Mustang Energy Plc
Annual Report & Financial Statements
for the year ended 31 December 2020
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
Page
3
4
5
7
14
21
26
30
35
36
37
38
39
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Company information
Directors
Alan Broome, AM
Dean L Gallegos
Peter Wale
Simon Holden
Jacqueline Yee
Company Secretary
Simon Holden
Registered Office
48 Chancery Lane,
London, WC2A 1JF
Registered Number
11155663
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 year ended 31 December 2020
Chairman’s Statement
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. The Company has only been active in
executing the Company’s objectives as outlined in the Company’s Prospectus.
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.
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. In the first half
of 2020 the effects of COVID-19 virus and an oil price war between Saudi Arabia and Russia
meant oil prices declined significantly and for a short period of time were negative. It was at that
time the Company announced its intention to diversify its search for an acquisition away from
purely the energy sector to any sector.
In March 2021 the Company announced a Strategic Alliance and Placing to Acacia Resources
Limited ("Acacia"). Acacia was established in 2012 with a current focus on minerals involved in
the energy transition process. The principal purposes of the Placing and the Strategic
Investment will be for the Company and Acacia:
To invest together in manufacturing assets involved in the energy transition process with
a relative focus on the energy storage/battery value chain; and
To invest in the development of renewable energy projects where there is scope to
include stationary energy storage.
Acacia also acquired existing shares from two shareholders and as a result of the Placing and
these purchases became the Company’s largest shareholder with 24.03%.
In late April 2021 the Company announced the acquisition of a 22.1% interest in VRFB Limited
(“VRFB”). VRFB owns a 50% interest in Enerox Holdings Limited (“EHL”) with EHL owning a
100% interest in Enerox GMbH (“Enerox”). Enerox is an Austrian-based vanadium redox flow
battery manufacturer. Enerox has invested more than 20 years of research and development
into its CellCube energy storage system. Their vanadium-based technology is known to be state-
of-the-art in the battery market and has already deployed more than 130 systems / 23 MWh
across 5 continents.
The Directors collectively have an interest of 23.8% 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.
For financial review results refer to Strategic statement below.
Alan Broome, AM
Chairman
10 May 2021
4
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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 and New Age Exploration Limited an Australian
based globally diversified minerals and metals exploration and development company focused
on gold projects and listed on the Australian Stock Exchange.
Dean Lloyd Gallegos (Managing Director), aged 53
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 an 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 51
Peter Wale brings a thorough understanding of financial markets and investment management
with a career of diverse professional investing experience across developed and emerging
markets with a smaller companies bias. 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 (AIM:
SML) 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 45
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 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 currently serves as company secretary of Iofina plc (AIM: IOF),
Primorus Investments plc (AIM: PRIM) and Synairgen plc (AIM: SNG).
5
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Jacqueline Yee (Non-Executive Director), aged 51
Ms Yee is based in Singapore after relocating from Australia in 2019. She has a global track
record in M&A, restructurings, capital markets structured finance and alternative investments,
and she is a recipient of the Money 20/20 RiseUp Leadership Award. Over her 30 year career,
she has worked in the United Kingdom, Europe, USA, Asia, Middle East, Australia and New
Zealand; and, has gained a global network, and insights and local knowledge in multiple sectors.
Ms Yee currently serves as Non-Executive Director and Chair of the Finance & Audit Committee
of Wellteq Digital Health Inc (CSE:WTEQ), Treasurer of Kidney Dialysis Foundation SG, SG
Community Partner of Global Fintech Connector; and, she serves on the Financial Services
Transformation Jury for SwissCham SG and the Bio-Med-HealthTech Jury for Enterprise SG
SWITCH Slingshot. She is multilingual and she has authored reports that have been
implemented in institutional and public policies.
6
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Directors’ Report
The Directors present their report with the audited financial statements of the Company for the
year ended 31 December 2020. A commentary on the business for the year is included in the
Chairman’s Statement on page 4. A review of the business is also included in the Strategic Report
on pages 14 to 20.
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 2020 were as follows:
Director
Position
Non-Executive Chairman
Alan Broome
Dean Gallegos Managing Director
Peter Wale
Simon Holden
Jacqueline Yee
Non-Executive Director
Non-Executive Director
Non-Executive Director
Appointed Ordinary
shares
140,000
17 January 2018
17 January 2018 1,630,000
340,000
17 January 2018
340,000
1 August 2018
18 May 2020
-
Options
90,000
630,000
90,000
90,000
350,000
Qualifying Third Party Indemnity Provision
At the date of this report, the Company has a third-party indemnity policy in place for all five
Directors.
Substantial shareholders
As at 31 December 2020, 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.
As at the date of approval of this report the Company had a total number of issued Ordinary
Shares with voting rights in the Company of 10,281,600. The Company has been notified of the
following interests of 3 per cent or more in its issued share capital.
Party Name
Acacia Resources Limited
Dean L Gallegos
Richard Corsie MBE
The Australian Special Opportunity Fund, LP
Matthew Lumb
Simon Holden
Peter Wale
Number of Ordinary
Shares
% of
Share Capital
2,471,600
1,630,000
1,050,000
1,000,000
500,000
340,000
340,000
24.0%
15.6%
10.2%
9.7%
4.9%
3.3%
3.3%
7
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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.
The Company does not meet Streamlined Energy & Carbon Reporting (SECR) requirements
since energy consumption is less than 40,000 kWh of energy in the reporting year.
Dividends
The Directors do not propose a dividend in respect of the period ended 31 December 2020. No
dividend was paid in the period to 31 December 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 14 to 20.
Corporate Governance
The Governance report forms part of the Director’s Report and is disclosed on pages 21 to 25.
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 ongoing COVID-19 pandemic and the
significant collapse in the oil price during the period impacted the Company’s ability to assess
and, ultimately, enter into a transaction to acquire any business, asset or interest in an asset
within the exploration and production sectors. However, given the limited overheads in the
business, the Directors have assessed the cash flow forecast and do not consider the continued
impacts of COVID-19 will have an impact on the ability to manage the costs over the next 12
months.
