REG - Earnz PLC - Final Results & Notice of AGM
03/06/2024 07:00
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RNS Number : 7455Q Earnz PLC 03 June 2024
3 June 2024
EARNZ plc
("EARNZ" or the "Company")
Final Results
and
Notice of AGM
EARNZ plc (AIM:EARN), an AIM Rule 15 cash shell which is seeking acquisitions
in the energy services sector, is pleased to announce its audited results for
the year ended 31 December 2023 (the "Full Year").
On 29 February 2024, the Company disposed of Verditek Italy srl and all
related business assets of Verditek plc (the "Solar Business"), after
receiving shareholder approval.
Following the disposal of the Solar Business, the existing Board of Directors
resigned with immediate effect, and a new Board of Directors was shortly
thereafter appointed being John Charlton, Elizabeth Lake and Bob Holt as well
as the Company being renamed EARNZ plc on 6 March 2024.
As a result of this disposal, from 1 March 2024, the Company is regarded as an
AIM Rule 15 cash shell, having ceased to own, control or conduct all, or
substantially all, of its existing trading business, activities or assets.
Under the AIM Rules for Companies, the Company has six months (31 August 2024)
to make an acquisition or acquisitions which constitute a reverse takeover
under AIM Rule 14.
The Report & Accounts for the Full Year, the contents of which are set out
below, together with the Notice of Annual General Meeting ("AGM"), will be
posted to shareholders and will be made available later today on the Company's
website at www.earnzplc.com
(https://url.avanan.click/v2/___http:/www.earnzplc.com___.YXAxZTpzaG9yZWNhcDphOm86ZDYyZDVmMzNlODg2OTJkZTFiN2VmNjFkMmM2ZWQzYmI6NjpkOWJlOmEzZWQ0OTkyZjI0OWUzOTYwZWUwMjJmMDliOTgzOWJjZmNiYWU2ZTgzYTUzNzA2YzZiZjZjODgzYmJlMWQ0YjQ6cDpG)
. The AGM will be held at 11:00 a.m. on 27 June 2024 at Shore Capital's
offices, Cassini House, 57 St James' Street, London, SW1A 1LD.
For further information, please contact:
EARNZ +44 (0) 7778 798 816
plc
Bob Holt
Elizabeth Lake
John Charlton
Shore Capital (Nominated Adviser and Joint Broker) +44 (0) 20 7408 4090
Tom Griffiths / Tom Knibbs / Lucy Bowden
WH Ireland (Joint Broker)
Hugh Morgan / Antonio Bossi / Andrew de Andrade +44 (0) 20 7220 1666
This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.
CHAIR'S REVIEW
Verditek plc was renamed EARNZ plc with effect from 6 March 2024. References
to "Verditek", "EARNZ" and "Company" throughout this report relate to EARNZ
plc. References to "Verditek Group" or "Group" relate to the consolidated
results and operations of the Company and its subsidiaries in the year.
The year to 31 December 2023 was operationally and commercially challenging
for the Verditek Group. There had been growth in sales of Verditek's
lightweight solar panel products, and previously reported collaborations to
design and manufacture integrated roofing solutions were progressing. During
the year, measures were taken, in the form of the factory move to Udine,
Italy, to lower the cost base and take advantage of more flexible working
arrangements. However, ultimately, sales did not increase at a rate sufficient
to sustain the business, and despite a bond issue and share placing each of
which raised £500,000 (before expenses) during the year, cash reserves were
low at the end of the year and the operational business could not continue in
its existing form without additional external fundraising.
On 28 February 2024, at a Company shareholder general meeting, the disposal of
Verditek Italy srl and all related business assets of Verditek plc ("Solar
Business") was approved, in return for satisfaction of the outstanding bonds
and accrued interest. The Solar Business was disposed of on 29 February 2024.
This disposal was necessary in order to satisfy outstanding creditor
obligations of the Company, and to avoid putting the Company into
administration. As a result of this disposal, from 1 March 2024, the Company
is now regarded as an AIM Rule 15 cash shell, having ceased to own, control or
conduct all, or substantially all, of its existing trading business,
activities or assets.
Following the disposal of the Solar Business, the existing Board of Directors
of the Company resigned with immediate effect, and a new Board of Directors
was shortly thereafter appointed being John Charlton, Elizabeth Lake and
myself. The Company was renamed EARNZ plc.
The Company's historic strategy had been to identify early-stage business
opportunities in the clean technology sector, invest in them and see them
through to commercial success. The focus following disposal of the Solar
Business, is now to seek acquisition targets in the energy services sector.
The Board of Directors believes that this sector presents some exciting
commercial opportunities that will ultimately deliver positive shareholder
value.
Under the AIM Rules for Companies ("AIM Rules"), the Company will need to make
an acquisition or acquisitions which constitute a reverse takeover under AIM
Rule 14 ("Reverse Takeover") within 6 months (by 31 August 2024) of becoming
an AIM Rule 15 cash shell.
To enable acquisitions and to fund ongoing working capital requirements of the
Company, there have been equity placements post year end in 2024. On 5 March
2024, shares were issued in the Company to raise £300,000. On 8 April 2024
the Company raised a further £3.7 million (before expenses) from the issue of
9,333,333 shares at 7.5 pence per share. Additionally, the Board of Directors
has taken steps to amend the capital structure of the Company in order to
reduce market volatility and increase liquidity in the Company's shares.
Existing shares in the Company were consolidated, following approval at a
shareholder general meeting on 4 April 2024, by exchanging each 100 existing
shares for 1 new share.
OUTLOOK AND AIM RULE 15
On 1 March 2024, the Company had disposed of its operating business and became
an AIM Rule 15 cash shell pursuant to the AIM Rules. As such, the Company is
required to make an acquisition or acquisitions which constitute a reverse
takeover under AIM Rule 14 or be re-admitted to trading on AIM as an investing
company (which requires, inter alia, the raising of at least £6.0 million)
under the AIM Rules, within six months from 1 March 2024.
The Company's strategy is to acquire businesses in the energy services sector
via a reverse takeover, and it has identified certain opportunities which
would constitute a reverse takeover pursuant to AIM Rule 14.
Any reverse takeover transaction will require the publication by the Company
of an AIM Rules compliant admission document and will be subject to
shareholder approval at a general meeting of the Company, to be convened at
the appropriate time.
If the Company does not complete a reverse takeover in accordance with AIM
Rule 14, or otherwise if re-admitted to trading on AIM as an investing company
fails to implement its investing policy to the satisfaction of the London
Stock Exchange within six months of becoming an investing company, the London
Stock Exchange will suspend trading in the Company's AIM securities pursuant
to AIM Rule 40.
Bob Holt,
Executive Chair
31 May 2024
STRATEGIC REPORT
The directors present their strategic report on the Group for the year ended
31 December 2023.
EARNZ plc disposed of its interests in its Solar Business on 29 February 2024.
The Company's principal business going forward is targeting acquisitions in
the energy services sector, with the aim of completing one or more
acquisitions before 31 August 2024 in compliance with AIM Rule 15.
For a review of the business during the year, please refer to the Chair's
Review on page 1-2. For an analysis of financial performance indicators,
please refer to the Financial Review on page 4.
Principal risks and uncertainties facing the business
A full review of principal risks and uncertainties facing the business during
the year and going forward is given on pages 5 to 7.
S172 Statement
As required by Section 172 of the Companies Act, a director of a company must
act in the way he or she considers, in good faith, would likely promote the
success of the company for the benefit of the shareholders. In doing so, the
director must have regard, amongst other matters, to the following issues:
• the likely consequences of any decisions in the long term (see Corporate
Governance Report, pages 10 to 17);
• the interests of the company's employees (see Corporate Social
Responsibility report on page 22)
• the need to foster the company's business relationships with
suppliers/customers and others (see Corporate Governance Report, pages 10 to
17);
• the impact of the company's operations on the community and environment
(see Corporate Social Responsibility report on page 22);
• the company's reputation for high standards of business conduct (see
Corporate Governance Report, pages 10 to 22); and
• the need to act fairly between members of the company (see Corporate
Governance Report, pages 10 to 22).
On behalf of the Board
John Charlton
Executive Director
31 May 2024
FINANCIAL REVIEW
Income statement
During 2023, the Group's loss after taxation was £2,088,979 (2022:
£1,821,567). The administrative expenses incurred for the year ended 31
December 2023 were £1,216,529 (2022: £1,610,791).
Loss per share
The basic and diluted loss per share was 0.5p (2022: 0.5p).
Financial Position
At 31 December 2023, the Group's net liabilities were £97,770 (2022: net
assets of £1,697,356). This comprised total assets of £1,046,994 and total
liabilities of £1,144,764. The total assets included property, plant and
equipment of £97,513 (2022: £195,470).
Cashflow
The Group's cash balance at the period end was £53,918 (2022: £842,632).
During the period the net cash outflow from operating activities was
£1,255,697 (2022: 1,079,319) with financing activities generating net
proceeds of £465,418 (2022: £1,394,143).
Dividends
No dividend is recommended (2022: £nil).
Capital management
The Board's objective is to maintain a financial position that is both
efficient and delivers long term shareholder value. The Group had cash
balances of £53,918 as at 31 December 2023 (2022: £842,632). The Board
continues to monitor the balance sheet to ensure it has an adequate capital
structure.
Key Performance Indicators
As the Group's revenues were still at an early stage during the period, the
main measures of performance were the level of expenditure compared to budget
and forecast expectations. Cash balances were also monitored against budget
and forecast. Going forward, revenue, gross margin, EBITDA and cash will be
key performance indicators for the Group and will be measured against previous
performance, budget and forecasts.
Events after the reporting period
Events after the reporting period are described in Note 28 to the financial
statements. Following receipt of the proceeds of share issues, the Group had
cash of approximately £3.4 million on 31 May 2024.
John Charlton
Executive Director
31 May 2024
RISK REPORT
Risk Management Framework
The Group has a risk register which includes all principal risks critical to
the business both now as a cash shell and following completion of a potential
reverse take over (RTO).
The Board retains responsibility and accountability for the effectiveness of
the risk management framework and internal control systems. As the business
grows the risks will continue to evolve and grow in complexity and so will the
risk management processes. This will ensure continuous improvement in the
organisation's risk maturity.
Approach to Risk Management
The Audit Committee, under delegated authority from the Board, is accountable
for overseeing the effectiveness of the risk management process, including
identification of the principal and emerging risks facing the Group. The
Audit Committee has particular focus on those risks that affect accounting in
general and safeguarding the Group's assets.
Principal Risks and Uncertainties
The current Board has identified the Group risks in relation to the status as
a cash shell.
In addition, below this are the risks that were identified as relevant to the
business throughout the reporting period.
DETAIL OF RISK MITIGATION and MANAGEMENT ASSESSMENT
Transaction risk Under the AIM Rules, the Company will need to make an acquisition or High risk
acquisitions which constitute a reverse takeover within 6 months of becoming
an AIM Rule 15 cash shell. There is a risk of failure to secure appropriate
acquisitions within the regulatory timeframe. Certain opportunities have been
identified and a timetable is in place with contingency included.
Underperformance of target businesses Full legal and financial due diligence is being completed on each target Medium risk
business, including historical financial information. External advisors and
Reporting Accountants are appointed for this work.
In addition, the Directors are also completing their own due diligence.
Strong management teams are in place within the target businesses.
Insufficient working capital Recent fundraise exceeded expectations and full working capital model is in Low risk
place which has been considered as part of the Board's going concern
assessment.
RISKS RELEVANT TO THE BUSINESS THROUGHOUT THE REPORTING PERIOD
Failure to secure cashflow and remain a going concern, also growth ambitions The Board reviewed medium to long term cashflow forecasts (including sales High risk (unchanged from prior year)
might outpace cash reserves. forecast), and aims to ensure sufficient funding was in place to meet
requirements.
Operational failings in manufacturing process. Technical and operational support for the factory manager was in place with an High risk (unchanged from prior year)
operational/quality control structure and process and a programme of regular
audits of the process.
Products are designed for a specific segment of the market and accessing that Build network of distribution partners and ensure review, challenge and High risk (unchanged from prior year)
segment needs to be done through distribution partners who typically have understanding of standard terms and conditions of the partnerships especially
greater negotiating power. payment terms and enforceability.
Poorly constructed sales contracts expose the company to punitive commercial
conditions. Partnering relationships expose the Company to unlimited
liabilities. The Company secured a single corporate counsel and has developed a suite of
proforma contracts to ensure commercial negotiations begin soundly.
Products are not competitive on cost as the Company cannot scale up Manufacturing has been moved to a larger automated modern factory unit which High risk (unchanged from prior year)
manufacturing with the existing manufacturing facilities. will allow increased productivity, improved quality and reduce costs per unit.
The Group was considering collaborations to scale up manufacturing or direct
investments in new manufacturing sites.
Factory output levels reduce, poor quality, other operational issues. The Group had systems in place for testing of each panel, and daily production Medium risk (unchanged from prior year)
levels are monitored and reported on regularly by local management.
The Group moved to a new larger factory unit with the aim of allowing
increased productivity, improved quality and reduce costs per unit.
HSE violations in Group operating companies. The Group is directly responsible for installing and auditing an HSE culture. Medium risk (unchanged from prior year)
Documented operating procedures were in place at the manufacturing facility,
which have been reviewed by an external body.
Non-compliance with the UK's anti-bribery and corruption legislation given the The Company has an Ethics policy which is referenced in third party contracts Medium risk (unchanged from prior year)
Company's potential operations in high-risk countries. and there is annual mandatory training for directors, employees and
contractors.
The solar marketplace continues to have increased efficiency (power output) Operational management monitored the efficiency of cells used in production of Medium risk (unchanged from prior year)
and increased competition. its solar panels, and seeks to remain at the forefront of technical
advancements at all times.
Failure to meet AIM corporate governance requirements. The executive benchmarked its corporate governance, policies and procedures Low risk (unchanged from prior year)
against published QCA guidelines to ensure compliance. The Company has regular
discussions with its nominated adviser and external counsel.
Adverse global trading conditions with companies and countries reducing their Contingency plans to control costs, through flex of production staff and Low risk (unchanged from prior year)
spend on capital projects. supply chain streamlining.
GOVERNANCE
BOARD OF DIRECTORS
The Board of Directors of EARNZ plc as at the date of signing the report and
accounts comprised:
Bob Holt OBE (Executive Chair) - appointed 29 February 2024
Bob Holt is a highly accomplished executive with over 35 years' experience in
senior leadership roles across various sectors, most recently serving as CEO
of Revolution Beauty Plc after joining its board as interim COO. Prior to
that, he successfully led Sureserve Group Plc as Chair, overseeing its
successful turnaround that resulted in over a fivefold increase in the
company's share price. He is perhaps most widely known for his role in the
rise of Mears Group PLC. Since being appointed as Chair in 1996, he guided the
company through its successful IPO on AIM and played a pivotal role in
building its order book value to £3 billion, establishing Mears as a market
leader in its sector. Bob has been awarded the OBE for his services to
philanthropic causes.
John Charlton (Executive Director) - appointed 29 February 2024
John Charlton spent 28 years in various senior corporate banking and risk
management roles within Barclays plc, specialising latterly in listed business
service companies. He joined Sureserve Group plc as Group Company Secretary in
2017 and assisted with the successful turnaround of that business. In
addition, John is Trustee and Chair of The Sureserve Foundation.
Elizabeth Lake (Non-Executive Director) - appointed 13 March 2024
Elizabeth is an accomplished executive with more than 25 years' finance and
commercial experience. Previously, Elizabeth joined the board of Revolution
Beauty Group as CFO in May 2022 and was instrumental in turning around the
business following the suspension of its shares from trading on AIM. Prior to
Revolution Beauty, she was CFO of AIM quoted, Everyman Media Group. During her
time at Everyman, Elizabeth successfully led the company through the
challenges presented by the Covid 19 pandemic, demonstrating her ability to
navigate uncertainty with strong financial and operational acumen. Prior to
Everyman, Elizabeth was Chief Financial Officer at AIM quoted, Science in
Sport, and before that finance director at Hugo Boss UK and Ireland. She
brings extensive UK plc experience to EARNZ having also worked in finance
roles at Marks & Spencer, Pearson and Thomson Reuters. Elizabeth is ACA
qualified having trained at Coopers and Lybrand (now PwC).
Linda Main (Senior Independent Non-Executive Director) - appointed 1 May 2024
Linda is a chartered accountant who retired from KPMG LLP in September 2023
after a long career leading its Capital Markets Advisory Group. Linda has
advised on well over 100 IPOs and significant transactions by listed companies
of all sizes ranging from start ups to members of the FTSE 100. She was also a
member of the UK board of KPMG where she chaired the Risk Committee and sat on
the Audit Committee. Until December 2023, Linda was a member of the London
Stock Exchange's AIM Advisory Group and earlier in her career sat on a number
of the Quoted Companies Alliance ("QCA")'s technical committees. She has
recently joined the QCA board. Linda is a Trustee of Carers Trust, a leading
charity working to transform the lives of unpaid carers. Linda will chair the
Company's audit and remuneration committees.
