TIDMMYX TIDMMYXR
RNS Number : 9758M
MyCelx Technologies Corporation
20 September 2023
20 September 2023
MYCELX TECHNOLOGIES CORPORATION (AIM: MYX)
Half Year Results Statement
MYCELX Technologies Corporation ("MYCELX" or the "Company"), the
clean water and clean air technology company transforming the
environmental impact of industry, is pleased to announce its
unaudited interim results for the six months ended 30 June
2023.
Highlights
Financial
-- Revenue up 51% to $5.6 million (2022 H1: $3.7 million)
-- Gross profit margin of 45.2% (2022 H1: 37.5%)
-- EBITDA loss $900,000 (2022 H1: loss $2.1 million)
-- Net loss of $1.5 million (2022 H1: $2.9 million)
-- Cash and cash equivalents $1.4 million at end of period
Operational
-- United States PFAS: signed three pilot testing agreements for
PFAS remediation in drinking water and landfill leachate sites
-- REGEN: secured second REGEN sale to National Oil Company for
water treatment during Enhanced Oil Recovery ('EOR') in the Middle
East
-- Middle East Downstream: converted an existing emergency
response project into a longer-term contract
-- Middle East Downstream: signed fourth project with existing
customer to provide clean water at a fertilizer production
facility
Post Period Update
-- PFAS: Company's Performer media received NSF 61 certification for drinking water
-- PFAS: trials continue, gathering critical longer run-time data
-- REGEN: trial of REGEN media in EOR production with strategic
partner expected to start up in Q4 2023
-- Middle East Downstream: secured project to treat complex
wastewater with minimum revenue of $1.0 million in 2023 meeting
strict discharge standards
-- Middle East Downstream: several contract renewals including
an operating contract to treat MTBE (methyl tert-butyl ether) plant
wastewater now entering its twelfth year
Outlook
MYCELX operates in three core markets, PFAS remediation, REGEN
and Middle East Downstream, that are poised for continued robust
growth into 2024 and beyond. The burgeoning PFAS remediation market
is in its infancy in the U.S. and around the world but there is
mounting evidence of large-scale toxic contamination of groundwater
and drinking water with more compromised industrial sites
identified every day. In the U.S., several global PFAS-producing
companies have settled lawsuits in the billions of dollars, such as
3M's $10.3 billion claim resolution, that will fund remediation
projects for years while the U.S. Department of Defense has set
aside $2 billion dollars to remediate groundwater around their
bases that have been contaminated for a significant period. The
PFAS remediation market is large, high margin and is expected to be
long-lasting with potential to provide sustainable and stable
revenues for the Company far into the future. The Company is
engaged in several ongoing pilot trials in different PFAS sectors
which satisfy the end users and engineering consultants'
expectations of significant data gathering. With multiple project
proposals submitted to end users and strategic partners, we expect
project bidding activity to be robust in our focus areas and expect
to move to commercial discussions later this year and in early
2024.
The oil and gas markets have been robust through H1 and are
forecasted to continue to be so into 2024 and beyond. In the
current oil price range, producers are expending resources to
upgrade or expand production and are investing in cleaner
production solutions. The Company anticipates the start-up of a
pilot system in Q4 for water treatment during EOR production
working in cooperation with a global strategic partner. The EOR
market is the most lucrative market for our REGEN media and this
pilot comes on the heels of the upgrade contract we were awarded in
competition earlier this year for use of REGEN in existing
equipment with a Middle East EOR producer.
Adding to our success in the downstream market this year, the
Company recently secured a project for complex wastewater treatment
leveraging our REGEN product in the process system that has a
minimum value of $1.0 million in 2023. This market continues to
grow as we have broadened and enhanced our offerings. Our position
as the best available technology for these complex wastewater
streams has been confirmed by our successful treatment where all
other competitors have failed. In one of our latest projects, our
technology has been so effective that the wastewater treated can
then be discharged to irrigation systems. This positions us well as
regulations become stricter and markets look for more sustainable
reuse options for industrial water. We are now poised to garner
higher quality projects where our technology and experience are
significant differentiators.
The Company is very upbeat about its prospects for the remainder
of 2023 and going into 2024. We have a solid foundation of
operating contracts, the adoption of our REGEN media for EOR
production by a major Middle Eastern producer, which is a major
step forward, and significant data-gathering pilots in the PFAS
market with potential strategic partners as well as direct customer
engagement. The pipeline in each of the core markets is strong and
growing and the Company is optimistic that it can continue to
convert bids to projects during the remainder of this year and into
2024 and 2025 in support of market expectations.
Commenting on these results, Connie Mixon, CEO, said:
"Today's Half Year results show solid improvement of MYCELX's
performance in comparison to the same period last year. A number of
significant contract awards with both existing and new customers
were secured during the first six months of the year and after
period end demonstrating our focus markets are robust and our
proprietary products meet the performance and environmental
challenges our customers face.
