28 June 2024
i(x) Net Zero PLC
("i(x) Net Zero" or the "Company")
Final Results for the Year Ended 31 December 2023
i(x) Net Zero PLC (AIM: IX.), the investing company which focuses on the Energy Transition, is pleased to announce the audited final results for the year ended 31 December 2023 ("FY 2023"). All amounts are in USD unless otherwise stated.
Financial and Investment Highlights
· Fair value of investments in i(x)'s portfolio companies ("Portfolio NAV") as at 31 December 2023 increased by 125.9% to $144.22 million (31 December 2022: $63.84 million);
· Portfolio NAV per share, including cash of $5.62 million (£4.42 million), as at 31 December 2023 of $1.74 per share (£1.37 per share) (31 December 2022: $0.90 per share (£0.75 per share);
· Profit of $78.58 million from continuing operations before non-cash deferred tax provision and share-based compensation (2022: Loss $5.08 million);
· As at 31 December 2023, the Company had $3.75 million of borrowings and cash of $5.62 million (31 December 2022: no borrowings and cash of $7.48 million); and
· In 2023, i(x) made portfolio investments of $1.85 million (2022: $1.60 million).
Corporate and Portfolio Highlights
· In January 2023, the Company announced the appointment of Pär Lindström, the Company's Chief Investment Officer, as its Chief Executive Officer and in April 2023, the Company announced the appointment of Jonathan Carpenter Stearns as CFO and Executive Director of the Company.
· In April 2023, following a period of strategic and operational review, the Board of Directors set ambitious NAV targets for the executive management team, in order to drive growth in the business and diversify the Company's portfolio of investments. The Company is accelerating its pursuit of this strategy with a more streamlined approach to operations.
· In April 2023, the Company announced that its wholly owned subsidiary, i(x) investments LLC entered into a new secured $7.5 million 2 year term loan facility with European Depositary Bank S.A.
· In July 2023, portfolio company WasteFuel announced a $10m investment from bp, the global energy company to assist WasteFuel's plans to develop a global network of plants to convert municipal and agricultural waste into bio-ethanol, a biofuel which could play a significant role in decarbonising hard-toabate sectors like shipping.
· In August 2023, the Company announced a conditional agreement for the sale of Carbon Engineering to Occidental Petroleum Corporation, the international energy company at a 7.2x realized multiple of invested capital.
· In September 2023, the Company completed a $600,000 investment into Citron Energy Inc, a US based alternative fuels business to increase the size of the portfolio and bring innovative cleantech technology to decarbonise industrial production and support the circular economy in the US.
For further information visit https://ixnetzero.com/ or contact:
| i(x) Net Zero | Via Buchanan below |
| Pär Lindström - Chief Executive Officer |
|
| |
|
| Canaccord Genuity Limited Nominated Adviser & Broker | +44 20 7523 8000 |
| Max Hartley | |
| Harry Pardoe | |
| | |
| Buchanan | |
| Helen Tarbet | +44 7872 604 453 |
| Simon Compton | +44 7979 497 324 |
Notes to Editors
About i(x) Net Zero PLC
i(x) Net Zero PLC is an AIM quoted investing company that seeks to provides its shareholders with the opportunity to create long-term capital growth with positive, scalable, measurable and sustainable impact on the environment and on the communities it serves.
In accordance with its belief that the world's biggest problems are also the biggest market opportunities, i(x) Net Zero focuses on two critical areas in which it aims to make a positive impact: (i) Energy Transition and (ii) Sustainability in the Built Environment.
The Company uses a multi-strategy investment approach, providing the companies in which it invests with the expertise and catalytic capital to help them grow. To date, i(x) Net Zero has invested in biofuels, direct air capture (carbon removal), renewable energy, sustainable workforce housing and net zero construction technology.
i(x) Net Zero is a signatory to the UN Principles for Responsible Investing.
The Company has received the London Stock Exchange's Green Economy Mark.
Chairman's Statement
The Company continued to see growth in asset values during the course of 2023, as well as further improvements to global policy incentives for sustainable investing and the move towards
decarbonisation. Nonetheless, stock market conditions remain challenging for smaller growth companies with NAV discounts widening during the period under review for many market participants.
Over the last twelve months we have not seen any real improvement in the liquidity of i(x) Net Zero shares which has contributed to volatility in the market price. The share price has recovered from lows, while remaining significantly below the price set at listing, and continues to trade at a significant discount to NAV.
The Board remains convinced that the landscape of opportunity to combine attractive investment returns with positive impact remains compelling, with global momentum now building in the key transitions that net zero commitments require. However the ability of the company to deploy meaningful capital is currently restrained by the balance sheet, and the Board continues to take a conservative view on the ability of the company to access capital in current market conditions.
Despite these challenging macro conditions which we hope to be cyclical in nature, the new senior executive team made significant progress during the year in realising value from the portfolio, adding a new investment and seeing significant new investment into the flagship WasteFuel
business from bp.
In addition there has been a reduction in operating costs and further work done on the assessment of opportunities to optimise the current portfolio which is tracking broadly in line with expectations.
During the year, the fair value of investments in i(x)'s portfolio companies increased by 125.9% to $144.22 million with Portfolio NAV per share, including cash of $5.62 million (£4.42 million), as at 31 December 2023 of $1.74 per share (£1.37 per share).
I would like to thank my follow board members and the executive team, for their continued commitment to increasing NAV and shareholder value in very difficult circumstances.
Nick Hurd
Chairman
27 June 2024
Chief Executive's Statement
The goal of our business remains the same, as we look to generate superior risk adjusted financial returns while enhancing access to growing businesses that are working on net zero strategies."
This is being achieved via investing in a portfolio that provides access to the longterm secular trend of capital flowing towards sustainable finance and ESG-related investing.It has been another challenging year - with continued uncertainty characterising global capital markets which
resulted in hesitancy on the part of investors and capital providers who have been seeking safe haven returns.
However, in the face of these challenges, the team has delivered meaningful progress against the challenges we set ourselves when we took up our leadership positions at the start of 2023. In April 2023, we announced our intention to prioritise the growth of the net asset value of the Company's investments by identifying and seeking to execute profitable investment realisations from the existing portfolio and by sourcing high growth investment opportunities while also reducing costs and operating expenditure, all of which have been achieved in the period under review. We continue to see high growth in our target markets and are working hard to secure capital, for both our balance sheet and external sources, to be available for us to expand and to fund selective investments.
Consistent with past successes, the Group will seek out investment targets with the following characteristics:
Companies with proven business models that are ready to scale yet find it challenging to access
capital including listed and unlisted growth companies in our target markets with depressed equity valuations;
Companies that have technologies that are proven at scale and profitability in certain developed markets but require capital and expertise to expand into other markets like the US or Western Europe;
Companies that are operating in our core markets and achieving scalable, positive ESG impact with near term paths to revenue and operating cash flow and long-term profitability profiles.
The global policy-making environment favours and supports our approach.
Operational Review
I am pleased to report that after a challenging twelve months during 2022, the new management team has been working to reposition and restructure the business during 2023.This has led to a renewed focus on improving net asset value, lowering the cost base and opportunistically obtaining liquidity from its existing investments. The table below shows the change in the Net Asset Value of the Company's portfolio companies in the year to 31 December 2023.
The Board of Directors has set ambitious NAV targets for the executive management team, in order to drive growth in the business and diversify the Company's portfolio of investments while the Company will accelerate its pursuit of this strategy with a more streamlined and lower cost approach to operations.
Portfolio Review
The following are brief descriptions of each of our investee companies:
WasteFuel Global, LLC ("WasteFuel") is focused on developing renewable, nonfossil fuels to help reduce the carbon emissions of the transportation sector with a particular focus on municipal solid waste to energy for trucks, planes and ships. Utilising WasteFuel technology, a plant will produce renewable biomethanol that is expected to help shipping companies reduce their CO2 emissions and other greenhouse gases by up to 90% compared with conventional fuels.
In mid-2023 WasteFuel secured a $10 million investment from bp, to further assist WasteFuel's
plans to develop a global network of plants to convert municipal and agricultural waste into bio-methanol, a biofuel which could play a significant role in decarbonising hard-to-abate sectors like shipping. This investment by bp was at a price which dramatically increased the NAV of the Company's holding in WasteFuel by $84.38 million to a total reported NAV of $131.50m as at December 31, 2023.
WasteFuel intends to develop multiple bio-methanol plants around the world in collaboration with local strategic partners including waste companies, with the first project expected to be in the GCC. Ever since bp's funding, WasteFuel has continued to proceed its projects in the GCC, with two of them leading the way. Bp and WasteFuel have entered a memorandum of understanding to offtake the produced bio-methanol and, working together, to help optimize and improve biomethanol yields and economics.
WasteFuel has a proven track record of working with global partners as it pursues its plans for a global network of biomethanol plants converted from waste. In 2022 WasteFuel entered a commercial-scale bio-methanol partnership with A.P. Moller - Maersk, the global container logistics company. WasteFuel also has continued to develop its projects in the GCC, to develop the first commercial scale municipal waste-to renewable methanol plant in the Middle East.
WasteFuel Featured on TIME and Statista's 2024 List of America's Top GreenTech Companies. WasteFuel also strengthened its management team with the appointment of Peter Jorgensen from Maersk (and previously Maersk board member of WasteFuel) as CFO. Peter is working closely with WasteFuel CEO, Trevor Neilson, to drive forward the company's growth and to take full advantage of the significant demand for its sustainable fuel products and services.
Enphys Management Company, LLC ("EMC") is i(x)Net Zero's partnership with the Latin America Investment Group, a business development and investment group. EMC pursues private and public opportunities focused on renewables and energy transition in Latin America and has a direct ownership in Enphys Acquisition Sponsor, LLC ("EAS"), the sponsor company of Enphys Acquisition Corp. ("EAC"), a NYSE- listed SPAC targeting renewable energy businesses in Latin America, in which EMC also has an ownership. Its strategy is to create a regional champion in the Americas for alternative energy through the aggregation of existing, cash-flow positive renewables assets.
Latin America provides a rapidly growing energy market where alternative energy production is often the lowest cost source. This provides Enphys the opportunity to execute at scale and become a significant publicly traded leader in energy transition. i(x) Net Zero invested an additional $1.5M million (including $1.1 million in 2023 and $0.4 million the first 5 months of 2024) in cash in Enphys to enable the company to actively pursue merger opportunities as announced
at its listing. In conjunction with this investment, the Company renegotiated the terms of its existing equity interest in Enphys, converting its shares into participating preferential shares, which carry rights over other Enphys share classes. Enphys remains in talks with a leading and well-established advanced biofuels company in Latin America and has until 8 December 2024 to consummate an initial business combination.
MultiGreen Properties, LLC ("MultiGreen") is a developer of sustainable, multi-family properties that aims to supply affordable workforce rental housing by reducing construction costs and duration. While having 1,100+ units currently under construction, the challenges in the regional banking market in the US, restricted access to capital, deteriorating local markets, provide a
challenged environment for all of MultiGreen's projects. Consequently, to be conservative we have reduced the value of our investment in MultiGreen to zero as of year end 2023. We will continue to monitor this investment closely as it weathers these turbulent real estate markets. Sustainable Living Innovations ("SLI") is a construction technology and product development company producing panelised buildings to address housing affordability, while delivering a new standard
in sustainable living. SLI continues to capture market share as a leader in delivering net zero buildings at scale. Its factory-assembled and cost effective steel panel technology addresses both the inflationary pressure on material costs and supply chain issues. SLI is due to complete its
15-storey apartment complex in Seattle ready for occupancy in 2024. This will be the world's first multi-family tower designed to meet the net zero energy criteria set by the International Living Future Institute's Living Building Challenge. During the year, SLI continued development of the Downtown Emergency Service Center (DESC), a non-profit housing organisation in Seattle, for
a 5 storey 124-unit energy efficient permanent supportive apartment building as a solution for long term homelessness. SLI is also planning to expand its assembly plant locations on the West Coast of the US and plans eventually to move eastwards to serve additional markets. In March 2023, SLI signed a non-binding letter of intent in relation to a proposed business combination with NYSE listed Churchill Capital Corp V ("Churchill V"). Unfortunately turbulence in the public market for new issuances and acquisitions prevented this combination from being consummated. Consequently, while SLI has continued to develop its pipeline of projects, it has had to reduce its
corporate expenses significantly and slow the pace of its developments. I(x) did participate in a bridge round to provide capital, investing $150,000 to allow the company to complete one project and to undertake the process of raising capital for the completion of its current pipeline.
