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Active Energy Group (AEG)

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Monday 01 June, 2020

Active Energy Group

Final Results for the Year Ended 31 December 2019

RNS Number : 4502O
Active Energy Group PLC
01 June 2020
 

1 June 2020

Active Energy Group Plc

('Active Energy', 'AEG', the 'Company' or the 'Group')

 Final Results for the Year Ended 31 December 2019

 

Active Energy, the international biomass based renewable energy business, is pleased to announce its final results for the year ended 31 December 2019.

 

Highlights:

· Revenues of US$ 1,895,972 (2018: US$195,000) reflecting licence income associated with AEG's CoalSwitch™ technology, rental income from AEG's Lumberton site and the provision of engineering consultancy services 

· Group's   overall net assets position remained stable at US$371,859 (2018: US$497,408)

· Acquisition of Lumberton site during the second quarter of 2019 - strategic hub for CoalSwitchTM development

· JV with Renewable Logistics Systems LLC ("RLS") in July 2019 - first revenues achieved during Q4 2019 with potential for ramp up in production

· Continued developed of intellectual property portfolio around CoalSwitchTM in the US, EU, Malaysia, Thailand and Canada

· James Leahy appointed as a non-executive Director in November 2019

 

Post Period End:

· Further strengthened the Board with the appointments of Max Aitken and Jason Zimmerman as non-executive Directors

· Acquisition of 100% interest in all joint venture lumber activities at Lumberton from RLS - generating material revenues

· Completion of Permit review by North Carolina Department of Environment and Natural Resources for the 5 tonne per hour CoalSwitchTM plant at Lumberton - final public comment closing on 26 June 2020

 

Outlook:

· AEG is well placed to rapidly scale up its Lumberton site and utilise its existing timber and lumber market infrastructure to accelerate its market presence creating additional revenues

· Development of our CoalSwitch TM plant at Lumberton to start shortly to realise our ambition of being a leading producer of environmentally friendly, next generation, biomass pellets

· AEG will publish its Notice of AGM in due course

 

Michael Rowan, CEO of AEG, said,  

"In 2019 and the first four months of 2020 we have rebuilt our corporate platform to accommodate and capture the commercial opportunities available to AEG. We have the right strategy, with revenue generation from our lumber activities complementing our aim of creating a strategic hub for CoalSwitch TM development, to deliver returns for all stakeholders.

 

"2020 will be an important year in AEG's history and we believe we have the right Board and Management to deliver on our strategy as we seek to become a leading provider of next generation biomass fuels."

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

 

 

 

Enquiries:

 

Website

LinkedIn

 

www.aegplc.com

www.linkedin.com/company/activeenergy

 

 

 

Enquiries

Active Energy Group Plc

Michael Rowan

Chief Executive Officer

Antonio Esposito

Chief Operations Officer

 

 

SP Angel Corporate Finance LLP

Nominated Adviser and Broker

 

David Hignell / Caroline Rowe

Office: +44 (0)20 3470 0470

Allenby Capital Limited

Joint Broker

Amrit Nahal

Office: +44 (0)20 3328 5656

Camarco

Financial PR Adviser

Gordon Poole / Tom Huddart / Emily Hall

[email protected]

Office: +44 (0) 20 3757 4980

 

About Active Energy Group:

Active Energy Group plc is a London listed (AIM: AEG) renewable energy company that has developed a proprietary technology which transforms low-cost biomass material into high-value green fuels.  Its patented product CoalSwitch™ is the world's only drop-in biomass fuel that can be mixed at any ratio with coal or completely replace coal in existing coal-fired power stations without requiring plant modification. Active Energy Group's immediate strategic focus is the production and commercialisation of CoalSwitch™ and a low emission CoalSwitch™ blend that utilises other waste materials.

 

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

 

In 2019, Active Energy continued its development to become a producer of biomass products focused on the utilisation of low cost and waste biomass materials that create higher value, energy efficient and carbon neutral fuels. To achieve this, Active Energy has focused on re-establishing business operations in the lumber sector which provide not only consistent revenue streams but also open up new business relationships for the forthcoming production of biomass pellets, which include its proprietary CoalSwitchTM technology. As I write this, the business has enhanced its position in the market since year end by strengthening its board and management team and expanding operations at the Lumberton site in North Carolina ("Lumberton" or the "Lumberton Site") as we move into our next phase of growth.

 

Lumberton - A significant strategic step

 

The foundations for the Company's achievements in 2019 were laid in late 2018 with the strategic decision to move the operations from Utah to Lumberton. After entering into our initial joint venture with Georgia Renewable Power LLC ("GRP") in October 2018, the Company identified the Lumberton Site which is adjacent to GRP's power facility In March 2019 AEG acquired the Lumberton Site which consists of covered factory space up to 415,000 sq ft and 151 acres of surrounding land. Lumberton also had a number of additional benefits including water treatment facilities, a laboratory for analysis of future biomass fuels and existing facilities capable of accommodating not only a functioning lumber operation but also a laboratory facility to produce and test biomass pellets, including CoalSwitchTM pellets.

 

The Directors believe that Lumberton's size can accommodate expansion both in the short and medium term, both for lumber operations and the scaled production of second-generation biomass fuels, including CoalSwitchTM pellets. The commercial goal for the production of biomass fuels, including CoalSwitchTM to be in operation as soon as possible, remains the Board's prime focus. Having acquired the Lumberton Site and completed the transaction during the second quarter of 2019, Active Energy focussed on establishing commercial activities at Lumberton. Certain inherited business activities have remained operational at Lumberton during the last 12 months, in line with our plans to create a carbon neutral hub at Lumberton. Requisite equipment (including the relevant CoalSwitchTM reactors) was transferred from Utah to Lumberton during the summer of 2019 and preparatory works commenced for the reconstruction of the existing CoalSwitchTM plant to operate at the Site. As the facility at Utah had never been completed or commissioned to production targets, Active Energy has had to spend additional time and money in preparation work toward the installation and construction of the first CoalSwitchTM facility. Vendor and construction contracts and additional equipment identification have been completed in order to minimize the time required toward first production from this CoalSwitchTM  facility.

 

As an existing "brownfield site", Lumberton already owned certain permits to allow operational activities to commence. Nonetheless, after joint analysis of the new project with the North Carolina Department of Environmental Quality ("DEQ")  and given that no relevant permits had ever been applied for in Utah, a recommendation was made to require an application for an air and construction permit in order to ensure the optimal production potential and the full scale operation of the existing CoalSwitchTM plant at Lumberton. 

 

Active Energy and the DEQ worked together to comply with the local procedures and Active Energy utilised locally qualified personnel to assist in organisation of the application process. The relevant permit application was completed and submitted in November 2019. The approval process anticipated a standard review process, including drafting of the specific permit to take up to 90 days. Unfortunately, this review and approval process has been subject to delays, owing to the DEQ determining the need to hold a public hearing meeting in Lumberton and more recently, the imposition on restrictions to hold such public meetings as a result of the COVID 19 pandemic. In spite of these difficulties, the Board remains confident that the requisite permits will be issued by the DEQ.

 

The establishment of an operating centre at Lumberton has been highly significant for Active Energy's future development. The Company's goal for Lumberton is to develop facilities for a carbon neutral operational facility which, not only produces second generation carbonised biomass pellets, but can also become a research and development centre for future biomass fuels using a variety of residual feedstock resources. In addition, Active Energy intends to create additional timber & lumber activities with new commercial partners. The Lumberton Site is uniquely placed with an abundance of local feedstock resources immediately available in North Carolina and in close proximity to all existing transportation infrastructure for the delivery of biomass and lumber products globally. As such, Active Energy is working hard with the local communities to establish an economic centre at Lumberton.

 

Active Energy intends to accelerate the lumber activities at Lumberton as quickly as possible and the announcement of the joint venture with Renewable Logistics Systems LLC ("RLS") in July 2019 was a significant part of the Company's growth strategy. Following the announcement of the joint venture with RLS, work commenced at Lumberton to establish lumber operations and the first revenues were achieved during Q4 2019. This was a significant milestone for the Company as it meant that by the end of 2019 operating sawmill activities had commenced at Lumberton with firm plans to scale up the production volumes during 2020. RLS's input to date, combined with the ramp up in production following the recent acquisition by AEG, has helped to create a meaningful business with many potential industry partners and prospective customers, both locally and internationally.  In addition, the current operations at Lumberton will benefit from the forthcoming preparations for the production from the  CoalSwitchTM facility of biomass pellet fuels.

 

CoalSwitchTM Technology - Continuing Development

 

Active Energy has continued to work on complementary business opportunities from the CoalSwitchTM technology. As was stated in 2019, Active Energy has focussed on accelerating the commercial strategy with the establishment of commercial partnerships. One example of this has included working with prospective partners who wish to licence some of the core technology to build their own CoalSwitchTM production facilities. It was with great pleasure that Active Energy announced its first licence with RMD Environmentals, Inc ("RMDE"), a British Columbia based forestry management and environmental engineering and consultancy business, for the production of CoalSwitchTM in the Provinces of Alberta and British Columbia on 28 November 2019. Active Energy has granted to RMDE an exclusive licence for the production of CoalSwitchTM in these territories.  Since the licence was granted to RMDE, representatives from Active Energy have provided technical assistance to RMDE in regard to its plans for the commencement of construction of CoalSwitchTM production facilities in Alberta.

 

Another partnership had involved working with Cobant Sp. z.o.o., a Polish research, development and environmental waste coal recovery company, regarding the development and production of a fuel blend, involving reclaimed coal from coal slurry dumps in Upper Silesia in Poland and CoalSwitchTM. Initial testing had provided favourable results and an application was made to the EU for an additional grant to continue this research and development. In April 2019, it was confirmed that the application had been unsuccessful. Active Energy has no immediate plans to resubmit an application in regard to this blended fuel.

 

Throughout 2019, Active Energy has continued to maintain and develop its intellectual property portfolio around CoalSwitchTM and some of the underlying production processes. All filings and requisite procedures have been maintained in the US and the EU. The Company has further extended the portfolio to include submission of additional patent applications in Malaysia, Thailand and Canada in 2019 and 2020.  At the Lumberton Site, once the Permits are issued, the Company is keen to commence testing of alternative waste materials in laboratory conditions to examine potential other constituents which could create steam exploded biomass pellets with improved heat and environmental performance over existing white pellets.

 

Complementary Focus on Timber and Feedstock Opportunities

 

The Company has continued to focus on feedstock business opportunities which would assist the commercial development of biomass fuels, including CoalSwitchTM. The Company continues to work with the Province of Newfoundland and Labrador, (the "Province") to commercialise the secured cutting timber permits ("CTPs") for Blocks 17 and 18, which were granted in November 2018. The Company and the Province maintained a regular dialogue throughout 2019 and the early months of 2020 and are working together with the aim of establishing activity later in 2020.

 

In addition, feedstock opportunities in and around North Carolina have also been presented to Active Energy in recent months and the Company is examining these opportunities with a view as to how these might complement existing activities at the Lumberton Site.

