Final Audited Results

Verditek PLC
29 June 2023
 

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (MAR), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

29 June 2023

Verditek PLC

("Verditek" or the "Company")

Final Audited Results

Verditek plc, (AIM:VDTK), the international green technology company that develops, manufactures and sells lightweight solar panels, today announces its final audited results for the year ended 31 December 2022.

Copies of the annual report will be posted to shareholders shortly and will be made available to view on the Company's website at https://verditek.com/ .

Verditek is also pleased to announce that it will be holding its Annual General Meeting ("AGM") on Tuesday 25 July 2023 at 3:00pm BST at the offices of Peachey & Co LLP, 7th floor, 95 Aldwych London, WC2B 4JF.

The Notice of AGM will be posted to shareholders on 29 June 2023 and will be made available on the Company's website (https://verditek.com/).

For further information:

Verditek plc 


Rob Richards, CEO

John McCall, Interim CFO

WH Ireland Limited - NOMAD and Broker

Tel: +44 (0)20 7129 1110

Chris Hardie

Hugh Morgan

Andrew de Andrade

 

Tel: +44 (0)20 7220 1666

About Verditek plc:

AIM listed Verditek plc is a holding company of a business operating within the green technology sector. The Company is focused on commercialising our lightweight low-profile solar panel business. With manufacturing based in Italy, we have developed renewable power solutions for our customers, that drive solar energy into applications previously unachievable. The exceptional properties of our solar panels replace diesel fuel in business such as perishable goods transport, off-grid telecommunication towers, electric vehicle charging stations, residential and holiday home power solutions and solar roofing for light-weight industrial roofing. In addition to our current PV panels in production, we have partnered with an outstanding leader in graphene technology, Paragraf. We are working together to engineer the technology for commercialisation.

 

 

 

 

CHAIRMAN'S STATEMENT

The year to 31 December 2022 was one of commercial challenge for Verditek. Although there has been a modest growth in sales and a focus on building repeat customer relationships, the conversion of pipeline projects was lower than anticipated, as customer capital projects were either postponed or cancelled due to the ongoing impact of the global pandemic. Production was correspondingly scaled back at the start of the year in order to focus on fulfilling orders.

Operationally there was a focus on developing the lightweight semi-flexible solar panel product, improving the quality of manufacturing processes, and strengthening the skills of the production team through recruitment and training.

An exciting area of focus with a great deal of potential are collaborations with partners to incorporate Verditek panels into their products. We have worked closely with strategic partners to develop solar roofing solutions. We were delighted to have delivered our first integrated solar roof-panel system through our partnership with Swedish company Lindab AB, and also an integrated solar roof tile product in partnership with Belgian company Metrotile. These solutions can be used on a wide variety of buildings, and significantly expands the potential reach of Verditek's product offering.

2022 was a frustrating year for Verditek. Ongoing uncertainty from the pandemic and rising fuel costs have resulted in delays of capital projects and increasing price pressure. In response, Verditek has streamlined its operational production and focussed efforts on product quality and strategic solution partnerships. The near-term outlook for clean technology in general and Verditek in particular is very positive. The Group has seen a growing number of enquiries and pilot projects towards the end of the year and in early 2023, which point to promising signs of commercial growth for 2023.

 

 

 

The Rt Hon. Lord David Willetts FRS

Non-Executive Chairman

 



 

CHIEF EXECUTIVE'S REVIEW

Overview

The year to December 2022 has been a year of transition for Verditek, cementing new relationships with major European distributors of integrated solar roof product. The Group has focussed on commercializing its flexible, lightweight solar panels, but conversion of the sales pipeline, although now firmly establishing a solid base, is only just beginning to show signs of scaling up.

Our work with established partners to develop competitive, applied and integrated, solar PV products for a wide range of mainstream commercial and residential roofing solutions has greatly expanded our market opportunities and we are confident that this enhanced offering leaves Verditek well placed for commercial growth in 2023.

Strategy

The Group's historic strategy has been to identify early-stage business opportunities in the clean technology sector, invest in them and see them through to commercial success. Whilst this remains the Group's long-term objective, the focus during 2022 was on refining the Group's solar offering and working to build and convert the sales pipeline.

The Group solar strategy is to manufacture high quality panels with a focus on B2B sales through engaging distributors and sales representatives in different regions. The Group also aims to partner with solutions providers, who develop and bring to market innovative solutions with integrated solar panels.

In light of the climate emergency, the world needs to evolve from its dependency on hydrocarbon-based energy sources to cleaner, more environmentally friendly energy, this has been further accelerated with the ongoing war which has escalated energy prices across the board. We believe the Verditek Solar product is extremely well positioned to become a market leader in the ultra-lightweight, flexible solar market. The Company's product has numerous potential applications that are not available to the traditional, heavy and fragile solar panel technology. We believe major new market opportunities for our lightweight product will open up in areas such as military, transportation, cellular telecoms masts, new build homes (as part of an integrated roof tile system), and warehousing (where roofing structures are less rigid). Here the advantages of a highly durable, efficient ultra-lightweight solar solution can now be embraced.

We believe the trend in the world moving from burning hydrocarbons as a primary energy source towards utilising solar solutions will accelerate. 

Operations

After the year end, in May 2023, the Group's manufacturing  operations have been relocated from Lainate to Tolmezzo in Udine, Italy. This move was to lower the cost base and take advantage of more flexible working arrangements. From Tolmezzo a core staff together with a further flexible contract labour team manufacture Verditek's flexible lightweight solar panels using the latest components sourced from around the world.

Sales and Marketing

The Group has various routes to market, including commission only sales agents, employed sales consultants, distributors and solutions partners.

Verditek continue to supply panels for various marine applications including conventional yachts, electric powered yachts, and canal boats.

The Group has highly promising partnerships with roofing providers. Verditek Solar has signed a long term supply agreement with Lindab AB, a Scandinavian supplier roof systems, and they have placed multiple orders for installations in a number of countries.

Verditek Solar is also collaborating with Metrotile, who are incorporating the Verditek solar panel into  their roof tile products. Both these opportunities enhance the potential for commercial growth in the lucrative roofing sector. Verditek continue to work with two other large roofing companies elsewhere in the world as we develop a similar offering for their respective markets.

As a result of these collaborations, the value of order intake in the first half of 2023 is approx. £395,000 versus £232,000 in the first half of 2022. The majority of the order intake will be recognized as revenue in the second half of 2023.

Other Opportunities         

We are in discussions to license our manufacturing technology to a larger scale, automated plant and we have received expressions of interest from others to build similar plants elsewhere in the world.   

We have an exciting relationship in place with Paragraf, a Cambridge (UK) based technology company which has developed world-leading graphene technology. Together we have completed three Joint Development Projects ("JDP"), and are scoping the fourth.

The intent is that this work will continue as we continue to make good progress.

I would like to take this opportunity to thank my fellow Board members, staff, valued shareholders and advisers for their support. We look forward to delivering on the vision of building a cash-generative and profitable clean technology company together.  

 

 

Rob Richards,

Chief Executive Officer

28 June 2023

 



 

STRATEGIC REPORT 

 

Verditek is a cleantech company with its principal interest being the manufacture and commercialistion of leading-edge solar technologies. Verditek Solar Italy (100% owned subsidiary) operates from a modern factory in  Italy.

Verditek's light weight solar modules offer several innovations including: interconnectivity of individual PV cells, increased flexibility, and are particularly light weight compared to conventional PV modules.

The market for Verditek's solar products covers both on grid and off grid installations and has applications from single panel use such as in Tuk Tuks in Thailand to large projects which deliver power where conventional fossil fuel power production is both expensive and logistically difficult to manage.  For such large rural projects, Verditek has developed its PowerMat concept where circa 250kw of panels are connected by one of two systems and are stored when not in use in a shipping container for easy transportation and re-use in different locations.

Verditek has recently partnered with specialist roofing solution providers to bring to market integrated solar products, which broaden the reach of Verditek's solar offering.

Verditek has entered into a series of joint development programmes with Paragraf, a pioneer in graphene technology, in order to develop potentially transformative PV cell technology.

During the year, the Group sold its stake in ICSI to an external buyer, see Notes 11 and 12 to the financial statements.

For a full review of the business during the year, please refer to the Chief Executive's Review on pages 2 and 3. For an analysis of financial performance indicators, please refer to the Financial Review on page 6.

Principal risks and uncertainties facing the business

A full review of principal risks and uncertainties facing the business is given on pages 7 to 9.

S172 Statement

As required by Section 172 of the Companies Act, a director of a company must act in the way he or she considers, in good faith, would likely promote the success of the company for the benefit of the shareholders. In doing so, the director must have regard, amongst other matters, to the following issues:

• the likely consequences of any decisions in the long term (see Corporate Governance Report, pages 12 to 17);

• the interests of the company's employees (see Corporate Social Responsibility report on page 21)

• the need to foster the company's business relationships with suppliers/customers and others (see Corporate Governance Report, pages 12 to 17);

• the impact of the company's operations on the community and environment (see Corporate Social Responsibility report on page 21);

• the company's reputation for high standards of business conduct (see Corporate Governance Report, pages 12 to 17); and

• the need to act fairly between members of the company (see Corporate Governance Report, pages 12 to 17).

 

On behalf of the Board

 

 

 

 

Rob Richards

Chief Executive Officer

28 June 2023



 

FINANCIAL REVIEW

 

Income statement

During the year 2022 the Group's loss after taxation was £1,872,711 (2021: £974,079). The administration expenses incurred for the year ended 31 December 2022 were £1,661,935 (2021: £1,501,942).

 

Loss per share

The basic and diluted loss per share was 0.5p (2021: 0.3p).

Financial Position

At 31 December 2022, the Group's net assets were £1,644,296 (2021: net assets of £1,870,713). This comprised total assets of £2,274,279 and total liabilities of £629,983. The total assets included property, plant and equipment of £195,470 (2021: £300,082).

 

Cashflow

The Group's cash balance at the period end was £842,632 (2021: £237,613). During the period the net cash outflow from operating activities was £1,079,319 (2021: 1,656,332) with financing activities generating net proceeds of £1,394,143 (2021: £204,264).

 

Dividends

No dividend is recommended (2021: £nil) due to the development stage of the Group.

Capital management

The Board's objective is to maintain a financial position that is both efficient and delivers long term shareholder value.  The Group had cash balances of £842,632 as at 31 December 2022 (2021: £237,613).  The Board continues to monitor the balance sheet to ensure it has an adequate capital structure.

Key Performance Indicators

As the Group's revenues are still at an early stage, the main measures of performance are the level of expenditure compared to budget and forecast expectations.  Going forward the Board will look to develop KPIs to monitor and report performance.  

Events after the reporting period

Events after the reporting period are described in Note 26 to the financial statements. Following receipt of the proceeds of the bond issue and repayment of the Crowd for Angels bonds, the Group had cash of approximately £290,000 at the end of May 2023.

 

 

 

 

John McCall

Interim Chief Financial Officer



PRINCIPAL RISKS AND UNCERTAINTIES

 

The Board is committed to protecting and enhancing our reputation and assets, while safeguarding the interests of our shareholders. It has overall responsibility for the Group's system of risk management and internal control. 

The Board assesses the Company's principal risks and monitors the risk management process regularly. The Board considers risks to the business at its monthly meetings and reviews the principal risks to the business and the risk register quarterly.  Over the course of the year, the Board has also considered specific risks of managing cash-flow and working capital, scaling up manufacturing and managing the associated operational risks and liquidity.

Accepting that it is not possible to identify, anticipate or eliminate every risk that may arise and that risk is an inherent part of doing business, our risk management process aims to provide reasonable assurance that we understand, monitor and manage the main uncertainties that we face in delivering our objectives.  Our principal risks are shown in the table below.

Risk Framework

Managing risk is an inherent part of any vital commercial enterprise. The Company has prepared a risk review using an established framework that assists the recognition and mitigation of risk. Ranking risk and opportunity is critical to any successful business and assists the executive in managing priorities to extract the maximum value from our investments, while maintaining vigilance on those aspects which most influence an outcome.

Over the course of the year we have continued to focus on the risk framework developed in our first year of operation to maintain and enhance a fit for purpose governance model and to ensure compliance. Financial control continues to figure prominently in this overall framework.

Risk Review

The key risks identified per business are as follows:

DETAIL OF RISK

MITIGATION and MANAGEMENT

ASSESSMENT

Failure to secure cashflow and remain a going concern, also growth ambitions might outpace cash reserves.