Citron Energy Since the Company's investment in November 2023, Citron has advanced the development of multiple projects in the US. The near term opportunity to conclude multi-year offtake and supply contracts has been accelerated by the increasing awareness of the need to
address carbon footprint and GHG emissions for industries including cement and lime production as well as an increasing focus on net zero recycling and limited space for new landfills. With equipment sources in place and site development activities well advanced and confirmed interest by equity and debt providers, Citron expects to accelerate the development of its project pipeline over the near term.
Carbon Engineering Ltd. ("Carbon Engineering")has developed a proprietary Direct Air Capture ("DAC") technology that removes carbon dioxide directly from the atmosphere for sequestration
and storage. With its DAC and carbon-to-value proposition, it represents the next generation of industrial scale decarbonisation. The company has a clear path to global opportunity and is focused on licensing its technology to industrial partners to build and operate. The company, through itsstrategic partner 1PointFive, an initiative with Occidental Petroleum's (NYSE: OXY) Low Carbon Ventures business, anticipates building and operating 70 DAC facilities by 2035, each with an expected capacity of up to 1 million tonnes per year. Following completion of the sale of Carbon Engineering Ltd. to Occidental Petroleum Corporation in November last year at a 7.2x realized multiple of invested capital, the Company received the first tranche of the proceeds
in November 2023 and expects the second tranche in November this year and a final payment in November 2025. Occidental's $1.1bn purchase of Carbon Engineering was a landmark moment for carbon capture sequestration (CCS) startups, marking the first major acquisition of a carbon
removals company, with the transaction regarded as one of the leading Energy Transition deals of the year in 2023, showing the strength and investment acumen of i(x) Net Zero.
Context Labs B.V. ("Context Labs") is an impact software company whose blockchain technology platform enables the harvesting and processing of data to help businesses track their carbon emissions and their compliance with regulatory frameworks. Context Labs has continued to successfully deliver on a number of projects including the EQT, Williams, Jonah Energy and Carbon GeoCapture projects. There were advances in discussions with Microsoft and Dell and a collaboration began with EEMDL, a multidisciplinary research and education center with a mission to be the global data and analytics hub to support improved greenhouse gas emissions accounting across energy supply chains.
Financial Review
The Group delivered a significant improvement in the fair value of investments in its portfolio companies ("Portfolio NAV") which increased by 125.9% or, $80.38 million, to $144.22 million
as at 31 December 2023 (31 December 2022: $63.84 million). The annual increase in Portfolio
NAV over the period of $80.4 million (2022: $3.1 million) comprises primarily unrealized gains of $81.1 million (2022: $1.5 million). The majority of unrealized gains relates to an increase in fair value of WasteFuel by $84.38m offset by a decrease in fair value of MultiGreen Properties, LLC
of $2.55 million, which was reduced to zero. WasteFuel NAV increased as a result of the $10 million investment by bp plc on 30 June 2023. MultiGreen NAV was reduced to zero due to increased costs, restricted access to capital and deteriorating local markets providing a challenged environment for MultiGreen's projects. As at 31 December 2023, Portfolio NAV per share, including cash of $5.62 million (£4.42 million), was $1.74 per share (£1.37 per share) (31
December 2022: $0.90 per share (£0.75 per share)).
Profit from continuing operations before non-cash deferred tax provision and share-based compensation was $78.58 million in 2023. (2022: loss $5.08 million) (This $78.58 million profit is derived as operating profit before financing activities of $79.31 million minus share-based compensation credit of $0.73 million). During 2023, stock options were granted to management
employees under the 2022 Company's Equity Incentive Plan. In connection with this outstanding options were forfeited which resulted in a non-cash share-based compensation credit of $0.73
million being recognized (2022: $1.75 million expense).
General and administrative expenses decreased by $2.69 million to $5.56 million (2022: $8.25 million), largely due to the cost-cutting program enacted by the new executive team along with non-cash sharebased compensation credit. As a result of the corporate inversion and resulting IPO transaction in 2022, i(x) Net Zero Plc is being treated as a U.S. domestic corporation for all purposes of the U.S. tax code as of the date of the transaction and there will be non-cash deferred
tax implications related to the Company's temporary difference in the book and tax basis of its assets, the most material of which is the difference between the tax basis and the fair value of the
Company's investments. For 2023, non-cash deferred tax expense of $16.69 million (2022: $11.27 million) was recognised in the statement of profit or loss. This deferred tax expense would not have been recognised by i(x) investments LLC, if the IPO transaction did not occur.
Net profit amounted to $62.6 million in 2023 (2022: $18.13 million net loss) primarily as a result of the increase in the WasteFuel NAV, net of deferred tax expense. As at 31 December 2023 the
Company had $3.75 million borrowings, cash of $5.62 million (31 December 2022: no borrowings and cash of $7.48 million) and net current assets of $6.73 million (31 December 2022: $6.68 million).
In April 2023, the Company announced that its wholly owned subsidiary, i(x) investments LLC entered into a new secured $7.5 million 2 year term loan facility with European Depositary Bank S.A. ("EDB") ("Loan"). This facility was increased in November 2023 to $11.75 million. The Loan bears interest at approximately 10.5% coupon (subject to periodic change in line with EDB's USD Base rate and more recently approximately 10.82%) and which is payable quarterly. The Loan can be utilised for the purposes of the financing of investments and general working capital purposes. The Loan is guaranteed by the Company.
In January 2022, Lion Point Capital, LP, on behalf of funds managed by it, ("Lion Point") and the Company entered into a strategic relationship to identify and pursue certain transactions together, with an initial focus on opportunities in Energy Transition. Lion Point is a global special situations
investment firm that seeks to invest in equity and debtsecurities of undervalued public and private companies. At the time of the Company's IPO, Lion Point Master, LP ("Lion Point Master") entered into a subscription agreement and subscribed for $6.8 million (approximately £5.0 million) in ordinary shares of the Company at the placing price as part of the fundraising. Lion Point Master was granted a put option and pursuant to the put option, the Company is obliged to repurchase Lion Point Master's holding of 6,672,161 Ordinary Shares at the placing price (£0.76 per share
($1.02 per share)) amounting to $6.8 million at any time during the three year term following
the Company's admission to trading on AIM.
Discussions with Lion Point are taking place with a view to settling the option. Lion Point has also granted the Company a call option to purchase $6.8 million of common shares of Suniva, Inc,
which has one of the largest solar cells manufacturing facilities in North America. Further details are set out in paragraph 5.6 of Part 1 and paragraphs 18.1 (j), (k) and (l) of Part 7 of the Company's
Admission document dated 4 February 2022, which is available on the Company's website https://ixnetzero.com/.
Prior to its IPO, the Company undertook a reorganisation in which i(x) Merger LLC, a wholly owned subsidiary of the Group merged with i(x) investments, LLC, with i(x) investments continuing as the surviving entity and as a wholly owned subsidiary of the Company. Prior to the reorganisation of the Group, i(x) Financial Services, LLC ("i(x) Financial Services"), (a wholly ownedsubsidiary of i(x) investments), i(x) Securities, LLC (a wholly owned subsidiary of i(x) Financial Services) and certain other assets held by i(x) investments were transferredto i(x) Sustainable Holdings, LLC, an entity owned by the shareholders of the Company. This transaction was reflected as an equity distribution of $1.62 million assets.
Outlook
While the growing global trend towards decarbonisation continues apace with the backing of government legislation and corporate commitments, the Company has grappled with a challenging twelve months. With the necessary changes to lower its expense and more tightly focus its investment strategy to those opportunities in the energy transition and technology enhancements to the built environment behind it, combined with its first exit which was very successful, i(x) Net Zero is now positioned to selectively expand its portfolio of investee companies.
In order to achieve its stated ambition, the Company will look to pursue strategic acquisitions that meet its strict investment criteria. It has already identified a number of exciting opportunities and plans to consider further investment in its existing portfolio. This may include near-term opportunities to participate in capital raises, negotiated add on investments, as well as replicating its success via new platforms in scaling technology and new market penetration.
The Company also remains eager to explore an investment in, or a potential alliance with, a renewables and circular economy platform that has a mission and purpose that is similar to the Company's, namely to build profitable businesses that support the achievement of the UN Sustainable Development Goals.
The Board of Directors have set ambitious growth targets for the executive management team, building on FY 2023 strong increase in NAV and reduction of operating expenditure. We believe that these targets, and company's focus to generate strong returns, should enhance shareholder value over the near and longer term.
Pär Lindström
Chief Executive Officer and Chief Investment Officer
27 June 2024
i(x) Net Zero Plc
Consolidated Statement of Comprehensive Income
For The Year Ended 31 December 2023
(Expressed in US dollars)
| | Notes | 2023 | 2022 |
| Net unrealised gain from investments | | 81,105,546 | 1,499,970 |
| Net realised gain/(loss) on investments | | 3,767,329 | (86,165) |
| Dividend income | | - | 2,645 |
| Investment return | | 84,872,875 | 1,416,450 |
| Expenses and other income | | (5,558,528) | (8,246,839) |
| OPERATING PROFIT/(LOSS) BEFORE FINANCING ACTIVITIES | |
79,314,347 |
(6,830,389) |
| Finance income | 10 | 168,990 | - |
| Finance cost | 10 | (236,157) | (27,495) |
| Net financing activities | | (67,167) | (27,495) |
| PROFIT/(LOSS) BEFORE TAX | | 79,247,180 | (6,857,884) |
| Tax provision | 18 | (16,685,451) | (11,271,318) |
| PROFIT/(LOSS) AFTER TAX | | 62,561,729 | (18,129,202) |
| Earnings/(loss) per share: | | | |
| Basic | 6 | 0.75 | (0.23) |
| Diluted | 6 | 0.71 | (0.23) |
Notes:
a) There is no other comprehensive income or loss for the years ended 31 December 2023 and 2022.
The accompanying notes are an integral part of these financial statements.
| i(x) Net Zero Plc Consolidated Statement of Financial Position 31 December 2023 | | ||
| (Expressed in US dollars) | |||
| | Notes | 31 December | 31 December |
| | | 2023 | 2022 |
| ASSETS Non-Current assets | | | |
| Investments, at fair value | 4 | 144,217,045 | 63,840,722 |
| Receivable from deemed distributions | 4 | 2,064,901 | - |
| Right-of-use asset | | 27,639 | 349,277 |
| Furniture and equipment Loan origination costs, net | | - 106,563 | 1,839 - |
| Security deposit | | 82,942 | 82,942 |
| Total Non-Current Assets | | 146,499,090 | 64,274,780 |
|
Current assets Receivable from deemed distributions |
4 |
1,962,123 |
- |
| Trade and other receivables | | 51,383 | 66,838 |
| Prepaid expenses and other current assets | | 127,631 | 135,806 |
| Cash and cash equivalents | 17 | 5,620,810 | 7,479,832 |
| Total Current Assets | | 7,761,947 | 7,682,476 |
| Total Assets | | 154,261,037 | 71,957,256 |
LIABILITIES
Current liabilities
| Accounts payable and accrued expenses | 1,002,804 | 612,788 | |
| Lease liability | 32,051 | 364,336 | |
| Security deposit payable | - | 24,601 | |
| Total Current Liabilities | 1,034,855 | 1,001,725 | |
| Non-current liabilities Deferred tax liability |
18 |
27,292,192 |
11,271,318 |
| Loan payable Lease liability | 8 | 3,751,875 - | - 32,051 |
| Total Non-Current Liabilities | | 31,044,067 | 11,303,369 |
| Total Liabilities | | 32,078,922 | 12,305,094 |
|
EQUITY Share capital and premium |
5 |
76,621,844 |
75,921,844 |
| Share options reserve | | 1,018,283 | 1,750,059 |
| Retained earnings | | 44,541,988 | (18,019,741) |
| Total Equity | | 122,182,115 | 59,652,162 |
| Total Liabilities and Equity | | 154,261,037 | 71,957,256 |
The financial statements were authorised for issue by the board of directors on 27 June 2024 and were signed on its behalf by:
Par Lindström Jonathan Stearns
Chief Executive Officer Chief Financial Officer
Company number - 138730
The accompanying notes are an integral part of these financial statements.