As set out in the Company’s prospectus dated 17 July 2019 (the “Prospectus”), if an Acquisition
was not announced within 18 months of Admission (i.e. by 29 January 2021), the Board would
recommend to Shareholders to approve that the Company either continue to pursue an
Acquisition for a further 12 months from such date or that the Company be wound up (in order
to return capital to Shareholders to the extent assets are available). The Board’s
recommendation would then be put to a Shareholder vote (from which the Directors holding
Ordinary Shares will abstain).
8
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
The statement from the Prospectus reads as follows: “If an Acquisition has not been announced
within 18 months of Admission, the Board will recommend to Shareholders that the Company
either continue to pursue an Acquisition for a further 12 months from such date 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).”
As at the date of this report, the Company has announced the acquisition of a 22.10%
shareholding interest in VRFB Holdings Limited (the “VRFB Transaction”). Given that the
Company has been in active discussions with the relevant stakeholders in connection with the
VRFB Transaction for the past several weeks, and because the Board was wary of the significant
risk posed by other interested parties making offers should negotiations between the Company
and such stakeholders become unduly protracted, the Board resolved that it was in the best
interests of the Company and Shareholders as a whole if the VRFB Transaction was prioritised
ahead of calling a Shareholder meeting to vote on the Board’s recommendation. Shareholders
should note that if a meeting was called earlier in the year, the Board’s recommendation would
have been the same then as it is at the time of writing; unanimously in favour of the Company
continuing to pursue an Acquisition. The Board would not have recommended to Shareholders
that the Company be wound up.
To finance the VRFB Transaction, the Company raised US$8,000,000 by the issue of
convertible loan notes which accrue interest at a rate of 10 per cent. per annum (the “Loan
Notes”). On readmission of the Company’s shares to trading on the Standard segment of the
London Stock Exchange’s main market for listed securities (“Readmission”), the Company will
issue to the holders of the Loan Notes (“Noteholders”) ordinary shares in the capital of the
Company at a price per share of 20 pence equivalent to the total principal amount of the Loan
Notes, save that if Readmission does not occur on or by 31 December 2021 (“Longstop Date”)
the Noteholders will receive shares in the capital of AIM-quoted Bushveld Minerals Limited
(“BMN”). Any accrued interest on the Loan Notes shall be capable of being satisfied, at the sole
discretion of the Company, by the issue of shares in the capital of the Company in the event
Readmission occurs by the Longstop Date or shares in the capital of BMN in the event it does
not. The Board does not anticipate any cash being payable by the Company in relation to the
Loan Notes.
Notwithstanding the announced VRFB Transaction, the Board shall propose a resolution to
Shareholders at the Company’s 2021 Annual General Meeting, to be held in June, in line with
the commitment that was contained in the Prospectus (such extract as set out above). The
Board will unanimously recommend to Shareholders that they vote in favour of the Company
continuing to pursue an Acquisition for a further 12 months, the Acquisition being the VRFB
Transaction. Shareholders should note the VRFB Transaction remains subject to certain
(additional) Shareholder and regulatory approval, and which the Board currently anticipates will
take between four and five months to conclude. The Company will communicate with
Shareholders at a later date in respect of such additional resolutions that they will be asked to
vote on.
The Board will not recommend that the Company be wound up. However, Shareholders should
note that in the event that the Company was to be wound up, any capital available for distribution
will be returned to Shareholders in accordance with the Company’s articles of association. 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
Shareholders vote to wind the Company up, the remaining assets and liabilities will be settled
in the normal course of business and any excess funds returned to Shareholders.
9
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Due to the statement contained in the Prospectus and no vote having yet been proposed to
Shareholders (the result of such vote therefore not being known), this is a material uncertainty
that could result in the Company being wound up and not continuing 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
Company was not a going concern. For the reasons set out above, the Directors consider that,
notwithstanding the uncertainty deemed to exist, it remains appropriate to prepare the financial
statements on a going concern basis.
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.
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.
10
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Directors’ Report (continued)
Auditors
The Board appointed BDO LLP as auditors of the Company. They have expressed their
willingness to continue in office and it is currently intended that 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 year.
Under that law the directors are required to prepare the financial statements in accordance with
international accounting standards in conformity with the requirements of the Companies Act
2006. 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 for the Company for that period.
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 they have been prepared in accordance with IFRSs in conformity with the
requirements of the Companies Act 2006, subject to any material departures disclosed and
explained in the financial statements;
Prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in business; and
prepare a director’s report, a strategic report and director’s remuneration report which
comply with the requirements of the Companies Act 2006.
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 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. The Directors are responsible for ensuring that the annual report and
accounts, taken as a whole, are fair, balanced, and understandable and provides the information
necessary for shareholders to assess the group’s 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. Financial statements are published on the
company’s website in accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the company's website is the responsibility of the
directors. The directors' responsibility also extends to the ongoing integrity of the financial
statements contained therein.
11
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Directors’ Report (continued)
Statement of Directors’ responsibilities pursuant to Disclosure and Transparency Rule
Each of the Directors, whose names and functions are listed on pages 5 and 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
On 12 March 2021 the Company announced that it issued 1,671,600 new Ordinary Shares in
the capital of the Company at a price per share of 10 pence raising gross proceeds of £167,160.
The placing proceeds will be used to provide additional working capital for the Company and to
allow it to have sufficient cash resources to undertake due diligence on future potential
acquisitions.
The subscriber of the Placing Shares is Acacia Resources Limited ("Acacia"). Acacia was
established in 2012 with a current focus on minerals involved in the energy transition process.