With our proven and patented technologies, we are uniquely well
placed to play a leading role in PFAS remediation, as well as to
continue servicing industrial clients, in particular in the oil and
gas sector where our REGEN media is in increasing demand for
enhanced oil recovery. We continue to offer innovative solutions in
the downstream wastewater market that allow our customers to reach
their stated goals of maximising operational performance while
minimising their environmental footprint.
We have much cause for optimism and look forward to updating
shareholders on these exciting developments over the remainder of
the year and beyond."
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 7770 6424
Jimmy Lea
Chairman's and Chief Executive Officer's Statement
We are pleased to publish MYCELX's H1 2023 results today,
alongside a wider business update on the corporate activity we have
been working on since the start of the year.
Operational Review
We delivered a number of important operational objectives during
H1, including securing multiple PFAS trials that were installed
post period and are ongoing, converting an emergency response
contract to longer term deployment, along with renewing several
contracts in the wastewater market in the Middle East. A
competitive contract award for sale of REGEN and retrofit package
to an EOR producer in the Middle East was secured confirming our
REGEN media is the most efficient and effective at treating water
for the expansive and lucrative EOR market.
A key focus for the Company in the first half of 2023 was
enhancing the applicability and credibility of our PFAS technology
offering. We achieved this goal by securing National Sanitation
Foundation NSF 61 certification which is required for use of our
proprietary PFAS media in drinking water applications. Our media
also tested favorably for the Toxicity Characteristic Leaching
Procedure (TCLP) that confirms our spent media does not leach
hazardous materials into the environment, a key factor in the
cost-effective removal of PFAS. Achieving both of these goals helps
open the door for our media to be deployed in specific, large PFAS
applications. Another key focus was growing our relationships with
strategic partners with active operating projects as well as
building strong client relationships. Two of the trials currently
operating are with potential partners who want effective, cost
competitive, reliable technology that is energy efficient, which
our solution achieves.
During the period the Company secured a sale to a Middle Eastern
National Oil Company (NOC) using an EOR production process that
will deploy our proprietary Retrofit package and REGEN media to
replace underperforming Nutshell media. We expect the sale to lead
to more projects with this producer who is upgrading and expanding
field operations over the next several years. The Company is also
working with a strategic partner in the EOR market with a pilot
expected to start up in Q4 that will showcase REGEN media to global
EOR producers. We expect to be able to leverage their sales
platform to accelerate uptake given our award of the NOC contract
in the Middle East.
We continue to have success in the downstream market in the
Middle East and in Saudi Arabia in particular. The Company has
focused on carving out business that competitors do not have the
capability or experience to address. As a technology company,
MYCELX has built on its proprietary technology to leverage other
protocols to successful projects that have direct impact on the
environmental goals of Saudi Arabia. An emergency response system
was converted to a longer-term deployment that allowed the customer
to continue operations prior to a scheduled maintenance program.
The Company renewed contracts with two other operating
installations with ongoing demand for our systems.
Financial Review
Due to increased demand in the Middle East and growth in
long-term legacy media sales, revenue increased by 51% to $5.6
million compared to $3.7 million in the first half of 2022. Revenue
from equipment sales and leases increased by 100% to $2.0 million
in the first half of 2022 (2022 H1: $1.0 million). Revenue from
consumable filtration media and service increased by 33% to $3.6
million (2022 H1: $2.7 million). Whilst the equipment sales are one
off by nature, there is longevity to the media sales and on-going
lease and service revenues.
Gross profit increased by 79% to $2.5 million in the first half
of 2023, compared to $1.4 million in the first half of 2022, and
gross profit margin increased to 45% in the first half of 2023
(2022 H1: 38%) due to the Company's focus on higher-quality,
higher-margin projects.
Total operating expenses for the first half of 2023, including
depreciation and amortisation, decreased by 7% to $3.8 million
(2022 H1: $4.1 million). The largest component of operating
expenses was selling, general and administrative expenses, which
decreased by approximately 8% to $3.6 million in the first half of
2023 (2022 H1: $3.9 million) due to moving expenses for relocating
the Company's office in Georgia in H1 2022. Depreciation and
amortisation within operating expenses increased by 26% to $116,000
(2022 H1: $92,000).
EBITDA was negative $900,000 for the first half of 2023,
compared to negative $2.1 million for the first half of 2022.
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 $1.3 million for the
first half of 2023, compared to loss before tax of $2.7 million for
the first half of 2022. Basic loss per share was 7 cents for the
first half of 2023, compared to basic loss per share of 13 cents
for the first half of 2022.
As of 30 June 2023, total assets were $12.2 million with the
largest assets being inventory of $3.8 million, property and
equipment of $3.0 million, $1.7 million of accounts receivable and
$1.4 million of cash and cash equivalents including restricted
cash.
