OIO Group 6-K, filed Feb 7, 2025
OIO Group (OIO)
About this 6-K
OIO Group filed this 6-K on February 7, 2025.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For February 2025
Commission
File No.
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Information Contained in this Form 6-K Report
This Form 6-K is being filed to include the unaudited consolidated financial statements of ESGL Holdings Limited (the “Company”) for the six month period ended June 30, 2024 (including Management’s Discussion and Analysis of Financial Condition and Results of Operations for such period), which financial statements and discussion were previously disclosed in the Company’s final prospectus filed with the Securities and Exchange Commission (“SEC”) on December 20, 2024 and the Company’s prospectus supplement filed with the SEC on January 17, 2025.
The following exhibits are attached:
| EXHIBIT NO. | DESCRIPTION | |
| 99.1 | Unaudited Consolidated Financial Statements as of June 30, 2024 | |
| EX-101 INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
| EX-101 SCH | Inline XBRL Taxonomy Extension Schema Document | |
| EX-101 CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| EX-101 DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| EX-101 LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| EX-101 PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| 2 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements that involve risks and uncertainties. The Company and its subsidiaries’ (collectively, the “ Group”) actual results and the timing of events could differ materially from those anticipated in these forward- looking statements as a result of various factors, including those set forth under “Risk Factors” in the Company’s filings with the Securities and Exchange Commission.
Overview
ESGL is a holding company incorporated as an exempted company under the laws of the Cayman Islands. As a holding company with no material operations of its own, the Group conducts all its operations through its operating entity incorporated in Singapore, ESA.
The Group is a waste management, treatment and recycling company involved in the collection and recycling of hazardous and non-hazardous industrial waste from customers such as pharmaceutical, semiconductor, petrochemical and electroplating companies. The Group currently has two revenue streams, from: (i) services income which is primarily comprised of the fees charged to customers for the provision of waste collection and disposal services, which fees are similar to those charged by the Group’s competitors, and (ii) the sales and trading of its circular products made from recycled waste, which is believed to make the Group a unique and environmentally-friendly offering in the marketplace.
The Ordinary Shares being registered for resale in connection with this offering will constitute a considerable percentage of our “public float” (defined as the number of our outstanding Ordinary Shares held by non-affiliates). The Selling Shareholders named herein beneficially own in the aggregate 17,241,380 Ordinary Shares registered for resale hereunder, which is equal to approximately 42.8% of our outstanding Ordinary Shares. The Selling Shareholders will be able to sell all of their Ordinary Shares for so long as the registration statement of which this prospectus forms a part is available for use. In addition, the Ordinary Shares being registered for resale hereunder were purchased by the Selling Shareholders at a price below the current market price of our Ordinary Shares. Given the substantial amount of redemptions in connection with the Business Combination and the relative lack of liquidity in our stock, sales of our Ordinary Shares under the registration statement of which this prospectus is a part could result in a significant decline in the market price of our securities.
Factors Affecting the Group’s Performance and Related Trends
The Group believes that the key factors affecting its performance and financial performance include:
| (i) | Continuous Engagement with the Group’s Customers: The Group benefits from its unique approach to waste handling — captive consumption, which has allowed it to capture customers from the target market segment of multinational corporations that aim to meet their environmental, social and governance goals. The Group’s revenue growth largely depends on its ability to retain current customers and attract new customers, including its ability to form relationships with and manage an increasing number of customers. In addition to the traditional means of attracting potential customers via emails, business brochures and LinkedIn, ESA is also a member of the Waste Management Recycling Association of Singapore and the United Nations Global Compact where it actively participates in industry forums to promote the Group’s brand and awareness of sustainable solutions, which has resulted in a substantial increase in customer engagement. | |
| (ii) | Manufacturing Activities: The Group derives part of its revenue by charging a disposal fee for the use of its collection and disposal service. Since the Group’s core business is tied to the volume of waste generated by its customers, its revenue growth could be influenced by manufacturing activities which are affected by the global supply and demand, as well as macroeconomic conditions. | |
| (iii) | Commodities Price: The Group derives part of its revenue from the sales and trading of its circular products, which typically include zinc, precious metals and base metals. As such, the prevailing market prices and the demand of these commodities will also determine the Group’s profitability and the sale of each commodity, respectively. |
| 3 |
| (iv) | Inflation: While many of the economies in Asia have experienced rapid growth over the last two decades, they currently are experiencing inflationary pressures, and the rate of growth is slowing down. The economy in Singapore and globally has experienced general increases in certain operating costs and expenses, such as employee compensation and office operating expenses as a result of higher inflation. Average wages in Singapore are expected to continue to increase and the Group expects that its employee costs, including wages and employee benefits, will continue to increase. Unless the Group is able to control its employee costs or pass them on to its clients, its financial condition, and results of operations may be adversely affected. |
| As governments in Asia (and worldwide) take steps to address current inflationary pressures, there may be significant changes in the availability of bank credit, commercial reasonability of interest rates, limitations on loans, restrictions on currency conversions and foreign investment rules, thereby restricting the availability of credit and reducing economic growth. Inflation, actions that may be implemented to combat inflation and public speculation about any possible additional actions also may contribute materially to economic uncertainty in Asia (and worldwide) and accordingly weaken investor confidence, thus adversely impacting economic growth and causing decreased economic activity, which in turn could lead to a reduction in demand for the Group’s products and services, and consequently have a material adverse effect on its businesses, financial condition and results of operations. Conversely, more lenient government policies and interest rate decreases may trigger increases in inflation and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect the Group’s business. There also may be imposition of price controls. If prices for the Group’s waste disposal services and/or its circular products rise at a rate that is insufficient to compensate for the rise in the costs of supplies and operations, it may have an adverse effect on the Group’s profitability. If these or other similar restrictions are imposed by a government to influence the economy, it may lead to a slowing of economic growth. |
| (v) | Government Regulations in Singapore: The Group’s operating subsidiary, ESA, is incorporated, and its operations and assets are all located, in Singapore. Accordingly, the Group’s business could be influenced by economic policies and initiatives undertaken by the Singapore government, changes in the Singapore business or regulatory environment affecting its customers and changes in the Singapore government policy on waste management. Unfavorable changes could affect demand for services that the Group provides and could materially and adversely affect its results of operations. Although the Group has generally benefited from Singapore’s economic growth and the policies to encourage the improvement of waste management, it is also affected by the complexity, uncertainties and changes in the Singapore economic conditions and regulations governing the waste industry. |
Results of Operations
Comparison of the Six Month Period Ending June 30, 2024 Compared with Six Month Period ending June 30, 2023
| Unaudited | ||||||||||||||||
| For the Period Ended June 30, | Percentage | |||||||||||||||
| 2024 | 2023 | Change | Change | |||||||||||||
| (US$) | (US$) | (US$) | % | |||||||||||||
| Revenue | 3,487,879 | 3,394,313 | 93,566 | 2.76 | % | |||||||||||
| Other income | 282,213 | 189,335 | 92,878 | 49.05 | % | |||||||||||
| Cost of inventory | (78,366 | ) | (407,291 | ) | (328,925 | ) | -80.76 | % | ||||||||
| Logistics costs | (264,638 | ) | (792,079 | ) | (527,441 | ) | -66.59 | % | ||||||||
| Operating expenses | (2,262,170 | ) | (1,630,586 | ) | 631,584 | 38.73 | % | |||||||||
| Finance expense | (147,128 | ) | (158,912 | ) | (11,784 | ) | -7.42 | % | ||||||||
| Depreciation and amortization | (1,340,734 | ) | (1,185,034 | ) | 155,700 | 13.14 | % | |||||||||
| Loss before income tax | (322,944 | ) | (590,254 | ) | (267,310 | ) | -45.29 | % | ||||||||
| Income tax expense | (148,480 | ) | (39,000 | ) | 109,480 | 280.72 | % | |||||||||
| Net loss and comprehensive loss | (471,424 | ) | (629,254 | ) | (157,830 | ) | -25.08 | % | ||||||||
| Loss per share | (0.03 | ) | (0.10 | ) | (0.06 | ) | -65.87 | % | ||||||||
| Weighted average number of shares | 14,000,514 | 6,378,267 | ||||||||||||||
Revenue
The Group derives its revenue from (i) the sales and trading of its circular products and (ii) waste disposal services which generally comprises the disposal fees it charges its customers for waste collection and disposal services. For the period ended June 30, 2024 (1H 2024”), total revenue for the Group increased marginally by 2.76% from approximately US$3.4 million to approximately US$3.5 million. The increase was mainly due to higher waste disposal services which increased by approximately US$0.6 million (29.2%) compared to the period ended June 30, 2023 (“1H 2023”). This offsets the decrease in sales of circular products which declined approximately US$0.5 million (39.1%) in 1H 2024 compared to 1H 2023. Lower circular products sales were mainly due to decrease in sales of base metal, copper and nickel.
| 4 |
Other Income
Other income increased by approximately US$93,000 (49.1%) in 1H 2024 due mainly to favorable exchange rates movements which compensated for decrease in other income from warehousing and logistic service, government grants and interest.
| Unaudited | ||||||||||||||||
| For the Period Ended June 30, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2024 | 2023 | Change | change % | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Foreign exchange gain | 264,158 | 65,015 | 199,143 | >100 | % | |||||||||||
| Interest income | 3 | 12,002 | (11,999 | ) | -100.0 | % | ||||||||||
| Gain from disposal of motor vehicle | - | 2,130 | (2,130 | ) | -100.0 | % | ||||||||||
| Government grants | 18,052 | 33,511 | (15,459 | ) | -46.1 | % | ||||||||||
| Grant from AEPW1 | - | 40,320 | (40,320 | ) | -100.0 | % | ||||||||||
| Warehousing and logistic services | - | 36,357 | (36,357 | ) | -100.0 | % | ||||||||||
| 282,213 | 189,335 | 92,878 | 49.1 | % | ||||||||||||
Cost of Inventory
The Group’s cost of inventory represents costs and expenses attributable to the provision of its circular products. The Group’s cost of inventory decreased by approximately US$329,000 or 80.8% from approximately US$407,000 for the period ended June 30, 2023 to approximately US$78,000 for the period ended June 30, 2024, which is in line with the decrease in product sales mentioned above.
Logistics Costs
The Group’s logistics costs represent costs attributable to the collection of waste and the delivery of its circular products. The Group’s logistics costs decreased by approximately US$527,000 or 66.6% from approximately US$792,000 for the period ended June 30, 2023 to approximately US$264,000 for the period ended June 30, 2024. The lower logistics costs were mainly due to a decrease in transportation costs and packaging costs such as containers for liquid hazardous waste and drums. The latter contributed to a decrease in logistics costs of approximately US$321,000. In 1H 2024, notwithstanding the increase in total waste disposal revenue of approximately US$607,000 (29.2%), the Group’s disposal of hazardous liquid waste decreased by approximately US$387,000 (45.8%) compared to the same period last year. This resulted in lower costs incurred for containers used to transport such hazardous liquid waste. This decrease in volumes of liquid hazardous waste was a temporary measure to allow the Group to invest in safety equipment to comply with new regulatory requirements.
Operating Expenses
Operating expenses for the period ended June 30, 2024 mainly comprise of employee benefits expense, foreign worker levy, insurance expense, professional fees, rental and disposal expenses.
Employee benefits expense in 1H 2024 increased by approximately US$411,000 (64.3%) from approximately US$639,000 for the period ended June 30, 2023 to approximately US$1.0 million due mainly to higher directors’ fees and remuneration which increased by approximately US$326,000 and staff salaries and bonus which increased by approximately US$52,000.
| 5 |
Other operating expenses are mainly as follows:
| Unaudited | ||||||||||||||||
| For the Period Ended June 30, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2024 | 2023 | Change | change % | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Foreign worker levy | 82,944 | 78,335 | 4,609 | 5.9 | % | |||||||||||
| Insurance | 189,192 | 38,647 | 150,545 | >100 | % | |||||||||||
| Professional fees | 285,343 | 291,303 | (5,960 | ) | -2.0 | % | ||||||||||
| Property tax | 54,293 | 54,630 | (337 | ) | -0.6 | % | ||||||||||
| Rental and storage | 211,561 | 214,175 | (2,614 | ) | -1.2 | % | ||||||||||
| Utilities | 36,889 | 92,045 | (55,156 | ) | -59.9 | % | ||||||||||
| Upkeep, repair and maintenance | 58,165 | 53,392 | 4,773 | 8.9 | % | |||||||||||
| Chemical and incineration fees | 189,545 | 70,378 | 119,167 | >100 | % | |||||||||||
| Bank service charges | 3,528 | 45,878 | (42,350 | ) | -92.3 | % | ||||||||||
| Others | 25,172 | 52,743 | (27,571 | ) | -52.3 | % | ||||||||||
| 1,212,273 | 991,526 | 220,747 | 22.3 | % | ||||||||||||
Insurance expense in 1H 2024 increased by approximately US$150,000 due mainly to D&O insurance premium incurred after the business combination. Disposal and incineration fees increased by approximately US$119,000 in 1H 2024 due to collection of mesh clay, a new waste material from a customer.