The principal purposes of the Placing and the Strategic Investment will be for the Company and
Acacia:
To invest together in manufacturing assets involved in the energy transition process with a
relative focus on the energy storage/battery value chain; and
To invest in the development of renewable energy projects where there is scope to include
stationary energy storage.
On 26 April 2021 the Company announced the acquisition of a 22.1% interest in VRFB Holdings
Limited (“VRFB-H”) for US$7.524 million. VRFB-H is a 50 per cent. shareholder in Enerox
Holding Limited (“EHL”). Bushveld Minerals Limited subsidiary, Bushveld Energy Limited is
VRFB-H’s majority shareholder, with 50.5% of its issued share capital. EHL is a special purpose
vehicle which holds the entire issued share capital of Enerox GmbH ("Enerox"), an Austrian-
based vanadium redox flow battery manufacturer. Enerox has invested more than 20 years of
research and development into its CellCube energy storage system. Their vanadium-based
technology is known to be state-of-the-art in the battery market and has already deployed more
than 130 systems / 23 MWh across 5 continents.
The Company will fund its investment into VRFB-H by way of an issue of US$8,000,000 10 per
cent. unsecured convertible loan notes ("CLNs") by the Company to certain investors ("CLN
holders"), including its 24.03% shareholder Acacia Resources Limited. The CLNs shall be
convertible into shares in the capital of the Company by no later than 31 December 2021,
following (a) the approval of its shareholders of the Company’s capital raising and, (b) the
publication of a prospectus by the Company and Readmission of the Company to listing and
trading as required given that the Company’s VRFB-H Investment constitutes a reverse takeover
under the Financial Conduct Authority's Listing Rules. If Readmission does not occur on or by
31 December 2021 (“Longstop Date”) the Noteholders will receive shares in the capital of AIM-
quoted Bushveld Minerals Limited (“BMN”).
12
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Directors’ Report (continued)
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 10 May 2021 and is signed on
its behalf by:
Alan Broome, AM
Chairman
13
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Strategic Report
The Directors present the Strategic Report of Mustang Energy Plc for the year ended 31
December 2020.
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 energy 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. For details, please refer to Post Balance
Date Events statement above.
(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 energy 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. The policy the Company’s Business Principle and Ethics
can be found on the Company’s website.
(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 UK Corporate Governance Code.
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.
14
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Strategic Report (continued)
The application of the s172 requirements can be demonstrated in relation to some of the key
decisions made during 2020:
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 10.
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.
As at the date of this report, the Company has announced the acquisition of a 22.10%
shareholding interest in VRFB Holdings Limited (the “VRFB Transaction”). Notwithstanding the
announced VRFB Transaction, the Board shall propose a resolution to Shareholders at the
Company’s 2021 Annual General Meeting, to be held in June, in line with the commitment that
was contained in the Prospectus.
Event since the period end
On 12 March 2021 the Company announced that it issued 1,671,600 new Ordinary Shares in
the capital of the Company at a price per share of 10 pence raising gross proceeds of £167,160.
The placing proceeds will be used to provide additional working capital for the Company and to
allow it to have sufficient cash resources to undertake due diligence on future potential
acquisitions.
The subscriber of the Placing Shares is Acacia Resources Limited ("Acacia"). Acacia was
established in 2012 with a current focus on minerals involved in the energy transition process.
15
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Strategic Report (continued)
The principal purposes of the Placing and the Strategic Investment will be for the Company and
Acacia:
To invest together in manufacturing assets involved in the energy transition process with a
relative focus on the energy storage/battery value chain; and
To invest in the development of renewable energy projects where there is scope to include
stationary energy storage.
On 27 April 2021 the Company announced the acquisition of a 22.1% interest in VRFB Holdings
Limited (“VRFB-H”) for US$7.524 million. VRFB-H is a 50 per cent shareholder in Enerox
Holding Limited (“EHL”). Bushveld Minerals Limited subsidiary, Bushveld Energy Limited is
VRFB-H’s majority shareholder, with 50.5% of its issued share capital. EHL is a special purpose
vehicle which holds the entire issued share capital of Enerox GmbH ("Enerox"), an Austrian-
based vanadium redox flow battery manufacturer. Enerox has invested more than 20 years of
research and development into its CellCube energy storage system. Their vanadium-based
technology is known to be state-of-the-art in the battery market and has already deployed more
than 130 systems / 23 MWh across 5 continents.
The Company has funded its investment into VRFB-H by the issue of US$8,000,000 10 per
cent. unsecured convertible loan notes ("CLNs") to certain investors, including its 24.03%
shareholder Acacia. The CLNs shall be convertible into shares in the capital of the Company,
calculated by dividing the nominal value (and accrued interest, if applicable) of the CLNs (using
the average US$/GBP£ closing exchange rate as shown on Bloomberg over the five trading
days prior to conversion) by 20 pence, by no later than 31 December 2021 (such date of
conversion being the "Conversion Date"), following: (a) the approval of its shareholders of the
Company’s capital raise; and (b) the publication of a prospectus by the Company and
readmission of MUST to listing and trading; as required given that the Acquisition constitutes a
reverse takeover ("RTO") under the Financial Conduct Authority's Listing Rules. The CLNs
attract interest at a rate of 10 per cent. per annum, and can be satisfied at the time of conversion
in cash or in shares of the capital of the Company (at the election of the Company). The CLN
holders will receive warrants to subscribe for new shares in the capital of the Company (one
warrant being issued for every two shares issued upon conversion of the CLN), exercisable at
a price per share of 30 pence . The Warrants have an expiry period of three years from the date
of issue.
Financial review
Results for the 2020 period
The Company incurred a loss for the period to 31 December 2020 of £231,901 (31 December
2019 – loss of £195,464).
Cash administrative expenses were £167,889 a small increase compared to 2019 (£167,642).
For details please refer to Note 20.
In 2020 the Company granted a further 350,000 Options which increased share based payments
reserve.
Loss per share: 0.03 cents (2019: loss of 0.04 cents).
