Final Results
Active Energy Group Plc / EPIC: AEG / Sector: Alternative Energy
27 June 2019
Active Energy Group Plc
('Active Energy', 'AEG', the 'Company' or the 'Group')
Final Results for the Year Ended 31 December 2018
Active Energy, the London quoted international biomass based renewable energy and forestry management business, announces its final results for the year ended 31 December 2018. The Company's Annual Report and financial statements for the year ended 31 December 2018 will be posted to shareholders shortly and will also be available on the Company's website, www.aegplc.com/investors/corporate-documents/ later today.
The Notice for the Company's forthcoming AGM will shortly be posted to shareholders separately and will also be made available on the Company's website.
Overview
· Advanced strategy of become a US based developer and supplier of renewable based fuels through the establishment of a commercial hub based on the East Coast of America
· Lumberton site is a 415,000 sq. ft of covered factory space and circa 151 acres of surrounding land and includes ancillary facilities, such as water treatment, an analysis lab and offices
· Construction of first prototype CoalSwitch™ plant completed enabling the commercial development of CoalSwitch™
· 5tph plant targeted for H22019 and 50tph plant for 2020
· Secured cutting timber permits in the Province of Newfoundland and Labrador
· Signed strategic partnerships with Georgia Renewable Power and Cobant, coupled with ongoing collaboration with global engineering group Andritz to further the commercialisation of CoalSwitch™ technology and development of alternative renewable fuels
· Global wood pellet imports were 24million tonnes in 2018 and the global wood pellet market is forecast to rise to over 35 million tonnes per annum by 2025 (source: Futuremetrics 2018.)
Broker Update
SP Angel Corporate Finance LLP is now the Company's sole broker with immediate effect and remains the Company's Nominated Adviser.
CHIEF EXECUTIVE'S STATEMENT
2018 was an important year for Active Energy as it focussed on building its position as a developer and supplier of renewable based fuels. It completed the construction of the first prototype plant to utilise the CoalSwitch™ technology and commenced on a strategy of commercial development for CoalSwitch™ as both a renewable fuel by itself, as well as a component for derivative renewable fuels combining with other biomass and coal based material.
During 2018 AEG achieved several significant developmental milestones and the Board's focus moved from validating the feasibility of the technology, to identifying the important commercial opportunities which must be focused on to successfully develop CoalSwitch™.
In February 2018, AEG announced the opening of the first CoalSwitch™ reference plant in Utah, US (the "Reference Plant"), which represented a significant achievement for the CoalSwitch™ programme. It was the first scalable plant with an ability to produce CoalSwitch™ in sufficient quantities to meet prospective customer demand. Although the Reference Plant was subsequently verified by a number of commercial partners & customers, the Board recognised that it had to be relocated to commence commercial production as the Utah site was not in an optimal location for scalable production.
At the same time, the Group continued to focus on feedstock business opportunities which would assist the commercial development of the CoalSwitch™ programme. The Group had worked extensively with the Province of Newfoundland and Labrador, (the "Province") to secure forestry rights which could provide a commercial base for a CoalSwitch™ operation in the Province. The process took time to complete, but in November 2018, the Group secured cutting timber permits ("CTPs") for Blocks 17 and 18 in the Province. The Group believes that this represents a starting point for a long-term relationship with the Province and has been in active conversations to assess additional complementary opportunities in the Province.
In tandem with the above, additional feedstock opportunities were identified in North America, Europe and Asia to complement the CoalSwitch™ programme and each geography has its own unique circumstances. Accordingly, the Board believes that the optimum route to market is now through the actual production of CoalSwitch™ to sell to end customers with a lesser focus on the feedstock supply issues.
With this in mind, the Board made a series of strategic decisions in mid-2018 to accelerate the commercialisation of CoalSwitch™. The first decision was to choose the optimal location for the business in the US. Upon thorough investigation, the Board decided that the prime base had to be on the East Coast of the US. The area has huge amounts of lumber feedstock, an established transportation infrastructure and links both domestically and to pellet markets in Western Europe and Asia.
The pellet market has been growing significantly since 2014, most notably, in Europe. Global wood pellet imports were 24million tonnes in 2018 and the global wood pellet market is forecast to rise to over 35 million tonnes per annum by 2025(source: Futuremetrics 2018.) The market for a CoalSwitch™ pellet remains highly attractive with potential customers indicating an enthusiasm for the pellet and for Active Energy to commence deliveries as soon as possible. The Group has therefore updated its business strategy to capitalise on this and optimise the business opportunities.
The second key decision was to accelerate AEG's commercial strategy with the establishment of partnerships in the industry. The Board believes that, in consideration of the Group's available resources, the optimal way to build a global franchise is through such industry partnerships.
In 2018 the Group started to establish these commercial partnerships. The first, signed in the fourth quarter of 2018, was a joint venture agreement with Georgia Renewable Power LLC ("GRP") to advance the commercial development of CoalSwitch™ in North Carolina and further examine the derivative product opportunities.
The second significant collaboration to assist the Group was with Andritz. A global engineering group focussed on the supply of equipment to the pulp and paper industry, Andritz completed an assessment of the initial pilot plant in Utah and agreed to work with the Group in forthcoming commercial opportunities. In the first half of 2019, this partnership has strengthened with joint presentations to prospective customers and the establishment of a technical programme, which aims to produce a new facility with production capacity up to 50 tonnes per hour.
The third partnership was with Cobant in Poland. Cobant has commenced test production for the recovery of environmentally damaging coal fines stored in coal slurry ponds in Poland. Through testing at their proprietary laboratories, Cobant established that CoalSwitch™ could be used as a binder to form briquettes suitable for burning, either to existing coal plants, or into the retail market. The relationship was extended with the formation of a joint venture to jointly examine commercial opportunities and examine financing opportunities, including EU funding. Testing and analysis for the fuel including CoalSwitch™ was completed in Poland. As announced on 9 April 2019, although the EU grant funding has not been forthcoming at this time, the collaboration with Cobant has been important. Their support has been highly valued, and the Board hopes that joint commercial opportunities can be established in Poland in the coming months.
The Board continues to actively explore other commercial industrial partnerships with the prime focus being the production of CoalSwitch™ and the creation of revenues from CoalSwitch™ either as a renewable fuel of itself, or as component for other renewable fuels including other waste biomass products.
Developments since December 2018
As mentioned, the Group recognised that for its corporate strategy to succeed, it needed an operational base in the prime lumber regions of the US, especially with its new relationship with GRP. During the fourth quarter of 2018 and into the early months of 2019, the Group focused on identifying a suitable site to achieve these objectives.
In the first quarter of 2019, AEG acquired an industrial site in Lumberton, North Carolina ("Lumberton Site"). The site will become the new base for all Active Energy's CoalSwitch™ operations in the US and house the first permanent production facility for CoalSwitch™. It includes up to 415,000 sq. ft of covered factory space and circa 151 acres of surrounding land and was purchased for a total consideration of US$3,330,000. It also includes ancillary facilities, such as water treatment, an analysis lab, offices and IT hardware, thus reducing the amount of capital expenditure required for the Lumberton Site.
The Directors believe that the size of the Lumberton Site will ensure significant scope for the expansion of the initial CoalSwitch™ plant via the addition of extra CoalSwitch™ production facilities targeting capacity of up to 400,000 tonnes per annum during 2021. Furthermore, the Directors expect that AEG will benefit from complementary biomass, saw logging and other renewable technology opportunities in the Lumberton area.
The Lumberton Site is of significant strategic importance to AEG. It provides access to the prime lumber district in the US, steam and power via AEG's joint venture partner, GRP, as well as proximal access to the Eastern Seaboard of the United States, ensuring that AEG is connected to established export routes for sales to Europe and South East Asia. In recent weeks, long term local feedstock supply contracts in North Carolina have been completed, ready to commence lumber deliveries as soon as the existing 5 tonne per hour plant is operational. This contract can be expanded to supply up to 800,000 tonnes of lumber per annum to the Lumberton Site.
The Board believes that these developments provide the bedrock for the future development of the business by providing key elements required to commercialise the CoalSwitch™ product, namely access to significant quantities of feedstock, access to power and steam, the establishment of proven and scalable technology and easy access to routes to market.
As a result, AEG has now completed the relocation of the existing Reference Plant from Utah to the Lumberton site, with the intention of commencing CoalSwitch™ production at a rate of 5 tonnes per hour in the second half of 2019. AEG's recent collaboration with Andritz means that developments are well underway to significantly increase the production capacity at the Lumberton Site, aiming for a 50 tonne per hour plant facility before the end of 2020. Andritz and AEG are currently working together on the designs for this new plant facility.
The support for the Group in the local region has been positive. In April 2019 the Group was awarded a US$500,000 building re-use and renovation grant for the site after the North Carolina Rural Infrastructure Authority voted to support the project. This is being allocated through the Community Development Block Grant programme of the U.S. Department of Housing and Urban Development and administered in part by the North Carolina Department of Commerce.
Further grants are currently being evaluated and the Group is working with its partners to make the Lumberton Site the primary base for all the Company's U.S. CoalSwitch™ operations and the focus of the Lumberton Site as a renewable energy hub.
Financial Review:
Overview
During 2018 management has focused on reducing costs and strengthening the Group's balance sheet. As a result, losses attributable to AEG excluding non-cash share based payment were limited to US$2,360,674 (2017: US$ 14,476,213). Similarly, the Group's overall net assets position has improved to US$497,408 (2017: net liabilities US$2,534,966).
Consolidated income statement
Following the losses in 2017 associated with the discontinuance of the Ukrainian wood fibre business, the Group focused its efforts on reducing costs and minimising losses in 2018. As a result, total comprehensive loss for the year attributable to owners of the parent was limited to US$3,256,104 (2017: US$14,783,962). Excluding non-cash share based payments losses attributable to AEG were limited to US$2,360,674 (2017: US$ 14,476,213). The primary elements of the consolidated income statement are as follows:
· Revenues were US$195,000 (2017: US$nil) reflecting the provision of engineering consultancy services associated with the Group's CoalSwitch™ technology.
· Research and development costs of US$nil (2017: US$2,389,807). The 2017 expenses reflect AEG's investment in research and development associated with CoalSwitch™ technology, prior to the construction of the first reference plant.
· An impairment charge of US$950,700 (2017: US$nil) was recorded against the Northern Alberta and Ukrainian intangible development assets, reflecting a re-evaluation of the economics of these assets.
· Administrative expenses were US$2,982,866 (2017: US$2,870,721) reflecting ongoing corporate costs and business development activity. Excluding non-cash share based payments, administrative expenses were US$2,087,436 (2017: US$2,562,972) reflecting cost reduction initiatives undertaken in 2018.
· Finance expenses were US$406,929 (2017: US$3,031,054), reflects ongoing servicing of the Group's Convertible Loan Notes, offset by interest capitalised to tangible and intangible fixed assets and foreign exchange gains.
· Loss on discontinued operations of US$386,994 (2017: US$7,284,981) reflects the close out of contractual matters associated with Active Energy's former Ukrainian wood chip operations. No further costs are expected to be incurred on these operations, which ceased during 2017.
· The tax credit of US$1,346,010 (2017: US$355,491) reflects income associated with research and development tax rebates.
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Statement of financial position
During 2018 the Group has focused on stabilising its financial position and as a result the Group's overall net assets position improved to US$497,408 (2017: net liabilities US$2,534,966.) The primary elements of the consolidated statement of financial position are explained below.
· Non-current assets increased to US$14,587,953 (2017: USD12,633,431). This increase primarily relates to investment in the construction of the CoalSwitch™ reference plant in the first half of 2018 of US$2,069,877; combined with investment of US$596,345 in CoalSwitch™ related intellectual property and costs incurred of US$804,103 to secure timber licences in Newfoundland and Labrador, partially offset by the impairment charges discussed above.
· Current assets increased to US$2,003,178 (2017: US$680,300) reflecting anticipated research and development tax rebates.
· Current liabilities increased to US$4,179,400(2017:US$2,034,283) reflecting increased shareholder loans.
· Non-current liabilities decreased to US$11,914,323(2017: US$13,814,414) reflecting the conversion of convertible loan notes into ordinary equity shares during 2018.
· Equity attributable to owners of the parent improved to US$497,408 (2017: negative US$2,534,966) as a result of the following:
Ø In June 2018 the Company announced that it had raised £1m (before expenses) through an issue of equity via an oversubscribed placing of new equity with new and existing investors.
Ø In November 2018 AEG raised a further £1.495 million (before expenses) via the issue of new equity. In addition, certain creditors resolved to receive a total of 15,500,000 ordinary shares of 1p each ("Ordinary Shares") in lieu of cash in consideration for services provided to the Company.
Ø During 2018 certain holders of convertible loan notes elected to convert their notes into shares, resulting is the issue of ordinary equity shares during 2018.
