Company's IPO, Lion
Point Master, LP ("Lion Point Master") entered into a subscription agreement
and subscribed for $6.8 million (approximately £5.0 million) in ordinary
shares of the Company at the placing price as part of the fundraising. Lion
Point Master was granted a put option and pursuant to the put option, the
Company is obliged to repurchase 6,672,161 Ordinary Shares of Lion Point
Master's Ordinary Shares at the Placing Price (£0.76 per share ($1.02 per
share)) amounting up to $6.8 million at any time during the three-year term
following the Company's admission to trading on AIM. Lion Point has also
granted to the Company a call option to purchase $6.8 million of common shares
of Suniva, Inc. Further details are set out in paragraph 5.6 of Part 1 and
paragraphs 18.1(j), (k) and (l) of Part 7 of the Company's Admission document
dated 4 February 2022, which is available on the Company's website
https://ixnetzero.com/.
9. Revenue
2022 2021
Dividend income $2,645 $378
Other income - 183
Total Revenue $2,645 $561
10. Net Changes in Fair Value on Financial Assets at Fair Value through
Profit or Loss
2022 2021
Net unrealised gain from investments $1,499,970 $40,852,949
Net realised loss from cash advances
for future investment (86,165) (133)
Total Net Changes in Fair Value on
Financial Assets at Fair Value
Through Profit or Loss $1,413,805 $40,852,816
11. Finance Costs
2022 2021
Lease interest $27,495 $43,220
12. Directors' Emoluments
2022 2021
Salaries $981,479 $914,018
Bonus 1,489,000 -
Share-based compensation 1,361,432 -
Consulting fees - 444,167
Director fees 423,968 -
Benefits 79,416 55,378
Payroll taxes 111,512 74,535
401K Contribution 25,687 26,363
Total Directors' Emoluments $4,472,494 $1,514,461
The highest amount of compensation paid to a director
in 2022 was $1,461,790.
13. Staff Employment Costs
2022 2021
Salaries $572,894 $282,741
Bonus 284,776 -
Share-based compensation 388,627 -
Benefits 141,254 46,788
Payroll taxes 52,458 33,532
401K Contribution 24,514 4,874
Total Staff Employment Costs $1,464,523 $367,935
14. Number of Employees
The average monthly number of employees (including Directors) during the year
was:
Year Ended Year Ended
31 December 2022 31 December 2021
Number of employees 11 8
15. Employee Benefits
Defined Contribution Plans
The expense for the defined contribution plan for the year ended 31 December
2022 was $6,150 and was included in general and administrative expenses.
This amount was accrued as of 31 December 2022.
401K Plan
During 2022, the Company made discretionary contributions of $50,201 to the
Plan, all of which was paid during the year. The discretionary contributions
are recorded as an expense and are included in general and administrative
expenses in the consolidated statement of comprehensive income.
16. Operating Expenses
2022 2021
Audit Fees $60,000 $226,906
Operating Lease Expense $304,149 $288,424
17. Income Taxes
The results of the corporate inversion and resulting IPO transaction result in
i(x) Net Zero being treated as a U.S. domestic corporation for all purposes of
the U.S. tax code under Internal Revenue Code Section 7874(b) as of the date
of the transaction. As a result of the transaction, there are deferred tax
implications related to the Company's temporary difference in the book and tax
basis of its assets, the most material of which is the difference between the
tax basis and the fair value of the Company's investments. As of 31 December
2022, the U.S. federal and state corporate deferred tax impact of the above
referenced transaction on the investments listed on the Company's schedule of
investments at fair value is projected to result in a deferred tax liability
of approximately $11,271,000 at the Company's effective federal and state tax
rates of 21% and 3.29%, respectively.
The Company recognizes a deferred tax asset for the tax benefit of a net
operating loss that, in the judgement of the Company's management, is more
likely than not of being realised in a future year. The tax benefit of a net
operating loss will be realised if it can be offset against taxable income in
a future year. Currently, federal net operating losses carryforward
indefinitely and the carryforward periods in the states where the Company
files income tax returns is 20 years. A valuation allowance is established for
any portion of a deferred tax asset that is not likely to be realised in a
future year. The valuation allowance is evaluated and adjusted annually by
management for changes in the estimated amount of deferred tax assets that are
not likely to be realised in future years, based on evidence currently
available.
The Company also recognizes deferred income tax liabilities for the tax effect
of temporary differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements.
Deferred tax assets and liabilities are determined based on enacted tax laws
and income tax rates expected to be in effect at the time the deferred tax
assets and liabilities are expected to affect taxable income.
A balance sheet approach is used to determine the deferred income tax
provision or benefit to be recognised in the Company's statements of
operations. The current year provision or benefit is determined based on the
difference between the prior and current year balances in the deferred tax
asset and deferred tax liability accounts. The change in valuation allowance
for the deferred tax asset is determined using the same approach.
