ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
ABN 94 099 116 275
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Contents
CORPORATE DIRECTORY ..................................................................................................................... 2
DIRECTORS’ REPORT ............................................................................................................................ 3
AUDITOR’S INDEPENDENCE DECLARATION ..................................................................................... 16
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME .. 17
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................. 18
CONSOLIDATED STATEMENT OF CASHFLOWS ............................................................................... 19
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................................. 20
NOTES TO THE FINANCIAL STATEMENTS......................................................................................... 21
DIRECTORS’ DECLARATION ............................................................................................................... 40
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS ................................................................. 41
SHAREHOLDER INFORMATION .......................................................................................................... 45
Page | 1
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
CORPORATE DIRECTORY
Non-Executive Chairman
Mr Gordon Ramsay
Managing Director
Non-Executive Director
Mr Andrew Knox
Mr Clinton Carey
Non-Executive Director
Mr Adrien Wing
Company Secretaries
Mr Adrien Wing
Ms Pauline Moffatt
Registered & Principal Office
Level 17, 500 Collins Street
Melbourne VIC 3000
Auditor
Solicitors
RSM Australia Partners
Level 21
55 Collins Street
Melbourne VIC 3000
Quinert Rodda & Associates
Level 6
400 Queen Street
Melbourne VIC 3000
Website Address
www.redskyenergy.com.au
Stock Exchange Listings
Red Sky Energy Ltd shares are listed on the Australian Securities Exchange under
the code ROG
Share Registry
Advanced Share Registry
110 Stirling Highway
Nedlands WA 6009
Telephone: + 61 8 9389 8033
Page | 2
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
DIRECTORS’ REPORT
Your directors present their report consisting of Red Sky Energy Ltd (the Company) and Red Sky Energy Ltd and controlled entities (the
Group) as at the end of, or during, the year ended 31 December 2019.
Directors
The following persons were directors of Red Sky Energy Ltd during the whole year and up to the date of this report, unless otherwise
stated:
Mr Gordon Ramsay – Non-Executive Chairman (appointed 6 November 2019)
Mr Andrew Knox – Managing Director
Mr Adrien Wing – Non-Executive Director
Mr Clinton Carey – Non-Executive Director
Mr Guy Le Page – Non-Executive Director (resigned 13 May 2019)
Company Secretaries
Mr Adrien Wing
Ms Pauline Moffatt (appointed 15 January 2019)
Principal Activities
The principal activities of the Group during the year were exploration for economic deposits of oil and gas.
Operating Results
The net operating loss of the Group for the year ended 31 December 2019 after income tax amounted to $1,723,807 (31 December 2018:
net operating loss $1,156,287).
Review of Operations
Highlights
The Company received ministerial consent to transfer the Innamincka Dome licences to its wholly owned subsidiary Red Sky
(NT) Pty Ltd from Beach Energy Ltd (Beach, ASX: BPT). The South Australian Minister for Energy and Mining approved the
registration of the Sale and Purchase Agreement (SPA). Consequently, the licences were transferred to Red Sky (NT) Pty Ltd.
On 11 September the Company announced a Farmout Agreement with Santos Ltd (ASX: STO) for its Cooper Basin licences
PRL’s 14, 17, 18, 180, 181 and 182 that injects A$9m in capital into Red Sky’s Innamincka Dome projects.
Fully carried Red Sky Cooper Basin work program begins to take shape, following the farm-out.
Spur pipeline from Gold Nugget field acquired.
During the year the Company placed 503 million fully paid ordinary shares to raise $1,124,500 before associated costs.
Innamincka Dome, Cooper Basin
On 21 March 2019, the Company received ministerial consent to transfer the Innamincka Dome licences to its wholly owned subsidiary
Red Sky (NT) Pty Ltd.
The South Australian Minister for Energy and Mining approved the registration of the Sale and Purchase Agreement (SPA) with Acer
Energy Pty Ltd, a Beach subsidiary, to acquire that subsidiary’s interests in the Innamincka Dome Project in the Cooper Basin, South
Australia. Consequently, the licences were transferred to Red Sky (NT) Pty Ltd.
Page | 3
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Only nominal consideration of $1 is payable for the assets acquired under the SPA. However the Company is responsible for discharging
all obligations arising in respect of the assets purchased, including all liabilities relating to the decommissioning, abandonment,
rehabilitation, remediation or restoration of those assets.
This registration followed agreement to amend the SPA with Acer Energy Pty Ltd, a Beach subsidiary, to acquire that subsidiary’s
interests in the Innamincka Dome Project in the Cooper Basin, South Australia. The principal term of which was Beach will continue to
provide financial security for the licences. Beach has subsequently been released from the financial security.
The Innamincka Dome Project comprises a portfolio of six highly prospective petroleum tenements (PRLs) near the township of
Innamincka in northeast South Australia. Beach’s interest in this portfolio comprises a 100% owned and operated stake in:
PRL14 (Flax oil field which was previously producing);
PRL17 (Yarrow gas field);
PRL18 (Juniper oil field);
PRL180;
PRL181; and
a 75% interest in PRL182 (remaining 25% later purchased from Bengal Energy (Australia) Pty Ltd).
The purchase of Beach’s interest in the Innamincka Dome Project is inclusive of all existing production infrastructure, storage tanks, yards
and camp facilities. This infrastructure is modern and in excellent operating condition. The project was suspended in 2015 due to the
downturn in oil and gas markets. The Company is reviewing farm out opportunities and has commenced re-commissioning planning for
the Innamincka Dome Project with a focus on resuming oil and gas production at Flax as soon as possible.
The acquisition affords Red Sky with a significant opportunity to leverage the recovery from the oil price downturn by returning quality
shut-in assets to production at the Flax field. Further significant opportunities exist within the unexploited Yarrow gas field and the Juniper
oil field. Evaluation of the remaining highly prospective tenements provides even more opportunities.
Mr Andrew Knox, CEO of Red Sky, agreed to lend to the Company the escrow amount ($800,000) as an unsecured loan which he has
agreed will not become repayable in circumstances where the demand for repayment would create an event of insolvency for the
Company. The term is for up to 18 months at an interest rate of 10% per annum. The loan terms provide for the issue of 66,670,000
ordinary fully paid shares to Mr Knox, the issue of which was approved by shareholders at a general meeting. The loan contains terms
which are typical for agreements of a similar nature. An amount of $525,000 of this loan was repaid during the year and $275,000 remains
outstanding.
Farmout Agreement
On 11 September 2019, the Company announced a Farmout Agreement with Santos QNT Pty Ltd, a subsidiary of Santos Ltd (ASX:
STO), for its Cooper Basin licences PRL’s 14, 17, 18, 180, 181 and 182 that injects A$9m in capital into Red Sky’s Innamincka Dome
projects.
This transaction accelerates the development strategy for Flax and Yarrow projects with a well-capitalised partner.
The terms of the Agreement provides for Santos to earn an 80% interest (and operatorship) in Red Sky’s Cooper Basin licences
(collectively known as the Innamincka Dome), along with the following considerations:
o Fund 100% of 50km2 of 3D seismic over the Yarrow gas field in PRL17, up to a maximum gross cost of A$1.0 million.
o Fund 100% of an appraisal well in the Yarrow gas field up to a maximum gross cost of A$3.0 million.
o Fund 100% of an appraisal well in the Flax oil and gas field in PRL14, up to a maximum gross cost of A$5.0 million.
o Fund 100% of any development of the fields with no cap, repaid out of production.
o The Farm Out Agreement, and the transfer of the 80% interest in the licences, was conditional on a number of standard
approvals including ministerial approval and licence registration.
During the December quarter Santos assumed operatorship and management of the Innamincka Dome projects and undertook the
following activities:
Santos (as operator) has applied for approval from the Minister to vary and suspend certain conditions and extend the term of
certain Innamincka Petroleum Retention Licences (PRLs) in order to efficiently coordinate their management and timing.
Page | 4
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Santos has also applied to vary the conditions of the licenses to group the six PRLs (into a Group Subject Area) so that any
expenditure for one PRL applies against the overall expenditure target across all six licenses. This action is supported by Red
Sky as it will encourage evaluation of the outer blocks (PRL 180, 181 & 182) where Red Sky sees significant oil and gas
potential.
The proposed drilling of the Red Sky Flax oil field (PRL 14) horizontal well has now been scheduled into Santos Cooper Basin horizontal
well program:
Drilling of the Flax oil field (PRL 14) horizontal well is in the planning phase and final timing will be subject to the drilling order
and timing of other wells already planned by Santos in its Cooper Basin horizontal well program.
