EQTEC plc
Annual Report and Accounts at 31 December 2018
1
EQTEC plc
Contents
Chairman’s Statement.......................................................................................
Chief Executive’s Report..............................................................................
Directors ..........................................................................................................
Advisers and other information ................................................................
Directors’ Report ...........................................................................................
Statement of the Directors’ Responsibilities............................................
Governance......................................................................................................
Independent Auditors’ Report....................................................................
Consolidated statement of profit or loss .................................................
Consolidated statement of other comprehensive income ...................
Consolidated statement of financial position...........................................
Consolidated statement of changes in equity...........................................
Consolidated statement of cash flows.......................................................
Company statement of financial position.................................................
Company statement of changes in equity.................................................
Company statement of cash flows.............................................................
Notes to the consolidated financial statements.......................................
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4
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32
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42
2
EQTEC plc
Chairman’s Statement
for the financial year ended 31 December 2018
Chairman’s Statement
Following completion of the acquisition of EQTEC Iberia SL (“EQTEC Iberia”) in December 2017 (the
“Acquisition”) and the resulting decision to change the Company’s financial year end to 31 December, this is the
Group’s first full annual results with a 31 December year end.
I joined the Group as Non-Executive Chairman on completion of the Acquisition and it is fair to say 2018 has
been a challenging year. We made the decision to part company with our former Chief Executive and, in August
2018, I was delighted to welcome Ian Price to the Board as Chief Executive. Ian has made a significant
contribution to EQTEC since he joined by driving operational and strategic improvements and, although there
are still headwinds and challenges, we believe the market opportunity for EQTEC remains significant and we
are now far better placed to capitalise on it.
2018 was a period of significant change and transition for the Group following completion of the Acquisition,
and whilst we had high hopes for our pipeline, it has taken longer than anticipated to turn this into orders and
revenues. This resulted in the Board undertaking a review of the Group’s operations and culminated with the
balance sheet restructuring and cash outlay and cost reduction programme announced on 28 June 2019, which
included a €3 million debt for equity swap, an equity placing of £0.75 million with new and existing investors
and a series of cost reduction proposals, which, once fully implemented, should lead to significant cost savings
across the Group.
Following the balance sheet restructuring and implementation of the proposed cost reduction plans, the
Directors believe that the Group will have a more appropriate capital structure and cost base to deliver on the
Group’s strategy to create shareholder value.
As set out in our announcement of 15 May 2019, EQTEC is seeking to create a collaborative ecosystem within
the waste-to-energy sector through entering into strategic relationships whereby waste operators, developers,
technologists, Engineering, Procurement and Construction (EPC) contractors and capital providers collaborate
to build sustainable waste elimination and clean energy infrastructure projects.
We have already entered into a number of key strategic partnerships with leading partners, including Phoenix
Biomass Energy and COBRA, with further strategic collaborations being considered. This collaborative
approach is already presenting new opportunities to the Group and, importantly, the Board believes that it will
enable the Group to deliver projects on an expedited basis, providing us with greater visibility and control over
our project pipeline.
I would like to thank Oscar Leiva who is stepping down as Non-Executive Director to focus on his
commitments to the EBIOSS Energy SE Group.
I would also like to take this opportunity to thank our shareholders and stakeholders for their continued support
and look forward to updating shareholders on our progress over the coming months.
Ian Pearson
Non-Executive Chairman
28 June 2019
3
EQTEC plc
Chief Executive’s Report
for the financial year ended 31 December 2018
This is my first report as Chief Executive, having joined the Group in August 2018. When I joined EQTEC it
was with the firm belief that the Group had a solid business pipeline and a strong technology platform, though
it needed to focus more on execution.
I am pleased with the progress we have made since I joined, albeit that it is taking longer than initially anticipated
to turn our pipeline into orders and revenues. However, shareholders can be assured that new projects are only
ever now taken on where there is a strong commercial benefit for EQTEC within a reasonable timeframe.
EQTEC has a great deal of latent potential to expand its range of services in global markets which continue to
suffer from too much waste and ever higher requirements for energy use.
Following the restructuring plans announced on 28 June 2019, I believe the Group is now better positioned
financially to execute its strategy.
Review of Operations
Upon taking the CEO role, I immediately set about establishing a detailed review of our operations. As part of
this undertaking we have decided to take greater direct control over our operations in Spain, which has led to a
shift in focus from business development to pipeline execution and greater accountability. I have ensured that
Dr. Yoel Alemán, recently announced as our Group Chief Technology Officer, is now fully supported to lead
the engineering function and reports directly to the Board. The review also led to a focus of our resources on
rejuvenating a number of key relationships with customers and suppliers. These initiatives have been far reaching
and detailed and have meant that I have spent considerable time in Spain to help revitalise the business. I am
also pleased that David Palumbo has recently been appointed as our new Commercial Director to help drive our
project pipeline forward into orders and revenue.
Changing dynamic of the business
As we seek to capitalise on our understanding of the waste-to-energy sector, we have modified our business
model to focus on becoming a progressive technology partner. We are creating, what we believe to be, a unique
ecosystem in our industry, whereby we are establishing a close group of strategic partners to work with, which
spans operators and developers through to contractors and capital providers. This decision has led to EQTEC
now targeting its activities on three key verticals, as announced on 15 May 2019:
Elimination of Waste Streams – this involves Municipal Solid Waste (MSW) and Refuse Derived Fuel (RDF)
with a focus on projects typically in the 10-30 MW range. Estimates suggest that approximately 3.5 million
tonnes of Refuse-Derived Fuel (RDF) are exported annually by the UK due to a lack of elimination and
processing capacity. To help establish EQTEC further in this market we have partnered with China Energy
Engineering Corporation Limited International Company and Cobra Instalaciones Y Servicios (“Cobra”). The
memorandum of understanding between EQTEC, Cobra and Scott Bros. Enterprises Limited for the joint
development of the proposed 25 MW Billingham Energy waste gasification and power plant is one example of
how this strategy is being progressed.
Industry Specific elimination of Waste Streams – this will focus on energy recovery, typically in the 2-10
MW project size. EQTEC will initially focus on the elimination of olive pomace waste in the Mediterranean
area. Estimates suggest 4 million tonnes of olive pomace waste are produced annually in Spain alone, so there is
clearly a significant opportunity. With over 90,000 hours of operational data at the Movialsa plant in Spain, we
believe we are well positioned to secure new projects. EQTEC is in discussions with a major Spanish business
group, which is active in the sector, to partner and collaborate on potential projects.
4
EQTEC plc
Chief Executive’s Report - continued
for the financial year ended 31 December 2018
Recovery of Clean Energy from Biomass – here we will focus on biomass energy with projects in the 2.5-5
MW project size. The US Energy Information Administration currently predicts that wood biomass will be used
to generate 117,000 MWh per day worldwide in 2019 which it is estimated would power 100 million homes. In
the US, and in particular California which has a significant need for waste wood solutions, there is a major
opportunity for the recovery of energy from biomass feedstocks. EQTEC, as a start, will be providing its
proprietary Gasifier Technology (EGT) to Phoenix Biomass Energy for two power plants in California. Design
work for the first power plant has been completed and discussions are in progress to form a deeper collaboration
to develop Phoenix’s project pipeline.
In fact, further to our framework agreement with Phoenix Biomass Energy, we recently announced the signing
of our first agreement regarding the joint development of a biomass gasification power project in California,
where we have acquired a 19.99% interest in North Fork Community Power LLC (“NFCP”), a special purpose
vehicle (“SPV”) formed to build and operate a 2MW biomass project in North Fork, California. The
consideration for the Company’s investment will be solely satisfied by the supply of certain items of the existing
equipment currently held at EQTEC’s Newry site, valued at US$2.5 million and no cash consideration will be
required. As previously announced, we also expect to invoice NFCP €2.2 million, under a separate sales contract
which is expected to be completed shortly, for the sale of further equipment and the supply of engineering and
design services to NFCP.
Financial Review
Revenue in the year ended 31 December 2018 amounted to €2.2 million (HY 2017: €20k). The Group reported
a loss for the period of €8.2 million, an increase on the prior year period loss of €6.0 million for HY 2017.
Included in the loss of €8.2 million are one-off impairment costs of €2.1 million arising on the revaluation of
assets held at the Company’s Newry site and €1.4 million arising on the revaluation of the goodwill on the
acquisition of Eqtec Iberia SL; and one-off other losses of €0.8 million. Losses before one off items and interest
expensed were €2.6 million for the year.
As at 31 December 2018, the Company had net debt of €5.5 million (31 December 2017: €2.7 million) including
cash balances of €0.4 million (31 December 2017: €1.8 million).
As announced on 28 June 2019, the Group has agreed to restructure €3 million of its existing debt through a
debt for equity swap, resulting in a significant reduction in the Group’s debt obligations. Following the debt for
equity swap, the Group has €2.1 million of debt which is payable in full, plus accrued interest, at the end of July
2020. In addition, the Company also announced a placing of €0.8 million, which will significantly strengthen the
Group’s cash position and provide additional working capital.
Future plans & Outlook
Whilst this has been a period of refocusing for EQTEC, our refined business plan has started to generate revenue
and we have a strong pipeline of new opportunities. With our renewed focus and business strategy, we believe
the Group is in a position to deliver its technology in a more targeted manner.
Our unique EQTEC Gasifier Technology (EGT) remains our core capability and has helped drive a significant
increase in interest from a wide range of international customers. The US biomass market is one that has started
to open up for EQTEC following its collaboration with Phoenix Biomass and one where we expect significant
growth. In Europe we have a number of opportunities both in biomass and in the processing of industrial waste
streams. Indeed, we are in advanced discussions with a major business group in Spain to develop projects in the
industrial and agricultural waste sector in that country. In the UK we are focusing on potential contracts to deal
with the lack of residual waste treatment capacity for processing RDF which we suffer from.
5
EQTEC plc
Chief Executive’s Report - continued
for the financial year ended 31 December 2018
During the current year we have announced a number of new significant projects which we expect to deliver
increasing revenues to EQTEC and I remain enthused about the prospects for the Group.
Ian Price
Chief Executive Officer
28 June 2019
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EQTEC plc
Directors
for the financial year ended 31 December 2018
Ian Pearson, Non-Executive Chairman
Ian was for five years the chairman of AIM listed OVCT2, a company which invested in a variety of renewal
energy companies and was successfully merged into Apollo VCT plc in 2016. He is currently a Non-Executive
Director of Thames Water Utilities Limited, the UK’s biggest water company with 15 million customers. He is
also a senior adviser to BAI Communications plc and has previously been a member of the UK Advisory Board
of the accountants, PwC, as well as Chairman of Code Investing Ltd. During a distinguished Ministerial career
from 2001-10 Ian Pearson held a number of positions, including Minister for Trade & Foreign Affairs, Minister
of State for Climate Change and the Environment, Minister for Science, and Economic Secretary to the Treasury.
He graduated from Balliol College, Oxford and has a Master’s degree and a Doctorate in Industrial and Business
Studies from the University of Warwick.
Ian Price, Chief Executive Officer
Ian Price is a science graduate from the University of Manchester and holds an MBA from the University of
Bath. He comes from a background in waste and renewables and the development of low carbon energy assets
using refuse derived fuels where he has a successful track record of managing and executing transactions. He has
had a career spanning over 20 years, mainly in the waste and renewables sectors. His career has included being
Director of Commercial Services for Covanta Energy and a Director of KSP Renewables Limited a company
which specialises in the development of merchant energy from waste (EfW) plants in the UK focusing on using
refuse derived fuel (RDF) from commercial and industrial waste sources. He also held management and
operations roles at Biffa, FCC Environment, Veolia and Sita (Suez). He is a member of the Chartered
Management Institute.
Gerry Madden, Finance Director
Gerry Madden joined EQTEC plc in May 2007 as Finance Director and was Chief Executive from 2011 to 2018.
He previously founded and operated a corporate finance practice between 1998 and 2007, advising UK and Irish
companies on corporate finance activities and business strategy. He has also acted as a Non-Executive director
for companies in the technology, healthcare, retail and renewable energy sectors. He originally worked for 16
years with international accountants KPMG and was auditor and adviser to listed companies, multinationals and
private companies operating in Ireland and internationally. He is a Fellow of the Institute of Chartered
Accountants in Ireland, a graduate of University College Cork and a Member of the Institute of Directors.
Tom Quigley, Non-Executive Director
Tom Quigley has had an executive career spanning over 25 years, mainly at board level, as Managing Director,
CFO and CIO. This included being a Managing Director of Close Brothers Corporate Finance, a Managing
Director and Head of the Retail, Hospitality and Leisure sector investment banking at ING Barings, London,
and a Director of Terra Firma Capital Partners. Tom originally qualified as a Chartered Accountant at Price
Waterhouse in London and has amassed considerable financial and management experience across multiple
sectors. Through his executive and non-executive positions, Tom has worked in real estate, financial services,
healthcare and banking, and across a number of jurisdictions.
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EQTEC plc
Advisers and other information
Nominated Adviser and Broker
Strand Hanson Limited
26 Mount Row
Mayfair
London W1K 3SQ
United Kingdom
Financial Public Relations
IFC Advisory Ltd
24 Cornhill
London EC3V 3ND
United Kingdom
Auditors
Grant Thornton
Chartered Accountants and Statutory Audit Firm
13-18 City Quay
Dublin 2
D02 ED70
Ireland.
Banks
Bank of Ireland
32 South Mall
Cork
Ireland.
Allied Irish Banks
Main Street
Carrigaline
Co. Cork
Ireland.
Solicitors
McEvoy Corporate Law
22 Fitzwilliam Place
Dublin 2
Ireland.
Fieldfisher LLP
Riverbank House2 Swan Lane
London EC4R 3TT
United Kingdom
Registrar
Link Asset Services
2 Grand Canal Square
Dublin 2
Ireland.
Registered Office
Building 1000
City Gate
Mahon
Cork T12 W7CV
Ireland
Company Registration Number
462861
8
EQTEC plc
Directors’ Report
for the financial year ended 31 December 2018
The Directors present their annual report and the audited financial statements of the Company and its
subsidiaries, collectively known as ‘the Group’ for the financial year ended 31 December 2018.
Principal Activities
The principal activities of the Company and the Group involve sourcing and providing assistance in
developing waste elimination projects to which it will ultimately sell its technology and O&M services.
The Group sources projects that have a local supply of waste in need of conversion. It builds relationships
and bring together the developers, the waste owners, the building contractors and funders and provides the
technology and engineering services to the projects. Furthermore, the Group provides O&M services to
the operating projects generating recurring revenues over the life of the projects.
Review of Business and Future Developments and Key Performance Indicators
A review of the Group’s business and future developments is contained in the Chairman’s Statement and
the Chief Executive’s Report on pages 3 to 6.
Results and Dividends
The results for the financial year are set out on page 32. No dividends have been proposed by the Directors
in the current year (six months ended 31 December 2017: €Nil).
Principal Risks and Uncertainties
The Group has a risk management structure in place, which is designed to identify, manage and mitigate
business risk. Risk assessment and evaluation is an essential part of the Group’s internal control system.
Information about the financial risk management objectives and policies of the Group, along with exposure
of the Group to credit risk, liquidity risk and market risk, is disclosed in Note 5 of the notes to the
consolidated financial statements.
The Group is exposed to a number of other risks and uncertainties. These break into certain important
strategic and operational risks which we describe below. Our risk framework operates at the business and
functional levels and is designed to identify, evaluate and mitigate risks within each of the risk categories.
Our reactions to material future developments as well as our competitors' reactions to those developments
will affect our future results.
Strategic Risks
Strategic risk relates to the Company's future business plans and strategies, including the risks associated
with the global macro-environment in which we operate, strategic partnerships; intellectual property; and
other risks, including the demand for our products and services, competitive threats, the success of
investments in our technology and other product and service innovations, and public policy.
9
EQTEC plc
Directors’ Report - continued
for the financial year ended 31 December 2018
Principal Risks and Uncertainties - continued
Global macro-environment
Our operations and the execution of our business plans and strategies are subject to the effects of global
competition and geopolitical risks. They are also affected by local economic environments, including low
interest rates, inflation, recession, currency volatility, currency controls and actual or anticipated default on
sovereign debt. Political changes and trends such as populism, economic nationalism and sentiment toward
multinational companies and resulting changes to trade, tax or other laws and policies may be disruptive,
and can interfere with our global operating model, our supply chain, our customers and all of our activities
in a particular location. While some global economic and political risks can be hedged using derivatives or
other financial instruments and some are insurable, such attempts to mitigate these risks are costly and not
always successful.
Strategic partnerships
The success of our business depends on achieving our strategic objectives, including through entering into
strategic partnerships with significant construction entities and groups where we may have a lesser degree
of control over the business operations, which may expose us to additional operational, financial, legal or
compliance risks.
Intellectual property
Our intellectual property portfolio may not prevent competitors from independently developing products
and services similar to or duplicative to ours, and the value of our intellectual property may be negatively
impacted by external dependencies. Our patents and other intellectual property may not prevent
competitors from independently developing or selling products and services similar to or duplicative of
ours, and there can be no assurance that the resources invested by us to protect our intellectual property
will be sufficient or that our intellectual property portfolio will adequately deter misappropriation or
improper use of our technology.
If we are not able to protect our intellectual property, the value of our brand and other intangible assets
may be diminished, and our business may be adversely affected.
Brexit
The UK has given notice under Article 50 of the Treaty on European Union of its intention to leave the
EU and will seek to negotiate the terms for it leaving the EU with the intention that those negotiations and
the UK’s departure are finalised by October 2019. Until further details are known regarding the terms on
which the UK will exit, the Directors are not able to assess the impact on the Company, or what impact
the wider regulatory and legal consequences of the UK leaving the EU would be on the Company.
Operational Risks
Operational risk relates to risks arising from systems, processes, people and external events that affect the
operation of our businesses. It includes product life cycle and execution; product safety and performance;
information management and data protection and security, including cybersecurity; supply chain and
business disruption; and other risks, including human resources and reputation.
10
EQTEC plc
Directors’ Report - continued
for the financial year ended 31 December 2018
Principal Risks and Uncertainties - continued
We may face operational challenges that could have a material adverse effect on our business, reputation,
financial position and results of operations, and we are dependent on the maintenance of existing product
lines, market acceptance of new product and service introductions and product and service innovations for
continued revenue and earnings growth.
We produce highly sophisticated products and provide specialised services for both our and third-party
products that incorporate or use leading-edge technology, including both hardware and software. Many of
our products and services involve complex industrial machinery or infrastructure projects, such as waste to
energy plants that use our gasification technology, and accordingly the impact of a catastrophic product
failure or similar event could be significant. While we have built extensive operational processes to ensure
that our product design, manufacture and servicing, and other services that we provide, meet the most
rigorous quality standards, there can be no assurance that we or our customers or other third parties will
not experience operational process failures or other problems that could result in potential product, safety,
regulatory or environmental risks. Despite the existence of crisis management or business continuity plans,
operational failures or quality issues, including as a result of organisational changes, attrition or labour
relations, could have a material adverse effect on our business, reputation, financial position and results of
operations. For a number of limited projects where we take on the full scope of engineering, procurement,
construction or other services, the potential risk is greater that operational, quality or other issues at
particular projects could adversely affect the Company’s results of operations.
The Group invests capital in developing and expanding its pipeline of waste to energy projects. The nature
of the Group’s business model means that the sales and project pipeline depend upon counterparties
commissioning and financing major projects, the timing of which is subject to many uncertainties and is
not under the Company’s control. This implies that the timing of funds generated from projects can be
difficult to predict and could adversely affect the Company’s results of operations.
Supply chain
Significant raw material shortages, supplier capacity constraints, supplier production disruptions, supplier
quality and sourcing issues or price increases could increase our operating costs and adversely impact the
competitive positions of our products. Our reliance on third-party suppliers, contract manufacturers and
service providers, and commodity markets to secure raw materials, parts, components and sub-systems
used in our products exposes us to volatility in the prices and availability of these materials, parts,
components, systems and services. A disruption in deliveries from our third-party suppliers, contract
manufacturers or service providers, capacity constraints, production disruptions, price increases, or
decreased availability of raw materials or commodities, including as a result of catastrophic events, could
have an adverse effect on our ability to meet our commitments to customers or increase our operating
costs. Quality, capability and sourcing issues experienced by third-party providers can also adversely affect
our costs, margin rates and the quality and effectiveness of our products and services and result in liability
and reputational harm.
Liquidity
The cash requirements of the Group are forecast by the Board annually in advance and reviewed monthly
by management, enabling the Group’s cash requirements to be anticipated. The cash forecast includes
assumptions with respect to working capital, development spend and the timing of planning consents and
financial close of projects. Significant delays in these expected timings may lead to a requirement for
additional cash and impinge on going concern.
11
EQTEC plc
Directors’ Report - continued
for the financial year ended 31 December 2018
Going Concern
The Group incurred a loss of €8,209,679 (6 months ended 31 December 2017: €6,002,269) during the
financial year ended 31 December 2017 and had net current liabilities of €2,659,683 (31 December 2017:
€679,672) and net assets of €11,870,707 (31 December 2017: €16,626,826 ) at 31 December 2018.
The Group continues to invest capital in developing and expanding its pipeline of waste to energy projects.
The nature of the Group’s business model means that the sales and project pipeline depend upon
counterparties commissioning and financing major projects, the timing of which is subject to many
uncertainties and is not under the Company’s control. This implies that the timing of funds generated from
projects can be difficult to predict. The forecasts which Management have prepared include certain
assumptions with regard to future funding from third parties the costs of business development, overheads
and the timing and amount of any funds generated from developments.
The Company also announced on 28 June 2019 that it has reached agreement for a comprehensive
restructuring of various payment obligations with its lenders, resulting in a reduction in its liabilities of, in
aggregate, €3 million and that it has raised approximately €0.8 million (before expenses) for general working
capital. It also announced its intention to undertake a cost reduction programme in relation to its operations
in the UK and Spain.
EQTEC will redeem £2,026,118 of the outstanding principal owed by the Company under the Altair
Facility and will also pay Altair an early redemption fee of £101,306, being 5 per cent. of the value of the
debt redeemed, through the issue of the Altair Redemption Shares (the “Redemption”). The remaining,
unredeemed amount of £795,000 under the Altair Facility will be governed by an amended and restated
secured loan facility.
