Source - RNS
RNS Number : 4035L
Mercom Capital Plc
30 September 2016
 

 

 

 

Mercom Capital Plc

("the Company")

 

Final Results

 

Mercom Capital Plc is pleased to announce its final results for the year ended 31 March 2016.  The full Report & Accounts have been sent to shareholders and will be available on the Company's website.

 

Chairman's Statement

 

I am pleased to present my Chairman's statement for Mercom Capital Plc ("the Company") for the year ended 31 March 2016.

 

On 29 May 2014, the Company  announced a range of investments totalling £768,000, of which £400,000 was invested for a 30% interest in Lion Natural Resources Limited, an unquoted company which holds investments in two companies with projects in Sierra Leone and Kenya; £300,000 was invested for a 35% interest in NWT Coal Limited, an unquoted company with two coal concessions in Vietnam; and a small investment of £68,000 was made in 7% convertible debentures of Maverick Petroleum Ltd, an oil company with a focus in the Republic of Chad. Subsequently this latter investment was converted into 66,026 common shares in Maverick Petroleum Ltd., representing a 2% interest. During the year ended 31 March 2016, the investments in Lion Natural Resources Limited and Maverick Petroleum Ltd. were further impaired as detailed in the Investment Report. Although no further investments have yet been made, the Company is continuing the process of identifying investment opportunities which match our strategy, and of evaluating the potential profitability and risks associated with them.  Despite the challenging environment in the resources sector, and particularly the current price of oil and gas, the Directors continue to believe there are opportunities to create value for shareholders.

 

During the year ended 31 March 2016 there were two issues of equity, and on 4 March 2016 the Company announced that its name had been changed to Mercom Capital Plc, reflecting the fact that its strategic focus had shifted to investing in assets in the natural resources and energy sectors, with a focus on oil and gas.  The name change had been approved by shareholder resolution at the AGM the previous day.

 

The annual audited accounts accordingly show that the Group had cash reserves of £592,698 at 31 March 2016, after corporate expenses of £314,229 had been incurred during the year (2015: £274,623). Net cash used in operations amounted to £16,752 (2015: £108,018). Our net asset value decreased to £0.06 per share from £0.08 per share in the previous year. Net assets value at 31 March 2016 was £1,058,697 compared to £1,428,492 as at 31 March 2015. The decrease was chiefly the result of the cash used in operations and the impairment of investments totalling £268,632.

 

Since the year end, the CEO has successfully negotiated the raising of a total of £302,500 in equity before expenses, which will be used to increase working capital and finance additional investments.  This achievement confirms the market's confidence in our strategy and in the resources sector generally.

 

To end on a personal note, I have decided that it is time for me to pass on the Chairman's responsibilities, and I shall not seek reelection at the coming AGM.I have enjoyed the role ever since Mercom Capital PLC (formerly Mercom Oil Sands PLC) was admitted to AIM on 29 May 2012, a period which has been both turbulent and exciting throughout the resources sector. However for the last few years (since my 70th birthday) I have been gradually reducing my portfolio of responsibilities and I think it is now time to bring a fresh mind to the Mercom Board.  I wish my successor and fellow Directors every good fortune in the years ahead.

 

 

Dr Patrick Cross

Chairman

30 September 2016

 

 

 

 

Investment Report

 

Viet Energy Ltd (formerly NWT Coal Limited)

 

Viet Energy Ltd is an unquoted company with two coal concessions in the Bac Giang Province of Northern Vietnam.

 

The concessions are based in the Quang Yen Basin, which currently provides 80% of Vietnam's coal production and are just 10 kilometres apart, potentially meaning they could be linked into a single exploration area.

 

The company believes an estimated coal resource for the larger concession is roughly 80 million tonnes and for the smaller concession around 10 million tonnes, but the company noted that these estimates are not based on systematic exploration. To date two shafts (inclined declines), two exploration audits and numerous partially developed and semi mined parts of the concession have been completed and visited. Construction on the first decline began in February 2015 and since then an additional 9 declines are in the process of development. Various parameters regarding, size, morphology etc. of the geology and various coal seams were recorded from one of the detailed plans of the main ore body and a rough resource is being calculated (Non-JORC compliant). The exploration program is being continued with high resolution magnetic survey over the license area. The purpose of the survey was to acquire high-resolution, geophysical data to map the magnetic anomalies and geophysical characteristics of the geology and structure in an effort to map and to explore the possibility that there may be interesting magnetic showings in the adjoining ground. Hand-held Overhauser effect magnetometer is intended to be used for the field work. As of 20 August, 2015, 13200.5m of survey lines were completed. Magnetic profiles were indicated in several areas of the potential drill holes targets.

 

Coal samples were brought back to Canada and had been submitted to one of the country's leading coal laboratories for coal quality determination. The following specifications were requested for analysis: Relative Density, Total moisture, Proximal analysis on density fractions of 1.4, 1.6 and 1.8, CV, S and P% determination. Ash fusion temperature was also requested.

 

First results indicated good suitability of coal to be effectively converted into a diesel fuel.