Activities focused on the evaluation of the Yarrow gas field (PRL 17) are to include:
Acquisition of 50km² of new 3D seismic over the Yarrow gas field (PRL 17) is to be coordinated with other Santos Cooper
Basin license seismic acquisition activities. Red Sky expect this will save significant costs.
Drilling of the Yarrow gas field (PRL 17) appraisal well is planned to take place following the acquisition, processing and
interpretation of the new Yarrow 3D seismic data, which is necessary to be completed before selecting the most promising
drilling location.
Santos Farm Out Terms
Santos to earn an 80% interest and operatorship (ROG: 20%) in Red Sky’s onshore Cooper Basin retention licences PRL 14, 17, 18, 180,
181 and 182, collectively known as the Innamincka Dome Projects. The terms provide for Santos to:
Fund 100% of 50km2 of 3D seismic over the existing Yarrow gas field in PRL 17, up to a maximum cost of A$1.0 million.
Fund 100% of an appraisal well in the Yarrow gas field in PRL 17 up to a maximum gross cost of A$3.0 million.
Fund 100% of an appraisal well in the Flax oil and gas field in PRL 14, up to a maximum gross cost of A$5 million.
Subject to satisfactory appraisal outcomes, initially fund 100% of any approved development of the fields, with Santos to be
repaid for Red Sky’s share of such development expenditure out of Red Sky’s share of production.
Page | 5
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Gold Nugget Gas Field
Gold Nugget is located in the Wind River Basin in Wyoming, one of the largest gas producing basins in the USA. Gold Nugget is a proven
gas field with a single production well (completed to 14,000ft in 2004).
In August 2019 ROG established that Gold Nugget is commercially viable. Since then Red Sky has purchased the feeder gas line from
the field to the main trunk line, invested in a second separator and a methanol injector system. The Gold Nugget #1-23 well has
undergone a production test and flowed over three days at approximately 250mcfpd. Ongoing technical problems with the separator were
addressed to enable the well to flow continuously. Due to recent inclement conditions, gas supply from the well has been severely
reduced. This is an annual event and we expect to be producing at full capacity in the near future.
Page | 6
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Corporate
On 20 March 2019 the Company placed 190 million fully paid ordinary shares at an issue price of $0.0018 (0.18 cents) per ordinary share
raising $342,000 before associated costs.
On 11 April 2019 the Company issued 100 million shares to Taylor Collison upon Completion of the arrangement with Beach (see ASX
announcement dated 10 July 2018).
On 26 September 2019 the Company placed 313 million fully paid ordinary shares at an issue price of $0.0025 (0.25 cents) per ordinary
share raising $782,500 before associated costs.
As a means of minimizing cash spend, the Company issued a further 199,974,483 shares in lieu of their outstanding fees and accruals
during the year. These share issues included shares issued to the Directors which were approved by shareholders at the Annual General
Meeting on 15 May 2019 and a General Meeting on 4 December 2019.
During the year experienced investment banking executive, Mr Gordon Ramsay, was appointed as Non-Executive Chairman of the
Company. Mr Ramsay’s extensive networks and expertise in equity markets and the resource sector is expected to aid in the
development of new opportunities. The Company welcomes Mr Ramsay to the Board.
The Company continues to actively review other opportunities in Australia and overseas.
Various statements in this report constitute statements relating to intentions, future acts and events. Such statements are
generally classified as forward looking statements and involve unknown risks, expectations, uncertainties and other
important factors that could cause those future acts, events and circumstances to differ from the way or manner in which
they are expressly or impliedly portrayed herein.
Some of the more important of these risks, expectations and uncertainties are pricing and production levels from the
properties in which the Company has interests and the extent of the recoverable reserves at those properties. In addition,
the Company has a number of exploration permits. Exploration for oil and gas is expensive, speculative and subject to a
wide range of risks. Individual investors should consider these matters in light of the personal circumstances (including
financial and taxation affairs) and seek professional advice from their accountant, lawyer or other professional advisor as to
the suitability for them of an investment in the Company.
Page | 7
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Unsecured Loans
During of the period, the Company received unsecured loans of $690,000 from directors and other third-party groups with an interest rate
of 10% p.a. to assist with the funding restructure of the Innamincka Dome project. These loans were repaid.
The Company received further unsecured loans of $800,000 (as referred to above in relation to the Innamincka project) and $60,000 from
directors at an interest rate of 10% p.a. As at 31 December an amount of $275,000 owing to Mr Andrew Knox remained unpaid.
Significant Changes in the State of Affairs
Details on share issues during the year is included in Note 15 of the financial report.
Events Subsequent to Balance Date
On 20 January 2020, the Chinese Government announced an outbreak of novel coronavirus (COVID-19) in the city of Wuhan in Hubei
Province. The outbreak was declared a pandemic by the World Health Authority on 11 March 2020. The COVID-19 outbreak has had a
significant impact on global oil and gas markets. The future impacts of this pandemic on the operations and results of the Company is
uncertain.
No other matters or circumstances have arisen since 31 December 2019 that have significantly affected, or may significantly affect the
group’s operations, the results of those operations, or the group’s state of affairs in future years.
Likely developments
The group will focus on the exploration for economic deposits of oil and gas. It is the intention of the Board to continue the strategy of
acquiring an oil and gas portfolio.
Dividends Paid or Recommended
No dividend was paid or declared during the period and the Directors do not recommend the payment of a dividend.
Environmental Issues
The Group’s operations are subject to various environmental regulations. The majority of the Company’s activities involve low level
disturbance associated with its exploration drilling programs. As at the date of this report the group complies fully with all such regulations.
Page | 8
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Information on Directors and Secretaries
Gordon Ramsay – Non Executive Chairman, B.Sc. (Applied Geophysics), M.B.A. (Finance and Marketing)
Mr Ramsay is a member of the Australian Institute of Company Directors (GAICD), American Association of Petroleum Geologists
(AAPG), and a former treasurer at the Petroleum Exploration Society of Australia (PESA). He has held senior management positions for
companies such as Ralton Asset Management, Royal Energy, FAR Ltd, UBS Investment Bank and Saloman Smith Barney (Citi Group).
Current Directorships:
Nil
Other Directorships within the last three years:
Nil
Andrew Knox – Managing Director – B.Comm, CA, CPA, FAICD
Mr Knox has over 35 years of experience in the upstream oil and gas sector. He has worked extensively throughout Australasia, South
East Asia and North America with several entities and has been a director of several public resource companies. He was formerly a
director and CFO of Cue Energy Resources Limited, a position he had held for 22 years. Mr Knox was appointed Director on 6 July 2018.
Current Directorships:
Rimfire Pacific Mining NL (since 18 March 2020)
Other Directorships within the last three years:
Nil
Clinton Carey – Non Executive Director
Mr Carey has over 20 years management and Director level experience in listed companies specializing in mining, oil and gas and
technology. Mr Carey was a director of Roper River Resources Limited when it completed a reverse take over of Webjet Limited. He has
worked for mining companies in Russia, Brazil, Canada, Australia and England. Mr Carey was appointed Director on 12 January 2015.
Current Directorships:
Nil
Other Directorships within the last three years:
Challenger Energy Limited (from 13 June 2018 to 3 July 2019)
Adrien Wing – Non Executive Director and Joint Company Secretary, B.Acc, CPA
Mr Wing is a Certified Practicing Accountant. He practiced in the audit and corporate advisory divisions of a chartered accounting firm
before working with a number of public companies listed on the Australian Securities Exchange as a corporate/accounting consultant and
company secretary. Mr Wing was appointed Company Secretary on 3 February 2011 and Non-Executive Director on 7 March 2014. Mr
Wing resigned as a Director on 22 March 2016 and was re-appointed on 15 December 2016.
Current Directorships:
High Grade Metals Limited (since 8 October 2018)
Mithril Resources Limited (since 15 May 2019)
Other Directorships within the last three years:
Nil
Pauline Moffatt – Joint Company Secretary, B.Comm, GAICD, FGIA ICSA
Ms Moffatt is a graduate of the Australian Institute of Company Directors (GAICD) and a fellow GIA ICSA of the Governance Institute of
Australia. Ms Moffatt has a wealth of experience, providing specialised accounting and company secretary services to public companies
for over 20 years. Ms Moffatt was appointed Joint Company Secretary on 15 January 2019.
Page | 9
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Meetings of Directors
The number of meetings held by the Company’s directors during the year and the number of meetings attended by each director were:
Director
Board meetings held
Gordon Ramsay
Guy Le Page
Clinton Carey
Adrien Wing
Andrew Knox
2
9
18
18
18
Board meetings
attended
2
9
18
18
17
Securities held and controlled by Directors
As at the date of this report, the interests of Directors in securities of the Company were as follows:
Holder
Gordon Ramsay
Andrew Knox
Clinton Carey
Adrien Wing
Total
Ordinary Shares
Performance Rights
-
84,442,222
51,544,933
51,990,111
187,977,266
-
150,000,000
10,000,000
10,000,000
170,000,000
Performance Rights granted to directors
Performance Rights were issued to directors following shareholder approval on 10 September 2018 (Mr Andrew Knox 30,000,000, Mr
Clinton Carey 10,000,000 and Mr Adrien Wing 10,000,000) as included above.