Total liabilities as of 30 June 2023 were $2.8 million and
stockholders' equity was $9.4 million, resulting in a
debt-to-equity ratio of 30%.
The Company ended the period with $1.4 million of cash and cash
equivalents, including restricted cash, compared to $1.7 million in
total at 31 December 2022. The Company used approximately $100,000
cash in operations in the first half of 2023, compared to $2.0
million used in operations in the first half of 2022. The Company
used $172,000 in investment activities in the first half of 2023
(H122: $373,000 used in investing) and there were no financing
activities in the first half of 2023 (H122: $2.0 million from the
sale of Common Shares of stock).
Outlook
The momentum shown in the first half from each of our three core
markets has been maintained into the current period and we are
confident that this will continue for the forseeable future. The
PFAS remediation market is large and will continue for years to
come. Regulations continue to get more stringent, and more sites
will be identified over time. In the short and medium term our goal
is to both win new contracts and to acquire solid data through
trials with significant longevity, building relationships with
strategic partners and direct customers that will accelerate uptake
of our PFAS solution. The EOR oil producers we have targeted are
upgrading and expanding their fields and, with the widening scope
of Environmental, Social and Governance ('ESG') requirements, are
looking for water treatment solutions that provide cleaner
production and use less water, which is solved with our technology.
We have made significant inroads with the adoption of our REGEN
product and look to leverage strategic partners to scale faster. In
the downstream market we continue to successfully focus on lower
risk, better margin projects as we grow our application and
installation base. With the oil price in the range that is widely
forecasted we expect the oil and gas market to continue to be
robust and seek the best technology that provides elevated
performance and addresses the environmental goals of the customer.
We will continue to grow our current customer and application base
where bidding contracts will be active. Collaborating with
strategic partners remains an important part of our path to market
and we will continue to vigorously pursue the best partnerships.
Overall, the Company is rigorously focused on growing our revenue
base, on maintaining a strict control over expenditure and
maximising shareholder returns. We believe we have a company that
is at the forefront of an ever-growing ESG compliant market with
technology that is market leading as proven by our list of
blue-chip customers.
Tom Lamb Connie Mixon
Chairman Chief Executive Officer
20 September 2023
MYCELX TECHNOLOGIES CORPORATION
Statements of Operations
(USD, in thousands, except share data)
Six Months Six Months Year
Ended Ended Ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited)
--------------------- ------------- -------------------
Revenue 5,568 3,699 10,026
Cost of goods sold 3,051 2,311 5,584
Gross profit 2,517 1,388 4,442
--------------------- ------------- -------------------
Operating expenses:
Research and development 107 101 218
Selling, general and administrative 3,608 3,898 7,589
Depreciation and amortisation 116 92 210
Gain on sale of property and equipment - (2) (2)
--------------------- ------------- -------------------
Total operating expenses 3,831 4,089 8,015
--------------------- ------------- -------------------
Operating loss (1,314) (2,701) (3,573)
Other income (expense)
Interest expense (4) - -
--------------------- ------------- -------------------
Loss before income taxes (1,318) (2,701) (3,573)
Provision for income taxes (187) (180) (418)
--------------------- ------------- -------------------
Net loss (1,505) (2,881) (3,991)
===================== ============= ===================
Loss per share-basic (0.07) (0.13) (0.18)
===================== ============= ===================
Loss per share-diluted (0.07) (0.13) (0.18)
===================== ============= ===================
Shares used to compute basic loss per share 22,983,023 21,429,675 22,214,884
===================== ================= ===============
Shares used to compute diluted loss per
share 22,983,023 21,429,675 22,214,884
===================== ================= ===============
The accompanying notes are an integral part of the financial
statements.
MYCELX TECHNOLOGIES CORPORATION
Balance Sheets
(USD, in thousands, except As of 30 June As of 30 June As of 31 December
share data) 2023 (unaudited) 2022 (unaudited) 2022
------------------ ------------------ ------------------
ASSETS
Current Assets
Cash and cash equivalents 1,394 2,765 1,645
Restricted cash 50 84 84
Accounts receivable -
net 1,675 1,226 2,778
Unbilled accounts receivable - 200 -
Inventory 3,826 4,182 3,737
Prepaid expenses 272 464 99
Other assets 138 233 138
------------------ ------------------ ------------------
Total Current Assets 7,355 9,154 8,481
Property and equipment
- net 3,007 3,101 3,229
Intangible assets - net 784 744 733
Operating lease asset
- net 1,011 1,334 1,176
------------------ ------------------ ------------------
Total Assets 12,157 14,333 13,619
================== ================== ==================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable 703 402 795
Payroll and accrued expenses 865 624 758
Customer deposits 176 72 18
Operating lease obligations
- current 331 311 326
------------------ ------------------ ------------------
Total Current Liabilities 2,075 1,409 1,897
Operating lease obligations
- long-term 725 1,055 890
------------------ ------------------ ------------------
Total Liabilities 2,800 2,464 2,787
------------------ ------------------ ------------------
Stockholders' Equity
Common stock, $0.025 par
value, 100,000,000 shares
authorised, 22,983,023
shares issued and outstanding
at 30 June 2023 and 2022
and 31 December 2022 574 574 574
Additional paid-in capital 44,798 44,695 44,768
Accumulated deficit (36,015) (33,400) (34,510)
------------------ ------------------ ------------------
Total Stockholders' Equity 9,357 11,869 10,832
------------------ ------------------ ------------------
Total Liabilities and
Stockholders' Equity 12,157 14,333 13,619
================== ================== ==================
The accompanying notes are an integral part of the financial
statements.