The following are the deferred tax liabilities of the Company as of 31
December 2022:
Total Federal State
Deferred Tax Liability $11,271,318 $9,118,320 $2,152,998
There were no deferred tax assets as of 31 December 2022.
Income (loss) from continuing operations before income taxes is comprised as
follows:
2022 2021
Domestic $(6,857,884) $-
Foreign - -
Total $(6,857,884) $-
Income (loss) from discontinued operations before income taxes is comprised as
follows:
2022 2021
Domestic $- $-
Foreign - -
Total $- $-
The provision for income taxes consisted of the following:
2022 2021
Current:
Federal
State $- $-
Foreign - -
Domestic -
Total current income tax expense - -
- -
Federal
State $9,118,320 $-
Foreign 2,152,998 -
Domestic - -
Total deferred income tax expense - -
11,271,318 -
Provision for Income Taxes $11,271,318 -
The effective tax rate is calculated as -164.4% -
A reconciliation of the statutory rate of 21% in 2022 and 2021 to the
effective income tax expense for each year follows:
2022 2021
Losses before income taxes $(6,857,884) $-
Statutory tax rate 21% 21%
Income tax (benefit) at statutory rate (1,440,156) -
State tax benefit (expense), net
of federal benefit (255,946) -
Stock compensation 107,880 -
Other 225 -
Deferred True Ups 12,859,315 -
Valuation Allowance - -
Total Income Tax Expense $11,271,318 $-
The tax effects of temporary differences and carryforwards that give rise to
deferred income tax assets and liabilities consisted of the following:
2022 2021
Net Operating Loss Carryforward $2,033,297 $-
ROU asset - -
Stock compensation - -
Other 152,087 -
Total deferred income tax assets 2,185,384 -
Investment Gain/Loss (13,341,296) -
ROU liability (86,384) -
Other (29,022) -
Deferred income tax liabilities (13,456,702) -
Def income tax assets before
valuation allowance (11,271,318) -
Less valuation allowance - -
Net Deferred Tax Liability $(11,271,318) $-
The Company has U.S. gross net operating loss carryforwards totaling $12.684
million as of 31 December 2022. Utilization of our net operating losses may be
subject to limitations upon certain ownership changes as provided by the
Internal Revenue Code and similar state provisions. Sections 382 and 383 of
the Internal Revenue Code of 1986 subject the future utilization of net
operating losses and certain other tax attributes, such as research and
experimental tax credits, to an annual limitation in the event of certain
ownership changes, as defined. The Company may be subject to the net operating
loss utilization provision of Section 382 of the Internal Revenue Code. The
effect of an ownership change would be the imposition of an annual limitation
of the use of NOL carryforwards attributable to periods before the change. The
amount of the annual limitation depends upon the value of the Company
immediately before the change, changes to the Company's capital during a
specified period prior to the change, and the federal published interest rate.
Although the Company has not completed an analysis under Section 382 of the
Code, it is likely that the utilization of the NOLs will be limited. The
Company has not performed an IRC 382 analysis for the net operating losses for
any of its corporate subsidiaries.
The Company is subject to income taxes in the U.S. as the statute of
limitations for adjustments to our historic tax obligations will vary from
jurisdiction to jurisdiction. Further operating losses may be subject to
adjustment after the expiration of the statute of limitations for the year
such net operating losses.
There were no unrecognized tax benefits as of 31 December 2022.
Accounting for Uncertainties in Income Taxes
The Company's management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is subject to
interpretation, and establishes provisions, where appropriate, on the basis of
amounts expected to be paid to the tax authorities. The Company's management
has determined that there are no uncertain tax positions and, as a result, has
identified no matters that require further disclosure in the financial
statements. As of 31 December 2022, 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 2019 through 2022.
18. 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 31 December 2022, 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 Global, LLC
Weight assigned to option pricing method 10% +10% 86
-10% (86)
(1) Based on fair value as of 31 December 2022
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 $66,838 as of 31 December 2022. The carrying
amount of these receivables is considered to be a reasonable approximation of
their fair value and the balance as of 31 December 2022 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 31 December 2022, the Company held a convertible note with a fair value
of $250,000, 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.
Interest rate risk
Interest rate risk arises from the effects of fluctuations in the prevailing
levels of market interest rates on the fair value of financial assets and
liabilities and future cash flows. The financial instruments exposed to
interest rate risk comprise cash and cash equivalents and investments at fair
value.
Other risks
Cash equivalents consisted of investments in the City National Rochdale
Government Money Market Fund (the "Government Fund") as of 31 December 2021, 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 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 18. The total amount invested in the
Government Fund was $0 and $1,000,847, as of 31 December 2022 and 2021,
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.
Lease Commitments
The Company leases office space at 1149 Third Street, Santa Monica, CA. The
lease commenced in December 2018 and expires in January 2024.