16
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Strategic Report (continued)
Trade and other receivables of £9,191 (2019: £8,000) mainly related to loans to employees, part
of which was repaid during 2020.
Cash flow
Cash operating outflows for 2020 were £171,357 (31 December 2019 - £97,795 outflow). The
outflow is represented mostly by payments for legal and professional costs and director’s
remuneration.
Closing cash
As at 31 December 2020, the Company held £345,200 of cash (31 December 2019 - £516,557).
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 been met with the acquisition of a 22.1% interest in VRFB Holdings
Limited.
Position of Company’s Business
At the period end the Company’s Statement of Financial Position shows net assets totaling
£327,587 (31 December 2019 – £495,859). 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 is one female Directors in the Company. The Company has a Chairman, a
Managing Director, three Non-Executive Directors and no employees. The Company is
committed to gender equality and during 2020 appointed a female Non-Executive Director.
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.
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
17
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Strategic Report (continued)
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 has acquired a 22.1% interest in VRFB Holdings Limited (“VRFB” or the “VRFB
Acquisition”, as the context requires). Whilst the acquisition itself is not subject to the approval of
the Company’s shareholders, certain other matters relating to it are, specifically but not limited to
the issue of new shares in the capital of the Company and the disapplication of pre-emption rights
in connection therewith on the anticipated conversion of the loan notes issued by the Company
to finance the VRFB Acquisition. To address the aforesaid risks, certain shareholders (holding a
majority of the shares in issue in the capital of the Company), including those Directors who hold
shares, have provided irrevocable undertakings to vote in favour of the resolutions applicable to
the VRFB Acquisition at the relevant time.
The Company’s revenues, if any, shall be dependent on the underlying performance of Enerox
GmbH (“Enerox”), an Austrian-based vanadium redox flow battery manufacturer. Enerox is
subject to certain operational risks, including no critical spare equipment or plant availability
during any required plant maintenance or shutdowns; asset integrity and health, safety, security
and environment incidents. Enerox has operated for several years and has the necessary
contingency plans in place to reduce operational risk. The Directors expect Enerox to leverage
the experience of its experienced management team and those of its partners to mitigate any
potential impacts of unforeseen events relating to operational performance. However, all actions
required to mitigate these risks are to be carried out by third parties which cannot be controlled
by the Company.
The Company’s reputation is central to its future success, in terms of the way in which it conducts
its business and the financial results which it achieves. Failure to meet the expectations of its
shareholders, business partners and other stakeholders may have a material adverse effect on
the Company’s reputation and future revenue.
The Company is exposed to the general economic environment which is impacted by events
such as the COVID-19 pandemic and, within a more national setting, Brexit. Following the VRFB
Acquisition, the Company’s increased geographical footprint gives it greater scope to adapt its
operations to mitigate against or take advantage of economic fluctuations in different regions.
Also, due its relatively small size, the Company can adapt reasonably quickly.
Operational restrictions may continue to be placed on or otherwise come into effect which impact
the Company, its underlying investments and partners (including VRFB and, indirectly, Enerox)
and their respective supply chains as a result of the spread of COVID-19. The restrictions could
lead to production shutdowns and/or delays in obtaining critical equipment for capital projects.
18
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Strategic Report (continued)
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.
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.
19
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Strategic Report (continued)
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 10 May 2021.
Alan Broome, AM
Chairman
20
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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, Simon Holden and
Jacqueline Yee 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.
Provision 36 of the Code requires that the board should develop a formal policy for post-
employment shareholding requirements encompassing both unvested and vested
shares.
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.
21
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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 year ended 31
December 2020. 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.
22
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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
Jacqueline Yee
Position
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Meetings
attended
2 of 2
2 of 2
2 of 2
2 of 2
0 of 0
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.
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 pages 5 to 6 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, Simon Holden and
Jacqueline Yee to be independent in character and judgement; this has been explored in more
detail on page 21.
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.
23
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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 and one female Director, 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 2020:
Directors
Male
4
Female
1
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 in line with the requirement 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.
24
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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 currently intends to reappoint BDO LLP as auditors to the Company at the 2020 Annual
General Meeting.
BDO LLP were paid £26,225 in relation to the audit of the 31 December 2020 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
10 May 2021
25
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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
The Company does not have approved remuneration policy. In accordance with the commitments
made in the Company’s IPO prospectus, the Company did not remunerate any of its Non-
Executive Directors in the relevant period for their ordinary duties prior to an acquisition and
currently has no employees. In February 2020 given the investment of time in the operation of
the Company and its search for a suitable acquisition the Board approved a monthly payment of
£5,000 to the Managing Director Dean Gallegos.
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
Jacqueline Yee
Period of
appointment
2018
2018
2018
2018
2020
Number of periods
completed
3
3
3
2
0
26
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Remuneration Report (continued)
Compensation of key management personnel (audited)
Set out below are the emoluments of the Directors for the year ended 31 December 2020
(GBP):
Fixed pay
Variable pay
Name of Director
Salary and
fees
Taxable
benefits
Alan Broome, AM
£
-
Dean Gallegos
55,000
Peter Wale
Simon Holden
Jacqueline Yee
-
-
-
£
-
-
-
-
-
Annual
bonus and
long term
benefits
Pension
related
benefits
Share
based
payments
Total
£
-
-
-
-
-
£
-
-
-
-
-
£
£
3,703
25,920
3,703
3,703
26,600
3,703
80,920
3,703
3,703
26,600
Set out below are the emoluments of the Directors for the period ended 31 December 2019
(GBP):
Fixed pay
Variable pay
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
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.
27
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Remuneration Report (continued)
Payments for loss of office (audited)
No payments were made for loss of office during the period.
UK Remuneration percentage changes
The following table shows the percentage change in the remuneration of directors in 2020 and
2019.
