REG - MyCelx Tech. Corp. MyCelx Tech. Cp-MYXR - Final Results for the Year Ending 31 December 2024
12/05/2025 07:00
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RNS Number : 2318I MyCelx Technologies Corporation 12 May 2025
12 May 2025
MYCELX TECHNOLOGIES CORPORATION (AIM: MYX)
Final Results for the Year Ending 31 December 2024
MYCELX Technologies Corporation ("MYCELX" or the "Company"), the clean water
and clean air technology company, announces its audited results for the year
ended 31 December 2024.
Highlights
Financial
· Revenue of $4.9 million (2023: $10.9 million). The decrease in
2024 is due to the sale of Saudi Araba business operations.
· Gross profit of $1.3 million (2023: $3.9 million).
· EBITDA(1) of negative $2.2 million (2023: negative $2.5 million).
The EBITDA loss decreased in 2024 despite reduced revenue due to the gain on
the sale of the Saudi branch assets.
· Loss before tax of $2.6 million (2023: loss before tax $3.3
million).
· Cash & cash equivalents of $1.3 million (2023: $0.4 million),
which reflects the $0.9 million fundraise in August 2024.
Operational
PFAS Remediation
· Completed a short-term, AFFF remediation project for a global
engineering company demonstrating capabilities as a "go to" solution for AFFF
remediation worldwide.
· Successfully completed a treatability study, paving the way for
its inclusion in a multiple technology, four-month pilot trial treating PFAS
contamination at a municipal wastewater treatment facility in Georgia. The
trial will commence in Q2 2025, with the important benefits of collecting data
on an application that will be very lucrative. The outcome is expected to
determine the award of a contract by the municipality in 2026.
· Hired an experienced PFAS technical expert with nine years of
industry experience from a global water equipment and solutions provider.
· Post period end:
o Awarded a short-term rental contract for a mobile PFAS treatment system to
treat groundwater contamination at a site in North Dakota for the U.S.
Department of Defense (DoD).
o Multiple technology pilot trials treating PFAS contamination at a
municipal wastewater treatment facility.
o Continuation of landfill leachate trial with pre-treatment system design
for PFAS.
Enhanced Oil Recovery and Shale Oil Production
· Delivered and successfully installed first REGEN retrofit package
for Middle East Producer.
· Awarded second REGEN installation at the same Producer worth $1.5
million with delivery expected in Q2 2025.
· Second sale of an oil-polishing unit to an electric utility in
Canada. Delivery expected in Q2 2025.
· Significant onshore trial in the U.S. Permian Basin including
both REGEN and MYCELX's primary treatment stage delivered outstanding water
quality and oil recovery results.
Corporate
· The Company sold its Saudi Arabia operations to a Saudi
Arabian-led consortium transitioning the established MYCELX business into an
exclusive MYCELX distributorship lead by the legacy MYCELX team.
o Post period end: earn-out for first 12-month period from the sale was
$1.25 million with MYCELX expecting to recognise a further gain in 2025.
· Successfully completed an equity fundraise of $0.9 million in
August 2024 to accelerate the Company's progress in the PFAS and produced
water markets.
Outlook
MYCELX's core markets, PFAS remediation and Produced Water treatment, are
poised for growth in 2025 and beyond. On 28 April, the U.S. Environmental
Protection Agency announced its proposed actions to tackle the PFAS threat
confirming the new Administration's support. Previous discussions with
PFAS-impacted entities and treatment companies indicated that they have been
awaiting this clarity. Similarly, oil producers in the U.S. have confidence to
move forward with their upgrade and expansion plans because of the recently
stated initiatives geared to energy independence. While we expect the macro
environment to be volatile, the Company is working closely with our oil
production customers who are progressing projects that provide long-term
operational and environmental benefits, despite the fluctuating oil price.
Connie Mixon, CEO, commented:
"During 2024, MYCELX made strong financial and operational progress in the
PFAS and Produced Water markets. This has been validated by the promising
contractual awards made post-period end.
Today, MYCELX stands at an important inflection point in its journey - poised
to deliver growth in its core markets, profitability, and delivering the
future of clean water globally. Given our continued innovation, refinement,
and global deployment of our proprietary technologies, we are now seeing the
commercial momentum that has been built from years of foundational work.
As such, we are very excited about the tailwinds we are currently seeing in
our core markets and look forward to updating all our stakeholders on the
Company's progress over the remainder of 2025."
For further information, please contact:
MYCELX Technologies Corporation
Connie Mixon, CEO Tel: +1 888 306 6843
Kim Slayton, CFO
Cavendish Capital Markets Limited (Nominated Adviser and Sole Broker)
Giles Balleny / Dan Hodkinson (Corporate Finance) Tel: +44 20 7523 8000
Ondraya Swanson (Corporate Broking)
Jasper Berry / Michael Johnson (Sales)
Celicourt Communications (Financial PR)
Mark Antelme Tel: +44 20 2770 6424
Jimmy Lea
Charlie Denley-Myerson
(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
2024 was a transformational year for MYCELX, as we achieved an important
strategic goal as well as made significant progress in our core focus areas:
Produced Water treatment for the Oil and Gas market (REGEN) and PFAS
(Perfluoroalkyl and Polyfluoroalkyl Substances) remediation. Our patented
technologies continue to resonate with customers by delivering cost
efficiency, enhanced environmental performance, and better and cleaner water
outcomes.