The Riverfort Lenders, pursuant to a further amendment to the Riverfort Facility, will convert US$800,000
(approximately £632,000) of its debt into 191,515,152 new Ordinary Shares at the Placing Price and will
receive a debt conversion fee of £31,600, being 5 per cent. of the value of the debt converted, to be satisfied
by the issue of 9,575,757 new Ordinary Shares. Following the Conversion, US$1,575,000 remains
outstanding under the Riverfort Facility.
Following the Redemption and Conversion, in aggregate, approximately £2,039,250 remains outstanding
under the Remaining Facilities. The Remaining Facilities will have a revised annual interest rate of 12.5 per
cent and all amounts outstanding are to be repaid as a single payment of principal and accrued interest on
31 July 2020, together with a cash redemption fee of 8 per cent. on the balances outstanding as at that date.
After making enquiries and considering the matters referred to above, the Directors have gained reasonable
assurance that the Group will have adequate resources to continue in operational existence for the
foreseeable future.
For these reasons the Directors continue to adopt the going concern basis of accounting in preparing the
financial statements. The financial statements do not include any adjustments that would result if the Group
was unable to continue as a going concern.
12
EQTEC plc
Directors’ Report - continued
for the financial year ended 31 December 2018
Directors
The following Directors held office during the financial year and to the date of this report:
Gerry Madden
Ian Pearson
Luis Sanchez (resigned 30 November 2018)
Oscar Leiva (resigned effective 28 June 2019)
Neil O’Brien (resigned 6 August 2018)
Tom Quigley (appointed 20 February 2018)
Ian Price (appointed 6 August 2018)
Directors’ and Secretary’s Interests in Shares
The Directors and secretary of EQTEC plc who held office at 31 December 2018 had the following interests
in the shares of the Company:
Number of
‘A’
Ordinary
Shares at
31
December
2018
Number of
Deferred
‘B’
Ordinary
Shares at
31
December
2018
Number of
Ordinary
Shares at 31
December
2017 or date
of
appointment
if later
Number of
‘A’ Ordinary
Shares at 31
December
2017 or date
of
appointment
if later
Number of
Deferred ‘B’
Ordinary
Shares at 31
December 2017
or date of
appointment if
later
Number of
Ordinary
Shares at 31
December
2018
Gerry Madden
1,386,817 14,926,161
817,140
817,140
14,926,161
817,140
Ian Pearson
Oscar Leiva
Thomas Quigley
Ian Price
537,634
-
193,548
725,806
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The directors and secretary who held office at 31 December 2018 did not have any interests in the share
capital of any of the subsidiaries of the Company.
Remuneration Committee Report
The Group’s policy on senior executive remuneration is designed to attract and retain people of the highest
calibre who can bring their experience and independent views to the policy, strategic decisions and
governance of the Group.
In setting remuneration levels, the Remuneration Committee takes into consideration the remuneration
practices of other companies of similar size and scope. A key philosophy is that staff must be properly
rewarded and motivated to perform in the best interests of the shareholders. Details of Directors’
remuneration are included in Note 32 of the notes to the consolidated financial statements.
13
EQTEC plc
Directors’ Report - continued
for the financial year ended 31 December 2018
Accounting Records
The Directors believe that they have complied with the requirements of Sections 281 to 285 of the
Companies Act, 2014 with regard to the keeping of accounting records by employing persons with
appropriate expertise and by providing adequate resources to the financial function. The accounting
records are held at the Company's business address at Building 1000, City Gate, Mahon, Cork.
Subsequent Events
Details of events occurring since 31 December 2018 which impact on the Group are included in Note 33.
Disclosure of information to auditors
Each of the persons who are Directors at the time when this Directors' report is approved has confirmed
that:
ꢀ
so far as that Director is aware, there is no relevant audit information of which the Company's
auditors are unaware, and
that Director has taken all the steps that ought to have been taken as a Director in order to be
aware of any relevant audit information and to establish that the Company's auditors are aware of
that information.
ꢀ
Directors’ compliance statement
To ensure that the Company achieved material compliance with its relevant obligations, the Directors
confirm that they have:
ꢀ
ꢀ
ꢀ
drawn up a compliance policy statement setting out the Company's policies respecting compliance
by the Company with its relevant obligations.
put in place appropriate arrangements and structures that are designed to secure material
compliance with the Company's relevant obligations.
conduct a review, during the financial year, of the arrangements and structures, referred to above.
Auditors
The auditors, Grant Thornton, Chartered Accountants and Statutory Audit Firm, continue in office in accordance
with Section 383(2) of the Companies Act, 2014.
Approved by the Board on 28 June 2019
Ian Pearson
Chairman
Ian Price
Director
14
EQTEC plc
Statement of the Directors’ Responsibilities
for the financial year ended 31 December 2018
The Directors are responsible for preparing the Directors' Report and the financial statements in
accordance with applicable Irish law and regulations and the AIM Rules for Companies.
Irish company law requires the directors to prepare financial statements for each financial year which give
a true and fair view of the state of affairs for the Group and the Company. Under that law the Directors
have elected to prepare the financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. 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 assets, liabilities
and financial position of the Group and the Company as at the financial year end date and of the profit or
loss of the Company for the financial year and otherwise comply with the Companies Act, 2014.
In preparing these financial statements, the Directors are required to:
ꢀ
select suitable accounting policies and then apply them consistently;
ꢀ make judgments and accounting estimates that are reasonable and prudent;
ꢀ
state whether the financial statements have been prepared in accordance with applicable accounting
standards, identify those standards, and note the effect and the reasons for any material departure
from those standards; 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.
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The Directors are responsible for ensuring that the Group and the Company keeps or causes to be kept
adequate accounting records which correctly explain and record the transactions of the Group and the
Company, enable at all times the assets, liabilities, financial position and profit or loss of the Group and the
Company to be determined with reasonable accuracy, enable them to ensure that the financial statements
and Directors’ Report comply with the Companies Act 2014 and enable the financial statements to be
audited. They are also responsible for safeguarding the assets of the Group and the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities. Legislation in
Ireland governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
On behalf of the board:
Ian Pearson
Chairman
Date: 28 June 2019
Ian Price
Director
15
EQTEC plc
Governance
for the financial year ended 31 December 2018
Corporate Governance Statement
The Board is committed to the highest standards of corporate governance and considers the Quoted
Companies Alliance’s Corporate Governance Code (“the QCA Code”) to be the most appropriate
framework to adopt. The Directors have adopted the QCA Code and the following sections explain how
this is done. Where the Board adopts a different path from the QCA Principles to the extent they consider
it appropriate having regard to the size and resources of the Company, an explanation is provided.
In his capacity as independent Chairman (since the restructuring of the board on readmission in December
2017), Ian Pearson has assumed responsibility for ensuring that the Group has appropriate corporate
governance standards in place and the 10 principles in the QCA Code are applied within the Group as a
whole.
Strategy and Business Model
The Company is focused on delivering shareholder value over the medium to long term by exploiting its
proprietary advanced gasification technology in waste to energy industrial power plants in the UK and
globally. Details of the Company’s Business Model and Strategy in relation to its business activity is set out
within this website at the About Us tab at:
http://eqtecplc.com/about-us/
The identification and management of risk in relation to the achievement of our strategic objectives and
business model is dealt with in “Managing and mitigating risk” below.
Engaging and Communicating with Shareholders
The Board is committed to maintaining good communication and having constructive dialogue with its
shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide
feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the
Company’s Annual General Meeting. Investors also have access to current information on the Company
though its website, www.eqtecplc.com and via Ian Price, CEO who is available to answer investor relations
enquiries. Regulatory information is disseminated via a Regulatory Information Services before anywhere
else.
Stakeholder Responsibilities
The Board recognises that the long-term success of the Group is reliant upon the efforts of the employees
of the Group, its contractors and suppliers and on the Group’s relationships with these and other
stakeholders such as customers and regulators. The Board has put in place a range of processes and systems
to ensure that there is close Board oversight and contact with its key resources and relationships. It is the
Company’s intention that, over the coming year, all employees of the Group participate in a structured
Group-wide annual assessment process which is designed to ensure that there is an open and confidential
dialogue with each person in the Group to help ensure successful two-way communication with agreement
on goals, targets and aspirations of the employee and the Group. These feedback processes will help to
ensure that the Group can respond to new issues and opportunities that arise to further the success of
employees and the Group. In addition, the Board ensures that all key relationships with, for example,
customers and suppliers are the responsibility of, or are closely supervised by, one of the Directors.
16
EQTEC plc
Governance - continued
for the financial year ended 31 December 2018
Stakeholder Responsibilities - continued
Our technology and services have a positive impact on society and the environment. Through taking waste
which cannot be recycled and turning it into energy we reduce the need for landfill and contribute towards
reducing carbon emissions and meeting renewable energy targets. We are passionate about using our
technology to deliver sustainable outcomes for the communities who are customers of the power plants
that use our technology, and to always deliver to the highest environmental standards.
Managing and mitigating risk
Effective risk management is critical to the achievement of our strategic objectives. Controls are integrated
into all levels of our business. As a Board we continually assess our exposure to risk and seek to ensure that
risks are mitigated wherever possible.
The Directors have established procedures for the purpose of providing a system of internal control. In
addition, there are a range of Group policies that are reviewed at least annually by the Board. These Group
policies cover matters such as share dealing and insider legislation.
The Board currently takes the view that an internal audit function is not considered necessary or practical
due to the size of the Group and the close day to day control exercised by the Executive Directors.
However, the Board will continue to monitor the need for an internal audit function.
Identified principal risks to the achievement of our strategic business objectives are outlined below, together
with their potential impact and the mitigation measures in place. The Board believe these risks to be
currently the most significant with the potential to impact our strategy, our financial and operational
performance and ultimately, our reputation. The Board reviews its risk register, identifying new risks and
updating on an ongoing basis.
17
EQTEC plc
Governance - continued
for the financial year ended 31 December 2018
Key areas for on-going risk management are set out in the following table:
Work winning and contract delivery
Mitigation
Central to achieving our strategy is the work to win and successfully
deliver our contract portfolio. Our continuing financial health relies
on our ability to successfully tender, mobilise, operate and manage
such contracts. Winning new and retaining existing contracts
continues to be critical for the future success of our business.
Reputational risk
Maintaining a strong reputation is vital to our success as a business. A
loss of confidence in our ability to undertake new client opportunities
may be caused by an adverse impact to our reputation which may, in
turn significantly affect our financial performance and growth
prospects. Significant impact to our reputation could be caused by an
incident involving major harm to one of our employees or
clients/partners, inadequate financial control processes or failure to
comply with regulatory requirements. Impact of this type would
potentially result in financial penalties, losses of key contracts, an
inability to win new business and challenges in retaining key staff and
recruiting new staff.
Attracting and Retaining Skilled People
Attracting and retaining the best skilled people at all levels of the
business is critical. This is particularly the case in ensuring we have
access to a diverse range of views and experience and in attracting
specific expertise at both managerial and operational levels where the
market may be highly competitive. Failure to attract new talent, or to
develop and retain our existing employees, could impact our ability to
achieve our strategic growth objectives. As we continue to grow and
diversify into new areas, this risk will continue to be a focus for the
Board.
System process or control failure
We produce highly sophisticated and specialised engineering and
design services leading to products that incorporate or use leading-
edge technology, including both hardware and software. Many of our
products and services involve complex energy infrastructure projects
and accordingly the impact of a catastrophic product failure or similar
event could be significant. Any inability to deliver on time, to budget
and to the right quality could result in financial loss or reputational
damage.
Our tender, mobilisation and contract management processes operate
under strict delegated authorities and are subject to rigorous executive
management oversight and approval. These contracts are supported
by teams of experienced tender, mobilisation and operational delivery
specialists to mitigate the risk of failure at any stage. On-going contract
assurance occurs together with regular dialogue to ensure service
delivery is consistent with the customer expectations.
Mitigation
Strong corporate governance and dedicated senior management
remain the key elements of effective reputational management. Senior
management provide a model of best practice and guidance to ensure
our values and expected behaviours are clear and understood by
everyone. As our business continues to grow and develop, we will
remain strongly focused on protecting the strength of our reputation
through effective governance, leadership, and through cultivating
open and transparent relationships with all stakeholders.
Mitigation
Our business model has created a pipeline of opportunities for staff at
every level of the business. This will continue to be the case as the
Group develops. Additionally, to ensure a talent pool is identified,
developed and ready for succession if needed, a succession plan will
be put in place over the coming year for key management. Our focus
on competency at all levels of the business continues to ensure that we
develop our people and enable them to successfully manage the
changing profile of our business. The Company is currently putting
incentive programmes in place to ensure that key individuals are
retained.
Mitigation
The basis of our governance framework is provided by our core
policies, which are subject to continual review and enhancement to
manage our growing and diversifying business requirements in line
with sound governance practice. We have built extensive operational
processes to ensure that our product design, and engineering, and
other services that we provide, meet the most rigorous quality
standards. Our internal control procedures continue to be reviewed
formally and we are in the process of introducing interdependent
operational and finance systems to achieve operational efficiencies and
transparent reporting.
Access to Funding to Grow the Business and Cash Generation Mitigation
The level of financial strength of the Group is a key consideration for
potential partners, customers and suppliers. Our ability to grow our
business organically and by acquisition will be impacted if our
financial performance deteriorates, by weakening profitability and
therefore limiting our ability to access diverse sources of funding on
competitive terms. This may cause an increase in the cost of
borrowing or cash flow issues which could, in turn, further affect our
financial performance. As a people business, our staff costs remain
our most significant area of expenditure. Our ability to pay our people
and suppliers regularly and at specific times relies not only on funding
being available but also upon effective cash conversion.
Reliance on material counterparties
We depend on a number of significant counterparties such as EPC
Contractors, insurers, banks, clients and suppliers to maintain our
business activities. The failure of a key business partner, supplier,
subcontractor, financer or other provider could materially affect the
operational and financial effectiveness of our business and our ability
to trade. Ensuring on-going relationships with our material
counterparties will underpin the Group’s ability to meet its strategic
objectives.
We have developed and continue to enhance financial control
procedures to oversee and monitor financial performance and cash
conversion including daily monitoring of bank balances, weekly cash
flow reporting and regular financial performance and balance sheet
reviews, which include detailed working capital reviews and forecasts.
We believe we have strong banking, debt finance and equity
relationships and appropriate levels of gearing for our business.
Mitigation
We have developed, through strategic partnerships, relationships with
a number of EPC Contractors and also a pool of suppliers and
providers to ensure we are limited on the dependency of any one
provider and hence the impact of any potential failure. The Board
reviews and monitors material counterparty risk and ensures that
concentration levels are kept to a minimum.
18
EQTEC plc
Governance - continued
for the financial year ended 31 December 2018
Political and Regulatory Risk
Our technology can be deployed in a wide number of international
markets and as such we are exposed to different political and
regulatory regimes with different risk profiles.
Mitigation
We monitor and evaluate political and regulatory risk at Board level.
Decisions on the balance of our project pipeline are taken to ensure
we are not over-reliant on one particular market over time.
Board of Directors
Currently the Board comprises two full time Executive Directors, the CEO, Ian Price, and CFO, Gerry
Madden; two independent Non-Executive Directors, Ian Pearson, who acts as the Chairman, and Tom
Quigley. Each Non-Executive Director devotes as much time as is required to carry out the roles and
responsibilities that the Director has agreed to take on.
Biographical details of the current directors are set out on page 7.
Executive and Non-Executive directors are subject to re-election intervals as prescribed in the Company’s
Articles of Association. At each Annual General Meeting one-third of the Directors, who are subject to
retirement by rotation shall retire from office. They can then offer themselves for re-election.
Non-Executive Directors, including the Chairman, receive payments under appointment letters which are
terminable by three months’ notice by either party. The letters of appointment of all Non-Executive
Directors are available for inspection at the Company’s registered office during normal business hours.
The Executive Directors are employed under service contracts requiring three months’ notice by either
party. The Service Contracts of all Executive Directors are available for inspection at the Company’s
registered office during normal business hours.
The Board encourages the ownership of shares in the Company by Executive and Non-Executive Directors
alike and in normal circumstances does not expect Directors to undertake dealings of a short-term nature.
The Board considers ownership of Company shares by Non-Executive Directors as a positive alignment
of their interest with shareholders. The Board will periodically review the shareholdings of the independent
Non-Executive Directors and will seek guidance from its advisers if, at any time, it is concerned that the
shareholding of any independent Non-Executive Director may, or could appear to, conflict with their duties
as an independent Non-Executive Director of the Company or their independence itself. Directors’
emoluments, including Directors’ interest in share options over the Group’s share capital, are set out in the
Annual Report.
The Board meets at least eight times a year. It has established an Audit Committee and a Remuneration
Committee. The Board has agreed that appointments to the Board are made by the Board as a whole and
so has decided a separate Nominations Committee is unnecessary at this time.
Skills, Capabilities and Board Performance
The Board of Directors has a strong mix of financial, operational, renewable energy, waste infrastructure,
regulatory and political experience. The Board recognises that it currently has a limited diversity, and this
will form a part of any future recruitment consideration if the Board concludes that replacement or
additional directors are required.
19
EQTEC plc
Governance - continued
for the financial year ended 31 December 2018
Skills, Capabilities and Board Performance – continued
The Company currently has two independent non-executive directors Ian Pearson and Tom Quigley. The
Company is satisfied that the Company's Board composition is appropriate given the Company's size and
stage of development. The Board will keep this matter under regular review and to the extent additional
independence is felt to be required on the Board, it shall be sought.
Internal evaluation of the Board, the Committees and individual Directors is seen as an important next step
in the development of the Board and one that will be addressed during the coming year. The aim is that
this will be undertaken on an annual basis in the form of peer appraisal, questionnaires and discussions to
determine the effectiveness and performance in various areas as well as the directors’ continued
independence. Accordingly, the Company does not satisfy the recommendation under Principle 7 of the
QCA that evaluation of Board performance should be “based on clear and relevant objectives, seeking
continuous improvement”.
Corporate Culture
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of
the Group as a whole and that this will impact the performance of the Group. The Board is very aware that
the tone and culture set by the Board will greatly impact all aspects of the Group as a whole and the way
that employees behave. A large part of the Group’s activities is centred upon addressing customer and
market needs. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of
the Group to successfully achieve its corporate objectives. The Board places great importance on this aspect
of corporate life and seeks to ensure that this flows through all that the Group does. The Board assessment
of the culture within the Group at the present time is one where there is respect for all individuals, there is
open dialogue within the Group and there is a commitment to provide the best service possible to all the
Group’s customers.
The Company has adopted a code for Directors’ and employees’ dealings in securities which is appropriate
for a company whose securities are traded on AIM and is in accordance with Rule 21 of the AIM Rules for
Companies and the Market Abuse Regulation.
Governance Structures and Processes
Authority for all aspects of the Group’s activities rests with the Board. The respective responsibilities of
the Chairman and Chief Executive Officer arise as a consequence of delegation by the Board. The Board
has adopted two statements; the first sets out matters which are reserved to the Board and the second
establishes the policy on delegation of authority. The Chairman is responsible for the effectiveness of the
Board, while management of the Group’s business and primary contact with shareholders has been
delegated by the Board to the Chief Executive Officer.
Non-Executive Directors
The Board has adopted guidelines for the appointment of Non-Executive directors which have been in
place and which have been observed throughout the year. These provide for the orderly and constructive
succession and rotation of the Chairman and Non-Executive Directors insofar as both the Chairman and
Non-Executive Directors will be appointed for an initial term of three years and may, at the Board’s
discretion believing it to be in the best interests of the Company, be appointed for subsequent terms. The
Chairman may serve as a Non-Executive Director before commencing a first term as Chairman.
20
EQTEC plc
Governance - continued
for the financial year ended 31 December 2018
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Governance Structures and Processes - continued
Non-Executive Directors - continued
In accordance with the Companies Act 2014 of Ireland, the Board complies with the following duties:
to act in good faith in what the Director considers to be the interests of the Company;
to act honestly and responsibly in relation to the conduct of the affairs of the Company;
to act in accordance with the Company's constitution and exercise powers only for the purposes
allowed by law;
not to use the Company's property, information or opportunities for the Director’s own or anyone
else's benefit;
not to agree to a restriction of the exercise of independent judgement;
to avoid any conflicts of interest;
to exercise the care, skill and diligence which would be exercised in the same circumstances by a
reasonable person;
to have regard to the interests of the members of the Company, in addition to the duty to have
regard to the interests of the company’s employees in general.
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Company Secretary
At present the Finance Director also acts as the Company Secretary. The Company has plans in place to
separate the role from an Executive Director at the appropriate time.
Substantial Shareholder
Due to the presence of a substantial shareholder at the time of re-admission in December 2017, the
Company put in place contractual arrangements to protect minority shareholders in the form of a
Relationship Agreement.
Audit Committee
The Audit Committee comprises Tom Quigley (Chairman), Ian Pearson and, until his resignation,
comprised Oscar Leiva. Meetings are also attended, by the Finance Director as appropriate. It meets as
required and specifically to review the Interim Report and Annual Report, and to consider the suitability
and monitor the effectiveness of internal control processes. The Audit Committee also reviews the findings
of the external auditor and reviews accounting policies and material accounting judgements. The Audit
Committee normally meets at least three times in each financial year and has unrestricted access to the
Group’s external auditor.
Remuneration Committee
The Remuneration Committee comprises Ian Pearson (Chairman), Tom Quigley and, until his resignation,
comprised Oscar Leiva. The Remuneration Committee reviews the performance of the Executive Directors
and makes recommendations to the Board on matters relating to their remuneration and terms of service.
The Remuneration Committee also makes recommendations to the Board on proposals for the granting of
share options and other equity incentives pursuant to any employee share option scheme or equity incentive
plans in operation from time to time. The Remuneration Committee meets at least annually. In exercising
this role, the Directors have regard to the recommendations put forward by the QCA Guidelines.
21
EQTEC plc
Governance - continued
for the financial year ended 31 December 2018
Irish Takeover Panel and Takeover Rules
The Company is subject to the Irish Takeover Panel and Takeover Rules and mandatory bid, compulsory
acquisition and buy-out provisions will apply.
