REG - i(x) Net Zero PLC - Final Results
28/06/2024 07:15
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RNS Number : 3232U i(x) Net Zero PLC 28 June 2024
28 June 2024
i(x) Net Zero PLC
("i(x) Net Zero" or the "Company")
Final Results for the Year Ended 31 December 2023
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 2023 ("FY 2023"). 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 2023 increased by 125.9% to $144.22 million (31
December 2022: $63.84 million);
· Portfolio NAV per share, including cash of $5.62 million (£4.42
million), as at 31 December 2023 of $1.74 per share (£1.37 per share) (31
December 2022: $0.90 per share (£0.75 per share);
· Profit of $78.58 million from continuing operations before non-cash
deferred tax provision and share-based compensation (2022: Loss $5.08
million);
· As at 31 December 2023, the Company had $3.75 million of borrowings
and cash of $5.62 million (31 December 2022: no borrowings and cash of $7.48
million); and
· In 2023, i(x) made portfolio investments of $1.85 million (2022:
$1.60 million).
Corporate and Portfolio Highlights
· In January 2023, the Company announced the appointment of Pär
Lindström, the Company's Chief Investment Officer, as its Chief Executive
Officer and in April 2023, the Company announced the appointment of Jonathan
Carpenter Stearns as CFO and Executive Director of the Company.
· 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.
· 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.
· In July 2023, portfolio company WasteFuel announced a $10m investment
from bp, the global energy company to assist WasteFuel's plans to develop a
global network of plants to convert municipal and agricultural waste into
bio-ethanol, a biofuel which could play a significant role in decarbonising
hard-toabate sectors like shipping.
· In August 2023, the Company announced a conditional agreement for the
sale of Carbon Engineering to Occidental Petroleum Corporation, the
international energy company at a 7.2x realized multiple of invested capital.
· In September 2023, the Company completed a $600,000 investment into
Citron Energy Inc, a US based alternative fuels business to increase the size
of the portfolio and bring innovative cleantech technology to decarbonise
industrial production and support the circular economy in the US.
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 Company continued to see growth in asset values during the course of 2023,
as well as further improvements to global policy incentives for sustainable
investing and the move towards
decarbonisation. Nonetheless, stock market conditions remain challenging for
smaller growth companies with NAV discounts widening during the period under
review for many market participants.
Over the last twelve months we have not seen any real improvement in the
liquidity of i(x) Net Zero shares which has contributed to volatility in the
market price. The share price has recovered from lows, while remaining
significantly below the price set at listing, and continues to trade at a
significant discount to NAV.
The Board remains convinced that the landscape of opportunity to combine
attractive investment returns with positive impact remains compelling, with
global momentum now building in the key transitions that net zero commitments
require. However the ability of the company to deploy meaningful capital is
currently restrained by the balance sheet, and the Board continues to take a
conservative view on the ability of the company to access capital in current
market conditions.
Despite these challenging macro conditions which we hope to be cyclical in
nature, the new senior executive team made significant progress during the
year in realising value from the portfolio, adding a new investment and seeing
significant new investment into the flagship WasteFuel
business from bp.
In addition there has been a reduction in operating costs and further work
done on the assessment of opportunities to optimise the current portfolio
which is tracking broadly in line with expectations.
During the year, the fair value of investments in i(x)'s portfolio companies
increased by 125.9% to $144.22 million with Portfolio NAV per share, including
cash of $5.62 million (£4.42 million), as at 31 December 2023 of $1.74 per
share (£1.37 per share).
I would like to thank my follow board members and the executive team, for
their continued commitment to increasing NAV and shareholder value in very
difficult circumstances.
Nick Hurd
Chairman
27 June 2024
Chief Executive's Statement
The goal of our business remains the same, as we look to generate superior
risk adjusted financial returns while enhancing access to growing businesses
that are working on net zero strategies."
This is being achieved via investing in a portfolio that provides access to
the longterm secular trend of capital flowing towards sustainable finance and
ESG-related investing.It has been another challenging year - with continued
uncertainty characterising global capital markets which
resulted in hesitancy on the part of investors and capital providers who have
been seeking safe haven returns.
However, in the face of these challenges, the team has delivered meaningful
progress against the challenges we set ourselves when we took up our
leadership positions at the start of 2023. In April 2023, we announced our
intention to prioritise the growth of the net asset value of the Company's
investments by identifying and seeking to execute profitable investment
realisations from the existing portfolio and by sourcing high growth
investment opportunities while also reducing costs and operating expenditure,
all of which have been achieved in the period under review. We continue to see
high growth in our target markets and are working hard to secure capital, for
both our balance sheet and external sources, to be available for us to expand
and to fund selective investments.
Consistent with past successes, the Group will seek out investment targets
with the following characteristics:
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;
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;
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.
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 during 2023.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 2023.
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,
nonfossil fuels to help reduce the carbon emissions of the transportation
sector with a particular focus on municipal solid waste to energy for trucks,
planes and ships. Utilising WasteFuel technology, a 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.
In mid-2023 WasteFuel secured a $10 million investment from bp, to further
assist WasteFuel's
plans to develop a global network of plants to convert municipal and
agricultural waste into bio-methanol, a biofuel which could play a significant
role in decarbonising hard-to-abate sectors like shipping. This investment by
bp was at a price which dramatically increased the NAV of the Company's
holding in WasteFuel by $84.38 million to a total reported NAV of $131.50m as
at December 31, 2023.
WasteFuel intends to develop multiple bio-methanol plants around the world in
collaboration with local strategic partners including waste companies, with
the first project expected to be in the GCC. Ever since bp's funding,
WasteFuel has continued to proceed its projects in the GCC, with two of them
leading the way. Bp and WasteFuel have entered a memorandum of understanding
to offtake the produced bio-methanol and, working together, to help optimize
and improve biomethanol yields and economics.
WasteFuel has a proven track record of working with global partners as it
pursues its plans for a global network of biomethanol plants converted from
waste. In 2022 WasteFuel entered a commercial-scale bio-methanol partnership
with A.P. Moller - Maersk, the global container logistics company. WasteFuel
also has continued to develop its projects in the GCC, to develop the first
commercial scale municipal waste-to renewable methanol plant in the Middle
East.
WasteFuel Featured on TIME and Statista's 2024 List of America's Top GreenTech
Companies. WasteFuel also strengthened its management team with the
appointment of Peter Jorgensen from Maersk (and previously Maersk board member
of WasteFuel) as CFO. Peter is working 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 renewables 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 $1.5M
million (including $1.1 million in 2023 and $0.4 million the first 5 months of
2024) 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. Enphys remains in talks with a leading and well-established
advanced biofuels company in Latin America and has until 8 December 2024 to
consummate an initial business combination.
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. While having 1,100+ units
currently under construction, the challenges in the regional banking market in
the US, restricted access to capital, deteriorating local markets, provide a
challenged environment for all of MultiGreen's projects. Consequently, to be
conservative we have reduced the value of our investment in MultiGreen to zero
as of year end 2023. 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 2024. 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. During the year, SLI continued development of the Downtown
Emergency Service Center (DESC), a non-profit housing organisation in Seattle,
for
a 5 storey 124-unit energy efficient permanent supportive apartment building
as a solution for long term homelessness. SLI is also planning to expand its
assembly plant locations on the West Coast of the US and plans eventually to
move eastwards to serve additional markets. 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"). Unfortunately
turbulence in the public market for new issuances and acquisitions prevented
this combination from being consummated. Consequently, while SLI has continued
to develop its pipeline of projects, it has had to reduce its
corporate expenses significantly and slow the pace of its developments. I(x)
did participate in a bridge round to provide capital, investing $150,000 to
allow the company to complete one project and to undertake the process of
raising capital for the completion of its current pipeline.
