News
Trading Update, Half Year Results and board changes
Dublin, Ireland – 13 September 2005
AgCert International plc (the “Company” or “AgCert”) announces an update as to its operational performance in the modification of animal waste management systems and its subsequent build up of greenhouse gas emission reduction offset (“offset”) inventory. While a number of performance indicators used by the management to monitor progress have exceeded the Directors' expectations, the number of completions and the time taken to complete the modification of animal waste management systems have not met the Directors' expectations. This has been due to a number of operational and regulatory reasons (detailed below) and, while the Company believes it will be able to meet its contractual obligations with its buyers, this significantly reduces the Directors' expectations about Offset delivery in 2005 and 2006, with the consequence of under recovery of related overheads.
AgCert has taken organizational and operational steps to increase the number and rate of site completions, to reduce the cost of constructing sites and to restore Offset production levels to plan in 2007.
These specific actions include hiring a Chief Construction Officer, utilizing fixed term and fixed cost construction contracts which incorporate financial penalties for non-performance of contractors, authorizing the deployment of a currency hedging policy, making project design and engineering improvements to minimize excavation, installation and procurement costs, and improving the farm selection criteria. The newly formed Executive Committee (see below) intends to investigate and explore additional steps.
In addition, effective immediately, Alan Tank will cease to serve as Chief Executive Officer, Managing Director and Director of the Company. Bill Haskell, a current Director, will serve as interim CEO comprising The Board will begin the search for a new CEO immediately. In addition, an Executive Committee has been formed to oversee the running of the Company’s operations. It comprises Rick Andlinger (Chairman), Bill Haskell (interim CEO), Peter Murray (Senior Independent Director), and Paul D’Alton (Finance Director).
The Directors remain confident that the economics of the business are sound and believe that the impact on expected results described above is principally a matter of timing. Taking account of favourable market movements in the price of Offsets in recent months, and the continued evolution of structured greenhouse gas emission markets around the world, the Directors believe that the Company’s value proposition remains attractive.
Below is a summary of the company's operational performance with reference to its key performance measures.
Performance measure
|
26 May 2005* |
10 September 2005 |
“Arrangements” with farms (Brazil, Mexico, Chile, Argentina) |
>500 |
>1,000 |
Farms size (average # of sows) |
1,000 (estimate of standard) |
920 (for the 74 completed sites) 623 (for all 528 starts) |
Total starts |
294 |
528 |
Build time |
8 to 12 weeks |
16 to 20 weeks |
Completions |
31 |
74 |
Capital cost per standard site |
~€60,000 |
~€85,000 |
Offset yield per standard site (annually) |
~10,000 tonnes CO2e (estimate of standard) |
~ 9,120 tonnes CO2e |
Prompt start qualifying farms |
471 |
471, of which, 342 farms meet company criteria |
Total credit reserve (from farms started) |
20 million tonnes CO2e |
32 million tonnes CO2e |
PDDs submitted |
1 |
18 |
Letters of approval |
2 (Mexico) |
7 (Mexico) |
* 27 May 2005 (Listing Particulars)
EUA prices * |
€ 19.94 |
€ 23.83 |
* Source: Point Carbon
The length of time required from the initiation of construction to completion has been significantly longer than planned or initially experienced by the Company. In the period since the initial public offering, a number of factors have affected the company’s operations: restrictions on the Company, prior to incorporation in Brazil and Mexico, to execute construction contracts with performance penalty provisions to the contractors; adverse weather conditions; and logistical challenges with procurement of key components, notably flares and meters. In addition, the Company has experienced slower time frame as regards regulatory approval of its offsets, and is awaiting its first letter of approval from Brazil.
At the same time, it has cost more than expected to install the Company’s anaerobic digesters on farms in Brazil and Mexico. The primary contributors to increased project costs are unfavourable movements of host country currencies, increases in vinyl and excavation costs as well as higher labour costs. Moreover, the Company commenced construction on farms smaller than the standard 1,000 sow equivalent target, leading to higher average capital expenditure cost per offset.
As result of these factors, there has been a significantly slower rate of inventory accumulation than expected. This, coupled with a slower than expected regulatory process, means that revenues for 2005 and 2006 will be significantly below expectations, with consequent implications for net income and cash flow. Therefore, the Directors believe there will be a delay, of the order of nine to twelve months, in achieving the inventory and sales targets anticipated for 2005 and 2006.
