Mustang Energy Plc
Annual Report & Financial Statements
for the period ended 31 December 2019
Company Registration No. 11155663 (England and Wales)
Contents
Company Information
Chairman’s Statement
Board of Directors and Senior Management
Directors’ Report
Strategic Report
Governance Report
Remuneration Report
Independent Auditors’ Report
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
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33
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Company information
Directors
Alan Broome, AM
Dean L Gallegos
Peter Wale
Simon Holden
Company Secretary
Simon Holden
Registered Office
48 Chancery Lane,
London, WC2A 1JF
Registered Number
11155663
Brokers
Optiva Securities Limited
49 Berkeley Square
London W1J 5AZ
Independent Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Solicitors
Druces LLP
Salisbury House, London Wall
EC2M 5PS
Principal Bankers
Metro Bank Plc
One Southampton Row
London WC1 5HA
Registrars
Share Registrars Limited
The Courtyard, 17 West Street
Farnham, Surrey, GU9 7DR
3
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Chairman’s Statement
The Company was formed to undertake an acquisition of a target business, or asset(s) with
operations in the energy or natural resources sectors.
As you are aware the Company’s shares began trading on the standard list of the London Stock
Exchange on the 29 July 2019 after raising £750,000. Even though the Company has only been
funded for a very short period of time we have been active in executing the Company’s
objectives as outlined in the Company’s Prospectus.
The Directors believe that their network and profile following Admission mean that the Company
will be able to target an Acquisition where the target company or business or asset(s) has a
transaction value of between £2 million and £50 million.
The Company’s determination in identifying a prospective target company or business or
asset(s) in the energy or natural resources sectors will not be limited to a specific geographic
region, stage of development from exploration through to production. However, it is the
Company’s preference that the target is generating cashflow or has the capability of generating
cash flow within 12-18 months of acquisition.
Since Admission to the London Stock Exchange the Company has been actively seeking
suitable acquisition opportunities and has seen good deal flow. The Company completed due
diligence on a number of assets located in the USA, all of these assets are already in production
and have development upside. Bids were placed on the assets in a competitive bidding process
however the Company was not successful in those instances.
In early 2020 the Company had initiated discussions with a number of companies in respect to
acquiring non-operated, minority interests in assets located in western Europe.
Since that time the effects of the COVID-19 virus and the oil price war between Saudi Arabia
and Russia has meant that oil prices have declined by approximately 60%. The current oil price
means that many oil assets are, at best, at close to break even on a cash flow basis but would
be in a loss position when accounting for a total return on capital that would need to be invested.
The Company believes that the effect of this will mean companies that were seeking to divest
assets will wait until the oil price recovers to a more attractive level, it is the Company’s view
that this level will be a Brent oil price of at least US$50 barrel. It is unknown how long this
recovery will take and therefore the Company will expand its search for appropriate acquisition
targets to the entire value chain of the energy industry and not just the upstream sector. It will
also consider potential acquisitions outside of the energy and natural resources industries.
The Directors collectively have an interest of 29.2% in the Company and therefore have a vested
interest to ensure the Company’s first acquisition is the right one. The Company will remain
diligent in minimising its overheads by reducing administration charges wherever possible. I look
forward to communicating with you further once a suitable acquisition has been identified and
secured by the Company.
Alan Broome, AM
Chairman
11 May 2020
4
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Board of Directors and Senior Management
Alan John Broome, AM (Non-Executive Chairman), aged 70
Alan Broome is a metallurgist with over 40 years experience in mining and metals. A well-known
figure in the Australian mining industry, Alan has extensive board experience, both as a director
and chairman, of a number of listed and unlisted energy, mining and mining technology
companies. Over the last 20 years, Alan has had in-depth experience in oil exploration and
production, coal mining, equipment, services and research sectors, in the UK, Australia and
abroad. Alan is currently non-executive chairman of Strategic Minerals, a minerals production
and development company incorporated and registered in England and Wales and listed on the
AIM market of the London Stock Exchange.
Dean Lloyd Gallegos (Managing Director), aged 52
Dean Gallegos has significant experience in financial markets in both institutional/retail advisory
and corporate advisory roles. This included being a founder and principal of an Australian based
stockbroking and corporate advisory firm between 1995 and 2002. Since that time he has acted
in a executive capacity in numerous mineral and energy focused public companies in Australia
and Singapore. Since 2006, he has focused on energy-related projects, principally in the US
(including Texas, Louisiana and Alaska) in both the onshore and offshore environments. Dean
specialises in the identification of projects and the funding of the development of those projects
through equity, debt and mezzanine financing. He has in-depth experience from both an
operational and financial perspective in respect to the requirements of the exploration, discovery
and subsequent production of oil and gas projects.
Peter Verdun Wale (Non-Executive Director), aged 50
Peter Wale brings a thorough understanding of financial markets and investment management
with over 25 years of diverse professional investing experience across developed and emerging
markets. He has worked for various American fund managers, including Fidelity Investments,
and was a partner at an international hedge fund for 12 years. Peter remains an investor, mainly
in the resources sector, and has an extensive network of contacts. He is an executive director
and significant shareholder of Strategic Minerals and a director of Cornwall Resources Limited,
where he has been actively involved in the development of the companies' strategy and investor
communications.
Simon William Holden (Non-Executive Director), aged 44
Simon Holden is an experienced corporate finance and capital markets lawyer. He advises
issuers in connection with initial public offerings and secondary fundraisings, start-ups and
growth companies on alternative finance, and public and private companies in respect of
domestic and cross border mergers and acquisitions. Simon is recommended in The Legal 500
2019 for: Flotations: Small and Mid-Cap; M&A: Smaller Deals up to £50M; Mining and Minerals;
and Oil and Gas. Simon has an in-depth understanding of the UK quoted company sector,
having advised on a significant number of AIM and Main Market transactions; acting for issuers,
nominated advisers and brokers. He was called to the Bar of England & Wales (Lincoln's Inn) in
1999 and was subsequently admitted as a Solicitor in England & Wales in 2002. He is currently
company secretary of Iofina plc (AIM: IOF) and previously served as company secretary of
InfraStrata plc (AIM: INFA) and SolGold plc (formerly Solomon Gold plc) (LSE: SOLG).
5
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Directors’ Report
On 5 September 2019 the Company changed its period end from 31 January to 31 December
and therefore these financial statements are for the 11 month period from 31 January 2019 until
31 December 2019.
The Directors present their report with the audited financial statements of the Company for the
period ended 31 December 2019. A commentary on the business for the period is included in the
Chairman’s Statement on page 4. A review of the business is also included in the Strategic Report
on pages 11 to 15.
The Company’s Ordinary Shares were admitted to listing on the London Stock Exchange, on the
Official List pursuant to Chapters 14 of the Listing Rules, which sets out the requirements for
Standard Listings.
Directors
The Directors of the Company during the period and their beneficial interest in the Ordinary
shares of the Company at 31 December 2019 were as follows:
Director
Position
Non-Executive Chairman
Alan Broome
Dean Gallegos Managing Director
Peter Wale
Simon Holden
Non-Executive Director
Non-Executive Director
Appointed Ordinary
shares
17 January 2018
140,000
17 January 2018 1,630,000
340,000
17 January 2018
340,000
1 August 2018
Options
90,000
630,000
90,000
90,000
Qualifying Third Party Indemnity Provision
At the date of this report, the Company has a third-party indemnity policy in place for all four
Directors.
Substantial shareholders
As at 31 December 2019, the total number of issued Ordinary Shares with voting rights in the
Company was 8,400,000. Details of the Company’s capital structure and voting rights are set out
in note 12 to the financial statements.
The Company has been notified of the following interests of 3 per cent or more in its issued share
capital as at the date of approval of this report.
Party Name
Dean L Gallegos
The Australian Special Opportunity Fund, LP
Optiva Securities Investments
Matthew Lumb
Curtis Burton
William Richards
Jonas & Catherine Chow
Helen Mary Leighton
Adrian Whitaker
Number of Ordinary
Shares
1,630,000
1,000,000
645,000
500,000
500,000
500,000
300,000
300,000
300,000
% of
Share Capital
19.4%
11.9%
7.7%
5.9%
5.9%
5.9%
3.6%
3.6%
3.6%
6
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Directors’ Report (continued)
Financial Instruments
Details of the use of the Company’s financial risk management objectives and policies as well as
exposure to financial risk are contained in the Accounting policies and note 1 of the financial
statements.
Greenhouse Gas (GHG) Emissions
The Company is aware that it needs to measure its operational carbon footprint in order to limit
and control its environmental impact. However, given the very limited nature of its operations
during the period under review, it has not been practical to measure its carbon footprint.