A major milestone during the year was the sale of our business operations in
Saudi Arabia. This strategic move significantly reduced our fixed cost base
and provided immediate and medium-term liquidity that strengthened the
Company's balance sheet. It also freed sales and engineering capital to
accelerate growth in our Produced Water and PFAS markets.
The post-sale partnership agreement established with the Saudi purchaser has
resulted in an earn-out payment to the Company of $1.25 million for the first
twelve months and another earn-out in 2026 if revenue hurdles are achieved. We
are optimistic about the long-term potential of this sales and marketing
collaboration with our partner in Saudi Arabia, which we expect will continue
to generate returns for our stakeholders in the future.
Having now exited direct operations in Saudi Arabia, we have been able to
direct our full attention to the rapidly expanding, high-margin REGEN and PFAS
sectors. While these markets are distinct and take time to penetrate, they
share key characteristics: both are large-scale, global markets, in need of
cost-effective technology solutions where incumbent offerings are
underperforming or failing. These markets offer substantial growth
opportunities for MYCELX.
In our core market of produced water treatment, our REGEN technology gained
notable commercial traction in 2024, with significant customer contracts
secured in the Middle East and Nigeria, and important trials in West Texas and
Canada. Our REGEN media has proven to be extremely effective in cleaning up
chemical-laden water during Enhanced Oil Recovery production in the Middle
East as well as providing high-quality water and oil recovery in traditional
shale oil production in the U.S.
Looking ahead, broader oil market dynamics are expected to influence spending
patterns across the industry. Recent forecasts from several financial
institutions project Brent crude oil prices to generally trend lower in 2025
versus 2024, reflecting concerns over sluggish demand growth, increased supply
from OPEC+, and rising trade-related uncertainties. While price pressure could
prompt oil producers to reassess their capital allocation, ESG-related
initiatives - including water reuse, environmental remediation, and
sustainability innovations - are increasingly seen as core to long-term
resilience and success in the industry. MYCELX is well aligned with this
strategic shift. Our solutions enable oil companies to meet regulatory
requirements and reduce environmental impact, while also creating cost
efficiencies. With our MYCELX solutions, we position ourselves not as an
optional add-on, but as a mission-critical partner in achieving ESG
alternatives amid potentially tighter spending environments.
Meanwhile, the PFAS remediation market continues to progress with anticipated
trials and brisk bidding activity across several key applications. There is
growing awareness of the PFAS threat to human health, particularly in the
United States where recent studies have found that at least 45% of tap water
nationally is affected by PFAS contamination. The threat presented by PFAS is
becoming a mainstream issue in the U.S. and globally. As government
regulations and public financing initiatives gather momentum, we anticipate
this PFAS remediation market will evolve into a high-volume, steady revenue
generator. As an example of the magnitude of the forecasted spend on PFAS
clean up, according to the U.S. Government Accountability Office, the
Department of Defense alone is budgeting $9.3 billion for remediation in
fiscal year 2025 and beyond and will increase as they continue to identify
further PFAS contamination. In addition, landfill leachate remediation is
another large market in which the Company believes it has a competitive
advantage. We are actively working with significant industry players to
demonstrate the efficacy of our solutions in the landfill leachate segment,
and early results are promising. MYCELX is well-positioned to lead, with a
differentiated offering and an experienced team committed to providing
effective solutions to this important market.
At the core of our business is MYCELX's market leading, patented technologies.
We have taken steps to strengthen our position and better align our business
with our two key priorities - REGEN and PFAS. The Board and senior management
believe the Company is well-positioned to capitalise on these large, growing
and attractive markets, and to deliver long-term value to our shareholders. We
are truly excited about our future prospects.
In closing, I extend heartfelt thanks to our employees, who have driven the
business forward with dedication and professionalism, and to our shareholders
for their continued support. With a leaner, more focused organisation, and a
compelling product suite aligned to urgent global market needs, MYCELX is
well-equipped to continue its growth trajectory in 2025 and beyond.
Chief Executive Officer's Statement
In 2024, MYCELX continued to make financial and operational progress towards
becoming the leading clean water technology company focused on the PFAS and
Produced Water markets.
As we move through 2025, MYCELX stands at an inflection point in its journey -
poised to deliver growth in its core markets, profitability, and meaningful
market leadership in global water treatment. Given our continued innovation,
refinement, and global deployment of our proprietary technologies, we are now
seeing the commercial momentum that reflects the years of foundational work
our team has delivered.