Finance expense
Total interest expense in 1H 2024 was approximately US$9,400 (-7.2%) lower than the same period last year due mainly to interest being paid on reducing bank loan balances.
Depreciation and Amortization
The Group’s depreciation and amortization expenses increased by approximately US$156,000 (13.1%) due to increase in intangible assets such as self-developed software tailored to our operational requirements.
Net Loss
As a result of the foregoing, the Group recorded a net loss of approximately US$471,000 for the period ended June 30, 2024. This is approximately US$158,000 (25.1%) lower than the loss incurred in 1H 2023.
Comparison of the Years Ended December 31, 2023 and 2022
| For the Year Ended December 31, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| (US$) | (US$) | (US$) | (%) | |||||||||||||
| Revenue | 6,164,173 | 4,992,034 | 1,172,139 | 23.5 | % | |||||||||||
| Other income | 169,819 | 396,373 | (226,554 | ) | -57.2 | % | ||||||||||
| Cost of inventory | 977,619 | 1,093,194 | (115,575 | ) | -10.6 | % | ||||||||||
| Logistics costs | 925,225 | 689,762 | 235,463 | 34.1 | % | |||||||||||
| Operating expenses | 3,466,606 | 2,460,951 | 1,005,655 | 40.9 | % | |||||||||||
| Finance expense | 388,717 | 246,359 | 142,358 | 57.8 | % | |||||||||||
| Depreciation and amortization | 2,354,839 | 2,300,252 | 54,587 | 2.4 | % | |||||||||||
| Listing expenses | 93,067,324 | 981,701 | 92,085,623 | >100 | % | |||||||||||
| Loss before income tax | (94,846,338 | ) | (2,383,812 | ) | (92,462,526 | ) | >100 | % | ||||||||
| Income tax expense | 133,000 | 8,000 | 125,000 | >100 | % | |||||||||||
| Net loss | (94,979,338 | ) | (2,391,812 | ) | (92,587,526 | ) | >100 | % | ||||||||
| 6 |
Revenue
The Group derives its revenue from (i) the sales and trading of its circular products and (ii) waste disposal services which generally comprises the disposal fees it charges its customers for waste collection and disposal services. The Group’s revenue increased by approximately US$1.2 million or 23.5% from approximately US$5.0 million for the year ended December 31, 2022 (“FY2022”) to approximately US$6.2 million for the year ended December 31, 2023 (“FY2023”), primarily attributable to the increase in waste disposal services which rose by approximately US$1.6 million or 71.8%. The increase from waste disposal services was offset by a decrease in sales of circular products by approximately US$0.4 million (16%) compared to the last financial year.
The decrease in sales of circular products was primarily attributable to (i) the lack of zinc sales in 2023. Sales of zinc fell from approximately US$1.2 million in FY2022 to zero in FY2023. The Group pivoted away from sales of zinc due primarily to higher costs related to such transactions; (ii) the decrease in sales of precious metals of approximately US$0.75 million or 78.2% from approximately US$0.96 million for the year ended December 31, 2022 to approximately US$0.21 million for the year ended December 31, 2023, (iii) offset by increase in sales of base metals which increased approximately by US$1.5 million (>100%) to approximately US$2.1 million for the year ended December 31, 2023 from approximately US$0.59 million in the previous financial year primarily due to the availability of materials, feasible freight charges and scheduling.
The Group’s revenue generated from waste disposal services increased by approximately US$1.6 million or 71.8% from approximately US$2.2 million for the year ended December 31, 2022 to approximately US$3.9 million for the year ended December 31, 2023, primarily due to the increase in higher demand for ESGL’s disposal services of solid industrial wastes, waste plastics, waste wood and chemical wastes. In FY2023, ESGL was awarded larger quantum contracts for such services from its major semi-conductor customers.
Other Income
The Group’s other income is mainly comprised of (i) grants, (ii) warehousing and logistics services, and (iii) interest income. The following table sets out the breakdown of other income for the periods indicated:
| For the Year Ended December 31, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2023 | 2022 | Change | change % | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Interest income | 18,308 | 4 | 18,304 | >100 | % | |||||||||||
| Gain from disposal of motor vehicle | - | 26,586 | (26,586 | ) | -100.0 | % | ||||||||||
| Government grants | 42,819 | 76,588 | (33,769 | ) | -44.1 | % | ||||||||||
| Grant from AEPW1 | 72,000 | 116,000 | (44,000 | ) | -37.9 | % | ||||||||||
| Warehousing and logistic services | 36,357 | 175,650 | (139,293 | ) | -79.3 | % | ||||||||||
| Others | 335 | 1,545 | (1,210 | ) | -78.3 | % | ||||||||||
| 169,819 | 396,373 | (226,554 | ) | -57.2 | % | |||||||||||
1The Alliance to End Plastic Waste (“AEPW”) is an industry-founded and funded non-governmental and non-profit organization based in Singapore. Founding members include BASF, Chevron Phillips Chemical, ExxonMobil, Dow Chemical, Mitsubishi Chemical Holdings, Proctor & Gamble and Shell.
| 7 |
The Group’s other income decreased by approximately US$226,000 or -57.2% from approximately US$396,000 for the year ended December 31, 2022 to approximately US$170,000 for the year ended December 31, 2023. Such decrease was primarily attributable to (i) the decrease in warehousing and logistic services which decreased by approximately US$139,000 (-79.3%) in FY2023 compared to the prior financial year as the warehousing arrangements were terminated and the Group utilized the space for its own operations, and (ii) the decrease in grant from AEPW of approximately US$44,000 or -37.9% from approximately US$116,000 for the year ended December 31, 2022 to approximately US$72,000 for the year ended December 31, 2023 as the grant from AEPW draws to a close in 2023. and (iii) the decrease in government grants of approximately US$34,000 or -44.1% as the Group had received less employment related subsidies under the Job Growth Incentive Scheme.
Cost of Inventory
The Group’s cost of inventory represents costs and expenses attributable to the provision of its circular products. The Group’s cost of inventory decreased by approximately US$115,000 or -10.6% from approximately US$1.1 million for the year ended December 31, 2022 to approximately US$978,000 for the year ended December 31, 2023, which is in line with the decrease in product sales such as zinc as mentioned above.
Logistics Costs
The Group’s logistics costs represent costs attributable to the collection of waste and the delivery of its circular products. The Group’s logistics costs increased by approximately US$235,000 or 34.1% from approximately US$690,000 for the year ended December 31, 2022 to approximately US$925,000 for the year ended December 31, 2023, which is in line with the increased demand for disposal services of wastes and the overall increase of Group’s business operations.
Operating Expenses
The Group’s operating expenses mainly comprise employee benefits expense and other operating expenses. The Group’s operating expenses increased by approximately US$1.0 million or 40.9%, from approximately US$2.4 million for the year ended December 31, 2022 to approximately US$3.4 million for the year ended December 31, 2023, primarily attributable to the overall increase in employee benefits expense which increased by approximately US$431,000 (46.2%) from approximately US$933,000 to US$1.4 million, and other operating expenses as detailed below.
Employee Benefits Expense
Employee benefits expense is mainly comprised of (i) salaries, wages and bonuses, (ii) directors’ remuneration, (iii) employer’s contribution to defined contribution plans including Central Provident Fund, and (iv) other short-term benefits, including compulsory skills development levy imposed in Singapore, administrative expenses relating to the application and/or renewal of work permits for foreign staff, medical expenses, staff insurance, staff welfare and training expenses, less (v) the amount capitalized as internal development of intangible assets. The following table sets out the breakdown of employee benefits expense for the periods indicated:
| For the Year Ended December 31, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2023 | 2022 | Change | change % | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Salaries, wages and bonuses | 2,258,195 | 1,571,124 | 687,071 | 43.7 | % | |||||||||||
| Directors’ remuneration | 272,659 | 211,853 | 60,806 | 28.7 | % | |||||||||||
| Directors’ fees | 52,252 | - | 52,252 | nm | ||||||||||||
| Employer’s contribution to defined contribution plans including Central Provident Fund | 142,749 | 107,263 | 35,486 | 33.1 | % | |||||||||||
| Other short term benefit | 26,943 | 54,077 | (27,134 | ) | -50.2 | % | ||||||||||
| 2,752,798 | 1,944,317 | 808,481 | 41.6 | % | ||||||||||||
| Less: Amount capitalized as internal development of intangible assets | (1,388,584 | ) | (1,011,193 | ) | (377,391 | ) | 37.3 | % | ||||||||
| 1,364,214 | 933,124 | 431,090 | 46.2 | % | ||||||||||||
| 8 |
The Group’s employee benefits expense increased by approximately US$431,000 or 46.2% from approximately US$933,000 for the year ended December 31, 2022 to approximately US$1.4 million for the year ended December 31, 2023. Such increase in employee benefits expense was primarily attributable to (i) the increase of salaries, wages and bonuses of approximately US$687,000 or 43.7% from approximately US$1.6 million for the year ended December 31, 2022 to approximately US$2.3 million for the year ended December 31, 2023 mainly due to higher headcount as the Group geared up for higher production to meet increased customer’s demands, and (ii) higher Directors’ remuneration of approximately US$61,000 or 28.7% from approximately US$212,000 for the year ended December 31, 2022 to approximately US$273,000 for the year ended December 31, 2023, (iii) Directors’ fees for non-executive independent directors of approximately US$52,000 for which no Directors’ fees were incurred in the last financial year offset by the increase of salary expense being capitalized as internal development of intangible assets of approximately US$377,000 or 37.3% from approximately US$1.0 million for the year ended December 31, 2022 to approximately US$1.4 million for the year ended December 31, 2023 and was primarily attributable to the increase in time and manpower allocated to the software development and innovation projects to develop engineering technologies in relation to the Group’s waste processing, treatment and recycling plans.
Other Operating Expenses
Other operating expenses are mainly comprised of (i) foreign exchange loss, (ii) foreign worker levy, (iii) impairment loss on receivables, (iv) insurance, (v) professional fees, (vi) property tax, (vii) rental and storage, (viii) utilities, (ix) upkeep, repair and maintenance, (x) chemical and incineration fees, and (xi) others relating to bank charges, marketing and advertising expenses, entertainment expenses, business travel expense, computer and internet expenses, telephone and internet expenses and filing and lodgment fees. The following table sets out the breakdown of other operating expenses for the periods indicated:
| For the Year Ended December 31, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2023 | 2022 | Change | change % | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Foreign exchange loss | 189,426 | 22,287 | 167,139 | >100 | % | |||||||||||
| Foreign worker levy | 168,137 | 97,703 | 70,434 | 72.1 | % | |||||||||||
| Impairment loss on receivables | - | 44,271 | (44,271 | ) | -100.0 | % | ||||||||||
| Insurance | 55,694 | 43,589 | 12,105 | 27.8 | % | |||||||||||
| Professional fees | 109,703 | 93,978 | 15,725 | 16.7 | % | |||||||||||
| Property tax | 108,412 | 105,771 | 2,641 | 2.5 | % | |||||||||||
| Rental and storage | 594,748 | 290,481 | 304,267 | >100 | % | |||||||||||
| Utilities | 189,982 | 157,974 | 32,008 | 20.3 | % | |||||||||||
| Upkeep, repair and maintenance | 230,037 | 317,267 | (87,230 | ) | -27.5 | % | ||||||||||
| Chemical and incineration fees | 396,428 | 229,204 | 167,224 | 73.0 | % | |||||||||||
| Bank service charges | 50,427 | 8,203 | 42,224 | >100 | % | |||||||||||
| Others | 9,398 | 117,099 | (107,701 | ) | -92.0 | % | ||||||||||
| 2,102,392 | 1,527,827 | 574,565 | 37.6 | % | ||||||||||||
| 9 |
The Group’s other operating expenses increased by approximately US$575,000 or 37.6% from approximately US$1.5 million for the year ended December 31, 2022 to approximately US$2.1 million for the year ended December 31, 2023. The increase was mainly due to (i) higher rental and storage expenses which increased by approximately U$304,000 from approximately US$290,000 in the year ended December 31, 2022 to approximately US$595,000 (>100%) in the year December 31, 2023 to cater for higher volumes of wastes collected in FY2023; (ii) increase in chemical and incineration fees from approximately US$229,000 in FY2022 to approximately US$396,000 in FY2023 as a result of higher wastes collected and treated in FY2023; (iii) higher foreign exchange loss of approximately US$189,000 in the year ended December 31, 2023 as compared to foreign exchange loss of approximately US$22,000 in the prior financial year; (iv) increase in foreign worker levy which increased by approximately US$70,000 from approximately US$98,000 in the prior financial year to approximately US$168,000 (72.1%) in the year ended December 31, 2023 on the increase in hiring to cater for higher volumes; (v) offset by a write-back of old account payables which were more than 2 years old.