i(x) Net Zero Plc
Consolidated Statement of Changes in Shareholders' Equity Page 1 of 2
For the Year Ended 31 December 2023
| (Expressed in US dollars) | | |||
| |
Share Capital and Premium |
Share Option Reserve |
Retained Earnings |
Total |
| At 1 January 2023 | 75,921,844 | 1,750,059 | (18,019,741) | 59,652,162 |
| Comprehensive profit for the year |
- |
- |
62,561,729 |
62,561,729 |
| Share bonus (Note 5) | 700,000 | - | - | 700,000 |
| Share option credit (Note 7) | - | (731,776) | - | (731,776) |
| At 31 December 2023 | 76,621,844 | 1,018,283 | 44,541,988 | 122,182,115 |
i(x) Net Zero Plc
Consolidated Statement of Changes in Shareholders' Equity Page 2 of 2
For the Year Ended 31 December 2022
| (Expressed in US dollars) | | ||||
| | Members' Capital | Share Capital and | Share Options | Retained Earnings | Total |
| | | Premium | Reserve | | |
|
At 1 January 2022 |
63,877,744 |
- |
- |
- |
63,877,744 |
| Capital contributions | 1,644,981 | - | - | - | 1,644,981 |
| Distribution of assets held | | | | | |
| for disposal to i(x) | | | | | |
| Sustainable Holdings LLC | (1,216,841) | - | - | - | (1,216,841) |
| Distribution of cash to i(x) | | | | | |
| Sustainable Holdings, LLC | (400,000) | - | - | - | (400,000) |
| Net loss for the period | | | | | |
| (1 January 2022 - | | | | | |
| 8 February 2022) | (109,461) | - | - | - | (109,461) |
| At 9 February 2022 | 63,796,423 | - | - | - | 63,796,423 |
|
Conversion from | | | | | |
| members' capital to | | | | | |
| shareholders' equity | (63,796,423) | 63,796,423 | - | - | - |
| Subscription for i(x) Net | | | | | |
| Zero shares, net of | | | | | |
| expenses | - | 12,125,421 | - | - | 12,125,421 |
| Net loss for the period | | | | | |
| (9 February 2022 - | | | | | |
| 31 December 2022) | - | - | - | (18,019,741) | (18,019,741) |
| Share option expense | - | - | 1,750,059 | - | 1,750,059 |
|
At 31 December 2022 |
- |
75,921,844 |
1,750,059 |
(18,019,741) |
59,652,162 |
The consolidated statement of changes in shareholders' equity is presented as changes in members' capital up to the date of the acquisition of i(x) investments, LLC, accounted for under merger principles.
| i(x) Net Zero Plc Consolidated Statements of Cash Flows For the Year Ended 31 December 2023 | | ||
| (Expressed in US dollars) | |||
| | Notes | 2023 | 2022 |
| CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) after taxes | |
62,561,729 |
(18,129,202) |
| Adjustments for: | | | |
| Interest expense | | 236,157 | - |
| Depreciation expense | | 1,839 | 13,472 |
| Bad debt expense | | 165,299 | - |
| Finance income | | (61,852) | - |
| Increase in foreign tax liability | | 457,577 | - |
| Foreign tax paid | | 207,000 | - |
| Interest income | | (235,471) | - |
| Foreign currency gain | | (5,819) | - |
| Other expense related to deemed distributions | | 1,002 | - |
| Amortisation of right-of-use asset | | 321,638 | 304,149 |
| Amortisation of loan facility fees Loss on cash advances for future investments | | 175,313 - | - 86,165 |
| Unrealised gain from investments | 4 | (81,105,546) | (1,499,970) |
| Realised gain on distribution of proceeds | | (3,767,329) | - |
| Bonus expense paid in shares | 5 | 700,000 | 1,000,000 |
| Incentive stock option grant expense/(credit) | 7 | (731,776) | 1,750,059 |
| Increase in deferred tax liability | | 16,020,874 | 11,271,318 |
| Changes in operating assets and liabilities Increase in trade and other receivables | | (149,844) | (26,464) |
| Decrease in prepaid expenses | | | |
| and other current assets | | 8,175 | 1,413,910 |
| Decrease in security deposit payable | | (24,601) | (24,601) |
| Decrease in member tax advance Increase/(Decrease) in accounts payable and accrued expenses | | - 390,016 | 11,500 (1,259,725) |
| Net Cash Used in Operating Activities | | (4,835,619) | (5,089,389) |
| CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from deemed distributions | |
1,957,090 |
- |
| Purchases of investments | | (1,850,000) | (1,600,000) |
| Net Cash Used in Investing Activities | | 107,090 | (1,600,000) |
| CASH FLOWS FROM FINANCING ACTIVITIES IPO Proceeds, net of expenses | |
- |
12,125,421 |
| Distribution to i(x) Sustainable Holdings, LLC | | - | (400,000) |
| Purchase of i(x) Net Zero shares | | - | (1,000,000) |
| Capital contributions | | - | 1,644,981 |
| Proceeds from loan facility borrowings | 8 | 3,751,875 | - |
| Interest paid - loans | | (226,151) | - |
| Payment of loan facility fees | | (281,875) | - |
| Decrease in lease liability | | (374,342) | (335,945) |
Net Cash Provided by Financing
activities 2,869,507 12,034,457
Net Increase (Decrease) in Cash and
Cash Equivalents (1,859,022) 5,345,068
| CASH AND CASH EQUIVALENTS | | |
| Beginning of year | 7,479,832 | 2,134,764 |
| End of year | 5,620,810 | 7,479,832 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash financing activity
| Share-based compensation | 7 | (731,776) | 1,750,059 |
| Distribution of assets held for disposal | | - | 1,216,841 |
| Bonus expense paid in shares | 7 | 700,000 | 1,000,000 |
| | | (31,776) | 3,966,900 |
i(x) Net Zero Plc
Notes to Consolidated Financial Statements 31 December 2023
1. Organisation and Nature of Business
i(x) Net Zero, PLC (the "Company") is a company incorporated and domiciled in Jersey, British Isles with Company Number 138730. The Company's shares are admitted to trading on the AIM market of the London Stock Exchange (ticker: IX). The Company is an investment company that provides its shareholders with an opportunity to create long-term capital growth with sustainable impact on the environment and communities it serves. The registered address of the Company is 3rd Floor, 44 Esplanade Street, Helier, Jersey JE4 9WG.
On 9 February 2022, the Company completed its initial public offering ("IPO") on the AIM market. The Company issued 14,056,811 ordinary shares at no par value in the IPO. The shares were issued at £0.76 per share, resulting in total share capital of £10,683,000 ($14,481,736) from the IPO. In addition, the members' capital in i(x) investments was converted to 65,000,000 shares in the Company as of the date of the IPO, bringing the total shares issued and outstanding as of 9 February 2022 to 79,056,811.
Prior to the IPO, the Company undertook a reorganisation in which i(x) Merger LLC, a wholly owned subsidiary of the Company merged with i(x) investments, with i(x) investments continuing as the surviving entity and as a wholly owned subsidiary of the Company. Prior to the reorganisation of the Company, i(x) Financial Services, LLC ("i(x) Financial Services"), (a wholly owned subsidiary of i(x) investments), i(x) Securities, LLC (a wholly owned subsidiary of i(x) Financial Services) and certain other assets held by i(x) investments were transferred to i(x) Sustainable Holdings, LLC ("i(x) Sustainable Holdings"), an entity owned by the members of i(x) investments, prior to the reorganisation.
The Company is governed in accordance with Companies (Jersey) Law 1991.
2. Summary of Significant Accounting Policies and Key Accounting Estimates Basis of Preparation
The Company's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRIC interpretations issued by the International Accounting Standards Board ("IASB") and with those parts of the Companies (Jersey) Law 1991 applicable to companies preparing their financial statements under IFRS. The consolidated financial statements have been prepared on the historical cost basis, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss. The Company reports cash flows from operating activities using the indirect method.
New Accounting Standards, Interpretations and Amendments
The following new amendments to accounting standards that are relevant to the Company were adopted by the Company for annual periods commencing on or after 1 January 2023:
Amendments to IAS 1: Presentation of Financial Statements: The amendments require that an entity discloses its material accounting policies, instead of significant accounting policies. Further amendments to the standard explain how an entity can identify material accounting policies.
Amendments to IAS 1: Classification of Liabilities as Current or Non-Current: The amendments affect only the presentation of liabilities as current or non-current in the statement of financial position and not the amount or timing of recognition of any asset, liability, income or expenses, or the information disclosed about those items.
Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates: The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The amendments clarify that a change in accounting estimate that results from new information or new developments is not the correction of an error.
Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction: The amendments provide a temporary exception to the requirements regarding deferred tax assets and liabilities related to pillar two income taxes.
Amendments to IFRS 17: Insurance Contracts: The amendments are aimed at helping companies implement the Standard and making it easier for them to explain their financial performance.
These new standards and amendments did not have an impact on the financial statements of the Company.
At the date of authorization of these financial statements, the following Standards and Interpretations, which have not yet been applied in these financial statements, were in issue but not yet effective:
IFRS S1 General Requirements to Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures
IAS7 and IFRS 7 Supplier Finance Arrangements: Amendments which address the disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on a company's liabilities, cash flows and exposure to liquidity risk
IFRS 16 Leases: Amendments which add to requirements explaining how a company accounts for a sale and leaseback after the date of the transaction.
IFRS 18 Presentation and Disclosure in Financial Statements
IFRS 19 Subsidiaries without Public Accountability: Disclosures
Amendments to IAS 1 Non-current Liabilities with Covenants: Clarify the criteria for classifying liabilities with covenants as current or non-current.
Enhancements to the SASB standards:
Amendments to IAS 21: The Effects of Changes in Foreign Exchange Rates: require disclosure of information that enables users of financial statements to understand the impact of a currency not being exchangeable.
Going Concern
The consolidated financial statements have been prepared on a going concern basis which assumes that the Company will continue to operate for the foreseeable future. As part of their going concern review the directors have prepared detailed cash flows for a period of 12 months from the date of the approval of these financial statements. In preparing these forecasts, the Directors have made certain assumptions based upon their view of the best estimate of the future developments of the business.
The cash flow includes certain important assumptions in its estimates over the next 12 months:
- A lower operating cost base
- Increased finance costs due to additional bank facilities utilized
The Directors continue to closely control expenditure and the directors and senior management continue to be fully supportive of the group and being mindful that cash liquidity is a constraint, they are validating their support by agreeing that should liquidity requirements require, that they will defer at least 50% of their salaries and all forms of remuneration commencing at any time as the Board determines from the date of this report and for up to twelve (12) months from the date of this report.
The assumptions also include the decision by management to cancel the admission of its company shares to trading on AIM (Delist) and the Directors are working on several scenarios to meet its obligations related to the Lion Point Capital (Lion Point) put option which expires by the end of January 2025 and address the risk of the put option being exercised prior to its expiration date. In addition, the Company, based on productive discussions, assumes the approval of an extension of its loan facility with European Depositary Bank S.A. ("EDB") will be finalized in the near term.
Post year end, Management has actively sought alternative financing arrangements including additional debt financing which has progressed to an advanced stage and the disposal of certain of its investments. The loan agreement with EDB has certain covenants attached pertaining to the net assets of the Company and based on the assumptions above the directors believe these covenants have been maintained.
For the above reasons, there exists a material uncertainty relating to going concern. However, the Directors continue to adopt the going concern basis of accounting in preparing the annual financial statements. The financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate or where certain events or conditions in the forecast do not materialise.
Foreign Currency
The consolidated financial statements are presented in the functional currency of US Dollars, since the majority of its revenue and operating expenditure is denominated in this currency. Foreign currency transactions are translated into the functional currency using the rates of exchange prevailing at the dates of the transactions. At each end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies, if any, are translated at the rates prevailing on the reporting end date. Gains and losses arising on translation, if any, are included in other income in the statement of comprehensive income for the period.