MYCELX TECHNOLOGIES CORPORATION
Statements of Stockholders'
Equity
(USD, in thousands)
Additional
Common Stock Paid-in Accumulated
Capital Deficit Total
Shares $ $ $ $
----------- ---- ----------- ------------ --------
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 - - 83 - 83
Net profit for the period - - - (2,881) (2,881)
----------- ---- ----------- ------------ --------
Balances at 30 June 2022 (unaudited) 22,983,023 574 44,695 (33,400) 11,869
Stock-based compensation expense - - 73 - 73
Net loss for the period - - - (1,110) (1,110)
----------- ---- ----------- ------------ --------
Balances at 31 December 2022 22,983,023 574 44,768 (34,510) 10,832
Stock-based compensation expense - - 30 - 30
Net loss for the period - - - (1,505) (1,505)
----------- ---- ----------- ------------ --------
Balances at 30 June 2023 (unaudited) 22,983,023 574 44,798 (36,015) 9,357
=========== ==== =========== ============ ========
The accompanying notes are an integral part of the financial
statements.
MYCELX TECHNOLOGIES CORPORATION
Statements of Cash Flows
(USD, in thousands)
Six Months Six Months Year
Ended Ended Ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited)
----------------------- ---------------------- ----------------
Cash flow from operating activities
Net loss (1,505) (2,881) (3,991)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortisation 441 552 1,091
Gain on sale of property and equipment - (2) (2)
Inventory reserve adjustment - - (5)
Stock compensation 30 83 156
Change in operating assets and
liabilities:
Accounts receivable - net 1,103 641 (911)
Unbilled accounts receivable - (25) 175
Inventory (187) 138 402
Prepaid expenses (173) (261) 104
Prepaid operating leases 5 25 32
Other assets - 166 261
Accounts payable (92) (281) 112
Payroll and accrued expenses 107 (134) -
Contract liability - (54) (54)
Customer deposits 158 (2) (56)
Net cash used in operating activities (113) (2,035) (2,686)
----------------------- ---------------------- ----------------
Cash flow from investing activities
Payments for purchases of property
and equipment (89) (364) (814)
Payments for internally developed
patents (83) (9) (28)
----------------------- ---------------------- ----------------
Net cash used in investing activities (172) (373) (842)
----------------------- ---------------------- ----------------
Cash flow from financing activities
Net proceeds from stock issuance - 2,045 2,045
Net cash provided by financing
activities - 2,045 2,045
----------------------- ---------------------- ----------------
Net decrease in cash, cash equivalents
and restricted cash (285) (363) (1,483)
----------------------- ---------------------- ----------------
Cash, cash equivalents and restricted
cash, beginning of period 1,729 3,212 3,212
Cash, cash equivalents and restricted
cash, end of period 1,444 2,849 1,729
======================= ====================== ================
Supplemental disclosures of cash flow information:
Cash payments for interest 4 - -
Cash payments for income taxes 244 188 390
Non-cash movements of inventory and fixed
assets 98 - 186
Non-cash operating ROU assets 906 1,120 1,014
Non-cash operating lease obligations 946 1,147 1,049
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 interim financial statements have
been prepared using recognition and measurement principles of
Generally Accepted Accounting Principles in the United States of
America ('U.S. GAAP').
The interim financial statements for the six months ended 30
June 2022 and 2021 have not been audited.
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. 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 continue to create 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 probably 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
interim financial statements and, accordingly, consider it
appropriate to adopt the going concern basis in preparing these
interim 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 judgment. Judgment 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 30
June 2023 and 2022, 31 December 2022 and 1 January 2022 was $nil,
$200,000, $nil and $175,000, respectively. Contract liability at 30
June 2023 and 2022, 31 December 2022 and 1 January 2022 was $nil,
$nil, $nil and $54,000, respectively.