Citron Energy Since the Company's investment in November 2023, Citron has
advanced the development of multiple projects in the US. The near term
opportunity to conclude multi-year offtake and supply contracts has been
accelerated by the increasing awareness of the need to
address carbon footprint and GHG emissions for industries including cement and
lime production as well as an increasing focus on net zero recycling and
limited space for new landfills. With equipment sources in place and site
development activities well advanced and confirmed interest by equity and debt
providers, Citron expects to accelerate the development of its project
pipeline over the near term.
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 itsstrategic
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.
Following completion of the sale of Carbon Engineering Ltd. to Occidental
Petroleum Corporation in November last year at a 7.2x realized multiple of
invested capital, the Company received the first tranche of the proceeds
in November 2023 and expects the second tranche in November this year and a
final payment in November 2025. Occidental's $1.1bn purchase of Carbon
Engineering was a landmark moment for carbon capture sequestration (CCS)
startups, marking the first major acquisition of a carbon
removals company, with the transaction regarded as one of the leading Energy
Transition deals of the year in 2023, showing the strength and investment
acumen of i(x) Net Zero.
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 has continued to successfully deliver on a
number of projects including the EQT, Williams, Jonah Energy and Carbon
GeoCapture projects. There were advances in discussions with Microsoft and
Dell and a collaboration began with EEMDL, a multidisciplinary research and
education center with a mission to be the global data and analytics hub to
support improved greenhouse gas emissions accounting across energy supply
chains.
Financial Review
The Group delivered a significant improvement in the fair value of investments
in its portfolio companies ("Portfolio NAV") which increased by 125.9% or,
$80.38 million, to $144.22 million
as at 31 December 2023 (31 December 2022: $63.84 million). The annual increase
in Portfolio
NAV over the period of $80.4 million (2022: $3.1 million) comprises primarily
unrealized gains of $81.1 million (2022: $1.5 million). The majority of
unrealized gains relates to an increase in fair value of WasteFuel by $84.38m
offset by a decrease in fair value of MultiGreen Properties, LLC
of $2.55 million, which was reduced to zero. WasteFuel NAV increased as a
result of the $10 million investment by bp plc on 30 June 2023. MultiGreen NAV
was reduced to zero due to increased costs, restricted access to capital and
deteriorating local markets providing a challenged environment for
MultiGreen's projects. As at 31 December 2023, Portfolio NAV per share,
including cash of $5.62 million (£4.42 million), was $1.74 per share (£1.37
per share) (31
December 2022: $0.90 per share (£0.75 per share)).
Profit from continuing operations before non-cash deferred tax provision and
share-based compensation was $78.58 million in 2023. (2022: loss $5.08
million) (This $78.58 million profit is derived as operating profit before
financing activities of $79.31 million minus share-based compensation credit
of $0.73 million). During 2023, stock options were granted to management
employees under the 2022 Company's Equity Incentive Plan. In connection with
this outstanding options were forfeited which resulted in a non-cash
share-based compensation credit of $0.73
million being recognized (2022: $1.75 million expense).
General and administrative expenses decreased by $2.69 million to $5.56
million (2022: $8.25 million), largely due to the cost-cutting program enacted
by the new executive team along with non-cash sharebased compensation credit.
As a result of the corporate inversion and resulting IPO transaction in 2022,
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 2023, non-cash deferred tax expense of $16.69
million (2022: $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 profit amounted to $62.6 million in 2023 (2022: $18.13 million net loss)
primarily as a result of the increase in the WasteFuel NAV, net of deferred
tax expense. As at 31 December 2023 the
Company had $3.75 million borrowings, cash of $5.62 million (31 December 2022:
no borrowings and cash of $7.48 million) and net current assets of $6.73
million (31 December 2022: $6.68 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"). This facility
was increased in November 2023 to $11.75 million. The Loan bears interest at
approximately 10.5% coupon (subject to periodic change in line with EDB's USD
Base rate and more recently approximately 10.82%) 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 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 debtsecurities 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 to $6.8 million at any time during the three year
term following
the Company's admission to trading on AIM.
Discussions with Lion Point are taking place with a view to settling the
option. 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://url.avanan.click/v2/___https:/ixnetzero.com/___.YXAzOml4bmV0emVybzphOm86NjQ1OTQ3ODg5YTFkOGE4OTJmNWNhNzhlNjkxNTM0MDg6NjpiYjAwOjFkODRiMjZiYjgxZTM4MjcxNmFjZGYyMjI2MDY5YjViZWJmMTkyZmUzY2NmN2RjNGI5ZDk4NjZmNzJhMmUzMDY6cDpUOk4)
.
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 ownedsubsidiary
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
transferredto 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, combined with its first exit which was very
successful, i(x) Net Zero is now 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 a 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 growth targets for the executive
management team, building on FY 2023 strong increase in NAV and reduction of
operating expenditure. We believe that these targets, and company's focus to
generate strong returns, should enhance shareholder value over the near and
longer term.
Pär Lindström
Chief Executive Officer and Chief Investment Officer
27 June 2024
i(x) Net Zero Plc
Consolidated Statement of Comprehensive Income
For The Year Ended 31 December 2023
(Expressed in US dollars)
Notes 2023 2022
Net unrealised gain from investments 81,105,546 1,499,970
Net realised gain/(loss) on investments 3,767,329 (86,165)
Dividend income - 2,645
Investment return 84,872,875 1,416,450
Expenses and other income (5,558,528) (8,246,839)
OPERATING PROFIT/(LOSS) BEFORE FINANCING ACTIVITIES
79,314,347 (6,830,389)
Finance income 10 168,990 -
Finance cost 10 (236,157) (27,495)
Net financing activities (67,167) (27,495)
PROFIT/(LOSS) BEFORE TAX 79,247,180 (6,857,884)
Tax provision 18 (16,685,451) (11,271,318)
PROFIT/(LOSS) AFTER TAX 62,561,729 (18,129,202)
Earnings/(loss) per share:
Basic 6 0.75 (0.23)
Diluted 6 0.71 (0.23)
Notes:
a) There is no other comprehensive income or loss for the years ended 31
December 2023 and 2022.
The accompanying notes are an integral part of these financial statements.
i(x) Net Zero Plc
Consolidated Statement of Financial Position 31 December 2023
(Expressed in US dollars)
Notes 31 December 31 December
2023 2022
ASSETS
Non-Current assets
Investments, at fair value 4 144,217,045 63,840,722
Receivable from deemed distributions 4 2,064,901 -
Right-of-use asset 27,639 349,277
Furniture and equipment Loan origination costs, net - 106,563 1,839
-
Security deposit 82,942 82,942
Total Non-Current Assets 146,499,090 64,274,780
Current assets
Receivable from deemed distributions 4 1,962,123 -
Trade and other receivables 51,383 66,838
Prepaid expenses and other current assets 127,631 135,806
Cash and cash equivalents 17 5,620,810 7,479,832
Total Current Assets 7,761,947 7,682,476
Total Assets 154,261,037 71,957,256
LIABILITIES
Current liabilities
Accounts payable and accrued expenses 1,002,804 612,788
Lease liability 32,051 364,336
Security deposit payable - 24,601
Total Current Liabilities 1,034,855 1,001,725
Non-current liabilities Deferred tax liability
18 27,292,192 11,271,318
Loan payable Lease liability 8 3,751,875 -
- 32,051
Total Non-Current Liabilities 31,044,067 11,303,369
Total Liabilities 32,078,922 12,305,094
EQUITY
Share capital and premium 5 76,621,844 75,921,844
Share options reserve 1,018,283 1,750,059
Retained earnings 44,541,988 (18,019,741)
Total Equity 122,182,115 59,652,162
Total Liabilities and Equity 154,261,037 71,957,256
The financial statements were authorised for issue by the board of directors
on 27 June 2024 and were signed on its behalf by:
Par
Lindström
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 Page 1 of 2
For the Year Ended 31 December 2023
(Expressed in US dollars)
Share Capital and Premium Share Option Retained Earnings Total
Reserve
At 1 January 2023 75,921,844 1,750,059 (18,019,741) 59,652,162
Comprehensive profit for the year
- - 62,561,729 62,561,729
Share bonus (Note 5) 700,000 - - 700,000
Share option credit (Note 7) - (731,776) - (731,776)
At 31 December 2023 76,621,844 1,018,283 44,541,988 122,182,115
i(x) Net Zero Plc
Consolidated Statement of Changes in Shareholders' Equity Page 2 of 2
For the Year Ended 31 December 2022
(Expressed in US dollars)
Members' Capital Share Capital and Share Options Retained Earnings Total
Premium Reserve
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
(1 January 2022 -
8 February 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 - - -
Subscription for i(x) Net
Zero shares, net of
expenses - 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 - 75,921,844 1,750,059 (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.