Assessment as an Investment Entity
Management of the Company has determined that it meets the definition of an investment entity within IFRS 10 and, therefore, is required to measure its subsidiaries held as investments at fair value through profit and loss rather than consolidate them. Management of the Company considered exit strategies and all the Company's activities to conclude whether the following criteria are satisfied:
• The entity obtains funds from one or more investors for the purpose of providing those investors with investment services;
• The entity commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both;
• The entity measures and evaluates the performance of substantially all of its investments on a fair value basis.
Management determined that the Company meets the definition of investment entity in accordance with IFRS 10, Consolidated Financial Statements, as all of the above criteria are met by the Company.
The Company was established to obtain funds from its investors and with a view to manage the investments made from those funds.
• The only sources of profit for the Company are capital appreciation and investment income. The Company aims to maximise value of its investments and to monetise this value through dividend inflow, interest revenue and disposal of investments at the right time and at the right price. The Company does not obtain any other benefit from its investments that are not available to other parties that are not related to the respective investee.
In addition to the above, while assessing whether the Company meets the definition of investment entity, management considered the following typical characteristics of the investment entity (as indicated in IFRS 10):
• investment entity has more than one investment;
• investment entity has more than one investor;
• investment entity has investors that are not related parties of the entity;
• investment entity has ownership interests in the form of equity or similar interests.
The Company has all of the above typical characteristics of an investment entity.
Management has concluded that the Company meets the definition of an investment entity. This conclusion will be reassessed on an annual basis, if any of these criteria or characteristics change.
Basis of Consolidation and Control of Subsidiary Entity
The consolidated financial statements of the Company comprise the financial statements of ix Net Zero PLC and its subsidiary, i(x) Investments LLC ('i(x) investments'), as at and for the year ended 31 December 2023. The Company consolidates the accounts of all subsidiaries which are deemed to be providing investment related services, as defined by IFRS 10, to the Company. All of the services provided by i(x) investments during 2022 and 2023 were attributable to performing investment related services for the Company. Accordingly, the statement of financial position of the Company was reported on a consolidated basis as of 31 December 2023.
Subsidiaries are entities controlled by the consolidated group of companies (the "Group"). Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following elements are present: power over an investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with policies adopted by the Group. Intergroup balances and any unrealised gains or losses or income expenses arising from the intergroup transactions are eliminated in preparing the consolidated financial statements.
The subsidiary consolidated in these consolidated financial statements, i(x) investments, was acquired via group reorganisation and as such merger accounting principles have been applied. i(x) investments' financial figures are included for their entire financial period rather than from the date the Company took control of them (100% interest acquired on 9 February 2022). The assets and liabilities of i(x) investments have been recognised and measured in these consolidated financial statements at their pre-combination carrying values. i(x) investments prepares their accounts to 31 December, under FRS101. There are no deviations from the accounting standards implemented by the Company.
The merger reserve was created on the acquisition of i(x) investments by the Company in 2022. Ordinary shares in the Company were issued to acquire the entire share capital of i(x) investments. Under section 612 of the Companies Act 2006, the premium on these shares has been included in a merger reserve.
Valuation of Assets and Liabilities
The Company's investments consist of investments in private operating companies. These investments are valued by the Company's management at the end of each financial reporting period at fair value. As of 31 December 2023 and 2022, the fair values of these investments were determined by the Company's management, as described under Fair Value Estimation.
The fair value of all other assets and liabilities held by the Company are determined at their fair value as reasonably determined in good faith by the Company's management.
Although the Company's management uses its best judgement in determining the fair value of its investments, there are inherent limitations in any such process. The fair value presented is not necessarily indicative of an amount the Company could realise in a current transaction and the differences could be material.
Financial Assets and Liabilities
Financial assets include cash and cash equivalents, investments, cash advances for future investments, accounts receivable, deemed distributions (an amount designated by a corporation as a distribution of dividends but that shall not be distributed during the year in which the designation is made) and other assets.
Financial liabilities include accounts payable and accrued expenses, and professional fees payable.
Financial Assets
On initial recognition, financial assets are classified as either financial assets at fair value through income statement, held-to-maturity, loans and receivables financial assets, or available-for-sale financial assets, as appropriate. The Group classifies all its financial assets other than investments as trade and receivables. The classification depends on the purpose for which the financial assets were acquired.
Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables financial assets. Loans and receivables financial assets are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
The Group's loans and receivables financial assets comprise other receivables (excluding prepayments) and cash and cash equivalents included in the Statement of Financial Position.
Financial Liabilities
Financial liabilities are recognised when, and only when, the Group becomes a party to the contracts which give rise to them and are classified as financial liabilities at fair value are classified as financial liabilities at fair value through the profit and loss or loans and payables as appropriate. The Group's loans and payables comprise borrowings (see note 8 for further information) and trade and other payables (excluding other taxes and social security costs and deferred income). When financial liabilities are recognised initially, they are measured at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method other than those categorised as fair value through income statement.
Fair value at the income statement category comprises financial liabilities that are either held for trading or are designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges. There were no financial liabilities classified under this category. The Group determines the classification of its financial liabilities at initial recognition and re-evaluates the designation at each financial year end. A financial liability is de-recognised when the obligation under the liability is discharged, cancelled or expires.
When an existing financial liability is replaced by another from the same party on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.
The balances in the accompanying consolidated statements of financial position for accounts payable and accrued expenses, professional fees payable and the current portion of the lease liability are due and payable within one year from 31 December 2023 and 2022.
Financial Assets and Liabilities at Fair Value through Profit or Loss
The Company classifies all of its investment portfolio as financial assets at fair value through profit or loss. The portfolio of financial assets is managed and performance is evaluated on a fair value basis. The Company is primarily focused on fair value information, and it uses that information to assess the assets' performance and to make decisions. The Company has not taken the option to irrevocably designate any equity securities as fair value through other comprehensive income. The contractual cash flows of the Company's debt securities are solely principal and interest, but these securities are neither held for the purpose of collecting contractual cash flows nor held both for collecting contractual cash flows and for sale. The collection of contractual cash flows is only incidental to achieving the objective of the Company's business model. Consequently, all investments are measured at fair value through profit or loss. The Company recognises net changes in fair value on financial assets at fair value through profit or loss on the statement of comprehensive income.
Financial assets and financial liabilities are measured initially at cost which is the fair value of the consideration given or received.
All recognised financial assets that are within the scope of IFRS 9 are required to be subsequently measured at amortised cost or fair value based on the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Subsequent to initial recognition, all financial assets and financial liabilities are measured at fair value and accounted for through profit or loss. Gains and losses arising from changes in the fair value of the financial assets or financial liabilities at fair value through profit or loss are presented in the consolidated statement of comprehensive income in revenue, in the period in which they arise.
Recognition
The Company recognises financial assets and financial liabilities on the date it becomes a party to the contractual provisions of the instrument.
Purchases and sales of financial assets are recognised on the trade date. From this date any gains and losses arising from changes in fair value of the financial assets or financial liabilities are recorded in the statement of comprehensive income.
Income and expense are recognised on an accrual basis. Transactions for private obligations are recorded on the date when the terms of the transaction are fully negotiated and known. Realised gains and losses from investment transactions are determined using the specific identification method.
Dividend income and expense are recorded on the ex-dividend date or the date of receipt where this is deemed more prudent. Interest expense is recognised as incurred. Interest and dividends have not been accrued for securities or other obligations when the Company's management believes there is substantial doubt of collection.
Income is measured at the fair value of the consideration received or receivable in the normal course of business. The Company recognises income when the amount of income can be reliably measured and when it is probable that the future economic benefits will flow into the Company.
Income which is expected to be received over time is recognized as the performance obligations of a contractual agreement are satisfied by the parties to such agreement.
Investment return
Investment return represents the sum of realised gains and losses on the disposal of investment portfolio assets and the unrealised gains and losses on the revaluation of these, together with and any related investment income received and receivable.
Realised gains and losses on the disposal of investments is the difference between the fair value of the consideration received less any directly attributable costs on the sale and the fair value of the investments at the start of the accounting period or acquisition date if later.
Unrealised gains and losses on the revaluation of investments is the movement in carrying value of investments between the start of the accounting period or acquisition date if later and the end of the accounting period. Dividends from investments are recognised when the shareholders' rights to receive payment have been established.
Interest income
Interest income is recognized as interest accrues using the effective interest rate method.
Other income
All other income is recognised as other income in the period to which it relates.
Taxation
Taxation for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity. The Company may be subject to withholding taxes in relation to income from investments, or investment realisation proceeds or gains, and such amounts will be accounted for as incurred. Current income tax is calculated on the basis of the tax rates and laws enacted or substantively enacted at the statement of financial position date in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns in regard to situations in which applicable tax regulations are subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The current income tax rate in Jersey is 0%.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements in accordance with IAS 12 - 'Income Taxes'. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable nor the accounting profit or loss. Deferred tax assets and liabilities are calculated using tax rates and laws that have been
substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
The Company recognizes a deferred tax asset for the tax benefit of a net operating loss that, in the judgement of the Company's management, is more likely than not of being realised in a future year. The tax benefit of a net operating loss will be realised if it can be offset against taxable income in a future year. Currently, federal net operating losses carryforward indefinitely and the carryforward periods in the states where the Company files income tax returns is 20 years. A valuation allowance is established for any portion of a deferred tax asset that is not likely to be realised in a future year. The valuation allowance is evaluated and adjusted annually by management for changes in the estimated amount of deferred tax assets that are not likely to be realised in future years, based on evidence currently available.
A balance sheet approach is used to determine the deferred income tax provision or benefit to be recognised in the Company's statements of operations. The current year provision or benefit is determined based on the difference between the prior and current year balances in the deferred tax asset and deferred tax liability accounts. The change in valuation allowance for the deferred tax asset is determined using the same approach.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with maturities of three months or less. Further details on the Company's cash and cash equivalent balances is available in Note 17.
Lease Accounting
The Company accounts for leases by recognising a right-of-use asset and a lease liability. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless this rate is not readily determinable, in which case the Company's incremental borrowing rate on commencement of the lease is used. Right-of- use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for lease payments made at or before commencement of the lease, initial direct costs incurred and the amount of any provision where the Company is contractually required to dismantle, remove or restore the leased asset. Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease. The Company applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss in accordance with IAS 36.
The Company has a lease agreement with lease and non-lease components. Such non- lease components are accounted for separately.
The Company has elected not to recognise right-of-use assets and liabilities for short-term leases that have a lease term of 12 months or less, or leases of low value assets. These lease payments are expensed on a straight-line basis over the lease term.
Share Capital
The Company records the proceeds from the issuance of ordinary shares as share capital, at no par value. Incremental costs directly attributable to the issuance of new ordinary shares or options are deducted, net of any tax, from the proceeds.
Share-Based Payments
Stock options granted to employees, which are settled in equity, are valued at fair value at the date of grant. The fair value of such options is charged to expense over the vesting period and the expense is reported in general and administrative expenses on the consolidated statement of comprehensive income. The shareholders' equity reserve account is credited by the amount of share-based payment charged to expense.
Payroll and Benefits Expense
Short-term Benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Company.
Defined Contribution Plans
The Company operates a defined contribution pension scheme for eligible employees. The assets of the scheme are held separately from those of the Company. The annual contributions payable are charged to the consolidated statement of comprehensive income and they become payable in accordance with the rules of the scheme.
401K Plan
The Company has a 401K Plan (the "Plan") for all eligible employees. The Plan permits each participant to contribute up to the federal contribution limits and allows the Company to make discretionary contributions. The discretionary contributions are recorded as an expense and are included in general and administrative expenses in the consolidated statement of comprehensive income.
Fair Value Estimation
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.
When available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
The Company measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
• Level 1: Assets and liabilities with inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
• Level 2: Assets and liabilities with inputs other than quoted prices included within Level 1, that are observable either directly or indirectly, including quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are considered less active or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
• Level 3: Assets and liabilities with inputs that are unobservable. Level 3 includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. The valuation technique used is dependent on the level of data, the circumstances and the availability of observable inputs and may include discounted cash flow analysis, market comparables and option pricing models.
• Level 3 instruments include investments in private operating companies, which comprise 100% of the Company's investment portfolio. The Company's management determines the fair value of these investments using valuation techniques applicable to Level 3 investments. Typically, the Company's best estimate of fair value at inception is the transaction price, excluding transaction costs. When evidence supports a change to the carrying value from the transaction price, adjustments are made to reflect expected exit values in the investment's principal market under current market conditions.
