TIDMMYX TIDMMYXR
RNS Number : 7973Z
MyCelx Technologies Corporation
18 May 2023
18 May 2023
MYCELX TECHNOLOGIES CORPORATION (AIM: MYX)
Final Results for the Year Ending 31 December 2022
MYCELX Technologies Corporation ("MYCELX" or the "Company"), the
clean water and clean air technology company transforming the
environmental impact of industry, announces its audited results for
the year ended 31 December 2022.
Highlights
Financial
-- Revenue of $10.0 million (2021: $8.5 million)
-- Gross profit of $4.4 million (2021: $3.3 million)
-- EBITDA(1) of negative $2.5 million (2021: $19,000)
-- Loss before tax of $3.6 million (2021: loss before tax $1.1 million)
-- Cash & cash equivalents of $1.7 million (2021: $3.2 million)
Operational
Continued focus on high quality projects with high margins that
deliver recurring revenue
PFAS Remediation
-- A successful trial was completed in Australia using MYCELX
proprietary technology for the treatment of PFAS
-- Post period end: signed three pilot testing agreements for
PFAS remediation in landfill leachate sites in the U.S.
REGEN in EOR
-- Secured a second REGEN sale for water treatment during
Enhanced Oil Recovery ("EOR") production
Middle East Downstream
-- Continued momentum in Saudi Arabia:
o Converted an emergency response project into a longer-term
deployment.
o New project secured on contaminated industrial wastewater.
-- Fourth project signed with existing customer to provide clean
water at a fertiliser production facility
Corporate
-- Secured Global Contract with SABIC to treat targeted, difficult wastewater streams
-- Added an experienced Business Development Director for the PFAS business segment
-- Awarded the London Stock Exchange's Green Economy Mark
Connie Mixon, CEO, commented:
" I am pleased to report that MYCELX continued to make solid
progress in 2022 securing high quality contracts in the Middle East
in EOR and REGEN, and the petrochemical market. Laying critical
groundwork in the PFAS remediation market was a top priority and is
accelerating in 2023.
During the period and into 2023, we remain committed to further
penetrating our three core markets of focus; PFAS remediation,
REGEN product for Enhanced Oil Recovery ("EOR") and Middle East
downstream. I am pleased to report that substantial progress has
been made in our core markets as evidenced by the range of new
awards we have won.
I would like to thank the MYCELX team and Board for their
diligence and hard work during the period and into 2023. The
targeting of our three core markets, along with the focus on
strategic partnerships, is building momentum, producing results,
and is designed to generate substantial returns for our investors.
Following the strong start we have made in 2023, we look forward to
updating the market on further developments over the coming months
."
For further information, please contact:
MYCELX Technologies Corporation
Connie Mixon, CEO Tel: +1 888 306 6843
Kim Slayton, CFO
Canaccord Genuity Limited (Nomad and Sole Broker)
Henry Fitzgerald-O'Connor Tel: +44 20 7523 8000
Gordon Hamilton
Celicourt Communications (Financial PR)
Mark Antelme Tel: +44 20 8434 2754
Jimmy Lea
(1) EBITDA is a non-U.S. GAAP measure that the Company uses to
measure and monitor performance and liquidity and is calculated as
net profit before interest expense, provision for income taxes, and
depreciation and amortisation of fixed and intangible assets,
including depreciation of leased equipment which is included in
cost of goods sold. This non-U.S. GAAP measure may not be directly
comparable to other similarly titled measures used by other
companies and may have limited use as an analytical tool.
Chairman's Statement
MYCELX made continued progress in its core initiatives in 2022,
while successfully navigating a highly volatile macro environment.
Due to this progress, we remain in a strong position to capitalise
on increasing demand for our innovative technologies that help
companies achieve their environmental and operational
objectives.
Following subdued energy markets in previous years, 2022 saw the
price of oil and natural gas increase significantly with the price
of oil exceeding $100 per barrel for the first time since 2014.
This increase was due to events that occurred in Ukraine, changing
travel policies and countries opening up post the COVID-19
pandemic. Natural gas prices across the world also soared, as
countries, mainly in Europe, sought to bolster supply, with energy
security becoming a highly important theme during the year.
These trends led to strong demand for our innovative
technologies in the downstream Middle East market as well as with
our REGEN media used in upstream EOR production. Operators are
requiring better performance from their water treatment
technologies in order to cost-effectively meet their production
targets and their environmental goals. Both of these oil and gas
markets benefit from our technology by having the ability to
significantly improve their overall water process management.
In addition to these opportunities in the Oil and Gas market,
the PFAS Remediation market presents an exciting target segment
because of its long-term growth potential. PFAS contamination is a
global threat and its remediation presents a large potential
market. The Company believes MYCELX's unique technology can become
an industry leader in completely removing PFAS from contaminated
streams and eliminating future liability. Following the signing of
three paid trials in Q1 2023, we have taken important steps in
proving the efficacy of our technology in the PFAS market.
In recent years, shareholders and the public have placed
increasing importance on companies' adoption of Environmental,
Social and Governance ("ESG") principles, thus increasing the
expectation that organisations will behave in an environmentally
sustainable and ethical manner. As a Board, we believe this trend
will continue in the coming years and will fuel increased demand
for MYCELX's innovative technologies. We are therefore highly
focused on delivering on the promise of helping our partners to
cost effectively improve the environment.
I would like to take the opportunity to thank the new and
existing investors that participated in the $2.3 million fundraise
conducted in March 2022. Our rationale was that additional funds
would allow us to accelerate our progress in capturing the
significant opportunity presented by the PFAS remediation segment
at a critical time in the market's development. I am pleased to
report that since the raise we have made good progress in
positioning our technology as a leader in the burgeoning PFAS
Remediation market.
We remain highly upbeat about our prospects in the Middle East
and with our REGEN offering globally. Historically we have
experienced heightened bidding activity in stronger energy markets
as operators look to increase margins and maximise output,
especially in the EOR segment.
We are also bullish about our PFAS market opportunity and
continue to believe that countries are just realising the
significant threat of PFAS contamination to the environment.
Addressing this problem will require significant levels of
investment for remediation at the federal, state and local
government levels, as well as by corporate entities. With our
progress so far in 2023 and the favourable industry trends, we are
optimistic about the growth prospects across the business for the
remainder of the year.
In closing, we are very excited about MYCELX's position in our
target markets. We have developed a unique and highly valued
technological offering for our customers that is proven to address
the industry's significant environmental challenges. We have shown
that our products can help companies achieve pressing environmental
goals which are priorities for the investment community and for the
broader population. As a Board and Management team, we therefore
look forward to further progress this year and continuing our
journey to positively affect the impact our customers have on the
environment.
Chief Executive Officer's Statement
I am pleased to report that MYCELX continued to make solid
progress in 2022 securing high quality contracts in the Middle East
in EOR and REGEN, and the petrochemical market. Laying critical
groundwork in the PFAS remediation market was a top priority and is
accelerating in 2023.
During the period and into 2023, we remain committed to further
penetrating our three core markets of focus; PFAS remediation,
REGEN product for Enhanced Oil Recovery ("EOR") and Middle East
downstream. I am pleased to report that substantial progress has
been made in our core markets as evidenced by the range of new
awards we have won.