i(x) Net Zero Plc
Consolidated Statements of Cash Flows For the Year Ended 31 December 2023
(Expressed in US dollars)
Notes 2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) after taxes 62,561,729 (18,129,202)
Adjustments for:
Interest expense 236,157 -
Depreciation expense 1,839 13,472
Bad debt expense 165,299 -
Finance income (61,852) -
Increase in foreign tax liability 457,577 -
Foreign tax paid 207,000 -
Interest income (235,471) -
Foreign currency gain (5,819) -
Other expense related to deemed distributions 1,002 -
Amortisation of right-of-use asset 321,638 304,149
Amortisation of loan facility fees 175,313 - 86,165
Loss on cash advances for future investments -
Unrealised gain from investments 4 (81,105,546) (1,499,970)
Realised gain on distribution of proceeds (3,767,329) -
Bonus expense paid in shares 5 700,000 1,000,000
Incentive stock option grant expense/(credit) 7 (731,776) 1,750,059
Increase in deferred tax liability 16,020,874 11,271,318
Changes in operating assets and liabilities Increase in trade and other (149,844) (26,464)
receivables
Decrease in prepaid expenses
and other current assets 8,175 1,413,910
Decrease in security deposit payable (24,601) (24,601)
Decrease in member tax advance Increase/(Decrease) in accounts payable - 11,500
and accrued expenses 390,016 (1,259,725)
Net Cash Used in Operating Activities (4,835,619) (5,089,389)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from deemed distributions 1,957,090 -
Purchases of investments (1,850,000) (1,600,000)
Net Cash Used in Investing Activities 107,090 (1,600,000)
CASH FLOWS FROM FINANCING ACTIVITIES
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
Proceeds from loan facility borrowings 8 3,751,875 -
Interest paid - loans (226,151) -
Payment of loan facility fees (281,875) -
Decrease in lease liability (374,342) (335,945)
Net Cash Provided by Financing
activities
2,869,507 12,034,457
Net Increase (Decrease) in Cash and
Cash
Equivalents
(1,859,022) 5,345,068
CASH AND CASH EQUIVALENTS
Beginning of year 7,479,832 2,134,764
End of year 5,620,810 7,479,832
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash financing activity
Share-based compensation 7 (731,776) 1,750,059
Distribution of assets held for disposal - 1,216,841
Bonus expense paid in shares 7 700,000 1,000,000
(31,776) 3,966,900
i(x) Net Zero Plc
Notes to Consolidated Financial Statements 31 December 2023
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 registered address of the
Company is 3(rd) 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 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 ("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 Preparation
The Company's consolidated 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 consolidated
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 amendments to accounting standards that are relevant to the
Company were adopted by the Company for annual periods commencing on or after
1 January 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.
Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising
from a Single Transaction: The amendments provide a temporary exception to
the requirements regarding deferred tax assets and liabilities related to
pillar two income taxes.
Amendments to IFRS 17: Insurance Contracts: The amendments are aimed at
helping companies implement the Standard and making it easier for them to
explain their financial performance.
These new standards and amendments did not have an impact on the financial
statements of the Company.
At the date of authorization of these financial statements, the following
Standards and Interpretations, which have not yet been applied in these
financial statements, were in issue but not yet effective:
IFRS S1 General Requirements to Disclosure of Sustainability-related Financial
Information and IFRS S2 Climate-related Disclosures
IAS7 and IFRS 7 Supplier Finance Arrangements: Amendments which address the
disclosure requirements to enhance the transparency of supplier finance
arrangements and their effects on a company's liabilities, cash flows and
exposure to liquidity risk
IFRS 16 Leases: Amendments which add to requirements explaining how a company
accounts for a sale and leaseback after the date of the transaction.
IFRS 18 Presentation and Disclosure in Financial Statements
IFRS 19 Subsidiaries without Public Accountability: Disclosures
Amendments to IAS 1 Non-current Liabilities with Covenants: Clarify the
criteria for classifying liabilities with covenants as current or non-current.
Enhancements to the SASB standards:
Amendments to IAS 21: The Effects of Changes in Foreign Exchange Rates:
require disclosure of information that enables users of financial statements
to understand the impact of a currency not being exchangeable.
Going Concern
The consolidated financial statements have been prepared on a going concern
basis which assumes that the Company will continue to operate for the
foreseeable future. As part of their going concern review the directors have
prepared detailed cash flows for a period of 12 months from the date of the
approval of these financial statements. In preparing these forecasts, the
Directors have made certain assumptions based upon their view of the best
estimate of the future developments of the business.
The cash flow includes certain important assumptions in its estimates over the
next 12 months:
- A lower operating cost base
- Increased finance costs due to additional bank facilities utilized
The Directors continue to closely control expenditure and the directors and
senior management continue to be fully supportive of the group and being
mindful that cash liquidity is a constraint, they are validating their support
by agreeing that should liquidity requirements require, that they will defer
at least 50% of their salaries and all forms of remuneration commencing at any
time as the Board determines from the date of this report and for up to twelve
(12) months from the date of this report.
The assumptions also include the decision by management to cancel the
admission of its company shares to trading on AIM (Delist) and the Directors
are working on several scenarios to meet its obligations related to the Lion
Point Capital (Lion Point) put option which expires by the end of January 2025
and address the risk of the put option being exercised prior to its expiration
date. In addition, the Company, based on productive discussions, assumes the
approval of an extension of its loan facility with European Depositary Bank
S.A. ("EDB") will be finalized in the near term.
Post year end, Management has actively sought alternative financing
arrangements including additional debt financing which has progressed to an
advanced stage and the disposal of certain of its investments. The loan
agreement with EDB has certain covenants attached pertaining to the net assets
of the Company and based on the assumptions above the directors believe these
covenants have been maintained.
For the above reasons, there exists a material uncertainty relating to going
concern. However, the Directors continue to adopt the going concern basis of
accounting in preparing the annual financial statements. The financial
statements do not include any adjustments that would result from the going
concern basis of preparation being inappropriate or where certain events or
conditions in the forecast do not materialise.
Foreign Currency
The consolidated 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 LLC ('i(x)
investments'), as at and for the year ended 31 December 2023. 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 and 2023 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 2023.
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 (100% interest acquired on 9 February 2022). 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 merger reserve was created on the acquisition of i(x) investments by the
Company in 2022. 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 2023 and
2022, 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 judgement 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, deemed distributions (an amount
designated by a corporation as a distribution of dividends but that shall not
be distributed during the year in which the designation is made) 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 other than
investments 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 value 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 borrowings (see note 8 for further
information) and 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.
The balances in the accompanying consolidated statements of financial position
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 2023 and 2022.
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.
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.
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 or the date
of receipt where this is deemed more prudent. 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.