 

Converting coal to a liquid fuel (CTL) - a process referred to as coal liquefaction - allows coal to be utilised as an alternative to oil. Company is experimenting with Indirect liquefaction where gasified coal to form a 'syngas' (a mixture of hydrogen and carbon monoxide). The syngas is then condensed over a catalyst - the 'Fischer-Tropsch' process - to produce high quality, ultra-clean products.

 

Coal to liquids has a number of benefits:

•           Coal is affordable and available worldwide enabling countries to access domestic coal reserves - and a well-supplied international market - and decrease reliance on oil imports, improving energy security;

•           Coal liquids can be used for transport, cooking, stationary power generation, and in the chemicals industry;

•           Coal-derived fuels are sulphur-free, low in particulates, and low in nitrogen oxides; and

•           Liquid fuels from coal provide ultra-clean cooking fuels, alleviating health risks from indoor air pollution.

 

Fuels produced from coal also have potential outside the transportation sector. In Vietnam, health impacts and local air quality concerns have driven calls for the use of clean cooking fuels. Replacing traditional biomass or solid fuels with liquefied petroleum gas (LPG) has been the focus of international aid programmes. LPG however, is an oil derivative - and is thus affected by the expense and price volatility of crude oil. Coal-derived dimethyl ether (DME) is receiving particular attention today as it is a product that holds out great promise as a domestic fuel. DME is non-carcinogenic and non-toxic to handle and generates less carbon monoxide and hydrocarbon air pollution than LPG. DME can also be used as an alternative to diesel for transport, as well as for on and off-grid power applications.

 

Subsequent to the year end, the Company was notified that the project will be going in to production in the first quarter of 2017, and that Viet Energy intends to pay its shareholders a dividend of 50% of its profits.

 

As at 31 March 2016, the Group measures this available for sale financial asset at cost of £300,000.

 

Lion Natural Resources Limited

 

Lion Natural Resources Limited is an unquoted company which holds investments in two companies, namely Askia Gold Limited and Advance Gold Corp.

 

Lion's major asset was its interest in Askia Gold Limited ("Askia"). The company's original plan was to develop an alluvial gold production project. Askia then converted its gold mining assets into testing areas for its revolutionary gold washing plants. Unfortunately, due to the difficult commodity markets during the past couple years, Askia was unable to execute its business plan, and on 21 June 2016 the company was dissolved.

 

Lion also has a minority interest in Advance Gold Corp. Advance Gold Corp. is an exploration stage company engaged in the evaluation and exploration of mineral property interests. Advance Gold Corp. trades on the TSX Venture Exchange under the symbol "AAX". It currently has interests in Kenya, East Africa. Like most companies in the junior resource sector, Advance Gold Corp. has struggled due to the depressed environment in the junior resource sector. As at 29 February  2016, Advance Gold Corp had $7,128 in current assets and $183,768 in current liabilities.

 

As at 31 March 2016, the Group recorded a full impairment of the available for sale financial asset. The impairment was recorded primarily as a result of (i) Askia being dissolved and (ii) the uncertainty of the ability of Advance Gold Corp. to continue in business.

 

Maverick Petroleum Ltd.

 

Maverick held an option to acquire the Sadiq Oil Concession which is 100 sq. km located in Western Chad, 15 miles west of Lake Chad‎ and within the much larger Lake Chad concession block.

 

Due to the continuation of extremely low international oil prices, Maverick returned the option to acquire the Sadiq Oil Concession back to the Energy Ministry of the Government of Chad. Maverick holds no other assets and liabilities at this time.

 

As at 31 March 2016, the Group recorded a full impairment of this available for sale financial asset.

 

 

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

 

For further information, please contact:

Mercom Capital Plc

John Zorbas

 001 416 504 3978

 

Northland Capital Partners Limited

Nominated Adviser and Broker

Edward Hutton / Matthew Johnson

 

+44 (0) 20 3861 6625

 

Beaufort Securities Limited

Joint Broker

Elliot Hance

 

+44 (0) 20 7382 8300

 

 

Consolidated Statement of Comprehensive Income

 

Group

Note

2016

2015

Continuing Operations


£

£

Expenses




   General and administrative expenses


314,229

274,623

   Exceptional item

5

268,632

200,000

Group Loss from Operations

 

(582,861)

(474,623)

Other items




   Investment revenue

           

-

2,000

Loss for the year before Taxation

4

(582,861)

(472,623)





   Taxation

7

-

-

Loss for the year attributable to equity holders of the Company


(582,861)

(472,623)

   Other comprehensive income


-

-

Total comprehensive loss for the year


(582,861)

(472,623)





Loss per Ordinary share




   Basic - continuing and total operations

14

(0.04)

(0.04)

   Diluted  - continuing and total operations

14

(0.04)

(0.04)





Company




Loss for the year attributable to equity holders of the Company


(582,220)

(465,390)





    Other comprehensive income


-

-

Total comprehensive loss for the year


(582,220)

(465,390)

 

 

Consolidated Statement of Financial Position

 


Note

2016

2015



£

£

Non-current assets




Available for sale financial assets

9

300,000

568,632

Total non-current assets


300,000

568,632





Current assets




Cash and cash equivalents


592,698

609,450

Trade and other receivables

10

432,109

499,900

Total current assets


1,024,807

1,109,350





TOTAL ASSETS


1,324,807

1,677,982





LIABILITIES AND EQUITY




Current liabilities




Trade and other payables

11

266,110

249,490

Total current liabilities


266,110

249,490








Share capital  

13

578,028

553,213

Share premium


4,255,348

3,067,097

Shares to be issued reserve


-

1,000,000

Warrant reserve


-

62,000

Accumulated deficit


(3,774,679)

