Mustang Energy Plc
Annual Report & Financial Statements
for the year ended 31 December 2021
Company Registration No. 11155663 (England and Wales)
Contents
Company Information
Chairman’s Statement
Board of Directors and Senior Management
Directors’ Report
Strategic Report
Governance Report
Remuneration Report
Independent Auditors’ Report
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
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Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
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
Keystone Law
48 Chancery Lane,
London, WC2A 1JF
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 2021
Chairman’s Statement
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 was for the Company and Acacia to invest together in manufacturing assets involved
in the energy transition process with a focus on energy storage and the battery value chain.
Additionally, it is also the intention to participate in the development of renewable energy
projects where there is scope to include stationary energy storage. At the same time as the
Placing Acacia also acquired existing shares from two existing shareholders and as a result of
the Placing and these purchases became the Company’s largest shareholder with 24.03%.
In April 2021 the Company announced that it had acquired a 22.1% interest in VRFB Holdings
Limited (“VRFB-H”) for US$7.524 million which was funded through the issue of US$8,000,000
10 per cent. unsecured convertible loan notes to certain investors, including the Company’s
24.03% shareholder Acacia. VRFB-H owns a 50% interest in Enerox Holdings Limited (“EHL”)
with EHL owning a 100% interest in Enerox GmbH (“Enerox”).
Mustang's 22.1% investment into VRFB-H constitutes a reverse takeover under the Listing
Rules. As a result, the Company’s shares were temporarily suspended until the Company
publishes a prospectus for the readmission of the ordinary share capital of the Company to
trading on the London Stock Exchange.
Enerox is an Austrian-based vanadium redox flow battery manufacturer. Bushveld Minerals
Limited owns a 50.5% interest in VRFB-H and Acacia owns the remaining 27.4%. 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.
In July 2021 the Company was advised that a claim form has been issued in the English High
court by Garnet Commerce Limited ("Garnet") against VRFB-H and EHL. Garnet owns the
remaining 50% interest in EHL. Garnet's claim form sought declarations against VRFB-H
concerning an alleged breach of the joint venture agreement in relation to EHL, in respect of the
indirect investment into EHL through VRFB-H by Mustang, as announced on 27 April 2021.
On 8 March 2022 the Company advised that VRFB-H had successfully defended Garnet’s
claims. The judgment vindicated the position that the investment by VRFB-H into EHL, funded
as it was partly by an investment by the Company, was permitted and did not violate any
agreements. Accordingly, the investment by Mustang into VRFB-H, and the investment by
VRFB-H into EHL, continues to remain effective. The Company is now in the process of
preparing a prospectus so as to facilitate the relisting of the Company’s shares.
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.
Alan Broome, AM
Chairman
21 June 2022
4
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Board of Directors and Senior Management
Alan John Broome, AM (Non-Executive Chairman), aged 71
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. He is also non-executive chairman of ASX listed
New Age Exploration Limited and director of DDH1 Drilling Limited.
Dean Lloyd Gallegos (Managing Director), aged 54
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. Mr Gallegos was appointed to the board of
VRFB Holdings Limited in May 2021.
Peter Verdun Wale (Non-Executive Director), aged 52
Peter Wale brings a thorough understanding of financial markets and investment management
with over 25 years of diverse professional investing experience across developed and emerging
markets. He has worked for various American fund managers, including Fidelity Investments,
and was a partner at an international hedge fund for 12 years. Peter remains an investor, mainly
in the resources sector, and has an extensive network of contacts. He is an executive director
and significant shareholder of Strategic Minerals and a director of Cornwall Resources Limited,
where he has been actively involved in the development of the companies' strategy and investor
communications.
Simon William Holden (Non-Executive Director), aged 46
Simon Holden is an experienced corporate finance and capital markets lawyer. He advises
issuers in connection with initial public offerings and secondary fundraisings, start-ups and
growth companies on alternative finance, and public and private companies in respect of
domestic and cross border mergers and acquisitions. Simon is recommended in The Legal 500
2019 for: Flotations: Small and Mid-Cap; M&A: Smaller Deals up to £50M; Mining and Minerals;
and Oil and Gas. Simon has an in-depth understanding of the UK quoted company sector,
having advised on a significant number of AIM and Main Market transactions; acting for issuers,
nominated advisers and brokers. He was called to the Bar of England & Wales (Lincoln's Inn) in
1999 and was subsequently admitted as a Solicitor in England & Wales in 2002. He is currently
company secretary of Iofina plc (AIM: IOF) and previously served as company secretary of
InfraStrata plc (AIM: INFA) and SolGold plc (formerly Solomon Gold plc) (LSE: SOLG).
5
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Jacqueline Yee (Non-Executive Director), aged 52
Ms Yee is based in Singapore after relocating from Australia in 2019 following almost 15 years
based in Europe, prior to which she worked in the Asia Pacific region for almost 12 years. Ms
Yee is a recipient of Money 2020 RiseUp FinTech & Financial Services Leadership award. She
has a global track record in mergers, acquisitions, restructurings and structured finance
delivering improved returns in both the private and public capital markets. She has global
insights and local knowledge in multiple sectors having worked in the United Kingdom, Europe,
USA, Asia, Middle East, Australia and New Zealand. Ms Yee is CEO of Funderbeam Exchange
- a private markets stock exchange, Non-Executive Director of Wellteq Digital Health (CSE:
WTEQ), the Singapore Community Partner of Global Fintech Connector and Mentor to IoT Tribe
Deeptech Accelerator programs and F10 Fintech Incubator & Accelerator programs. She is
fluent in multiple Asian and European languages and presents globally, she has also 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 2021
Directors’ Report
The Directors present their report with the audited financial statements of the Company for the
year ended 31 December 2021. 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 19.
Directors
The Directors of the Company during the period and their beneficial interest in the Ordinary
shares of the Company at 31 December 2021 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
17 January 2018
140,000
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 2021, the total number of issued Ordinary Shares with voting rights in the
Company was 10,281,600. Details of the Company’s capital structure and voting rights are set
out in note 17 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 2021
Directors’ Report (continued)
Financial Instruments
Details of the use of the Company’s exposure to financial risk are contained in note 23 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 is exempt from the 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 2021. No
dividend was paid in the period to 31 December 2020.
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 19.
Corporate Governance
The Governance report forms part of the Director’s Report and is disclosed on pages 20 to 24.
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 the Strategic Report.
Further, note 23 to the financial statements disclose the Company’s financial risk management
policy. As noted in the Directors’ report, on 28 March 2022 the parties to the investment
agreement dated 26 April 2021 and as subsequently amended and restated (the “Investment
Agreement”) relating to the Company’s conditional purchase of shares in VRFB-H(“VRFB Share
Purchase”), including the Company, agreed to extend the longstop date to satisfy the principal
outstanding condition of the VRFB Share Purchase, namely the publication by the Company of
a prospectus and the readmission of the ordinary share capital of the Company (“MUST
Shares”) to listing and trading (together, “Readmission”) by no later than 31 July 2022 (the
“Longstop Extension”). In turn, the Longstop Extension was mirrored in the Company’s
convertible loan note instrument (the “CLN Instrument”) pursuant to which it issued US$8 million
10% convertible loan notes (the “CLNs”) to certain investors (the “CLN Holders”) such that the
maturity date of the CLNs was, as agreed between the Company and the CLN Holders,
extended to 31 July 2022 (or such later date as may be agreed between the Company and the
CLN Holders) (the “Maturity Date”).
8
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Directors’ Report (continued)
Under the terms of the CLN Instrument, the CLNs are convertible into new MUST Shares,
following: (a) the approval of its shareholders of the Company’s capital raise; and (b)
Readmission occurring on or before the Maturity Date; the publication of a prospectus and
readmission of the entire issued MUST Shares to trading being required given that the VRFB
Share Purchase constitutes a reverse takeover ("RTO") under the Financial Conduct Authority's
Listing Rules. At the date of this report, Readmission has not occurred albeit the Company is
working with its professional advisers to satisfy this requirement. If Readmission does not occur
by the Maturity Date, the CLNs (comprised of the principal amount of US$8 million and all
accrued and unpaid interest thereon) can be redeemed for cash within 28 days of the Maturity
Date (the “Redemption Period”). If the Company determines that it is unable to repay the CLNs
within the Redemption Period, it shall notify the CLN Holders of this and shall exercise its rights
under the Investment Agreement pursuant to which Bushveld Minerals Limited (“BMN”) is
required, in return for the Company transferring to BMN’s subsidiary Bushveld Energy Limited
its shares in VRFB-H, to issue to each CLN Holder, within the Redemption Period, such number
of new ordinary shares in the capital of BMN as is equivalent to the then outstanding amount of
the CLNs (including principal and all accrued and unpaid interest thereon) (the “Backstop”).