In the Middle East, we made a strong start to 2022 with a
contract extension signed in Q1 and an emergency response system,
which was operational in Q2 2022. Furthermore, in Saudi Arabia, the
Company commenced a rapid response project, the fifth ammonia
removal installation undertaken with a global leader in fertiliser
production. In addition, due to the superior results delivered by
our technology, a project extension with a leading independent
petrochemical company was secured. The aforementioned projects were
sufficient to ensure the company achieved its 2022 financial
guidance.
The Company continues to generate momentum in Saudi Arabia with
the conversion of an emergency response project into a longer-term
deployment and a new project win to treat some of the most
contaminated industrial wastewater in the country. Given Saudi
Arabia has significant growth plans, we look forward to further
establishment of our product offering in the region, not only in
the downstream market, but upstream as well with our unique REGEN
product for EOR.
During the period MYCELX was pleased with the number of REGEN
related orders secured, including a successful EOR trial with a
major producer in the Middle East. A REGEN produced water system
was also installed and commissioned in Nigeria, a region that we
continue to focus on. In February 2023, we secured our second REGEN
project to a National Oil Company in the Middle East for water
treatment during EOR production.
Our unique REGEN offering has proven to outperform other
technologies when applied to treatment for EOR water. Given the
number of regions across the world where EOR production is either
stable or increasing, this technology will continue to be in demand
to tackle all of the wastewater operational issues associated with
this type of production. Again, further evidence of our efforts to
help our customers achieve the highest of environmental
standards.
The PFAS remediation market remains one of the most exciting
areas for MYCELX. This is a widespread global human health and
environmental issue, and one that many governments have yet to
acknowledge. Given that our technology is already installed and
performing in Australia paves the way to success in the U.S. and
globally. In August 2022, we hired an experienced Business
Development Director for the PFAS segment of our business which has
accelerated securing trials and a lease-to-own contract.
The work we did in 2022 is now reaping rewards. We targeted a
number of global water treatment companies, environmental
engineering firms and U.S. water treatment companies building
relationships through technical webinars and presentations. We
believe adoption of our PFAS solution will be accelerated with
strategic partnerships we form in the early stages of trials and
technology vetting. Since then, in 2023, we signed a six-month paid
trial for treatment of PFAS contaminated leachate from a solid
waste landfill in the United States. Then in March, we were pleased
to secure two pilot testing agreements for PFAS remediation of
landfill leachate in the U.S. A successful outcome at these paid
trials will boost our position as the industry leader in PFAS
remediation, but it will also enable us to leverage the successful
sites and gain further market share with new contract wins.
As seen with the recently announced project wins, we are
focusing on projects that have shorter cash conversion cycles, with
longer total durations. Projects of this nature ensure regular cash
flows that can support MYCELX's working capital requirements.
Maintaining healthy operating margins on the projects we are
involved in is also a priority for the Company, as we will continue
to build our cash position.
In January 2022, we were pleased to announce that MYCELX was
awarded the Green Economy Mark by the London Stock Exchange. The
award validates the Company's claims that its product offering is
supporting the transition to a low or net zero economy by enabling
companies to reduce their impact on the environment. At a time when
ESG related themes are at the front of investors' minds, we believe
that our commitment to providing technologies that have a positive
impact on the environment remains strong.
I would like to thank the MYCELX team and Board for their
diligence and hard work during the period and into 2023. The
targeting of our three core markets, along with the focus on
strategic partnerships, is building momentum, producing results,
and will generate substantial returns for our investors. Following
the strong start we have made in 2023, we look forward to updating
the market on further developments over the coming months.
Financial Review
Due to increased demand in the Middle East and growth in legacy
media sales, we saw revenue rise 18% to $10.0 million for 2022,
compared to $8.5 million for 2021. Revenue from equipment sales and
leases decreased by 5% to $3.6 million for 2022 (FY21: $3.8
million) and revenue from consumable filtration media and service
increased by 36% to $6.4 million (FY21: $4.7 million). Whilst the
equipment sales are one-off by nature, there is longevity to the
media sales and ongoing lease and service revenues.
Gross profit increased by 33% to $4.4 million during the year,
compared to $3.3 million in 2021, and gross profit margin increased
to 44% (FY21: 39%).
Total operating expenses for 2022, including depreciation and
amortisation and the gain on sale of property and equipment,
increased by 67% to $8.0 million (FY21: $4.8 million). Operating
expenses in 2021 were reduced by a financial gain of approximately
$2.6 million from the sale of the Company's building in Duluth,
Georgia, USA.
The largest component of operating expenses was selling, general
and administrative expenses, which increased by approximately 10%
to $7.6 million (FY21: $6.9 million) due to moving expenses,
maintenance on lease equipment and payroll tax credits that did not
extend to 2022. Depreciation and amortisation within operating
expenses increased by 2% to $210,000 (FY21: $205,000).
EBITDA was negative $2.5 million, compared to $19,000 in 2021.
Normalised EBITDA excluding the sale of the Company's building in
Duluth, Georgia was negative $2.5 million in 2021. EBITDA is a
non-U.S. GAAP measure that the Company uses to measure and monitor
performance and liquidity and is calculated as net profit before
interest expense, provision for income taxes, and depreciation and
amortisation of fixed and intangible assets, including depreciation
of leased equipment which is included in cost of goods sold. This
non-U.S. GAAP measure may not be directly comparable to other
similarly titled measures used by other companies and may have
limited use as an analytical tool.
The Company recorded a loss before tax of $3.6 million in 2022,
compared to a loss before tax of $1.1 million in 2021. The 2021 net
loss included the $2.6 million gain the Company recognised on the
sale of its building. Without the gain, net loss would have been
$3.7 million in 2021. Basic loss per share was 17 cents in 2022,
compared to basic loss per share of 7 cents in the previous
year.
As of 31 December 2022, total assets were $13.6 million with the
largest assets being inventory of $3.7 million, property and
equipment of $3.2 million, $2.8 million of accounts receivable and
$1.7 million of cash and cash equivalents including restricted
cash.
Total liabilities as of 31 December 2022 were $2.8 million and
stockholders' equity was $10.8 million, resulting in a
debt-to-equity ratio of 26%.
In March 2022, the Company completed the closing of a placing of
3,539,273 Common Shares at a price of US$0.66 (50 pence) per new
share raising gross proceeds of approximately $2.3 million before
expenses. The Company incurred costs in the issuance of these
shares of approximately $267,000. The proceeds from the transaction
were used to accelerate the commercialisation of the Company's PFAS
remediation system in the U.S. and in order to support working
capital across the Company's core markets.
The Company ended the period with $1.7 million of cash and cash
equivalents, including restricted cash, compared to $3.2 million in
total at 31 December 2021. The Company used approximately $2.7
million of cash in operations in 2022 (FY21: $3.4 million used in
operations) and $800,000 was used in investing activities (FY21:
$5.1 million provided by investing activities). Proceeds from the
placing of Common Shares contributed $2.0 million provided by
financing activities.