Finance Expense
| For the Year Ended December 31, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2023 | 2022 | Change | change % | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Interest expenses: | ||||||||||||||||
| - Lease liabilities | 55,934 | 28,559 | 27,375 | 95.9 | % | |||||||||||
| - Borrowings | 284,112 | 217,800 | 66,312 | 30.4 | % | |||||||||||
| - Loans from Directors | 48,671 | - | 48,671 | nm | ||||||||||||
| 388,717 | 246,359 | 142,358 | 57.8 | % | ||||||||||||
The Group’s finance expense increased by approximately US$142,000 from approximately US$246,000 in the year ended December 31, 2022 to approximately US$389,000 (57.8%) in FY2023. This was mainly due to higher interest on borrowings which increased by approximately US$66,000 in FY2023 compared to FY2022 on new bank loans drawn down in FY2023. The interest on loans from Directors also resulted in higher interest costs of approximately US$49,000 in FY2023. There was no such interest in the last financial year.
Depreciation and Amortization
The Group’s depreciation and amortization expense remain relatively unchanged for the financial years ended December 31, 2023 and 2022.
Listing expense
Listing expenses are non-recurring expenses incurred in connection with the Business Combination and are as follows:
| For the Year Ended December 31, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2023 | 2022 | Change | change % | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Share issued as consideration | 67,641,500 | - | 67,641,500 | nm | ||||||||||||
| Net assets of SPAC | (590,526 | ) | - | (590,526 | ) | nm | ||||||||||
| Revaluation of FPA | 24,241,261 | - | 24,241,261 | nm | ||||||||||||
| Professional fees | 1,680,198 | 981,701 | 698,497 | 71.2 | % | |||||||||||
| Printing, courier, and others | 94,891 | - | 94,891 | nm | ||||||||||||
| 93,067,324 | 981,701 | 92,085,623 | >100 | % | ||||||||||||
| Total | ||||||||||||
| Quantity | Price | Amount | ||||||||||
| Issuance of shares | 6,764,150 | 10.00 | 67,641,500 | |||||||||
Net Loss
As a result of the foregoing, the Group recorded a net loss of approximately US$95.0 million for the year ended December 31, 2023, which increased by approximately US$92.6 million or >100% as compared with a net loss of approximately US$2.4 million for the year ended December 31, 2022.
| 10 |
Non-GAAP Measures
EBITDA
The Group defines EBITDA as net income (loss) before interest, taxes and depreciation and amortization.
For the years ended December 31, 2023 and 2022, EBITDA consisted of the following:
| For the Year Ended December 31, | ||||||||||||||||
| Percentage | ||||||||||||||||
| 2023 | 2022 | Change | change % | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Loss before income tax | (94,846,338 | ) | (2,383,812 | ) | (92,462,526 | ) | >100 | % | ||||||||
| Finance expense | 388,717 | 246,359 | 142,358 | 57.8 | % | |||||||||||
| Depreciation and amortization | 2,354,839 | 2,300,252 | 54,587 | 2.4 | % | |||||||||||
| EBITDA | (92,102,782 | ) | 162,799 | (92,265,581 | ) | >100 | % | |||||||||
| add : non-recurring expenses | 93,067,324 | 981,701 | 92,085,623 | >100 | % | |||||||||||
| 964,542 | 1,144,500 | (179,958 | ) | -15.7 | % | |||||||||||
*Non-recurring expenses mainly relate to expenses incurred for the SPAC merger
EBITDA is a financial measure that is not calculated in accordance with IFRS, as issued by the IASB. The Group’s management uses EBITDA (i) as a measure of operating performance, (ii) for planning and forecasting in future periods, and (iii) in communications with the Group’s board of directors concerning the Group’s financial performance. The Group’s presentation of EBITDA is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation and should not be used by investors as a substitute or alternative to net income or any measure of financial performance calculated and presented in accordance with IFRS, as issued by the IASB. Instead, the Group’s management believes EBITDA should be used to supplement the Group’s financial measures derived in accordance with IFRS, as issued by the IASB, to provide a more complete understanding of the trends affecting the business.
Liquidity and Capital Resources
ESGL was incorporated in the Cayman Islands as a holding company and it did not have active business operations as of December 31, 2023. The Group’s consolidated assets and liabilities, consolidated revenue and net income are mainly the operation results of its subsidiary in Singapore. In assessing the Group’s liquidity, the Group monitors and analyzes its cash on-hand and its operating expenditure commitments. The Group’s liquidity needs are to meet its working capital requirements and operating expense obligations. Historically, the Group has financed its operations primarily through the (i) issuance of common stock, (ii) cash generated by operations, (iii) loans from Directors and (iv) borrowings from banks. The Group has no other debt instruments other than those stated here.
| 11 |
As of December 31, 2023, the Group’s working capital was approximately negative US$13.8 million, its cash and cash equivalents amounted to approximately US$367,000, its current assets were approximately US$1.5 million and its current liabilities were approximately US$15.2 million. The negative working capital was primarily attributable to the deferred underwriting fee payable and the classification of certain bank loan balances of approximately US$5.7 million as current liabilities as the relevant bank loan agreements allow the banks to demand immediate repayments even though they were not due for repayment within a year. To date, the Group has been able to service its loan repayments and there were no indications that the banks intend to recall the loans.
The following table illustrates the maturity profile of the Group’s borrowings:
| As of December 31, | ||||||||
2023 (US$) | 2022 (US$) | |||||||
| Within 1 year or on demand | 5,666,160 | 5,427,538 | ||||||
| Between 1 year and 2 years | 112,319 | 371,103 | ||||||
| Between 2 and 5 years | - | - | ||||||
| Total | 5,778,479 | 5,798,641 | ||||||
Interest rates for the Group’s borrowings range from a fixed rate of 2% per annum to a floating rate of 2% above the lending bank’s cost of funds on a reducing balance basis. The Group’s treasury policy is to maintain controls on all exposures, to adhere to stringent counterparty credit standards, and to actively monitor marketplace exposures.
The capital expenditure contracted for as of December 31, 2023 and 2022 but not recognized in the financial statements is approximately US$1.3 million and US$1.3 million, respectively.
On November 27, 2024 , the last reported sales price of our Ordinary Shares was $1.35 and the exercise price per share of the Warrants is $11.50. The exercise price of the Warrants is significantly higher than the current market price of our Ordinary Shares and accordingly, it is highly unlikely that Warrant holders will exercise their Warrants in the foreseeable future. Cash proceeds associated with the exercises of the Warrants are dependent on our stock price and given the recent price volatility of our Ordinary Shares and relative lack of liquidity in our stock, we may not receive any cash proceeds in relation to our outstanding Warrants.
Based on the Group’s current operating plan, the Group believes that its existing cash and cash equivalents and anticipated cash generated from operating activities will be sufficient to meet its anticipated working capital and capital expenditures for at least the next 12 months. The Group’s future working capital requirements will depend on many factors, including the rate of its revenue growth, its introduction of new products and processes, and its expansion of sales and marketing and product development activities. To the extent that the Group’s cash and cash equivalents and cash flow from operating activities are insufficient to fund its future activities, the Group may need to raise additional funds through bank credit arrangements, public or private equity or debt financing . In April 2024, the Group successfully raised US$2.5 million from the issuance of Ordinary Shares and in August and September 2024, the Group successfully raised US$5.0 million from the issuance of Ordinary Shares.
The Group also may need to raise additional funds in the event it decides in the future to acquire businesses, technologies and products that will complement its existing operations. In the event additional funding is required, the Group may not be able to obtain bank credit arrangements or equity or debt financing on terms acceptable to it or at all.
Following the closing of the Business Combination, the Company owes substantial professional fees and expenses incurred by GUCC in connection with the Business Combination. Given the current market price of our Ordinary Shares and that Warrant holders are unlikely to exercise their Warrants in the foreseeable future for the reasons set forth above, the Company may need to raise additional capital and negotiate payment arrangements with the involved parties to address these financial obligations. In the event additional funding is required, the Group may not be able to obtain bank credit arrangements or equity or debt financing on terms acceptable to it or at all. In addition, given the substantial amount of redemptions in connection with the Business Combination and the relative lack of liquidity in our stock, sales of our Ordinary Shares under the registration statement of which this prospectus is a part could result in a significant decline in the market price of our securities, which would have a negative effect on our ability to raise additional capital.
| 12 |
Cash Flows for the Periods Ended June 30, 2024 and 2023
The following summarizes the key components of the Group’s cash flows for the periods ended June 30, 2024 and 2023:
| Unaudited | ||||||||
| For the Period Ended | ||||||||
| June 30 | ||||||||
| 2024 | 2023 | |||||||
| (US$) | (US$) | |||||||
| Net cash (used in)/generated from operating activities | (42,780 | ) | 688,977 | |||||
| Net cash used in investing activities | (692,543 | ) | (735,892 | ) | ||||
| Net cash provided by financing activities | 625,063 | 952,137 | ||||||
| Net (decrease)/increase in cash and bank balances | (110,260 | ) | 905,222 | |||||
Operating Activities
For the period ended June 30, 2024, the Group utilized US$42,780 for its operating activities due primarily to its loss from operating activities of approximately US$323,000 and higher repayments of trade and other payables which reduced operating cashflows by approximately US$1.04 million. For the period ended June 30, 2023, the Group generated cash from operating activities of approximately US$689,000 due primarily to adjustments for favorable foreign exchange coupled with lower repayments of trade and other payables which improved operating cash flows by approximately US$479,000.
Investing Activities
Net cash used in investing activities for the period ended June 30, 2024 was approximately US$693,000 and was primarily attributable to the addition of approximately US$654,000 of intangible assets.
Net cash used in investing activities was approximately US$736,000 for the period ended June 30, 2023 and was primarily attributable to (i) the purchase of approximately US$115,000 of property, plant and equipment, and (ii) the addition of approximately US$634,000 of intangible assets.
Financing Activities
Net cash provided by financing activities was approximately US$625,000 for the period ended June 30, 2024 and was primarily attributable to (i) approximately US$2.5 million from the issuance of 10 million shares. The share issuance increased the weighted average number of shares from approximately 6.4 million shares as of December 31, 2023 to approximately 14 million shares as of June 30, 2024; and (ii) proceeds from bank borrowings of approximately US$747,000 offset by (i) repayment of approximately US$1.7 million of bank borrowings, (ii) repayment of approximately US$600,000 of underwriting fees, (iii) the repayment of approximately US$143,000 of lease liabilities, and (iv) the payment of approximately US$147,000 of interest.
Net cash provided by financing activities was approximately US$952,000 for the period ended June 30, 2023 and was primarily attributable to (i) share issuance of approximately US$754,000 and (ii) proceeds from bank borrowings of approximately US$2.2 million offset by (i) repayment of approximately US$1.8 million of bank borrowings, (ii) the repayment of approximately US$58,000 of lease liabilities, and (iii) the payment of approximately US$159,000 of interest.