Half Year Results
The Company also publishes today its results for the period from incorporation to 30 June 2005, together with the Chairman’s introductory letter to those accounts. The balance sheet and cash flow statements reflect funds raised in the early June IPO, investment in fixed assets and operating expenditure in executing the Company’s business plan. As expected, the company did not generate sales revenue in the period and while cash expenses were generally in line with plan, these costs were almost all expensed rather than carried in the cost of inventory as a result of the slower level of inventory accumulation. The operating loss for the period was €5.38 million and the net loss was €7.22 million.
Contact:
Paul D’Alton, Finance Director/CFO +353 (0) 1 245 7400
Elizabeth Morley / Colin Browne Maitland +44 (0)20 7379 5151
This announcement contains certain statements regarding the group's financial position and results, business strategy,plans and objectives that are or may be deemed to be forward-looking statements, including without limitation, statements containing the words "believes","anticipates" "intends" "plans", "estimates", "aims","expects" or, in each case, their negative or other variations or comparable terminology. Such statements involve risk and uncertainty because they relate to future events and circumstances, and there are accordingly a number of factors which might cause actual results and performance to differ materially from those expressed or implied by such statements.
Chairman’s Letter to
Condensed consolidated interim financial statements
Period from incorporation 8 December 2004 to 30 June 2005
The first six months of 2005 have both reaffirmed the business opportunity for AgCert to produce greenhouse gas emissions offsets, and defined the Company’s operating challenges in reaching its goals.
The Kyoto Protocol came into force in February of this year establishing a global system to reduce greenhouse gases. The European Union Emission Trading Scheme (“EU ETS”) was launched in January and created the main market for AgCert’s business. Trading of European Union Allowances (“EUA”s) began, and the market anticipated the emergence of the first Certified Emission Reduction (“CER”) from the lengthy and still developing regulatory process.
Together with these market developments, AgCert rapidly expanded its operations in Brazil and Mexico to secure long term contracts and construct improved animal waste management systems on livestock farms for the production of greenhouse gas emissions offsets. On the day Kyoto came into force, Mexican President, Vicente Fox, granted AgCert its first Letter of Approval (“LOA”), a necessary step in the registration and certification process of AgCert’s projects to create CERs from its Offsets. The Company is engaged in a similar process in Brazil and is optimistic about receiving a LOA in the near future.
To provide resources to fund its business, in June 2005 AgCert completed its initial public offering on the London Stock Exchange, raising gross proceeds of €91 million. Earlier in the year the International Finance Corporation (“IFC”), a member of the World Bank Group, became a significant investor and strategic partner.
As a young and developing company facing a new and evolving market, AgCert is in the fortunate position of having already secured advance sales contracts of approximately €74 million, and sees an abundance of potential future customers. The Company’s focus is to generate greenhouse gas emission offsets and work with the regulatory authorities to achieve registration and certification.
The six month financial statements reflect the cash balance resulting from the initial public offering, a net loss greater than expected due primarily to a slower booking of inventory which caused the expensing of operating costs rather than carrying them in inventory. Adverse currency movements and a slight increase in cash operating expenses also contributed to the net loss.
A review of our performance measures after 30 June shows that that while a number of indicators used by management to monitor progress have exceeded the Directors’ expectations, the number of completions and the time taken to complete the modification of animal waste management systems have not met with our expectations. This has been due to a number of operational and regulatory reasons, and while the Company believes it will be able to meets its contractual obligations with its buyers, it significantly reduces the Directors’ expectations about offset delivery in 2005 and 2006.
The Company has taken a number of organizational and operational steps to increase the number and rate of site completions, to reduce the cost of constructing sites, and to restore offset production levels.
The Directors remain confident that the economics of the business are sound and consistent with the delivery of excellent returns to shareholders.
Merrick G Andlinger
Chairman
13 September 2005
Independent review report to AgCert International Plc
Introduction
We have been engaged by the company to review the financial information set out on pages 5 to 16, and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Listing Rules of the UK Financial Services Authority. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this 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 for our review work, for this report, or for the conclusions we have reached.
Directors' Responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistently applied.