In the future, the Company will only measure the impact of its direct activities, as the full impact
of the entire supply chain of its suppliers cannot be measured practically.
Dividends
The Directors do not propose a dividend in respect of the period ended 31 December 2019. No
dividend was paid in the period to 31 January 2019.
Future developments and events subsequent to the period end
Further details of the Company’s future developments and events subsequent to the period-end
are set out in the Strategic Report on pages 11 to 15.
Corporate Governance
The Governance report forms part of the Director’s Report and is disclosed on pages 16 to 20.
Going Concern
The Company’s business activities, together with facts likely to affect its future operations and
financial and liquidity positions are set out in the Chairman’s Statement and also the Strategic
Report. In addition, note 18 to the financial statements disclose the Company’s financial risk
management policy.
As noted in the Chairman’s report the impact of the current COVID-19 crisis and significant drop
in oil price is likely to impact upon the timing of the company entering into a transaction to acquire
a business, asset or interest in an asset. Given the limited overheads in the business the
Directors have assessed the cash flow forecast and do not consider COVID-19 to have an impact
on the ability to manage the costs over the next 12 months.
The Directors, having made-due and careful enquiry, are of the opinion that the Company has
adequate working capital to execute its operations over 12 months from the date of these
financial statements.
The Directors note that as disclosed in the prospectus dated 17 July 2019, if an acquisition has
not been announced by the end of January 2021, the Board will recommend to Shareholders
either that the Company continue to pursue an acquisition for a further 12 months or that the
Company be wound up (in order to return capital to Shareholders, to the extent assets are
available).
7
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Directors’ Report (continued)
The Board’s recommendation will then be put to a Shareholder vote (from which the Directors
holding Ordinary Shares will abstain). In the event that the Company is wound up, any capital
available for distribution will be returned to Shareholders in accordance with the Articles. An
ordinary resolution of Shareholders is required to voluntarily wind-up the Company unless the
Directors resolve to petition the High Court in England and Wales to wind-up the Company.
If an acquisition is not successfully completed by January 2021 and the shareholders voted to
wind the company up, the remaining assets and liabilities would be settled in the normal course
of business and any excess funds returned to shareholders. This is considered to be a material
uncertainty as the company would be wound up and not continue to trade on a going concern
basis. These events may cast significant doubt on the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that may be necessary if the
Group were not a going concern.
The Directors consider that despite this uncertainty it remains appropriate to prepare the financial
statements on a going concern basis as they continue to pursue completion of an appropriate
transaction and have widen the search in terms of industry and geographical location and
continue to engage with shareholders such that if a vote did occur they are confident that the
shareholders would vote to continue to support the Directors in their search.
Principal Activities
The Company has identified the following criteria that it believes are important in evaluating a
prospective target company or business or asset(s). It will generally use these criteria in
evaluating acquisition opportunities. However, it may also decide to enter into an Acquisition with
a target company or business or asset(s) that does not meet the below criteria.
The Directors intend to take an active approach to completing an acquisition and to adhere to
the following criteria, insofar as reasonably practicable:
• Geographic focus: The Company intends, but is not required to, seek to acquire an
exploration or production company or business or asset(s) with operations in energy or
natural resources in any part of the world with: (i) strong underlying fundamentals and clear
broad-based growth drivers; (ii) a meaningful population and an identifiable market; (iii)
established financial regulatory systems; (iv) stable political structures; and (v) strong or
improving governance and anti-corruption ratings.
• Sector focus: The Company intends to search initially for acquisition opportunities in the
energy and natural resources sectors, but the Company shall not be limited to such sectors.
The Directors believe that opportunities exist to create value for Shareholders through a
properly executed, acquisition-led strategy in the energy or natural resources industry,
however the Directors will consider other industries and sectors where they believe value
may be created for Shareholders.
•
Identifiable routes to value creation: The Company intends, but is not required to, seek
to acquire a company or business or asset(s) in respect of which the Company can: (i) play
an active role in the optimisation of strategy and execution; (ii) enhance existing
management capabilities through the Directors’ proven management skills and depth of
experience; (iii) effect operational changes to enhance efficiency and profitability; and (iv)
provide capital to support significant, credible, growth initiatives.
8
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Directors’ Report (continued)
• Management of an Acquisition: An Acquisition may be made by direct purchase of an
interest in a company, partnership or joint venture, or a direct interest in a project, and can
be at any stage of development. Following the completion of an Acquisition, the Directors
will work in conjunction with incumbent management teams to develop and deliver a strategy
for performance improvement and/or strategic and operational enhancements.
Auditors
The Board appointed BDO LLP as auditors of the Company on 15 October 2019. They have
expressed their willingness to continue in office and a resolution to reappoint them will be
proposed at the Annual General Meeting.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report alongside the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial period.
Under that law the Directors have prepared the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Under Company law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period. The Directors are also required to prepare financial
statements in accordance with the rules of the London Stock Exchange for companies with a
Standard Listing.
In preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgments and accounting estimates that are reasonable and prudent;
• State whether applicable IFRSs as adopted by the European Union have been followed,
subject to any material departures disclosed and explained in the financial statements; and
• Prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show
and explain the Company’s transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the financial statements and
the Remuneration Committee Report comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities. They are also responsible to
make a statement that they consider that the annual report and accounts, taken as a whole, is
fair, balanced, and understandable and provides the information necessary for the shareholders
to assess the Company’s position and performance, business model and strategy.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from legislation in other
jurisdictions.
9
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Directors’ Report (continued)
Statement of Directors’ responsibilities pursuant to Disclosure and Transparency Rule
Each of the Directors, whose names and functions are listed on page 6 confirm that, to the best
of their knowledge and belief:
•
•
the financial statements prepared in accordance with IFRS as adopted by the European
Union, give a true and fair view of the assets, liabilities, financial position and loss of the
Company; and
the Annual Report and financial statements, including the Strategic Report, includes a fair
review of the development and performance of the business and the position of the
Company, together with a description of the principal risks and uncertainties that they face.
Post Balance Date Events
Since the 31 December 2019 the effects of the COVID-19 virus and the oil price war between
Saudi Arabia and Russia has meant that oil prices have declined by approximately 60%. The
current oil price means that many oil assets are, at best, at close to break even on a cash flow
basis but would be in a loss position when accounting for a total return on capital that would
need to be invested.
The Company believes that the effect of this will mean companies that were seeking to divest
assets will wait until the oil price recovers to a more attractive level, it is the Company’s view
that this level will be a Brent oil price of at least US$50 barrel. It is unknown how long this
recovery will take and therefore the Company will expand its search for appropriate acquisition
targets to the entire value chain of the energy industry and not just the upstream sector. It will
also consider potential acquisitions outside of the energy and natural resources industries.
Disclosure of Information to Auditors
So far as the Directors are aware, there is no relevant audit information of which the Company’s
auditors are unaware, and each Director has taken all the steps that he ought to have taken as
a Director in order to make himself aware of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
This directors’ report was approved by the Board of Directors on 11 May 2020 and is signed on
its behalf by:
Alan Broome, AM
Chairman
10
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Strategic Report
The Directors present the Strategic Report of Mustang Energy Plc for the period ended 31
December 2019.
Section 172(1) Statement - Promotion of the Company for the benefit of the members as
a whole
The Directors believe they have acted in the way most likely to promote the success of the
Company for the benefit of its members as a whole, as required by s172 of the Companies Act
2006.
Specific commentary has been made below against the relevant provisions of Section 172(1)(a)
to (f) of the Companies Act:
(a) the likely consequences of any decision in the long term
The Company has not made any material decisions over the period other than its decision to
raise new equity capital.
(b) the interests of the company’s employees
Aside from the Executive Directors and Company Secretary, the Company does not have any
other employees.
(c) the need to foster the company’s business relationships with suppliers, customers and others
Aside from a small number of service providers, the success of the Company’s investment
strategy will be driven in part by the business relationships that exist between the Directors and
the management of other oil and gas companies and as such the maintenance of such
relationships is given a very high priority by the Directors. Shareholders have been engaged with
extensively as part of the capital raising and admission to LSE.
(d) the impact of the company’s operations on the community and the environment
During the current investment phase the Company has no operations. The Directors are
nevertheless cognisant of the potential impact of future investments on affected communities
and the environment and such factors will continue to be considered as part of investment
appraisal and decision making.
(e) the desirability of the company maintaining a reputation for high standards of business
conduct
The Company’s standing and reputation with other oil and gas companies, equity investors,
providers of debt, advisers and the relevant authorities are key in the Company achieving its
investment objectives and the Company’s ethics and behaviour, as summarised in the
Company’s Business Principle and Ethics, will continue to be central to the conduct of the
Directors. The Company is advised by blue-chip experienced advisers which also assist in
maintaining high standards of conduct.