Trade Receivables
The Group’s trade receivables balances remained relatively unchanged, decreasing marginally by approximately US$7,000 from approximately US$461,000 as of December 31, 2023 to approximately US$454,000 as of June 30, 2024.
| 13 |
The Group seeks to maintain strict control over its outstanding receivables, and overdue balances are reviewed regularly by its senior management. The following table sets out an ageing analysis of the Group’s trade receivables that are past due but not impaired, as of the dates indicated:
| Unaudited | ||||||||
June 30, 2024 | December 31, 2023 | |||||||
| (US$) | (US$) | |||||||
| Less than 30 days | 32,438 | 44,543 | ||||||
| 30 to 90 days | 93,230 | 15,214 | ||||||
| 125,668 | 59,757 | |||||||
As of June 30, 2024, the Group’s trade receivables that are past due but not impaired amounted to approximately US$126,000. These trade receivables were all subsequently settled as of date of this prospectus.
Average trade receivables turnover days indicates the average time required for the Group to collect cash payments from its provision of goods or services. The Group’s average trade receivables turnover days remained stable at 24 and 25 as of June 30, 2024 and December 31, 2023 respectively.
The Group has applied the simplified approach by using the provision matrix to measure the lifetime expected credit loss (“ECL”) for trade receivables.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry or country in which the customers operate and therefore significant concentrations of credit risk primarily arise when the Group has significant exposure to individual customers. At the end of June 30, 2024, 69.6% of total trade receivables were from three of the Group’s largest customers. As of December 31, 2023 48.0% of the total trade receivables were from three of the Group’s largest customers.
Individual credit evaluations are performed on all customers. These evaluations focus on the customer’s past history of making payments when due and current ability to pay and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Unless agreed the otherwise, trade receivables are generally due within 30 days from the date of billing. Normally, the Group does not obtain collateral from customers.
The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is calculated with reference to the credit spread for each of the groupings (which taking into consideration of historical credit loss experience, average actual date of receipt, customers’ background, listing status and size as groupings of various debtors), which reflect the credit risk of the debtors, over the expected life of the debtors and are adjusted for forward-looking information that is available without undue cost or effort. As the Group’s historical credit loss experience does not indicate significantly different loss patterns for different customer segments, the loss allowance based on past due status is not further distinguished between the Group’s different customer bases.
Expected loss rates are based on actual loss experience. These rates are adjusted to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables. The movements in loss allowance for trade receivables during the periods indicated:
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| At January 1 | 46,768 | 46,768 | ||||||
| Foreign exchange rates movements | (478 | ) | - | |||||
| At June 30 and December 31 | 46,290 | 46,768 | ||||||
| 14 |
Trade Payables
Trade payables represent primarily the Group’s obligations to pay for goods or services that have been engaged in the ordinary course of business from suppliers, including purchases of raw materials and utilities, as well as payment to its logistics providers. The Group is generally granted credit periods ranging from 30 to 60 days. Trade payables decreased by approximately US$197,000 (37.3%) from approximately US$529,000 as of December 31, 2023 to approximately US$332,000 as of June 30, 2024 as the Group purchased less packaging materials for the disposal of liquid hazardous wastes.
Lease Liabilities
The Group recognized and measured lease liabilities in accordance with IFRS 16 “Leases”. The Group leases properties in Singapore mainly for use as factory space for the processing and storage of waste. The table below sets forth the breakdown of the Group’s lease liabilities as of the dates indicated:
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Current | 149,516 | 192,282 | ||||||
| Non-current | 1,852,343 | 1,974,524 | ||||||
| 2,001,859 | 2,166,806 | |||||||
The Group’s lease liabilities (comprising current and non-current liabilities) decreased approximately US$165,000 from approximately US$2.2 million as of December 31, 2023 to approximately US$2.0 million as of June 30, 2024, in line with the normal utilization of the lease tenure.
Cash Flows for the Years Ended December 31, 2023 and 2022
The following summarizes the key components of the Group’s cash flows for the years ended December 31, 2023 and 2022:
| For the Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| (US$) | (US$) | |||||||
| Net cash generated from operating activities | 5,282,766 | 1,969,910 | ||||||
| Net cash used in investing activities | (2,019,189 | ) | (1,484,274 | ) | ||||
| Net cash used in financing activities | (3,149,215 | ) | (370,251 | ) | ||||
| Net increase in cash and bank balances | 114,362 | 115,385 | ||||||
Operating Activities
For the year ended December 31, 2023, the Group generated net cash from operating activities of approximately US$5.3 million despite a loss before income tax of approximately US$94.8 million. The significant loss before taxation was mainly due to listing expense of US$93.1 million and primarily arose from the accounting effects of the acquisition of GUCC and has no impact on operational cash flows. Net cash generated from operating activities was primarily attributable to (i) positive cash inflows after the adjustments for the depreciation of property, plant and equipment and the amortization of intangible assets of approximately US$2.4 million, and (ii) the overall improvements in working capital.
| 15 |
For the year ended December 31, 2022, the Group generated net cash from operating activities of approximately US$2.0 million despite a loss before income tax of approximately US$2.4 million. This was primarily attributable to (i) positive cash inflows after the adjustments for the depreciation of property, plant and equipment and the amortization of intangible assets of approximately US$2.3 million, and (ii) the overall improvements in working capital.
Investing Activities
Net cash used in investing activities was approximately US$2.0 million for the year ended December 31, 2023 and was primarily attributable to (i) the purchase of approximately US$651,000 of property, plant and equipment, and (ii) the addition of approximately US$1.4 million of intangible assets.
Net cash used in investing activities was approximately US$1.5 million for the year ended December 31, 2022 and was primarily attributable to (i) the purchase of approximately US$503,000 of property, plant and equipment, and (ii) the addition of approximately US$1.0 million of intangible assets.
Financing Activities
Net cash used in financing activities was approximately US$3.1 million for the year ended December 31, 2023 and was primarily attributable to (i) the repayment of approximately US$3.8 million of bank borrowings, (ii) the settlement of approximately US$3.2 of promissory note to shares, (iii) the repayment of approximately US$186,000 of lease liabilities, and (iv) the payment of approximately US$389,000 of interest, which was partially offset by the share issuance of approximately US$754,000 and draw down of bank borrowings of approximately US$3.6 million.
Net cash used in financing activities was approximately US$370,000 for the year ended December 31, 2022 and was primarily attributable to (i) the repayment of approximately US$1.5 million of bank borrowings, (ii) the repayment of approximately US$186,000 of lease liabilities, and (iii) the payment of approximately US$246,000 of interest, which was partially offset by the share issuance of approximately US$1.6 million.
Trade Receivables
The Group’s trade receivables increased by approximately US$72,000 from approximately US$390,000 as of December 31, 2022 to approximately US$461,000 as of December 31, 2023, which is in line with the increase in sales as mentioned above.
The Group seeks to maintain strict control over its outstanding receivables, and overdue balances are reviewed regularly by its senior management. The following table sets out an ageing analysis of the Group’s trade receivables that are past due but not impaired, as of the dates indicated:
| For the Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| (US$) | (US$) | |||||||
| Less than 30 days | 44,543 | 22,473 | ||||||
| 30 to 90 days | 15,214 | 1,895 | ||||||
| More than 90 days | - | 2,117 | ||||||
| 59,757 | 26,485 | |||||||
As of December 31, 2023, the Group’s trade receivables that are past due but not impaired amounted to approximately US$60,000. These trade receivables were all subsequently settled as of date of this prospectus.
| 16 |
The following table sets out the Group’s average trade receivables turnover days for the periods indicated:
Average trade receivables turnover days indicates the average time required for the Group to collect cash payments from its provision of goods or services. The Group’s average trade receivables turnover days were 25 and 23 as of December 31, 2023 and 2022, respectively. The increase in the Group’s average trade receivables turnover days as of December 31, 2023 as compared to 2022 was mainly attributable to the increased sales from the provision of waste disposal services to multi-national companies which generally require an average credit term of 60 days.
The Group has applied the simplified approach by using the provision matrix to measure the lifetime expected credit loss (“ECL”) for trade receivables.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry or country in which the customers operate and therefore significant concentrations of credit risk primarily arise when the Group has significant exposure to individual customers. At the end of the financial year, 48.0% of the total trade receivables were from three of the Group’s largest customers. In 2022, 48.0% of the total trade receivables were from three of the Group’s largest customers.
Individual credit evaluations are performed on all customers. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Unless agreed the otherwise, trade receivables are generally due within 30 days from the date of billing. Normally, the Group does not obtain collateral from customers.
The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is calculated with reference to the credit spread for each of the groupings (which taking into consideration of historical credit loss experience, average actual date of receipt, customers’ background, listing status and size as groupings of various debtors), which reflect the credit risk of the debtors, over the expected life of the debtors and are adjusted for forward-looking information that is available without undue cost or effort. As the Group’s historical credit loss experience does not indicate significantly different loss patterns for different customer segments, the loss allowance based on past due status is not further distinguished between the Group’s different customer bases.
Expected loss rates are based on actual loss experience. These rates are adjusted to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables. The movements in loss allowance for trade receivables during the periods indicated:
For the Year Ended December 31, | ||||||||
2023 (US$) | 2022 (US$) | |||||||
| At January 1 | 46,768 | 150,000 | ||||||
| Impairment losses recognized | - | 46,768 | ||||||
| Amount written off as uncollectible | - | 150,000 | ||||||
| At December 31 | 46,768 | 46,768 | ||||||
Trade Payables
Trade payables represent primarily the Group’s obligations to pay for goods or services that have been engaged in the ordinary course of business from suppliers, including purchases of raw materials and utilities, as well as payment to its logistics providers. The Group is generally granted credit periods ranging from 30 to 60 days.
There were no significant changes to the Group’s trade payables balance for the two financial years under review.
| 17 |
Lease Liabilities
The Group recognized and measured lease liabilities in accordance with IFRS 16 “Leases”. The Group leases properties in Singapore mainly for use as factory space for the processing and storage of waste. The table below sets forth the breakdown of the Group’s lease liabilities as of the dates indicated:
| For the Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| (US$) | (US$) | |||||||
| Current | 192,282 | 185,764 | ||||||
| Non-current | 1,974,524 | 2,071,571 | ||||||
| 2,166,806 | 2,257,335 | |||||||
The Group’s lease liabilities (comprising current and non-current liabilities) decreased approximately US$91,000 from approximately US$2.3 million as of December 31, 2022 to approximately US$2.2 million as of December 31, 2023, in line with the normal utilization of the lease tenure.
Capital Commitments
During the years ended December 31, 2023 and 2022, the Group incurred capital expenditures mainly for the procurement of property, plant and equipment. The following table sets out the Group’s capital expenditure contracted for as of December 31, 2023 and 2022 but not recognized in the financial statements:
| As of December 31, | ||||||||
2023 (US$) | 2022 (US$) | |||||||
| Property, plant and equipment | 1,328,306 | 1,339,532 | ||||||
Off-Balance Sheet Arrangements
The Group has no off-balance sheet arrangements including arrangements that would affect its liquidity, capital resources, market risk support and credit risk support or other benefits.
Critical Accounting Estimates
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenues and expenses during the periods presented. On an ongoing basis, management evaluates their estimates, assumptions and judgments, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Management bases their estimates on historical experience and on various other factors, including expectations of future events, that they believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on the Group’s consolidated financial statements. While the Group’s significant accounting policies are more fully described in the notes to its consolidated financial statements appearing elsewhere in this prospectus, the Group believes that the following accounting policies and estimates are critical to the process of making significant judgments and estimates in the preparation of the Group’s financial statements and understanding and evaluating its reported financial results.
| 18 |
Revenue recognition
Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
Revenue is recognized when the Group satisfies a performance obligation by transferring a promised good or service to the customer, which is when the customer obtains control of the good or service. A performance obligation may be satisfied at a point in time or over time. The amount of revenue recognized is the amount allocated to the satisfied performance obligation.
Revenue from contracts with customers
| (a) | Rendering of services |
Revenue from rendering of services is recognized when the entity satisfies the performance obligation at a point in time, generally when the significant acts have been completed and when transfer of control occurs, or for services that are not significant, transactions revenue is recognized as the services are provided. The Group’s primary service consists of collecting and disposing of industrial wastes for its customers.
| (b) | Sale of goods |
Revenue from sale of goods is recognized at a point in time when the performance obligation is satisfied by transferring a promised good to the customer. Control of the goods is transferred to the customer, generally on delivery of the goods (in this respect, incoterms are considered).
Other revenue
| (c) | Interest income |
Interest income is recognized using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or where appropriate, a shorter period.