Base salary
2020
£
Managing Director
55,000
2019
£
-
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, except Managing
Director. 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 year in the share capital of the Company at
31 December 2020 and at the date of this report has been set out in the Directors’ Report on
page 7.
28
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
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
10 May 2021
29
Mustang Energy Plc
Independent auditor’s report to the members of Mustang Energy Plc
Opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 December 2020 and of
the Company’s loss for the year then ended;
• have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Mustang Energy Plc (the ‘Company’) for the year ended
31 December 2020 which comprise of the Statement of Comprehensive Income, the Statement of
Financial position, the Statement of Changes in Equity, the 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 accounting
standards in conformity with the requirements of the Companies Act.
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 believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit opinion is consistent with the additional report to the audit committee.
Independence
We were appointed by the Board of the directors on 15 October 2019 to audit the financial statements
for the period ending 31 December 2019 and subsequent financial periods. The period of total
uninterrupted engagement including retenders and reappointments is 2 years, covering the years
ending 31 December 2019 to 31 December 2020. We remain 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. The non-audit services
prohibited by that standard were not provided to the Company.
Material uncertainty relating to going concern
We draw attention to note 1.2 of the financial statements, which indicates that the impact of the ongoing
COVID-19 pandemic and the significant collapse in the oil price during the period impacted the
Company’s ability to assess and, ultimately, enter into a transaction to acquire any business, asset or
interest in an asset within the exploration and production sectors. As stated in note 1.2, as part of the
Prospectus issued on Initial Public Offering (IPO), the directors disclosed the intention that if an
acquisition 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. Due to the statement contained in the Prospectus and no vote having yet been proposed to
Shareholders (the result of such vote therefore not being known), this is a material uncertainty that
could result in the Company being wound up and not continuing to trade on a going concern basis.
These events 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.
30
Mustang Energy Plc
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:
• Confirmed with the directors, and by reference to the IPO prospectus and subsequent board
minutes and RNS announcements, that it remains the intention of the directors to propose a
shareholder vote regarding the continuance of the Company;
• Obtained the VRFB-H investment agreement and confirmed that any future funding will be in
the form of equity on pre-emptive terms with customary dilution provisions should the company
not fund its pro rata requirement;
• Obtained the terms of the US$8.0 million convertible loan notes (“CLN’s”) used to fund the
US$7.524 million VRFB-H acquisition and confirmed the CLN’s could not be redeemed for cash;
• Obtained the Directors’ cash flow forecast and tested the key operating assumptions based on
2020 and 2021 year to date actual results and external data, where possible;
• Performed reverse stress testing to determine cash flow sensitivities; and
• Considered the adequacy of disclosure within note 1.2 to the financial statements.
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate.
Our responsibilities and the responsibilities of the directors with respect to going concern are described
in the relevant sections of this report.
Overview
Coverage
Key audit matters
100% (2019: 100%) of Company loss before tax
100% (2019: 100%) of Company total assets
2020
Going concern
Valuation of share options and
warrants
2020
X
-
2019
X
X
Valuation of share options and warrants is no longer
considered to be a key audit matter.
Materiality
Financial statements as a whole
£3,000 (2019: £3,000) based on 1.25% (2019: 1.25%) of
gross expenditure.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the
Company’s system of internal control, and assessing the risks of material misstatement in the financial
statements. We also addressed the risk of management override of internal controls, including assessing whether
there was evidence of bias by the Directors that may have represented a risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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. We determined that there were no matters in addition to
the matter described in the Material uncertainty related to going concern section to be communicated
in our report.
31
Mustang Energy Plc
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating 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.
In order to reduce to an appropriately low level the probability that any misstatements exceed
materiality, we use a lower materiality level, performance materiality, to determine the extent of testing
needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial
as we also take account of the nature of identified misstatements, and the particular circumstances of
their occurrence, when evaluating their effect on the financial statements as a whole.
Company financial statements
2020
2019
£3,000
1.25% of gross expenditure
£3,000
We consider gross expenditure to be the financial metric of the most
relevance to shareholders and other users of the financial statements,
given the Company’s current situation as a non- trading company.
£2,250
Performance materiality was set at 75% of the above materiality levels.
£2,250
for
Materiality
Basis
determining
materiality
Rationale for the
benchmark
applied
Performance
materiality
Basis
determining
performance
materiality
for
Reporting threshold
We agreed with the Board that we would report to them all individual audit differences in excess of £150 (2019:
£150). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
32
Mustang Energy Plc
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit,
we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters
as described below.
Strategic
report
Directors’
report
and
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.
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.
Directors’
remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has
been properly prepared in accordance with the Companies Act 2006.
Matters
on
which we are
to
required
report
by
exception
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 Statement of Directors’ responsibilities, 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.
33
Mustang Energy Plc
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
• We held discussions with management and the Board to consider any known or suspected
instances of non-compliance with laws and regulations or fraud identified by them;
• Considering the significant laws and regulations of the UK to be those relating to the industry,
financial reporting framework, tax legislation and the listing rules;
• Assessing the susceptibility of the Company's financial statements to material misstatement,
including how fraud might occur;
• The Company made few transactions in year. In addition to our audit testing, we identified and
tested any large or unusual journal entries made in the year. We determined unusual journals
by selecting key risk characteristics to filter the population of journals selected for testing;
• We reviewed estimates and judgements applied by Management in the financial statements to
assess their appropriateness and the existence of any systematic bias; and
• We reviewed unadjusted audit differences for indications of bias or deliberate misstatement.
Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, 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, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed 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 are to become aware of
it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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 and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Peter Acloque (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
10 May 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
34
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Statement of Comprehensive Income
Note
20
Year ended
12 months ended
31 December 2020
Period ended
11 months ended
31 December 2019
£
£
(231,901)
(195,464)
(231,901)
(195,464)
(231,901)
(195,464)
-
-
(231,901)
(195,464)
-
-
19
(231,901)
(195,464)
8
(0.03)
(0.05)
Administrative expenses
Operating loss
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 and diluted loss per share
(pence per share)
The notes to the financial statements on page 39 to page 50 form an integral part of these
financial statements.