(f) the need to act fairly as between members of the company
The Directors will continue to act fairly between the members of the Company as required under
the Companies Act, the AIM Rules and QCA and UK corporate governance principles.
The Company operates as a cash shell. The Directors are as transparent about the cash position
of the Company and its funding requirements as is allowed under LSE regulations.
11
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Strategic Report (continued)
The application of the s172 requirements can be demonstrated in relation to some of the key
decisions made during 2019:
• Any contracts for services provided have been undertaken with a clear cap on financial
exposure; and
• Maintain a policy of no rented office space with all directors working virtually.
As a cash shell Company, the Board seriously considers its ethical responsibilities to the
communities and environment.
Review of Business in the Period
Operational Review
The Company’s principal activity is set out in the Directors’ Report on page 8.
Business Strategy
The Company is currently focused on delivering a material acquisition in the energy or natural
resources sectors. The Directors note that as disclosed in the prospectus dated 17 July 2019, if
an acquisition has not been announced by the end of January 2021, the Board will recommend
to Shareholders either that the Company continue to pursue an acquisition for a further 12
months or that the Company be wound up (in order to return capital to Shareholders, to the extent
assets are available).
The Board’s recommendation will then be put to a Shareholder vote (from which the Directors
holding Ordinary Shares will abstain). In the event that the Company is wound up, any capital
available for distribution will be returned to Shareholders in accordance with the Articles. An
ordinary resolution of Shareholders is required to voluntarily wind-up the Company unless the
Directors resolve to petition the High Court in England and Wales to wind-up the Company.
Event since the period end
Since the 31 December 2019 the effects of the COVID-19 virus and the oil price war between
Saudi Arabia and Russia has meant that oil prices have declined by approximately 60%. The
current oil price means that many oil assets are, at best, at close to break even on a cash flow
basis but would be in a loss position when accounting for a total return on capital that would
need to be invested.
The Company believes that the effect of this will mean companies that were seeking to divest
assets will wait until the oil price recovers to a more attractive level, it is the Company’s view
that this level will be a Brent oil price of at least US$50 barrel. It is unknown how long this
recovery will take and therefore the Company will expand its search for appropriate acquisition
targets to the entire value chain of the energy industry and not just the upstream sector.
12
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Strategic Report (continued)
Financial review
Results for the 2019 period
The Company incurred a loss for the period to 31 December 2019 of £195,464 (31 December
2018 – loss of £74,148 unaudited).
The loss for the period occurred as a result of on-going administrative expenses required to
operate the Company and costs in relation to undertaking due diligence on potential acquisitions.
Cash flow
Cash operating outflows for 2019 were £97,795 (31 December 2018 - £1,160 outflow unaudited).
Total inflows were £633,771 which represented £629,000 from initial public offering and £4,771
from the proceeds of loans and borrowings.
Closing cash
As at 31 December 2019, the Company held £516,557 of cash (31 December 2018 - Nil
unaudited).
Key Performance Indicators (KPI)
The sole KPI for the Company has been to source a suitable acquisition target. As at the date of
this report this KPI has not been met.
Position of Company’s Business
At the period end the Company’s Statement of Financial Position shows net assets totaling
£495,859 (31 December 2018 – (£74,148) unaudited). The Company has few working capital
liabilities and is considered to have a strong cash position for a company operating as a cash
shell, at the reporting date.
Environmental matters
The Board contains personnel with a good history of running businesses that have been
compliant with all relevant laws and regulations and there have been no instances of non-
compliance in respect of environmental matters.
Employee information
At present, there are no female Directors in the Company. The Company has a Chairman, a
Managing Director, two Non-Executive Directors and no employees. The Company is committed
to gender equality and, if future roles are identified, a wide-ranging search would be completed
with the most appropriate individual being appointed irrespective of gender.
Social/Community/Human rights matters
The Company ensures that employment practices take into account the necessary diversity
requirements and compliance with all employment laws. The Board has experience in dealing
with such issues and sufficient training and qualifications to ensure they meet all requirements.
13
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Strategic Report (continued)
Anti-corruption and anti-bribery policy
The government of the United Kingdom has issued guidelines setting out appropriate procedures
for companies to follow to ensure that they are compliant with the UK Bribery Act 2010. The
Company has conducted a review into its operational procedures to consider the impact of the
Bribery Act 2010 and the Board has adopted an anti-corruption and anti-bribery policy which can
be accessed on the Company’s website
Principal Risks and Uncertainties
The Company operates in an uncertain environment and is subject to a number of risk factors.
The Directors consider the following risk factors are of particular relevance to the Company’s
activities although it should be noted that this list is not exhaustive and that other risk factors not
presently known or currently deemed immaterial may apply.
The Company’s business strategy is to identify, evaluate and complete suitable Acquisition
opportunities in the energy or natural resources sectors. The collapse in oil prices in the first part
of 2020 from the impact of oil demand due to the effects of the COVID-19 virus and the oil price
war between Saudi Arabia and Russia means that many oil assets are, at best, at close to break
even on a cash flow basis but would be in a loss position when accounting for a total return on
capital that needs to be invested.
The Company believes that the effect of this will mean companies that were seeking to divest
assets will wait until the oil price recovers to a more attractive level, it is the Company’s view
that this level will be a Brent oil price of at least US$50 barrel, it is unknown how long this
recovery will take. The Director’s also believe that the collapse in the oil price will mean it will
be very difficult to raise either debt or equity funding, even if and when oil prices recover. The
effect on investors confidence as a result of the oil price collapse cannot be underestimated and
will take some time to recover.
The Directors intend to mitigate the risk of not finding a suitable acquisition in the energy sector
by expanding its search to the entire value change in the energy sector and not just the upstream
part of that sector. To date the Directors search has been predominantly in the energy sector
however it will expand the search to natural resources and outside of both energy and natural
resources if an attractive opportunity presents itself.
Letters of Undertaking
The Directors have each signed a letter of undertaking dated 17 July 2019 addressed to the
Company that any acquisition opportunities in the energy or natural resources sector, excluding
acquisition opportunities relating to the exploration and/or production of magnetite in North
America, and/or the exploration and/or production of nickel sulphide in Western Australia and/or
the Northern Territory of Australia, and/or the exploration and/or production of tin, tungsten or
copper in South West England, originated by each of them respectively, will be offered to the
Company first (individually the “Undertaking” and together the “Undertakings”).
The specific reason for these exclusions is that Mr Broome and Mr Wale are directors of Strategic
Minerals plc (AIM: SML) (“Strategic Minerals”), which is quoted on AIM and which has operations
in these sectors within the stated linked geographical areas. To avoid any conflict with any duties
owed to Strategic Minerals by Mr Broome and Mr Wale, these sectors and linked geographical
areas have been excluded from any acquisition opportunities that Mr Broome and Mr Wale, as
well as Mr Gallegos and Mr Holden will consider for the Company.
14
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Strategic Report (continued)
Letters of Undertaking (continued)
If the Company declines a particular acquisition opportunity it may then be offered to other entities
the Directors are affiliated to. If an Undertaking is breached by a Director, recourse may
potentially be taken by Shareholders for such breach. Furthermore, in the event of a breach of
an Undertaking, it may also be likely that the Director in question has breached their fiduciary
duties as a Director pursuant to the Companies Act 2006.
Further grounds for recourse may potentially therefore be available for Shareholders. It would be
a commercial decision of the Shareholders as to whether any recourse should be taken in the
event of a breach of an Undertaking. It should be noted however that as the Directors are also
Shareholders and have been granted Options in the Company, they each have a financial stake
in the Company which incentivises them to act in the interests of the Company.
The Board has decided that if the Company decides to proceed with an acquisition opportunity,
the acquisition opportunity will only be handled by the Director/s whom a potential conflict of
interest does not arise in relation to any other entities such Director/s may be affiliated with. Only
the non-conflicted Director/s will be involved in the due diligence process and be able to decide
if the acquisition opportunity is fit and proper for the Company.
Composition of the Board
A full analysis of the Board, its function, composition and policies, is included in the Governance
Report.
Capital structure
The Company’s capital consists of ordinary shares which rank pari passu in all respects which
are traded on the Standard segment of the Main Market of the London Stock Exchange. There
are no restrictions on the transfer of securities in the Company or restrictions on voting rights and
none of the Company’s shares are owned or controlled by employee share schemes.
