Notes to the Interim Consolidated Financial Statements

1        Reporting entity

Advance Energy plc is a public limited company incorporated and domiciled in the Isle of Man whose shares are publicly traded on the AIM market of the London Stock Exchange.

The Company and its subsidiary, Resolute Oil & Gas (UK) Limited, are collectively referred to as the Group.

The principal activity of the Group during the period was the acquisition and development of oil and gas assets.

2        Basis of accounting

These interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".   These interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 30 April 2020, which were prepared in accordance with IFRSs as adopted by the European Union.  However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those disclosed in the Group's statutory financial statements for the year ended 30 April 2020.

The interims are presented in US Dollars unless otherwise indicated.

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial period beginning on or after 1 May 2020 that would be expected to have a material impact on the Group.

The consolidated financial statements of the Group as at and for the year ended 30 April 2020 are available upon request from the Company's registered office at 55 Athol Street, Douglas, Isle of Man or the Company website  https://www.advanceplc.com

These interim consolidated financial statements have been approved and authorised for issue by the Company's Board of directors on 25 January 2021.

3        Going concern

The Group had negative $317,000 net assets at 31 October 2020. The Group currently has limited cash resources and will therefore need to secure additional financing to complete the acquisition shown in note 10 and provide for general working capital.

On 12 November 2020, the Company raised £300,000 (gross), equivalent to $401,000, by way of a placing of 136,363,636 new ordinary shares of no par value in the Company at a price of 0.22 pence per share (see note 10).

The Group intends to raise the additional funding to finance future acquisitions and provide for general working capital needs by way of additional capital through the issue of further ordinary shares. The Directors believe that the Group will be successful in raising the necessary finance. 

Notes to the Interim Consolidated Financial Statements (continued)

Accordingly, the Directors have a reasonable expectation that the Company and the Group will continue in operational existence for the foreseeable future, and for a period of at least 12 months from the date of signing of these financial statements.

Whilst the Directors are confident of being able to raise such funding if required, there is no certainty that such funding will be available and/or the terms of such funding.  The financial statements do not include the adjustments that would result if the Company and the Group were unable to continue as a going concern.

4        Expenses

Administration fees and expenses consist of the following:

5        Directors remuneration

The remuneration of those in office during the period ended 31 October 2020 was as follows:

Notes to the Interim Consolidated Financial Statements (continued)

Ross Warner (Non-Executive Director) is entitled to a fixed monthly fee of $5,000 payable in cash. Mark Rollins (Chairman) and Leslie Peterkin (Chief Executive Officer) are entitled to a fixed monthly fee of $5,000 and $10,000 respectively payable in cash, and $10,000 payable in shares each. Stephen West (Chief Financial Officer) is entitled to a fixed monthly fee of £4,082 payable in cash together with an amount of warrants in the Company calculated on a monthly basis by dividing £8,165 by the Company's mid-market price on the date of determination, being no later than the last day of each month ("Director Warrants"). The Director Warrants accrue monthly, have an exercise price of zero, expire five years from the issue date and vest three months from the issue date.

The accrued entitlement of shares and warrants includes a prior accrual of $60,000.

The accrued shares are recorded in note 8 and the accrued share based payment expense is as shown above. The corresponding warrants cost is recorded in Consolidated Statement of Changes in Equity.

6          Earnings per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.                

In accordance with International Accounting Standard 33 'Earnings per share', no diluted earnings per share is presented as the Group is loss making. 

7          Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

Notes to the Interim Consolidated Financial Statements (continued)

8          Shares in issue

The number of shares in issue throughout the period was 1,560,636,834.  In addition to the shares in issue, as described in note 5, Mark Rollins and Leslie Peterkin receive part of their remuneration in new shares in lieu of cash.  As at 31 October 2020, they each had an entitlement to receive 43,980,136 shares.  Stephen West receives part of his remuneration in the form of zero cost warrants. As at 31 October 2020, he was entitled to receive 24,994,042 warrants.

The notional number of shares in issue taking into account the above entitlements and assuming the warrants are exercised would be 1,673,591,148.  The Company intends to issue the shares and warrants to the directors in accordance with their entitlement in conjunction with a later capital-raising event.

In addition, after the period end new shares were issued for cash and to settle certain third party creditors, as described in note 10.

9        Commitments and contingencies

There were no capital commitments authorised by the Directors or contracted other than those provided for in these financial statements as at 31 October 2020 (30 April 2020: None).

There are 81,250,000 unvested options issued to the current directors and consultants that are due to vest in 2021.

There are 10,790,608 of unvested zero cost warrants to the current directors that are yet to vest.

10      Subsequent events

Placing and Issue of Equity

On 12 November 2020, the Company raised £300,000 (gross), equivalent to $401,000, by way of a placing of 136,363,636 new ordinary shares of no par value in the Company at a price of 0.22 pence per share. The funds are being used to progress new venture opportunities and for general working capital purposes.

In addition, the Company issued 21,416,515 ordinary shares to various creditors to settle liabilities amounting to $69,000.

The total number of shares in issue as at the date of this report is 1,718,416,985.

Reverse Takeover Transaction and Suspension of Trading

On 17 December 2020, the Company created a new wholly owned subsidiary, Advance Energy TL Limited ("AETL"), with which it entered into a subscription agreement with Timor-Leste Petroleum Pty Ltd ("CVNA") (a subsidiary of Carnarvon Petroleum Limited (ASX:CVN, "Carnarvon")) pursuant to which AETL will subscribe for equity such that AETL holds up to 50% of the total equity interest in Carnarvon Petroleum Timor, Unipessoal Lda (a subsidiary of CVNA incorporated in Timor-Leste) for a consideration of up to US$20 million.

The transaction is classified as a reverse takeover pursuant to the AIM Rules for Companies and accordingly the Company's shares were temporarily suspended from trading on AIM as of 17 December 2020 and will remain suspended from trading on AIM until such time as either an Admission Document setting out details of the proposed transaction is published or confirmation is given that the transaction is not proceeding.