As disclosed in the notes to the financial information, the next annual financial statements of the group will be prepared in accordance with IFRSs adopted for use in the European Union.
The accounting policies that have been adopted in preparing the financial information are consistent with those that the directors currently intend to use in the next annual financial statements. There is, however, a possibility that the directors may determine that some changes to these policies are necessary when preparing the full annual financial statements for the first time in accordance with those IFRSs adopted for use by the European Union.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 Review of interim financial information issued by the Auditing Practices Board for use in Ireland and the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the period ended 30 June 2005.
KPMG 12 September 2005
Chartered Accountants
Registered Auditors
AgCert International Plc
Condensed consolidated interim income statement
for the period from incorporation to 30 June 2005
|
|
2005 |
|
Note |
€ |
Revenue |
|
- |
Administration Expenses |
1 |
(5,377,578) |
Operating Loss |
|
(5,377,578) |
Financial Income |
|
111,746 |
Foreign Exchange Loss |
|
(1,559,667) |
Financial Expense |
|
(392,037) |
Loss for the Period |
|
(7,217,536) |
Attributable to: |
|
|
Equity holders |
|
(7,217,536) |
Loss for the Period |
|
(7,217,536) |
Basic Earnings per share |
2 |
(0.73) |
Diluted Earnings per share |
2 |
(0.73) |
On behalf of the board
Merrick G Andlinger Paul M D'Alton
Director Director
AgCert International Plc
Condensed consolidated interim statement of recognised income and expense
For the period from incorporation to 30 June 2005
|
|
2005 |
|
Note |
€ |
Foreign exchange translation differences |
|
(189,719) |
|
|
|
Income and expense recognised directly in equity |
|
(189,719) |
|
|
|
Loss for the period |
|
(7,217,536) |
|
|
|
Total recognised income and expense for the period |
|
(7,407,255) |
|
|
|
Attributable to: |
|
|
Equity holders |
|
(7,407,255) |
|
|
|
Total recognised income and expense for the period |
|
(7,407,255) |
AgCert International Plc
Condensed consolidated interim balance sheet
As at 30 June 2005
|
|
2005 |
|
Note |
€ |
Assets |
|
|
Property, Plant and Equipment |
3 |
10,369,146 |
Intangible assets |
|
3,728,704 |
Total non-current assets |
|
14,097,850 |
|
|
|
Inventories |
|
43,786 |
Prepayments |
|
603,031 |
Trade and other receivables |
|
340,250 |
Cash and Cash Equivalents |
|
66,872,089 |
Total current assets |
|
67,859,156 |
Total assets |
|
81,957,006 |
Equity |
|
|
Issued capital |
4 |
88,235,365 |
Reserves |
|
(189,719) |
Retained Earnings |
|
(7,217,536) |
Total equity attributable to equity holders of the parent |
|
80,828,110 |
|
|
|
Liabilities |
|
1,128,896 |
Trade and other payables |
|
|
Total current liabilities |
|
1,128,896 |
Total equity and liabilities |
|
81,957,006 |
On behalf of the board
Merrick G Andlinger Paul M D'Alton
Director Director
AgCert International Plc
Condensed consolidated interim cash flow statement
For the period from incorporation to 30 June 2005
|
|
2005 |
|
Note |
€ |
Net Cash from operating activities |
5 |
(7,151,877) |
|
|
|
Cash flows from Investing Activities |
|
|
Acquisition of property plant and equipment |
3 |
(10,404,595) |
Acquisition of intangibles |
|
(3,795,978) |
Net cash from investing activities |
|
(14,200,573) |
Cash flows from financing activities |
|
|
Proceeds from the issue of share capital |
|
90,946,464 |
Proceeds from the issue of debt |
|
22,215,702 |
Repayment of borrowings |
|
(13,839,252) |
Payment of transaction costs |
|
(11,098,375) |
Net cash from financing activities |
|
88,224,539 |
Net Increase in cash and cash equivalents |
|
66,872,089 |
Cash and cash equivalents at 8 December 2004 |
|
- |
Cash and cash equivalents at 30 June 2005 |
|
66,872,089 |
On behalf of the board
Merrick G Andlinger Paul M D'Alton
Director Director
AgCert International Plc
Significant accounting policies
AgCert International Plc is a company domiciled in the Republic of Ireland, with a principal place of business at Apex Business Centre, Blackthorn Road, Sandyford, Dublin 18. The Company's registered office address is 30 Herbert Street, Dublin 2, Ireland. The condensed interim financial statements of the Company for the period from incorporation to 30 June 2005 comprise the Company and its subsidiaries (together referred to as the "Group").
a Statement of compliance
The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) for interim financial statements. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements.
b Basis of preparation
The financial statements are presented in euro. They are prepared on the historical cost basis.