On 25 January 2022, the Company entered a loan agreement with BMN (replacing in its entirety
the agreement entered by the parties on 14 January 2022) pursuant to which BMN provided the
Company with an unsecured non-interest-bearing loan of US$220,000 (the “Loan”). The Loan
is repayable in full at any time on or prior to 31 December 2023 (the “Repayment Date”) and is
repayable in any event if the Company raises any debt or equity capital of no less than £1 million
(excluding any conversion of the CLNs into new MUST Shares) prior to the Repayment Date.
At the option of the Company, the Loan is repayable either by way of a single repayment in cash
or by the issue of such number of new MUST Shares as is equal to the Loan (the “Loan Shares”).
The issue price of the Loan Shares is the greater of £0.20 per MUST Share and the average
volume-weighted average price of a MUST Share for the consecutive 10 dealing days ending
on the dealing day immediately preceding the repayment date. The Loan shall be waived in full
if the Backstop is implemented prior to the Repayment Date.
If Readmission occurs by the Maturity Date, the Directors, having assessed cash flow forecasts
prepared for a period of at least 12 months, are of the opinion that the Company has adequate
working capital to meet its overhead costs for at least 12 months from the date of approving
these accounts. Notwithstanding their belief that the Company, in line with its strategy, shall
have sufficient working capital to meet its needs following Readmission, the Directors anticipate
that the Company shall, concurrent with the Readmission process, seek to raise additional
finance to fund further acquisitions and for further working capital purposes.
If Readmission does not occur and the Backstop is triggered the Company will divest its only
asset. If the Company is unable to raise additional funds through the issuance of debt or equity
then the Company, other than being able to pay overhead costs for a period of at least 12 months
from the date of approval of these financial statements, will have no means of funding due
diligence costs for a new acquisition caused by the publication of a prospectus and readmission
of the entire issued MUST Shares to trading.
These events or conditions indicate the existence of a material uncertainty that may cast
significant doubt on the Company's ability to continue as a going concern and, therefore, that it
may be unable to realize its assets and discharge its liabilities in the normal course of business.
The financial statements do not include any adjustments that may be necessary if the Company
was not a going concern.
9
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Directors’ Report (continued)
The Directors consider that despite this uncertainty it remains appropriate to prepare the
financial statements on a going concern basis as the Company is currently preparing for
Readmission.
Principal Activities
The Company is an investment company which made its first acquisition in 2021. It 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 for additional investments that complement
its existing 22.1% interest in VRFB-H and which are in manufacturing assets involved in the
energy transition process with a relative focus on the energy storage/battery value chain
and in the development of renewable energy projects where there is scope to include
stationary energy storage. 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.
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.
10
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Directors’ Report (continued)
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report alongside the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial period.
Under that law the Directors have prepared the financial statements in accordance with UK-
adopted international accounting standards.
Under Company law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period. The Directors are also required to prepare financial
statements in accordance with the rules of the London Stock Exchange for companies with a
Standard Listing.
In preparing these financial statements, the Directors are required to:
Select suitable accounting policies and then apply them consistently;
Make judgments and accounting estimates that are reasonable and prudent;
State whether they have been prepared in accordance with UK-adopted international
accounting standards, 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 and
the Remuneration Committee Report comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities. They are also responsible to
make a statement that they consider that the annual report and accounts, taken as a whole, is
fair, balanced, and understandable and provides the information necessary for the shareholders
to assess the Company’s position and performance, business model and strategy.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from legislation in other
jurisdictions.
11
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Directors’ Report (continued)
Statement of Directors’ responsibilities pursuant to Disclosure and Transparency Rule
Each of the Directors, whose names and functions are listed on page 7 confirm that, to the best
of their knowledge and belief:
the financial statements have been prepared in accordance UK-adopted international
accounting standards and 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.
The financial statements have been prepared in accordance with UK-adopted international
accounting standards and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into
the UK law and became UK-adopted international accounting standards, with future changes
being subject to endorsement by the UK Endorsement Board. The group transitioned to UK-
adopted international accounting standards in its consolidated financial statements on 1 January
2021. There was no impact or changes in accounting from the transition.
Post Balance Date Events
In July 2021 the Company advised that a claim form has been issued in the English High court
by Garnet against VRFB-H and EHL. Garnet owns the remaining 50% interest in EHL. As part
of its response, on
19 January 2022 the Company and Bushveld Minerals agreed the following terms so as to
extend the Maturity Date of the CLNs until 28 February 2022 which would allow some visibility
as to the result of the High Court hearing:
1. A reduction of the backstop fee from 5.0% to 2.0% of any CLN amount converted to BMN
shares as per the provisions of the Investment Agreement. The backstop fee can, at the
election of the Company, be satisfied by the issue of Mustang shares at an issue price of
20 pence each. The backstop fee will be reinstated to 5.0% if the Company's shares are
relisted and has an interest in VRFB-H.
2. The Loan to be used by the Company to fund the additional expenses that arise as a result
of the extension of the Maturity Date. As VRFB-H was successful in the High Court
proceedings, the Loan is repayable on the earlier of the Company completing a capital
raising of £1 million or 31 December 2023. The Loan can, at the election of the Company,
be repaid by the issue of Mustang shares at an issue price of 20 pence each.
3. If the Backstop is triggered and VRFB-H is subsequently successful in the High Court
proceedings the Company has been granted a call option to acquire the VRFB-H shares it
transferred to Bushveld Energy Limited (“BEL”) under the Backstop at the same entry price
as paid by the Company pursuant to the Investment Agreement. The call option needs to
be exercised within one month of finalisation of the High Court proceedings.
12
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Directors’ Report (continued)
4. The Company has granted BMN a put option that can be exercised if the Company does
not exercise the call option, to sell the VRFB-H shares the Company transferred to BEL
under the Backstop at the same entry price as paid by the Company pursuant to the
Investment Agreement. The put option needs to be exercised within one month of the expiry
of the call option described above.
On 8 March 2022 the Company advised that VRFB-H had successfully defended Garnet’s
claims. The judgment vindicates the position that the investment by VRFB-H into EHL, funded
as it was partly by an investment by the Company, was permitted and did not violate any
agreements. Accordingly, the investment by Mustang into VRFB-H, and the investment by
VRFB-H into EHL, remains effective.
On 28 March 2022 BMN issued a convertible loan note to Primorus Investments Plc ("Primorus")
pursuant to the previously announced Backstop arrangement with Primorus and Mustang. The
Company cancelled the Mustang CLNs issued to Primorus on 26 April 2021 for US$1,500,000
and issued US$1,500,000 10 per cent convertible loan notes to BMN. The Company paid a
US$32,737 backstop fee to BMN.
On 29 March 2022 the parties to the Investment Agreement, including the Company, agreed to
extend the Maturity Date of the CLN’s until the 31 July 2022 to allow for the preparation of a
prospectus and review process of that prospectus by the FCA for the readmission of the ordinary
share capital of the Company to trading on the London Stock Exchange. Additionally, it was
agreed to reduce the conversion price of the CLNs into Mustang shares from £0.20 to £0.18.
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 21 June 2022 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 2021
Strategic Report
The Directors present the Strategic Report of Mustang Energy Plc for the year ended 31
December 2021.
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
acquire a 22.1% interest in VRFB Holdings Limited and the issue of US$8,000,000 10 per cent.
unsecured convertible loan notes ("CLNs") to certain investors. The Directors believe this
investment will significantly increase shareholder value in the medium to long term.