35
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2020
Statement of Financial Position
As at
31 December 2020
As at 31
December 2019
Note
£
£
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
168
168
25,085
345,200
370,285
370,453
551
551
31,282
516,557
547,839
548,390
84,000
654,000
91,100
(501,513)
84,000
654,000
27,471
(269,612)
327,587
495,859
42,866
42,866
52,531
52,531
Total equity and liabilities
370,453
548,390
The notes to the financial statements on page 39 to page 50 form an integral part of these
financial statements
This report was approved by the board and authorised for issue on 10 May 2021 and signed on
its behalf by:
Dean L Gallegos
Managing Director
Company Registration Number: 11155663
36
Annual Report and Financial Statements
For the year ended 31 December 2020
Statement of Changes in Equity
Share
capital
£
Share
premium
account
£
Share
based
payments
reserve
£
Retained
deficit
£
Total
equity
£
-
-
-
(74,148)
(74,148)
-
-
-
(195,464)
(195,464)
Balance as at 1 February 2019
(unaudited)
Period ended 31 December 2019
Total comprehensive loss for the
period
Issue of share capital
84,000
654,000
-
Share based payment
-
-
27,471
-
-
738,000
27,471
Balance as at 31 December 2019
84,000
654,000
27,471
(269,612)
495,859
Year ended 31 December 2020
Total comprehensive loss for the
period
Share based payment
-
-
-
-
-
63,629
(231,901)
-
(231,901)
63,629
Balance as at 31 December 2020
84,000
654,000
91,100
(501,513)
327,587
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 39 to page 50 form an integral part of these
financial statements.
37
Annual Report and Financial Statements
For the year ended 31 December 2020
Statement of Cash Flows
Cash (absorbed by) from operations
Cash flow from operating activities
Cash (absorbed by) from operations
12 months to
11 months to
31 December 2020 31 December 2019
Note
£
£
19
19
(171,357)
(97,795)
(171,357)
(97,795)
Cash flow from operating activities
(171,357)
(97,795)
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
12
Proceeds from loans and borrowings
Net cash generated from financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
-
-
-
-
-
-
-
-
629,000
(19,419)
4,771
614,352
(171,357) 516,557
516,557
345,200
-
516,557
The notes to the financial statements on page 39 to page 50 form an integral part of these
financial statements.
38
Notes to the Financial Statements
For the year ended 31 December 2020
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 accounting
standards in conformity with the requirements of the Companies Act 2006.
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 £231,901 and at the reporting date had
accumulated losses of £501,513. However, it should also be noted the company did have net
assets of £370,453 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 ongoing COVID-19 pandemic and the
significant collapse in the oil price during the period impacted the Company’s ability to assess
and, ultimately, enter into a transaction to acquire any business, asset or interest in an asset
within the exploration and production sectors. However, given the limited overheads in the
business, the Directors have assessed the cash flow forecast and do not consider the continued
impacts of COVID-19 will have an impact on the ability to manage the costs over the next 12
months.
As set out in the Company’s prospectus dated 17 July 2019 (the “Prospectus”), if an Acquisition
was not announced within 18 months of Admission (i.e. by 29 January 2021), the Board would
recommend to Shareholders to approve that the Company either continue to pursue an
Acquisition for a further 12 months from such date or that the Company be wound up (in ord er
to Shareholders to the extent assets are available). The Board’s
to return capital
recommendation would then be put to a Shareholder vote (from which the Directors holding
Ordinary Shares will abstain).
The statement from the Prospectus reads as follows: “If an Acquisition has not been announced
within 18 months of Admission, the Board will recommend to Shareholders that the Company
either continue to pursue an Acquisition for a further 12 months from such date 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).”
39
Annual Report and Financial Statements
For the year ended 31 December 2020
As at the date of this report, the Company has announced the acquisition of a 22.10%
shareholding interest in VRFB Holdings Limited (the “VRFB Transaction”). Given that the
Company has been in active discussions with the relevant stakeholders in connection with the
VRFB Transaction for the past several weeks, and because the Board was wary of the
significant risk posed by other interested parties making offers should negotiations between the
Company and such stakeholders become unduly protracted, the Board resolved that it was in
the best interests of the Company and Shareholders as a whole if the VRFB Transaction was
prioritised ahead of calling a Shareholder meeting to vote on the Board’s recommendation.
Shareholders should note that if a meeting was called earlier in the year, the Board’s
recommendation would have been the same then as it is at the time of writing; unanimously in
favour of the Company continuing to pursue an Acquisition. The Board would not have
recommended to Shareholders that the Company be wound up.
To finance the VRFB Transaction, the Company raised US$8,000,000 by the issue of
convertible loan notes which accrue interest at a rate of 10 per cent. per annum (the “Loan
Notes”). On readmission of the Company’s shares to trading on the Standard segment of the
London Stock Exchange’s main market for listed securities (“Readmission”), the Company will
issue to the holders of the Loan Notes (“Noteholders”) ordinary shares in the capital of the
Company at a price per share of 20 pence equivalent to the total principal amount of the Loan
Notes, save that if Readmission does not occur on or by 31 December 2021 (“Longstop Date”)
the Noteholders will receive shares in the capital of AIM-quoted Bushveld Minerals Limited
(“BMN”). Any accrued interest on the Loan Notes shall be capable of being satisfied, at the sole
discretion of the Company, by the issue of shares in the capital of the Company in the event
Readmission occurs by the Longstop Date or shares in the capital of BMN in the event it does
not. The Board does not anticipate any cash being payable by the Company in relation to the
Loan Notes.