Ø Movements in the consolidated income statement described above.
Post year-end developments
Since the end of 2018 the Group has continued to stabilise and secure its financial position. On 4 March 2019 the Company announced that it had completed a fund raising of US$3,413,000 (or £2,573,906) (before expenses) through the subscription of convertible loan notes by new and existing institutional investors in order to acquire its industrial site in Lumberton, North Carolina. Furthermore, on 23 April 2019 the Group announced that it had been awarded a US$500,000 building re-use and renovation grant for the Lumberton site. Management continues to actively discuss opportunities with existing and prospective partners and potential providers of project finance, in order execute Active Energy's business plan following the acquisition of the Lumberton Site.
Corporate:
During 2018, our board composition changed to reflect the strategic development of the business. In Q1 2018, Brian Evans-Jones stepped down and shortly thereafter, we welcomed Simon Melling as a Non-Executive Director. Simon brings with him over 30 years' experience of working in senior roles within the finance sector. Simon was previously the CEO of AIM listed stockbroker Cenkos Securities Limited and is currently CEO of Vermeer LLP. In July 2018 Richard Spinks relinquished the role of Chief Executive Officer for the Group and Michael Rowan assumed this position.
Mr. Spinks later stepped down as an Executive Director of the Group in October 2018 and has now resigned from all positions within the AEG Group. In December 2018, Antonio Esposito joined the Board. Mr Esposito is a qualified engineer with over 18 years' experience in logistics, operations, business development and project management globally and has an in-depth understanding of commodities export and global markets with a notable focus on woods and biomass-based fuels.
Furthermore, we are in active discussions with individuals to join the Senior Management team in the coming months along with candidates to join the Board, as we look to strengthen our team ahead of the production and commercialisation phase.
Outlook:
2018 was a pivotal year for AEG, where the Board made the necessary decisions to optimise the commercial opportunities for CoalSwitch™. The core technology has been supported by independent analysis from commercial partners and the Group's sole focus must be on execution of a profitable business plan. Recent conversations have only supported this strategy and more prospective partners are now emerging as the Lumberton Site gets closer to scalable production.
Following the acquisition of the Lumberton Site and commercial partnerships with GRP and Cobant, coupled with the Company's ongoing collaboration with Andritz, the Board believes that the key strategic elements are now in place to underpin the future development of the business and successful roll out of CoalSwitch™ as a black pellet fuel.
I would like to take this opportunity to thank all members of the current team for their commitment and dedication to AEG.
2018 presented challenges, and with the continued dedication of our team, combined with the inherent value in our technology and revised business model, I am confident that we can reach our immediate commercial and strategic goals. We look to capitalise on the opportunities arising from the changes occurring in the coal fired-power and biomass industries through the commercialisation and delivery of a second-generation biomass black pellet fuel and its derivative products.
Michael Rowan
Chief Executive Officer
26 June 2019
OPERATIONS REVIEW
The Group's primary activities are centred on the commercialisation of its CoalSwitch™ product and process supported by a forestry management business, Timberlands.
CoalSwitch™
CoalSwitch™ uses patented technologies to create a new second generation biomass fuel which can be briquetted or pelleted as required by customers. CoalSwitch™ has a number of significant advantages compared with existing biomass fuels such as torrefied or white pellet alternatives, namely and among others:
· Lower unit costs reflecting lower feedstock costs. CoalSwitch™ technology can process lower quality fibre materials such as forestry residuals and waste wood including waste, bark, branches leaves, needles and salty hog thus reducing feedstock costs.
· CoalSwitch™ has a higher energy density than alternative biomass fuels.
· CoalSwitch™ has a higher bulk density than alternative biomass fuels.
· CoalSwitch™ when pelletised is hydrophobic meaning that the pellets do not degrade in water in the same way as traditional white or torrefied pellets. In addition, CoalSwitch™ pellets can be transported with minimal losses/degradation due to being almost dust-free in storage, handling or transport.
· CoalSwitch™ pellets can be used in coal fired power stations, without the need for significant capital expenditure for retrofitting and modifying existing coal burning facilities.
AEG first became involved in this ground-breaking technology in 2015. During 2016 & 2017 work was primarily focused on research and development activities. 2018 was a pivotal year for the commercial development of CoalSwitch™ technology.
Construction of Reference Plant
In September 2017, AEG announced that it was constructing a five-tonne-per-hour CoalSwitch™ plant at its premises in Utah, USA. In February 2018, AEG announced the opening of this plant. During the first half of 2018, AEG operated the facility, albeit with the customary issues as one would expect when commissioning any new technology or equipment. Additional testing of the design and functionality of the reactors was undertaken, and samples were produced. The Board regarded the completion and initial testing of the plant as the significant breakthrough in the development of the CoalSwitch™ business model, showing that the initial reactor results and positive laboratory results can be upscaled to industrial scale production facilities.
At the end of the H1 2018, the Board decided to limit activity at the Utah Reference Plant, pending review of the optimal deployment of this facility, which included a potential sale of the Reference Plant at that time to a customer. The review is now complete, and AEG has now moved the Reference Plant to the Lumberton site in North Carolina, where it intends to commence scalable production in the second half of 2019.
Activities in North Carolina, United States of America
During the fourth quarter of 2018 and into the first half of 2019, North Carolina, USA emerged as the centre of activity for AEG's CoalSwitch™ business. This jurisdiction is ideally placed to leverage value from AEG's CoalSwitch™ technology, as it provides access to the prime lumber district in the US, as well as proximal access to the Eastern Seaboard of the United States, ensuring that AEG is connected to established export routes for sales to Europe and South East Asia.
On 15 October 2018, AEG announced that it had entered into a joint venture agreement with Georgia Renewable Power LLC to advance the commercial development of CoalSwitch™. The aim of the joint venture is to leverage the significant synergies between GRP and AEG's businesses including GRP's established steam and drying infrastructure at its existing power plants. The joint venture also intends to work on a number of additional projects, including the creation of black pellet fuel inclusive of poultry litter (a beneficiated pelletised fuel derived from poultry litter) using CoalSwitchTM technology.
On 27 March 2019, AEG announced that it had completed the acquisition of an industrial site in Lumberton, North Carolina for a total consideration of US$3,330,000. The site, which includes up to 415,000 sq. ft of covered factory space and approximately 151 acres of surrounding land, is the new base for all Active Energy's CoalSwitch™ operations in the US. The Lumberton Site has a number of additional advantages for AEG:
· It is strategically located close to AEG's joint venture partner GRP thereby providing access to steam and power, required to operate CoalSwitch™ facilities.
· The Lumberton Site is fully permitted for operations and the permits, thus reducing the time to market of the planned production of CoalSwitch™.
· The Lumberton Site includes key ancillary facilities, such as water treatment, an analysis laboratory, offices and IT hardware, thus further reducing the amount of capital expenditure required.
· The Directors believe that the size of the Lumberton Site provides significant scope for the expansion of the initial CoalSwitch™ plant via the addition of extra CoalSwitch™ production facilities. Furthermore, the Directors expect that AEG will also benefit from complementary biomass, saw logging, rental and other commercial opportunities in the Lumberton area. The site is also eligible for government grants and support and in April 2019, the Group was awarded a US$500,000 building re-use and renovation grant.
· As part of Active Energy's due diligence on the Lumberton Site, the Company's Directors reviewed an independent valuation report on the Lumberton Site. The report, which was dated November 2017, valued the Lumberton Site at US$4,550,000.
AEG has relocated the existing Reference Plant from Utah to the Lumberton Site, with the intention of commencing CoalSwitch™ production at a rate of 5 tonnes per hour in the second half of 2019. AEG is targeting additional investment and development in order to increase production capacity via a new 50 tonne per hour production facility with the ability to produce to up to 400,000 tonnes per annum from 2021.
Joint Venture in Poland and Test Results from the Polish Government
On 13 March 2018, AEG announced that it had signed a joint venture agreement with Cobant Sp. z o.o. a Polish research, development and environmental waste coal recovery company active in the land reclamation, environmental services and energy sectors. The joint venture's primary objective was the production and commercialisation of a "SuperFuel™" product that blends CoalSwitch™ with reclaimed coal from coal slurry dumps in Upper Silesia, Poland. On the 13 June 2018, AEG announced that the joint venture received confirmation from the Polish Government Burn Test Laboratory that testing had been completed on the "SuperFuel™" product. The test results demonstrated that the "SuperFuel™" has a similar calorific value to coal with significantly lower sulphur content and low ash and SOx and NOx emissions. Receipt of approval from the formal independent certification tests enable the commencement of commercial production of the "SuperFuel™" for use in coal fired power stations across Poland, and also in municipal heating and private household heating systems. In addition, this approval certified the "SuperFuel™" product to carry the Polish Government's Ecological Safety Symbol, a requirement to allow solid fuels to be sold without restriction in Poland.
In August 2018, the joint venture applied to the EU to request grant funding to support further development of the SuperFuel™ technology. In April 2019, the joint venture was notified that, whilst the Company's application scored highly, it had been unsuccessful in receiving funds. AEG and Cobant are working together to develop the optimal strategy for CoalSwitch™ and SuperFuel™ related opportunities in Poland.
South East Asia Activities
During 2018 and into 2019 the strategic focus of AEG has shifted towards North America, and specifically opportunities in North Carolina and Canada, and resources have been dedicated to those regions accordingly. Nevertheless, AEG is continuing to make progress in South East Asia. The research and development program into the creation of CoalSwitch™ from empty fruit bunch palm oil waste has been successfully completed. Furthermore, AEG has had approaches from and is actively working with government bodies, who are taking an increasing interest in AEG's knowledge and experience, and the Group is actively working with local commercial partners in the region. The Board hopes for a commercial milestone as soon as practicable.
PeatSwitch™
During the development of the CoalSwitch™ technology, AEG's scientists identified that the technology can also be reconfigured to produce an enhanced soil replacement product from waste fibre. This substrate can be easily adjusted and tailored to meet the specific requirements of an individual agricultural customer and more importantly specific plant type or species.
On 11 June 2018, the Group announced that it had entered into a Memorandum of Understanding with Young Living Farms ("YLF"), pursuant to which YLF would become the first buyer of a PeatSwitch plant, utilising components of the Reference Plant. However, this did not result in a definitive commercial contract due to internal strategic reviews at YLF. In the light of this AEG is currently considering the commercial opportunities with this product.
Timberlands
Overview
The mission of the Timberlands business is to identify, develop and manage forestry projects. This business has multiple benefits and advantages to AEG and the forestry owners, including, among others:
· Security and traceability of feedstock for CoalSwitch™ production plants located at these sites.
· Using timber in CoalSwitch™ technology optimises output and value, as wood, which is traditionally seen as waste, can be processed in CoalSwitch™ plants to produce value.
· An opportunity to secure long-term timber proprietary tenures should allow AEG to enter into significant and long-term supply agreements for its products with a lesser risk of market price fluctuations and the opportunity to increase profitability of the CoalSwitch™ product.
· Control of the supply chain ensures co-ordinated environmental sustainability.
Newfoundland
On 26 November 2018, and following many months of work and negotiation, AEG announced that its subsidiary, Timberlands International Limited through its local operating company Timberlands International (Newfoundland and Labrador) Inc, had been formally issued two five-year Commercial Timber Permits ('CTPs') for Forestry Management Areas 17 and 18 by the Ministry of Fisheries and Land Resources of the Crown Province of Newfoundland and Labrador.
The CTPs were issued with a five-year revolving renewal facility relating to a total Annual Allowable Cut of 100,000 cubic metres per annum. In addition, the CTPs specify certain standard conditions including the species, class and volume of timber that may be cut and the locations from where such timber may be cut.
The Group is currently reviewing the optimal commercial strategy to develop its opportunities in Newfoundland. Recent conversations have presented complementary business opportunities for the Group, in additions to the CTPs. These are being examined with the aim to construct and install a CoalSwitch™ plant in the Province.
Alberta
AEG is continuing to consider various commercial opportunities in Alberta. On 17 May 2018, AEG announced an MoU with Powerwood Canada ("Powerwood") which, subject to formal contract and available funding, would allow AEG to assume a controlling interest in Powerwood. Powerwood has access to a number of forestry assets granted by the Crown in the name of the Province of Alberta. Commercial conversations have continued between the parties but at this time, there is no immediate prospect of a transaction.
In addition, AEG has continued to maintain an ongoing relationship with the Métis Settlements General Council under the stewardship of Metis Settlements General Council President Gerald Cunningham.
Finally, in recent weeks, AEG has been approached by commercial partners, who may wish to acquire a territorial licence to develop CoalSwitch™ in Alberta.
AEG is examining various solutions to realise value and see the commencement of operations in Alberta and will provide the market with a further update as soon as practicable.