Directors in post during the year included:
Rob Richards (Chief Executive Officer) - resigned 29 February 2024
The Rt Hon. Lord David Willetts FRS (Non-Executive Chair) - resigned 29
February 2024
George Katzaros (Non-Executive Director) - resigned 29 February 2024
Gavin Mayhew (Non-Executive Director) - resigned 2 January 2024
The Board and responsibilities
The Board holds monthly meetings to review, formulate and approve the Group's
strategy, budgets, corporate actions and oversee the Group's progress towards
its goals. There is an Audit Committee and a Remuneration Committee in place
with formally delegated duties and responsibilities and with specific terms of
reference. From time-to-time separate committees may be set up by the Board to
consider specific issues when the need arises. Due to the size of the Group,
the Directors have decided that issues concerning the nomination of directors
will be dealt with by the Board rather than a committee but will regularly
reconsider whether a nominations committee is required.
Details of board meetings held in the reporting period, and attendance of
Board directors is shown below:
Board Members Eligible to attend Attended
Executive Directors
Rob Richards 20 20
Non-Executive Directors
The Rt Hon. Lord David Willetts FRS 20 20
George Francis Katzaros 19 16
Gavin Mayhew 19 17
The Audit Committee
The Audit Committee comprised The Rt Hon. Lord David Willetts FRS (resigned 29
February 2024) as Chair and Gavin Mayhew (resigned 2 January 2024) during the
period. Following the resignations of these directors, the Audit Committee
comprises Linda Main as Chair and Elizabeth Lake.
The Audit Committee determines the terms of engagement of the Group's auditors
and will determine, in consultation with the auditors, the scope of the audit.
The Audit Committee receives, and reviews reports from management and the
Group's auditors relating to the interim and annual accounts and the
accounting and internal control systems in use throughout the Group. The Audit
Committee has unrestricted access to the Group's auditors.
The Audit Committee Report is presented on page 17.
The Remuneration Committee
The Remuneration Committee comprised George Katzaros (resigned 29 February
2024) as Chair and Gavin Mayhew resigned 2 January 2024) during the period.
Following the resignations of these directors, the Remuneration Committee
comprises Linda Main as Chair and Elizabeth Lake.
The Remuneration Committee reviews the scale and structure of the executive
Directors' and senior employees' remuneration and the terms of their service
or employment contracts, including share option schemes and other bonus
arrangements. The remuneration and terms and conditions of the non-executive
Directors are set by the entire Board.
The Directors' Remuneration Report is presented on pages 19 - 21.
Investor relations
The General Meeting is the principal forum for dialogue with shareholders.
Updates on the progress of the business are regularly published on the
Group's website.
On behalf of the Board
John Charlton
Executive Director
31 May 2024
CORPORATE GOVERNANCE REPORT
The Chair has overall responsibility for corporate governance and is fully
committed to good corporate governance being central to the Group's approach
to creating sustainable growth and enhancing long-term shareholder value.
Directors are expected to always act ethically and responsibly, reflecting our
core values.
The Directors recognise that good corporate governance is a key foundation for
the long-term success of the Group. As the Company is listed on the AIM market
of the London Stock Exchange it is subject to the continuing requirements of
the AIM Rules. The Board has therefore voluntarily adopted the principles set
out in the Corporate Governance Code for small and midsized companies
published by the Quoted Companies Alliance ("QCA Code").
The principles are listed below with an explanation of how the Company applies
each principle, and what we do and why.
QCA Code Principle Application (as set out by QCA) What we do and why
1. Establish a strategy and business model which promote long-term value The board must be able to express a shared view of the company's purpose, The Company's strategy is explained fully within the Chair's Review section of
for shareholders business model and strategy. It should go beyond the simple description of the Report and Accounts for the year ended 31 December 2023.
products and corporate structures and set out how the company intends to
deliver shareholder value in the medium to long term. It should have
specific long-term objectives against which it can assess whether the Company
is delivering on its purpose. It should demonstrate that the delivery of Our strategy is identifying potential acquisitions in the energy services
long-term growth is underpinned by a clear set of values aimed at protecting sector, to create a consolidated Group with scale and breadth of offering in
the company from unnecessary risk and securing its long-term future. the energy services sector, growing revenues and profitability.
The key challenges to the business and how these are mitigated are detailed on
pages 5 to 7 of the Report and Accounts for the year ended 31 December 2023.
2. Promote a corporate culture that is based on ethical values and The Board should embody and promote a corporate culture that is based on sound The Corporate and Social Responsibility section on page 22 of the Report &
behaviours ethical values and which is supportive of the delivery of the Company's Accounts for the year ended 31 December 2023 details the ethical values of the
established purpose, strategy and business model. Company.
The desired culture should be reflected in the actions and decisions of the
Board and executive management team. Corporate values should guide the
objectives and the strategy of the Company.
The culture should be visible in every aspect of the business, including The Company's policies and procedures on Data Protection; Disciplinary,
recruitment, nominations, training and engagement. The performance and reward Dismissal and Grievance; Ethics; Share Dealing; Social Media; and Speak-Up
system throughout the Company should reflect and reinforce the maintenance of were reviewed and updated as required and amended policies were approved by
this culture. the Board during the year. The new Board is reviewing those policies and will
amend as required.
The corporate culture should be recognisable throughout the disclosures in the
annual report, website and any other communications by the Company, both
internal and external.
These policies and procedures are made available to staff and consultants and
anti-bribery and anti-corruption training and data protection training will be
mandatory.
Staff and consultants are encouraged to ask questions and seek clarifications
from senior members of the team on these policies and procedures.
3. Seek to understand and meet shareholder expectations Directors must develop a good understanding of the needs and expectations of Whilst the Company is early stage, the Board is committed to returning value
all elements of the Company's shareholder base. to shareholders through execution of our strategy
The Board should ensure proactive engagement with shareholders on governance The Board recognises the AGM as an important opportunity to meet shareholders.
matters. This should be led by the Chair or, where appropriate by the Senior All the Directors are available to listen to the views of shareholders
Independent Director. Other Directors such as the chairs of the Boards informally immediately after the AGM
sub-committees, should make themselves available for engagement with
shareholders. The people responsible for shareholder liaison are:
The Chair
The Executive Directors
NOMAD (Shore Capital)
The Board must manage shareholders' expectations and should seek to understand The Company's website maintains a channel to provide information and receive
the motivations behind shareholder voting decisions feedback from all stakeholders.
In addition the Company will present results directly to Investors and provide
opportunities for questions at the AGM
4. Take into account wider stakeholder interests, including social and Long-term success relies upon good relations with a range of different The executive maintained communications with trade and interest groups working
environmental responsibilities, and their implications for long term success. stakeholder groups. in the markets where its products are sold and applied.
The board should periodically identify the company's key stakeholders - for A number of mechanisms are in place to solicit feedback from shareholders
example suppliers, customers, employees, communities, regulators, or others. including the website and face to face meetings as well as the AGM
The Board should understand their needs, interests and expectations.
Feedback is an essential part of all control mechanisms. Systems need to be in Going forward, much of the Group's business will be involved in
place to solicit, consider and act on feedback from all shareholders. decarbonisation of public, commercial and private buildings.
The Company should devote particular attention to its workforce and ensure
that its practices towards it's employees (direct and indirect) are consistent
with the Company's values. Arrangements should be in place to enable employees
to raise concerns in confidence and processes to ensure that such matters are
considered and where appropriate actions are taken. The Company has a whistleblowing policy in place which is given to all new
employees. This provides a confidential mechanism for employees to raise
concerns.
The governance and appropriate oversight of a Company's approach towards The business model is focussed on decarbonisation of buildings in the public,
relevant environmental and social issues is a responsibility of the Board. commercial and private sector, together with energy efficiency.
Matters that relate to the Company's impact on society, the communities within
which it operates, or the environment - including those relating to or
stemming from climate change - have potential to affect the Company's ability
to deliver shareholder value over the medium to long term. These matters must The culture of the business reinforces social and environmental
be integrated into the Company's strategy, risk management and business model. responsibility.
5. Embed effective risk management, internal controls and assurance The board needs to ensure that the company's risk management framework Risk management on pages 5 to 7 of our Annual Report and Accounts details the
activities, considering both opportunities and threats, throughout the identifies and addresses all relevant risks in order to execute and deliver on risks to the business and how these are mitigated.
organisation. its stated purpose and strategy. Companies need to consider not only the
enterprise view but also their extended business, including the company's
entire supply chain, other material third parties (including suppliers of
outsourced services) and any reliance on strategic partners.
Setting strategy includes determining the extent of exposure to the identified The Board considers risks to the business at its monthly meetings and reviews
principal risks that the Company is able to bear and willing to take (risk the principal risks to the business and the risk register quarterly.
tolerance and
risk appetite). The Company should ensure that a balanced view of risk is
achieve, and, as well as threats should consider opportunities and the
potential for value creation.
The Board should ensure that all potential risks are considered, on a Risks are reviewed in the business monthly and quarterly by the Board.
proportionate and material basis, including those relating to climate
change.
The Board should review and consider whether the Company's enterprise wide The enterprise-wide controls have been reviewed post the balance sheet date
controls are sufficiently robust to manage the identified risks adequately. and a new FPPP (Financial Position and Prospects Procedures) is in place.
To achieve effective risk management, the Board, and in particular the audit All Board members are entitled to engage external experts as part of their
committee, must ensure that there are appropriate assurance activities in roles where they see fit.
operation. This may be based on access to internal resources, or particularly
in specialist or technical areas, the utilisation of external experts.
It is important to ensure that the Company auditor is and is seen to be The Company's auditor Haysmacintyre is independent of management.
sufficiently independent of management.
6. Establish and maintain the Board as a well-functioning, balanced team, The board members have a collective responsibility and legal obligation to All members of the Board are experts in their fields with no one individual
led by the Chair. promote the interests of the Company and are collectively responsible for dominating. All Directors are seasoned Board members and understand the
defining corporate governance arrangements. The Board should not be dominated responsibilities of being a company Director.
by one person or a group of people, and each Director must be able to commit
the time necessary to fulfil their role. Ultimate responsibility for the
quality and effectiveness of the Board lies with the Chair.
Shareholders should be given the opportunity to vote annually on the (re-) The shareholders have the opportunity annually at the AGM to vote for the
election of all individual Directors to the Board. (re-)election of all the Directors
In order to uphold the quality of Board independence, the Board should be The new Board comprises 2 executive Directors and 2 non-executive Directors.
comprised of an appropriate balance between executive and non-executive
Directors. The independent non-executive Directors should comprise at lease
half of the Board. The Chair, if independent upon appointment and still
considered independent can be included in this calculation. However, as a
minimum there should be at least two non-executive Directors whom the Board
considers to be independent.
Key committees, in particular the audit committee, should comprise at least a Both the audit and remuneration committees comprise non-executive Directors
majority of independent NEDs and ideally aim for full independence. The only, with Linda Main being the Senior Independent Director.
Company should consider whether it is appropriate to have a senior independent
Director.
Boards should be sensitive to both real and perceived impediments to The Board is relatively newly constituted.
independence. Consideration should be given to those factors which may impede
independence which include length of Board tenure, size of shareholding, prior Any related parties are excluded from Board discussions concerning their
and/or current commercial or contractual relationships with the Company; prior interests to maintain independence.
and/or current commercial or contractual relationships with executive
Directors; and significant pay arrangements beyond a Director's fee. Directors' remuneration is set by the remuneration committee which comprises 2
independent non-executive Directors.
7. Maintain appropriate governance structures and ensure that individually The Company should maintain governance structures and processes in line with The Corporate Governance report on pages 10 to 16 details the Company's
and collectively the Directors have the necessary up-to-date experience, its corporate culture and appropriate to its: governance structures and why they are appropriate and suitable for the
skills and capabilities.
Company.
• size and complexity; and
• capacity, appetite and tolerance for risk.
The governance structures processes and policies should evolve in parallel The Board has a formal schedule of matters reserved for the Board and is
with its size, strategy and business model to reflect its maturity and stage supported by the audit and remuneration committees. Due to the size of the
of development. Company, the Board has decided that issues concerning the nomination of
Directors will be dealt with directly by the Board but will reconsider on a
The Board should be supported by committees - typically at least an audit, regular basis whether a nominations committee is needed.
remuneration and nominations committee - that also have the necessary skills
and knowledge to discharge their duties and responsibilities effectively. The audit and remuneration committees have specific terms of reference under
which they operate.
The Board should ensure it has the necessary skills and experience to fulfil The Directors have a proven track record of previously serving on Boards.
its governance responsibilities, including among other things with respect to Where an expert view is needed the Board will seek input from external
cyber security, emerging technologies, and relevant sustainability matters advisors
such as climate change. The Board should consider any need to establish
further dedicated sub-committees and, where appropriate, seek input from
external advisors on such matters.
All Directors should continually update their skills and knowledge. As the Further information about the Board's skillset, including each Director's
Company and the external environment evolves, the mix of skills and experience biography is set out on the Company website and additional information is set
required on the Board will change. The Board should consider its training and out on page 8 in this report.
development needs in this context, plan ahead and structure such provision
accordingly
The Board (and any committees) should be provided with high quality Through the FPPP process a new Board pack has been developed and this will
information in a timely manner to facilitate the proper assessment of the continue to evolve as the business grows.
matter requiring decision or insight. The Board should consider this and the
design and implementation of its decision making processes to ensure they are
effective.
8. Evaluate board performance based on clear and relevant objectives, The Board should regularly review its performance as a unit, as well as that The Board is new, a performance evaluation process will be developed.
seeking continuous improvement. of its committees and the individual Directors.
The Board performance review should be carried out on an annual basis and The annual review process will be implemented post RTO, together with
include opportunities for improvement with respect to the performance of the succession planning.
Chair, and the operation of the Board and its committees. The review should
identify development or mentoring needs of individual Directors and/or the
senior management team.
The annual review can be carried out internally and should, ideally, be
supplemented periodically by an external independent third-party review.
It is healthy for membership of the Board to be periodically refreshed. No
member of the Board should become indispensable.
Succession planning for both executives and non-executives is a vital task for
Boards. This should extend to contingency planning for the absence of key
staff. There should be a robust process for the orderly appointment of new
Directors to the Board and senior management positions. Consideration should
be given to establishing a nominations committee to help with the process and
ensure a diverse pipeline - both internally and externally - for succession.
The skills, experience, capabilities and background required for Directors and
senior management to support the next stage of the Company's development
should be identified and factored into succession planning.
9. Establish a remuneration policy which is supportive of long-term value It is the Boards responsibility to establish an effective remuneration policy A remuneration committee has been established comprising 2 independent
creation and the Company's purpose and culture which is aligned with the Company's purpose, strategy and culture, as well as non-executive Directors. One of the first objectives is to design and
its stage of development. implement a remuneration policy for the Board.
A remuneration policy should motivate management and promote the long-term The remuneration policy will include long term incentive schemes to promote
growth of shareholder value. Remuneration practices across the Company, in long term growth of shareholder value.
particular for senior management, should support and reinforce the desired
corporate culture and promote the right behaviours and decisions.
Pay structures for senior management should be simple and easy for The remuneration policy will include share options and a Save-As-You-Earn
participants to understand and foster alignment with shareholders through the scheme for wider participation in shareholding across the Group.
building and the holding of a meaningful shareholding in the Company
The remuneration committee should, as necessary, consult with other Board The remuneration committee will consult with the audit committee and the
committees in order to set appropriate incentive targets and to appraise Board, as appropriate, when developing the remuneration policy.
performance in respect of those targets.
The annual remuneration report should be put to an advisory shareholder vote. The Chair of the remuneration committee will consult with major shareholders
Where not mandated to be put to a binding vote, remuneration policies should on the design of incentives.
at least be put to an advisory vote. Given the significance and dilutive
impact of such plans, new (or significant amendments to existing) share Whilst this will not be binding, it will give shareholders the opportunity for
schemes or long term incentive plans should be put to shareholder vote. input.
10. Communicate how the company is governed and is performing by maintaining a A healthy dialogue should exist between the Board and all of its stakeholders, The Company encourages two-way communication with its investors and responds
dialogue with shareholders and other relevant stakeholders. including shareholders, to enable all interested parties to come to informed quickly to all queries received.
decisions about the company.
The Board recognises the AGM as an important opportunity to meet private
shareholders. The Directors are available to listen to the views of
shareholders informally immediately following the AGM.
Appropriate communication and reporting structure should exist between the The Chair is responsible for ensuring appropriate communication and reporting
Board and all constituent parts of its shareholder base. This will assist: to shareholders.
the communication of shareholders' views to the board; and
the shareholders' understanding of the unique circumstances and constraints A range of corporate information (including Company announcements, historical
faced by the company. annual reports and other governance related material) is also available on the
Company's website.