(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 principals and management of other companies involved in the energy storage value chain
and renewable energy projects development sectors 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 the London Stock Exchange.
(d) the impact of the company’s operations on the community and the environment
During the year under review the Company had 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 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
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 Companies Act, the LSE Regulations and UK Corporate Governance code.
14
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Strategic Report (continued)
The Company is transition from operating as a cash shell to an investment holding company
seeking further investments in the energy storage value chain and renewable energy projects
development space. The Directors are as transparent about the cash position of the Company
and its funding requirements as is allowed under the Listing Rules.
The application of the s172 requirements can be demonstrated in relation to some of the key
decisions made during 2021:
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 and an investment Company, the Board seriously considers its ethical
responsibilities to the communities and environment.
Review of Business in the Period
Business Strategy
The Company is currently focused on its 22.1% equity holding in VRFB Holdings Limited and the
identification of additional opportunities in the energy storage value chain and renewable energy
projects development sectors.
Operational Review
The Company’s principal activity is set out in the Directors’ Report on page 7. During the year
the Company has made it’s first acquisition, being a 22.1% interest in VRFB Holdings Limited
(“VRFB-H”) for US$7.524 million. VRFB-H owns a 50% interest in Enerox Holdings Limited
(“EHL”) with EHL owning a 100% interest in Enerox GmbH (“Enerox”).
Mustang's 22.1% investment into VRFB-H constitutes a reverse takeover under the Listing Rules.
As a result, the Company’s shares were temporarily suspended until the Company publishes a
prospectus for the readmission of the ordinary share capital of the Company to trading on the
London Stock Exchange.
In July 2021 the Company was advised that a claim form has been issued in the English High
court by Garnet Commerce Limited ("Garnet") against VRFB-H and EHL. Garnet owns the
remaining 50% interest in EHL.
Garnet's claim form sought declarations against VRFB-H concerning an alleged breach of the joint
venture agreement in relation to EHL, in respect of the indirect investment into EHL through VRFB-
H by Mustang, as announced on 27 April 2021.
As a result of Garnet’s objections and legal claim, the Company had no practical ability to exercise
joint control or influence over VRFB-H, as there were no board meetings, revised shareholder
agreement or management information.
The claim was successfully defended in March 2022.
15
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Strategic Report (continued)
The Company financed its investment in VRFB-H through the issue of US$8,000,000 10 per cent.
unsecured convertible loan notes (“CLN”) to certain investors, including the Company’s 24.03%
shareholder Acacia. The principal terms of the CLN were that the notes would convert into ordinary
shares in the Company on successful readmission of the Company’s shares to trading on the
London Stock Exchange. In the event of the readmission not taking place by 31 December 2021
and the Company failing to raise sufficient capital, the Company would be forced to surrender its
investment in VRFB-H to VRFB-H’s other investor, Bushveld Minerals Limited, which would take
on the CLN liability. The terms of the CLN are disclosed further in note 15 to the financial
statements and in the going concern assessment within the Directors’ Report.
Business Strategy
The Company is currently focused on its 22.1% equity holding in VRFB Holdings Limited and the
identification of additional opportunities in the energy storage value chain and renewable energy
projects development sectors.
Financial review
Results for the 2021 period
The Company incurred a total comprehensive loss for the period to 31 December 2021 of
£902,624 (2020 – loss of £231,901).
The single most significant cash cost to the business is directors’ remuneration.
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 in 2020. On completion of the acquisition of the 22.1% interest in VRFB-H in April 2021
the monthly payment was increased to £10,000 per month and the Company also commenced
the payment of non-executive directors’ fees that total £6,500 per month. The impact of this
increased Director’s Remuneration costs to £152,988 for the year (2020: £55,000). For details
please refer to note 26.
An additional key driver of the increased loss for the year are finance costs of £601,891 (2020:
nil) which comprise interest payable on loan notes of £491,631 and a fair value loss on the loan
note derivative of £110,260, These have arisen in year as a consequence of the financing of the
VRFB-H acquisition as detailed above and in the Chairman’s and the Director’s report. For further
details see notes 5 and 15.
The statement of financial position shows a movement in net liabilities to £400,002 (from an
opening net assets position at 1 January 2021 of £327,587). The key drivers of this movement
are the increase in the investments balance to £5,573,333 (31 December 2020: nil) and the
corresponding increase in borrowings to £6,329,952 (31 December 2020: nil) that have resulted
from the acquisitive transactions outlined above in the Chairman’s and the Director’s report.
Excluding these impacts of the transaction on assets, liabilities and also on equity balances, the
remaining components of the company’s statement of financial position have remained stable
year on year including working capital balances.
No share options in the Company were issued during 2021 (2020: 350,000).
Loss per share: 0.09 pence (2020: loss of 0.03 pence).
16
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Strategic Report (continued)
Cash flow
Cash operating outflows for 2021 were £374,478 (2020: £171,357 outflow). Comparing the two
periods at the operating cash flow line does not accurately give an impression of cashflow
impacts in the year. The investing and financing cashflows, reflecting the impacts of the key
transaction in year, should be reviewed in combination with this (cashflows from investing and
financing activities were nil in the prior year). Taken together, the cashflow impact of the
financing of the transaction and the purchase of the investment broadly offset to give an overall
small net reduction in cash and cash equivalents at the reporting date compared to the opening
balance.
Closing cash
As at 31 December 2021, the Company held £394,700 of cash (31 December 2020 - £345,200).
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% equity interest in VRFB-H.
Position of Company’s Business
At the period end the Company’s Statement of Financial Position shows net liability totaling
£400,002 (31 December 2020 – net asset of £327,587). Other than the CLNs the Company has
few working capital liabilities and is considered to have a strong cash position for a company
operating as a cash shell which is transitioning to an investment company, at the reporting date.
The CLNs are not expected to be redeemed in cash and reference is made in the Director’s
Report on page 8 and 9 which details how the CLNs are either converted into shares in the
Company or settled in return for the Company’s investment in VRFB-H.
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.
17
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Strategic Report (continued)
Anti-corruption and anti-bribery policy
The government of the United Kingdom has issued guidelines setting out appropriate procedures
for companies to follow to ensure that they are compliant with the UK Bribery Act 2010. The
Company has conducted a review into its operational procedures to consider the impact of the
Bribery Act 2010 and the Board has adopted an anti-corruption and anti-bribery policy which can
be accessed on the Company’s website.
Principal Risks and Uncertainties
The Company operates in an uncertain environment and is subject to a number of risk factors.
The Directors consider the following risk factors are of particular relevance to the Company’s
activities although it should be noted that this list is not exhaustive and that other risk factors not
presently known or currently deemed immaterial may apply.
The Company has acquired a 22.1% interest in VRFB-H. 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 Share Purchase.
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 Share
Purchase at the relevant time.
The Company’s revenues, if any, and the value of the Company’s investment shall be dependent
on the underlying performance of 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.
18
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Strategic Report (continued)
Operational restrictions may continue to be placed on or otherwise come into effect which impact
the Company, its underlying investments and partners (including VRFB-H 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.
Russian sanctions
To date there has been no impact on the Company from Russian sanctions. Going forward the
board consider that the Company’s current supply chain will remain available to the Company,
however if that were not to be the case, it would seek alternative options avoiding Russia.
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, Ms Yee 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 2021
Strategic Report (continued)
Capital structure
The Company’s capital consists of ordinary shares which rank pari passu in all respects which
were traded on the Standard segment of the Main Market of the London Stock Exchange until
their suspension in April 2021 as a result of the Company’s investment in VRFB-H, pending
readmission. 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 21 June 2022.
Alan Broome, AM
Chairman
20
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
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.
Until a prospectus is issued and shareholders have approved the issuance of shares and
warrants to the holder of the Convertible Loan Notes and the Company shares are relisted and
trading, the Company will not have a 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 the issuance of a
prospectus and the Company’s shares are relisted and trading, 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 and which is available on the Company’s website. 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 2021
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 2021. After the Company has issued a prospectus and the Company’s shares are
relisted and trading, 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 full Board met on 1 occasion. 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 2021
Governance Report (continued)
Summary of the Board’s work in the year – During the year, 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
1 of 1
1 of 1
1 of 1
1 of 1
1 of 1
There were also 3 ad-hoc board meetings of an administrative nature which were attended by
Peter Wale and Simon Holden. 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 the issuance of a prospectus and the
Company’s shares are relisted and trading.