There are no arrangements in place between shareholders that are known to the Company that
may restrict voting rights, restrict the transfer of securities, result in the appointment or
replacement of Directors, amend the Company’s Articles of Association or restrict the powers of
the Company’s Directors, including in relation to the issuing or buying back by the Company of
its shares or any significant agreements to which the Company is a party that take effect after or
terminate upon, a change of control of the Company following a takeover bid or arrangements
between the Company and its Directors or employees providing for compensation for loss of
office or employment (whether through resignation, purported redundancy or otherwise) that may
occur because of a takeover bid.
Approved by the Board on 11 May 2020.
Alan Broome, AM
Chairman
15
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Governance Report
Introduction
The Company recognises the importance of, and is committed to, high standards of Corporate
Governance. Whilst the Company is not formally required to comply with the UK Corporate
Governance Code, the Company has looked to the requirements of the UK Code of Corporate
Governance published in July 2018 (the Code) for best practice. The following sections explain
how the Company has applied the Code:
Compliance with the UK Code of Corporate Governance
The Company has stated that, to the extent practicable for a company of its size and nature, it
follows the UK Corporate Governance Code. The Directors are aware that there are currently
certain provisions of the UK Corporate Governance Code that the Company is not in compliance
with, given the size and early stage nature of the Company. These include:
• Provision 11 of the Code requires that at least half of the board should be non-executive
directors whom the board considers to be independent. Non-Executive Directors are
interested in ordinary shares in the Company and cannot therefore be considered fully
independent under the Code. However Alan Broome, Peter Wale and Simon Holden are
considered to be independent in character and judgement.
• Provision 17 of the Code requires that the board should establish a Nomination
Committee with at least two independent non-executive directors.
• Provision 24 of the Code requires that the board should establish an Audit Committee
with at least two independent non-executive directors.
• Provision 25 of the Code requires that the board should establish a Risk Committee with
comprised of independent non-executive directors.
• Provision 32 of the Code requires that the board should establish a Remuneration
Committee with at least two independent non-executive directors.
Until the acquisition is made, the Company will not have nomination, remuneration, audit or risk
committees. The Board as a whole will instead review its size, structure and composition, the
scale and structure of the Directors’ fees (taking into account the interests of Shareholders and
the performance of the Company), take responsibility for the appointment of auditors, monitor
and review the integrity of the Company’s financial statements and take responsibility for any
formal announcements on the Company’s financial performance. Following an Acquisition, the
Board intends to put in place nomination, remuneration, audit and risk committees.
The Board has a share dealing code that complies with the requirements of the Market Abuse
Regulation. All persons discharging management responsibilities (comprising only the Directors
at the current time) shall comply with the share dealing code at all times.
16
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Governance Report (continued)
Compliance with the UK Code of Corporate Governance (continued)
The UK Corporate Governance Code can be found at www.frc.org.uk.
Set out below are Mustang Energy’ corporate governance practices for the period ended 31
December 2019. After the Company has completed an acquisition, these corporate governance
practices will be considered and reviewed to ensure they remain appropriate.
Leadership
The Company is headed by an effective Board which is collectively responsible for the long- term
success of the Company.
The role of the Board - The Board sets the Company’s strategy, ensuring that the necessary
resources are in place to achieve the agreed strategic priorities, and reviews management and
financial performance. It is accountable to shareholders for the creation and delivery of strong,
sustainable financial performance and long-term shareholder value. To achieve this, the Board
directs and monitors the Company’s affairs within a framework of controls which enable risk to
be assessed and managed effectively. The Board also has responsibility for setting the
Company’s core values and standards of business conduct and for ensuring that these, together
with the Company’s obligations to its stakeholders, are widely understood throughout the
Company. The Board has a formal schedule of matters reserved which is provided later in this
report.
Board Meetings - The core activities of the Board are carried out in scheduled meetings of the
Board. These meetings are timed to link to key events in the Company’s corporate calendar and
regular reviews of the business are conducted. Additional meetings and conference calls are
arranged to consider matters which require decisions outside the scheduled meetings. During
the period, the Board met on 2 occasions. Outside the scheduled meetings of the Board, the
Directors maintain frequent contact with each other to discuss any issues of concern they may
have relating to the Company or their areas of responsibility, and to keep them fully briefed on
the Company’s operations. Where Directors have concerns which cannot be resolved about the
running of the company, or a proposed action, they will ensure that their concerns are recorded
in the Board minutes.
Matters reserved specifically for Board - The Board has a formal schedule of matters reserved
that can only be decided by the Board. The key matters reserved are the consideration and
approval of:
• The Company’s overall strategy;
• Financial statements and dividend policy;
• Management structure including succession planning, appointments and remuneration;
material acquisitions and disposals, material contracts, major capital expenditure projects
and budgets;
• Capital structure, debt and equity financing and other matters;
• Risk management and internal controls;
• The Company’s corporate governance and compliance arrangements; and
• Corporate policies.
17
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Governance Report (continued)
Summary of the Board’s work in the period – During the period, the Board considered all relevant
matters within its remit, but focused in particular on the establishment of the Company and the
identification of suitable investment opportunities for the Company to pursue, the associated due
diligence work as required and the decisions thereon.
Attendance at meetings:
Member
Alan Broome, AM
Dean Gallegos
Peter Wale
Simon Holden
Position
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Meetings
attended
2 of 2
2 of 2
2 of 2
2 of 2
The Chairman, Alan Broome, AM, proposes and seeks agreement to the Board Agenda and
ensures adequate time for discussion.
The UK Corporate Governance Code also recommends the submission of all directors for re-
election at annual intervals. No Director will be required to submit for re-election until the first
annual general meeting of the Company following an Acquisition.
The terms and conditions of appointment of Non-Executive Directors will be made available upon
written request.
Other governance matters - All of the Directors are aware that independent professional advice
is available to each Director in order to properly discharge their duties as a Director.
The Company Secretary - The Company Secretary is Simon Holden who is responsible for the
Board complying with UK procedures.
Effectiveness
For the period under review the Board comprised of a Non-Executive Chairman and 3 Non-
Executive Directors. Biographical details of the Board members are set out on page 5 of this
report.
The Directors are of the view that the Board consist of Directors with an appropriate balance of
skills, experience, independence and diverse backgrounds to enable them to discharge their
duties and responsibilities effectively.
Independence - The non-executive Directors bring a broad range of business and commercial
experience to the Company. The Board considers Alan Broome, Peter Wale and Simon Holden
to be independent in character and judgement; this has been explored in more detail on page
16.
Appointments – the Board is responsible for reviewing the structure, size and composition of the
Board and making recommendations to the Board with regards to any required changes.
Commitments – All Directors have disclosed any significant commitments to the Board and
confirmed that they have sufficient time to discharge their duties.
18
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Governance Report (continued)
Induction - All new Directors received an informal induction as soon as practical on joining the
Board. No formal induction process exists for new Directors, given the size of the Company, but
the Chairman ensures that each individual is given a tailored introduction to the Company and
fully understands the requirements of the role.
Board performance and evaluation – The Chairman normally carries out an annual formal
appraisal of the performance of the other Directors which takes into account the objectives set in
the previous period and the individual’s performance in the fulfilment of these objectives.
Although the Board consisted of four male Directors, the Board supports diversity in the
Boardroom and the Financial Reporting Council’s aims to encourage such diversity. Aside from
the Directors, there are no employees in the Company. The following table sets out a breakdown
by gender at 31 December 2019:
Directors
Male
4
Female
-
The Board will pursue an equal opportunity policy and seek to employ those persons most
suitable to delivering value for the Company.
Accountability
The Board is committed to providing shareholders with a clear assessment of the Company’s
position and prospects. This is achieved through this report and as required other periodic
financial and trading statements. The Board has made appropriate arrangements for the
application of risk management and internal control principles.
Going concern – The preparation of the financial statements requires an assessment on the
validity of the going concern assumption.
In making their assessment of going concern, the Directors have reviewed forecasts, under one
which entails continuing to search for an acquisition, for a period of at least 12 months from the
date of approval of these financial statements. The Directors recognise the small cost base of
the Company and its ability to conserve cash. As a result the Directors consider that the Company
has sufficient funds for the required timeframe and as such they consider it appropriate to adopt
the going concern basis in the preparation of the financial statements.
Internal controls - The Board of Directors reviews the effectiveness of the Company’s system of
internal controls to align with the requirements of the Code. The internal control system is
designed to manage the risk of failure to achieve its business objectives. This covers internal
financial and operational controls, compliance and risk management. The Company had
necessary procedures in place for the period under review and up to the date of approval of the
Annual Report and financial statements. The Directors acknowledge their responsibility for the
Company’s system of internal controls and for reviewing its effectiveness. The Board confirms
the need for an ongoing process for identification, evaluation and management of significant risks
faced by the Company. The Directors carry out a risk assessment before signing up to any
commitments.