It should be clear where these communication practices are described (annual The Company will disclose outcomes of all votes at shareholder meetings in a
report or website). clear and transparent manner by releasing a market announcement and by
including it on the Company website.
AUDIT COMMITTEE REPORT
The Audit Committee helps the Board discharge its responsibilities regarding
financial reporting, external and internal audits and controls as well as
reviewing the Group's annual and half-year financial statements, other
financial information and internal Group reporting.
This includes:
• considering whether the Company has followed appropriate
accounting standards and, where necessary, made appropriate estimates and
judgments taking into account the views of the external auditors;
• reviewing the clarity of disclosures in the financial statements
and considering whether the disclosures made are set properly in context;
• where the audit committee is not satisfied with any aspect of
the proposed financial reporting of the Company, reporting its view to the
Board of Directors;
• reviewing material information presented with the financial
statements and corporate governance statements relating to the audit and to
risk management; and
• reviewing the adequacy and effectiveness of the Company's
internal financial controls and, review the Company's internal control and
risk management systems and, except where dealt with by the Board, review and
approve the statements included in the annual report in relation to internal
control and the management of risk.
The Audit Committee assists by reviewing and monitoring the extent of
non-audit work undertaken by external auditors, advising on the appointment of
external auditors and reviewing the effectiveness of the Group's internal
audit activities, internal controls and risk management systems. The ultimate
responsibility for reviewing and approving the Annual Report and financial
statements and the half-yearly reports remains with the Board.
For the year under review, there were no non-audit services rendered to the
Group and the Company. The audit committee considered the nature and scope of
engagement and remuneration paid were such that the independence and
objectivity of the auditors were not impaired. Fees paid for audit services
are provided in Note 6.
Significant reporting issues considered during the year included the
following:
Going concern
The Committee considered the Going Concern basis on which the accounts have
been prepared and can refer shareholders to the Group's accounting policy set
out in Note 2.4. The directors are satisfied that the going concern basis is
appropriate for the preparation of the financial statements, albeit that the
directors have concluded that a material uncertainty exists as to the
Company's ability to continue as a going concern beyond the AIM Rule 15
timetable, as the successful completion of any Reverse Takeover target cannot
be assured at this time.
Linda Main
Chair - Audit committee
31 May 2024
DIRECTORS' REMUNERATION REPORT
This report sets out the remuneration policy operated by the Company in
respect of the Chair, Executive and Non-Executive Directors. The remuneration
policy is the responsibility of the Remuneration Committee, a sub-committee of
the Board. No Director is involved in discussions relating to their own
remuneration.
Remuneration policy
The objective of the remuneration policy is to attract, retain and motivate
high calibre executives to deliver outstanding shareholder returns and at the
same time maintain an appropriate compensation balance with the other
employees of the Group. There is no formal requirement for Directors to own
shares in the Group.
The Remuneration Committee is comprised of independent Non-Executive
Directors, and is appointed by the Board. The Remuneration Committee has terms
of reference approved by the Board, which sets out a framework for determining
the remuneration of the Company's Executive Chairman, Executive Directors
including pension rights and compensation payments. The remuneration of
Non-Executive Directors is a matter reserved for the Board. No Director or
senior manager shall be involved in any decisions as to their own
remuneration. The Remuneration Committee recommends and monitors the level and
structure of remuneration for senior management.
The Remuneration Committee has regard to the following factors when
determining remuneration:
· The pay and employment conditions across the Company and/or the
Group when setting remuneration policy for Directors, especially when
determining salary increases.
· The Company's appetite for risk and long term strategic goals.
· Remuneration in other companies of comparable scale
The Remuneration Committee sets appropriate Directors' compensation to reward
long term success:
· A significant proportion of Executive Directors' remuneration
should be structured to link rewards to corporate and individual performance
and be designed to promote the long-term success of the Company. The
Remuneration Committee approves the design of, and determines targets for, any
performance related pay schemes operated by the Company and approves any
payments made under such schemes.
The Remuneration Committee has regard to the following factors when reviewing
remuneration:
· The Remuneration Committee reviews the performance of share
incentive plans and discretionary bonus schemes. Each year the Remuneration
Committee determines whether awards will be made, and if so, the overall
amount of such awards, the individual awards to Executive Directors and other
senior management and the performance targets to be used.
· The Remuneration Committee periodically reviews the ongoing
appropriateness and relevance of the remuneration policy.
Directors' remuneration
The normal remuneration arrangements for Executive Directors consist of base
salary, performance bonuses and other benefits as determined by the Board. The
Company currently has two Executive Directors, who have service agreements
that can be terminated at any time by either party giving to the other six
months' written notice.
The remuneration package for an Executive Director is detailed below:
• Base Salary:
Annual review of the base salary of the Executive Director considering the
Executive Director's role, responsibilities and contribution to the Group
performance.
• Performance Bonus:
During FY23, bonus arrangements were discretionary and payable depending on
the performance of the Executive Director in meeting key performance
indicators and in the wider context with the performance of the Group.
As part of the Executive Director's service agreement, there was a formula for
discretionary bonus based on sales contracts. Any bonus payment to the
Executive was discretionary and did not form part of the Executive's
contractual remuneration. The bonus formula was as follows:
a) a 5% commission on sales of solar panels to customers introduced by the
Executive at a sales price of €1.05/watt or above, once the Executive has
introduced sales that would, but for this provision, have generated a
commission equal to the Executive's annual salary (£150,000),
b) a 1% commission on sales of solar panels of 10-20MW that are realised by
the Group in any year (not limited to those introduced by the Executive) at a
sales price of €1.05/watt or above; and
c) a 2% commission on sales of solar panels of in excess of 20MW that are
realised by the Group in any year (not limited to those introduced by the
Executive) at a sales price of €1.05/watt or above.
No bonuses were paid in relation to the reporting period Going forward the new
remuneration committee will be establishing a performance bonus scheme with
relevant targets.
• Benefits:
Benefits include Company pension contributions of 5%, health insurance, and
life insurance
• Longer term incentives:
In order to incentivise the Directors and employees, and align their interests
with shareholders, the Company granted share options in previous years though
no further share options were granted in the current year. The share options
will vest at various future dates as described in Note 24 to the financial
statements. In addition to service conditions, the vesting of the share
options granted to the previous Executive Director and the Chair were subject
to an earnings before interest, tax, depreciation and amortisation (EBITDA)
performance condition. Following a review at the period end, it has been
determined that it is not likely that any of the performance related
conditions will be met.
Going forward, the Remuneration Committee are working on a new Long Term
Incentive Plan.
Non-Executive Directors are remunerated solely in the form of Directors' fees
and pension contributions.
At the last Annual General Meeting held on 25th July 2023, there was an
ordinary resolution for shareholders to cast an advisory vote on the
directors' remuneration for the year ended December 2022, as set out in the
Directors' Remuneration Report included in the 2022 Annual Report and
Accounts. There were 73,972,137 votes cast in favour, and 2,122,433 against.
The resolution was duly passed with 97.21% in favour.
Re-election of Directors
All Directors stand for re-election on an annual basis and all Directors are
aware of the need to maintain their independence and to demonstrate their
continued commitment to the role. Succession planning is limited due to the
current size of the Board.
The remuneration of the Directors in EARNZ plc who held office during the
years to 31 December 2023 and 2022 were as follows:
The emoluments of the Directors were as follows (Audited):
Year ended 31 December 2023 Year ended 31 December 2022
Salary & Directors' fees Pension Contributions Share-based payment Total Total
£ £ £ £ £
Executive directors
Robert Richards 150,000 - - 150,000 236,715
Non-executive directors
The Rt Hon. Lord David Willetts FRS 25,000 - - 25,000 73,330
George Katzaros 12,500 - - 12,500 25,000
Gavin Mayhew - - - - 30,000
Total 187,500 - - 187,500 365,045
In previous years, between 2018 and 2021, 4,500,000 share options had been
issued to Lord Willetts, and 14,000,000 share options had been issued to
Robert Richards. 15,800,000 of these options had performance conditions
attached to them. At the year end, following a review of these performance
conditions, it was assessed that none of these options would vest. There is a
credit to the income statement in the year of £154,001 in respect of amounts
previously recognized for these options. Therefore at the period end, there
are 1,500,000 vested share options held by The Rt Hon. Lord David Willetts FRS
and 1,200,000 vested share options held by Robert Richards: details are shown
in Note 24. No options were exercised in the year. At 31 December 2023 the
directors held 2,700,000 options, all of which had vested.
Linda Main
Chair - Remuneration committee
31 May 2024
CORPORATE AND SOCIAL RESPONSIBILITY
The Company understands that its impact reaches beyond that of its core
business and into the environment and society in which it operates. With
integrity at the heart of our corporate social goals our aim is to make a
lasting positive contribution to all our stakeholders.
In view of the limited number of stakeholders, the Company has not adopted a
specific policy on Corporate Social Responsibility. However, it does seek to
protect the interests of stakeholders in the Company through its policies,
combined with ethical and transparent business operations.
Environment
EARNZ Plc is sensitive to the environment in which it operates. Previously the
Group established well defined operating guidelines with some of the
manufacturing partners where it sought their compliance with ISO14001 (a
recognized standard for Environmental Management Systems) when relevant, to
ensure certain environmental standards are complied with. Going forward the
Company will be operating in the energy services sector, and as such will be
instrumental in assisting with the delivery of de-carbonisation across the
public and private sector.
Human Rights
EARNZ plc is committed to socially and morally responsible research,
development and manufacturing processes for the benefit of all stakeholders.
The activities of the Company are in line with applicable laws on human
rights.
Employees
Employees are key to achieving the business objectives of the Company. The
Board's priority is to provide a working environment in which our employees
can develop to achieve their full potential and have opportunities for both
professional and personal development. We aim to invest time and resource to
support, engage and motivate our employees to feel valued, to be able to
develop rewarding careers and want to stay with us. The Company embraces
employee participation in issue raising and resolution through regular
meetings with managers and values contributions from all levels regardless of
their position in the business.
Shareholders
The Board of Directors actively encourages communication and they seek to
protect the interest of shareholders at all times. The Company updates
shareholders regularly through regulatory news, financial reports and research
notes. The Company also engages directly with investors at our General
Meetings or investor events.
Health and Safety
Company and Group activities are carried out in accordance with its health and
safety policy which adheres to all applicable laws. Health and Safety
procedures were reviewed by an external organization in Italy during the year.
DIRECTORS' REPORT
The Directors present their report and the audited financial statements for
EARNZ plc ("EARNZ" or the "Company") for the year ended 31 December 2023.
The preparation of financial statements is in compliance with UK adopted
International Accounting Standards and the Companies Act 2006. The Group
financial statements comprise of the financial information of the parent
Company and its subsidiaries (together the "Group"). The parent Company's
financial statements present information about the Company as a separate
entity and not about its Group.
Principal activities
EARNZ plc is a holding company based in UK. The principal activity of the
Group is to develop and commercialise clean technologies.
A detailed review of the business activities of the Group is contained in the
Strategic Report.
Business review and future developments
The review of the business's operations, future developments and key risks is
contained in the Strategic Report. The Directors do not recommend the payment
of a final dividend for the year (2022: £nil).
Directors and directors' interests
The directors who held office during the year or subsequently were as follows:
The Rt Hon. Lord David Willetts FRS Resigned 29 February 2024
George Francis Katzaros Resigned 29 February 2024
Gavin Mayhew Resigned 2 January 2024
Robert Richards Resigned 29 February 2024
Bob Holt Appointed 29 February 2024
John Charlton Appointed 29 February 2024
Elizabeth Lake Appointed 13 March 2024
With regard to the appointment and replacement of Directors, the Company is
governed by its articles of association, the Companies Act and related
legislation. The articles themselves may be amended by special resolution of
the shareholders.
Directors' interests
The Directors held the following beneficial interests in the shares of
Verditek plc at 31(st) December 2023:
Note Ordinary shares Issued share capital %
of £0.0004 each
George Katzaros 1.1 26,166,675 5.90%
Gavin Mayhew 1.2 47,157,381 10.63%
Robert Richards 2,437,833 0.55%
Notes
1.1 Shares held by George Katzaros
- Direct 9,000,000
- through Blueview Business Ltd 10,550,000
- through MF Ltd 5,900,000
- Subtotal 25,450,000
- Family member 716,675
26,166,675
1.2 Shares held by Gavin Mayhew
- through Vidacos Nominees Limited 46,457,381
- through Platform Securities Nominees Limited 700,000
47,157,381
At the reporting date, the new Board of Directors have bought ordinary shares
in the Company as follows:
Note Ordinary shares Issued share capital %
of £0.04 each
Robert Holt 4,666,666 7.42%
John Charlton 333,333 0.53%
Elizabeth Lake 1,333,333 2.12%
Through family holdings, Bob Holt has interest in a further 133,333 shares
bringing his total interest to 7.63%, and John Charlton has interest in a
further 1,333 shares with his total interest remaining at 0.53%.
Directors' indemnities
The Company has taken out Directors' and Officers' indemnity insurance for the
benefit of its Directors.
Events after the reporting date
See Note 28 of the accounts.
Financial Risk management
Details of financial risk management are provided in Note 3 to the accounts.
Political and charitable contributions
The Group made no charitable or political contributions during the year.
Going Concern
Following the Disposal, the Company has ceased to own, control, or conduct all
or substantially all its previous trading business, activities and assets and,
on 1 March 2024, became an AIM Rule 15 cash shell.
As such, the Company is required to make an acquisition or acquisitions which
constitute a reverse takeover under AIM Rule 14 ("Reverse Takeover") or
be re-admitted to trading on AIM as an investing company (which requires,
inter alia, the raising of at least £6.0 million) under the AIM Rules,
within the date falling six months from 1 March 2024.
If the Company does not complete a Reverse Takeover in accordance with AIM
Rule 14, or otherwise if re-admitted to trading on AIM as an investing company
fails to implement its investing policy to the satisfaction of the London
Stock Exchange within twelve months of becoming an investing company, the
London Stock Exchange will suspend trading in the Company's AIM securities
pursuant to AIM Rule 40.
Accordingly, the Company will evaluate opportunities in the energy services
sector, seeking to identify one or more companies, which would constitute a
Reverse Takeover under AIM Rule 14.
Following the Board changes in March and May 2024, the monthly cost of
maintaining the Company has reduced.
The Directors have a clear strategy to identify Reverse Takeover targets and
have a number of opportunities in the pipeline. The Directors believe that the
cash resources of the Company are sufficient to cover the costs of a Reverse
Takeover.
As the successful completion of any Reverse Takeover target cannot be assured
at this time, the directors have concluded that a material uncertainty exists
as to the Company's ability to continue as a going concern beyond the AIM Rule
15 timetable. This uncertainty arises primarily because should the Company's
shares be suspended from trading on AIM on 1 September 2024 or its listing is
subsequently cancelled, the Directors believe that the Company's ability to
raise finance for the longer term would be significantly impaired.
Notwithstanding the above, as at the date of approval of the financial
statements, the base case cash flow forecast indicated that no additional cash
resources will be required over the course of the next 12 months. The
directors therefore consider the Group and the Company to be a going concern
and have therefore prepared these financial statements on the going concern
basis.
Substantial shareholdings:
The Company has been advised of the following interests in more than 3% of its
ordinary share capital as at 31 December 2023:
No. of Shares (nominal value £0.0004) %
Shareholder
Hargreaves Lansdown (Nominees) Limited 119,002,785 21.5%
Peel Hunt Partnership Limited 90,587,529 16.3%
Vidacos Nominees Limited 69,982,734 12.6%
Pershing Nominees Limited 49,305,888 8.9%
Interactive Investor Services Nominees Limited 31,781,855 5.7%
HSDL Nominees Limited 23,629,821 4.3%
The Bank Of New York (Nominees) Limited 20,470,495 3.7%
Platform Securities Nominees Limited 18,331,941 3.3%
At the signing date the Company had been advised of the following interests in
more than 3% of its ordinary share capital:
No. of Shares (nominal value £0.004) %
Shareholder
Gresham House 6,287,982 10.00%
G Force Capital 5,700,000 9.06%
Bob Holt (Executive Chair) 4,799,999 7.63%
Oakglen Wealth Limited 3,666,666 5.83%
Pentwater Capital Management Europe LLP 2,466,666 3.93%
Trium Capital 2,000,000 3.18%
First Equity Limited 2,000,000 3.18%
Statement of Disclosure to the Auditors
The Directors of the Company at the date of approval of this report confirm
that:
· As far as each director is aware, there is no relevant audit
information of which the Company's and the Group's auditor is unaware; and
· each Director has taken all reasonable steps that they ought to
have taken as a Director to make themselves aware of any relevant information
and to establish that the Company's and the Group's auditor is aware of that
information.
Auditors appointment
Haysmacintyre LLP has been appointed as auditor, and a resolution to
re-appoint them will be proposed at the annual general meeting.