Statements of Operations
(USD, in thousands, except share data)
For the Year Ended 31 December: 2022 2021
Revenue 10,026 8,478
---------- ----------
Cost of goods sold 5,584 5,203
---------- ----------
Gross profit 4,442 3,275
---------- ----------
Operating expenses:
---------- ----------
Research and development 218 223
---------- ----------
Selling, general and administrative 7,589 6,939
---------- ----------
Depreciation and amortisation 210 205
---------- ----------
Gain on sale of property and equipment (2) (2,584)
---------- ----------
Total operating expenses 8,015 4,783
---------- ----------
Operating loss (3,573) (1,508)
---------- ----------
Other income (expense)
---------- ----------
Gain upon extinguishment of debt - 403
---------- ----------
Interest expense - (24)
---------- ----------
Loss before income taxes (3,573) (1,129)
---------- ----------
Provision for income taxes (418) (296)
---------- ----------
Net loss (3,991) (1,425)
---------- ----------
Loss per share - basic (0.18) (0.07)
---------- ----------
Loss per share - diluted (0.18) (0.07)
---------- ----------
Shares used to compute basic loss per share 22,214,884 19,443,750
---------- ----------
Shares used to compute diluted loss per share 22,214,884 19,443,750
---------- ----------
The accompanying notes are an integral part of the financial
statements.
Balance Sheets
(USD, in thousands, except share data)
As at 31 December: 2022 2021
Assets
-------- --------
Current Assets
-------- --------
Cash and cash equivalents 1,645 3,128
-------- --------
Restricted cash 84 84
-------- --------
Accounts receivable - net 2,778 1,867
-------- --------
Unbilled accounts receivable - 175
-------- --------
Inventory 3,737 4,320
-------- --------
Prepaid expenses 99 203
-------- --------
Other assets 138 399
-------- --------
Total Current Assets 8,481 10,176
-------- --------
Property and equipment - net 3,229 3,249
-------- --------
Intangible assets - net 733 774
-------- --------
Operating lease asset - net 1,176 1,459
-------- --------
Total Assets 13,619 15,658
-------- --------
Liabilities and Stockholders' Equity
-------- --------
Current Liabilities
-------- --------
Accounts payable 795 683
-------- --------
Payroll and accrued expenses 758 758
-------- --------
Contract liability - 54
-------- --------
Customer deposits 18 74
-------- --------
Operating lease obligations - current 326 251
-------- --------
Total Current Liabilities 1,897 1,820
-------- --------
Operating lease obligations - long-term 890 1,216
-------- --------
Total Liabilities 2,787 3,036
-------- --------
Stockholders' Equity
-------- --------
Common stock, $0.025 par value, 100,000,000
shares authorised, 22,983,023 shares Issued and
outstanding at 31 December 2022 and 19,443,750
shares issued and outstanding at 31 December
2021. 574 486
-------- --------
Additional paid-in capital 44,768 42,655
-------- --------
Accumulated deficit (34,510) (30,519)
-------- --------
Total Stockholders' Equity 10,832 12,622
-------- --------
Total Liabilities and Stockholders' Equity 13,619 15,658
-------- --------
The accompanying notes are an integral part of the financial
statements.
Statements of Stockholders' Equity
(USD, in thousands, except share data)
Common Stock
Additional
Paid-in Accumulated
Capital Deficit Total
Shares $ $ $ $
---------- ---
Balances at 31 December 2020 19,443,750 486 42,400 (29,094) 13,792
---------- --- ---------- ----------- -------
Stock-based compensation expense - - 255 - 255
---------- --- ---------- ----------- -------
Net loss for the period - - - (1,425) (1,425)
---------- --- ---------- ----------- -------
Balances at 31 December 2021 19,443,750 486 42,655 (30,519) 12,622
---------- --- ---------- ----------- -------
Issuance of common stock,
net of offering costs 3,539,273 88 1,957 - 2,045
---------- --- ---------- ----------- -------
Stock-based compensation expense - - 156 - 156
---------- --- ---------- ----------- -------
Net loss for the period - - - (3,991) (3,991)
---------- --- ---------- ----------- -------
Balances at 31 December 2022 22,983,023 574 44,768 (34,510) 10,832
---------- --- ---------- ----------- -------
The accompanying notes are an integral part of the financial
statements.
Statements of Cash Flows
(USD, in thousands)
For the Year Ended 31 December: 2022 2021
Cash flow from operating activities
------- -------
Net loss (3,991) (1,425)
------- -------
Adjustments to reconcile net loss to net cash
used in operating activities:
------- -------
Depreciation and amortisation 1,091 1,124
------- -------
Gain on sale of property and equipment (2) (2,584)
------- -------
Inventory reserve adjustment (5) (45)
------- -------
Gain upon extinguishment of debt - (401)
------- -------
Stock compensation 156 255
------- -------
Change in operating assets and liabilities:
------- -------
Accounts receivable - net (911) (388)
------- -------
Unbilled accounts receivable 175 (175)
------- -------
Inventory 402 1,265
------- -------
Prepaid expenses 104 (119)
------- -------
Prepaid operating leases 32 40
------- -------
Other assets 261 (292)
------- -------
Accounts payable 112 210
------- -------
Payroll and accrued expenses - 218
------- -------
Contract liability (54) (691)
------- -------
Customer deposits (56) (418)
------- -------
Net cash used in operating activities (2,686) (3,426)
------- -------
Cash flow from investing activities
------- -------
Payments for purchases of property and equipment (814) (327)
------- -------
Proceeds from sale of property and equipment - 5,455
------- -------
Payments for internally developed patents (28) (43)
------- -------
Net cash (used in) provided by investing activities (842) 5,085
------- -------
Cash flows from financing activities
------- -------
Net proceeds from stock issuance 2,045 -
------- -------
Payments on notes payable - (1,643)
------- -------
Proceeds from notes payable - 401
------- -------
Payments on line of credit - (997)
------- -------
Net cash provided by (used in) financing activities 2,045 (2,239)
------- -------
Net decrease in cash, cash equivalents and restricted
cash (1,483) (580)
------- -------
Cash, cash equivalents and restricted cash, beginning
of year 3,212 3,792
------- -------
Cash, cash equivalents and restricted cash,
end of year 1,729 3,212
------- -------
Supplemental disclosures of cash flow information:
------- -------
Cash payments for interest - 30
------- -------
Cash payments for income taxes 390 300
------- -------
Non-cash movements of inventory and fixed assets 186 102
------- -------
Non-cash operating ROU assets 1,049 1,192
------- -------
Non-cash operating lease obligations 1,049 1,192
------- -------
The accompanying notes are an integral part of the financial
statements.
Notes to the Financial Statements
1. Nature of Business and Basis of Presentation
Basis of presentation - These financial statements have been
prepared using recognition and measurement principles of Generally
Accepted Accounting Principles in the United States of America
('U.S. GAAP').
Nature of business - MYCELX Technologies Corporation ('MYCELX'
or the 'Company') was incorporated in the State of Georgia on 24
March 1994. The Company is headquartered in Norcross, Georgia with
operations in Houston, Texas, Saudi Arabia and the United Kingdom.
The Company provides clean water technology equipment and related
services to the oil and gas, power, marine and heavy manufacturing
sectors and the majority of its revenue is derived from the Middle
East and the United States.
Liquidity - The Company meets its day-to-day working capital and
other cash flow requirements through cash flow from operations. The
Company had a Note Payable (Note 10) with an original maturity in
March 2023 and access to a line of credit (Note 8) that renewed
annually. However, the Note and the line of credit were paid in
full, and $500,000 of cash was reclassified from restricted cash,
during H1 2021 when the Company completed the sale of its building
in Duluth, Georgia, USA for total consideration of $5.4 million.
The sale enabled the Company to right-size its office space needs
across its main operating locations and provided cash proceeds,
after repayment of the Note Payable and line of credit, of $2.8
million, which is being used for working capital purposes to
support the business needs. In March 2022, the Company completed
the closing of a placing raising gross proceeds of approximately
$2.3 million before expenses. The proceeds from the transaction are
being used to accelerate the commercialisation of the Company's
PFAS remediation system in the U.S., and in order to support
working capital across the Company's core markets. The Company
actively manages its financial risk by operating Board-approved
financial policies that are designed to ensure that the Company
maintains an adequate level of liquidity and effectively mitigates
financial risks.