The Board reviews medium to long term cashflow forecasts (including sales forecast), and aims to ensure sufficient funding is in place to meet requirements.

High risk (elevated from prior year)

Operational failings in manufacturing process.

Technical and operational support for the factory manager has been put in place with an operational/quality control structure and process and a programme of regular audits of the process.

High risk (elevated from prior year)

Products are designed for a specific segment of the market and accessing that segment needs to be done through distribution partners who typically have greater negotiating power.

Poorly constructed sales contracts expose the company to punitive commercial conditions. Partnering relationships expose the Company to unlimited liabilities.

Build network of distribution partners and ensure review, challenge and understanding of standard terms and conditions of the partnerships especially payment terms and enforceability.

 

The Company has secured Peachey & Co. LLP as their single corporate counsel and have developed a suite of proforma contracts to ensure commercial negotiations begin soundly.

High risk (elevated from prior year)

Products are not competitive on cost as the Company cannot scale up manufacturing with the existing manufacturing facilities.

 

Manufacturing has been moved to a larger automated modern factory unit which will allow increased productivity, improved quality and reduce costs per unit.

The Group is considering collaborations to scale up manufacturing or direct investments in new manufacturing sites.

High risk (unchanged from prior year)

Factory output levels reduce, poor quality, other operational issues.

 

The Group has systems in place for testing of each panel, and daily production levels are monitored and reported on regularly by local management.

The Group has approved a move to a new larger factory unit with the aim of allowing increased productivity, improved quality and reduce costs per unit.

Medium risk (unchanged from prior year)

HSE violations in Group operating companies.

The Group is directly responsible for installing and auditing an HSE culture. Documented operating procedures are in place at the manufacturing facility, which have been reviewed by an external body.

Medium risk (unchanged from prior year)

Non-compliance with the UK's anti-bribery and corruption legislation given the Company's potential operations in high-risk countries.

The Company has an Ethics policy which is referenced in third party contracts and there is annual mandatory training for directors, employees and contractors.

Medium risk (unchanged from prior year)

The solar marketplace continues to have increased efficiency (power output) and increased competition.

 

Verditek continues to monitor the efficiency of cells used in production of its solar panels, and seeks to remain at the forefront of technical advancements at all times.

Medium risk (unchanged from prior year)

Failure to meet AIM corporate governance requirements.

The executive benchmarked its corporate governance, policies and procedures against published QCA guidelines to ensure compliance. The Company has regular discussions with its nominated advisor and external counsel.

Low risk (unchanged from prior year)

 

 

Adverse global trading conditions due to the COVID-19 pandemic, with companies and countries reducing their spend on capital projects.

Contingency plans to control costs, through flex of production staff and supply chain streamlining.

Low risk (descend from prior year)

 

 



 

GOVERNANCE

BOARD OF DIRECTORS

The Board of Directors of Verditek plc ("Verditek" or the "Company") as at the date of signing the report and accounts comprised:

 

Rob Richards (Chief Executive Officer)

Rob is the Chief Executive Officer of Verditek plc. Rob is a chartered electrical engineer with over 20 years' experience in the Oil and Gas and Energy Industry. Rob joined Verditek plc, having held senior management positions in Ecolog International, FZE, Penspen Ltd, Thailand, KNM Process Systems Sdn Bhd in Malaysia, Siemens Oil and Gas, Singapore and Alstom Power.

 

The Rt Hon. Lord David Willetts FRS (Non-Executive Chairman)

The Rt Hon. Lord David Willetts FRS is the Chairman of Verditek plc. He is also the President of the Resolution Foundation. He served as the Member of Parliament for Havant (1992-2015), as Minister for Universities and Science (2010-2014) and previously worked at HM Treasury and the No. 10 Policy Unit.

 

Lord Willetts is a visiting Professor at King's College London, a Board member of UK Innovation and Research (UKRI) and of the Biotech Growth Trust. He is an Honorary Fellow of Nuffield College Oxford.

 

George Katzaros (Non-Executive Director)

George is the founder of Verditek plc, identifying the three core technologies and leading the company to IPO on AIM.  George has over 30 years' experience in advisory and asset management as well as investment banking and venture capital particularly for cleantech companies.

 

Gavin Mayhew (Non-Executive Director)

Gavin was formerly the CEO of Energy Savers FZE, a UAE consultancy providing energy saving solutions to commercial and industrial clients. Before that Gavin was president of Zubair Terminal Company in Iraq, which was set up to finance, develop and operate a new commercial port in Iraq and a 38 year port concession was signed with the Iraqi government in 2018.  He has over 20 years of business management experience in Latin America, Europe and the Middle East.  Gavin has an MBA from INSEAD and undergraduate degree from Brown University in the USA.

The Board and responsibilities

The Board hold monthly meetings to review, formulate and approve the Group's strategy, budgets, corporate actions and oversee the Group's progress towards its goals. There is an Audit Committee and a Remuneration Committee in place with formally delegated duties and responsibilities and with specific terms of reference. From time-to-time separate committees may be set up by the Board to consider specific issues when the need arises. Due to the size of the Group, the Directors have decided that issues concerning the nomination of directors will be dealt with by the Board rather than a committee but will regularly reconsider whether a nominations committee is required.

 

Details of board meetings held, and attendance of Board directors is shown below:

Board Members

Eligible to attend

Attended

Executive Directors

 


Rob Richards

14

14




Non-Executive Directors



The Rt Hon. Lord David Willetts FRS

14

14

George Francis Katzaros

14

12

Gavin Mayhew     

14

13

 

 

The Audit Committee

The Audit Committee comprises The Rt Hon. Lord David Willetts FRS as chairman and Gavin Mayhew.

 

The Audit Committee determines the terms of engagement of the Group's auditors and will determine, in consultation with the auditors, the scope of the audit. The Audit Committee receives and reviews reports from management and the Group's auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The Audit Committee has unrestricted access to the Group's auditors.

 

The Audit Committee Report is presented on page 18.

 

The Remuneration Committee

The Remuneration Committee comprises George Katzaros as chairman and Gavin Mayhew.

 

The Remuneration Committee reviews the scale and structure of the executive Directors' and senior employees' remuneration and the terms of their service or employment contracts, including share option schemes and other bonus arrangements. The remuneration and terms and conditions of the non-executive Directors are set by the entire Board.

 

The Directors' Remuneration Report is presented on pages 19 - 20.

 

Investor relations

The General Meeting is the principal forum for dialogue with shareholders.  Updates on the progress of the business are regularly published on the Group's website.

 

On behalf of the Board

 

 

Rob Richards

Chief Executive Officer

 



 

CORPORATE GOVERNANCE REPORT

 

The Directors recognise that good corporate governance is a key foundation for the long-term success of the Group. As the Company is listed on the AIM market of the London Stock Exchange it is subject to the continuing requirements of the AIM Rules. The Board has therefore adopted the principles set out in the Corporate Governance Code for small and midsized companies published by the Quoted Companies Alliance ("QCA Code").

 

The principles are listed below with an explanation of how the Company applies each principle, and what we do and why.

 

QCA Code Principle

Application (as set out by QCA)

What we do and why

1.   Establish a strategy and business model which promote long-term value for shareholders

The board must be able to express a shared view of the company's purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term.  It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future. 

The Company's strategy is explained fully within the Chief Executive's Report section of our Report and Accounts for the year ended 31 December 2022.

 

Our strategy is focused on reviewing manufacturing capabilities to optimise the cost of production and ensure a competitively priced product, and developing a "go to market strategy" by advancing partnerships with solutions providers to incorporate our panels and deliver readily saleable solutions.

 

 

The key challenges to the business and how these are mitigated are detailed on pages 7 to 9 of our Report and Accounts for the year ended 31 December 2022. 

2.   Seek to understand and meet shareholder needs and expectations

Directors must develop a good understanding of the needs and expectations of all elements of the company's shareholder base.

Whilst the company is early stage, the Board is committed to returning value to our shareholders through execution of our strategy.

The Board must manage shareholders' expectations and should seek to understand the motivations behind shareholder voting decisions.

Verditek plc encourages two-way communication with its investors and responds quickly to all queries received.

 

The Board recognises the AGM as an important opportunity to meet shareholders. The Directors are available to listen to the views of shareholders informally immediately following the AGM.

 

The people responsible for shareholder liaison are:

The Chief Executive Officer

The Chief Financial Officer

Nomad (W.H. Ireland Limited)

 

 

The Chief Executive Officer is responsible for shareholder liaison and he can be contacted using the "contact" link on the Company website.

The Board noted that a resolution at the Annual General Meeting held in 2022 to re-appoint one the Directors was passed with the necessary majority but received less than 80% of votes in favour. The Board have engaged with its shareholders to understand the reasons behind the voting result.

 

3.   Take into account wider stakeholder and social responsibilities and their implications for long-term success

 

 

Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company's stakeholders and understand their needs, interests and expectations.

The executive maintains communications with trade and interest groups working in the markets where its products are sold and applied.

Where matters that relate to the company's impact on society, the communities within which it operates, or the environment have the potential to affect the company's ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company's strategy and business model.

The Company is committed to developing green technology, and this forms the backbone to decision making.

 

Feedback is an essential part of all control mechanisms, and is welcomed from all stakeholder groups.

The Company's website maintains a channel to receive feedback from all stakeholders.

4.   Embed effective risk management, considering both opportunities and threats, throughout the organisation

The board needs to ensure that the company's risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company's supply chain, from key suppliers to end-customer.

Risk Management on pages 7 to 9 of our Report and Accounts for the year ended 31 December 2022 details the risks to the business and how these are mitigated.

 

Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and

risk appetite).

 

The Board considers risks to the business at its monthly meetings and reviews the principal risks to the business and the risk register quarterly.

5.  Maintain the Board as a well-functioning, balanced team led by the chair

The Board members have a collective responsibility and legal obligation to promote the interests of the company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.

The Company is controlled by the Board of Directors. The Rt Hon. Lord David Willetts FRS, the Non-executive Chairman, is responsible for the running of the Board and Rob Richards, the Chief Executive, has executive responsibility for running the Group's business and implementing Group strategy.

 

The Board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.  

 

All Directors receive regular and timely information on the Group's operation and financial performance. Relevant information is circulated to the Directors in advance of meetings. All Directors have direct access to the advice and services of the Company Secretary and are able to take independent professional advice in the furtherance of the duties, if necessary, at the Company's expense. 

The Board should have an appropriate balance between executive and non-executive directors and should have at least two independent non- executive directors. Independence is a board judgement. 

The Board comprises one Executive Director and three Non-Executive Directors. The Board considers that all the Non-Executive Directors bring an independent judgement to bear.

The Board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. 

The Executive Director is full time and the Non-Executive Directors provide such time as is required to fully and diligently perform their duties.

Directors must commit the time necessary to fulfil their roles.

 

The Board holds Board meetings at least once a month. Details of the attendance record of each Director at Board meetings is included in the Governance report of the Annual Report.

 

6.   Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition. 

The Directors have attended professional NED instruction and have proven track-records of serving on boards previously.

 

 

The Board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board.

The Board will work to increase the diversity of the Directors.

As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.

Further information about the Board's skillset, including each Director's experience and CV, is set out on the Company website and additional information is shown on page 10 of the Annual Report for the year ending 31 December 2022.

7.   Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

The Board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors. 

 

 

The Company was admitted to trading on AIM in August 2017. Since that time there has been a greater than 50% turnover in Board membership.

 

It was proposed that a board performance evaluation  be carried out in 2022 to look critically at what we do and to identify areas of improvement but this was not possible given other Board priorities and it will take place in the second half of 2023.

 

An appraisal is scheduled to be carried out each year with the Executive Director.

 

The Board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.

The Company is early stage and as such the Board has been focussed on ensuring that sufficient capital is in place to execute its strategy: first sales; investing in longer term development opportunities and developing the organisation. 

 

It is against the performance of this strategy that the Board is currently assessed.

 

It is healthy for membership of the Board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable.

No formal succession plans are currently in place, but the Board will continue to review this position.

8.   Promote a corporate culture that is based on ethical values and behaviours

 

 

The Board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. 

The Corporate and Social Responsibility section on page 21 of our Report & Accounts for the year ended 31 December 2022 details the ethical values of the Company. 

Corporate values should guide the objectives and strategy of the company.

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.

The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.

The Company's policies and procedures on Data Protection; Disciplinary, Dismissal and Grievance; Ethics; Share Dealing; Social Media; and Speak-Up are reviewed and updated as required and amended policies were approved by the Board during the year.