By order of the Board
John Charlton
Executive Director
31 May 2024
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial
statements for each financial year. Under that law the Directors have elected
to prepare the Group consolidated financial statements in accordance with UK
adopted International Accounting Standards (UK IAS) and elected to prepare the
parent company financial statements under United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable laws
including FRS 101 Reduced Disclosure Framework).
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group
for that period.
In preparing each of the Group and Company financial statements, the Directors
are required to:
• Select suitable accounting policies and then
apply them consistently;
• Make judgments and estimates that are reasonable
and prudent;
• State whether they have been prepared in
accordance with UK-adopted International Accounting Standards (IASs) and
International Financial Reporting Standards (IFRSs) have been followed,
subject to any material departures disclosed and explained;
• Prepare the Strategic Report and Directors'
report which comply with the requirements of the Companies Act 2006; and
• Prepare the financial statements on the going
concern basis unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group and the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also generally responsible for
taking such steps as are reasonably open to them to safeguard the assets of
the group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Information published on the website is accessible in many countries and
legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group's position and performance, business
model and strategy. Each of the directors confirms that, to the best of their
knowledge:
The Group financial statements, which have been prepared in accordance with UK
IAS and Companies Act 2006, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and the Annual Report
includes a fair review of the development and performance of the business and
the position of the Group, together with a description of the principal risks
and uncertainties that it faces.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF EARNZ PLC
Qualified opinion
We have audited the financial statements of EARNZ plc (the 'parent company')
and its subsidiaries (the 'Group') for the year ended 31 December 2023 which
comprise the Consolidated Statement of Comprehensive Income, the Consolidated
and Company Statement of Financial Position, the Consolidated and Company
Statement of Changes in Equity and notes to the financial statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK adopted international accounting standards. The financial reporting
framework that has been applied in the preparation of the Parent Company
financial statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 Reduced Disclosure
Framework (United Kingdom Generally Accepted Accounting Practice.)
In our opinion, except for the possible effects of the matter described in the
basis for qualified opinion section of our report, the financial statements:
• give a true and fair view of the state of the Group's and of the parent
company's affairs as at 31 December 2023 and of the group's loss for the
period then ended;
• the Group financial statements and Parent Company financial statements
have been properly prepared in accordance with UK adopted international
accounting standards and United Kingdom Accounting Standards FRS 101
respectively; and
• have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for qualified opinion
We were not appointed as auditor of the parent company until after 31 December
2023 and thus did not observe the counting of physical inventories at the end
of the year. We were unable to satisfy ourselves by alternative means
concerning the inventory quantities held at 31 December 2023, which are
included in the balance sheet at £560,038, by using other audit procedures.
Consequently, we were unable to determine whether any adjustment to this
amount was necessary. In addition, were any material adjustment to the
inventory balance to be required, the strategic report would also need to be
amended.
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our qualified opinion.
Material uncertainty related to going concern
We draw attention to Note 2.4 in the financial statements, which indicates
that following the post balance sheet disposal of the trading subsidiary, a
material uncertainty exists regarding the successful completion of any reverse
takeover within the AIM Rule 15 timetable required for going concern. As
stated in Note 2.4, these events or conditions, along with other matters as
set forth in Note 2.4, indicate that a material uncertainty exists that may
cast significant doubt on the company's ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the Group and Parent Company's ability to continue to adopt the
going concern basis of accounting included the following procedures:
· Obtaining and reviewing the directors' going concern assessment
which included a working capital forecast for a period spanning at least 12
months from the date of approval of the financial statements;
· We reviewed the cash balance as at the date of approval to ensure
this was sufficiently in line with the working capital forecast prepared for
the going concern assessment;
· We ensured that the working capital forecast prepared was
arithmetically correct;
· We evaluated judgements made by the directors in determining that
a material uncertainty existed to ensure that these were reasonable, this
included engaging in discussions with the directors regarding their
assessment;
· We agreed significant expected cash outflows in the working
capital forecast to supporting documentation to ensure these were based on
accurate information;
· We ensured that reasonable sensitivity analysis applied to the
working capital forecast did not results in a reasonably plausible alternative
scenario whereby the Group would not be considered a going concern.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
An overview of the scope of our audit
The Group comprises a parent holding company, one trading subsidiary and a
number of dormant entities. The scope of our work was the audit of the
financial statements of the Group and its trading subsidiary being the only
material components of the Group with the Parent company being audited for
statutory purposes. The trading subsidiary Verditek Solar S.r.l. was not
subject to statutory audit however, in forming an opinion on the Group we have
performed audit procedures on Verditek Solar S.r.l. that are comparable to
that of a full statutory audit.
As the subsidiary was based in Italy, we have engaged with local component
auditors to complete our planned audit procedures and we have subsequently
reviewed these and engaged in discussions with the component auditors to
ensure we have sufficient audit evidence to be able to form an opinion on the
Group.
The scope of the audit and our audit strategy was developed by using our audit
planning process to obtain and update our understanding of the Group and its
environment, including the Group's system of internal control, and assessing
the risks of material misstatement at the group level. Audit work to respond
to the assessed risks was performed directly by the audit engagement team who
performed full scope audit procedures on the parent company and the Group as a
whole.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
In addition to the matter described in the basis for qualified opinion section
and in addition to the material uncertainty in relation to going concern
section above, we have determined the matters described below to be the key
audit matters to be communicated in our report.
Key Audit Matter How our scope addressed this matter
Fraud in revenue recognition In order to address the risks associated with the revenue our audit procedures
consisted of but were not limited to:
The Group has one revenue stream. Details of the accounting policies applied
are given in note 2.15. · assessing whether revenue had been recognised in accordance with
the Group's accounting policy and IFRS 15 requirements;
· considering if revenue was recognised appropriately based on
We consider there to be a significant risk of misstatement of the financial whether the Group had completed its performance obligations under the contract
statements related to transactions occurring close to the year end, as prior to the reporting date by reference to its obligations stated in the
transactions could be recorded in the incorrect financial period (cut off), customer contracts; and
and also in relation to the occurrence of the revenue recognised.
· reviewing any other terms within the contracts had considering
any material accounting or disclosure implications.
Management make judgements in relation to revenue recognition for the sale of
solar panels under IFRS 15. These include determining EARNZ's performance
obligations in its contracts with customers and whether as at the reporting We also performed a cash to revenue reconciliation, tested a sample of sales
date, the group has completed its performance obligations. orders raised one month either side of the year-end and obtained and
critically evaluated management's revenue recognition policy and whether this
was in line with IFRS 15.
Inventory In order to address the risks associated with inventory our audit procedures
consisted of but were not limited to:
There is a risk in relation to inventory existence, valuation and cut off.
Inventory is a material component of the balance sheet and by its nature is · We selected a sample of inventory to ensure they are valued at
susceptible to misstatement. The inventory obsolescence provision is a key the lower of cost and NRV. We also reviewed estimation techniques used in the
area of judgement and there is a risk that the inventory provision is not valuation, including review of overhead absorption.
sufficient to cover any obsolete stock held at the year-end.
· We obtained a list of obsolete/slow-moving stock and considered
if a provision is required.
· For cut off we obtained support for a sample of December 23 and
January 24 warehouse movements and agreed to support, including delivery notes
and invoices, to verify if the Company recorded them correctly based on
applicable incoterms.
· We confirmed that there were no credit notes issued post year-end
relating to the stock sold.
· We reviewed the capitalisation of employee time for internal
staff and external contractors. We agreed a sample of capitalised time back to
timesheet data and independently assessed whether sufficient economic benefits
were likely to flow from the projects to support the values capitalised.
· We were unable to attend the year end inventory count as
mentioned in the basis for qualified opinion section of our audit report
Our application of materiality
The scope and focus of our audit were influenced by our risk assessment and
application of materiality. We define materiality as the magnitude of
misstatement that could reasonably be expected to influence the economic
decisions of the users of the financial statements. We use materiality to
determine the scope of our audit and the nature, timing and extent of our
audit procedures and to evaluate the effect of misstatements, both
individually and on the financial statements as a whole.
Materiality for the financial statements as a whole was set at £66,000,
determined by reference to 5% of normalised loss before tax (loss before tax
excluding impairment of an asset relating to an earn out). We have reported to
the audit committee any corrected or uncorrected misstatements arising
exceeding £3,000. Performance materiality was set at £43,000, being 65% of
materiality.
Component materiality for the parent company and subsidiaries was set at
£49,000, with reference to a benchmark of Group materiality.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
As described in the basis for qualified opinion section of our report, we were
unable to satisfy ourselves concerning the inventory quantities of £560,038
held at 31 December 2023. We have concluded that where the other information
refers to the inventory balance or related balances such as cost of sales, it
may be materially misstated for the same reason.
Opinions on other matters prescribed by the Companies Act 2006
Except for the possible effects of the matter described in the basis for
qualified opinion section of our report, in our opinion, based on the work
undertaken in the course of the audit:
• the information given in the strategic report and the directors' report
for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
• the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent
company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
Arising solely from the limitation on the scope of our work relating to
inventory, referred to above:
• we have not obtained all the information and explanations that we
considered necessary for the purpose of our audit; and
• we were unable to determine whether adequate accounting records have been
kept.
We have nothing to report in respect of the following matters in relation to
which the Companies Act
2006 requires us to report to you if, in our opinion:
• or returns adequate for our audit have not been received from branches not
visited by us; or
• the parent company financial statements are not in agreement with the
accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not
made
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out
on page 27, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group's and the parent company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud.
Based on our understanding of the company and industry, we identified that the
principal risks of non-compliance with laws and regulations related to
regulatory requirements for the business and trade regulations, and we
considered the extent to which non-compliance might have a material effect on
the financial statements. We also considered those laws and regulations that
have a direct impact on the preparation of the financial statements such as
the Companies Act 2006, income tax, payroll tax and sales tax.
We evaluated management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of
controls) and determined that the principal risks were related to posting
inappropriate journal entries to revenue and management bias in accounting
estimates. Audit procedures performed by the engagement team included:
− Inspecting correspondence with regulators and tax authorities;
− Discussions with management including consideration of known or suspected
instances of non-compliance with laws and regulation and fraud;
− Evaluating management's controls designed to prevent and detect
irregularities;
− Identifying and testing journals, in particular journal entries which
shared key risk characteristics; and
- Challenging assumptions and judgements made by management in their critical
accounting estimates
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(https://url.avanan.click/v2/___http:/www.frc.org.uk/auditorsresponsibilities___.YXAxZTpzaG9yZWNhcDphOm86YWU4NGNiMjAyMDI3NDJjOTVhMmNjZTdhZjlhNjlmYjM6Njo2NjI3OjhiNzAzZWEwMjE2ZmI5NTUxNTE4MTc3ODI2OGFlYTczMGY2NDNjYTdkZjEyN2U5ZDVjM2JjZGMyOTlkYTdhMzM6cDpG)
. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an Auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Jonathan Maddison
(Senior Statutory
Auditor)
10 Queen Street Place
For and on behalf of Haysmacintyre
LLP
London
Statutory
Auditors
EC4R 1AG
31 May 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 2023 31 December 2022
Restated*
Notes £ £
Revenue 4 606,260 417,457
Direct costs (864,071) (670,547)
Administrative expenses (1,216,529) (1,610,791)
Operating loss 6 (1,474,340) (1,863,881)
Other (expense) / income 5 (556,783) 91,933
Finance income 3,722 2,084
Finance costs 8 (61,578) (73,604)
Loss before tax (2,088,979) (1,843,468)
Income Tax 9 - 21,901
Loss for the period (2,088,979) (1,821,567)
Other comprehensive income
Items that will or may be reclassified to profit or loss:
Translation of foreign operations (17,137) 43,333
Total comprehensive loss for the period (2,106,116) (1,778,234)
Loss for the period attributable to:
Owners of the parent Company (2,088,979) (1,821,567)
(2,088,979) (1,821,567)
Total comprehensive loss for the period attributable to:
Owners of the parent Company (2,106,116) (1,778,234)
(2,106,116) (1,778,234)
Loss per ordinary share - basic and diluted (p) 10 (0.5) (0.5)
*See Note 27 for details of the restatement.
The accompanying notes are an integral part of these financial statements.
All amounts are derived from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2023 At 31 December 2022 At 1 January 2022
Restated* Restated*
Notes £ £ £
Assets
Non-current assets
Investments - - 990,000
Other receivables 12 - 556,783 -
Property, plant and equipment 13 97,513 195,470 300,082
Right of use asset 15 306,085 48,902 142,391
Total non-current assets 403,598 801,155 1,432,473
Current assets
Inventories 16 419,020 534,959 657,151
Trade and other receivables 17 170,458 148,593 392,193
Cash and cash equivalents 18 53,918 842,632 237,613
Total current assets 643,396 1,526,184 1,286,957
TOTAL ASSETS 1,046,994 2,327,339 2,719,430
Equity and liability
Non-current liabilities
Loans and borrowings 20 522,587 - 277,080
Lease liabilities 22 93,756 - 90,687
Total non-current liabilities 616,343 - 367,767
Current liabilities
Trade and other payables 19 283,742 289,995 411,213
Loans and borrowings 20 - 310,306 -
Provisions 21 30,212 - -
Lease liabilities 22 214,467 29,682 69,737
Total current liabilities 528,421 629,983 480,950
TOTAL LIABILITIES 1,144,764 629,983 848,717
Equity
Share capital 23 221,860 177,417 136,883
Share premium 23 12,626,283 12,205,726 10,761,055
Share-based payment reserve 24 178,796 332,806 213,134
Accumulated losses (13,115,733) (11,026,754) (9,205,187)
Foreign exchange reserve 25 (8,976) 8,161 (35,172)
Equity attributable to equity holders of the parent (97,770) 1,697,356 1,870,713
Non-controlling interests* 27 - - -
Total shareholder's equity (97,770) 1,697,356 1,870,713
TOTAL EQUITY AND LIABILITIES 1,046,994 2,327,339 2,719,430
*See Note 27 for details of the restatement.
These financial statements were approved and authorised for issue by the Board
of directors on 31 May 2024 and were signed on its behalf by:
John Charlton
Executive Director
Company Registration Number: 10114644
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued Share capital Share Premium Share-based payment reserve Accumulated losses Foreign Exchange reserve Non-Controlling interests Total
£ £ £ £ £ £
Balance as previously stated as at 1-Jan-22 136,883 10,761,055 213,134 (9,098,300) (35,172) (106,887) 1,870,713
Prior year adjustment* - - - (106,887) - 106,887 -
Balance as at 1-Jan-22 Restated* 136,883 10,761,055 213,134
(9,205,187) (35,172) - 1,870,713
Loss for the year - - - (1,821,567) - - (1,821,567)
Translation of foreign subsidiary - - - - 43,333 - 43,333
Total comprehensive loss - - - (1,821,567) 43,333 - (1,778,234)
Issue of shares net of expenses 40,534 1,444,671 - - - - 1,485,205
Share-based payment - - 119,672 - - - 119,672
Balance as previously stated as at 31-Dec-22 177,417 12,205,726 332,806 (10,971,011) 6,245 (106,887) 1,644,296
Net prior year adjustment impact on retained earnings for 2022 - - - (55,743) 1,916 106,887 53,060
Balance as at 31-Dec-22 177,417 12,205,726 332,806 -
Restated* (11,026,754) 8,161 1,697,356
Loss for the year - - - (2,088,979) - - (2,088,979)
Translation of foreign subsidiary - - - - (17,137) - (17,137)
Total comprehensive loss - - - (2,088,979) (17,137) - (2,106,116)
Issue of shares net of expenses 44,443 420,557 - - - - 465,000
Share-based payment (154,010) - - - (154,010)
Balance as at 31-Dec-23 221,860 12,626,283 178,796 (13,115,733) (8,976) - (97,770)
*See Note 27 for details of the restatement.
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 2023 31 December 2022
Restated*
£ £
Cash flows from operating activities
Loss before tax (2,088,979) (1,843,468)
Adjustments for:
Finance costs 61,578 73,604
Finance income (3,722) (2,084)
Impairment of ICSI receivable 556,783 125,486
Depreciation and amortisation 223,340 195,555
Loss on disposal of assets 50,167 501
Share-based payment (154,010) 119,672
Remeasurement of assets - (78,323)
(1,354,843) (1,409,057)
Working capital adjustments
(Increase) / Decrease in inventory 115,939 122,192
(Increase) / Decrease in trade and other receivables (24,884) 160,251
Increase / (Decrease) in trade and other payables 8,091 (97,847)
Cash used in operations (1,255,697) (1,224,461)
Taxation - 145,142
Net cash outflow from operating activities (1,255,697) (1,079,319)
Investing activities
Sale consideration received (ICSI) - 307,731
Purchase of property, plant and equipment (2,039) (19,540)
Net cash outflow from investing activities (2,039) 288,191
Financing activities
Proceeds from issue of ordinary share capital (net of expenses) - 1,485,205
Issue of new shares (net of expenses) 465,000 -
Loan interest paid (15,229) (22,210)
Interest received 3,722 2,084
Proceeds from loans 500,000 -
Repayments of loans [(Refer note 20)] (324,858) -
Payments of lease liabilities (163,217) (70,936)
Net cash inflows from financing activities 465,418 1,394,143
Net increase/(decrease) in cash and cash equivalents (792,318) 603,015
Cash and cash equivalents at the beginning of the year 842,056 237,613
Exchange gains/(losses) on cash and cash equivalents 4,180 2,004
Cash and cash equivalents at the end of the year 53,918 842,632
The accompanying notes are an integral part of these financial statements.
