REG - MyCelx Tech. Corp. MyCelx Tech. Cp-MYXR - Final Results for the Year Ending 31 December 2022
18/05/2023 07:00
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RNS Number : 7973Z MyCelx Technologies Corporation 18 May 2023
18 May 2023
MYCELX TECHNOLOGIES CORPORATION (AIM: MYX)
Final Results for the Year Ending 31 December 2022
MYCELX Technologies Corporation ("MYCELX" or the "Company"), the clean water
and clean air technology company transforming the environmental impact of
industry, announces its audited results for the year ended 31 December 2022.
Highlights
Financial
· Revenue of $10.0 million (2021: $8.5 million)
· Gross profit of $4.4 million (2021: $3.3 million)
· EBITDA(1) of negative $2.5 million (2021: $19,000)
· Loss before tax of $3.6 million (2021: loss before tax $1.1
million)
· Cash & cash equivalents of $1.7 million (2021: $3.2 million)
Operational
Continued focus on high quality projects with high margins that deliver
recurring revenue
PFAS Remediation
· A successful trial was completed in Australia using MYCELX
proprietary technology for the treatment of PFAS
· Post period end: signed three pilot testing agreements for PFAS
remediation in landfill leachate sites in the U.S.
REGEN in EOR
· Secured a second REGEN sale for water treatment during Enhanced
Oil Recovery ("EOR") production
Middle East Downstream
· Continued momentum in Saudi Arabia:
o Converted an emergency response project into a longer-term deployment.
o New project secured on contaminated industrial wastewater.
· Fourth project signed with existing customer to provide clean
water at a fertiliser production facility
Corporate
· Secured Global Contract with SABIC to treat targeted, difficult
wastewater streams
· Added an experienced Business Development Director for the PFAS
business segment
· Awarded the London Stock Exchange's Green Economy Mark
Connie Mixon, CEO, commented:
"I am pleased to report that MYCELX continued to make solid progress in 2022
securing high quality contracts in the Middle East in EOR and REGEN, and the
petrochemical market. Laying critical groundwork in the PFAS remediation
market was a top priority and is accelerating in 2023.
During the period and into 2023, we remain committed to further penetrating
our three core markets of focus; PFAS remediation, REGEN product for Enhanced
Oil Recovery ("EOR") and Middle East downstream. I am pleased to report that
substantial progress has been made in our core markets as evidenced by the
range of new awards we have won.
I would like to thank the MYCELX team and Board for their diligence and hard
work during the period and into 2023. The targeting of our three core markets,
along with the focus on strategic partnerships, is building momentum,
producing results, and is designed to generate substantial returns for our
investors. Following the strong start we have made in 2023, we look forward to
updating the market on further developments over the coming months."
For further information, please contact:
MYCELX Technologies Corporation
Connie Mixon, CEO Tel: +1 888 306 6843
Kim Slayton, CFO
Canaccord Genuity Limited (Nomad and Sole Broker)
Henry Fitzgerald-O'Connor Tel: +44 20 7523 8000
Gordon Hamilton
Celicourt Communications (Financial PR)
Mark Antelme Tel: +44 20 8434 2754
Jimmy Lea
(1) EBITDA is a non-U.S. GAAP measure that the Company uses to measure and
monitor performance and liquidity and is calculated as net profit before
interest expense, provision for income taxes, and depreciation and
amortisation of fixed and intangible assets, including depreciation of leased
equipment which is included in cost of goods sold. This non-U.S. GAAP measure
may not be directly comparable to other similarly titled measures used by
other companies and may have limited use as an analytical tool.
Chairman's Statement
MYCELX made continued progress in its core initiatives in 2022, while
successfully navigating a highly volatile macro environment. Due to this
progress, we remain in a strong position to capitalise on increasing demand
for our innovative technologies that help companies achieve their
environmental and operational objectives.
Following subdued energy markets in previous years, 2022 saw the price of oil
and natural gas increase significantly with the price of oil exceeding $100
per barrel for the first time since 2014. This increase was due to events that
occurred in Ukraine, changing travel policies and countries opening up post
the COVID-19 pandemic. Natural gas prices across the world also soared, as
countries, mainly in Europe, sought to bolster supply, with energy security
becoming a highly important theme during the year.
These trends led to strong demand for our innovative technologies in the
downstream Middle East market as well as with our REGEN media used in upstream
EOR production. Operators are requiring better performance from their water
treatment technologies in order to cost-effectively meet their production
targets and their environmental goals. Both of these oil and gas markets
benefit from our technology by having the ability to significantly improve
their overall water process management.
In addition to these opportunities in the Oil and Gas market, the PFAS
Remediation market presents an exciting target segment because of its
long-term growth potential. PFAS contamination is a global threat and its
remediation presents a large potential market. The Company believes MYCELX's
unique technology can become an industry leader in completely removing PFAS
from contaminated streams and eliminating future liability. Following the
signing of three paid trials in Q1 2023, we have taken important steps in
proving the efficacy of our technology in the PFAS market.
In recent years, shareholders and the public have placed increasing importance
on companies' adoption of Environmental, Social and Governance ("ESG")
principles, thus increasing the expectation that organisations will behave in
an environmentally sustainable and ethical manner. As a Board, we believe this
trend will continue in the coming years and will fuel increased demand for
MYCELX's innovative technologies. We are therefore highly focused on
delivering on the promise of helping our partners to cost effectively improve
the environment.
I would like to take the opportunity to thank the new and existing investors
that participated in the $2.3 million fundraise conducted in March 2022. Our
rationale was that additional funds would allow us to accelerate our progress
in capturing the significant opportunity presented by the PFAS remediation
segment at a critical time in the market's development. I am pleased to report
that since the raise we have made good progress in positioning our technology
as a leader in the burgeoning PFAS Remediation market.
We remain highly upbeat about our prospects in the Middle East and with our
REGEN offering globally. Historically we have experienced heightened bidding
activity in stronger energy markets as operators look to increase margins and
maximise output, especially in the EOR segment.
We are also bullish about our PFAS market opportunity and continue to believe
that countries are just realising the significant threat of PFAS contamination
to the environment. Addressing this problem will require significant levels of
investment for remediation at the federal, state and local government levels,
as well as by corporate entities. With our progress so far in 2023 and the
favourable industry trends, we are optimistic about the growth prospects
across the business for the remainder of the year.
In closing, we are very excited about MYCELX's position in our target markets.
We have developed a unique and highly valued technological offering for our
customers that is proven to address the industry's significant environmental
challenges. We have shown that our products can help companies achieve
pressing environmental goals which are priorities for the investment community
and for the broader population. As a Board and Management team, we therefore
look forward to further progress this year and continuing our journey to
positively affect the impact our customers have on the environment.