 

Greater Environmental Awareness within the Biomass Industry

 

Active Energy plans to be at the forefront of the development of next generation biomass fuels which address current and prospective environmental concerns. Work has already commenced in examining alternate feedstock for biomass fuels, including residual wood, chicken litter and energy crops, namely miscanthus grass to create steam exploded pellets which have an equivalent energy value to existing fossil fuels without their existing carbon footprint. More work needs to be undertaken but AEG's Directors believe the Lumberton Site presents an invaluable opportunity to develop these next generation fuels for the global markets.

 

The existing white pellet market has been growing significantly since 2014, most notably, in Europe. The Unites States remains the largest exporter of white pellet, producing nearly 2.5 times as much white pellet as the second largest exporter, Vietnam (source: Futuremetrics). While consumption growth in Europe is beginning to plateau, new markets are emerging in Japan and South Korea and in the Unites States. There is an increasing demand for a pelletised fuel which can co-fire with coal or fully fire instead of coal. Active Energy believes that biomass pellets, such as CoalSwitchTM, using waste and forest residual wood could further accommodate tighter environmental criteria being set by regulators globally. 

 

Developments since December 2019 and the impact of COVID 19 

 

Active Energy has experienced more significant developments since the beginning of 2020. From an operational perspective, the lumber activities at the Lumberton Site have increased. Steady production volumes of various lumber products have increased over the recent months at Lumberton. There has been minimal impact on these production activities during the recent COVID 19 outbreak, nonetheless Active Energy remains concerned about the health and welfare of all its employees and is taking all action possible to protect its employees and all staff working at Lumberton.

 

While the State of North Carolina has declared a state of emergency limiting much economic and social activity, activities within the lumber industry have been exempted.  Active Energy's current focus in regard to lumber activities remain fully operational. Nonetheless, in the current circumstances the Board now expects there may be some time delays in the growth and development of additional activities at Lumberton, including future biomass pellet production.

 

As AEG has already announced, there have been delays in the review and approval process in regard to the requisite air and construction permits to be issues by the Department of Environmental Quality of North Carolina owing to the COVID-19 pandemic. Active Energy has been actively working with both the DEQ and our partners in Robeson County (where the Lumberton Site is situated) to resolve these process issues and address any outstanding concerns. Active Energy continues to believe that its next generation biomass fuels will address existing environmental concerns.

 

The commercial goals for Active Energy have not altered in spite of COVID 19. While timelines on project development are expected to be affected by the general disruption to economic activity, Active Energy will continue to execute its strategic plan and update its stakeholders as soon as practicable on all developments.

 

The Company has achieved a number of significant milestones in 2020. Firstly, following the appointment of James Leahy as a non-executive Director in November 2019, the Board was further strengthened by the appointments of Max Aitken and Jason Zimmerman as non-executive Directors in January 2020. Each individual brings a specific area of expertise to Active Energy given their knowledge of the lumber industry, biomass and power generation markets and global capital markets.

 

These new appointments follow the departure of Simon Melling in the fourth quarter of 2019. Simon stepped down as a non-executive Director and I would like to thank Simon for his invaluable contribution during his two year tenure on the AEG board.

 

Secondly, in February 2020 Active Energy announced a renegotiation of the key terms of its outstanding convertible loan note ("CLN") pursuant to which the existing CLN holders agreed to significant amendments to the coupon structure of the CLN. The Board is extremely grateful for the continuing support of the CLN holders.

 

Finally, negotiations with RLS were successfully completed for the re-organisation of the existing joint venture activities under one entity, Active Energy Renewable Power, a wholly owned subsidiary of Active Energy ("AERP"). With the ongoing support of RLS team members (now working for AERP), this should provide a significant contribution toward a platform for the growth of all the lumber activities at the Lumberton Site in the coming months.  In the recent COVID-19 operating environment, their commitment and experience has already been valuably demonstrated.

 

 

Financial Review:

 

Overview

 

During 2019 management continued to focus on stablising the Group's financial position. As a result losses attributable to AEG excluding non-cash share based payment reduced to US$2,101,372  (2018: US$2,360,674). Similarly, the Group's overall net assets position remained stable at US$371,859 (2018: US$497,408).

 

Consolidated income statement

 

During 2019, the management continued to focus its efforts on developing revenue generating activities in the newly acquired Lumberton's site and through licencing of its CoalSwitchtechnology while proceeding with cost consolidation and reduction. As a result, total comprehensive loss for the year attributable to owners of the parent decreased to US$1,264,088 (2018: US$ 3,568,999). Excluding non-cash share based payments losses attributable to AEG were limited to US$895,237 (2018: US$2,673,579). The primary elements of the consolidated income statement are as follows:

 

·Revenues were US$1,895,972 (2018: US$195,000) reflecting income from licencing of AEG's CoalSwitch™ technology, rental income from AEG's Lumberton site and the provision of engineering consultancy services.

· An impairment charge of US$Nil (2018: US$950,700) was recorded in 2018 against the Northern Alberta and Ukrainian intangible development assets, reflecting a re-evaluation of the economics of these assets.

·Administrative expenses were US$2,779,473 (2018: US$2,982,866) reflecting ongoing corporate costs and business development activity. Excluding non-cash share based payments, administrative expenses were US$2,410,623 (2018: US$2,087,436). The year on year increase reflects losses on disposal of certain items of equipment, partially offset by cost reduction initiatives.

·Finance expenses were US$2,461,376 (2018: US$406,929). These cost relate to ongoing servicing of the Group's Convertible Loan Notes, foreign exchange gains and losses, offset by interest capitalised to tangible and intangible fixed assets. The year on year movement primarily reflects foreign exchange movements.

· Loss on discontinued operations were US$Nil (2018: US$386,994). This reflected the close out of contractual matters associated with Active Energy's former Ukrainian wood chip operations during 2018.

· The tax credit of US$874,655 (2018: US$1,346,010) reflects income associated with research and development tax credits.

· Total other comprehensive income was US$1,206,134 (2018 expense of: US$312,895) reflecting upward revaluations of the recently acquired Lumberton site and the Group's available for sale investments.

 

Statement of financial position

 

During 2019 Group's overall net assets position remained stable at US$371,859  (2018: US$497,408.) The primary elements of the consolidated statement of financial position are explained below.

 

· Non-current assets increased to US$19,882,848 (2018: US$14,587,953). This increase relates to the purchase and subsequent revaluation of land & buildings at Lumberton of $4m ; an increase in Intangible Assets of US$720,616 due to further investment in CoalSwitch™ intellectual property; and further investment, and revaluation of, AEG's  available for sale investment totalling US$718,424.

·Current assets reduced to US$1,544,138 (2018: US$2,003,178) reflecting movements in research and development tax credits receivable.

·Current liabilities decreased to US$2,500,079 (2018:US$4,179,400). This reduction reflects repayment of shareholder loans.

· Non-current liabilities increased to US$18,555,048 (2018: US$11,914,323) reflecting the issue of convertible loan notes during 2019.

· Equity attributable to owners of the parent company were US$371,859 (2018: US$497,408) as a result of the following:

Ø An increase in the convertible debt reserve to US$3,490,621 (2018: US$ 2,720,933) reflecting the equity element of convertible loan notes issued during the year;

Ø An increase in the revaluation reserve to US$504,646 (2018: US$Nil) due to the revaluation of the Group's Lumberton site; 

Ø Other movements in the consolidated income statement relating to profit for the year, foreign exchange variations and revaluation of available for sale investments.

 

Outlook:

 

2019 was a pivotal year for AEG, during which the Company completed a strategic review of the market opportunities based upon establishing commercial operations in Lumberton. Significant goals have been achieved with the acquisition of the Site and the commencement of timber and lumber operational activities. At the same time, preparation work toward the production and manufacture of biomass pelletised fuels utilising the existing CoalswitchTM technologies has continued.

 

Looking forward the outlook is very positive. All the efforts of the last 12 months at Lumberton are coming to fruition for AEG. The Company is currently generating revenues with a material increase expected in production volumes and revenues as lumber activities increase in the near term.

 

The revenue generation gives the Company a consolidated platform to launch its biomass products including CoalSwitchTM as soon as practicable in spite of the delays in the approval process for the grant of the permit and the disruption caused by the COVID-19 pandemic.  The Board is confident in AEG's ability to deliver on its strategic aims in this financial year and become both a material producer of next generation biomass pellets from Lumberton and a significant provider of lumber services in North Carolina.

 

 

Michael Rowan

Chief Executive Officer

29 May 2020

 

 

 

 

CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

 

 

 

 

2019

 

2018

 

Note

 

 

US$

 

US$

 

 

 

 

 

 

 

REVENUE FROM CONTRACTS WITH CUSTOMERS

3

 

 

1,895,972

 

195,000

 

 

 

 

 

 

 

GROSS PROFIT

 

 

 

1,895,972

 

195,000

Impairment charge

 

 

 

-

 

(950,700)

Administrative expenses

5

 

 

(2,779,473)

 

(2,982,866)

 

 

 

 

 

 

 

OPERATING LOSS

 

 

 

(883,501)

 

(3,738,566)

 

 

 

 

 

 

 

Finance costs

6

 

 

(2,461,376)

 

(406,929)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) from continuing operations

 

 

 

(3,344,877)

 

(4,145,495)

 

 

 

 

 

 

 

Income tax credit on continuing operations

8

 

 

874,655

 

1,346,010

(Loss) from discontinued operations

7

 

 

-

 

(386,994)

 

 

 

 

 

 

 

LOSS FOR THE PERIOD

 

 

 

(2,470,222)

 

(3,186,479)

 

 

 

 

 

 

 

(Profit)/Loss attributable to Non‐controlling Interest

 

 

 

-

 

(69,625)

 

 

 

 

 

 

 

(Loss) attributable to the Parent Company

 

 

 

(2,470,222)

 

(3,256,104)

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME/(EXPENSE):

 

 

 

 

 

 

Items that may be subsequently reclassified to profit or loss

 

 

 

 

 

Exchange differences on translation of operations

 

 

 

137,540

 

(278,237)

Revaluation of land and buildings

 

 

 

504,646

 

-

Revaluation of assets held for resale

 

 

 

563,948

 

(34,658)

 

 

 

 

 

 

 

Total other comprehensive income (expense)

 

 

 

1,206,134

 

(312,895)

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE LOSS FOR THE PERIOD

 

 

 

(1,264,088)

 

(3,568,999)

 

 

 

 

 

 

 

(Loss) per share (US cent) - continuing operations

 

 

 

(0.21)

 

(0.28)

(Loss) per share (US cent) - discontinued operations

 

 

 

0.00

 

(0.04)

Basic and Diluted (loss) per share (US cent)

9

 

 

(0.21)

 

(0.32)

 

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement.

 

The notes below form part of these financial statements.
 