Ian Pearson
Chairman
Date: 28 June 2019
Ian Price
Director
22
Independent auditor’s report to the members of Eqtec
Plc
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Eqtec Plc for the financial year ended 31 December 2018,
which comprise the Consolidated statement of profit or loss, Consolidated statement of other
comprehensive income, Consolidated statement of financial position, Consolidated statement of changes
in equity, Consolidated statement of cash flows, Company statement of financial position, Company
statement of changes in equity, Company statement of cash flows and the related notes.
The financial reporting framework that has been applied in their preparation is Irish law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion:
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the financial statements give a true and fair view in accordance with IFRSs as adopted by the
European Union, of the state of the assets, liabilities and financial position of the Group and
Company at 31 December 2018 and of loss and cash flows for the financial year then ended; and
the financial statements have been properly prepared and in accordance with the requirements of
the Companies Act 2014.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (‘ISAs’) and
applicable law. Our responsibilities under those standards are further described in the ‘Responsibilities of
the auditor for the audit of the financial statements’ section of our report. We are independent of the Group
and Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Ireland, namely the Irish Auditing and Accounting Supervisory Authority (IAASA) Ethical
Standard concerning the integrity, objectivity and independence of the auditor and the ethical
pronouncements established by Chartered Accountants Ireland, applied as determined to be appropriate in
the circumstances of the entity. 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 opinion.
Material uncertainty related to going concern
In forming our opinion, which is not modified, we have considered the adequacy of disclosures made in
the Directors’ Report and in Note 3 to the financial statements in respect of the ability of the Group to
continue as a going concern for a period of at least 12 months from the date of the approval of these
financial statements. The Group incurred a net loss of €8,209,679 for the year ended 31 December 2018
and has an accumulated deficit of €52,341,726 as at 31 December 2018. In addition, the Group had net
current liabilities of €2,659,683 as at 31 December 2018.
23
Independent auditor’s report to the members of Eqtec
Plc (continued)
Material uncertainty related to going concern (continued)
These conditions, along with the matters explained in the Directors’ Report and Note 3 to the financial
statements, indicate the existence of a material uncertainty which may cast significant doubt over the
Group’s ability to continue as a going concern should the Group fail to raise additional funding.
Management plans in regard to these matters are also described in the Directors’ Report and Note 3. The
Directors are confident that the finance will be secured, and the Group will have adequate resources to
continue in operational existence for the foreseeable future. For these reasons the Directors continue to
adopt the going concern basis of accounting in preparing the financial statements. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Under the Listing Rules we are required to review the directors’ statement, set out on page 12, in relation
to going concern. We have nothing to report having performed our review.
Emphasis of matter – Impairment of goodwill
In forming our opinion on the consolidated financial statements, which is not modified, we have considered
the adequacy of the disclosures made in Note 19 to the financial statements concerning the Director’s
assessment of the impairment of the Group’s goodwill which amounted to €15,283,459 and 75.46% of the
Group’s total assets.
The preparation of the consolidated financial statements requires management to make estimates and
judgements that affect the reported amounts of assets and liabilities at the date of the consolidated financial
statements and the reported amount of income and expenses during the reporting period. Management
bases its estimates and judgements on historical experience and on other factors that are believed to be
reasonable under the circumstances. Actual results may differ from the estimates under different
assumptions or conditions.
The value of the goodwill is based on the best estimates of the Directors. Future events that affects the
timing of revenue cash flows are by their nature uncertain and the consolidated financial statements do not
reflect the adjustments that might arise should the assumptions used in the impairment model change.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current year 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 the directing of 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 therefore we do not provide a separate opinion on
these matters.
Overall audit strategy
We designed our audit by determining materiality and assessing the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements as
discussed in the key audit matters section. We also addressed the risk of management override of internal
controls, including evaluating whether there was any evidence of potential bias that could result in a risk
of material misstatement due to fraud.
24
Independent auditor’s report to the members of Eqtec
Plc (continued)
How we tailored the audit scope
We tailored the scope of our audit taking into account the areas where the risk of misstatement was
considered material to the Group, taking into account the nature of the Group’s business and the industry
in which it operates.
In establishing the overall approach to our audit, we assessed the risk of material misstatement at a Group
level, taking into account the nature, likelihood and potential magnitude of any misstatement. As part of
our risk assessment, we considered the control environment in place at Eqtec plc.
The scope of our audit is influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us 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 and audit approach (continued)
Based on our professional judgment, we determined materiality for the Group as follows: 1% of total assets
(excluding goodwill) for the financial year ended 31 December 2018.
We agreed with the board of directors that we would report to them misstatements identified during our
audit above 5% of materiality as well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
Significant risks identified
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our
resources and effort, are set out in the “Material uncertainty related to going concern” section of this report
and below as significant risks together with an explanation of how we tailored our audit to address these
specific areas in order to provide an opinion on the financial statements as a whole. This is not a complete
list of all risks identified by our audit.
Carrying value of property, plant and equipment
Risk
The Group has significant construction in progress recorded under property, plant and equipment
amounting to €2,228,375 (see Note 18). Due to the complexity of the recoverability of these assets,
impairment assessment process and assessing the appropriateness of the methodology applied by the
Directors in calculating impairment charges, we consider this area to be a key audit matter.
25
Independent auditor’s report to the members of Eqtec
Plc (continued)
Significant risks identified (continued)
Our response
For this risk, our audit procedures included the following testing:
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Reviewed the memorandum of understanding and agreements related to the recoverability of the
assets;
Challenged the assumptions used by the Group in determining the fair market value of the assets
in relation to the Group’s fair value less costs of disposal amount; and
Assessed the adequacy of related disclosures in the Group’s financial statements regarding
impairment charges and the recoverable amount of the property, plant and equipment.
Impairment of goodwill
Risk
The Group has significant amount of goodwill arising from the acquisition of Eqtec Iberia SL in 2017 (see
Note 19). Goodwill amounted to €15,283,459 as of 31 December 2018. Eqtec Iberia SL incurred losses
amounting to €1,164,440 in 2018 which we have identified as an indicator of impairment. We obtained
management’s discounted cash flow projections in support of the recoverability of this goodwill. Due to
the subjective estimates inherent in this calculation, this was a key judgmental area that our audit
concentrated on.
Our response
For this risk, our audit procedures included the following testing:
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Evaluating and challenging management’s future cash flow forecasts and the process by which they
were drawn up;
Testing the significant assumptions and estimates used in preparing the cash flows which includes
revenue forecasts, gross profit rates, among others;
Reviewing reasonableness of growth rates used for the projection and compared them against
proven track record of performance; and
Testing the adequacy of discount rate used in the model
Other information
Other information comprises information included in the Annual Report, other than the financial
statements and our auditor’s report thereon, including the Directors’ Report. The directors are responsible
for the other information. 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.
26
Independent auditor’s report to the members of Eqtec
Plc (continued)
Other information (continued)
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 in the financial statements, 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.
In addition, we are required to report if, in our opinion,
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the statement given by the Directors on pages 16 to 22 in accordance with provision C.1.1 of the
UK Corporate Governance Code (the “Code”), that they consider the Annual Report taken as a
whole to be fair, balanced and understandable and provides the information necessary for members
to assess the Group’s and Company’s position and Group’s performance, business model and
strategy is materially inconsistent with our knowledge of the Company acquired in the course of
performing our audit.
the section of the Annual Report on pages 16 to 22 as required by provision C.3.8 of the Code,
describing the work of the Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.
We have nothing to report in this regard.
The Directors' assessment of the prospects of the Company and the principal risks that
would threaten the solvency or liquidity of the Company
Under ISAs (Ireland) we are required to report to you if we have anything material to add or to draw
attention to in relation to:
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the Directors confirmation on pages 9 to 14 of the Annual Report in accordance with provision
C.2.1 of the Code, that they have carried out a robust assessment of the principal risks facing the
Company, including those that would threaten its business model, future performance, solvency
and liquidity.
the disclosures in the Annual Report that describe those risks and explain how they are being
managed or mitigated.
the Directors' explanation on page 45 to 46 of the Annual Report, in accordance with provision
C.2.2 of the Code, as to how they have assessed the prospects of the Company, over what year
they have done so and why they consider that year to be appropriate, and a statement as to whether
they have a reasonable expectation that the Company will be able to continue in operation and
meet its liabilities as they fall due over the year of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
We have nothing material to add or to draw attention to.
27
Independent auditor’s report to the members of Eqtec
Plc (continued)
The Directors' assessment of the prospects of the Company and the principal risks that
would threaten the solvency or liquidity of the Company (continued)
Under the Listing Rules we are required to review the Directors' statement that they have carried out a
robust assessment of the principal risks facing the Company and the Directors' statement in relation to
the longer-term viability of the Company. Our review was substantially less in scope than an audit and
only consisted of making inquiries and considering the Directors' process supporting their statements;
checking that the statements are in alignment with the relevant provisions of the Code; and considering
whether the statements are consistent with the knowledge acquired by us in the course of performing our
audit. We have nothing to report having performed our review.
Matters on which we are required to report by the Companies Act 2014
ꢀ We have obtained all the information and explanations which we consider necessary for the
ꢀ
ꢀ
ꢀ
ꢀ
purposes of our audit.
In our opinion the accounting records of the Company were sufficient to permit the financial
statements to be readily and properly audited.
The financial statements are in agreement with the accounting records.
In our opinion the information given in the Directors’ Report is consistent with the financial
statements.
Based solely on the work undertaken in the course of our audit, in our opinion, the Directors’
Report has been prepared in accordance with the requirements of the Companies Act 2014.
Matters on which we are required to report by exception
Based on our knowledge and understanding of the Company and its environment obtained in the course
of the audit, we have not identified material misstatements in the Directors’ Report. Under the Companies
Act 2014, we are required to report to you if, in our opinion, the disclosures of directors’ remuneration and
transactions specified by sections 305 to 312 of the Act have not been made. We have no exceptions to
report arising from this responsibility.
Corporate governance statement
In our opinion, based on the work undertaken in the course of our audit of the financial statements, the
description of the main features of the internal control and risk management systems in relation to the
financial reporting process included in the Corporate Governance Statement, is consistent with the financial
statements and has been prepared in accordance with Section 1373(2)(c) of the Companies Act 2014.
Based on our knowledge and understanding of the Company and its environment obtained in the course
of our audit of the financial statements, we have not identified material misstatements in the description of
the main features of the internal control and risk management systems in relation to the financial reporting
process included in the Corporate Governance Statement.
In our opinion, based on the work undertaken during the course of the audit of the financial statements,
the information required by Section 1373(2)(a), (b), (e) and (f) is contained in the Corporate Governance
Statement.
28
Independent auditor’s report to the members of Eqtec
Plc (continued)
Responsibilities of the management and those charged with governance for the financial
statements
Management is responsible for the preparation of the financial statements which give a true and fair view
in accordance with IFRSs as adopted by the European Union, and for such internal control as directors
determine necessary to enable the preparation of financial statements are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Group and 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 management either intends to liquidate the Group and
Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group and Company’s financial
reporting process.
Responsibilities of the auditor for the audit of the financial statements
An auditor’s 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 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.
As part of an audit in accordance with ISAs, the auditor exercises professional judgment and maintain
professional scepticism throughout the audit. The auditor will also:
ꢀ
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for their opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
ꢀ Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group and Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
ꢀ
29
Independent auditor’s report to the members of Eqtec
Plc (continued)
Responsibilities of the auditor for the audit of the financial statements (continued)
ꢀ
ꢀ
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group and Company’s ability to continue as
a going concern. If they conclude that a material uncertainty exists, they are required to draw
attention in the auditor’s report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify their opinion. Their conclusions are based on the audit
evidence obtained up to the date of the auditor’s report. However, future events or conditions may
cause the Group and the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a matter that achieves a true and fair view.
The auditor shall communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that may be identified during the audit.
Where the auditor is reporting on the audit of the Group, the auditors’ responsibilities are to obtain
sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the Group financial statements. The auditor is responsible for
the direction, supervision and performance of the audit, and the auditor remain solely responsible for the
auditor’s opinion.
The auditor also provides those charged with governance with a statement that they have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on their independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, the auditor determines those matters
that were of most significance in the audit of the financial statements of the current year and are therefore
the key audit matters. These matters are described in the auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, the auditor determines that a
matter should not be communicated in the report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with section 391 of the
Companies Act 2014. 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.
30
EQTEC plc
Consolidated statement of profit or loss
for the financial year ended 31 December 2018
Revenue
Cost of sales
Gross (loss)/profit
Operating expenses
Administrative expenses
Other income
Impairment of property, plant and equipment
Impairment of goodwill
Other gains and losses
Foreign currency (losses)/gains
Operating loss
Finance income
Finance costs
Loss before taxation
Income tax
Loss for the period from continuing operations
Profit for the period from discontinued operations
Notes
8
9
10
11
18
19
12
13
13
15
16
30
12 months
ended
31 Dec 2018
€
2,175,687
(2,253,389)
(77,702)
(2,762,864)
142,325
(2,121,637)
(1,427,038)
(772,046)
(14,813)
(7,033,775)
52
(1,212,714)
6 months
ended
31 Dec 2017
€
20,200
-
20,200
(778,006)
-
(4,984,561)
-
-
9,906
(5,732,461)
-
(271,398)
(8,246,437)
-
(6,003,859)
-
(8,246,437)
36,758
(6,003,859)
1,590
LOSS FOR THE FINANCIAL PERIOD
(8,209,679)
(6,002,269)
Loss attributable to:
Owners of the company
Non-controlling interest
Basic loss per share:
From continuing operations
From continuing and discontinued operations
Diluted loss per share:
From continuing operations
From continuing and discontinued operations
17
17
17
17
The notes on pages 42 to 102 form part of these financial statements.
32
(6,992,090)
(1,217,589)
(3,330,090)
(2,672,179)
(8,209,679)
(6,002,269)
12 months
Ended
31 Dec 2018
€ per share
6 months
Ended
31 Dec 2017
€ per share
(0.004)
(0.004)
(0.004)
(0.004)
(0.009)
(0.009)
(0.009)
(0.009)
EQTEC plc
Consolidated statement of other comprehensive income
for the financial year ended 31 December 2018
Loss for the financial year
Other comprehensive loss
Items that may be reclassified
subsequently to profit or loss
Exchange differences arising on retranslation
of foreign operations
12 months
Ended
31 Dec 2018
€
6 months
ended
31 Dec 2017
€
(8,209,679)
(6,002,269)
(13,376)
(92,774)
(13,376)
(92,774)
Total comprehensive loss for the financial year
(8,223,055)
(6,095,043)
Attributable to:
Owners of the company
Non-controlling interests
(7,005,976)
(1,217,079)
(3,381,312)
(2,713,731)
(8,223,055)
(6,095,043)
The notes on pages 42 to 102 form part of these financial statements.
33
EQTEC plc
Consolidated statement of financial position
At 31 December 2018
ASSETS
Non-current assets
Property, plant and equipment
Intangible fixed assets
Other financial investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets included in disposal group classified as
held for resale
Total current assets
Total assets
Notes
31 December
2018
€
31 December
2017 (Restated)
€
18
19
21
23
24
25
30
2,313,431
15,283,459
18,934
4,468,180
16,710,497
18,934
17,615,824
21,197,611
98,851
831,752
463,414
1,394,017
167,124
499,264
1,804,943
2,471,331
1,243,547
1,309,633
2,637,564
3,780,964
20,253,388
24,978,575
34
EQTEC plc
Consolidated statement of financial position
At 31 December 2018 – continued
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Retained earnings/(deficit)
Equity attributable to the owners of the company
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Deferred Tax
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Liabilities included in disposal group classified as held
for resale
Total current liabilities
Total equity and liabilities
Notes
31 December
2018
€
31 December
2017
€
26
26
27
28
22
29
28
30
19,182,850
47,582,446
(52,341,726)
18,724,196
44,574,164
(45,335,750)
14,423,570
(2,552,863)
17,962,610
(1,335,784)
11,870,707
16,626,826
3,085,401
33
3,891,080
33
3,085,434
3,891,113
1,494,673
2,889,092
4,383,765
2,766,985
646,857
3,413,842
913,482
1,046,794
5,297,247
4,460,636
20,253,388
24,978,575
The financial statements were approved by the Board of Directors on 28 June 2019 and signed on its behalf
by:
Ian Pearson
Chairman
Ian Price
Director
The notes on pages 42 to 102 form part of these financial statements.
35
EQTEC plc
Consolidated statement of cash flows
for the financial year ended 31 December 2018
Cash flows from operating activities
Loss for the financial year
Adjustments for:
Depreciation of property, plant and equipment
Gain on disposal of property, plant & equipment
Impairment of property, plant and equipment
Impairment of goodwill
Loss on debt for equity swap
Unrealised foreign exchange movements
Operating cash flows before working capital changes
Decrease/(Increase) in:
Inventories
Trade and other receivables
(Decrease)/Increase in:
Trade and other payables
Cash used in operating activities – continuing
operations
Finance costs
Finance income
Net cash used in operating activities – continuing
operations
Net cash generated from operating activities – discontinued
operations
Notes
18
18
19
12
12 months
ended
31 Dec 2018
€
6 months
ended
31 Dec
2017
€
(8,246,437)
(6,003,859)
17,058
(3,139)
2,121,637
1,427,038
772,046
(29,287)
-
-
4,984,561
-
-
(123,923)
(3,941,084)
(1,143,221)
68,273
(113,054)
-
145,475
(377,648)
267,161
(4,363,513)
(730,585)
1,212,714
(52)
(3,150,851)
271,398
-
(459,187)
30
142,956
49,820
Cash used in operating activities
(3,007,895)
(409,367)
Cash flows from investing activities
Additions to property, plant and equipment
Proceeds from the disposal of property, plant and
equipment
Net cash inflow in acquisition of subsidiaries
Amounts advanced to related parties
Interest received
Net cash generated from/(used in) investing activities
– continuing operations
Net cash (used in)/generated from investing activities –
discontinued operations
31
30
Net cash generated from/(used in) investing activities
(1,233)
3,139
-
-
52
-
-
13,728
(60,000)
-
1,958
(46,272)
(904)
3
1,054
(46,269)
37
EQTEC plc
Consolidated statement of cash flows
for the financial year ended 31 December 2018
Notes
12 months
ended
6 months
ended
31 Dec 2018 31 Dec 2017
€
€
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Loan issue costs
Proceeds from issue of ordinary shares
Share issue costs
Interest paid
Net cash generated from financing activities –
continuing operations
Net cash used in financing activities – discontinued
operations
6,036,706
(2,631,718)
(621,154)
66,017
(743,261)
(300,171)
596,597
-
(31,266)
1,816,761
(274,336)
(84,475)
1,806,419
2,023,281
30
(120,472)
(61,584)
Net cash generated from financing activities
1,685,947
1,961,697
Net (decrease)/increase in cash and cash equivalents
(1,320,894)
1,506,061
Cash and cash equivalents at the beginning of the financial
period
Cash and cash equivalents at the end of the financial
period
Cash and cash equivalents included in disposal group
Cash and cash equivalents for continuing operations
25
30
25
1,908,463
402,402
587,569
1,908,463
(126,718)
(105,138)
460,851
1,803,325
Details of non-cash transactions are set out in Note 34 of the financial statements.
The notes on pages 42 to 102 form part of these financial statements.
38
EQTEC plc
Company statement of financial position
At 31 December 2018
ASSETS
Non-current assets
Property, plant and equipment
Investment in subsidiary undertakings
Total non-current assets
Current assets
Trade and other receivables
Cash and bank balances
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Retained earnings/(deficit)
Equity attributable to the owners of the
company
Non-current liabilities
Borrowings
Total non-current liabilities
Current liabilities
Borrowings
Trade and other payables
Total current liabilities
Notes
31 December
2018
€
31 December
2017
€
18
20
24
25
26
26
28
28
29
822
17,367,967
-
17,617,399
17,368,789
17,617,399
1,963,851
384,704
339,583
1,779,736
2,348,555
2,119,319
19,717,344
19,736,718
19,182,850
66,516,526
(71,715,400)
18,724,196
63,508,244
(67,436,323)
13,983,976
14,796,117
2,771,448
3,617,399
2,771,448
3,617,399
2,676,364
285,556
1,618
1,321,584
2,961,920
1,323,202
Total equity and liabilities
19,717,344
19,736,718
The financial statements were approved by the Board of Directors on 28 June 2019 and signed on its behalf by:
Ian Pearson
Chairman
Ian Price
Director
The notes on pages 42 to 102 form part of these financial statements.
39
EQTEC plc
Company statement of changes in equity
for the financial year ended 31 December 2018
Share
capital
€
Share
premium
€
Retained
earnings
€
Total
€
Balance at 1 July 2017
17,563,409
47,612,993
(64,006,844)
1,169,558
Issue of ordinary shares in
EQTEC plc
Issue of ordinary shares on
acquisition of subsidiary
246,154
1,570,607
833,864
15,062,799
Conversion of debt into equity
80,769
515,355
Share issue costs
-
(1,253,510)
-
-
-
-
1,816,761
15,896,663
596,124
(1,253,510)
Loss for the financial period
(Note 35)
-
-
(3,429,479)
(3,429,479)
Balance at 31 December 2017
18,724,196
63,508,244
(67,436,323)
14,796,117
Conversion of debt into equity
(Notes 26 and 28)
458,654
3,121,070
Share issue costs
-
(112,788)
-
-
3,579,724
(112,788)
Loss for the financial year
(Note 35)
-
-
(4,279,077)
(4,279,077)
Balance at 31 December 2018
19,182,850
66,516,526
(71,715,400)
13,983,976
The notes on pages 42 to 102 form part of these financial statements.
40
EQTEC plc
Company statement of cash flows
for the financial year ended 31 December 2018
Cash flows from operating activities
Loss before taxation
Adjustments for:
Depreciation of property, plant and equipment
Finance costs
Provision for impairment of investment in
subsidiaries
Provision for impairment of trade and other
receivables
Loss on debt for equity swap
Foreign currency gains arising from retranslation of
borrowings
Operating cash flows before working capital changes
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of plant, property and equipment
Investment in subsidiaries
Amounts advanced to related parties
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Funds advanced to inter-company loans
Repayment of inter-company loan
Proceeds from issue of ordinary shares
Share issue costs
Loan issue costs
Interest paid
Notes
18
20
12
18
20
12 months
ended
31 Dec 2017
€
6 months
Ended
31 Dec
2018
€
(4,279,077)
(3,429,479)
411
1,151,593
1,149,432
-
271,398
2,642,950
113,493
772,046
50
-
(4,023)
(132)
(1,096,125)
(8,141)
(150,655)
(515,213)
157,042
38,252
(1,254,921)
(319,919)
(1,233)
(900,000)
-
-
-
(60,000)
(901,233)
(60,000)
6,036,706
(2,238,548)
(1,556,113)
55,580
66,017
(743,261)
(621,154)
(239,050)
596,597
-
(139,136)
3,592
1,816,761
(274,336)
(31,266)
(84,476)
Net cash generated from financing activities
760,177
1,887,736
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at the beginning of the
financial period
(1,395,977)
1,507,817
1,778,118
270,301
Cash and cash equivalents at the end of the financial
period
25
382,141
1,778,118
The notes on pages 42 to 102 form part of these financial statements.
