EQTEC plc and Group

Unaudited, condensed, consolidated statement of cash flows

for the six months ended 30 June 2023

EQTEC plc and Group

Notes to the unaudited, condensed, consolidated financial statements

for the six months ended 30 June 2023

1.    GENERAL INFORMATION

The unaudited interim condensed consolidated financial statements of EQTEC plc ("the Company") and its subsidiaries ("the Group") for the six months ended 30 June 2023 were authorised for issue in accordance with a resolution of the directors on 27 September 2023.

EQTEC plc ("the Company") is a company domiciled in Ireland. The Company's registered office is at Building 1000, City Gate, Mahon, Cork T12 W7CV, Ireland. The Company's shares are quoted on the AIM market of the London Stock Exchange plc.

The Group is a waste-to-value group, which uses its proven proprietary Advanced Gasification Technology to generate safe, green energy from nearly 60 different kinds of feedstock such as municipal, agricultural and industrial waste, biomass, and plastics. The Group collaborates with waste operators, developers, technologists, EPC contractors and capital providers to build sustainable waste elimination and green energy infrastructure.

Our income currently comes from the following streams: gasification technology sales including software, engineering & design and other related services; maintenance income from operating plants; and we receive development fees from projects where we invest development capital. In the future we expect to receive potential revenue from licensing opportunities and revenue from live operations where EQTEC has an equity stake in a plant.

2.    BASIS OF PREPERATION

The unaudited interim condensed consolidated financial statements are for the six months ended 30 June 2023 and are presented in Euro, which is the functional currency of the parent company. They have been prepared on a going concern basis in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

The annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. The condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the financial year ended 31 December 2022, except for the adoption of new standards effective as of 1 January 2023. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The financial information contained in this interim statement, which is unaudited, does not constitute statutory accounts as defined by the Companies Act, 2014. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's financial statements for the financial year ended 31 December 2022. The financial statements of the Group were prepared in accordance with IFRSs as adopted by the European Union and can be found on the Group's website at www.eqtec.com.

The financial information for the six months ended 30 June 2023 and the comparative financial information for the six months ended 30 June 2022 have not been audited or reviewed by the Company's auditors pursuant to guidance issued by the Auditing Practices Board. The comparative figures for the financial year ended 31 December 2022 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and will be delivered to the Company's Registration Office in due course. The audit report on those statutory accounts was unqualified.

The Group incurred a loss on continuing operations of €2,424,606 (1H 2022: €2,280,362) during the six-month period ended 30 June 2023 and had net current assets of €12,474,036 (31 December 2022: €8,966,819) and net assets of €39,647,841 (31 December 2022: €37,132,639) at 30 June 2023.

Going concern and future funding

These unaudited interim condensed consolidated financial statements have been prepared on a going-concern basis, which assumes the Company will have sufficient funds available to enable it to trade for not less than twelve months from the date of announcing these unaudited interim condensed consolidated financial statements.

The management team has prepared financial forecasts to estimate the likely cash requirements of the Company over the next twelve months from the date of announcing these unaudited interim condensed consolidated financial statements. These forecasts show that the Company will require additional external debt or equity funding going into the second half of 2024 to be able to continue as a going concern.

The directors have assessed that there is a reasonable prospect that the funding required for the Company to continue as a going concern will be secured and therefore have prepared the unaudited interim condensed consolidated financial statements on a going-concern basis. In the event that additional funding is not secured, the Company would not be a going concern and as a consequence there is a material uncertainty relating to the Company's ability to continue as a going concern.

The unaudited interim condensed consolidated financial statements do not include any adjustments that would arise if the Company were unable to continue as a going concern.

3.    BASIS OF CONSOLIDATION

The unaudited interim condensed consolidated financial statements include the financial statements of the Group and all subsidiaries. The financial period ends of all entities in the Group are coterminous.

4.    SIGNIFICANT ACCOUNTING POLICIES

5.    ESTIMATES

The preparation of the interim condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of certain assets, liabilities, revenues and expenses together with disclosure of contingent assets and liabilities. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions of accounting estimates are recognised in the period in which the estimate is revised.

The judgements, estimations and assumptions applied in the interim financial statements, including the key sources of estimation uncertainty, were the same as those applied in the Group's last annual financial statements for the financial year ended 31 December 2022.

6.    SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the products and services sold to customers. The Group's reportable segments under IFRS 8 Operating Segments are as follows:

Technology Sales: Being the sale of Gasification Technology and associated Engineering and Design Services; and

Power Generation: Being the development and operation of renewable energy electricity and heat generating plants.