Whilst macro events are creating uncertainty within world
markets and volatility in oil prices, today's high oil price bodes
well for the completion of new commercial agreements with both
existing and new international customers. On the basis of current
financial projections, including a downside scenario sensitivity
analysis considering only revenues that are contracted or that the
Company considers probable and adjusting for direct cost of goods
sold within the analysis, the Company believes that it has adequate
resources to continue in operational existence for the foreseeable
future of at least 12 months from the date of the issuance of these
financial statements and, accordingly, consider it appropriate to
adopt the going concern basis in preparing these Financial
Statements. Should the projected cash flow not materialise under
certain scenarios, alternative actions to increase liquidity may
need to be considered.
2. Summary of Significant Accounting Policies
Use of estimates - The preparation of financial statements in
conformity with U.S. GAAP requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the amounts reported in the financial statements and
accompanying notes. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised. The
primary estimates and assumptions made by management relate to the
inventory valuation, accounts receivable valuation, useful lives of
property and equipment, volatility used in the valuation of the
Company's share-based compensation and the valuation allowance on
deferred tax assets. Although these estimates are based on
management's best knowledge of current events and actions the
Company may undertake in the future, actual results ultimately may
differ from the estimates and the differences may be material to
the financial statements.
Revenue recognition - The Company's revenue consists of
filtration media product, equipment leases, professional services
to operate the leased assets, turnkey operations and equipment
sales. These sales are based on mutually agreed upon pricing with
the customer prior to the delivery of the media product and
equipment. The Company recognises revenue when it satisfies a
performance obligation by transferring control over a product or
service to a customer.
Revenue from filtration media sales and spare parts is billed
and recognised when products are shipped to the customer. Revenue
from equipment leases is recognised over time as the equipment is
available for customer use and is typically billed monthly. Revenue
from professional services provided to monitor and operate the
equipment is recognised over time when the service is provided and
is typically billed monthly. Revenue from turnkey projects whereby
the Company is asked to manage the water filtration process end to
end is recognised on a straight-line basis over time as the
performance obligation, in the context of the contract, is a
stand-ready obligation to filter all water provided. Revenue from
contracts related to construction of equipment is recognised upon
shipment of the equipment to the customer because the contractual
terms state that control transfers at the point of shipment and
there is no enforceable right to payments made as customer deposits
prior to that date. Customer deposits for equipment sales represent
payments made prior to transferring control at the point of
shipment that can be refunded at any time when requested by the
customer.
Sales tax charged to customers is presented on a net basis
within the statements of operations and therefore recorded as a
reduction of net revenues. Shipping and handling costs associated
with outbound freight after control over a product has transferred
to a customer are accounted for as a fulfilment cost and are
included in cost of goods sold.
The Company's contracts with the customers state the final terms
of the sales, including the description, quantity, and price of
media product, equipment (sale or lease) and the associated
services to be provided. The Company's contracts are generally
short-term in nature and in most situations, the Company provides
products and services ahead of payment and has fulfilled the
performance obligation prior to billing.
The Company believes the output method is a reasonable measure
of progress for the satisfaction of its performance obligations
that are satisfied over time, as it provides a faithful depiction
of (1) performance toward complete satisfaction of the performance
obligation under the contract and (2) the value transferred to the
customer of the services performed under the contract. All other
performance obligations are satisfied at a point in time upon
transfer of control to the customer.
The Company's contracts with customers often include promises to
transfer multiple products and services. Determining whether
products and services are considered distinct performance
obligations that should be accounted for separately versus together
may require significant judgement. Judgement is required to
determine stand-alone selling price ('SSP') for each distinct
performance obligation. The Company develops observable SSP by
reference to stand-alone sales for identical or similar items to
similarly situated clients at prices within a sufficiently narrow
range.
All equipment sold by the Company is covered by the original
manufacturer's warranty. The Company does not offer an additional
warranty and has no related obligations.
Unbilled accounts receivable represents revenue recognised in
excess of amounts billed. Contract liability represents billings in
excess of revenue recognised. Unbilled accounts receivable at 31
December 2022 and 2021, and 1 January 2021 was $nil, $175,000 and
$nil, respectively. Contract liability at 31 December 2022 and
2021, and 1 January 2021 was $nil, $54,000 and $745,000,
respectively.
Timing of revenue recognition for each of the periods and
geographic regions presented is shown below:
Consumable Filtration
Equipment Leases, Turnkey Media, Equipment Sales
Arrangements, and Services and Service Recognised
Recognised Over Time at a Point in Time
Year Ending 31 December
(USD, in thousands) 2022 2021 2022 2021
-------------- ------------- ------------ -----------
Middle East 6,453 4,550 572 838
-------------- ------------- ------------ -----------
United States - - 2,094 1,311
-------------- ------------- ------------ -----------
Australia - - 558 257
-------------- ------------- ------------ -----------
Nigeria - - - 1,312
-------------- ------------- ------------ -----------
Other - - 349 185
-------------- ------------- ------------ -----------
Total revenue recognised
under ASC 606 6,453 4,550 3,573 3,903
-------------- ------------- ------------ -----------
Total revenue recognised
under ASC 842 - 25 - -
-------------- ------------- ------------ -----------
Total revenue 6,453 4,575 3,573 3,903
-------------- ------------- ------------ -----------
Contract costs - The Company capitalises certain contract costs
such as costs to obtain contracts (direct sales commissions) and
costs to fulfil contracts (upfront costs where the Company does not
identify the set-up fees as a performance obligation). These
contract assets are amortised over the period of benefit, which the
Company has determined is customer life and averages one year.
During the years ended 31 December 2022 and 2021, the Company
did not have any costs to obtain a contract and any costs to fulfil
a contract were inconsequential.
Cash, cash equivalents and restricted cash - Cash and cash
equivalents consist of short-term, highly liquid investments which
are readily convertible into cash within ninety (90) days of
purchase. At 31 December 2022, all of the Company's cash, cash
equivalent and restricted cash balances were held in checking and
money market accounts. The Company maintains its cash in bank
deposit accounts which, at times, may exceed federally insured
limits. At 31 December 2022 and 2021, cash in non-U.S. institutions
was $159,000 and $25,000, respectively. The Company has not
experienced any losses in such accounts. The Company classifies as
restricted cash all cash whose use is limited by contractual
provisions. At 31 December 2022 and 2021, restricted cash included
$84,000 in a money market account to secure the Company's corporate
credit card and a stand-by letter of credit.
Reconciliation of cash, cash equivalents and restricted cash at
31 December 2022 and 2021:
31 December 31 December
2022 2021
US$000 US$000
Cash and cash equivalents 1,645 3,128
----------- -----------
Restricted cash 84 84
----------- -----------
Total cash, cash equivalents and restricted cash 1,729 3,212
----------- -----------
Accounts receivable - Trade accounts receivable are stated at
the amount management expects to collect from
outstanding balances. The Company provides credit in the normal
course of business to its customers and performs
ongoing credit evaluations of those customers and maintains
allowances for doubtful accounts, as necessary. Accounts are
considered past due based on the contractual terms of the
transaction. Credit losses, when realised, have been within the
range of the Company's expectations and, historically, have not
been significant. The allowance for doubtful accounts at 31
December 2022 and 2021 was $168,000 and $90,000, respectively.