41
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
1. GENERAL INFORMATION
EQTEC plc (“the Company”) is a company domiciled in Ireland. These financial statements for the financial
year ended 31 December 2018 consolidate the individual financial statements of the Company and its
subsidiaries (together referred to as ‘the Group’).
The principal activities of the Company and the Group involve sourcing and providing assistance in
developing waste elimination projects to which it will ultimately sell its technology and O&M services.
The Group sources projects that have a local supply of waste in need of conversion. It builds relationships
and bring together the developers, the waste owners, the building contractors and funders and provides the
technology and engineering services to the projects. Furthermore, the Group provides O&M services to the
operating projects generating recurring revenues over the life of the projects.
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRSs)
Impact of application of IFRS 15 Revenue from Contracts with Customers
In the current financial year, the Group has applied IFRS 15 Revenue from Contracts with Customers (as amended
in April 2016) which is effective for an annual period that begins on or after 1 January 2018.
IFRS 15 provides a single, principle-based, five-step model to be applied to all sales contracts, based on the
transfer of control of goods and services to customers. It replaced IAS 18 Revenue, IAS 11 Construction
Contracts and related interpretations.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and
the revenue can be reliably measured.
Sale of goods
The Group has concluded that it is the principal in its revenue arrangements as it is the primary obligor in
these revenue arrangements, has pricing latitude and is also exposed to inventory and credit risks.
As such, revenue from the sale of goods is recognised when control is transferred to the customer. i.e. when
all the following conditions are satisfied:
ꢀ
ꢀ
ꢀ
ꢀ
ꢀ
the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
in general, this is deemed to occur when customers take delivery of the goods;
the Group retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue is measured at the fair value of the consideration received or receivable, taking into account
contractually defined terms of payment and excluding taxes or duty which are generally recognised at the
point of sale.
Revenue is reduced for estimated customer returns, rebates and other similar allowances to customers, the
measurement of which is determined by contractual arrangements with customers. Sales incentives are
recognised in the same period as the related revenue is recorded, and comprise:
42
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRSs) - continued
Impact of application of IFRS 15 Revenue from Contracts with Customers – continued
ꢀ Discounts and rebates - which are sales incentives to customers to encourage them to purchase
increased volumes and are related to total volumes purchased and sales growth;
ꢀ Marketing services - which include merchandising, slotting and listing fees; and
ꢀ
Sales support for promotional activities - which include payments to customers, distributors and
external agencies.
The Group has adopted IFRS 15 using the cumulative effect method. Accordingly, the information presented
for 2017 has not been restated, i.e. it is presented, as previously reported, under IAS 18 Revenue.
The introduction of IFRS 15 did not result in changes to the Group's significant accounting policies, except
to update them for new terminology introduced by the new standard for contract costs (previously known as
deferred acquisition costs for non-insurance contracts), contract assets (previously known as accrued income
from contracts with customers), and contract liabilities (previously known as deferred fee income from
contracts with customers).
Impact of initial application of IFRS 9 Financial Instruments
In the current financial year, the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and
the related consequential amendments to other IFRS Standards that are effective for an annual period that
begins on or after 1 January 2018.
This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 sets out
requirements for recognising and measuring financial assets and financial liabilities.
The adoption of IFRS 9 has not impacted the Group's accounting policies related to financial liabilities,
however financial assets classified as loans and receivables under IAS 39 are now measured at amortised cost.
These include cash and cash equivalents, trade and other receivables and customs deposits.
Financial assets are measured at amortised cost using the effective interest method. The amortised cost is
reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.
The effect of adopting IFRS 9 on the carrying amounts of financial assets relates solely to the new impairment
requirements, as described further below. The requirements of IFRS 9 have been adopted without restating
comparative information but are recognised in the opening balance sheet at 1 January 2018.
IFRS 9 replaces the 'incurred loss' model in IAS 39 with a forward looking 'expected credit loss' (ECL) model.
ECLs are based on the difference between the contractual cashflows due in accordance with the contract and
all the cashflows that the Group expects to receive. The shortfall is then discounted at an approximation to
the asset's original effective interest rate.
For trade and other receivables, the Group has applied the standard's simplified approach and has calculated
ECLs based on lifetime expected credit losses. The Group has established a provision matrix that is based
on the Group's historical credit loss experience, adjusted for forward-looking factors specific to the debtors
and the economic environment.
43
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRSs) – continued
Impact of initial application of IFRS 9 Financial Instruments - continued
There has not been a material impact to the Group's consolidated financial statements as a consequence of
adopting IFRS 9.
The provision for bad debts is not considered to be a critical accounting judgement or key source of
estimation uncertainty. While the actual level of debt collected may differ from the estimated levels of
recovery this is not expected to be by a material amount. In addition to applying the ECL model, each
subsidiary evaluates the collectability of trade receivables at each balance sheet date and makes any specific
provisions where there is objective evidence of impairment.
Presentation of impairment
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount
of the assets.
Impairment losses related to trade and other receivables are presented separately in the statement of profit
and loss and other comprehensive income.
Other new/revised standards and interpretations adopted in 2018
In the current financial year, the Group has applied a number of amendments to IFRS Standards and
Interpretations issued by the International Accounting Standards Board (IASB) that are effective for an
annual period that begins on or after 1 January 2018. Their adoption has not had any impact on the disclosures
or on the amounts reported in these financial statements.
ꢀ
ꢀ
ꢀ
ꢀ
ꢀ
Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions;
Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts;
Amendments to IAS 40 Transfer of Investment Properties;
Annual Improvements to IFRS Standards 2014-2016 Cycle – minor amendments to IFRS 1 and IAS
28;
IFRIC 22 Foreign Currency Transactions and Advance Consideration
New and revised IFRS Standards in issue but not yet effective
The following new and revised Standards and Interpretations have not been adopted by the Group, whether
endorsed by the European Union or not. The Group is currently analysing the practical consequences of the
new Standards and the effects of applying them to the financial statements. The related standards and
interpretations are:
IFRS 16 Leases (effective for annual reporting periods beginning on or after 1 January 2019, endorsed by the
European Union on 31 October 2017);
Amendments to IFRS 9 Prepayment Features with Negative Compensation (effective for annual reporting periods
beginning on or after 1 January 2019, endorsed by the European Union on 22 March 2018);
Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures (effective for annual reporting periods
beginning on or after 1 January 2019, endorsed by the European Union on 8 February 2019);
Annual Improvements to IFRS Standards 2015-2017 Cycle (effective for annual years beginning on or after
1 January 2019, endorsed by the European Union on 14 March 2019);
Amendments to IAS 19 Employee Benefits – Plan Amendment, Curtailment or Settlement (effective for annual years
beginning on or after 1 January 2019, endorsed by the European Union on 13 March 2019);
44
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRSs) – continued
New and revised IFRS Standards in issue but not yet effective - continued
IFRIC 23 Uncertainty Over Income Tax Treatments (effective for annual years beginning on or after 1 January
2019, endorsed by the European Union on 23 October 2018);
Amendment to IFRS 3 Business Combinations (effective for annual reporting periods beginning on or after 1
January 2020, not yet endorsed by the European Union); and
Amendments to IAS 1 and IAS 8: Definition of Material (effective for annual reporting periods beginning on
or after 1 January 2020, not yet endorsed by the European Union);
IFRS 16 Leases was issued in January 2016 and replaces IAS 17 Leases, IFRIC 4 Determining Whether an
Arrangement Contains a Lease, SIC-15 – Operating Leases – Incentives and SIC-27 – Evaluating the
Substance of Transactions Involving the Legal Form of a Lease. The Group will adopt IFRS 16 on January
1, 2019 and will apply the modified retrospective approach on transition. Comparative results will not be
restated.
At transition date, the Group will determine the lease payments outstanding at that date and apply the
appropriate discount rate to calculate the present value of the lease payments. The Group’s commitments
outstanding on all leases as at December 31, 2018 is US$0.36 million (2017: US$0.43 million) (see Note 36)
to the consolidated financial statements. The related right-of-use assets will be recognised within Property,
Plant and Equipment.
The Group has not assessed the impact of the adoption of these standards and interpretations on its financial
statements on initial adoption.
3. STATEMENT OF ACCOUNTING POLICIES
Basis of Preparation and Going Concern
The Group’s consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (‘EU’) and effective at 31 December 2018
for all years presented as issued by the International Accounting Standards Board.
The consolidated financial statements are prepared under the historical cost convention except for certain
financial assets and financial liabilities which are measured at fair value. The principal accounting policies set
out below have been applied consistently by the parent company and by all of the Company’s subsidiaries to
all years presented in these consolidated financial statements.
The financial statements of the parent company, EQTEC plc have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union (‘EU’) effective at 31
December 2018 for all years presented as issued by the International Accounting Standards Board and Irish
Statute comprising the Companies Act, 2014.
The Group incurred a loss of €8,209,679 (6 months ended 31 December 2017: €6,002,269) during the
financial year ended 31 December 2018 and had net current liabilities of €2,659,683 (31 December 2017:
€679,672) and net assets of €11,870,707 (31 December 2017: €16,626,826 ) at 31 December 2018.
45
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Basis of Preparation and Going Concern - continued
The Group continues to invest capital in developing and expanding its pipeline of waste to energy projects.
The nature of the Group’s business model means that the sales and project pipeline depend upon
counterparties commissioning and financing major projects, the timing of which is subject to many
uncertainties and is not under the Company’s control. This implies that the timing of funds generated from
projects can be difficult to predict. The forecasts which Management have prepared include certain
assumptions with regard to future funding from third parties the costs of business development, overheads
and the timing and amount of any funds generated from developments.
The Company also announced on 28 June 2019 that it has reached agreement for a comprehensive
restructuring of various payment obligations with its lenders, resulting in a reduction in its liabilities of, in
aggregate, €3 million and that it has raised approximately €0.8 million (before expenses) for general working
capital. It also announced its intention to undertake a cost reduction programme in relation to its operations
in the UK and Spain.
EQTEC will redeem £2,026,118 of the outstanding principal owed by the Company under the Altair Facility
and will also pay Altair an early redemption fee of £101,306, being 5 per cent. of the value of the debt
redeemed, through the issue of the Altair Redemption Shares (the “Redemption”). The remaining,
unredeemed amount of £795,000 under the Altair Facility will be governed by an amended and restated
secured loan facility.
The Riverfort Lenders, pursuant to a further amendment to the Riverfort Facility, will convert US$800,000
(approximately £632,000) of its debt into 191,515,152 new Ordinary Shares at the Placing Price and will
receive a debt conversion fee of £31,600, being 5 per cent. of the value of the debt converted, to be satisfied
by the issue of 9,575,757 new Ordinary Shares. Following the Conversion, US$1,575,000 remains
outstanding under the Riverfort Facility.
Following the Redemption and Conversion, in aggregate, approximately £2,039,250 remains outstanding
under the Remaining Facilities. The Remaining Facilities will have a revised annual interest rate of 12.5 per
cent and all amounts outstanding are to be repaid as a single payment of principal and accrued interest on
31 July 2020, together with a cash redemption fee of 8 per cent. on the balances outstanding as at that date.
After making enquiries and considering the matters referred to above, the Directors have gained reasonable
assurance that the Group will have adequate resources to continue in operational existence for the
foreseeable future.
For these reasons the Directors continue to adopt the going concern basis of accounting in preparing the
financial statements. The financial statements do not include any adjustments that would result if the Group
was unable to continue as a going concern.
Basis of consolidation
The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 31
December 2018. All subsidiaries have a reporting date of 31 December.
All transactions and balances between Group companies are eliminated on consolidation, including
unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-
group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a
Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where
necessary to ensure consistency with the accounting policies adopted by the Group.
46
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Basis of consolidation - continued
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are
recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. The
Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and
the non-controlling interests based on their respective ownership interests.
Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration
transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date
fair values of assets transferred, liabilities incurred, and the equity interests issued by the Group, which
includes the fair value of any asset or liability arising from a contingent consideration arrangement.
Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are generally measured
at their acquisition-date fair values.
Step Acquisitions
Business combination achieved in stages is accounted for using acquisition method at acquisition date. The
components of a business combination, including previously held investments are remeasured at fair value
at acquisition date and a gain or loss is recognised in the consolidated statement of profit or loss.
Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of or is classified as
held for sale. Profit or loss from discontinued operations comprises the post-tax profit or loss of
discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of assets
classified as held for sale (see also policy on non-current assets and liabilities classified as held for sale and
discontinued operations below and Note 30).
Investments in associates and joint ventures
Investments in associates and joint ventures are accounted for using the equity method. The carrying
amount of the investment in associates and joint ventures is increased or decreased to recognise the Group’s
share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted
where necessary to ensure consistency with the accounting policies of the Group. When the Group’s share
of losses on an associate or a joint venture exceeds the Group’s interest in that associate or joint venture
(which includes any long-term interests that, in substance, form part of the Group’s net
Investments in associates and joint ventures
investment in the associate or joint venture), the Group discontinues recognising its share of future losses.
Additional losses are recognised only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate or joint venture.
Unrealised gains and losses on transactions between the Group and its associates and joint ventures are
eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the
underlying asset is also tested for impairment.
Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Euro, which is also the functional currency of the
parent company. The Group has subsidiaries in the United Kingdom, whose functional currency is the GBP
£.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity,
using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange
47
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Foreign currency translation - continued
Foreign currency transactions and balances - continued
gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary
items denominated in foreign currency at year-end exchange rates are recognised in profit or loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using
the exchange rates at the transaction date), except for non-monetary items measured at fair value which are
translated using the exchange rates at the date when fair value was determined.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional
currency other than Euro are translated into Euro upon consolidation. The functional currency of the
entities in the Group has remained unchanged during the reporting year.
On consolidation, assets and liabilities have been translated into Euro at the closing rate at the reporting
date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as
assets and liabilities of the foreign entity and translated into Euro at the closing rate. Income and expenses
have been translated into Euro at the average rate over the reporting year. Exchange differences are charged
or credited to other comprehensive income and recognised in the currency translation reserve in equity. On
disposal of a foreign operation, the related cumulative translation differences recognised in equity are
reclassified to profit or loss and are recognised as part of the gain or loss on disposal.
Segment reporting
The Group has two operating segments: the power generation segment and the technology sales segment.
In identifying these operating segments, management generally follows the Group’s service lines
representing its main products and services.
Each operating segment is managed separately as each requires different technologies, marketing
approaches and other resources. All inter-segment transfers are carried out at arm’s length prices based on
prices charged to unrelated customers in standalone sales of identical goods or services.
For management purposes, the Group uses the same measurement policies as those used in its financial
statements. In addition, corporate assets which are not directly attributable to the business activities of any
operating segment are not allocated to a segment. This primarily applies to the Group’s central
administration costs and directors’ salaries.
Revenue
Revenue arises from the sale of goods and the rendering of services. It is measured at the fair value of
consideration received or receivable, excluding sales taxes, and reduced by any rebates and trade discounts
allowed. The Group applies the revenue recognition criteria set out below to each separately identifiable
component of the sales transaction. The consideration received from these multiple-component
transactions is allocated to each separately identifiable component in proportion to its relative fair value.
Rendering of services
The Group generates revenues from after-sales service and maintenance, consulting, and construction
contracts for renewable energy systems. Consideration received for these services is initially deferred,
included in other payables, and is recognised as revenue in the year when the service is performed. In
recognising after-sales service and maintenance revenues, the Group determines the stage of completion by
considering both the nature and timing of the services provided and its customer’s pattern of consumption
of those services, based on historical experience. Where the promised services are characterised by an
indeterminate number of acts over a specified year of time, revenue is recognised on a straight-line basis.
48
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Revenue - continued
Rendering of services - continued
Revenue from consulting services is recognised when the services are provided by reference to the contract’s
stage of completion at the reporting date in the same way as construction contracts for renewable energy
systems described below.
Construction contracts for renewable energy systems
Construction contracts for renewable energy systems specify a fixed price for the design, development and
installation of biomass systems. When the outcome can be assessed reliably, contract revenue and associated
costs are recognised by reference to the stage of completion of the contract activity at the reporting date.
Contract revenue is measured at the fair value of consideration received or receivable. When the Group
cannot measure the outcome of a contract reliably, revenue is recognised only to the extent of contract
costs that have been incurred and are recoverable. Contract costs are recognised in the year in which they
are incurred. In either situation, when it is probable that total contract costs will exceed total contract
revenue, the expected loss is recognised immediately in profit or loss.
A construction contract’s stage of completion is assessed by management by comparing costs incurred to
date with the total costs estimated for the contract (a procedure sometimes referred to as the cost-to-cost
method). Only those costs that reflect work performed are included in costs incurred to date. The gross
amount due from customers for contract work is presented within trade and other receivables for all
contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds
progress billings. The gross amount due to customers for contract work is presented within other liabilities
for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less
recognised losses).
Interest and dividends
Interest income and expenses are reported on an accrual basis using the effective interest method.
Dividends, other than those from investments in associates and joint ventures, are recognised at the time
the right to receive payment is established.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred.
Expenditure for warranties is recognised when the Group incurs an obligation, which is typically when the
related goods are sold.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or sale,
are added to the cost of those assets, until such time as the assets are substantially ready for their intended
use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of or is classified as
held for sale. Profit or loss from discontinued operations comprises the post-tax profit or loss of
discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of assets
classified as held for sale.
49
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not
individually identified and separately recognised. Goodwill is carried at cost less accumulated impairment
losses. Goodwill is not amortised but is reviewed for impairment at least annually. Refer below for a
description of impairment testing procedures.
Non-controlling interests
Non-controlling interests that are present ownership interest and entitle their holders to a proportionate
share of the entity’s net assets in the event of a liquidation may be initially measured either at fair value of
at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable
net assets. Other types of non-controlling interests are measured at fair value, or, when applicable, on the
basis specified in another IFRS.
Property, plant and equipment
Land and buildings and plant and equipment are initially recognised at acquisition cost or manufacturing
cost, including any costs directly attributable to bringing the assets to the location and condition necessary
for them to be capable of operating in the manner intended by the Group’s management. Leasehold
buildings, plant and equipment are subsequently measured at cost less accumulated depreciation and
impairment losses. Depreciation is recognised on a straight-line basis to write down the cost less estimated
residual value of leasehold buildings and plant and equipment. The following useful lives are applied:
• Leasehold buildings: 5-50 years
• Office equipment: 2-5 years
• Wind Turbine: 20 years
• Heat boilers: 15-20 years
Material residual value estimates and estimates of useful life are updated as required, but at least annually.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference
between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss
within other income or other expenses.
Leased assets
Finance leases
Management applies judgment in considering the substance of a lease agreement and whether it transfers
substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered
include the length of the lease term in relation to the economic life of the asset, the present value of the
minimum lease payments in relation to the asset’s fair value, and whether the Group obtains ownership of
the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component based
on the relative fair values of the respective lease interests. Each component is then evaluated separately for
possible treatment as a finance lease, taking into consideration the fact that land normally has an indefinite
economic life. The interest element of lease payments is charged to profit or loss, as finance costs over the
year of the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease
agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs,
such as maintenance and insurance, are expensed as incurred.
50
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Impairment testing of goodwill and property, plant and equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely
independent cash inflows (cash-generating units). As a result, some assets are tested individually for
impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating
units that are expected to benefit from synergies of a related business combination and represent the lowest
level within the Group at which management monitors goodwill. Cash-generating units to which goodwill
has been allocated (determined by the Group’s management as equivalent to its operating segments) are
tested for impairment at least annually. All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised for the amount by which the asset’s (or cash-generating unit’s) carrying
amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-
in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-
generating unit and determines a suitable discount rate in order to calculate the present value of those cash
flows. The data used for impairment testing procedures are directly linked to the Group’s latest approved
budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements.
Discount factors are determined individually for each cash-generating unit and reflect current market
assessments of the time value of money and asset-specific risk factors.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to
that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-
generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that
an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset’s
or cash-generating unit’s recoverable amount exceeds its carrying amount.
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs,
except for those carried at fair value through profit or loss which are measured initially at fair value.
Subsequent measurement of financial assets and financial liabilities is described below.
Financial assets are derecognised 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. A financial
liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement financial assets, other than those designated and effective as
hedging instruments, are classified into the following categories upon initial recognition:
•
•
•
•
loans and receivables
financial assets at fair value through profit or loss (FVTPL)
held-to-maturity (HTM) investments
available-for-sale (AFS) financial assets.
All financial assets except for those at FVTPL are reviewed for impairment at least at each reporting date
to identify whether there is any objective evidence that a financial asset or a group of financial assets is
impaired. Different criteria to determine impairment are applied for each category of financial assets, which
are described below.
51
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Financial instruments - continued
Classification and subsequent measurement of financial assets - continued
All income and expenses relating to financial assets that are recognised in profit or loss are presented within
finance costs, finance income or other financial items, except for impairment of trade receivables which is
presented within other expenses.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition, these are measured at amortised cost using the effective
interest method, less provision for impairment. Discounting is omitted where the effect of discounting is
immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category
of financial instruments.
Individually significant receivables are considered for impairment when they are past due or when other
objective evidence is received that a specific counterparty will default. Receivables that are not considered
to be individually impaired are reviewed for impairment in groups, which are determined by reference to
the industry and region of the counterparty and other shared credit risk characteristics. The impairment loss
estimate is then based on recent historical counterparty default rates for each identified group.
In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as
they possess shared credit risk characteristics. They have been grouped based on the days past due and
also according to the geographical location of customers.