The chief operating decision maker is the Chief Executive Officer. Information regarding the Group's current reportable segment is presented below. The following is an analysis of the Group's revenue and results from continuing operations by reportable segment:

Revenue reported above represents revenue generated from associated undertakings and external customers. Inter-segment sales for the financial period amounted to €Nil (2022: €Nil). Included in revenues in the Technology Sales Segment are revenues of €Nil (2022: €2,550,000) which arose from sales to associate undertakings and joint ventures of EQTEC plc.

Segment profit or loss represents the profit or loss earned by each segment without allocation of central administration costs and directors' salaries, other operating income, share of losses of jointly controlled entities, investment revenue and finance costs. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

The Group operates in four principal geographical areas: Republic of Ireland (country of domicile), the European Union, United States and the United Kingdom. The Group's revenue from continuing operations from external customers and information about its non-current assets* by geographical location are detailed below:

*Non-current assets excluding goodwill, financial instruments, deferred tax and investment in jointly controlled entities and associates.

The management information provided to the chief operating decision maker does not include an analysis by reportable segment of assets and liabilities and accordingly no analysis by reportable segment of total assets or total liabilities is disclosed.

7.    OTHER GAINS AND LOSSES

During the financial period, the Group extinguished some of its borrowings by issuing equity instruments. In accordance with IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, the gain recognised on these transactions was €182,833 (H1 2022: €Nil).

8.    INCOME TAX

An income tax charge does not arise for the six months ended 30 June 2023 or 30 June 2022 as the effective tax rate applicable to expected total annual earnings is Nil as the Group has sufficient tax losses coming forward to offset against any taxable profits. A deferred tax asset as not been recognised for the losses coming forward.

9.    LOSS PER SHARE

The loss and weighted average number of ordinary shares used in the calculation of the basic and diluted loss per share are as follows:

Dilutive and anti-dilutive potential ordinary shares

The following potential ordinary shares were excluded in the diluted earnings per share calculation as they were anti-dilutive.

10.   PROPERTY, PLANT AND EQUIPMENT

During the six-month period ended 30 June 2023, the Group acquired property, plant and equipment to the value of €489,130 financed by new leases (H1 2022 - €Nil) and €7,482 financed by cash. (H1 2022: €26,465).

11.   INTANGIBLE ASSETS

Included are the following amounts relating to goodwill in intangible assets:

12.   INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments accounted for using the equity method are made up as follows:

The carrying amount of equity-accounted investments has changed as follows in the six months to June 2023:

13.   DEVELOPMENT ASSETS

The Group uses its expertise in engineering, project management, permitting, planning and financing to develop waste to value projects. Once the projects reach a certain level of maturity, third party investors are allowed invest in the project SPV. The Group charges a premium to the project SPV for the development services over and above the costs incurred in developing the project.

Costs associated with project development, including loans advanced to project undertakings (together "Total Project Costs") comprise expenses associated with engineering, project management, permitting, planning, financing and other services, incurred in furthering the development of a project towards financial close. Total Project Costs set out above represent the cost of delivery of project development services and are transferred to cost of sales when the project SPV is invoiced by the Group for project development work.

Included in loans receivable from project development undertakings is an amount of €450,000 which is receivable, along with accrued interest, 18 months from the date of drawdown. Interest is charged at 15% per annum. At 30 June 2023, the loan is valued at €605,177 (31 December 2022: €597,329).

Included in loans receivable is an amount of £2,500,000 (31 December 2022: £2,500,000) arising from development service fees to Shankley Biogas Limited which has been converted into a convertible loan note secured by a fixed and floating charge on the assets and business of Shankley Biogas Limited. The loan note, which is interest-free, is due to be paid to the company following sale of, or investment into Shankley Biogas Limited by any third party. At 30 June 2023, the loan is valued at €2,908,147 (31 December 2022: €2,824,572).

The remaining loans receivables were issued with no interest and no fixed repayment date.

14.   TRADE AND OTHER RECEIVABLES

Included in trade and other receivables is an amount of €884,077 (31 December 2022: €858,670) being a deposit towards the purchase of land on which the proposed up to 25 MWe Billingham waste gasification and power plant at Haverton Hill, Billingham, UK, will be constructed.