Critical judgements in applying the entity’s accounting policies
| (a) | Determination of functional currency |
In determining the functional currency of the Group, judgment is used by the management to determine the currency of the primary economic environment in which the Group operates. Consideration factors include the currency that mainly influences sales prices of goods and services and the currency of the country whose competitive forces and regulations mainly determines the sales prices of its goods and services.
| (b) | Determination of lease term of contracts with extension options |
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Group has several lease contracts that include extension options. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to extend the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise the extension. After the commencement date, the Group reassesses the lease term to consider whether there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to extend (e.g., construction of significant leasehold improvements or significant customization to the leased asset).
The Group includes the extension option in the lease term for leases of leasehold buildings because of the leasehold improvements made and the significant costs that would arise to replace the assets. The extension options for leases of motor vehicles are not included as part of the lease term because the Group typically leases motor vehicles for not more than five years and, hence, will not exercise the extension options.
| 19 |
Critical accounting estimates and assumptions
| (a) | Useful lives of property, plant and equipment |
The useful life of an item of property, plant and equipment is estimated at the time the asset is acquired and is based on historical experience with similar assets and takes into account anticipated technological or other changes. If changes occur more rapidly than anticipated or the asset experiences an unexpected level of wear and tear, the useful life will be adjusted accordingly. The carrying amount of the Group’s property, plant and equipment as of December 31, 2023 was US$21,786,365 (as of December 31, 2022: US$22,493,283).
| (b) | Inventory valuation method |
Inventory write-down is made based on the current market conditions, historical experience and selling goods of a similar nature. It could change significantly as a result of changes in market conditions. A review is made periodically for excess inventories, obsolescence and declines in net realizable value and an allowance is recorded against the inventory balances for any such declines. The realizable value represents the best estimate of the recoverable amount and is based on the most reliable evidence available and inherently involves estimates regarding the future expected realizable value. The carrying amount of the Group’s inventories as of December 31, 2023 was US$64,184 (as of December 31, 2022: US$221,151).
| (c) | Provision for expected credit losses of trade receivables |
The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns.
The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust historical credit loss experience with forward-looking information. At every reporting date, historical default rates are updated and changes in the forward-looking estimates are analyzed.
The assessment of the correlation between historical observed default rates, forecasted economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecasted economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customers’ actual default in the future.
The carrying amount of the Group’s trade receivables as of December 31, 2023 was US$461,497 (as of December 31, 2022: US$389,648).
| (d) | Impairment of non-financial assets |
The impairment testing of non-financial assets requires assumptions about the future cash flows projections as well as about the discount rate to be applied. The assumptions used to arrive at the cash flow projections are dependent on the future market shares, the market trend and the profitability of the Group’s products.
Impairment testing of non-financial assets requires estimates about the extent and probability of the occurrence of future events. As far as possible, estimates are derived from past experience taking into account current market conditions and the stage of technological advancement.
| (e) | Capitalization of intangible assets |
The costs of internally generated intangible assets are capitalized in accordance with the accounting policy in Note 2.6 to the financial statements. Initial capitalization of costs is based on management’s judgement that technological and economic feasibility is confirmed, usually when a development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits. The carrying amount of the intangible assets as of December 31, 2023 was US$2,381,465 (as of December 31, 2022: US$1,845,912).
| 20 |
The Group’s internally generated intangible assets consist of software development projects. These include an inventory management system, a proprietary software for tracking real time used catalytic converters to facilitate buying and selling decisions, a database to facilitate reporting, analysis and certification in its laboratory, a thermal treatment and desiccation system, an acid treatment and renewal system and a system to convert waste plastics to oil. These intangible assets were developed to improve efficiency, increase productivity and generate circular products. The costs incurred for each project consist principally of the salaries of the employees working directly on the projects and include time to develop business requirements, programming and coding, software architecture design and version deployment and testing.
Emerging Growth Company Status
ESGL is an “emerging growth company”, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, the Group is eligible to take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to SEC reporting companies that are not emerging growth companies. For so long as ESGL remains an emerging growth company, it will not be required to, among other things:
| ● | present more than two years of audited consolidated financial statements and two years of related selected financial data and management’s discussion and analysis of financial condition and results of operations disclosure; | |
| ● | have an auditor report on its internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and | |
| ● | disclose certain executive compensation related items. |
ESGL will remain an emerging growth company until the earlier of (i) the last day of the fiscal year following the fifth anniversary of the closing of the Business Combination, (ii) the last day of the fiscal year during which ESGL has total annual gross revenue of at least US$1.07 billion, (iii) the date on which ESGL is deemed to be a “large accelerated filer” under the Exchange Act, which means the market value of its ordinary shares that are held by non-affiliates exceeds US$700.0 million as of the last business day of its most recently completed second fiscal quarter, and (iv) the date on which ESGL has issued more than US$1.0 billion in non-convertible debt during the prior three-year period.
ESGL has taken advantage of certain of the reduced reporting requirements as a result of being an emerging growth company and a foreign private issuer. Among those advantages, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. ESGL has elected not to opt out of such extended transition period. Accordingly, when a standard is issued or revised and it has different application dates for public or private companies, ESGL, as an emerging growth company, can defer adopting the new or revised standard until the later of the two application dates. As a result, the information that ESGL provides here may be different than the information you may receive from other public companies in which you hold equity interests. If some investors find ESGL’s securities less attractive as a result, there may be a less active trading market for its securities and the prices of its securities may be more volatile.
Quantitative and Qualitative Disclosures about Market Risk
Risk management overview
The Group has exposure to market risk (including currency risk and interest rate risk), credit risk, liquidity risk, capital risk and commodity price risk. The Group’s exposure to each of these risks, and its objectives, policies and processes for measuring and managing risk are more fully described in the notes to its consolidated financial statements appearing elsewhere in this prospectus.
Market Risk
| (i) | Currency Risk |
While the Group’s reporting currency is the U.S. dollar, almost all of its sales and purchases are denominated in Singapore dollars. As a result, the Group is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and Singapore dollar. If the Singapore dollar depreciates against the U.S. dollar, the value of the Group’s Singapore dollar revenues, earnings and assets as expressed in the Group’s U.S. dollar consolidated financial statements will decline. The Group does not have a policy to hedge its exposure to foreign exchange risk.
| 21 |
| (ii) | Interest Rate Risk |
The Group is exposed to interest rate risk on its non-current borrowings at variable rates.
The Group’s borrowings at variable rates are denominated mainly in Singapore dollars. At December 31, 2023, if the Singapore dollar interest rates had increased/decreased by 0.5% (at December 31, 2022: 0.5%) with all other variables including tax rate being held constant, the loss after tax for the financial year would have been lower/higher by US$18,830 (2022: US$18,554) as a result of higher/lower interest expense on these borrowings.
Credit risk
The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group performs ongoing credit evaluation of its counterparties’ financial conditions and generally do not require collateral.
Financial assets are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations in full or in a timely manner. These arise principally from cash and cash equivalents, receivables and other financial assets. The maximum exposure to credit risk is the total of the fair value of the financial assets at the end of the reporting year. Credit risk on cash balances with banks and any other financial instruments is limited because the counter-parties are entities with acceptable credit ratings.
Liquidity risk
The Group is exposed to liquidity risk, which is risk that it will be unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Group will turn to other financial institutions and related parties to obtain short-term funding to cover any liquidity shortage.
Capital risk
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and a net current asset position to support its business and maximize its shareholders’ value. The capital structure of the Group comprises issued share capital and retained earnings.
The Group manages its capital structure and makes adjustments in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
The Group is in compliance with all externally imposed capital requirements for the financial years ended December 31, 2023 and 2022.
Commodity Price Risk
As the Group derives part of its revenue from the sales and trading of its circular products, which typically include zinc, precious metals and base metals, the Group is exposed to commodity price risk, which is risk on its financial performance and profitability upon fluctuations in the prevailing market prices of these commodities that are out of its control since they are primarily driven by external market forces.
| 22 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ESGL Holdings Limited | ||
| By: | /s/ Ho Shian Ching | |
| Name: | Ho Shian Ching | |
| Title: | Chief Financial Officer | |
| Dated: February 7, 2025 | ||
| 23 |
Exhibit 99.1
ESGL Holdings Limited
Index to Unaudited Consolidated Financial Statements
| F-1 |
ESGL Holdings Limited
Consolidated Statement of Financial Position
As at June 30, 2024 and December 31, 2023
| Notes | June 30, 2024 | December 31, 2023 | ||||||||
| Unaudited | ||||||||||
| Notes | June 30, 2024 | December 31, 2023 | ||||||||
| US$ | US$ | |||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | ||||||||||
| Trade and other receivables | 12 | |||||||||
| Prepaid forward purchase agreement | ||||||||||
| Inventories | 13 | |||||||||
| Total current assets | ||||||||||
| Non-current assets | ||||||||||
| Property, plant and equipment, net | 10 | |||||||||
| Intangible assets, net | 11 | |||||||||
| Total non-current assets | ||||||||||
| Total assets | ||||||||||
| LIABILITIES | ||||||||||
| Current liabilities | ||||||||||
| Trade and other payables | 16 | |||||||||
| Lease liabilities | 15 | |||||||||
| Borrowings | 17 | |||||||||
| Deferred underwriting fee payable | ||||||||||
| Tax liabilities | ||||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities | ||||||||||
| Lease liabilities (non-current) | 15 | |||||||||
| Borrowings (non-current) | 17 | |||||||||
| Deferred tax liabilities | 18 | |||||||||
| Total non-current liabilities | ||||||||||
| Total liabilities | ||||||||||
| Net assets | ||||||||||
| EQUITY | ||||||||||
| Share Capital | 19 | |||||||||
| Accumulated losses | ( | ) | ( | ) | ||||||
| Other reserves | ||||||||||
| Share premium reserve | 14 | |||||||||
| Exchange Reserves | ( | ) | ( | ) | ||||||
| Revaluation Surplus | 14 | |||||||||
| Total equity | ||||||||||
The accompanying notes form an integral part of these consolidated financial statements.
| F-2 |
ESGL Holdings Limited
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Financial Periods ended June 30, 2024 and 2023
| 2024 | 2023 | |||||||||
| Unaudited | ||||||||||
| For the Periods Ended June 30, | ||||||||||
| 2024 | 2023 | |||||||||
| Note | (US$) | (US$) | ||||||||
| Revenue | 4 | |||||||||
| Other income | 5 | |||||||||
| Cost of inventory | ( | ) | ( | ) | ||||||
| Logistics costs | ( | ) | ( | ) | ||||||
| Depreciation of property, plant and equipment | ( | ) | ( | ) | ||||||
| Amortization of intangible assets | ( | ) | ( | ) | ||||||
| Employee benefits expense | 7 | ( | ) | ( | ) | |||||
| Finance expense | ( | ) | ( | ) | ||||||
| Other operating expenses | 6 | ( | ) | ( | ) | |||||
| Loss before income tax | ( | ) | ( | ) | ||||||
| Income tax expense | 9 | ( | ) | ( | ) | |||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ||||||
| Loss per share | ) | ) | ||||||||
| Weighted average number of shares | ||||||||||
The accompanying notes form an integral part of these consolidated financial statements.
| F-3 |
ESGL Holdings Limited
Consolidated Statement of Changes in Equity for the Financial Periods ended June 30, 2024 and 2023
| Share capital | Revaluation reserve | Exchange reserve | Share premium reserve | Other reserve | Accumulated losses | Total equity | ||||||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||||
| Beginning of financial year | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of new shares | ||||||||||||||||||||||||||||
| Loss for the year | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance as of June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||||
| Beginning of financial year | ( | ) | ( | ) | ||||||||||||||||||||||||
| Beginning balance | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of new shares | ||||||||||||||||||||||||||||
| Loss for the year | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance as of June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Ending balance | ( | ) | ( | ) | ||||||||||||||||||||||||
The accompanying notes form an integral part of these consolidated financial statements.