Ukraine
Whilst AEG has no current active business activities in Ukraine at this time, the Group retains its supply contract granted by the Lyubomi Forestry, which is the administrator of the Lyubomi Forest in the Ukraine. Following the extension of the contract term during the 2014, the remaining useful life on contractual relationships is 45 years. AEG is currently reviewing options to utilise this asset to provide feedstock to future CoalSwitch™ operations including AEG's proposed activities in Poland.
Enquiries & Further Information:
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Website |
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www.aegplc.com |
www.linkedin.com/company/activeenergy
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Enquiries |
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Active Energy Group Plc |
Michael Rowan Chief Executive Officer (Active Energy) Antonio Esposito Chief Operations Officer (Active Energy) |
C/O SBP +44 (0) 20 7236 1177 |
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SP Angel Corporate Finance LLP Nominated Adviser and Broker
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David Hignell / Lindsay Mair / Jamie Spotswood |
Office: +44 (0)20 3470 0470 |
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St Brides Partners Financial PR Adviser |
Melissa Hancock / Gaby Jenner |
info@stbridespartners.co.uk Office: +44 (0) 20 7236 1177 |
CONSOLIDATED STATEMENT OF INCOMEAND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
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2018 |
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2017 |
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Note |
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US$ |
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US$ |
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REVENUE FROM CONTRACTS WITH CUSTOMERS |
3 |
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195,000 |
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- |
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GROSS PROFIT |
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195,000 |
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- |
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R&D expenditure |
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- |
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(2,389,807) |
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Impairment charge |
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(950,700) |
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- |
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Administrative expenses |
5 |
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(2,982,866) |
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(2,870,721) |
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OPERATING LOSS |
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(3,738,566) |
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(5,260,528) |
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Finance costs |
6 |
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(406,929) |
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(3,031,054) |
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(Loss) from continuing operations |
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(4,145,495) |
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(8,291,582) |
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Income tax credit on continuing operations |
8 |
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1,346,010 |
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355,491 |
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(Loss) from discontinued operations |
7 |
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(386,994) |
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(7,284,981) |
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LOSS FOR THE PERIOD |
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(3,186,479) |
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(15,221,072) |
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(Profit)/Loss attributable to Non‐controlling Interest |
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(69,625) |
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437,110 |
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(Loss) attributable to the Parent Company |
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(3,256,104) |
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(14,783,962) |
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OTHER COMPREHENSIVE INCOME/(EXPENSE): |
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Items that may be subsequently reclassified to profit or loss |
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Exchange differences on translation of operations |
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(278,237) |
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137,734 |
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Revaluation of assets held for resale |
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(34,658) |
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331,585 |
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Total other comprehensive expense |
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(312,895) |
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469,319 |
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TOTAL COMPREHENSIVE LOSS FOR THE PERIOD |
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(3,568,999) |
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(14,314,643) |
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(Loss) per share (US cent) - continuing operations |
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(0.28) |
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(0.90) |
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(Loss) per share (US cent) - discontinued operations |
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(0.04) |
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(0.88) |
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Basic and Diluted (loss) per share (US cent) |
9 |
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(0.32) |
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(1.78) |
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement.
The notes below form part of these financial statements.
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018
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Group |
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Group |
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Company |
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Company |
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2018 |
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2017 |
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2018 |
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2017 |
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Note |
US$ |
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US$ |
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US$ |
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US$ |
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NON-CURRENT ASSETS |
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|
|
|
|
Intangible assets |
10 |
8,459,850 |
|
8,054,947 |
|
- |
|
- |
|
Property, plant and equipment |
11 |
5,375,888 |
|
3,791,611 |
|
- |
|
- |
|
Investment in subsidiaries |
12 |
- |
|
- |
|
58,426 |
|
58,427 |
|
Long term loans |
14 |
- |
|
- |
|
17,372,234 |
|
- |
|
Available for sale financial assets |
15 |
752,215 |
|
786,873 |
|
752,215 |
|
786,873 |
|
|
|
14,587,953 |
|
12,633,431 |
|
18,182,875 |
|
845,300 |
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
Inventory |
16 |
- |
|
20,349 |
|
- |
|
- |
|
Trade and other receivables |
17 |
1,704,410 |
|
517,902 |
|
784,268 |
|
13,772,668 |
|
Cash and cash equivalents |
18 |
298,768 |
|
142,049 |
|
234 |
|
135,706 |
|
|
|
2,003,178 |
|
680,300 |
|
784,502 |
|
13,908,374 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
16,591,131 |
|
13,313,731 |
|
18,967,377 |
|
14,753,674 |
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
Trade and other payables |
19 |
2,851,693 |
|
1,944,676 |
|
1,469,614 |
|
1,122,458 |
|
Loans and borrowings |
22 |
1,327,707 |
|
- |
|
1,000,000 |
|
- |
|
Finance leases falling due in less than one year |
21 |
- |
|
89,607 |
|
- |
|
- |
|
|
|
4,179,400 |
|
2,034,283 |
|
2,469,614 |
|
1,122,458 |
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities |
20 |
241,585 |
|
384,169 |
|
- |
|
- |
|
Finance leases falling due in more than one year |
21 |
- |
|
205,993 |
|
- |
|
- |
|
Loans and borrowings |
22 |
11,672,738 |
|
13,224,252 |
|
11,672,738 |
|
13,224,252 |
|
|
|
11,914,323 |
|
13,814,414 |
|
11,672,738 |
|
13,224,252 |
|
TOTAL LIABILITIES |
|
16,093,723 |
|
15,848,697 |
|
14,142,352 |
|
14,346,710 |
|
NET ASSETS |
|
497,408 |
|
(2,534,966) |
|
4,825,025 |
|
406,964 |
|
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT |
|
|
|
|
||||
|
Share capital |
23 |
17,265,379 |
|
14,493,246 |
|
17,265,379 |
|
14,493,246 |
|
Share premium |
|
17,303,159 |
|
14,740,478 |
|
17,303,159 |
|
14,740,478 |
|
Merger reserve |
|
2,350,175 |
|
2,350,175 |
|
2,350,175 |
|
2,350,175 |
|
Foreign exchange reserve |
|
(204,815) |
|
108,080 |
|
(716,115) |
|
(403,220) |
|
Own shares held reserve |
|
(268,442) |
|
(779,222) |
|
(268,442) |
|
(779,222) |
|
Convertible debt / warrant reserve |
|
2,720,933 |
|
2,930,209 |
|
2,720,933 |
|
2,930,209 |
|
Retained earnings |
|
(38,310,938) |
|
(35,950,264) |
|
(33,830,064) |
|
(32,924,702) |
|
Non‐controlling Interest |
|
(358,043) |
|
(427,668) |
|
- |
|
- |
|
TOTAL EQUITY |
|
497,408 |
|
(2,534,966) |
|
4,825,025 |
|
406,964 |
The financial statements were approved and authorised for issue by the Directors on 26 June 2019 and were signed on their behalf by:
Michael Rowan
Chief Executive Officer
Company Number 03148295
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018
|
|
|
Group |
|
Group |
|
Company |
|
Company |
|
|
Note |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
Cash (outflow)/inflow from operations |
26 |
(1,515,299) |
|
(5,821,095) |
|
(4,242,757) |
|
(13,717,090) |
|
Income tax paid |
|
- |
|
(6,684) |
|
- |
|
- |
|
Net cash (outflow)/inflow from operating activities |
|
(1,515,299) |
|
(5,827,779) |
|
(4,242,757) |
|
(13,717,090) |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Purchase of intangible assets |
|
(1,108,770) |
|
(1,438,017) |
|
- |
|
- |
|
Acquisition of investment |
|
- |
|
- |
|
- |
|
(58,427) |
|
Purchase of property, plant and equipment |
|
(1,777,388) |
|
(3,923,481) |
|
- |
|
- |
|
Sale of property, plant and equipment |
|
123,222 |
|
221,504 |
|
- |
|
- |
|
Net cash outflow from investing activities |
|
(2,762,936) |
|
(5,139,994) |
|
- |
|
(58,427) |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Issue of equity share capital, net of share issue costs |
|
3,299,248 |
|
3,142,674 |
|
3,299,247 |
|
3,142,674 |
|
Loans raised |
|
2,350,445 |
|
7,537,671 |
|
2,022,738 |
|
10,181,201 |
|
Finance expenses |
|
(1,193,316) |
|
(1,693,031) |
|
(1,193,316) |
|
(1,454,191) |
|
Net cash inflow from financing activities |
|
4,456,377 |
|
8,987,314 |
|
4,128,669 |
|
11,869,684 |
|
Net increase/(decrease) in cash and cash equivalents |
|
178,142 |
|
(1,980,459) |
|
(114,088) |
|
(1,905,833) |
|
Cash and cash equivalents at beginning of the year |
|
142,049 |
|
2,121,841 |
|
135,706 |
|
2,041,134 |
|
Exchange (losses)/gains on cash and cash equivalents |
|
(21,423) |
|
667 |
|
(21,384) |
|
405 |
|
Cash and cash equivalents at end of the year |
18 |
298,768 |
|
142,049 |
|
234 |
|
135,706 |
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
|
|
Share capital |
Share premium |
Merger reserve |
Foreign exchange reserve |
Own shares held reserve |
Convertible debt and warrant reserve |
Retained earnings |
|
|
|
Non-controlling Interest |
Total equity |
||||||||
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
|
At 31 December 2016 |
12,621,134 |
13,469,916 |
2,350,175 |
(29,654) |
(779,222) |
1,075,301 |
(21,805,636) |
- |
6,902,014 |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(15,221,072) |
- |
(15,221,072) |
|
Other comprehensive income |
- |
- |
- |
137,734 |
- |
- |
331,585 |
- |
469,319 |
|
Issue of share capital |
1,872,112 |
1,270,562 |
- |
- |
- |
- |
- |
- |
3,142,674 |
|
Embedded derivative on issue of CLN |
- |
- |
- |
- |
- |
1,854,908 |
- |
- |
1,854,908 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
307,749 |
- |
307,749 |
|
Minority Interest |
- |
- |
- |
- |
- |
- |
437,110 |
(427,668) |
9,442 |
|
At 31 December 2017 |
14,493,246 |
14,740,478 |
2,350,175 |
108,080 |
(779,222) |
2,930,209 |
(35,950,264) |
(427,668) |
(2,534,966) |
|
Loss for the period |
- |
- |
- |
- |
- |
- |
(3,186,479) |
- |
(3,186,479) |
|
Other comprehensive income |
- |
- |
- |
(312,895) |
- |
- |
|
- |
(312,895) |
|
CLN conversions |
734,267 |
1,812,079 |
- |
|
- |
(339,081) |
- |
- |
2,207,265 |
|
Issue of share capital |
2,548,646 |
750,602 |
- |
- |
- |
- |
- |
- |
3,299,248 |
|
Embedded derivative on CLN issue |
- |
- |
- |
- |
- |
129,805 |
- |
- |
129,805 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
895,430 |
- |
895,430 |
|
Cancellation of Treasury shares |
(510,780) |
- |
- |
- |
510,780 |
- |
- |
- |
- |
|
Minority Interest |
- |
- |
- |
- |
- |
- |
(69,625) |
69,625 |
- |
|
At 31 December 2018 |
17,265,379 |
17,303,159 |
2,350,175 |
(204,815) |
(268,442) |
2,720,933 |
(38,310,938) |
(358,043) |
497,408 |
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018
|
|
Share capital |
Share premium |
Merger reserve |
Foreign exchange reserve |
Own shares held reserve |
Convertible debt and warrant reserve |
Retained earnings |
|
|
Total equity |
||||||||
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
|
At 31 December 2016 |
12,621,134 |
13,469,916 |
2,350,175 |
(1,023,565) |
(779,222) |
1,075,301 |
(22,345,436) |
5,368,303 |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(11,218,600) |
(11,218,600) |
|
Other comprehensive income |
- |
- |
- |
620,345 |
- |
- |
331,585 |
951,930 |
|
Issue of share capital |
1,872,112 |
1,270,562 |
- |
- |
- |
- |
- |
3,142,674 |
|
Embedded derivative on issue of CLN |
- |
- |
- |
- |
- |
1,854,908 |
- |
1,854,908 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
307,749 |
307,749 |
|
At 31 December 2017 |
14,493,246 |
14,740,478 |
2,350,175 |
(403,220) |
(779,222) |
2,930,209 |
(32,924,702) |
406,964 |
|
Loss for the period |
- |
- |
- |
- |
- |
- |
(1,800,792) |
(1,800,792) |
|
Other comprehensive income |
- |
- |
- |
(312,895) |
- |
- |
- |
(312,895) |
|
CLN conversions |
734,267 |
1,812,079 |
- |
- |
- |
(339,081) |
- |
2,207,265 |
|
Issue of share capital |
2,548,646 |
750,602 |
- |
- |
- |
- |
- |
3,299,248 |
|
Embedded derivative on CLN issue |
- |
- |
- |
- |
- |
129,805 |
- |
129,805 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
895,430 |
895,430 |
|
Cancellation of Treasury shares |
(510,780) |
- |
- |
- |
510,780 |
- |
- |
- |
|
At 31 December 2018 |
17,265,379 |
17,303,159 |
2,350,175 |
(716,115) |
(268,442) |
2,720,933 |
(33,830,064) |
4,825,025 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1. ACCOUNTING POLICIES
General information
Active Energy Group plc is a company incorporated in England and Wales and quoted on the AIM market of the London Stock Exchange. The address of the registered office is disclosed on page 1 of the Company's 2018 annual report. The principal activity of the Group is described in the Strategic Report.