*See Note 27 for details of the restatement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate information
EARNZ Plc ("EARNZ", "Company") is a public limited company incorporated,
registered and domiciled in England and Wales (registration number 10114644),
whose shares are quoted on the AIM on the London Stock Exchange. Its
registered office is located at First Floor, Holborn Gate, 330 Holborn, London
WC1V 7QT.
EARNZ is the holding company of a group of companies that were engaged in the
clean technology sector during this reporting period. On 1 March 2024, the
Company had disposed of its operating business and became an AIM Rule 15 cash
shell pursuant to the AIM Rules.
The consolidated financial statements comprised of the Company and its
subsidiaries (together referred to as "the Group") as at and for the year to
31 December 2023. The parent Company financial statements present information
about the Company as a separate entity and not about its Group.
The comparative financial information is for the year ended 31 December 2022.
2. Accounting policies
The principal accounting policies applied in the preparation of the
consolidated financial statements are set out below. These policies have been
consistently applied to all periods presented, unless otherwise stated.
2.1. Basis of preparation
The financial statements have been prepared in accordance with UK adopted
International Financial Reporting Standards (UK IFRS) and those part of the
Companies Act 2006 applicable to companies reporting under IFRS. IFRS consists
of standards issued by the International Accounting Standards Board (IASB) and
the interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC) as adopted by the UK.
The financial statements have been prepared on the historical cost basis
except for certain assets which are stated at their fair value.
The consolidated financial statements are presented in GBP, which is also the
Company's functional currency.
2.2. Basis of consolidation
The financial information consolidates the financial statements of EARNZ plc,
and the entities controlled by the Company.
2.2.1. Subsidiaries
Subsidiaries are all entities (including special purpose entities) over whose
financial and operating policies the Group has the power to govern, generally
accompanying a shareholding of more than one half of the voting rights. The
existence and effect of the potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group
controls another entity. Subsidiaries are consolidated from the date on which
control is transferred to the Group. They are deconsolidated from the date
that control ceases.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Accounting policies of subsidiaries
are changed where necessary to ensure consistency with the policies adopted by
the Group.
2.3. Changes in accounting policies and disclosures:
2.3.1. New standards, interpretations and amendments adopted in these
financial statements:
The Group has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 January 2023:
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8); and
· Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
· IAS 1 Presentation of Financial Statements (Amendment -
Classification of Liabilities as Current or Non-current)
The amendments listed above did not have any impact on the amounts recognised
in prior periods and do not significantly affect the current or future
periods.
2.3.2 Standards, amendments and interpretations to existing standards that
are not yet effective and have not been early adopted by the Company in the 31
December 2023 financial statements:
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2023 reporting periods and have not been
early adopted by the Group.
Effective from 1 January 2024:
· IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback).
In September 2022, the IASB finalised narrow-scope amendments to the
requirements for sale and leaseback transactions in IFRS 16 Leases which
explain how an entity accounts for a sale and leaseback after the date of the
transaction.
· IAS 1 Presentation of Financial Statements (Amendment -
Non-current Liabilities with Covenants) Amendments made to IAS 1 Presentation
of Financial Statements in 2020 and 2022 clarified that liabilities are
classified as either current or non-current, depending on the rights that
exist at the end of the reporting period. Classification is unaffected by the
entity's expectations or events after the reporting date.
In June 2023, the International Sustainability Standards Board (ISSB) issued
its first two standards which are effective from 1 January 2024.
· IFRS S1 General requirements for disclosure of
sustainability-related financial information. This standard includes the core
framework for the disclosure of material information about
sustainability-related risks and opportunities across an entity's value chain.
· IFRS S2: Climate-related disclosures. This is the first thematic
standard issued that sets out requirements for entities to disclose
information about climate-related risks and opportunities.
Effective from 1 January 2025:
· Amendments to IAS 21 to clarify the accounting when there is a
lack of exchangeability on foreign currency.
The Group will continue to assess any impact on the Group from the adoption of
these amendments. It is not anticipated that any of these will have a material
impact on the Group's financial statements.
2.4. Going concern
Following the Disposal, the Company has ceased to own, control, or conduct all
or substantially all its previous trading business, activities and assets and,
on 1 March 2024, became an AIM Rule 15 cash shell.
As such, the Company is required to make an acquisition or acquisitions which
constitute a reverse takeover under AIM Rule 14 ("Reverse Takeover") or
be re-admitted to trading on AIM as an investing company (which requires,
inter alia, the raising of at least £6.0 million) under the AIM Rules, on or
before the date falling six months from 1 March 2024.
If the Company does not complete a Reverse Takeover in accordance with AIM
Rule 14, or otherwise if re-admitted to trading on AIM as an investing company
fails to implement its investing policy to the satisfaction of the London
Stock Exchange within twelve months of becoming an investing company, the
London Stock Exchange will suspend trading in the Company's AIM securities
pursuant to AIM Rule 40.
Accordingly, the Company will evaluate opportunities in the energy services
sector, seeking to identify one or more companies which the Company can
acquire, which would constitute a Reverse Takeover under AIM Rule 14.
Following the Board changes in March and May 2024, the monthly cost of
maintaining the Company has reduced.
The directors have a clear strategy to identify Reverse Takeover targets and
have a number of opportunities in the pipeline. The cash resources of the
Company are sufficient to cover the costs of a Reverse Takeover.
As the successful completion of any Reverse Takeover target cannot be assured
at this time, the directors have concluded that a material uncertainty exists
as to the Company's ability to continue as a going concern beyond the AIM Rule
15 timetable. This uncertainty arises primarily because should the Company's
shares be suspended from trading on AIM or its listing is cancelled, the
Company's ability to raise finance for the longer term would be significantly
impaired.
Notwithstanding the above, as at the date of approval of the financial
statements, the base case cash flow forecast indicated that no additional cash
resources will be required over the course of the next 12 months. The
directors therefore consider the Group and the Company to be a going concern
and have therefore prepared these financial statements on the going concern
basis.
Management has successfully raised money in the past, but there is no
guarantee that adequate funds will be available when needed in the future.
2.5. Foreign currency
The Group's consolidated financial statements are presented in Sterling. The
functional currencies of the Group's subsidiaries include the Euro and the US
dollar. For each entity, the Group determines the functional currency and
items included in the financial statements of each entity are measured using
that functional currency.
The assets and liabilities of foreign operations are translated into sterling
at the rate of exchange ruling at the reporting date. Income and expenses are
translated at weighted average exchange rates for the period. The exchange
differences arising on translation for consolidation are recognized in Other
Comprehensive Income.
2.6. Operating segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision maker has been identified as the management team including the two
main directors and two non-executive directors.
The Board considers that the Group's activity constitutes one operating and
one reporting segment, as defined under IFRS 8. Management reviews the
performance of the Company by reference to total results against budget.
The total profit measures are operating profit and profit for the period, both
disclosed on the face of the income statement. No differences exist between
the basis of preparation of the performance measures used by management and
the figures in the Group's financial information.
2.7. Share-based payments
The Group has issued share options to one Non-Executive Director and one
Executive Director, in return for which the Group receives services from the
Non-Executive Director. The fair value of the services received in exchange
for the grant of the options is recognised as an expense. The Group valued the
options at the grant date using the Black Scholes valuation model to establish
the relevant fair values.
The total amount to be expensed is determined by reference to the fair value
of the options granted but excluding the impact of any service or non-market
performance vesting conditions (for example the requirement of the grantee to
remain an employee of the Group).
Non-market vesting conditions are included in the assumptions regarding the
number of options that are expected to vest. The total expense is recognised
over the vesting period. At the end of each period the Group revises its
estimates of the number of options expected to vest based on the non-market
vesting conditions. It recognises the impact of any revision in the income
statement with a corresponding adjustment to equity.
2.8 Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the statement of financial position differs from
its tax base, except for differences arising on:
· the initial recognition of goodwill;
· the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
· investments in subsidiaries where the Group is able to control
the timing of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantially enacted by the balance sheet date and are
expected to apply when the deferred tax liabilities or assets are settled or
recovered. Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities.
2.8. Property, plant and equipment
Property, plant and equipment is stated at historic cost, including
expenditure that is directly attributable to the acquired item, less
accumulated depreciation and impairment losses.
Depreciation is provided to write off cost, less estimated residual values, of
all property, plant and equipment, evenly over their expected useful lives,
when the asset is available for use, and calculated at the following rates:
Leasehold
improvements
- straight line over 5 years
Plant and
machinery
- straight line over 7-10 years
Computer
equipment
- straight line over 3 years
The carrying value of the property, plant and equipment is compared to the
higher of value in use and the fair value less costs to sell. If the carrying
value exceeds the higher of the value in use and fair value less the costs to
sell the asset, then the asset is impaired, and its value reduced by
recognising an impairment provision.
2.9. Leased asset
At the lease commencement date, the Group recognises a right-of-use asset and
a lease liability, which comprises of the building, except for short-term
leases that have a lease term of 12 months or less and leases of low-value
assets, which are expensed to the profit & loss over the expense term.
The right-of-use asset is initially recognised at cost, which comprises the
initial amount of the lease liability plus any lease payments made at or
before the commencement date, plus any initial direct costs incurred, plus any
costs associated with restoring the asset to its original condition, less any
lease incentive received. The right-of-use asset is subsequently stated at
cost less accumulated depreciation and impairment losses.
Lease payments included in the measurement of the lease liability comprise the
following:
· fixed payments, including in-substance fixed payments;
· variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date.
The lease liability is measured at amortised cost using the effective interest
method. The liability recognised at inception of the lease comprises the
present value of future payments payable under the lease contract, discounted
at the rate implicit in the lease. If there is no discount rate implicit in
the lease, then the incremental rate of borrowing is used. The liability is
remeasured when there is a change in future lease payments arising from a
change in an index or rate, or there is a change in the Group's estimate of
the amount expected to be payable under a residual value guarantee, or there
is a change arising from the reassessment of whether the Group will be
reasonably certain to exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset or is recorded in
profit or loss if the carrying amount has been reduced to zero.
2.10. Financial Instruments
The Group classifies a financial instrument, or its component parts, as a
financial asset, a financial liability, or an equity instrument in accordance
with the substance of the contractual arrangement and the definitions of a
financial liability, a financial asset and an equity instrument.
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
2.10.1. Financial assets
Financial assets are classified, at initial recognition, as subsequently
measured at amortised cost, fair value through other comprehensive income
("FVOCI"), and investments in particular at fair value through profit or loss
("FVTPL"),
The classification of financial assets at initial recognition depends on the
financial asset's contractual cash flow characteristics and the Group's
business model for managing them, with the exception of trade receivables that
do not contain a significant financing component or for which the Group has
applied the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs. Trade receivables that do not
contain a significant financing component or for which the Group has applied
the practical expedient are measured at the transaction price determined under
IFRS 15.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both.
Financial assets at amortised cost are subsequently measured using the
effective interest (EIR) method and are subject to impairment. Gains and
losses are recognised in profit or loss when the asset is de-recognised,
modified, or impaired.
The Group's financial assets at amortised cost includes trade receivables and
loans to related parties, are included under other current financial assets.
In the periods presented the Group does not have any financial assets
categorised as FVOCI.
Financial assets are de-recognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred.
2.10.2. Financial liabilities
All financial liabilities are recognised initially at fair value and, in the
case of loans and borrowings and payables, net of directly attributable
transaction costs. Financial instruments are assessed at inception to identify
and any component equity features, such as embedded derivatives, that need to
be separated.
Financial liabilities designated upon initial recognition at fair value
through profit or loss are designated at the initial date of recognition, and
only if the criteria in IFRS 9 are satisfied. Equity instruments are
recognized at inception at fair value, with a corresponding reduction in the
associated liability. The Group has not designated any financial liability as
at fair value through profit or loss. The Group has identified an embedded
derivative in its convertible loan note instrument, but has determined that
the value is not material enough to require separation. The judgement of this
is described in more detail in Note 2.18.2.
Loans after initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the EIR method. Gains and losses
are recognised in profit or loss when the liabilities are de-recognised as
well as through the EIR amortisation process.
Amortised cost is calculated by considering any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans and borrowings.
A financial liability is de-recognised when the obligation under the liability
is discharged, cancelled, or expires.
2.10.3. Impairment
The Group assesses all other current receivables on a forward-looking basis,
with expected credit losses (ECL) associated with debt instruments measured at
amortised cost. These are deemed short term (i.e., less than 12 months) and
apply the Group policy for credit rating and risk management policies in
place.
The impairment stages are defined as:
Stage 1 - When a receivable is recognised, ECLs resulting from default events
that are possible within the next 12 months are expensed to the statement of
comprehensive income (12-month ECL) and a loss allowance is established. On
subsequent reporting dates, the 12-month ECL also applies to existing
receivables with no significant increase in credit risk since their initial
recognition. In determining whether a significant increase in credit risk has
occurred since initial recognition, the Company assesses the change, if any,
in the risk of default over the expected life of the receivable (that is, the
change in the probability of default, as opposed to the amount of ECLs).
Stage 2 - If the receivables credit risk has increased significantly since
initial recognition and is not considered low, lifetime ECLs are recognised.
Stage 3 - If the receivables credit risk increases to the point where it is
considered credit-impaired, lifetime ECLs are recognised, as in Stage 2.
The impairment methodology applied for the Group is stage 1, which requires
12-month expected credit losses to be recognised until a change in credit risk
occurs, in which case stage 2 would apply.
2.11. Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition
are accounted for, as follows:
· Raw materials: purchase cost on a first-in/first-out basis;
· Finished goods and work in progress: cost of direct materials and
labour and a proportion of manufacturing overheads based on the normal
operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and the estimated costs necessary
to make the sale
2.12. Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held on call,
together with other short term highly liquid investments which are not subject
to significant changes in value and have original maturities of less than
three months.
2.13. Fair Value measurement
Where financial and non-financial assets and liabilities are measured at fair
value, the Group use appropriate valuation techniques for which sufficient
data are available to measure fair value, maximising the use of relevant
observable inputs and minimising the use of unobservable inputs.
Fair value is categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as follow:
· Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
· Level 2: inputs other than quoted prices included in Level 1 that
are observable for the assets or liability, either directly (eg; as prices) or
indirectly (eg; derived from prices);
· Level 3: input for the assets or liability that are based on
observable market data (unobservable input).
The Group recognise transfer between level of fair value hierarchy at the end
of the reporting period during which the changes have occurred.
The carrying amount of cash and cash equivalents, receivables, trade payable,
accruals and other current liabilities in the Group consolidated statement of
financial position approximates their fair value because of short maturities
of these instruments.
2.14. Warranty provision
A warranty provision is recognised where there is a probable obligation to
rectify problems with goods sold. The calculation of the warranty provision is
based on historical warranty claim data. Provisions for cash outflows in
excess of one year are determined by discounting expected future cashflows at
a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the liability. The unwinding of discount is
recognised as a finance cost. Warranty provisions are a management estimate,
please see note 2.18.1. for information about how the provision was calculated
in the year.
2.15. Revenue recognition
Revenue is generated from the manufacture and supply of lightweight solar
panels. The Group recognises revenue when (or as) a performance obligation in
the customer contract is satisfied. Performance obligations relevant to the
customer contract are to manufacture goods in accordance with the
specification in the customer order form and any other regulatory or statutory
requirements. The performance obligations are satisfied at the point in time
when the goods are deemed to be delivered. Under the customer contract, goods
are determined to be delivered Ex Works (at the factory address) under
International Chamber of Commerce Incoterms. This means that once the customer
is provided a shipping document which indicates that the goods are ready and
available for collection from the factory, obligations of the contract have
been performed and risk transfers to the customer. Revenue is measured as
the fair value of the consideration received or receivable and represents
amounts receivable for services provided in the normal course of business, net
of discounts and sales-related taxes.
Customers are billed in advance of the delivery of goods, with 30 days terms.
Upon receipt of an advanced payment a contract liability is recognized. The
contract liability is released at the point in time goods are delivered.
Under the Group's standard terms and conditions there is a product warranty
for ongoing acceptable function of the goods for a period of 10 years,
effective from the point of installation, or 3 months after delivery,
whichever is earlier. This warranty is not sold as a separate component.