 

These policies and procedures are made available to staff and consultants and anti-bribery and anti-corruption training and data protection training is mandatory.

 

Staff and consultants are encouraged to ask questions and seek clarifications from senior members of the team on these policies and procedures.

 

 

 

9.   Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The Company should maintain governance structures and processes in line with its corporate culture and appropriate to its:

•  size and complexity; and

•  capacity, appetite and tolerance for risk.

The Corporate Governance Report on pages 12 to 17 of our Report & Accounts for the year ended 31 December 2022 details the Company's governance structures and why they are appropriate and suitable for the Company.

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.

 

The Board has a formal schedule of matters reserved to it and is supported by the Audit and Remuneration Committees. Due to the size of the Company, the Directors have decided that issues concerning the nomination of directors will be dealt with by the Board rather than a committee but will regularly reconsider whether a nominations committee is required.

 

The Audit Committee and a Remuneration Committee have formally delegated duties and responsibilities and with specific terms of reference and these are available on request.

 

10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

A healthy dialogue should exist between the Board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company. 

The Company encourages two-way communication with its investors and responds quickly to all queries received.

 

The Board recognises the AGM as an important opportunity to meet private shareholders. The Directors are available to listen to the views of shareholders informally immediately following the AGM. 

 

Appropriate communication and reporting structure should exist between the Board and all constituent parts of its shareholder base. This will assist:  

·      the communication of shareholders' views to the board; and

·      the shareholders' understanding of the unique circumstances and constraints faced by the company.

 

The Chairman and the Chief Executive Officer are responsible for ensuring appropriate communication and reporting to shareholders.

 

A range of corporate information (including all Company announcements, historical annual reports and other governance related material since the company was admitted to AIM in August 2017) is also available to shareholders, investors and the public on the Company's website. 

 

It should be clear where these communication practices are described (annual report or website).

 

The Company will disclose outcomes of all votes at shareholder meetings in a clear and transparent manner by either publishing a market announcement or by reporting it on the Company website. When a considerable proportion of votes (20%) have been cast against a resolution at any meeting of shareholders, the Company will include an explanation of what actions it intends to take to understand the reasons behind that vote result and, where appropriate, any different action it has taken, or will take, as a result of the vote.

 

 



 

AUDIT COMMITTEE REPORT

 

The Audit Committee helps the Board discharge its responsibilities regarding financial reporting, external and internal audits and controls as well as reviewing the Group's annual and half-year financial statements, other financial information and internal Group reporting.

This includes:

•      considering whether the Company has followed appropriate accounting standards and, where necessary, made appropriate estimates and judgments taking into account the views of the external auditors;

•      reviewing the clarity of disclosures in the financial statements and considering whether the disclosures made are set properly in context;

•      where the audit committee is not satisfied with any aspect of the proposed financial reporting of the Company, reporting its view to the Board of Directors;

•      reviewing material information presented with the financial statements and corporate governance statements relating to the audit and to risk management; and

•      reviewing the adequacy and effectiveness of the Company's internal financial controls and, unless expressly addressed by a separate board risk committee composed of independent directors, or by the Board itself, review the Company's internal control and risk management systems and, except where dealt with by the Board or risk management committee, review and approve the statements included in the annual report in relation to internal control and the management of risk.

The Audit Committee assists by reviewing and monitoring the extent of non-audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the Group's internal audit activities, internal controls and risk management systems. The ultimate responsibility for reviewing and approving the Annual Report and financial statements and the half-yearly reports remains with the Board.

For the year under review, there were no non-audit services rendered to the Group and the Company. The audit committee considered the nature and scope of engagement and remuneration paid were such that the independence and objectivity of the auditors were not impaired. Fees paid for audit services are provided in Note 6.

Significant reporting issues considered during the year included the following:

Going concern

The Committee considered the Going Concern basis on which the accounts have been prepared and can refer shareholders to the Group's accounting policy set out in Note 2.4. The directors are satisfied that the going concern basis is appropriate for the preparation of the financial statements.

 

The Rt Hon. Lord David Willetts FRS

Chairman - Audit committee

 

 

 

 

 



 

DIRECTORS' REMUNERATION REPORT

 

This report sets out the remuneration policy operated by the Company in respect of the Executive and Non-Executive Directors. The remuneration policy is the responsibility of the Remuneration Committee, a sub-committee of the Board. No Director is involved in discussions relating to their own remuneration.

Remuneration policy

The objective of the proposed remuneration policy is to attract, retain and motivate high calibre executives to deliver outstanding shareholder returns and at the same time maintain an appropriate compensation balance with the other employees of the Group.

Directors' remuneration

The normal remuneration arrangements for Executive Directors consist of base salary, performance bonuses and other benefits as determined by the Board. The Company currently has one Executive Director, the Chief Executive Officer, who has a service agreement that can be terminated at any time by either party giving to the other three months' written notice. Compensation for loss of office is restricted to base salary and benefits only.

The remuneration package for an Executive Director is detailed below:

•      Base Salary:

Annual review of the base salary of the Executive Director considering the Executive Director's role, responsibilities and contribution to the Group performance.

•      Performance Bonus:

Bonus arrangements are discretionary and are payable depending on the performance of the Executive Director in meeting his key performance indicators and in the wider context with the performance of the Group.

•      Benefits:

Benefits include payments for provident funds that are mandatory and statutory pension payments as required by the laws of the resident countries of the Executive Director, health insurance and other benefits.

•      Longer term incentives:

In order to incentivise the Directors and employees, and align their interests with shareholders, the Company has granted share options in previous years though no further share options were granted in the current year. The share options will vest at various future dates as described in the Note 23 to the financial statements. In addition to service conditions, the vesting of the share options granted to the Executive Director and the Chairman are subject to an earnings before interest, tax, depreciation and amortisation (EBITDA) performance condition.

Non-Executive Directors are remunerated solely in the form of Directors' fees and share options determined by the Board and are not entitled to pensions, annual bonuses or employee benefits.

 



 

DIRECTORS' REMUNERATION REPORT (Continued)

Re-election of Directors

One-third of continuing Directors stand for re-election on an annual basis and all Directors are aware of the need to maintain their independence and to demonstrate their continued commitment to the role. Succession planning is limited due to the current size of the Board.

The remuneration of the Directors in Verditek plc who held office during the years to 31 December 2022 and 2021 were as follows:

The emoluments of the Directors were as follows (Audited):






Year ended 31 December 2022

Year ended 31 December 2021

Salary & Directors' fees

Pension Contributions

Share-based payment

Total

Total

£

£ 

£

£

£

 

Executive directors

Robert Richards

152,037

-

84,678

236,715

185,081

 

Non-executive directors

The Rt Hon. Lord David Willetts FRS  

50,000

-

23,330

73,330

60,984

George Katzaros

25,000

-

-

25,000

25,000

Gavin Mayhew

30,000

-

-

30,000

30,000







Total

257,037

-

108,008

365,045

301,065

 

There are 4,500,000 share options held by The Rt Hon. Lord David Willetts FRS and 14,000,000 share options held by Robert Richards: details are shown in Note 23.  No options were exercised in the year.

 

 

George Katzaros

Chairman - Remuneration committee

CORPORATE AND SOCIAL RESPONSIBILITY

 

The Company understands that its impact reaches beyond that of its core business and into the environment and society in which it operates. With integrity at the heart of our corporate social goals our aim is to make a lasting positive contribution to all our stakeholders.

In view of the limited number of stakeholders, the Company has not adopted a specific policy on Corporate Social Responsibility.  However, it does seek to protect the interests of stakeholders in the Company through its policies, combined with ethical and transparent business operations.  The Company has adopted an Ethics Policy which covers anti-bribery and anti-corruption, environmental sustainability, social responsibility, health and safety and tax evasion.

Environment

Verditek Plc is sensitive to the environment in which it operates and has established well defined operating guidelines with some of the manufacturing partners where it seeks their compliance with ISO14001 (a recognized standard for Environmental Management Systems) when relevant, to ensure certain environmental standards are complied with.

Human Rights

Verditek plc is committed to socially and morally responsible research, development and manufacturing processes for the benefit of all stakeholders.  The activities of the Company are in line with applicable laws on human rights.

Employees

Our employees are key to achieving the business objectives of the Company.  The Board's priority is to provide a working environment in which our employees can develop to achieve their full potential and have opportunities for both professional and personal development. We aim to invest time and resource to support, engage and motivate our employees to feel valued, to be able to develop rewarding careers and want to stay with us.  The Company embraces employee participation in issue raising and resolution through regular meetings with managers and values contributions from all levels regardless of their position in the business.

Shareholders

The Board of Directors actively encourage communication and they seek to protect the interest of shareholders at all times.  The Company updates shareholders regularly through regulatory news, financial reports and research notes. The Company also engages directly with investors at our Annual General Meeting or investor events.

Health and Safety

Company activities are carried out in accordance with its health and safety policy which adheres to all applicable laws and are audited both internally and by an external organisation.



 

 

DIRECTORS' REPORT

 

The Directors present their report and the audited financial statements for Verditek plc ("Verditek" or the "Company") for the year ended 31 December 2022. 

The preparation of financial statements is in compliance with UK adopted International Accounting Standards and the Companies Act 2006. The Group financial statements comprise of the financial information of the parent Company and its subsidiaries (together the "Group"). The parent Company's financial statements present information about the Company as a separate entity and not about its Group.

Principal activities

Verditek plc is a holding company based in UK. The principal activity of the Group is to develop and commercialise clean technologies.  

A detailed review of the business activities of the Group is contained in the Strategic Report.

Business review and future developments

The review of the business's operations, future developments and key risks is contained in the Strategic Report. The Directors do not recommend a final ordinary dividend for the year (2021: £nil).

Directors and directors' interests

The directors who held office during the year and subsequently were as follows:

The Rt Hon. Lord David Willetts FRS


George Francis Katzaros

 


Gavin Mayhew


Robert Richards


 

With regard to the appointment and replacement of Directors, the Company is governed by its articles of association, the Companies Act and related legislation. The articles themselves may be amended by special resolution of the shareholders.

 

 

 



 

DIRECTORS' REPORT (Continued)

 

Directors' interests

 

The Directors held the following beneficial interests in the shares of Verditek plc at 31st December 2022:


Note

Ordinary shares

Issued share capital %

of £0.0004 each

George Katzaros

1.1

26,166,675

5.90%

Gavin Mayhew 

1.2

47,157,381

10.63%

Robert Richards


2,437,833

0.55%





Notes








1.1 Shares held by George Katzaros




-   direct


9,000,000


-   through Blueview Business Ltd


10,550,000


-   through MF Ltd


5,900,000


-   Subtotal


25,450,000


-  Family member


716,675

26,166,675

 


1.2 Shares held by Gavin Mayhew



 

- through Vidacos Nominees Limited

- through Platform Securities Nominees Limited


46,457,381

700,000

 



47,157,381


During the year, as part of the share issue mentioned in Note 22 to the financial statements, Gavin Mayhew subscribed for 20,000,000 shares at 1.5p per share.

 

There has been no change between the end of the reporting period and the reporting date.

 

Directors' indemnities

The Company has taken out Directors' and Officers' indemnity insurance for the benefit of its Directors.

Post Balance Sheet Events

There are no material post balance sheet events to disclose, other than those disclosed in Note 26 of the accounts.

Research and Development Activities

Verditek continues to invest in research and development activities such as the joint development project with Paragraf Limited to research the application of graphene onto solar devices.  Research and development aims to develop and enhance the existing product portfolio and new products that will complement and expand the product offering. Additional research and development has been undertaken on further generations of the semi-flexible, lightweight solar panels.

Financial Risk management

Details of financial risk management are provided in Note 3 to the accounts.

Political and charitable contributions

The Group made no charitable or political contributions during the year.



 

DIRECTORS' REPORT (Continued)

 

Going Concern

As described in note 2.4, the Directors have considered base case and worst-case scenarios, the Group has secured additional funding by the issue of £500,000 Secured Convertible Loan Notes as announced on 3 May 2023. The Board has used the proceeds of the bond issue principally to repay the Crowd for Angels Bonds which were due for repayment on 18 May (of £221,605) and 3 August 2023 (of £103,253) and to provide additional working capital for the business. As such, the Directors believe that the Company and the Group as a whole have adequate resources to continue in operational existence for the foreseeable future. There is a risk that the Group may need to raise additional funding in the next 18 months to fund ongoing operations, and therefore acknowledge that there is material uncertainty around going concern in this respect. On balance, they continue to adopt the going concern basis in preparing the financial statements.