In estimating the value of Level 3 investments, the inputs generally used by the Company's management include the original transaction price, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. The Company also considers specific events which may impact the fair value of investee companies, including the following:
• Corporate, political or operating events that may have a material impact on the investee company's prospects and therefore, its fair value.
• The investee company is placed into receivership or bankruptcy.
• The investee company is unlikely to continue as a going concern.
• Management changes at the investee company that may have a positive or negative impact on the investee company's ability to achieve its objectives and build value for shareholders.
Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Company's management in the absence of market information. The fair value measurement of Level 3 investments does not include transaction costs that may have been capitalised as part of the security's cost basis. Assumptions used by the Company's management due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Company's results of
operations.
Segmental Reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments for the Company are reported based on the financial information provided to the Board, which is used to make strategic decisions. The Directors are of the opinion that under IFRS 8 - "Operating Segments", the Company had only one reportable segment, being i(x) investments, during the year ended 31 December 2023 and the period from 9 February 2022 to 31 December 2022. Prior to the reorganisation of the Company, i(x) investments had two operating segments, which were i(x) investments and i(x) Securities, LLC, a broker/dealer. The Board assesses the performance of operating segments based on financial information which is measured and presented in a manner consistent with that in the financial statements. Information on the reorganization is available in note 1.
3. Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies and making any estimates. Changes in assumptions might have a significant impact on the financial statements in the period in which the assumptions changed. Management believes that the underlying assumptions are appropriate and that the Company's financial statements are fairly presented.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates have the most significance to the carrying value of assets and liabilities in the financial statements are the unquoted investments at fair value on the basis of accounting policies disclosed in Note 2 under Fair Value Estimation and note 4.
Wastefuel is the Group's largest fair value investment and is held at a value of $131.5m in the financial statements. If this valuation was to increase or decrease by 10% it would lead to a $13.15m change in the fair value of the investment in the statement of financial position and an equivalent movement in the income statement. Management has sought to mitigate the risks associated with this uncertainty by engaging an expert third party to produce independent valuation reports.
The deferred tax liability also has a significant impact on the financial statements. Given the high degree of complexity regarding the calculation of these figures expert US tax advisors were engaged to make the calculations but it cannot be guaranteed that any final tax charge, if any, will be the same as that calculated.
Management has also made assumptions and estimates that are significant in relation to share-based compensation. The share-based compensation figures were calculated by an expert third party using the Black-Scholes model where the fair value of the services was not able to be directly calculated.
For further information on the going concern basis used for these financial statements please refer to note 2.
4. Investments in Private Operating Companies
Following are the schedules of investments as of 31 December 2023 and 31 December 2022:
31 December 2023
| Principal Amounts/Shares/ | | |
| Units | Description | Fair Value ($) |
| Private Operating | | |
| Companies | ||
| United States Common Shares | ||
Biofuel Developer
10,380,581 Wastefuel Global, Inc. 131,190,437
Total Common Shares (cost $231,900) 131,190,437
Preferred Shares
24,005
-
Biofuel Developer Wastefuel Global, Inc.
Alternative Fuels Citron Energy, Inc
310,379
600,000
Total Preferred Shares (cost $850,000) 910,379
Limited Liability Company Interests
Real estate development
1,228,063 MultiGreen Properties, LLC -
Total Limited Liability Company Interests
(cost $3,837,697) -
Limited Partnership Interest
| Building technology Sustainable Living Innovations (FKA Multigreen SLI Partners, | |
| LP) | 737,000 |
| Total Limited Partnership Interests (cost $500,000) | 737,000 |
Convertible Note
Building technology
150,000 Sustainable Living Innovations(FKA Multigreen SLI Partners, 150,000
| | LP) | |
| Real estate development | ||
| 250,000 | MultiGreen Properties, LLC | - |
| | Total Convertible Note (cost $400,000) | 150,000 |
| | Total United States (cost $5,819,597) | 132,987,816 |
| Canada Common Shares | | |
| | Carbon Capture Technology | |
| 21,876 | Carbon Engineering, Ltd. (1) | - |
| | Total Common Shares - Canada (cost $1,005,809) | - |
Cayman Islands
Limited Liability Company Interest
Renewable Energy
| 38,150 | Enphys Management Company | 10,757,229 |
| | Total Limited Liability Company Interests - Cayman Islands (cost $5,570,000) | 10,757,229 |
| Netherlands | | |
| Preferred Class B1 Shares | | |
| | Software/Information Technology | |
| 499,955 | Context Labs, BV | 472,000 |
| | Total Preferred Class B1 Shares - Netherlands (cost | |
| | $499,955) | 472,000 |
| | Total Investments (cost $11,889,552) | 144,217,045 |
31 December 2022
Principal Amount/Shares/
Units Description Fair Value ($)
Private Operating Companies United States
Limited Liability Company Interests
Biofuel Developer
10,380,581 Wastefuel Global, LLC 46,908,475
| 1,228,063 | Real estate development MultiGreen Properties, LLC | 2,260,000 |
| | Total Limited Liability Company Interests (cost $4,069,597) |
49,168,475 |
Limited Partnership Interest
| Building technology Sustainable Living Innovations (FKA Multigreen SLI Partners, | |
| LP) | 742,000 |
| Total Limited Partnership Interests (cost $500,000) | 742,000 |
|
Convertible Note
Canada Common Shares
21,876
Cayman Islands
Limited Liability Company Interest
Renewable Energy
Enphys Management Company 10,340,024
Total Limited Liability Company Interests - 10,340,024
Cayman Islands (cost $4,470,000)
Netherlands
Preferred Class B1 Shares
Software/Information Technology
499,955 Context Labs, BV 511,000
Total Preferred Class B1 Shares - Netherlands (cost
$499,955) 511,000
Total Investments (cost $11,045,361) 63,840,722
(1) Shares of Carbon Engineering, Ltd. were held indirectly through investments in RCM Carbon Engineering Partners, LLC (12,490 common shares) and C12 Equity Ltd. (9,273 common shares) until disposal in November 2023.
The following tables present the changes in assets classified in Level 3 of the fair value hierarchy for the years ended 31 December 2023 and 31 December 2022:
| 31 December 2023 | | | | Limited Liability | | Simple Agreement | |
| | Common | Preferred | Convertible | Company | Limited | For Future | |
| | Stock | Stock | Note | Interests | Partnerships | Equity (SAFE) | Totals |
| | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
| Balance at 31 December | | | | | | | |
| 2022 | 2,579,223 | 511,000 | 250,000 | 59,508,499 | 742,000 | 250,000 | 63,840,722 |
| Realised gain | 3,767,329 | - | - | - | - | - | 3,767,329 |
| Purchases of investments | 600,000 | - | 150,000 | 1,100,000 | - | - | 1,850,000 |
| Unrealised gain/(loss) | 84,281,962 | 21,379 | (250,000) | (2,942,795) | (5,000) | - | 81,105,546 |
| Deemed distributions | (6,346,552) | - | - | - | - | - | (6,346,552) |
| Conversion to shares | 46,908,475 | 250,000 | - | (46,908,475) | - | (250,000) | - |
| Balance at 31 December 2023 | 131,790,437 | 782,379 | 150,000 | 10,757,229 | 737,000 | - | 144,217,045 |
| 31 December 2022 | | | |
Limited | |
Simple | |
| | | | | Liability | | Agreement | |
| | Common | Preferred | Convertible | Company | Limited | For Future | |
| | Stock | Stock | Note | Interests | Partnerships | Equity (SAFE) | Totals |
| | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
| Balance at 31 December 2021 | 2,383,698 | 499,955 | - | 57,357,099 | 500,000 | - | 60,740,752 |
| Purchases of investments | - | - | 250,000 | 1,100,000 | - | 250,000 | 1,600,000 |
| Unrealised gain | 195,525 | 11,045 | - | 1,051,400 | 242,000 | - | 1,499,970 |
| Balance at 31 December 2022 | 2,579,223 | 511,000 | 250,000 | 59,508,499 | 742,000 | 250,000 | 63,840,722 |
The following tables summarize the methods and significant assumptions used to measure investments categorized in Level 3 of the fair value hierarchy and whose values were determined by management as of 31 December 2023 and 31 December 2022:
Preferred Stock
| Software/Information Technology | 511 | Market approach | Recent transaction cost - capital raise (50% weight) | 46.56/share |
| | | Option Pricing | Risk free rate - | |
| | | Method | 4%, volatility - | |
| | | (backsolve) | 202.1% ;time to | |
| | | | liquidity event - 5 years (50% | |
| | | | weight) | |
| Total Preferred Stock | 511 | | | |
| Limited Partnership Interest | | | | |
| Building technology | 742 | Transaction cost | Transaction cost | 225/unit |
| Simple Agreement For | | | | |
| Future Equity (SAFE) Biofuel Developer | 250 | Transaction cost | Transaction cost | N/A |
| Convertible Note | | | | |
| Real Estate Development | 250 | Transaction cost | Transaction cost | N/A |
| Total | 63,841 | | | |
Note:
The per unit price of Wastefuel Global in the most recent capital raise was given a 90% weight in the 31 December 2023 and 2022 valuations. A 10% weight was ascribed to the backsolve method, which is a method that derives the equity value for a company from a transaction involving the company's own securities. The rights and preferences of each class of equity, market interest rates, industry sector volatility data, and an estimated time period to a liquidity event are all considered and included in an option pricing model under the backsolve method. The weighting of these two valuation methods and the unobservable inputs used in the valuation were based on management judgement. The unobservable inputs are presented in the Level 3 valuation table as of 31 December 2023 and 2022.
WasteFuel Global, Inc. ("Wastefuel")
Effective 30 June 2023, WasteFuel finalized an agreement with BP p.l.c. ("BP"), the multi- national energy company, to secure a $10 million investment in Wastefuel. The $10 million investment, which was the lead investment in Wastefuel's Series B investment round, resulted in a material increase in the fair value attributable to the Company's holding in WasteFuel. Following BP's investment, the fair value of the Company's equity and preferred interest in WasteFuel is $131.5 million, an increase of 180% from the last reported audited fair value ($46.91 million as at 31 December 2022). This increase in the fair value of Wastefuel was included in the Company's H1 2023 results. In addition, effective 30 June 2023, Wastefuel was reorganized from a limited liability company to a corporation.
On a semi-annual basis, the Company's management reviews the fair value calculation for each Level 3 security and assesses, among other things, the reasonableness of the pricing models, the inputs to the pricing models and the significant assumptions developed internally or by independent valuation experts.
Mr Lindström is a director of Wastefuel and has a holding of 25,000 ordinary shares (0.08%). Carbon Engineering Ltd.
In August 2023, the Company announced that a conditional agreement was reached for the sale of Carbon Engineering Ltd. ("Carbon Engineering"), to Occidental Petroleum Corporation ("Occidental"), the international energy company.
The acquisition saw Occidental acquire the outstanding shares in Carbon Engineering for a total cash consideration of $1.1 billion, payable in three approximately equal annual payments with the first made at closing in November 2023. Following the sale, Carbon Engineering became a wholly owned subsidiary of Occidental.
i(x) Net Zero held an indirect circa 0.45% interest in Carbon Engineering through two special purpose vehicles ("SPVs"). The Company's indirect interest equated to approximately $7.2 million, and subject to the distribution of the proceeds over the three years following completion by those SPVs, this will generate a 7.2x return on the Company's initial investment of $1 million before taxes and any costs of the SPVs. On this basis the sale price represents a 2.8x multiple on the previous holding value of the Company's investment in Carbon Engineering, of $2.6 million.
The Company realised a net gain on its investments in the two SPVs of $3.8 million. On 17 November 2023, the Company received the first annual distribution payments from the SPVs in connection with the Carbon Engineering acquisition. The total amount received was $1,957,090, representing 30% of the total gross proceeds expected to be distributed by the SPV's, net of Canadian taxes withheld and administrative expenses. In addition, the Company recorded receivables as of 31 December 2023 totalling $4,027,024 representing the estimated deemed distributions expected to be received in 2024 and 2025, of which
$1,962,123 is expected to be received in November 2024 and $2,064,901 is expected to be received in November 2025.
Citron Energy Inc.
In September 2023, the Company announced that it has added an additional company to its portfolio via a $600,000 investment into Citron Energy Inc. ("Citron Energy"), a U.S. based alternative fuels business.