Basis of preparation
The principal accounting policies adopted in preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.
Both the Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards, International Accounting Standards and IFRIC interpretations (collectively IFRS) as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on the historical cost basis, as modified by the revaluation of property, plant and equipment, available for sale financial assets, and financial assets and liabilities, including derivative financial instruments, at fair value through profit or loss.
The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in the most appropriate application in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 29.
Going concern
Historically, the Group's primary revenue generating business segment was the Ukrainian wood fibre business. This was discontinued during 2017 and since then the group has focused its efforts on the CoalSwitch™ business segment. This business segment had not generated significant revenues at the date of signing these financial statements.
The Directors have considered the cash requirements of the business for the following 12 months. As part of this process, they have taken into account existing liabilities, along with detailed operating cash flow requirements. The projections prepared include ongoing running costs of the Group and committed expenditure at the date of approving the financial statements.
The Directors note that the current operational plans involve commencement of production and sale of CoalSwitchTM and other biomass products in the second half of 2019. In addition the Directors have identified a variety of potential sources of funds including issue of additional equity and/or debt, tax credits, rental income, government subsidies and sale of investments. In addition, the Directors have identified additional cost reductions which may be implemented if necessary.
Taking this into account and following a detailed review by the Directors of the Group's cash flow requirements, the directors believe that the Group will have sufficient cash resources to continue to trade for a period of at least 12 months from the date that the financial statements are signed. Consequently, the financial statements have been prepared on a going concern basis.
However, as of the date of signing these financial statements, production and sale of CoalSwitchTM has not commenced and not all of the potential sources of funds have been finalised and therefore there can be no guarantee that sufficient funds will be received to secure the future of the group. These circumstances indicate the existence of a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.
Standards, interpretations and amendments to existing standards
The following Adopted IFRSs have been issued but have not been applied by the Group in these Financial Statements. The full impact of their adoption has not yet been fully assessed; however, management do not expect the changes to have a material effect on the Financial Statements unless otherwise indicated:
· Annual Improvements to IFRSs - 2015-2017 Cycle (1 January 2019)
· Amendments to IAS 1 and IAS 8 - on definition of materiality (1 January 2019)
· Amendments to IAS 19 - employees benefits plan amendments, curtailments or settlements
· Amendments to IAS 28 on long term interests in associates and joint ventures
· Amendments to IFRS 3 "Business combinations" on definition of a business
· Amendments to IFRS 9, financial instruments on prepayment features with negative compensation
· IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (effective date to be confirmed)
· Amendments to IAS 40 Investment Property (effective date to be confirmed)
· IFRIC 23 Uncertainty over Income Tax Treatments (1 January 2019)
· Amendments to IAS 28 Investments in Associates and Joint Ventures (effective date to be confirmed)
· IFRS 17 Insurance contracts (1 January 2021)
Changes in accounting standards: Standards which have been implemented in the year
IFRS 9 'Financial Instruments': The standard replaces all phases of the financial instruments project and IAS 39 'Financial Instruments: Recognition and Measurement'. The standard is effective from periods beginning on or after January 2018 and introduces:
· new requirements for the classification and measurement of financial assets and financial Liabilities; and,
· a new model for recognising provisions based on expected credit Losses.
IFRS 15 'Revenue from Contracts with Customers': IFRS 15 replaced IAS 18 'Revenue' and IAS 11 'Construction Contracts' for accounting periods commencing on or after 1 January 2018. The core principle of the standard is that an entity will recognise revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring promised goods or services to a customer.
The impact of IFRS 9 & 15 has been assessed at a Group level, and there is no material impact on the consolidated results of the Group.
Basis of consolidation
The financial information incorporates the results of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Group has power over relevant activities, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The consolidated financial statements present the financial results of the Company and its subsidiaries (the Group) as if they formed a single entity. Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
In the Company's statement of financial position, investments in subsidiaries are stated at cost less provisions for any permanent diminution in value.
Revenue recognition
Revenue is recognised in according with the requirements of IFRS 15 'Revenue from Contracts with Customers'. The Company recognises revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework:1. Identify the contract(s) with the customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognise revenue when (or as) the entity satisfy a performance obligation.
Revenue is recognised when control of the products have been transferred to the customer. Control is considered to have transferred once products have been received by the customer unless shipping terms dictate otherwise. Revenues exclude intra-group sales and value added taxes and represent net invoice value less estimated rebates, returns and settlement discounts. The net invoice value is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied.
Goodwill and business combinations
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.
When the consideration transferred by the Group in a business combination includes assets or liabilities from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration paid. Changes in the fair value of the consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.
Goodwill arising on consolidation is recognised as an intangible asset and reviewed for impairment at least annually by comparing the carrying value of the asset to the recoverable amount. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
Associates
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
Joint arrangements
Profits and losses arising on transactions between the Group and its joint ventures are recognised only to the extent of unrelated investors' interests in the joint venture. The investor's share in the Joint Venture profits and losses resulting from these transactions is eliminated against the carrying value of the Joint Venture. Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations.
Impairment of non-financial assets (excluding inventories, investment properties and deferred tax assets)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ("CGUs"). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.
Intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see note 29 related to critical estimates and judgements below).
Internally generated intangible fixed assets are recognised if they meet the requirements set out by international accounting standards. Specifically,
· the asset must be separately identifiable that is to say that either it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged; or it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
· The cost of the asset can be measured reliably;
· the technical feasibility of completing the intangible asset;
· the Group intends and is able to complete the intangible asset and use or sell it;
· the intangible asset will generate probable future economic benefits;
· there are available and adequate technical, financial and other resources to complete and to use or sell the intangible asset.
· Expenditure attributable to the intangible asset is measurable.
The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are disclosed in note 10 below.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less accumulated depreciation and any recognised impairment loss. Cost includes the purchase price and all directly attributable costs. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.
Plant and equipment - 2 to 10 years straight line
Furniture and office equipment - 2 to 5 years straight line
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less applicable selling expenses.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including Executive Directors.
Financial assets and liabilities
The Group classifies its financial assets at inception into three measurement categories; 'amortised cost', 'fair value through other comprehensive income' ('FVOCI') and 'fair value through profit and loss' ('FVTPL'). The Group classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost. Management determines the classification of its investments at initial recognition. A financial asset or financial liability is measured initially at fair value. At inception transaction cost that are directly attributable to its acquisition or issue, for an item not at fair value through profit or loss, is added to the fair value of the financial asset and deducted from the fair value of the financial liability.
Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal payments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and maturity amount, minus any reduction for impairment.
Fair value measurement
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date. The fair value of assets and liabilities in active markets are based on current bid and offer prices respectively. If the market is not active the group establishes fair value by using appropriate valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net present value and discounted cash flow analysis.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the group has transferred substantially all of the risks and rewards of ownership. In transaction in which the group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. There have not been any instances where assets have only been partly derecognised. The group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Impairment
The Group assesses at each financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is objective experience (such as significant financial difficulty of obligor, breach of contract, or it becomes probable that debtor will enter bankruptcy), the asset is tested for impairment. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (that is, the effective interest rate computed at initial recognition).The carrying amount of the asset is reduced through use of an allowance account. The amount of loss is recognised in the Statement of Comprehensive Income.
Taxation
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantively enacted by the year-end date.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
· investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available to utilise the difference. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/assets are settled/recovered.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
· the same taxable group company; or
· different Group entities which intend either to settle current tax assets/liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled/recovered.
Foreign currencies
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which they operate (their "functional currency"). The Company and Consolidated financial statements are presented in United States Dollar ("US Dollar", "US$"), which is the Group's presentation currency as the Group's activities are ultimately linked to the US Dollar. The Company's functional currency is Pound Sterling.
Transactions entered into by Group entities in a currency other than their functional currency are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On consolidation, the results of overseas operations are translated into the Group's presentation currency, US Dollars, at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve. Exchange differences recognised in the statement of comprehensive income of Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the foreign exchange reserve on consolidation. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.
Convertible debt
The proceeds received on issue of the Group's convertible debt are allocated into their liability and equity components. The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or maturity of the bond. The remainder of the proceeds are allocated to the conversion option and are recognised in the "Convertible debt reserve" within shareholders' equity, net of income tax effects.
Where the proceeds from the convertible debt have been used to finance construction of property, plant and equipment, or to invest in intangible assets, then the associated borrowing costs are allocated to the relevant asset in accordance with the requirements of IAS23.
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest.
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an "operating lease"), the total rentals payable under the lease are charged to the consolidated income statement on a straight-line basis over the lease term.
Share based payments
Where employees receive remuneration in the form of shares or share options, the fair value of the share-based employee compensation arrangement at the date of the grant is recognised as an employee benefit expense in the consolidated income statement. The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non-market-based vesting conditions) at the date of the grant. The assumptions underlying the number of awards expected to vest are subsequently adjusted for the effects of non-market-based vesting to reflect the conditions prevailing at the year-end date. Fair value is measured by the use of a Monte Carlo (JSOP options) or Black Scholes (other options) simulations. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of the non-transferability, exercise restrictions and behavioural considerations.
Where equity instruments are granted to persons other than employees, the consolidated income statement is charged with the fair value of goods and services received; except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
Own shares held
Consideration paid/received for the purchase/sale of shares held in escrow or in trust for the benefit of employees is recognised directly in equity. The nominal value of such shares held is presented within the "own shares held" reserve. Any excess of the consideration received on the sale of the shares over the weighted average cost of the shares sold is credited to retained earnings.
Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Group consolidated income statement.
Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision for impairment in the Company financial statements.
2. SEGMENTAL INFORMATION
The Group reports two operating continuing business segments:
· "Forestry & Natural Resources" denotes the Group's initiatives to secure ownership of the entire timber supply chain from forest to finished product
· "CoalSwitch™/PeatSwitch™ denotes the Group's renewable wood pellet and soil replacement business.
Revenues and costs associated with the Ukrainian Wood Fibre business were reclassified as discontinued operations in 2017.
Factors that management used to identify the Group's reportable segments
The Group's reportable segments are strategic business units that offer different products. During the business development stage they are managed separately because each business operates in different markets and locations. In future it is likely that these business segments may be combined into single operations and reporting structures will be revisited accordingly.
Measurement of operating segment profit or loss
The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with IFRS but excluding corporate overheads, non-recurring losses, such as goodwill impairment, the effects of share-based payments, and joint venture profit and losses.
|
|
|
2018 |
2018 |
2018 |
|
|
|
Forestry & Natural Resources |
CoalSwitch™/ PeatSwitch™ |
|
|
Total |
||||
|
|
|
US$ |
US$ |
US$ |
|
|
|
|
|
|
|
Total Revenue |
|
- |
195,000 |
195,000 |
|
Operating segment (loss) |
|
(995,545) |
(407,323) |
(1,402,868) |
|
Segment (loss) before tax |
|
(995,545) |
(407,323) |
(1,402,868) |
|
Tax charge |
|
142,584 |
1,203,426 |
1,346,010 |
|
Segment (loss) for the year |
|
(852,961) |
796,103 |
(56,858) |
|
|
|
|
|
|
|
|
|
2017 |
2017 |
2017 |
|
|
|
Forestry & Natural Resources |
CoalSwitch™/ PeatSwitch™ |
|
|
Total |
||||
|
|
|
US$ |
US$ |
US$ |
|
|
|
|
|
|
|
Total Revenue |
|
- |
- |
- |
|
Operating segment (loss) |
|
- |
(3,260,588) |
(3,260,588) |
|
Segment (loss) before tax |
|
- |
(3,260,588) |
(3,260,588) |
|
Tax charge |
|
- |
346,522 |
346,522 |
|
Segment (loss) for the year |
|
- |
(2,914,066) |
(2,914,066) |
Profits and losses associated with the Ukrainian wood fibre business were reclassified as discontinuing in 2017 and have therefore be excluded from the above analysis. All other finance costs relate to Group funding and are not allocated to an individual segment.
Capital expenditure relating to the CoalSwitch™/PeatSwitch™ segment was US$2,666,222 (2017: US$3,877,226) and capital expenditure relating to the Forestry and natural resource segment was US$804,103 (2017: US$896,957).