Substantial shareholdings:

The Company has been advised of the following interests in more than 3% of its ordinary share capital as at 31 December 2022:

 

Shareholder


No. of Shares

      %

 

Hargreaves Lansdown (Nominees) Limited


 112,356,046

25.33%

 

Vidacos Nominees Limited


63,066,239

14.22%

Pershing Nominees Limited


49,679,387

11.20%

Interactive Investor Services Nominees Limited


22,502,014

5.07%

The Bank Of New York (Nominees) Limited


21,020,495

4.74%

HSDL Nominees Limited


             20,220,028

4.56%

JIM Nominees Limited


             19,096,257

4.31%

Platform Securities Nominees Limited


             14,656,941

3.30%

 

Statement of Disclosure to the Auditors

The Directors of the Company at the date of approval of this report confirm that:

·      As far as each director is aware, there is no relevant audit information of which the Company's and the Group's auditor is unaware; and

·      each Director has taken all reasonable steps that they ought to have taken as a Director to make themselves aware of any relevant information and to establish that the Company's and the Group's auditor is aware of that information.

 

Auditors appointment

Crowe U.K. LLP has indicated its willingness to continue in office and a resolution to re-appoint them will be proposed at the annual general meeting.

 

 

By order of the Board

 

 

 

Rob Richards

Chief Executive Officer

28 June 2023

 

 



 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law the Directors have elected to prepare the Group consolidated financial statements in accordance with UK adopted International Accounting Standards (UK IAS) and elected to prepare the parent company financial statements under United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws including FRS 101 Reduced Disclosure Framework).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.

In preparing each of the Group and Company financial statements, the Directors are required to:

•              Select suitable accounting policies and then apply them consistently;

•              Make judgments and estimates that are reasonable and prudent;

•              State whether they have been prepared in accordance with UK IAS or UK Accounting Standards have been followed, subject to any material departures disclosed and explained;

•              Prepare the Strategic Report and Directors' report which comply with the requirements of the Companies Act 2006; and 

•              Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also generally responsible for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Information published on the website is accessible in many countries and legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy. Each of the directors confirms that, to the best of their knowledge:

The Group financial statements, which have been prepared in accordance with UK IAS and Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

 

 

 



 

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



 Year ended

 Year ended

 


31 December 2022

31 December 2021


Notes

£

£

 




Revenue

4

417,457

107,632

Direct costs


(670,547)

(609,213)

Administrative expenses


(1,661,935)

(1,501,942)

Operating loss

6

(1,915,025)

(2,003,523)

Other income

5

91,933

966,354

Finance income


2,084

335

Finance costs

8

(73,604)

(60,553)

Loss before tax

 

(1,894,612)

(1,097,387)

 




Income Tax

9

21,901

123,308





Loss for the period


(1,872,711)

(974,079)

 




Other comprehensive income

 



Items that will or may be reclassified to profit or loss:




Translation of foreign operations

 

41,417

(36,036)

Total comprehensive loss for the period


(1,831,294)

(1,010,115)

 




Loss for the period attributable to:

 



Owners of the parent Company


(1,872,711)

(988,479)

Non-controlling interest

14 

-

14,400

 

 

(1,872,711)

(974,079)

 




Total comprehensive loss for the period attributable to:

 



Owners of the parent Company


(1,831,294)

(1,024,515)

Non-controlling interest


-

14,400



(1,831,294)

(1,010,115)

 




Loss per ordinary share - basic and diluted (p)

10

(0.5)

(0.3)

 

The accompanying notes are an integral part of these financial statements.

All amounts are derived from continuing operations.



 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION



At 31 December 2022

At 31 December 2021


Notes

£

£

Assets

 



Non-current assets

 



Investments

11

-

990,000

Other receivables

12

556,783

-

Property, plant and equipment

13

195,470

300,082

Right of use asset

15

48,902

142,391

Total non-current assets


801,155

1,432,473

 




Current assets

 



Inventories

16

534,959

657,151

Trade and other receivables

17

95,533

392,193

Cash and cash equivalents

18

842,632

237,613

Total current assets

 

1,473,124

1,286,957





TOTAL ASSETS

 

2,274,279

2,719,430

 




Equity and liability

 



Non-current liabilities

 



Loans and borrowings

20

-

277,080

Lease liabilities

21

-

90,687

Total non-current liabilities

 

-

367,767

 

 



Current liabilities

 



Trade and other payables

19

289,995

411,213

Loans and borrowings

20

310,306

-

Lease liabilities

21

29,682

69,737

Total current liabilities


629,983

480,950





TOTAL LIABILITIES

 

629,983

848,717

 




Equity

 



Share capital

22

177,417

136,883

Share premium

22

12,205,726

10,761,055

Share-based payment reserve

23

332,806

213,134

Accumulated losses


(10,971,011)

(9,098,300)

Foreign exchange reserve


6,245

(35,172)

Equity attributable to equity holders of the parent


1,751,183

1,977,600

Non-controlling interests

24

(106,887)

(106,887)

Total shareholder's equity


1,644,296

1,870,713

 




TOTAL EQUITY AND LIABILITIES


2,274,279

2,719,430

These financial statements were approved and authorised for issue by the Board of directors on 28 June 2023 and were signed on its behalf by:

 

Rob Richards

Chief Executive Officer

Company Registration Number: 10114644

The accompanying notes are an integral part of these financial statements.



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


 Issued Share capital

 Share Premium

Share-based payment reserve

Accumulated losses

 Foreign Exchange reserve

Non-Controlling interests

Total


£

£

 

£

 £

£

£

Balance as at 1-Jan-21

136,470

10,733,073

99,184

(8,109,821)

864

(121,287)

2,738,483

Loss for the year

-

-

-

(988,479)

-

14,400

(974,079)

Translation of foreign subsidiary

-

-

-

-

(36,036)

-

(36,036)

Total comprehensive loss

-

-

-

(988,479)

(36,036)

14,400

(1,010,115)

Issue of shares net of expenses

413

27,982

-

-

-

-

28,395

Issue of warrants - corporate bond

-

-

65,903

-

-

-

65,903

Share-based payment

-

-

48,047

-

-

-

48,047

Balance as at 31-Dec-21

136,883

10,761,055

213,134

(9,098,300)

(35,172)

(106,887)

1,870,713

Loss for the year

-

-

-

(1,872,711)

-

-

(1,872,711)

Translation of foreign subsidiary

-

-

-

-

41,417

-

41,417

Total comprehensive loss

-

-

-

(1,872,711)

41,417

-

(1,831,294)

Issue of shares net of expenses

40,534

1,444,671

-

-

-

-

1,485,205

Share-based payment

-

-

119,672

-

-

-

119,672

Balance as at 31-Dec-22

177,417

12,205,726

332,806

(10,971,011)

6,245

(106,887)

1,644,296

 

The accompanying notes are an integral part of these financial statements.



 

CONSOLIDATED STATEMENT OF CASH FLOWS



Year ended

Year ended

 


31 December 2022

31 December 2021

 


£

£

Cash flows from operating activities




Loss before tax from continuing operations

(1,894,612)

(1,097,387)

Adjustments for:




Finance costs

73,604

60,553


Finance income

(2,084)

(335)


ICSI revaluation

125,486

(966,354)


Depreciation and amortisation

 

195,555

306,915


Loss on disposal of assets

501

1,582


Share-based payment

119,672

48,047


Remeasurement of assets

(78,323)

-

 

(1,460,201)

 

(1,646,979)

 

Working capital adjustments

 

 


(Increase) / Decrease in inventory

122,192

(21,109)


(Increase) / Decrease in trade and other receivables

211,395

158,455


Increase / (Decrease) in trade and other payables

(97,847)

(146,699)

Cash used in operations

(1,224,461)

(1,656,332)


Taxation

145,142

-

Net cash outflow from operating activities

(1,079,319)

(1,656,332)

 

Investing activities




Sale consideration received (ICSI)

307,731

-


Sale of property, plant and equipment

-

2,048


Purchase of property, plant and equipment

(19,540)

(7,001)

Net cash outflow from investing activities

288,191

(4,954)

 

Financing activities




Proceeds from issue of ordinary share capital (net of expenses)

1,485,205

28,395


Proceeds from corporate green bonds issued [(Refer note 20)]

-

353,253


Loan interest paid

(22,210)

(27,372)


Interest received

2,084

334


Repayments of loans [(Refer note 20)]

-

(98,395)


Payments of lease liabilities

(70,936)

(51,950)

Net cash inflows from financing activities

1,394,143

204,264





Net increase/(decrease) in cash and cash equivalents

603,015

(1,457,022)

Cash and cash equivalents at the beginning of the year

237,613

1,711,761

Exchange gains/(losses) on cash and cash equivalents

2,004

(17,126)

Cash and cash equivalents at the end of the year

842,632

237,613

 

The accompanying notes are an integral part of these financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.    Corporate information

 

Verditek plc ("Verditek", "Company") is a public limited company incorporated, registered and domiciled in England and Wales (registration number 10114644), whose shares are quoted on the AIM on the London Stock Exchange. Its registered office is located at First Floor, Holborn Gate, 330 Holborn, London WC1V 7QT.

 

Verditek is the holding company of a group of companies engaged in the clean technology sector.

 

The consolidated financial statements comprised of the Company and its subsidiaries (together referred to as "the Group") as at and for the year to 31 December 2022. The parent Company financial statements present information about the Company as a separate entity and not about its Group.

 

The comparative financial information is for the year ended 31 December 2021.

 

2.    Accounting policies

The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.

 

2.1.     Basis of preparation

The financial statements have been prepared in accordance with UK adopted International Accounting Standards (UK IAS) and the Companies Act 2006.

 

The financial statements have been prepared on the historical cost basis except for certain assets which are stated at their fair value.

 

The consolidated financial statements are presented in GBP, which is also the Company's functional currency.

 

2.2.     Basis of consolidation

The financial information consolidates the financial statements of Verditek plc, and the entities controlled by the Company.

 

2.2.1.  Subsidiaries

Subsidiaries are all entities (including special purpose entities) over whose financial and operating policies the Group has the power to govern, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of the potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group.



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

2.3.     Changes in accounting policies and disclosures:

 

2.3.1.  New standards, interpretations and amendments adopted in these financial statements:

 

The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2022:

 

●     Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);

●     Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);

●     Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and

●     References to Conceptual Framework (Amendments to IFRS 3).

 

The amendments listed above did not have any impact on the amounts recognised in prior periods and do not significantly affect the current or future periods.

 

 

2.3.2  Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company in the 31 December 2022 financial statements:

 

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the Group.

 

Effective from 1 January 2023:

●     Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

●     Definition of Accounting Estimates (Amendments to IAS 8); and

●     Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

●     IAS 1 Presentation of Financial Statements (Amendment - Classification of Liabilities as Current or Non-current)

 

Effective from 1 January 2024:

●     IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback)

●     IAS 1 Presentation of Financial Statements (Amendment - Non-current Liabilities with Covenants)

 

The Group will continue to assess any impact on the Group from the adoption of these amendments. It is not anticipated that any of these will have a material impact on the Group's financial statements.



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

2.4.     Going concern

 

The financial statements have been prepared under the going concern basis as the Directors are satisfied that sufficient funds are or will become available to the Group to meet its on-going working capital requirements for at least the next 12 months. The Group's assessment takes account of current cash resources, expected costs and expected revenues. The Group has a pipeline of commercial opportunities and promising partnerships, and is focussed on converting these into sales in the next year. On 3 May 2023 the Company announced a raise of an additional £175,000 (before expenses) by way of the issue of £500,000 7% Secured Convertible Loan Notes. The Company used the proceeds principally to repay the existing Crowd for Angels bonds of approx. £325,000 and to provide working capital.

In the event that trading does not grow as envisaged, sufficient cost reductions are not made, or if there are unforeseen costs, then it is possible that the Company may need to seek additional funding in the next 12 months. Management has successfully raised money in the past, but there is no guarantee that adequate funds will be available when needed in the future.

As there can be no guarantee that any required future funding can be raised in the necessary timeframe, a material uncertainty exists that may cast significant doubt on the Company's future ability to continue as a going concern.

The Directors are aware of the risks and uncertainties facing the business and the assumptions used are the Directors' best estimate of the future development of the business.

After considering the forecasts and the risks, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting.