The 20,000,000 Performance Rights issued to the Non-Executive Directors are subject to the following vesting condition:
-
The achievement of production (of a saleable quantity) at the Innamincka Dome Project no later than 11 September 2020.
The 30,000,000 Performance Rights issued to Mr Knox in 3 tranches of 10,000,000 each are subject to the following vesting conditions:
-
-
-
Tranche 1: The volume weighted average price (VWAP) of the Company’s shares over 14 consecutive days on which trades in
the Company’s shares are recorded meets or exceeds 0.6 cents.
Tranche 2: The VWAP of the Company’s shares over 14 consecutive days on which trades in the Company’s shares are
recorded meets or exceeds 1.2 cents.
Tranche 3: The VWAP of the Company’s shares over 14 consecutive days on which trades in the Company’s shares are
recorded meets or exceeds 2.4 cents.
During the financial year, 120,000,000 Performance Rights were issued to Mr Andrew Knox following shareholder approval on 15 May
2019 subject to the following vesting condition:
-
The achievement of production (being production of a saleable quantity) at the Innamincka Dome Project.
Shares under option or issued on exercise of options
There are no unissued shares. Interests under option as at the date of this report are as follows:
Expiry Date
Exercise Price
(cents)
Number on issue –
2018
Issued during year
Lapsed during
year
Exercised
during year
Number on issue
30/11/2019
Total Options Issued
1.00
280,809,480
280,809,480
-
-
(280,809,480)
(280,809,480)
-
-
-
-
No ordinary shares were issued during the financial year and up to the date of this report on the exercise of options.
Page | 10
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
Remuneration Report (audited)
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporation Act 2001.
This report outlines the remuneration arrangements in place for Directors and executives of Red Sky Energy Limited. This report has
been set out under the following main headings:
A. Principles Used to Determine the Nature and Amount of Remuneration
B. Service Agreements
C. Details of Remuneration
D. Key Management Personnel Equity Holdings
E. Share-based Compensation
F. Other Transactions with Key Management Personnel
G. Additional Information
A. Principles Used to Determine the Nature and Amount of Remuneration
The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors and Executive Officers.
The Board will assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to
relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high
quality Board and executive team.
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the
results delivered. The framework aligns executive reward with achievement of strategic objectives, and the creation of value for
shareholders, and conforms to market best practice for delivery of reward. The Board ensures that executive reward satisfies the following
key criteria for good reward governance practices:
Competitiveness and reasonableness
Acceptability to shareholders
Performance linkage/alignment of executive compensation
Transparency
Capital management
The board policy is to remunerate Non-executive Directors at fair market rates for comparable companies for the relevant time,
commitment and responsibilities. The board determines payments to the non-executive Directors and reviews their remuneration annually
based on market practice, duties and accountability. The maximum amount of fees that can be paid to Non-executive Directors is subject
to approval by shareholders at the Annual General Meeting. The maximum amount approved is $250,000. Fees for non-executive
Directors are not linked to the performance of the Group. However, to align Director’s interests with shareholder interests the Directors are
encouraged to hold shares in the Company and may be issued with additional securities as deemed appropriate.
The Board believes that the remuneration policy is appropriate given the stage of development of the Company and the activities which it
undertakes and is appropriate for aligning Director and executive objectives with shareholder and business objectives. The board will
continually develop new practices which are appropriate to the Company’s size and stage of development.
Executive Officers are those directly accountable for the operational management and strategic direction of the Company and the
consolidated entity. All contracts with Directors and executives may be terminated by either party with three months notice.
Fixed remuneration
Fixed remuneration consists of a base remuneration package, which includes Directors’ fees (in the case of Directors), salaries, consulting
fees and employer contributions to superannuation funds.
Page | 11
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
B. Service Agreements
The directors and key management personnel during the current year included:
Directors
Mr Gordon Ramsay – Non-Executive Chairman (appointed 6 November 2019)
Director fees set at $48,000 per annum inclusive of superannuation.
Mr Andrew Knox – Managing Director (appointed 6 July 2018)
Director salary set at $156,000 per annum plus superannuation.
30,000,000 Performance Rights were issued following shareholder approval on 10 September 2018. The 30,000,000
Performance Rights issued in 3 tranches of 10,000,000 each are subject to the following vesting conditions:
- Tranche 1: The volume weighted average price (VWAP) of the Company’s shares over 14 consecutive days on which
trades in the Company’s shares are recorded meets or exceeds 0.6 cents.
- Tranche 2: The VWAP of the Company’s shares over 14 consecutive days on which trades in the Company’s shares are
recorded meets or exceeds 1.2 cents.
- Tranche 3: The VWAP of the Company’s shares over 14 consecutive days on which trades in the Company’s shares are
recorded meets or exceeds 2.4 cents.
120,000,000 Performance Rights were issued following shareholder approval on 15 May 2019 subject to the following vesting
condition:
- The achievement of production (being production of a saleable quantity) at the Innamincka Dome Project.
In addition to annual reviews, Mr Knox’s base salary may:
- increase to $312,000 per annum plus superannuation upon the Company’s EBITDA exceeding $2,000 per day for 90
consecutive days (average); and
- increase to $468,000 per annum plus superannuation upon the Company’s EBITDA exceeding $4,000 per day for 90
consecutive days (average); and
- increase to $624,000 per annum plus superannuation upon the Company’s EBITDA exceeding $6,000 per day for 90
consecutive days (average).
The Company may terminate Mr Knox’s salary by giving not less than 6 months written notice, or upon payment of 6 months’
base salary in lieu of notice.
Mr Guy Le Page – former Non-Executive Chairman
Director fees were set at $36,000 per annum.
10,000,000 Performance Rights following shareholder approval on 10 September 2018 were issued to Mr Le Page subject to
the following vesting condition:
- The achievement of production (being production of a saleable quantity) at the Innamincka Dome Project no later than 11
September 2020.
Mr Clinton Carey – Non-Executive Director
Director fees set at $36,000 per annum.
Consulting fees of $106,575 earned during 2019 for corporate advisory services.
10,000,000 Performance Rights following shareholder approval on 10 September 2018 were issued to Mr Carey subject to the
following vesting condition:
- The achievement of production (being production of a saleable quantity) at the Innamincka Dome Project no later than 11
September 2020.
Mr Adrien Wing – Non-Executive Director and Company Secretary
Director fees set at $36,000 per annum.
The company has an agreement with Northern Star Nominees Pty Ltd for company secretarial services at a rate of $5,500 per
month.
Consulting fees of $43,000 earned during 2019 for corporate advisory services.
10,000,000 Performance Rights following shareholder approval on 10 September 2018 were issued to Mr Wing subject to the
following vesting condition:
- The achievement of production (being production of a saleable quantity) at the Innamincka Dome Project no later than 11
September 2020.
Page | 12
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
C. Details of Remuneration
The key management personnel of Red Sky Energy Limited during the years ended 31 December 2019 and 2018 included all directors
mentioned above. There are no other executives of the Company which are required to be disclosed.
Remuneration packages contain the following key elements:
Primary benefits – salary and consulting fees;
Equity – share options, performance rights and other equity securities; and
Other benefits.
Nature and amount of remuneration:
2019
Short-term employee benefits
Director
Fees/Salary
$
Company
secretarial, or
consulting fees
$
Annual Leave
Accrual
$
Post -
employment
benefits
Superannuation
$
Equity Performance related
Options
$
Performance
Rights
$
Total
$
Directors
G Ramsay (1)
G Le Page (2)
A Knox
C Carey
A Wing (3)
TOTAL
6,697
6,000
156,000
36,000
36,000
240,697
-
-
-
106,575
109,000
215,575
-
-
636
-
4,508
14,820
-
-
-
-
4,508
15,456
-
-
-
-
-
-
-
-
-
-
-
-
7,333 *
6,000 *
175,328 *
142,575 *
145,000 *
476,236
2018
Short-term employee benefits
Director
Fees/Salary
$
Company
secretarial, or
consulting fees
$
Annual Leave
Accrual
$
Post -
employment
benefits
Superannuation
$
Equity Performance related
Options
$
Performance
Rights
$
Total
$
36,000
73,864
36,000
36,000
181,864
-
-
85,425
66,000
151,425
-
5,991
-
-
-
7,017
-
-
5,991
7,017
-
-
-
-
-
-
87,700
-
-
87,700
36,000
174,572
121,425
102,000
433,997
Directors
G Le Page
A Knox (4)
C Carey
A Wing (3)
TOTAL
*
During 2019 the Directors accepted non-cash payment of amounts owing. Following approval by shareholders at general
meetings, shares were issued in lieu of cash to Mr G Le Page ($9,900), Mr A Knox ($31,990), Mr C Carey ($90,205) and Mr A
Wing ($86,713).