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019

 

 

 

Group

 

Group

 

Company

 

Company

 

 

2019

 

2018

 

2019

 

2018

 

Note

US$

 

US$

 

US$

 

US$

NON-CURRENT ASSETS

 

 

 

 

 

 

 

 

Intangible assets

10

9,180,466

 

8,459,850

 

-

 

-

Property, plant and equipment

11

9,231,743

 

5,375,888

 

-

 

-

Investment in subsidiaries

12

-

 

-

 

1,455,091

 

58,426

Long term loans

13

-

 

-

 

23,272,315

 

17,372,234

Available for sale financial assets

14

1,470,639

 

752,215

 

1,470,649

 

752,215

 

 

19,882,848

 

14,587,953

 

26,198,055

 

18,182,875

CURRENT ASSETS

 

 

 

 

 

 

 

 

Trade and other receivables

15

1,146,815

 

1,704,410

 

954,232

 

784,268

Cash and cash equivalents

16

397,323

 

298,768

 

360,622

 

234

 

 

1,544,138

 

2,003,178

 

1,314,854

 

784,502

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

21,426,986

 

16,591,131

 

27,512,909

 

18,967,377

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Trade and other payables

17

2,391,229

 

2,851,693

 

1,441,593

 

1,469,614

Loans and borrowings

19

108,850

 

1,327,707

 

-

 

1,000,000

 

 

2,500,079

 

4,179,400

 

1,441,593

 

2,469,614

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Deferred income tax liabilities

18

364,316

 

241,585

 

-

 

-

Loans and borrowings

19

18,190,732

 

11,672,738

 

18,190,732

 

11,672,738

 

 

18,555,048

 

11,914,323

 

18,190,732

 

11,672,738

TOTAL LIABILITIES

 

21,055,127

 

16,093,723

 

19,632,325

 

14,142,352

NET ASSETS

 

371,859

 

497,408

 

7,880,584

 

4,825,025

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT

 

 

 

 

Share capital

20

17,265,379

 

17,265,379

 

17,265,379

 

17,265,379

Share premium

 

17,303,159

 

17,303,159

 

17,303,159

 

17,303,159

Merger reserve

 

2,350,175

 

2,350,175

 

2,350,175

 

2,350,175

Foreign exchange reserve

 

(67,274)

 

(204,815)

 

(468,793)

 

(716,115)

Own shares held reserve

 

(268,442)

 

(268,442)

 

(268,442)

 

(268,442)

Convertible debt / warrant reserve

 

3,490,621

 

2,720,933

 

3,490,621

 

2,720,933

Retained earnings

 

(40,206,405)

 

(38,310,938)

 

(31,791,515)

 

(33,830,064)

Revaluation reserve

 

504,646

 

-

 

-

 

-

Non‐controlling Interest

 

-

 

(358,043)

 

-

 

-

TOTAL EQUITY

 

371,859

 

497,408

 

7,880,584

 

4,825,025

 

The financial statements were approved and authorised for issue by the Directors on  May 2020 and were signed on their behalf by:

 

 

Michael Rowan 

Chief Executive Officer 

Company Number 03148295

The notes below form part of these financial statements

CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019

 

 

Group

 

Group

 

Company

 

Company

 

Note

2019

 

2018

 

2019

 

2018

 

 

US$

 

US$

 

US$

 

US$

Cash (outflow)/inflow from operations

23

1,675,831

 

(1,515,299)

 

1,201,865

 

(4,242,757)

Income tax paid

 

-

 

-

 

-

 

-

Net cash (outflow)/inflow from operating activities

 

1,675,831

 

(1,515,299)

 

1,201,865

 

(4,242,757)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of intangible assets

 

(519,312)

 

(1,108,770)

 

-

 

-

Increase in share of subsidiary undertaking

 

 

-

 

(1,396,666)

 

-

Purchase of property, plant and equipment

 

(1,756,619)

 

(1,777,388)

 

-

 

-

Sale of property, plant and equipment

 

362,790

 

123,222

 

-

 

-

Net cash outflow from investing activities

 

(1,913,141)

 

(2,762,936)

 

(1,396,666)

 

-

Cash flows from financing activities

 

 

 

 

 

 

 

 

Issue of equity share capital, net of share issue costs

 

-

 

3,299,248

 

-

 

3,299,247

Issue of CLN

 

2,762,781

 

2,350,445

 

2,762,781

 

2,022,738

Unsecured loans repaid

 

(1,218,857)

 

-

 

(1,000,000)

 

 

Finance expenses

 

(1,207,093)

 

(1,193,316)

 

(1,207,093)

 

(1,193,316)

Net cash inflow from financing activities

 

336,831

 

4,456,377

 

555,688

 

4,128,669

Net increase/(decrease) in cash and cash equivalents

 

99,521

 

178,142

 

360,887

 

(114,088)

Cash and cash equivalents at beginning of the year

 

298,768

 

142,049

 

234

 

135,706

Exchange (losses)/gains on cash and cash equivalents

 

(966)

 

(21,423)

 

(499)

 

(21,384)

Cash and cash equivalents at end of the year

16

397,323

 

298,768

 

360,622

 

234

 

 

The notes below form part of these financial statements.

 

GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019

 

Share capital

Share premium

Merger reserve

Foreign exchange reserve

Own shares held reserve

Convertible debt and warrant reserve

Retained earnings

 

 

 

Revaluation Reserve

Non-controlling Interest

Total equity

 

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

At 31 December 2017

14,493,246

14,740,478

2,350,175

108,080

(779,222)

2,930,209

(35,950,264)

-

(427,668)

(2,534,966)

Loss for the period

-

-

-

-

-

-

(3,186,479)

-

-

(3,186,479)

Other comprehensive income

-

-

-

(312,895)

-

-

 

-

-

(312,895)

CLN conversions

734,267

1,812,079

-

 

-

(339,081)

-

-

-

2,207,265

Issue of share capital

2,548,646

750,602

-

-

-

-

-

-

-

3,299,248

Embedded derivative on CLN issue

-

-

-

-

-

129,805

-

-

-

129,805

Share based payments

-

-

-

-

-

-

895,430

-

-

895,430

Cancellation of Treasury shares

(510,780)

-

-

-

510,780

-

-

-

-

-

Minority Interest

-

-

-

-

-

-

(69,625)

-

69,625

-

At 31 December 2018

17,265,379

17,303,159

2,350,175

(204,815)

(268,442)

2,720,933

(38,310,938)

-

(358,043)

497,408

Loss for the period

-

-

-

-

-

-

(2,470,222)

-

-

(2,470,222)

Other comprehensive income

-

-

-

137,541

-

-

563,948

-

-

701,489

Revaluation of land & buildings

-

-

-

-

-

-

-

504,646

-

504,646

Embedded derivative on CLN issue

-

-

-

-

-

769,688

-

-

-

769,688

Share based payments

-

-

-

-

-

-

368,850

-

-

368,850

Minority Interest adjustment

-

-

-

-

-

-

(358,043)

-

358,043

-

At 31 December 2019

17,265,379

17,303,159

2,350,175

(67,274)

(268,442)

3,490,621

(40,206,405)

504,646

-

371,859

The purpose and nature of each of the above reserves is described in note 22. The notes below form part of these financial statements.
 

  COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019 

 

Share capital

Share premium

Merger reserve

Foreign exchange reserve

Own shares held reserve

Convertible debt and warrant reserve

Retained earnings

 

Total equity

 

US$

US$

US$

US$

US$

US$

US$

US$

At 31 December 2017

14,493,246

14,740,478

2,350,175

(403,220)

(779,222)

2,930,209

(32,924,702)

406,964

Loss for the period

-

-

-

-

-

-

(1,800,792)

(1,800,792)

Other comprehensive income

-

-

-

(312,895)

-

-

-

(312,895)

CLN conversions

734,267

1,812,079

-

-

-

(339,081)

-

2,207,265

Issue of share capital

2,548,646

750,602

-

-

-

-

-

3,299,248

Embedded derivative on CLN issue

-

-

-

-

-

129,805

-

129,805

Share based payments

-

-

-

-

-

-

895,430

895,430

Cancellation of Treasury shares

(510,780)

-

-

-

510,780

-

-

-

At 31 December 2018

17,265,379

17,303,159

2,350,175

(716,115)

(268,442)

2,720,933

(33,830,064)

4,825,025

Profit for the period

-

-

-

-

-

-

1,105,751

1,105,751

Other comprehensive income

-

-

-

247,322

-

-

563,948

811,270

Embedded derivative on CLN issue

-

-

-

-

-

769,688

-

769,688

Share based payments

-

-

-

-

-

-

368,850

368,850

At 31 December 2019

17,265,379

17,303,159

2,350,175

(468,793)

(268,442)

3,490,621

(31,791,515)

7,880,584

 

The purpose and nature of each of the above reserves is described in note 22.

 

The notes below form part of these financial statements

1.  ACCOUNTING POLICIES

 

General information

Active Energy Group plc is a public limited company incorporated in England and Wales and quoted on the AIM market of the London Stock Exchange. The address of the registered office is disclosed on page 1 of the annual report. The principal activity of the Group is described in the Strategic Report.

 

Basis of preparation

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

Both the Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards, International Accounting Standards and IFRIC interpretations (collectively IFRS) as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on the historical cost basis, as modified by the revaluation of property, plant and equipment, available for sale financial assets, and financial assets and liabilities, including derivative financial instruments, at fair value through profit or loss.

The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in the most appropriate application in applying the Group's accounting policies.  The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 26.

Going concern

Historically, the Group's primary revenue generating business segment was the Ukrainian wood fibre business. This was discontinued during 2017 and the group's emphasis shifted toward development of the CoalSwitch™ business segment. In Q1 2019 AEG purchased an industrial site in Lumberton, North Carolina. Later that year saw log export and sawmill activities were commenced at that site by AEG's JV partner, Renewable Logistics Systems LLC.  On 31 March 2020 AEG announced that it had acquired a 100% interest in the Lumberton Wood business and this business activity has been operated by AEG's 100% subsidiary (AERP) since this date.

 

The Directors have considered the cash requirements of the business for the following 12 months. As part of this process, they have taken into account existing liabilities, along with detailed operating cash flow requirements. The projections prepared include ongoing running costs of the Group and committed expenditure at the date of approving the financial statements.

The Directors note that the current operational plans involve the ramp up of sawmill production and saw log exports during 2020, together with commencement of production and sale of CoalSwitch TM in the second half of 2020. The Directors have identified a variety of potential sources of funding including issue of additional equity and/or debt in order to finance the ramp up and commissioning of these operational activities. In addition, the Directors have identified additional cost reductions and cash flow optimisation steps, which may be implemented if necessary. Finally, the Directors have considered the potential impact of the Covid-19 on the group and noted that AERP's activities are classified as pertaining to an "essential industry" by the state of North Carolina and that the business has continued to operate during "lockdown" periods.

 

 

1.  ACCOUNTING POLICIES (continued) 

Going concern (continued)

Taking this into account and following a detailed review by the Directors of the Group's cash flow requirements, the directors believe that the Group will have sufficient cash resources to continue to trade for a period of at least 12 months from the date that the financial statements are signed. Consequently, the financial statements have been prepared on a going concern basis.

However, as of the date of signing these financial statements, the Company does not have a significant period of history of sawmill and saw log export activity on which to rely. In addition the environmental permit for the CoalSwitch TM plant has not yet been granted and production and sale of CoalSwitch has not commenced. Furthermore, the potential sources of funds have not yet been finalised and therefore there can be no guarantee that sufficient funds will be available to finance the ramp up and commissioning of operations.  Finally, the potential impact of the Covid-19 pandemic on the Group is not fully known. These circumstances indicate the existence of a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.