(3,253,818)

Total equity


1,058,697

1,428,492





TOTAL EQUITY AND LIABILITIES


1,324,807

1,677,982





Company Statement of Financial Position

 


Note

2016

2015



£

£

Non-current assets




Investment in subsidiary undertaking

9

-

-

Available for sale financial assets


300,000

568,632

Total non-current assets


300,000

568,632





Current assets




Cash and cash equivalents


578,702

606,570

Trade and other receivables

10

453,943

509,977

Total current assets


1,032,645

1,116,547





TOTAL ASSETS


1,332,645

1,685,179





LIABILITIES AND EQUITY




Current liabilities




Trade and other payables

11

266,110

249,490

Total current liabilities


266,110

249,490





Equity




Share capital  

13

578,028

553,213

Share premium


4,255,348

3,067,097

Shares to be issued reserve


-

1,000,000

Warrant reserve


-

62,000

Accumulated deficit


(3,766,841)

(3,246,621)

Total equity


1,066,535

1,435,689





TOTAL EQUITY AND LIABILITIES


1,332,645

1,685,179





 

 

Consolidated Statement of Cash Flows

 


2016

2015


£

£

Cash flow from operating activities



Loss for the period before tax

(582,861)

(472,623)

Adjustments for:



Impairment of available for sale financial assets

268,632

200,000

Shares issued for services rendered

-

82,250

Shares issued as settlement of debt

213,066

-

Decrease in trade and other receivables

67,791

38,560

Increase in trade and other payables

16,620

43,795

Cash used in operations

(16,752)

(108,018)




Cash flow from investing activities



Purchase of  available for sale financial assets

-

(700,000)

Net cash used in investing activities

-

(700,000)




Decrease in cash and cash equivalents

(16,752)

(808,018)

Cash and cash equivalents at the beginning of the period

609,450

1,417,468




Cash and cash equivalents at the end of the period

592,698

609,450

 

Company Statement of Cash Flows

 


2016

2015


£

£

Cash flow from operating activities



Loss for the period before tax

(582,220)

(465,390)

Adjustments for:



Impairment of investments

268,632

200,000

Shares issued for services rendered

-

82,250

Shares issued as settlement of debt

213,066

-

Decrease in trade and other receivables

56,034

445,207

Increase in trade and other payables

16,620

43,795

Cash (used in)/ generated from operations

(27,868)

305,862




Cash flow from investing activities



Purchase of available for sale financial assets

-

(700,000)

Net cash used in investing activities

-

(700,000)







Decrease in cash and cash equivalents

(27,868)

(394,138)

Cash and cash equivalents at the beginning of the period

606,570

1,000,708




Cash and cash equivalents at the end of the period

578,702

606,570

 

 

Consolidated and Company Statements of Changes in Equity

 

 

Group

Share capital

Share premium

Shares to be issued

Warrant reserve

Retained earnings

Total


£

£

£

£

£

£

As at 31 March 2014

551,840

2,986,120

1,000,000

62,270

(2,781,365)

1,818,865








   Shares issued in year

1,373

80,977

-

-

(100)

82,250

   Warrants expired in year

-

-

-

(270)

270

-

Total comprehensive loss for the year

-

 -

-

-

(472,623)

(472,623)








As at 31 March 2015

553,213

3,067,097

1,000,000

62,000

(3,253,818)

1,428,492








   Shares issued in year

14,817

1,198,249

(1,000,000)

-

-

213,066

   Share reclassification*

9,998

(9,998)

-

-

-

-

   Warrants expired in year

-

-

-

(62,000)

62,000

-

Total comprehensive loss for the year

-

 -

-

-

(582,861)

(582,861)








As at 31 March 2016

578,028

4,255,348

-

-

(3,774,679)

1,058,697















Company 

Share

capital

Share premium

Shares to be issued

Warrant

reserve

Retained earnings

Total


£

£

£

£

£

£








As at 31 March 2014

551,840

2,986,120

1,000,000

 62,270

(2,781,401)

1,818,829








   Shares issued in year

1,373

80,977

-

-

(100)

82,250

   Warrants expired in year

-

-

-

(270)

270

-

Total comprehensive loss for the year

-

-

-

-

(465,390)

(465,390)








As at 31 March 2015

553,213

3,067,097

1,000,000

 62,000

(3,246,621)

1,435,689








   Shares issued in year

14,817

1,198,249

(1,000,000)

-

-

213,066

   Share reclassification*

9,998

(9,998)

-

-

-

-

   Warrants expired in year

-

-

-

(62,000)

62,000

-

Total comprehensive loss for the year

-

-

-

-

(582,220)

(582,220)








As at 31 March 2016

578,028

4,255,348

-

-

(3,766,841)

1,066,535

 

 

 

* The reclassification is to correct the allocation between share capital and share premium for shares issued in prior years. This has no effect on the number of shares in issue and is not considered that a prior period adjustment is required.