Chief Executive Officer's Statement
I am pleased to report that MYCELX continued to make solid progress in 2022
securing high quality contracts in the Middle East in EOR and REGEN, and the
petrochemical market. Laying critical groundwork in the PFAS remediation
market was a top priority and is accelerating in 2023.
During the period and into 2023, we remain committed to further penetrating
our three core markets of focus; PFAS remediation, REGEN product for Enhanced
Oil Recovery ("EOR") and Middle East downstream. I am pleased to report that
substantial progress has been made in our core markets as evidenced by the
range of new awards we have won.
In the Middle East, we made a strong start to 2022 with a contract extension
signed in Q1 and an emergency response system, which was operational in Q2
2022. Furthermore, in Saudi Arabia, the Company commenced a rapid response
project, the fifth ammonia removal installation undertaken with a global
leader in fertiliser production. In addition, due to the superior results
delivered by our technology, a project extension with a leading independent
petrochemical company was secured. The aforementioned projects were sufficient
to ensure the company achieved its 2022 financial guidance.
The Company continues to generate momentum in Saudi Arabia with the conversion
of an emergency response project into a longer-term deployment and a new
project win to treat some of the most contaminated industrial wastewater in
the country. Given Saudi Arabia has significant growth plans, we look forward
to further establishment of our product offering in the region, not only in
the downstream market, but upstream as well with our unique REGEN product for
EOR.
During the period MYCELX was pleased with the number of REGEN related orders
secured, including a successful EOR trial with a major producer in the Middle
East. A REGEN produced water system was also installed and commissioned in
Nigeria, a region that we continue to focus on. In February 2023, we secured
our second REGEN project to a National Oil Company in the Middle East for
water treatment during EOR production.
Our unique REGEN offering has proven to outperform other technologies when
applied to treatment for EOR water. Given the number of regions across the
world where EOR production is either stable or increasing, this technology
will continue to be in demand to tackle all of the wastewater operational
issues associated with this type of production. Again, further evidence of our
efforts to help our customers achieve the highest of environmental standards.
The PFAS remediation market remains one of the most exciting areas for MYCELX.
This is a widespread global human health and environmental issue, and one that
many governments have yet to acknowledge. Given that our technology is already
installed and performing in Australia paves the way to success in the U.S. and
globally. In August 2022, we hired an experienced Business Development
Director for the PFAS segment of our business which has accelerated securing
trials and a lease-to-own contract.
The work we did in 2022 is now reaping rewards. We targeted a number of global
water treatment companies, environmental engineering firms and U.S. water
treatment companies building relationships through technical webinars and
presentations. We believe adoption of our PFAS solution will be accelerated
with strategic partnerships we form in the early stages of trials and
technology vetting. Since then, in 2023, we signed a six-month paid trial for
treatment of PFAS contaminated leachate from a solid waste landfill in the
United States. Then in March, we were pleased to secure two pilot testing
agreements for PFAS remediation of landfill leachate in the U.S. A successful
outcome at these paid trials will boost our position as the industry leader in
PFAS remediation, but it will also enable us to leverage the successful sites
and gain further market share with new contract wins.
As seen with the recently announced project wins, we are focusing on projects
that have shorter cash conversion cycles, with longer total durations.
Projects of this nature ensure regular cash flows that can support MYCELX's
working capital requirements. Maintaining healthy operating margins on the
projects we are involved in is also a priority for the Company, as we will
continue to build our cash position.
In January 2022, we were pleased to announce that MYCELX was awarded the Green
Economy Mark by the London Stock Exchange. The award validates the Company's
claims that its product offering is supporting the transition to a low or net
zero economy by enabling companies to reduce their impact on the environment.
At a time when ESG related themes are at the front of investors' minds, we
believe that our commitment to providing technologies that have a positive
impact on the environment remains strong.
I would like to thank the MYCELX team and Board for their diligence and hard
work during the period and into 2023. The targeting of our three core markets,
along with the focus on strategic partnerships, is building momentum,
producing results, and will generate substantial returns for our investors.
Following the strong start we have made in 2023, we look forward to updating
the market on further developments over the coming months.
Financial Review
Due to increased demand in the Middle East and growth in legacy media sales,
we saw revenue rise 18% to $10.0 million for 2022, compared to $8.5 million
for 2021. Revenue from equipment sales and leases decreased by 5% to $3.6
million for 2022 (FY21: $3.8 million) and revenue from consumable filtration
media and service increased by 36% to $6.4 million (FY21: $4.7 million).
Whilst the equipment sales are one-off by nature, there is longevity to the
media sales and ongoing lease and service revenues.
Gross profit increased by 33% to $4.4 million during the year, compared to
$3.3 million in 2021, and gross profit margin increased to 44% (FY21: 39%).
Total operating expenses for 2022, including depreciation and amortisation and
the gain on sale of property and equipment, increased by 67% to $8.0 million
(FY21: $4.8 million). Operating expenses in 2021 were reduced by a financial
gain of approximately $2.6 million from the sale of the Company's building in
Duluth, Georgia, USA.
The largest component of operating expenses was selling, general and
administrative expenses, which increased by approximately 10% to $7.6 million
(FY21: $6.9 million) due to moving expenses, maintenance on lease equipment
and payroll tax credits that did not extend to 2022. Depreciation and
amortisation within operating expenses increased by 2% to $210,000 (FY21:
$205,000).
EBITDA was negative $2.5 million, compared to $19,000 in 2021. Normalised
EBITDA excluding the sale of the Company's building in Duluth, Georgia was
negative $2.5 million in 2021. EBITDA is a non-U.S. GAAP measure that the
Company uses to measure and monitor performance and liquidity and is
calculated as net profit before interest expense, provision for income taxes,
and depreciation and amortisation of fixed and intangible assets, including
depreciation of leased equipment which is included in cost of goods sold. This
non-U.S. GAAP measure may not be directly comparable to other similarly titled
measures used by other companies and may have limited use as an analytical
tool.
The Company recorded a loss before tax of $3.6 million in 2022, compared to a
loss before tax of $1.1 million in 2021. The 2021 net loss included the $2.6
million gain the Company recognised on the sale of its building. Without the
gain, net loss would have been $3.7 million in 2021. Basic loss per share was
17 cents in 2022, compared to basic loss per share of 7 cents in the previous
year.
As of 31 December 2022, total assets were $13.6 million with the largest
assets being inventory of $3.7 million, property and equipment of $3.2
million, $2.8 million of accounts receivable and $1.7 million of cash
and cash equivalents including restricted cash.
Total liabilities as of 31 December 2022 were $2.8 million and stockholders'
equity was $10.8 million, resulting in a debt-to-equity ratio of 26%.