The expected loss rates are based on the payment profile for sales over the past 48 months before 31
December 2018 and 1 January respectively as well as the corresponding historical credit losses during that
period. The historical rates are adjusted to reflect current and forward-looking macroeconomic factors
affecting the customer’s ability to settle the amount outstanding. The Group has identified gross domestic
product (GDP) and unemployment rates in the countries in which the customers are domiciled to be the
most relevant factors and accordingly adjusts historical loss rates for expected changes in these factors.
However, given the short period exposed to credit risk, the impact of these macroeconomic factors has
not been considered significant within the reporting period.
Financial assets at FVTPL
Financial assets at FVTPL include financial assets that are either classified as held for trading or that meet
certain conditions and are designated at FVTPL upon initial recognition. All derivative financial
instruments fall into this category, except for those designated and effective as hedging instruments, for
which the hedge accounting requirements apply.
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair
values of financial assets in this category are determined by reference to active market transactions or
using a valuation technique where no active market exists.
HTM investments
HTM investments are non-derivative financial assets with fixed or determinable payments and fixed
maturity other than loans and receivables. Investments are classified as HTM if the Group has the intention
and ability to hold them until maturity.
HTM investments are measured subsequently at amortised cost using the effective interest method. If there
is objective evidence that the investment is impaired, determined by reference to external credit ratings, the
financial asset is measured at the present value of estimated future cash flows. Any changes in the carrying
amount of the investment, including impairment losses, are recognised in profit or loss.
52
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Financial instruments - continued
AFS financial assets
AFS financial assets are non-derivative financial assets that are either designated to this category or do not
qualify for inclusion in any of the other categories of financial assets.
All AFS financial assets are measured at fair value. Gains and losses are recognised in other comprehensive
income and reported within the AFS reserve within equity, except for interest and dividend income,
impairment losses and foreign exchange differences on monetary assets, which are recognised in profit or
loss. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognised
in other comprehensive income is reclassified from the equity reserve to profit or loss. Interest calculated
using the effective interest method and dividends are recognised in profit or loss within finance income.
Reversals of impairment losses for AFS debt securities are recognised in profit or loss if the reversal can be
objectively related to an event occurring after the impairment loss was recognised. For AFS equity
investments impairment reversals are not recognised in profit loss and any subsequent increase in fair value
is recognised in other comprehensive income.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial
instruments.
Classification and subsequent measurement of financial liabilities - continued
Financial liabilities are measured subsequently at amortised cost using the effective interest method except
for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value
with gains or losses recognised in profit or loss (other than derivative financial instruments that are
designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit
or loss are included within finance costs or finance income.
Derivative financial instruments and hedge accounting
Derivative financial instruments are accounted for at FVTPL except for derivatives designated as hedging
instruments in cash flow hedge relationships, which require a specific accounting treatment. To qualify for
hedge accounting, the hedging relationship must meet several strict conditions with respect to
documentation, probability of occurrence of the hedged transaction and hedge effectiveness.
All derivative financial instruments used for hedge accounting are recognised initially at fair value and
reported subsequently at fair value in the statement of financial position.
To the extent that the hedge is effective, changes in the fair value of derivatives designated as hedging
instruments in cash flow hedges are recognised in other comprehensive income and included within the
cash flow hedge reserve in equity. Any ineffectiveness in the hedge relationship is recognised immediately
in profit or loss.
At the time the hedged item affects profit or loss, any gain or loss previously recognised in other
comprehensive income is reclassified from equity to profit or loss and presented as a reclassification
adjustment within other comprehensive income. However, if a non-financial asset or liability is recognised
as a result of the hedged transaction, the gains and losses previously recognised in other comprehensive
income are included in the initial measurement of the hedged item.
53
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Financial instruments - continued
Derivative financial instruments and hedge accounting - continued
If a forecast transaction is no longer expected to occur, any related gain or loss recognised in other
comprehensive income is transferred immediately to profit or loss. If the hedging relationship ceases to
meet the effectiveness conditions, hedge accounting is discontinued, and the related gain or loss is held in
the equity reserve until the forecast transaction occurs.
Fair values
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which inputs to the fair value measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the
recorded fair value are observable, either directly or indirectly
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the
recorded fair value are not based on observable market data
Income taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised
in other comprehensive income or directly in equity.
Income taxes - continued
Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted
by the end of the reporting year. Deferred income taxes are calculated using the liability method.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible
temporary difference will be utilised against future taxable income. This is assessed based on the Group’s
forecast of future operating results, adjusted for significant non-taxable income and expenses and specific
limits on the use of any unused tax loss or credit.
Deferred tax liabilities are generally recognised in full, although IAS 12 ‘Income Taxes’ specifies limited
exemptions. As a result of these exemptions the Group does not recognise deferred tax on temporary
differences relating to goodwill, or to its investments in subsidiaries.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term,
highly liquid investments maturing within 90 days from the date of acquisition that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of changes in value.
Non-current assets and liabilities classified as held for sale and discontinued operations
Non-current assets classified as held for sale are presented separately and measured at the lower of their
carrying amounts immediately prior to their classification as held for sale and their fair value less costs to
sell. However, some held for sale assets such as financial assets or deferred tax assets, continue to be
measured in accordance with the Group’s relevant accounting policy for those assets. Once classified as
held for sale, the assets are not subject to depreciation or amortisation.
Any profit or loss arising from the sale or remeasurement of discontinued operations is presented as part
of a single line item, profit or loss from discontinued operations (See also policy on profit or loss from
discontinued operations above).
54
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Equity, reserves and dividend payments
Share capital represents the nominal (par) value of shares that have been issued. Share premium includes
any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares
are deducted from share premium, net of any related income tax benefits.
Other components of equity
Other components of equity include a reserve for deferred consideration on the acquisition of businesses
by the Group.
Retained earnings include all current and prior year retained profits. All transactions with owners of the
parent are recorded separately within equity. Dividend distributions payable to equity shareholders are
included in other liabilities when the dividends have been approved in a general meeting prior to the
reporting date.
Share-based payments
All goods and services received in exchange for the grant of any share-based payment are measured at their
fair values.
Where employees are rewarded using share-based payments, the fair value of employees’ services is
determined indirectly by reference to the fair value of the equity instruments granted. This fair value is
appraised at the grant date and excludes the impact of non-market vesting conditions (for example
profitability and sales growth targets and performance conditions). All share-based remuneration is
ultimately recognised as an expense in profit or loss with a corresponding credit to retained earnings. If
vesting years or other vesting conditions apply, the expense is allocated over the vesting year, based on the
best available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are expected
to become exercisable. Estimates are subsequently revised if there is any indication that the number of share
options expected to vest differs from previous estimates. Any adjustment to cumulative share-based
compensation resulting from a revision is recognised in the current year. The number of vested options
ultimately exercised by holders does not impact the expense recorded in any year.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are
allocated to share capital up to the nominal (or par) value of the shares issued with any excess being recorded
as share premium.
Share Warrants
The Group has share warrants outstanding that were issued to loan notes holders as part of the loan
agreements. These share warrants are assessed under IAS 32 as instruments settled in an entity’s own equity
instruments. The classification of this instrument as either a financial liability or equity depends on the
substance of the financial instruments rather that its legal form.
Provisions, contingent assets and contingent liabilities
Provisions for legal disputes, onerous contracts or other claims are recognised when the Group has a present
legal or constructive obligation as a result of a past event, it is probable that an outflow of economic
resources will be required from the Group and amounts can be estimated reliably. Timing or amount of the
outflow may still be uncertain.
Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and
management has either communicated the plan’s main features to those affected or started implementation.
Provisions are not recognised for future operating losses.
55
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Provisions, contingent assets and contingent liabilities - continued
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the
most reliable evidence available at the reporting date, including the risks and uncertainties associated with
the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will
be required in settlement is determined by considering the class of obligations as a whole. Provisions are
discounted to their present values, where the time value of money is material.
Any reimbursement that the Group is virtually certain to collect from a third party with respect to the
obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related
provision.
No liability is recognised if an outflow of economic resources as a result of present obligations is not
probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
AND ESTIMATION UNCERTAINTY
When preparing the financial statements, management makes a number of judgements, estimates and
assumptions about the recognition and measurement of assets, liabilities, income and expenses.
Significant management judgements
The following are significant management judgements in applying the accounting policies of the Group that
have the most significant effect on the financial statements.
Going concern
As described in the basis of preparation and going concern in Note 3 above, the validity of the going
concern basis is dependent upon the Company sourcing finance required to develop projects. After making
enquiries and considering the matters referred to in Note 3, the Directors have a reasonable expectation
that the Company will source this financing and the Group will have adequate resources to continue in
operational existence for the foreseeable future. For these reasons the Directors continue to adopt the going
concern basis of accounting in preparing the financial statements.
Control assessment in a business combination.
As disclosed in Note 20, the Group owns 50.02% of the voting rights in Newry Biomass Limited. One
other company owns the remaining voting rights. Management has reassessed its involvement in Newry
Biomass Limited in accordance with IFRS 10’s revised control definition and guidance and has concluded
that it has control of Newry Biomass Limited.
Assets held for disposal
On 27 March 2017, the Board of Directors announced its decision to dispose the wind turbine segment of
the Group consisting of Pluckanes Windfarm Limited, a wholly owned subsidiary of Reforce Energy
Limited, are classified as assets held for disposal. The Board considered the subsidiary to meet the criteria
to be classified as held for sale at that date for the following reasons:
ꢀ
ꢀ
ꢀ
Pluckanes Windfarm Limited is available for immediate sale and can be sold to the buyer in its
current condition.
The actions to complete the sale were initiated and expected to be completed within one year from
the date of initial classification.
There is an active programme with an intermediary being appointed to procure a buyer and
negotiations with certain parties are in place as at the reporting date.
For more details on the discontinued operation, refer to Note 30.
56
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
AND ESTIMATION UNCERTAINTY - continued
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and
measurement of assets, liabilities, income and expenses is provided below. Actual results may be
substantially different.
Impairment of goodwill and non-financial assets
Determining whether goodwill and non-financial assets are impaired requires an estimation of the value in
use of the cash generating units to which the assets have been allocated. The value in use calculation requires
the directors to estimate the future cash flows to arise from the cash-generating unit and a suitable discount
rate in order to calculate present value. Where the actual cash flows are less than expected, a material
impairment may arise. The total property, plant and equipment impairment during the year as included in
Note 18 amounted to €2,121,637 (6 months ended 31 December 2017: €4,984,561), while the impairment
for goodwill during the year as included in Note 19 amounted to €1,427,038 (6 months ended 31 December
2017: €Nil).
Provision for impairment of financial assets
Determining whether the carrying value of financial assets has been impaired requires an estimation of the
value in use of the investment in subsidiaries and joint venture vehicles. The value in use calculation requires
the directors to estimate the future cash flows expected to arrive from these vehicles and a suitable discount
rate in order to calculate present value. After reviewing these calculations, the directors are satisfied that a
net impairment cost of €Nil (6 months ended 31 December 2017: €Nil) should be recognised in the group
accounts and €1,149,432 (6 months ended 31 December 2017: €2,642,950) should be recognised in the
Company accounts of EQTEC plc. Details of this impairment are set out in Note 20.
Allowances for impairment of trade receivables
The Group estimates the allowance for doubtful trade receivables based on assessment of specific accounts
where the Group has objective evidence comprising default in payment terms or significant financial
difficulty that certain customers are unable to meet their financial obligations. In these cases, judgment
used was based on the best available facts and circumstances including but not limited to, the length of
relationship. At 31 December 2018, provisions for doubtful debts amounted to €306,292 which represents
73% of trade receivables at that date (31 December 2017: €306,292– 54%).
Deferred tax assets
Deferred tax is recognised based on differences between the carrying value of assets and liabilities and the
tax value of assets and liabilities. Deferred tax assets are only recognised to the extent that the Group
estimates that future taxable profits will be available to offset them.
Useful lives of depreciable assets
The annual depreciation charge depends primarily on the estimated lives of each type of asset and, in certain
circumstances, estimates of fair values and residual values. The directors annually review these asset lives
and adjust them as necessary to reflect current thinking on remaining lives in light of technological change,
prospective economic utilisation and physical condition of the assets concerned. Changes in asset lives can
have significant impact on depreciation charges for the year. It is not practical to quantify the impact of
changes in asset lives on an overall basis, as asset lives are individually determined, and there are a significant
number of asset lives in use. The impact of any change would vary significantly depending on the individual
changes in assets and the classes of assets impacted.
57
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
AND ESTIMATION UNCERTAINTY - continued
Estimation uncertainty - continued
Fair value measurement
Management uses valuation techniques to determine the fair value of financial instruments (where active
market quotes are not available) and non-financial assets. This involves developing estimates and
assumptions consistent with how market participants would price the instrument. Management bases its
assumptions on observable data as far as possible, but this is not always available. In that case management
uses the best information available. Estimated fair values may vary from the actual prices that would be
achieved in an arm’s length transaction at the reporting date.
The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair
value on a recurring basis at year-end.
31 December 2018
Financial assets
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Trade and other payables
Investor loans
Bank loans
Bank overdrafts
31 December 2017
Financial assets
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Trade and other payables
Investor loans
Bank loans
Bank overdrafts
Level 1
€
-
463,414
-
-
-
(2,563)
460,851
Level 1
€
-
1,804,943
-
-
-
(1,618)
1,803,325
Level 2
€
831,752
-
(1,494,673)
(5,450,941)
(520,989)
-
(6,634,851)
Level 2
€
499,264
-
(2,766,985)
(3,657,399)
(878,920)
-
(6,804,040)
Level 3
€
-
-
-
-
-
-
Total
€
831,752
463,414
(1,494,673)
(5,450,941)
(520,989)
(2,563)
(6,174,000)
Level 3
€
Total
€
-
-
-
-
-
-
-
499,264
1,804,943
(2,766,985)
(3,657,399)
(878,920)
(1,618)
(5,000,715)
There were no transfers between Level 1 and Level 2 during the year.
58
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
5. FINANCIAL RISK MANAGEMENT
Financial risk management objectives and policies
The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk, interest rate risk and
foreign currency exchange risk.
The Group’s financial risk management programme aims to manage the Group’s exposure to the
aforementioned risks in order to minimise the potential adverse effects on the financial performance of the
Group. The Group seeks to minimise the effects of these risks by monitoring the working capital position,
cash flows and interest rate exposure of the Group. There is close involvement by members of the Board
of Directors in the day-to-day running of the business.
Many of the Group’s transactions are carried out in Pounds Sterling. The Group’s exposure to price risk is
not a significant risk as the Company does not currently hold a portfolio of securities which may be materially
impacted by a decline in market values.
Credit risk
The Group’s maximum exposure to credit risk is represented by the balance sheet amount of each financial
asset:
Trade and other receivables
Cash and cash equivalents
31 Dec
2018
€
279,388
463,414
31 Dec
2017
€
404,788
1,804,943
The Group’s credit risk is primarily attributable to its trade and other receivables.
The Group has adopted procedures in extending credit terms to customers and in monitoring its credit risk.
The Group’s exposure to credit risk arises from defaulting customers, with a maximum exposure equal to
the carrying amount of the related receivables. Provisions are made for impairment of trade receivables
when there is default of payment terms and significant financial difficulty. On-going credit evaluation is
performed on the financial condition of accounts receivable at operating unit level at least on a monthly
basis.
The Group does not have significant risk exposure to any single counterparty. Concentration of credit risk
to any other counterparty did not exceed 5% of gross monetary assets at any time during the financial year.
The Group defines counterparties as having similar characteristics if they are related parties.
Exposure to credit risk on cash deposits and liquid funds is monitored by directors. Cash held on deposit
is with financial institutions in the Ba rating category of Moody’s. The directors are of the opinion that the
likelihood of default by a counter party leading to material loss is minimal.
Liquidity risk
The Group’s liquidity is managed by ensuring that sufficient facilities are available for the Group’s
operations from diverse funding sources. The Group uses cash flow forecasts to regularly monitor the
funding requirements of the Group. The Group’s operations are funded by cash generated from financing
activities, borrowings from banks and investors and proceeds from the issuance of ordinary share capital.
59
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
5.
FINANCIAL RISK MANAGEMENT - continued
The table below details the maturity of the Group’s liabilities as at 31 December 2018:
Up to 1 year
1 – 5 years
Notes
€
€
Trade and other payables
Investor loans
Bank borrowings
Bank overdrafts
29
28
28
28
1,494,673
2,679,492
207,037
2,563
-
2,771,449
313,952
-
4,383,765
3,085,401
After 5
years
€
-
-
-
-
-
Total
€
1,494,673
5,450,941
520,989
2,563
7,469,166
The table below details the maturity of the Group’s liabilities as at 31 December 2017:
Up to 1 year
1 – 5 years
Trade and other payables
Investor loans
Bank borrowings
Bank overdrafts
Notes
29
28
28
28
€
2,766,985
40,000
605,239
1,618
€
-
3,617,399
273,681
-
After 5
years
€
-
-
-
-
Total
€
2,766,985
3,657,399
878,920
1,618
3,413,842
3,891,080
-
7,304,922
Interest rate risk
The primary source of the Group’s interest rate risk relates to bank loans and other debt instruments. The
interest rates on these assets and liabilities are disclosed above.
Bank borrowings and other debt instruments (excluding amounts in the disposal group) amounted to
€5,974,493 and €4,537,937 in 31 December 2018 and 31 December 2017, respectively.
The interest rate risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate
borrowings. The Group does not engage in hedging activities. Bank loans and certain debt instruments are
arranged at floating rates which are mainly based upon EURIBOR and the prime lending rate of financial
institutions thus exposing the Group to cash flow interest rate risk. The other remaining debt instruments
were arranged at fixed interest rates and expose the Group to a fixed cash outflow.
These bank loans and debt instruments are mostly medium-term to long-term in nature. Interest rates on
loans received from investors and shareholders are fixed in some cases while others are a fixed percentage
greater than current prime lending rates. ‘Medium-term’ refers to bank loans and debt instruments
repayable between 2 and 5 years and ‘long-term’ to bank loans repayable after more than 5 years.
60
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
5.
FINANCIAL RISK MANAGEMENT - continued
Interest rate risk -continued
The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative
instruments at the end of the reporting year. For floating rate liabilities, the analysis is prepared assuming
that the amount of the liability outstanding at the end of the year was outstanding for the whole year. A 50-
basis point increase or decrease is used when reporting interest rate risk internally to key management
personnel and represents management’s assessment of the reasonably possible changes in interest rates.
If interest rates have been 50 basis points higher/lower and all other variables were held constant, the
Group’s loss for the year ended 31 December 2018 would increase/decrease by €7,124 (6 months ended
31 December 2017: decrease/increase by €2,472). This is mainly attributable to the Group’s exposure to
interest rates on its variable rate borrowings, which are primarily included in Eqtec Iberia SL and in the
disposal group. The Group’s sensitivity to interest rates has increased during the current year mainly due to
the inclusion of bank borrowings from the acquisition of EQTEC Iberia in December 2017.
Foreign exchange risk
The Group is mainly exposed to future changes in the Sterling and the US Dollar relative to the Euro. These
risks are managed by monthly review of Sterling and US Dollar denominated monetary assets and monetary
liabilities and assessment of the potential exchange rate fluctuation exposure. The Group’s exposure to
foreign exchange risk is not actively managed. Management will reassess their strategy to foreign exchange
risk in the future.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities
at the end of the reporting year are as follows:
Sterling
US Dollar
Liabilities
Assets
31 Dec 2018
€
3,499,871
3,049,155
31 Dec 2017
€
4,640,618
-
31 Dec 2018
€
670,653
-
31 Dec 2017
€
1,825,518
-
The following table details the Group’s sensitivity to a 10% increase and decrease in the Euro against the
relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally
to key management personnel and represents management’s assessment of the reasonably possible change
in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates. The
sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the
denomination of the loan is in the currency other than the currency of the lender or the borrower. A positive
number below indicates an increase in profit and other equity where the Euro strengthens 10% against the
relevant currency. For a 10% weakening of the Euro against the relative currency, there would be a
comparable impact on the loss and other equity, and the balances below will be negative.
Profit and loss
Sterling Impact
31 Dec 2018
€
285,780
31 Dec 2017
€
284,353
US Dollar Impact
31 Dec 2018
€
269,015
31 Dec 2017
€
-
The Group’s sensitivity to foreign currency has increased during the current year mainly due to exposure
to outstanding US Dollar loans at the year-end date.
61
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
6.
CAPITAL MANAGEMENT POLICIES AND PROCEDURES
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange
rates and interest rates, which are detailed above. There has been no change to the Group’s exposure to
market risks or the manner in which it manages and measures the risk.
The Group manages its capital to ensure that the Group is able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the company consists of financial liabilities, cash and cash equivalents and equity
attributable to the equity holders of the parent company.
The Group’s management reviews the capital structure on a yearly basis. As part of the review, management
considers the cost of capital and risks associated with it. The Group’s overall strategy on capital risk
management is to continue to improve the ratio of debt to equity.
The gearing ratio of the Group for the year presented is as follows:
Debt
Cash and bank balances
Net debt
Equity
Net debt to equity ratio
31 Dec 2018
€
5,974,493
(463,414)
5,511,079
14,423,570
31 Dec 2017
€
4,539,937
(1,804,943)
2,734,994
17,962,610
38%
15%
Debt is defined as financial liabilities and borrowings of the Group while equity includes all capital, reserves
and retained earnings attributable to equity holders of the parent.
The movement in the net debt to equity ratio is as a result of the acquisition of $3.2 million loans in the
year to finance operations.
7.
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:
Power Generation: Being the development and operation of renewable energy electricity and heat
generating plants;
Technology Sales: Being the sale of Gasification Technology and associated Engineering and Design
Services.
The chief operating decision maker is the Chief Executive Officer.
62
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
7.
