Company Announcements

NOTES TO THE FINANCIAL STATEMENTS

1.   General Information

EnergyPathways plc (the "Company" or "EnergyPathways") is a company incorporated in England and Wales under the Companies Act 2006 with the registered number 13201653. The Company's registered office is Highdown House, Yeoman Way, Worthing, West Sussex, BN99 3HH.

The principal activity of the Company is delivering clean, home-grown energy for the UK. On 3 March 2022, the Group acquired a 100% interest in, and is administrator for the Marram gas field located in the East Irish Sea, with proven reserves of 38.8 Bcf of natural gas.

2.   Summary of significant accounting policies

The principal accounting principles applied in the preparation of these unaudited interim financial statements are set out below. These principles have been consistently applied to all periods presented, unless otherwise stated.

2.1. Basis of preparation

The interim financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 2006. It has been prepared on a going concern basis in accordance with UK-adopted international accounting standards. Statutory financial statements for the year ended 31 December 2023 were approved by the Board of Directors on 3 June 2024 and delivered to the Registrar of Companies. The report of the auditors on those financial statements was unqualified.

The interim financial information for the six months ended 30 June 2024 has not been reviewed or audited. The interim financial report was approved by the Board on 26 September 2024.

2.2. Going concern

The Directors, having made appropriate enquiries, consider that adequate resources exist for the Company to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the interim financial statements for the period ended 30 June 2024.

2.3. Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Company's medium term performance and the factors that mitigate those risks have not substantially changed from those set out in the Company's 2023 Annual Report and Financial Statements, a copy of which is available on the Company's website: https://energypathways.uk. The key financial risks are securing finance for the Marram gas project and an emerging cost inflation risk.

2.4. Critical accounting estimates

The preparation of interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in note 3 of the Company's 2023 Annual Report and Financial Statements. The nature and amounts of such estimates have not changed significantly during the interim period.

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2023, as described in those annual financial statements.

3.   Reverse acquisition and admission to AIM

On 20 December 2023, the Company acquired the entire issued share capital of EnergyPathways UK Holdings Ltd, a private company incorporated in the United Kingdom, by way of a share for share exchange.

Although the transaction resulted in EnergyPathways UK Holdings Ltd becoming a wholly owned subsidiary of the Company, the transaction constitutes a reverse acquisition in as much as the shareholders of EnergyPathways UK Holdings Ltd own a substantial majority of the outstanding ordinary shares of the Company and all 6 members of the Board of Directors of the Company are EnergyPathways UK Holdings Ltd shareholders and management.

In substance, the shareholders of EnergyPathways UK Holdings Ltd acquired a controlling interest in the Company and the transaction has therefore been accounted for as a reverse acquisition ("RTO"). As the Company previously discontinued its investment activities and was engaged in acquiring EnergyPathways UK Holdings Ltd and raising equity financing to provide the required funding for the operations of the acquisition and admission of the Company's shares to trading on the AIM market of the London Stock Exchange ("AIM"), it did not meet the definition of a business according to the definition in IFRS 3. Accordingly, this reverse acquisition does not constitute a business combination and was accounted for in accordance with IFRS 2, Share-based payment and IFRIC guidance, with the difference between the equity value given up by the EnergyPathways UK Holdings Ltd shareholders and the share of the fair value of net assets gained by the EnergyPathways UK Holdings Ltd shareholders charged to the statement of comprehensive income as the cost of admission to AIM.

Following the completion of the transaction the Company changed its name to EnergyPathways plc.

In accordance with reverse acquisition accounting principles, these consolidated financial statements represent a continuation of the consolidated financial statements of EnergyPathways UK Holdings Ltd and include:

a.   the assets and liabilities of EnergyPathways UK Holdings Ltd at their pre-acquisition carrying amounts and the results for both periods; and

b.  the assets and liabilities of the Company as at 31 December 2023 and its results from 20 December 2023 to 31 December 2023.