 

  Standards, interpretations and amendments to existing standards

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the group has decided not to adopt early. The full impact of their adoption has not yet been fully assessed; however, management do not expect the changes to have a material effect on the Financial Statements. The most significant of these are as follows, which are all effective for the period beginning 1 January 2020:

· IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in  Accounting Estimates and Errors (Amendment - Definition of Material)

· IFRS 3 Business Combinations (Amendment - Definition of Business)

· Revised Conceptual Framework for Financial Reporting

 

Changes in accounting standards which have been implemented in the year

The following new standards have been adopted by the Group. No adjustments were required the prior year's figures as a result of the adoption of these standards. 

 

Ø IFRS 16  Leases (effective date 1 January 2019)

Ø IFRIC 23  Uncertain tax treatments (effective date 1 January 2019

Basis of consolidation

The financial information incorporates the results of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Group has power over relevant activities, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The consolidated financial statements present the financial results of the Company and its subsidiaries (the Group) as if they formed a single entity. Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

In the Company's statement of financial position, investments in subsidiaries are stated at cost less provisions for any permanent diminution in value.

 

 

1.  ACCOUNTING POLICIES (continued)

Revenue recognition

Revenue is recognised in accordance with the requirements of IFRS 15 'Revenue from Contracts with Customers'. The Company recognises revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework: 1. Identify the contract(s) with the customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognise revenue when (or as) the entity satisfy a performance obligation.

 

Revenue is recognised when control of the products have been transferred to the customer. Control is considered to have transferred once products have been received by the customer unless shipping terms dictate otherwise. Revenues exclude intra-group sales and value added taxes and represent net invoice value less estimated rebates, returns and settlement discounts. The net invoice value is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied.

 

In the case of income from licencing activities, revenue is recognised as and when the relevant performance obligations defined by the licence agreement have been satisfied. This may be on initial grant of the licence, if the grant is itself the performance obligation. Alternatively the performance obligation may be dependent on certain further events, such as production under the terms of the licence, in which case revenue will be recognised as this occurs.

 

Goodwill and business combinations

On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition.  Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.  Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.

When the consideration transferred by the Group in a business combination includes assets or liabilities from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration paid. Changes in the fair value of the consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.

Goodwill arising on consolidation is recognised as an intangible asset and reviewed for impairment at least annually by comparing the carrying value of the asset to the recoverable amount. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.

 

 

1.  ACCOUNTING POLICIES (continued)

Associates

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

 

Joint arrangements

Profits and losses arising on transactions between the Group and its joint ventures are recognised only to the extent of unrelated investors' interests in the joint venture. The investor's share in the Joint Venture profits and losses resulting from these transactions is eliminated against the carrying value of the Joint Venture. Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

 

The Group accounts for its interests joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations.

  Impairment of non-financial assets (excluding inventories, investment properties and deferred tax

assets)

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ("CGUs"). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

 

 

 

1.  ACCOUNTING POLICIES (continued)

Intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see note 26 related to critical estimates and judgements below).

Internally generated intangible fixed assets are recognised if they meet the requirements set out by international accounting standards. Specifically,

· the asset must be separately identifiable that is to say that either it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged; or it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations;

· The cost of the asset can be measured reliably;

· the technical feasibility of completing the intangible asset;

· the Group intends and is able to complete the intangible asset and use or sell it;

· the intangible asset will generate probable future economic benefits;

· there are available and adequate technical, financial and other resources to complete and to use or sell the intangible asset; and

· Expenditure attributable to the intangible asset is measurable.

 

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are disclosed in note 10.

 

Property, plant and equipment

Property, plant and equipment is stated at cost or deemed cost less accumulated depreciation and any recognised impairment loss. Cost includes the purchase price and all directly attributable costs. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Plant and equipment     - 2 to 10 years straight line

Furniture and office equipment  - 2 to 5 years straight line

Buildings  - 25 to 50 years straight line

The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less applicable selling expenses.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Executive Directors.

 

 

1.  ACCOUNTING POLICIES (continued)

Financial assets and liabilities

The Group classifies its financial assets at inception into three measurement categories; 'amortised cost', 'fair value through other comprehensive income' ('FVOCI') and 'fair value through profit and loss' ('FVTPL'). The Group classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost. Management determines the classification of its investments at initial recognition. A financial asset or financial liability is measured initially at fair value. At inception transaction cost that are directly attributable to its acquisition or issue, for an item not at fair value through profit or loss, is added to the fair value of the financial asset and deducted from the fair value of the financial liability.

 

Amortised cost measurement

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal payments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and maturity amount, minus any reduction for impairment.

 

Fair value measurement

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date. The fair value of assets and liabilities in active markets are based on current bid and offer prices respectively. If the market is not active the group establishes fair value by using appropriate valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net present value and discounted cash flow analysis.

 

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the group has transferred substantially all of the risks and rewards of ownership. In a transaction in which the group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. There have not been any instances where assets have only been partly derecognised. The group derecognises a financial liability when its contractual obligation are discharge, cancelled or expire.

 

Impairment

The Group assesses at each financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is objective experience (such as significant financial difficulty of obligor, breach of contract, or it becomes probable that debtor will enter bankruptcy), the asset is tested for impairment. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (that is, the effective interest rate computed at initial recognition).The carrying amount of the asset is reduced through use of an allowance account. The amount of loss is recognised in the Statement of Comprehensive Income.

 

 

 

1.  ACCOUNTING POLICIES (continued)

Taxation

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantively enacted by the year-end date.

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

· the initial recognition of goodwill;

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

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

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available to utilise the difference. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/assets are settled/recovered.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

· the same taxable group company; or

· different Group entities which intend either to settle current tax assets/liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled/recovered.

Foreign currencies

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which they operate (their "functional currency"). The Company and Consolidated financial statements are presented in United States Dollar ("US Dollar", "US$"), which is the Group's presentation currency as the Group's activities are ultimately linked to the US Dollar. The Company's functional currency is Pound Sterling.

Transactions entered into by Group entities in a currency other than their functional currency are recorded at the rates ruling when the transactions occur.  Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date.  Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.

On consolidation, the results of overseas operations are translated into the Group's presentation currency, US Dollars, at rates approximating to those ruling when the transactions took place.  All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve. Exchange differences recognised in the statement of comprehensive income of Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the foreign exchange reserve on consolidation

 

 

1.  ACCOUNTING POLICIES (continued)

Foreign currencies (continued)

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal. The key US$/GBP exchange rates used to prepare the accounts were as follows: rate at 31 December 2018: 1.276; average for year-ended 31 December 2019: 1.277; rate at 31 December 2019: 1.327.

Convertible debt

The proceeds received on issue of the Group's convertible debt are allocated into their liability and equity components. The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or maturity of the bond. The remainder of the proceeds are allocated to the conversion option and are recognised in the "Convertible debt reserve" within shareholders' equity, net of income tax effects.

Where the proceeds from the convertible debt have been used to finance construction of property, plant and equipment, or to invest in intangible assets, then the associated borrowing costs are allocated to the relevant asset in accordance with the requirements of IAS23.

Leased assets

           From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs required to remove or restore the underlying asset, less any lease incentives received. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. The initial measurement of the corresponding lease liability is at the present value of the lease payments that are not paid at the lease commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The lease payments include fixed payments, less any lease incentive receivable, variable leases payments based on an index or rate, and amounts expected to be payable by the lessee under residual value guarantees. 

 

           The lease liability is subsequently measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee or if the Group changes its assessment of whether it will 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 of the right-of-use asset has been reduced to zero.

 

 

 

1.  ACCOUNTING POLICIES (continued)

  Share based payments

Where employees receive remuneration in the form of shares or share options, the fair value of the share-based employee compensation arrangement at the date of the grant is recognised as an employee benefit expense in the consolidated income statement. The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non-market-based vesting conditions) at the date of the grant.  The assumptions underlying the number of awards expected to vest are subsequently adjusted for the effects of non-market-based vesting to reflect the conditions prevailing at the year-end date. Fair value is measured by the use of a Monte Carlo (JSOP options) or Black Scholes (other options) simulations.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of the non-transferability, exercise restrictions and behavioural considerations.

Where equity instruments are granted to persons other than employees, the consolidated income statement is charged with the fair value of goods and services received; except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

  Own shares held

Consideration paid/received for the purchase/sale of shares held in escrow or in trust for the benefit of employees is recognised directly in equity. The nominal value of such shares held is presented within the "own shares held" reserve. Any excess of the consideration received on the sale of the shares over the weighted average cost of the shares sold is credited to retained earnings.

Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Group consolidated income statement.

Investment in subsidiaries

Investments in subsidiaries are stated at cost less provision for impairment in the Company financial statements.

 

2.  SEGMENTAL INFORMATION

The Group reports two operating continuing business segments:

· "Forestry & Natural Resources" denotes the Group's initiatives to secure ownership of the entire timber supply chain from forest to finished product

· "CoalSwitch denotes the Group's renewable wood pellet business.

Revenues and costs associated with the Ukrainian Wood Fibre business were been reclassified as discontinued operations in 2017.

 

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that offer different products. During the business development stage they are managed separately because each business operates in different markets and locations. In future it is likely that these business segments may be amended to reflect the sawmill and saw log export activities and reporting structures will be revisited accordingly.

 

 

2.  SEGMENTAL INFORMATION (continued)

Measurement of operating segment profit or loss

 

The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with IFRS but excluding corporate overheads, non-recurring losses, such as goodwill impairment, the effects of share-based payments, and joint venture profit and losses.

 

 

 

2019

2019

2019

 

 

Forestry & Natural Resources

CoalSwitch

 

Total

 

 

US$

US$

US$

 

 

 

 

 

Total Revenue

 

-

1,717,676

1,717,676

Operating segment (loss)

 

(150,991)

992,889

841,898

Segment (loss) before tax

 

(150,991)

992,889

841,898

Tax charge

 

30,198

842,362

872,560

Segment (loss) for the year

 

(120,793)

1,835,251

1,714,458

 

 

 

 

 

 

 

2018

2018

2018

 

 

Forestry & Natural Resources

CoalSwitch

 

Total

 

 

US$

US$

US$

 

 

 

 

 

Total Revenue

 

-

195,000

195,000

Operating segment (loss)

 

(995,545)

(407,323)

(1,402,868)

Segment (loss) before tax

 

(995,545)

(407,323)

(1,402,868)

Tax charge

 

142,584

1,203,426

1,346,010

Segment (loss) for the year

 

(852,961)

796,103

(56,858)

 

 

Profits and losses associated with the Ukrainian wood fibre business were reclassified as discontinuing in 2017 and have therefore be excluded from the above analysis. All other finance costs relate to Group funding and are not allocated to an individual segment.

 

Capital expenditure relating to the CoalSwitch segment was US$1,1335,274 (2018: US$2,666,222) and capital expenditure relating to the Forestry and natural resource segment was US$394,774 (2018: US$804,103). In addition AEG incurred capital expenditure of US$3,600,416 on the acquisition of land and buildings at the Lumberton site during 2019.