SEGMENT INFORMATION - continued
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:
12 months ended
31 Dec 2018
Segment Revenue
6 months
ended 31
Dec 2017
€
€
Segment Profit/(Loss)
6 months
ended 31
Dec 2017
€
12 months
ended 31
Dec 2018
€
Technology Sales
Power Generation
Total from continuing
operations
2,134,028
41,659
-
20,200
(1,482,168)
(280,674)
-
(269,471)
2,175,687
20,200
(1,762,842)
(269,471)
Central administration costs and directors’ salaries
Impairment of property, plant and equipment
Impairment of goodwill
Other income
Other gains and losses
Foreign currency (losses)/gains
Finance Income
Finance costs
(1,077,724)
(2,121,637)
(1,427,038)
142,325
(772,046)
(14,813)
52
(1,212,714)
(488,335)
(4,984,561)
-
-
-
9,906
-
(271,398)
Loss before taxation (continuing operations)
(8,246,437)
(6,003,859)
Revenue reported above represents revenue generated from jointly controlled entities and external
customers. Inter-segment sales for the financial year amounted to €Nil (6 months ended 31 December 2017:
€Nil). Included in revenues in the Power Generation Segment are revenues of €41,659 (6 months ended 31
December 2017: €20,200 ) which arose from sales to GG Eco Energy Limited, an associate undertaking of
EQTEC plc. This represents 2% (6 months ended 31 December 2017: 100%) of total revenues in the year.
The accounting policies of the reportable segments are the same as the Group’s accounting policies
described in Note 3. 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 profit or
loss of jointly controlled entities, profit on disposal of jointly controlled entities, interest costs, interest
income and income tax expense. This is the measure reported to the chief operating decision maker for the
purpose of resource allocation and assessment of segment performance.
63
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
7.
SEGMENT INFORMATION - continued
Other segment information:
Technology sales
Power Generation
Head Office
Depreciation and
amortisation
Additions to non-current
assets
12 months
ended 31
Dec 2018
€
16,647
-
411
6 months
ended 31
Dec 2017
€
-
-
-
12 months
ended 31
Dec 2018
€
-
-
1,233
6 months
ended 31
Dec 2017
€
-
(13,691)
-
17,058
-
1,233
(13,691)
In addition to the depreciation and amortisation reported above, impairment losses of €2,121,637 (6 months
ended 31 December 2017: €4,984,561) and €1,427,038 (6 months ended 31 December 2017: €Nil) were
recognised in respect of property, plant and equipment and goodwill respectively. These impairment losses
were attributable as follows: Power Generation Segment, €2,121,637 (6 months ended 31 December 2017:
€4,984,561); Technology Sales €1,427,038 (6 months ended 31 December 2017: €Nil).
The Group operates in three principal geographical areas: Republic of Ireland (country of domicile), Spain
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:
Revenue from Associates and
External Customers
Non-current assets*
12 months
ended 31
Dec 2018
€
-
2,134,028
41,659
6 months
ended 30
Jun 2017
€
-
-
20,200
31 Dec 2018
31 Dec 2017
€
822
84,234
2,228,375
€
-
100,881
4,367,299
2,175,687
20,200
2,313,431
4,468,180
Republic of Ireland
Spain
United Kingdom
*Non-current assets excluding goodwill, financial instruments, deferred tax and investment in jointly
controlled entities.
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.
64
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
8.
REVENUE
An analysis of the Group’s revenue for the financial year (excluding interest revenue), from continuing and
discontinued operations, is as follows:
Continuing
Discontinued
12 months
ended 31
Dec 2018
€
2,134,028
6 months
ended 31
Dec 2017
€
-
12 months
ended 31
Dec 2018
€
-
6 months
ended 31
Dec 2017
€
-
-
-
183,660
77,410
Revenue from technology sales
Revenue from the generation of energy
from wind
Revenue from consultancy fees associated
with the generation of heat
41,659
20,200
-
-
9.
COST OF SALES
Materials purchased
Sub-contracted work
ISEM trading fees
10. ADMINISTRATIVE EXPENSES
Employee expenses
Office and operating expenses
Marketing expenses
Professional fees (including
release of accruals)
equipment
Depreciation of property, plant &
equipment (Note 18)
Gain on disposal of PPE
Travel and subsistence
Other miscellaneous expenses
Regulatory expenses
2,175,687
20,200
183,660
77,410
Continuing
Discontinued
12 months
ended 31
Dec 2018
€
2,252,639
750
-
6 months
ended 31
Dec 2017
€
-
-
-
12 months
ended 31
Dec 2018
€
-
-
275
6 months
ended 31
Dec 2017
€
-
-
-
2,253,389
-
275
-
Continuing
12 months
ended 31
Dec 2018
€
1,439,110
559,534
11,698
6 months
ended 31
Dec 2017
€
346,624
270,400
2,099
Discontinued
12 months
ended 31
Dec 2018
€
-
35,652
-
6 months
ended 31
Dec 2017
€
-
19,523
-
285,999
60,200
3,400
1,200
17,058
(3,139)
165,396
45,002
242,206
-
36,363
1,624
60,696
73,321
-
-
58
-
36,509
-
-
45
-
2,762,864
778,006
112,431
57,277
65
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
11. OTHER INCOME
Income from insurance claim
Income from lease arrangements
Income from other services
Operating grants
12. OTHER GAINS AND LOSSES
Loss on debt for equity swap
Continuing
Discontinued
12 months
ended 31
Dec 2018
€
108,027
23,000
8,400
2,898
6 months
ended 31
Dec 2017
€
-
-
-
-
12 months
ended 31
Dec 2018
€
-
-
-
-
6 months
ended 31
Dec 2017
€
-
-
-
-
142,325
-
-
-
Continuing
Discontinued
12 months
ended 31
Dec 2018
€
772,046
6 months
ended 31
Dec 2017
€
-
12 months
ended 31
Dec 2018
€
-
6 months
ended 31
Dec 2017
€
-
During the year the Group extinguished some of its borrowings by issuing equity instruments. In
accordance with IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, the (gain)/loss
recognised on these transactions was €772,046 (6 months ended 31 December 2017: €Nil).
13.
FINANCE COSTS AND INCOME
Continuing
6 months
12 months
ended 31
ended 31
Dec 2018 Dec 2017
€
€
Discontinued
6 months
12 months
ended 31
ended 31
Dec 2018 Dec 2017
€
€
1,212,714
271,398
34,202
18,546
Finance Costs
Interest on loans, bank facilities and
overdrafts
Finance Income
Interest receivable on bank deposits
52
-
6
3
66
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
14. EMPLOYEE DATA
Employee costs (including executive directors):
Salaries
Social insurance costs
Average number of employees (including executive directors)
Company
Average number of employees (including executive directors)
12 months
ended 31
Dec 2018
€
6 months
ended 31
Dec 2017
€
1,070,394
183,756
198,000
21,124
1,254,150
219,124
No.
No.
17
3
3
2
Capitalised employee costs in the financial year amounted to €Nil (6 months ended 31 December
2017 €Nil).
15. LOSS BEFORE TAXATION
12 months
ended 31
Dec 2018
€
6 months
ended 31
Dec 2017
€
Loss before taxation on continuing operations is stated after
charging/(crediting):
Depreciation of property, plant and equipment (Note 18)
Profit on disposal of property, plant and equipment
Loss/(Gain) on foreign exchange
Directors’ remuneration: for services as directors
(Note 32)
redundancy
termination of service as director
Impairment of goodwill (Note 19)
Impairment losses of property, plant and
equipment charged to profit and loss (Note 18)
17,058
(3,139)
14,813
167,245
478,852
-
10,093
1,427,038
for other services
2,121,637
-
-
(9,906)
12,000
168,500
115,000
-
-
4,984,561
12 months
ended 31
Dec 2018
€
6 months
ended 31
Dec 2017
€
48,000
11,000
30,000
9,900
59,000
39,900
Auditor’s remuneration:
Audit of group accounts
Tax advisory services
67
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
16. TAX CREDIT
Tax expense comprises:
Current tax expense
Deferred tax credit
Adjustment for prior years
Tax credit
Loss before taxation
12 months
ended 31
Dec 2018
€
6 months
ended 31
Dec 2017
€
-
-
-
-
-
-
-
-
12 months
ended 31
Dec 2018
€
6 months
ended 31
Dec 2017
€
(8,209,679)
(6,002,269)
Applicable tax 12.50% (6 months ended 31 December 2017:
12.50%)
(1,026,210)
(750,284)
Effects of:
Amortisation & depreciation in excess of capital allowances
Expenses not deductible for tax purposes
Losses carried forward
Movement in deferred tax
Actual tax credit
11,297
540,090
474,823
-
-
4,564
616,185
129,535
-
-
-
-
The tax rate used for the reconciliation above is the corporate rate of 12.5% payable by corporate entities
in Ireland on taxable profits under tax law in that jurisdiction.
17. LOSS PER SHARE
Basic loss per share
From continuing operations
From discontinued operations
Total basic loss per share
Diluted loss per share
From continuing operations
From discontinued operations
Total diluted loss per share
68
12 months
ended 31
Dec 2018
€ per share
6 months
ended 31
Dec 2017
€ per share
(0.004)
-
(0.004)
(0.004)
-
(0.004)
(0.009)
-
(0.009)
(0.009)
-
(0.009)
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
17. LOSS PER SHARE- continued
The loss and weighted average number of ordinary shares used in the calculation of the basic and diluted
loss per share are as follows:
Loss for period attributable to equity holders of the parent
Profit for the period from discontinued operations used in the
calculation of basic earnings per share from discontinued
operations
Losses used in the calculation of basic loss per share from
continuing operations
12 months
ended 31
Dec 2018
€
(6,992,090)
6 months
ended 31
Dec 2017
€
(3,330,090)
36,758
1,590
(7,028,848)
(3,331,680)
Weighted average number of ordinary shares for
the purposes of basic loss per share
Weighted average number of ordinary shares for
the purposes of diluted loss per share
1,563,237,257
378,767,831
1,563,237,257
378,767,831
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.
Share warrants in issue
Convertible loans in issue
Total anti-dilutive shares
31 Dec 2018
31 Dec 2017
339,000,429
10,000,000
349,000,429
55,486,204
10,000,000
65,486,204
Details of share warrants in issue outstanding at year-end are set out in Note 26.
Events after the year-end
As disclosed in Note 33, 163,027,158 Ordinary Shares were issued on 5 March 2019 as part of an exercise
of warrants held. If these shares were in issue prior to 31 December 2018, they would have affected the
calculation of the weighted average number of shares in issue for the purposes of calculating both the basic
and diluted loss per share by 13,585,596 (assuming the shares were issued in December 2018).
As disclosed in Note 33, 2,777,777 Ordinary Shares were issued on 16 May 2019 as consideration for
services rendered to the Company. If these shares were in issue prior to 31 December 2018, they would
have affected the calculation of the weighted average number of shares in issue for the purposes of
calculating both the basic and diluted loss per share by 231,481 (assuming the shares were issued in
December 2018).
As disclosed in Note 33, 33,767,588 Ordinary Shares were issued on 24 May 2019 in settlement of debt
issued to the Company. If these shares were in issue prior to 31 December 2018, they would have affected
the calculation of the weighted average number of shares in issue for the purposes of calculating both the
basic and diluted loss per share by 2,813,966 (assuming the shares were issued in December 2018).
69
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
17. LOSS PER SHARE- continued
As disclosed in Note 33, 1,073,037,545 Ordinary Shares were issued on 28 June 2019 as part of a
share placing and debt conversion. If these shares were in issue prior to 31 December 2018, they
would have affected the calculation of the weighted average number of shares in issue for the
purposes of calculating both the basic and diluted loss per share by 89,419,795 (assuming the shares
were issued in December 2018).
18. PROPERTY, PLANT & EQUIPMENT
Group
Cost
At 1 July 2017
Additions
Acquired on acquisition of
subsidiary (Note 31)
Foreign currency adjustment
At 31 December 2017
Additions
Disposals
Foreign currency adjustment
Motor
Vehicles
€
Office
equipment
€
Construction
in Progress
€
Total
€
-
-
141
-
12,104,737
(13,691)
12,104,878
(13,691)
52,055
-
52,055
-
(52,055)
-
184,853
(1)
184,993
1,233
(14,396)
(1)
-
(134,766)
11,956,280
-
-
(149,723)
236,908
(134,767)
12,193,328
1,233
(66,451)
(149,724)
At 31 December 2018
-
171,829
11,806,557
11,978,386
Accumulated depreciation
At 1 July 2017
Charge for the financial period
Impairment
Acquired on acquisition of
subsidiary (Note 31)
Foreign currency adjustment
At 31 December 2017
Charge for the financial year
Charge on disposal
Impairment
Foreign currency adjustment
-
-
-
50,933
-
50,933
1,122
(52,055)
-
-
141
-
-
85,094
(1)
85,234
15,936
(14,396)
-
(1)
2,639,826
-
4,984,561
-
(35,406)
7,588,981
-
-
2,121,637
(132,436)
2,639,967
-
4,984,561
136,027
(35,407)
7,725,148
17,058
(66,451)
2,121,637
(132,437)
At 31 December 2018
-
86,773
9,578,182
9,664,955
Carrying amount
At 31 December 2017
1,122
99,759
4,367,299
4,468,180
At 31 December 2018
-
85,056
2,228,375
2,313,431
70
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
18. PROPERTY, PLANT & EQUIPMENT – continued
The Group carried out a review of the recoverable amount of property held by the Power
Generation operating segment at 31 December 2018. The review led to recognition of an
impairment loss in the current financial year of €2,121,637 (6 months ended 31 December 2017:
€4,984,561), which has been recognised in profit or loss. The recoverable amount of the assets
has been determined on the basis of their fair value, less costs to sell.
The impairment losses have been shown separately in the consolidated statement of profit or loss.
Company
Cost
At 1 January 2018
Additions
Office
equipment
€
-
1,233
Total
€
-
1,233
At 31 December 2018
1,233
1,233
Accumulated depreciation
At 1 January 2018
Charge for the financial year
At 31 December 2018
Carrying amount
At 1 January 2018
At 31 December 2018
-
411
411
-
822
-
411
411
-
822
71
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
19.
INTANGIBLE ASSETS
Cost
As at 1 July 2017
Acquired on acquisition of
subsidiary (Note 31)
As at 31 December 2017
(As originally stated)
Fair value adjustment on
acquisition (Note 31)
As at 31 December 2017
(As restated)
Development
Costs in
Progress
€
-
Goodwill
€
-
Patents and
trademarks
€
-
Total
€
-
15,247,434
277,760
902,655
16,427,849
15,247,434
277,760
902,655
16,427,849
1,463,063
(277,760)
(902,655)
282,648
16,710,497
-
-
16,710,497
As at 31 December 2018
16,710,497
-
-
16,710,497
Amortisation
As at 1 July 2017
Acquired on acquisition of
subsidiary (Note 31)
As at 31 December 2017
(As originally stated)
Fair value adjustment on
acquisition (Note 31)
As at 31 December 2017
(As restated)
Impairment losses
-
-
-
-
-
-
376,083
376,083
-
-
376,083
376,083
-
-
(376,083)
(376,083)
-
1,427,038
-
-
-
-
-
1,427,038
As at 31 December 2018
1,427,038
-
-
1,427,038
Carrying value
As at 31 December 2017 –
As originally stated
As at 31 December 2017 –
As restated
15,247,434
277,760
526,572
16,051,766
16,710,497
-
-
16,710,497
As at 31 December 2018
15,283,459
-
-
15,283,459
72
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
19.
INTANGIBLE ASSETS – continued
Cash-generating units
Goodwill acquired in business combinations is allocated, at acquisition, to the cash-generating units
(CGUs) that are expected to benefit from that business combination. A CGU is the smallest identifiable
group of assets that generate cash inflows that are largely independent of the cash inflows from other
assets or group of assets. The CGUs represent the lowest level within the Group at which the associated
goodwill is assessed for internal management purposes and are not larger than the operating segments
determined in accordance with IFRS 8 Operating Segments. A total of 1 CGUs (31 December 2017: 1) have
been identified and these are all associated with the Technology Sales Segment. The carrying value of
the goodwill within the Technology Sales Segment is €15,283,459 (31 December 2017(restated):
€16,710,497).
In accordance with IAS 36 Impairment of Assets, the CGUs to which significant amounts of goodwill have
been allocated are as follows:
Eqtec Iberia
31 Dec 2018
€
31 Dec 2017
(as restated) €
15,283,459
16,710,497
For the purpose of impairment testing, the discount rates applied to this CGU to which significant
amounts of goodwill have been allocated was 14% (31 December 2017: N/a) for the Eqtec Iberia CGU.
Annual test for impairment
Goodwill acquired through business combinations has been allocated to the above CGU for the purpose
of impairment testing. Impairment of goodwill occurs when the carrying value of the CGU is greater
than the present value of the cash that it is expected to generate (i.e. the recoverable amount). The Group
reviews the carrying value of each CGU at least annually or more frequently if there is an indication that
a CGU may be impaired.
The recoverable amount of each CGU is determined from value-in-use calculations. The forecasts used
in these calculations are based on a financial plan approved by the Board of Directors, plus 5-year
projections forecasted by management, and specifically excludes any future acquisition activity.
The value in use calculation represents the present value of the future cash flows, including the terminal
value, discounted at a rate appropriate to each CGU. The real pre-tax discount rates used is 14%. These
rates are based on the Group’s estimated weighted average cost of capital, adjusted for risk, and are
consistent with external sources of information.
The cash flows and the key assumptions used in the value in use calculations are determined based on
management’s knowledge and expectation of future trends in the industry. Expected future cash flows
are, however, inherently uncertain and are therefore liable to material change over time. The key
assumptions used in the value in use calculations are subjective and include projected EBITDA margins,
net cash flows, discount rates used and the duration of the discounted cash flow model.
73
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
19.
INTANGIBLE ASSETS – continued
The directors believe that any reasonably possible change in key assumptions on which the value-in-use
is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of
the cash-generating unit.
An impairment loss of €1,427,038 has been calculated for the year ended 31 December 2018.
The value-in-use calculation is subject to significant estimation, uncertainty and accounting judgements
and is particularly sensitive in the following areas:
ꢀ
ꢀ
ꢀ
In the event there was a 1% increase in the discount rate used to calculate the potential
impairment of the carrying values, which would represent a reasonably likely range of outcomes,
there would be an additional impairment loss of €860k at 31 December 2018.
In the event there was only 4 projects started each year from 2020, which would represent a
reasonably likely range of outcomes, there would be an additional impairment loss of €315k at
31 December 2018.
In the event that there was only 3 projects started each year from 2020, which would represent
a reasonably likely range of outcomes, there would be an additional impairment loss of €5.1m
at 31 December 2018.
20.
FINANCIAL ASSETS
GROUP
Investment in associate
Details of the Group’s interests in associated undertakings at 31 December 2018 is as follows:
Name of associated
undertaking
Country of
incorporation
Shareholding
Principal activity
GG Eco Energy
Limited
United Kingdom
30%
Operator of biomass heat
generating projects
Summarised financial information in respect of the Group’s interests in associated undertakings is
as follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net liabilities
31 Dec 2018
€
1,124,930
263,963
(1,176,779)
(1,299,410)
31 Dec 2017
€
1,235,265
181,559
(1,459,030)
(757,094)
(1,087,296)
(799,300)
Group’s share of net assets of associated entities
-
-
74
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
20.
FINANCIAL ASSETS
Total revenue
Total expenses
12 months
ended 31
Dec 2018
€
542,171
(844,397)
6 months
ended 31
Dec 2017
€
534,478
(750,929)
Total loss for the financial period
(302,226)
(216,451)
Group’s share of profits of associated undertakings
-
-
The investment in GG Eco Energy Limited is accounted for using the equity method in accordance
with IAS 28.
Company
Investment in subsidiary undertakings
At beginning of financial year
Investment in shares in Eqtec Iberia (Note 31)
At end of financial year
Loans to subsidiary undertakings
At beginning of financial year
Funds advanced to subsidiary undertakings
Provision for impairment of investment in subsidiaries
Foreign currency adjustment
At end of financial year
Total
12 Months
Ended 31
Dec 2018
€
15,896,663
900,000
6 Months
Ended 31
Dec 2017
€
-
15,896,663
16,796,663
15,896,663
1,720,736
-
(1,149,432)
-
4,409,954
15
(2,642,950)
(46,283)
571,304
1,720,736
17,367,967
17,617,399
75
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
20. FINANCIAL ASSETS- continued
Details of EQTEC plc subsidiaries at 31 December 2018 are as follows:
Name
Newry Biomass No. 1
Limited
React Biomass Limited
Reforce Energy Limited
Country of
Incorporation
Republic of Ireland
Shareholding
100%
Principal activity
Investment company
Republic of Ireland
Republic of Ireland
100%
100%
Pluckanes Windfarm Limited
Republic of Ireland
100%
Grass Door Limited
United Kingdom
100%
Newry Biomass Limited
Enfield Biomass Limited
Moneygorm Wind Turbine
Limited
Eqtec No. 1 Limited
Eqtec Strategic Project
Finance Limited (formerly
Plymouth Biomass Limited)
Clay Cross Biomass Limited
Altilow Wind Turbine
Limited
Eqtec Iberia SL
Northern Ireland
United Kingdom
Republic of Ireland
Republic of Ireland
United Kingdom
United Kingdom
Republic of Ireland
Spain
50.02%
100%
100%
100%
100%
90%
100%
100%
Investment company
Renewable energy
development company
Generation of electricity
through wind
Developer & operator of
biomass heat generating
projects
Energy utility company
Energy utility company
Dormant company
Investment company
Dormant company
Energy utility company
Generation of electricity
through wind
Provision of technical
engineering services
The shareholding in each company above is equivalent to the proportion of voting power held.
The registered office for all of the above companies is Building 1000, City Gate, Mahon, Cork, except
for Enfield Biomass Limited, Plymouth Biomass Limited, Clay Cross Biomass Limited and Grass Door
Limited, whose registered office is 3 Stucley Place, London NW1 8NS, England; Newry Biomass
Limited, whose registered office is 68 Cloughanramer Road, Carnmeen, Newry, Co. Down BT34 1QG,
Northern Ireland; and Eqtec Iberia SL, whose registered office is Rosa Sensat nº 9-11 Planta 5ª, 08005
Barcelona, Spain.
76
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
21. OTHER FINANCIAL INVESTMENTS
Investment in Bonds of Inteltrade
Less: Provision against investment in bonds
Investment in Shares of Energotec ECO AD
Other investments
31 Dec
2018
€
402,644
(402,644)
1,832
17,102
31 Dec 2017
€
402,644
(402,644)
1,832
17,102
18,934
18,934
22. DEFERRED TAXATION
A deferred tax asset has not been recognised at the balance sheet date in respect of trading tax losses
arising from the Irish and UK subsidiaries. Due to the history of past losses, the company has not
recognised any deferred tax asset in respect of tax losses to be carried forward which are approximately
€14 million at 31 December 2018.