This length of warranty is standard in the industry. This is not a separate
service and is deemed an "assurance" type warranty under IFRS 15 guidance; and
is therefore accounted for separately under IAS 37 instead. See note 2.14 for
information about how a warranty provision is recognized and measured.
2.16. Research and Development costs
Expenditure on research activities is recognised in profit or loss as
incurred. Development expenditure is capitalised only if the expenditure can
be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Group intends to and
has sufficient resources to complete development and to use or sell the asset.
Otherwise, it is recognised in profit or loss as incurred. Amortisation on
development costs commences once the asset under development is available for
use or sale. Subsequent to initial recognition, development expenditure is
measured at cost less accumulated amortisation and any accumulated impairment
losses.
2.17. Grant income
Government grants that are receivable as compensation for expenses or losses
already incurred or for the purpose of giving immediate financial support to
the Group with no future related costs are recognised in profit or loss in the
period in which they become receivable. Grants are recognised in the statement
of comprehensive income as other income.
2.18. Summary of critical accounting estimates and judgements
The preparation of financial information in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires the directors
to exercise their judgement in the process of applying the accounting policies
which are detailed above. These judgements are continually evaluated by the
directors and management and are based on historical experience and other
factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The key estimates and underlying assumptions concerning the future and other
key sources of estimation uncertainty at the statement of financial position
date, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial period
are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods.
The estimates and judgements which have a significant risk of causing a
material adjustment to the carrying amount of assets and liabilities within
the next financial year are discussed below:
2.18.1. Estimates
Share-based payments
Share options are recognised as an expense based on their fair value at date
of grant. The fair value of the options is estimated through the use of a
valuation model - which require inputs such as the risk-free interest rate,
expected dividends, expected volatility and the expected option life - and is
expensed over the vesting period. Some of the inputs used to calculate the
fair value are not market observable and are based on estimates derived from
available data, such as employee exercise behaviour and employee turnover
(note 24).
Warranty provision
The provision for warranty claims has been estimated for the year 2023 based
on historical data for warranty replacements since production began in 2020.
The majority of the liability is expected to be settled in the next year,
based on the same data.
Stock valuation
The cost calculation for finished stock panels includes some absorbed costs
for factory staff and utilities. The calculation of staff cost per panel is a
fixed amount based on what the cost absorption rate is when the factory is
running at full capacity. Stock provisions are recognised where there is
evidence that the cost initially recognised is no longer recoverable; for
finished panels this is either where there the panel is classed as less than
grade A standard following testing, or where there is a sale of a similar age
or specification product which is lower than the cost value.
2.18.2. Judgements
Other receivables
Other receivables comprise estimated earn out payments receivable from the
sale of the investment in ICSI - note 12. The estimated earn out payments
are structured over several product development milestones to be achieved
through to 2025. The estimated earn out payments to be received as at year end
are based on this information and includes management assessment around the
achievability of each individual milestone. At the year end it has been judged
that any further earn out payments are unlikely, and therefore the value of
the receivable has been written down to nil.
Revenue recognition
Revenue is recognised at the point that the performance obligations are
satisfied. This is judged to be the point when the goods are delivered under
the customer contract. The customer contract specifies that all goods are
delivered "Ex Works" under International Chamber of Commerce Incoterms,
meaning that they are delivered when available for collection from the
factory.
Share-based payments
Management performs an assessment to determine whether non-market performance
conditions of non-vested share options are likely to be met. As a result, the
calculation of the share-based payment charge is adjusted where it is deemed
that the number of options likely to vest has changed.
Convertible loan note
Management has assessed that the convertible loan note instrument, issued
during the year, is classified wholly as a financial liability, although it
includes a conversion feature that qualifies as an embedded derivative.
Management has determined the value of the embedded derivative to be
immaterial, and therefore it has not been separated from the host contract
liability. The reason for this assessment is that the probability of the
conversion feature being exercised was judged to be very low. The conversion
element of the instrument had been designed as a protection feature for the
debt holders, rather than as a mechanism to gain short-term gains through
equity conversion. The debt holders were long-term investors in the company,
one of which was a director. The loan notes were also secured against the
assets of the Group. The debt holders were unlikely to exercise in the short
term as the share price was expected to reduce due to liquidity issues.
Together this gave a strong indication that the debt holders were unlikely to
convert their holdings before the term, and therefore the value of the
derivative was assessed to be low.
3. Financial Risk Management
The Group is exposed to risks that arise from its use of financial
instruments. This note describes the Group's objectives, policies and
processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented
throughout these financial statements.
3.1. Principal financial instruments and their categories
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
Categories of financial assets 31 December 2023 31 December 2022
£ £
Other receivables (ICSI) - 556,783
Cash and cash equivalents 53,918 842,632
Trade receivables - net of provision 29,999 50,911
Total current financial assets at amortised cost 83,917 1,450,326
Categories of financial liabilities 31 December 2023 31 December 2022
£ £
Trade payables 173,040 62,976
Wages payable 19,072 29,586
Pension payable - 175
Accruals 72,049 139,851
Trade and other payables 264,161 232,588
Current loans and borrowings - 310,306
Non-current loans and borrowings 522,587 -
Loans and borrowings 522,587 310,306
Current lease liabilities 214,467 29,682
Non-current lease liabilities 93,756 -
Lease liabilities 308,223 29,682
Total financial liabilities at amortised cost 1,094,971 572,576
3.2. General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives
and policies to the Group's finance function. The Board receives monthly
reports from the CFO through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives and policies
it sets.
The overall objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out below:
3.2.1. Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. In order to
minimise this risk, the Group endeavours only to deal with companies which are
demonstrably creditworthy.
The aggregate financial exposure is continuously monitored. The maximum
exposure to credit risk is the value of the outstanding amount of bank
balances. The Group's exposure to credit risk on cash and cash equivalents is
considered low as the bank accounts are with banks with high credit ratings.
The analysis of trade receivables and expected credit loss allocation is
detailed in (note 17).
3.2.2. Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. To achieve this aim, it
seeks to maintain cash balances (or agreed facilities) to meet expected
requirements for a period of at least 45 days.
The Group currently holds cash balances to provide funding for normal trading
activity and is managed centrally. Trade and other payables are monitored as
part of normal management routine. The Board receives rolling cash flow
projections on a monthly basis as well as information regarding cash balances.
The following table sets out the contractual maturities (representing
undiscounted contractual cash-flows, including contractual interest) of
financial liabilities:
31 December 2023 Up to 3 Months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years
Trade payables 173,040 - - -
Wages payable 19,072 - - -
Pension payable - - - -
Accruals 72,049 - - -
Lease liability 57,209 171,626 95,348 -
Non-current loan - interest bearing - - 522,587 -
Undiscounted financial liabilities at amortised cost 321,370 -
171,626 617,935
31 December 2022 Up to 3 Months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years
Trade payables 62,976 - - -
Wages payable 29,586 - - -
Pension payable 175 - - -
Accruals 139,851 - - -
Lease liability 19,369 11,037 - -
Current loan - interest bearing 310,306 - - -
Undiscounted financial liabilities at amortised cost 562,263 11,037 - -
3.2.3. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
The Group's exposure to interest rate risk is limited, as its loans and
borrowings are a fixed rate loan. There are no overdraft facilities. At the
reporting date there were corporate bonds with principal of £500,000 which
had a fixed interest rate of 7% (2022: corporate bonds with principal of
£310,306 which had a fixed interest rate of 7%).
3.2.4. Foreign exchange risk
Foreign exchange risk arises when individual Group entities enter into
transactions denominated in a currency other than their functional currency.
The Group's policy is, where possible, to allow group entities to settle
liabilities denominated in their functional currency with the cash generated
from their own operations in that currency. Where group entities have
liabilities denominated in a currency other than their functional currency
(and have insufficient reserves of that currency to settle them), cash already
denominated in that currency will, where possible, be transferred from
elsewhere within the Group.
In the current year the Group is predominantly exposed to currency risk on
purchases made in EUR and USD.
The following table details the Group's exposure at the end of the year to
currency risk arising from recognised assets or liabilities denominated in a
currency other than the functional currency of the entity to which they
relate. Differences resulting from the translation of the financial statements
of the entity within the Group into the Group's presentation currency are
excluded:
As of 31 December 2023 the Group's exposure to changes in foreign exchange
rate was as follows:
Forex sensitivity calculation Effect on net assets Effect on loss before tax
USD GBP EUR USD GBP EUR
CAD CAD
£ £ £ £ £ £ £ £
1% 7 2 (41) - (7) (2) 41 -
-1% (7) (2) 41 - 7 2 (41) -
As of 31 December 2022, the Group's exposure to changes in foreign exchange
rate was as follows:
Forex sensitivity calculation Effect on net assets Effect on loss before tax
USD GBP EUR USD GBP EUR
CAD CAD
£ £ £ £ £ £ £ £
1% 79 (1) (53) - (79) 1 53 -
-1% (79) 1 53 - 79 (1) (53) -
4. Revenue and segmental information
Revenues Year ended Year ended
31 December 2023 31 December 2022
£ £
Sale of Goods 606,260 417,457
Total 606,260 417,457
The Group had revenues from customers in the following countries that were
determined to be material:
Revenues Year ended Year ended
31 December 2023 31 December 2022
£ £
Belgium 175,856 20,661
Sweden 104,068 3,479
Czechia 79,271 610
Denmark 72,994 7,533
Germany 36,734 64,294
UK 16,876 109,467
Thailand - 101,263
Rest of the world 120,462 110,149
606,260 417,457
The Group had 3 customers that exceeded 10% of revenue in 2023 (2022: 2
customers). All sales related to the development and commercialisation of
clean technologies operating segment:
Revenues Year ended Year ended
31 December 2023 31 December 2022
£ £
Customer 1 175,856 10,957
Customer 2 104,068 3,479
Customer 3 78,271 610
Customer 4 - 78,107
Customer 5 - 41,018
359,194 134,171
Segment information
The chief operating decision maker has been identified as the management team
including the executive and non-executive directors. The chief operating
decision-maker allocates resources and assesses performance of the business
and other activities at the operating segment level.
The chief operating decision maker has determined that EARNZ had one operating
segment, the development and commercialisation of clean technologies.
Geographical Segments
Apart from holding company activities in the UK the Group had operations in
Italy in the period. An analysis of revenue, operating loss and non-current
assets by geographical market is given below:
Year ended Year ended
31 December 2023 31 December 2022
Restated*
£ £
Revenue
UK - 18,661
Italy 606,260 398,796
Total revenue 606,260 417,457
Operating loss
UK (729,155) (1,042,666)
Italy (745,185) (821,215)
Total operating loss (1,474,340) (1,863,881)
Non-current assets
UK 10,741 571,010
Italy 392,857 230,145
Total non-current assets 403,598 801,155
*See Note 27 for details of the restatement.
5. Other (expense)/income Year ended Year ended
31 December 2023 31 December 2022
£ £
Fair value decrease through P&L - ICSI (556,783) (125,486)
Grant income - 217,419
Total other (expense)/income (556,783) 91,933
Refer to Investments and Other Receivables Notes 11-12 for further information
on the ICSI revaluation.
6. Operating loss
Year ended Year ended
31 December 2023 31 December 2022
Restated*
£ £
Operating loss is stated after charging:
Auditors' remuneration:
Audit fees - audit of the company and its subsidiaries pursuant to legislation 73,090 48,584
Non-audit fees - other assurance services - 800
Direct costs - inventory cost of goods expense 582,830 253,102
Direct costs - inventory write (back)/down (47,051) 167,417
Direct costs - other 328,293 246,213
Warranty provision 30,313 -
Depreciation of Property Plant and Equipment 50,207 134,692
Depreciation of Right of Use asset 173,133 60,863
Remeasurement of Right of Use asset - (25,537)
Provision against other receivables 70,444 (51,144)
Short term leases 4,824 5,688
Disposal of assets 50,167 -
Directors' fee and staff costs (note 7) (35,188) 407,901
Bad debt 16,506 70,202
Research costs - 142,555
*See Note 27 for details of the restatement.
7. Employees and directors
The average number of employees (including directors) during the period was
made up as follows:
Year ended Year ended
31 December 2023 31 December 2022
Number Number
Directors 4 4
Production 6 6
Administrative 1 1
Total 11 11
The cost of staff and directors during the period was made up as follows:
Year ended Year ended
31 December 2023 31 December 2022
£ £
Salaries 193,496 299,108
Directors' fees 111,250 257,037
Share-based payments (154,010) 119,672
Social security costs 11,685 41,079
Pension costs 32,034 1,932
Total staff cost in the statement of comprehensive income 194,455 718,828
Consisting of:
Employee costs included in direct costs 233,783 179,531
Employee costs included in administrative expenses (39,327) 539,297
Key management personnel include both board and non-board members. Key
management personnel compensation is as follows:
Key management personnel compensation Year ended Year ended
31 December 2023 31 December 2022
£ £
Salaries 23,750 102,500
Fees 183,727 288,323
Share-based payments (154,010) 119,672
Social security costs 3,446 6,964
56,913 517,459
Please refer to the Directors' Remuneration report on pages 19-21.
Year ended Year ended
31 December 2023 31 December 2022
£ £
Finance expenses
Interest on loans (note 20) 31,061 23,056
Amortisation of bond issue costs (note 20) 16,045 34,446
Lease interest 14,472 16,102
Total finance expense 61,578 73,604
8. Finance costs
Details of the interest rate on the loans are shown in note 20.
9. Income tax
Year ended Year ended
31 December 2023 31 December 2022
£ £
UK Corporation tax
Tax credit/ (expense)- current year - -
Tax credit/ (expense)- prior year - 21,901
Total current tax - 21,901
Deferred tax
Origination and reversal of timing differences - -
Total tax credit/(expense) - 21,901
Factors affecting the tax expense
The reasons for the difference between the actual tax expense for the year and
the standard rate of corporation tax in the United Kingdom applied to the
result for the year are as follows:
Year ended Year ended
31 December 2023 31 December 2022
Restated*
£ £
Loss on ordinary activities before income tax (2,088,980) (1,843,468)
Standard rate of corporation tax 19.00% 19.00%
Loss before tax multiplied by the standard rate of corporation tax (396,906) (350,259)
Effects of:
Research and Development tax credit - 21,901
Losses utilised against chargeable gains - -
Non-deductible expenses 58,989 20,183
Difference in overseas tax rates (5,338) (6,768)
Capital allowances (171) (3,642)
Deferred tax not recognised 343,426 340,486
Withholding tax - -
Tax credit - 21,901
*See Note 27 for details of the restatement of prior year result.
The Group has not recognized deferred tax assets arising from the accumulated
tax losses due to uncertainty of their future recovery. The deferred tax asset
not recognized is £1,864,738 at 31 December 2023 (2022: £1,515,764).
10. Loss per share
Year ended Year ended
31 December 2023 31 December 2022
Restated*
Basic and diluted
Loss for the period and earnings used in basic & diluted EPS (£) (2,088,979) (1,821,567)
Weighted average number of shares used in basic and diluted EPS 428,877,728 393,565,703
Loss per share:
Basic and diluted (0.5p) (0.5p)
*See Note 27 for details of the restatement of prior year result.
Basic loss per share is calculated by dividing the loss for the period from
continuing operations of the Group by the weighted average number of ordinary
shares in issue during the period. There were no potentially dilutive ordinary
shares in either period, therefore was no difference between the basic and
diluted loss per share.
11. Investments
Financial assets at fair value through profit or loss Total
£ £
Cost
At 1 January 2022 990,000 990,000
Disposal (990,000) (990,000)
At 31 December 2022 - -
Disposal - -
At 31 December 2023 - -
The Company previously held a stake in Industrial Climate Solutions (ICSI), an
unlisted company registered in Canada. This was sold during 2022 for a total
consideration comprising cash on completion of £307,731 and earn out payments
payable over 3 years (see note 12).
12. Other receivables
2023 2022
£ £
Fair value of earn-out from ICSI sale - 556,783
Other receivables - 556,783
The estimated earn out payments from the ICSI sale are structured over several
product development milestones to be achieved through to 2025. The estimated
earn out payments to be received as at year end are based on management
assessment of the achievability of each individual milestone. At recognition
of the receivable this risk weighted compensation was discounted at an
estimated cost of equity, being 14.2%.
In 2023 management received information from the ICSI Sellers' Committee that
future milestones are unlikely to be met, so a full impairment of the
receivable was recognized in the period.