Should the Group be unable to continue as a going concern, adjustments would have to be made to restate the value of assets to their recoverable amounts, to provide for further liabilities that might arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities. The effect of these potential adjustments has not been reflected in the consolidated financial statements.

 

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.5.     Foreign currency

 

The Group's consolidated financial statements are presented in Sterling. The functional currencies of the Group's subsidiaries include the Euro and the US dollar. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

 

The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the reporting date. Income and expenses are translated at weighted average exchange rates for the period. The exchange differences arising on translation for consolidation are recognized in Other Comprehensive Income.

 

2.6.     Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the two main directors and two non-executive directors.

 

The Board considers that the Group's activity constitutes one operating and one reporting segment, as defined under IFRS 8. Management reviews the performance of the Company by reference to total results against budget.

 

The total profit measures are operating profit and profit for the period, both disclosed on the face of the income statement. No differences exist between the basis of preparation of the performance measures used by management and the figures in the Group's financial information.

 

2.7.     Share-based payments

The Group has issued share options to one Non-Executive Director, in return for which the Group receives services from the Non-Executive Director. The fair value of the services received in exchange for the grant of the options is recognised as an expense. The Group valued the options at the grant date using the Black Scholes valuation model to establish the relevant fair values.

 

The total amount to be expensed is determined by reference to the fair value of the options granted but excluding the impact of any service or non-market performance vesting conditions (for example the requirement of the grantee to remain an employee of the Group).

 

Non-market vesting conditions are included in the assumptions regarding the number of options that are expected to vest. The total expense is recognised over the vesting period. At the end of each period the Group revises its estimates of the number of options expected to vest based on the non-market vesting conditions. It recognises the impact of any revision in the income statement with a corresponding adjustment to equity.

 

 

 

 

 

 

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

2.8          Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base, except for differences arising on:

 

·      the initial recognition of goodwill;

·      the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

·      investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

 

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

 

The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.

 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities.

 

2.8.     Property, plant and equipment

Property, plant and equipment is stated at historic cost, including expenditure that is directly attributable to the acquired item, less accumulated depreciation and impairment losses.

 

Depreciation is provided to write off cost, less estimated residual values, of all property, plant and equipment, evenly over their expected useful lives, when the asset is available for use, and calculated at the following rates:

 

Leasehold improvements                                                 - straight line over 5 years

Plant and machinery                                                         - straight line over 7-10 years

Computer equipment                                                       - straight line over 3 years

 

The carrying value of the property, plant and equipment is compared to the higher of value in use and the fair value less costs to sell. If the carrying value exceeds the higher of the value in use and fair value less the costs to sell the asset, then the asset is impaired, and its value reduced by recognising an impairment provision.

 

2.9.     Leased asset

At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, which comprises of the building, except for short-term leases that have a lease term of 12 months or less and leases of low-value assets, which are expensed to the profit & loss over the expense term.

 

The right-of-use asset is initially recognised at cost, which comprises the initial amount of the lease liability plus any lease payments made at or before the commencement date, plus any initial direct costs incurred, plus any costs associated with restoring the asset to its original condition, less any lease incentive received. The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses.

 

Lease payments included in the measurement of the lease liability comprise the following:

·      fixed payments, including in-substance fixed payments;

·      variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date.



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

The lease liability is measured at amortised cost using the effective interest method. The liability recognised at inception of the lease comprises the present value of future payments payable under the lease contract, discounted at the rate implicit in the lease. If there is no discount rate implicit in the lease, then the incremental rate of borrowing is used. The liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, or there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or there is a change arising from the reassessment of whether the Group will be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount has been reduced to zero.

 

2.10.   Financial Instruments

The Group classifies a financial instrument, or its component parts, as a financial asset, a financial liability, or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument.

 

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

 

2.10.1.      Financial assets

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income ("FVOCI"), and investments in particular at fair value through profit or loss ("FVTPL"),

 

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them, with the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.

 

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

 

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is de-recognised, modified, or impaired.

 

The Group's financial assets at amortised cost includes trade receivables and loans to related parties, are included under other current financial assets. In the periods presented the Group does not have any financial assets categorised as FVOCI.

 

Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred.



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

2.10.2.      Financial liabilities

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

 

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at fair value through profit or loss.

 

Loans after initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process.

Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to interest-bearing loans and borrowings.

 

A financial liability is de-recognised when the obligation under the liability is discharged, cancelled, or expires.

 

2.10.3.      Impairment

The Group assesses all other current receivables on a forward-looking basis, with expected credit losses (ECL) associated with debt instruments measured at amortised cost. These are deemed short term (i.e., less than 12 months) and apply the Group policy for credit rating and risk management policies in place.

 

The impairment stages are defined as:

Stage 1 - When a receivable is recognised, ECLs resulting from default events that are possible within the next 12 months are expensed to the statement of comprehensive income (12-month ECL) and a loss allowance is established. On subsequent reporting dates, the 12-month ECL also applies to existing receivables with no significant increase in credit risk since their initial recognition. In determining whether a significant increase in credit risk has occurred since initial recognition, the Company assesses the change, if any, in the risk of default over the expected life of the receivable (that is, the change in the probability of default, as opposed to the amount of ECLs).

 

Stage 2 - If the receivables credit risk has increased significantly since initial recognition and is not considered low, lifetime ECLs are recognised.

 

Stage 3 - If the receivables credit risk increases to the point where it is considered credit-impaired, lifetime ECLs are recognised, as in Stage 2.

 

The impairment methodology applied for the Group is stage 1, which requires 12-month expected credit losses to be recognised until a change in credit risk occurs, in which case stage 2 would apply.

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

2.11.   Inventories

Inventories are valued at the lower of cost and net realisable value.

 

Costs incurred in bringing each product to its present location and condition are accounted for, as follows:

·      Raw materials: purchase cost on a first-in/first-out basis;

·      Finished goods and work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing costs.

 

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

 

2.12.   Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid investments which are not subject to significant changes in value and have original maturities of less than three months.

 

2.13.   Fair Value measurement

 

Where financial and non-financial assets and liabilities are measured at fair value, the Group use appropriate valuation techniques for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

 

Fair value is categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follow:

 

·      Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

·      Level 2: inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly (eg; as prices) or indirectly (eg; derived from prices);

·      Level 3: input for the assets or liability that are based on observable market data (unobservable input).

 

The Group recognise transfer between level of fair value hierarchy at the end of the reporting period during which the changes have occurred.

 

The carrying amount of cash and cash equivalents, receivables, trade payable, accruals and other current liabilities in the Group consolidated statement of financial position approximates their fair value because of short maturities of these instruments.

 

2.14.   Revenue recognition

Revenue is generated from the manufacture and supply of lightweight solar panels. The Group recognises revenue when (or as) a performance obligation in the customer contract is satisfied. Performance obligations relevant to the customer contract are to manufacture goods in accordance with the specification in the customer order form and any other regulatory or statutory requirements. The performance obligations are satisfied at the point in time when the goods are deemed to be delivered.  Revenue is measured as the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts and sales-related taxes.

 

Customers are billed in advance of the delivery of goods, with 30 days terms. Upon receipt of an advanced payment a contract liability is recognized. The contract liability is released at the point in time goods are delivered.

Under the Group's standard terms and conditions there is a product warranty for ongoing acceptable function of the goods for a period of 10 years, effective from the point of installation, or 3 months after delivery, whichever is earlier.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

This warranty is not sold as a separate component. This length of warranty is standard in the industry. This is not a separate service and is deemed an "assurance" type warranty under IFRS 15 guidance; and is therefore accounted for separately under IAS 37 instead.

2.15.   Research and Development costs

Expenditure on research activities is recognised in profit or loss as incurred. Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Amortisation on development costs commences once the asset under development is available for use or sale. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses.

 

2.16.   Grant income

 

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Grants are recognised in the statement of comprehensive income as other income.

 

2.17.   Summary of critical accounting estimates and judgements

The preparation of financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the directors to exercise their judgement in the process of applying the accounting policies which are detailed above. These judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The key estimates and underlying assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

The estimates and judgements which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below:

 

2.17.1.  Estimates

 

Share-based payments

Share options are recognised as an expense based on their fair value at date of grant. The fair value of the options is estimated through the use of a valuation model - which require inputs such as the risk-free interest rate,

expected dividends, expected volatility and the expected option life - and is expensed over the vesting period. Some of the inputs used to calculate the fair value are not market observable and are based on estimates derived from available data, such as employee exercise behaviour and employee turnover [note 23].

 

Other receivables

Other receivables comprise estimated earn out payments receivable from the sale of the investment in ICSI  - note 11. The estimated earn out payments are structured over several product development milestones to be achieved through to 2025. The estimated earn out payments to be received as at year end are based on this information and includes management assessment around the achievability of each individual milestone.

This risk weighted compensation has then been discounted at an estimated cost of equity, being 14.2%.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

2.17.2.  Judgements

 

Corporate bond

During the prior period the Company issued corporate bonds through funding platform Crowd For Angels, with a term of 2 years, as set out in note 20. In tandem with the bond issue, the Company also issued share warrants to Crowd For Angels, with a term of 3 years. According to the warrant instrument, the share warrants can only be subscribed for in cash, which means they cannot be exercised in return for a redemption of the bond principal. As such, management considers that the corporate bonds are not convertible by way of share warrant exercise as there is a contractual obligation to pay cash, and also no contractual obligation to repay any such funds received in redemption of the outstanding bonds. Therefore, the fair value of the warrants is viewed as a cost of bond issue and is deducted from the bond liability balance, rather than as an equity instrument. The warrants were fair valued using the Black Scholes model, [see note 23] for details.

 

Other receivables

As noted in 2.16.1 above, management has assessed the probabilities of the timing and amount of the estimated earn out payments due.

 

3.    Financial Risk Management

 

The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

 

 

3.1.     Principal financial instruments and their categories

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

 

Categories of financial assets

31 December 2022

31 December 2021

 

£

£

Other receivables (ICSI)

556,783

-

Cash and cash equivalents

842,632

237,613

Trade receivables - net of provision

50,911

17,053

Total current financial assets at amortised cost

1,450,326

254,666

 





 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

 

Categories of financial liabilities

31 December 2022

31 December 2021

 

£

£

 Trade payables

62,976

232,011

 Wages payable

29,586

19,535

 Pension payable

175

508

 Accruals 

139,851

77,150

 Amount due to related parties

-

70,000

Trade and other payables

232,588

399,205




Current loans and borrowings

310,306

-

Non-current loans and borrowings

-

277,080

Loans and borrowings

310,306

277,080




Current lease liabilities

29,682

69,737

Non-current lease liabilities

-

90,687

Lease liabilities

29,682

160,424




Total financial liabilities at amortised cost

572,577

836,709

 

3.2.     General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Board receives monthly reports from the CFO through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

 

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:

 

3.2.1.  Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. In order to minimise this risk, the Group endeavours only to deal with companies which are demonstrably creditworthy.

 

The aggregate financial exposure is continuously monitored. The maximum exposure to credit risk is the value of the outstanding amount of bank balances. The Group's exposure to credit risk on cash and cash equivalents is considered low as the bank accounts are with banks with high credit ratings.  The analysis of trade receivables and expected credit loss allocation is detailed in [note 17].

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

3.2.2.  Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

 

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of at least 45 days.

 

The Group currently holds cash balances to provide funding for normal trading activity and is managed centrally.  Trade and other payables are monitored as part of normal management routine.

 

The Board receives rolling 12-month cash flow projections on a monthly basis as well as information regarding cash balances.

 

The liquidity risk of each group entity is managed centrally by the group treasury function. Each operation has a facility with group treasury, the amount of the facility being based on budgets. The budgets are set locally and agreed by the Board in advance, enabling the Group's cash requirements to be anticipated. Where facilities of group entities need to be increased, approval must be sought from the group finance director. Where the amount of the facility is above a certain level, agreement of the Board is needed. The following table sets out the contractual maturities (representing undiscounted contractual cash-flows, including contractual interest) of financial liabilities:



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

31 December 2022

Up to 3 Months

Between 3 and 12 months

Between 1 and 2 years

Between 2 and 5 years

 





Trade payables

62,976

-

-

-

Wages payable

29,586

-

-

-

Pension payable

175

-

-

-

Accruals 

139,851

-

-

-

Lease liability

19,369

11,037

-

-

Current loan - interest bearing

310,306

-

-

-

Undiscounted financial liabilities at amortised cost

562,263

11,037

-

-

 

31 December 2021

Up to 3 Months

Between 3 and 12 months

Between 1 and 2 years

Between 2 and 5 years

 





Trade payables

232,011

-

-

-

Wages payable

19,535

-

-

-

Pension payable

508

-

-

-

Accruals 

77,150

-

-

-

Amount due to related parties

70,000

-

-

-

Lease liability

35,096

52,921

106,675

-

Non-current loan - interest bearing

5,557

16,672

325,370

-

Undiscounted financial liabilities at amortised cost

439,857

69,737

448,045

-

 

 

3.2.3.  Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's debt obligations with floating interest rates.