| F-4 |
ESGL Holdings Limited
Consolidated Statement of Cash Flows for the Financial Periods ended June 30, 2024 and 2023
| June 30, 2024 | June 30, 2023 | |||||||||
| Unaudited | ||||||||||
| June 30, 2024 | June 30, 2023 | |||||||||
| US$ | US$ | |||||||||
| Cash flows from operating activities | ||||||||||
| Loss before income tax | ( | ) | ( | ) | ||||||
| Adjustments for: | ||||||||||
| - Prepaid forward purchase agreement written-off | ||||||||||
| - Depreciation of property, plant and equipment | 10 | |||||||||
| - Amortisation of intangible assets | 11 | |||||||||
| - Interest income | ( | ) | ( | ) | ||||||
| - Interest expense | 8 | |||||||||
| - Loss/(gain) on disposal of property, plant and equipment | 5 | |||||||||
| - Foreign exchange adjustment | ( | ) | ||||||||
| Total adjustments | ||||||||||
| Changes in operating assets and liabilties : | ||||||||||
| - Trade and other receivables | ( | ) | ||||||||
| - Inventories | ( | ) | ||||||||
| - Trade and other payables | ( | ) | ||||||||
| Net cash (used in)/generated by operating activities | ( | ) | ||||||||
| Cash flows from investing activities | ||||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||||
| Proceeds from disposal of property, plant and equipment | ||||||||||
| Additions to intangible assets | ( | ) | ( | ) | ||||||
| Interest received | ||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||
| Cash flows from financing activities | ||||||||||
| Proceeds from bank borrowings | ||||||||||
| Repayment of bank borrowings | ( | ) | ( | ) | ||||||
| Shares issuance | ||||||||||
| Repayment of underwriting fees | ( | ) | ||||||||
| Repayments of lease liabilities | ( | ) | ( | ) | ||||||
| Interest paid | ( | ) | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||||
| Net (decrease)/increase in cash and bank balances | ( | ) | ||||||||
| Cash and cash equivalents | ||||||||||
| Beginning of the financial year | ||||||||||
| End of the financial period | ||||||||||
The accompanying notes form an integral part of these consolidated financial statements.
| F-5 |
ESGL Holdings Limited
Consolidated Statement of Cash Flows for the Financial Periods ended June 30, 2024 and 2023
Reconciliation of liabilities arising from financing activities
| Unaudited | Lease liabilities | borrowings | Total | |||||||||
| Interest- | ||||||||||||
| bearing bank | ||||||||||||
| and other | ||||||||||||
| Unaudited | Lease liabilities | borrowings | Total | |||||||||
| US$ | US$ | US$ | ||||||||||
| At January 1 2023 | ||||||||||||
| Changes from financing cash flows: | ||||||||||||
| Proceeds from bank borrowings | ||||||||||||
| Repayment of bank loans | ( | ) | ( | ) | ||||||||
| Principal element of lease payments | ( | ) | ( | ) | ||||||||
| Borrowing cost paid | ( | ) | ( | ) | ( | ) | ||||||
| Total change from financing cash flows | ( | ) | ( | ) | ( | ) | ||||||
| Other changes: | ||||||||||||
| Exchange adjustments | ||||||||||||
| Lease modification | ||||||||||||
| Interest expenses | ||||||||||||
| Total other changes | ||||||||||||
| At December 31, 2023 | ||||||||||||
| Beginning balance | ||||||||||||
| Changes from financing cash flows: | ||||||||||||
| Proceeds from bank borrowings | ||||||||||||
| Repayment of bank loans | ( | ) | ( | ) | ||||||||
| Principal element of lease payments | ( | ) | ( | ) | ||||||||
| Borrowing cost paid | ( | ) | ( | ) | ( | ) | ||||||
| Total change from financing cash flows | ( | ) | ( | ) | ( | ) | ||||||
| Other changes: | ||||||||||||
| Exchange adjustments | ( | ) | ( | ) | ( | ) | ||||||
| Interest expenses | ||||||||||||
| Total other changes | ( | ) | ( | ) | ||||||||
| At June 30, 2024 | ||||||||||||
| Ending balance | ||||||||||||
The accompanying notes form an integral part of these consolidated financial statements.
| F-6 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1. General information
ESGL Holdings Limited
ESGL Holdings Limited (“ESGL” or the “Company”) was incorporated in the Cayman Islands on November 18, 2022. Following the successful completion of a business combination on August 3, 2023, ESGL listed on Nasdaq and is a publicly traded company. ESGL’s stock commenced trading August 4, 2023.
ESGL’s subsidiaries are as follows:
Environmental Solutions Group Holdings Limited
Environmental Solutions Group Holdings Limited is a holding company incorporated under the laws of the Cayman Islands as an exempted company with limited liability on June 14, 2022. The address of its registered office is 71 Fort Street, PO Box 500, George Town, Grand Cayman, KY1-1106, Cayman Islands. As a holding company with no material operations of its own, ESGH conducts all of its operations through its operating entity incorporated in Singapore, Environmental Solutions (Asia) Pte. Ltd.
Environmental Solutions Asia Holdings Limited (“ESAH”)
ESAH, a wholly-owned subsidiary of the ESGH, was incorporated on June 29, 2022 and domiciled in the British Virgin Islands with its registered office at Mandar House, 3rd Floor, Johnson’s Ghut, Tortola, British Virgin Islands.
Environmental Solutions (Asia) Pte. Ltd. (“ESA”)
ESA was incorporated and domiciled in Singapore, with its registered office at 101 Tuas, South Avenue 2, Singapore 637226. ESA is a waste management, treatment and recycling company involved in the collection and recycling of hazardous and non-hazardous industrial waste from customers such as pharmaceutical, semiconductor, petrochemical and electroplating companies.
As ESGL, ESGH, ESAH and ESA (collectively the “Group”) were under common control, the Merger constituted a reorganization under common control and are required to be retrospectively applied to the consolidated financial statements at their historical amounts. The consolidated financial statements have been prepared as if the existing corporate structure had been in existence throughout all periods. This includes a retrospective presentation for all equity related disclosures, including issued shares, which have been revised to reflect the effects of the reorganization in accordance with International Financial Reporting Standards (“IFRS”) as of June 30, 2024 and 2023.
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”).
These financial statements have been prepared on a historical cost convention, except for Prepaid forward purchase agreement and leasehold land and buildings which are measured at fair value.
The preparation of financial statements in conformity with IFRS requires management to exercise its judgement in the process of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions.
| F-7 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
| 2.1 | Basis of preparation (continued) |
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.
2.2 Basis of Consolidation
The financial statements are presented in United States Dollars (“US$”), which is the Group’s functional currency. All financial information presented in United States Dollars has been rounded to the nearest dollar, unless otherwise indicated.
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at June 30, 2024 and 2023. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Company the current ability to direct the relevant activities of the investee).
When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:-
| ● | Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); | |
| ● | Exposure, or rights, to variable returns from its involvement with the investee; and | |
| ● | The ability to use its power over the investee to affect its returns. |
The financial statements of subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
| ● | The contractual arrangement(s) with the other vote holders of the investee; | |
| ● | Rights arising from other contractual arrangements; | |
| ● | The Company’s voting rights and potential voting rights. |
The Company assesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (“OCI”) are attributed to the equity holders of the parent of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.
| F-8 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
2.3 Revenue recognition
Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
Revenue is recognized when the Group satisfies a performance obligation by transferring a promised good or service to the customer, which is when the customer obtains control of the goods or services. A performance obligation may be satisfied at a point in time or over time. The amount of revenue recognized is the amount allocated to the satisfied performance obligation.
Revenue from contracts with customers
| (a) | Rendering of services |
Revenue from rendering of services is recognized when the entity satisfies the performance obligation at a point in time, generally when the significant acts have been completed and when transfer of control occurs, or for services that are not significant, transactions revenue is recognized as the services are provided. The Group’s primary service consists of collecting and disposing of industrial wastes for its customers.
| (b) | Sale of goods |
Revenue from sale of goods is recognized at a point in time when the performance obligation is satisfied by transferring a promised good to the customer. Control of the goods is transferred to the customer, generally on delivery of the goods (in this respect, incoterms are considered).
Other revenue
Interest income
Interest income is recognized using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or where appropriate, a shorter period.
Contract assets
The contract assets are for the Group’s rights to consideration for work completed but not billed at the reporting date on its contracts; costs incurred to obtain or fulfil a contract with a customer; and any impairment losses recognized in the reporting year. The contract assets are transferred to the receivables when the right to payment becomes unconditional.
2.4 Government grants
Grants from the government are recognized as a receivable at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with all the attached conditions.
Government grants receivable are recognized as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis. Government grants relating to expenses are shown separately as other income.
Government grants relating to non-monetary assets are deducted against the carrying amount of the non-monetary assets.
| F-9 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
2.5 Property, plant and equipment
| (a) | Measurement |
| (i) | Property, plant and equipment |
Property, plant and equipment other than leasehold land and buildings are initially recognized at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses.
Leasehold land and buildings are measured at fair value less accumulated depreciation and impairment losses recognized after the date of the revaluation. Valuations are performed frequently to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any revaluation surplus is credited to the property revaluation reserve in equity, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the Statement of Profit or Loss and Other Comprehensive Income, in which case the increase is recognized in the statement of profit or loss.
A revaluation deficit is recognized in the statement of profit or loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve.
An annual transfer from the property revaluation reserve to accumulated losses is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Upon disposal, any revaluation reserve relating to that particular asset being sold is transferred to retained profits.
| (ii) | Components of costs |
The cost of an item of property, plant and equipment initially recognized includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
| (b) | Depreciation |
Depreciation is calculated using the straight-line method to allocate depreciable amounts over the estimated useful lives as follows:
| Useful lives | ||
| Leasehold land and buildings | ||
| Plant and equipment | ||
| Machineries | ||
| Renovation | ||
| Motor vehicles | ||
| Furniture and fittings |
The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each reporting date. The effects of any revision are recognized in profit or loss when the changes arise.
Fully depreciated property, plant and equipment are retained in the financial statements until they are no longer in use.
| (c) | Subsequent expenditure |
Subsequent expenditure relating to property, plant and equipment that has already been recognized is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognized in profit or loss when incurred.
| F-10 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
| 2.5 | Property, plant and equipment (continued) |
| (d) | Disposal |
On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognized in profit or loss.
2.6 Intangible assets
Intangible assets acquired separately are measured initially at cost. Following initial acquisition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss in the year in which the expenditure is incurred.
Intangible assets with finite useful lives are amortized over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
Amortization is calculated using the straight-line method to allocate depreciable amounts over the estimated useful lives of the assets. The estimated useful lives are as follows:
Schedule of intangible assets depreciable, estimated useful lives
| Useful lives | |||
| Software |
2.7 Borrowing costs
Borrowing costs are recognized in profit or loss using the effective interest method.
2.8 Impairment of non-financial assets
Intangible assets, property, plant and equipment and right-of-use assets are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired or when annual impairment testing for an asset is required.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash inflows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the cash-generating units (“CGU”) to which the asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognized as an impairment loss in profit or loss.
An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of accumulated depreciation) had no impairment loss been recognized for the asset in prior years.
A reversal of impairment loss for an asset is credited to profit or loss in the period in which it arises.
| F-11 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
2.9 Financial assets
| (a) | Classification and measurement |
The Group classifies its financial assets at amortized cost.
The classification of debt instruments depends on the Group’s business model for managing the financial assets as well as the contractual terms of the cash flows of the financial assets.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
The Group reclassifies debt instruments when and only when its business model for managing those assets changes.
At initial recognition
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of the financial assets not a fair value through profit or loss, transactions costs that are directly attributable to the acquisition of the financial asset.
At subsequent measurement
Debt instruments are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt instrument that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in interest income using the effective interest rate method.
| (b) | Impairment of financial assets |
The Group recognizes a loss allowance for expected credit loss (“ECL”) on financial assets which are subject to impairment under IFRS 9 (including trade and other receivables). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessments are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.
The Group always recognizes lifetime ECL for trade and other receivables. The ECL on these assets are assessed individually for debtors with significant balances and/or collectively using a provision matrix with appropriate groupings.
For all other instruments, the Group measures the loss allowance as equal to 12m ECL, unless there has been a significant increase in credit risk since initial recognition for which the Group recognizes lifetime ECL. The assessment of whether lifetime ECL should be recognized is based on significant increases in the likelihood or risk of a default occurring since initial recognition.
| F-12 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
| 2.9 | Financial assets (continued) |
| (b) | Impairment of financial assets (continued) |
| (i) | Significant increase in credit risk |
In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk has increased significantly:
| ● | An actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating; | |
| ● | Significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, or the credit default swap prices for the debtor; | |
| ● | Existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations; | |
| ● | An actual or expected significant deterioration in the operating results of the debtor; | |
| ● | An actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations. |
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.
| (ii) | Definition of default |
For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collateral held by the Group).