Income is measured at the fair value of the consideration received or
receivable in the normal course of business. The Company recognises income
when the amount of income can be reliably measured and when it is probable
that the future economic benefits will flow into the Company.
Income which is expected to be received over time is recognized as the
performance obligations of a contractual agreement are satisfied by the
parties to such agreement.
Investment return
Investment return represents the sum of realised gains and losses on the
disposal of investment portfolio assets and the unrealised gains and losses on
the revaluation of these, together with and any related investment income
received and receivable.
Realised gains and losses on the disposal of investments is the difference
between the fair value of the consideration received less any directly
attributable costs on the sale and the fair value of the investments at the
start of the accounting period or acquisition date if later.
Unrealised gains and losses on the revaluation of investments is the movement
in carrying value of investments between the start of the accounting period or
acquisition date if later and the end of the accounting period. Dividends from
investments are recognised when the shareholders' rights to receive payment
have been established.
Interest income
Interest income is recognized as interest accrues using the effective interest
rate method.
Other income
All other income is recognised as other income in the period to which it
relates.
Taxation
Taxation for the year comprises current and deferred tax. Tax is recognised in
the income statement except to the extent that it relates to items recognised
in other comprehensive income or directly in equity. The Company may be
subject to withholding taxes in relation to income from investments, or
investment realisation proceeds or gains, and such amounts will be accounted
for as incurred. Current income tax is calculated on the basis of the tax
rates and laws enacted or substantively enacted at the statement of financial
position date in the countries where the Company operates and generates
taxable income. Management periodically evaluates positions taken in tax
returns in regard to situations in which applicable tax regulations are
subject to interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities. The current
income tax rate in Jersey is 0%.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements in
accordance with IAS 12 - 'Income Taxes'. Deferred tax liabilities are
generally recognised for all taxable temporary differences, and deferred tax
assets are generally recognised for all deductible temporary differences to
the extent that it is probable that taxable profits will be available against
which those deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable nor the accounting profit or loss. Deferred tax assets and
liabilities are calculated using tax rates and laws that have been
substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and
liabilities on a net basis.
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.
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.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand, deposits held on call with
banks, other short-term highly liquid investments with maturities of three
months or less. Further details on the Company's cash and cash equivalent
balances is available in Note 17.
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 Payments
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 payment 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 Company 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 IFRS 8 - "Operating Segments", the
Company had only one reportable segment, being i(x) investments, during the
year ended 31 December 2023 and the period from 9 February 2022 to 31 December
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. 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. Information on the
reorganization is available in note 1.
3. Judgements 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 judgement 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 judgement or complexity, or areas where
assumptions and estimates have the most significance to the carrying value of
assets and liabilities in the financial statements are the unquoted
investments at fair value on the basis of accounting policies disclosed in
Note 2 under Fair Value Estimation and note 4.
Wastefuel is the Group's largest fair value investment and is held at a value
of $131.5m in the financial statements. If this valuation was to increase or
decrease by 10% it would lead to a $13.15m change in the fair value of the
investment in the statement of financial position and an equivalent movement
in the income statement. Management has sought to mitigate the risks
associated with this uncertainty by engaging an expert third party to produce
independent valuation reports.
The deferred tax liability also has a significant impact on the financial
statements. Given the high degree of complexity regarding the calculation of
these figures expert US tax advisors were engaged to make the calculations but
it cannot be guaranteed that any final tax charge, if any, will be the same as
that calculated.
Management has also made assumptions and estimates that are significant in
relation to share-based compensation. The share-based compensation figures
were calculated by an expert third party using the Black-Scholes model where
the fair value of the services was not able to be directly calculated.
For further information on the going concern basis used for these financial
statements please refer to note 2.
4. Investments in Private Operating Companies
Following are the schedules of investments as of 31 December 2023 and 31
December 2022:
31 December 2023
Principal Amounts/Shares/
Units Fair Value ($)
Description
Private Operating
Companies
United States Common Shares
Biofuel Developer
10,380,581 Wastefuel Global,
Inc.
131,190,437
Total Common Shares (cost
$231,900)
131,190,437
Preferred Shares
24,005
-
Biofuel Developer Wastefuel Global, Inc.
Alternative Fuels Citron Energy, Inc
310,379
600,000
Total Preferred Shares (cost
$850,000)
910,379
Limited Liability Company Interests
Real estate development
1,228,063 MultiGreen Properties,
LLC
-
Total Limited Liability Company Interests
(cost
$3,837,697)
-
Limited Partnership Interest
Building technology
Sustainable Living Innovations (FKA Multigreen SLI Partners,
LP) 737,000
Total Limited Partnership Interests (cost $500,000) 737,000
Convertible Note
Building technology
150,000 Sustainable Living Innovations(FKA Multigreen SLI
Partners,
150,000
LP)
Real estate development
250,000 MultiGreen Properties, LLC -
Total Convertible Note (cost $400,000) 150,000
Total United States (cost $5,819,597) 132,987,816
Canada Common Shares
Carbon Capture Technology
21,876 Carbon Engineering, Ltd. (1) -
Total Common Shares - Canada (cost $1,005,809) -
Cayman Islands
Limited Liability Company Interest
Renewable Energy
38,150 Enphys Management Company 10,757,229
Total Limited Liability Company Interests - Cayman Islands (cost $5,570,000) 10,757,229
Netherlands
Preferred Class B1 Shares
Software/Information Technology
499,955 Context Labs, BV 472,000
Total Preferred Class B1 Shares - Netherlands (cost
$499,955) 472,000
Total Investments (cost $11,889,552) 144,217,045
31 December 2022
Principal Amount/Shares/
Units
Description
Fair Value ($)
Private Operating Companies United States
Limited Liability Company Interests
Biofuel Developer
10,380,581 Wastefuel Global,
LLC
46,908,475
1,228,063 Real estate development MultiGreen Properties, LLC 2,260,000
Total Limited Liability Company Interests (cost $4,069,597)
49,168,475
Limited Partnership Interest
Building technology
Sustainable Living Innovations (FKA Multigreen SLI Partners,
LP) 742,000
Total Limited Partnership Interests (cost $500,000) 742,000
Biofuel Developer
Wastefuel Global, LLC 250,000
Total SAFE (cost $250,000) 250,000
Real estate development
MultiGreen Properties, LLC 250,000
Total Convertible Note (cost $250,000) 250,000
Total United States (cost $5,069,597) 50,410,475
Carbon Capture Technology Carbon Engineering, Ltd. (1)
2,579,223
Total Common Shares - Canada (cost $1,005,809) 2,579,223
Simple Agreement for Future Equity (SAFE)
Convertible Note
Canada Common Shares
21,876
Cayman Islands
Limited Liability Company Interest
Renewable Energy
Enphys Management
Company
10,340,024
Total Limited Liability Company Interests
-
10,340,024
Cayman Islands (cost $4,470,000)
Netherlands
Preferred Class B1 Shares
Software/Information Technology
499,955 Context Labs,
BV
511,000
Total Preferred Class B1 Shares - Netherlands (cost
$499,955)
511,000
Total Investments (cost
$11,045,361)
63,840,722
(1) Shares of Carbon Engineering, Ltd. were held indirectly through
investments in RCM Carbon Engineering Partners, LLC (12,490 common shares) and
C12 Equity Ltd. (9,273 common shares) until disposal in November 2023.