On the PFAS front, we continue to see increased reporting around the world on
the threat of PFAS to human health, which has intensified the levels of
regulatory and legal scrutiny. The fact that this is happening now shows there
is a considerable commercial opportunity at play. While, in our view, there
are many claims of effective competing solutions to the problem, our solutions
offer reliable, cost-effective treatment at scale. We are well-placed to
benefit from the growth of this massive global market, which will require
decades to clean up.
Simultaneously, the growing global shift toward chemical EOR production
process is creating unprecedented opportunities for MYCELX. Traditional
nutshell filters used in EOR water treatment are being rapidly outpaced by the
performance, efficiency, and reliability of our REGEN media. With breakthrough
improvements in backwash efficiency, a patented equipment retro-fit package
and the ability to operate in chemically complex environments, our REGEN
systems offer a compelling return on investment for producers seeking to
maintain or expand production in mature fields. A $5.4 million contract with a
national oil company and a follow-on order from a leading Middle East producer
during the period highlight the growing confidence in our technology.
In the onshore produced water market in the U.S., our proprietary technology
and solutions have proven to provide high-performing results on oil recovery
and levels of clean water for reuse and recycle that is unmatched by competing
systems.
Operational Highlights
PFAS Remediation
MYCELX has chosen to target four markets in the PFAS sector: landfill
leachate, municipal drinking water, DoD/AFFF and wastewater. We are working
with a global engineering company on a pre-treatment system identification
process for a landfill leachate project to prevent fouling of the MYCELX PFAS
system and media. We believe the pre-treatment system will offer significant
potential for follow-on opportunities to work in the landfill leachate market
with the global engineering company and with large waste management companies
who own landfill sites. We expect to build on our progress in this market with
further leachate trials expected to commence in 2025.
In the municipal water and industrial wastewater markets MYCELX successfully
completed a treatability study, paving the way for its inclusion in a multiple
technology, four-month pilot trial treating PFAS contamination at a municipal
wastewater treatment facility in the U.S. The trial will commence in Q2 2025,
with the important benefits of collecting data on an application that will be
very lucrative. The outcome is expected to determine the award of a contract
by the municipality in 2026.
Another significant achievement was the successful completion of a short-term,
emergency PFAS remediation project to treat Aqueous Film Forming Foam ('AFFF')
contaminated water in 2024. The project indicates the growing market which
AFFF represents, and we intend to leverage this success to win more
AFFF-related projects with the aim of becoming the market-leading AFFF
remediation solution. During the year we made an important addition to our
in-house PFAS team, hiring an experienced PFAS technical expert with nine
years of industry experience from a global water and solutions provider, all
part of our efforts to further strengthen our PFAS offering as we make inroads
into this important market. Going into 2025, we expect to build on this
progress and aim to convert our successful trials into contracts and projects,
growing MYCELX's revenues and delivering value to shareholders in this large,
long-term market.
Produced Water Treatment
The Produced Water treatment market, which includes Enhanced Oil Recovery,
Offshore Regulatory Discharge and Onshore Beneficial Reuse, remained strong in
2024, underpinned by robust and fairly stable commodity prices. In the Middle
East, an important market for us, the Company was awarded a second REGEN
installation for a Middle East producer to treat produced water during EOR
production, which was valued at $1.5 million to MYCELX. We expect this
momentum to continue in 2025 and 2026. The change in Administration in the
United States has impacted the oil production markets in North America, which
we believe will be favourable for us, given the primary focal point for the
Administration is increased production and energy security. We are already
trialling with producers who are investigating advanced water management
technologies at their sites, with a long-term view of treating more produced
water for Beneficial Reuse to grow non-edible crops, such as cotton and
biofuels, recharge aquifers, and power generation. In the U.S. offshore
market, a global producer we have supplied media to for ten years has
completed two tie-ins to their current infrastructure in the Gulf of America,
which will result in increased need for our Polishing filter media to insure
overboard discharge is always in compliance.
The Company was notified by a global product supplier to the EOR producers
that REGEN technology was the most effective at treating water during EOR
production and they intend to include REGEN in their project bids going
forward. Garnering verification of our REGEN's performance from well-respected
ancillary technology providers is extremely helpful in convincing new
customers to switch from nutshell filters to REGEN.
Looking at the Produced Water trials we ran in 2024 that included REGEN, three
key projects were delivered; a pilot trial with a global energy technology
company in the Middle East, a further trial with a Canadian EOR producer,
which could result in a c.$2 million project award, and one onshore in the
U.S., which continued into Q1 2025. The onshore project included not only
REGEN, but also MYCELX's primary treatment stage, our MAC Coalescer, which
delivered outstanding results in terms of outlet water quality and the amount
and quality of oil recovered from the produced water that can be sold. We did
however experience external delays with our REGEN project installation in
Nigeria. While the impact of this was felt in FY 2024 revenue, the Company had
received milestone payments upfront and the revenue of $5.4 million on this
contract will now be recognised in 2025. As with our PFAS division, we
expanded our REGEN team to further strengthen our expertise and engineering
capability to execute on the increased bidding and proposal activity as well
as onsite start-ups and commissioning.