Reconciliation of reportable segment profit or loss, assets and liabilities to the Group's corresponding amounts are as follows:
|
|
2018 |
2017 |
|
|
US$ |
US$ |
|
|
|
|
|
Total (loss) from reportable segments |
(56,858) |
(2,914,066) |
|
Unallocated amount - corporate expenses |
(1,440,268) |
(1,683,222) |
|
Unallocated amount - finance income |
- |
- |
|
Unallocated amount - finance expense |
(406,929) |
(3,031,054) |
|
Share based payments |
(895,430) |
(307,749) |
|
Discontinued operations |
(386,994) |
(7,284,981) |
|
Loss for the period |
(3,186,479) |
(15,221,072) |
An analysis of non-current assets by location of assets is given below:
|
|
2018 |
2017 |
|
|
US$ |
US$ |
|
|
|
|
|
United Kingdom |
5,303,081 |
4,741,653 |
|
Ukraine |
1,267,925 |
2,170,583 |
|
Canada |
2,701,058 |
2,179,584 |
|
United States |
5,315,889 |
3,541,611 |
|
|
14,587,953 |
12,633,431 |
2. REVENUE
All revenues in 2017 relating to the Ukrainian wood fibre business (shown below as sale of goods) have been reclassified as discontinued and therefore are not shown on the face of the income statement.
|
|
2018 |
2017 |
|
Group |
US$ |
US$ |
|
|
|
|
|
Sale of goods |
- |
1,323,200 |
|
Engineering services |
195,000 |
- |
|
|
195,000 |
1,323,200 |
The following table analyses revenue by location of customer. Revenues in 2017 relate to the Ukrainian wood fibre business and was therefore reclassified as discontinued in the 2017 financial statements.
|
|
2018 |
2017 |
|
|
US$ |
US$ |
|
Switzerland |
25,000 |
- |
|
USA |
170,000 |
- |
|
Turkey |
- |
856,869 |
|
Ukraine |
- |
466,331 |
|
|
195,000 |
1,323,200 |
Revenue derived from a single external customer amounted to US$170,000 (2017: US$856,869).
3. EMPLOYEE COSTS AND DIRECTORS
The following table analyses group wages and salaries before any allocations to property, plant and equipment or intangible assets.
|
|
2018 |
2017 |
|
Group |
US$ |
US$ |
|
Wages and salaries |
2,021,959 |
2,068,200 |
|
Social security costs |
177,463 |
183,631 |
|
|
2,199,422 |
2,251,831 |
|
Share based payments - others |
37,920 |
59,240 |
|
Share based payments - directors |
857,510 |
248,509 |
|
|
3,094,852 |
2,559,580 |
The average monthly number of employees during the year was as follows:
|
|
2018 |
2017 |
|
Directors |
3 |
3 |
|
Administration |
6 |
11 |
|
Production |
10 |
25 |
|
|
19 |
39 |
Directors' and key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. During the period these were considered to be the Directors of the Company listed on page 16 of the Company's 2018 Annual Report.
|
|
2018 |
2017 |
|
|
US$ |
US$ |
|
Directors' emoluments |
434,957 |
719,293 |
|
Share based payments (note 24) |
857,510 |
248,509 |
|
|
1,292,467 |
967,802 |
The emoluments of the highest paid Director for the year, excluding non-cash share based payments, were US$193,295 (2017: US$255,879).
4. OPERATING LOSS
|
Group |
2018 |
2017 |
|
The loss before income tax is stated after charging/(crediting): |
US$ |
US$ |
|
|
|
|
|
Operating leases - premises |
33,596 |
26,807 |
|
Operating leases - vehicles |
- |
2,886 |
|
Operating leases - equipment |
- |
29,045 |
|
Amortisation of intangible assets |
44,845 |
44,845 |
|
Depreciation and impairment |
950,700 |
280,473 |
|
Loss / (profit) on disposal of fixed assets/discontinued operations |
1,778 |
5,600,464 |
|
Auditors' remuneration - parent company and consolidation |
40,830 |
34,000 |
|
Auditors' remuneration - subsidiaries |
23,605 |
20,500 |
|
Auditors' remuneration - taxation services |
4,466 |
9,400 |
|
Auditors' remuneration - other services |
14,035 |
- |
|
Share based payments |
895,430 |
307,749 |
|
Foreign exchange (gains)/loss |
(640,353) |
(754,703) |
5. FINANCE INCOME AND COSTS
|
|
2018 |
2017 |
|
Group |
US$ |
US$ |
|
Finance costs |
|
|
|
Interest on convertible loan |
1,003,213 |
958,299 |
|
Other loan interest and charges |
44,070 |
929,083 |
|
Foreign exchange losses |
(640,354) |
1,143,672 |
|
Net finance (credit)/costs |
406,929 |
3,031,054 |
Foreign exchanges movements primarily relate to movements in US$/Sterling exchange rates and resulting movements in intercompany balances.
6. LOSS FROM DISCONTINUED OPERATIONS
During 2017 AEG plc discontinued its Wood fibre business in Ukraine. The results of this business are disclosed as a single line item in the Group Income and Expenditure Statement in accordance with IRFS5. Details of the results of these operations are shown below.
|
|
|
2018 |
2017 |
|
|
|
US$ |
US$ |
|
REVENUE |
|
- |
1,323,200 |
|
Cost of sales |
|
(265,006) |
(2,925,138) |
|
GROSS PROFIT |
|
(265,006) |
(1,601,938) |
|
Administrative expenses |
|
(120,210) |
(719,519) |
|
|
|
|
|
|
OPERATING (LOSS)/PROFIT |
|
(385,216) |
(2,321,457) |
|
Finance income |
|
- |
641,126 |
|
(Loss)/profit for the Period |
|
(385,216) |
(1,680,331) |
|
Loss on sale of discontinued operations |
|
(1,778) |
(5,600,464) |
|
Income tax |
|
- |
(4,186) |
|
(Loss)/profit attributable to the Parent Company |
(386,994) |
(7,284,981) |
|
Discontinued operations cashflows from operating activities were US$1,135,216 outflow (2017: US$124,081 outflow); cash flows from investing activities were US$123,222 inflow (2017: US$221,504 inflow); and cashflows arising from financing activities were US$200,000 (2017: US$nil).
8. TAXATION
|
|
2018 |
|
2017 |
|
Group |
US$ |
|
US$ |
|
|
|
|
|
|
Current tax |
|
|
|
|
Overseas tax charge on discontinued operations |
- |
|
4,187 |
|
R&D tax credit |
(1,203,426) |
|
(346,522) |
|
Deferred tax |
|
|
|
|
Reversal of temporary differences |
(142,584) |
|
(8,969) |
|
Total income tax (credit)/charge |
(1,346,010) |
|
(351,304) |
|
|
|
|
|
|
Breakdown between continuing and discontinuing operations |
|
|
|
|
Tax charge relating to discontinued operations |
- |
|
4,187 |
|
Tax (credit)/charge relating to continued operations |
(1,346,010) |
|
(355,491) |
|
|
(1,346,010) |
|
(351,304) |
Factors affecting the tax charge
The tax on the Group assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:
|
|
2018 |
|
2017 |
|
|
US$ |
|
US$ |
|
|
|
|
|
|
Loss before income tax |
(4,532,489) |
|
(15,572,377) |
|
Standard rate of corporation tax |
19% |
|
19.25% |
|
Loss before tax multiplied by standard rate of corporation tax |
(861,173) |
|
(2,997,683) |
|
Effects of: |
|
|
|
|
R&D tax credit rate |
(1,203,426) |
|
113,516 |
|
Non-deductible expenses |
187,707 |
|
1,553,856 |
|
Overseas tax rate difference from UK rate |
(25) |
|
4,883 |
|
Income not taxable |
(81,940) |
|
(264,739) |
|
Accelerated depreciation |
- |
|
15,839 |
|
Revenue items capitalised |
(110,991) |
|
- |
|
Losses carried forward |
723,838 |
|
1,223,022 |
|
Current tax (credit)/charge |
(1,346,010) |
|
(351,306) |
|
Tax charge relating to discontinued operations |
|
|
4,187 |
|
Tax (credit) relating to continued operations |
(1,346,010) |
|
(355,491) |
The Finance Act 2017 confirmed that the main rate of corporation tax, which applies to most companies subject to UK tax, will be reduced from the 19% rate applying from 1 April 2017 to 17% from 1 April 2020.
Movements in the groups tax loss position can be summarised as follows:
|
|
US$ |
|
Tax losses brought forward at 1 January 2018 |
22,614,986 |
|
Adjusted Loss per A/c's |
4,668,938 |
|
Surrendered for R&D tax credit |
(8,299,489) |
|
Tax losses carried forward at 31 December 2018 |
18,984,435 |
This equates to a potential deferred tax asset at 17% of US$3,227,354 at the year-end 2018 (2017: US$$4,296,847), which has not been recognised due to uncertainties regarding the recoverability of this balance.
Tax effects of amounts which are not deductible/(taxable) in calculating taxable income are as follows:
|
|
2018 |
|
2017 |
|
|
US$ |
|
US$ |
|
Intercompany loan written off |
- |
|
399,295 |
|
Loss on disposal of investments |
- |
|
184,206 |
|
Impairment of investment |
- |
|
848,402 |
|
Share based payments |
170,132 |
|
59,242 |
|
Legal and professional fees |
14,804 |
|
70,556 |
|
Revaluation of assets held for sale |
- |
|
63,830 |
|
Revaluation gains |
- |
|
(62,937) |
|
Investor relations |
2,470 |
|
- |
|
Sundry items |
301 |
|
(8,738) |
|
|
187,707 |
|
1,553,856 |
9. LOSS PER SHARE
Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the company of US$3,256,104 (2017: US$14,783,962) by the weighted average number of Ordinary Shares in issue during the year, excluding own shares held, of 1,013,575,699 (2017: 829,908,445).
At 31 December 2018, there were no own shares held (2017:33,212,841) Ordinary Shares. The weighted average number of own shares held by the company during the year are not included in the weighted average Ordinary Shares in issue during the financial year.
10. INTANGIBLE ASSETS
|
Group |
Goodwill |
Other intellectual property |
Development |
Total |
|
|
US$ |
US$ |
US$ |
US$ |
|
Cost |
|
|
|
|
|
At 31 December 2016 |
2,212,930 |
2,746,747 |
2,936,252 |
7,895,929 |
|
Additions |
- |
541,060 |
896,957 |
1,438,017 |
|
Disposals |
(2,212,930) |
- |
- |
(2,212,930) |
|
Costs incurred by JV partner |
- |
1,911,121 |
- |
1,911,121 |
|
Transfers from investment in associate |
- |
- |
1,282,627 |
1,282,627 |
|
R&D costs transferred to income statement |
- |
(1,244,045) |
- |
(1,244,045) |
|
At 31 December 2017 |
- |
3,954,883 |
5,115,836 |
9,070,719 |
|
Additions |
|
596,345 |
804,103 |
1,400,448 |
|
At 31 December 2018 |
- |
4,551,228 |
5,919,939 |
10,471,167 |
|
Accumulated amortisation |
|
|
|
|
|
At 31 December 2016 |
- |
362 |
970,565 |
970,927 |
|
Charge for year |
- |
- |
44,845 |
44,845 |
|
At 31 December 2017 |
- |
362 |
1,015,410 |
1,015,772 |
|
Impairment charge |
|
|
950,700 |
950,700 |
|
Amortisation charge for year |
- |
- |
44,845 |
44,845 |
|
At 31 December 2018 |
- |
362 |
2,010,955 |
2,011,317 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 December 2018 |
- |
4,550,866 |
3,908,984 |
8,459,850 |
|
|
|
|
|
|
|
At 31 December 2017 |
- |
3,954,521 |
4,100,426 |
8,054,947 |
|
Company |
Intellectual property |
|
|
US$ |
|
At 31 December 2016 |
2,746,396 |
|
Transfers to other group companies |
(2,746,396) |
|
At 31 December 2017 |
- |
|
At 31 December 2018 |
- |
|
Accumulated amortisation |
|
|
At 31 December 2016, 2017 and 2018 |
- |
|
Net book value |
|
|
At 31 December 2017 & 2018 |
- |
Goodwill
Goodwill arose from the acquisition of Nikofeso and was considered to relate solely to the underlying business acquired which is a single cash generating unit ("CGU"). The asset was reviewed at each balance sheet dates to assess if it had been impaired. This Company was sold at the end of 2017 and therefore the associated goodwill was included in loss on sale of discontinued operations in the Income and Expenditure Statement for that year.
Other intellectual property
Other intellectual property comprises costs incurred to secure the rights and knowledge associated with the CoalSwitch™ and PeatSwitch™ technology.