Details of the cash amounts paid during the 2019 year were as follows:
Mr G Ramsay was paid $nil for outstanding director fees and superannuation.
Mr G Le Page was paid $3,000 for outstanding director fees.
Mr C Carey was paid $32,313 for outstanding consulting and director fees.
Mr A Knox was paid $117,328 for outstanding salary and superannuation.
Mr A Wing was paid $45,383 for outstanding director and company secretarial fees.
(1)
(2)
(3)
(4)
G Ramsay was appointed as a Director on 6 November 2019.
G Le Page resigned as a Director on 13 May 2019.
The fees for A Wing include $66,000 per annum for company secretarial services.
A Knox was appointed as a Director on 6 July 2018.
Page | 13
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
D. Key Management Personnel Equity Holdings
As at 31 December 2019, the interests of the Directors in shares, options and performance rights of the Company were:
Ordinary Shares
Holder
Balance at beginning
of the year
Granted as
compensation
Options exercised
Net change other *
Final Interest
Balance at end of
the year
Gordon Ramsay
Andrew Knox
-
-
Adrien Wing
11,594,000
Clinton Carey
Guy Le Page
9,208,783
1,000,000
-
-
-
-
-
-
-
-
-
-
-
84,442,222
40,396,111
42,336,150
-
-
-
-
-
-
-
84,442,222
51,990,111
51,544,933
1,000,000
* Net change other includes shares acquired or disposed of during the year.
Options
Holder
Balance at
beginning of
the year
Granted as
compensation
Options
exercised
Expired
Final
interest
Balance at
end of the
year
Vested and
exercisable
Vested but
not
exercisable
Options
vested
during the
year
Gordon Ramsay
Andrew Knox
-
-
Adrien Wing
11,922,000
Clinton Carey
9,922,002
Guy Le Page
500,000
Performance Rights
-
-
-
-
-
-
-
-
-
-
-
-
(11,922,000)
(9,922,002)
-
-
-
-
-
(500,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Holder
Balance at beginning
of the year
Granted as
compensation
Rights exercised
Rights lapsed
Final Interest
Balance at end of
the year
Gordon Ramsay
-
-
Andrew Knox
30,000,000
120,000,000
Adrien Wing
Clinton Carey
Guy Le Page
10,000,000
10,000,000
10,000,000
E. Share-based Compensation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000,000
10,000,000
10,000,000
(10,000,000)
-
Other than the above Performance Rights granted as compensation, there was no share-based compensation granted to key
management personnel.
F. Related party transactions with key management personnel
Related party transactions are set out in Note 19.
Page | 14
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
G. Additional information
Principles used to determine the nature and amount of remuneration: relationship between remuneration and Company performance.
In considering the Company’s performance and its effect on shareholder wealth, the Board has regard to a broad range of factors, some
of which are financial and others of which relate to the progress on the Company’s projects, results and progress of exploration and
development activities, joint venture agreements, etc.
The Board also gives consideration to the Company’s result and cash consumption for the year. It does not utilise earnings per share as
a performance measure or contemplate payment of any dividends in the short to medium term given that all efforts are currently being
expended to build the business and establish self-sustaining revenue streams.
END OF AUDITED REMUNERATION REPORT
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, the Company maintained an insurance policy which indemnifies the Directors and Officers of Red Sky Energy
Limited in respect of any liability incurred in connection with the performance of their duties as Directors or Officers of the Company. The
Company’s insurers have prohibited disclosure of the amount of the premium payable and the level of indemnification under the insurance
contract.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the court under section 237 of the
Corporations Act 2001.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and
experience with the Company and/or the Group are important.
There were no non-audit services provided during the year.
AUDITOR’S INDEPENDENCE DECLARATION
Section 307C of the Corporations Act 2001 requires the consolidated entity's auditor, RSM Australia Partners to provide the directors with
a written Independence Declaration in relation to their audit of the financial report for the year ended 31 December 2019. The written
Auditor's Independence Declaration is attached at page 15 and forms part of this Director's Report.
This report is made in accordance with a resolution of directors.
Andrew Knox
Managing Director
27 March 2020
Page | 15
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the annual financial report of Red Sky Energy Limited for the year ended 31
December 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
Dated: 27 March 2020
Melbourne, Victoria
Page | 16
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2019
Revenue from continuing operations
Administration and travel expenses
Corporate advisory and consulting fees
Director remuneration
Employee entitlements
Legal fees
Finance costs
Finance costs – share based payment
Acquisition costs – share based payment
Depreciation
Loss from continuing operations before income tax
Income tax benefit
Net loss for the year
Other comprehensive income
Items that may be reclassified to profit or loss:
Foreign currency translation
Total comprehensive loss for the year, net of tax
Notes
5
20
2019
$
112
(342,374)
(48,455)
(476,236)
(135,391)
(45,470)
(394,136)
(100,000)
(180,000)
(1,857)
Group
2018
$
2,416
(375,924)
(223,042)
(433,997)
(77,100)
(43,496)
(4,056)
-
-
(1,088)
(1,723,807)
(1,156,287)
-
-
(1,723,807)
(1,156,287)
6,035
(1,717,772)
115,345
(1,040,942)
Basic and diluted (loss) per share – overall (cents per share)
17
(0.14)
(0.17)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying
notes to the financial statements.
Page | 17
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
Group
Current Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Total current assets
Non-Current Assets
Plant and equipment
Other financial assets
Exploration and evaluation assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Borrowings
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Issued share capital
Reserves
Accumulated losses
Total Equity
Notes
8
9
10
12
13
14
15
16
2019
$
119,329
22,846
56,454
198,629
2,216
22,037
1,116,094
1,140,347
1,338,976
302,984
19,318
314,322
636,624
636,624
2018
$
90,801
19,788
43,172
153,761
4,073
21,929
1,047,833
1,073,835
1,227,596
355,049
11,289
112,550
478,888
478,888
702,352
748,708
39,967,552
264,258
38,302,284
252,075
(39,529,458)
(37,805,651)
702,352
748,708
The above consolidated statement of financial position should be read in conjunction with the accompanying notes to the financial
statements.
Page | 18
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
CONSOLIDATED STATEMENT OF CASHFLOWS
For the year ended 31 December 2019
Cash flows from operating activities
Payments to suppliers and employees (inclusive of GST)
Interest and finance costs paid
Interest received
Net cash used in operating activities
Cash flows from investing activities
Exploration and evaluation expenditure
Payments for plant and equipment
Deposits refunded/(paid)
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of shares
Proceeds from issues of convertible loans
Capital raising costs
Borrowing transaction costs
Repayment of borrowings
Proceeds from borrowings
Net cash flows provided by financing activities
Notes
Group
2018
$
(799,430)
(3,998)
2,338
2019
$
(725,873)
(355,261)
112
18
(1,081,022)
(801,090)
(62,226)
-
(108)
(62,334)
1,124,500
-
(43,745)
(32,000)
(1,426,871)
1,550,000
1,171,884
28,528
90,801
119,329
(42,856)
(3,755)
19,549
(27,062)
663,574
50,000
(37,180)
-
(56,619)
90,000
709,775
(118,377)
209,178
90,801
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
8
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the financial statements.
Page | 19
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
Consolidated
2019
Issued Capital
Accumulated Losses
Reserves
Total Equity
Balance at beginning of year
38,302,284
(37,805,651)
252,075
Loss for the year
Other comprehensive loss for the year
Total comprehensive loss for the year
Transactions with equity holders in their capacity
as equity holders
Issues of share capital (net of costs)
Share based payments - Performance Rights
Balance at the end of the year
Consolidated
-
-
-
(1,723,807)
-
(1,723,807)
1,665,268
-
1,665,268
39,967,552
-
-
-
-
6,035
6,035
-
6,148
6,148
(39,529,458)
264,258
2018
748,708
(1,723,807)
6,035
(1,717,772)
1,665,268
6,148
1,671,416
702,352
Issued Capital
Accumulated Losses
Reserves
Total Equity
Balance at beginning of year
37,495,890
(36,649,364)
Loss for the year
Other comprehensive loss for the year
Total comprehensive loss for the year
Transactions with equity holders in their capacity
as equity holders
Issues of share capital (net of costs)
Share based payments – Performance Rights
-
-
-
806,394
-
806,394
(1,156,287)
-
(1,156,287)
-
-
-
Balance at the end of the year
38,302,284
(37,805,651)
49,030
-
115,345
115,345
-
87,700
87,700
252,075
895,556
(1,156,287)
115,345
(1,040,942)
806,394
87,700
894,094
748,708
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes to the financial
statements.