2023 $374,342
2024 32,051
$405,393
19. Leases
The Company's lease for office space at 1149 Third Street, Santa Monica, CA
commenced in December 2018 and expires in January 2024. Upon initial
recognition of the lease liability, such amount was measured at the present
value of the contractual payments due to the lessor, using the Company's
incremental borrowing rate of 5% as the discount rate. The amount of the
initial liability and the right of use asset was $1,549,998. For the years
ended 2022, information pertaining to this operating lease was as follows:
Supplemental Information 2022 2021
Operating lease ROU asset as of 1 January $653,426 $941,850
Amortisation of ROU assets for the year ended 31 December (304,149) (288,424)
Operating lease ROU asset as of 31 December 2022 $349,277 $653,426
Total operating lease costs included in occupancy expense $304,149 $288,424
Remaining lease term 13 months 25 months
Discount rate 5.0% 5.0%
Maturities of operating lease liability for fiscal years ending
31 December
2022 $- $363,439
2023 374,342 374,342
2024 32,051 32,051
Total lease payments 406,393 769,832
Less imputed interest (10,006) (37,500)
Total operating lease liability as of 31 December 2022 $396,387 $732,332
Interest expense on lease liabilities for the years ended 31 December 2022 and
2021 was $27,495 and $43,220, 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.
20. Related Parties
As disclosed in the Admission document, upon Admission, Steven Oyer, the CEO
and Director of i(x) Net Zero plc would have been entitled to $2,000,000 as
an investor liquidity bonus under the terms of his service agreement.
However, he voluntarily agreed to amend his agreement. Under the amendment
proposed by Steven Oyer, he would receive a cash bonus of $1,050,000, and
$700,000 of his $2,000,000 bonus would at his direction and request
instead be paid to other members of the i(x) executive team, including the
CIO, CFO, COO and Director, Strategic Initiatives, for a total of $1.75
million in cash bonus to be paid to the executive team. The executive
team then agreed that an aggregate of $1,000,000 of the cash bonus
payments (being approximately the aggregate after-tax amount of the cash
bonus to the executive team) would be used to fund the acquisition by the
executive team of $1,000,000 of Ordinary Shares at the Placing Price from
Trevor Neilson, a former CEO and Director of i(x) investments.
The remaining $250,000 due to Steven Oyer under his original service
agreement was paid to him via an option grant made on Admission to purchase
any time after Admission such number of Ordinary Shares as equals $250,000 at
the Placing Price. This option grant was in addition to the incentive
grant awarded to Steven Oyer under the Company's Equity Incentive Plan on
Admission.
On 9 February 2022 the five members of the executive team purchased 981,201
shares of i(x) Net Zero stock from Trevor Neilson, the former CEO and
Director of i(x) investments for $1,000,000, which the Company paid on their
behalf. The Company recorded that payment as IPO bonus expense of
$1,000,000. The Company then recorded the remaining $750,000 of the
aggregate cash bonus, plus a small additional amount to cover additional
employee income tax liability, for a total of $765,182, to be paid in
2022. The amount of the bonus that is payable as of 31 December 2022 is $0.
A former CEO and Director of the Company, who served through December 2020,
and served as a consultant to the Company through August 2021, was paid
consulting fees totaling $444,167 in 2021. This former CEO and Director is
also a shareholder in the Company, serves as the Chairman and CEO of an
investee company and is a shareholder in another investee company. In
addition, two of the Directors of the Company are investors in an investee
company and invested on the same terms as the Company.
21. Subsequent Events
New Loan Facility
In April 2023, the Company announced that its wholly owned subsidiary, i(X)
investments LLC has entered into a new secured $7.5 million 2-year term loan
facility with European Depositary Bank S.A. ("EDB") ("Loan"). The Loan, once
drawn, bears interest at 10.5% coupon (subject to periodic change in line with
EDB's USD Base rate) and which is payable quarterly. The Loan can be utilised
for the purposes of the financing of investments and general working capital
purposes. The Loan is guaranteed by the Company.
i(X) Investments LLC has agreed to pay an arrangement fee equal to 2% of the
amount of the facility and a commitment fee of 1.75% per annum on any undrawn
funds, payable quarterly in arrears.
Drawdown of the Loan is conditional upon there being no event of default and
other customary provisions including delivery of documents. The Loan is
repayable together with default interest in the event of default which, inter
alia, includes a change of control and a reduction of aggregate NAV of the
Company below $50 million.
The Loan is secured by a pledge granted by the Company and its nominee of the
shares held by it including those in i(X) Investments LLC and all other
proceeds and property and assets owned by it. In addition, as part of
the Facility Agreement, i(X) Investments LLC will pledge $4.0 million as a
security at a deposit account with EDB. The Company will be able to invest
this security deposit in certain money markets funds and other financial
instruments and generate a return on deposited funds (currently expected to be
approximately 4-5% per annum) thereby mitigating the interest payable. In
addition, i(X) Investments LLC has undertaken to maintain a minimum cash
balance in an operating account with amount varying depending on the remaining
time to facility maturity but being zero if drawdowns are below $4 million.