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 20.
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 2021
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 2021:
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 additional 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. Reference is also
made to the director’s assessment of going concern on in the Directors Report on page 7. Within
the Directors report, details are included indicating management’s view that there is a material
uncertainty related to the going concern assumption should the Readmission event outlined in
the VRFB transaction not occur by the Maturity Date. These events may cast significant doubt
on the Company's ability to continue as a going concern. See the Director’s report and financial
statement note 1.2 for more details on this matter.
24
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Governance Report (continued)
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 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.
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 the issuance of a
prospectus and the Company’s shares are relisted and trading.
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 £40,300 in relation to the audit of the 31 December 2021 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 acquisition plans 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.
25
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Governance Report (continued)
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
21 June 2022
26
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Remuneration Report
Remuneration Report Approval
A resolution to approve this report will be proposed at the AGM of the Company. The vote will
have advisory status, will be in respect of the remuneration policy and overall remuneration
packages and will not be specific to individual levels of remuneration.
Remuneration policy
In 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. On completion of the acquisition of the 22.1% interest in VRFB-H in April
2021 the monthly payment was increased to £10,000 per month, the Company also commenced
the payment of non-executive directors fees that total £6,500 per month. This was the last date
of approval of the directors’ remuneration policy by the company. At this meeting implementation
of the policy was discussed and agreed. All members can access the minutes from this meeting
and the director’s remuneration policy on request from the Managing Director.
It is the intention of the Board to negotiate a new service agreement with the Managing Director
Dean Gallegos once the Company has issued a prospectus and its shares are relisted and
trading. The quantum of fees paid to Non-Executive directors will also be re-assessed at that
time.
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
4
4
4
3
1
27
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Remuneration Report (continued)
Compensation of key management personnel (audited)
Set out below are the emoluments of the Directors for the year ended 31 December 2021
(GBP):
Name of Director
Salary and
fees
Taxable
benefits
Annual
bonus and
long term
benefits
Pension
related
benefits
Share
based
payments
£
Alan Broome, AM
20,000
Dean Gallegos
100,000
Peter Wale
Simon Holden
Jacqueline Yee
Total
16,000
-
16,000
152,000
£
-
-
-
-
-
-
£
-
-
-
-
-
-
£
-
-
-
-
-
-
£
-
-
-
-
-
-
Total
£
20,000
100,000
16,000
-
16,000
152,000
Set out below are the emoluments of the Directors for the year ended 31 December 2020 (GBP):
Name of Director
Salary and
fees
Taxable
benefits
Annual
bonus and
long term
benefits
Pension
related
benefits
Share
based
payments
Total
Alan Broome, AM
Dean Gallegos
Peter Wale
Simon Holden
Jacqueline Yee
Total
£
-
55,000
-
-
-
55,000
£
-
-
-
-
-
-
£
-
-
-
-
-
-
£
-
-
-
-
-
-
£
£
3,703
3,703
25,920
80,920
3,703
3,703
26,600
63,629
3,703
3,703
26,600
118,629
Total Fixed
Remuneration
£
Total Variable
Remuneration
£
2021
2020
2021
2020
Total
152,000
55,000
-
63,629
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.
28
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Remuneration Report (continued)
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.
Share options
The Directors did not any exercise any share options in 2021 (2020: nil).
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 executive directors in
2021 and 2020.
Base salary
2021
£
2020
£
Average
change, %
Managing Director
100,000
55,000
82%
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
just made its first investment, is not paying dividends, is currently incurring losses as it gains
scale. In addition and as mentioned above, the remuneration of Directors is not currently linked
to performance. 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 Managing Director’s remuneration is not currently linked to
performance. 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.
29
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Remuneration Report (continued)
UK Directors’ shares (audited)
The interests of the Directors who served during the year in the share capital of the Company at
31 December 2021 and at the date of this report has been set out in the Directors’ Report on
page 7.
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
21 June 2022
30
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
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 2021 and of
the Company’s loss for the year then ended;
• have been properly prepared in accordance with UK adopted international accounting
standards; 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 2021 which comprise 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 UK adopted international
accounting standards.
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 Board of the directors on 15 October 2019 to audit the financial statements for
the year ending 31 December 2019 and subsequent financial periods. The period of total uninterrupted
engagement including retenders and reappointments is 3 years, covering the years ending 31
December 2019 to 31 December 2021. 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 related to going concern
We draw attention to note 1.2 of the financial statements, which indicates that the Company is seeking
to raise additional finance to fund acquisitions and for further working capital purposes. As stated in
note 1.2, these events or conditions, along with other matters as set out in note 1.2, indicate that a
material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a
going concern. Our opinion is not modified in respect of this matter.
31
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Given the conditions and uncertainties noted above, we considered going concern to be a key audit
matter. We have performed the following as part of our audit:
• 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 only be redeemed for cash
at the discretion of the Directors of the Company;
• Obtained the Directors’ cash flow forecast for the period to July 2023 and tested the key
operating assumptions based on 2021 and 2022 year to date actual results and external data,
where possible;
• Reviewed reverse stress testing and performed our own reverse stress testing to determine cash
flow sensitivities;
• Discussed with management their plans regarding obtaining further funding; and
• Considered the adequacy of disclosure, in light of our knowledge of the business, within note 1.2
to the financial statements relating to the Directors’ assessment of the going concern basis of
preparation.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described
in the relevant sections of this report.
Overview
Key audit matters
Materiality
Going concern
Accounting & disclosure of
investments in VRFB-H
Valuation of convertible loan
notes
Financial statements as a whole
2021
2020
-
-
£79,000 (2020: £3,000) based on 1.3% (2020: 1.25%)
of Total assets (2020: 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.
32
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
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. These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. In addition to the matter described in the Material uncertainty related
to going concern section, we have determined the matters described below to be the key audit matters
to be communicated in our report.
Key audit matter
Accounting
treatment of
investments
in VRFB-H
Note 3
Critical
accounting
estimates
and
judgements
and note 12
Investments.
On 27 April 2021, the
Company entered into an
investment agreement to
acquire 22.10% of issued
share capital of VRFB-H
for a cash consideration of
$7,524,000.
Given the material size
and judgement related to
the Company’s ability to
exercise any significant
influence over VRFB-H
involved in accounting for
this investment we
considered this to be a key
audit matter.
How the scope of our audit
addressed the key audit matter
Our procedures included the
following:
• We obtained and reviewed
management’s assessment of the
accounting treatment related to
investment in VRFB-H;
• We tested that key terms had
been appropriately included in the
Directors assessment by obtaining
and reading the purchase
agreement;
• We reviewed the accounting
treatment adopted against
requirements of applicable
accounting standards for the
investment and considered the
appropriateness of the
classification and measurement of
the investment;
• Given the Company holds over a
20% interest in VRFB-H we
challenged management on their
judgement that they did not hold
significant influence; and
• We made enquiries of the other
directors of VRFB-H Board,
representing VRFB-H’s parent
company, to confirm the Company
was not able to exercise any
significant influence over VRFB-H.
Key observations:
Based on the work performed, we
consider that the judgements applied
in the accounting treatment of the
investment to be reasonable.
33
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Key audit matter
Valuation of
convertible
loan notes
Note 3
Critical
accounting
estimates
and
judgements
and note 15
Borrowings.
.
In the year the Company
issued $8,000,000 of 10%
unsecured convertible
loan notes (“CLNs”) to
certain investors.
The conversion features of
the CLN are complex to
value to and include
estimates related to future
share price, expected
foreign exchange
conversion rate. For this
reason we consider the
valuation of the loan and
the related conversion
features to be a key audit
matter.
How the scope of our audit
addressed the key audit matter
Our procedures included the
following:
• We vouched the terms of the CLN
agreement to the client’s
assessment, board minutes and
confirmation receipt of cash to
bank statements and the purchase
of the investment in VRFB-H;
• We reviewed the accounting
treatment applied and entries
made in respect of this financial
instrument to ensure they were in
accordance with the requirements
of IFRS 9 “Financial instruments”;
• We evaluated managements
valuation of the loan and its
conversion features by performing
our own independent valuation
and comparing it to managements
valuation; and
• We involved our internal
valuations expert to assist us to
assess the reasonableness of the
key inputs in the valuation and
performed sensitivity analysis over
they inputs.