Timing of revenue recognition for each of the periods and
geographic regions presented is shown below:
Equipment Leases, Turnkey Consumable Filtration
Arrangements, and Services Media, Equipment Sales
Recognised Over Time and Service Recognised
at a Point in Time
30 June 30 June 31 December 30 June 30 June 31 December
2023 2022 2022 2023 2022 2022
(USD, in thousands)
Middle East 3,885 2,479 6,453 6 136 573
United States - - - 1,338 741 2,094
Australia - - - 184 260 558
Other - - - 148 83 349
---------- ---------- -------------- ---------- ---------- --------------
Total revenue recognised
under ASC 606 3,885 2,479 6,543 1,676 1,220 3,573
Total revenue recognised 7 - - - - -
under ASC 842
---------- ---------- -------------- ---------- ---------- --------------
Total revenue 3,892 2,479 6,543 1,676 1,220 3,573
========== ========== ============== ========== ========== ==============
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 six months ended 30 June 2023 and 2022, and the year
ended 31 December 2022, 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 30 June 2023, 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 30 June 2023 and 2022, and 31 December 2022, cash in
non-U.S. institutions was $106,000, $124,000 and $159,000,
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 30 June 2022,
restricted cash included $50,000 in a money market account to
secure the Company's corporate credit card. At 30 June 2022 and 31
December 2022, 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
30 June 2023 and 2022, and 31 December 2022:
30 June 30 June 31 December
2023 2022 2022
US$000 US$000 US$000
Cash and cash equivalents 1,394 2,765 1,645
Restricted cash 50 84 84
---------- ---------- ------------
Total cash, cash equivalents
and restricted cash 1,444 2,849 1,729
========== ========== ============
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 30 June 2023 and 2022, and 31 December 2022 was
$168,000, $90,000 and $168,000, 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 30 June 2023 and
2022, and 31 December 2022, the Company had REGEN-related inventory
of 41 percent, 39 percent and 41 percent of the total inventory
balance, respectively, which is in excess of the Company's current
requirements based on the recent level of sales. The inventory is
associated with efforts to expand into the Enhanced Oil Recovery
and Beneficial Reuse markets that the Company has identified as
large global markets. These efforts should reduce this inventory to
desired levels over the near term and management believes no loss
will be incurred on its disposition. However, there is a risk that
management will sustain a loss on the value of the inventory before
it is sold. No estimate can be made of a range of amounts of loss
that are reasonably possible should the efforts not be
successful.
Prepaid expenses and other current assets - Prepaid expenses and
other current assets include non-trade receivables that are
collectible in less than 12 months, security deposits on leased
space and various prepaid amounts that will be charged to expenses
within 12 months. Non-trade receivables that are collectible in 12
months or more are included in long-term assets.
Property and equipment - All property and equipment are valued
at cost. Depreciation is computed using the straight-line method
for reporting over the following useful lives:
Leasehold improvements Lease period or 1-5 years (whichever
is shorter)
Office equipment 3-10 years
Manufacturing equipment 5-15 years
Research and development equipment 5-10 years
Purchased software Licensing period or 5 years (whichever
is shorter)
Equipment leased to customers 5-10 years
Expenditures for major renewals and betterments that extend the
useful lives of property and equipment are capitalised.
Expenditures for maintenance and repairs are charged to expense as
incurred. Depreciation expense includes depreciation on equipment
leased to customers and is included in cost of goods sold.
Intangible assets - Intangible assets consist of the costs
incurred to purchase patent rights and legal and registration costs
incurred to internally develop patents. Intangible assets are
reported net of accumulated amortisation. Patents are amortised
using the straight-line method over a period based on their
contractual lives which approximates their estimated useful
lives.
Impairment of long-lived assets - Long-lived assets to be held
and used, including property and equipment and intangible assets
with definite useful lives, are assessed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If the total of the
expected undiscounted future cash flows is less than the carrying
amount of the asset, a loss, if any, is recognised for the
difference between the fair value and carrying value of the assets.
Impairment analyses, when performed, are based on the Company's
business and technology strategy, management's views of growth
rates for the Company's business, anticipated future economic and
regulatory conditions, and expected technological availability. For
purposes of recognition and measurement, the Company groups its
long-lived assets at the lowest level for which there are
identifiable cash flows, which are largely independent of the cash
flows of other assets and liabilities. No impairment charges were
recorded in the six months ended 30 June 2023 and 2022, and the
year ended 31 December 2022.
Research and development costs - Research and development costs
are expensed as incurred. Research and development expense for the
six months ended 30 June 2023 and 2022, and the year ended 31
December 2022 was approximately $107,000, $101,000 and $218,000,
respectively.
Advertising costs - The Company expenses advertising costs as
incurred. Advertising expense for the six months ended 30 June 2023
and 2022, and the year ended 31 December 2022 was $7,000, $nil and
$nil, respectively, and is recorded in selling, general and
administrative expenses.
Income taxes - The provision for income taxes for interim and
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 six months ending 30 June 2023
and 2022, and the year ended 31 December 2022 the Company
recognised no interest or penalties.