Notwithstanding the announced VRFB Transaction, the Board shall propose a resolution to
Shareholders at the Company’s 2021 Annual General Meeting, to be held in June, in line with
the commitment that was contained in the Prospectus (such extract as set out above). The
Board will unanimously recommend to Shareholders that they vote in favour of the Company
continuing to pursue an Acquisition for a further 12 months, the Acquisition being the VRFB
Transaction. Shareholders should note the VRFB Transaction remains subject to certain
(additional) Shareholder and regulatory approval, and which the Board currently anticipates will
take between four and five months to conclude. The Company will communicate with
Shareholders at a later date in respect of such additional resolutions that they will be asked to
vote on.
The Board will not recommend that the Company be wound up. However, Shareholders should
note that in the event that the Company was to be wound up, any capital available for distribution
will be returned to Shareholders in accordance with the Company’s articles of association. 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
Shareholders vote to wind the Company up, the remaining assets and liabilities will be settled
in the normal course of business and any excess funds returned to Shareholders.
Due to the statement contained in the Prospectus and no vote having yet been proposed to
Shareholders (the result of such vote therefore not being known), this is a material uncertainty
that could result in the Company being wound up and not continuing 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
Company was not a going concern. For the reasons set out above, the Directors consider that,
notwithstanding the uncertainty deemed to exist, it remains appropriate to prepare the financial
statements on a going concern basis.
40
Notes to the Financial Statements
For the year ended 31 December 2020
Accounting policies (Continued)
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 deposits held at call with banks.
1.6 Financial assets
There are no other categories of financial instrument other than those listed below:
Trade and other receivables
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. Lifetime ECLs are determined using all relevant, reasonable and
supportable historical, current and forward-looking information that provides evidence about the
risk that the trade and other receivables will default and the amount of losses that would arise
as a result of that default. Analysis indicated that the Company will fully recover the carrying
value of the trade and other receivables so no ECL has been recognised in the current period.
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.
41
Notes to the Financial Statements
For the year ended 31 December 2020
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
No new International Financial Reporting Standards (IFRS), amendments or interpretation became
effective in the year ended 31 December 2020 which has a material effect on this financial information.
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:
42
Notes to the Financial Statements
For the year ended 31 December 2020
Accounting policies (Continued)
Conceptual Framework Amendments to References to the Conceptual Framework in
IFRS Standards
Amendments regarding replacement issues in the context of the IBOR reform
Amendments to IFRS 9 derecognition of financial liabilities
Amendments to the presentation of Financial Statements: Classification of liabilities
Amendments to IAS 16 in deducting amounts received from the cost
Amendments to IAS 37 in assessing whether a contract is onerous
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.
Critical judgements and estimates
a) Share option
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. The model is sensitive to volatility assumptions and the expected term of the
underlying instruments. A 10% change in volatility rate could result in £1,750 impact on income
statement.
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
Year ended Period ended
12 months ended 11 months ended
31 December 2020 31 December 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)
26,225
383
63,629
27,500
351
27,141
43
Notes to the Financial Statements
For the year ended 31 December 2020
5 Employees
The average monthly number of persons (including directors) employed by the company during the
period was:
Directors
Year ended
Period ended
31 December 2020 31 December 2019
5
4
The Directors were the key management personnel. Their compensation is disclosed in note 6 to the
financial statements.
6
Compensation of key management personnel
12 months to 11 months to
31 December 2020 31 December 2019
Share based payments
Salaries
7
Income tax expense
£
63,629
55,000
£
16,971
-
118,629
16,971
At the reporting date the company had accumulated tax losses of approximately £295,000 (2019 - £163,000)
available for carry forward against future trading profits. There is no expiry date on the remaining losses as at 31
December 2020.
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
Year ended Period ended
12 months ended 11 months ended
31 December 2020 31 December 2019
£
£
8,400,000
4,230,541
Weighted average number of ordinary shares for diluted
earnings per share
8,400,000
4,230,541
Loss
Loss for the period from continued operations
(231,901)
(195,464)
Loss for basic and diluted earnings per share being net profit
attributable to equity shareholders of the company for
continued operations
(231,901)
(195,464)
Loss per share Period ended (continued)
Loss per share for continuing operations
Basic and diluted loss per share
(0.03)
(0.05)
The share options and warrants as disclosed in note 11 are considered to be anti-dilutive.
44
Notes to the Financial Statements
For the year ended 31 December 2020
9
Trade and other receivables
Other receivables
VAT recoverable
Prepayments
Year ended Period ended
31 December 2020 31 December 2019
£
9,191
8,642
7,252
£
8,000
14,671
8,611
25,085
31,282
10 Trade and other payables
Year ended Period ended
31 December 2020 31 December 2019
Trade Payables
Accruals
11 Share-based payment transactions
Outstanding at 1 January 2020
Granted
Outstanding at 31 December 2020
£
9,116
33,750
£
18,245
34,286
42,866
52,531
Number of
warrants
options
Number of
options
210,000
-
900,000
350,000
210,000
1,250,000
Exercisable at 31 December 2020
210,000
1,250,000
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 year 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). On 16 February 2021, the Warrants have been exercised at £21,000 total
price.
The fair value of the warrants at their grant date has been calculated using the Black Scholes Model
and a valuation of £10,500 was adjusted through the Share based payment reverse in equity during
the prior year.
45
Notes to the Financial Statements
For the year ended 31 December 2020
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.
On 18 May 2020, the Company granted a further 350,000 Options to a company director which have
the same entitlements and vesting conditions as those granted on 29 July 2019.
On 15 December 2020 the Company achieved a share price of 15p and therefore all Options have
vested and exercisable.
The fair value of the options at their grant date has been calculated using the Black Scholes Model
and a valuation of £63,629 has been recognised through the Share based payment reverse in equity
during the current period (2019: £16,971).