The following deferred tax assets and liabilities were acquired on the acquisition of Eqtec Iberia SL on
28 December 2018:
Deferred Tax Assets
Spain – Research and Development tax credit
Spain - Corporate tax-losses
Disclosed under non-current assets – as originally stated
Fair value adjustment on acquisition
Disclosed under non-current assets – as restated
Deferred Tax Liabilities
Spain – Other items
31 Dec
2018
31 Dec 2017
(As
restated)
€
42,325
€
-
- 616,406
-
-
-
658,731
(658,371)
-
33
33
Disclosed under non-current liabilities
33
33
All deferred tax is recognized in profit or loss.
78
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
23.
INVENTORIES
Work in progress
31 Dec
2018
€
31 Dec 2017
€
98,851
167,124
In the 12 months to 31 December 2018, €68,273 (6 months to 31 December 2017: €Nil) of inventories
was included in profit or loss as an expense. This includes an amount of €Nil (6 months to 31 December
2017: €Nil) resulting from a write down of inventories.
In the opinion of the directors the replacement cost of the inventory did not differ materially from the
figure shown.
24. TRADE AND OTHER RECEIVABLES
Group
Trade receivables
Allowance for impairment of trade receivables
VAT receivable
Payments on account
Advances to related undertakings
Prepayments
Accrued income
Corporation tax
Other receivables
31 Dec
2018
€
31 Dec 2017
€
420,169
(306,292)
566,701
(306,292)
113,877
260,409
232,590
34,594
60,000
319,678
-
96
70,917
33,302
35,014
60,000
54,807
3,205
6,367
46,160
831,752
499,264
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable
approximation of fair value.
The following table shows an analysis of trade receivables split between past due and within terms
accounts. Past due is when an account exceeds the agreed terms of trade, which are typically 60 days.
Within terms
Past due more than one month but less than two months
Past due more than two months
31 Dec 2018
€
35,196
2,377
382,596
31 Dec 2017
€
81,780
2,377
482,544
420,169
566,701
Included in the Group’s trade receivables balance are debtors with carrying amount of €76,304 (31
December 2017: €176,252) which are past due at year end and for which the Group has not provided.
79
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
24. TRADE AND OTHER RECEIVABLES - continued
The Group does not hold any collateral over these balances. No interest is charged on overdue
receivables. The quality of past due not impaired trade receivables is considered good. The carrying
amount of trade receivables approximates to their fair values.
The Group’s policy is to recognise an allowance for doubtful debts of 100% against all receivables over
120 days because historical experience has been that trade receivables that are past due beyond 120 days
are not recoverable. Allowances for doubtful debts are recognised against trade receivables between 60
days and 120 days based on estimated irrecoverable amounts determined by reference to past default
experience of the counterparty and an analysis of the counterparty’s current financial position. The above
trade receivables are arising from EQTEC Iberia SL and the review on these balances shows that all of
the above amounts, with the exception of €306,292, are considered recoverable.
In determining the recoverability of a trade receivable, the Group considers any changes in the credit
quality of the trade receivable from the date credit was initially granted up to the end of the current
reporting year. The concentration of the credit risk is limited due to the customer base being large and
unrelated, and the fact that no one customer holds balances that exceeds 10% of the gross assets of the
Group. The maximum exposure risk to trade and other receivables at the reporting date by geographic
region, ignoring provisions, is as follows:
Ireland
Spain
United Kingdom
31 Dec 2018
€
-
420,169
-
31 Dec 2017
€
-
566,701
-
420,169
566,701
Other receivables relate to deposits on rental contracts amounting to €4,614 (31 December 2017:
€3,830), other debtors of €23,973 (31 December 2017: €Nil) and payments on account related to shares
of €42,330 (31 December 2017: €42,330). The aged analysis of other receivables is within terms.
There is no concentration of credit risk with respect to receivables as disclosed in Note 5 under credit
risk.
Company
Amounts due from subsidiary undertakings
Allowance for impairment of balances
Advances to related undertakings
Prepayments
Corporation Tax
VAT Receivable
Other receivables
80
31 Dec 2018
€
1,756,008
(160,521)
1,595,487
60,000
248,866
96
13,721
45,681
31 Dec 2017
€
248,045
(49,251)
198,794
60,000
22,268
96
12,265
46,160
1,963,851
339,583
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
24. TRADE AND OTHER RECEIVABLES - continued
The concentration of credit risk in the individual financial statements of EQTEC plc relates to amounts
due from subsidiary undertakings. The directors have reviewed these balances in the light of the
impairment review carried out on the investments by EQTEC plc in its subsidiaries.
The directors considered the future cash flows arising from subsidiaries and are satisfied that the
appropriate impairment has been applied to these balances.
25. CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and in
banks and bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the
cash flow statement can be reconciled to the related items in the balance sheet as follows:
Group
Cash and bank balances
Bank overdrafts (Note 28)
Sub-total
Cash and cash equivalents included in a
disposal group held for resale (Note 30)
Company
Cash and bank balances
Bank overdrafts (Note 28)
31 Dec 2018
€
463,414
(2,563)
460,851
31 Dec 2017
€
1,804,943
(1,618)
1,803,325
126,718
587,569
105,138
1,908,463
384,704
(2,563)
382,141
1,779,736
(1,618)
1,778,118
81
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
26. EQUITY
Share Capital
At 31 December 2017
Ordinary shares of €0.001
each
Deferred ordinary shares of
€0.40 each
Deferred “B” Ordinary
Shares of €0.099 each
Deferred convertible “A”
ordinary shares of €0.01
each
At 31 December 2018
Ordinary shares of €0.001
each
Deferred ordinary shares of
€0.40 each
Deferred “B” Ordinary
Shares of €0.099 each
Deferred convertible “A”
ordinary shares of €0.01
each
Authorised
Number
12,561,091,094
Allotted and
called up
Number
1,346,090,838
Authorised
€
12,561,091
Allotted and
called up
€
1,346,090
200,000,000
22,370,042
80,000,000
8,948,017
75,140,494
75,140,494
7,438,909
7,438,909
10,000,000,000
99,117,952
100,000,000
991,180
200,000,000
18,724,196
Authorised
Number
Allotted and
called up
Number
Authorised
€
Allotted and
called up
€
12,561,091,094
1,804,744,243
12,561,091
1,804,744
200,000,000
22,370,042
80,000,000
8,948,017
75,140,494
75,140,494
7,438,909
7,438,909
10,000,000,000
99,117,952
100,000,000
991,180
200,000,000
19,182,850
The holders of the ordinary shares are entitled to participate in the profits or assets of the Company (by
way of payment of any dividends, on a winding up or otherwise) and are entitled to receive notice, attend,
speak and vote at general meetings of the Company. Each ordinary share equates to one vote at meetings
of the company.
The holders of the deferred convertible “A” ordinary shares are entitled to participate pari passu with
ordinary shareholders in the profits or assets of the Company on a winding-up, up to an amount equal
to the par value paid in respect of such deferred convertible “A” ordinary shares but are not entitled to
participate in the profits or assets of the Company (by way of payment of any dividends or otherwise).
The holders of the deferred convertible “A” ordinary shares are not entitled to receive notice, attend,
speak and vote at general meetings of the Company.
The holders of the deferred ordinary shares and the deferred “B” ordinary shares are not entitled to
participate in the profits or assets of the Company (by way of payment of any dividends, on a winding
up or otherwise) and are not entitled to receive notice, attend, speak and vote at general meetings of the
Company.
82
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
26. EQUITY - continued
Share Premium
Proceeds received in excess of the nominal value of the shares issued during the year have been included
in share premium, less registration and other regulatory fees.
Company Share Premium
The share premium included in the consolidated and company statement of financial position is different
by €18,934,079 due to the reverse acquisition of the Group which occurred on 13 October 2008. The
reverse acquisition resulted to a reverse acquisition reserve which has been netted off against the share
premium in the consolidated statement of financial position.
Movements in the financial year to 31 December 2018
On 19 April 2018, the Company received a conversion notice pursuant to the Unsecured Loan Note
Facility (“ULNF”) for the principal amount of £150,000 to be converted at 0.4p per share into
37,500,000 new ordinary shares in the company.
On 26 April 2018, the Company agreed with EBIOSS Energy SE (“EBIOSS”) to convert a receivable
owned by EBIOSS in the amount of £147,900 into 36,975,000 new ordinary shares in the company at a
conversion price of 0.4p.
On 25 May 2018, the Company received a conversion notice pursuant to the ULNF for the principal
amount of £100,000 to be converted at 0.3p per share into 33,333,333 new ordinary shares in the
company.
On 31 May 2018, the Company agreed with EBIOSS to convert a receivable owned by EBIOSS in the
amount of £87,000 into 29,000,000 new ordinary shares in the company at a conversion price of 0.3p.
On 6 August 2018, the Company announced that in accordance with arrangements entered into on 5
July 2018 and the conclusion of the standstill period announced on 30 July 2018 the Company has issued
and allotted 307,194,667 Ordinary Shares arising from the conversion of loan notes entered into on 5
July 2018 with Origen Capital LLP ("Origen"), Altair Group Investments Limited ("Altair") and
Ecofinance (GLI) Limited ("Ecofinance"). The exercise price of the shares is 0.6p per share.
On 3 October 2018, the Company announced that under the Amended Loan Agreement with Cuart
Investment Funds and Associates (“the Lenders”), a commitment fee of US$136,000 is paid by the
Company to the Lenders through the issue of 8,349,546 Ordinary Shares in the Company to the Lenders
at an issue price of 1.2542 pence per share.
On 30 October 2018, the Company announced the subscription for 2,026,665 new shares in the
Company's ordinary shares of €0.001 each by certain Directors of the Board. The Ordinary Shares were
issued by the Company to the Directors at an issue price of 0.93 pence per Ordinary Share. In addition,
under the agreement with the Company's Joint Broker VSA Capital Limited, advisor fees totalling
£39,750 were converted into 4,274,194 Ordinary Shares in the Company at an issue price of 0.93 pence
per share.
83
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
26. EQUITY - continued
Share Warrants
No share warrants were exercised during the financial year ended 31 December 2018. The following
share warrants were in existence and remain unexercised as at 31 December 2018:
Detail
Number
Grant Date
Exercise
Price
(GBP)
Expiry
Date
Origen Capital Partners LLP
Alchemy Capital Ltd
Strand Hanson Limited
Michael Joseph
Resource Reserve Recovery
plc
Altair Group Investments
Limited
Cuart Investments Pcc Ltd
YA II Pn Ltd
Origen Capital LLP
Altair Group Investments
Limited
Ecofinance (GLI) Limited
Cuart Investments Pcc Ltd
YA II Pn Ltd
3,150,000
35,300,000
1,533,505
76,923,077
14/07/2015
14/07/2015
06/02/2018
28/12/2017
13/07/2022
13/07/2022
05/02/2022
31/12/2019
£0.10
£0.10
£0.0533
£0.022
3,846,154
28/12/2017
31/12/2019
£0.022
105,263,158
40,648,067
40,648,067
95,833,333
31/12/2017
05/07/2018
05/07/2018
07/08/2018
31/12/2022
04/07/2021
04/07/2021
06/08/2020
£0.00975
£0.0119
£0.0119
£0.0075
50,000,000
7,764,000
16,675,159
16,675,159
07/08/2018
07/08/2018
04/10/2018
04/10/2018
06/08/2020
06/08/2020
03/10/2021
03/10/2021
£0.0075
£0.0075
£0.0157
£0.0157
Fair
Value at
Grant
Date
(GBP)
£-
£-
£-
£-
£-
£-
£-
£-
£-
£-
£-
£-
£-
27.
NON-CONTROLLING INTERESTS
494,259,679
Balance at beginning of financial year
Share of loss for the year
Unrealised foreign exchange gains/(losses)
12 months
ended 31
Dec 2018
€
(1,335,784)
(1,217,589)
510
6 months
ended 31
Dec 2017
€
1,377,947
(2,672,179)
(41,552)
Balance at end of financial year
(2,552,863)
(1,335,784)
84
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
28. BORROWINGS
Group
Current liabilities
At amortised cost
Bank overdrafts
Bank borrowings
Unsecured loan
15% secured loan facility
Other loan with EBIOSS Energy SE
10% secured loan facility
Non-current liabilities
At amortised cost
Bank borrowings
15% convertible secured loan note
15% secured loan facility
Company
Current liabilities
Bank overdrafts
15% secured loan facility
10% secured loan facility
Non-current liabilities
15% convertible secured loan note
15% secured loan facility
3
4
1
6
3
2
1
1
6
2
1
31 Dec 2018
€
31 Dec 2017
€
2,563
207,037
-
147,474
5,691
2,526,327
1,618
605,239
40,000
-
-
-
2,889,092
646,857
313,952
2,216,604
554,845
273,681
2,693,276
924,123
3,085,401
3,891,080
€
2,563
147,474
2,526,327
2,676,364
2,216,603
554,845
€
1,618
-
-
1,618
2,693,276
924,123
2,771,448
3,617,399
Borrowings at amortised cost
1. 15% Secured Loan Note Facility (“SLF”) £1,000,000
The SLF is at a fixed rate of 15% per annum, the interest on which will be paid monthly in arrears. The
SLF is for a five-year term and the principal together with any accrued interest will be repayable by a
bullet repayment at the end of the term on 15 July 2020. The SLF is secured by mortgage debentures,
cross guarantees and share pledges over EQTEC and its subsidiary companies.
On 19 January 2018, the Company announced that it had made a partial repayment of £378,882 on its
SLF. The SLF, commencing in 2015, was repayable in full in July 2020. The Company, with the
agreement of the loan provider had decided to repay £378,882 of capital and £2,958 in accrued interest
to the loan provider, earlier than scheduled, in order to reduce the cost of debt to the Group. The
remaining balance of £621,118 is repayable in July 2020.
In December 2018, the company received £132,526 under the facility as an advance on monies due for
a share placement that took place on 4 March 2019.
85
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
28. BORROWINGS – continued
1. 15% Secured Loan Note Facility (“SLF”) £1,000,000 - continued
The carrying amount of the SLF at 31 December 2018 is as follows:
Proceeds from the issue of the SLF
Less: Transaction costs
Net proceeds
Accreted transaction costs
Repayment of SLF
Currency gains on retranslation
Carrying amount of SLF at 31 December 2018
€
1,565,582
(496,113)
1,069,469
329,585
(426,740)
(269,995)
702,319
The face value of the SLF at 31 December 2018 is €838,652 (31 December 2017: €1,126,313).
2. 15% convertible secured loan note (“CSLN”) £2,000,000
The CSLN is secured by the same security package granted in favour of the SLF. This is governed by an
inter-creditor deed under which the SLF security plus interest and costs shall rank in priority to the
CSLN security plus interest and costs. Under the terms of the CSLN, the Secured Creditor has the right
to convert up to £1 million into new Ordinary Shares at £0.10.
The carrying amount of the CSLN at 31 December 2018 is as follows:
Amounts rolled up from previous facilities
Additional proceeds issued on CSLN
Less: Transaction Costs
Net Proceeds
Accreted Transaction Costs
Currency gains on retranslation
Carrying amount of CSLN at 31 December 2018
€
2,742,430
110,000
(146,344)
2,706,086
137,134
(626,616)
2,216,604
The face value of the CSLN at 31 December 2018, including accrued interest, is €2,216,604 (31
December 2017: €2,693,276).
The CSLN was due for repayment on 14 July 2017. The Company has entered into a new agreement
with the holder of the CSLN (“the holder”) whereby the holder has agreed to extend the date for
payment of the CSLNs together with accrued interest thereon until 14 July 2020 (“Extension Date”)
subject to the following terms:
(A) that the interest rate set out in the CSLNs shall be increased from 7.5% to the rate of 15% per
annum for the year between (but excluding) 31 October 2018 and the Extension Date on the
outstanding principal amount of the Notes;
(B) that in the event that the Company repays the entire amount due under the CSLNs in full
prior to the Extension Date the interest set above shall be reduced as follows:
1. if the CSLNs are repaid in full between 1 November 2018 and 30 April 2018 the
interest rate shall be 9% per annum; and
2. if the CSLNs are repaid in full between 1 May 2018 and 31 October 2019 the interest
rate shall be 12% per annum.
86
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
28. BORROWINGS – continued
2. 15% convertible secured loan note (“CSLN”) £2,000,000 - continued
In consideration of holder's agreement to the extension of the payment of the Notes, the Company has
agreed that:
(i)
the Company pays £300,000 to the holder in satisfaction of accrued interest on the Notes;
(ii) the Company amends the Instrument to provide that up to £1 million of outstanding principal
amount of the Notes may be converted at the election of the holder into new ordinary shares in
the Company (“Ordinary Shares”) at 0.585p;
(iii) the Company grants the holder warrants to subscribe for 105,263,158 Ordinary Shares at an exercise
price of 0.975p (“Exercise Price”), exercisable for five years from the date of grant.
3. Bank Borrowings
The following borrowings are held in various Spanish Banks by Eqtec Iberia SL at the year-end:
Borrower
Banco Popular
Banco Popular
Banco Santander
Credit cards
Expiry
Date
13/01/2021
09/03/2025
29/12/2019
Initial
Loan
€
350,000
269,193
250,000
-
Interest
Rate
2.80%
8.00%
3.92%
-
Balance
Current
€
187,172
246,998
86,682
137
€
88,482
31,736
86,682
137
Non-
current
€
98,690
215,262
-
-
520,989
207,037
313,952
The borrowings were used to finance the operations and working capital of Eqtec Iberia SL. They
are unsecured. There has been no breach of covenants with respect to these borrowings.
4. Unsecured borrowings
The Group acquired borrowings of €40,000 payable to Synagastech on the acquisition of Eqtec Iberia
SL on 28 December 2017. These borrowings are interest-free and was repaid in 2018.
5. Unsecured Convertible Loan Note (“UCLN”) Facility
On 28 February 2018, the Company announced that it had agreed an Unsecured Convertible Loan Note
facility of up to £7.5 million ("Loan Notes") with one investor, Bercheva Opportunities Limited ("the
The Loan Notes would be issued to a single investor,
Investor") to help accelerate its growth strategy.
Bercheva Opportunities Limited, in up to five tranches. Each Loan Note has a subscription price of
£23,500 and will be redeemed at par value, being £25,000, five years from the date of issue (the "Maturity
Date") unless converted at an earlier date. The issue of the first tranche of Loan Notes having an
aggregate principal amount of £1.5 million was advanced on 28 February 2018.
The Company received subscription proceeds of £1,350,000 for this issue and has agreed to pay an
arrangement fee of 5% on this and subsequent issues. Subsequent issues of Loan Notes would be made
at the sole discretion of the Company and must be for a minimum of £1.5 million and a maximum of
£2 million in principal amount of Loan Notes. The Company can elect to issue Loan Notes every 90
calendar days unless the Company and the Investor agree to vary the issue date. The issue of Loan Notes
will require the consent of the Investor where there has been an event of default by the Company or the
closing bid price of the Ordinary Shares (as defined below) on AIM is below 1p for any five consecutive
trading days.
87
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
28. BORROWINGS – continued
5. Unsecured Convertible Loan Note Facility - continued
The Loan Notes are convertible by the Investor at any time before the Maturity Date into ordinary
shares of €0.0001 each in the capital of the Company ("Ordinary Shares") at the lesser of: a) 125% of
the closing bid-price of an Ordinary Share on AIM one trading day before the date of issue of the
relevant Loan Notes being converted; and b) the lowest closing bid price of an Ordinary Share on AIM
from the ten trading days immediately prior to notice of conversion being served (the "Conversion
Price"). The Investor has undertaken not to dispose of any Ordinary Shares arising from a conversion
of Loan Notes on any given trading day if the number of Ordinary Shares disposed would exceed the
greater of: (a) 5% of the maximum nominal amount of Ordinary Shares which have been or may be
issued on any conversion of Loan Notes issued under the Instrument (assuming conversion of the Loan
Notes in full at the Conversion Price(s) prevailing on such trading day); and (b) 20% of the daily trading
volume of Ordinary Shares on the relevant trading day, other than in a block transaction.
Upon conversion of a Loan Note, the holder will be granted one warrant to subscribe for an Ordinary
Share ("Warrant") for every two Ordinary Shares issued on conversion. The subscription price payable
on the exercise of a Warrant will be the lesser of a) £0.027 per share; or b) 125% of the Conversion
Price attributable to the Loan Notes the conversion of which resulted in the grant of the Warrant. Each
Warrant will be exercisable at any time prior to the fifth anniversary of the date of issue of the relevant
Loan Note. The Warrants have adjustment and anti-dilution provisions in the event of certain changes
to the Company's share capital and issues of Ordinary Shares at below the relevant exercise price unless
the Investor has been offered a pro rata right to participate in such issue.
The Loan Notes will not bear interest. In certain events of default by the Company or the Company not
having sufficient share authorities in place to permit the issue of Ordinary Shares on a conversion of the
Loan Notes, the Investor may elect to redeem the Loan Notes for 120 per cent. of the par value of such
Loan Notes. In the event of a change of control of the Company, the Company may be required to
redeem the Loan Notes at 110 per cent. of the par value of such Loan Notes. The Company can also
elect to redeem at any time one or more Loan Notes at a price equal to 105 per cent. of the par value of
such Loan Notes, subject to giving the Investor 10 business days' notice, following which the Investor
will have the ability to convert some or all of these Loan Notes instead.
On 16 March 2018, the Company announced that it had decided not to proceed with any further draw
down amounts under the Unsecured Convertible Loan Note Facility Agreement of up to £7.5 million
("Loan Notes"). In addition, the Company has agreed in principle, and is in preliminary discussions with
the investor and the Company's advisers, to cancel the Loan Note Agreement, and for the redemption
of existing amounts outstanding at the earliest opportunity.
On 23 May 2018, the Company announced that it had agreed with the Investor a partial redemption of
the UCLN amounting to £157,500 to be paid immediately. This amount will be the initial payment ahead
of the full redemption of the remainder of outstanding Unsecured Convertible Loan Notes. Additionally,
the Investor had also agreed, on full redemption of the remaining UCLN, to give up any future or past
equity rights in the Company in the form of warrants that were attached to the original UCLN. The
balance of the UCLN would be redeemed once final negotiations are completed between the Company
and a new debt provider and a drawdown is made on the new facility.
