ESGL (US:ESGL)2025-04-29 13:07PART I Item 3. Key Information This section details the primary risks facing the company, categorized into business/industry, securities, and public company operations * Net Loss and Accumulated Deficit | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net Loss | US$633,257 | US$94,979,338 | | Accumulated Deficit | US$100,619,185 | US$99,985,928 | * The significant net loss in 2023 was primarily driven by non-recurring listing expenses of approximately US$93.1 million related to the Business Combination30 * The company's revenue for fiscal year 2024 was approximately US$6.1 million, failing to meet the projected range of US$7.6 million to US$9.5 million due to lower hazardous chemical waste revenue, funding challenges, and unexpected regulatory changes3637 * The business is exposed to various risks, including competition from larger players, fluctuations in recyclable material prices, dependency on key personnel, and potential impacts from economic conditions, climate change, and cybersecurity threats3438465260 Item 4. Information on the Company ESGL operates as a holding company, with its primary business conducted through its Singapore-based subsidiary, ESA, a waste management and recycling firm A. History and Development of the Company ESGL Holdings Limited was formed on November 18, 2022, and became a publicly traded entity on Nasdaq on August 4, 2023, following a business combination with Genesis Unicorn Capital Corp * The company was formed on November 18, 2022, and completed its business combination with GUCC on August 2, 2023, becoming a publicly traded entity on Nasdaq9920 B. Business Overview ESGL, through its subsidiary ESA, is a Singapore-based waste management company that recycles industrial waste into circular products, pursuing growth through technology enhancement, overseas expansion, licensing, and strategic acquisitions * On February 26, 2025, ESGL agreed to acquire De Tomaso Automobili Holdings Limited for an aggregate consideration of US$1.03 billion, to be paid in 1 billion newly issued ESGL ordinary shares, with potential earnout shares based on vehicle delivery targets105106 * The company's four-pillar growth strategy focuses on making its Singapore operations a center of excellence, expanding overseas, forming partnerships via technology licensing, and diversifying its portfolio through acquisitions113119 * Customer and Supplier Concentration (FY2024) | Concentration Type | Details | | :--- | :--- | | Customer Concentration | Four customers accounted for 22.3%, 15.4%, 14.7%, and 13.4% of total revenue | | Supplier Concentration | One supplier accounted for 36.9% of total inventory and logistic costs | | Logistics Provider Concentration | Two logistics providers accounted for 52.2% of total inventory and logistics costs | * Capitalized R&D Expenses | Year | Amount (US$) | | :--- | :--- | | 2024 | 6,100,000 | | 2023 | 4,300,000 | D. Property, Plant and Equipment The company operates from several leased facilities in Singapore and recently moved storage operations to a new, larger leased facility in Johor, Malaysia, to reduce rental expenses and support expansion * The company's headquarters are located at 101 Tuas South Avenue 2, Singapore, under a 17-year state lease ending in 2030150 * In October 2024, the company terminated a lease at 110 Tuas, Singapore, and moved storage operations to a new 52,270 sq. ft. facility in Johor, Malaysia, to reduce costs and support expansion, estimated to save S$17,000 in monthly rent152153 Item 5. Operating and Financial Review and Prospects In FY2024, ESGL's revenue remained stable at US$6.1 million, while its net loss significantly reduced to US$0.63 million due to the absence of one-off listing expenses from the prior year Results of Operations For FY2024, revenue slightly decreased to US$6.1 million, while net loss dramatically improved to US$0.63 million due to the absence of US$93.1 million in non-recurring listing expenses from 2023 * Comparison of Operations (FY2024 vs FY2023) | Metric | 2024 (US$) | 2023 (US$) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 6,099,777 | 6,164,173 | -1.0% | | Cost of inventory | 215,059 | (977,619) | 122.0% | | Logistics costs | (642,423) | (925,225) | -30.6% | | Operating expenses | (3,789,227) | (3,466,606) | 9.3% | | Listing expenses | - | (93,067,324) | -100.0% | | Net loss | (633,257) | (94,979,338) | 99.3% | * The slight revenue decrease was due to lower collection of chemical waste (down US$0.09 million) and reduced sales of circular products (down US$0.26 million), particularly base metals which fell 51.3%, partially offset by a US$0.35 million increase in revenue from solid hazardous waste treatment161162 Non-GAAP Measures The company uses EBITDA as a non-GAAP measure, reporting US$2.31 million for FY2024, a significant improvement from the negative US$92.1 million in FY2023, which was heavily impacted by non-recurring listing expenses * EBITDA Reconciliation (Non-GAAP) | | For the Year Ended December 31, | | :--- | :--- | :--- | | | 2024 (US$) | 2023 (US$) | | Loss before income tax | (760,586) | (94,846,338) | | Finance expense | 350,145 | 388,717 | | Depreciation and amortization | 2,720,774 | 2,354,839 | | EBITDA | 2,310,333 | (92,102,782) | | Add: non-recurring listing expenses | - | 93,067,324 | | Adjusted EBITDA | 2,310,333 | 964,542 | Liquidity and Capital Resources As of December 31, 2024, the Group had negative working capital of approximately US$7.0 million, an improvement from 2023, with cash from financing activities providing a net inflow of US$5.4 million * Cash Flow Summary (FY2024 vs FY2023) | Cash Flow Activity | 2024 (US$) | 2023 (US$) | | :--- | :--- | :--- | | Net cash (used in)/from operating activities | (3,111,587) | 5,282,766 | | Net cash used in investing activities | (2,019,272) | (2,019,189) | | Net cash from/(used in) financing activities | 5,398,980 | (3,149,215) | | Net increase in cash | 268,121 | 114,362 | * The Group had negative working capital of US$7.0 million at year-end 2024, primarily because bank loans of US$4.3 million were classified as current liabilities due to demand clauses in the agreements177414 * Average trade receivables turnover days increased from 25 days in 2023 to 34 days in 2024, mainly due to increased sales to multinational companies with longer credit terms (average 60 days)188 Critical Accounting Estimates The company's financial statements, prepared under IFRS, require management to make critical estimates and judgments in areas such as revenue recognition, asset useful lives, inventory valuation, and impairment of non-financial assets * Management's critical accounting estimates include useful lives of property and equipment, inventory valuation, expected credit losses for receivables, impairment of non-financial assets, and capitalization of intangible assets201523 * The carrying amount of capitalized internally generated intangible assets, which include systems for inventory management, thermal treatment, and converting waste to oil, was US$2.98 million as of December 31, 2024219220 Item 6. Directors, Senior Management and Employees This section outlines the company's leadership, compensation, board structure, and employee base, noting that total compensation for named executive officers was US$0.60 million in 2024 and the company had 79 full-time employees * Executive and Director Compensation (US$) | Compensation Type | 2024 | 2023 | | :--- | :--- | :--- | | Named Executive Officers (4 individuals) | | | | Base Salary | 563,596 | 445,111 | | Annual Bonuses | 37,840 | 0 | | Defined Contribution Plan | 44,884 | 35,745 | | Non-Employee Directors | | | | Total Remuneration | 128,000 | 55,252 | * On December 16, 2024, the Board adopted an Equity Incentive Plan, under which approximately 865,000 ordinary shares were issued to named executive officers in February 2025250 * As of December 31, 2024, the company had 79 full-time employees, with 47 classified as operations workers264266 * As of April 16, 2025, significant beneficial ownership includes Samuel Wu (16.78%), Chin Sor Fong (11.96%), Ftag Investment Bank (9.57%), and Chau Loi Yau (8.25%)270 Item 7. Major Shareholders and Related Party Transactions This section details transactions with related parties, including a director's personal guarantee for bank loans and an unsecured promissory note from the SPAC's Sponsor prior to the business combination * A director, Mr. Quek Leng Chuang, provided a personal guarantee to secure a term loan (Term Loan VII) and a revolving credit loan (Revolving Credit Loan II) from a bank, obtained in March 2023277 * Prior to the merger, the Sponsor provided GUCC with an unsecured promissory note, which had an outstanding balance of US$0.35 million as of the report date275 Item 10. Additional Information This section covers the company's share capital, governance documents, material contracts, and tax considerations, including the potential classification as a Passive Foreign Investment Company (PFIC) * As of April 16, 2025, the company had 41.8 million ordinary shares and 9.3 million warrants outstanding288 * The company conducted several private placements to raise funds, including raising US$2.5 million in March/April 2024, US$5.0 million in August/September 2024, and securing an agreement for up to US$30.0 million in January 2025306307308 * The Forward Purchase Agreement with Vellar and ARRT, established during the 2023 business combination, was fully terminated by March 2024, with the company receiving net proceeds of US$1.0 million from Vellar before its termination313315317 * The company notes that it may be classified as a Passive Foreign Investment Company (PFIC), which could result in adverse U.S. federal income tax consequences for U.S. holders of its securities, with the determination being factual and made annually98324 Item 11. Quantitative and Qualitative Disclosures About Market Risks The company is exposed to market