The Directors are responsible for taking such steps as are reasonably available to them to
safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
19
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Governance Report (continued)
At the present, due to the size of the Company, there is no internal audit function. The
requirement for internal audit will be considered following the completion of an acquisition.
External auditor
The Company’s external auditor is BDO LLP. The external auditor has unrestricted access to the
Board. The Board is satisfied that BDO LLP has adequate policies and safeguards in place to
ensure that auditor objectivity and independence are maintained. The external auditors report to
the Board annually on their independence from the Company. In accordance with professional
standards, the partner responsible for the audit is changed every five periods. The current
auditor, BDO LLP was first appointed by the Company in October 2019, and therefore the current
partner is due to rotate off the engagement after completing the audit for the period ended 31
December 2024. Having assessed the performance objectivity and independence of the auditors,
the Board will be recommending the reappointment of BDO LLP as auditors to the Company at
the 2020 Annual General Meeting.
BDO LLP were paid £25,000 in relation to the audit of the 31 December 2019 financial
statements. They were paid an additional £2,500 during 2019 for non-audit services which related
to a read through of the half-period financial statements.
Shareholder relations
Communication and dialogue – Open and transparent communication with shareholders is given
high priority and there is regular dialogue with institutional investors, as well as general
presentations made at the time of the release of the annual and interim results. All Directors are
kept aware of changes in major shareholders in the Company and are available to meet with
shareholders who have specific interests or concerns. The Company issues its results promptly
to individual shareholders and also publishes them on the Company’s website. Regular updates
to record news in relation to the Company and the status of its exploration and development
programmes are included on the Company’s website. Shareholders and other interested parties
can subscribe to receive these news updates by email by registering online on the website free
of charge.
The Directors are available to meet with institutional shareholders to discuss any issues and gain
an understanding of the Company’s business, its strategies and governance. Meetings can also
held with the corporate governance representatives of institutional investors when requested.
Annual General Meeting - At every AGM individual shareholders will be given the opportunity to
put questions to the Chairman and to other members of the Board that may be present. Notice
of the AGM is sent to shareholders at least 21 working days before the meeting. Details of proxy
votes for and against each resolution, together with the votes withheld are announced to the
London Stock Exchange and are published on the Company’s website as soon as practical after
the meeting.
Approved on behalf of the Board of Directors by:
Alan Broome, AM
Non-Executive Chairman
11 May 2020
20
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Remuneration Report
Remuneration Report Approval
A resolution to approve this report will be proposed at the AGM of the Company. The vote will
have advisory status, will be in respect of the remuneration policy and overall remuneration
packages and will not be specific to individual levels of remuneration.
Remuneration policy
In accordance with the commitments made in the Company’s IPO prospectus, the Company did
not remunerate any of its Directors in the relevant period for their ordinary duties prior to an
acquisition and currently has no employees. At this stage of the Company’s growth there is
therefore no remuneration policy in place. If the Company decides to remunerate the Directors
or hires any employees then a policy will be put in place.
Non-executive Directors
The Company policy is that the Non-Executive Directors are expected to attend scheduled board
meetings and attend committee meetings as required. The Company does not have service
contracts with any of the directors.
Other Employees
At present there are no other employees in the Company other than the Directors, so this policy
only applies to the Board.
Terms of appointment
The services of the Directors are provided in accordance with their appointment letter. Directors
are expected to devote such time as is necessary for the proper performance of their duties, but
as a minimum they are expected to commit at least one day per month, which shall include
attendance at all meetings of the Board and any sub-committees of the Board.
Director
Alan Broome, AM
Dean Gallegos
Peter Wale
Simon Holden
Period of
appointment
2018
2018
2018
2018
Number of periods
completed
2
2
2
1
21
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Remuneration Report (continued)
Compensation of key management personnel (audited)
Set out below are the emoluments of the Directors for the period ended 31 December 2019
(GBP):
Name of Director
Salary and
fees
Taxable
benefits
Annual
bonus and
long term
benefits
Pension
related
benefits
Share
based
payments
Alan Broome, AM
Dean Gallegos
Peter Wale
Simon Holden
£
-
-
-
-
£
-
-
-
-
£
-
-
-
-
£
-
-
-
-
Total
£
£
1,697
1,697
11,880
11,880
1,697
1,697
1,697
1,697
Set out below are the emoluments of the Directors for the period ended 31 December 2018 (GBP)
(unaudited):
Name of Director
Salary and
fees
Taxable
benefits
Annual
bonus and
long term
benefits
Pension
related
benefits
Share
based
payments
Alan Broome, AM
Dean Gallegos
Peter Wale
Simon Holden
£
-
-
-
-
£
-
-
-
-
£
-
-
-
-
£
-
-
-
-
£
-
-
-
-
Total
£
-
-
-
-
Pension contributions (audited)
The Company does not currently have any pension plans for any of the Directors and does not
pay pension amounts in relation to their remuneration.
The Company has not paid out any excess retirement benefits to any Directors or past Directors.
Payments to past directors (audited)
The Company has not paid any compensation to past Directors.
Payments for loss of office (audited)
No payments were made for loss of office during the period.
22
Mustang Energy Plc
Annual Report and Financial Statements
For the period ended 31 December 2019
Remuneration Report (continued)
UK Remuneration percentage changes
As the remuneration for the preceding financial period is nil for all Directors, no percentage
changes for remuneration have been set out in this report.
UK 10-period performance graph
The Directors have considered the requirement for a UK 10-period performance graph comparing
the Company’s Total Shareholder Return with that of a comparable indicator. The Directors do
not currently consider that including the graph will be meaningful because the Company has only
been listed since July 2019, is not paying dividends, is currently incurring losses as it gains scale
and its focus is to seek an acquisition. In addition and as mentioned above, the remuneration of
Directors is not currently linked to performance and we therefore do not consider the inclusion of
this graph to be useful to shareholders at the current time. The Directors will review the inclusion
of this table for future reports.
UK 10-period CEO table and UK percentage change table
The Directors have considered the requirement for a UK 10-period CEO table. The Directors do
not currently consider that including these tables would be meaningful given that the Company
is not yet trading and the Directors are not yet remunerated for their services. The Directors will
review the inclusion of this table for future reports.
Relative importance of spend on pay
The Directors have considered the requirement to present information on the relative importance
of spend on pay compared to shareholder dividends paid. Given that the Company does not
currently pay dividends we have not considered it necessary to include such information.
UK Directors’ shares (audited)
The interests of the Directors who served during the period in the share capital of the Company
at 31 December 2019 and at the date of this report has been set out in the Directors’ Report on
page 6.
Other matters
The Company does not currently have any other annual or long-term incentive schemes in place
for any of the Directors and as such there are no disclosures in this respect.
Approved on behalf of the Board of Directors by:
Alan Broome, AM
Non-Executive Chairman
11 May 2020
23
Independent auditor’s report to the members of Mustang Energy Plc
Opinion
We have audited the financial statements of Mustang Energy Plc (“the Company”) for the 11 month
period ended 31 December 2019 which comprise of the Statement of Comprehensive Income,
Statement of Financial position, Statement of Changes in Equity, Statement of Cash Flows and notes
to the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union and, as applied in
accordance with the provisions of the Companies Act 2006.
In our opinion the financial statements:
•
give a true and fair view of the state of the Company’s affairs as at 31 December 2019 and of
the Company’s loss for the period then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material Uncertainty related to going concern
We draw attention to note 1.2 of the financial statements, which indicates that both COVID-19 and the
suppression in global oil prices is likely to cause a delay in the Company completing a transaction to
acquire a business, asset or interest in an asset. As stated in note 1.2, as part of the prospectus
issued on Initial Public Offering (IPO), the directors disclosed the intention that if a transaction had not
been completed by January 2021, the members would take a vote to either continue the search for a
transaction for a further 12 months or wind up the Company and return any excess funds. The directors
also disclose the need to potentially raise further funds as and when a transaction completes. These
events or conditions indicate that a material uncertainty exists that may cast significant doubt on the
Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Given the conditions and uncertainties noted above, we considered going concern to be a key audit
matter. We have performed the following work as part of our audit:
• Verified the disclosure within the IPO prospectus noting the Director’s intention to propose a
shareholder vote if a transaction is not completed by January 2021 and corroborated this to the
disclosure in note 1.2;
• Reviewed board minutes and RNS announcements to consider whether there had been any
changes made to the disclosure in the IPO prospectus and to verify that at the date of this report
no committed transaction had occurred;
• Obtained the Directors’ cash flow forecast and sensitised to consider based on the current run
rate for overheads, if the Company has sufficient funds to continue to trade for a period of at
least 12 months but further funds would be required to complete a transaction as and when this
occurs;
• Challenged the Directors on the impact that COVID-19 and the depressed oil price would have
on the timing of completing a transaction; and
24
• Considered the adequacy of disclosure within note 1.2 to the financial statements against the
requirements of the accounting standards.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks
of material misstatement (whether or not due to fraud) that we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. This matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on this matter. In addition to the matter described in the material uncertainty related to going concern
section, we have determined the matters described below to be the key audit matters to be
communicated in our report.