In March 2022, the Company completed the closing of a placing of 3,539,273
Common Shares at a price of US$0.66 (50 pence) per new share raising gross
proceeds of approximately $2.3 million before expenses. The Company incurred
costs in the issuance of these shares of approximately $267,000. The proceeds
from the transaction were used to accelerate the commercialisation of the
Company's PFAS remediation system in the U.S. and in order to support working
capital across the Company's core markets.
The Company ended the period with $1.7 million of cash and cash equivalents,
including restricted cash, compared to $3.2 million in total at 31 December
2021. The Company used approximately $2.7 million of cash in operations in
2022 (FY21: $3.4 million used in operations) and $800,000 was used in
investing activities (FY21: $5.1 million provided by investing activities).
Proceeds from the placing of Common Shares contributed $2.0 million provided
by financing activities.
Statements of Operations
(USD, in thousands, except share data)
For the Year Ended 31 December: 2022 2021
Revenue 10,026 8,478
Cost of goods sold 5,584 5,203
Gross profit 4,442 3,275
Operating expenses:
Research and development 218 223
Selling, general and administrative 7,589 6,939
Depreciation and amortisation 210 205
Gain on sale of property and equipment (2) (2,584)
Total operating expenses 8,015 4,783
Operating loss (3,573) (1,508)
Other income (expense)
Gain upon extinguishment of debt - 403
Interest expense - (24)
Loss before income taxes (3,573) (1,129)
Provision for income taxes (418) (296)
Net loss (3,991) (1,425)
Loss per share - basic (0.18) (0.07)
Loss per share - diluted (0.18) (0.07)
Shares used to compute basic loss per share 22,214,884 19,443,750
Shares used to compute diluted loss per share 22,214,884 19,443,750
The accompanying notes are an integral part of the financial statements.
Balance Sheets
(USD, in thousands, except share data)
As at 31 December: 2022 2021
Assets
Current Assets
Cash and cash equivalents 1,645 3,128
Restricted cash 84 84
Accounts receivable - net 2,778 1,867
Unbilled accounts receivable - 175
Inventory 3,737 4,320
Prepaid expenses 99 203
Other assets 138 399
Total Current Assets 8,481 10,176
Property and equipment - net 3,229 3,249
Intangible assets - net 733 774
Operating lease asset - net 1,176 1,459
Total Assets 13,619 15,658
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 795 683
Payroll and accrued expenses 758 758
Contract liability - 54
Customer deposits 18 74
Operating lease obligations - current 326 251
Total Current Liabilities 1,897 1,820
Operating lease obligations - long-term 890 1,216
Total Liabilities 2,787 3,036
Stockholders' Equity
Common stock, $0.025 par value, 100,000,000 shares authorised, 22,983,023 574 486
shares Issued and outstanding at 31 December 2022 and 19,443,750 shares issued
and outstanding at 31 December 2021.
Additional paid-in capital 44,768 42,655
Accumulated deficit (34,510) (30,519)
Total Stockholders' Equity 10,832 12,622
Total Liabilities and Stockholders' Equity 13,619 15,658
The accompanying notes are an integral part of the financial statements.
Statements of Stockholders' Equity
(USD, in thousands, except share data)
Common Stock Additional Accumulated Deficit Total
Paid-in
$
$
Capital
$
Shares $
Balances at 31 December 2020 19,443,750 486 42,400 (29,094) 13,792
Stock-based compensation expense - - 255 - 255
Net loss for the period - - - (1,425) (1,425)
Balances at 31 December 2021 19,443,750 486 42,655 (30,519) 12,622
Issuance of common stock, net of offering costs 3,539,273 88 1,957 - 2,045
Stock-based compensation expense - - 156 - 156
Net loss for the period - - - (3,991) (3,991)
Balances at 31 December 2022 22,983,023 574 44,768 (34,510) 10,832
The accompanying notes are an integral part of the financial statements.
Statements of Cash Flows
(USD, in thousands)
For the Year Ended 31 December: 2022 2021
Cash flow from operating activities
Net loss (3,991) (1,425)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortisation 1,091 1,124
Gain on sale of property and equipment (2) (2,584)
Inventory reserve adjustment (5) (45)
Gain upon extinguishment of debt - (401)
Stock compensation 156 255
Change in operating assets and liabilities:
Accounts receivable - net (911) (388)
Unbilled accounts receivable 175 (175)
Inventory 402 1,265
Prepaid expenses 104 (119)
Prepaid operating leases 32 40
Other assets 261 (292)
Accounts payable 112 210
Payroll and accrued expenses - 218
Contract liability (54) (691)
Customer deposits (56) (418)
Net cash used in operating activities (2,686) (3,426)
Cash flow from investing activities
Payments for purchases of property and equipment (814) (327)
Proceeds from sale of property and equipment - 5,455
Payments for internally developed patents (28) (43)
Net cash (used in) provided by investing activities (842) 5,085
Cash flows from financing activities
Net proceeds from stock issuance 2,045 -
Payments on notes payable - (1,643)
Proceeds from notes payable - 401
Payments on line of credit - (997)
Net cash provided by (used in) financing activities 2,045 (2,239)
Net decrease in cash, cash equivalents and restricted cash (1,483) (580)
Cash, cash equivalents and restricted cash, beginning of year 3,212 3,792
Cash, cash equivalents and restricted cash, end of year 1,729 3,212
Supplemental disclosures of cash flow information:
Cash payments for interest - 30
Cash payments for income taxes 390 300
Non-cash movements of inventory and fixed assets 186 102
Non-cash operating ROU assets 1,049 1,192
Non-cash operating lease obligations 1,049 1,192
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements
1. Nature of Business and Basis of Presentation
Basis of presentation - These financial statements have been prepared using
recognition and measurement principles of Generally Accepted Accounting
Principles in the United States of America ('U.S. GAAP').
Nature of business - MYCELX Technologies Corporation ('MYCELX' or the
'Company') was incorporated in the State of Georgia on 24 March 1994. The
Company is headquartered in Norcross, Georgia with operations in Houston,
Texas, Saudi Arabia and the United Kingdom. The Company provides clean water
technology equipment and related services to the oil and gas, power, marine
and heavy manufacturing sectors and the majority of its revenue is derived
from the Middle East and the United States.
Liquidity - The Company meets its day-to-day working capital and other cash
flow requirements through cash flow from operations. The Company had a Note
Payable (Note 10) with an original maturity in March 2023 and access to a line
of credit (Note 8) that renewed annually. However, the Note and the line of
credit were paid in full, and $500,000 of cash was reclassified from
restricted cash, during H1 2021 when the Company completed the sale of its
building in Duluth, Georgia, USA for total consideration of $5.4 million. The
sale enabled the Company to right-size its office space needs across its main
operating locations and provided cash proceeds, after repayment of the Note
Payable and line of credit, of $2.8 million, which is being used for working
capital purposes to support the business needs. In March 2022, the Company
completed the closing of a placing raising gross proceeds of approximately
$2.3 million before expenses. The proceeds from the transaction are being used
to accelerate the commercialisation of the Company's PFAS remediation system
in the U.S., and in order to support working capital across the Company's core
markets. The Company actively manages its financial risk by operating
Board-approved financial policies that are designed to ensure that the Company
maintains an adequate level of liquidity and effectively mitigates financial
risks.