Irrespective of the above, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.
| (iii) | Credit-impaired financial assets |
A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:
| (a) | Significant financial difficulty of the issuer or the borrower; | |
| (b) | A breach of contract, such as a default or past due event; | |
| (c) | The lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession that the lender(s) would not otherwise consider. |
| F-13 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
| 2.9 | Financial assets (continued) |
| (b) | Impairment of financial assets (continued) |
| (iii) | Credit-impaired financial assets (continued) |
| (d) | It is becoming probable that the borrower will enter bankruptcy or other financial reorganization; or |
| (e) | The disappearance of an active market for that financial asset because of financial difficulties. |
| (iv) | Write-off policy |
The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over one year past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognized in profit or loss.
| (v) | Measurement and recognition of ECL |
The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure to default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default representing the weights.
Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition.
Where ECL is measured on a collective basis or for cases where evidence at the individual instrument level may not yet be available, the financial instruments are grouped on the following basis:
| ● | Nature of financial instruments; | |
| ● | Past-due status; | |
| ● | Nature, size and industry of debtors; and | |
| ● | External credit ratings where available. |
The groups are regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.
Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortized cost of the financial asset.
| (c) | Recognition and derecognition |
Regular way purchases and sales of financial assets are recognized on the trade date – the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
On disposal of a debt instrument, the difference between the carrying amount and the sale proceeds is recognized in profit or loss. Any amount previously recognized in other comprehensive income relating to that asset is reclassified to profit or loss.
| F-14 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
2.10 Financial Liabilities
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the reporting date, in which case they are presented as non-current liabilities.
Borrowings are initially recognized at fair values (net of transaction costs) and subsequently carried at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities.
Trade and other payables are initially recognized at fair value, and subsequently carried at amortized cost using the effective interest method.
| (a) | Derecognition |
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
| (b) | Offsetting of financial instruments |
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
2.11 Leases
When the Group is the lessee
At the inception of the contract, the Group assesses if the contract contains a lease. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Reassessment is only required when the terms and conditions of the contract are changed.
Right-of-use assets
The Group recognizes a right-of-use asset and lease liability at the date at which the underlying asset is available for use. Right-of-use assets are measured at cost which comprises the initial measurement of lease liabilities adjusted for any lease payments made at or before the commencement date and lease incentive received. Any initial direct costs that would not have been incurred if the lease had not been obtained are added to the carrying amount of the right-of-use assets.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
Right-of-use assets are presented within “Property, plant and equipment”.
| F-15 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
| 2.11 | Leases (continued) |
Lease liabilities
The initial measurement of a lease liability is measured at the present value of the lease payments discounted using the implicit rate in the lease, if the rate can be readily determined. If that rate cannot be readily determined, the Group shall use its incremental borrowing rate.
Lease payments include the following:
| ● | Fixed payments (including in-substance fixed payments), less any lease incentives receivable; | |
| ● | Variable lease payment that is based on an index or rate, initially measured using the index or rate as at the commencement date; | |
| ● | Amount expected to be payable under residual value guarantees; | |
| ● | The exercise price of a purchase option if it is reasonably certain the option will be exercised; and | |
| ● | Payment of penalties for terminating the lease, if the lease term reflects the Group exercising that option. |
For a contract that contains both lease and non-lease components, the Group allocates the consideration to each lease component on the basis of the relative stand-alone price of the lease and non-lease components. The Group has elected to not separate lease and non-lease components for property leases and accounts for these as one single lease component.
Lease liability is measured at amortized cost using the effective interest method. Lease liability shall be remeasured when:
| ● | There is a change in future lease payments arising from changes in an index or rate; | |
| ● | There is a change in the Group’s assessment of whether it will exercise an extension option; or | |
| ● | There is modification in the scope or the consideration of the lease that was not part of the original term. |
Lease liability is remeasured with a corresponding adjustment to the right-of-use assets, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group presents lease liabilities as a separate line item on the statement of financial position.
Short-term and low-value leases
The Group has elected to not recognize right-of-use assets and lease liabilities for short-term leases that have lease terms of 12 months or less and leases of low value. Payments relating to these leases are expensed to profit or loss on a straight-line basis over the lease term.
Variable lease payments
Variable lease payments that are not based on an index or a rate are not included as part of the measurement and initial recognition of the lease liability. The Group shall recognize those lease payments in profit or loss in the periods that triggered those lease payments.
Lease modifications
The Group accounts for a lease modification as a separate lease if:
| ● | The modification increases the scope of the lease by adding the right to use one or more underlying assets; and |
| F-16 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
| 2.11 | Leases (continued) |
| ● | The consideration for the leases increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract. |
For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.
The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-of-use asset. When the modified contract contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the modified contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
When the Group is the lessor
Classification and measurement of leases
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Amounts due from lessees under finance leases are recognized as receivables at commencement date at amounts equal to net investments in the leases, measured using the interest rate implicit in the respective leases. Initial direct costs are included in the initial measurement of the net investments in the leases. Interest income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and such costs are recognized as an expense on a straight-line basis over the lease term except for investment properties measured under the fair value model. Variable lease payments for operating leases that depend on an index or a rate are estimated and included in the total lease payments to be recognized on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or a rate are recognized as income when they arise.
Refundable rental deposits
Refundable rental deposits received are accounted for under IFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments from lessees.
Lease modification
Changes in consideration of lease contracts that were not part of the original terms and conditions are accounted for as lease modifications, including lease incentives provided through forgiveness or reduction of rentals.
The Group accounts for a modification to an operating lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease.
| F-17 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
2.12 Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is calculated using the specific identification method and includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale.
When necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying values of inventories to the lower of cost and net realizable value.
2.13 Income taxes
Income tax represents the sum of current and deferred tax. Income tax relating to items recognized outside profit or loss is recognized outside profit or loss, either in other comprehensive income or directly in equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:-
| ● | When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit or loss nor taxable profit or loss; and |
| ● | In respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. |
Deferred tax assets are recognized for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilized, except:
| ● | When the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit or loss nor taxable profit or loss; and |
| ● | In respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognized to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. |
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.
| F-18 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
| 2.13 | Income Taxes (continued) |
Deferred tax is calculated, without discounting, at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred taxes are recognized as income or expenses in profit or loss, except to the extent that the tax arises from a transaction which is recognized directly in equity.
The Group accounts for investment tax credits similar to accounting for other tax credits where a deferred tax asset is recognized for unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax credits can be utilized.
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
2.14 Employee benefits
Employee benefits are recognized as an expense, unless the cost qualifies to be capitalized as an asset.
| (a) | Defined contribution plans |
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid.
| (b) | Short-term employees benefits |
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
| F-19 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
2.15 Currency translation
The financial statements are presented in United States Dollar (“US$”), which is the functional currency of the Group.
Transactions in a currency other than the United States Dollar (“foreign currency”) are translated into the United States Dollar using the exchange rates at the dates of the transactions. Currency exchange differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the reporting date are recognized in profit or loss. Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined.
All foreign exchange gains and losses impacting profit or loss are presented in statement of comprehensive income within “Other operating expenses”.
2.16 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand and deposits with financial institutions which are subject to any insignificant risk of changes in value, and have a short maturity of generally within three months when acquired.
2.17 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account.
2.18 Related parties
| (a) | A person, or a close member of that person’s family, is related to the Company if that person : |
| (i) | Has control or joint control over the Company; |
| (ii) | Has significant influence over the Company; or |
| (iii) | Is a member of key management personnel of the Company or the Company’s parent; |
or
| (b) | An entity is related to the Company if any of the following conditions applies:- |
| (i) | The entity and the Company are members of the same group; |
| (ii) | One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); |
| (iii) | The entity and the Company are joint ventures of the same third party; |
| (iv) | One entity is a joint venture of a third entity and the other entity is an associate of the third entity; |
| (v) | The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company; |
| (vi) | The entity is controlled or jointly controlled by a person identified in (a); |
| (vii) | A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and |
| (viii) | The entity, or any member of a group of which it is a part, provides key management personnel services to the Company or to the Company’s parent. |
| F-20 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
| 2.18 | Related parties (continued) |
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:
| (a) | That person’s children and spouse or domestic partner; |
| (b) | Children of that person’s spouse or domestic partner; and |
| (c) | Dependents of that person or that person’s spouse or domestic partner. |
2.19 Fair value measurement
The Group measures its properties at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:-
Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly
Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
| F-21 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 2. | Significant accounting policies (continued) |
2.20 Application of amendments to IFRS
In the preparation of the financial statements for the period ended June 30, 2024, the Group has applied the following amendments to IFRSs, for the first time, which are mandatorily effective for the annual periods beginning on or after January 1, 2024:
| Amendments to IFRS 16 | Leases on sale and leaseback | |
| Amendments to IFRS 7 | Supplier finance | |
| Amendments to IAS 1 | Classification of liabilities as current or non-current | |
| Non-current liabilities with covenants |
The application of the amendments to IFRSs in the current year has had no material impact on the Group’s financial positions and performance for the current and prior years and/or on the disclosures set out in these financial statements.
3. Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Critical judgements in applying the entity’s accounting policies
| (a) | Determination of functional currency |
In determining the functional currency of the Group, judgment is used by the management to determine the currency of the primary economic environment in which the Group operates. Consideration factors include the currency that mainly influences sales prices of goods and services and the currency of the country whose competitive forces and regulations mainly determines the sales prices of its goods and services.
| (b) | Determination of lease term of contracts with extension options |
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Group has several lease contracts that include extension options. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to extend the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise the extension. After the commencement date, the Group reassesses the lease term to consider whether there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to extend (e.g. construction of significant leasehold improvements or significant customization to the leased asset).
The Group includes the extension option in the lease term for leases of leasehold buildings because of the leasehold improvements made and the significant costs that would arise to replace the assets. The extension options for leases of motor vehicles are not included as part of the lease term because the Group typically leases motor vehicles for not more than five years and, hence, will not exercise the extension options.
| F-22 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 3. | Critical accounting estimates, assumptions and judgements (continued) |
Critical accounting estimates and assumptions
| (a) | Useful lives of plant and equipment |
The
useful life of an item of property, plant and equipment is estimated at the time the asset is acquired and is based on historical experience
with similar assets and takes into account anticipated technological or other changes. If changes occur more rapidly than anticipated
or the asset experiences an unexpected level of wear and tear, the useful life will be adjusted accordingly. The carrying amount of the
Group’s plant and equipment as at June 30, 2024 was US$
| (b) | Inventory valuation method |
Inventory
write-down is made based on the current market conditions, historical experience and selling goods of a similar nature. It could change
significantly as a result of changes in market conditions. A review is made periodically for excess inventories, obsolescence and declines
in net realizable value and an allowance is recorded against the inventory balances for any such declines. The realizable value represents
the best estimate of the recoverable amount and is based on the most reliable evidence available and inherently involves estimates regarding
the future expected realizable value. The carrying amount of the Group’s inventories as at June 30, 2024 was US$
| (c) | Provision for expected credit losses of trade receivables |
The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns.
The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust historical credit loss experience with forward-looking information. At every reporting date, historical default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation between historical observed default rates, forecasted economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecasted economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customers’ actual default in the future.
The
carrying amount of the Group’s trade receivables as at June 30, 2024 was US$
| (d) | Impairment of non-financial assets |
The impairment testing of non-financial assets requires assumptions about the future cash flows projections as well as about the discount rate to be applied. The assumptions used to arrive at the cash flow projections are dependent on the future market shares, the market trend and the profitability of the Group’s products.