 

 

Notes to the Consolidated Financial Statements

 

1.   BASIS OF PRESENTATION                                                                                                                                                      

 

Basis of presentation and statement of compliance

 

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union.

 

Basis of consolidation

 

The Group financial statements include the financial statements of the Company and its subsidiary undertaking Mercom Oil Sands Canada Inc., a company incorporated in Canada. The results of subsidiary undertakings sold or acquired are included in the Consolidated Statement of Comprehensive Income up to, or from the date control passes. Intra group sales and profits are eliminated fully on consolidation.

 

Functional currency

 

The presentational and functional currency of the Group and Company is U.K Sterling.

 

Significant accounting estimates and judgments

 

The preparation of these financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these judgments and estimates. The financial statements include judgments and estimates which, by their nature, are uncertain. The impacts of such judgments and estimates are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognised in the period in which the estimate is revised and the revision affects both current and future periods.

 

Significant assumptions about the future and other sources of judgments and estimates that management has made at the statement of financial position date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

 

·     The accounting treatment of the available for sale financial assets;

·     The valuation of available for sale financial assets;

·     The valuation of trade and other receivables; and

·     The judgment that significant influence is not exercised by the Group over any of the investments as detailed in note 9.

 

Going concern

 

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") applicable to a going concern, which assume that the Group will be able to realise its assets and discharge its liabilities in the normal course of operations. The Group has no current source of operating revenues and its capacity to operate as a going concern in the near-term will likely depend on its ability to continue raising equity or debt financing. There can be no assurance that the Group will be able to continue to raise funds in which case the Group may be unable to meet its obligations. Should the Group be unable to realise on its assets and discharge its liabilities in the normal course of business, the net realisable value of its assets may be materially less than the amounts recorded in the Consolidated and Company Statements of Financial Position.

 

The Directors consider that given the level of expenses the Group expects to incur and the significant cash reserves held by the Group will be sufficient to continue in operation and meet its liabilities as they fall due for a period of no less than twelve months from the date of approval of these financial statements.

 

The financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Group be unable to continue in operation.

 

 

2.  SIGNIFICANT ACCOUNTING POLICIES                                                                                                                              

 

Investments

 

Investments in subsidiaries, associates and joint ventures, and other investments are presented in the Parent Company financial statements at cost, less any necessary provision for impairment.

 

Associates

 

Associates are entities over which the Group exercises significant influence but does not exercise control. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost, which includes goodwill identified on acquisition, net of any accumulated impairment loss. The Group's share of its associate's profits or losses after acquisition of its interest is recognised in profit or loss and cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Where the Group's share of losses of an associate equals or exceeds the carrying amount of the investment, the Group only recognises further losses where it has incurred obligations or made payments on behalf of the associate.

 

Entities where the Group has a holding of 20% or more but does not exercise significant influence are accounted for as available for sale financial assets.  Significant influence is not therefore considered to be exercised

 

In respect of the available for sale financial assets detailed in note 9 in all cases the Company has no right to appoint directors and has no ability to influence the strategic and operational decisions taken.

 

Financial assets

 

Available for sale financial assets consist of equity investments in other companies or limited partnerships where the Group does not exercise either control or significant influence.

 

Available for sale financial assets are shown at fair value at each reporting date with changes in fair value being shown in Other Comprehensive Income, or at cost less any necessary provision for impairment where a reliable estimate of fair value is not able to be determined. In cases where the Group can reliably estimate fair value of the available for sale financial assets, fair value is  determined in reference to practical completion of each development project.

 

All assets for which fair value is measured or disclosed in the financial statements are categorised 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 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

·       Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

·       Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

 

The valuation technique applied to the available for sale financial assets in the current period is a Level 3 technique.

 

Corporation tax

 

Corporation tax on the profit or loss for the period presented comprises current and deferred tax. Corporation tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

 

Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the period end.

 

Deferred tax is recorded using the asset and liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not-deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting or taxable loss; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the period end date.

 

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. To the extent that the Group does not consider it probable that a future tax asset will be recovered, the tax asset is not recognised.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and 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.

 

Cash and cash equivalents

 

Cash and cash equivalents consist of cash on deposit with banks and short-term interest-bearing investments with maturities of 90 days or less from the original date of acquisition. Cash and cash equivalents are recorded at fair value and changes in fair value would be reflected in the Consolidated Statement of Comprehensive Income.

 

Warrants

 

Warrants issued are accounted for using the fair value method and result in share issue costs and a credit to the warrants reserve when the warrants are issued. When warrants are exercised, the corresponding warrant fair value and the proceeds received by the Group are credited to share capital. When warrants expire, the corresponding fair value is credited to the accumulated deficit.

 

Loss per share

 

Basic loss per share is calculated using the weighted average number of shares outstanding.  Diluted loss per share assumes that any proceeds from the exercise of dilutive stock options and warrants would be used to repurchase Ordinary shares at the average market price during the period, with the incremental number of shares being included in the denominator of the diluted earnings per share calculation. 

 

During the year ended 31 March 2016, all issued and outstanding warrants and options were anti-dilutive and were excluded from the diluted loss per share calculations.