Whilst macro events are creating uncertainty within world markets and
volatility in oil prices, today's high oil price bodes well for the completion
of new commercial agreements with both existing and new international
customers. On the basis of current financial projections, including a downside
scenario sensitivity analysis considering only revenues that are contracted or
that the Company considers probable and adjusting for direct cost of goods
sold within the analysis, the Company believes that it has adequate resources
to continue in operational existence for the foreseeable future of at least 12
months from the date of the issuance of these financial statements and,
accordingly, consider it appropriate to adopt the going concern basis in
preparing these Financial Statements. Should the projected cash flow not
materialise under certain scenarios, alternative actions to increase liquidity
may need to be considered.
2. Summary of Significant Accounting Policies
Use of estimates - The preparation of financial statements in conformity with
U.S. GAAP requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the amounts reported in
the financial statements and accompanying notes. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised. The
primary estimates and assumptions made by management relate to the inventory
valuation, accounts receivable valuation, useful lives of property and
equipment, volatility used in the valuation of the Company's share-based
compensation and the valuation allowance on deferred tax assets. Although
these estimates are based on management's best knowledge of current events and
actions the Company may undertake in the future, actual results ultimately may
differ from the estimates and the differences may be material to the financial
statements.
Revenue recognition - The Company's revenue consists of filtration media
product, equipment leases, professional services to operate the leased assets,
turnkey operations and equipment sales. These sales are based on mutually
agreed upon pricing with the customer prior to the delivery of the media
product and equipment. The Company recognises revenue when it satisfies a
performance obligation by transferring control over a product or service to a
customer.
Revenue from filtration media sales and spare parts is billed and recognised
when products are shipped to the customer. Revenue from equipment leases is
recognised over time as the equipment is available for customer use and is
typically billed monthly. Revenue from professional services provided to
monitor and operate the equipment is recognised over time when the service is
provided and is typically billed monthly. Revenue from turnkey projects
whereby the Company is asked to manage the water filtration process end to end
is recognised on a straight-line basis over time as the performance
obligation, in the context of the contract, is a stand-ready obligation to
filter all water provided. Revenue from contracts related to construction of
equipment is recognised upon shipment of the equipment to the customer because
the contractual terms state that control transfers at the point of shipment
and there is no enforceable right to payments made as customer deposits prior
to that date. Customer deposits for equipment sales represent payments made
prior to transferring control at the point of shipment that can be refunded at
any time when requested by the customer.
Sales tax charged to customers is presented on a net basis within the
statements of operations and therefore recorded as a reduction of net
revenues. Shipping and handling costs associated with outbound freight after
control over a product has transferred to a customer are accounted for as a
fulfilment cost and are included in cost of goods sold.
The Company's contracts with the customers state the final terms of the sales,
including the description, quantity, and price of media product, equipment
(sale or lease) and the associated services to be provided. The Company's
contracts are generally short-term in nature and in most situations, the
Company provides products and services ahead of payment and has fulfilled the
performance obligation prior to billing.
The Company believes the output method is a reasonable measure of progress for
the satisfaction of its performance obligations that are satisfied over time,
as it provides a faithful depiction of (1) performance toward complete
satisfaction of the performance obligation under the contract and (2) the
value transferred to the customer of the services performed under the
contract. All other performance obligations are satisfied at a point in time
upon transfer of control to the customer.
The Company's contracts with customers often include promises to transfer
multiple products and services. Determining whether products and services are
considered distinct performance obligations that should be accounted for
separately versus together may require significant judgement. Judgement is
required to determine stand-alone selling price ('SSP') for each distinct
performance obligation. The Company develops observable SSP by reference to
stand-alone sales for identical or similar items to similarly situated clients
at prices within a sufficiently narrow range.
All equipment sold by the Company is covered by the original manufacturer's
warranty. The Company does not offer an additional warranty and has no related
obligations.
Unbilled accounts receivable represents revenue recognised in excess of
amounts billed. Contract liability represents billings in excess of revenue
recognised. Unbilled accounts receivable at 31 December 2022 and 2021, and 1
January 2021 was $nil, $175,000 and $nil, respectively. Contract liability at
31 December 2022 and 2021, and 1 January 2021 was $nil, $54,000 and $745,000,
respectively.
Timing of revenue recognition for each of the periods and geographic regions
presented is shown below:
Year Ending 31 December Equipment Leases, Turnkey Arrangements, and Services Consumable Filtration Media, Equipment Sales and Service Recognised at a Point
(USD, in thousands)
Recognised Over Time in Time
2022 2021 2022 2021
Middle East 6,453 4,550 572 838
United States - - 2,094 1,311
Australia - - 558 257
Nigeria - - - 1,312
Other - - 349 185
Total revenue recognised under ASC 606 6,453 4,550 3,573 3,903
Total revenue recognised under ASC 842 - 25 - -
Total revenue 6,453 4,575 3,573 3,903
Contract costs - The Company capitalises certain contract costs such as costs
to obtain contracts (direct sales commissions) and costs to fulfil contracts
(upfront costs where the Company does not identify the set-up fees as a
performance obligation). These contract assets are amortised over the period
of benefit, which the Company has determined is customer life and averages one
year.
During the years ended 31 December 2022 and 2021, the Company did not have any
costs to obtain a contract and any costs to fulfil a contract were
inconsequential.
Cash, cash equivalents and restricted cash - Cash and cash equivalents consist
of short-term, highly liquid investments which are readily convertible into
cash within ninety (90) days of purchase. At 31 December 2022, all of the
Company's cash, cash equivalent and restricted cash balances were held in
checking and money market accounts. The Company maintains its cash in bank
deposit accounts which, at times, may exceed federally insured limits. At 31
December 2022 and 2021, cash in non-U.S. institutions was $159,000 and
$25,000, respectively. The Company has not experienced any losses in such
accounts. The Company classifies as restricted cash all cash whose use is
limited by contractual provisions. At 31 December 2022 and 2021, restricted
cash included $84,000 in a money market account to secure the Company's
corporate credit card and a stand-by letter of credit.