Page | 20
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been
consistently applied to all the year presented, unless otherwise stated. The financial report includes separate financial statements for Red
Sky Energy Limited as an individual entity and the consolidated entity consisting of Red Sky Energy Limited and its subsidiaries.
(a)
Basis of Preparation
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards and
Interpretations and the Corporations Act 2001. Red Sky Energy Limited and its subsidiaries (the Group) is a for-profit entity for the
purpose of preparing the financial statements.
Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently
applied unless otherwise stated. The financial statements have been prepared on an accruals basis and are based on historical costs,
modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.
The Directors have reviewed and applied all new accounting standards and amendments applicable for the first time in the financial year
commencing 1 January 2019 and determined that there was no material impact on the financial statements.
(i) Compliance with IFRSs
Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRs). Compliance with
AIFRSs ensures that the financial report of the Group complies with International Financial Reporting Standards (IFRSs).
(ii) Historical cost convention
These financial statements have been prepared under the historical cost convention.
(iii) Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the Group’s accounting policies (refer note 3).
(iv) Going Concern
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the
recognition and settlement of liabilities in the normal course of business.
The consolidated entity incurred a loss of $1,723,807 and had net cash outflows from operating activities of $1,081,022 for the year ended
31 December 2019. In addition, as at 31 December 2019, the consolidated entity had a deficiency in working capital of $437,995. The
various matters detailed above give rise to the existence of a material uncertainly that cast significant doubt on the ability of the group to
continue as a going concern.
Notwithstanding this, the Directors are satisfied that the consolidated entity will have sufficient cash resources to meet its working capital
requirements in the future. The Directors have reviewed the cashflow forecasts and believe that for a period in excess of 12 months from
the date of signature of the financial report, the consolidated entity has the ability to meet its debts as and when they fall due. The
Directors believe there are sufficient funding strategies and alternatives to meet working capital requirements should the need arise
including:
-
Directors have agreed to temporarily accrue their remuneration payments and may have amounts owing satisfied by future
share issues, subject to the approval of shareholders;
Managing and reducing operational costs to a minimum level;
Consideration of re-arranging agreements on existing projects through sale or deferring expenditure; and
The consolidated entity expects to raise funds through future capital raisings.
-
-
-
On the basis that sufficient cash inflows are expected to be raised from future capital raisings (pursuant to ASX listing rules 7.1 and 7.1A)
to fund further activities for at least 12 months after the date of this report, the Directors are of the opinion that the use of the going
concern basis of accounting is appropriate. Although the Directors believe they will be successful in these measures, there remains a
material uncertainty that may cast significant doubt on the Company and its controlled entities’ ability to continue as a going concern and
therefore their ability to realise assets and extinguish liabilities in the normal course of business and at the amounts stated in the financial
report.
The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities that might be
necessary if the consolidated entity does not continue as a going concern.
Page | 21
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(b)
Principles of Consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Red Sky Energy Limited (“Company” or
“parent entity”) as at 31 December 2019 and the results of all subsidiaries for the year then ended. Red Sky Energy Limited and its
subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all those entities (including special purpose entities) over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Group. They are de-consolidated from the date that control ceases. Inter-Company transactions, balances and recognised gains on
transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of
the impairment of the asset transferred. Accounting policies of subsidiaries are consistent with the policies adopted by the Group.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Red Sky Energy Limited.
(ii) Joint arrangements
Under AASB 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures
depending on the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement. The Group
has assessed the nature of its joint arrangements and concluded that the correct classification is ‘joint operations’.
The proportionate interests in the assets, liabilities, income and expenditure of joint operations have been incorporated in the financial
statements under the appropriate headings.
(iii) Business combinations
Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities.
All business combinations, including those involving entities under common control, are accounted for by applying the purchase method.
The purchase method requires an acquirer of the business to be indentified and for the cost of the acquisition and fair values of
identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost
is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control. Any deferred
consideration payable is discounted to present value using the entity’s incremental borrowing rate.
Goodwill is recognised initially at the excess of cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised. If the fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in the
Statement of Comprehensive Income.
(c)
Segment reporting
The Group currently operates in the oil and gas industry. Refer to Note 4 for details.
(d)
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised as follows:
(e)
Interest income
Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group
reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest
rate of the instrument and continues unwinding the discount as interest income.
(f)
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less allowance for doubtful debts.
Trade receivables are due for settlement between thirty (30) and ninety (90) days from the date of recognition.
Page | 22
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(g)
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised
cost or fair value depending on their classification. Classification is determined based on both the business model within which such
assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated
entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or
all of a financial asset, its carrying value is written off.
(i) Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at
fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose
of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where
permitted. Fair value movements are recognised in profit or loss.
(ii) Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to
hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition.
(h)
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised
cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's
assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial
recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss
allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is
possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has
increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss
recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument
discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other
comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.
(i)
Exploration, evaluation and development expenditure
Exploration, evaluation and development expenditure incurred is either written off as incurred or accumulated in respect of each
identifiable area of interest. Costs are only carried forward to the extent that they are expected to be recouped through the successful
development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the
existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the
area is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs
in relation to that area of interest.
When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to
the rate of depletion of the economically recoverable reserves. Restoration, rehabilitation and environmental costs necessitated by
exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure. Proceeds from the
sale of exploration permits or recoupment of exploration costs from farm-in arrangements are credited against exploration costs previously
capitalised. Any excess of the proceeds over costs recouped are accounted for as a gain on disposal.
Page | 23
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(j) Plant and Equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land)
over their expected useful lives as follows:
Computer equipment
3 Years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
(k)
Fair value estimation
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired at fair value. The fair value of
financial assets and financial liabilities must be estimated for recognition and measured or for disclosure purposes.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The
fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market
interest rate that is available to the Group for similar financial instruments.
(l)
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year, which remain
unpaid at year end. The amounts are unsecured and are usually paid within 60 days of recognition. They are recognised at fair value on
initial recognition and subsequently at amortised cost.
(m) Contributed Equity
Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on
the issue of ordinary shares are recognised directly in equity as a reduction, net of tax, of the share proceeds received.
(n) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing
equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for
bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income
tax effect of interest and other financing costs associated with dilutive potential ordinary share and the weighted average number of
shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Page | 24
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(o) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of
the reporting period.
(p) Employee benefits
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave for services
rendered to the reporting date, when it is probable that settlement will be required and they are capable of being measured reliably. The
calculation of employee benefits includes all relevant on-costs and is calculated as follows at the reporting date.
(i) Wages and Salaries, Annual Leave and Long Service Leave
Provisions made in respect of employee benefits are measured based on an assessment of the existing benefits to determine the
appropriate classification under the definition of short term and long term benefits, placing emphasis on when the benefit is expected to be
settled. Short term benefits provisions that are expected to be settled within 12 months are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Long term benefits provisions that are not expected to be settled within 12 months, and are measured as the present value of the
estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. Consideration
is given to the expected future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date to estimate the future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money.
Regardless of the expected timing of settlement, provisions made in respect of employee benefits are classified as a current liability
unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date, in which case it
would be classified as a non-current liability. Provisions made for annual leave and unconditional long service leave are classified as a
current liability where the employee has a present entitlement to the benefit. A non-current liability would include long service leave
entitlements accrued for employees with less than 10 years of continuous service who do not yet have a present entitlement.
(ii) Accumulated superannuation contribution plans
Obligations for contributions to accumulated superannuation contribution plans are recognised as an expense as incurred.
(q) Share Based Payments
The Group may at times provide benefits to employees (including directors) and consultants of the Group in the form of share-based
payment transactions, whereby employees and consultants render services in exchange for shares or rights over shares (‘equity-settled
transactions’). The cost of these equity-settled transactions with employees and consultants is measured by reference to the fair value at
the date at which they are granted. The fair value is determined using the Black & Scholes or Monte-Carlo simulation methods. The cost
of equity-settled transactions is recognised, together with a corresponding increase in equity, over the year in which the performance
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which
the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This
opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance
conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised
for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified.
In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the
date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification
of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional
share dilution in the computation of earnings per share.
Page | 25
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(r) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of
three months or less, which are subject to an insignificant risk of changes in value.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net
of outstanding bank overdrafts.