 

Foreign currency translation

 

The functional and presentational currency of the Group is U.K Sterling. Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on dates of transactions. At each period end date monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to U.K Sterling at the exchange rate at that date. Foreign exchange differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income. Non-monetary assets and liabilities that are measured at historical cost are translated using the exchange rate at the date of the transaction.

 

Impairment of assets

At each period end date, assets are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. If any such indication is present, the recoverable amount of the asset is estimated in order to determine whether impairment exists. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Any intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

 

An asset's recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset or cash generating unit is estimated to be less than its carrying amount, the carrying amount is reduced to the recoverable amount. Impairment is recognised immediately as additional depreciation. Where an impairment subsequently reverses, the carrying amount is increased to the revised estimate of recoverable amount but only to the extent that this does not exceed the carrying value that would have been determined if no impairment had previously been recognised. A reversal is recognised as a reduction in the depreciation charge for the period.

 

Share issue costs

 

Costs incurred for the issue of Ordinary shares are deducted from the share premium arising on that issue.

 

Revenue recognition

 

Revenue from the sale of petroleum and natural gas is recognised when the risks and rewards of ownership pass to the purchaser, including delivery of the product, the selling price is fixed or determinable and collection is reasonably assured. Oil and natural gas royalty revenue is recognised when received.

 

Financial Instruments

 

Financial assets

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:

 

Fair value through profit or loss - This category comprises derivatives, or assets acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the Consolidated and Company Statements of Financial Position at fair value with changes in fair value recognised in the Consolidated Statement of Comprehensive Income.

 

Loans and receivables - These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default.

 

Held-to-maturity investments - These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity. These assets are measured at amortised cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings and other relevant indicators, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognised in the Consolidated Statement of Comprehensive Income.

 

Available-for-sale - Non-derivative financial assets not included in the above categories are classified as available-for-sale. They are carried at fair value with changes in fair value recognised directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognised in profit or loss.

 

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described above.

 

Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:

 

Fair value through profit or loss - This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the Consolidated and Company Statements of Financial Position at fair value with changes in fair value recognised in the Consolidated Statement of Income.

 

Other financial liabilities - This category includes promissory notes, amounts due to related parties and accounts payables and accrued liabilities, all of which are recognised at amortised cost.

 

The Group's financial instruments consist of the following:

 

Financial assets:                                                                             Classification:

Cash and cash equivalents                                                          Loans and receivables

Other receivables                                                                           Loans and receivables

 

Financial liabilities:                                                                        Classification:

Accounts payable and accrued liabilities                                  Other financial liabilities

 

During the year ended 31 March 2016 the Group adopted a number of new IFRS standards, interpretations, amendments and improvements to existing standards. These new standards and changes did not have any material impact on the Company's financial statements.

 

The following new standards, amendments to standards or interpretations are mandatory for the Group for the first time for the financial year beginning 1 April 2016, but are not currently considered to be relevant to the Group (although they may affect the accounting for future transactions and events):

 

·      IAS16 (Amended), 'Property, Plant and Equipment' and IAS 38 (Amended), 'Intangible Assets', issued in May 2014 and effective from 1 April 2016. These amendments clarify that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment. There is also a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate.

·      IFRS11 (Amended), 'Joint Arrangements', effective for periods beginning on or after 1 April 2016 requires an acquirer of an interest in a joint operation in which the activity constitutes a business to apply all of the business combinations accounting principles in IFRS3 and all other IFRSs.

·      IAS27 (Amended), 'Separate Financial Instruments', issued in August 2014 and effective 1 April 2016 permits investments in subsidiaries, joint ventures and associates to be optionally accounted using the equity method in separate financial statements.

 

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1April 2016 and have not been early adopted:

 

·      IFRS9, 'Financial Instruments', effective for periods commencing on or after 1 January 2018 but not yet adopted by the EU. This is final version of the project to replace IAS39 'Financial Instruments: Recognition and Measurement'.

·      IFRS15, 'Revenue from Contracts with Customers', effective for periods commencing on or after 1 January 2018 but not yet adopted by the EU. This standard focuses on a principles based model which is to be applied to all contracts with customers.

·      IFRS16, 'Leases', effective for periods commencing on or after 1 January 2019 but not yet adopted by the EU. The standard provides a single lessee accounting model, requiring lessees to recognise assets unless the lease term is twelve months or less or the underlying asset has a low value.

·      IAS12 (Amended), 'Income Taxes', effective for periods commencing on or after 1 January 2017 but not yet adopted by the EU. This amendment relates to the recognition of deferred tax assets for unrealised losses and clarifies that estimations for future taxable profits exclude tax deductions arising from the reversal of temporary differences.

 

3CAPITAL AND FINANCIAL RISK MANAGEMENT                                                                                                             

 

The capital of the Group consists of shareholders' equity. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to pursue the development of its financial assets and to maintain optimal returns to shareholders and benefits for other stakeholders.

 

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Group may attempt to issue new shares or debt, dispose of assets, or adjust the amount of cash and cash equivalents.

 

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Group, is reasonable. There were no changes in the Group's approach to capital management during the year ended 31 March 2016. The Group is not subject to externally imposed capital requirements.