The following tables present the changes in assets classified in Level 3 of
the fair value hierarchy for the years ended 31 December 2023 and 31 December
2022:
31 December 2023 Limited Liability Simple Agreement
Common Preferred Convertible Company Limited For Future
Stock Stock Note Interests Partnerships Equity (SAFE) Totals
($) ($) ($) ($) ($) ($) ($)
Balance at 31 December
2022 2,579,223 511,000 250,000 59,508,499 742,000 250,000 63,840,722
Realised gain 3,767,329 - - - - - 3,767,329
Purchases of investments 600,000 - 150,000 1,100,000 - - 1,850,000
Unrealised gain/(loss) 84,281,962 21,379 (250,000) (2,942,795) (5,000) - 81,105,546
Deemed distributions (6,346,552) - - - - - (6,346,552)
Conversion to shares 46,908,475 250,000 - (46,908,475) - (250,000) -
Balance at 31 December 2023 131,790,437 782,379 150,000 10,757,229 737,000 - 144,217,045
31 December 2022
Limited Simple
Liability Agreement
Common Preferred Convertible Company Limited For Future
Stock 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
Purchases 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 2,579,223 511,000 250,000 59,508,499 742,000 250,000 63,840,722
The following tables summarize the methods and significant assumptions used to
measure investments categorized in Level 3 of the fair value hierarchy and
whose values were determined by management as of 31 December 2023 and 31
December 2022:
Preferred Stock
Software/Information Technology 511 Market approach Recent transaction cost 46.56/share
- capital raise (50% weight)
Option Pricing Risk free rate -
Method 4%, volatility -
(backsolve) 202.1% ;time to
liquidity event - 5 years (50%
weight)
Total Preferred Stock 511
Limited Partnership Interest
Building technology 742 Transaction cost Transaction cost 225/unit
Simple Agreement For
Future Equity (SAFE) 250 Transaction cost Transaction cost N/A
Biofuel Developer
Convertible Note
Real Estate Development 250 Transaction cost Transaction cost N/A
Total 63,841
Note:
The per unit price of Wastefuel Global in the most recent capital raise was
given a 90% weight in the 31 December 2023 and 2022 valuations. 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
judgement. The unobservable inputs are presented in the Level 3 valuation
table as of 31 December 2023 and 2022.
WasteFuel Global, Inc. ("Wastefuel")
Effective 30 June 2023, WasteFuel finalized an agreement with BP p.l.c.
("BP"), the multi- national energy company, to secure a $10 million investment
in Wastefuel. The $10 million investment, which was the lead investment in
Wastefuel's Series B investment round, resulted in a material increase in the
fair value attributable to the Company's holding in WasteFuel. Following BP's
investment, the fair value of the Company's equity and preferred interest in
WasteFuel is $131.5 million, an increase of 180% from the last reported
audited fair value ($46.91 million as at 31 December 2022). This increase in
the fair value of Wastefuel was included in the Company's H1 2023 results. In
addition, effective 30 June 2023, Wastefuel was reorganized from a limited
liability company to a corporation.
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.
Mr Lindström is a director of Wastefuel and has a holding of 25,000 ordinary
shares (0.08%). Carbon Engineering Ltd.
In August 2023, the Company announced that a conditional agreement was reached
for the sale of Carbon Engineering Ltd. ("Carbon Engineering"), to Occidental
Petroleum Corporation ("Occidental"), the international energy company.
The acquisition saw Occidental acquire the outstanding shares in Carbon
Engineering for a total cash consideration of $1.1 billion, payable in three
approximately equal annual payments with the first made at closing in November
2023. Following the sale, Carbon Engineering became a wholly owned subsidiary
of Occidental.
i(x) Net Zero held an indirect circa 0.45% interest in Carbon Engineering
through two special purpose vehicles ("SPVs"). The Company's indirect interest
equated to approximately $7.2 million, and subject to the distribution of the
proceeds over the three years following completion by those SPVs, this will
generate a 7.2x return on the Company's initial investment of $1 million
before taxes and any costs of the SPVs. On this basis the sale price
represents a 2.8x multiple on the previous holding value of the Company's
investment in Carbon Engineering, of $2.6 million.
The Company realised a net gain on its investments in the two SPVs of $3.8
million. On 17 November 2023, the Company received the first annual
distribution payments from the SPVs in connection with the Carbon Engineering
acquisition. The total amount received was $1,957,090, representing 30% of the
total gross proceeds expected to be distributed by the SPV's, net of Canadian
taxes withheld and administrative expenses. In addition, the Company recorded
receivables as of 31 December 2023 totalling $4,027,024 representing the
estimated deemed distributions expected to be received in 2024 and 2025, of
which
$1,962,123 is expected to be received in November 2024 and $2,064,901 is
expected to be received in November 2025.
Citron Energy Inc.
In September 2023, the Company announced that it has added an additional
company to its portfolio via a $600,000 investment into Citron Energy Inc.
("Citron Energy"), a U.S. based alternative fuels business.
Citron Energy aims to replace the use of fossil fuels by processing
non-recyclable municipal and commercial waste into a combustible fuel. The use
of CitronFuel will allow the replacement of coal as well as helping to reduce
landfill usage and significantly lower CO2 emissions. The Company's $600,000
investment is in the form of a subscription for new shares in Citron Energy
and i(x) Net Zero has an equity interest of approximately 32.2% in Citron
Energy.
Enphys
In August 2023, the Company announced that it had committed to invest an
additional $2.5 million into Enphys Management Company ("EMC") and that its
wholly owned subsidiary i(x) Investments LLC has entered into a revised EMC
LLC Agreement with LAIG Investments.
The investment, the cost of which will be spread over the next four years and
immediately took the Company's ownership in Enphys to 30.0%. 10% of the issued
capital in EMC is subject to pro-rata clawback if payments by the Company are
either stopped or not made when due in accordance with the revised terms and a
further portion subject to additional clawback if a minimum of $1 million is
not funded in full, provided that the Company will retain at least a 20%
interest in EMC.
The obligation with regards to the second tranche funding of $1.5 million is
conditional upon Enphys Acquisition Corp. consummating its initial acquisition
of an operating company and concluding its de-SPAC process. If the obligation
is triggered similar provisions for clawback as for the first tranche of $1
million will apply.
In addition, if before 5 August 2025 EMC's fair market value falls below $25
million and EMC issues additional equity securities, the Company will benefit
from anti dilution provisions to ensure that the value of its equity interest
does not fall below the amount contributed.
The new funding, being made from the Company's existing cash resources, will
provide additional support to EMC for budgeted working capital, certain other
approved costs and investments into new assets as it initially progresses
towards a merger opportunity for its SPAC, Enphys Acquisition Corp, with the
intention of forming a major renewables energy group that can be a regional
champion for sustainability in the Americas and later expanding its assets
under management with new assets and new investment structures.
Following this announcement Enphys Acquisition Corp. (NYSE: NFYS, "EAS", EMC
is the sponsor of EAS and has a direct ownership in EAS) has filed a
preliminary proxy statement in connection with an extraordinary general
meeting of shareholders of EAS for the purpose of, among other things,
extending the time by which it has to consummate an initial business
combination from 8 June 2024 to 8 December 2024 (the "Extension"), as well as
other documents filed by EAS with the U.S. Securities and Exchange Commission.
The Extension was approved by EAS shareholders in June 2024.
EAS has also signed a non-binding letter of intent for a business combination
with a leading and well-established advanced biofuels company in Latin
America.
Mr Lindström is a director of EMC.
5. Share Capital
The Company has 85,877,429 ordinary shares, at no par value, authorised,
issued and outstanding as of 31 December 2023.
14,056,811 ordinary shares were issued upon completion of the Company's IPO on
9 February 2022. In addition, the members' capital in i(x) investments was
converted to 65,000,000 Ordinary shares in the Company on the same date,
bringing the total shares issued and outstanding as of 9 February 2022 to
79,056,811.
6,820,618 Ordinary shares were issued and admitted to trading on AIM on 26
April 2023 in relation to the CEO Bonus Shares, as described below under CEO
Bonuses.
Total Voting Rights
Following the 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.