(s) Income Tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by
the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements and are recognised for all taxable temporary differences:
Except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax
losses can be utilised:
Except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor the taxable profit or loss; and
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests and joint
ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in
the foreseeable future extent that it is probable that the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.
(t) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except:
Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authorities, in which case
the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense item as applicable; and
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
balance sheet.
Cash flows are included the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and
financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows included in
receipts from customers or payments to suppliers.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
Page | 26
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
2. FINANCIAL RISK MANAGEMENT
The Group’s principal financial instruments comprise receivables, payables, cash and short-term deposits. The Group manages its
exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the policy is to support
the delivery of the Group’s financial targets while protecting future financial security.
The main risks arising from the Group’s financial instruments are interest rate risk, credit risk and liquidity risk. The Group does not
speculate in the trading of derivative instruments. The Group uses different methods to measure and manage different types of risks to
which it is exposed. These include monitoring levels of exposure to interest rates and assessments of market forecasts for interest rates.
Ageing analysis of and monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development
of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for identification
and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified below,
including for interest rate risk, credit allowances and cash flow forecast projections.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the
basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in note
1 to the financial statements.
Risk Exposures and Responses
Market Risk
Interest rate risk
The Group’s exposure to risks of changes in market interest rates relates primarily to the Group’s cash balances. The Group constantly
analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative
financing positions and the mix of fixed and variable interest rates. As the Group has no interest bearing borrowings its exposure to
interest rate movements is limited to the amount of interest income it can potentially earn on surplus cash deposits.
At reporting date, the Group had the following financial assets exposed to variable interest rates not designated in cash flow hedges:
Security deposits
Cash and cash equivalents (interest-bearing accounts)
Net exposure
Group
2019
$
22,037
119,329
141,366
2018
$
21,929
90,801
112,730
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At the reporting date, if
interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity relating to
financial assets of the Group would have been affected as follows:
Judgments of reasonably possible movements:
Post tax profit – higher / (lower)
+ 0.5%
- 0.5%
Equity – higher / (lower)
+ 0.5%
- 0.5%
707
(707)
707
(707)
564
(564)
564
(564)
Page | 27
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
2. FINANCIAL RISK MANAGEMENT
Commodity Price and Foreign Currency Risk
The Group’s exposure to commodity price is minimal at present.
Foreign currency risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a
currency that is not the entity’s functional currency. The risk is measured, monitored and managed using cash flow forecasting. The
consolidated entity does not enter into any hedging contracts. The carrying amount of the consolidated entity’s foreign currency
denominated financials assets and financial liabilities the reporting date was minimal.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days,
including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be
predicted, such as natural disasters.
The financial liabilities the Group had at reporting date were trade payables incurred in the normal course of the business. Trade payables
were non-interest bearing and were due within the normal 30-60 days terms of creditor payments.
Maturities of financial liabilities
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting
date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Group
1 - 5
years
Less
than 1
month
$
1 - 3
3 months
months
- 1 year
$
$
5+
Total
Carrying
Years
contractual
amount
cash flows
$
$
As at 31 December 2019
Non-interest bearing
Trade and other payables
302,984
-
-
Interest bearing
Borrowings
As at 31 December 2018
Non-interest bearing
282,866
15,728
15,728
Trade and other payables
355,049
Interest bearing
Borrowings
112,750
-
-
-
-
-
-
-
-
-
-
-
-
302,984
302,984
314,322
314,322
355,049
355,049
112,750
112,750
Page | 28
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
2. FINANCIAL RISK MANAGEMENT
Credit risk
Credit risk arises from the financial assets of the Group, which comprise deposits with banks, security deposits and trade and other
receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with the maximum exposure equal to
the carrying amount of these instruments. The carrying amount of financial assets included in the statement of financial position
represents the Group’s maximum exposure to credit risk in relation to those assets. The Group does not hold any credit derivatives to
offset its credit exposure.
The Group trades mainly with recognised, credit worthy third parties and as such collateral is not requested nor is it the Group’s policy to
securities it trade and other receivables. Receivable balances are monitored on an ongoing basis with the result that the Group does not
have a significant exposure to bad debts.
There are no other significant concentrations of credit risk within the Group.
Capital Management Risk
Management controls the capital of the Group in order to maximise the return to shareholders and ensure that the Group can fund its
operations and continue as a going concern.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in
response to changes in these risks and in the market. These responses include the management of expenditure, debt levels and share
and option issues.
There have been no changes in the strategy adopted by management to control capital of the Group since the prior year.
3. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
(i) Exploration expenditure
Exploration expenditure that does not form part of the cash generating units assessed for impairment has been carried forward on the
basis that exploration and evaluation activities have not yet reached a stage which permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves and active and significant operations in relation to the area are continuing. In the event
that significant operations cease and/or economically recoverable reserves are not assessed as being present, this expenditure will be
expensed to the Income Statement.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
4. SEGMENT REPORTING
The Group operated predominately as an explorer with the view to identify attractive oil and gas deposits of sufficient scale to provide
sustainable returns to shareholders.
The directors do not believe that there are any reportable segments that meet the requirements of Accounting Standard AASB 8 Segment
Reporting, on the basis that the chief operating decision maker, being the Board of Directors, review geological results and other
qualitative measures as a basis for decision making. Financial results are reviewed on a consolidated group basis.
Types of products and services
The Group currently has no significant revenue from products or services.
Major customers
The Group has no reliance on major customers.
Geographical areas
The Group’s exploration assets were located in the United States and Australia during the year ended 31 December 2019.
Page | 29
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
5. REVENUE
Interest income
Total
6. EXPENSES
Loss from continuing operations before income tax has been determined after including
superannuation expense as follows:
Directors Superannuation
Employee Superannuation
Total
7. INCOME TAX
The prima facie income tax benefit on pre-tax accounting loss from operations reconciles
to the income tax benefit in the financial statements as follows:
Loss before tax
Income tax benefit calculated at 27.5% (2018: 27.5%)
Effect of expenses that are not deductible in determining taxable profit
Temporary differences and tax losses in the current year for which no deferred tax asset has
been brought to account
Income tax benefit
Deferred tax assets:
Group
Group
2018
$
2,416
2,416
2018
$
7,017
6,229
13,246
2019
$
112
112
2019
$
15,456
10,908
26,364
Group
2019
$
2018
$
(1,723,807)
(1,156,287)
(474,047)
79,189
394,858
(317,979)
28,359
289,620
-
-
Deferred tax assets not brought to account arising from tax losses, the benefits of which will
only be realised if the conditions for deductibility set out in Note 1(r) occur:
7,238,476
7,058,692
Page | 30
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
8. CASH AND CASH EQUIVALENTS
Cash at bank
9. TRADE AND OTHER RECEIVABLES
Current
Other Receivables
10. PLANT AND EQUIPMENT
Non-Current
Computer equipment
Less: Accumulated depreciation
Reconciliations of movements:
Opening Balance
Additions
Depreciation expense
Closing Balance
11. INVESTMENT IN CONTROLLED ENTITIES
Cydonia Resources Pty Ltd
Norwest Hydrocarbons Pty Ltd
Surat Resources Pty Ltd
Red Sky NT Pty Ltd
Summerland Way Energy Pty Ltd
Red Sky Gold Nugget LLC
Group
Group
Group
2019
$
119,329
2019
$
22,846
2019
$
5,572
(3,356)
2,216
4,073
-
(1,857)
2,216
Ownership Interest
Country of Incorporation
Australia
Australia
Australia
Australia
Australia
United States
2019
%
-
-
-
100
100
100
2018
$
90,801
2018
$
19,788
2018
$
5,572
(1,499)
4,073
1,406
3,755
(1,088)
4,073
2018
%
100
100
100
100
100
100
Page | 31
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
12. OTHER FINANCIAL ASSETS
Security deposits
13. EXPLORATION AND EVALUATION ASSETS
Opening balance
Additions
Foreign exchange movement
14. BORROWINGS
Director loans (refer Note 19)
Loan for insurance funding
Group
Group
2018
$
21,929
2018
$
917,819
14,669
115,345
2019
$
22,037
2019
$
1,047,833
62,226
6,035
1,116,094
1,047,833
Group
2019
$
275,000
39,322
314,322
2018
$
90,000
22,550
112,550
Page | 32
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
15. ISSUED CAPITAL
(a) Share Capital
Ordinary shares
Group
2019
$
2018
$
1,626,183,277 fully paid ordinary shares (31 December 2018: 823,208,794)
39,967,552
38,302,284
Movements during the year:
Beginning of year - 823,208,794 fully paid ordinary shares (2017: 608,727,909)
38,302,284
37,495,890
Shares issued during the prior year
133,304,483 shares issued to creditors
66,670,000 shares issued related to finance costs
100,000,000 shares issued related to exploration acquisition costs
190,000,000 shares issued @ $0.0018
313,000,000 shares issued @ $0.0025
Equity Raising Expenses
-
281,948
100,000
180,000
342,000
782,500
(21,180)
883,174
-
-
-
-
-
(76,780)
39,967,552
38,302,284
(b) Options
Expiry Date
30/11/2019
Total
Exercise Price
(cents)
Number on issue –
2018
Issued during year
Lapsed during
year
Exercised
during year
Number on issue -
2019
1.00
280,809,480
280,809,480
-
-
(280,809,480)
(280,809,480)
-
-
-
-
The above Options lapsed during the year at the expiry date of 30 November 2019.