 

 

 

 

2.  SEGMENTAL INFORMATION (continued)

Reconciliation of reportable segment profit or loss, assets and liabilities to the Group's corresponding amounts are as follows:

 

 

2019

2018

 

US$

US$

Total (loss) from reportable segments

1,714,458

(56,858)

Unallocated amount - corporate expenses

(1,532,750)

(1,440,268)

Unallocated amount - rental income

178,296

-

Unallocated amount - finance expense

(2,461,376)

(406,929)

Share based payments

(368,850)

(895,430)

Discontinued operations

-

(386,994)

Loss for the period

(2,470,222)

(3,186,479)

 

An analysis of non-current assets by location of assets is given below:

 

 

2019

2018

 

US$

US$

 

 

 

United Kingdom

6,498,339

5,303,081

Ukraine

1,056,934

1,267,925

Canada

3,095,832

2,701,058

United States

9,231,743

5,315,889

 

19,882,848

14,587,953

 

 

3.  REVENUE

 

2019

2018

Group

US$

US$

 

 

 

Grant of licence

1,617,676

-

Engineering services

100,000

195,000

Rental income

178,296

-

 

1,895,972

195,000

 

 

 

3.   REVENUE (continued)

The following table analyses revenue by location of customer.

 

2019

2018

 

US$

US$

Switzerland

-

25,000

USA

178,296

170,000

Canada

1,617,676

-

Malaysia

100,000

-

 

1,895,972

195,000

 

Revenue derived from a single external customer amounted to US$1,617,676 (2018: US$170,000).

 

4.  EMPLOYEE COSTS AND DIRECTORS

 

The following table analyses group wages and salaries before any allocations to property, plant and equipment or intangible assets.

 

 

2019

2018

Group

US$

US$

Wages and salaries

1,075,916

2,021,959

Social security costs

130,155

177,463

 

1,206,071

2,199,422

Share based payments - others

224,840

37,920

Share based payments - directors

144,010

857,510

 

1,574,921

3,094,852

 

The average monthly number of employees during the year was as follows:

 

2019

2018

Directors

3

3

Administration

3

6

Production

5

10

 

11

19

Directors' and key management personnel remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group.  During the period these were considered to be the Directors of the Company listed on page 19.

 

2019

2018

 

US$

US$

Directors' emoluments

411,444

434,957

Share based payments

144,010

857,510

 

555,454

1,292,467

The emoluments of the highest paid Director for the year, excluding non-cash share based payments, were US$191,540 (2018: US$193,295).

 

5.  OPERATING LOSS

Group

2019

2018

The loss before income tax is stated after charging/(crediting):

US$

US$

 

 

 

Operating leases - premises

-

33,596

Amortisation of intangible assets

150,991

44,845

Depreciation and impairment

66,055

950,700

Loss / (profit) on disposal of fixed assets/discontinued operations

678,803

386,994

Auditors' remuneration - parent company and consolidation

42,777

40,830

Auditors' remuneration - subsidiaries

24,517

23,605

Auditors' remuneration - taxation services

145,827

4,466

Auditors' remuneration - other services

14,046

14,035

Share based payments

368,850

895,430

Foreign exchange (gains)/loss

717,188

(640,353)

 

 

6.  FINANCE INCOME AND COSTS

 

2019

2018

Group

US$

US$

Finance costs

 

 

Interest on convertible loan

1,445,234

1,003,213

Other loan interest and charges

298,954

44,070

Foreign exchange losses/(gains)

717,188

(640,354)

Net finance (credit)/costs

2,461,376

406,929

 

Foreign exchanges movements primarily relate to movements in US$/Sterling exchange rates and resulting movements in intercompany balances.
 

 

7.  LOSS FROM DISCONTINUED OPERATIONS

During 2017 AEG plc discontinued its Wood fibre business in Ukraine. The results of this business are disclosed as a single line item in the Group Income and Expenditure Statement in accordance with IRFS5. Details of the results of these operations are shown below.

 

 

2019

2018

 

 

US$

US$

REVENUE

 

-

-

Cost of sales

 

-

(265,006)

GROSS PROFIT

 

-

(265,006)

Administrative expenses

 

-

(120,210)

 

 

 

 

OPERATING (LOSS)/PROFIT

 

-

(385,216)

Finance income

 

-

-

 

 

 

 

(Loss)/profit for the Period

 

-

(385,216)

Loss on sale of discontinued operations

 

-

(1,778)

Income tax

 

-

-

(Loss)/profit attributable to the Parent Company

-

(386,994)

 

 

Discontinued operations cash flows from operating activities were US$Nil (2018: US$1,135,216 outflow); cash flows from investing activities were US$Nil (2018: US$123,222 inflow); and cash flows arising from financing activities were US$60,000 (2018: US$200,000).

 

 

 

8.  TAXATION

 

2019

 

2018

Group

US$

 

US$

 

 

 

 

Current tax

 

 

 

R&D tax credit at 14.5% on continued operations

(842,364)

 

(1,203,426)

Deferred tax

 

 

 

Reversal of temporary differences

(32,291)

 

(142,584)

Total income tax (credit)/charge

(874,655)

 

(1,346,010)

 

 

 

 

Breakdown between continuing and discontinuing operations

 

 

 

Tax charge relating to discontinued operations

-

 

-

Tax (credit)/charge relating to continued operations

(874,655)

 

(1,346,010)

 

(874,655)

 

(1,346,010)

Factors affecting the tax charge

The tax on the Group assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:

 

2019

 

2018

 

US$

 

US$

 

 

 

 

Loss before income tax

(3,344,877)

 

(4,532,489)

Standard rate of corporation tax

19%

 

19%

Loss before tax multiplied by standard rate of corporation tax

(635,527)

 

(861,173)

Effects of:

 

 

 

R&D tax credit rate

(507,108)

 

(1,203,426)

Non-deductible expenses

8,275

 

187,707

Overseas tax rate difference from UK rate

272

 

(25)

Income not taxable

-

 

(81,940)

Accelerated depreciation

107,718

 

-

Revenue items capitalised

(278,539)

 

(110,992)

Prior year adjustment

-

 

-

Current tax (credit)/charge

(874,655)

 

(1,346,011)

Tax charge  relating to discontinued operations

 

 

 

Tax (credit) relating to Continued operations

(874,655)

 

(1,346,011)

 

 

 

 

8.  TAXATION (continued)

Movements in the Group's tax loss position can be summarised as follows:

 

 US$

Tax losses brought forward at 1 January 2018

18,984,435

Adjusted Loss per A/c's

5,402,157

Surrendered for R&D tax credit

(1,499,987)

Tax losses carried forward at 31 December 2019

22,886,605

 

This equates to a potential deferred tax asset at 19% of US$4,348,455  at the year-end 2018 (2018: US$3,227,354), which has not been recognised due to uncertainties regarding the recoverability of this balance.

Tax effects of amounts which are not deductible/(taxable) in calculating taxable income are as follows:

 

 

2019

 

2018

 

US$

 

US$

Intercompany loan written off

742

 

-

Share based payments

-

 

170,131

Legal and professional fees

-

 

14,804

Investor relations

7,533

 

2,470

Sundry items

-

 

302

 

8,275

 

187,707

 

9.  LOSS PER SHARE

Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the company of US$2,375,092 (2018: US$3,256,104) by the weighted average number of Ordinary Shares in issue during the year of 1,201,906,951 (2018: 1,013,575,699).

 

 

 

 

10.  INTANGIBLE ASSETS

Group

Other intellectual property

Development

Total

 

US$

US$

US$

Cost

 

 

 

At 31 December 2017

3,954,883

5,115,836

9,070,719

Additions

596,345

804,103

1,400,448

At 31 December 2018

4,551,228

5,919,939

10,471,167

Additions

476,833

394,774

871,607

At 31 December 2019

5,028,061

6,314,713

11,342,774

 

 

 

 

Accumulated amortisation

 

 

 

At 31 December 2017

362

1,015,410

1,015,772

Impairment charge

-

950,700

950,700

Amortisation charge for year

-

44,845

44,845

At 31 December 2018

362

2,010,955

2,011,317

 

 

 

 

Amortisation charge for year

-

150,991

150,991

At 31 December 2019

362

2,161,946

2,162,308

Net book value

 

 

 

At 31 December 2019

5,027,699

4,152,767

9,180,466

 

 

 

 

At 31 December 2018

4,550,866

3,908,984

8,459,850

 

 

 

 

10.  INTANGIBLE ASSETS (continued)

Company

Intellectual property

 

US$

At 31 December 2017, 2018 & 2019

-

Accumulated amortisation

 

At 31 December 2017, 2018 & 2019

-

Net book value

 

At 31 December 2017, 2018 & 2019

-

 

Other intellectual property

Other intellectual property comprises costs incurred to secure the rights and knowledge associated with the CoalSwitch technology. 

 

In 2015 the Group entered into a joint venture agreement with Biomass Energy Enhancements LLC ("BEE"), incorporated in the United States, for the joint commercial development and exploitation of intellectual property assets held by BEE in connection with biomass technologies.  A long term loan to BEE was recognised in the accounts to reflect monies loaned by AEG to the joint venture. An agreement was later reached with the other joint venture partners whereby AEG became the sole proprietor of this technology and as a result the loan balance was transferred to intangible fixed assets during 2017. Since 2017 the Group has continued to undertake research, development and other activities to further develop and secure its rights over its CoalSwitch™ technology.

 

Management undertakes  a review at each balance sheet date to assess whether these balances need to be impaired. Based on this review, the group did not record an impairment charge against this asset in 2019 (2018: US$Nil). The directors have noted that the recoverability of this balance is dependent upon the commercialisation of CoalSwitchTM project. Furthermore, as of the date of this announcment, production of CoalSwitchTM in commercial quantities has not yet commenced. As a result the directors intend to monitor the recoverability of this balance on an ongoing basis.

 

Development assets

Development assets relate to the following:

Ukraine: The Group is party to a supply contract granted by the Lyubomi Forestry, which is the administrator of the Lyubomi Forest in the Ukraine.  This contract was extended to October 2060 from 1 January 2015 and the Company is currently reviewing options to develop this asset as feedstock for CoalSwitch plants in Eastern Europe and/or other options to monetise this asset. The remaining life of the supply agreement is assessed to be 40 years. However, given uncertainties over the timing and nature of commercialisation of this asset Management has assessed the useful life to be 8 years and is therefore the asset is being amortised over this period. In addition, management undertakes  a review at each balance sheet date to assess whether these balances need to be impaired. Based on this review, the group did not record an impairment charge against this asset in 2019 (2018: a charge of US$668,073 was recognised). However, the directors have noted that, as of the date of this announcement, commercialisation of this asset has not yet commenced and intend to monitor the recoverability of this balance on an ongoing basis.

 

 

 

10.  INTANGIBLE ASSETS (continued)

Northern Alberta: Since 2014 AEG has invested a significant amount of time and resources building up knowledge, expertise and contacts and preparing Timber Supply licences in this territory, with the intention of developing forestry assets, in conjunction with AEG's CoalSwitchTM technology.  During 2019 AEG negotiated an agreement with RMDE whereby the latter would have the right to develop and sell CoalSwitchTM related products in this territory.  According to the terms of the licence agreement, AEG was entitled to an upfront payment followed by a royalty of US$5 for each tonne of CoalSwitchTM produced.