Reconciliation of cash, cash equivalents and restricted cash at 31 December
2022 and 2021:
31 December 2022 31 December 2021
US$000
US$000
Cash and cash equivalents 1,645 3,128
Restricted cash 84 84
Total cash, cash equivalents and restricted cash 1,729 3,212
Accounts receivable - Trade accounts receivable are stated at the amount
management expects to collect from
outstanding balances. The Company provides credit in the normal course of
business to its customers and performs
ongoing credit evaluations of those customers and maintains allowances for
doubtful accounts, as necessary. Accounts are considered past due based on the
contractual terms of the transaction. Credit losses, when realised, have been
within the range of the Company's expectations and, historically, have not
been significant. The allowance for doubtful accounts at 31 December 2022 and
2021 was $168,000 and $90,000, respectively.
Inventories - Inventories consist primarily of raw materials and filter media
finished goods as well as equipment to house the filter media and are stated
at the lower of cost or net realisable value. Equipment that is in the process
of being constructed for sale or lease to customers is also included in
inventory (work-in-progress). The Company applies the Average Cost method to
account for its inventory. Manufacturing work-in-progress and finished
products inventory include all direct costs, such as labour and materials, and
those indirect costs which are related to production, such as indirect labour,
rents, supplies, repairs and depreciation costs. A valuation reserve is
recorded for slow-moving or obsolete inventory items to reduce the cost of
inventory to its net realisable value. The Company determines the valuation by
evaluating expected future usage as compared to its past history of
utilisation and future expectations of usage. At 31 December 2022 and 2021,
the Company had REGEN-related inventory of 41 percent and 39 percent of the
total inventory balance, respectively, which is in excess of the Company's
current requirements based on the recent level of sales. The inventory is
associated with efforts to expand into the Enhanced Oil Recovery and
Beneficial Reuse markets that the Company has identified as large global
markets. These efforts should reduce this inventory to desired levels over the
near term and Management believes no loss will be incurred on its disposition.
However, there is a risk that management will sustain a loss on the value of
the inventory before it is sold. No estimate can be made of a range of amounts
of loss that are reasonably possible should the efforts not be successful.
Prepaid expenses and other current assets - Prepaid expenses and other current
assets include non-trade receivables that are collectible in less than 12
months, security deposits on leased space and various prepaid amounts that
will be charged to expenses within 12 months. Non-trade receivables that are
collectible in 12 months or more are included in long-term assets.
Property and equipment - All property and equipment are valued at cost.
Depreciation is computed using the straight-line method for reporting over the
following useful lives:
Building 39 years
Leasehold improvements Lease period or 1-5 years (whichever is shorter)
Office equipment 3-10 years
Manufacturing equipment 5-15 years
Research and development equipment 5-10 years
Purchased software Licensing period or 5 years (whichever is shorter)
Equipment leased to customers 5-10 years
Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalised. Expenditures for maintenance and
repairs are charged to expense as incurred. Depreciation expense includes
depreciation on equipment leased to customers and is included in cost of goods
sold.
Intangible assets - Intangible assets consist of the costs incurred to
purchase patent rights and legal and registration costs incurred to internally
develop patents. Intangible assets are reported net of accumulated
amortisation. Patents are amortised using the straight-line method over a
period based on their contractual lives which approximates their estimated
useful lives.
Impairment of long-lived assets - Long-lived assets to be held and used,
including property and equipment and intangible assets with definite useful
lives, are assessed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the
total of the expected undiscounted future cash flows is less than the carrying
amount of the asset, a loss, if any, is recognised for the difference between
the fair value and carrying value of the assets. Impairment analyses, when
performed, are based on the Company's business and technology strategy,
management's views of growth rates for the Company's business, anticipated
future economic and regulatory conditions, and expected technological
availability. For purposes of recognition and measurement, the Company groups
its long-lived assets at the lowest level for which there are identifiable
cash flows, which are largely independent of the cash flows of other assets
and liabilities. No impairment charges were recorded in the years ended 31
December 2022 and 2021.
Research and development costs - Research and development costs are expensed
as incurred. Research and development expense for the years ended 31 December
2022 and 2021 was approximately $218,000 and $223,000, respectively.
Advertising costs - The Company expenses advertising costs as incurred.
Advertising expense for the years ended
31 December 2022 and 2021 was $nil and $5,000, respectively, and is recorded
in selling, general and administrative expenses.
Income taxes - The provision for income taxes for annual periods is determined
using the asset and liability method, under which deferred tax assets and
liabilities are calculated based on the temporary differences between the
financial statement carrying amounts and income tax bases of assets and
liabilities using currently enacted tax rates. The deferred tax assets are
recorded net of a valuation allowance when, based on the weight of available
evidence, it is more likely than not that some portion or all of the recorded
deferred tax assets will not be realised in future periods. Decreases to the
valuation allowance are recorded as reductions to the provision for income
taxes and increases to the valuation allowance result in additional provision
for income taxes. The realisation of the deferred tax assets, net of a
valuation allowance, is primarily dependent on the ability to generate taxable
income. A change in the Company's estimate of future taxable income may
require an addition or reduction to the valuation allowance.
The benefit from an uncertain income tax position is not recognised if it has
less than a 50 percent likelihood of being sustained upon audit by the
relevant authority. For positions that are more than 50 percent likely to be
sustained, the benefit is recognised at the largest amount that is
more-likely-than-not to be sustained. Where a net operating loss carried
forward, a similar tax loss or a tax credit carry forward exists, an
unrecognised tax benefit is presented as a reduction to a deferred tax asset.
Otherwise, the Company classifies its obligations for uncertain tax positions
as other non-current liabilities unless expected to be paid within one year.
Liabilities expected to be paid within one year are included in the accrued
expenses account.
The Company recognises interest accrued related to tax in interest expense and
penalties in selling, general and administrative expenses. During the years
ended 31 December 2022 and 2021 the Company recognised no interest or
penalties.
Earnings per share - Basic earnings per share is computed using the weighted
average number of common shares outstanding during the period. Diluted
earnings per share is computed using the weighted average number of common and
potentially dilutive shares outstanding during the period. Potentially
dilutive shares consist of the incremental common shares issuable upon
conversion of the exercise of common stock options. Potentially dilutive
shares are excluded from the computation if their effect is antidilutive.
Total common stock equivalents consisting of unexercised stock options that
were excluded from computing diluted net loss per share were approximately
2,019,118 for the year ended 31 December 2022 and there were no adjustments to
net income available to stockholders as recorded on the statement of
operations.
The following table sets forth the components used in the computation of basic
and diluted net (loss) profit per share for the periods indicated:
Years Ended 31 December
2022 2021
Basic weighted average outstanding shares of common stock 22,214,884 19,443,750
Effect of potentially dilutive stock options - -
Diluted weighted average outstanding shares of common stock 22,214,884 19,443,750
Anti-dilutive shares of common stock excluded from diluted weighted 2,019,118 1,782,420
average shares of common stock
Fair value of financial instruments - The Company uses the framework in ASC
820, Fair Value Measurements, to determine the fair value of its financial
assets. ASC 820 establishes a fair value hierarchy that prioritises the inputs
to valuation techniques used to measure fair value and expands financial
statement disclosures about fair value measurements.
