Klimvest : Annual Report 202

Company No: 04426643

KLIMVEST PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021

KLIMVEST PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2021
CONTENTS	Page
Chairman's statement	2 -3
Strategic report	4
Directors' report	5 -7
Independent Auditors' report	8 - 10
Statement of Comprehensive Income	11
Balance sheet	12
Statement of changes in shareholders' equity	13
Cash flow statement	14
Notes to the financial statements	15 - 23

KLIMVEST PLC

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2021

I am pleased to present a report of Klimvest PLC's activities for the year ending on 31 December 2021.

SUMMARY

I'll first present below a financial summary, which will be very short considering the limited changes in the P&L and Balance Sheet compared with 2020.

This presentation of Klimvest PLC audited yearly financial statements for 2021 will also demand a specific explanation for the extraordinary circumstances the company is now operating under.

As a summary, on March 17, 2022, the High Court ruled that the Company be Wound Up on the ground of loss of substratum, and an appeal of that decision has been filed by the respondent to the petition.

FINANCIAL SYNTHESIS

For 2021, due to the freezing of the operations of the Company in the context of a winding-up petition initiated in October 2020, (see below), the PLC has had no income except for £2,094 from operations, and £7,372 generated by the interest from the funds in the treasury account at Natwest.

On the expense side, the total for administrative expenses for 2021 has been £442,664.

The main component of the expenses was costs approaching £200,000 in the year under review in respect of Legal Fees in discharging its responsibilities as a Neutral party to the proceedings. Some of this may be recovered from the respondent but the quantum of any such recovery is unknown at this time. As the possibility of recovery of these costs is uncertain, in Accordance with International Accounting Standard 37 "Provisions, Contingent Liabilities and Contingent Assets", the balance is not recognised as an asset at 31 December 2021. In addition, the Company incurred salaries and social security costs, for a total of £118,775. Accounting costs, including audit fees represent £18,225. The other main costs are: Insurance (£10,660) and Listing costs (£27,861).

That situation did result in an operating loss of £440,570, reduced to a loss before tax of £431,022 with the positive impact of finance income (treasury interests).

On the balance sheet, the total of equity and liabilities is £7.500,071 at year end, compared to £7,840,976 for 2020 (-£350,905). (As of March 31, 2022, that position is £7,237,753)

The cash and cash equivalent position is £7,306,915 against £7,661,452 the year before. (As of March 31, 2022, that position is £7,127,912).

The trade and other receivables position is £193,156, mainly coming from the outstanding debt owed by the purchaser of the Assima business.

ON GOING LITIGATIONS

As exposed above, the PLC has on its books a large debt owed by PartnerOne Acquisitions ("P1A"), the acquisition vehicle of PartnerOneCapital ("P1C"), a Canadian Investment Fund which acquired the operational assets of the PLC on January 25, 2019.

That debt has been incurred by P1A in relation to the Assets Purchase Agreement terms ("APA"), which P1A refuses to comply with.

After several failed attempts to obtain compliance with these terms, the Board had decided to file a petition in the UK court to obtain these sums.

In December 2021, the other party made a settlement offer for roughly £18k, which is well below our claim of £145k.

In January 2021, in the context of pending outcome of the winding up petition, the other party requested a stay of the Company's legal action in view of attempting mediation, which the Company accepted.

Immediately following the decision of the High Court to grant the winding up of the Company, we received a letter from P1A/P1C withdrawing from the mediation process and invalidating all prior settlement proposals.

The Company intends to pursue the ongoing action to obtain payment by P1A of the due sums believed to be due the Company during the appeal process, and after the appeal result if the winding up order is rescinded.

Apart from this first issue with P1A, I had informed the shareholders in prior reports that we are also facing a potentially more costly issue stemming from the execution of the APA.

The PLC has ongoing potential contractual commitments with our ex General Manager ("GM") of our ex German subsidiary (Assima Deutschland), as a result of the acquisition of ELS AG in 2011.

That commitment is related to an earnout to be calculated and paid to that GM under specific provisions.

That contract and earnout commitment have not been assigned to the Buyer of the Company assets due to legal constraints, but it was agreed, in the APA, that any payment made by the Company to that GM in execution of his earnout would be fully compensated by P1A.

After completion of the sale, P1A took the position that they viewed the earnout voided by the terms of an amendment to the ELS AG purchase agreement.

CHAIRMAN'S STATEMENT

On the other side, the GM has been chasing the Company to obtain payment of his earnout. This has taken the form of various demands, including ones from lawyers but no arbitration action has yet been filed.

In their latest communication to the Company, the GM and his solicitor demanded a payment of £530k (€630k), to be made by April 8, 2022 to settle the earnout claim.

In compliance with the APA, the Company has informed P1A of that claim and with no response from them, did not respond to the German parties.

It is important to recall that, in order to benefit from the refund guarantee provided by the APA, the Company cannot enter into any settlement related to the sold assets without the formal agreement of the assets Buyer.

We are now expecting to be involved in an arbitration in. Germany as a result of this dead end.

The position of the Board was, and still is, that it is in the interest of the shareholders to demand and obtain full execution of the APA, that provides full financial neutrality in the issue with our ex-GM.

If the arbitration is filed, and the Company is ordered to pay part or all the earnout related to the ELS AG acquisition, then the Company would seek to recover that sum from P1A.

THE WINDING UP PROCESS

As explained above, by judgement made on March 17, 2022, the High Court has ordered that the Company ought to be wound up on the grounds of loss of substratum.

The Company has adopted a neutral stance on the winding up petition, but I was a respondent and did fight it in my capacity of largest shareholder, through my holding Klimt Invest SA.

As a shareholder, I challenged the 6 claims advanced by Mr Duneau, second largest shareholder and director until May 24, 2021, to obtain the winding up.

An Appeal was filed at the UK Court of Appeal, on April 28th

I will apply for a stay. If it is granted, the Company will organise an AGM to submit these accounts to the shareholders.

If a stay is not granted, the winding up order will become automatically enforceable, and the running of the Company will be transferred to Liquidators.

It is in that scenario that I have provided above, in the financial synthesis the position of the Company as of March 31, 2022.

Michel Balcaen

Chairman

29 April 2022

STRATEGIC REPORT

BUSINESS REVIEW

At the year end the company's assets are primarily cash of £7,306,915 and receivables related to the sale of the subsidiaries totalling £172,304 due from the Purchaser of the subsidiaries. Legal action has been commenced to recover these outstanding amounts.

Key performance indicators

2021 £

2020 £

Net assets Cash

7,315,534 7,742,556

7,306,915 7,661,452

RISKS

Liquidity risk

At 31 December 2021, the cash position was £7,306,915.

The company finances itself through equity and retained earnings. Following the sale of the subsidiaries the company holds cash on deposit and manages its liquid resources so as to obtain the best available rates of return on cash investments, whilst retaining access to those resources. Cash that is not needed for short term requirements is deposited for periods of one month (or more), based on the Directors' assessment of prevailing interest rate trends, the interest rates available and the liquid resource requirements of the company. In addition, cash is placed on instant access deposit with the company's bankers, which is available for shorter-term requirements.

Interest rate risk

The company does not have any debt subject to rate indexation. Hence there is no major impact on our finances from potential rate variations which will affect the level of interest income received on cash held on deposit.

Currency risk

The company has not implemented a specific policy to protect against currency fluctuations. Since the sale of the trading subsidiaries the company has a significantly lower need for foreign exchange and hence reduced exposure to currency risks.

M Balcaen

Director

29 April 2022