Page | 33
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
(c) Performance Rights
Expiry Date
Fair Value per
Right (cents)
Amount
expensed $
Recipients
Issued during
year
Lapsed during
year
Number on issue
at year end
11/9/2020
11/9/2023
11/9/2023
11/9/2023
n/a
1/6/2020
1/12/2020
Total
Non-Executive
Directors
A Knox - Tranche 1
A Knox - Tranche 2
A Knox - Tranche 3
-
-
-
-
A Knox
120,000,000
Employee
Employee
10,000,000
10,000,000
140,000,000
-
-
-
-
-
-
-
-
30,000,000
10,000,000
10,000,000
10,000,000
120,000,000
10,000,000
10,000,000
200,000,000
0.25
0.25
4,098
2,049
6,147
The 120,000,000 Performance Rights issued to Mr Andrew Knox are subject to the following vesting condition:
-
The achievement of production (being production of a saleable quantity) at the Innamincka Dome Project.
The 20,000,000 Performance Rights issued to an employee are subject to the following vesting conditions:
10,000,000 vesting upon 6 months of continuous employment with the Company; and
10,000,000 vesting upon 12 months of continuous employment with the Company.
-
-
Performance Rights were issued to directors following shareholder approval on 10 September 2018 (Mr Andrew Knox 30,000,000, Mr Guy
Le Page 10,000,000, Mr Clinton Carey 10,000,000 and Mr Adrien Wing 10,000,000) as described above.
The 30,000,000 Performance Rights issued to the Non-Executive Directors are subject to the following vesting condition:
-
The achievement of production (being production of a saleable quantity) at the Innamincka Dome Project no later than 11
September 2020.
The 30,000,000 Performance Rights issued to Mr Andrew Knox in 3 tranches of 10,000,000 each are subject to the following vesting
conditions:
-
Tranche 1: The volume weighted average price (VWAP) of the Company’s shares over 14 consecutive days on which trades in
the Company’s shares are recorded meets or exceeds 0.6 cents.
Tranche 2: The VWAP of the Company’s shares over 14 consecutive days on which trades in the Company’s shares are
recorded meets or exceeds 1.2 cents.
Tranche 3: The VWAP of the Company’s shares over 14 consecutive days on which trades in the Company’s shares are
recorded meets or exceeds 2.4 cents.
-
-
The fair value of the Performance Rights granted is estimated using a Monte-Carlo model taking into account the terms and conditions
upon which the Performance Rights were granted. The model inputs used an expected volatility of 100%, and a share price at the grant
date of 0.4 cents.
* The probability of the non-market condition being met is ignored for assessing fair value. At year end it was not considered probable that
the non-market condition would be achieved and therefore no expense has been recorded for these Performance Rights.
Page | 34
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
16. RESERVES
Share based payments reserve
Foreign currency translation reserve
Opening balance
Movements during the year:
Share based payments – performance rights issued
Foreign currency translation
Group
2019
$
162,848
101,410
264,258
2018
$
156,700
95,375
252,075
252,075
49,030
6,148
6,035
264,258
87,700
115,345
252,075
Nature and purpose of reserves:
Share based payments reserve records the value of options and performance rights issued which have been taken to expenses.
Foreign currency translation reserve recognises exchange differences arising from translation of the financial statements of foreign
operations to Australian dollars.
17. LOSS PER SHARE
Reconciliation of earnings to net loss
Net loss
Calculation of basic and dilutive EPS – continued operations (cents)
Weighted average number of ordinary shares outstanding during the year used in calculation
of basic and dilutive EPS
Group
2019
$
2018
$
(1,723,807)
(1,156,287)
(0.14)
Number
(0.17)
Number
1,218,127,521
697,659,292
Page | 35
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
18. CASH FLOW INFORMATION
Reconciliation of cash flow from operations with loss from continuing operations after income tax
Loss after income tax
Non cash flows in loss:
Share based payments
Depreciation
Changes in assets and liabilities:
Increase in trade creditors and accruals
Increase in provisions
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments
Cash flows used in operating activities
GROUP
2019
$
2018
$
(1,723,807)
(1,156,287)
568,096
1,857
81,143
8,029
(3,058)
(13,282)
267,700
1,088
91,187
11,289
(13,575)
(2,492)
(1,081,022)
(801,090)
Page | 36
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
19. RELATED PARTY TRANSACTIONS
(a) Parent entity
Red Sky Energy Ltd is the parent entity.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 11.
(c) Key management personnel
Disclosures in relation to key management personnel are set out in Note 20 and the Remuneration Report in the Directors’ Report. The
transactions in the table below in Note 19 (d) do not include amounts paid to key management personnel for remuneration.
(d) Transactions with related parties
Directors and officers, or their personally-related entities, hold positions in other entities that result in them having control or significant
influence over the financial or operating policies of those entities.
Entity
RM Corporate Finance
Pty Ltd
2019
2018
Amount
$
-
60,000
Relationship
Corporate advisory services provided. RM Corporate Finance Pty Ltd
is a related entity of Mr Guy Le Page, a former director.
(e) Details of the amounts accrued but unpaid at the end of the year are as follows:
Cyprus Investments Pty Ltd (a related entity of Mr Clinton Carey) was owed $90,390 (2018: $62,133) for outstanding consulting and director fees.
Mr Guy Le Page was owed $nil (2018: $6,000) for outstanding director fees.
Mr Andrew Knox was owed $35,737 (2018: $14,235) for salary and superannuation and $nil (2018: $8,160) for outstanding consulting fees and
expenses.
Mr Gordon Ramsay was owed $7,333 (2018: $nil) for salary and superannuation.
Mr Adrien Wing was owed $84,862 (2018: $64,075) for outstanding director and company secretarial fees.
(f) Loans to/from related parties
Mr Andrew Knox provided an unsecured loan of $800,000 to the Company during the 2019 year. A loan establishment fee of $100,000 on the
loan was satisfied by the issue of shares following shareholder approval on 15 May 2019. There is no repayment date on the loan. Interest is
charged at 10% per annum. An amount of $525,000 was repaid during the year. The loan balance owing at 31 December 2019 was $275,000
and interest owing of $6,875.
Mr Andrew Knox and Mr Adrien Wing provided an unsecured loan of $30,000 each (total of $60,000) to the Company during the 2019 year.
There was no repayment date on the loans. Interest was charged at 10% per annum. These loans were repaid in full during the 2019 year.
Mr Andrew Knox, Mr Clinton Carey and Mr Adrien Wing provided an unsecured loan of $30,000 each (total of $90,000) to the Company during
the 2018 year. There was no repayment date on the loans. Interest was charged at 10% per annum. These loans were repaid in full during the
2019 year.
(g) Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Page | 37
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
20. KEY MANAGEMENT PERSONNEL DISCLOSURES
Details of the names and positions of key management personnel and their remuneration are provided in the remuneration report in the
Directors’ Report. Summary disclosures are as follows:
Key Management Personnel Compensation
Short-term employee benefits
Post employee benefits
Share-based payments
Total
21. REMUNERATION OF AUDITORS
Group
2019
$
460,780
15,456
-
476,236
2018
$
339,280
7,017
87,700
433,997
GROUP
2019
$
2018
$
Amounts received or due and receivable by RSM Australia Partners for:
Audit and audit review services
39,633
38,460
22. COMMITMENTS AND CONTINGENCIES
The consolidated entity has no commitments or contingencies.
23. EVENTS SUBSEQUENT TO BALANCE DATE
On 20 January 2020, the Chinese Government announced an outbreak of novel coronavirus (COVID-19) in the city of Wuhan in Hubei
Province. The outbreak was declared a pandemic by the World Health Authority on 11 March 2020. The COVID-19 outbreak has had a
significant impact on global oil and gas markets. The future impacts of this pandemic on the operations and results of the Company is
uncertain.
No other matters or circumstances have arisen since 31 December 2019 that have significantly affected, or may significantly affect the
group’s operations, the results of those operations, or the group’s state of affairs in future financial years.
24. NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting
periods. The group’s assessment of the impact of applicable new standards and interpretations is there will be no significant impact.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
Page | 38
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
25. PARENT ENTITY DISCLOSURES
(a) Summary financial information
Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share based payments reserve
Accumulated losses
Total equity
Financial Performance
Loss for the year
Other comprehensive income
Total comprehensive income
(b) Guarantees
Parent
2019
$
2018
$
198,629
1,060,682
1,259,311
636,624
-
636,624
153,550
1,000,205
1,153,755
478,888
55,000
533,888
622,687
619,867
39,967,552
38,302,284
162,848
156,700
(39,507,713)
(37,839,117)
622,687
619,867
(1,668,596)
(1,156,287)
-
-
(1,668,596)
(1,156,287)
Red Sky Energy Limited has not entered into any guarantees in relation to the debts of its subsidiaries.
(c) Other Commitments and Contingencies
Red Sky Energy Limited has no commitments to acquire property, plant and equipment, and has no contingent liabilities.
Page | 39
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
DIRECTORS’ DECLARATION
The directors of the company declare that:
1.
the financial statements and notes, as set out on pages 17 to 39, and the remuneration disclosures contained within
the Remuneration Report, are in accordance with the Corporations Act 2001 and:
a)
b)
c)
give a true and fair view of the financial position of the group as at 31 December 2019 and of its performance
for the year ended on that date;
comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
the financial statements also comply with International Financial Reporting Standards as disclosed in Note
1(a)(i)
2.
the Chief Executive Officer and Chief Finance Officer have each declared that:
a)
b)
c))
the financial records of the company for the financial year have been properly maintained in accordance with
s 286 of the Corporations Act 2001;
the financial statements and notes for the financial year comply with the Accounting Standards; and
the financial statements and notes for the financial year give a true and fair view;
3.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Andrew Knox
Managing Director
Melbourne, Victoria
27 March 2020
Page | 40
INDEPENDENT AUDITOR’S REPORT
To the Members of Red Sky Energy Limited
Opinion
We have audited the financial report of Red Sky Energy Limited (the Company) and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 31 December 2019, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the financial year then ended, and notes to the financial statements,
including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group's financial position as at 31 December 2019 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Page | 41
Material Uncertainty Related to Going Concern
We draw attention to Note 1 (a) (iv) in the financial report, which indicates that the Group incurred a net loss of
$1,723,807 and had net cash outflows from operating activities of $1,081,022 during the year ended 31 December
2019 and as at that date, the Group had net current liabilities amounting to $437,995. As stated in Note 1(a) (iv),
these conditions, along with other matters as set forth in Note 1 (a) (iv), indicate that a material uncertainty exists
that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified
in respect of this matter.
Emphasis of Matter
We draw attention to Note 23 of the financial report, which describes the effects on the operations of the company
of the COVID-19 virus. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report 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
How our audit addressed this matter
Carrying value of capitalised Exploration and evaluation assets
Refer to Note 13 in the financial statements
The Group has capitalised exploration expenditure
with a carrying value of $1,391,094. We determined
this to be a key audit matter because capitalised
exploration expenditure represents 86% of the total
assets and due to the significant management
judgment involved in assessing the carrying value
in accordance with AASB 6 Exploration for and
Evaluation of Mineral Resources, including:
• Determination of whether expenditure can be
associated with finding specific mineral
resources, and the basis on which that
expenditure is allocated to an area of interest.
• Assessing whether any indicators of
impairment are present, and if so, judgments
applied to determine and quantify any
impairment loss.
• Determination of whether exploration activities
have progressed to the stage at which the
existence of an economically recoverable
mineral reserve may be assessed.
Our audit procedures in relation to the carrying value
of exploration and evaluation assets included:
• Gaining an understanding of management’s
ongoing exploration plans and short-term
budgeted expenditure;
• Discussing with management the status of work
undertaken and planned;
• Assessing and evaluating management’s
assessment that no indicators of impairment
existed in relation to this asset;
• Agreeing a sample of the additions to Exploration
and evaluation assets during the financial year to
supporting documentation, and ensuring that the
capitalised amounts were capital in nature and in
line with the Group’s accounting policy; and
• Corroborating the accuracy of the translation of
the asset from USD to AUD.
Page | 42
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Company's annual report for the year ended 31 December 2019; but does not include the financial report
and the auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
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.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group 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 Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is 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 the Australian Auditing Standards 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 this
financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This
description forms part of our auditor's report.
Page | 43
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 15 of the directors' report for the year ended
31 December 2019.
In our opinion, the Remuneration Report of Red Sky Energy Limited for the year ended 31 December 2019,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
Dated: 27 March 2020
Melbourne, Victoria
Page | 44
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
SHAREHOLDER INFORMATION
TWENTY LARGEST SHAREHOLDERS
SHAREHOLDERS (Fully Paid Ordinary) 23 March 2020
NUMBER OF
SHARES
Percentage
CASHMERE DELL PTY LTD
111,904,281
ABACUS ENTERPRISES PTY LTD
MR MAVRODIS NESTOR
MRS MARGARET ANNE GILL
CYPRUS INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LTD
NORTHERN STAR NOMINEES PTY LTD
SCINTILLA STRATEGIC INVESTMENTS LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LTD
MR SEONG YUN KANG
MR MARK SIMON NAYTON
NESTOR FAMILY SUPERANNUATION PTY LTD
CLEANWEST PROPERTY SERVICES PTY LTD
QUITO SF PTY LTD
MR RAYMOND JOHN COLLINS
MR IAN DAVIS + MRS SUSAN DAVIS
AMBER PLUS PTY LTD
MR GAVIN MICHAEL JAMES
MR BRODIE ROYDEN YULL
SIRROM SUPER PTYLTD
TOP 20 SHAREHOLDERS
TOTAL ISSUED SHARES
84,442,222
70,000,000
70,000,000
51,544,933
49,815,378
40,396,111
40,000,000
32,012,920
30,479,106
30,000,000
30,000,000
25,000,000
20,000,000
19,444,444
18,000,000
16,753,121
16,000,000
15,056,000
14,384,828
6.88
5.19
4.30
4.30
3.17
3.06
2.48
2.46
1.97
1.87
1.84
1.84
1.54
1.23
1.20
1.11
1.03
0.98
0.93
0.88
785,233,344
1,626,183,277
48.29
100%
Distribution schedule of the number of fully paid ordinary shareholders in each class of equity security.
By Class
1 – 1,000
1,001 - 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
Holder of Ordinary shares
Number of Ordinary shares
Percentage
639
689
220
417
585
2,550
321,875
1,800,361
1,742,654
14,495,274
1,607,823,113
1,626,183,277
0.02
0.11
0.11
0.89
98.87
100 %
Page | 45
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
ADDITIONAL SHAREHOLDER INFORMATION
A. CORPORATE GOVERNANCE
Refer to the Company’s Corporate Governance Statement at www.redskyenergy.com.au
B. SHAREHOLDING
1.
Substantial Shareholders
Cashmere Dell Pty Ltd has registered a relevant interest of 8.08% (89,904,281 shares).
Abacus Enterprises Pty Ltd has registered a relevant interest of 6.74% (84,442,222 shares).
Mr Mavrodis Nestor has registered a relevant interest of 5.61% (91,420,000 shares).
2.
Unquoted Securities
There are no unlisted Options present.
3.
Number of holders in each class of equity securities and the voting rights attached.
At the general meeting, every ROG shareholder present in person or by proxy, representative or attorney has one vote on a show of
hands and on a poll, one vote for each share (which is fully paid). There are 2,550 holders of fully paid ordinary shares. The Company has
no partly paid shares on issue.
4.
Marketable parcel
There were 2,195 Shareholders with less than a marketable parcel as at 23 March 2020.
Page | 46
Red Sky Energy Ltd
For the year ended 31/12/2019
ABN 94 099 116 275
C. OTHER DETAILS
1.
Company Secretaries
Mr Adrien Wing
Ms Pauline Moffatt
2.
Address and telephone details of the entity’s registered and administrative office
The address and telephone details of the registered and administrative office:
Level 17, 500 Collins Street
Melbourne VIC 3000
Telephone: + (61) 03 9614 0600
Facsimile: + (61) 03 9614 0550
3.
Address and telephone details of the office at which a register of securities is kept
The address and telephone number of the office at which a registry of securities is kept:
Advanced Share Registry
110 Stirling Highway
Nedlands WA 6009
Telephone: + (61) 08 9389 8033
Facsimile: + (61) 08 9262 3723
4.
Stock exchange on which the Company’s securities are quoted
The Company’s listed equity securities are quoted on the Australian Stock Exchange.
5.
Restricted Securities
The Company has no restricted securities on issue.
Page | 47