In 2015 the Group entered into a joint venture agreement with Biomass Energy Enhancements LLC ("BEE"), incorporated in the United States, for the joint commercial development and exploitation of intellectual property assets held by BEE in connection with biomass technologies. A long term loan to BEE was recognised in the accounts to reflect monies loaned by AEG to the joint venture. An agreement was later reached with the other joint venture partners whereby AEG became the sole proprietor of this technology and as a result the loan balance was transferred to intangible fixed assets.
Costs which specifically relate to future plant design have been capitalised an intangible fixed assets.
Development assets
Development assets relate to the following:
Ukraine: The Group is party to a supply contract granted by the Lyubomi Forestry, which is the administrator of the Lyubomi Forest in the Ukraine. This contract was extended to October 2060 from 1 January 2015 and the Company is currently reviewing options to develop this asset as feedstock for CoalSwitch™ plants in Eastern Europe. The remaining useful life on the Ukrainian assets is assessed to be 41 years and the asset is being amortised over this period. Management undertakes
a review at each balance sheet date to assess whether these balances need to be impaired. As a result of this review the group recorded an impairment charge of US$668,073 for the year ended 31 December 2018.
Northern Alberta: During 2014 the Group acquired a 45% interest in a joint venture, KAQUO Forestry & Natural Resources Development Corporation, incorporated in Canada, to exclusively commercialise forestry and agricultural land holdings belonging to the indigenous Métis Settlements of Alberta in Western Canada. Cost associated with this activity were originally recorded as Investments in Associates. This Joint Venture is no longer operational. However, AEG is continuing to work with the Canadian authorities and its partners in Northern Alberta to develop and secure title to and monetise these assets. As a result the costs incurred on the joint venture were transferred to intangible fixed assets during 2017, on the basis that these costs fulfil the definition of an internally generated intangible fixed asset under IAS38.
These costs will be amortised over the period of awarded licences. No amortisation has been recognised in the current accounting period pending licence awards and commencement of production. In addition, management undertakes a review at each balance sheet date to assess whether these balances need to be impaired. As a result of this review the group recorded an impairment charge of US$282,627 for the year ended 31 December 2018.
Newfoundland: On 29 November 2018 the Provincial Government of Newfoundland & Labrador announced that it had issued two five-year commercial cutting permits to Timberlands International (Newfoundland and Labrador) Inc., a subsidiary of Active Energy Group (AEG) Plc, totalling 100,000 m3 annually (500,000 m3 over five years) in Forest Management Districts 17 and 18 on the Great Northern Peninsula. Prior to this date AEG invested significant time and resources in developing management and supplier capability as well as government relations in order to not only secure the licences, but also to develop the business model and capabilities to monetise the permits once awarded.
Costs incurred in acquiring these licences have been recorded as additions to intangible fixed assets These costs will be amortised over the period of awarded licences. No amortisation has been recognised in the current accounting period as the licence awards occurred at the end of 2018 and commencement of production had not occurred at the balance sheet date. Management undertakes a review at each balance sheet date to assess whether these balances need to be impaired. No impairment was recorded for the year ended 31 December 2018.
11. PROPERTY, PLANT AND EQUIPMENT
|
Group |
|
Plant |
Furniture and office equipment |
Total |
|
and equipment |
||||
|
|
|
US$ |
US$ |
US$ |
|
Cost |
|
|
|
|
|
At 31 December 2016 |
|
3,187,609 |
32,346 |
3,219,955 |
|
Foreign exchange difference |
|
(534,717) |
768 |
(533,949) |
|
Additions |
|
4,219,081 |
- |
4,219,081 |
|
Disposals |
|
(3,080,362) |
(24,154) |
(3,104,516) |
|
At 31 December 2017 |
|
3,791,611 |
8,960 |
3,800,571 |
|
Additions |
|
2,069,877 |
- |
2,069,877 |
|
Disposals |
|
(420,600) |
- |
(420,600) |
|
At 31 December 2018 |
|
5,440,888 |
8,960 |
5,449,848 |
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
At 31 December 2016 |
|
628,633 |
29,177 |
657,810 |
|
Foreign exchange difference |
|
(155,592) |
(20,737) |
(176,329) |
|
Elimination on disposal |
|
(752,588) |
(406) |
(752,994) |
|
Charge for year |
|
279,547 |
926 |
280,473 |
|
At 31 December 2017 |
|
- |
8,960 |
8,960 |
|
Impairment charge |
|
65,000 |
|
65,000 |
|
At 31 December 2018 |
|
65,000 |
8,960 |
73,960 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 December 2018 |
|
5,375,888 |
- |
5,375,888 |
|
|
|
|
|
|
|
At 31 December 2017 |
|
3,791,611 |
- |
3,791,611 |
The net book value of asset held under finance leases included within Property, Plant & Equipment above are US$nil (2017: US$345,600). No depreciation (2017:nil) has been charged on these assets as the machinery had not been brought into use at the balance sheet dates.
Additions in the year primarily relate to the construction of the inaugural CoalSwitch™ plant in Utah. The exchange rates movements in 2017 relate to the reduction in value of the Ukrainian Wood Fibre business, which was denominated in Ukrainian Hryvnia. This business was discontinued during 2017.
|
|
|
|
|
US$ |
|
Cost |
|
|
|
|
|
At 31 December 2016 |
|
|
|
8,193 |
|
Foreign exchange difference |
|
|
|
767 |
|
At 31 December 2017 & 2018 |
|
|
|
8,960 |
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
At 31 December 2016 |
|
|
|
7,931 |
|
Charge for year |
|
|
|
755 |
|
Foreign exchange difference |
|
|
|
274 |
|
At 31 December 2017 & 2018 |
|
|
|
8,960 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 December 2017 & 2018 |
|
|
|
- |
12. INVESTMENTS IN SUBSIDIARIES
|
Company |
|
|
Cost |
US$ |
|
At 31 December 2016 |
4,611,570 |
|
Additions |
58,431 |
|
Disposals |
(546,804) |
|
Foreign exchange translation difference |
431,848 |
|
At 31 December 2017 & 2018 |
4,555,045 |
|
Provision for impairment |
|
|
At 31 December 2016 |
2,571,278 |
|
Charge for the period |
1,684,557 |
|
Foreign exchange translation difference |
240,783 |
|
At 31 December 2017 & 2018 |
4,496,618 |
|
Net book value |
|
|
At 31 December 2017 & 2018 |
58,427 |
At 31 December 2018 the Group held share capital of the following companies:
|
Subsidiary undertaking |
Country of incorporation |
Nature of business |
Percentage Holding |
|
|
|
|
|
2018 |
2017 |
|
AE Ukraine |
Ukraine |
Woodchip processing and distribution |
100 |
100 |
|
Nikofeso Holdings Limited |
Cyprus |
Wood chip distribution |
100 |
100 |
|
AETrading (EMEA) SarL |
Switzerland |
Wood chip distribution |
100 |
100 |
|
AEG Trading Limited |
United Kingdom |
Wood chip distribution |
100 |
100 |
|
AEG Pelleting Limited |
United Kingdom |
Biomass for energy development |
100 |
100 |
|
AEG Biopower Limited |
United Kingdom |
Biomass for energy development |
100 |
100 |
|
AEG Coalswitch Limited |
United Kingdom |
Biomass for energy development |
100 |
100 |
|
ABS plc |
United Kingdom |
Biomass for energy development |
85 |
85 |
|
Timberlands Int. Ltd |
United Kingdom |
Biomass for energy development |
81 |
95 |
|
Alpha Prospects Ltd |
United Kingdom |
Energy investments holding company |
4.2 |
4.2 |
|
AEG CoalSwitch USA LLC |
United States |
Biomass for energy development |
100 |
- |
|
Timberlands Newfoundland & Labrador Inc |
Canada |
Biomass for energy development |
81 |
- |
13. INVESTMENT IN ASSOCIATE
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Carrying value at beginning of the year |
- |
1,282,627 |
- |
2,333,176 |
|
Transfer to intangible fixed assets |
- |
(1,282,627) |
- |
- |
|
Transfer to other group companies |
- |
- |
- |
(2,333,176) |
|
Carrying value at end of the year |
- |
- |
- |
- |
During 2014 the Group acquired a 45% interest in a joint venture, KAQUO Forestry & Natural Resources Development Corporation (KAQUO), incorporated in Canada, to exclusively commercialise forestry and agricultural land holdings belonging to the indigenous Métis Settlements of Alberta in Western Canada.
This joint venture is no longer operational and the licences were not awarded as anticipated. However, AEG is continuing to work with the Canadian authorities and its partners in Alberta to develop and secure title to these assets. As a result the costs incurred on the joint venture were transferred to intangible fixed assets during 2017
Summarised financial information in relation to the joint venture is presented below:
|
|
2018 |
2017 |
|
|
US$ |
US$ |
|
At 31 December |
|
|
|
Current assets |
- |
- |
|
Current liabilities |
- |
- |
|
|
|
|
|
Period ended 31 December |
|
|
|
Revenues |
- |
- |
|
Loss for the year |
- |
- |
|
Other comprehensive income |
- |
- |
|
Total comprehensive income |
- |
- |
14. LONG TERM LOANS
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Carrying value at beginning of the year |
- |
1,911,121 |
- |
1,911,121 |
|
Transfer to intangible fixed assets |
- |
(1,911,121) |
- |
- |
|
Transfer to other group companies |
- |
- |
- |
(1,911,121) |
|
Transfer from current assets |
- |
- |
15,577,661 |
- |
|
Accrued interest |
- |
- |
1,794,573 |
- |
|
Carrying value at end of the year |
- |
- |
17,372,234 |
- |
In September 2015 the Group entered into a joint venture agreement with Biomass Energy Enhancements LLC ("BEE"), incorporated in the United States, for the joint commercial development and exploitation of intellectual property assets held by BEE in connection with biomass technologies.
A long term loan to BEE was recognised in the accounts to reflect monies loaned by AEG to the joint venture. An agreement was later reached with the other joint venture partners whereby AEG became the sole proprietor of this technology and as a result the loan balance was transferred to intangible fixed assets during 2017.
During 2018 certain intercompany debts were reclassified as long term to reflect the commercial reality of the likely repayment schedule of these loans. Interest was accrued at a rate of 12 % which is considered to be a market rate.
15. AVAILABLE FOR SALE FINANCIAL ASSET
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Fair value at beginning of the year |
786,873 |
83,455 |
786,873 |
83,455 |
|
Revaluation to market value |
- |
786,483 |
- |
786,393 |
|
Foreign exchange translation |
(34,658) |
(83,065) |
(34,658) |
(83,065) |
|
Fair value at end of the year |
752,215 |
786,873 |
752,215 |
786,873 |
Available for sale assets consist of an unquoted equity instrument which is classified as non- current assets. The asset was revalued in 2017 based on the proceeds received from issue of shares by this entity, less a discount to reflect the absence of a liquid market for these shares. This revaluation was reperformed in 2018 and based on that assessment management concluded that the 2017 valuation remained valid. The available-for-sale financial asset is denominated in Pound Sterling.
16. INVENTORIES
|
|
|
|
|
Group |
2018 |
2017 |
|
|
US$ |
US$ |
|
Raw materials |
- |
20,349 |
|
Total inventories |
- |
20,349 |
17. TRADE AND OTHER RECEIVABLES
In the Directors' opinion the carrying values of trade and other receivables are stated at their fair value, after deduction of appropriate allowances for irrecoverable amounts as these assets are not interest bearing and receipts occur over a short period and are subject to an insignificant risk of changes in value.
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Current |
|
|
|
|
|
Trade receivables |
- |
128,136 |
- |
128,136 |
|
Amounts due from group companies |
- |
- |
379,778 |
13,629,890 |
|
Other receivables |
|
1,198 |
- |
- |
|
VAT |
77,212 |
42,046 |
77,212 |
14,642 |
|
Prepayments |
- |
- |
- |
- |
|
Corporation tax credit receivable |
1,627,198 |
346,522 |
327,278 |
- |
|
Total |
1,704,410 |
517,902 |
784,268 |
13,772,668 |
Trade and other receivables that have not been received within the payment terms are classified as overdue. As at 31 December 2018 trade receivables of US$Nil (2017: US$Nil) were overdue.
As at 31 December 2018, Group trade receivables of US$NIL (2017: US$NIL and 2016: US$NIL) were overdue and impaired. An analysis of the Group's trade and other receivables classified as financial assets by currency is provided in note 27.