Key observations:
Based on the work performed, we
consider that the estimates and
judgements applied to the valuation
of convertible loan notes to be
reasonable.
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.
34
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Based on our professional judgement, we determined materiality for the financial statements as a whole
and performance materiality as follows:
Company financial statements
2020
2021
Materiality
Basis for determining
materiality
£79,000
1.3% of total assets
£3,000
1.25% of gross
expenditure
Rationale for the benchmark
applied
Performance materiality
Basis for determining
performance materiality
Specific materiality
We determined that an
asset-based measure is
appropriate as the
Company’s principal
activity is the investing
activities, the change in
the materiality
benchmark for this year
is mainly caused by the
Company investing in
non-current assets and
acquisition made in the
period - the asset base
is considered to be a
key financial metric for
users of the financial
statements.
£59,250
We considered gross
expenditure to be the
financial metric of the
most relevance to
shareholders and other
users of the financial
statements, given the
Company’s situation as a
non- trading company.
£2,250
Performance materiality was set at 75% of the
above materiality levels, given the history of low
level of adjustments.
We also determined that for expenditures, a misstatement of less than materiality for the financial
statements as a whole, specific materiality, could influence the economic decisions of users. As a result,
we determined materiality for these items based on £3,000, based on 1.25% of gross expenditure. We
further applied a performance materiality level of 75% of specific materiality to ensure that the risk of
errors exceeding specific materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in
excess of £1,580 (2020: £150). We also agreed to report differences below this threshold that, in our
view, warranted reporting on qualitative grounds.
35
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Other information
The directors are responsible for the other information. The other information comprises the information
included in the Annual Report & 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.
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 and
Directors’
report
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
required to
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 by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the Company 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.
36
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
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.
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;
• We reviewed minutes from board meetings of those charges with governance to identify any
instances of non-compliance with laws and regulations;
• 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.
37
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
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, UK
21 June 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
38
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Statement of Comprehensive Income
Administrative expenses
Operating loss
Finance costs
Other operating expense
Loss before taxation
Taxation
Loss for the year
Note
26
5
6
9
2021
£
2020
£
(274,927)
(231,901)
(274,927)
(601,891)
(25,806)
(231,901)
-
-
(902,624)
(231,901)
-
-
(902,624)
(231,901)
Other comprehensive income for the year
-
-
Total comprehensive loss or
the year 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)
19
10
(902,624)
(231,901)
(0.09)
(0.03)
The notes to the financial statements form an integral part of these financial statements.
39
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Statement of Financial Position
As at
31 December 2021
As at
31 December 2020
Note
£
£
Assets
Non-current assets
Property, plant and equipment
Investments
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
Borrowings
Total liabilities
11
12
13
17
18
19
14
15
1,525
168
5,573,333 -
5,574,858
168
13,117
394,700
407,817
5,982,675
25,085
345,200
370,285
370,453
102,816
810,219
91,100
(1,404,137)
84,000
654,000
91,100
(501,513)
(400,002)
327,587
52,725
6,329,952
6,382,677
42,866
-
42,866
Total equity and liabilities
5,982,675
370,453
The notes to the financial statements form an integral part of these financial statements
This report was approved by the board and authorised for issue on 21 June 2022 and signed on
its behalf by:
Dean L Gallegos
Managing Director
40
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Statement of Changes in Equity
Share
capital
£
Share
premium
account
£
Share
based
payments
reserve
£
Retained
deficit
£
Total
equity
£
Balance as at 1 January 2020
84,000
654,000
27,471
(269,612)
495,859
Year ended 31 December 2020
Total comprehensive loss for the
year
-
-
-
(231,901)
(231,901)
Share based payment
-
-
63,629
-
63,629
Balance as at 31 December 2020
84,000
654,000
91,100
(501,513)
327,587
Year ended 31 December 2021
Total comprehensive loss for the
year
-
-
-
(902,624)
(902,624)
Exercise of warrants
2,100
18,900
Issue of share capital
16,716
137,319
-
-
-
21,000
-
154,035
Balance as at 31 December 2021
102,816
810,219
91,100
(1,404,137)
(400,002)
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 form an integral part of these financial statements.
41
Mustang Energy Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
Statement of Cash Flows
Cash flow from operating activities
Cash absorbed by operations
Cash flow from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of unlisted investment
Note
2021
£
2020
£
24
11
12
(370,984)
(171,357)
(370,984)
(171,357)
(1,526)
-
(5,416,847)
-
Net cash used in investing activities
(5,418,373)
-
Financing activities
Proceeds from issue of shares and exercise of warrants 17,18
188,160
-
Share issue costs
17,18
(13,215)
-
Issue of convertible loan notes
15
5,667,316
-
Net cash generated from financing activities
5,842,351
-
Net increase/(decrease) in cash and cash
equivalents
Exchange losses
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
52,994
(171,357)
(3,494)
345,200
394,700
-
516,557
345,200
The notes to the financial statements form an integral part of these financial statements.
42
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
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 UK-adopted international
accounting standards and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into
the UK law and became UK-adopted international accounting standards, with future changes
being subject to endorsement by the UK Endorsement Board. The group transitioned to UK-
adopted international accounting standards in its consolidated financial statements on 1
January 2021. There was no impact or changes in accounting from the transition.
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 except for revaluation
of certain financial instruments. The principal accounting policies adopted are set out below.
1.2 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 the Strategic Report.
Further, note 23 to the financial statements disclose the Company’s financial risk management
policy. As noted in the Directors’ report, on 28 March 2022 the parties to the investment
agreement dated 26 April 2021 and as subsequently amended and restated (the “Investment
Agreement”) relating to the Company’s conditional purchase of shares in VRFB-H(“VRFB Share
Purchase”, including the Company, agreed to extend the longstop date to satisfy the principal
outstanding condition of the VRFB Share Purchase, namely the publication by the Company of
a prospectus and the readmission of the ordinary share capital of the Company (“MUST Shares”)
to listing and trading (together, “Readmission”) by no later than 31 July 2022 (the “Longstop
Extension”). In turn, the Longstop Extension was mirrored in the Company’s convertible loan
note instrument (the “CLN Instrument”) pursuant to which it issued US$8 million 10% convertible
loan notes (the “CLNs”) to certain investors (the “CLN Holders”) such that the maturity date of
the CLNs was, as agreed between the Company and the CLN Holders, extended to 31 July
2022 (or such later date as may be agreed between the Company and the CLN Holders) (the
“Maturity Date”).
43
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Accounting policies (Continued)
Under the terms of the CLN Instrument, the CLNs are convertible into new MUST Shares,
following: (a) the approval of its shareholders of the Company’s capital raise; and (b)
Readmission occurring on or before the Maturity Date; the publication of a prospectus and
readmission of the entire issued MUST Shares to trading being required given that the VRFB
Share Purchase constitutes a reverse takeover ("RTO") under the Financial Conduct Authority's
Listing Rules. At the date of this report, Readmission has not occurred albeit the Company is
working with its professional advisers to satisfy this requirement. If Readmission does not occur
by the Maturity Date, the CLNs (comprised of the principal amount of US$8 million and all
accrued and unpaid interest thereon) can be redeemed for cash within 28 days of the Maturity
Date (the “Redemption Period”). If the Company determines that it is unable to repay the CLNs
within the Redemption Period, it shall notify the CLN Holders of this and shall exercise its rights
under the Investment Agreement pursuant to which Bushveld Minerals Limited (“BMN”) is
required, in return for the Company transferring to BMN’s subsidiary Bushveld Energy Limited
its shares in VRFB-H, to issue to each CLN Holder, within the Redemption Period, such number
of new ordinary shares in the capital of BMN as is equivalent to the then outstanding amount of
the CLNs (including principal and all accrued and unpaid interest thereon) (the “Backstop”).