Inventories - Inventories consist primarily of raw materials and
filter media finished goods as well as equipment to house the
filter media and are stated at the lower of cost or net realisable
value. Equipment that is in the process of being constructed for
sale or lease to customers is also included in inventory
(work-in-progress). The Company applies the Average Cost method to
account for its inventory. Manufacturing work-in-progress and
finished products inventory include all direct costs, such as
labour and materials, and those indirect costs which are related to
production, such as indirect labour, rents, supplies, repairs and
depreciation costs. A valuation reserve is recorded for slow-moving
or obsolete inventory items to reduce the cost of inventory to its
net realisable value. The Company determines the valuation by
evaluating expected future usage as compared to its past history of
utilisation and future expectations of usage. At 31 December 2022
and 2021, the Company had REGEN-related inventory of 41 percent and
39 percent of the total inventory balance, respectively, which is
in excess of the Company's current requirements based on the recent
level of sales. The inventory is associated with efforts to expand
into the Enhanced Oil Recovery and Beneficial Reuse markets that
the Company has identified as large global markets. These efforts
should reduce this inventory to desired levels over the near term
and Management believes no loss will be incurred on its
disposition. However, there is a risk that management will sustain
a loss on the value of the inventory before it is sold. No estimate
can be made of a range of amounts of loss that are reasonably
possible should the efforts not be successful.
Prepaid expenses and other current assets - Prepaid expenses and
other current assets include non-trade receivables that are
collectible in less than 12 months, security deposits on leased
space and various prepaid amounts that will be charged to expenses
within 12 months. Non-trade receivables that are collectible in 12
months or more are included in long-term assets.
Property and equipment - All property and equipment are valued
at cost. Depreciation is computed using the straight-line method
for reporting over the following useful lives:
Building 39 years
Lease period or 1-5 years (whichever
Leasehold improvements is shorter)
---------------------------------------
Office equipment 3-10 years
---------------------------------------
Manufacturing equipment 5-15 years
---------------------------------------
Research and development equipment 5-10 years
---------------------------------------
Licensing period or 5 years (whichever
Purchased software is shorter)
---------------------------------------
Equipment leased to customers 5-10 years
---------------------------------------
Expenditures for major renewals and betterments that extend the
useful lives of property and equipment are capitalised.
Expenditures for maintenance and repairs are charged to expense as
incurred. Depreciation expense includes depreciation on equipment
leased to customers and is included in cost of goods sold.
Intangible assets - Intangible assets consist of the costs
incurred to purchase patent rights and legal and registration costs
incurred to internally develop patents. Intangible assets are
reported net of accumulated amortisation. Patents are amortised
using the straight-line method over a period based on their
contractual lives which approximates their estimated useful
lives.
Impairment of long-lived assets - Long-lived assets to be held
and used, including property and equipment and intangible assets
with definite useful lives, are assessed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If the total of the
expected undiscounted future cash flows is less than the carrying
amount of the asset, a loss, if any, is recognised for the
difference between the fair value and carrying value of the assets.
Impairment analyses, when performed, are based on the Company's
business and technology strategy, management's views of growth
rates for the Company's business, anticipated future economic and
regulatory conditions, and expected technological availability. For
purposes of recognition and measurement, the Company groups its
long-lived assets at the lowest level for which there are
identifiable cash flows, which are largely independent of the cash
flows of other assets and liabilities. No impairment charges were
recorded in the years ended 31 December 2022 and 2021.
Research and development costs - Research and development costs
are expensed as incurred. Research and development expense for the
years ended 31 December 2022 and 2021 was approximately $218,000
and $223,000, respectively.
Advertising costs - The Company expenses advertising costs as
incurred. Advertising expense for the years ended
31 December 2022 and 2021 was $nil and $5,000, respectively, and
is recorded in selling, general and administrative expenses.
Income taxes - The provision for income taxes for annual periods
is determined using the asset and liability method, under which
deferred tax assets and liabilities are calculated based on the
temporary differences between the financial statement carrying
amounts and income tax bases of assets and liabilities using
currently enacted tax rates. The deferred tax assets are recorded
net of a valuation allowance when, based on the weight of available
evidence, it is more likely than not that some portion or all of
the recorded deferred tax assets will not be realised in future
periods. Decreases to the valuation allowance are recorded as
reductions to the provision for income taxes and increases to the
valuation allowance result in additional provision for income
taxes. The realisation of the deferred tax assets, net of a
valuation allowance, is primarily dependent on the ability to
generate taxable income. A change in the Company's estimate of
future taxable income may require an addition or reduction to the
valuation allowance.
The benefit from an uncertain income tax position is not
recognised if it has less than a 50 percent likelihood of being
sustained upon audit by the relevant authority. For positions that
are more than 50 percent likely to be sustained, the benefit is
recognised at the largest amount that is more-likely-than-not to be
sustained. Where a net operating loss carried forward, a similar
tax loss or a tax credit carry forward exists, an unrecognised tax
benefit is presented as a reduction to a deferred tax asset.
Otherwise, the Company classifies its obligations for uncertain tax
positions as other non-current liabilities unless expected to be
paid within one year. Liabilities expected to be paid within one
year are included in the accrued expenses account.
The Company recognises interest accrued related to tax in
interest expense and penalties in selling, general and
administrative expenses. During the years ended 31 December 2022
and 2021 the Company recognised no interest or penalties.
Earnings per share - Basic earnings per share is computed using
the weighted average number of common shares outstanding during the
period. Diluted earnings per share is computed using the weighted
average number of common and potentially dilutive shares
outstanding during the period. Potentially dilutive shares consist
of the incremental common shares issuable upon conversion of the
exercise of common stock options. Potentially dilutive shares are
excluded from the computation if their effect is antidilutive.
Total common stock equivalents consisting of unexercised stock
options that were excluded from computing diluted net loss per
share were approximately 2,019,118 for the year ended 31 December
2022 and there were no adjustments to net income available to
stockholders as recorded on the statement of operations.
The following table sets forth the components used in the
computation of basic and diluted net (loss) profit per share for
the periods indicated:
Years Ended 31 December
2022 2021
------------ -----------
Basic weighted average outstanding shares of
common stock 22,214,884 19,443,750
------------ -----------
Effect of potentially dilutive stock options - -
------------ -----------
Diluted weighted average outstanding shares of
common stock 22,214,884 19,443,750
------------ -----------
Anti-dilutive shares of common stock excluded
from diluted weighted
average shares of common stock 2,019,118 1,782,420
------------ -----------
Fair value of financial instruments - The Company uses the
framework in ASC 820, Fair Value Measurements , to determine the
fair value of its financial assets. ASC 820 establishes a fair
value hierarchy that prioritises the inputs to valuation techniques
used to measure fair value and expands financial statement
disclosures about fair value measurements.
The hierarchy established by ASC 820 gives the highest priority
to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy under ASC 820 are
described below:
-- Level 1: Unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access at the measurement date.
-- Level 2: Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly.
-- Level 3: Unobservable inputs for the asset or liability.
There were no transfers into and out of each level of the fair
value hierarchy for assets measured at fair value for the years
ended 31 December 2022 or 2021.
All transfers are recognised by the Company at the end of each
reporting period.