CEO Bonuses
The CEO Bonus in respect of the year ended 31 December 2023 was accrued in
2023 in the amount of $410,000. In February 2024, the Company announced that
Mr. Lindström, the Company's CEO, agreed to apply his annual bonus to
subscribe for new ordinary shares in the Company at the previous day's closing
price of 21p per share. As a result, Mr. Lindström received 1,550,293 new
ordinary shares in the Company. These shares were admitted to trading on AIM
London Stock Exchange on 20 February 2024.
In December 2022, the Company agreed to pay to Mr. Lindström an incentive
bonus of
$200,000 (£160,772) in respect of the year ended 31 December 2022 and, 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). In total, these bonuses represent approximately 170% of
Mr. Lindström's 2023 annual base salary. In order to preserve the Company's
cash resources and to demonstrate his commitment to the Company, Mr.
Lindström agreed to apply both of these bonuses to subscriptions of new
ordinary shares at the previous day's closing price of 8.25p per share. This
resulted in the issuance of 6,820,618 new ordinary shares to Mr. Lindström
("Bonus Shares"). The Bonus Shares represent 8.7% of the issued share capital
prior to the issuance of these shares. Both of these bonuses were recorded in
2023 and are included in general and administrative expenses for the year from
1 January to 31 December 2023. The shares subscribed for by Mr. Lindström
pursuant to each of these bonus schemes were subject to a risk of forfeiture
if the Company's Net Asset Value ("NAV") did not meet the hurdle of $120
million within the 24-month period following their issue ("NAV Hurdle"). The
forfeiture risk expired when the Company's Net Asset Value ("NAV") exceeded
$120 million during the period from 1 January to 30 June 2023. The Bonus
Shares were admitted to trading on AIM London Stock Exchange on 26 April 2023.
6. Earnings per Share
Basic earnings per share is calculated by dividing the earnings attributable
to 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/(loss) attributable to the ordinary Shareholders
31 December 2023 31 December
2023 31 December 2022
Basic and
Basic
Diluted
Diluted
of the
Company
62,561,729
62,561,729
(18,019,741)
Weighted average number
of
shares
83,728,467
88,129,654
79,056,811
Earnings/(loss) per
share
0.75
0.71
(0.23)
7. Share Based Payments
Pursuant to the Company's Equity Incentive Plan for 2022 (the "Incentive
Plan"), share options ("Options") were granted to management employees during
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.
In February 2023, 2,703,967 Options were forfeited, resulting in a reversal of
expense previously recorded by the Company for these Options of $1,145,141.
Also, effective 22 April 2023, 2,166,157 Options were surrendered and replaced
with new options (the "New Options") and 4,158,388 additional New Options were
granted to management employees. The total number of New Options granted
during the year from 1 January to 31 December 2023 was 6,324,545. The New
Options 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 New Options vest over
a period of three years, with a third vesting on each of the three successive
anniversaries of the date of grant. The New Options granted on 22 April 2023
are expected to be fully vested as of 22 April 2026.
The aggregate fair value of the options granted on 22 April 2023 was $293,360,
which was determined using the Black Scholes options pricing model. The
expected volatility used to determine the fair values of the options was 60%
and the annual risk-free rate used in the determination of the fair values of
the options was 3.57%.
Details of the stock options outstanding during the years from 1 January to 31
December 2023 and 2022 are as follows:
Period from 1 January Period from 1 January
2023 to 2023 to
31 31
December December
2023 2023
Expense/
Credit
Recognised
Number of During the
Options Period
Beginning of
Period 4,870,124 -
Forfeited (2,703,967) (1,145,141)
Surrendered (2,166,157) (604,918)
Options
granted during
the period 6,324,545 1,018,283
End of period 6,324,545 (731,776)
Period from Period from
1 January 1 January
2022 to 2022 to
31 31
December December
2022 2022
Expense/
Credit Recognised
Number of During the
Options Period
Beginning of
Period Options - -
granted during
the period 5,779,227 2,091,220
Forfeited (909,153) (341,161)
Surrendered - -
End of period 4,870,124 1,750,059
The weighted average exercise price of the options surrendered and forfeited
during 2023 was 76p per share.
The weighted average exercise price of the options granted during 2023 was 20p
per share.
The weighted average exercise price of the options granted and forfeited
during 2022 was 76p per share.
The (credit)/expense recognised for the years ended 31 December 2023 and 2022,
was
$(731,776) and $1,750,059, respectively. These amounts are included in
expenses and other income on the accompanying consolidated statement of
comprehensive income.
The unvested amount of the Company's stock options as of 31 December 2023 was
$918,325.
On 14 February 2024 the Company announced that Mr Stearns had been awarded
share options over 1,058,737 shares at an exercise price of 21p per share.
This grant was equivalent to 80% of his 2023 salary of $350,000. An expense of
$280,000 was therefore accrued in the 2023 accounts in relation to this.
8. Borrowings
In April 2023, the Company's wholly owned subsidiary, i(X) investments, LLC
entered into a secured $7.5 million 2-year term loan facility with European
Depositary Bank S.A. ("EDB") ("Loan"). Amounts drawn down on the loan facility
originally bore interest at 10.5% (subject to periodic change in line with
EDB's USD Base rate) which is payable quarterly. The interest rate at the end
of 2023 had increased to 10.82%. 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 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 $125 million and that of WasteFuel below $100 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 has pledged $4.0 million as security
in a deposit account with EDB. The Company will be able to invest this
security deposit in certain money market 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 at EDB with an 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.
On 3 November 2023, the Company announced that i(x) investments, LLC had
entered into a restated and amended secured two-year term loan facility
increasing the loan facility by $4.25 million ("Increased Facility Amount")
from $7.5 million to $11.75 million.
The Increased Facility Amount included a revision to the events of default
such that aggregate NAV of the Company must be above $125 million and $100
million in respect of WasteFuel.
The amount of the loan drawn down as of 31 December 2023 was $3,751,875. This
amount is recorded on the consolidated statement of financial condition as
Loan Payable. Interest paid on the amount drawn down was $226,151 during the
year from 1 January to 31 December 2023.
9. Commitments and Contingencies
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 was 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 to $6.8 million at any time during the three-year term
following the Company's admission to trading on AIM. As of December 31, 2023,
the put option has not been exercised by Lion Point.
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/.
10. Finance Activities
2023 2022
Finance
income
61,852 -
Interest
income
107,138 27,495 Total Finance
Income
168,990 27,495
Loan
interest
226,151 -
Lease
interest
10,006 27,495 Total Finance
Costs
236,157 27,495
11. Directors' Emoluments
2023
2022
Salaries
754,914 981,479
Bonus
1,450,000 1,489,000
Other
payables
71,016 -
Severance
539,583 -
Share-based
compensation
(343,149) 1,361,432
Director
fees
287,719 423,968
Benefits
99,966 79,416
Payroll
taxes
165,176 111,512
401K
Contribution
19,041 25,687
Total Directors'
Emoluments
3,044,266 4,472,494
The highest amount of compensation paid to a director in 2023 was $898,762
(excluding bonuses relating to 2022 amounting to $700,000, but recorded in
2023). All bonuses recorded in 2023, with the exception of the signing bonus
of $60,000 for Mr Stearns, were non-cash settled.
There was a total of 7 paid directors during the year (2022: 7).
12. Staff Employment Costs
2023
2022
Salaries
510,822 572,894
Bonus
- 284,776
Share-based
compensation
(388,627) 388,627
Benefits
118,813 141,254
Payroll
taxes
65,665 52,458
401K
Contribution
25,896 24,514
Total Staff Employment
Costs
332,569 1,464,523
13. Number of Employees
The average monthly number of employees (including Directors) during the year
was:
Year Ended Year Ended
31 December
2023
31 December
2022
Number of employees
8
11
14. Employee Benefits
Defined Contribution Plans
The expense for the defined contribution plan for the years ended 31 December
2023 and 31 December 2022, respectively was $33,897 and $6,150 and was
included in expenses and other income. These amounts were accrued as of 31
December 2023 and 2022, respectively.