Earnings per share - Basic earnings per share is computed using
the weighted average number of common shares outstanding during the
period. Diluted earnings per share is computed using the weighted
average number of common and potentially dilutive shares
outstanding during the period. Potentially dilutive shares consist
of the incremental common shares issuable upon conversion of the
exercise of common stock options. Potentially dilutive shares are
excluded from the computation if their effect is anti-dilutive.
Total common stock equivalents consisting of unexercised stock
options that were excluded from computing diluted net loss per
share were approximately 2,021,707 for the six months ended 30 June
2023 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:
30 June 30 June 31 December
2023 2022 2022
US$000 US$000 US$000
Basic weighted average outstanding
shares of common stock 22,983,023 21,429,675 22,214,884
Effect of potentially dilutive - - -
stock options
Diluted weighted average outstanding
shares of common stock 22,983,023 21,429,675 22,214,884
Anti-dilutive shares of common
stock excluded from diluted weighted
average shares of common stock 2,021,707 2,297,505 2,019,118
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 or out of each level of the fair
value hierarchy for assets measured at the fair value for the six
months ended 30 June 2023 and 2022, and the year ended 31 December
2022.
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 30 June 2023 and 2022,
and 31 December 2022 include cash and cash equivalents, restricted
cash, accounts receivable and accounts payable. The carrying values
of cash and cash equivalents, restricted cash, accounts receivable
and accounts payable approximate fair value due to the short-term
nature of those assets and liabilities.
Foreign currency transactions - From time to time the Company
transacts business in foreign currencies (currencies other than the
United States Dollar). These transactions are recorded at the rates
of exchange prevailing on the dates of the transactions. Foreign
currency transaction gains or losses are included in selling,
general and administrative expenses.
Stock compensation - The Company issues equity-settled
share-based awards to certain employees, which are measured at fair
value at the date of grant. The fair value determined at the grant
date is expensed, based on the Company's estimate of shares that
will eventually vest, on a straight-line basis over the vesting
period. Fair value for the share awards representing equity
interests identical to those associated with shares traded in the
open market is determined using the market price at the date of
grant. Fair value is measured by use of the Black Scholes valuation
model (see Note 8).
Recently issued accounting standards - In June 2016, the 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 Company adopted this guidance effective 1 January
2023. 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 30
June 2023 and 2022, and 31 December 2022:
30 June 30 June 31 December
2023 2022 2022
US$000 US$000 US$000
Accounts receivable 1,843 1,317 2,946
Less: allowance for doubtful
accounts (168) (90) (168)
---------- ---------- --------------
Total receivable - net 1,675 1,226 2,778
========== ========== ==============
4. Inventories
Inventories consist of the following at 30 June 2023 and 2022,
and 31 December 2022:
30 June 30 June 31 December
2023 2022 2022
US$000 US$000 US$000
Raw materials 2,066 1,928 1,957
Work-in-progress - 12 -
Finished goods 1,760 2,242 1,780
---------- ---------- --------------
Total inventory 3,826 4,182 3,737
========== ========== ==============
5. Property and equipment
Property and equipment consist of the following at 30 June 2023
and 2022, and 31 December 2022:
30 June 30 June 31 December
2023 2022 2022
US$000 US$000 US$000
Leasehold improvements 617 292 617
Office equipment 636 636 636
Manufacturing equipment 976 937 943
Research and development equipment 545 545 545
Purchased software 222 222 222
Equipment leased to customers 10,307 10,643 10,221
Equipment available for lease - - -
to customers
13,303 13,275 13,184
Less: accumulated depreciation (10,296) (10,174) (9,955)
---------------- -------------------- --------------
Property and equipment - net 3,007 3,101 3,229
================ ==================== ==============
During the six months ended 30 June 2023 and 2022, and the year
ended 31 December 2022, the Company removed property, plant and
equipment and the associated accumulated depreciation of
approximately $68,000, $14,000 and $742,000, respectively, to
reflect the disposal of property, plant and equipment.
Depreciation expense for the six months ended 30 June 2023 and
2022, and the year ended 31 December 2022 was approximately
$409,000, $513,000 and $1,022,000, respectively, and includes
depreciation on equipment leased to customers. Depreciation expense
on equipment leased to customers included in cost of goods sold for
the six months ended 30 June 2023 and 2022, and the year ended 31
December 2022 was $325,000, $460,000 and $881,000,
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 $80,000, $74,000 and $77,000 as of 30 June
2023 and 2022, and 31 December 2022, respectively.
In January 2023, the Company entered into a patent rights
purchase agreement. The patents are amortised utilizing the
straight-line method over useful lives of 13 and 14.75 years which
represent the remaining legal life of the patents on the date of
purchase. Accumulated amortisation on the patents was approximately
$2,000 at 30 June 2023.
In addition to the purchased patents, the Company has internally
developed patents. Internally developed patents include legal and
registration costs incurred to obtain the respective patents. The
Company currently holds various patents and numerous pending patent
applications in the United States, as well as numerous foreign
jurisdictions outside of the United States. In the six months ended
30 June 2023, there was $33,000 of new internally developed patents
and fees on patents in progress.