 

Credit risk

All the Group's cash and cash equivalents are held with well-known and established financial institutions. As such, management considers credit risk related to these financial assets to be minimal. The Group's maximum credit risk exposure is limited to the carrying value of its cash and subscriptions receivable. At 31 March 2016 the Group had no material amounts deemed to be uncollectible.

 

Commodity price risk

Commodity price risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in oil and natural gas commodity prices. The nature of the Group's operations will result in exposure to fluctuations in commodity prices. The Group is currently in its development stage and as such the exposure to fluctuations in commodity prices is not actively managed. In the future, the Group may use commodity price contracts to manage exposure to fluctuations in pricing.

 

Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Group does not have a material exposure to this risk as there are no outstanding debt facilities.

 

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they come fall. The Group ensures, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or harm to the Group's reputation.

 

The Group utilises authorisation for expenditures to further manage capital expenditures and attempts to match its payment cycle with available cash resources.

 

Foreign currency risk

The Group is exposed to foreign currency fluctuations on its cash which is denominated in U.K. Sterling and Canadian Dollars.

 

4LOSS FOR THE YEAR BEFORE TAXATION                                                                                                                          

 







2016        

£

2015

£









Loss for the year before taxation is stated after charging:




Shares issued for services and settlement of debt




213,066

82,250

Foreign exchange gain






(284)

(80)









Fees payable to the Company's auditors for:






   - the audit of the Company's annual accounts




18,615

17,250









     Total audit fees






18,615

17,250







Fees payable to the Company's auditors for:






   - taxation compliance services






1,385

1,345

   - other services






-

-









     Total other fees






1,385

1,345

 

5EXCEPTIONAL ITEM                                                                                                                                                                    

 





2016

£

2015

£







Impairment of available for sale financial assets




268,632

200,000

 

The exceptional item in the year relates to an impairment of the Group's investments in Lion Natural Resources Limited of £200,000 (2015: £200,000) and Maverick Petroleum Ltd of £68,632 (2015: £nil).

 

The impairment of the investment in Lion Natural Resources Limited in the year is a result of (i) Askia Gold Limited being dissolved and (ii) the uncertainty of the ability of Advance Gold Corp. to continue in business, both being underlying investments of Lion Natural Resources Limited.  The impairment of Maverick Petroleum Ltd is due to Maverick returning the option to acquire the Sadiq Oil Concession.

 

6.             EMPLOYEES      

 






2016

Number

2015

Number






The average weekly number of employees (including Directors) during the year was:



Management

3

3






There were no staff costs in the year except for those described below in respect of the Directors.


Key management personnel are those persons having the authority and responsibility for planning, controlling and directing the activities of the Group.  In the opinion of the Board, the Group's key management personnel are the Directors of the Company and information regarding their remuneration is provided below.


Remuneration in respect of the Directors was as follows:



2016

2015




£

£

Aggregate emoluments (including benefits in kind)



-

-

Fees



180,000

176,500













180,000

176,500








Remuneration for each Director (including benefits in kind)



2016

2015




£

£

K.Appleby





36,000

24,000

Dr P.H.Cross





24,000

24,000

A.E. Taubi (resigned 16 May 2014)





-

7,500

J.Zorbas





120,000

121,000













180,000

176,500








On 23 May 2012 Dr P.H. Cross entered into a letter of appointment with the Company under which
Dr P.H. Cross agreed to act as non-executive Chairman for a fee of £2,000 per month for an initial period of three years.

 

On 29 May 2012 K. Appleby and CFO Advantage Inc. entered into a consultancy agreement with the Company under which CFO Advantage Inc. agreed to provide the services of K. Appleby as Finance Director for a fee of £2,000 per month for an initial period of three years.

 

On 29 May 2012 A.E. Taubi entered into a letter of appointment with the Company under which A.E. Taubi agreed to act as a non-executive Director for a fee of £1,250 per month for an initial period of three years. On
16 May 2014 A.E. Taubi resigned as a Director.

 

On 19 April 2013 J. Zorbas and Zorpcorp Capital Holdings Inc. entered into an agreement with the Company under which Zorpcorp Capital Holdings Inc. agreed to provide the services of J. Zorbas as Chief Executive Officer.  On 1 April 2014 the Board agreed to commence paying Zorpcorp Capital Holdings Inc. a fee of £10,000 per month for these services.

 

In the current year the Company was charged an additional £12,000 fee by CFO Advantage Inc. for services provided by K. Appleby. The time spent on matters was beyond normal expectations of Board members and compensation was measured at the value the Company would have had to pay other individuals or entities in order to obtain these services.

 

The amounts above include remuneration in respect of the highest paid Director as follows:




2016

2015



£

£

Fees



120,000

121,000

 

7.             TAXATION         

 

Taxation





2016

2015






£

£

(a) Analysis of charge in year







    Current tax:







    Corporation tax




-

-

Total current tax





-

-








(b) Factors affecting the tax charge for the year





The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 20% (2015: 21%). 

The differences are explained below:











2016

2015






£

£

Loss on ordinary activities before tax




(582,861)

(472,623)








Loss on ordinary activities multiplied by the standard rate of corporation tax of

20% (2015:21%)



(116,572)

(99,251)








Effects of:







Expenses not deductible for tax purposes




53,854

56,476

Loss carried forward





62,718

42,775















Current tax charge for the year




-

-








(c) Factors that may affect future tax charges


No deferred tax asset has been recognised on losses carried forward in the Company due to the uncertainty of the timing of taxable profits.