On 25 January 2022, the Company entered a loan agreement with BMN (replacing in its entirety
the agreement entered by the parties on 14 January 2022) pursuant to which BMN provided the
Company with an unsecured non-interest bearing loan of US$220,000 (the “Loan”). The Loan is
repayable in full at any time on or prior to 31 December 2023 (the “Repayment Date”) and is
repayable in any event if the Company raises any debt or equity capital of no less than £1 million
(excluding any conversion of the CLNs into new MUST Shares) prior to the Repayment Date.
At the option of the Company, the Loan is repayable either by way of a single repayment in cash
or by the issue of such number of new MUST Shares as is equal to the Loan (the “Loan Shares”).
The issue price of the Loan Shares is the greater of £0.20 per MUST Share and the average
volume-weighted average price of a MUST Share for the consecutive 10 dealing days ending
on the dealing day immediately preceding the repayment date. The Loan shall be waived in full
if the Backstop is implemented prior to the Repayment Date.
If Readmission occurs by the Maturity Date, the Directors, having assessed cash flow forecasts
prepared for a period of at least 12 months, are of the opinion that the Company has adequate
working capital to meet its overhead costs for at least 12 months from the date of approving
these accounts. Notwithstanding their belief that the Company shall have sufficient working
capital to meet its needs following Readmission, the Directors anticipate that the Company, in
line with its strategy, shall, concurrent with the Readmission process, seek to raise additional
finance to fund further acquisitions and for further working capital purposes.
If Readmission does not occur and the Backstop is triggered the Company will divest its only
asset. If the Company is unable to raise additional funds through the issuance of debt or equity
then the Company, other than being able to pay overhead costs for a period of at least 12 months
from the date of approval of these financial statements, will have no means of funding due
diligence costs for a new acquisition caused by the publication of a prospectus and readmission
of the entire issued MUST Shares to trading.
These events or conditions indicate the existence of a material uncertainty that may cast
significant doubt on the Company's ability to continue as a going concern and, therefore, that it
may be unable to realize its assets and discharge its liabilities in the normal course of business.
The financial statements do not include any adjustments that may be necessary if the Company
was not a going concern.
44
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Accounting policies (Continued)
The Directors consider that despite this uncertainty it remains appropriate to prepare the
financial statements on a going concern basis as the Company is currently preparing for
Readmission.
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
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 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 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
other receivables so no ECL has been recognised in the current period.
1.7
Investments
Investments in equity instruments which are not subsidiaries, associates or joint ventures, are
initially measured at fair value, which is normally the transaction price. Such assets are
subsequently carried at fair value and the changes in fair value are recognised in profit or loss.
45
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Accounting policies (Continued)
1.8 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.
The component parts of compound instruments issued by the company are classified separately
as financial liabilities and equity in accordance with the substance of the contractual
arrangement. At the date of issue, the fair value of the liability component is estimated using the
prevailing market interest rate for a similar non-convertible instrument. This amount is recorded
as a liability on an amortised cost basis using the effective interest method until extinguished
upon conversion or at the instrument's maturity date. The equity component is determined by
deducting the amount of the liability component from the fair value of the compound instrument
as a whole. This is recognised and included in equity net of income tax effects and is not
subsequently remeasured.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date a derivative contract is entered into
and are subsequently remeasured to fair value at each reporting end date.
A derivative with a positive fair value is recognised as a financial asset, whereas a derivative
with a negative fair value is recognised as a financial liability. A derivative is presented as a non-
current asset or liability if the remaining maturity of the instrument is more than 12 months and
it is not expected to be realised or settled within 12 months. Other derivatives are classified as
current.
An embedded derivative is a component of a hybrid contract that also includes a non-derivative
host – with the effect that some of the cash flows of the combined instrument vary in a way
similar to a standalone derivative. Derivatives embedded in a hybrid contract with financial
liability hosts are treated as separate derivatives when they meet the definition of a derivative,
their risks and characteristics are not closely related to those of the host contracts and the host
contracts are not measured at fair value through profit or loss.
Derivative assets embedded within financial liability hosts are combined with the corresponding
financial liability host and are shown net in the statement of financial position.
1.9 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
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.
46
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Accounting policies (Continued)
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 recognized 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.
1.10 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.
1.11 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 in other operating gains and losses.
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 2021 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:
Conceptual Framework Amendments to References to the Conceptual Framework in
IFRS Standards – effective for annual periods beginning on or after 1 January 2022.
47
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Accounting policies (Continued)
Amendments to IFRS 16 to provide lessees with an exemption from assessing whether
a Covid-19 related rent concession is a lease modification – effective for annual periods
beginning on or after 1 April 2021.
Amendments to the presentation of Financial Statements: Classification of liabilities –
effective for annual periods beginning on or after 1 January 2023.
Amendments to IAS 16 in deducting amounts received from the cost – effective for
annual periods beginning on or after 1 January 2022.
Amendments to IAS 37 in assessing whether a contract is onerous – effective for annual
periods beginning on or after 1 January 2022.
Amendments to IAS 1 in disclosure of accounting policies – effective for annual periods
beginning on or after 1 January 2023.
Amendments to IAS 8 in the definition of Accounting Estimates – effective for annual
periods beginning on or after 1 January 2023.
Amendments to IAS 12 in deferred tax relating to assets and liabilities arising from a
single transaction – effective for annual periods beginning on or after 1 January 2023.
IFRS 17 establishing new principles for the recognition, measurement, presentation,
and disclosure of insurance contracts.
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
Investments
As disclosed in the Strategic report, during the year-ended 31 December 2021 the Ligation
against VRFB Holdings Limited has prevented the Company from participating in the financial
and operating policy decisions of VRFB Holdings Limited, despite holding over 20% of voting
rights in the entity. This was due to the fact that the Company had no practical ability to exercise
joint control or influence as there were no board meetings, revised shareholder agreement or
management information. In addition, Garnet objected to the Company’s investment within days
of making the investment (prior to commencement of formal litigation) which immediately cast
doubt on the Company’s ability to exercise its influence.
As a result, the Directors consider that the criteria for equity accounting have not been met. The
Company’s investment in VRFB Holdings Limited is thus accounted for as a financial asset
measured at fair value through profit or loss within the scope of IFRS 9 in these financial
statements. On the basis that the investment is pre-profit and performed in line with expectation,
the Directors consider the fair value has not changed since acquisition in April 2021.
48
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Critical accounting estimates and judgements (Continued)
Critical judgements (continued)
As disclosed in note 20, on 8 March 2022, the Litigation was settled in favour of VRFB Holdings
Limited and the Company was able to start exercising its significant influence over VRFB
Holdings Limited and commenced equity accounting for the investment from that date.
Sources of estimation uncertainty.
a) Share option
The valuation of the options and warrants granted in 2020 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.
b) Convertible Loan Notes – valuation of embedded derivatives
The Company issued convertible loan notes to finance the acquisition of its investment in VRFB-
H. As detailed in note 15, the terms of the loan are complex and require judgement regarding
the probability and timing of various scenarios occurring, as well as estimating the Company’s
future share price and future GBP/USD exchange rate. The Directors performed sensitivity
analysis on the various valuation inputs which showed an immaterial net impact on the financial
statements.
There are no other estimates, judgements or assumptions that have significant risk of causing
a material adjustment to the carrying amount of assets and liabilities within the next financial
period.
49
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
4 Operating loss
Operating loss for the period is stated after charging /
(crediting):
Fees payable to the company’s auditor for the audit of the
financial statements
Depreciation of property, plant and equipment
Share-based payments
Exchange losses
5
Finance costs
31 December 2021
£
31 December 2020
£
42,181
169
-
25,806
26,225
383
63,629
-
31 December 2021 31 December 2020
£
£
Interest payable on loan notes
Fair value loss on convertible loan note derivative (note 15)
491,631
110,260
-
-
6
Other operating expense
601,891
-
31 December 2021 31 December 2020
£
£
Exchange losses
25,806
-
7
Employees
The average monthly number of persons (including directors) employed by the company during the period
was:
Directors
31 December 2021 31 December 2020
5
5
The Directors were the key management personnel. Their compensation is disclosed in note 8 to the financial
statements.