Intangible assets as of 30 June 2023 and 2022, and 31 December
2022 consist of the following:
Weighted 30 June 30 June 31 December
Average 2023 2022 2022
Useful US$000 US$000 US$000
lives
Internally developed
patents 15 years 1,508 1,456 1,475
Purchased patents 13-17 years 150 100 100
1,658 1,556 1,575
Less accumulated amortisation
- internally developed
patents (792) (739) (765)
Less accumulated amortisation
- purchased patents (82) (74) (77)
------------------ -------------------- -------------------
Intangible assets -
net 784 744 733
================== ==================== ===================
At 30 June 2023, internally developed patents include
approximately $228,000 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 37
2024 67
2025 66
2026 60
2027 58
Thereafter 268
Amortisation expense for the six months ended 30 June 2023 and
2022, and the year ended 31 December 2022 was approximately
$32,000, $39,000 and $69,000, respectively.
7. Income taxes
The components of income taxes shown in the statements of
operations are as follows:
30 June 30 June 31 December
2023 2022 2022
US$000 US$000 US$000
------------------- ------------------ ------------------
Current:
Federal - - -
Foreign 186 177 415
State 1 3 3
------------------- ------------------ ------------------
Total current provision 187 180 418
------------------- ------------------ ------------------
Deferred:
Federal - - -
Foreign - - -
State - - -
------------------- ------------------ ------------------
Total deferred provision - - -
------------------- ------------------ ------------------
Total provision for income taxes 187 180 418
=================== ================== ==================
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:
30 June 30 June 31 December
2023 2022 2022
---------- ---------- --------------
Federal statutory income tax rate 21.0% 21.0% 21.0%
State tax rate, net of federal
benefit 2.4% 0.6% 0.8%
Valuation allowance (26.5%) (23.0%) (18.8%)
Other 0.0% (0.1%) (5.6%)
Foreign withholding tax (11.1%) (5.2%) (9.1%)
---------- ---------- --------------
Effective income tax rate (14.2%) (6.7%) (11.7%)
========== ========== ==============
The significant components of deferred income taxes included in
the balance sheets are as follows:
30 June 30 June 31 December
2023 2022 2022
US$000 US$000 US$000
---------------------- --------------------- ----------------------
Deferred tax assets
Net operating loss 6,940 6,406 6,598
Equity compensation 233 290 227
Research and development credits 159 159 159
Right of use liability 228 304 263
Inventory valuation reserve 349 349 350
Other 145 102 145
Total gross deferred tax asset 8,054 7,610 7,742
Deferred tax liabilities
Property and equipment (710) (578) (708)
Right of use asset (218) (303) (254)
Total gross deferred tax liability (928) (881) (962)
Net deferred tax asset before
valuation allowance 7,126 6,729 6,780
Valuation allowance (7,126) (6,729) (6,780)
---------------------- --------------------- ---------------------
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
30 June 2023 and 2022 and 31 December 2022, the Company has
recorded a valuation allowance of $7.1 million, $6.7 million and
$6.8 million, respectively, a change of $346,000, $600,000 and
$670,000 for each period, 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 30 June 2023, the Company has approximately $31.6 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 2024 tax year and will continue through 2042
when the current year net operating losses will expire. As of 30
June 2022, the Company had approximately $29.3 million of gross
U.S. federal net operating loss carry forwards and $3.9 million of
gross state net operating loss carry forwards and at 31 December
2022, the Company had 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.
On 27 March 2020, the U.S. Government enacted the Coronavirus
Aid, Relief, 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 the six months
ended 30 June 2022 and 2022 or for the year ended 31 December
2022.
The Company's tax years 2019 through 2022 remain subject to
examination by federal, state and foreign income tax
jurisdictions.
8. Stock compensation
In July 2011, the Company's shareholders approved the Conversion
Shares and the Directors' Shares, as well as the Plan Shares and
Omnibus Performance Incentive Plan ('Plan'). This included the
termination of all outstanding stock incentive plans, cancellation
of all outstanding stock incentive agreements, and the awarding of
stock incentives to Directors and certain employees and
consultants. The Company established the Plan to attract and retain
Directors, officers, employees and consultants. The Company
reserved an amount equal to 10 percent of the Common Shares issued
and outstanding immediately following 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 2,020,040 shares allocated as of 30 June 2023. 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 in 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 2023
and 2022 were as follows:
Number Risk-Free Fair
of Options Grant Interest Expected Exercise Value
Granted Date Rate Term Volatility Price Per Option
------- -------------- ------------- ------------ ------------ ------------- ----------- --------------
2022 250,000 27/06/2022 3.25% 6.0 years 279% $0.55 $0.54
25,000 28/09/2022 4.18% 6.0 years 279% $0.33 $0.33
The Company assumes a dividend yield of 0.0%.