 

8.  LOSS OF THE PARENT COMPANY                                                                                                                                       

 

As permitted by section 408 of the Companies Act 2006, the profit or loss element of the Parent Company Statement of Comprehensive Income is not presented as part of these financial statements.  The Group loss for the financial period of £582,861 (2015 - £472,623) includes a loss of £582,220 (2015 - £465,390), which was dealt with in the financial statements of the Company.

 

 

9.    INVESTMENTS                                                                                                                                                                             

 

Group

 

a) Available for sale financial assets






£


Cost






At 1 April 2015




768,632


Additions




-


31 March 2016




768,632








Impairment






At 1 April 2015




200,000


Impairment in year




268,632


At 31 March 2016




468,632








Net book value






31 March 2016




300,000


31 March 2015




586,632







The cost represents investments in the following companies:

 


County of Incorporation

Holding

Proportion held

Nature of business

Lion Natural Resources Limited

England & Wales

Ordinary

30%

Direct exploration and development of natural resources

NWT Coal Limited

Cyprus

Ordinary

35%

Direct exploration and development of natural resources

Maverick Petroleum Ltd.

Republic of Seychelles

Ordinary

2%

Direct and indirect exploration and development of natural resources

 

The impairment in the year is in respect of Lion Natural Resources Limited and Maverick Petroleum Ltd., as detailed in note 5.

 

The accounting treatment of the investments in Lion Natural Resources Limited and NWT Coal Limited as available for sale financial assets and not as associates is detailed in note 1.  These investments are measured at cost less impairment as also detailed in note 1 as it is not possible to reliably measure a fair value.

 


Company












b) Available for sale financial assets










£


Cost






At 1 April 2015




768,632


Additions




-


31 March 2016




768,632








Impairment






At 1 April 2015




200,000


Impairment in year




268,632


At 31 March 2016




468,632








Net book value






31 March 2016




300,000


31 March 2015




568,632

 

The above investments represent the investments as detailed in the Group note a) as detailed above.

 




c) Investment in subsidiary undertakings














The Company has a shareholding in the following company incorporated in Canada:









Subsidiary undertakings

Holding


Proportion


Nature of Business





held










Mercom Oil Sands Canada Inc.

Common shares

(Nil Par Value)


100%


Investment company

 

10. TRADE AND OTHER RECEIVABLES

 


Group

Group


Company

Company

2016

2015


2016

2015

£

£


£

£









Amounts owed by group undertakings

-

-


453,943

509,977

Other receivables


432,109

499,900


-

-




432,109

499,900


453,943

509,977









On 10 January 2013, the Group entered in to a contract to purchase 20,000 cubic meters of Gasoil at a price of US$775 per cubic meter. On entering the contract the Group paid a refundable deposit of £499,900. If the Group chooses not to perform on the contract, the deposit will be refunded. The contractor, at their sole discretion, has the right to impose a 2.25% fee for any amounts refunded for non-performance.

 

The contract was extended to 1 July 2016 and the deposit was refunded in full in August 2016 less the non-performance fee.

 

11. TRADE AND OTHER PAYABLES

 



Group

Group


Company

Company

2016

2015


2016

2015

£

£


£

£

Trade payables


124,110

178,990


124,110

178,990

Accruals and deferred income


142,000

70,500


142,000

70,500



266,110

249,490


266,110

249,490

 

12. RELATED PARTY TRANSACTIONS AND BALANCES   

 


The Group's and Company's related parties, as defined by International Accounting Standard 24 (revised), the nature of the relationship and the amount of transactions with them during the year ended 31 March 2016 were as follows:

The Group and Company were charged £36,000 (2015: £24,000) in consulting fees by CFO Advantage Inc., a company that is controlled by K. Appleby (Finance Director). As at 31 March 2016 the Group and Company owed CFO Advantage Inc. £28,396 (2015: £12,000).


The Group and Company were charged £nil (2015: £7,500) in consulting fees by AT Investments SA, a company of which A.E. Taubi (former Non-executive Director) was a director. At 31 March 2016 the Group and Company owed AT Investments SA £nil (2015: £nil).  E. E. Taubi resigned on 16 May 2014.

 

The Group and Company were charged £24,000 (2015: £24,000) in consulting fees by Dr P.H. Cross (Non-executive Chairman). As at 31 March 2016, the Group and Company owed Dr. P.H. Cross £16,000 (2015: £16,363).

 

The Group and Company were charged £121,000 (2015: £120,000) in consulting fees by J. Zorbas (Chief Executive Officer and incurred expenses on behalf of the Group of £nil (2015 - £1,150). As at 31 March 2016, the Group and the Company owed J. Zorbas £114,000 (2015: £nil).

 

13. SHARE CAPITAL       

 


a)      Shares authorised

On 16 July 2014 the Company consolidated its share capital so that every 50 Ordinary shares of £0.001 in the issued share capital of the Company was consolidated into one Ordinary share of £0.05 (New Ordinary share).  Each New Ordinary share would have the same rights and would be subject to the same restrictions as an Ordinary share. Following the consolidation the New Ordinary shares were sub divided into one Ordinary share of £0.001 and one Deferred share of £0.049.