Outlook
During the period we maintained our strict financial discipline, finishing the
period with $1.3 million of cash and cash equivalents on the balance sheet. We
chose to conduct an equity fundraise of $0.9 million in September 2024, with
the capital subsequently employed to accelerate the Company's progress in the
PFAS and Produced Water treatment markets, through the upgrade and
refurbishment of additional trial equipment so that more trials can be
executed.
We anticipate 2025 being another pivotal year for MYCELX, with an increase in
commercial activity anticipated as the PFAS remediation market continues to
ramp up and the newly established U.S. Administration ensuring that maximising
energy production on the continent remains a priority.
I would like to thank our team members for their unwavering dedication and
hard work, our customers and partners for their valuable collaboration, and
our investors for their continued support and belief in our vision. Together
we are pioneering a cleaner, safer, and more sustainable future.
Financial Review
In February 2024, the Company sold its Saudi Arabia branch assets for an
acquisition price of up to $7.125 million which included $3.125 million paid
at closing and up to $4 million deferred on a 24 month earn-out structure. The
assets sold had a net book value of $2.2 million. The proceeds of the sale
enable the Company to focus on accelerating its marketing and sales plan for
its unique technologies in the PFAS remediation and Produced Water markets
while also supporting other working capital needs.
Due to the sale of the Saudi Arabia branch assets, total revenue decreased 55%
to $4.9 million for 2024, compared to $10.9 million for 2023. Revenue from
equipment sales and leases decreased 83% to $500,000 for 2024 (FY23: $3.0
million) and revenue from consumable filtration media and service decreased
44% to $4.4 million (FY23: $7.9 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 decreased by 65% to $1.3 million during the year, compared to
$3.9 million in 2023, and gross profit margin decreased to 27% (FY23: 36%) due
to a material amount of ancillary services provided in Saudi Arabia prior to
the sale of the Saudi Arabia business.
Total operating expenses for 2024, including depreciation and amortisation,
decreased by 18% to $5.9 million (FY23: $7.2 million). The largest component
of operating expenses was selling, general and administrative expenses, which
decreased by approximately 18% to $5.5 million (FY23: $6.7 million) due to the
elimination of overhead expenses associated with the branch office in Saudi
Arabia. Depreciation and amortisation within operating expenses decreased by
8% to $212,000 (FY23: $231,000).
EBITDA was negative $2.2 million, compared to negative $2.5 million in 2023.
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, and includes gains on sale of fixed assets
(which includes gains from the sale of Saudi Arabia branch assets - see Note
13). 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 $2.6 million in 2024, compared to a
loss before tax of $3.3 million in 2023. Basic loss per share was 12 cents in
2024, compared to basic loss per share of 16 cents in the previous year.
As of 31 December 2024, total assets were $10.0 million with the largest
assets being inventory of $4.0 million, $1.8 million of billed and unbilled
accounts receivable, $1.0 million of property and equipment, and $1.3 million
of cash and cash equivalents including restricted cash.
Total liabilities as of 31 December 2024 were $4.8 million and stockholders'
equity was $5.2 million. Total liabilities include $2.9 million of deferred
revenue related to milestone payments on a large project expected to be
delivered in 2025.
The Company ended the period with $1.3 million of cash and cash equivalents,
including restricted cash, compared to $433,000 in total at 31 December 2023.
The Company used approximately $2.2 million of cash in operations in 2024
(FY23: $1.1 million used in operations). Due to proceeds from the sale of the
Saudi branch assets, the Company generated $2.2 million in investment
activities in 2024 (FY23: $180,000 used in investing activities). Proceeds
from a Placing of Common Shares contributed $800,000 provided by financing
activities in 2024.
In September 2024, the Company completed the closing of a Placing of 1,380,791
Common Shares at a price of US$0.68 (51.5 pence) per new share raising gross
proceeds of approximately $900,000 before expenses. The proceeds from the
transaction will be used to purchase additional trial equipment so that more
trials can be entered into, which increases the chances of securing project
bids going forward.
Financial Statements
Statements of Operations
(USD, in thousands, except share data)
For the Year Ended 31 December: 2024 2023
Revenue 4,903 10,907
Cost of goods sold 3,559 7,017
Gross profit 1,344 3,890
Operating expenses:
Research and development 219 248
Selling, general and administrative 5,466 6,743
Depreciation and amortisation 212 231
Total operating expenses 5,897 7,222
Operating loss (4,553) (3,332)
Other income (expense)
Interest expense (13) (9)
Gain on sale of property and equipment 1,928 -
Loss before income taxes (2,638) (3,341)
Provision for income taxes (85) (365)
Net loss (2,723) (3,706)
Loss per share - basic (0.12) (0.16)
Loss per share - diluted (0.12) (0.16)
Shares used to compute basic loss per share 23,429,416 22,983,023
Shares used to compute diluted loss per share 23,429,416 22,983,023
The accompanying notes are an integral part of the financial statements.