 

The Group's exposure to interest rate risk is limited, as all its loans and borrowings are fixed rate loan. At the reporting date there were corporate bonds of £324,858 which had a fixed interest rate of 7% (2021: corporate bonds of £324,858 which had a fixed interest rate of 7%.

 

3.2.4.  Foreign exchange risk

Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.

 

In the current year the Group is predominantly exposed to currency risk on purchases made in EUR and USD.

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

The following table details the Group's exposure at the end of the year to currency risk arising from recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate. Differences resulting from the translation of the financial statements of the entity within the Group into the Group's presentation currency are excluded:

 

As of 31 December 2022 the Group's exposure to changes in foreign exchange rate was as follows:

Forex sensitivity calculation

Effect on net assets

 

Effect on loss before tax

 

USD

GBP

EUR

 

CAD

USD

GBP

EUR

 

CAD


£

£

£

£

£

£

£

£

1%

23

-

39

5,568

(23)

-

(39)

(5,568)

-1%

(23)

-

(39)

(5,568)

23

-

39

5,568

 

As of 31 December 2021, the Group's exposure to changes in foreign exchange rate was as follows:

Forex sensitivity calculation

Effect on net assets

 

Effect on loss before tax

 

USD

GBP

EUR

 

CAD

USD

GBP

EUR

 

CAD


£

£

£

£

£

£

£

£

1%

79

(1)

(53)

-

(79)

1

53

-

-1%

(79)

1

53

-

79

(1)

(53)

-

 

4.    Revenue and segmental information

 

Revenues

Year ended

Year ended

 

31 December 2022

31 December 2021


£

£

Sale of Goods

417,457

107,632

Total 

417,457

107,632

 

The Group had 2 customers that exceeded 10% of revenue in 2022 (2021: 2 customers), one customer 18.71%% and one 18.41%%.

 

Segment information

 

The chief operating decision maker has been identified as the management team including the executive and non-executive directors. The chief operating decision-maker allocates resources and assesses performance of the business and other activities at the operating segment level.

The chief operating decision maker has determined that in the year ended 31 December 2022 Verditek had one operating segment, the development and commercialisation of clean technologies, although it is likely that in future periods the Group's segmental reporting will be expanded as different technologies are developed and commercialised.

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

Geographical Segments

Apart from holding company activities in the UK the Group had operations in Italy in the period.

 

An analysis of revenue, operating loss and total assets less current liabilities by geographical market is given below:


Year ended

Year ended

 

31 December 2022

31 December 2021

 

£

£

Revenue

 

 

UK

18,661

-

Rest of Europe

398,796

107,632

Total revenue 

417,457

107,632

 

 

 

 

Operating loss

 

 

UK

(1,095,726)

(643,547)

Rest of Europe

(819,299)

(1,359,976)

Total operating loss

(1,915,025)

(2,003,523)


 

 


 

 

Non-current assets

 

 

UK

571,010

990,599

Rest of Europe

230,145

441,875

 Total non-current assets

801,155

1,432,474

 

 

5.    Other income

 

 

 

Fair value changes through P&L - ICSI

(125,486)

966,354

Grant income

217,419

-

 Total other income

91,933

966,354

 

Refer to investment [note 11 & 12] for further information on the ICSI revaluation.

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

6.    Operating loss


Year ended

Year ended

 

31 December 2022

31 December 2021


£

£

Operating loss is stated after charging:






Auditors' remuneration:



Audit fees - audit of the company and its subsidiaries pursuant to legislation

48,584

32,500

Non-audit fees - other assurance services

800

-

Direct costs - inventory cost of goods expense

253,102

80,176

Direct costs - inventory write-down

167,417

125,770

Direct costs - inventory theft

-

346,841

Direct costs - other

246,213

56,785

Depreciation of PPE

134,692

256,897

Depreciation of ROU asset

60,863

50,018

Remeasurement of ROU asset

(25,537)

-

Disposal of PPE

-

1,582

Provision against non-trading assets

-

43,551

Director's fee and staff costs (note 7)

407,901

500,810

Advertising, marketing and development

249,575

184,013

Bad debt

70,202

-

Research costs

142,555

(81,847)

Other costs

558,630

511,560

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

7.    Employees and directors

The average number of employees (including directors) during the period was made up as follows:

 


Year ended

31 December 2022

Year ended

31 December 2021


Number

Number

Directors

4

2

Production

6

7

Administrative

1

2

Total

11

11

 

The cost of staff and directors during the period was made up as follows:

 


Year ended

31 December 2022

Year ended

31 December 2021


£

£

Salaries

299,108

362,535

Directors' fees

257,037

247,374

Share-based payments

119,672

48,047

Social security costs

41,079

21,340

Pension costs

1,932

23,741

 

718,828

703,037

Costs capitalised as part of inventories

(-)

(20,073)

 

Total staff cost in the statement of comprehensive income

718,828

682,964

 

 

 

 

Consisting of:

 

 

Employee costs included in direct costs

179,531

183,727

Employee costs included in admin expenses

539,297

499,237

 

Key management personnel include both board and non-board members. Key management personnel compensation is as follows:

 

Key management personnel compensation

 

Year ended

31 December 2022

Year ended

31 December 2021


£

£

Salaries

102,500

137,500

Fees

288,323

289,617

Share-based payments

119,672

46,928

Social security costs

6,964

9,746

Pension costs

-

1,876

 

517,459

485,667

 

Please refer to the Directors' Remuneration report on pages 19-20.

 

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 


Year ended

Year ended

 

31 December 2022

31 December 2021


£

£

Finance expenses

 


Interest on loans (note 20)

23,056

12,623

Amortisation of bond issue costs (note 20)

34,446

18,125

Lease interest

16,102

29,805

Total finance expense

73,604

60,553

 8.   Finance costs

 

Details of the interest rate on the loans are shown in [note 20].

 

9.    Income tax           


Year ended

31 December 2022

Year ended

31 December 2021

 

£

£

UK Corporation tax



Tax credit/ (expense)- current year

-

-

Tax credit/ (expense)- prior year

21,901

123,308

Total current tax

21,901

123,308




Deferred tax



Origination and reversal of timing differences

-

-

Total tax credit/(expense)

21,901

123,308

 

Factors affecting the tax expense

The reasons for the difference between the actual tax expense for the year and the standard rate of corporation tax in the United Kingdom applied to the result for the year are as follows:


Year ended

31 December 2022

Year ended

31 December 2021


£

£

Loss on ordinary activities before income tax

(1,894,611)

(1,097,387)

Standard rate of corporation tax

19.00%

19.00%

Loss before tax multiplied by the standard rate of corporation tax

(359,976)

(208,504)

Effects of:



Research and Development tax credit

21,901

123,308

Losses utilised against chargeable gains

-

(183,607)

Non-deductible expenses

20,183

26,163

Difference in overseas tax rates

(6,768)

(69,432)

Capital allowances

(3,642)

-

Deferred tax not recognised

350,203

435,380

Withholding tax

-

-

Tax credit

21,901

123,308

The Group has not recognized deferred tax assets arising from the accumulated tax losses due to uncertainty of their future recovery. The deferred tax asset not recognized is £1,515,764 at 31 December 2022 (2021: £1,471,603).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

10.       Loss per share

 


Year ended

Year ended


31 December 2022

31 December 2021

Basic and diluted



Loss for the period and earnings used in basic & diluted EPS (£)

(1,872,711)

(974,079)

Weighted average number of shares used in basic and diluted EPS

393,565,703

341,351,150

Loss per share:



Basic and diluted

(0.5p)

(0.3p)

 

Basic loss per share is calculated by dividing the loss for the period from continuing operations of the Group by the weighted average number of ordinary shares in issue during the period. There were no potentially dilutive ordinary shares in either period, therefore was no difference between the basic and diluted loss per share.

 

11.       Investments

 


Financial assets at fair value through profit or loss

Total


£

£

Cost

 


At 1 January 2021

23,405

23,405

Exchange Difference

 

 

Revalue investment

966,595

966,595

At 31 December 2021

990,000

990,000

Disposal

(990,000)

(990,000)

At 31 December 2022

-

-

 

The Company held at 31 December 2021 a stake in Industrial Climate Solutions (ICSI), an unlisted company registered in Canada. This has been sold during 2022 for a total consideration comprise cash on completion of £307,731 and earn out payments payable over 3 years (see note 12). At 31 December 2021, the financial asset was measured at the fair value less costs of disposal.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

12.  Other receivables


2022

2021


£

£

Estimated earn-out from ICSI sale

682,269

-

Fair Value adjustment

(125,486)

-

Other receivables

556,783

-

 

The estimated earn out payments are structured over several product development milestones to be achieved through to 2025. The estimated earn out payments to be received as at year end are based on this information and includes management assessment around the achievability of each individual milestone. This risk weighted compensation has then been discounted at an estimated cost of equity, being 14.2%

 

 

 

Sensitivity analysis:

The group's exposure to changes in key assumptions affecting the carrying value are as follows:

 



£

1% change in expected cash flows amount and timing


5,568

1% change in discount rate


9,480

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

13.  Property, plant and equipment

 


Plant & Machinery

Computer equipment

Leasehold Improvements

Total


£

£

 

£

Cost

 




At 1 January 2021

648,050

3,972

76,427

728,449

Additions

3,483

-

3,518

7,001

Disposals

(7,138)

-

-

(7,138)

Exchange adjustments

(42,462)

-

(5,022)

(47,484)

At 31 December 2021

601,933

3,972

74,923

680,828

Additions

14,312

2,708

2,520

19,540

Disposals

-

(949)

-

(949)

Exchange adjustments

32,155

-

4,015

36,170

At 31 December 2022

648,400

5,731

81,458

735,589

 





Depreciation

 




At 1 January 2021

125,783

2,754

13,300

141,837

Charge for the year

250,779

619

6,057

257,455

Disposals

(3,508)

-

-

(3,508)

Exchange adjustments

(14,020)

-

(1,018)

(15,038)

At 31 December 2021

359,034

3,373

18,339

380,746

Charge for the year

104,737

358

29,597

134,692

Disposals

-

(448)

-

(448)

Exchange adjustments

23,037

-

2,092

25,129

At 31 December 2022

486,808

3,283

50,028

540,119

 





Net book value

 




At 31 December 2021

242,900

599

56,583

300,082

At 31 December 2022

161,592

2,448

31,430

195,470

 

At the reporting date a review of useful lives of depreciable assets was conducted. Several individual plant & machinery assets were identified that had no remaining useful life. This resulted in an acceleration of depreciation for those assets, with an additional charge of £37,948.

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

14.  Subsidiary undertakings

 

As at 31 December 2022 the subsidiaries of Verditek plc, all of which have been included in these consolidated

financial statements, are as follows:

 

Name

Country of incorporation

Parent

Proportion of ownership interest at 31 December 2022

Nature of business

Greenflex Energy Limited

UK

Verditek plc

100%

Dormant

Greenflex RSM S.r.l 1

San Marino

Greenflex Energy Limited

100%

Dormant

Verditek Solar S.r.l

Italy

Verditek plc

100%

Solar technology services

BBR Filtration USA, LLC

USA

BBR Filtration Limited

50.49%

Dormant

Verditek USA, Limited

USA

Verditek plc

100%

Dormant

Verditek Solar Solutions Limited

UK

Verditek plc

100%

Dormant

 

1 - Greenflex RSM S.r.l ceased to trade in July 2018, and an application to liquidate the company was made in February 2019;

 

Name

Registered address

Greenflex Energy Limited

First Floor, Holborn Gate, 330 Holborn, London, WC1V 7QT

Greenflex RSM S.r.l

Via L. Cibrario, 25, 47893 Cailungo, San Marino

Verditek Solar S.r.l 2

Via Pogliano, 26, 20020 Lainate, Italy

BBR Filtration USA, LLC  (99%)

C/o 2605, Ponce De Leon, Boulevard, Coral Gables, Florida 33134

Verditek USA, Limited

Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801

Verditek Solar Solutions Limited

 First Floor, Holborn Gate, 330 Holborn, London, WC1V 7QT

 

 

2 - Verditek Solar S.r.l  relocated as of 29th May 2023 to Via dell Industria, 41C 33028 Tolmezzo.