The preparation of interim financial statements in conformity with IAS 34 Interim Financial Reporting requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on management's best judgement as to what is reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The condensed consolidated interim financial statements have been prepared on the basis of IFRSs in issue that are effective or available for early adoption at the Group's first IFRS annual reporting date, 31 December 2005. Based on these IFRSs, the Board of Directors have made assumptions about the accounting policies expected to be adopted (accounting policies) when the first IFRS annual financial statements are prepared for the period ended 31 December 2005.
The IFRSs that will be effective or available for voluntary early adoption in the annual financial statements for the period ended 31 December 2005 are still subject to change and to the issue of additional interpretation(s) and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period that are relevant to this interim financial information will be determined only when the first IFRS financial statements are prepared at 31 December 2005.
The accounting policies have been applied consistently throughout the Group for purposes of these condensed consolidated interim financial statements.
c Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible arc taken into account. The financial statements of subsidiaries are included in the condensed consolidated interim financial statements from the date that control commences until the date that control ceases.
(ii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the condensed consolidated interim financial statements.
d Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to euro at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to euro at foreign exchange rates ruling at the dates the fair value was determined.
(ii) Financial statements of foreign operations
The financial statements of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to euro at the foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated into euro at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly into a separate component of equity.
e Property, Plant and Equipment
Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation. Property that is being constructed or developed for future use is classified as property, plant and equipment and stated at cost until construction or development is complete, at which point it is depreciated accordingly.
(i) Depreciation
Depreciation is charged to profit or loss on a straight line basis over the estimated useful lives of each part of property, plant and equipment. The estimated useful lives are as follows:
• Plant and equipment 10 years
f Intangible assets
(i) Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill has been recognised in business acquisitions. In respect of the business, acquired goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is no longer amortised but is tested annually for impairment.
(ii) Other Intangible assets
Intangible assets other than goodwill that are acquired by the group are stated at cost less accumulated amortisation and impairment losses.
(iii) Amortisation
Amortisation is charged to profit or loss on a straight line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are tested systematically for impairment at each annual balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
• Patents and trademarks 10 years
• Software 10 years
• Aggregation contracts 10 years
g Trade and other receivables
Other receivables are stated at their cost less impairment losses (see accounting policy j below).
h Inventories
Inventories are stated at the lower of their cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
i Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
j Impairment
The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated (see accounting policy j(i) below).
For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds it recoverable amount. Impairment losses are recognised in profit or loss unless the asset is recorded at a revalued amount in which case it is treated as a revaluation decrease.
(i) Calculation of recoverable amount
The recoverable amount of the Group's investments in receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate computed at the time of initial recognition of these financial assets). Receivables with a short duration are not discounted.
k Revenue
(i) Goods sold and services rendered
Revenue from the sale of emission offsets is recognised when the Group has transferred the significant risks and rewards of ownership to a customer. Revenue is recognised only if it is probable that future economic benefits will flow to the Group and these benefits can be measured reliably. In order for the Group to generate a Certified Emission Reduction, a number of steps must be performed, as follows:
• the Group constructs a facility that produces Emission Reductions;
• the United Nations approves the process and methodology of measuring Emission Reductions and certifies their acceptance of the production process;
• the Group has to obtain the approval of the Designated National Authority for the process and methodology in the country in which the Emission Reduction facility is based;
• the Group produces Emission Reductions to supply to the customer;
• the Group then notifies the customer that Emission Reductions have been verified and are held for the customer's account; and
• the Emission Reductions need to be registered by the UNFCCC before they become Certified Emission Reductions that can be utilized by the customer in its own jurisdiction to reduce its level of emission production.