Key Audit Matter
Valuation of share options and warrants
How we addressed the Key Audit Matter in Our Audit
We performed the following audit procedures:
During the year the Company issued share
options to Directors and warrants to advisors
in return for services provided. Disclosure in
the financial statements regarding the share
options and warrants can be found at note
1.11 and note 10.
The valuation of share options and warrants
includes a number of key estimates and
judgements in particular the volatility
estimate included in the Black Scholes
valuation model. Sensitivity within the
volatility could have a material impact upon
the financial statements. This was consider
a significant risk to our audit and therefore a
key audit matter.
Key Observations
• Verified the option and warrant agreements to ensure
key terms had been appropriately included in the
Directors’ valuation.
• Obtained the Directors’ assessment of volatility, used
in the Black Scholes valuation model and
benchmarked this to market information on
comparable companies. We engaged BDO internal
valuation experts to assess the reasonableness of
the volatility applied and compared it to an
acceptable range.
• Re-performed the Black Scholes, agreeing other
inputs to empirical information, to ensure accuracy.
• Evaluated the adequacy of disclosures in respect of
share options and warrants made by the Directors in
the Annual Report in view of the requirements of
Accounting Standards,
The valuation of share options and warrants has been undertaken appropriately by the Directors in line with
the requirements of the accounting standards. Key variables, such as volatility, applied by the Directors are
within a reasonable range. The valuation and the disclosure are considered to be materially correct..
Our application of materiality
Materiality
Materiality for the financial statements as a whole
31 December 2019
£3,000
Basis of materiality
Gross expenditure
We apply the concept of materiality both in planning and performing our audit and in evaluation the
effect of misstatements. We consider materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users that are taken on the basis of
the financial statements. Importantly misstatements below these level will not necessary be evaluated
as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluation their effect on the financial statements as a whole.
We consider gross expenditure to be the financial metric of the most interest to shareholders and other
users of the financial statements, given the Company’s current situation as a non- trading company and
only incurring expenditure. Gross expenditure is therefore considered to be the most appropriate basis
for materiality. A benchmark of 1.25% has been applied to total expenditure and is considered
reasonable given the level of transactions in the period.
25
Performance materiality is the application of materiality at the individual account or balance level and
is set at an amount which reduces to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.
Performance materiality was set at 75% of the above materiality levels. We considered 75% as a
reasonable benchmark having given consideration to the level of transactions occurring in the Company
and the nature of the operations.
We agreed with the Board that we would report to the Board all individual audit differences identified
during the course of our audit in excess of £150. We also agreed to report differences below that
threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, as well as
assessing the risks of material misstatement in the financial statements. In approaching the audit, we
considered how the Company is organised and managed. BDO LLP completed a full statutory audit on
the company’s financial information.
The extent to which the audit is capable of detecting irregularities is affected by the inherent difficulty
in detecting irregularities, the effectiveness of the entity’s controls, and the nature, timing and extent of
the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to
detect than irregularities that result from error.
As part of the audit gained an understanding of the legal and regulatory framework applicable to the
Company and the industry in which it operates, and considered the risk of acts by the Company that
were contrary to applicable laws and regulations, including fraud. We designed audit procedures to
respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion. We
focused on laws and regulations where non-compliance might have a material effect on the financial
statements, including, but not limited to, the Companies Act 2006, the UK Listing Rules and tax
legislation.
Our audit approach included:
• agreeing the financial statement disclosures to underlying supporting documentation to assess
compliance with relevant laws and regulations,
• enquiring with the Directors concerning actual and potential legal claims
• addressing the risk of fraud through management override of controls, testing the
appropriateness of adjustments posted during the financial close and agreeing a sample of
overhead spend to Board approval;
• assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and evaluating the business rationale of any significant transactions that are
unusual or outside the normal course of business.
There are inherent limitations in the audit procedures described above and, the further removed non-
compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely we would become aware of it.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report and financial statements, other than the financial statements and our
auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
26
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there
is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared
in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’
report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept , or returns adequate for our audit have not
•
been received from branches not visited by us; or
the financial statements and the part of the directors’ remuneration report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement , the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
27
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters which we are required to address
Following the recommendation of the Board, we were appointed by the Board on 15 October 2019 to
audit the financial statements for the period ending 31 December 2019. The period of total uninterrupted
engagement is 1 year.
The corresponding figures for the period ended 31 January 2019 are unaudited.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company
and we remain independent of the company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Matt Crane (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
11 May 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
28
Annual Report and Financial Statements
For the period ended 31 December 2019
Statement of Comprehensive Income
Note
20
Period ended
11 months ended
31 December 2019
Year ended
12 months ended
31 January 2019
£
£
(195,464)
(74,148)
(195,464)
(74,148)
-
-
(195,464)
(74,148)
-
-
(195,464)
(74,148)
-
-
19
(195,464)
(74,148)
8
(0.05)
(0.04)
(18,357)
(18,357)
Administrative expenses
Operating loss
Interest income
Loss before taxation
Taxation
Loss for the period
Other comprehensive income for the
period
Total comprehensive loss or
the period attributable to the
equity owners
Loss per share from continuing
operations attributable to the
equity owners
Basic loss per share
Diluted loss per share
(pence per share)
The notes to the financial statements on page 33 to page 42 form an integral part of these
financial statements.
29
Annual Report and Financial Statements
For the period ended 31 December 2019
Statement of Financial Position
As at
31 December 2019
Note
£
As at
31 January 2019
(Unaudited)
£
Assets
Non-current assets
Property, plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity attributable to shareholders
Share capital
Share premium
Share based payments reserve
Retained deficit
Total equity
Liabilities
Current liabilities
Trade and other payables
Total liabilities
9
12
13
14
10
551
551
31,282
516,557
547,839
548,390
84,000
654,000
27,471
(269,612)
902
902
13,260
-
13,260
14,162
-
-
-
(74,148)
495,859
(74,148)
52,531
52,531
88,310
88,310
Total equity and liabilities
548,390
(74,148)
The notes to the financial statements on page 33 to page 42 form an integral part of these
financial statements
This report was approved by the board and authorised for issue on 11 May 2020 and signed on
its behalf by:
Dean L Gallegos
Director
Company Registration Number: 11155663
30
Annual Report and Financial Statements
For the period ended 31 December 2019
Statement of Changes in Equity
Share
capital
£
Share
premium
account
£
Share
based
payments
reserve
£
Retained
deficit
£
Total
equity
£
-
-
-
-
-
-
-
-
(74,148)
(74,148)
-
-
-
(74,148)
(74,148)
-
-
-
(195,464)
(195,464)
On 17 January 2018
Period ended 31 January 2019
Total comprehensive loss for the
period
Balance as at 31 January 2019
(unaudited)
Period ended 31 December 2019
Total comprehensive loss for the
period
Issue of share capital
84,000
654,000
-
-
738,000
Share based payment
-
-
27,471
-
27,471
Balance as at 31 December 2019
84,000
654,000
27,471
(269,612)
495,859
Share capital comprises the ordinary issued share capital of the Company.
Share premium represents consideration less nominal value of issued shares and costs directly
attributable to the issue of new shares.
Share based payments represents the value of equity settled share-based payments provided
to employees, including key management personnel, and third parties for services provided.
Retained deficit represents the cumulative retained losses of the Company at the reporting date.
The notes to the financial statements on page 33 to page 42 form an integral part of these
financial statements.
31
Annual Report and Financial Statements
For the period ended 31 December 2019
Statement of Cash Flows
11 months to
12 months to
31 December 2019 31 January 2019
(unaudited)
Cash (absorbed by) from operations
Cash flow from operating activities
Cash (absorbed by) from operations
19
19
Note
£
(97,795)
£
1,160
(97,795)
1,160
Cash flow from operating activities
(97,795)
1,160
Investing activities
Purchase of property, plant and equipment
Net cash (used) in investing activities
Financing activities
Proceeds from issue of shares (net of share issue
costs)
Repayment of loans and borrowings
Proceeds from loans and borrowings
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
-
-
(1,160)
(1,160)
12
629,000
-
(19,419)
4,771
614,352
516,557
-
516,557
-
-
-
-
The notes to the financial statements on page 33 to page 42 form an integral part of these
financial statements.