In connection with the facility, i(X) Investments LLC has also agreed to give
customary undertakings, warranties and indemnities to the Lender, the Agent
and Security Agent including as to tax and undertakings not to undertake
certain corporate transactions without consent.
Options
In April 2023, the Company issued a total of 6,324,545 options to subscribe
for new Ordinary Shares in the Company ("Options") under the 2022 i(x) Net
Zero Plc Equity Incentive Plan (the "EIP"). The Options all have an exercise
price of 20p, being a 142.4 per cent premium to the previous day's closing
share price on AIM of 8.25p. The Options vest over a period of three years,
with a third vesting on each of the three successive anniversaries of the date
of grant.
On 4 February 2022, in conjunction with its IPO, the Company issued options
over Ordinary Shares representing approximately 6.3 per cent. of the Company's
issued share capital under the EIP ("IPO Options"). In conjunction with the
above issuance of Options, all remaining IPO Options that have not yet already
lapsed, have been surrendered. In total, 2,166,157 share options have been
surrendered, of which 1,375,589 were held by Par Lindstrom and 790,568 were
held by Dmitri Tsvetkov.
Following the new grant of the Options, and the surrender of IPO Options, the
Company has a total of 6,324,545 options to subscribe for new Ordinary Shares.
CEO Bonuses
In December 2022, the Company agreed to pay to Pär Lindström an incentive
bonus of $200,000 (£160,772) in respect of the year ended 31 December 2022,
an amount which equates to approximately 50% of his annual compensation for
the year. In order to preserve the Company's cash resources and to demonstrate
his commitment to the Company, Mr Lindström has agreed to apply this sum to a
subscription of new ordinary shares at the previous day's closing price of
8.25p per share. This will result in the issue of 1,948,748 new ordinary
shares to Mr Lindström ("2022 Bonus Shares"). The 2022 Bonus Shares
represent 2.5% of the issued share capital prior to the issue of these shares.
Furthermore, as part of his promotion to CEO in January 2023, the Company
agreed to pay Mr Lindström a promotion bonus based on increased
responsibilities as CEO of $500,000 (£401,929) being approximately 120% of
his 2023 annual compensation. In order to preserve the Company's cash
resources and to demonstrate his commitment to the Company, Mr Lindström has
also agreed to apply this sum to a subscription of new ordinary shares at
previous day's closing price of 8.25p per share. This resulted in the issue
of 4,871,870 new ordinary shares to Mr Lindström ("CEO Bonus Shares"). The
CEO Bonus Shares represent 6.2% of the issued share capital prior to the issue
of shares referred to in this announcement.
By way of further alignment to shareholders and the creation of shareholder
value, in respect of the 2022 Bonus Shares and CEO Bonus Shares, the shares
subscribed for by Mr Lindström pursuant to each of these bonus schemes will
be subject to a risk of forfeiture and may not be sold or otherwise
transferred until such forfeiture risk has lapsed. Specifically, Mr. Lindstrom
may not sell, transfer, or otherwise transact in these shares until such time
as the risk of forfeiture with respect to the bonus shares has lapsed. This
forfeiture risk will expire if and when the Company's Net Asset value reaches
and exceeds $120 million within the 24-month period following their issue
("NAV Hurdle"). If the NAV Hurdle is not met in that time period, the
bonus shares will be forfeited back to the Company.
The 2022 Bonus Shares and the CEO Bonus Shares were admitted to trading on AIM
London Stock Exchange on 26 April 2023.
Total Voting Rights
Following issuance of 2022 Bonus Shares and CEO Bonus Shares in April 2023,
the Company has 85,877,429 Ordinary Shares in issue, each carrying the right
to one vote. No Ordinary Shares are held by the Company in treasury. The total
number of voting rights in the Company is therefore 85,877,429.
First Republic Bank
Management of the Company became aware of multiple banks being transferred
into government receivership and the appointment of the Federal Deposit
Insurance Corporation (the "FDIC") as receiver in March 2023. On 13 March
2023, the Company, after consulting with the Board, transferred all funds on
deposit at First Republic Bank to their Trust account which is located at Key
Bank. On 28 April 2023, the Company transferred the majority of these funds
to fund their security deposit and operating account with European Depositary
Bank S.A. On 1 May 2023, JPMorgan Chase & Co. acquired the substantial
majority of assets, and assumed certain liabilities, of First Republic Bank
from the FDIC. Subsequent to 1 May 2023, the Company transferred certain
funds back to First Republic Bank for deposit in an operating account.
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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