The hierarchy established by ASC 820 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).
The three levels of the fair value hierarchy under ASC 820 are described
below:
· Level 1: 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: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly.
· Level 3: Unobservable inputs for the asset or liability.
There were no transfers into and out of each level of the fair value hierarchy
for assets measured at fair value for the years ended 31 December 2022 or
2021.
All transfers are recognised by the Company at the end of each reporting
period.
Transfers between Levels 1 and 2 generally relate to whether a market becomes
active or inactive. Transfers between Levels 2 and 3 generally relate to
whether significant relevant observable inputs are available for the fair
value measurement in their entirety.
The Company's financial instruments as of 31 December 2022 and 2021 include
cash and cash equivalents, restricted cash, accounts receivable and accounts
payable. The carrying values of cash and cash equivalents, restricted cash,
accounts receivable and accounts payable approximate fair value due to the
short-term nature of those assets and liabilities.
Foreign currency transactions - From time to time the Company transacts
business in foreign currencies (currencies other than the United States
Dollar). These transactions are recorded at the rates of exchange prevailing
on the dates of the transactions. Foreign currency transaction gains or losses
are included in selling, general and administrative expenses.
Stock compensation - The Company issues equity-settled share-based awards to
certain employees, which are measured at fair value at the date of grant. The
fair value determined at the grant date is expensed, based on the Company's
estimate of shares that will eventually vest, on a straight-line basis over
the vesting period. Fair value for the share awards representing equity
interests identical to those associated with shares traded in the open market
is determined using the market price at the date of grant. Fair value is
measured by use of the Black Scholes valuation model (see Note 11).
Recently issued accounting standards - In June 2016, the FASB issued ASU
2016-13, Financial Instruments - Credit Losses (Topic 326), which requires
measurement and recognition of expected credit losses for financial assets
held. The standard is to be applied through a cumulative-effect adjustment to
retained earnings as of the beginning of the first reporting period in which
the guidance is effective. The guidance will become effective for the Company
in fiscal years beginning after 15 December 2022, including interim periods
within that reporting period. The Company is currently evaluating the impact
of adopting this guidance but does not expect it to have a material impact on
the Company's financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes, which is expected to simplify
income tax accounting requirements in areas deemed costly and complex. The
Company adopted this guidance effective 1 January 2021. The adoption of this
new guidance did not have a material impact on the financial statements.
Recent accounting pronouncements pending adoption not discussed above are
either not applicable or are not expected to have a material impact on the
Company.
3. Accounts Receivable
Accounts receivable and their respective allowance amounts at 31 December 2022
and 2021:
31 December 2022 31 December 2021
US$000
US$000
Accounts receivable 2,946 1,957
Less: allowance for doubtful accounts (168) (90)
Total receivable - net 2,778 1,867
4. Inventories
Inventories consist of the following at 31 December 2022 and 2021:
31 December 2022 31 December 2021
US$000
US$000
Raw materials 1,957 1,950
Work-in-progress - 202
Finished goods 1,780 2,168
Total inventory 3,737 4,320
5. Property and Equipment
Property and equipment consist of the following at 31 December 2022 and 2021:
31 December 2022 31 December 2021
US$000
US$000
Leasehold improvements 617 107
Office equipment 636 636
Manufacturing equipment 943 888
Research and development equipment 545 545
Purchased software 222 222
Equipment leased to customers 10,221 10,254
Equipment available for lease to customers - 272
13,184 12,924
Less: accumulated depreciation (9,955) (9,675)
Property and equipment - net 3,229 3,249
In March 2021, the Company completed the sale of its building in Duluth,
Georgia for total consideration of $5.4 million enabling the Company to
right-size its office space needs across its main operating locations. The net
book value of the building and land was $2.8 million so the Company recognised
a financial gain of approximately $2.6 million.
During the years ended 31 December 2022 and 2021, the Company removed property
and equipment and the associated gross and accumulated depreciation of
approximately $742,000 and $856,000, respectively, to reflect the disposal of
property and equipment.
Depreciation expense for the years ended 31 December 2022 and 2021 was
approximately $1,022,000 and $1,066,000, respectively, and includes
depreciation on equipment leased to customers. Depreciation expense on
equipment leased to customers included in cost of goods sold for the years
ended 31 December 2022 and 2021 was $881,000 and $919,000, respectively.
6. Intangible Assets
During 2009, the Company entered into a patent rights purchase agreement. The
patent is amortised utilising the straight-line method over a useful life of
17 years which represents the legal life of the patent from inception.
Accumulated amortisation on the patent was approximately $77,000 and $70,000
as of 31 December 2022 and 2021, respectively.
In addition to the purchased patent, the Company has internally developed
patents. Internally developed patents include legal and registration costs
incurred to obtain the respective patents. The Company currently holds various
patents and numerous pending patent applications in the United States, as well
as numerous foreign jurisdictions outside of the United States. In 2022, there
was $47,000 of new internally developed patents and fees on patents in
progress.
Intangible assets as of 31 December 2022 and 2021 consist of the following:
Weighted Average Useful Lives 31 December 2022 31 December 2021
US$000
US$000
Internally developed patents 15 years 1,475 1,447
Purchased patents 17 years 100 100
1,575 1,547
Less accumulated amortisation - Internally developed patents (765) (703)
Less accumulated amortisation - purchased patents (77) (70)
Intangible assets - net 733 774
At 31 December 2022, internally developed patents include approximately
$361,000 for costs accumulated for patents that have not yet been issued and
are not depreciating.
Approximate aggregate future amortisation expense is as follows:
Year Ending 31 December (USD, in thousands)
2023 54
2024 52
2025 51
2026 48
2027 43
Thereafter 123
Amortisation expense for the years ended 31 December 2022 and 2021 was
approximately $69,000 and $58,000, respectively.
7. Income Taxes
The components of income taxes shown in the statements of operations are as
follows:
31 December 2022 31 December 2021
US$000
US$000
Current:
Federal - -
Foreign 415 291
State 3 5
Total current provision 418 296
Deferred:
Federal - -
Foreign - -
State - -
Total deferred provision - -
Total provision for income taxes 418 296
The provision for income tax varies from the amount computed by applying the
statutory corporate federal tax rate of 21 percent, primarily due to the
effect of certain non-deductible expenses, foreign withholding tax, and
changes in valuation allowances.