13. Property, plant and equipment
Plant & Machinery Computer equipment Leasehold Improvements Total
£ £ £ £
Cost
At 1 January 2022 601,933 3,972 74,923 680,828
Additions 14,312 2,708 2,520 19,540
Disposals - (948) - (948)
Exchange adjustments 32,155 - 4,015 36,170
At 31 December 2022 648,400 5,732 81,458 735,590
Additions 1,140 899 - 2,039
Disposals (334,886) (1,705) (79,842) (416,433)
Exchange adjustments (12,577) 10 (1,616) (14,183)
At 31 December 2023 302,077 4,936 - 307,013
Depreciation
At 1 January 2022 359,034 3,373 18,340 380,747
Charge for the year 104,737 358 29,596 134,691
Disposals - (449) - (449)
Exchange adjustments 23,039 - 2,092 25,131
At 31 December 2022 486,810 3,282 50,028 540,120
Charge for the year 46,454 1,028 2,725 50,207
Disposals (291,343) (1,704) (76,069) (369,116)
Exchange adjustments (35,038) 11 23,316 (11,711)
At 31 December 2023 206,883 2,617 - 209,500
Net book value
At 31 December 2022 161,590 2,450 31,430 195,470
At 31 December 2023 95,194 2,319 - 97,513
14. Subsidiary undertakings
As at 31 December 2023 the subsidiaries of the Company, all of which have been
included in these consolidated
financial statements, are as follows:
Name Country of incorporation Parent Direct or indirect holding Proportion of ownership interest at 31 December 2023 Nature of business
Verditek Solar S.r.l Italy Verditek plc Direct 100% Solar technology services
Verditek USA, Limited USA Verditek plc Direct 100% Dormant
Verditek Solar Solutions Limited UK Verditek plc Direct 100% Dormant
Name Registered address
Verditek Solar S.r.l Via dei Martinitt, 3, 20146, Milan, Italy
Verditek USA, Limited Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801
Verditek Solar Solutions Limited First Floor, Holborn Gate, 330 Holborn, London, WC1V 7QT
15. Right of use asset
Building
£
Cost
At 1 January 2022 323,617
Additions -
Remeasurement of asset (262,655)
Foreign Exchange 7,500
At 31 December 2022 68,462
Additions 432,120
Disposal of asset (67,104)
Exchange (1,358)
At 31 December 2023 432,120
Depreciation
At 1 January 2022 181,226
Charge for the year 60,863
Unwind of discount of lease deposit (trade and other receivables) 7,306
Remeasurement of asset (233,356)
Foreign Exchange 3,521
At 31 December 2022 19,560
Charge for the year 173,133
Unwind of discount of lease deposit* (trade and other receivables) 1,414
Disposal of asset (67,328)
Exchange (744)
At 31 December 2023 126,035
Net book value
At 31 December 2022 48,902
At 31 December 2023 306,085
The right-of-use asset as at 31 December 2023 is the present value of a lease
asset on a factory in Tolmezzo, Italy signed in May 2023 for 2 years. The
rental amount is fixed for the term of the lease.
*Included within the lease asset is a deposit of £38,139 payable at inception
of the lease. This has been discounted to reflect the time value of money, and
that this will be repaid at the term of the lease. The discount rate applied
is 7%, being the rate of borrowing of the Company during the year. The unwind
of this discount reduces the right of use asset, and increases the deposit
(held in Trade and other receivables, Note 17).
16. Inventories
2023 2022
£ £
Finished goods (cost) 75,849 345,032
Finished goods (fair value less costs to sell) 207,962 -
Raw materials 135,209 189,927
Total Inventories 419,020 534,959
During the period £582,830 inventories relating to revenue were recognized as
a cost in the P&L (2022: £253,102). There was also a release of a
provision against inventories to write-back defective and slow-moving stock,
£47,051 (2022: £167,417), upon sale of old stock panels.
17. Trade and other receivables
2023 2022
Restated*
£ £
Trade receivables - gross 73,569 123,744
Less: provision for expected credit losses (43,570) (72,833)
Trade receivables - net 29,999 50,911
Advance to suppliers and deposits 67,094 19,503
Amounts due from related parties - 100
VAT and other taxes receivable 39,449 65,543
Prepayments 33,916 12,536
Total trade and other receivables 170,458 148,593
*See Note 27 for details of the restatement of prior year other receivables.
The ageing of trade receivables and ECL allocation is as follows:
31 December 2023 Gross ECL Net
£ £ £
Not past due and not impaired - - -
Up to 30 days past due 14,676 - 14,676
31 to 60 days past due 13,176 - 13,176
61 to 90 days past due 176 - 176
Over 90 days past due 45,541 (43,570) 1,971
Total 73,569 (43,570) 29,999
31 December 2022 Gross ECL Net
£ £ £
Not past due and not impaired 829 - 829
Up to 30 days past due - - -
31 to 60 days past due 3,155 - 3,155
61 to 90 days past due 9,829 - 9,829
Over 90 days past due 109,931 (72,833) 37,098
Total 123,744 (72,833) 50,911
The movement in ECL in the year was as follows:
ECL
£
Cost
At 1 January 2023 72,833
Utilised provision (45,534)
Additional provision 16,506
Foreign exchange (55)
At 31 December 2023 43,750
18. Cash and cash equivalents
2023 2022
£ £
Cash at bank and in hand 53,918 842,632
The fair value of the cash & cash equivalents is as disclosed above. For
the purpose of the cash flow statement, cash and cash equivalents comprise of
the amounts shown above.
19. Trade and other payables
2023 2022
£ £
Trade payables 173,040 62,976
Accruals 72,049 139,851
Deferred revenue 9,922 43,955
Wages payable 19,072 29,586
Pension payable - 175
Other payable 166 173
Financial liabilities at amortised costs other than loans and borrowings 274,249 276,716
Social security & other taxes payables 9,493 13,279
Total trade and other payables 283,742 289,995
20. Loans and borrowings
2023 2022
£ £
Current
Corporate bonds issued to related party - 25,000
Corporate bonds (net of bond issue costs) - 285,306
Non - current
Convertible loans 522,587 -
Total current and non - current loans and borrowings 522,587 310,306
On 9 May 2023, the Group raised £500,000 in secured convertible loan notes
and shortly thereafter repaid the convertible bonds. The convertible loan
notes carry a coupon of 7% per annum which is payable on the redemption date
or earlier if converted. The convertible loan notes are redeemable 2 years
from the date of issue and are convertible at the option of the noteholder
into ordinary shares at the lower of 1.0625 pence per share, or the
subscription price per ordinary share of any fundraising over £250,000 in the
6 months from the issue of the loan notes. As a result of the equity raise on
1 September 2023, the conversion price for the secured convertible loan notes
has been adjusted to 0.45 pence per share. At inception an embedded derivative
was identified, although this has not been separated from the loan liability
as it has been determined to be immaterial. The convertible loans were
redeemed post year end as part of the disposal of Verditek Solar Italy srl.
Alongside the corporate bonds in prior year, warrants were also issued to
Crowd For Angels, including
- 2,250,000 warrants on 28 May 2021, with a term 36 months
and exercise price 3.1p
- 1,032,530 warrants on 30 July 2021, with a term 36 months
and exercise price 2.75p
The 1,032,530 warrants were exercised in 2021 and the proceeds repaid part of
the Corporate bond.
The warrants were fair valued using the Black Scholes model, see note 24 for
details, and recognised as a cost of issue. During the year there was an issue
cost amortisation charge of £16,045 (2022: £33,226) recorded within finance
costs.
Reconciliation of liabilities to cashflows arising from financing activities
01-Jan-23 Cash inflow Cash outflow Non-cash Non-cash 31-Dec-23
New lease liability Interest and discount unwind
£ £ £ £ £ £
Corporate bonds 285,306 - (299,858) - 14,552 -
Corporate bonds - related party 25,000 - (25,000) - - -
Lease liability 29,682 - (163,217) 427,286 14,472 308,223
Convertible loan notes - 500,000 - - 22,587 522,587
339,988 500,000 (488,075) 427,286 51,611 830,810
21.
Provisions
2023 2022
£ £
Warranty provision 30,212 -
Total provisions 30,212 -
A warranty provision has been recognised in the year based on historical panel
warranty claim rates, at 5% of revenue. It is assumed that all of the
provision will be utilized within the next year.
22. Lease
liability
2023 2022
£ £
Current Lease liability 214,467 29,682
Non-Current Lease liability 93,756 -
Total Current loans and borrowings 308,223 29,682
Maturity analysis of Group's discounted lease liability:
Future minimum lease payments Interest Discounted lease liability
£ £ £
Less than one year 228,835 (14,368) 214,467
Between one and five years 95,348 (1,592) 93,756
324,183 (15,960) 308,223
The cash outflow on lease liability payments in the year was £163,217(2022:
£70,936). The interest expense on lease liabilities recognised in the year
was £14,472 (2022: £16,102).
23. Share capital and reserves
Number of Shares Par Value £0.0004 Share capital Share premium
£ £
At 1 January 2022 342,204,973 136,883 10,761,055
Exercise of shares for cash
Shares issued June 2022 at 1.5p per share 101,333,333 40,534 1,479,466
Share issue costs (34,795)
At 31 December 2022 443,538,306 177,417 12,205,726
Exercise of shares for cash
Shares issued September 2023 at 0.45p per share 111,111,111 44,443 455,557
Share issue costs (35,000)
At 31 December 2023 554,649,417 221,860 12,626,283
24. Share-based payment reserve
The Company operates an equity-settled share-based remuneration schemes for
Senior Executives, under the terms of the Company's EMI and Non-Qualifying
Share Option Plan (the "Option Plan"). The options are valid for 10 years from
the date of grant. After satisfaction of any performance condition included in
the award the options will become exercisable in equal tranches on each
anniversary of the Grant Date during the first three years.
The fair value of the employee services received in exchange for the grant of
the options is recognised as an expense. The total amount to be expensed is
determined by reference to the fair value of the options granted including any
market performance conditions (for example the Company's share price) but
excluding the impact of any service or non-market performance vesting
conditions (for example the requirement of the grantee to remain an employee
of the Group).
Non-market vesting conditions are included in the assumptions regarding the
number of options that are expected to vest. The total expense is recognised
over the vesting period. At the end of each period the Group revises its
estimates of the number of options expected to vest based on the non-market
vesting conditions. It recognises the impact of any revision in the income
statement with a corresponding adjustment to equity.
The Company uses a Black Scholes model to estimate the cost of share options.
The following information is relevant in the determination of the fair value
of options granted. The assumptions inherent in the use of this model are as
follows:
• The option life is the estimated average period over which the options
will be exercised.
• For options issued to Rob Richards and David Willetts in 2021, there is a
vesting condition linked to performance of the company.
• For other options issued in 2021 and earlier, the vesting conditions are 3
years' continued service with the Group.
• No variables change during the life of the option (e.g. dividend yield
remains zero).
During 2021 there were also warrants issued to Crowd For Angels, please see
note 20 for details.
The key assumptions used in the fair value calculation for issues is as
follows
Issue date 28/05/2021 30/07/2021 17/09/2021 06/04/2020
Stock price at grant date 3.1p 2.75p 3.8p 2.0p
Volatility 107% 99% 100% 73%
Time to maturity (months) 36 36 36 60
Risk free rate 0.08125% 0.07400% 0.07088% 0.6528%
The movement in outstanding share options and warrants are as follows:
Number of share options Weighted average strike price Weighted average term
Number of warrants
(pence) (years)
Opening at 1 January 2023 20,000,000 2,250,000 3.9 8.2
Forfeit (16,300,000) - (3.7) (7.4)
Exercised - - - -
At 31 December 2023 3,700,000 2,250,000 0.2 0.8
1,500,000 options were granted under the scheme in April 2018 to Chair, Lord
David Willetts, with an exercise price of 9.0p. During 2020 there were
4,000,000 options issued to CEO, Rob Richards at an exercise price of 3.0p.
During 2021 there were 3,000,000 options issued to Lord David Willetts and
10,000,000 options were issued to Rob Richards at an exercise price of 3.8p.
At the period end, following an assessment that it was unlikely that
performance conditions would be met for a portion of the 2020 options and 2021
options issued to Lord Willetts and Rob Richards, a reversal of previously
recognized share-based payment expense was required, as a credit to the income
statement. At the period end, Rob Richards held 1,200,000 share options with
an exercise price of 3.0p, and David Willetts held 1,500,000 share options
with an exercise price of 9.0p.
The share-based payment credit recognized in the income statement during the
period was £154,010 (2022: cost of £119,672).
25. Reserves
The following describes the nature and purpose of each reserve within equity:
Issued share capital - Amount subscribed for share capital at nominal value.
The company has one class of shares being Ordinary Shares. Holders of these
shares are entitled to one vote per share at general meetings of the Company,
and are entitled to dividends as declared from time to time.
Share premium - Amount subscribed for share capital in excess of nominal
value. This includes share issue costs, which are deducted from share premium.
Share-based payment reserve - The share-based payment reserve represents
equity settled share-based employee remuneration until such share options are
exercised.
Foreign exchange reserves - Foreign exchange translation gains and losses on
the translation of the financial statements of subsidiary from the functional
to the presentation currency, and also foreign exchange on intra-group funding
balances.
Accumulated losses - All other net gains and losses and transactions with
owners (e.g. dividends) not recognised elsewhere.
Non-controlling interests - Represents accumulated profits or losses from
subsidiaries where there is less than a 100% holding.
26. Related Party Transactions
The Group has related party transactions with related parties who are not
members of the Group.
Transactions during the year Amounts owed by related parties Amounts owed to related parties/loans
2023 2022 2023 2022 2023 2022
£ £ £ £ £ £
The Rt Hon. Lord David Willetts FRS(1) 25,000 50,000 - - - 29,167
George Katzaros(2) 12,500 25,000 - - - 14,583
Gavin Mayhew(3) - 31,774 - - - 60,327
Rob Richards(4) 150,000 152,037 24,934 - - -
Fly SolarTech Solutions SRL sales(5) 41,978 32,940 2,115 43,276 - -
Fly SolarTech Solutions SRL purchases(5) 246,574 41,867 - - 29,220 25,410
Notes:
(1) The Rt Hon. Lord David Willetts FRS Lord David Willetts, Chair of the Company, was entitled to fees and services
of £50,000 during the period but he waived his fees from July 2023 onwards.
( )
(2)George Katzaros Mr. George Katzaros, a non-executive director of the Company, was entitled to
Directors fees of £25,000 during the year, but he waived his fees from July
2023 onwards. At the year-end George Katzaros was owed a Directors fee of
£nil. In February 2024 he waived any right to fees.
(3)Gavin Mayhew Gavin Mayhew, a former director of the Company, was owed £165,000 corporate
bonds with an expiry date of 28/04/2025 accruing 7% interest, at the year end
this amounted to £172,468.
( 4)Rob Richards (appointed 1 June 2020) Robert James Richards, director during the year was entitled to Directors fees
of £150,000. At year end, he was owed £24,934 of which £22,038 was fees and
£2,896 related to expenses.
(5) Fly SolarTech Solutions SRL Fly SolarTech Solutions SRL is a company of which a director of Verditek Solar
SRL is also a director and shareholder. Transactions are conducted on an arms
length basis and subject to authorisation by Rob Richards, CEO of Verditek
plc. During the year Verditek entered into a service agreement with
FlySolarTech Solutions resulting in rental payment and receipt of rental
income. At year end, in other debtors a deposit is recognised of £34,831
(€40,050).
Details of the directors' emoluments, together with the other related
information, are set out in the Directors' Remuneration Report. The
Company's executive and non-executive directors are considered to be key
management personnel for the purposes of this disclosure.
27. Prior period restatement
During 2023, the Group determined that the Non-Controlling Interest Reserve
recognized at prior balance sheet dates in connection with BBR Filtration
should have been released to Accumulated losses at 31/12/2021.
On admission to AIM in 2017, the Company acquired 51% of BBR Filtration
Limited (which in turn had a 50.49% holding in BBR Filtration USA LLC), a
bio-filtration company developing a system to remove odours (e.g. hydrogen
sulphide) from wastewater. BBR Filtration Limited remained a 51% owned
subsidiary of the Company but ceased trading during 2019. BBR Filtration
Limited was dissolved in June 2021. Therefore the residual Non-Controlling
Interest Reserve, £106,887, should have been released to Accumulated losses
during the year 2021.
During 2023 it was determined that a provision against VAT recognized in prior
years should have been partially reversed in the prior year, as there was
information available at the time which suggested that it could be
recoverable. A prior year adjustment has been made as a result of there being
an error identified in the estimate made as at 31 December 2022.
The errors described have been corrected by restating each of the affected
line items for prior periods. The impact on shareholders' equity and assets is
summarized as follows:
Consolidated statement of financial position Impact of correction error
As previously reported Adjustment As restated
1 January 2022 £ £ £
SHAREHOLDERS' EQUITY
Accumulated losses (9,098,300) (106,887) (9,205,187)
Non-controlling interests (106,887) 106,887 -
31 December 2022
ASSETS
Trade and other receivables 95,533 53,060 148,593
SHAREHOLDERS' EQUITY
Accumulated losses (10,971,011) (55,743) (11,026,754)
Foreign exchange reserve 6,245 1,916 8,161
Non-controlling interests (106,887) 106,887 -
Consolidated statement of comprehensive income Impact of correction error
As previously reported Adjustment As restated
For the year ended 31 December 2022 £ £ £
Administrative expenses (1,661,935) 51,144 (1,610,791)
Loss for the period (1,894,612) 51,144 (1,843,468)
Translation of foreign operations 41,417 1,916 43,333
Comprehensive income (1,831,294) 53,060 (1,778,234)
28. Events after the reporting date
On 27 February 2024 the Company entered into a loan agreement with Bob Holt,
prior to his appointment as a director of the Company, for up to £300,000, of
which £250,000 was drawn down on 28 February 2024 prior to the disposal of
the Solar Business described below to settle outstanding liabilities of the
Group. The remaining £50k has subsequently been drawn down. The loan was
unsecured and interest free, convertible in part or in whole at any equity
fundraising undertaken by the Company after the date of the drawdown. The loan
was converted into 4,000,000 ordinary shares on 8 April 2024.