Citron Energy aims to replace the use of fossil fuels by processing non-recyclable municipal and commercial waste into a combustible fuel. The use of CitronFuel will allow the replacement of coal as well as helping to reduce landfill usage and significantly lower CO2 emissions. The Company's $600,000 investment is in the form of a subscription for new shares in Citron Energy and i(x) Net Zero has an equity interest of approximately 32.2% in Citron Energy.
Enphys
In August 2023, the Company announced that it had committed to invest an additional $2.5 million into Enphys Management Company ("EMC") and that its wholly owned subsidiary i(x) Investments LLC has entered into a revised EMC LLC Agreement with LAIG Investments.
The investment, the cost of which will be spread over the next four years and immediately took the Company's ownership in Enphys to 30.0%. 10% of the issued capital in EMC is subject to pro-rata clawback if payments by the Company are either stopped or not made when due in accordance with the revised terms and a further portion subject to additional clawback if a minimum of $1 million is not funded in full, provided that the Company will retain at least a 20% interest in EMC.
The obligation with regards to the second tranche funding of $1.5 million is conditional upon Enphys Acquisition Corp. consummating its initial acquisition of an operating company and concluding its de-SPAC process. If the obligation is triggered similar provisions for clawback as for the first tranche of $1 million will apply.
In addition, if before 5 August 2025 EMC's fair market value falls below $25 million and EMC issues additional equity securities, the Company will benefit from anti dilution provisions to ensure that the value of its equity interest does not fall below the amount contributed.
The new funding, being made from the Company's existing cash resources, will provide additional support to EMC for budgeted working capital, certain other approved costs and investments into new assets as it initially progresses towards a merger opportunity for its SPAC, Enphys Acquisition Corp, with the intention of forming a major renewables energy group that can be a regional champion for sustainability in the Americas and later expanding its assets under management with new assets and new investment structures.
Following this announcement Enphys Acquisition Corp. (NYSE: NFYS, "EAS", EMC is the sponsor of EAS and has a direct ownership in EAS) has filed a preliminary proxy statement in connection with an extraordinary general meeting of shareholders of EAS for the purpose of, among other things, extending the time by which it has to consummate an initial business combination from 8 June 2024 to 8 December 2024 (the "Extension"), as well as other documents filed by EAS with the U.S. Securities and Exchange Commission. The Extension was approved by EAS shareholders in June 2024.
EAS has also signed a non-binding letter of intent for a business combination with a leading and well-established advanced biofuels company in Latin America.
Mr Lindström is a director of EMC.
5. Share Capital
The Company has 85,877,429 ordinary shares, at no par value, authorised, issued and outstanding as of 31 December 2023.
14,056,811 ordinary shares were issued upon completion of the Company's IPO on 9 February 2022. In addition, the members' capital in i(x) investments was converted to 65,000,000 Ordinary shares in the Company on the same date, bringing the total shares issued and outstanding as of 9 February 2022 to 79,056,811.
6,820,618 Ordinary shares were issued and admitted to trading on AIM on 26 April 2023 in relation to the CEO Bonus Shares, as described below under CEO Bonuses.
Total Voting Rights
Following the issuance of 2022 Bonus Shares and CEO Bonus Shares in April 2023, the Company has 85,877,429 Ordinary Shares in issue, each carrying the right to one vote. No Ordinary Shares are held by the Company in treasury. The total number of voting rights in the Company is therefore 85,877,429.
CEO Bonuses
The CEO Bonus in respect of the year ended 31 December 2023 was accrued in 2023 in the amount of $410,000. In February 2024, the Company announced that Mr. Lindström, the Company's CEO, agreed to apply his annual bonus to subscribe for new ordinary shares in the Company at the previous day's closing price of 21p per share. As a result, Mr. Lindström received 1,550,293 new ordinary shares in the Company. These shares were admitted to trading on AIM London Stock Exchange on 20 February 2024.
In December 2022, the Company agreed to pay to Mr. Lindström an incentive bonus of
$200,000 (£160,772) in respect of the year ended 31 December 2022 and, as part of his promotion to CEO in January 2023, the Company agreed to pay Mr. Lindström a promotion bonus based on increased responsibilities as CEO of $500,000 (£401,929). In total, these bonuses represent approximately 170% of Mr. Lindström's 2023 annual base salary. In order to preserve the Company's cash resources and to demonstrate his commitment to the Company, Mr. Lindström agreed to apply both of these bonuses to subscriptions of new ordinary shares at the previous day's closing price of 8.25p per share. This resulted in the issuance of 6,820,618 new ordinary shares to Mr. Lindström ("Bonus Shares"). The Bonus Shares represent 8.7% of the issued share capital prior to the issuance of these shares. Both of these bonuses were recorded in 2023 and are included in general and administrative expenses for the year from 1 January to 31 December 2023. The shares subscribed for by Mr. Lindström pursuant to each of these bonus schemes were subject to a risk of forfeiture if the Company's Net Asset Value ("NAV") did not meet the hurdle of $120 million within the 24-month period following their issue ("NAV Hurdle"). The forfeiture risk expired when the Company's Net Asset Value ("NAV") exceeded $120 million during the period from 1 January to 30 June 2023. The Bonus Shares were admitted to trading on AIM London Stock Exchange on 26 April 2023.
6. Earnings per Share
Basic earnings per share is calculated by dividing the earnings attributable to shareholders by the weighted average number of ordinary shares outstanding during the period. Fully diluted earnings per share is calculated based on the weighted average number of shares assuming all stock options are exercised. Due to losses in the year from 1 January 2022 to 31 December 2022, the effect of stock options on earnings per share is anti-dilutive and therefore stock options are not included in the calculation of diluted earnings per share.
Earnings/(loss) attributable to the ordinary Shareholders
31 December 2023 31 December 2023 31 December 2022
Basic and
Basic Diluted Diluted
of the Company 62,561,729 62,561,729 (18,019,741)
Weighted average number
of shares 83,728,467 88,129,654 79,056,811
Earnings/(loss) per share 0.75 0.71 (0.23)
7. Share Based Payments
Pursuant to the Company's Equity Incentive Plan for 2022 (the "Incentive Plan"), share options ("Options") were granted to management employees during 2022. Each management employee was granted the option to purchase shares of the Company's stock in accordance with each employee's Stock Option Grant.
In February 2023, 2,703,967 Options were forfeited, resulting in a reversal of expense previously recorded by the Company for these Options of $1,145,141. Also, effective 22 April 2023, 2,166,157 Options were surrendered and replaced with new options (the "New Options") and 4,158,388 additional New Options were granted to management employees. The total number of New Options granted during the year from 1 January to 31 December 2023 was 6,324,545. The New Options have an exercise price of 20p, being a 142.4 per cent premium to the previous day's closing share price on AIM of 8.25p. The New Options vest over a period of three years, with a third vesting on each of the three successive anniversaries of the date of grant. The New Options granted on 22 April 2023 are expected to be fully vested as of 22 April 2026.
The aggregate fair value of the options granted on 22 April 2023 was $293,360, which was determined using the Black Scholes options pricing model. The expected volatility used to determine the fair values of the options was 60% and the annual risk-free rate used in the determination of the fair values of the options was 3.57%.
Details of the stock options outstanding during the years from 1 January to 31 December 2023 and 2022 are as follows:
| | Period from 1 January | Period from 1 January |
| 2023 to | 2023 to | |
| 31 | 31 | |
| December | December | |
| 2023 | 2023 | |
| | Expense/ | |
| | Credit | |
| | Recognised | |
| Number of | During the | |
| Options | Period | |
| Beginning of | | |
| Period | 4,870,124 | - |
| Forfeited | (2,703,967) | (1,145,141) |
| Surrendered | (2,166,157) | (604,918) |
| Options granted during | | |
| the period | 6,324,545 | 1,018,283 |
| End of period | 6,324,545 | (731,776) |
| | Period from 1 January | Period from 1 January |
| 2022 to | 2022 to | |
| 31 December | 31 December | |
| 2022 | 2022 | |
| | Expense/ | |
| | Credit Recognised | |
| Number of | During the | |
| Options | Period | |
| Beginning of | | |
| Period Options | - | - |
| granted during | | |
| the period | 5,779,227 | 2,091,220 |
| Forfeited | (909,153) | (341,161) |
| Surrendered | - | - |
| End of period | 4,870,124 | 1,750,059 |
The weighted average exercise price of the options surrendered and forfeited during 2023 was 76p per share.
The weighted average exercise price of the options granted during 2023 was 20p per share.
The weighted average exercise price of the options granted and forfeited during 2022 was 76p per share.
The (credit)/expense recognised for the years ended 31 December 2023 and 2022, was
$(731,776) and $1,750,059, respectively. These amounts are included in expenses and other income on the accompanying consolidated statement of comprehensive income.
The unvested amount of the Company's stock options as of 31 December 2023 was
$918,325.
On 14 February 2024 the Company announced that Mr Stearns had been awarded share options over 1,058,737 shares at an exercise price of 21p per share. This grant was equivalent to 80% of his 2023 salary of $350,000. An expense of $280,000 was therefore accrued in the 2023 accounts in relation to this.
8. Borrowings
In April 2023, the Company's wholly owned subsidiary, i(X) investments, LLC entered into a secured $7.5 million 2-year term loan facility with European Depositary Bank S.A. ("EDB") ("Loan"). Amounts drawn down on the loan facility originally bore interest at 10.5% (subject to periodic change in line with EDB's USD Base rate) which is payable quarterly. The interest rate at the end of 2023 had increased to 10.82%. The Loan can be utilised for the purposes of the financing of investments and general working capital purposes. The Loan is guaranteed by the Company.
i(x) investments, LLC agreed to pay an arrangement fee equal to 2% of the amount of the facility and a commitment fee of 1.75% per annum on any undrawn funds, payable quarterly in arrears.
Drawdown of the Loan is conditional upon there being no event of default and other customary provisions including delivery of documents. The Loan is repayable together with default interest in the event of default which, inter alia, includes a change of control and a reduction of aggregate NAV of the Company below $125 million and that of WasteFuel below $100 million.
The Loan is secured by a pledge granted by the Company and its nominee of the shares held by it including those in i(x) investments, LLC and all other proceeds and property and assets owned by it. In addition, as part of the Facility Agreement, i(x) investments, LLC has pledged $4.0 million as security in a deposit account with EDB. The Company will be able to invest this security deposit in certain money market funds and other financial instruments and generate a return on deposited funds (currently expected to be approximately 4-5% per annum) thereby mitigating the interest payable. In addition, i(x) investments, LLC has undertaken to maintain a minimum cash balance in an operating account at EDB with an amount varying depending on the remaining time to facility maturity but being zero if drawdowns are below $4 million.
In connection with the facility, i(x) investments, LLC has also agreed to give customary undertakings, warranties and indemnities to the Lender, the Agent and Security Agent including as to tax and undertakings not to undertake certain corporate transactions without consent.
On 3 November 2023, the Company announced that i(x) investments, LLC had entered into a restated and amended secured two-year term loan facility increasing the loan facility by $4.25 million ("Increased Facility Amount") from $7.5 million to $11.75 million.
The Increased Facility Amount included a revision to the events of default such that aggregate NAV of the Company must be above $125 million and $100 million in respect of WasteFuel.
The amount of the loan drawn down as of 31 December 2023 was $3,751,875. This amount is recorded on the consolidated statement of financial condition as Loan Payable. Interest paid on the amount drawn down was $226,151 during the year from 1 January to 31 December 2023.
9. Commitments and Contingencies
In January 2022, Lion Point Capital, LP, on behalf of funds managed by it, ("Lion Point") and the Company entered into a strategic relationship to identify and pursue certain transactions together, with an initial focus on opportunities in Energy Transition. At the time of the Company's IPO, Lion Point Master, LP ("Lion Point Master") entered into a subscription agreement and subscribed for $6.8 million (approximately £5.0 million) in ordinary shares of the Company at the placing price as part of the fundraising. Lion Point Master was granted a put option and pursuant to the put option, the Company was obliged to repurchase 6,672,161 Ordinary Shares of Lion Point Master's Ordinary Shares at the Placing Price (£0.76 per share ($1.02 per share)) amounting to $6.8 million at any time during the three-year term following the Company's admission to trading on AIM. As of December 31, 2023, the put option has not been exercised by Lion Point.