On 20 December 2023, the Company issued 68,013,885 shares for all 143,333,324 ordinary shares, 15,100,000 performance shares and 20,000,000 warrants of EnergyPathways UK Holdings Ltd.

As of 20 December 2023, the last quoted share price of Dial Square Investments Plc (renamed EnergyPathways plc upon completion of the transaction) was £0.0325 and therefore this valued the investment in EnergyPathways UK Holdings Ltd at £862,875.

Because the legal subsidiary, EnergyPathways UK Holdings Ltd, was treated as the accounting acquirer and the legal Parent Company, Dial Square Investments Plc, was treated as the accounting subsidiary, the fair value of the shares deemed to have been issued by EnergyPathways UK Holdings Ltd was calculated at £1,213,303 based on an assessment of the purchase consideration for a 100% holding in EnergyPathways plc.

The fair value of net assets of  Dial Square Investments plc was as follows:

The difference between the deemed cost and the fair value of the net assets acquired of £1,015,270 has been expensed in accordance with IFRS 2, Share based payments, reflecting the economic cost to the EnergyPathways UK Holdings Ltd shareholders of acquiring a quoted entity.

The transfers to retained earnings that arose pursuant to the RTO are as follows:

The movements within retained earnings relating to the RTO are as follows:

1) these consolidated financial statements present the legal capital structure of the Company. However, under reverse acquisition accounting rules, the Company was not acquired until 20 December 2023 and therefore the entry above is required to eliminate the initial retained losses of the Company;

2)  EnergyPathways UK Holdings Ltd had issued share capital of equivalent to £1,108,510 as at 20 December 2023. As these financial statements present the capital structure of the parent entity, the issue of equity by EnergyPathways UK Holdings Ltd has been transferred to this reserve;

3)  the Company issued 68,013,885 shares at 4 pence each, totalling £2,720,555 for the entire issued capital of EnergyPathways UK Holdings Ltd, as well as stamp duty of £13,605. The above entry is required to eliminate the balance sheet impact of this transaction; and

4) the reverse acquisition accounting is described in detail in note 3. The entry above represents the difference between the value of the equity issued by the Company, and the deemed consideration given by EnergyPathways UK Holdings Ltd to acquire the Company.

4.   Earnings per share

The calculation of the basic and diluted earnings per share is calculated by dividing the loss for the period for continuing operations for the EnergyPathways Group by the weighted average number of ordinary shares in issue during period year.

The weighted average number of shares is adjusted for the impact of the reverse acquisition as follows:

- prior to the reverse takeover, the number of shares is based on EnergyPathways UK Holdings Ltd, adjusted using the share exchange ratio arising on the reverse takeover; and

- from the date of the reverse takeover, the number of shares is based on the Company.

Dilutive loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in all three periods presented, there is no dilutive effect from the subsisting share options and warrants.

5.   Intangible assets

6.   Trade and other receivables

7.   Trade and other payables - due within one year

8.   Borrowings

On 9 March 2023, EnergyPathways Uk Holdings Limited entered in to a loan agreement with the Company for a facility of £200,000. The facility was fully drawn down as at 30 June 2023. The loan has been eliminated on consolidation as at 31 December 2023 following the completion of the RTO on 20 December 2023 (refer to note 3).            

9.   Ordinary share capital and share premium

The ordinary shares confer the right to vote at general meetings of the Company, to a repayment of capital in the event of liquidation or winding up and certain other rights as set out in the Company's articles of association.

The issued capital of the Group for the period 31 December 2022 to 20 December 2023 is that of EnergyPathways UK Holdings Ltd. ("EPL"). Upon completion of the acquisition the share capital of EPL was transferred to the Reverse acquisition reserve (see note 3) and the share capital of EnergyPathways plc was brought to account.

10. Events after the reporting period

On 7 August 2024 the Company issued 791,233 ordinary shares at 2.09 pence each in settlement of consultancy fees to a member of the Marram Project management team in lieu of cash.