A reconciliation of the differences between the effective tax rate and the
federal statutory tax rate is as follows:
31 December 2022 31 December 2021
Federal statutory income tax rate 21.0% 21.0%
State tax rate, net of federal benefit 0.8% (4.9%)
Valuation allowance (18.8%) (13.3%)
Other (5.6%) (8.8%)
Foreign withholding tax (9.1%) (20.2%)
Effective income tax rate (11.7%) (26.2%)
The significant components of deferred income taxes included in the balance
sheets are as follows:
31 December 2022 31 December 2021
US$000 US$000
Deferred tax assets
Net operating loss 6,598 5,802
Equity compensation 227 272
Research and development credits 159 159
Right of use liability 263 316
Inventory valuation reserve 350 349
Other 145 102
Total gross deferred tax asset 7,742 7,000
Deferred tax liabilities
Property and equipment (708) (578)
Right of use asset (254) (314)
Total gross deferred tax liability (962) (892)
Net deferred tax asset before valuation allowance 6,780 6,108
Valuation allowance (6,780) (6,108)
Net deferred tax asset (liability) - -
Deferred tax assets and liabilities are recorded based on the difference
between an asset or liability's financial statement value and its tax
reporting value using enacted rates in effect for the year in which the
differences are expected to reverse, and for other temporary differences as
defined by ASC-740, Income Taxes. At 31 December 2022 and 2021, the Company
has recorded a valuation allowance of $6.8 million and $6.1 million,
respectively, a change of $670,000 and $300,000 for each year, for which it is
more likely than not that the Company will not receive future tax benefits due
to the uncertainty regarding the realisation of such deferred tax assets.
As of 31 December 2022, the Company has approximately $30.2 million of gross
U.S. federal net operating loss carry forwards and $3.7 million of gross state
net operating loss carry forwards that will begin to expire in the 2023 tax
year and will continue through 2042 when the current year net operating losses
will expire. As of 31 December 2021, the Company had approximately $26.5
million of gross U.S. federal net operating loss carry forwards and $3.6
million of gross state net operating loss carry forwards.
On 27 March 2020, the U.S. Government enacted the Coronavirus Aid, Relied, and
Economic Security Act (the 'CARES Act'). The CARES Act includes, but is not
limited to, tax law changes related to (1) accelerated depreciation deductions
for qualified improvement property placed in service after 27 September 2017,
(2) reduced limitation of interest deductions, and (3) temporary changes to
the use and limitation of NOLs. There was no material impact of the CARES Act
to the Company's income tax provision for 2022 or 2021.
The Company's tax years 2018 through 2022 remain subject to examination by
federal, state and foreign income tax jurisdictions.
8. Line of Credit
In October 2014, the Company entered into a bank line of credit that allowed
for borrowings up to $500,000. The line of credit was revolving and was
payable on demand. In November 2018, the maximum borrowing capacity was
increased to $1,875,000. The facility renewed annually and was secured by the
assignment of a deposit account held by the lender and a second deed to the
property owned by the Company in Duluth, Georgia. The line of credit carried a
floating rate of interest equal to the lender's Prime Rate and was subject to
change any time the Prime Rate changed. Under terms of the line of credit, the
Company was required to maintain a minimum cash balance and a specified cash
flow coverage ratio, as those terms were defined, and the Company was in
compliance as throughout the term of the facility. In March 2021, the line of
credit was paid in full with proceeds from the sale of the Company's building
in Duluth, Georgia and the facility was closed. Interest expense related to
this loan was $9,000 for the year ended 31 December 2021.
9. Paycheck Protection Program Loan
In December 2020, Congress enacted the Consolidated Appropriations Act, 2021.
The Act is an approximately $900 billion COVID-19 relief package and includes
$284 billion for a second round of the Paycheck Protection Program ('PPP
Loan'), Title I of the CARES Act, which was enacted 27 March 2020. In January
2021, the Company applied for and was granted a PPP Loan from Pinnacle Bank in
the amount of approximately $401,000. The PPP Loan issued to the Company
matures in January 2026 and bears an interest rate of 1 percent per annum and
may be prepaid in whole or in part without penalty. No interest payments are
due within the initial six months of the PPP Loan. The interest accrued during
the initial six-month period is due and payable, together with the principal,
on the maturity date. On 5 August 2021, the Company's PPP Loan was forgiven in
full, including all principal and interest outstanding as of the date of the
forgiveness. Any amount forgiven when the Company was legally released as the
primary obligor under the loan was recognised in the Statement of Operations
as a gain upon the extinguishment of the loan.
10. Note Payable
On 27 March 2013, the Company entered into a term loan agreement with a lender
for the purchase of property and a building for its manufacturing operations
and corporate offices. The note was secured by the property and building from
which the Company continued to operate through March 2022. The carrying amount
of the property and building was $2.9 million as of 31 December 2020. Upon
selling the collateral, the Company was required to repay the term loan in
full. The lender was not allowed to sell the collateral during the term of the
loan. The Company borrowed proceeds of $2,285,908 at a fixed interest rate of
4.45 percent. The loan had a 10-year term with monthly payments based on a
20-year amortisation. The result was a one-time balloon payment at the end of
the term of the note of approximately $1,400,000 during 2023. In accordance
with the terms of the agreement, the Company was required to keep $500,000 in
a deposit account with the lending bank. In March 2021, the Note Payable was
paid in full with proceeds from the sale of the Company's building in Duluth,
Georgia and $500,000 of cash was reclassified from restricted cash.
11. Stock Compensation
In July 2011, the Company's shareholders approved the Conversion Shares and
the Directors' Shares, as well as the Plan Shares and Omnibus Performance
Incentive Plan ('Plan'). This included the termination of all outstanding
stock incentive plans, cancellation of all outstanding stock incentive
agreements, and the awarding of stock incentives to Directors and certain
employees and consultants. The Company established the Plan to attract and
retain Directors, officers, employees and consultants. The Company reserved an
amount equal to 10 percent of the Common Shares issued and outstanding
immediately following the Public Offering.
Upon the issuance of these shares, an award of share options was made to the
Directors and certain employees and consultants, and a single award of
restricted shares was made to a former Chief Financial Officer. In addition,
additional stock options were awarded in each year subsequent. The awards of
stock options and restricted shares made upon issuance were in respect of 85
percent of the Common Shares available under the Plan, equivalent to 8.5
percent of the Public Offering.
In July 2019, the Company's shareholders approved the extension of the Plan to
2029 and the increase in the possible number of shares to be awarded pursuant
to the Plan to 15 percent of the Company's issued capital at the date of any
award. The total number of shares reserved for stock options under this Plan
is 3,447,453 with 2,105,080 shares allocated as of 31 December 2022. The
shares are all allocated to employees, executives and consultants.
Any options granted to Non-Executive Directors, unless otherwise agreed, vest
contingent on continuing service with the Company at the vesting date and
compliance with the covenants applicable to such service.