risks including currency risk, where a 10% SGD/USD exchange rate change would impact pre-tax profit by US$0.89 million, and interest rate risk, where a 0.5% change would affect after-tax loss by US$0.02 million * The Group is exposed to currency risk as most sales and purchases are in Singapore Dollars (SGD) while reporting is in U.S. Dollars (USD), where a 10% strengthening of the SGD against the USD would decrease profit before tax by approximately US$0.89 million347585 * The Group is exposed to interest rate risk on its variable-rate borrowings, where a 0.5% increase/decrease in SGD interest rates would lower/higher the loss after tax by US$0.02 million for FY2024349587 * The company faces commodity price risk as a portion of its revenue is derived from the sale of circular products like zinc and other metals, whose prices are subject to market volatility234355 PART II Item 15. Controls and Procedures Management concluded that the company's disclosure controls and procedures, and internal control over financial reporting, were effective as of December 31, 2024 * Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024361 * Based on the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2024365 Item 16. Corporate Governance and Other Matters The company has adopted a Code of Business Conduct and Ethics and an Insider Trading Policy, with US$0.14 million paid to the principal auditor for audit services in FY2024, and a cybersecurity risk management program in place * Principal Accountant Fees (Assentsure PAC) | Service | 2024 (US$) | 2023 (US$) | | :--- | :--- | :--- | | Audit Fees | 140,000 | 140,000 | * The company has adopted a Code of Business Conduct and Ethics, which is publicly available on its website368 * A cybersecurity risk management program is in place, with oversight from the Board's Audit Committee, and the company has not experienced any material cybersecurity incidents in the last three fiscal years379380381 PART III Item 18. Financial Statements This section contains the company's audited consolidated financial statements for FY2024 and FY2023, highlighting a going concern uncertainty despite a significant reduction in net loss in 2024 Report of Independent Registered Public Accounting Firm The auditor's report provides a fair opinion on the financial statements but includes a 'Going Concern' paragraph due to net losses and net current liabilities, raising substantial doubt about the company's ability to continue * The auditor's report includes a 'Going Concern' paragraph, citing the company's net losses and net current liabilities as conditions that raise doubt about its ability to continue as a going concern393 Consolidated Financial Statements The consolidated financial statements show total assets of US$25.9 million and total liabilities of US$11.1 million as of December 31, 2024, with a net loss of US$0.63 million for FY2024, a significant improvement from the US$95.0 million net loss in FY2023 * Consolidated Statement of Financial Position (Abridged) | Metric (US$) | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | 25,855,412 | 25,632,266 | | Total Liabilities | 11,142,299 | 17,611,509 | | Total Equity | 14,713,113 | 8,020,757 | * Consolidated Statement of Profit or Loss (Abridged) | Metric (US$) | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | 6,099,777 | 6,164,173 | | Net Loss | (633,257) | (94,979,338) | | Basic and Diluted Loss Per Share | (0.02) | (14.69) | Notes to the Consolidated Financial Statements The notes provide detailed explanations, reiterating the going concern uncertainty, breaking down revenue by type, detailing borrowings secured by a director's guarantee, and outlining significant subsequent events including a private placement and the De Tomaso acquisition * The financial statements were prepared on a going concern basis, despite net current liabilities of US$7.0 million, with management's plans relying on cost reduction, revenue growth, and capital raising, noting that US$7.5 million was successfully raised via share issuance in FY2024414415 * Revenue by Type (US$) | Revenue Source | 2024 | 2023 | | :--- | :--- | :--- | | Sales of circular products | 1,198,610 | 2,305,646 | | Waste disposal services | 4,901,167 | 3,858,527 | | Total | 6,099,777 | 6,164,173 | * Subsequent to year-end, the company entered into an agreement to acquire De Tomaso Automobili for US$1.03 billion in stock and entered a share purchase agreement for a private placement of up to 37.5 million shares at US$0.80 per share619620621 Item 19. Exhibits This section lists all exhibits filed as part of the annual report, including key legal documents such as the Merger Agreement, the De Tomaso Share Purchase Agreement, the company's charter, and various financing and governance documents * The exhibits include key legal documents such as the Merger Agreement (2.1), the De Tomaso Share Purchase Agreement (2.2), the company's charter (3.1), and various financing and governance documents385