401K Plan
During 2023 and 2022, the Company made discretionary contributions of $11,040
and
$50,201, respectively, to the Plan, all of which was paid during the year. The
discretionary contributions are recorded as an expense and are included in
expenses and other income in the consolidated statement of comprehensive
income.
15. Audit Expenses
2023
2022
Audit
Fees
94,870 60,000
16. Trade and Other Receivables
2023 2022
Accounts receivable Interest receivable - 66,838
51,383 -
Total Trade and Other Receivables 51,383 66,838
The following is an aging of the receivables from deemed distributions as of
31 December 2023 and 2022 (see also note 4):
Deemed Distribution Neither More
Impaired
Receivables Carrying Nor Past 61-90 91-120 Than
Balance Amount Due Days Days 120 Days
31 December 2023 4,027,024 4,027,024 - - 4,027,024
31 December 2022 - - - - -
17. Cash and cash equivalents
Cash consists primarily of cash held in an operating account at First Republic
Bank ("FRB"). Such balances may exceed the Federal Deposit Insurance
Corporation ("FDIC") insurance limit on an overnight basis. The Company also
holds cash in an operating account at European Depository Bank SA ("EDB") as
described in Note 8.
Cash equivalents is comprised of funds invested in a short-term, highly liquid
investment with a maturity of three months or less held at European Depository
Bank SA ("EDB"). These funds are held as a security deposit in connection with
a loan facility agreement (discussed in Note 8). In addition to the $4.0
million security deposit, the balance includes reinvested interest of $50,805.
For further details, pertaining to the investments in cash equivalents, please
refer to Note 19.
The following are the balances in cash and cash equivalents as of 31 December
2023 and 2022:
2023 2022
Cash 1,570,005 7,479,832
Cash equivalents - restricted 4,050,805 -
Total 5,620,810 7,479,832
18. 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
2023, 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 $30,117,872 at the Company's effective federal and state tax
rates of 21% and 1.79%, respectively.
The following are the deferred tax assets and liabilities of the Company as of
31 December 2023:
Total Federal State
Deferred Tax Asset 3,193,689 2,443,733 749,956
Valuation Allowance (368,009) 97,825 (465,834)
Deferred Tax Asset, net 2,825,680 2,541,558 284,122
Deferred Tax Liability 30,117,872 27,716,070 2,401,803
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. The provision for
income taxes consisted of the following:
2023 2022
Current: Federal
- -
State - -
Foreign 664,577 -
Domestic - -
Total current income tax expense 664,577 -
-
Deferred:
Federal 16,055,301 9,118,320
State (34,427) 2,152,998
Foreign - -
Domestic - -
Total deferred income tax expense 16,020,874 11,271,318
Total Provision for Income Taxes 16,685,451 11,271,318
The effective tax rate is calculated as 21.0% -164.4%
A reconciliation of the statutory rate of 21% in 2023 and 2022 to the
effective income tax expense for each year follows:
2023 2022
Profit/(Loss) before income taxes 79,247,180 (6,857,884)
Statutory tax rate 21% 21%
Income tax (benefit) at statutory rate 16,641,907 (1,440,156)
State tax benefit (expense), net of federal benefit (97,812) (255,946)
Stock compensation - 107,880
Other 607 225
Deferred True Ups (227,260) 12,859,315
Valuation Allowance 368,009 -
Total Income Tax Expense 16,685,451 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:
2023 2022
Net Operating Loss Carryforward 2,242,617 2,033,297
ROU Liability - -
Stock compensation 130,458 -
Foreign tax credit 664,577 -
Other 156,038 152,087
Total deferred income tax assets 3,193,690 2,185,384
Investment Gain (30,084,855) (13,341,296)
ROU Asset (6,194) (86,384)
Other (26,823) (29,022)
Deferred income tax liabilities (30,117,872) (13,456,702)
Def income tax assets before valuation allowance
(26,924,182) (11,271,318)
Less valuation allowance (368,009) -
Net Deferred Tax Liability (27,292,192) (11,271,318)
A reconciliation of deferred tax assets and liabilities from 31 December 2022
to 31 December 2023 follows:
Deferred Tax Asset 2,185,384
Balance as of 31 December 2022
Net operating loss carryforward 209,289
Stock compensation 130,458
Foreign tax credit 664,577
Other 3,981
Balance as of 31 December 2023 3,193,690
Less valuation allowance (368,009)
Net Balance as of 31 December 2,825,680
2023
Deferred Tax Liability
Balance as of 31 December 2022 (13,456,702)
Investment gain/loss (16,743,559)
ROU asset 80,189
Other 2,199
Balance as of 31 December 2023 (30,117,872)
The Company has U.S. gross net operating loss carryforwards totaling $7.947
million as of 31 December 2023. Utilization of the 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 the Company's 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 of such net operating losses.
There were no unrecognized tax benefits as of 31 December 2023 and 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 2023, 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 2020 through 2023.
19. Financial Instruments with Off-Balance Sheet Risk and Management of Market 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 2023, 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.
Change in Fair Value of Investment
Base Change ($000) (1)
Case in Input
Investment/Input
Wastefuel Global, LLC
Weight assigned to option pricing method 10% +5% 1,973
-5% (1,973)
(1) Based on fair value as of 31 December 2023
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.
Foreign currency risk
The Group holds minimal non-US dollar cash balances and normally settles
non-US dollar denominated invoices at the spot rate prevailing at the time of
settlement. Financial assets and liabilities are materially all US dollar
denominated.
The Group has a small proportion of expenses settled in GBP comprising
auditor's fees, listing related advisory fees and a small proportion of
professional fees. Management believes the foreign exchange exposure related
to settling these expenses is minimal.
One receipt of funds in US dollars was briefly exposed to Canadian dollar risk
whilst the funds were being transferred from an investee company to a Canadian
indirect investment holding company and finally to the Group. Management do
not believe the foreign exchange exposure risk is material as the movement of
funds took place over a short period of time, thus minimizing exposure to
foreign exchange risk.
Management do not consider the impact of possible exchange rate movements
based on current market conditions to be material to the net result for the
year.
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 trade and other receivables, 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 receivables attributable
to deemed distributions from investments which amounted to $4,027,024 and $0
as of 31 December 2023 and 2022 respectively, and trade and other receivables
which amounted to $51,383 and $66,838 as of 31 December 2023 and 2022,
respectively. The carrying amounts of these receivables are considered to be
reasonable approximations of their fair value. The receivable from deemed
distributions as of 31 December 2023 is expected to be collected
within two years. The balance in trade and other receivables is expected to be
collected within one year. The Company will receive the sums owed from
intermediary companies that held the Company's interest in Carbon Engineering
prior to disposal. The risk of default is primarily mitigated by shareholder
agreements being in place with the debtors, along with regular communication
and the monitoring of the financial condition of the primary debtors.
Management considers the risk of default on primarily all trade and other
receivables to be low because the primary debtors have a strong capacity to
meet their contractual obligations in the near term. The Company recorded an
allowance for bad debts totaling $165,299 as of 31 December 2023.
As of 31 December 2023, the Company held two convertible notes. These notes,
which were issued by two of the Company's investee companies, are subject to
default and counterparty nonperformance risks. The Company monitors the
debtors' businesses with respect to assessing potential impairment in the
note's value. For one of these notes, indicators of a lower expectation of
recovery and a greater risk of default triggered by 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, resulted in
the Company determining that the convertible note was impaired as of 31
December 2023. Accordingly, the Company recorded an unrealised loss on this
convertible note in the amount of
$250,000, the face amount of the note, as of 31 December 2023.