On 25 May 2018, the Company received a conversion notice pursuant to the ULNF for the principal
amount of £100,000 to be converted at 0.3p per share into 33,333,333 new ordinary shares in the
company.
88
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
28. BORROWINGS – continued
5. Unsecured Convertible Loan Note Facility - continued
On 6 July 2018, the Company used the proceeds of the first instalment of the Loan Facility (see 6
below) to redeem the remaining amount outstanding under the UCLN facility of £1.15 million.
6. Loan Facility
The Company has entered into a loan agreement (the "Loan Agreement") with Cuart Investments
Fund and associates (the "Lenders") for the provision of a secured loan facility of up to US$3.2
million (approximately £2.4 million) (the "Loan Facility") with the Lenders. The Loan Facility may
be drawn down in two equal instalments with the first instalment of US$1.6 million being advanced
upon satisfaction of certain conditions, including:
ꢀ
ꢀ
ꢀ
the provider of the convertible loan announced on the 28th February 2018 confirming the
ability to redeem the outstanding amount of such loan out of the proceeds of the Loan
Facility;
the Company entering into and drawing down under arrangements with Origen, Altair and
Ecofinance as described below; and
the Company having granted warrants to the Lenders over Ordinary Shares valued at
US$1.28 million at an exercise price of 125% of the average of the daily Volume Weighted
Average Prices ("VWAPs") for each of the five trading days preceding the drawdown of the
initial instalment of the Loan Facility.
The Company can elect to redeem at any time the outstanding amount of an advance at a price equal
to 105% of the principal amount together with all accrued and unpaid interest, subject to giving the
Lenders four business days' notice.
The Company shall pay interest on any instalments of the Loan Facility at the rate of 10% per annum.
Each instalment of the Loan Facility will have a maturity date of 12 months from the date of advance
(the "Advance Date"). No repayments of the Loan Facility will be made by the Company in the first
three months following the Advance Date, following which repayments shall be made as follows: (i)
US$67,500 shall be paid at the end of the fourth month following the Advance Date; (ii) 70% of the
principal and interest shall be repaid over the following seven months; and (iii) the balance paid on
the maturity date.
The Company's obligations under the Loan Agreement are subject to the existing security granted by
the Company and its subsidiaries in favour of Altair and Ecofinance.
The Company used the proceeds of the first instalment of the Loan Facility to redeem the amount
outstanding under the convertible loan facility entered into by the Company on 28 February 2018.
(see 6 above).
On 3 October 2018, the Company announced that it has executed final legal documentation
amending the existing secured loan facility ("Amended Loan Agreement") entered into by the
Company on 5 July 2018 with the "Lenders", such that the secured loan facility is increased by up to
US$10 million (approximately £7.6 million). The Company received net approximately US$0.8
million after expenses from the first Tranche which was drawn down on that date.
89
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
28. BORROWINGS – continued
6. Loan Facility - continued
The Company granted warrants to the Lenders over 33,350,318 Ordinary Shares at an exercise price
of 1.57 pence per Ordinary Share exercisable within three years from the date of grant. Under the
Amended Loan Agreement, a commitment fee of US$136,000 was paid by the Company to the
Lenders through the issue of 8,349,546 Ordinary Shares in the Company to the Lenders at an issue
price of 1.2542 pence per share.
On 14 December 2018, the Company announced that it had drawn down a third tranche amounting
to US$864,000 under the US$10 million financing facility provided by the Lenders. The total amount
drawdown to date under the financing facility amounts to US$3,328,000 (approximately £2.6 million).
The carrying amount of the loan agreement at 31 December 2018 is as follows:
Proceeds from the issue of the Loan Agreement
Less: Transaction costs
Net proceeds
Accrued interest
Accreted transaction costs
Repayment of principal and interest
Currency losses on retranslation
€
2,878,841
(552,271)
2,326,570
91,285
228,234
(148,951)
29,189
Carrying amount of loan at 31 December 2018
2,526,327
The face value of the loan and accrued interest at 31 December 2018 is €2,853,811 (31 December
2017: €Nil).
7. Other borrowings
On 6 July 2018, the Group received an unsecured, non-interest accruing, convertible loan of £1.15
million from Origen Capital LLP. This loan was converted into 191,666,667 Ordinary Shares of
€0.001 each in the company on 6 August 2018 (See Note 26).
90
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
29. TRADE AND OTHER PAYABLES
Group
VAT payable
Trade payables
Other payables
Accruals
Other tax liabilities
Deferred revenues
PAYE & social welfare
31 Dec
2018
€
23,000
725,576
56,890
600,301
-
-
88,906
31 Dec
2017
€
15,044
1,259,650
330,699
847,234
126,996
81,921
105,441
1,494,673
2,766,985
The carrying amount of trade and other payables approximates fair value. All trade and other payables
fall due within one year.
Trade and other creditors are payable at various dates in accordance with the suppliers’ usual and
customary credit terms. Corporation tax and other taxes including social insurance are repayable at
various dates over the coming months in accordance with the applicable statutory provisions.
Company
Trade payables
Other creditors
Amounts payable to subsidiary undertakings
PAYE & social welfare
Accruals
31 Dec
2018
€
127,411
1,250
12,881
20,065
123,949
31 Dec 2017
€
579,247
115,360
3,592
48,126
575,259
285,556
1,321,584
The carrying amount of trade and other payables approximates fair value. All trade and other payables
fall due within one year.
30. DISPOSAL GROUP CLASSIFIED AS HELD FOR RESALE AND DISCONTINUED
OPERATIONS
The Group is in negotiations with certain parties with respect to the sale of its subsidiary, Pluckanes
Windfarm Limited, which is involved in the generation of electricity through wind. The disposal is
consistent with the Group’s long-term policy to focus its activities as a technology solution company for
waste gasification to energy projects. The disposal is expected to be complete in Q3 2019.
Consequently, assets and liabilities allocable to Pluckanes Windfarm Limited were classified as a disposal
group. Revenues and expenses, gains and losses relating to the discontinuation of this subgroup have
been eliminated from profit or loss from the Group’s continuing activities and are shown as a single line
item on the face of the statement of profit or loss. The combined results of the discontinued operations
included in the loss for the financial year are set out below.
93
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
30.
DISPOSAL GROUP CLASSIFIED AS HELD FOR RESALE AND DISCONTINUED
OPERATIONS – continued
Profit for the financial period from discontinued
operations
Revenue (Note 8)
Cost of sales (Note 9)
Administrative Expenses (Note 10)
Operating Profit
Finance Costs (Note 13)
Finance Income (Note 13)
Profit from discontinued operations before tax
Tax Expenses
Profit for the year from discontinued operations
(attributable to owners of the Company)
12 months
ended 31
Dec 2018
€
6 months
ended 31
Dec 2017
€
183,660
(275)
183,385
(112,431)
70,954
(34,202)
6
36,758
-
77,410
-
77,410
(57,277)
20,133
(18,546)
3
1,590
-
36,758
1,590
Cash flows generated by Pluckanes Windfarm Limited for the years under review are as follows:
Cash flows from discontinued operations
Operating activities
Investing activities
Financing activities
12 months
ended 31
Dec 2018
€
142,956
(904)
(120,472)
6 months
ended 31
Dec 2017
€
49,820
3
(61,584)
Net cash flows used in discontinued operations
21,580
(11,761)
The carrying amount of assets and liabilities in this disposal group are summarised as follows:
94
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
30.
DISPOSAL GROUP CLASSIFIED AS HELD FOR RESALE AND DISCONTINUED
OPERATIONS
Assets classified as held for resale:
Non-current assets:
Property, plant and equipment
Current assets:
Trade and other receivables
Cash and cash equivalents (Note 25)
Assets classified as held for resale
Liabilities classified as held for resale:
Current liabilities:
Borrowings
Trade and other payables
Liabilities classified as held for resale
12 months
ended 31
Dec 2018
€
6 months
ended 31
Dec 2017
€
1,090,858
1,166,679
25,971
126,718
37,816
105,138
1,243,547
1,309,633
901,250
12,232
987,250
59,544
913,482
1,046,794
The directors of the Company expect that the fair value less costs to sell Pluckanes Windfarm Limited
will be higher than the aggregate carrying amount of the related assets and liabilities. Therefore, no
impairment loss was recognised on reclassification of the assets and liabilities as held for resale.
31. BUSINESS COMBINATIONS
Subsidiaries acquired
Name of
Subsidiary
Principal
Activity
Date of
Acquisition
Proportion of voting
equity interests
acquired
Consideration
transferred
(€)
Eqtec Iberia SL
Provision of
technical
engineering
services
28/12/2017
100%
15,896,663
Eqtec Iberia SL (“Eqtec Iberia”) was acquired for the following strategic benefits to the Group:
ꢀ Eqtec Iberia has a highly efficient and highly compliant proprietary gasification technology;
ꢀ It will result in an Enlarged Group with solid experience in the Energy from Waste (“EfW”)
sector;
ꢀ It will result in a strong experienced management team with complimentary skill sets;
ꢀ It will secure a pipeline of projects in the UK and mainland Europe;
ꢀ It secures existing relationships with Energy China and some of the foremost companies in the
energy sector; and
95
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
31.
BUSINESS COMBINATIONS - continued
ꢀ
It will give the Group the benefit of the Collaboration Framework Agreement signed in May
2016 between Eqtec Iberia, EBIOSS and Energy China which sets out the objectives and
parameters surrounding the completion of EfW projects in the UK through which Energy
China would be responsible for the construction and obtaining funding for projects in the UK
that use Eqtec Gasifier Technology through Engineering, Procurement and Construction
contracts.
Consideration Transferred
Eqtec Iberia SL
€
Total
€
833,864,531 Ordinary Shares of €0.001 each at
a price of £0.016789 per share (Total £14
million)
15,896,663
15,896,663
Assets acquired, and liabilities recognised at the date of acquisition
Non-current assets
Property, plant and equipment
Intangible assets
Other financial investments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Borrowings
Non-current liabilities
Borrowings
Deferred tax liabilities
Cost
€
100,881
804,332
421,578
658,731
167,124
1,246,953
13,728
(1,046,209)
(645,239)
(363,681)
(33)
Fair Value
Adjustment
€
-
-
(402,644)
-
-
(306,292)
-
Fair Value
€
100,881
804,332
18,934
658,731
167,124
940,661
13,728
-
-
(1,046,209)
(645,239)
-
-
(363,681)
(33)
Net assets acquired – as
originally stated
Further fair value adjustment
Intangible assets
Deferred tax assets
Net liabilities acquired – as
restated
1,358,165
(708,936)
649,229
-
-
(804,332)
(658,731)
(804,332)
(658,731)
1,358,165
(2,171,999)
(813,834)
96
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
31.
BUSINESS COMBINATIONS - continued
Goodwill arising on acquisition
Consideration transferred
Less: fair value of identifiable net assets acquired
As originally stated
Further fair value
adjustment
As restated
€
15,896,663
(649,229)
15,247,434
1,463,063
16,710,497
Goodwill arose in the acquisition of Eqtec Iberia because the purchase included the project pipeline
and customer relationships of Eqtec Iberia as part of the acquisition. These assets could not be
separately recognised from goodwill because they are not capable of being separated from the Group
and sold, transferred, licenced, rented or exchanged, either individually or together with any related
contracts. None of the goodwill arising on acquisition is expected to be deductible for tax purposes.
Net cash inflow on acquisition of subsidiaries
Consideration paid in cash
Cash and cash equivalents acquired
Eqtec Iberia
€
-
13,728
Net cash inflow on acquisition of subsidiaries
13,728
Impact of acquisitions on the results of the Group
Included in the loss for the comparative period is a profit of €Nil related to Eqtec Iberia. Revenue for
the comparative period includes €Nil in respect of Eqtec Iberia.
Had the acquisition of EQTEC Iberia been effected at 1 July 2017, the revenue of the group from
continuing operations for the financial period ended 31 December 2017 would have been increased by
€270,202; and the loss for the financial period from continuing operations of the Group, after accounting
for a gain on the disposal of financial instruments of €604,350, would have been increased by €15,759.
The directors of the Group consider these pro-forma numbers to represent an approximate measure of
the performance of the combined group on an annualised basis and to provide a reference point for
comparison in future years.
97
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
32. RELATED PARTY TRANSACTIONS
The Group’s related parties include EBIOSS Energy SE (“EBIOSS”), who at 31 December 2018 held
41.13% of the shares in the Company, the joint venture and key management.
Transactions with EBIOSS
Included in trade and other receivables is an amount of €60,000 (31 December 2017: €60,000) receivable
from EBIOSS. Included in borrowings in €5,691 due to EBIOSS from the group.
Transactions with key management personnel
Key management of the Group are the members of EQTEC plc’s board of directors. Key management
personnel remuneration includes the following expenses:
Fees/Salaries
/Expenses
Termination
Other Pension
€’000
250
68
24
145
40
35
84
-
-
646
€’000
-
-
10
-
-
-
-
-
-
10
€’000
-
-
-
-
-
-
-
-
-
-
€’000
-
-
-
-
-
-
-
-
-
-
12
months
ended 31
Dec 2018
€’000
250
68
34
145
40
35
84
-
-
656
6 months
ended 31
Dec 2017
€’000
125
-
-
-
-
158
12
295
Directors
G Madden
I Pearson
N O’Brien
L Sanchez
O Leiva
T Quigley
I Price
B Halpin
D O’Connell
Total
At 31 December 2018, directors’ remuneration unpaid (including past directors) amounted to €23,642
(31 December 2017: €115,360).
Included in trade and other receivables is an amount of €14,000 receivable from O. Leiva (31 December
2017: €Nil).
Details of each director’s interests in shares that were in office at the year-end are shown in the Directors’
Report.
98
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
32. RELATED PARTY TRANSACTIONS - continued
Transactions with associate undertakings
During the financial year ended 31 December 2018, sales of €41,659 were made to associate undertakings
(6 months ended 31 December 2017: €20,200). Included in trade and other receivables at 31 December
2018 is balances of €Nil due from associate undertakings (30 June 2018 : €Nil).
Other transactions
During the financial year ended 31 December 2018, the Group sold services totalling €53,524 to TNL
Equipamientos Amb, SL (“TNL”), a related party of EQTEC Iberia SL. Included in trade and other
receivables at 31 December 2018 is €45,441 due from TNL (31 December 2017: €16,917).
33. EVENTS AFTER THE BALANCE SHEET DATE
Loan Facilities
The Company announced on 11 January 2019 that it had executed final legal documentation to amend
the existing secured loan facility initially entered into by the Company on 5 July 2018 (the "Loan Facility")
with Cuart Investments Fund and associates (the "Lenders"). The Company, in order to pursue its
opportunities and targets, had agreed with the Lenders to further amend the terms of the Loan Facility
so that repayment amounts due pursuant to the Loan Facility after 5 January 2019 would now commence
on 5 April 2019. As part of the amendment to the terms of the Loan Facility, a monthly fee of US$6,667
would be paid on the 5th day of each month beginning on 5 April 2019 for 15 months. Payments of
capital and interest due and outstanding under the Loan Facility on 5 January 2019 were US$486,893.
As such, the Company had also agreed with the Lenders to make a minimum cash payment of
US$100,000 of this balance by 31 January 2019 with the balance of US$386,893 being paid no later than
28 February 2019.
Altair Loan Facility
The Company announced on 22 January 2019 that it has entered into an agreement with Altair Group
Investment Limited ("Altair") to increase the loan facility available for drawdown by £0.879 million to
£3.5 million. Altair would also consolidate two loans between Altair and EQTEC, for which Altair has
the ultimate benefit, into one facility.
Exercise of warrants
On 4 March 2019, the Company received a notice of exercise from Altair in respect of warrants over
105,263,158 Ordinary Shares at a price of 0.975 pence per share and further notices of exercise from
each of Altair and Ecofinance in respect of warrants over 50,000,000 Ordinary Shares and 7,764,000
Ordinary Shares respectively at a price of 0.75 pence per share. The aggregate gross proceeds of these
exercises amount to £1,459,546. These warrants were issued in 2017 and 2018 and represent the full
exercise of the warrants issued to both Altair and Ecofinance.
99
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
33. EVENTS AFTER THE BALANCE SHEET DATE - continued
Issue of Shares to Service Provider
On 16 May 2019, the Company announced that it had issued and allotted 2,777,777 Ordinary Shares of
€0.001 each to a service provider as consideration for services rendered.
Issue of shares to Loan Facility Provider
On 24 May 2019, the Company announced that it had issued 33,767,588 new ordinary shares of €0.001
each to Cuart Investments Fund and associates (the "Lenders") in settlement of US$300,362 of principal
and accrued interest due in May under the loan facility with the Lenders as announced on 5 July 2018
and as amended as announced on 3 October 2018 and 11 January 2019 (the "Loan Facility").
Loan Facility Drawdown
On 3 June 2019, the Company announced a £0.2 million drawdown under the £3.5 million loan facility
with Altair Group Investment Limited ("the Loan Facility"), which was announced on 22 January 2019.
Investment in North Fork Community Power
On 4 June 2019, the Company announced that it had signed a legally binding agreement with Phoenix
and North Fork Community Development Council ("NFCDC") (the "Agreement"), to acquire 19.99%
ownership of North Fork Community Power LLC ("NFCP"), a special purpose vehicle ("SPV") formed
to build and operate a 2MW biomass project in North Fork, California (the "Project"). The
consideration for the Company's investment will be solely satisfied by the supply of certain items of the
existing equipment currently held at EQTEC's Newry site, valued at US$2.5 million and no cash
consideration will be required.
Debt Restructuring, Placing and Corporate Restructuring
On 28 June 2019 the Company announced it has reached agreement for a comprehensive restructuring
of various payment obligations with its lenders, resulting in a reduction in its liabilities of, in aggregate,
approximately €3 million and that it has raised €0.8 million (before expenses) for general working capital
purposes.
The Company also announced its intention to undertake a cost reduction programme in relation to its
operations in the UK and Spain and certain senior management appointments.
EQTEC will redeem £2,026,118 of the outstanding principal owed by the Company under the Altair
Facility and will also pay Altair an early redemption fee of £101,306, being 5 per cent. of the value of
the debt redeemed, through the issue of the Altair Redemption Shares (the “Redemption”). The
remaining, unredeemed amount of £795,000 under the Altair Facility will be governed by an amended
and restated secured loan facility.
The Riverfort Lenders, pursuant to a further amendment to the Riverfort Facility, will convert
US$800,000 (approximately £632,000) of its debt into 191,515,152 new Ordinary Shares at the Placing
Price and will receive a debt conversion fee of £31,600, being 5 per cent. of the value of the debt
converted, to be satisfied by the issue of 9,575,757 new Ordinary Shares. Following the Conversion,
US$1,575,000 remains outstanding under the Riverfort Facility.
Following the Redemption and Conversion, in aggregate, approximately £2,039,250 remains outstanding
under the Remaining Facilities. The Remaining Facilities will have a revised annual interest rate of 12.5
per cent and all amounts outstanding are to be repaid as a single payment of principal and accrued
interest on 31 July 2020, together with a cash redemption fee of 8 per cent. on the balances outstanding
as at that date.
100
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
34. NON-CASH TRANSACTIONS
During the financial year, the Group entered into the following non-cash investing and financing
activities which are not reflected in the consolidated statement of cash flows:
On 19 April 2018, the Company received a conversion notice pursuant to the Unsecured Loan Note
Facility (“ULNF”) for the principal amount of £150,000 to be converted at 0.4p per share into
37,500,000 new ordinary shares in the company.
On 26 April 2018, the Company agreed with EBIOSS Energy SE (“EBIOSS”) to convert a receivable
owned by EBIOSS in the amount of £147,900 into 36,975,000 new ordinary shares in the company at a
conversion price of 0.4p.
On 25 May 2018, the Company received a conversion notice pursuant to the ULNF for the principal
amount of £100,000 to be converted at 0.3p per share into 33,333,333 new ordinary shares in the
company.
On 31 May 2018, the Company agreed with EBIOSS to convert a receivable owned by EBIOSS in the
amount of £87,000 into 29,000,000 new ordinary shares in the company at a conversion price of 0.3p.
On 6 August 2018, the Company announced that in accordance with arrangements entered into on 5
July 2018 and the conclusion of the standstill period announced on 30 July 2018 the Company has issued
and allotted 307,194,667 Ordinary Shares arising from the conversion of loan notes entered into on 5
July 2018 with Origen Capital LLP ("Origen"), Altair Group Investments Limited ("Altair") and
Ecofinance (GLI) Limited ("Ecofinance"). The exercise price of the shares is 0.6p per share.
On 3 October 2018, the Company announced that under the Amended Loan Agreement with Cuart
Investment Funds and Associates (“the Lenders”), a commitment fee of US$136,000 is paid by the
Company to the Lenders through the issue of 8,349,546 Ordinary Shares in the Company to the Lenders
at an issue price of 1.2542 pence per share.
On 30 October 2018, the Company announced the subscription for 2,026,665 new shares in the
Company's ordinary shares of €0.001 each by certain Directors of the Board. The Ordinary Shares were
issued by the Company to the Directors at an issue price of 0.93 pence per Ordinary Share. In addition,
under the agreement with the Company's Joint Broker VSA Capital Limited, advisor fees totalling
£39,750 were converted into 4,274,194 Ordinary Shares in the Company at an issue price of 0.93 pence
per share.
35. COMPANY PROFIT AND LOSS
As a consolidated group income statement is published, a separate income statement for the parent
company is omitted from the group financial statements by virtue of section 304(2) of the Companies
Act, 2014. The Company’s loss for the financial year ended 31 December 2018 was €4,279,077 (6 months
ended 31 December 2017: €3,429,479).
101
EQTEC plc
Notes to the consolidated financial statements
for the financial year ended 31 December 2018
36. COMMITMENTS UNDER OPERATNG LEASES
At 31 December 2018 and 2017, the Group had future minimum lease payments under non-cancellable
operating leases as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Late than 5 years
31 Dec 2018
€
72,000
288,000
-
360,000
31 Dec 2017
€
72,000
288,000
72,000
432,000
37. APPROVAL OF FINANCIAL STATEMENT
These consolidated financial statements were approved by the Board of Directors on 28 June 2019.
102