 

b)      Ordinary shares issued

Called up, allotted and fully paid:


 

2016

2015



£

£


17,526,773 (2015 - 12,509,593) Ordinary shares of £0.001

17,527

12,510


11,438,797 (2015 - 11,238,797) Deferred shares of £0.049

560,501

540,703



578,028

553,213


 


The Company issued shares in the year as follows:

 


(i)     On 6 May 2015, the Company issued 3,034,886 Ordinary shares of £0.001 each at £0.04625 to settle fees owed Dr P.H. Cross and J Zorbas.

 

(ii)    On 15 October 2015, the Company issued 1,258,879 Ordinary shares of £0.001 each at £0.03904 to settle fees owed to certain consultants.

 

(iii)  On 15 October 2015, the Company issued 523,415 Ordinary shares of £0.001 each at £0.03904 to settle fees owed to K. Appleby.

 


The 200,000 Ordinary shares of £0.001 each and 200,000 Deferred shares of £0.049p each held in the shares to be issued reserve were issued on 28 January 2016.

 


c)      Share purchase warrants

The following summarises the share purchase warrants as at 31 March  2016:

 




Warrants

outstanding

Value

£


Balance at 31 March 2014


160,000

62,270


Expired 15 February 2015


(140,000)

(270)







Balance at 31 March 2015


20,000

62,000







Expired 29 May 2016



(20,000)

(62,000)


Balance at 31 March 2016



-

-


 

 

The fair value of the warrants issued during the year ended 31 March 2014, was estimated at £62,000 using the Black-Scholes option pricing model with the following assumptions:

Risk free interest rate                                                                                                                                                   1.08 %

Expected dividend yield                                                                                                                                                     nil

Expected volatility                                                                                                                                                        100 %

Expected life                                                                                                                                                                 3 years

 

The exercise price of these warrants was £0.10; the warrants expired on 29 May 2015. No warrants were issued during the year ended 31 March 2016.

 

All the warrants in issue have expired during the year ended 31 March 2016 as detailed above.

 

d)                      Share options

On 16 July 2014 the Company granted an option to J. Zorbas, the Company's Chief Executive Officer, to subscribe at any time during a 10 year period from the date of grant for 100,049 (pre-consolidation) Ordinary shares at an exercise price of 0.1p per share (pre consolidation price). J. Zorbas exercised this option and 100,049 Ordinary shares were issued on 16 July 2014 by the Company credited as fully paid.

 

The fair value of these options issued during the year ended 31 March 2015, was estimated at £nil using the Black-Scholes option pricing model with the following assumptions:

 

Risk free interest rate                                           2.20 %

Expected dividend yield                                             nil

Expected volatility                                                100 %

Expected life                                                         0 years

 

Option pricing models require the input of subjective assumptions regarding the expected volatility. Volatility is difficult to ascertain given that the company is still in the development stage, therefore it has been set at 100%. Changes in assumptions can materially affect the estimate of fair value, and therefore, the use of the Black-Scholes option pricing model, as required by IFRS, may not provide a realistic measure of the fair value of the Company's warrants and share options at the date of issue.

 

14. LOSS PER ORDINARY SHARE              

 

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of Ordinary shares in issue during the year.

 


2016

2015

Loss attributable to equity holders of the Company

£ (582,861)

£ (472,623)




Weighted average number of Ordinary shares in issue

16,208,363

11,474,777

Basic loss per share

£ (0.04)

£ (0.04)

 

Diluted loss per share is calculated by adjusting the weighted average number of Ordinary shares in issue to assume the conversion of all dilutive potential ordinary shares at the start of the period. The Company's dilutive potential Ordinary shares arise from warrants. In respect of the warrants a calculation is performed to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to the outstanding warrants. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the warrants.

 


2016

2015

Loss attributable to equity holders of the Company

£(582,220)

£(465,390)




Weighted average number of Ordinary shares in issue

16,208,363

11,474,777

Dilutive warrants

-

-

Weighted average number of Ordinary shares used to determine diluted loss per share

16,208,363

   11,474,777

Diluted loss per share

£ (0.04)

£ (0.04)

 

There were no potentially dilutive warrants as the exercise price exceeded the average market price of the Ordinary shares during the period. Any potentially dilutive Ordinary shares would have been anti-dilutive because the Group was loss-making.

 

15. ULTIMATE CONTROLLING PARTY    

 

In the opinion of the Directors there is no ultimate controlling party.

16. SUBSEQUENT EVENTS

 

On 20 July 2016 the Company closed a financing of £227,500 before expenses through the placing of 9,100,000 Ordinary Shares of 0.1p each (the "Placing Shares") at a price of 2.5p per Placing Share (the "Placing") with new shareholders, together with the issue of warrants over Ordinary Shares on the basis of one warrant for every two Placing Shares exercisable at a price of 5p per share for a period of six months from admission of the Placing Shares to trading on AIM.

 

In addition, two directors of the Company, J. Zorbas and K. Appleby, subscribed for a total of 3,000,000 Ordinary shares on the same terms. These shares have not been issued at the date of signing of these financial statements

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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