Balance Sheets
(USD, in thousands, except share data)
As at 31 December: 2024 2023
Assets
Current Assets
Cash and cash equivalents 1,260 383
Restricted cash 50 50
Accounts receivable - net 558 1,812
Unbilled accounts receivable 1,206 255
Inventory 4,002 3,417
Prepaid expenses 35 123
Other assets 71 153
Total Current Assets 7,182 6,193
Property and equipment - net 955 2,594
Intangible assets - net 704 759
Operating lease asset - net 1,208 844
Total Assets 10,049 10,390
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 274 1,541
Payroll and accrued expenses 178 793
Contract Liability 2,913 -
Customer deposits 164 10
Operating lease obligations - current 380 282
Total Current Liabilities 3,909 2,626
Operating lease obligations - long-term 877 607
Total Liabilities 4,786 3,233
Stockholders' Equity
Common stock, $0.025 par value, 100,000,000 shares authorised, 24,363,814 609 574
shares issued and outstanding at 31 December 2024 and 22,983,023 shares
issued and outstanding at 31 December 2023
Additional paid-in capital 45,593 44,799
Accumulated deficit (40,939) (38,216)
Total Stockholders' Equity 5,263 7,157
Total Liabilities and Stockholders' Equity 10,049 10,390
The accompanying notes are an integral part of the financial statements.
Statements of Stockholders' Equity
(USD, in thousands, except share data)
Additional
Paid-in Accumulated
Common Stock Capital Deficit Total
Shares $ $ $ $
Balances at 31 December 2022 22,983,023 574 44,768 (34,510) 10,832
Stock-based compensation expense - - 31 - 31
Net loss for the period - - - (3,706) (3,706)
Balances at 31 December 2023 22,983,023 574 44,799 (38,216) 7,157
Issuance of common stock, net of offering costs 1,380,791 35 757 - 792
Stock-based compensation expense - - 37 - 37
Net loss for the period - - - (2,723) (2,723)
Balances at 31 December 2024 24,363,814 609 45,593 (40,939) 5,263
The accompanying notes are an integral part of the financial statements.
Statements of Cash Flows
(USD, in thousands)
For the Year Ended 31 December: 2024 2023
Cash flows from operating activities
Net loss (2,723) (3,706)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortisation 398 868
Gain on sale of property and equipment (1,928) -
Inventory reserve adjustment (525) (415)
Stock compensation 37 31
Change in operating assets and liabilities:
Accounts receivable - net 1,254 966
Unbilled accounts receivable 139 (255)
Inventory (163) 657
Prepaid expenses 88 (24)
Prepaid operating leases 5 5
Other assets 82 (15)
Accounts payable (1,267) 746
Payroll and accrued expenses (615) 35
Contract Liability 2,913 -
Customer deposits 154 (8)
Net cash used in operating activities (2,151) (1,115)
Cash flows from investing activities
Payments for purchases of property and equipment (32) (90)
Proceeds from sale of property and equipment 2,281 -
Payments for internally developed patents (13) (91)
Net cash provided by (used in) investing activities 2,236 (181)
Cash flows from financing activities
Net proceeds from stock issuance 792 -
Net cash provided by financing activities 792 -
Net decrease in cash, cash equivalents and restricted cash 877 (1,296)
Cash, cash equivalents and restricted cash, beginning of year 433 1,729
Cash, cash equivalents and restricted cash, end of year 1,310 433
Supplemental disclosures of cash flow information:
Cash payments for interest 13 9
Cash payments for income taxes 156 394
Non-cash movements of inventory and fixed assets 103 78
Non-cash operating ROU assets 1,257 889
Non-cash operating lease obligations 1,257 889
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 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 believes that it has sufficient liquidity from
available cash balances, cash generated from ongoing operations, and general
ability to access the capital and debt markets to satisfy the operating
requirements of the business through the next twelve months. In February 2024,
the Company sold its Saudi Arabia branch assets for $7.125 million which
included payment of $3.125 million at closing and up to $4 million deferred on
a 24 month earn-out structure. Within the Statement of Cash Flows, of the
$3.125 million of proceeds from the sale, $2,281 million is reflected as
proceeds from sale of property and equipment, within cash flows from investing
activities, and $844,000 is included in net loss within cash flows from
operating activities. Additionally, the Company raised gross proceeds of $0.9
million before expenses in a Placing of Common Shares in September 2024. The
proceeds of these transactions will enable the Company to focus on
accelerating its marketing and sales plan for its unique technologies in the
PFAS remediation and EOR markets while also supporting other working capital
needs. 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.
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,
considers 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 (part of equipment sales)
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 either factory acceptance testing
or shipment of the equipment to the customer because the control transfers at
acceptance or 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. Contract liabilities represent milestone payments on large equipment
sales.