18. CASH AND CASH EQUIVALENTS
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Bank accounts |
298,768 |
142,049 |
234 |
135,706 |
|
|
298,768 |
142,049 |
234 |
135,706 |
19. TRADE AND OTHER PAYABLES
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Current |
|
|
|
|
|
Trade payables |
2,038,818 |
936,111 |
798,603 |
200,512 |
|
Social security and other taxes |
3,122 |
45,902 |
3,122 |
41,598 |
|
Accruals and deferred income |
809,753 |
866,594 |
667,889 |
859,279 |
|
Other payables |
- |
96,069 |
- |
21,069 |
|
|
2,851,693 |
1,944,676 |
1,469,614 |
1,122,458 |
The carrying values of trade and other payables approximate their fair value as payments occur over a short period and the risk of material changes in value is insignificant. The following table analyses the maturity of the trade and other payables, excluding borrowings. These are classified as financial liabilities on the balance sheet and they are measured at amortised cost.
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Less than three months |
2,851,693 |
1,944,676 |
1,469,614 |
372,458 |
|
Three to 12 months |
- |
- |
- |
750,000 |
|
|
2,851,693 |
1,944,676 |
1,469,614 |
1,122,458 |
The amounts shown are undiscounted and represent the contractual cash-flows. An analysis of the Group's trade and other payables classified as financial liabilities by currency is provided in note 27.
20. DEFERRED TAXATION
Deferred tax is calculated on temporary differences under the liability method using tax rates applicable in the respective Group entities' jurisdiction. The movement on the deferred tax account is shown below and the balance relates to deferred tax on fair value adjustments related to intangibles:
|
Group |
2018 |
2017 |
|
|
US$ |
US$ |
|
At beginning of the period |
384,169 |
393,137 |
|
Reversal of temporary differences |
(8,968) |
(8,968) |
|
Impairment charge |
(133,616) |
- |
|
At the end of the period |
241,585 |
384,169 |
The deferred tax liability relates to temporary differences arising on the fair valuation of intangible assets acquired in 2011.
No provision for the deferred tax asset in respect of tax losses has been made in the Group or Company due to the uncertainty of the Group or Company being able to generate sufficient future taxable profits from which the future reversal of the timing difference can be deducted. See note 8 for further details of this balance.
21. FINANCE LEASES
The future minimum finance lease payments are as follows:
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Less than 1 year |
- |
89,607 |
- |
- |
|
Between 1 and 3 years |
- |
205,993 |
- |
- |
|
|
- |
295,600 |
- |
- |
The finance lease related to a Pellet Mill leased from the manufacturer for use at the Utah CoalSwitch™ plant. The lease term is 3 years. At the end of the lease term the company had the option to purchase the asset for $1. This piece of machinery was returned to the supplier during 2018
22. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
|
Group |
Book value |
Fair value |
Book value |
Fair value |
|
|
2018 |
2018 |
2017 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Non-Current |
|
|
|
|
|
Convertible debt |
11,672,738 |
11,672,738 |
13,224,252 |
13,224,252 |
|
Unsecured loans |
- |
- |
- |
- |
|
|
11,672,738 |
11,672,738 |
13,224,252 |
13,224,252 |
|
Current |
|
|
|
|
|
Convertible debt |
- |
- |
- |
- |
|
Unsecured loans |
1,327,707 |
1,327,707 |
- |
- |
|
|
1,327,707 |
1,327,707 |
- |
- |
|
Total loans and borrowings |
13,000,445 |
13,000,445 |
13,224,252 |
13,224,252 |
|
|
|
|
|
|
|
Company |
Book value |
Fair value |
Book value |
Fair value |
|
|
2018 |
2018 |
2017 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Non-Current |
|
|
|
|
|
Convertible debt |
11,672,738 |
11,672,738 |
13,224,252 |
13,224,252 |
|
Unsecured loans |
- |
- |
- |
- |
|
|
11,672,738 |
11,672,738 |
13,224,252 |
13,224,252 |
|
Current |
|
|
|
|
|
Convertible debt |
- |
- |
- |
- |
|
Unsecured loans |
1,000,000 |
1,000,000 |
- |
- |
|
|
1,000,000 |
1,000,000 |
- |
- |
|
Total loans and borrowings |
12,672,738 |
12,672,738 |
13,224,252 |
13,224,252 |
Unsecured loans
During the year the Group obtained $1.3m of unsecured loans.
Convertible debt
On the 14 March 2017 the company successfully completed a fund raising of £11.57 million before expenses (or $14.15 million) through the issue of convertible loan notes ('CLNs') to new and existing investors. The CLNs have a maturity date of 14 March 2022 and have been listed on the International Securities Exchange. The CLN can be converted into Ordinary Shares of AEG plc, at any time prior to the Maturity Date, at a 30% premium to 2.535p, being the Company's 10 day Volume Weighted Average Price immediately prior to the issue date. The fair value of the liability component at inception was calculated using a market interest rate for an equivalent instrument without conversion option. The CLN has a coupon rate of 8% and the imputed interest rate applied was 12%.
During 2018 certain note holders took the opportunity to convert their CLN's into AEG Ordinary Shares. Details of these transactions are disclosed below in note 23. On 15 March 2017 the Convertible Loan Note to Brahma Finance for £1,000,000 was repaid in full and settled. The following table analyses the maturity of loan and borrowings. The amounts shown are undiscounted and represent contractual cash-flows.
|
Group |
Up to 3 months |
Between 3 and 12 months |
Between 1 and 2 years |
Between 2 and 5 years |
Total |
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
|
At 31 December 2018 |
|
|
|
|
|
|
Convertible debt |
- |
- |
- |
11,672,738 |
11,672,738 |
|
Unsecured loans |
1,327,707 |
- |
- |
|
1,327,707 |
|
|
1,327,707 |
- |
- |
11,672,738 |
13,000,445 |
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
|
At 31 December 2017 |
|
|
|
|
|
|
Convertible debt |
- |
- |
- |
13,224,252 |
13,224,252 |
|
|
- |
- |
- |
13,224,252 |
13,224,252 |
|
|
|
|
|
|
|
|
|
Up to 3 months |
Between 3 and 12 months |
Between 1 and 2 years |
Between 2 and 5 years |
Total |
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
|
At 31 December 2018 |
|
|
|
|
|
|
Convertible debt |
- |
- |
- |
11,672,738 |
11,672,738 |
|
Unsecured loans |
1,000,000 |
- |
- |
|
1,000,000 |
|
|
1,000,000 |
- |
- |
11,672,738 |
12,672,738 |
|
|
US$ |
US$ |
US$ |
US$ |
US$ |
|
At 31 December 2017 |
|
|
|
|
|
|
Convertible debt |
- |
- |
- |
13,224,252 |
13,224,252 |
|
|
- |
- |
- |
13,224,252 |
13,224,252 |
23. CALLED UP SHARE CAPITAL
|
|
2018 |
2018 |
2017 |
2017 |
|
|
Number |
US$ |
Number |
US$ |
|
Allotted, called up and fully paid |
|
|
|
|
|
Ordinary shares of 1p each |
|
|
|
|
|
At 1 January |
983,071,276 |
14,493,246 |
840,381,500 |
12,621,134 |
|
Issue of shares |
252,048,516 |
3,282,913 |
142,689,776 |
1,872,112 |
|
Cancellation of treasury shares |
(33,212,841) |
(510,780) |
- |
- |
|
As at 31 December |
1,201,906,951 |
17,265,379 |
983,071,276 |
14,493,246 |
During 2018 the Company issued 252,048,516 Ordinary Shares for a total consideration of US$5.6m as follows:
· On 28 March 2018 the Company announced the issue of 13,792,164 at 4.9 cents satisfying exercise notices over CLN's.
· On 20 April 2018 the Company announced the issue of 4,855,105 at 4.6 cents satisfying exercise notices over CLN's.
· On 4 May 2018 the Company announced the issue of 11,565,537 at 5.0 cents satisfying exercise notices over CLN's.
· On 10 May 2018 the Company announced the issue of 7,282,658 at 4.5 cents satisfying exercise notices over CLN's.
· On 30 May 2018 the Company announced the issue of 12,137,763 at 4.4 cents satisfying exercise notices over CLN's.
· On 26 June 2018 the Company announced the issue of 33,333,333 at 4.0 cents following a new share placement.
· On 5 October 2018 the Company announced the issue of 4,081,955 at 4.8 cents satisfying exercise notices over CLN's.
· On 30 November 2018 the Company announced the issue of 165,000,000 at 1.27 cents following a new share placement.
During 2017 the Company issued 142,689,776 ordinary shares for a total consideration of US$3.3m as follows:
· On 27 June 2017 the company issued 17,623,110 Ordinary Shares at 1.6 US cents satisfying exercise notices over warrants in issue.
· On 6 November 2017 the company issued 83,333,333 Ordinary Shares at 2.7 US cents following a new share placement.
· On 21 December 2017 the company issued 40,000,000 Ordinary Shares at 1.6 US cents satisfying exercise notices over share options in issue.
· On 21 December 2017 the company issued 1,733,333 Ordinary Shares at 1.6 US cents satisfying exercise notices over warrants in issue.
24. SHARE OPTIONS AND WARRANTS
From time to time the Company has entered into share option arrangements under which the holders are entitled to subscribe for a percentage of the Company's ordinary share capital. All options vest immediately with the exception of 41,000,000 (2017: 14,166,667) options which are based on various market, service and performance conditions. The number of warrants and share options exercisable at 31 December 2018 was 124,825,099 (2017: 127,325,099).
The movements of warrants and share options during the period were as follows:
|
|
Weighted average exercise price (UK pence) |
Number of Warrants and Share Options |
Weighted average exercise price (UK pence) |
Number of Warrants and Share Options |
|
|
|
|
|
|
|
Outstanding at beginning of the period |
2.72 |
127,325,099 |
1.96 |
239,655,831 |
|
Cancelled |
2.59 |
(78,500,000) |
1.09 |
(54,707,622) |
|
Granted |
- |
- |
- |
- |
|
Exercised |
4.31 |
76,000,000 |
1.25 |
(57,623,110) |
|
Outstanding at end of the period |
3.77 |
124,825,099 |
2.72 |
127,325,099 |
At 31 December 2018, the weighted average remaining contractual life of warrants and share options exercisable was 4.55 years (2017 - 4.02 years). Total share option of 41,000,000 (2017: nil) were granted during the year at a weighted average exercise price of 6.5 pence.
There was charge for equity settled share based payments of US$895,430 (2017: US$307,749) in the income statement for the year ended 31 December 2018. In addition, during the year ended 31 December 2018 certain share options were cancelled. This resulted in a credit to equity settled share based payments of US$810,109 (2017: US$1,044,450). This was not shown in the income statement for the year ended 31 December 2018, but was recorded as a reserve transfer.
Options and warrants outstanding at 31 December 2018 were exercisable as follows:
|
Exercise price range (Pence, US cents in brackets) |
2018 |
2017 |
|
Number |
Number |
|
|
1.250p (1.686 cent) |
- |
56,500,000 |
|
1.500p (2.023 cent) |
7,500,000 |
7,500,000 |
|
1.750p (2.360 cent) |
19,047,619 |
19,047,619 |
|
1.750p (2.2341 cent) |
35,000,000 |
- |
|
3.000p (4.047cent) |
13,450,000 |
13,450,000 |
|
4.500p (6,281 cent) |
20,500,000 |
- |
|
5.000p (6.745 cent) |
2,000,000 |
15,000,000 |
|
6.000p (8.094 cent) |
4,500,000 |
4,500,000 |
|
6.375p (8.600 cent) |
1,823,480 |
1,823,480 |
|
7.500p (10.118 cent) |
- |
9,000,000 |
|
8.500p (11.863 cent) |
20,500,000 |
- |
|
20.000p (26.982 cent) |
504,000 |
504,000 |
|
At the end of the period |
124,825,099 |
127,325,099 |
The above disclosures apply to both the Company and the Group.
JSOP awards
Under the JSOP, shares in the Company are jointly purchased at fair market value by the participating employee and the trustees of the JSOP trust, with such shares held in the JSOP trust. For accounting purposes, the awards are valued as employee share options.
The JSOP trust holds the shares of the JSOP until such time as the JSOP shares are vested and the participating employee exercises their rights under the JSOP. The JSOP trust is granted an interest bearing loan by the Company in order to fund the purchase of its interest in the JSOP shares. The loan held by the trust is eliminated on consolidation in the financial statements of the Group. The Company funded portion of the share purchase price is deemed to be held in treasury until such time as the shares are transferred to the employee and is recorded as a reduction in equity in both the Group and Company financial statements.
The exercise price of the "option" is deemed to be the issue price of the shares. The awards vest based on a market condition, which requires the shares to meet a specific share price hurdle, or a change in control condition, as defined by the plan. Under the JSOP and subject to the vesting of the employee's interest, the participating employee will, when the JSOP shares are sold, be entitled to a share of the proceeds of sale equal to the growth in market value of the JSOP shares versus the exercise price, less simple interest on the original share purchase price, net of executives' cash contribution at inception, as agreed for each grant (the "Carry Charge"). The balance of proceeds will remain to the benefit of the JSOP trust and be applied to the repayment of the loan originally made by the Company to the JSOP trust. Any funds remaining in the JSOP trust after settlement of the loan and any expenses of the JSOP trust are for the benefit of the Company.