The following table summarises the Company's stock option
activity for the six months ended 30 June 2023:
Weighted-Average Weighted-Average Average
Exercise Remaining Contractual Grant Date
Stock Options Shares Price Term (in years) Fair Value
------------------------------ ------------ ------------------- ------------------------- --------------
Outstanding at 31 December
2022 2,105,080 $1.22 5.8 $0.68
Forfeited (85,040) $3.41
------------------------------ ------------
Outstanding at 30 June
2023 2,020,040 $1.12 5.8 $0.67
------------------------------ ------------
Exercisable at 30 June
2023 1,277,040 $1.45 5.4
------------------------------ ------------
The total intrinsic value of the stock options exercised during
the six months ended 30 June 2023 and 2022, and 31 December 2022
was $nil.
A summary of the status of unvested options as of 30 June 2023
and changes during the six months ended 30 June 2023 is presented
below:
Weighted-Average
Fair Value at Grant
Unvested Options Shares Date
-------------------------------- ------------ -----------------------
Unvested at 31 December 2022 743,000 $0.43
Vested (293,000) $0.42
-------------------------------- ------------
Unvested at 30 June 2023 450,000 $0.43
-------------------------------- ------------
As of 30 June 2023, total unrecognised compensation cost of
$114,000 was related to unvested share-based compensation
arrangements awarded under the Plan.
Total stock compensation expense for the six months ended 30
June 2023 and 2022, and 31 December 2022 was approximately $30,000,
$83,000 and $156,000, respectively.
9. Commitments and contingencies
Operating leases - As of 30 June 2023, the Operating Lease ROU
Asset has a balance of $1,011,000, net of accumulated amortisation
of $492,000 and an Operating Lease Liability of $1,056,000, 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 3.4 years.
Future maturities under the Operating Lease Liability are as
follows for the years ended 31 December:
(USD, in thousands) Future Lease
Payments
------------
2023 192
2024 321
2025 280
2026 290
2027 74
------------
Total future maturities 1,157
Portion representing interest (101)
------------
1,056
============
Total lease expense for the six months ended 30 June 2023 and
2022, and the year ended 31 December 2022 was approximately
$193,000, $148,000 and $341,000, respectively.
Total cash paid for leases for the six months ended 30 June 2023
and 2022, and the year ended 31 December 2022 was $189,000,
$122,000 and $307,000, 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 $120,000, $196,000 and $322,000 for the
six months ended 30 June 2023 and 2022, and 31 December 2022,
respectively.
Legal - From time to time, the Company is a party to certain
legal proceedings arising in the ordinary course of business. In
the opinion of management, there are no current legal proceedings
or other claims outstanding which could have a material adverse
effect on the results of operations or financial position of the
Company.
10. Related party transactions
The Company has held a patent rights purchase agreement since
2009 with a Director, who is also a shareholder, as described in
Note 6.
11. Segment and geographic information
ASC 280-10, Disclosures About Segments of an Enterprise and
Related Information, establishes standards for reporting
information about operating segments. ASC 280-10 requires that the
Company report financial and descriptive information about its
reportable operating segments. Operating segments are components of
an enterprise for which separate financial information is available
that is evaluated regularly by the chief operating decision maker
('CODM') in deciding how to allocate resources and in assessing
performance. The Company's CODM is the Chief Executive Officer
('CEO'). While the CEO is apprised of a variety of financial
metrics and information, the business is principally managed on an
aggregate basis as of 30 June 2023. For the six months ended 30
June 2023, 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:
Six months Six months Year ended
ended 30 June ended 30 June 31 December
(USD, in thousands) 2023 2022 2022
Middle East 3,891 2,615 7,025
United States 1,345 741 2,094
Australia 184 260 558
Other 148 83 349
----------------- ----------------- ---------------
Total 5,568 3,699 10,026
================= ================= ===============
Long lived assets, net of depreciation, by geography is as
follows:
Six months Six months Year ended
ended 30 June ended 30 June 31 December
(USD, in thousands) 2023 2022 2022
Middle East 1,743 2,361 2,016
United States 1,264 2,074 2,389
----------------- ----------------- ---------------
Total 3,007 4,435 4,405
================= ================= ===============
12. Concentrations
At 30 June 2023, two customers, one with three contracts with
three separate plants, represented 84 percent of accounts
receivable. During the six months ended 30 June 2023, the Company
received 85 percent of its gross revenue from four customers, one
with three contracts with three separate plants.
At 30 June 2022, two customers, one with three contracts with
three separate plants, represented 84 percent of accounts
receivable. During the six months ended 30 June 2022, the Company
received 84 percent of its gross revenue from two customers, one
with four contracts with four separate plants.
At 31 December 2021, 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.
13. 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 20
September 2023, the date the interim results were available to be
issued, and no events have occurred which require further
disclosure.
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Mycelx Technologies (LSE:MYX)
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