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
customers 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 2024 and 2023, and 1
January 2023 was $1.2 million, $255,000 and $nil, respectively. The increase
in unbilled accounts receivable during the period was due to the gain on the
Saudi Arabia earn-out that was unbilled at year end. Contract liability at 31
December 2024 and 2023, and 1 January 2023 was $2.9 million, $nil and $nil,
respectively. The increase in contract liability during the period was from
milestone payments collected on a large project that will deliver in 2025.
Timing of revenue recognition for each of the periods and geographic regions
presented is shown below:
Equipment Leases, Turnkey Consumable Filtration Media,
Arrangements, and Services Equipment Sales and Services
Year Ending 31 December Recognised Over Time Recognised at a Point in Time
(USD, in thousands) 2024 2023 2024 2023
Middle East 871 6,967 954 615
United States 141 - 1,664 2,683
Australia - - 772 369
Other - - 430 248
Total revenue recognised under ASC 606 1,012 6,967 3,820 3,915
Total revenue recognised under ASC 842 71 25 - -
Total revenue 1,083 6,992 3,820 3,915
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 2024 and 2023, 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 days of purchase. At 31 December 2024, 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 2024 and
2023, cash in non-U.S. institutions was $1,000 and $92,000, 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 2024 and 2023, restricted cash included $50,000 in
a money market account to secure the Company's corporate credit card.
Reconciliation of cash, cash equivalents and restricted cash at 31 December
2024 and 2023:
31 December 2024 31 December 2023
US$000 US$000
Cash and cash equivalents 1,260 383
Restricted cash 50 50
Total cash, cash equivalents and restricted cash 1,310 433
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 Company measures its credit losses using a current
expected credit loss model. The measurement of expected credit losses is based
on relevant information about past events, including historical experience,
current conditions and reasonable and supportable forecasts that affect the
collectability of the reported amounts. The allowance for credit losses
represents the Company's best estimate of probable future losses in the
accounts receivable balance, primarily based on known troubled accounts,
historical experience and other currently available evidence. Accounts
receivable are written off against the allowance when the Company believes
that the receivable will not be recovered. The allowance for doubtful accounts
at 31 December 2024 and 2023 was $83,000 and $208,000, 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. The inventory reserve at 31
December 2024 and 2023 was $675,000 and $1.2 million, respectively. Changes to
the inventory reserve are included in cost of goods sold. At 31 December 2024
and 2023, the Company had REGEN-related inventory of 32 percent and 44 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:
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 2024 and 2023.
Research and development costs - Research and development costs are expensed
as incurred. Research and development expense for the years ended 31 December
2024 and 2024 was approximately $220,000 and $248,000, respectively.
Advertising costs - The Company expenses advertising costs as incurred.
Advertising expense for the years ended 31 December 2024 and 2023 was $31,000
and $9,000, 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 2024 and 2023 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 anti-dilutive.
Total common stock equivalents consisting of unexercised stock options that
were excluded from computing diluted net loss per share were approximately
1,478,718 for the year ended 31 December 2024 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
2024 2023
Basic weighted average outstanding shares of common stock 23,429,416 22,983,023
Effect of potentially dilutive stock options - -
Diluted weighted average outstanding shares of common stock 23,429,416 22,983,023
Anti-dilutive shares of common stock excluded from diluted weighted average 1,478,718 1,906,694
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 2024 or
2023.
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 2024 and 2023 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 8).
Recently issued accounting standards - In June 2016, the Financial Account
Standards Board ('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 using a
modified retrospective approach through a cumulative-effect adjustment to
retained earnings as of the beginning of the first reporting period in which
the guidance is effective. The Company adopted this guidance effective 1
January 2023. The adoption of this new guidance did not have a material impact
on the financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)
Improvements to Reportable Segment Disclosures, to enhance disclosures about
significant segment expenses. The guidance is effective for fiscal years
beginning after 15 December 2023. The Company adopted the new accounting
standard for the fiscal year 2024. The adoption of the ASU did not have a
material effect on the Company's financial statements, other than the newly
required disclosure for significant expense. Refer to Note 11, Segment and
Geographic Reporting.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting
Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):
Disaggregation of Income Statement Expenses, to improve the disclosures by
requiring more detailed information about the types of expenses (including
purchases of inventory, employee compensation, depreciation and amortisation)
in commonly presented expense captions (such as cost of sales, SG&A, and
research and development). In January 2025, the FASB issued 2025-01, Income
Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40), to modify the effective date previously stated
in ASU 2024-03 to clarify that all public business entities are required to
adopt the guidance in annual reporting periods beginning after 15 December
2026. Early adoption is permitted. We are currently evaluating the impact that
adopting ASU 2024-03 would have on our financial statements and will adhere to
the clarified effective date in ASU 2025-01 if implementation is necessary.