The Group will only recognise revenue when it notifies the customer that the Emission Reductions have been produced and are held for the customer's account, and it determines that the delivery and regulatory risk encompassed in the final Emission Reduction registration and certification process is minimal. As of the date of this report, no Emission Reductions have yet been certified and, consequently, it is not possible to identify the degree of this delivery or regulatory risk.
AgCert International Plc
Notes to the condensed consolidated interim financial statements
1. Administrative Expenses
Administrative expenses are made up as follows:
|
€ |
Employee costs |
3,844,857 |
Professional and Legal |
281,283 |
Depreciations and amortisation |
99,696 |
General and administrative |
1,151,742 |
|
5,377,578 |
2. Earnings per Share
The calculation of basic and diluted earnings per share for the period ended 30 June 2005 was based on the loss attributable to ordinary shareholders of (€7,217,536) and a weighted average number of ordinary shares outstanding during the six months ended 30 June 2005 of 9,923,991, calculated as follows:
Loss attributable to ordinary shareholders for the period ended 30 June 2005 (in thousands of Euro)
|
'000 |
Loss for the period |
(7,217) |
Dividends on preference shares |
nil |
Loss Attributable to Ordinary shareholders |
(7,217) |
Weighted average number of ordinary shares for the six months ended 30 June 2005 (in thousands of shares)
Issued ordinary shares at 8 December 2004 |
1,000 |
Effect of Initial Public Offering in June 2005 |
7,239 |
Effect of debt converted in June 2005 |
1,684 |
Weighted average number of ordinary shares at 30 June 2005 |
9,924 |
3. Property, Plant and Equipment
Acquisitions and DisposalsDuring the six months ended 30 June 2005, the Group acquired assets with a cost of €10,404,595.
4. Capital and Reserves
|
Number of |
Share |
Share |
Total |
|
Ordinary |
Capital |
Premium |
|
|
Shares |
€ |
€ |
€ |
|
|
|
|
|
On issue of incorporation |
1,000,000 |
10,000 |
- |
10,000 |
Renominalisation of Share capital from €0.01 to €0.0001 |
99,000,000 |
- |
- |
- |
|
100,000,000 |
10,000 |
- |
10,000 |
Issued for cash on IPO |
43,436,293 |
4,344 |
79,844,580 |
79,848,924 |
Conversion of loan notes |
10,107,656 |
1,011 |
8,375,430 |
8,376,441 |
|
153,543,949 |
15,355 |
88,220,010 |
88,235,365 |
· Date of renominalisation was 27 April 2004.
· The IPO proceeds are shown net of issue costs of €11,097,540.
|
Share |
Share |
Retained |
Translation |
Fair Value |
|
|
Capital |
Premium |
Earnings |
Reserve |
Reserve |
Total |
|
€ |
€ |
€ |
€ |
€ |
€ |
|
|
|
|
|
|
|
Balance on inception |
10,0000 |
- |
- |
- |
- |
10,000 |
Issue of convertible loan notes |
- |
- |
- |
- |
1,876,450 |
1,876,450 |
IPO issue |
4,344 |
79,844,580 |
- |
- |
- |
79,848,924 |
Conversion of loan notes |
1,011 |
8,375,430 |
- |
- |
(1,876,450) |
6,499,991 |
Total recognised income and expenses |
- |
- |
(7,217,536) |
(189,719) |
- |
(7,407,255) |
|
15,355 |
88,220,010 |
(7,217,536) |
(189,719) |
- |
80,828,110 |
Ordinary shares
The holders of the ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
5. Cash Flows from Operating Activities
The net cash flow from operating activities is calculated as follows:
Net Loss |
(7,217,536) |
Adjustments |
|
Depreciation and Amortisation |
99,696 |
Loss on disposal of assets |
3,026 |
Translation adjustment |
(189,719) |
Changes in operating assets and liabilities |
|
Inventory and aggregation options |
(177,857) |
Prepaid expense and other assets |
(798,383) |
Accounts payable and accrued liabilities |
1,128,896 |
Net cash from operating activities |
(7,151,877) |
6. Employee Benefits
Defined contribution pension plan
The Group contributed €nil during the period on behalf of employees to a defined contribution pension plan.
7. Acquisitions
During the period under review certain of the business, assets and liabilities of AgCert International LLC and AgCert Canada Co were acquired by the Company and its subsidiary undertakings.