 

Cost incurred to date developing this asset have been recorded as development assets within intangible fixed assets and management intends to amortise these costs over the period of production. In addition, management undertakes a review at each balance sheet date to assess whether these balances need to be impaired. As a result of this review the group did not record an impairment charge against this asset (2018: a charge of US$282,627 was recognised). The directors have noted that the recoverability of this balance is dependent upon the production of CoalSwitchTM under the terms of the licence. Furthermore, as of the date of this announcement, this production has not yet commenced. As a result the directors intend to monitor the recoverability of this balance on an ongoing basis.

 

 

Newfoundland: On 29 November 2018 the Provincial Government of Newfoundland & Labrador announced that it had  issued two renewable five-year commercial cutting permits to Timberlands International (Newfoundland and Labrador) Inc., a subsidiary of AEG, totalling 100,000 m3 annually (500,000 m3 over five years) in Forest Management Districts 17 and 18 on the Great Northern Peninsula. Prior to this date AEG invested significant time and resources  in developing management and supplier capability as well as government relations in order to not only secure the licences, but also to develop the business model and capabilities to monetise the permits once awarded.

 

Costs incurred in acquiring these licences have been recorded as additions to intangible fixed assets These costs will be amortised over the period of production Management undertakes a review at each balance sheet date to assess whether these balances need to be impaired. No impairment was recorded for the year ended 31 December 2019 (2018: US$Nil). However, the directors have noted that, as of the date of this announcement, commercialisation of this asset has not yet commenced, and therefore intend to monitor the recoverability of this balance on an ongoing basis.

 

 

11.  PROPERTY, PLANT AND EQUIPMENT

 

Group

 

Land & Buildings

Plant and equipment

Furniture and office equipment

Total

 

 

 

 

 

 

 

US$

US$

US$

 

 

Cost

 

 

 

 

 

 

 

At 31 December 2017

 

-

8,960

 

 

Additions

 

-

-

 

 

Disposals

 

-

(420,600)

-

(420,600)

 

 

At 31 December 2018

 

-

8,960

 

 

Revaluation of Land & Buildings

 

504,646

-

 

 

Additions

 

3,512,999

33,137

 

 

Disposals

 

-

(1,106,593)

-

(1,106,593)

 

 

At 31 December 2019

 

4,017,645

5,247,016

42,097

9,306,758

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

At 31 December 2017

 

-

-

8,960

8,960

 

 

Impairment charge

 

-

65,000

-

65,000

 

 

At 31 December 2018

 

-

65,000

8,960

73,960

 

 

Charge for the year

 

54,000

5,428

6,627

66,055

 

 

Disposals

 

-

(65,000)

-

(65,000)

 

 

At 31 December 2019

 

54,000

5,428

15,587

75,015

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 December 2019

 

3,963,645

5,241,588

26,510

9,231,743

 

 

 

 

 

 

 

 

 

 

At 31 December 2018

 

-

5,375,888

-

5,375,888

 

 

 

The net book value of asset held under finance leases included within Property, Plant & Equipment above are US$Nil (2018: US$Nil).

Additions in the year primarily relate to the purchase of the Lumberon site in North Carolina, which is included in land & buildings above. Following the purchase of this site, the group contracted a firm of independent Certified General Real Estate Appraisers to undertake an independent valuation of this property. As a result of this valuation, which was based on an assessment of the value of the Lumberton site compared with other commercial properties in the area, the group revalued the property in line with the valuation prepared by the independent firm of Certified General Real Estate Appraisers.

 

 

 

 

11.  PROPERTY, PLANT AND EQUIPMENT (continued)

 

Company

 

 

 

Furniture and office equipment

 

 

 

 

US$

Cost

 

 

 

 

At 31 December 2017, 2018 & 2019

 

 

 

8,960

 

 

 

 

 

Accumulated depreciation

 

 

 

 

At 31 December 2017, 2018 & 2019

 

 

 

8,960

 

 

 

 

 

Net book value

 

 

 

 

At 31 December 2017, 2018 & 2019

 

 

 

-

 

12.  INVESTMENTS IN SUBSIDIARIES

Company

 

 

 

Cost

US$

At 31 December 2017 & 2018

4,555,044

Additions

1,396,665

At 31 December 2019

5,951,709

Provision for impairment

 

At 31 December 2017, 2018 & 2019

4,496,618

Net book value

 

At 31 December 2019

1,455,091

At 31 December 2017 & 2018

58,426

 

 

 

 

12.  INVESTMENTS IN SUBSIDIARIES (continued)

At 31 December 2019 the Group held share capital of the following companies:

Subsidiary undertaking

Country of incorporation

 Nature of business

Percentage Holding

 

 

 

2019

2018

AE Ukraine

Ukraine

Woodchip processing and distribution

100

100

Nikofeso Holdings Limited

Cyprus

Wood chip distribution

100

100

AETrading (EMEA) SarL

Switzerland

Wood chip distribution

100

100

AEG Trading Limited

United Kingdom

Wood chip distribution

100

100

Active Energy Services UK Limited (formerly AEG Pelleting Limited)

United Kingdom

Corporate Services

100

100

AEG Biopower Limited

United Kingdom

Biomass for energy development

100

100

AEG Coalswitch Limited

United Kingdom

Biomass for energy development

89

100

AEG Coalswitch USA LLC

United States

Biomass for energy development

100

100

ABS plc

United Kingdom

Biomass for energy development

99

85

Timberlands Int. Ltd

United Kingdom

Biomass for energy development

76

81

Alpha Prospects Ltd

United Kingdom

Energy/Natural resources investments holding company

5.2

4.2

Timberlands Newfoundland & Labrador Inc

Canada

Biomass for energy development

76

81

Lumberton Energy Holdings LLC

United States

Property Holding Company

100

-

Active Energy Renewable Power LLC

United States

Biomass for energy development

100

-

Renewable Energy Systems

United States

Wood processing and distribution

30

-

 

 

AEG Biopower Limited was in the process of being struck off and AETrading (EMEA) SarL was being wound up as of the date of this announcement.

 

 

 

13.  LONG TERM LOANS 

 

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

Carrying value at beginning of the year

-

-

17,372,234

-

Loans advanced during the period

-

-

3,562,889

-

Transfer from current assets

-

-

-

15,577,661

Accrued interest

-

-

2,337,192

1,794,573

Carrying value at end of the year

-

-

23,272,315

17,372,234

 

During 2018 certain intercompany debts were reclassified as long term to reflect the commercial reality of the likely repayment schedule of these loans. Interest was accrued at a rate of 12 % which is considered to be a market rate.

 

 

14.  AVAILABLE FOR SALE FINANCIAL ASSET

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

Fair value at beginning of the year

752,215

786,873

752,215

786,873

Shares purchased during the period

132,705

-

132,705

-

Revaluation to market value

563,947

-

563,947

-

Foreign exchange translation

21,772

(34,658)

21,772

(34,658)

Fair value at end of the year

1,470,639

752,215

1,470,639

752,215

 

Available for sale assets consist of an unquoted equity instrument which is classified as a non- current asset. During 2019 the Group increased its investment in these assets, reflecting managements continued confidence in this asset. In addition, the asset was revalued in 2019 based on the proceeds received from issue of shares by this entity, over a number of years at a stable share issue price. The available-for-sale financial asset is denominated in Pound Sterling.

 

 

 

15.  TRADE AND OTHER RECEIVABLES

 

In the Directors' opinion the carrying values of trade and other receivables are stated at their fair value, after deduction of appropriate allowances for irrecoverable amounts as these assets are not interest bearing and receipts occur over a short period and are subject to an insignificant risk of changes in value.

 

Group

Group

Company

Company

 

 

 

 

 

 

2019

2018

2019

2018

 

US$

US$

US$

US$

Current

 

 

 

 

Amounts advanced to joint venture partners

200,000

-

200,000

-

Amounts due from group companies

-

-

688,768

379,778

Other receivables

48,321

-

21,507

-

VAT

43,957

77,212

43,957

77,212

Prepayments

50,000

-

-

-

Corporation tax credit receivable

804,537

1,627,198

-

327,278

Total

1,146,815

1,704,410

954,232

784,268

 

Trade and other receivables that have not been received within the payment terms are classified as overdue. As at 31 December 2019 trade receivables of US$Nil (2018: US$Nil) were overdue. As at 31 December 2019, Group trade receivables of US$NIL (2018: US$NIL) were overdue and impaired.  An analysis of the Group's trade and other receivables classified as financial assets by currency is provided in note 24.

 

16.  CASH AND CASH EQUIVALENTS

 

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

Bank accounts

397,323

298,768

360,622

234

 

397,323

298,768

360,622

234

 

 

Cash and cash equivalents are defined as cash at bank, demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
 

 

17.  TRADE AND OTHER PAYABLES

 

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

Current

 

 

 

 

Trade payables

1,615,201

2,038,818

747,864

798,603

Social security and other taxes

136,193

3,122

42,758

3,122

Accruals and deferred income

639,835

809,753

650,971

667,889

 

2,391,229

2,851,693

1,441,593

1,469,614

 

The carrying values of trade and other payables approximate their fair value as payments occur over a short period and the risk of material changes in value is insignificant. The following table analyses the maturity of the trade and other payables, excluding borrowings. These are classified as financial liabilities on the balance sheet and they are measured at amortised cost.

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

Less than three months

2,391,229

2,851,693

1,441,593

1,469,614

Three to 12 months

-

-

-

-

 

2,391,229

2,851,693

1,441,593

1,469,614

The amounts shown are undiscounted and represent the contractual cash-flows. An analysis of the Group's trade and other payables classified as financial liabilities by currency is provided in note 24.

 

18.  DEFERRED TAXATION

Deferred tax is calculated on temporary differences under the liability method using tax rates applicable in the respective Group entities' jurisdiction. The movement on the deferred tax account is shown below and the balance relates to deferred tax on fair value adjustments related to intangibles:

Group

2019

2018

 

US$

US$

At beginning of the period

241,585

384,169

Deferred tax liability recognised on revaluation of land & buildings

155,022

-

Reversal of temporary differences

(32,291)

(8,968)

Impairment charge

-

(133,616)

At the end of the period

364,316

241,585

 

The opening deferred tax liability relates to temporary differences arising on the fair valuation of intangible assets acquired in 2011 and this was subject to an impairment in 2018.  During 2019 a deferred tax liability was recognised to reflect the tax impact of the revaluation of land & buildings at Lumberton. No provision for the deferred tax asset in respect of tax losses has been made in the Group or Company due to the uncertainty of the Group or Company being able to generate sufficient future taxable profits from which the future reversal of the timing difference can be deducted.  See note 8 for further details of this balance.