15.   EQUITY

During the 6-month period ended 30 June 2023, 2,106,774,908 shares (6 months ended 30 June 2022: Nil shares) were issued as follows:

16.   BORROWINGS

During the six months ended 30 June 2023, the following occurred in relation to debt securities:

Altair Facility

On 21 March 2023, it was announced that Altair Group Investments Limited ("Altair"), the largest shareholder of the Company, has agreed to subscribe for £1.5 million pursuant to the Placing announced on that date. In addition, the Company has an existing £2 million loan facility with Altair, as announced on 9 December 2022 (the "Altair Facility"). The Company and Altair entered into an agreement through which Altair's participation in the Placing will be applied towards reducing the outstanding amount of £1.8 million under the Altair Facility and to increase the maximum amount of such facility to £3.5 million, with £1.7 million remaining available for drawdown following the Altair Placing and intended repayment (the "Facility Extension"). All other terms of the Altair Facility remain unchanged.

Lenders' Facility

On 21 March 2023, the Company announced that the Company had an existing £10 million loan facility with Riverfort Global Opportunities PCC Limited and YA II PN Limited (the "Lenders" and the "Lenders Facility"). As at 21 March 2023, the outstanding balance of the Lenders Facility is £5,137,500. The Lenders agreed, conditional upon admission of the placing shares pursuant to the £3.5 million placing as announced on 21 March 2023, to convert £887,500 of the current outstanding loan balance into 403,409,091 units at the placing price comprising 403,409,091 new Ordinary Shares ("Lender Shares") and 201,704,540 share purchase warrants on the same terms as the Warrants.

The Lenders have also agreed to reprofile the monthly repayment schedule of the Lenders' Facility for the period until 31 December 2024, with repayments starting on 30 June 2023. A one-off reprofile fee of 3% of the Lenders' Facility will be added to the outstanding balance. Following the reprofile, the outstanding balance of the Lenders' Facility will be £4.25 million and a fixed-interest monthly coupon of £31,875 will be payable when repayments commence.

The Lenders will also receive warrants over 965,909,091 Ordinary Shares as part of the debt reprofile, exercisable for a period of two years from the date of grant at a 100 percent premium over the Placing Price ("Lender Warrants"). However, the Lender Warrants will be exercisable only once the mid-market closing price of the Ordinary Shares is equal to or exceeds 0.55 pence at the time of exercise.

17.   LEASES

Lease liabilities are presented in the statement of financial position as follows:

The Group has a lease for its offices in Iberia, Spain and London, United Kingdom. The lease liabilities are secured by the related underlying asset. Further minimum lease payments at 30 June 2023 were as follows:

18.   TRADE AND OTHER PAYABLES

Included in trade and other payables at 30 June 2023 is an amount of €2,559,169 (£2,200,000) (31 December 2022: €2,485,623 (£2,200,000)) relating to consideration payable under the share purchase contract to acquire Logik WTE Limited.

19.   RELATED PARTY TRANSACTIONS

The Group's related parties include Altair Group Investment Limited ("Altair"), who at 30 June 2023 held 15.91% of the shares in the Company, the associate and joint venture companies and key management.

Transactions with Altair

During the six-month period ended 30 June 2023, Altair advanced €906,540 (H1 2022: €Nil) by way of borrowings and was repaid €1,707,919 (H1 2022: €Nil) with respect to these loans. Interest payable to Altair for the six-month period ended 30 June 2023 amounted to €42,295 (H1 2022: €Nil). Included in borrowings, net of amortisation costs, at 31 December 2022 is an amount of €372,130 (31 December 2022: €1,064,598) due to Altair from the Group

Transactions with associate undertakings and joint ventures

The following aggregated transactions were made with associate undertakings and joint ventures in the six months ended 30 June 2023:

Transactions with key management

Key management of the Group are the members of EQTEC plc's board of directors. There have been no non-remuneration transactions with key management in the six months ended 30 June 2023.

20.   EVENTS AFTER THE BALANCE SHEET DATE

Sale of subsidiary

On 12 July 2023, the Company announced that it had agreed with French infrastructure owner and utility company Idex to the sale of 95% of the share capital of its 100% subsidiary, Grande-Combe SAS ("Grande-Combe"), the project company for the Company's France Market Development Centre ("MDC") and the project to construct and commission it ("France MDC"). Idex's acquisition of Grande-Combe from the Company has been formalised through execution of a share-purchase agreement (the "SPA") and a shareholders' agreement (together with the SPA, the "Agreement"). Under the terms of the Agreement, Idex acquires the project for construction and commissioning of France MDC and EQTEC remains the integrator and licensor of core technology, also retaining the right to utilise France MDC as an MDC.