Lion Point has also granted to the Company a call option to purchase $6.8 million of common shares of Suniva, Inc. Further details are set out in paragraph 5.6 of Part 1 and paragraphs 18.1(j), (k) and (l) of Part 7 of the Company's Admission document dated 4 February 2022, which is available on the Company's website https://ixnetzero.com/.
10. Finance Activities
2023 2022
Finance income 61,852 -
Interest income 107,138 27,495 Total Finance Income 168,990 27,495
Loan interest 226,151 -
Lease interest 10,006 27,495 Total Finance Costs 236,157 27,495
11. Directors' Emoluments
2023 2022
Salaries 754,914 981,479
Bonus 1,450,000 1,489,000
Other payables 71,016 -
Severance 539,583 -
Share-based compensation (343,149) 1,361,432
Director fees 287,719 423,968
Benefits 99,966 79,416
Payroll taxes 165,176 111,512
401K Contribution 19,041 25,687
Total Directors' Emoluments 3,044,266 4,472,494
The highest amount of compensation paid to a director in 2023 was $898,762 (excluding bonuses relating to 2022 amounting to $700,000, but recorded in 2023). All bonuses recorded in 2023, with the exception of the signing bonus of $60,000 for Mr Stearns, were non-cash settled.
There was a total of 7 paid directors during the year (2022: 7).
12. Staff Employment Costs
2023 2022
Salaries 510,822 572,894
Bonus - 284,776
Share-based compensation (388,627) 388,627
Benefits 118,813 141,254
Payroll taxes 65,665 52,458
401K Contribution 25,896 24,514
Total Staff Employment Costs 332,569 1,464,523
13. Number of Employees
The average monthly number of employees (including Directors) during the year was:
Year Ended Year Ended
31 December
2023
31 December
2022
Number of employees 8 11
14. Employee Benefits
Defined Contribution Plans
The expense for the defined contribution plan for the years ended 31 December 2023 and 31 December 2022, respectively was $33,897 and $6,150 and was included in expenses and other income. These amounts were accrued as of 31 December 2023 and 2022, respectively.
401K Plan
During 2023 and 2022, the Company made discretionary contributions of $11,040 and
$50,201, respectively, to the Plan, all of which was paid during the year. The discretionary contributions are recorded as an expense and are included in expenses and other income in the consolidated statement of comprehensive income.
15. Audit Expenses
2023 2022
Audit Fees 94,870 60,000
| 16. | Trade and Other Receivables | | |
| | | 2023 | 2022 |
| | Accounts receivable Interest receivable | - 51,383 | 66,838 - |
| | Total Trade and Other Receivables | 51,383 | 66,838 |
The following is an aging of the receivables from deemed distributions as of 31 December 2023 and 2022 (see also note 4):
| Deemed Distribution | | Neither Impaired | | | More |
| Receivables | Carrying | Nor Past | 61-90 | 91-120 | Than |
| Balance | Amount | Due | Days | Days | 120 Days |
| 31 December 2023 | 4,027,024 | 4,027,024 | - | - | 4,027,024 |
| 31 December 2022 | - | - | - | - | - |
17. Cash and cash equivalents
Cash consists primarily of cash held in an operating account at First Republic Bank ("FRB"). Such balances may exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit on an overnight basis. The Company also holds cash in an operating account at European Depository Bank SA ("EDB") as described in Note 8.
Cash equivalents is comprised of funds invested in a short-term, highly liquid investment with a maturity of three months or less held at European Depository Bank SA ("EDB"). These funds are held as a security deposit in connection with a loan facility agreement (discussed in Note 8). In addition to the $4.0 million security deposit, the balance includes reinvested interest of $50,805. For further details, pertaining to the investments in cash equivalents, please refer to Note 19.
The following are the balances in cash and cash equivalents as of 31 December 2023 and 2022:
| 2023 | 2022 | |
|
Cash |
1,570,005 |
7,479,832 |
| Cash equivalents - restricted | 4,050,805 | - |
| Total | 5,620,810 | 7,479,832 |
18. Income Taxes
The results of the corporate inversion and resulting IPO transaction result in i(x) Net Zero being treated as a U.S. domestic corporation for all purposes of the U.S. tax code under Internal Revenue Code Section 7874(b) as of the date of the transaction. As a result of the transaction, there are deferred tax implications related to the Company's temporary difference in the book and tax basis of its assets, the most material of which is the difference between the tax basis and the fair value of the Company's investments. As of 31 December 2023, the U.S. federal and state corporate deferred tax impact of the above referenced transaction on the investments listed on the Company's schedule of investments at fair value is projected to result in a deferred tax liability of approximately $30,117,872 at the Company's effective federal and state tax rates of 21% and 1.79%, respectively.
The following are the deferred tax assets and liabilities of the Company as of 31 December 2023:
| | Total | Federal | State |
| Deferred Tax Asset | 3,193,689 | 2,443,733 | 749,956 |
| Valuation Allowance | (368,009) | 97,825 | (465,834) |
| Deferred Tax Asset, net | 2,825,680 | 2,541,558 | 284,122 |
| Deferred Tax Liability | 30,117,872 | 27,716,070 | 2,401,803 |
The following are the deferred tax liabilities of the Company as of 31 December 2022:
Total Federal State
Deferred Tax Liability 11,271,318 9,118,320 2,152,998
There were no deferred tax assets as of 31 December 2022. The provision for income taxes consisted of the following:
| 2023 | 2022 | |
| Current: Federal |
- |
- |
| State | - | - |
| Foreign | 664,577 | - |
| Domestic | - | - |
| Total current income tax expense | 664,577 | - |
|
Deferred: | | - |
| Federal | 16,055,301 | 9,118,320 |
| State | (34,427) | 2,152,998 |
| Foreign | - | - |
| Domestic | - | - |
| Total deferred income tax expense | 16,020,874 | 11,271,318 |
|
Total Provision for Income Taxes |
16,685,451 |
11,271,318 |
| The effective tax rate is calculated as | 21.0% | -164.4% |
A reconciliation of the statutory rate of 21% in 2023 and 2022 to the effective income tax expense for each year follows:
| 2023 | 2022 | |
|
Profit/(Loss) before income taxes |
79,247,180 |
(6,857,884) |
| Statutory tax rate | 21% | 21% |
| Income tax (benefit) at statutory rate | 16,641,907 | (1,440,156) |
| State tax benefit (expense), net of federal benefit | (97,812) | (255,946) |
| Stock compensation | - | 107,880 |
| Other | 607 | 225 |
| Deferred True Ups | (227,260) | 12,859,315 |
| Valuation Allowance | 368,009 | - |
| Total Income Tax Expense | 16,685,451 | 11,271,318 |
The tax effects of temporary differences and carryforwards that give rise to deferred income tax assets and liabilities consisted of the following:
| 2023 | 2022 | |
|
Net Operating Loss Carryforward |
2,242,617 |
2,033,297 |
| ROU Liability | - | - |
| Stock compensation | 130,458 | - |
| Foreign tax credit | 664,577 | - |
| Other | 156,038 | 152,087 |
| Total deferred income tax assets | 3,193,690 | 2,185,384 |
| Investment Gain | (30,084,855) | (13,341,296) |
| ROU Asset | (6,194) | (86,384) |
| Other | (26,823) | (29,022) |
| Deferred income tax liabilities | (30,117,872) | (13,456,702) |
| Def income tax assets before valuation allowance |
(26,924,182) |
(11,271,318) |
| Less valuation allowance | (368,009) | - |
| Net Deferred Tax Liability | (27,292,192) | (11,271,318) |
A reconciliation of deferred tax assets and liabilities from 31 December 2022 to 31 December 2023 follows:
| Deferred Tax Asset Balance as of 31 December 2022 | 2,185,384 |
| Net operating loss carryforward | 209,289 |
| Stock compensation | 130,458 |
| Foreign tax credit | 664,577 |
| Other | 3,981 |
| Balance as of 31 December 2023 | 3,193,690 |
| Less valuation allowance | (368,009) |
| Net Balance as of 31 December | 2,825,680 |
| 2023 |
|
|
Deferred Tax Liability Balance as of 31 December 2022 |
(13,456,702) |
| Investment gain/loss | (16,743,559) |
| ROU asset | 80,189 |
| Other | 2,199 |
| Balance as of 31 December 2023 | (30,117,872) |
The Company has U.S. gross net operating loss carryforwards totaling $7.947 million as of 31 December 2023. Utilization of the net operating losses may be subject to limitations upon certain ownership changes as provided by the Internal Revenue Code and similar state provisions. Sections 382 and 383 of the Internal Revenue Code of 1986 subject the future utilization of net operating losses and certain other tax attributes, such as research and experimental tax credits, to an annual limitation in the event of certain ownership changes, as defined. The Company may be subject to the net operating loss utilization provision of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation of the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company's capital during a specified period prior to the change, and the federal published interest rate. Although the Company has not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be limited. The Company has not performed an IRC 382 analysis for the net operating losses for any of its corporate subsidiaries.
The Company is subject to income taxes in the U.S. as the statute of limitations for adjustments to the Company's historic tax obligations will vary from jurisdiction to jurisdiction. Further operating losses may be subject to adjustment after the expiration of the statute of limitations for the year of such net operating losses.
There were no unrecognized tax benefits as of 31 December 2023 and 2022. Accounting for Uncertainties in Income Taxes
The Company's management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation, and establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. The Company's management has determined that there are no uncertain tax positions and, as a result, has identified no matters that require further disclosure in the financial statements. As of 31 December 2023, the tax years that remain subject to examination by United States federal and state tax jurisdictions under the statute of limitations, are the calendar years 2020 through 2023.
19. Financial Instruments with Off-Balance Sheet Risk and Management of Market Risks
The Company's investment activities expose it to various types of risk, both on and off balance sheet, which are associated with the financial instruments and markets in which it invests. These financial instruments expose the Company in varying degrees to elements of liquidity, fair value estimation, credit, market, interest rate, counterparty, and currency risk. The principal risks that the Company is exposed to are as follows:
Fair value estimation risk
As of 31 December 2023, 100% of the Company's investments comprise investments in private operating companies which have been fair valued by the Company's management in accordance with the policies set out in Note 2 to the consolidated financial statements. The analysis below is provided to illustrate the sensitivity of the fair value of investments to an individual input, while all other variables remain the same. The Company's Board considers these changes in inputs to be within reasonable expected ranges. This is not intended to imply the likelihood of change or that possible changes in value would be restricted to this range.
|
Investment/Input |
Base Case |
Change in Input | Change in Fair Value of Investment ($000) (1) |
|
Wastefuel Global, LLC | | | |
|
Weight assigned to option pricing method |
10% |
+5% |
1,973 |
| | | -5% | (1,973) |
| (1) Based on fair value as of 31 December 2023 | | | |
Liquidity risk
The market for less liquid investments may be more volatile than the market for highly liquid securities. Investments in relatively illiquid securities may restrict the ability of the Company to dispose of its investments at a price and time that it wishes. If the Company was forced to dispose of an illiquid investment at an inopportune time, it might be forced to do so at a substantial discount to fair value, resulting in a loss to the Company.
Liquidity risk could affect the Company's ability to meet the obligations associated with its financial liabilities. The Company manages its liquidity requirements through capital raising and by investing excess cash in a money market fund which is highly liquid. The money market fund is described below under Other Risks.
Foreign currency risk
The Group holds minimal non-US dollar cash balances and normally settles non-US dollar denominated invoices at the spot rate prevailing at the time of settlement. Financial assets and liabilities are materially all US dollar denominated.
The Group has a small proportion of expenses settled in GBP comprising auditor's fees, listing related advisory fees and a small proportion of professional fees. Management believes the foreign exchange exposure related to settling these expenses is minimal.
One receipt of funds in US dollars was briefly exposed to Canadian dollar risk whilst the funds were being transferred from an investee company to a Canadian indirect investment holding company and finally to the Group. Management do not believe the foreign exchange exposure risk is material as the movement of funds took place over a short period of time, thus minimizing exposure to foreign exchange risk.
Management do not consider the impact of possible exchange rate movements based on current market conditions to be material to the net result for the year.