 

19.  LOANS AND BORROWINGS

The book value and fair value of loans and borrowings are as follows:

Group

Book value

Fair value

Book value

Fair value

 

2019

2019

2018

2018

 

US$

US$

US$

US$

Non-Current

 

 

 

 

Convertible debt

18,190,732

18,190,732

11,672,738

11,672,738

 

18,190,732

18,190,732

11,672,738

11,672,738

Current

 

 

 

 

Convertible debt

-

-

-

-

Unsecured loans

108,850

108,850

1,327,707

1,327,707

 

108,850

108,850

1,327,707

1,327,707

 

 

 

 

 

Total loans and borrowings

18,299,582

18,299,582

13,000,445

13,000,445

 

 

 

 

 

Company

Book value

Fair value

Book value

Fair value

 

2018

2018

2018

2018

 

US$

US$

US$

US$

Non-Current

 

 

 

 

Convertible debt

18,190,732

18,190,732

11,672,738

11,672,738

 

18,190,732

18,190,732

11,672,738

11,672,738

Current

 

 

 

 

Unsecured loans

-

-

1,000,000

1,000,000

 

-

-

1,000,000

1,000,000

 

 

 

 

 

Total loans and borrowings

18,190,732

18,190,732

12,672,738

12,672,738

 

Unsecured loans

During the year the Group repaid US$1.2m of a total of US$1.3m of unsecured short term loans. These loans had been made in 2018.

 

Convertible debt

On the 14 March 2017 the company completed a fund raising of £11.57 million before expenses (or US$14.15 million) through the issue of convertible loan notes ('CLNs') to new and existing investors. The CLNs have a maturity date of 14 March 2022 and were listed on the International Securities Exchange. These CLN can be converted into Ordinary Shares of AEG plc, at any time prior to the Maturity Date, at a 30% premium to 2.535p, being the Company's 10 day Volume Weighted Average Price immediately prior to the issue date.  During 2018 certain note holders took the opportunity to convert their CLN's into AEG Ordinary Shares.

 

 

19.  LOANS AND BORROWINGS (continued)

 

During 2019 the company issued a further of £4.76 million before expenses (or USD$6.32 million) through the issue of further CLNs to new and existing investors. These CLN also have a maturity date of 14 March 2022. These CLN can be converted into Ordinary Shares of AEG plc, at any time prior to the Maturity Date, at a price of 1p. The fair value of the liability component at inception has been calculated using a market interest rate for an equivalent instrument without conversion option. The CLN has a coupon rate of 8% and the imputed interest rate applied was 12%.

 

The following table analyses the maturity of loan and borrowings. The amounts shown are undiscounted and represent contractual cash-flows.

Group

Up to 3 months

Between 3 and 12 months

Between 1 and 2 years

Between 2 and 5  years

Total

 

US$

US$

US$

US$

US$

At 31 December 2019

 

 

 

 

 

Convertible debt

-

-

-

20,190,995

20,190,995

Unsecured loans

108,850

-

-

-

108,850

 

108,850

-

-

20,190,995

20,299,845

 

US$

US$

US$

US$

US$

At 31 December 2018

 

 

 

 

 

Convertible debt

-

-

-

13,335,583

13,335,583

Unsecured loans

1,327,707

-

-

-

1,327,707

 

1,327,707

-

-

13,335,583

14,663,290

 

 

 

 

 

 

 

Up to 3 months

Between 3 and 12 months

Between 1 and 2 years

Between 2 and 5  years

Total

Company

 

 

 

 

 

 

 

 

 

 

 

 

US$

US$

US$

US$

US$

At 31 December 2019

 

 

 

 

 

Convertible debt

-

-

-

20,190,995

20,190,995

Unsecured loans

-

-

-

-

-

 

-

-

-

20,190,995

20,190,995

 

US$

US$

US$

US$

US$

At 31 December 2018

 

 

 

 

 

Convertible debt

-

-

-

13,335,583

13,335,583

Unsecured loans

1,000,000

-

-

-

1,000,000

 

1,000,000

-

-

13,335,583

14,335,583

 

 

 

 

20.  CALLED UP SHARE CAPITAL

 

 

2019

2019

2018

2018

 

Number

US$

Number

US$

Allotted, called up and fully paid

 

 

 

 

Ordinary shares of 1p each

 

 

 

 

At 1 January

1,201,906,951

17,265,379

983,071,276

14,493,246

Issue of shares

-

-

252,048,516

3,282,913

Cancellation of treasury shares

-

-

(33,212,841)

(510,780)

As at 31 December

1,201,906,951

17,265,379

1,201,906,951

17,265,379

 

During 2019 the Company did not issue any shares. During 2018 the Company issued 252,048,516 Ordinary Shares for a total consideration of US$5.6m.

 

21.  SHARE OPTIONS AND WARRANTS

From time to time the Company has entered into share option arrangements under which the holders are entitled to subscribe for a percentage of the Company's ordinary share capital. All options vest immediately with the exception of 41,000,000 (2018: 41,000,000) options which are based on various market, service and performance conditions. The number of warrants and share options exercisable at 31 December 2019 was 123,001,619 (2018: 124,825,099).

The movements of warrants and share options during the period were as follows:

 

Weighted average  exercise price  (UK pence)

Number of Warrants and Share Options

Weighted average  exercise price  (UK pence)

Number of Warrants and Share Options

 

 

 

 

 

Outstanding at beginning of the period

3.77

124,825,099

2.72

127,325,099

Cancelled

1.98

(36,823,480)

2.59

(78,500,000)

Granted

0.79

35,000,000

4.31

76,000,000

Outstanding at end of the period

3.46

123,001,619

3.77

124,825,099

 

At 31 December 2019, the weighted average remaining contractual life of warrants and share options exercisable was 4.63 years (2018 -  4.55 years). Total share options and warrants of 35,000,000 (2018: 41,000,000) were granted during the year at a weighted average exercise price of 0.78 pence (2018: 6.5 pence).

 

There was charge for equity settled share based payments to employees and directors of US$368,851 (2018: US$895,430) in the income statement for the year ended 31 December 2019. During the year ended 31 December 2019 no share options granted to employees or directors were cancelled and as a result no credit to equity settled share based payments was recognised during the year (2018: US$ 810,109).  This was not shown in the income statement for the year ended 31 December 2018, but was recorded as a reserve transfer.

 

 

 

21.  SHARE OPTIONS AND WARRANTS (continued)

Options and warrants outstanding at 31 December 2019 were exercisable as follows:

Exercise price range (Pence, US cents in brackets)

2019

2018

Number

Number

0.5p (0.657 cent)

15,000,000

1.000p (1.315 cent)

20,000,000

1.500p (2.023 cent)

7,500,000

7,500,000

1.750p (2.360 cent)

19,047,619

19,047,619

1.750p (2.2341 cent)

35,000,000

3.000p (4.047cent)

13,450,000

13,450,000

4.500p (6,281 cent)

20,500,000

20,500,000

5.000p (6.745 cent)

2,000,000

2,000,000

6.000p (8.094 cent)

4,500,000

4,500,000

6.375p (8.600 cent)

1,823,480

8.500p (11.863 cent)

20,500,000

20,500,000

20.000p (26.982 cent)

504,000

504,000

At the end of the period

123,001,619

124,825,099

 

The above disclosures apply to both the Company and the Group.

 

JSOP awards

Under the JSOP, shares in the Company are jointly purchased at fair market value by the participating employee and the trustees of the JSOP trust, with such shares held in the JSOP trust.  For accounting purposes the awards are valued as employee share options.

The JSOP trust holds the shares of the JSOP until such time as the JSOP shares are vested and the participating employee exercises their rights under the JSOP.  The JSOP trust is granted an interest bearing loan by the Company in order to fund the purchase of its interest in the JSOP shares.  The loan held by the trust is eliminated on consolidation in the financial statements of the Group.  The Company funded portion of the share purchase price is deemed to be held in treasury until such time as the shares are transferred to the employee and is recorded as a reduction in equity in both the Group and Company financial statements.

The exercise price of the "option" is deemed to be the issue price of the shares.  The awards vest based on a market condition, which requires the shares to meet a specific share price hurdle, or a change in control condition, as defined by the plan.  Under the JSOP and subject to the vesting of the employee's interest, the participating employee will, when the JSOP shares are sold, be entitled to a share of the proceeds of sale equal to the growth in market value of the JSOP shares versus the exercise price, less simple interest on the original share purchase price, net of executives' cash contribution at inception, as agreed for each grant (the "Carry Charge").  The balance of proceeds will remain to the benefit of the JSOP trust and be applied to the repayment of the loan originally made by the Company to the JSOP trust.  Any funds remaining in the JSOP trust after settlement of the loan and any expenses of the JSOP trust are for the benefit of the Company.

 

21.  SHARE OPTIONS AND WARRANTS (continued)

The Group measures the fair value of the awards using the Monte Carlo (JSOP options) the share based payment expense is recorded over the expected life of the option.  Share based payment expenses are recognised in the income statement in accordance with the provisions of IFRS2.

The Group granted 15,000,000 JSOP awards on 4 July 2013. The JSOP awards granted during 2013 contained a share price hurdle of 3p per share. The awards vested in 2015, but all remain outstanding at year end. These disclosures apply to both the Company and the Group. No awards were made in 2019 (2018:US$Nil). The share based payment charge for the year is US $Nil (2018: US$Nil) related to the JSOP awards.

 

22.  RESERVES

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

Reserve

Description and purpose

Share premium

Amounts subscribed for share capital in excess of nominal value.

Merger reserve

Difference between fair value and nominal value of shares issued to acquire 90% or more interest in subsidiaries.

Foreign exchange reserve

Gains/losses arising on retranslating the net assets of overseas operations into US Dollars.

Own shares held reserve

Cost of own shares held by the employee benefit trust, the JSOP trust or the company as shares held in escrow.

Convertible debt and warrant reserve

Equity component of the convertible loan and the fair value of equity component of warrants issued that do not form part of a share based payment.

Revaluation reserve

Increase in valuation of land and buildings to reflect updated valuations.

Retained earnings/ Accumulated loss

Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.

 

 

 

23.  NOTES SUPPORTING THE STATEMENT OF CASH FLOWS

  Reconciliation of loss before taxation to cash outflows from operating activities

Group

 

2019

 

2018

 

 

US$

 

US$

Loss for the period

 

(2,470,222)

 

(3,186,479)

Adjustments for:

 

 

 

 

Share based payment expense

 

368,850

 

895,430

Depreciation

 

66,055

 

-

Amortisation of intangibles

 

150,991

 

44,845

Impairment of property plant & equipment

 

-

 

65,000

Impairment of intangible assets

 

-

 

950,700

Loss/ (profit) on disposal of PP&E

 

678,803

 

1,778

Revaluation of investments for resale

 

-

 

34,658

Foreign currency translations

 

612,747

 

(966,788)

Finance expenses

 

1,744,188

 

1,047,283

Income tax

 

122,731

 

(142,584)

 

 

1,274,143

 

(1,256,157)

(Increase)/decrease in inventories

 

-

 

20,349

(Increase)/decrease in trade and other receivables

 

557,595

 

(1,186,508)

(Decrease)/increase in trade and other payables

 

(155,907)

 

907,017

Net cash outflow from operating activities

 

1,675,831

 

(1,515,299)

 

Company

 

2019

2018

 

 

US$

US$

Profit/(loss) for the period

 

1,105,751

(1,800,792)

Adjustments for:

 

 

 

Share based payment expense

 

368,850

895,430

Foreign currency translations

 

722,054

(932,168)

Finance expenses

 

1,744,188

1,047,283

 

 

3,940,843

(790,247)

Increase in trade and other receivables

 

(5,267,287)

(3,799,666)

Increase/(decrease) in trade and other payables

 

2,528,309

347,156

Net cash inflow/(outflow) from operating activities

 

1,201,865

(4,242,757)

 

Non-cash transactions relating to the issue of Convertible Loan Notes to acquire Land & Buildings or to repay creditors are excluded from cash flows.