The main elements of the Agreement are as follows:

·   Under the SPA, Idex acquires 95% of the share capital in Grande-Combe, with the Company retaining a 5% carried interest; EQTEC's carried interest requires no financial investment by EQTEC;

·    In respect of the acquired share capital, the Company receives a fixed consideration of €750,000, payable at completion of the transaction (the "Fixed Consideration");

·   In addition to the Fixed Consideration, the Company is eligible to receive additional payments up to full commissioning of the France MDC, subject to achieving performance milestones and for a combined total of up to €750,000;

·   In addition, under the Agreement, EQTEC will receive fees for engineering services, equipment, commissioning and licensing over the period Q4 2023 - Q1 2025, estimated to amount in total c. €15 million; and

·     Under the Agreement, the Company is entitled to utilise France MDC for one prospective client visit per month, with more visits possible under specific terms.

Discontinuation of Billingham Project

On 20 September 2023, the Company announced its intention to cease activity on its Billingham project at Haverton Hill, Teesside, UK (the "Project"). The Company's decision comes amidst challenging market conditions in the UK and following recent setbacks with the project that make it increasingly inappropriate for the Company to prioritise the Project against opportunities elsewhere. Given its investments into development of the Project in recent years and the likelihood the Company will be unable to recover all of them, the Company anticipates writing some of them off. At 30 June 2023, the total costs capitalised in the Project amounted to €4,721,316.

Legal claim against Logik Developments Limited and Logik WTE Limited re: Deeside

On 20 September 2023, the Company initiated legal proceedings in the London Circuit Commercial Court of the Business and Property Courts of England and Wales by submitting a Particulars of Claim against Logik Developments Limited and Logik WTE Limited. The Claim outlines the case against Logik for failure to pay for the services rendered, costs incurred and loans made by EQTEC plc and its subsidiaries to Logik and for breach of the share purchase agreement between the two parties originally executed on 07 December 2020 and amended several times since that date (the "SPA"). The amounts claimed by the Group total c. £4 million.

In relation to the Deeside project, as at 30 June 2023 the full consideration of €3,838,754 (or £3,454,878) (31 December 2022: €3,728,434 (or £3,300,000)) has been recognised as an Investment in Related Undertakings and the balance of consideration payable of €2,559,169 (£2,303,252) (31 December 2022: €2,485,623 (£2,200,000)) has been recognised as a liability in Other Payables. In addition, the total costs capitalised in relation to the Project amounted to €3,548,873 of which €1,464,794 was classified as Development Costs and €2,084,079 as Loans Receivable from Project Development Undertakings.

21.   APPROVAL OF FINANCIAL STATEMENTS

The condensed consolidated financial statements for the six months ended 30 June 2023, which comply with IAS 34, were approved by the Board of Directors on 27 September 2023.

This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014, as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended, and has been announced in accordance with the Company's obligations under Article 17 of that Regulation.  

ENQUIRIES

About EQTEC plc

As one of the world's most experienced gasification technology and engineering companies, with a growing track record of delivering operational and commercial success for transforming waste-to-energy through best-in-class technology innovation, engineering and project development, EQTEC brings together design innovation, project delivery discipline and solid commercial experience to add momentum to the global energy transition. EQTEC's proven, proprietary and patented technology is at the centre of clean energy projects, sourcing local waste, championing local businesses, creating local jobs and supporting the transition to localised, decentralised and resilient energy systems.

EQTEC designs, supplies and builds advanced gasification facilities in the UK, EU and US, with highly efficient equipment that is modular and scalable from 1MW to 30MW. EQTEC's versatile solutions process over 50 varieties of feedstock, including forestry wood waste, vegetation and other agricultural waste from farmers, industrial waste and sludge from factories and municipal waste, all with no hazardous or toxic emissions. EQTEC's solutions produce a pure, high-quality synthesis gas ("syngas") that can be used for the widest range of applications, including the generation of electricity and heat, production of synthetic natural gas (through methanation) or biofuels (through Fischer-Tropsch, gas-to-liquid processing) and reforming of hydrogen.

EQTEC's technology integration capabilities enable the Group to lead collaborative ecosystems of qualified partners and to build sustainable waste reduction and green energy infrastructure around the world.

The Company is quoted on AIM (ticker: EQT) and the London Stock Exchange has awarded EQTEC the Green Economy Mark, which recognises listed companies with 50% or more of revenues from environmental/green solutions.

Further information on the Company can be found at www.eqtec.com.