32
Notes to the Financial Statements
For the period ended 31 December 2019
1
Accounting policies
Company information
Mustang Energy PLC is a public company limited by shares incorporated and domiciled in
England and Wales. The registered office is 48 Chancery Lane, c/o Keystone Law, London,
WC2A 1JF.
1.1 Accounting convention
The financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted for use in the European Union and with those parts of
the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements are prepared in sterling, which is the functional currency of the
company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared on the historical cost basis. The principal
accounting policies adopted are set out below.
1.2 Going concern
During the period the company made losses of £195,464 and at the reporting date had
accumulated losses of £269,612. However, it should also be noted the company did have net
assets of £548,390 at the reporting date.
The company funds its operations through the issue of share capital at a premium and at the
reporting date had raised total financing of £738,000 with the view of seeking additional equity
capital in the future.
As noted in the Chairman’s report the impact of the current COVID-19 crisis and significant drop
in oil price is likely to impact upon the timing of the company entering into a transaction to acquire
a business, asset or interest in an asset. Given the limited overheads in the business the
Directors have assessed the cash flow forecast and do not consider COVID-19 to have an
impact on the ability to manage the costs over the next 12 months.
As disclosed in the listing prospectus dated 17 July 2019, if an acquisition has not been
announced by the end of January 2021, the Board will recommend to Shareholders either that
the Company continue to pursue an acquisition for a further 12 months or that the Company be
wound up (in order to return capital to Shareholders, to the extent assets are available).
The Board’s recommendation will then be put to a Shareholder vote (from which the Directors
holding Ordinary Shares will abstain). In the event that the Company is wound up, any capital
available for distribution will be returned to Shareholders in accordance with the Articles.
In the scenario of a successful acquisition, sufficient funds will need be raised to undertake the
identified future plan for the enlarged Company. If an acquisition does not complete, the Directors
have satisfied themselves that the Company has adequate existing cash resources to continue
operating over the following 12 months. The Directors therefore have made an informed judgement,
at the time of approving the financial statements, that there is reasonable expectation that the
Company has adequate resources to continue in operational existence for the foreseeable future
and are confident that an acquisition will be successfully completed or the shareholders will vote to
continue to pursue a transaction.
If an acquisition is not successfully completed by January 2021 and the shareholders voted to wind
the company up, the remaining assets and liabilities would be settled in the normal course of
business and any excess funds returned to shareholders. This is considered to be a material
uncertainty as the company would be wound up and not continue to trade on a going concern basis.
These events may cast significant doubt on the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that may be necessary if the Group were
not a going concern.
33
Notes to the Financial Statements
For the period ended 31 December 2019
Accounting policies (Continued)
The Directors consider that despite this uncertainty it remains appropriate to prepare the financial
statements on a going concern basis as they continue to pursue completion of an appropriate
transaction and have widen the search in terms of industry and geographical location and continue
to engage with shareholders such that if a vote did occur they are confident that the shareholders
would vote to continue to support the Directors in their search.
1.3 Property, plant and equipment
Property, plant and equipment are initially measured at cost and subsequently measured at cost
or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual
values over their useful lives on the following bases:
Plant and equipment
33% straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the
sale proceeds and the carrying value of the asset, and is recognised in the income statement.
1.4
Impairment of tangible and intangible assets
At each reporting end date, the company reviews the carrying amounts of its tangible assets to
determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it is not possible to estimate the
recoverable amount of an individual asset, the company estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
1.5 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-
term liquid investments with original maturities of three months or less.
1.6 Financial assets
There are no other categories of financial instrument other than those listed below:
Trade and other receivables
Trade receivables are recognised and carried at the original invoice amount less any provision
for impairment. Other receivables are recognised and measured at nominal value less any
provision for impairment.
The Company applies the expected credit loss model in respect of trade and other receivables.
The Company tracks changes in credit risk, and recognises a loss allowance based on lifetime
ECLs at each reporting date.
1.7 Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the
contractual arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the asset of the Company after deducting all of its liabilities. Equity
instruments issued by the Company are recorded at the proceeds received net of direct issue
costs.
Trade payables are stated at their amortised cost.
1.8 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
34
Notes to the Financial Statements
For the period ended 31 December 2019
Accounting policies (Continued)
Current tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net
profit as reported in the income statement because it excludes items of income or expense that
are taxable or deductible in other periods and it further excludes items that are never taxable or
deductible. The company’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the reporting end date.
The Company is registered in England and Wales and is taxed at the company standard rate of
19%.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amounts of assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises from goodwill or from
the initial recognition of other assets and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is settled or the asset is realised. Deferred tax
is charged or credited in the income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax
assets and liabilities are offset when the company has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the
same tax authority.
1.9 Share-based payments
Equity-settled share-based payments are measured at fair value at the date of grant by
reference to the fair value of the equity instruments granted using the Black-Scholes pricing
model. The fair value determined at the grant date is expensed on a straight-line basis over the
vesting period, based on the estimate of shares that will eventually vest. A corresponding
adjustment is made to equity.
1.10 Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange
prevailing at the dates of the transactions. At each reporting end date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on
the reporting end date. Gains and losses arising on translation are included in the income
statement for the period.
2
Adoption of new and revised standards and changes in accounting policies Standards
which are in issue but not yet effective
In the current period, the following new and revised Standards and Interpretations have been adopted
by the company for the first time. These have been considered by the directors and deemed not to
have a material impact on the current, previously reported, or future financial position and
performance of the company.
•
•
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatments
35
Notes to the Financial Statements
For the period ended 31 December 2019
Accounting policies (Continued)
At the date of authorisation of these financial statements, the following Standards and
Interpretations, which have not yet been applied in these financial statements, were in issue but
not yet effective:
• Amendments to IFRS 3 Definition of a business Amendments to IAS 1 and IAS 8
Definition of material
• Conceptual Framework Amendments to References to the Conceptual Framework in
IFRS Standards
It is not anticipated that adoption of the standards and interpretations listed above will have a
material impact on the current financial position and performance of the company.
3
Critical accounting estimates and judgements
In the application of the company’s accounting policies, the directors are required to make
judgements, estimates and assumptions about the carrying amount of assets and liabilities that
are not readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised, if the revision
affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
The valuation of the options and warrants incorporates a judgmental value. The Directors valued the
options and warrants, using the Black Scholes model where inputs such a volatility, dividend yield
and risk free rate require judgement. Volatility is a key estimate and therefore share options and
warrants is considered a key judgment. Directors used an average volatility excluding certain outliers.
There are no other estimates and assumptions that have significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within the next financial period.
4 Operating loss
Period ended
Year ended
11 months ended 12 months ended
31 December 2019 31 January 2019
£
£
Operating loss for the period is stated after charging /
(crediting):
Exchange gains
Fees payable to the company’s auditor for the audit of the
financial statements
Depreciation of property, plant and equipment
Share-based payments
(479)
27,500
351
27,471
-
-
258
-
36
Notes to the Financial Statements
For the period ended 31 December 2019
5 Employees
The average monthly number of persons (including directors) employed by the company during the
period was:
Period ended
31 December 2019
Period ended
31 January 2019
Directors
4
3
The Directors were the key management personnel. Their compensation is disclosed in note 7 to the
financial statements.
6
Compensation of key management personnel
11 months to
12 months to
31 December 2019 31 January 2019
Share based payments
7
Income tax expense
£
16,971
£
-
At the reporting date the company had accumulated tax losses of approximately £163,000 (31 January 2019 -
£75,000) available for carry forward against future trading profits.
No deferred tax asset has been provided for in relation to these losses.
8
Loss per share Period ended
Number of shares
Weighted average number of ordinary shares for basic
earnings per share
Weighted average number of ordinary shares for diluted
earnings per share
Period ended
Year ended
11 months ended 12 months ended
31 December 2019 31 January 2019
£
£
4,230,541
4,230,541
4
4
Loss
Loss for the period from continued operations
(195,464)
(74,148)
Loss for basic and diluted earnings per share being net profit
attributable to equity shareholders of the company for
continued operations
(195,464)
(74,148)
Loss per share Period ended (continued)
Loss per share for continuing operations
Basic loss per share
Diluted loss per share
(0.05)
(0.04)
(18,537)
(18,537)
The share options and warrants as disclosed in note 11 are considered to be anti-dilutive.