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 2024
and 2023:
31 December 2024 31 December 2023
US$000 US$000
Accounts receivable 641 2,020
Less: allowance for doubtful accounts (83) (208)
Total receivable - net 558 1,812
4. Inventories
Inventories consist of the following at 31 December 2024 and 2023:
31 December 2024 31 December 2023
US$000 US$000
Raw materials 1,048 1,637
Work-in-progress 1,691 -
Finished goods 1,263 1,780
Total inventory 4,002 3,417
5. Property and Equipment
Property and equipment consist of the following at 31 December 2024 and 2023:
31 December 2024 31 December 2023
US$000 US$000
Leasehold improvements 530 617
Office equipment 616 636
Manufacturing equipment 709 975
Research and development equipment 427 545
Purchased software 207 222
Equipment leased to customers 1,809 10,114
4,298 13,109
Less: accumulated depreciation (3,343) (10,515)
Property and equipment - net 955 2,594
During the years ended 31 December 2024 and 2023, the Company removed property
and equipment and the associated gross and accumulated depreciation of
approximately $7.5 million and $243,000, respectively, to reflect the disposal
of property and equipment.
Depreciation expense for the years ended 31 December 2024 and 2023 was
approximately $330,000 and $803,000, 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 2024
and 2023 was $186,000 and $637,000, 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 $89,000 and $83,000
as of 31 December 2024 and 2023, respectively.
In January 2023, the Company entered into a patent rights purchase agreement.
The patents are amortised utilising the straight-line method over useful lives
of 13 and 14.75 years which represent the remaining legal life of the patents
on the date of purchase. Accumulated amortisation on the patents was
approximately $7,000 and $4,000 at 31 December 2024 and 2023, respectively.
In addition to the purchased patents, 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 2024, there
was $13,000 of new internally developed patents and fees on patents in
progress.
Intangible assets as of 31 December 2024 and 2023 consist of the following:
Weighted Average 31 December 2024 31 December 2023
Useful Lives US$000 US$000
Internally developed patents 15 years 1,529 1,516
Purchased patents 17 years 150 150
1,679 1,666
Less accumulated amortisation - Internally developed Patents (879) (824)
Less accumulated amortisation - purchased patents (96) (83)
Intangible assets - net 704 759
At 31 December 2024, internally developed patents include approximately
$250,000 for costs accumulated for patents that have not yet been issued and
are not amortised.
Approximate aggregate future amortisation expense is as follows:
Year Ending 31 December (USD, in thousands)
2025 66
2026 63
2027 58
2028 52
2029 46
Thereafter 172
Amortisation expense for the years ended 31 December 2024 and 2023 was
approximately $68,000 and $65,000, respectively.
7. Income Taxes
The components of income taxes shown in the Statements of Operations are as
follows:
31 December 2024 31 December 2023
US$000 US$000
Current:
Federal - -
Foreign 81 363
State 4 2
Total current provision 85 365
Deferred:
Federal - -
Foreign - -
State - -
Total deferred provision - -
Total provision for income taxes 85 365
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 2024 31 December 2023
Federal statutory income tax rate 21.0% 21.0%
State tax rate, net of federal benefit (1.0%) (0.7%)
Valuation allowance (14.0%) (23.0%)
Other (6.8%) 0.3%
Foreign withholding tax (2.4%) (8.5%)
Effective income tax rate (3.2%) (10.9%)
The significant components of deferred income taxes included in the Balance
Sheets are as follows:
31 December 2024 31 December 2023
US$000 US$000
Deferred tax assets
Net operating loss 7,822 7,478
Equity compensation 119 208
Research and development credits 91 159
Right of use liability 274 196
Inventory valuation reserve 147 265
Other 53 68
Total gross deferred tax asset 8,506 8,374
Deferred tax liabilities
Property and equipment (323) (638)
Right of use asset (263) (186)
Total gross deferred tax liability (586) (824)
Net deferred tax asset before valuation allowance 7,920 7,550
Valuation allowance (7,920) (7,550)
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 2024 and 2023, the Company
has recorded a valuation allowance of $7.9 million and $7.6 million,
respectively, a change of $370,000 and $770,000 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 2024, the Company has approximately $36.2 million of gross
U.S. federal net operating loss carry forwards and $3.3 million of gross state
net operating loss carry forwards that will begin to expire in the 2025 tax
year and will continue through 2044 when the current year net operating losses
will expire. As of 31 December 2023, the Company had approximately $34.4
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 2024 or 2023.
On 16 August 2022, the Inflation Reduction Act of 2022 ('IRA') was signed into
law. The IRA levies a 1% excise tax on net stock repurchases after 31 December
2022 and imposes a 15% corporate alternative minimum tax ('CAMT') for tax
years beginning after 31 December 2022. There was no material impact of the
IRA on the Company's income tax provision for 2024 or 2023.
The Company's tax years 2020 through 2024 remain subject to examination by
federal, state and foreign income tax jurisdictions. However, net operating
losses that were generated in previous years may still be adjusted by the
Internal Revenue Service if they are used in a future period.