Employee options vest over three years with a third vesting ratably each year,
partially on issuance and partially over the following 24-month period, or if
there is a change of control, and expire on the tenth anniversary date the
option vests. Vesting accelerates in the event of a change of control. Options
granted to Non-Executive Directors, Consultants and one Executive vest
partially on issuance and will vest partially one to two years later. The
remaining Non-Executive Director options expired at the end of 2016 on the
five-year anniversary date of the grant.
As discussed in Note 2, the Company uses the Black Scholes valuation model to
measure the fair value of options granted. The Company's expected volatility
is calculated as the historical volatility of the Company's stock over a
period equal to the expected term of the awards. The expected terms of options
are calculated using the weighted average vesting period and the contractual
term of the options. The risk-free interest rate is based on a blended average
yield of two- and five-year United States Treasury Bills at the time of grant.
The assumptions used in the Black Scholes option pricing model for options
granted in 2022 and 2021 were as follows:
Number of Options Granted Grant Date Risk-free Interest Rate Expected Term Volatility Exercise Price Fair Value Per Option
2021 762,000 09/04/2021 1.10% 5.7 years 76.00% $0.69 $0.45
100,000 11/11/2021 1.23% 5.2 years 63.00% $1.00 $0.54
2022 250,000 27/06/2022 3.25% 6.0 years 279.00% $0.55 $0.54
25,000 28/09/2022 4.18% 6.0 years 279.00% $0.33 $0.33
The Company assumes a dividend yield of 0.0 percent.
The following table summarises the Company's stock option activity for the
years ended 31 December 2022 and 2021:
Stock Options Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Average Grant Date Fair Value
Outstanding at 31 December 2020 1,324,338 $2.04 5.8 $1.01
Granted 862,000 $1.69 5.7 $0.46
Forfeited (143,000) $2.83
Outstanding at 31 December 2021 2,043,338 $1.43 5.8 $0.76
Granted 275,000 $0.53 6.0 $0.52
Forfeited (213,258) $2.41
Outstanding at 31 December 2022 2,105,080 $1.22 5.8 $0.68
Exercisable at 31 December 2022 1,362,080 $1.57 5.7
The total intrinsic value of the stock options exercised during the years
ended 31 December 2022 and 2021 was approximately $nil.
A summary of the status of unvested options as of 31 December 2022 and changes
during the years ended 31 December 2022 and 2021 is presented below:
Unvested Options Shares Weighted-Average Fair Value at Grant Date
Unvested at 31 December 2020 365,000 $0.34
Granted 862,000 $0.46
Vested (374,000) $0.46
Forfeited (2,000)
Unvested at 31 December 2021 851,000 $0.41
Granted 275,000 $0.52
Vested (356,334) $0.46
Forfeited (26,666)
Unvested at 31 December 2022 743,000 $0.43
As of 31 December 2022, total unrecognised compensation cost of approximately
$171,000 was related to unvested share-based compensation arrangements awarded
under the Plan.
Total stock compensation expense for the years ended 31 December 2022 and 2021
was approximately $156,000 and $255,000, respectively.
12. Commitments and Contingencies
Operating leases - As of 31 December 2022, the Operating Lease ROU Asset has a
balance of $1,176,000, net of accumulated amortisation of $567,000, and an
Operating Lease Liability of $1,216,000, which are included in the
accompanying balance sheet. The weighted average discount rate used for leases
is 5.25 percent, which is based on the Company's secured incremental borrowing
rate.
The Company's leases do not include any options to renew that are reasonably
certain to be exercised. The Company's leases mature at various dates through
March 2027 and have a weighted average remaining life of 3.86 years.
Future maturities under the Operating Lease Liability are as follows for the
years ended 31 December:
Year Ending 31 December Future Lease Payments US$000
2023 381
2024 321
2025 280
2026 290
2027 74
2028 -
Total future maturities 1,346
Portion representing interest (130)
1,216
Total lease expense for the years ended 31 December 2022 and 2021 was
approximately $341,000 and $259,000, respectively.
Total cash paid for leases for the years ended 31 December 2022 and 2021 was
$307,000 and $227,000, respectively, and is part of prepaid operating leases
on the Statements of Cash Flows.
The Company has elected to apply the short-term lease exception to all leases
of one year or less and is not separating lease and non-lease components when
evaluating leases. Total costs associated with short-term leases was $322,000
and $447,000 for the years ended 31 December 2022 and 2021, respectively.
Legal - From time to time, the Company is a party to certain legal proceedings
arising in the ordinary course of business. In the opinion of management,
there are no current legal proceedings or other claims outstanding which could
have a material adverse effect on the results of operations or financial
position of the Company.
13. Related Party Transactions
The Company has held a patent rights purchase agreement since 2009 with a
shareholder as described in Note 6.
14. Segment and Geographic Information
ASC 280-10, Disclosures About Segments of an Enterprise and Related
Information, establishes standards for reporting information about operating
segments. ASC 280-10 requires that the Company report financial and
descriptive information about its reportable operating segments. Operating
segments are components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief operating
decision maker ('CODM') in deciding how to allocate resources and in assessing
performance. The Company's CODM is the Chief Executive Officer ('CEO'). While
the CEO is apprised of a variety of financial metrics and information, the
business is principally managed on an aggregate basis as of 31 December 2022.
For the year ended 31 December 2022, the Company's revenues were generated
primarily in the Middle East and the United States ('U.S.'). Additionally, the
majority of the Company's expenditures and personnel either directly supported
its efforts in the Middle East and the U.S., or cannot be specifically
attributed to a geography. Therefore, the Company has only one reportable
operating segment.
Revenue from customers by geography is as follows:
Year Ending 31 December (USD, in thousands) 2022 2021
Middle East 7,025 5,388
United States 2,094 1,336
Australia 558 257
Nigeria - 1,312
Other 349 185
Total 10,026 8,478
Long lived assets, net of depreciation, by geography is as follows:
Year Ending 31 December (USD, in thousands) 2022 2021
Middle East 2,016 2,380
United States 2,389 2,328
Other - -
Total 4,405 4,708
15. Concentrations
At 31 December 2022, two customers, one with four contracts with four separate
plants, represented 88 percent of accounts receivable. During the year ended
31 December 2022, the Company received 85 percent of its gross revenue from
five customers, one with four contracts with four separate plants.
At 31 December 2021, two customers, one with four contracts with four separate
plants, represented 82 percent of accounts receivable. During the year ended
31 December 2021, the Company received 78 percent of its gross revenue from
five customers, one with six contracts with four separate plants.
16. Subsequent Events
The Company discloses material events that occur after the balance sheet date
but before the financials are issued. In general, these events are recognised
in the financial statements if the conditions existed at the date of the
balance sheet, but are not recognised if the conditions did not exist at the
balance sheet date. Management has evaluated subsequent events through 17 May
2023, the date the financial statements were available to be issued, and no
events have occurred which require further disclosure.
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. END FR GPUPPAUPWGRMRecent news on Mycelx Technologies
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