The Company's exposure to credit risk on cash and cash equivalents is
discussed in Note 17 with respect to cash balances.
he Company seeks to limit the level of credit risk on the cash balances by
only depositing funds with reputable international banking institutions.
2023 2022
Cash AA- 1,570,005 7,479,832
Cash equivalents 4,050,805 -
- restricted B
Total 5,620,810 7,479,832
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.
The group's current credit risk grading framework comprises the following
category:
• Performing: the counterparty has a low risk of default and does not
have any past due amounts.
The basis for recognizing expected credit losses ("ECL") is 12 month ECL. The
deemed distributions debtor has a low risk of default and does not have any
past-due amounts, as it is performing, and therefore the expected credit loss
is $nil.
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, investments at fair
value and borrowings.
Borrowings under the EDB loan constitute by far the largest exposure to
interest rate risk. The sensitivity analysis below has been determined based
on the exposure to interest rates for borrowings and the restricted cash
security deposit for the loan at the reporting date.
A 10 per cent increase or decrease is used when reporting interest rate risk
internally and represents management's assessment of the reasonably possible
change in interest rates.
If interest rates had been 10 per cent higher/lower and all other variables
were held constant, the effect on the Group's profit for the year ended 31
December 2023 would have been immaterial, principally because the interest
payments on the borrowings were partially mitigated by the interest earned on
the security deposit.
The Group's sensitivity to interest rates has increased slightly during the
current year due to the increase in EDB's USD base rate. The Group was paying
approximately 10.82% in annual interest at the end of the year, compared to
10.5% when the loan facility was agreed in April 2023. Management believes
that it is unlikely that USD base rates will increase further and are likely
to decrease in the short to medium term.
Classes and categories of financial instruments and their fair values
The maximum exposure to credit risk on the Company's financial assets is
represented by their carrying amount, as outlined in the categorisation of
financial instruments table below.
Loans and receivables Financial liabilities at amortised cost Financial assets at fair value through profit Total
and loss
$'000 $'000 $'000 $'000
At 31 December 2023
Investments 144,217 144,217
Cash and restricted cash 5,620 5,620
Trade and other receivables 4,078 4,078
Trade and other payables (1,003) (1,003)
Borrowings (3,751) (3,751)
Net Total 9,698 (4,754) 144,217 149,161
At 31 December 2022
Investments 63,841 63,841
Cash and restricted cash 7,479 7,479
Trade and other receivables 67 67
Trade and other payables Borrowings (613) (613)
Net Total - -
7,546 (613) 63,841 70,774
The Company does not consider that any changes in fair value of financial
assets in the year are attributable to credit risk.
With the exception of the deemed distribution receivables (see note 16), no
aged analysis of financial assets is presented as no financial assets are past
due at the reporting date.
At 31 December 2023 and 31 December 2022, with the exception of investment
portfolio assets
, non-current trade receivables and borrowings, all financial assets and
liabilities mature for payment within one year. Borrowings mature for payment
within two years as at 31 December 2023 (2022: not applicable).
At 31 December 2023 and 31 December 2022 all investment portfolio assets were
measured at Level 3 of the fair value hierarchy (see note 4 for further
details).
There were no transfers between Levels of the fair value hierarchy during the
current or prior year.
Other risks
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.
20. 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 $1,549,998. For the years
ended 2023, information pertaining to this operating lease was as follows:
2023 ($) 2022 ($)
Supplemental
Information
Operating lease ROU asset as of 1 January 349,277 653,426
Amortisation of ROU assets for the year ended 31 December (321,638) (304,149)
Operating lease ROU asset as of 31 December 27,639 349,277
2023
Total operating lease costs included in occupancy expense 321,638 304,149
Remaining lease term 1 month 13 months
Discount rate 5.0% 5.0%
Maturities of operating lease liability for fiscal years ending 31 December
2023 - 374,342
2024 32,051 32,051
Total lease payments 32,051 406,393
Less imputed interest - (10,006)
Total operating lease liability as of 31 December 2023 32,051 396,387
Interest expense on lease liabilities for the years ended 31 December 2023 and
2022 was
$10,006 and $27,495, respectively.
The Company sublet its office space in Santa Monica, California, effective 1
August 2021. In accordance with the terms of the sublease agreement, the
subtenant is obligated to pay rent to the Company monthly, totaling $26,850
over the remaining life of the lease, which terminates on 31 January 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. As of 31 December 2023, the subtenant is in default on the sublease
agreement and owes $165,299 in rent payments. A reserve for bad debts has been
established by the Company for this amount.
21. Related Parties
The CEO Bonus in respect of the year ended 31 December 2023 was accrued in
2023 in the amount of $410,000. In February 2024, the Company announced that
Mr. Lindström, the Company's CEO, agreed to apply his annual bonus to
subscribe for new ordinary shares in the Company at the previous day's closing
price of 21p per share. As a result, Mr. Lindström received 1,550,293 new
ordinary shares in the Company. These shares were admitted to trading on AIM
London Stock Exchange on 20 February 2024.
In December 2022, the Company agreed to pay to Mr. Lindström an incentive
bonus of
$200,000 (£160,772) in respect of the year ended 31 December 2022 and, 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). In total, these bonuses represent approximately 170% of
Mr. Lindström's 2023 annual compensation.
In order to preserve the Company's cash resources and to demonstrate his
commitment to the Company, Mr. Lindström agreed to apply both of these
bonuses to subscriptions of new ordinary shares at the previous day's closing
price of 8.25p per share. This resulted in the issuance of 6,820,618 new
ordinary shares to Mr. Lindström ("Bonus Shares"). The Bonus Shares represent
8.7% of the issued share capital prior to the issuance of these shares. Both
of these bonuses were recorded in 2023 and are included in general and
administrative expenses for the year from 1 January to 31 December 2023. The
shares subscribed for by Mr. Lindström pursuant to each of these bonus
schemes were subject to a risk of forfeiture if the Company's Net Asset Value
("NAV") did not meet the hurdle of $120 million within the 24-month period
following their issue ("NAV Hurdle"). The forfeiture risk expired when the
Company's Net Asset Value ("NAV") exceeded $120 million during the period from
1 January to 30 June 2023. The Bonus Shares were admitted to trading on AIM
London Stock Exchange on 26 April 2023.
On 14 February 2024 the Company announced that Mr Stearns had been awarded
share options over 1,058,737 shares at an exercise price of 21p per share.
This grant was equivalent to 80% of his 2023 salary of $350,000. An expense of
$280,000 was therefore accrued in the 2023 accounts in relation to this.
Mr Stearns has a non-controlling holding in Citron Energy and is the chairman
of Citron Energy.
Mr Lindström has a 0.08% interest in Wastefuel and is a director of
Wastefuel. Mr Lindström is a director of Enphys Management Company.
22. Subsequent Events
$5m was drawndown from the loan facility in early March 2024 and a further $3m
in early June 2024.
The 2023 bonuses for Mr Lindström and Mr Stearns were paid with shares and
share options respectively in mid-February 2024 ($410k in shares to Mr
Lindström and $280k in share options to Mr Stearns) as described in notes 5
and 7.
Changes were made to the Enphys non-binding commitment in May 2024 in relation
to the extension by which time the Enphys SPAC needs to consummate a business
combination from 8 June 2024 to 8 December 2024.
Negotiations with Lion Point in relation to the settlement of the put option
are ongoing (see note 9).
The Board announced the proposed delisting of the Company from the AIM Market
in an announcement made simultaneously with the release of these financial
statements.
Following issuance of 2023 Bonus Shares in February 2024 the Company has
87,427,722 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 87,427,722.
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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