8. 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 its 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 3,654,572 with 1,311,668 shares allocated as of 31 December 2024. 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 2024 and 2023 were as follows:
Number of Risk-free Interest Fair Value Per
Options Granted Grant Date Rate Expected Term Volatility Exercise Price Option
2024 25,000 13/03/2024 3.97% 6.0 years 65.00% $0.64 $0.40
225,000 15/03/2024 3.97% 6.0 years 65.00% $0.59 $0.37
50,000 15/03/2024 3.97% 5.75 years 65.00% $0.59 $0.36
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 2024 and 2023:
Weighted-
Average
Weighted- Remaining
Average Contractual Average
Exercise Term (in Grant Date
Stock Options Shares Price years) Fair Value
Outstanding at 31 December 2022 2,105,080 $1.12 5.8 $0.66
Forfeited (351,705) $1.70
Outstanding at 31 December 2023 1,753,375 $1.12 5.8 $0.66
Granted 300,000 $0.59 6.0 $0.37
Forfeited (741,707) $1.53
Outstanding at 31 December 2024 1,311,668 $0.80 5.8 $0.50
Exercisable at 31 December 2024 1,103,334 $0.84 5.5
The total intrinsic value of the stock options exercised during the years
ended 31 December 2024 and 2023 was approximately $nil.
A summary of the status of unvested options as of 31 December 2024 and changes
during the years ended 31 December 2024 and 2023 is presented below:
Weighted-Average
Fair Value at Grant
Unvested Options Shares Date
Unvested at 31 December 2022 743,000 $0.43
Vested (301,333) $0.42
Forfeited (100,000)
Unvested at 31 December 2023 341,667 $0.40
Granted 300,000 $0.37
Vested (108,333) $0.57
Forfeited (325,000)
Unvested at 31 December 2024 208,334 $0.37
As of 31 December 2024, total unrecognised compensation cost of approximately
$79,000 was related to unvested share-based compensation arrangements awarded
under the Plan.
Total stock compensation expense for the years ended 31 December 2024 and 2023
was approximately $37,000 and $31,000, respectively.
9. Commitments and Contingencies
Operating leases - As of 31 December 2024, the Operating Lease ROU Asset has a
balance of $1,208,000, net of accumulated amortisation of $1,253,000, and an
Operating Lease Liability of $1,257,000, 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
May 2029 and have a weighted-average remaining life of 3.8 years.
Future maturities under the Operating Lease Liability are as follows for the
years ended 31 December:
Future Lease
Payments
Year Ending 31 December US$000
2025 436
2026 452
2027 241
2028 173
2029 73
Total future maturities 1,375
Portion representing interest (118)
1,257
Total lease expense for the years ended 31 December 2024 and 2023 was
approximately $412,000 and $386,000, respectively.
Total cash paid for leases for the years ended 31 December 2024 and 2023 was
$410,000 and $381,000, 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 $62,000
and $237,000 for the years ended 31 December 2024 and 2023, 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.
10. Related Party Transactions
The Company has held a patent rights purchase agreement since 2009 with a
Director, who is also a shareholder, as described in Note 6.
11. 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 2024.
The CODM, or CEO, uses net income to evaluate income generated from the
Company's assets (return on assets) in deciding whether to reinvest profits
into further business development activities or to pay dividends. Net income
is also used by the CEO to monitor overall budget versus actual results. The
CEO is regularly provided with only the consolidated expenses as noted on the
face of the income statement. For the year ended 31 December 2024, 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) 2024 2023
Middle East 1,825 7,582
United States 1,856 2,708
Australia 772 369
Other 450 248
Total 4,903 10,907
Long-lived assets, net of depreciation, by geography is as follows:
Year Ending 31 December (USD, in thousands) 2024 2023
Middle East - 1,518
United States 955 1,075
Total 955 2,593
12. Concentrations
At 31 December 2024, five customers represented 93 percent of accounts
receivable. During the year ended 31 December 2024, the Company received 64
percent of its gross revenue from seven customers.
At 31 December 2023, five customers, one with three contracts with three
separate plants, represented 90 percent of accounts receivable. During the
year ended 31 December 2023, the Company received 87 percent of its gross
revenue from seven customers, one with three contracts with three separate
plants.
13. Gain on sale of Saudi Arabia branch assets
On 29 February 2024, the Company sold its Saudi Arabia branch assets,
including equipment and inventory, for an acquisition price of up to $7.125
million (the 'Total Consideration') to Twarid Water Treatment LLC ('Twarid').
The Total Consideration was split $3.125 million paid at closing with up to $4
million deferred on a 24 month earn-out structure based on Twarid achieving
defined revenue targets. The assets sold had a net book value of $2.2 million.
The Company initially recognised a gain of $838,000 from the sale of fixed
assets and operating profit of $100,000 from the sale of inventory. The
Company recognised an additional gain of $1.1 million related to the earn-out
for the period ended 31 December 2024. The proceeds of the sale enable the
Company to focus on accelerating its marketing and sales plan for its unique
technologies in the PFAS remediation and EOR markets while continuing to grow
its proprietary media and product sales in Saudi Arabia through an exclusive
distribution agreement with Twarid.
14. 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 9 May
2025, the date the financial statements were available to be issued, and no
events have occurred which require further disclosure.
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