 

 

 

 

 

 

 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

15.  Right of use asset


Building


£

Cost


At 1 January 2021

345,173

Additions

1,126

Remeasurement

-

Exchange

(22,224)

At 31 December 2021

324,075

Additions

-

Remeasurement of asset

(262,655)

Exchange

7,500

At 31 December 2022

68,920



Depreciation


At 1 January 2021

138,528 

Charge for the year

49,460

Unwind of discount of lease deposit (other receivables)

3,945

Exchange

(10,248)

At 31 December 2021

181,685

Charge for the year

60,863

Unwind of discount of lease deposit (other receivables)

7,306

Remeasurement of asset

(233,356)

Exchange

3,520

At 31 December 2022

20,018



Net book value


At 31 December 2021

142,391

At 31 December 2022

48,902

 

 

 

The right-of-use asset is the present value of a lease asset on a factory in Lainate, Italy signed in 2018 for 6 years. The lease term was due to expire in 2024, with an option to renew for another 6 years. The rental amount is reviewed on an annual basis, with increase in rental value linked to 75% of the consumer price index for white- and blue-collar worker households established by ISTAT (a national central statistics institute). In 2022 notice was given to terminate early this has resulted in changes to the carrying value for future payments with impact taken to P&L but no penalty is required to be paid.



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

16.  Inventories


2022

2021


£

£


 

 

Finished goods

345,032

509,849

Raw materials

189,927

147,302

Total Inventories

534,959

657,151

 

During the period £253,102 inventories relating to revenue were recognized as a cost in the P&L (2021: £80,176). There was also a provision against inventories to write-down defective and slow-moving stock, £167,417 (2021: £125,770). The defective panels were identified as part of an operational review during the year. During 2021 there was also a theft of inventory, which resulted in an expense of £346,841.

 

17.  Trade and other receivables


2022

2021


£

£

Trade receivables - gross

123,744

43,466

Less: provision for expected credit losses

(72,833)

(26,413)

Trade receivables - net

50,911

17,053

Advance to suppliers and deposits

19,503

42,882

Amounts due from related parties

100

100

VAT and other taxes receivable

12,483

170,388

Prepayments

12,536

161,770

Total trade and other receivables

95,533

392,193

 

The ageing of trade receivables and ECL allocation is as follows:

31 December 2022

Gross

ECL

Net


£

£

£

Not past due and not impaired

829

-

829

Up to 30 days past due

-

-

-

31 to 60 days past due

3,155

-

3,155

61 to 90 days past due

9,829

-

9,829

Over 90 days past due

109,931

(72,833)

37,099

Total

123,744

(72,833)

50,911

 

31 December 2021

Gross

ECL

Net


£

£

£

Not past due and not impaired

2,673

-

2,673

Up to 30 days past due

-

-

-

31 to 60 days past due

969

-

969

61 to 90 days

1,180

-

1,180

Over 90 days

38,644

(26,413)

12,231

Total

43,466

(26,413)

17,053



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

18.  Cash and cash equivalents

 

2022

 2021

 

£

£

Cash at bank and in hand

842,632

237,613

 

The fair value of the cash & cash equivalents is as disclosed above. For the purpose of the cash flow statement, cash and cash equivalents comprise of the amounts shown above.

19.  Trade and other payables

 

2022

                           2021

 

£

£

Trade payables

62,976

232,011

Accruals

139,851

77,150

Deferred revenue

43,955

-

Wages payable

29,586

19,535

Pension payable

175

508

Other payable

173

162

Amounts due to related parties

-

70,000

Financial liabilities at amortised costs other than loans and borrowings

276,716

399,366

Social security & other taxes payables

13,279

11,847

Total trade and other payables

289,995

411,213



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

20.  Loans and borrowings


2022

2021


£

£

Current

 

 

Convertible bonds issued to related party

25,000

-

Corporate bonds (net of bond issue costs)

285,306

-

Non - current



Convertible bonds issued to related party

-

25,000

Corporate bonds (net of bond issue costs)

-

252,080

Total current and non - current loans and borrowings

310,306

277,080

 

During the prior year, a series of corporate green bonds were issued through crowdfunding platform Crowd For Angels with an interest rate of 7%:           

-       £225,000 was issued on 28 May 2021 with a term of 2 years, and is secured by way of a floating charge against the assets of the Company;

-       £25,000 was issued on 28 May 2021, with the same term, to non-executive director Gavin Mayhew;

-       £103,253 was issued on 13 August 2021, with a term of 2 years to external investors through the Crowd For Angels platform and is secured by way of a floating charge against the assets of the Company.

 

Alongside the corporate bonds, warrants were also issued to Crowd For Angels, including

-       2,250,000 warrants on 28 May 2021, with a term 36 months and exercise price 3.1p

-       1,032,530 warrants on 30 July 2021, with a term 36 months and exercise price 2.75p

The 1,032,530 warrants were exercised in 2021 and the proceeds repaid part of the corporate green bond.

 

The warrants were fair valued using the Black Scholes model, see note 23 for details. During the year there was a bond amortisation charge of £33,226 (2021: £18,125) recorded within finance costs.

 

Reconciliation of liabilities to cashflows arising from financing activities

 


01-Jan-22

Cash inflow

Cash outflow

Non-cash

31-Dec-22


£

£

£

 

£







Corporate bonds

252,080

-

-


252,080

Corporate bonds issued to related party

25,000

-

-


25,000

Lease liability

160,424

-

(70,936)

(59,806)

29,682

 

437,504

-

(70,936)

(59,806)

306,762

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

21.  Lease liability                                               


2022

2021


£

£

Current Lease liability

29,682

69,737

Non-Current Lease liability

-

90,687

Total Current loans and borrowings

29,682

160,424

 

Lease liabilities are payable as follows:



Future minimum lease payments

Interest

Present value of minimum lease payments



£

£

£

Less than one year


30,406

(724)

29,682

Between one and five years


-

-

-

 

 

30,406

(724)

29,682

The cash outflow on lease liability payments in the year was £70,936 (2021: £51,950). The interest expense on lease liabilities recognised in the year was £16,102 (2021: £29,805).

 

22.  Share capital and reserves


Number of Shares Par Value £0.0004

Share capital

Share premium



£

£

At 1 January 2021

341,172,443

136,470

10,733,073

Exercise of shares for cash

 

 

 

Shares issued October 2021

1,032,530

413

27,982

Exercise of shares - non-cash








At 31 December 2021

342,204,973

136,883

10,761,055

Exercise of shares for cash

 

 

 

            Shares issued June 2022

101,333,333

40,534

1,463,638

 

 

 

 

At 31 December 2022

443,538,306

177,417

12,224,693

 

During 2021 there was an exercise of 1,032,530 share warrants to subscribe for ordinary shares at 2.75p per share.



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

23.  Share-based payment reserve

The Company operates an equity-settled share-based remuneration schemes for Senior Executives, under the terms of the Company's EMI and Non-Qualifying Share Option Plan (the "Option Plan"). The options are valid for 10 years from the date of grant. After satisfaction of any performance condition included in the award the options will become exercisable in equal tranches on each anniversary of the Grant Date during the first three years.

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted including any market performance conditions (for example the Company's share price) but excluding the impact of any service or non-market performance vesting conditions (for example the requirement of the grantee to remain an employee of the Group).

Non-market vesting conditions are included in the assumptions regarding the number of options that are expected to vest. The total expense is recognised over the vesting period. At the end of each period the Group revises its estimates of the number of options expected to vest based on the non-market vesting conditions. It recognises the impact of any revision in the income statement with a corresponding adjustment to equity.

The Company uses a Black Scholes model to estimate the cost of share options. The following information is relevant in the determination of the fair value of options granted. The assumptions inherent in the use of this model are as follows:

• The option life is the estimated average period over which the options will be exercised.

• For options issued to Rob Richards and David Willetts in 2021, there is a vesting condition linked to performance of the company.

• For other options issued in 2021 and earlier, the vesting conditions are 3 years' continued service with the Group.

• No variables change during the life of the option (e.g. dividend yield remains zero).

 

During the prior year there were also warrants issued to Crowd For Angels, please see note 20 for details.

 

The key assumptions used in the fair value calculation for issues is as follows

 

Issue date

28/05/2021

30/07/2021

17/09/2021

06/04/2020

Stock price at grant date

3.1p

2.75p

3.8p

2.0p

Volatility

107%

99%

100%

73%

Time to maturity (months)

36

36

36

60

Risk free rate

0.08125%

0.07400%

0.07088%

0.6528%

 

The movement in outstanding share options and warrants are as follows:

 


Number of share options

 

Number of warrants

Weighted average strike price

Weighted average term



 

(pence)

(years)

Opening at 1 January 2022

20,000,000

2,250,000

3.9

8.2

 

 

 

 

 

Issued

-

-

-

-

Exercised

-

-

-

-

At 31 December 2022

20,000,000

2,250,000

3.9

8.2

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1,500,000 options were granted under the scheme in April 2018 to Chairman, Lord David Willetts, with an exercise price of 9.0p. During 2020 there were 4,000,000 options issued to CEO, Rob Richards at an exercise price of 3.0p.

During the prior year there were 3,000,000 options issued to Lord David Willetts and 10,000,000 options were issued to Rob Richards at an exercise price of 3.8p.

The share-based payment expense recognized in the income statement during the period was £119,672 (2021: £48,047).

24.  Reserves

The following describes the nature and purpose of each reserve within equity:

Issued share capital - Amount subscribed for share capital at nominal value.

Share premium - Amount subscribed for share capital in excess of nominal value. This includes share issue costs, which are deducted from share premium.

Share-based payment reserve - The share-based payment reserve represents equity settled share-based employee remuneration until such share options are exercised.

 

Foreign exchange reserves - Foreign exchange translation gains and losses on the translation of the financial statements of subsidiary from the functional to the presentation currency, and also foreign exchange on intra-group funding balances.

Retained earnings - All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

 

Non-controlling interests - Represents accumulated profits or losses from subsidiaries where there is less than a 100% holding.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

25.  Related Party Transactions

 

The Group has related party transactions with related parties who are not members of the group.

 


Transactions during the year

Amounts owed by related parties

Amounts owed to related parties/loans

 

2022

2021

2022

2021

2022

2021


£

£

£

£

£

£

The Rt Hon. Lord David Willetts FRS1

50,000

50,000

-

-

29,167

33,000

George Katzaros2

25,000

25,000

-

-

14,583

16,666

Gavin Mayhew3

31,774

31,053

-

-

60,327

46,053

Rob Richards4

152,037

151,374

-

-

-

-

Fly SolarTech Solutions SRL sales5

35,912

4,199

48,936

5,123

-

-

Fly SolarTech Solutions SRL purchases5

25,706

1,613

-

-

33,329

1,968

 

Notes:

2George Katzaros

Mr. George Katzaros, a non-executive director of Verditek plc, was entitled to Directors fees of £25,000 during the year. At the year-end George Katzaros was owed a Directors fee of £14,583.

 

Details of the directors' emoluments, together with the other related information, are set out in the Directors Report of the Remuneration Committee.  The Company's executive and non-executive directors are considered to be key management personnel for the purposes of this disclosure.

 

26.  Events subsequent to the reporting date

 

In May 2023 the company raised £500,000 before expenses by the issue of Secured Convertible Loan Notes. The Notes carry a coupon of 7 per cent. per annum which is payable on the redemption date or earlier if converted. The Notes are redeemable 2 years from the date of issue and are convertible at the option of the noteholder into ordinary shares in the Company at the lower of 1.0625 pence  per share (being the average VWAP - volume weighted average price - of the Company's ordinary shares for the 30 days prior to the agreement of the terms of the Notes) or the subscription price per ordinary share of any fundraising over £250,000 in the  6 months from the issue of the Notes. Verditek used the proceeds of the bond issue principally to repay the Crowd for Angels Bonds (approximately £325,000 in aggregate) which were due for repayment on 18th May 2023 (£221,605) and 3rd August 2023 (£103,253) and to provide additional working capital.

27.  Ultimate controlling party

 

There is no ultimate controlling party of the Company.