Credit risk
The Company's exposure to credit risk is associated with default risk on the value of debt held and with counterparty nonperformance. The Company is exposed to credit risk on trade and other receivables, convertible notes, cash and cash equivalents held in financial institutions and at brokerage firms.
The Company is subject to the risk of default on its receivables attributable to deemed distributions from investments which amounted to $4,027,024 and $0 as of 31 December 2023 and 2022 respectively, and trade and other receivables which amounted to $51,383 and $66,838 as of 31 December 2023 and 2022, respectively. The carrying amounts of these receivables are considered to be reasonable approximations of their fair value. The receivable from deemed distributions as of 31 December 2023 is expected to be collected
within two years. The balance in trade and other receivables is expected to be collected within one year. The Company will receive the sums owed from intermediary companies that held the Company's interest in Carbon Engineering prior to disposal. The risk of default is primarily mitigated by shareholder agreements being in place with the debtors, along with regular communication and the monitoring of the financial condition of the primary debtors. Management considers the risk of default on primarily all trade and other receivables to be low because the primary debtors have a strong capacity to meet their contractual obligations in the near term. The Company recorded an allowance for bad debts totaling $165,299 as of 31 December 2023.
As of 31 December 2023, the Company held two convertible notes. These notes, which were issued by two of the Company's investee companies, are subject to default and counterparty nonperformance risks. The Company monitors the debtors' businesses with respect to assessing potential impairment in the note's value. For one of these notes, indicators of a lower expectation of recovery and a greater risk of default triggered by failure to demonstrate the potential to raise capital, significant negative developments regarding the debtor's potential revenue pipeline and failure to engage with the Company on alternative payment arrangements, amongst other considerations, resulted in the Company determining that the convertible note was impaired as of 31 December 2023. Accordingly, the Company recorded an unrealised loss on this convertible note in the amount of
$250,000, the face amount of the note, as of 31 December 2023.
The Company's exposure to credit risk on cash and cash equivalents is discussed in Note 17 with respect to cash balances.
he Company seeks to limit the level of credit risk on the cash balances by only depositing funds with reputable international banking institutions.
| | 2023 | 2022 |
| Cash AA- | 1,570,005 | 7,479,832 |
| Cash equivalents - restricted B | 4,050,805 | - |
| Total | 5,620,810 | 7,479,832 |
Although the Company's investments are denominated in U.S. dollars, the Company may invest in securities and hold cash balances that are denominated in currencies other than its reporting currency, the U.S. dollar. Consequently, the Company may become exposed to risks that the exchange rate of the U.S. dollar relative to other currencies may change in a manner which has an adverse effect on the reported value of that portion of the Company's assets which are denominated in currencies other than the U.S. dollar. The Company may utilise options, futures, and forward currency contracts to hedge against currency fluctuations, but there can be no assurance that such hedging transactions will be effective.
The group's current credit risk grading framework comprises the following category:
• Performing: the counterparty has a low risk of default and does not have any past due amounts.
The basis for recognizing expected credit losses ("ECL") is 12 month ECL. The deemed distributions debtor has a low risk of default and does not have any past-due amounts, as it is performing, and therefore the expected credit loss is $nil.
Market risk
Certain investments may be disposed of at a price different from the value recorded in the accompanying financial statements since the market price of these investments generally is more volatile than that of more liquid investments.
As such, the Company may incur greater losses on the sale of some portfolio investments than under more stable market conditions. Such losses may adversely impact the Company's capital balance. Due to market instability, it may become more difficult to obtain market valuations from third party vendors and other market participants for these investments. As a result, there can be no assurance that the Company could purchase or sell these investments at the price used to calculate the Company's capital balance.
Legal, tax and regulatory changes could occur that may adversely affect the Company. The regulatory environment for investment companies is evolving, and changes in the regulation of investment companies may adversely affect the value of investments held by the Company and the ability of the Company to pursue its investment strategies. In addition, if the Company is required to liquidate all or a portion of its portfolio quickly, it may realise significantly less than the value at which it previously recorded such investments.
Interest rate risk
Interest rate risk arises from the effects of fluctuations in the prevailing levels of market interest rates on the fair value of financial assets and liabilities and future cash flows. The financial instruments exposed to interest rate risk comprise cash and cash equivalents, investments at fair value and borrowings.
Borrowings under the EDB loan constitute by far the largest exposure to interest rate risk. The sensitivity analysis below has been determined based on the exposure to interest rates for borrowings and the restricted cash security deposit for the loan at the reporting date.
A 10 per cent increase or decrease is used when reporting interest rate risk internally and represents management's assessment of the reasonably possible change in interest rates.
If interest rates had been 10 per cent higher/lower and all other variables were held constant, the effect on the Group's profit for the year ended 31 December 2023 would have been immaterial, principally because the interest payments on the borrowings were partially mitigated by the interest earned on the security deposit.
The Group's sensitivity to interest rates has increased slightly during the current year due to the increase in EDB's USD base rate. The Group was paying approximately 10.82% in annual interest at the end of the year, compared to 10.5% when the loan facility was agreed in April 2023. Management believes that it is unlikely that USD base rates will increase further and are likely to decrease in the short to medium term.
Classes and categories of financial instruments and their fair values
The maximum exposure to credit risk on the Company's financial assets is represented by their carrying amount, as outlined in the categorisation of financial instruments table below.
| | Loans and receivables | Financial liabilities at amortised cost | Financial assets at fair value through profit and loss | Total |
|
At 31 December 2023 | $'000 | $'000 | $'000 | $'000 |
| Investments | | | 144,217 | 144,217 |
| Cash and restricted cash | 5,620 | | | 5,620 |
| Trade and other receivables | 4,078 | | | 4,078 |
| Trade and other payables | | (1,003) | | (1,003) |
| Borrowings | | (3,751) | | (3,751) |
| Net Total | 9,698 | (4,754) | 144,217 | 149,161 |
| At 31 December 2022 Investments | | |
63,841 |
63,841 |
| Cash and restricted cash | 7,479 | | | 7,479 |
| Trade and other receivables | 67 | | | 67 |
| Trade and other payables Borrowings Net Total |
7,546 | (613) - (613) |
63,841 | (613) - 70,774 |
The Company does not consider that any changes in fair value of financial assets in the year are attributable to credit risk.
With the exception of the deemed distribution receivables (see note 16), no aged analysis of financial assets is presented as no financial assets are past due at the reporting date.
At 31 December 2023 and 31 December 2022, with the exception of investment portfolio assets
, non-current trade receivables and borrowings, all financial assets and liabilities mature for payment within one year. Borrowings mature for payment within two years as at 31 December 2023 (2022: not applicable).
At 31 December 2023 and 31 December 2022 all investment portfolio assets were measured at Level 3 of the fair value hierarchy (see note 4 for further details).
There were no transfers between Levels of the fair value hierarchy during the current or prior year.
Other risks
Financial Risk Management
Risk management is carried out by the Chief Investment Officer under policies approved by the Board of Directors and the Audit and Risk Committee. The Chief Investment Officer and senior management identify, evaluate and hedge financial risks in close cooperation with the Group's operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as liquidity risk, market risk, credit risk and other risks.
20. Leases
The Company's lease for office space at 1149 Third Street, Santa Monica, CA commenced in December 2018 and expires in January 2024. Upon initial recognition of the lease liability, such amount was measured at the present value of the contractual payments due to the lessor, using the Company's incremental borrowing rate of 5% as the discount rate. The amount of the initial liability and the right of use asset was $1,549,998. For the years ended 2023, information pertaining to this operating lease was as follows:
| Supplemental Information | 2023 ($) | 2022 ($) |
| Operating lease ROU asset as of 1 January | 349,277 | 653,426 |
| Amortisation of ROU assets for the year ended 31 December | (321,638) | (304,149) |
| Operating lease ROU asset as of 31 December 2023 | 27,639 | 349,277 |
| Total operating lease costs included in occupancy expense | 321,638 | 304,149 |
| Remaining lease term | 1 month | 13 months |
| Discount rate | 5.0% | 5.0% |
| Maturities of operating lease liability for fiscal years ending 31 December | | |
| 2023 | - | 374,342 |
| 2024 | 32,051 | 32,051 |
| Total lease payments | 32,051 | 406,393 |
| Less imputed interest | - | (10,006) |
| Total operating lease liability as of 31 December 2023 | 32,051 | 396,387 |
Interest expense on lease liabilities for the years ended 31 December 2023 and 2022 was
$10,006 and $27,495, respectively.
The Company sublet its office space in Santa Monica, California, effective 1 August 2021. In accordance with the terms of the sublease agreement, the subtenant is obligated to pay rent to the Company monthly, totaling $26,850 over the remaining life of the lease, which terminates on 31 January 2024. In addition, the subtenant is obligated to pay the Company's share of operating expenses which are payable to the lessor under the terms of the original lease. As of 31 December 2023, the subtenant is in default on the sublease agreement and owes $165,299 in rent payments. A reserve for bad debts has been established by the Company for this amount.
21. Related Parties
The CEO Bonus in respect of the year ended 31 December 2023 was accrued in 2023 in the amount of $410,000. In February 2024, the Company announced that Mr. Lindström, the Company's CEO, agreed to apply his annual bonus to subscribe for new ordinary shares in the Company at the previous day's closing price of 21p per share. As a result, Mr. Lindström received 1,550,293 new ordinary shares in the Company. These shares were admitted to trading on AIM London Stock Exchange on 20 February 2024.
In December 2022, the Company agreed to pay to Mr. Lindström an incentive bonus of
$200,000 (£160,772) in respect of the year ended 31 December 2022 and, as part of his promotion to CEO in January 2023, the Company agreed to pay Mr. Lindström a promotion bonus based on increased responsibilities as CEO of $500,000 (£401,929). In total, these bonuses represent approximately 170% of Mr. Lindström's 2023 annual compensation.
In order to preserve the Company's cash resources and to demonstrate his commitment to the Company, Mr. Lindström agreed to apply both of these bonuses to subscriptions of new ordinary shares at the previous day's closing price of 8.25p per share. This resulted in the issuance of 6,820,618 new ordinary shares to Mr. Lindström ("Bonus Shares"). The Bonus Shares represent 8.7% of the issued share capital prior to the issuance of these shares. Both of these bonuses were recorded in 2023 and are included in general and administrative expenses for the year from 1 January to 31 December 2023. The shares subscribed for by Mr. Lindström pursuant to each of these bonus schemes were subject to a risk of forfeiture if the Company's Net Asset Value ("NAV") did not meet the hurdle of $120 million within the 24-month period following their issue ("NAV Hurdle"). The forfeiture risk expired when the Company's Net Asset Value ("NAV") exceeded $120 million during the period from 1 January to 30 June 2023. The Bonus Shares were admitted to trading on AIM London Stock Exchange on 26 April 2023.
On 14 February 2024 the Company announced that Mr Stearns had been awarded share options over 1,058,737 shares at an exercise price of 21p per share. This grant was equivalent to 80% of his 2023 salary of $350,000. An expense of $280,000 was therefore accrued in the 2023 accounts in relation to this.
Mr Stearns has a non-controlling holding in Citron Energy and is the chairman of Citron Energy.
Mr Lindström has a 0.08% interest in Wastefuel and is a director of Wastefuel. Mr Lindström is a director of Enphys Management Company.
22. Subsequent Events
$5m was drawndown from the loan facility in early March 2024 and a further $3m in early June 2024.
The 2023 bonuses for Mr Lindström and Mr Stearns were paid with shares and share options respectively in mid-February 2024 ($410k in shares to Mr Lindström and $280k in share options to Mr Stearns) as described in notes 5 and 7.
Changes were made to the Enphys non-binding commitment in May 2024 in relation to the extension by which time the Enphys SPAC needs to consummate a business combination from 8 June 2024 to 8 December 2024.
Negotiations with Lion Point in relation to the settlement of the put option are ongoing (see note 9).
The Board announced the proposed delisting of the Company from the AIM Market in an announcement made simultaneously with the release of these financial statements.
Following issuance of 2023 Bonus Shares in February 2024 the Company has 87,427,722 Ordinary Shares in issue, each carrying the right to one vote. No Ordinary Shares are held by the Company in treasury. The total number of voting rights in the Company is therefore 87,427,722.
There were no other subsequent events identified by the Company's management which would require adjustment to, or disclosure in, the financial statements.
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