Transfers between Levels 1 and 2 generally relate to whether a
market becomes active or inactive. Transfers between Levels 2 and 3
generally relate to whether significant relevant observable inputs
are available for the fair value measurement in their entirety.
The Company's financial instruments as of 31 December 2022 and
2021 include cash and cash equivalents, restricted cash, accounts
receivable and accounts payable. The carrying values of cash and
cash equivalents, restricted cash, accounts receivable and accounts
payable approximate fair value due to the short-term nature of
those assets and liabilities.
Foreign currency transactions - From time to time the Company
transacts business in foreign currencies (currencies other than the
United States Dollar). These transactions are recorded at the rates
of exchange prevailing on the dates of the transactions. Foreign
currency transaction gains or losses are included in selling,
general and administrative expenses.
Stock compensation - The Company issues equity-settled
share-based awards to certain employees, which are measured at fair
value at the date of grant. The fair value determined at the grant
date is expensed, based on the Company's estimate of shares that
will eventually vest, on a straight-line basis over the vesting
period. Fair value for the share awards representing equity
interests identical to those associated with shares traded in the
open market is determined using the market price at the date of
grant. Fair value is measured by use of the Black Scholes valuation
model (see Note 11).
Recently issued accounting standards - In June 2016, the FASB
issued ASU 2016-13, Financial Instruments - Credit Losses (Topic
326) , which requires measurement and recognition of expected
credit losses for financial assets held. The standard is to be
applied through a cumulative-effect adjustment to retained earnings
as of the beginning of the first reporting period in which the
guidance is effective. The guidance will become effective for the
Company in fiscal years beginning after 15 December 2022, including
interim periods within that reporting period. The Company is
currently evaluating the impact of adopting this guidance but does
not expect it to have a material impact on the Company's financial
statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes
(Topic 740): Simplifying the Accounting for Income Taxes , which is
expected to simplify income tax accounting requirements in areas
deemed costly and complex. The Company adopted this guidance
effective 1 January 2021. The adoption of this new guidance did not
have a material impact on the financial statements.
Recent accounting pronouncements pending adoption not discussed
above are either not applicable or are not expected to have a
material impact on the Company.
3. Accounts Receivable
Accounts receivable and their respective allowance amounts at 31
December 2022 and 2021:
31 December 31 December
2022 2021
US$000 US$000
Accounts receivable 2,946 1,957
----------- -----------
Less: allowance for doubtful accounts (168) (90)
----------- -----------
Total receivable - net 2,778 1,867
----------- -----------
4. Inventories
Inventories consist of the following at 31 December 2022 and
2021:
31 December 31 December
2022 2021
US$000 US$000
Raw materials 1,957 1,950
----------- -----------
Work-in-progress - 202
----------- -----------
Finished goods 1,780 2,168
----------- -----------
Total inventory 3,737 4,320
----------- -----------
5. Property and Equipment
Property and equipment consist of the following at 31 December
2022 and 2021:
31 December 31 December
2022 2021
US$000 US$000
Leasehold improvements 617 107
----------- -----------
Office equipment 636 636
----------- -----------
Manufacturing equipment 943 888
----------- -----------
Research and development equipment 545 545
----------- -----------
Purchased software 222 222
----------- -----------
Equipment leased to customers 10,221 10,254
----------- -----------
Equipment available for lease to customers - 272
----------- -----------
13,184 12,924
----------- -----------
Less: accumulated depreciation (9,955) (9,675)
----------- -----------
Property and equipment - net 3,229 3,249
----------- -----------
In March 2021, the Company completed the sale of its building in
Duluth, Georgia for total consideration of $5.4 million enabling
the Company to right-size its office space needs across its main
operating locations. The net book value of the building and land
was $2.8 million so the Company recognised a financial gain of
approximately $2.6 million.
During the years ended 31 December 2022 and 2021, the Company
removed property and equipment and the associated gross and
accumulated depreciation of approximately $742,000 and $856,000,
respectively, to reflect the disposal of property and
equipment.
Depreciation expense for the years ended 31 December 2022 and
2021 was approximately $1,022,000 and $1,066,000, respectively, and
includes depreciation on equipment leased to customers.
Depreciation expense on equipment leased to customers included in
cost of goods sold for the years ended 31 December 2022 and 2021
was $881,000 and $919,000, respectively.
6. Intangible Assets
During 2009, the Company entered into a patent rights purchase
agreement. The patent is amortised utilising the straight-line
method over a useful life of 17 years which represents the legal
life of the patent from inception. Accumulated amortisation on the
patent was approximately $77,000 and $70,000 as of 31 December 2022
and 2021, respectively.
In addition to the purchased patent, the Company has internally
developed patents. Internally developed patents include legal and
registration costs incurred to obtain the respective patents. The
Company currently holds various patents and numerous pending patent
applications in the United States, as well as numerous foreign
jurisdictions outside of the United States. In 2022, there was
$47,000 of new internally developed patents and fees on patents in
progress.
Intangible assets as of 31 December 2022 and 2021 consist of the
following:
31 December 31 December
Weighted Average 2022 2021
Useful Lives US$000 US$000
Internally developed patents 15 years 1,475 1,447
----------------- ----------- -----------
Purchased patents 17 years 100 100
----------------- ----------- -----------
1,575 1,547
-------------------------------------------------------------- ----------- -----------
Less accumulated amortisation - Internally
developed patents (765) (703)
----------- -----------
Less accumulated amortisation - purchased
patents (77) (70)
----------- -----------
Intangible assets - net 733 774
----------- -----------
At 31 December 2022, internally developed patents include
approximately $361,000 for costs accumulated for patents that have
not yet been issued and are not depreciating.
Approximate aggregate future amortisation expense is as
follows:
Year Ending 31 December (USD, in thousands)
2023 54
---
2024 52
---
2025 51
---
2026 48
---
2027 43
---
Thereafter 123
---
Amortisation expense for the years ended 31 December 2022 and
2021 was approximately $69,000 and $58,000, respectively.
7. Income Taxes
The components of income taxes shown in the statements of
operations are as follows:
31 December 31 December
2022 2021
US$000 US$000
Current:
----------- -----------
Federal - -
----------- -----------
Foreign 415 291
----------- -----------
State 3 5
----------- -----------
Total current provision 418 296
----------- -----------
Deferred:
----------- -----------
Federal - -
----------- -----------
Foreign - -
----------- -----------
State - -
----------- -----------
Total deferred provision - -
----------- -----------
Total provision for income taxes 418 296
----------- -----------
The provision for income tax varies from the amount computed by
applying the statutory corporate federal tax rate of 21 percent,
primarily due to the effect of certain non-deductible expenses,
foreign withholding tax, and changes in valuation allowances.