On 28 February 2024, at a general meeting of the Company, the disposal of
Verditek Italy srl and all related business assets of the Company
(collectively, "Solar Business") to newly incorporated private company,
Verditek Solar
Limited, was approved, in return for satisfaction of the outstanding secured
convertible loan notes (see Note 20) and accrued interest, £528,340. Verditek
Solar Limited is a company owned by the convertible loan note holders. The
disposal of the Solar Business included:
- All issued share capital in Verditek Solar Italy srl
- All intellectual property rights associated with the Group's
solar operations
- The Company's interest in an agreement with Net Zero Valley to
develop a solar panel manufacturing plant in Southern Italy
- The Company's interest in the joint development project with
Paragraf Limited
- Any monies receivable from the earn-out agreement from the sale
of ICSI
The disposal of the Solar Business completed on 29 February 2024. The Company
has been regarded since 1 March 2024 as an AIM Rule 15 cash shell, having
ceased to own, control or conduct all, or substantially all, of its existing
trading business, activities or assets.
Following the disposal of the Solar Business, the existing Board of Directors
of the Company resigned with immediate effect. The Chair, Lord Willetts, and
Non-Executive Director, George Katzaros, waived any fees that they would have
been contractually entitled to up until 29 February 2024. Rob Richards, the
former Chief Executive of the Company, agreed to vary the terms of his service
contract to receive a settlement amount of £50,000 (less payments on account
made in February) in respect of fees owed under his existing contract.
A new Board of Directors was shortly thereafter appointed, being Bob Holt,
John Charlton and Elizabeth Lake. The Company was renamed EARNZ plc effective
from 6(th) March 2024. The new board intends to seek suitable acquisition
targets within the energy services sector, which will constitute a reverse
takeover under AIM Rule 14.
On 5 March 2024 400,000,000 shares were issued in the Company, at 0.075 pence
per share, giving total proceeds of £300,000.
On 4 April 2024 there was a general meeting to approve a share consolidation,
so that every 100 shares in the Company would be consolidated to 1 share. This
increased the nominal value of each share from £0.0004 to £0.04, and reduced
the number of shares from 954,649,497 to 9,546,495 shares.
On 8 April 2024 the Company raised a further £3.7 million (before expenses)
from the issue of 39,954,644 shares at 7.5 pence per share. The loan from Bob
Holt was also converted to shares at this time, at the same price.
29. Ultimate controlling party
There is no ultimate controlling party of the Company.
COMPANY STATEMENT OF FINANCIAL POSITION
31 December 2023 31 December 2022
Notes £ £
Non-current assets
Investments in subsidiaries 3 8,916 8,916
Other receivables 5 - 556,783
Property, plant and equipment 6 10,741 14,227
Total non-current assets 19,657 579,926
Current assets
Trade and other receivables 7 27,373 22,709
Net amounts due from subsidiaries 3 489,572
Cash and cash equivalents 8 46,654 801,642
Total current assets 563,599 824,351
Total assets 583,256 1,404,277
Non-current liabilities
Loans and borrowings 10 522,587 -
Total Non-current liabilities 522,587 -
Current liabilities
Trade and other payables 9 142,363 143,039
Loans and borrowings 10 - 310,306
Total current liabilities 142,363 453,345
Net assets (81,694) 950,932
Share capital 11 221,860 177,417
Share premium 12,626,283 12,205,726
Share-based payment reserve 12 178,797 332,806
Retained losses (13,108,634) (11,765,017)
Total equity (81,694) 950,932
The Company's loss for the year was £1,343,617 (2022: loss of £5,580,995).
As permitted by s408 Companies Act 2006, the Company has not presented its own
statement of comprehensive income.
These financial statements were approved and authorised for issue by the Board
of Directors on 31 May 2024 and were signed on its behalf by:
John Charlton
Executive Director
Company Registration Number: 10114644
The accompanying notes are an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Share-based payment reserve Retained losses Total
£ £ £ £
Equity as at 1 January 2022 136,883 10,761,055 213,134 (6,184,022) 4,927,050
Profit/(loss) for the year - - - (5,580,995) (5,580,995)
Total comprehensive loss - - - (5,580,995) (5,580,995)
Share issue (net of expenses) 40,534 1,444,671 - - 1,485,205
Share-based payments - - 119,672 - 119,672
Equity as at 31 December 2022 177,417 12,205,726 332,806 (11,765,017) 950,932
Profit/(loss) for the year - - - (1,343,617) (1,343,617)
Total comprehensive loss - - - (1,343,617) (1,343,617)
Share issue (net of expenses) 44,443 420,557 - - 465,000
Share-based payments - - (154,009) - (154,009)
Equity as at 31 December 2023 221,860 12,626,283 178,797 (13,108,634) (81,694)
The accompanying notes are an integral part of these financial statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. Accounting policies
The accounting policies that are applicable, as set out in note 1 to the
consolidated financial statements have been applied together with the
following accounting policies that have been consistently applied in the
preparation of these EARNZ PLC ("the Company") financial statements.
Basis of preparation
The financial statements of EARNZ PLC have been prepared in accordance with
Financial Reporting Standard 101, 'Reduced Disclosure Framework' (FRS 101).
The financial statements have been prepared under the historical cost
convention, as modified and in accordance with the Companies Act 2006.
The Company has taken advantage of Section 408 of the Companies Act 2006 in
not presenting its own statement of comprehensive income.
The Company has taken advantage of the following disclosure exemptions under
FRS 101, on the basis that equivalent disclosures are, where required, given
in the consolidated financial statements of EARNZ PLC:
a. a Cash Flow Statement and related notes as required by IAS 7 -
'Statement of Cashflows';
b. the requirement in paragraph 38 of IAS 1 'Presentation of Financial
Statements' to present comparative information in respect of paragraph
79(a)(IV) of IAS 1 - a reconciliation of the share capital at beginning and
end of the period;
c. the requirements of paragraph 134 - 136 of IAS 1 'Presentation of
Financial Statements' to disclose the management of the capital of the
Company;
d. the requirements of paragraphs 30 and 31 of IAS 8, 'Accounting
Policies, Changes in Accounting Estimates and Errors' to disclose the new or
revised standards that have not been adopted and information about their
likely impact;
e. all of the disclosure requirements of IFRS 7 'Financial Instruments:
Disclosures';
f. the requirements of paragraph 17 of IAS 24, 'Related Party
Disclosures' to disclose key management personnel; and
g. the requirements in IAS 24 'Related Party Disclosures' to disclose
related party transactions entered into between two or more members of a
group, provided that any subsidiaries which is a party to the transaction is
wholly owned by such a member.
Going concern
Following the Disposal, the Company has ceased to own, control, or conduct all
or substantially all its previous trading business, activities and assets and,
on 1 March 2024, became an AIM Rule 15 cash shell.
As such, the Company is required to make an acquisition or acquisitions which
constitute a reverse takeover under AIM Rule 14 ("Reverse Takeover") or
be re-admitted to trading on AIM as an investing company (which requires,
inter alia, the raising of at least £6.0 million) under the AIM Rules, on or
before the date falling six months from 1 March 2024.
If the Company does not complete a Reverse Takeover in accordance with AIM
Rule 14, or otherwise if re-admitted to trading on AIM as an investing company
fails to implement its investing policy to the satisfaction of the London
Stock Exchange within twelve months of becoming an investing company, the
London Stock Exchange will suspend trading in the Company's AIM securities
pursuant to AIM Rule 40.
Accordingly, the Company will evaluate opportunities in the sectors the
directors consider appropriate, seeking to identify one or more projects or
assets which the Company can acquire, which would constitute a Reverse
Takeover under AIM Rule 14.
Following the Board changes in March and May 2024, the monthly cost of
maintaining the Company has reduced.
The directors have a clear strategy to identify Reverse Takeover targets and
have a number of opportunities in the pipeline. The cash resources of the
Company are sufficient to cover the costs of a Reverse Takeover.
As the successful completion of any Reverse Takeover target cannot be assured
at this time, the directors have concluded that a material uncertainty exists
as to the Company's ability to continue as a going concern beyond the AIM Rule
15 timetable. This uncertainty arises primarily because should the Company's
shares be suspended from trading on AIM or its listing is cancelled, the
Company's ability to raise finance for the longer term would be significantly
impaired.
Notwithstanding the above, as at the date of approval of the financial
statements, the base case cash flow forecast indicated that no additional cash
resources will be required over the course of the next 12 months. The
directors therefore consider the Group and the Company to be a going concern
and have therefore prepared these financial statements on the going concern
basis.
Investments in subsidiaries
The Company's investment in its subsidiaries are carried at cost less
provision for any impairment. Investments include shareholder loans.
Investments denominated in foreign currency are recorded using the rate of
exchange at the date of acquisition. The carrying value is tested for
impairment when there is an indication that the value of the investment might
be impaired. When carrying out impairment tests, the recoverable amount is
based upon future cash flow forecasts and these forecasts would be based upon
management judgement. Where the carrying value is more than the recoverable
amount, no impairment provision is made.
Trade and other receivables
The Company assesses on a forward-looking basis the expected credit loss
associated with its receivables carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase
in credit risk. For trade receivables, the Company applies the simplified
approach permitted by IFRS 9, resulting in trade receivables recognised and
carried at original invoice amount less an allowance for any uncollectible
amounts based on expected credit losses.
Critical accounting estimates and judgments
The preparation of financial information in conformity with FRS 101 requires
the use of certain critical accounting estimates. It also requires the
Directors to exercise their judgement in the process of applying the
accounting policies which are detailed above. These judgements are continually
evaluated by the Directors and management and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The judgements that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are as follow:
Impairment of investments in and amount due from subsidiaries
In determining whether there are indicators of impairment of the Company's
investments in, and amounts receivable from, its subsidiary undertakings, the
directors take into consideration various factors including the economic
viability and expected future financial performance of the business of the
subsidiary undertakings. Future cashflows from solar operations requires
significant management judgement, as the solar production business is still in
its early stages.
Classification of investments in and amount due from subsidiaries
Investments in subsidiaries are classified as non-current assets. Funding
provided to subsidiaries is long-term in nature and not intended to be repaid
on demand, and therefore it is appropriate to present the assets as
non-current.
2. Staff costs
The average number of employees (including directors) during the period was
made up as follows:
2023 2022
Number Number
Directors 4 4
Administrative - -
Total 4 4
The cost of employees (including directors) during the period was made up as
follows:
2023 2022
£ £
Salaries (including directors) 111,250 409,890
Share-based payment (154,010) 119,672
Social security costs 3,445 9,235
Pension cost - 500
Total staff costs (39,315) 539,297
Investments in subsidiary undertakings
Investment in subsidiary Amount due from subsidiary
Total
COST £ £ £
At 1 January 2022 608,916 4,009,539 4,618,455
Additions - - -
Movement for the year - 504,358 504,358
At 31 December 2022 608,916 4,513,897 5,122,813
Additions - - -
Movement for the year - 489,572 489,572
At 31 December 2023 608,916 5,003,469 5,612,385
IMPAIRMENT
At 1 January 2022 600,000 - 600,000
Impairment of investment in subsidiary - 4,513,897 4,513,897
At 31 December 2022 600,000 4,513,897 5,113,897
Impairment of investment in subsidiary - -
At 31 December 2023 600,000 4,513,897 5,113,897
Net book value
At 31 December 2022 8,916 - 8,916
At 31 December 2023 8,916 489,572 498,488
The details of the subsidiaries of the Company, are set out in the Note 11 to
the consolidated financial statements.
The directors consider that the carrying amounts owed by and to group
undertakings approximates their fair value. The amounts reported under current
assets have no fixed repayment terms and repayment on demand.
3. Other investments
Financial assets at fair value through profit or loss Total
£
Cost
At 1 January 2022 990,000 990,000
Disposal (990,000) (990,000)
At 31 December 2022 - -
Addition
Disposal
At 31 December 2023 - -
The Company previously held a stake in Industrial Climate Solutions (ICSI), an
unlisted company registered in Canada. This was sold during 2022 for a total
consideration comprising cash on completion of £307,731 and earn out payments
payable over 3 years (see note 5).
4. Other receivables
2023 2022
£ £
Fair value of earn-out from ICSI sale - 556,783
Other receivables - 556,783
The estimated earn out payments from the ICSI sale are structured over several
product development milestones to be achieved through to 2025. The estimated
earn out payments to be received as at year end are based on management
assessment of the achievability of each individual milestone. At recognition
of the receivable this risk weighted compensation was discounted at an
estimated cost of equity, being 14.2%.
In 2023 management received information from the ICSI Sellers' Committee that
future milestones are unlikely to be met, as so a full impairment of the
receivable was recognized in the period.
5. Property, plant and equipment
Plant and machinery Computer equipment Total
£ £ £
At 1 January 2022 1,873 2,277 4,150
Additions 12,422 2,708 15,130
Disposal - (949) (949)
At 31 December 2022 14,295 4,036 18,331
Additions - 899 899
Disposal - - -
At 31 December 2023 14,295 4,935 19,230
DEPRECIATION
At 1 January 2022 1,873 1,678 3,551
Charge for the year 643 358 1,001
Disposal - (448) (448)
At 31 December 2022 2,516 1,588 4,104
Charge for the year 3,358 1,027 4,385
Disposal
At 31 December 2023 5,874 2,615 8,489
Net book value
At 31 December 2022 11,779 2,448 14,227
At 31 December 2023 8,421 2,320 10,741
6. Trade and other receivables
31 December 2023 31 December 2022
£ £
Prepayments 12,193 10,526
Corporation tax receivable - -
VAT receivable 15,179 12,183
Total trade and other receivables 27,372 22,709
All amounts are due within three months.
7. Cash and cash equivalents
31 December 2023 31 December 2022
£ £
Cash at bank and in hand 46,654 801,642
8. Trade and other payables
31 December 2023 31 December 2022
£ £
Trade payables 93,679 5,146
Accruals and deferred income 46,294 128,387
Social security & other taxes payable 2,390 9,331
Pension cost - 175
Total trade and other payables 142,363 143,039
9. Loans and borrowings
31 December 2023 31 December 2022
£ £
Current
Convertible loans - 310,306
Non-Current
Corporate bonds 522,587 -
Total loans and borrowings 522,587 310,306
See note 20 of the consolidated financial statements for details.
10. Share capital
For details of share capital see note 23 to the consolidated financial
statements.
11. Share-based payment reserve
For details of the share-based payments see note 24 to the consolidated
financial statements.
12. Related party transactions
The Group has related party transactions with entities in which directors have
significant financial interests. For details of the related party transactions
see note 26 to the consolidated financial statements.
Details of the directors' emoluments, together with the other related
information, are set out in the Report of the Directors. There are no other
related party transactions.
13. Commitments
The Company has no lease or capital commitments at the end of the reporting
period.
14. Contingent liabilities
The Company has no contingent liabilities, other than what has been disclosed
already.
15. Ultimate controlling party
The Company does not have an ultimate controlling party.
16. Events after reporting date
For details of events after reporting date see note 28 of the consolidated
financial statements.
OFFICERS AND ADVISERS
Directors: Robert Holt (appointed 29 February 2024)
John Charlton (appointed 29 February 2024)
Elizabeth Lake (appointed 13 March 2024)
Linda Main (appointed 1 May 2024)
The Rt Hon. Lord David Willetts FRS (resigned 29 February 2024)
George Francis Katzaros (resigned 29 February 2024)
Gavin Mayhew (resigned 2 January 2024)
Robert Richards (resigned 29 February 2024)
Company secretary and registered office: CFPro Cosec Limited
First Floor, Holborn Gate, 330 Holborn, London WC1V 7QT
Nominated Adviser and Joint Broker: Shore Capital
57 St. James's Street
London SW1A 1LD
Joint Broker: W H Ireland Limited
24 Martin Lane,
London EC4R 0DR
Bankers: Natwest Bank plc
Auditors: Haysmacintyre LLP
10 Queen Street Place
London, EC4R 1AG
Solicitors: BPE Solicitors LLP
St. James' House
St. James' Square
Cheltenham GL50 3PR
Registrars: Neville Registrars
Neville House
18 Laurel Lane
Halesowen B63 3DA
Company Number: 10114644
Website: www.earnzplc.com
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