8
Compensation of key management personnel
Share based payments
Wages and salaries
Social security costs
31 December 2021 31 December 2020
£
-
152,000
988
£
63,629
55,000
-
152,988
118,629
50
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
9
Income tax
The charge of the year can be reconciled to the loss per the income statement as follows:
Loss before taxation
Expected tax credit based on a corporation tax rate of 19%
(2020 – 19%)
Effect of expenses not deductible in determining taxable profits
Unutilised tax losses carried forward
Depreciation on assets not qualifying for tax allowances
Taxation credit for the year
Tax charged in the financial statements
31 December 2021 31 December 2020
£
£
(902,624)
(231,901)
(171,499)
25,631
145,836
32
-
-
(44,061)
18,823
25,165
73
-
-
At the reporting date the Company had accumulated tax losses of approximately £1,063,000 (2020 - £295,000)
available for carry forward against future trading profits. There is no expiry date on the remaining losses as at
31 December 2021.
No deferred tax asset has been provided for in relation to these losses.
10 Loss per share
31 December 2021 31 December 2020
£
£
Number of shares
Weighted average number of ordinary shares for basic earnings
per share
9,809,727
8,400,000
Weighted average number of ordinary shares for diluted
earnings per share
9,809,727
8,400,000
Loss
Loss for the period from continued operations
(902,624)
(231,901)
Loss for basic and diluted earnings per share being net profit
attributable to equity shareholders of the company for continued
operations
(902,624)
(231,901)
Loss per share for continuing operations (continued)
Basic and diluted loss per share
(0.09)
(0.03)
The share options and warrants as disclosed in note 16 are considered to be anti-dilutive.
51
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
11 Property, plant and equipment
Cost
At 1 January 2021
Additions
At 31 December 2021
Accumulated depreciation and impairment
At 31 December 2020
Charge for the year
At 31 December 2021
Carrying amount
At 31 December 2021
At 31 December 2020
12
Investments
Shares in unlisted entities
Movements in non-current investments
Cost or valuation
At 1 January 2021
Additions
Fair value adjustment due to changes in exchange rate
At 31 December 2021
Carrying amount
At 31 December 2021
At 31 December 2020
Plant and
equipment
£
1,160
1,526
2,686
992
169
1,161
1,525
168
Year ended
Year ended
31 December 2021 31 December 2020
£
5,573,333
£
-
Shares in
unlisted
investments
£
-
5,416,846
156,487
5,573,333
5,573,333
-
The Directors of the Company consider the fair value of the investment in VRFB-H at the reporting date
to be equal to the original cost of $7,524,000, translated at closing foreign exchange rates, as the
Directors estimate that has been no material change in the fair value of the investment between the
acquisition and the reporting dates. The gain in the fair value due to changes in exchange rates is
included in profit or loss within exchange losses (note 6).
52
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
13 Trade and other receivables
Other receivables
VAT recoverable
Prepayments
Year ended
Year ended
31 December 2021 31 December 2020
£
£
7,665
116
5,336
9,191
8,642
7,252
13,117
25,085
14 Trade and other payables
Year ended
Year ended
31 December 2021 31 December 2020
Trade payables
Other taxation and social security
Accruals
15 Borrowings
Convertible loan notes
£
693
2,632
49,400
52,725
£
9,116
-
33,750
42,866
Year ended
Year ended
31 December 2021 31 December 2020
£
6,329,952
£
-
As announced on 27 April 2021 the Company entered into an investment agreement to acquire a 22.1% interest
(“Investment Agreement””) in VRFB-H for a consideration of US$7,524,000. The investment was financed
through the issue of US$8,000,000 convertible loan notes (“CLNs”), with surplus funds being used to pay
associated costs and working capital.
The principal terms of the CLNs, as at 31 December 2021, are detailed below:
- The CLNs attract an interest rate of 10% per annum, payable in cash or shares in the Company at the election
of the Company;
- The CLNs are redeemable at par together with outstanding accumulated interest on 28 January 2022 unless
converted into shares in the Company at the option of the Company;
- The CLNs are convertible into shares in the Company, calculated by dividing the nominal value (and accrued
interest, if applicable) of the CLNs (using the average USD/GBP closing exchange rate as shown on Bloomberg
over the five trading days prior to conversion) by 20 pence ("MUST Conversion Shares"), by no later than 31
December 2021 (such date of conversion being the "Conversion Date") and the publication of a prospectus by
the Company and readmission of the Company to listing and trading ("Readmission”) on the London stock
exchange;
- The CLN holders will receive warrants to subscribe for new shares in the Company (one warrant being issued
for every two MUST Conversion Shares held), exercisable at a price per share of 30 pence. The warrants have
an expiry period of three years from the Conversion Date;
53
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
-
In circumstances where the Company is in default, the Company is obliged to exercise a backstop mechanism,
whereby BMN has agreed to issue new ordinary shares in its capital ("BMN Shares") to CLN holders in respect
of the principal amount and accrued interest under the CLNs (the "Backstop") in return for the Company: (i)
transferring to BEL all of the Company’s shares in VRFB-H; and (ii) paying a fee to BMN of an amount equal to
5% of the MUST Capital Raise (including both principal and interest), to be satisfied by the issue of new ordinary
shares in the Company at a price of 20 pence per share (the "Backstop Fee"). In consideration of BMN providing
the Backstop, the Backstop Fee is payable in the event of Readmission not occurring by the aforesaid date or
immediately prior to completion of Readmission.
-
In the event of change of control of the Company, the CLNs and accumulated interest become redeemable either
in cash or in shares in the Company at the option of the CLN holders via the conversion process specified above.
The terms of the CLNs were amended after 31 December 2021 as detailed in note 20.
The Company’s conversion option to redeem the CLNs and accumulated interest in Company shares, subject
to Readmission, is a non-closely related embedded derivate asset and accounted for separately at fair value
through profit or loss. The host contract is a financial liability, initially recognised at £5,667,316 being the net
proceeds plus the fair value of the embedded derivate asset and is subsequently carried at amortised cost using
the effective interest rate of 15.3%.
The Directors assessed the probability of the change of control event to be remote and thus the conversion
option in relation to it has no value.
The movement in the fair value of the embedded derivative asset is detailed below:
Opening balance
Fair value of the option at inception
Loss on the fair value of the option
Closing balance
Year ended
31 December
2021
£
-
110,260
(110,260)
-
The loss on the fair value of the embedded derivate asset is included within finance costs (note 5).
The valuation of the embedded derivate is driven by unobservable inputs such as the expected timing and
probability of Readmission, the Company’s share price at Readmission as well as the expected USD/GBP
exchange rate. The value of the conversion derivate is £nil as at 31 December 2021 as the extension to the
latest Readmission date was not agreed until after the year-end date (note 20).
54
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
16 Share-based payment transactions
Outstanding at 1 January 2021
Granted
Exercised
Year ended
31 December 2021
Number
of options
Year ended
31 December 2020
Number of
options
Number
of
warrants
options
210,000
-
-
1,250,000
1,250,000
-
-
900,000
1,250,000
350,000
-
Number
of
warrants
options
210,000
-
(210,000)
Outstanding at 31 December 2021
-
1,250,000
210,000
1,250,000
Exercisable at 31 December 2021
-
1,250,000
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 reserve in equity during previous
years.
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 was adjusted through the Share based payment reverse in equity during previous
years.
55
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Share-based payment transactions (continued)
Black Scholes Model
Share Price
Exercise Price
Expected volatility
Risk-free interest rate
Expected life
Number of warrants/options granted
Share Price
Exercise Price
Expected volatility
Risk-free interest rate
Expected life
Number of options granted
17 Share Capital
At grant date
At grant date
of 29 July 2019 of 29 July 2019
Options
Warrants
£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
Year ended
31 December
2021
Number
Year ended
31 December
2021
£
Year ended 31
December
2020
Number
Year ended
31 December
2020
£
17,136,000
171,360
14,000,000
140,000
8,400,000
210,000
1,671,600
84,000
2,100
16,716
8,400,000
84,000
-
-
-
-
10,281,600
102,816
8,400,000
84,000
Ordinary Share
Capital -
Authorised
Issued and fully
paid for
Brought forward
Exercise of
warrants
Issue of new
shares
Carried forward
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.