A reconciliation of the differences between the effective tax
rate and the federal statutory tax rate is as follows:
31 December 31 December
2022 2021
Federal statutory income tax rate 21.0% 21.0%
----------- -----------
State tax rate, net of federal benefit 0.8% (4.9%)
----------- -----------
Valuation allowance (18.8%) (13.3%)
----------- -----------
Other (5.6%) (8.8%)
----------- -----------
Foreign withholding tax (9.1%) (20.2%)
----------- -----------
Effective income tax rate (11.7%) (26.2%)
----------- -----------
The significant components of deferred income taxes included in
the balance sheets are as follows:
31 December 31 December
2022 2021
US$000 US$000
Deferred tax assets
----------- -----------
Net operating loss 6,598 5,802
----------- -----------
Equity compensation 227 272
----------- -----------
Research and development credits 159 159
----------- -----------
Right of use liability 263 316
----------- -----------
Inventory valuation reserve 350 349
----------- -----------
Other 145 102
----------- -----------
Total gross deferred tax asset 7,742 7,000
----------- -----------
Deferred tax liabilities
----------- -----------
Property and equipment (708) (578)
----------- -----------
Right of use asset (254) (314)
----------- -----------
Total gross deferred tax liability (962) (892)
----------- -----------
Net deferred tax asset before valuation allowance 6,780 6,108
----------- -----------
Valuation allowance (6,780) (6,108)
----------- -----------
Net deferred tax asset (liability) - -
----------- -----------
Deferred tax assets and liabilities are recorded based on the
difference between an asset or liability's financial statement
value and its tax reporting value using enacted rates in effect for
the year in which the differences are expected to reverse, and for
other temporary differences as defined by ASC-740, Income Taxes .
At 31 December 2022 and 2021, the Company has recorded a valuation
allowance of $6.8 million and $6.1 million, respectively, a change
of $670,000 and $300,000 for each year, for which it is more likely
than not that the Company will not receive future tax benefits due
to the uncertainty regarding the realisation of such deferred tax
assets.
As of 31 December 2022, the Company has approximately $30.2
million of gross U.S. federal net operating loss carry forwards and
$3.7 million of gross state net operating loss carry forwards that
will begin to expire in the 2023 tax year and will continue through
2042 when the current year net operating losses will expire. As of
31 December 2021, the Company had approximately $26.5 million of
gross U.S. federal net operating loss carry forwards and $3.6
million of gross state net operating loss carry forwards.
On 27 March 2020, the U.S. Government enacted the Coronavirus
Aid, Relied, and Economic Security Act (the 'CARES Act'). The CARES
Act includes, but is not limited to, tax law changes related to (1)
accelerated depreciation deductions for qualified improvement
property placed in service after 27 September 2017, (2) reduced
limitation of interest deductions, and (3) temporary changes to the
use and limitation of NOLs. There was no material impact of the
CARES Act to the Company's income tax provision for 2022 or
2021.
The Company's tax years 2018 through 2022 remain subject to
examination by federal, state and foreign income tax
jurisdictions.
8. Line of Credit
In October 2014, the Company entered into a bank line of credit
that allowed for borrowings up to $500,000. The line of credit was
revolving and was payable on demand. In November 2018, the maximum
borrowing capacity was increased to $1,875,000. The facility
renewed annually and was secured by the assignment of a deposit
account held by the lender and a second deed to the property owned
by the Company in Duluth, Georgia. The line of credit carried a
floating rate of interest equal to the lender's Prime Rate and was
subject to change any time the Prime Rate changed. Under terms of
the line of credit, the Company was required to maintain a minimum
cash balance and a specified cash flow coverage ratio, as those
terms were defined, and the Company was in compliance as throughout
the term of the facility. In March 2021, the line of credit was
paid in full with proceeds from the sale of the Company's building
in Duluth, Georgia and the facility was closed. Interest expense
related to this loan was $9,000 for the year ended 31 December
2021.
9. Paycheck Protection Program Loan
In December 2020, Congress enacted the Consolidated
Appropriations Act, 2021. The Act is an approximately $900 billion
COVID-19 relief package and includes $284 billion for a second
round of the Paycheck Protection Program ('PPP Loan'), Title I of
the CARES Act, which was enacted 27 March 2020. In January 2021,
the Company applied for and was granted a PPP Loan from Pinnacle
Bank in the amount of approximately $401,000. The PPP Loan issued
to the Company matures in January 2026 and bears an interest rate
of 1 percent per annum and may be prepaid in whole or in part
without penalty. No interest payments are due within the initial
six months of the PPP Loan. The interest accrued during the initial
six-month period is due and payable, together with the principal,
on the maturity date. On 5 August 2021, the Company's PPP Loan was
forgiven in full, including all principal and interest outstanding
as of the date of the forgiveness. Any amount forgiven when the
Company was legally released as the primary obligor under the loan
was recognised in the Statement of Operations as a gain upon the
extinguishment of the loan.
10. Note Payable
On 27 March 2013, the Company entered into a term loan agreement
with a lender for the purchase of property and a building for its
manufacturing operations and corporate offices. The note was
secured by the property and building from which the Company
continued to operate through March 2022. The carrying amount of the
property and building was $2.9 million as of 31 December 2020. Upon
selling the collateral, the Company was required to repay the term
loan in full. The lender was not allowed to sell the collateral
during the term of the loan. The Company borrowed proceeds of
$2,285,908 at a fixed interest rate of 4.45 percent. The loan had a
10-year term with monthly payments based on a 20-year amortisation.
The result was a one-time balloon payment at the end of the term of
the note of approximately $1,400,000 during 2023. In accordance
with the terms of the agreement, the Company was required to keep
$500,000 in a deposit account with the lending bank. In March 2021,
the Note Payable was paid in full with proceeds from the sale of
the Company's building in Duluth, Georgia and $500,000 of cash was
reclassified from restricted cash.
11. Stock Compensation
In July 2011, the Company's shareholders approved the Conversion
Shares and the Directors' Shares, as well as the Plan Shares and
Omnibus Performance Incentive Plan ('Plan'). This included the
termination of all outstanding stock incentive plans, cancellation
of all outstanding stock incentive agreements, and the awarding of
stock incentives to Directors and certain employees and
consultants. The Company established the Plan to attract and retain
Directors, officers, employees and consultants. The Company
reserved an amount equal to 10 percent of the Common Shares issued
and outstanding immediately following the Public Offering.
Upon the issuance of these shares, an award of share options was
made to the Directors and certain employees and consultants, and a
single award of restricted shares was made to a former Chief
Financial Officer. In addition, additional stock options were
awarded in each year subsequent. The awards of stock options and
restricted shares made upon issuance were in respect of 85 percent
of the Common Shares available under the Plan, equivalent to 8.5
percent of the Public Offering.
In July 2019, the Company's shareholders approved the extension
of the Plan to 2029 and the increase in the possible number of
shares to be awarded pursuant to the Plan to 15 percent of the
Company's issued capital at the date of any award. The total number
of shares reserved for stock options under this Plan is 3,447,453
with 2,105,080 shares allocated as of 31 December 2022. The shares
are all allocated to employees, executives and consultants.
Any options granted to Non-Executive Directors, unless otherwise
agreed, vest contingent on continuing service with the Company at
the vesting date and compliance with the covenants applicable to
such service.
Employee options vest over three years with a third vesting
ratably each year, partially on issuance and partially over the
following 24-month period, or if there is a change of control, and
expire on the tenth anniversary date the option vests. Vesting
accelerates in the event of a change of control. Options granted to
Non-Executive Directors, Consultants and one Executive vest
partially on issuance and will vest partially one to two years
later. The remaining Non-Executive Director options expired at the
end of 2016 on the five-year anniversary date of the grant.