Impairment testing of non-financial assets requires estimates about the extent and probability of the occurrence of future events. As far as possible, estimates are derived from past experience taking into account current market conditions and the stage of technological advancement.
| F-23 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 3. | Critical accounting estimates, assumptions and judgements (continued) |
Critical accounting estimates and assumptions (continued)
| (e) | Capitalization of intangible assets |
The
costs of internally generated intangible assets are capitalized in accordance with the accounting policy in Note 2.6 to the financial
statements. Initial capitalization of costs is based on management’s judgement that technological and economic feasibility is confirmed,
usually when a development project has reached a defined milestone according to an established project management model. In determining
the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates
to be applied and the expected period of benefits. The carrying amount of the intangible assets at the reporting date is US$
| (f) | Forward Purchase Agreement |
On
July 27, 2023, the Company, ESGL entered into an agreement (“Forward Purchase Agreement”) with Vellar Opportunities Fund
Master, Ltd. (“Vellar”) for an OTC Equity Prepaid Forward Transaction. On the same date as the execution of the Forward Purchase
Agreement, Vellar assigned and novated
In
aggregate, Vellar purchased shares, and ARRT shares of the Company’s Class A common
stock (the “Recycled Shares”). In connection with these purchases, the Sellers revoked any redemption elections. The purchases
were recognized as a current asset in the financial statements as Prepaid Forward Purchase Agreement (“Prepaid FPA”), at
fair value at the time of the purchase transaction. For the financial year ended December 31, 2023, the fair value of the Prepaid FPA
was assessed using a Monte Carlo simulation model to be US$
Termination of Forward Purchase Agreement
On or about December 4, 2023, the Company and ARRT mutually agreed to terminate the Forward Purchase Agreement. Subsequently, the Company received a termination notice from Vellar dated March 14, 2024, notifying the Company that the Valuation Date with Vellar shall be deemed to be March 15, 2024. Upon the Valuation Date, the obligations of Vellar and the Company under the Forward Purchase Agreement shall terminate.
| F-24 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
4. Revenue
Revenue classified by type of good or service is as follows :
Schedule of revenue classified by type of good or service
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| For the Period Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Revenue from: | ||||||||
| - Sales of circular products | ||||||||
| - Waste disposal services | ||||||||
| Revenue | ||||||||
The revenue from sales of goods and other service income is recognized based on a point in time.
5. Other income
Schedule of other income
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| For the Periods Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Foreign exchange gain | ||||||||
| Interest income | ||||||||
| Gain from disposal of motor vehicle | ||||||||
| Government grants | ||||||||
| Grant from AEPW1 | ||||||||
| Warehousing and logistic services | ||||||||
| Other income | ||||||||
| 1 |
6. Other operating expenses
Schedule of other operating expenses
| Unaudited | ||||||||
| For the Periods Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Foreign exchange loss | ||||||||
| Foreign worker levy | ||||||||
| Impairment loss on receivables | ||||||||
| Insurance | ||||||||
| Professional fees | ||||||||
| Property tax | ||||||||
| Rental and storage | ||||||||
| Utilities | ||||||||
| Upkeep, repair and maintenance | ||||||||
| Chemical and incineration fees | ||||||||
| Bank service charges | ||||||||
| Listing fees and expenses | ||||||||
| Others | ||||||||
| Other operating expenses | ||||||||
| F-25 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
7. Employee benefits expense
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| For the Periods Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Salaries, wages and bonuses | ||||||||
| Directors’ remuneration | ||||||||
| Directors’ fees | ||||||||
| Employer’s contribution to defined contribution plans including Central Provident Fund | ||||||||
| Other short term benefit | ||||||||
| Employee benefits expense | ||||||||
8. Finance expense
Schedule of finance expense
| Unaudited | ||||||||
| For the Periods Ended June 30 | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Interest expenses: | ||||||||
| - Lease liabilities | ||||||||
| - Borrowings | ||||||||
| Interest expenses | ||||||||
9. Income tax expense
Schedule of tax expense attributable to loss
| Unaudited | ||||||||
| For the Periods Ended June 30 | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Tax expense attributable to loss is made up of: | ||||||||
| - Current income tax | ||||||||
| - Movements in deferred tax liabilities | ||||||||
| Tax expense attributable to loss | ||||||||
The tax on profit or loss before income tax differs from the theoretical amount that would arise using the Singapore standard rate of income tax expense as follows :
Schedule of income tax rates to profit or loss before income tax expense
| Unaudited | ||||||||
| For the Periods Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Loss before income tax | ( | ) | ( | ) | ||||
| Tax calculated at tax rate of | ( | ) | ( | ) | ||||
| Effects of: | ||||||||
| - Expenses not deductible for tax purposes | ||||||||
| - Income not subject to tax | ( | ) | ( | ) | ||||
| - Temporary difference | ||||||||
| Income tax expense | ||||||||
| F-26 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
10. Property, plant and equipment
Schedule of property, plant and equipment
| Leasehold land and buildings | Plant and equipment | Machineries | Renovation | Motor vehicles | Furniture and fittings | Total | ||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||
| Leasehold land and buildings | Plant and equipment | Machineries | Renovation | Motor vehicles | Furniture and fittings | Total | ||||||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||||
| Beginning of financial period | ||||||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||
| Valuation | ||||||||||||||||||||||||||||
| Beginning of financial period | ||||||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||||||
| End of financial period | ||||||||||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||||||
| Beginning of financial year | ||||||||||||||||||||||||||||
| Depreciation charge | ||||||||||||||||||||||||||||
| End of financial period | ||||||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||||||
| End of financial period | ||||||||||||||||||||||||||||
| F-27 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 10. | Property, plant and equipment (continued) |
| Leasehold land and buildings | Plant and equipment | Machineries | Renovation | Motor vehicles | Furniture and fittings | Total | ||||||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||||
| Beginning of financial year | ||||||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||
| Valuation | ||||||||||||||||||||||||||||
| Beginning of financial year | ||||||||||||||||||||||||||||
| Beginning balance | ||||||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||||||
| Disposal | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Lease modifications | ||||||||||||||||||||||||||||
| Revaluation | ( | ) | ( | ) | ||||||||||||||||||||||||
| Exchange difference | ||||||||||||||||||||||||||||
| End of financial year | ||||||||||||||||||||||||||||
| Ending balance | ||||||||||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||||||
| Beginning of financial year | ||||||||||||||||||||||||||||
| Beginning balance | ||||||||||||||||||||||||||||
| Depreciation charge | ||||||||||||||||||||||||||||
| Disposal | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Revaluation | ( | ) | ( | ) | ||||||||||||||||||||||||
| End of financial year | ||||||||||||||||||||||||||||
| Ending balance | ||||||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||||||
| End of financial year | ||||||||||||||||||||||||||||
| Ending balance | ||||||||||||||||||||||||||||
| F-28 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
11. Intangible assets
Schedule of intangible assets
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Cost | ||||||||
| Beginning of financial year | ||||||||
| Additions - internal development | ||||||||
| End of financial period and year | ||||||||
| Accumulated amortisation | ||||||||
| Beginning of financial year | ||||||||
| Amortization | ||||||||
| End of financial period and year | ||||||||
| Net book value | ||||||||
| End of financial period and year | ||||||||
12. Trade and other receivables
Schedule of trade and other receivables
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Trade receivables | ||||||||
| - Non-related parties | ||||||||
| Trade receivables | ||||||||
| Non-trade receivables | ||||||||
| - Advance payment to suppliers | ||||||||
| - Amount due from a director | ||||||||
| - Deposits | ||||||||
| - Goods and services tax recoverable | ||||||||
| - Prepayments | ||||||||
| Non-trade receivables | ||||||||
| Trade and other receivables | ||||||||
| F-29 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 12. | Trade and other receivables (continued) |
Receivables that are past due but not impaired
The
Group had trade receivables amounting to US$
Schedule of components of trade receivables aging
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Less than 30 days | ||||||||
| 30 to 90 days | ||||||||
| Trade and other receivables | ||||||||
13. Inventories
Schedule of inventories
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Raw materials | ||||||||
| Finished goods | ||||||||
| Inventories | ||||||||
14. Reserve
| (a) | Revaluation reserve |
Revaluation reserve represents increases in the fair value of leasehold land and buildings, net of tax, and decreases to the extent that such decrease relates to an increase on the same asset previously recognized in other comprehensive income.
| (b) | Other reserve |
Other reserve represents member’s deemed contribution arising from reorganization.
| (c) | Exchange reserve |
The exchange reserve represents the exchange differences relating to the translation of the Group’s leasehold land and building from the revaluation. The exchange differences are recognized directly in other comprehensive income and accumulated in the exchange reserve. Such exchange differences accumulated in the exchange reserve are reclassified to the consolidated income statement on the disposal of the leasehold land and building.
| (d) | Share premium reserve |
The share premium reserve represents the excess amounts paid by shareholders above the par value of the shares issued.
| F-30 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
15. Leases – The Group as a lessee
Nature of the Group’s leasing activities
The Group has lease contracts for land, buildings, machineries and equipment. The Group’s obligations under these leases are secured by the lessor’s title to the leased assets. The Group is restricted from assigning and subleasing the leased assets.
The Group regularly enters into short-term leases of 12 months or less for certain plant and equipment and machineries. The Group applies the ‘short-term lease’ recognition exemptions for these leases.
| (a) | Carrying amounts |
ROU assets classified within property, plant and equipment
Schedule of ROU assets classified within property, plant and equipment
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Carrying amounts | ||||||||
| Leasehold land and buildings | ||||||||
| Plant and equipment | ||||||||
| Motor vehicles | ||||||||
| Carrying amounts ROU assets | ||||||||
(b) Depreciation charge during the financial year
| Unaudited | ||||||||
| Periods ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Leasehold land and buildings | ||||||||
| Plant and equipment | ||||||||
| Motor vehicles | ||||||||
| Depreciation charge | ||||||||
Interest expense
Schedule of interest expense
| Unaudited | ||||||||
| Periods ended June 30 | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Interest expense on lease liabilities | ||||||||
| F-31 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
16. Trade and other payables
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Trade payables | ||||||||
| - Non-related parties | ||||||||
| Trade payables | ||||||||
| Other payables | ||||||||
| - Amount due to shareholders | ||||||||
| - Contract liabilities | ||||||||
| - Amount due to directors | ||||||||
| - Deposit from customers | ||||||||
| - Accruals and other payables | ||||||||
| - Goods and services tax payable | ||||||||
| - Withholding tax | ||||||||
| Other payables | ||||||||
| Trade and other payables | ||||||||
17. Borrowings
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Term loan I (i) | ||||||||
| Term loan IV (iii) | ||||||||
| Term loan V (iv) | ||||||||
| Term loan VI (v) | ||||||||
| Term loan VII (vi) | ||||||||
| Trade receivables financing | ||||||||
| Revolving credit | ||||||||
| Total borrowings | ||||||||
Details of the repayment schedule in respect of the interest-bearing borrowings are as follows :
Schedule of respect of the interest-bearing borrowings trade and other payables
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Bank borrowings repayable : | ||||||||
| Within one year or on demand | ||||||||
| Within a period of more than one year but not exceeding two years | ||||||||
| Total Bank borrowings repayable | ||||||||
| F-32 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
| 17. | Borrowings (continued) |
| (i) |
| (ii) | Term
loan II was obtained to finance the construction of the proposed erection of a single user
1-story factory with part 3-story ancillary. This loan is repayable by monthly instalments
over a |
| (iii) |
| (iv) |
| (v) |
| (vi) |
| (vii) | Revolving
credit is obtained for working capital purposes. These loans are repayable |
During
the current financial year, the Group entered into a trade receivables financing agreement with one of its lenders. The arrangement will
provide immediate payment of up to
Security granted
The Group’s borrowings are secured by:
| (a) | A
legal mortgage on the Group’s leasehold land and buildings with net book value of US$ |
| (b) | Several guarantees from a director and a former director of the Group in their personal capacities. |
| F-33 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
18. Deferred tax
Schedule of deferred tax assets and liabilities
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Deferred tax assets recognized | ||||||||
| Deferred tax liabilities recognized | ||||||||
| Net deferred tax liabilities | ||||||||
The movement in deferred tax liabilities (prior to offsetting of balances) during the financial year is as follows:
Schedule of deferred tax liabilities
| Unaudited | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| US$ | US$ | |||||||
| Balance as at beginning of financial year | ||||||||
| Movements in deferred tax liabilities | ||||||||
| Balance as at end of financial year | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| No. of ordinary shares | ||||||||
| F-34 |
ESGL Holdings Limited
Notes to the Consolidated Financial Statements for Financial Periods ended June 30, 2024 and 2023
20. Group information
Subsidiaries
The consolidated financial statements of the Group include :
| Place of | ||||||||||||
| incorporation | Effective equity held by the | |||||||||||
| Name of subsidiary | Principal activities | and business | Group | |||||||||
| 2024 | 2023 | |||||||||||
| % | % | ||||||||||
| Held by the Company | ||||||||||||
| Environmental Solutions Group Holdings Limited | Investment holding company | |||||||||||
| Held by Subsidiary | ||||||||||||
| Environmental Solutions Asia Holdings Limited | Investment holding company | |||||||||||
| Environmental Solutions (Asia) Pte Ltd | Waste management and recycling of industrial wastes | |||||||||||
| F-35 |