56
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
18 Share premium account
Year ended
Year ended
31 December 2021 31 December 2020
£
£
At the beginning of period
Exercise of warrants
Issue of new shares
Less: Issue of new share costs
654,000
18,900
150,444
(13,125)
654,000
-
-
-
At end of period
810,219
654,000
19 Retained Earnings
At the beginning of period
Loss for the period
At end of period
Year ended Period ended
31 December 2021 31 December 2020
£
£
(501,513)
(902,624)
(269,612)
(231,901)
(1,404,137)
(501,513)
The retained earnings reserve represents cumulative profits and losses, net of dividends paid and other
adjustments.
20 Events after reporting date
In July 2021 the Company advised that a claim form has been issued in the English High court by Garnet
against VRFB-H and EHL. Garnet owns the remaining 50% interest in EHL. As part of its response, on
19 January 2022 the Company and Bushveld Minerals agreed the following terms so as to extend the
Maturity Date of the CLNs until 28 February 2022 which would allow some visibility as to the result of the
High Court hearing:
1. A reduction of the backstop fee from 5.0% to 2.0% of any CLN amount converted to BMN shares as per the
provisions of the Investment Agreement. The backstop fee can, at the election of the Company, be satisfied
by the issue of Mustang shares at an issue price of 20 pence each. The backstop fee will be reinstated to
5.0% if the Company's shares are relisted and has an interest in VRFB-H.
2. The Loan to be used by the Company to fund the additional expenses that arise as a result of the extension
of the Maturity Date. As VRFB-H was successful in the High Court proceedings, the Loan is repayable on
the earlier of the Company completing a capital raising of £1 million or 31 December 2023. The Loan can,
at the election of the Company, be repaid by the issue of Mustang shares at an issue price of 20 pence
each.
3.
If the Backstop is triggered and VRFB-H is subsequently successful in the High Court proceedings the
Company has been granted a call option to acquire the VRFB-H shares it transferred to Bushveld Energy
Limited (“BEL”) under the Backstop at the same entry price as paid by the Company pursuant to the
Investment Agreement. The call option needs to be exercised within one month of finalisation of the High
Court proceedings.
4. The Company has granted BMN a put option that can be exercised if the Company does not exercise the
call option, to sell the VRFB-H shares the Company transferred to BEL under the Backstop at the same
entry price as paid by the Company pursuant to the Investment Agreement.
57
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Events after reporting date (Continued)
The put option needs to be exercised within one month of the expiry of the call option described above.
On 28 March 2022 BMN issued a convertible loan note to Primorus Investments Plc ("Primorus") pursuant
to the previously announced Backstop arrangement with Primorus and Mustang. The Company cancelled
the Mustang CLNs issued to Primorus on 26 April 2021 for $1,500,000 and issued US$1,500,000 10 per
cent convertible loan notes to BMN. The Company paid a US$32,737 backstop fee to BMN.
On 29 March 2022 the parties to the Investment Agreement, including the Company, agreed to extend the
Maturity Date of the CLN’s until the 31 July 2022 to allow for the preparation of a prospectus and review
process of that prospectus by the FCA for the readmission of the ordinary share capital of the Company to
trading on the London Stock Exchange. Additionally, it was agreed to reduce the conversion price of the
CLNs into Mustang shares from £0.20 to £0.18.
21 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
Short-term employee benefits
Directors’ loans
Year ended Period ended
31 December 2021 31 December 2020
£
£
-
152,988
63,629
55,000
152,988
118,629
At the reporting date £8,100 (2020 - £8,100) 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. These amounts are repayable on demand, interest free and are considered fully recoverable.
In addition, £843 (2020 – £1,000 due from) was due to D L Gallegos. This amount is interest-free.
Services
During the year, legal services were provided by Simon Holden to the amount of £12,000.
22 Controlling party
The company has no immediate or ultimate controlling party.
58
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
23 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 Year ended
31 December 2021 31 December 2020
£
£
394,700
7,665
345,200
9,191
402,365
354,391
Financial assets at fair value through profit or loss:
Embedded conversion option derivative
-
-
Financial liabilities at amortised cost:
Trade Payables
Accruals
Convertible loan notes – host liability
693
49,400
6,293,975
9,116
33,750
-
6,344,068
42,866
There are no material differences between the fair value and the book value of the financial assets and
liabilities. All financial liabilities are carried as current liabilities therefore there is no difference between
present value (carrying value) and undiscounted value (and there is no maturity of financial liabilities in
more than one year).
IFRS 13 requires the provision of information about how the Company establishes the fair values of
financial instruments. Valuation techniques are divided into three levels based on the quality of inputs:
-
-
-
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 inputs are inputs other than quoted prices included in level 1 that are observable, directly or
indirectly; and
Level 3 inputs are unobservable.
The Company’s only financial instruments measured at fair value are its investment in VRFB-H and the
conversion option derivative embedded in convertible loan notes. As disclosed at Note 15, the carried
forward value of the embedded derivative element is zero. Both of these rely primarily on unobservable
inputs for their valuation which are classified as Level 3. Movements in the fair values of these financial
instruments together with inputs into their valuations are detailed in notes 11 and 13 respectively. There
were no transfers of financial instruments into or out of Level 3 during the year (2020 - none).
The company has exposure to the following risks from the use of financial investments:
59
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
Financial instruments and associated risks (continued)
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, with the exception of the issue of convertible loan notes to fund the
acquisition in VRFB-H, are conducted in the Company's functional currency of UK pound.
Occasional small value invoices were paid in US dollars and AUS dollars. The convertible loan notes and
acquisition were issued in US Dollars.
Given this, the Company’s main exposure to foreign currency risk arises from the exchange rate movements
between the US dollar and the UK pound. Little risk has been identified in respect of the movement
between AUS dollars and UK pound.
A 10 per cent strengthening of UK pound against the US dollar at 31 December 2021 would have
increased equity and reduced loss for the year by £24,000, an immaterial amount.
A 10 per cent weakening of UK pound against the US dollar would have an equal but opposite effect.
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.
Equity price risk
The company is exposed to equity price risk through its investment in VRFB-H, an unlisted business.
The fair value of the Company’s investment can fluctuate based on uncontrollable macroeconomic
and geopolitical developments as well as operational performance of the company. The Directors
monitor the performance of VRFB-H based on the information available to them and under the terms
of the shareholder agreement will have a representation on its board of directors.
Interest rate risk
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of
changes in interest rates. The Company is not exposed to the interest rate risk as the interest rate
on the convertible loan note is fixed and the company has no other interest bearing assets or
liabilities.
Capital management
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.
60
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
24 Cash generated from operations
Year ended
Year ended
31 December 2021 31 December 2020
£
£
Loss for the period after tax
(902,624)
(231,901)
Adjustments for:
Depreciation and impairment of property, plant and equipment
Equity settled share-based payment expense
Finance costs
Exchange losses
Movements in working capital
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
169
-
491,631
18,013
11,968
9,859
383
63,629
-
-
6,197
(9,665)
(370,984)
(171,357)
25 Analysis of changes in financial liabilities
Issue of convertible loan
notes
31 December
2020
Cash
flow
-
5,667,316
Other non-
cash
movements
662,636
31
December
2021
6,329,952
Other non-cash movements principally relate to accrued and unpaid interest.
61
Mustang Energy Plc
Notes to the Financial Statements
For the year ended 31 December 2021
26 Schedule of Administrative Expenses for the year ended 31 December 2021
Administrative expenses
Equity settled share-based payment costs
Directors’ remuneration
Computer running costs
Motor running expenses
Travelling expenses
Professional subscriptions
Legal and professional costs
Accountancy
Audit fees
Bank charges
Insurance
Entertaining
Sundry expenses
Depreciation
Year ended Year ended
12 months to 12 months to
31 December 2021 31 December 2020
£
£
-
152,988
2,185
245
3,747
11,940
39,528
18,620
42,181
1,276
-
986
1,062
169
63,629
55,000
1,112
-
6,987
11,105
50,073
13,025
26,225
749
1,633
1,175
805
383
274,927
231,901
62