As discussed in Note 2, the Company uses the Black Scholes
valuation model to measure the fair value of options granted. The
Company's expected volatility is calculated as the historical
volatility of the Company's stock over a period equal to the
expected term of the awards. The expected terms of options are
calculated using the weighted average vesting period and the
contractual term of the options. The risk-free interest rate is
based on a blended average yield of two- and five-year United
States Treasury Bills at the time of grant. The assumptions used in
the Black Scholes option pricing model for options granted in 2022
and 2021 were as follows:
Number of Risk-free
Options Interest Expected Exercise Fair Value
Granted Grant Date Rate Term Volatility Price Per Option
2021 762,000 09/04/2021 1.10% 5.7 years 76.00% $0.69 $0.45
--------- ---------- --------- --------- ---------- -------- -----------
100,000 11/11/2021 1.23% 5.2 years 63.00% $1.00 $0.54
--------- ---------- --------- --------- ---------- -------- -----------
2022 250,000 27/06/2022 3.25% 6.0 years 279.00% $0.55 $0.54
--------- ---------- --------- --------- ---------- -------- -----------
25,000 28/09/2022 4.18% 6.0 years 279.00% $0.33 $0.33
--------- ---------- --------- --------- ---------- -------- -----------
The Company assumes a dividend yield of 0.0 percent.
The following table summarises the Company's stock option
activity for the years ended 31 December 2022 and 2021:
Weighted-Average Average Grant
Weighted-Average Remaining Contractual Date Fair
Stock Options Shares Exercise Price Term (in years) Value
Outstanding at 31 December
2020 1,324,338 $2.04 5.8 $1.01
--------- ---------------- ---------------------- -------------
Granted 862,000 $1.69 5.7 $0.46
--------- ---------------- ---------------------- -------------
Forfeited (143,000) $2.83
--------- ---------------- ---------------------- -------------
Outstanding at 31 December
2021 2,043,338 $1.43 5.8 $0.76
--------- ---------------- ---------------------- -------------
Granted 275,000 $0.53 6.0 $0.52
--------- ---------------- ---------------------- -------------
Forfeited (213,258) $2.41
--------- ---------------- ---------------------- -------------
Outstanding at 31 December
2022 2,105,080 $1.22 5.8 $0.68
--------- ---------------- ---------------------- -------------
Exercisable at 31 December
2022 1,362,080 $1.57 5.7
--------- ---------------- ---------------------- -------------
The total intrinsic value of the stock options exercised during
the years ended 31 December 2022 and 2021 was approximately
$nil.
A summary of the status of unvested options as of 31 December
2022 and changes during the years ended 31 December 2022 and 2021
is presented below:
Weighted-Average
Fair Value
Unvested Options Shares at Grant Date
Unvested at 31 December 2020 365,000 $0.34
--------- ----------------
Granted 862,000 $0.46
--------- ----------------
Vested (374,000) $0.46
--------- ----------------
Forfeited (2,000)
--------- ----------------
Unvested at 31 December 2021 851,000 $0.41
--------- ----------------
Granted 275,000 $0.52
--------- ----------------
Vested (356,334) $0.46
--------- ----------------
Forfeited (26,666)
--------- ----------------
Unvested at 31 December 2022 743,000 $0.43
--------- ----------------
As of 31 December 2022, total unrecognised compensation cost of
approximately $171,000 was related to unvested share-based
compensation arrangements awarded under the Plan.
Total stock compensation expense for the years ended 31 December
2022 and 2021 was approximately $156,000 and $255,000,
respectively.
12. Commitments and Contingencies
Operating leases - As of 31 December 2022, the Operating Lease
ROU Asset has a balance of $1,176,000, net of accumulated
amortisation of $567,000, and an Operating Lease Liability of
$1,216,000, which are included in the accompanying balance sheet.
The weighted average discount rate used for leases is 5.25 percent,
which is based on the Company's secured incremental borrowing
rate.
The Company's leases do not include any options to renew that
are reasonably certain to be exercised. The Company's leases mature
at various dates through March 2027 and have a weighted average
remaining life of 3.86 years.
Future maturities under the Operating Lease Liability are as
follows for the years ended 31 December:
Future Lease
Year Ending 31 December Payments US$000
2023 381
----------------
2024 321
----------------
2025 280
----------------
2026 290
----------------
2027 74
----------------
2028 -
----------------
Total future maturities 1,346
----------------
Portion representing interest (130)
----------------
1,216
----------------
Total lease expense for the years ended 31 December 2022 and
2021 was approximately $341,000 and $259,000, respectively.
Total cash paid for leases for the years ended 31 December 2022
and 2021 was $307,000 and $227,000, respectively, and is part of
prepaid operating leases on the Statements of Cash Flows.
The Company has elected to apply the short-term lease exception
to all leases of one year or less and is not separating lease and
non-lease components when evaluating leases. Total costs associated
with short-term leases was $322,000 and $447,000 for the years
ended 31 December 2022 and 2021, respectively.
Legal - From time to time, the Company is a party to certain
legal proceedings arising in the ordinary course of business. In
the opinion of management, there are no current legal proceedings
or other claims outstanding which could have a material adverse
effect on the results of operations or financial position of the
Company.
13. Related Party Transactions
The Company has held a patent rights purchase agreement since
2009 with a shareholder as described in Note 6.
14. Segment and Geographic Information
ASC 280-10, Disclosures About Segments of an Enterprise and
Related Information , establishes standards for reporting
information about operating segments. ASC 280-10 requires that the
Company report financial and descriptive information about its
reportable operating segments. Operating segments are components of
an enterprise for which separate financial information is available
that is evaluated regularly by the chief operating decision maker
('CODM') in deciding how to allocate resources and in assessing
performance. The Company's CODM is the Chief Executive Officer
('CEO'). While the CEO is apprised of a variety of financial
metrics and information, the business is principally managed on an
aggregate basis as of 31 December 2022. For the year ended 31
December 2022, the Company's revenues were generated primarily in
the Middle East and the United States ('U.S.'). Additionally, the
majority of the Company's expenditures and personnel either
directly supported its efforts in the Middle East and the U.S., or
cannot be specifically attributed to a geography. Therefore, the
Company has only one reportable operating segment.
Revenue from customers by geography is as follows:
Year Ending 31 December (USD, in thousands) 2022 2021
Middle East 7,025 5,388
------ -----
United States 2,094 1,336
------ -----
Australia 558 257
------ -----
Nigeria - 1,312
------ -----
Other 349 185
------ -----
Total 10,026 8,478
------ -----
Long lived assets, net of depreciation, by geography is as
follows:
Year Ending 31 December (USD, in thousands) 2022 2021
Middle East 2,016 2,380
----- -----
United States 2,389 2,328
----- -----
Other - -
----- -----
Total 4,405 4,708
----- -----
15. Concentrations
At 31 December 2022, two customers, one with four contracts with
four separate plants, represented 88 percent of accounts
receivable. During the year ended 31 December 2022, the Company
received 85 percent of its gross revenue from five customers, one
with four contracts with four separate plants.
At 31 December 2021, two customers, one with four contracts with
four separate plants, represented 82 percent of accounts
receivable. During the year ended 31 December 2021, the Company
received 78 percent of its gross revenue from five customers, one
with six contracts with four separate plants.
16. Subsequent Events
The Company discloses material events that occur after the
balance sheet date but before the financials are issued. In
general, these events are recognised in the financial statements if
the conditions existed at the date of the balance sheet, but are
not recognised if the conditions did not exist at the balance sheet
date. Management has evaluated subsequent events through 17 May
2023, the date the financial statements were available to be
issued, and no events have occurred which require further
disclosure.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR GPUPPAUPWGRM
(END) Dow Jones Newswires
May 18, 2023 02:00 ET (06:00 GMT)
Mycelx Technologies (LSE:MYX)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
Mycelx Technologies (LSE:MYX)
Gráfica de Acción Histórica
De May 2023 a May 2024