Share-based payment transactions (continued)
Black Scholes Model
At grant date
At grant date
of 29 July 2019 of 29 July 2019
Options
Warrants
Share Price
Exercise Price
Expected volatility
Risk-free interest rate
Expected life
Number of warrants/options granted
Share Price
Exercise Price
Expected volatility
Risk-free interest rate
Expected life
Number of options granted
£0.10
£0.10
80%
0.68%
3 periods
210,000
£0.10
£0.10
80%
0.68%
5 periods
900,000
At grant date
of 18 May 2020
Options
£0.11
£0.10
96%
0.68%
4 periods
350,000
12 Share Capital
Year ended Period ended
31 December 2020 31 December 2019
£
£
Ordinary Share capital
Issued
8,400,000 Ordinary shares of 1p each
84,000
84,000
84,000
84,000
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.
46
Notes to the Financial Statements
For the year ended 31 December 2020
13 Share premium account
At the beginning of period
Issue of new shares
Less directly attributable issue costs
At end of period
14 Retained Earnings
At the beginning of period
Loss for the period
At end of period
Year ended Period ended
31 December 2020 31 December 2019
£
£
654,000
-
-
-
675,000
(21,000)
654,000
654,000
Year ended Period ended
31 December 2020 31 December 2019
£
£
(269,612)
(231,901)
(74,148)
(195,464)
(501,513)
(269,612)
The retained earnings reserve represents cumulative profits and losses, net of dividends paid and
other adjustments.
15 Events after reporting date
On 12 March 2021 the Company announced that it issued 1,671,600 new Ordinary Shares in the
capital of the Company at a price per share of 10 pence raising gross proceeds of £167,160. The
placing proceeds will be used to provide additional working capital for the Company and to allow it to
have sufficient cash resources to undertake due diligence on future potential acquisitions.
The subscriber of the Placing Shares is Acacia Resources Limited ("Acacia"). Acacia was established
in 2012 with a current focus on minerals involved in the energy transition process.
The principal purposes of the Placing and the Strategic Investment will be for the Company and Acacia:
To invest together in manufacturing assets involved in the energy transition process with a relative
focus on the energy storage/battery value chain; and
To invest in the development of renewable energy projects where there is scope to include
stationary energy storage.
On 26 April 2021 the Company announced the acquisition of a 22.1% interest in VRFB Holdings
Limited (“VRFB-H”) for US$7.524 million. VRFB-H is a 50 per cent. shareholder in Enerox Holding
Limited (“EHL”). Bushveld Minerals Limited subsidiary, Bushveld Energy Limited is VRFB-H’s majority
shareholder, with 50.5% of its issued share capital. EHL is a special purpose vehicle which holds the
entire issued share capital of Enerox GmbH ("Enerox"), an Austrian-based vanadium redox flow battery
manufacturer. Enerox has invested more than 20 years of research and development into its CellCube
energy storage system. Their vanadium-based technology is known to be state-of-the-art in the battery
market and has already deployed more than 130 systems / 23 MWh across 5 continents. The Company
will fund its investment into VRFB-H by way of an issue of US$8,000,000 10 per cent. unsecured
convertible loan notes ("CLNs") by the Company to certain investors ("CLN holders"), including its
24.03% shareholder Acacia Resources Limited.
47
Notes to the Financial Statements
For the year ended 31 December 2020
The CLNs shall be convertible into shares in the capital of the Company by no later than 31 December
2021, following (a) the approval of its shareholders of the Company’s capital raising and, (b) the
publication of a prospectus by the Company and Readmission of the Company to listing and trading
as required given that the Company’s VRFB-H Investment constitutes a reverse takeover under the
Financial Conduct Authority's Listing Rules. If Readmission does not occur on or by 31 December 2021
(“Longstop Date”) the Noteholders will receive shares in the capital of AIM-quoted Bushveld Minerals
Limited (“BMN”).
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.
Share based payments
Salary
Directors’ loans
Year ended Period ended
31 December 2020 31 December 2019
£
£
63,629
55,000
16,971
-
118,629
16,971
At the reporting date £8,100 (2019 - £9,000) 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 and P V Wale. An amount of £900 due from S W Holden was settled during the year. These
amounts are repayable on demand, interest free and are considered fully recoverable.
In addition, £1,000 (2019 – £1,000 was due to) was due from D L Gallegos and £91 (2019 - £nil) was
due from S W Holden. These amounts are repayable on demand, interest free and are considered
fully recoverable.
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
Year ended Period ended
31 December 2020 31 December 2019
£
£
345,200
9,191
516,557
8,000
354,391
524,557
48
Notes to the Financial Statements
For the year ended 31 December 2020
Financial liabilities at amortised cost:
Trade Payables
Accruals
9,116
33,750
18,245
34,286
42,866
52,531
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.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial
institutions. For banks and financial institutions, only independently rated parties with minimum
rating "B" are accepted.
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.
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.
49
Notes to the Financial Statements
For the year ended 31 December 2020
19 Cash generated from operations
Loss for the period after tax
(231,901)
(195,464)
Year ended Period ended
31 December 2020 31 December 2019
£
£
Adjustments for:
Depreciation and impairment of property, plant and equipment
Equity settled share-based payment expense
Movements in working capital
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
383
63,629
6,197
(9,665)
351
27,471
(10,022)
79,869
(171,357)
(97,795)
20 Schedule of Administrative Expenses for the year ended 31 December 2020
Administrative expenses
Equity settled share based payment costs
Directors’ remuneration
Computer running costs
Travelling expenses
Professional subscriptions
Legal and professional costs
Consultancy fees
Accountancy
Audit fees
Bank charges
Insurance
Entertaining
Sundry expenses
Depreciation
(Profit) or loss on foreign exchange
Year ended Period ended
12 months ended 11 months ended
31 December 2020 31 December 2019
£
£
63,629
55,000
1,112
6,987
11,105
50,073
-
13,025
26,225
749
1,633
1,175
805
383
-
27,471
-
2,231
14,128
31,805
51,673
22,703
17,500
25,000
353
1,167
1,041
520
351
(479)
231,901
195,464
50