The key transactions were:
· right, title and interest in the bio-digesters and lagoons constructed in Brazil and Mexico, together with all related equipment and tangible and intangible property were transferred from AgCert International LLC to the Company for the amount of US$1.5 million;
· right, title and interest in and to any and all non US intellectual property rights (including the AgCert trade mark and the proprietary computer software) to be used outside of the United States of America were assigned from AgCert International LLC to the Company for the amount of US$3.7 million;
· right, title and interest in and to any and all US intellectual property rights (including the AgCert trade mark and the proprietary computer software) to be used inside the US only, were assigned from AgCert International LLC to AgCert Services USA, Inc. a subsidiary of the Company for the amount of US$10.00;
· the Company acquired the rights and assumed the obligations of AgCert Canada Co under certain contracts with bio-digester construction contractors in Brazil and letters of intent, contracts and arrangements with farmers in Canada, Brazil and Mexico for the collection of relevant data, construction of certain improvements on farmers' property and the generation of environmental emission offsets. As part of the assignment, the Company agreed to assume AgCert Canada Co's obligations under a certain promissory note (the 'Canadian Note') in the original amount of US$1.3 million issued by AgCert Canada Co to AgCert International LLC in respect of the financing by AgCert International LLC of AgCert Canada Co's costs in obtaining and performing the contracts. In exchange for the cancellation of the Canadian Note, the Company issued to AgCert International LLC US$1.3 million in nominal value Series "B" Unsecured Non Convertible Loan Notes 2007;
· AgCert Canada Holding Limited, a subsidiary of the Company, acquired the issued share capital of AgCert Canada Co for US$ 1.00.
The consideration paid in respect of key transactions outlined above totalled US$6.5 million and was settled through the issuance by the Company to AgCert International LLC of Series "A" Unsecured Non Convertible Loan Notes 2007 ('Series "A" Notes') in the amount of US$2.7 million and the issuance of Series "B" Unsecured Non Convertible Loan Notes 2007 ('Series "B" Notes') in the amount of US$3.8 million.
8. Significant Subsidiaries
The Company has an investment in the following subsidiaries:
|
Country of Incorporation interest |
Ownership |
AgCert Services (USA), Inc |
Unites States |
100% |
AgCert Brazil Environmental Solutions Limited |
Brazil |
99.98%1 |
AgCert Mexico Environmental Services S de RL de CV |
Mexico |
99%2 |
AgCert Canada Holding Limited |
Ireland |
100% |
Note 1: The remaining ownership interest is held by Andlinger Capital III, LLC.
Note 2: The remaining ownership interest is held by AgCert Canada Holdings Limited.
9. Contractual Commitments
Effective as of 1 January 2005, certain long term contractual commitments held by AgCert International LLC and AgCert Canada Co were transferred to the Company.
The Company now has various long term contractual commitments to supply certified emission reductions to third parties. The sales value of these contractual commitments is €74 million. In certain circumstances where the Company is unable to generate sufficient quantities of CERs to supply to third parties, under the terms of these contracts, replacement CERs would need to be sourced in order for the Company to fulfil its contractual obligations. The projected cost of these alternate CERs is indeterminable, however, it is possible that the Company would have to acquire these CERs at the then prevailing market price.
The Company also has various contractual commitments with the farmers in Brazil and Argentina. As part of the contract with the farmers the Company agrees to pay them a percentage of the revenue received from the sale of the offsets.
10. Warrants
During a three year period subsequent to the Company's initial public offering International Finance Corporation, member of the World Bank Group, ("IFC") and Antipodcan Partners ("AP") have an option to subscribe for shares at an option price equal to £1.40. The number of shares that are the subject of the option are: IFC 1,862,700 and AP 149,000.
The option maybe exercised in whole or in part and shall not become exercisable until certain specified conditions in the agreement are satisfied.
11. Related Party Transactions
The Group has a related party relationship with its subsidiaries (see note 8).
12. Contingencies
There were no known undisclosed material contingencies at the date of signing the condensed consolidated interim financial statements.
13. Subsequent Events
At the date of signing the condensed consolidated interim financial statements there were no known material subsequent events which required disclosure.
14. Approval of Condensed Consolidated Interim Financial Statements
The directors approved these condensed consolidated interim financial statements on 12 September 2005.