The Group measures the fair value of the awards using the Monte Carlo (JSOP options) the share based payment expense is recorded over the expected life of the option. Share based payment expenses are recognised in the income statement in accordance with the provisions of IFRS2.
The Group granted 15,000,000 JSOP awards on 4 July 2013. The JSOP awards granted during 2013 contained a share price hurdle of 3p per share. The awards vested in 2015, but all remain outstanding at year end. These disclosures apply to both the Company and the Group. No awards were made in 2018 (2017:Nil). The share based payment charge for the year is US $Nil (2017: US$Nil) related to the JSOP awards.
25. RESERVES
The following describes the nature and purpose of each reserve within equity:
|
Reserve |
Description and purpose |
|
Share premium |
Amounts subscribed for share capital in excess of nominal value. |
|
Merger reserve |
Difference between fair value and nominal value of shares issued to acquire 90% or more interest in subsidiaries. |
|
Foreign exchange reserve |
Gains/losses arising on retranslating the net assets of overseas operations into US Dollars. |
|
Own shares held reserve |
Cost of own shares held by the employee benefit trust, the JSOP trust or the company as shares held in escrow. |
|
Convertible debt and warrant reserve |
Equity component of the convertible loan and the fair value of equity component of warrants issued that do not form part of a share based payment. |
|
Retained earnings/ Accumulated loss |
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
|
26. NOTES SUPPORTING THE STATEMENT OF CASH FLOWS
Reconciliation of loss before taxation to cash outflows from operating activities
|
Group |
|
2018 |
|
2017 |
|
|
|
US$ |
|
US$ |
|
Loss for the period |
|
(3,186,479) |
|
(15,221,072) |
|
Adjustments for: |
|
|
|
|
|
Share based payment expense |
|
895,430 |
|
307,749 |
|
Depreciation |
|
- |
|
280,473 |
|
Amortisation of intangibles |
|
44,845 |
|
44,835 |
|
R&D expensed to income statement |
|
- |
|
1,244,045 |
|
Impairment of property plant & equipment |
|
65,000 |
|
- |
|
Impairment of intangible assets |
|
950,700 |
|
2,212,930 |
|
Loss/ (profit) on disposal of PP&E |
|
1,778 |
|
2,130,018 |
|
Revaluation of investments for resale |
|
34,658 |
|
(454,928) |
|
Foreign currency translations |
|
(966,788) |
|
(556,421) |
|
Finance expenses |
|
1,047,283 |
|
3,031,054 |
|
Income tax |
|
(142,584) |
|
(4,781) |
|
|
|
(1,256,157) |
|
(6,986,098) |
|
(Increase)/decrease in inventories |
|
20,349 |
|
404,649 |
|
(Increase)/decrease in trade and other receivables |
|
(1,186,508) |
|
2,132,430 |
|
(Decrease)/increase in trade and other payables |
|
907,017 |
|
(1,372,076) |
|
Net cash outflow from operating activities |
|
(1,515,299) |
|
(5,821,095) |
|
Company |
|
2018 |
2017 |
|
|
|
US$ |
US$ |
|
Loss for the period |
|
(1,800,792) |
(11,218,600) |
|
Adjustments for: |
|
|
|
|
Share based payment expense |
|
895,430 |
307,749 |
|
Depreciation |
|
- |
755 |
|
Impairment of investments / intercompany debtors |
|
- |
2,040,292 |
|
Revaluation of investments |
|
- |
(454,928) |
|
Foreign currency translations |
|
(932,168) |
702,918 |
|
Finance expenses |
|
1,047,283 |
1,648,174 |
|
|
|
(790,247) |
(6,973,640) |
|
Decrease in trade and other receivables |
|
(3,799,666) |
(6,457,872) |
|
Increase/(decrease) in trade and other payables |
|
347,156 |
(285,578) |
|
Net cash inflow/(outflow) from operating activities |
|
(4,242,757) |
(13,717,090) |
27. FINANCIAL INSTRUMENTS
The Group's treasury policy is to avoid transactions of a speculative nature. In the course of trade the Group is exposed to a number of financial risks that can be categorised as market, credit and liquidity risks. The board reviews these risks and their impact on the activities of the Group on an ongoing basis.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
· Trade and other receivables
· Cash and cash equivalents
· Trade and other payables
· Available-for-sale financial assets
· Loans and borrowings
A summary of the financial instruments held by category is provided below:
|
Financial assets |
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Loans and receivables |
|
|
|
|
|
Cash and cash equivalents |
298,768 |
142,049 |
234 |
135,706 |
|
Trade and other receivables |
1,704,410 |
517,902 |
18,156,502 |
13,772,668 |
|
|
2,003,178 |
659,951 |
18,156,736 |
13,908,374 |
|
Available-for-sale financial asset |
752,215 |
786,873 |
752,215 |
786,873 |
|
Total financial assets |
2,755,393 |
1,446,824 |
18,908,951 |
14,695,247 |
|
|
|
|
|
|
|
Financial liabilities |
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
Financial liabilities at amortised cost |
|
|
|
|
|
Trade and other payables |
2,851,693 |
2,240,276 |
1,469,614 |
1,122,458 |
|
Loans and Borrowings |
13,000,445 |
13,224,252 |
12,672,738 |
13,224,252 |
|
|
15,852,138 |
15,464,528 |
14,142,352 |
14,346,710 |
Fair value measurement
The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):
Level 1: Quoted prices in active markets for identical items (unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item.
Transfers of items between levels are recognised in the period they occur.
The only financial asset carried at fair value consists of the available for sale financial asset, which is classified as level 3.
Market Risk
Currency risk
The Group's financial risk management objective is broadly to seek to make neither profit nor loss from exposure to currency or interest rate risks. The Group is exposed to transactional foreign exchange risk and takes profits and losses as they arise, as in the opinion of the directors, the cost of hedging against fluctuations would be greater than the potential benefits.
The carrying amounts of the group's trade and other receivable financial instruments are denominated in the following currencies:
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
US Dollar |
- |
- |
17,752,012 |
13,629,890 |
|
UK Pound sterling |
1,704,410 |
517,902 |
404,490 |
14,642 |
|
Euro |
- |
- |
- |
128,136 |
|
Ukrainian Hryvnia |
- |
- |
- |
- |
|
|
1,704,410 |
517,902 |
18,156,502 |
13,772,668 |
The carrying amounts of the group's cash and cash equivalents are denominated in the following currencies:
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
US Dollar |
2,397 |
134,510 |
- |
132,262 |
|
UK Pound sterling |
296,371 |
3,945 |
234 |
3,244 |
|
Euro |
- |
2,214 |
- |
200 |
|
Ukrainian Hryvnia |
- |
1,380 |
- |
- |
|
|
298,768 |
142,049 |
234 |
135,706 |
Information about the Group's loans and borrowings are provided in note 22.
27. FINANCIAL INSTRUMENTS (continued)
The carrying amounts of the group's trade and other payable financial instruments are denominated in the following currencies:
|
|
Group |
Group |
Company |
Company |
|
|
2018 |
2017 |
2018 |
2017 |
|
|
US$ |
US$ |
US$ |
US$ |
|
US Dollar |
1,371,978 |
1,106,200 |
- |
- |
|
UK Pound sterling |
1,469,614 |
1,122,457 |
1,469,614 |
1,122,458 |
|
Euro |
- |
4,304 |
- |
- |
|
Ukrainian Hryvnia |
10,101 |
7,315 |
- |
- |
|
|
2,851,693 |
2,240,276 |
1,469,614 |
1,122,458 |
The effect of a 5 per cent strengthening of the US Dollar at the reporting date on the foreign denominated financial instruments carried at that date would, all variables held constant, would have resulted in a decrease in net assets by US$46,713 (2017: increased in net assets US$7,107). A 5 per cent weakening in the exchange rate would, on the same basis, have increased the net loss and decreased net assets by the same amount.
Interest rate risk
The Group and Company finances its operations through a mixture of equity and loans. The Group and Company exposure to interest rate fluctuations on its borrowings has been limited by the terms of the Convertible Loan Notes described in note 22.
Credit risk
Operational
The Group is mainly exposed to credit risk from credit agreements and sales. It is the Group's policy, implemented locally, to assess the credit risk of new customers before entering contracts. Such credit ratings, taking into account local business practices are then factored into trading decisions. The Group does not enter into any derivatives to manage credit risk. Further information on Trade and other receivables are presented in note 17.
Financial
Financial risk relates to non-performance by banks in respect of cash deposits and is mitigated by the selection of institutions with a strong credit rating.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Group finances its operations through a mix of equity and borrowings. The Group's objective is to provide funding for future growth. The Group's policies aim to ensure sufficient liquidity is available to meet foreseeable needs through the preparation of short and long term forecasts. Further disclosure of the Directors' consideration of going concern is included in note 1.
The Group had no bank loans or invoice finance facilities at 31 December 2018 (2017: Nil). The Group had an overdraft at 31 December 2018 of $843 (2017: Nil) which is disclosed within other payables as a liability on the balance sheet. No personal guarantees were in place.
Capital risk management
The Group's objective when managing capital is to establish and maintain a capital structure that safeguards the Group as a going concern and provides a return to shareholders.
28. RELATED PARTY DISCLOSURES
Details of Director's remuneration are given in the Report of the Directors.
Transactions between the Company and its subsidiaries, which are related parties to the Company, have been eliminated on consolidation. During the year in the Company's financial statements, the Company made net cash recoveries from fellow Group companies of US$nil (2017: US$nil).
The Company's intercompany receivable balances at the year-end were as follows:
|
|
2018 |
2017 |
|
|
|
US$ |
US$ |
|
|
Amounts due from Group companies |
17,752,012 |
13,629,890 |
|
29. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of financial information in conformity with International Financial Reporting Standards requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the year-end date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were as follows:
Impairment of goodwill, intangible fixed assets and other assets
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount of cash generating units is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary. Intangible fixed assets and other assets are considered for impairment where such indicators exist using value in use calculations or fair value and recoverability estimates. The use of these methods similarly requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows.
Share based payments
In determining the fair value of equity settled share based payments and the related charge to the income statement, the Group makes assumptions about future events and market conditions. In particular, judgements must be made as to the fair value of each award granted. The fair value is determined using a valuation model which is dependent on further estimates, including the Group's future dividend policy, the timing with which options will be exercised and the future volatility in the price of the Group' shares. Such assumptions are based on publicly available information and reflect market expectations and advice taken from qualified personnel. Different assumptions about these factors to those made by the Group could materially affect the reported value of share based payments.
Useful lives of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the consolidated statement of comprehensive income in specific periods.
Recognition of development costs within intangible fixed assets
The Group undertakes certain development activity, which is recognised within intangible fixed assets, if it meets certain criteria laid down by international accounting standards. This means that management is required to assess various factors associated with these assets to determine whether the asset is separately identifiable, that it is probable that future economic benefits attributable to will arise; the technical feasibility of completing the asset; that the Group intends and is able to complete the asset; and there are available and adequate technical, financial and other resources to complete the asset. All these matters involve technical and economic judgement and changes to these assessments can result in significant variations in the carrying value and amounts charged to the consolidated statement of comprehensive income in specific periods.
30. CAPITAL AND OPERATING COMMITMENTS
Capital commitments at the 31 December 2018 were US$nil (2017: US$408,908). Operating lease commitments at the 31 December 2018 were US$nil (2017: US$11,142). All amounts were due within one year.
31. SUBSEQUENT EVENTS
The key business developments since 31 December 2018 were as follows:
· On 4 March 2019 AEG announced that it had entered into an agreement with Alamac Holdings LLC to acquire an industrial site in Lumberton, North Carolina for US$3.3m. The acquisition was funded by the issue of CLNs to new and existing institutional investors. The acquisition was completed on 27 March 2019.
· On 23 April 2019 AEG announced that it has been awarded a US$500,000 building re-use and renovation grant for the Lumberton site.
· On 4 June 2019 AEG provided a progress update regarding the next stage of development at its industrial site in Lumberton. The update noted that the team was making rapid progress advancing construction of new CoalSwitch™ operation at Lumberton, U.S, that the test reactor were operational and that a five-year contract had been signed for the supply of up to 800,000 tonnes per annum of feedstock to Lumberton.
· Management continues to actively discuss opportunities with existing and prospective partners and potential providers of project finance, in order execute Active Energy's business plan following the acquisition of the Lumberton Site.
Further details are provided in the Chief Executive Officer's statement.
32. ULTIMATE CONTROLLING PARTY
In the opinion of the directors there is no one ultimate controlling party.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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