COMPANY STATEMENT OF FINANCIAL POSITION

 

 


31 December 2022

31 December 2021


Notes

£

£

Non-current assets

 



Investments in subsidiaries

3

8,916

4,018,455

Investment

4

-

990,000

Other receivable

5

556,783

-

Property, plant and equipment

6

14,227

599

Total non-current assets


579,926

5,009,054

 




Current assets

 



Trade and other receivables

7

22,709

330,333

Cash and cash equivalents

8

801,642

200,260

Total current assets

 

824,351

530,593

Total assets

 

1,404,277

5,539,647

 

 



Non-current liabilities

 



Loans and borrowings

10

-

277,080

Total Non-current liabilities

 

-

277,080

 

 



Current liabilities




Trade and other payables

9

143,039

335,517

Loans and borrowings

10

310,306

-

Total current liabilities

 

453,345

335,517

 

 

 

 

Net assets

 

950,932

4,927,050

 

 

 


Share capital

11

177,417

136,883

Share premium

 

12,205,726

10,761,055

Share-based payment reserve

12

332,806

213,134

Retained losses

 

(11,765,017)

(6,184,022)

Total equity


950,932

4,927,050









The Company's loss for the year was £(5,580,995) (2021: profit of £438,954).

 

These financial statements were approved and authorised for issue by the Board of Directors on 28 June 2023 and were signed on its behalf by:

 

 

Rob Richards

Chief Executive Officer

Company Registration Number: 10114644

The accompanying notes are an integral part of these financial statements.

COMPANY STATEMENT OF CHANGES IN EQUITY


 Share capital

 Share premium

Share-based payment reserve

 Retained losses

Total

 

£

£

 

£

£

Equity as at 1 January 2021

136,470

10,733,073

99,184

(6,622,976)

4,345,752

Profit/(loss) for the year

-

-

-

438,954

438,954

Total comprehensive loss

-

-

-

438,954

438,954

Share issue (net of expenses)

413

27,982

-

-

28,395

Issue of warrants - corporate bond

-

-

65,903

-

65,903

Share-based payments

-

-

48,047

-

48,047

Equity as at 31 December 2021

136,883

10,761,055

213,134

(6,184,022)

4,927,050

Profit/(loss) for the year

-

-

-

(5,580,995)

(5,580,995)

Total comprehensive loss

-

-

-

(5,580,995)

(5,580,995)

Share issue (net of expenses)

40,534

1,444,671

-

-

1,485,205

Share-based payments

-

-

119,672

-

119,672

Equity as at 31 December 2022

177,417

12,205,726

332,806

(11,765,017)

950,932

 

The accompanying notes are an integral part of these financial statements.

 

 

 

 



 

NOTES TO THE COMPANY FINANCIAL STATEMENTS

 

1.    Accounting policies

 

The accounting policies that are applicable, as set out in note 1 to the consolidated financial statements have been applied together with the following accounting policies that have been consistently applied in the preparation of these Verditek PLC ("the Company") financial statements.

 

Basis of preparation

 

The financial statements of Verditek PLC have been prepared in accordance with Financial Reporting Standard 101, 'Reduced Disclosure Framework' (FRS 101). The financial statements have been prepared under the historical cost convention, as modified and in accordance with the Companies Act 2006.

 

The Company has taken advantage of Section 408 of the Companies Act 2006 in not presenting its own statement of comprehensive income.

 

The Company has taken advantage of the following disclosure exemptions under FRS 101, on the basis that equivalent disclosures are, where required, are given in the consolidated financial statements of Verditek plc:

a.   a Cash Flow Statement and related notes as required by IAS 7 - 'Statement of Cashflows';

b.   the requirement in paragraph 38 of IAS 1 'Presentation of Financial Statements' to present comparative information in respect of paragraph 79(a)(IV) of IAS 1 - a reconciliation of the share capital at beginning and end of the period;

c.   the requirements of paragraph 134 - 136 of IAS 1 'Presentation of Financial Statements' to disclose the management of the capital of the Company;

d.   the requirements of paragraphs 30 and 31 of IAS 8, 'Accounting Policies, Changes in Accounting Estimates and Errors' to disclose the new or revised standards that have not been adopted and information about their likely impact;

e.   all of the disclosure requirements of IFRS 7 'Financial Instruments: Disclosures';

f.    the requirements of paragraph 17 of IAS 24, 'Related Party Disclosures' to disclose key management personnel; and

g.   the requirements in IAS 24 'Related Party Disclosures' to disclose related party transactions entered into between two or more members of a group, provided that any subsidiaries which is a party to the transaction is wholly owned by such a member.

 

Going concern

A going concern review for the Company has been based on current cash resources, expected costs and expected receipts.  The Directors have prepared an expected cash flow forecast covering a period of 12-month period to 30 June 2024, which contains both the base case and the worst case models of working capital requirements. More detail on this is set out in Note 2.4 to the Group accounts.

 

Investments in subsidiaries

The Company's investment in its subsidiaries are carried at cost less provision for any impairment. Investments include shareholder loans. Investments denominated in foreign currency are recorded using the rate of exchange at the date of acquisition. The carrying value is tested for impairment when there is an indication that the value of the investment might be impaired. When carrying out impairment tests, the recoverable amount is based upon future cash flow forecasts and these forecasts would be based upon management judgement. Where the carrying value is more than the recoverable amount, no impairment provision is made.

 



 

NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

 

Trade and other receivables

The Company assesses on a forward-looking basis the expected credit loss associated with its receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses.

 

Critical accounting estimates and judgments

The preparation of financial information in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires the Directors to exercise their judgement in the process of applying the accounting policies which are detailed above. These judgements are continually evaluated by the Directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follow:

 

Impairment of investments in and amount due from subsidiaries

In determining whether there are indicators of impairment of the Company's investments in, and amounts receivable from, its subsidiary undertakings, the directors take into consideration various factors including the economic viability and expected future financial performance of the business of the subsidiary undertakings. Future cashflows from solar operations requires significant management judgement, as the solar production business is still in its early stages.

 

Classification of investments in and amount due from subsidiaries

Investments in subsidiaries are classified as non-current assets. Funding provided to subsidiaries is long-term in nature and not intended to be repaid on demand, and therefore it is appropriate to present the assets as non-current.

NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

 

2.    Staff costs

 

The average number of employees (including directors) during the period was made up as follows:

 


2022

2021


Number

Number

Directors

4

4

Administrative

-

-

Total

4

4

 

The cost of employees (including directors) during the period was made up as follows:


2022

2021


£

£

Salaries (including directors)

409,890

188,589

Share-based payment

119,672

12,092

Social security costs

9,235

11,977

Pension cost

500

3,250

Total staff costs

539,297

215,908



 

NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

 

3.    Investments in subsidiary undertakings

 


Investment in subsidiary

Amount due from subsidiary

 

 

Total


£

£

£

At 1 January 2021

608,916

2,868,906

3,477,822

Additions

-

-

-

Movement for the year

-

1,140,633

1,140,633

At 31 December 2021

608,916

4,009,539

4,618,455

Additions

-

-

-

Movement for the year

-

504,358

504,358

At 31 December 2022

608,916

4,513,897

5,122,813





IMPAIRMENT




At 1 January 2021

600,000

-

600,000

Impairment of investment in subsidiary

-

-

-

At 31 December 2021

600,000

-

600,000

Impairment of investment in subsidiary

-

4,513,897

4,513,897

At 31 December 2022

600,000

4,513,897

5,113,897

 

 

 

 

Net book value

 

 

 

At 31 December 2021

8,916

4,009,539

4,018,455

At 31 December 2022

8,916

-

8,916

 

The details of the subsidiaries of Verditek plc, are set out in the Note 11 to the consolidated financial statements.

 

The directors consider that the carrying amounts owed by and to group undertakings approximates their fair value. The amounts reported under current assets have no fixed repayment terms and repayment on demand.

Full provision has been at made 31 December 2022 against amounts due from Verditek Solar Italy SRL. This company is projected to become cash generative during the course of 2024 but until such time the directors consider it prudent to make full provision.

NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

 

4.      Other investments


Financial assets at fair value through profit or loss

Total


 

£

Cost

 


At 1 January 2021

23,406

23,406

Exchange difference

 

 

Revalue investment

966,594

966,594

At 31 December 2021

990,000

990,000

Disposal

(990,000)

(990,000)

At 31 December 2022

-

-

 

The Company held a stake at 31 December 2021 in Industrial Climate Solutions (ICSI), an unlisted company registered in Canada. This has been sold during 2022 for a total consideration comprise cash on completion of £307,731 and earn out payments payable over 3 years (see note 5). At 31 December 2021, the financial asset was measured at the fair value less costs of disposal.

 

5.      Other receivables


2022

2021


£

£

Earn-out from ICSI investment sale

682,268

-

Fair Value adjustment

(125,486)

-

Other receivables

556,783

-

 

The estimated earn out payments are structured over several product development milestones to be achieved through to 2025. The estimated earn out payments to be received as at year end are based on this information and includes management assessment around the achievability of each individual milestone. This risk weighted compensation has then been discounted at an estimated cost of equity, being 14.2%

 

Sensitivity analysis:

The group's exposure to changes in key assumptions affecting the carrying value are as follows:

 



£

1% change in expected cash flows amount and timing


5,568

1% change in discount rate


9,480



 

NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

 

6.      Property, plant and equipment


Plant and machinery

Computer equipment

Total


£

£

£

At 1 January 2021

1,873

2,277

4,150

Additions

-

-

-

At 31 December 2021

1,873

2,277

4,150

Additions

12,422

2,708

15,130

Disposal

-

(949)

(949)

At 31 December 2022

14,295

4,036

18,331





DEPRECIATION




At 1 January 2021

1,873

1,059

2,932

Charge for the year

-

619

619

At 31 December 2021

1,873

1,678

3,551

Charge for the year

643

358

1,001

Disposal

-

(448)

(448)

At 31 December 2022

2,516

1,588

4,104

 

 

 

 

Net book value

 

 

 

At 31 December 2021

-

599

599

At 31 December 2022

11,779

2,448

14,227

 

7.    Trade and other receivables

 

31 December 2022

31 December 2021

 

£

£

Prepayments

10,526

160,245

Corporation tax receivable

-

123,308

VAT receivable

12,183

46,780

Total trade and other receivables

22,709

330,333

 

All amounts are due within three months.

 

8.    Cash and cash equivalent


31 December 2022

31 December 2021


£

£




Cash at bank and in hand

801,642

200,260




 

9.    Trade and other payables

 

31 December 2022

31 December 2021

 

£

£

Trade payables

5,146

212,018

Accruals and deferred income

128,387

47,617

Social security & other taxes payable

9,331

5,374

Pension cost

175

508

Loans from related parties

-

70,000

Total trade and other payables

143,039

335,517

 

NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

 

10.  Loans and borrowings

 

31 December 2022

31 December 2021

 

£

£

Current



Convertible loans

310,306

-

Non-Current

 


Corporate bonds

-

277,080

Total loans and borrowings

310,306

277,080

 

See [note 20] of the consolidated financial statements for details.

 

11.  Share capital

For details of share capital see [note 22] to the consolidated financial statements.

 

12.  Share-based payment reserve

For details of the share-based payments see [note 23] to the consolidated financial statements.

 

13.  Related party transactions

The Group has related party transactions with entities in which directors have significant financial interests. For details of the related party transactions see [note 25] to the consolidated financial statements.

 

Details of the directors' emoluments, together with the other related information, are set out in the Report of the Directors.  There are no other related party transactions.

 

14.  Commitments

The Company has no lease or capital commitments at the end of the reporting period.

 

15.  Contingent liabilities

The Company has no contingent liabilities, other than what has been disclosed already.

 

16.  Ultimate controlling party

The Company does not have an ultimate controlling party.

 

17.  Events after reporting date

For details of events after reporting date see [note 26] of the consolidated financial statements.

 

The financial information set out in this announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.  Accordingly pursuant to section 435(2), this announcement does not include the auditor's report on the statutory accounts.

However the financial information for the year ended 31 December 2022 contained in the announcement is taken directly from the statutory accounts for that year.  The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006. The report included an emphasis of matter on going concern.

The statutory accounts for the year ended 31 December 2022 have been delivered to the Registrar of Companies.

The Annual Report and Financial Statements, including the Notice of Annual General Meeting, will be made available on the Company's website www.verditek.com by 9am today and will be posted to shareholders today.

This announcement was approved by the Board on 29 June 2023.

 

 

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