37
Notes to the Financial Statements
For the period ended 31 December 2019
9
Trade and other receivables
Other receivables
VAT recoverable
Prepayments
10 Trade and other payables
Trade Payables
Accruals
Other payables
11 Share-based payment transactions
Outstanding at 1 February 2019
Granted
Outstanding at 31 December 2019
Period ended
Period ended
31 December 2019 31 January 2019
£
£
8,000
14,671
8,611
11,260
2,000
-
31,282
13,260
Period ended
Period ended
31 December 2019 31 January 2019
£
£
18,245
34,286
-
-
7,528
80,782
52,531
88,310
Number of
warrants
Number of
options
-
210,000
-
900,000
210,000
900,000
Exercisable at 31 December 2019
-
900,000
In July 2019 210,000 Warrants and 900,000 options were granted with an exercise price of 10p each.
Each Warrant entitles the Warrant Holder to subscribe for one Ordinary Share at the Placing Price
per each Ordinary Share. The Warrants have not been admitted to trading on the Official List but are
freely transferable. The Warrant Holder must exercise the Warrants within a three period from 29
July 2019. The Warrants can be transferred by means of an instrument of transfer in any usual form
or any other form approved by the Board.
The Warrants have been granted to Optiva Securities Limited in consideration for the provision of
brokering services to the Company (and other services ancillary to the Admission of shares onto the
London Stock Exchange).
The fair value of the warrants at their grant date has been calculated using the Black Scholes Model
and a valuation of £10,500 has been adjusted through the Share based payment reverse in equity
during the current period.
38
Notes to the Financial Statements
For the period ended 31 December 2019
On 29 July 2019, the Company granted 900,000 Options to company directors. Each Option entitles
the Option Holder to subscribe for one Ordinary Share at the Placing Price per each Ordinary Share.
The Options vest when the share price of the Ordinary Shares reaches 15p. The Option Holders
must exercise the Options within a five-period period from 29 July 2019, subject to the Options having
vested.
The directors are of the opinion the company will achieve a share price of 15p by 31 December 2020,
and therefore the Options will vest by this date. The successful acquisition of a target company is
anticipated by 31 December 2020 following the expansion of searches for target companies into
increased industries and areas, and the share price is expected to increase following acquisition.
The fair value of the options at their grant date has been calculated using the Black Scholes Model
and a valuation of £16,971 has been adjusted through the Share based payment reverse in equity
during the current period.
Share-based payment transactions (continued)
Black Scholes Model
Share Price
Exercise Price
Expected volatility
Risk-free interest rate
Expected life
Number of warrants/options granted
12 Share Capital
Ordinary Share capital
Issued
84,000,000 Ordinary shares of 1p each
At grant date
Warrants
At grant date
Options
£0.10
£0.10
80%
0.68%
3 periods
210,000
£0.10
£0.10
80%
0.68%
5 periods
900,000
Period ended
Period ended
31 December 2019 31 January 2019
£
£
84,000
84,000
-
-
On 15 July 2019 899,996 Ordinary shares of 1p each were issued at par.
On 17 July 2019 7,500,000 Ordinary shares of 1p each were issued at 10p per share.
Of the 7,500,000 Ordinary shares that were paid for, 7,400,000 shares were settled in cash and
1,000,000 shares were settled through the capitalization of a director's loan account.
The Ordinary shares have attached to them full voting rights, dividend and capital distribution rights
(including on a winding up) but they do not confer any rights of redemption.
13 Share premium account
At the beginning of period
Issue of new shares
Less directly attributable issue costs
At end of period
Period ended
Period ended
31 December 2019 31 January 2019
£
£
-
675,000
(21,000)
654,000
-
-
-
39
Notes to the Financial Statements
For the period ended 31 December 2019
14 Retained Earnings
At the beginning of period
Loss for the period
At end of period
Period ended
Period ended
31 December 2019 31 January 2019
£
£
(74,148)
(195,464)
-
(74,148)
(269,612)
(74,148)
The retained earnings reserve represents cumulative profits and losses, net of dividends paid and
other adjustments.
15 Events after reporting date
Since the 31 December 2019 the effects of the COVID-19 virus and the oil price war between Saudi
Arabia and Russia has meant that oil prices have declined by approximately 60%. The current oil
price means that many oil assets are, at best, at close to break even on a cash flow basis but would
be in a loss position when accounting for a total return on capital that would need to be invested.
The Company believes that the effect of this will mean companies that were seeking to divest assets
will wait until the oil price recovers to a more attractive level, it is the Company’s view that this level
will be a Brent oil price of at least US$50 barrel. It is unknown how long this recovery will take and
therefore the Company will expand its search for appropriate acquisition targets to the entire value
chain of the energy industry and not just the upstream sector. It will also consider potential
acquisitions outside of the energy and natural resources industries.
16 Related party transactions
Remuneration of key personnel
The remuneration of directors, who are key management personnel, is set out below in aggregate
for each of the categories specified in IAS 24 Related Party Disclosures.
Period ended
Period ended
31 December 2019 31 January 2019
£
£
Share based payments
16,971
-
Directors’ loans
At the reporting date £9,000 (31 January 2019 - £nil) was due from the directors to the company in
respect of unsettled share capital. £6,300 was due from D L Gallegos, and £900 was each due from
A J Broome, P V Wale and S W Holden. These amounts are repayable on demand, interest free and
are considered fully recoverable.
In addition, £1,000 (31 January 2019 - £70,789) was due to D L Gallegos in respect of expenses
paid by the director on behalf of the company. This amount is repayable on demand and interest
free.
On 15 July 2019 1,000,000 Ordinary shares of 1p each were issued to D L Gallegos and settled by
way of the capitalization of £100,000 due to him from the company.
40
Notes to the Financial Statements
For the period ended 31 December 2019
17 Controlling party
The company has no immediate or ultimate controlling party.
18 Financial instruments and associated risks
The company has the following categories of financial instruments at the period end:
Financial assets at amortised cost:
Cash and cash equivalents
Other receivables
Prepayments
Financial liabilities at amortised cost:
Trade Payables
Accruals
Other Payables
Period ended
Period ended
31 December 2019 31 January 2019
£
£
516,557
8,000
8,611
-
11,260
-
533,168
11,260
18,245
34,286
-
-
7,528
80,782
52,531
88,310
There are no material differences between the fair value and the book value of the financial assets
and liabilities.
The company has exposure to the following risks from the use of financial investments:
Liquidity risk
Liquidity risk is the risk that the company will not be able to meet its financial obligations as they
fall due. The company has sufficient liquid assets to meet the operating needs of the business.
The financial obligations are very minimal therefore the company is unlikely to be exposed to
significant liquidity risk.
Foreign currency risk
Virtually all transactions are conducted in the company's functional currency of UK pound.
Occasional small value invoices were paid in US dollars and AUS dollars. It is therefore not
significantly exposed to foreign exchange risk arising from exchange rate movements between the
US dollar, AUS dollar and the UK pound.
Credit risk
The company does not generate any revenue therefore there is no exposure to credit risk from
revenue. The company's financial assets as at the date of financial position were minimal and
deemed recoverable.
Market risk
The company was formed to undertake an acquisition of a target company or business or
asset(s) with operations in the energy or natural resources sectors. Any regulatory or market price
changes in this sector might affect the company's financial position.
41
Notes to the Financial Statements
For the period ended 31 December 2019
Capital risk
The company’s objectives when managing capital are to safeguard the company's ability to
continue as a going concern in order to provide returns for shareholders, to provide benefits for
other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. The
capital structure of the company consists of equity attributable to the equity holders of the
company, comprising issued capital and retained earnings. The capital structure of the company
is managed and monitored by the directors.
19 Cash generated from operations
Period ended
Period ended
31 December 2019 31 January 2019
£
£
Loss for the period after tax
(195,464)
(74,148)
Adjustments for:
Depreciation and impairment of property, plant and equipment
Equity settled share-based payment expense
351
27,471
258
-
Movements in working capital
Increase in trade and other receivables
Increase in trade and other payables
(10,022)
79,869
(13,260)
88,310
(97,795)
1,160
20 Schedule of Administrative Expenses for the period ended 31 December 2019
Period ended
Year ended
11 months ended 12 months ended
31 December 2019 31 January 2019
£
£
27,471
2,231
14,128
31,805
51,673
22,703
17,500
25,000
353
1,167
-
1,041
520
351
(479)
-
495
26,448
17,000
16,756
-
12,500
-
-
-
36
541
114
258
-
195,464
74,148
Administrative expenses
Equity settled share based payment costs
Computer running costs
Travelling expenses
Professional subscriptions
Legal and professional costs
Consultancy fees
Accountancy
Audit fees
Bank charges
Insurance
Printing and stationary
Entertaining
Sundry expenses
Depreciation
(Profit) or loss on foreign exchange
42