 

 

24.  FINANCIAL INSTRUMENTS  

The Group's treasury policy is to avoid transactions of a speculative nature.  In the course of trade the Group is exposed to a number of financial risks that can be categorised as market, credit and liquidity risks. The board reviews these risks and their impact on the activities of the Group on an ongoing basis.

Principal financial instruments

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

· Trade and other receivables

· Cash and cash equivalents

· Trade and other payables

· Available-for-sale financial assets

· Loans and borrowings

A summary of the financial instruments held by category is provided below:

 

Financial assets

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

Loans and receivables

 

 

 

 

Cash and cash equivalents

397,323

298,768

360,622

234

Amounts advanced to joint venture partners

200,000

-

200,000

-

Amounts due from group companies

-

-

23,961,083

17,752,012

Other receivables

48,321

-

21,507

-

VAT

43,957

77,212

43,957

77,212

Prepayments

50,000

-

-

-

Corporation tax credit receivable

804,537

1,627,198

-

327,278

 

1,544,138

2,003,178

24,587,169

18,156,736

Available-for-sale financial asset

1,470,639

752,215

1,470,639

752,215

Total financial assets

3,014,777

2,755,393

26,057,808

18,908,951

 

Financial liabilities

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

Financial liabilities at amortised cost

 

 

 

 

Trade payables

1,615,201

2,038,818

747,864

798,603

Social security and other taxes

136,193

3,122

42,758

3,122

Accruals and deferred income

639,835

809,753

650,971

667,889

Loans and Borrowings

18,299,582

13,000,445

18,190,732

12,672,738

 

20,690,811

15,852,138

19,632,325

14,142,352

 

 

 

 

 

24.  FINANCIAL INSTRUMENTS (continued)  

 

Fair value measurement

The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):

Level 1: Quoted prices in active markets for identical items (unadjusted)

Level 2: Observable direct or indirect inputs other than Level 1 inputs

Level 3: Unobservable inputs (i.e. not derived from market data).

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item.

Transfers of items between levels are recognised in the period they occur.

The only financial asset carried at fair value consists of the available for sale financial asset, which is classified as level 3.

 

Market Risk

Currency risk

The Group's financial risk management objective is broadly to seek to make neither profit nor loss from exposure to currency or interest rate risks. The Group is exposed to transactional foreign exchange risk and takes profits and losses as they arise, as in the opinion of the directors, the cost of hedging against fluctuations would be greater than the potential benefits.

The carrying amounts of the group's trade and other receivable financial instruments are denominated in the following currencies:

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

US Dollar

291,199

-

24,177,282

17,752,012

UK Pound sterling

855,616

1,704,410

49,265

404,490

 

1,146,815

1,704,410

24,226,547

18,156,502

 

The carrying amounts of the group's cash and cash equivalents are denominated in the following currencies:

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

US Dollar

267,529

2,397

261,311

-

UK Pound sterling

125,873

296,371

99,303

234

Euro

3,921

-

8

-

 

397,323

298,768

360,622

234

 

Information about the Group's loans and borrowings are provided in note 19.

 

 

 

 

24.  FINANCIAL INSTRUMENTS   (continued)

The carrying amounts of the group's trade and other payable financial instruments are denominated in the following currencies:

 

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

US$

US$

US$

US$

US Dollar

856,202

1,371,978

-

-

UK Pound sterling

1,441,593

1,469,614

1,441,593

1,469,614

Euro

-

-

-

-

Ukrainian Hryvnia

93,434

10,101

-

-

 

2,391,229

2,851,693

1,441,593

1,469,614

 

The effect of a 5 per cent strengthening of the US Dollar at the reporting date on the foreign denominated financial instruments carried at that date would, all variables held constant, would have resulted in an increase in net assets by US$24,734 (2018:  decreased in net assets US46,713). A 5 per cent weakening in the exchange rate would, on the same basis, have increased the net loss and decreased net assets by the same amount.

 

Interest rate risk

The Group and Company finances its operations through a mixture of equity and loans.  The Group and Company exposure to interest rate fluctuations on its borrowings has been limited by the terms of the Convertible Loan Notes described in note 19.

 

Credit risk

Operational

The Group is mainly exposed to credit risk from credit agreements and sales. It is the Group's policy, implemented locally, to assess the credit risk of new customers before entering contracts. Such credit ratings, taking into account local business practices are then factored into trading decisions. The Group does not enter into any derivatives to manage credit risk.  Further information on Trade and other receivables are presented in note 15.

Financial

Financial risk relates to non-performance by banks in respect of cash deposits and is mitigated by the selection of institutions with a strong credit rating.

 

 

 

24.  FINANCIAL INSTRUMENTS   (continued)

Liquidity risk

Liquidity risk arises from the Group's management of working capital and the coupon payments associated with the group's convertible loan notes.  It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

 

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.  The Group finances its operations through a mix of equity and convertible loan notes. The Group's objective is to provide funding for future growth. The Group's policies aim to ensure sufficient liquidity is available to meet foreseeable needs through the preparation of short and long term forecasts.  Further disclosure of the Directors' consideration of going concern is included in note 1.

The Group had no bank loans or invoice finance facilities at 31 December 2019 (2018: US$Nil). The Group had an overdraft at 31 December 2019 of US$Nil  (2018: US$843) which is disclosed within other payables as a liability on the balance sheet. As of 31 December 2019  there were US$20,190,995 convertible loan notes (undiscounted) in issue (2018: US$13,335,583). No personal guarantees were in place.

 

Capital risk management

The Group's objective when managing capital is to establish and maintain a capital structure that safeguards the Group as a going concern and provides a return to shareholders.

 

25.  RELATED PARTY DISCLOSURES

Details of Director's remuneration are given in the Report of the Directors. In Details of Director's remuneration are given in the Report of the Directors. In July 2019 the Group announced that it had entered into a Joint Venture arrangement with Renewable Logistics Systems LLC, to develop saw log exports at AEG's Lumberton site. This agreement was in addition to an existing rental agreement between RLS and AEG Plc. Antonio Esposito holds a 30% interest in Renewable Logistics Systems LLC via his wife, Lisa Esposito. During the remainder of 2019 AEG Plc advanced US$200,000 to Renewable Logistics Systems LLC in order to finance the start up of these joint venture activities. This balance is recorded within advances to joint venture partners on the group and Company statement of financial position.

Transactions between the Company and its subsidiaries, which are related parties to the Company, have been eliminated on consolidation.

 

The Company's intercompany receivable balances at the year-end were as follows:

 

 

2019

2018

 

 

US$

US$

 

Amounts due from Group companies

23,796,415

17,752,012

 

 

 

 

26. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of financial information in conformity with International Financial Reporting Standards requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the year-end date and the reported amounts of revenues and expenses during the reporting period.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were as follows:

Impairment of intangible fixed assets, property plant and equipment and other assets

The group has a variety of intangible fixed assets relating to development timber licences, supply contracts and timber assets (Newfoundland, Alberta and Lybomyi). Details of these assets are contained in the operations report and note 10 to the accounts. In addition the group has property plant and equipment in the form of the Lumberton industrial site and the CoalSwitchTM reference plant.  Intangible fixed assets, property plant and equipment and other assets are considered for impairment where such indicators exist using value in use calculations or fair value and recoverability estimates. The use of these methods similarly requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Furthermore, these methods require an assessment of various strategies to develop and monetise these assets as well as an assessment of the success of these strategies. Actual outcomes may vary.

Share based payments

In determining the fair value of equity settled share based payments and the related charge to the income statement, the Group makes assumptions about future events and market conditions.  In particular, judgements must be made as to the fair value of each award granted.  The fair value is determined using a valuation model which is dependent on further estimates, including the Group's future dividend policy, the timing with which options will be exercised and the future volatility in the price of the Group' shares.  Such assumptions are based on publicly available information and reflect market expectations and advice taken from qualified personnel.  Different assumptions about these factors to those made by the Group could materially affect the reported value of share based payments.

Useful lives of intangible assets and property, plant and equipment

Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness.  Changes to estimates can result in significant variations in the carrying value and amounts charged to the consolidated statement of comprehensive income in specific periods.

Recognition of development costs within intangible fixed assets

The Group undertakes certain development activity which is recognised within intangible fixed assets, if it meets certain criteria laid down by international accounting standards. This means that management is required to assess various factors associated with these assets to determine whether the asset is separately identifiable, that it is probable that future economic benefits attributable to will arise; the technical feasibility of completing the asset; that the Group intends and is able to complete the asset; and there are available and adequate technical, financial and other resources to complete the asset. All these matters involve technical and economic judgement and changes to these assessment can result in significant variations in the carrying value and amounts charged to the consolidated statement of comprehensive income in specific periods.

 

26.`CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

Recoverability of intercompany loans

The AEG Plc company only balance sheet contains various intercompany loans. These loans have not been impaired on the basis that the counterparty will generate sufficient future cashflows to repay these loans. This is based on an assessment of the assets and goodwill held by that counterparty and its ability to monetise those assets in the future.  Actual results may vary.

27.  CAPITAL AND OPERATING COMMITMENTS

Capital commitments at the 31 December 2019 were US$Nil (2018: US$Nil). Operating lease commitments at the 31 December 2019 were US$Nil (2018: US$Nil). All amounts were due within one year.

 

28.  SUBSEQUENT EVENTS

The key business developments since 31 December 2019 were as follows:

· On 20 January 2020 AEG announced that Max Aitken and Jason Zimmermann had joined the board.

· On 14 February 2020 AEG announced that it had reached an agreement with all of its bondholders to revise the terms and conditions of the outstanding CLN. Specifically, it had been agreed that the Company has the option to decide that the coupon payment maybe by either (1) in cash or (2) via the issuance of additional Bonds in regard to each relevant quarter for the remainder of 2019.

· On 31 March 2020 AEG announced that  it had entered into an agreement with its joint venture partner  Renewable Logistics Systems LLC whereby AEG (through its 100% owned subsidiary Active Energy Renewable Power LLC) secured 100% control and ownership of the sawmill and saw log export activities based at AEG's industrial site in Lumberton, North Carolina.

· AEG has continued to work with the local authorities in order to secure the necessary permits to enable the commissioning of the CoalSwitchTM reference plant at AEG's industrial site in Lumberton, North Carolina.

 

Further details are provided in the Chief Executive Officer's statement.

 

29.  ULTIMATE CONTROLLING PARTY

 

In the opinion of the directors there is no one ultimate controlling party.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
FR EAASFDDDEEFA

a d v e r t i s e m e n t