ISLE OF MAN ‐ COMPANY NUMBER 6969V
ENGLAND AND WALES ‐ COMPANY NUMBER FC022829
TomCo Energy plc
Annual report and financial statements 2012
Board of Directors and Company Information
Isle of Man
Company number
6969V
England and Wales
FC022829
Country of incorporation
Isle of Man
Board of Directors
Sir Nicholas Bonsor – non executive chairman
Paul Rankine – chief executive officer
Miikka Haromo – finance director
Secretary and Registered Office
Stuart J Adam CPFA, Chartered MCSI
2nd Floor
Sixty Circular Road
Douglas
Isle of Man IM1 1SA
Nominated adviser and broker
NUMIS Securities Ltd
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Registrars
Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Solicitors
Wallace LLP
1 Portland Place
London W1B 1PN
Bankers
Investec Bank
2 Gresham Street
London EC2V 7QP
Barclays Bank plc
Park House
Newbrick Road
Stoke Gifford
Bristol BS3Y 8ZJ
Wachovia Bank NA
1525 West W.T. Harris Boulevard
Charlotte
NC 28262
USA
2
Directors’ report
The Directors submit their report and the financial statements of the Company and of the Group for the year ended
30 September 2012.
Principal activity
The principal activity of the Group is that of developing oil shale leases for future production.
Risk assessment
The Group’s oil and gas activities are subject to a range of financial and operational risks which can significantly impact
on its performance.
Operational risk
The Group has entered into a license with Red Leaf Resources Inc, which owns the EcoShale™ extraction process, to use this
unique and environmentally sensitive technology to extract oil from the Group’s leases. Having built and tested a small pilot
plant, Red Leaf is now planning production with a full scale plant producing 9,800 barrels of oil per day (bopd). The technology
produced by Red Leaf is currently unique within the marketplace and until extraction commences, the viability of this technology
will not be determinable. Once the viability of this technology has been determined, the Group intends to build and operate a
similar EcoShale™ plant on its Holliday Block lease,
Liquidity and interest rate risks
Cash forecasts identifying the liquidity requirements of the Group are produced frequently. These are reviewed regularly
by management and the Board to ensure that sufficient financial headroom exists for at least a twelve month period. This
strategy will continually be reviewed in the light of developments with existing projects and new project opportunities as they
arise.
Currency risk
Due to the limited income and expenses denominated in foreign currencies, it was not considered cost effective to manage
transactional currency exposure on an active basis. However, as the financial statements are reported in sterling and the
Group’s revenue and the majority of its exploration costs are in US dollars, movements in the exchange rate of the US dollar
against sterling may significantly affect the Group’s statements of comprehensive income and financial position.
Financial instruments
It was not considered an appropriate policy for the Group to enter into any hedging activities or trade in any financial instruments.
Further information can be found in Note 12.
Results and dividends
The statement of comprehensive income is set out on page 8. The Directors do not propose the payment of a dividend (2011:
£Nil).
The Group made no charitable or political donations in the year (2011: £Nil).
Review of the key events during the year and post reporting date
Financing
On 28 January 2013, the Group announced it had entered into a Liquidity Facility Agreement and an associated Promissory
Note (together the “Liquidity Facility”) with Windsor Capital Partners Limited (“Windsor Capital”). Under the Liquidity Facility
TomCo has issued and allotted 100 million ordinary shares of 0.5p each (“Ordinary Shares”), representing an increase of 6% on
the then current number of shares in issue, to Windsor Capital in exchange for the Promissory Note. The Liquidity Facility allows
the Company to access capital using the natural liquidity that is available in the Company’s shares in a more cost-effective
manner than a traditional equity line product (Note 23).
On 7 March, the Group announced that it had successfully raised £1.781 million, before expenses, through a share placing of
148,406,526 new ordinary shares of 0.5p each at a price of 1.2p per share. The Placing was supported by a number of new
financial institutions as well as other existing shareholders. The gross proceeds from the Placing are to be used by TomCo for
advancing permitting required for commercial production at the Company’s Holliday project and for general working capital
purposes.
Oil Shale
During the year the Group announced that SRK Consulting (UK) Limited (“SRK”) had reviewed recent work carried out by
TomCo on the Company’s Holliday Block and issued an updated mineral resource statement. In doing this, SRK upgraded the
123 million barrels previously reported in the Indicated category to 126 million barrels in the measured category.
SRK’s Mineral Resource Estimate has been reported using the terms and definitions defined in the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves, (the JORC Code). It also includes mineralisation in the
Four Senators, Upper and Lower Mahogany Zones and Mahogany Bed within the Holliday Block and mineralisation in the
Mahogany Zone outside of the Holliday Block, which now has an Inferred Resource of a further 12 million barrels.
3
Directors’ report
The analysis is based on information from 9 drill holes and 732 assays. The drilling and assaying was coordinated and
supervised by SRK and the results are now supported by a programme of check assays completed during 2012. The oil shale
horizons are continuous across the TomCo licence area and dip gently to the northwest.
Within the reporting period the Group also announced that it had commenced measures to secure the necessary approvals and
permits required for commercial production by appointing EPIC Engineering (“EPIC”) to prepare a ‘Waters of the United States
Jurisdictional Assessment’ report. A draft of this was received from EPIC and the Group later submitted the final report to the
United States Army Corps of Engineers, to determine the environmental permitting route the Company would be required to
take in order to comply with all state requirements.
The United States Army Corps of Engineers has subsequently issued the Group a nationwide 401 permit so the Group will need
to prepare an Environmental Assessment (“EA”) under Utah state environmental law and not an Environmental Impact
Statement (“EIS”) under United States federal environmental law. The EA is a far more expedient and economic option to
prepare than an EIS. The Directors believe that the Utah government is supportive of the development of oil shale in the state,
which should aid the EA process.
TomCo will also submit the same EPIC report to the Utah Division of Water Quality (“DWQ”) as part of its base line assessment,
which is required for the DWQ to approve a Groundwater Discharge Permit.
Red Leaf’s focus is on executing the Early Production System (‘EPS’) phase of its joint venture with Total. The goal of the EPS
is the construction of a large scale capsule. Questerre Energy Corporation has reported that capsule construction is planned for
late 2013 with first oil expected in 2014.
Directors
Directors who served on the Board during the year to 30 September 2012 were as follows:
N Bonsor
S A Komlosy (resigned 6 March 2012)
Paul Rankine
Miikka Haromo
Directors’ interests in the shares of the Group, including family interests, were as follows:
S A Komlosy (resigned 6 March 2012)
N Bonsor *
M Haromo**
P Rankine
30 September 2012
30 September 2011
Ordinary
0.5 pence
Ordinary
Share
0.5 pence
shares
warrants
shares
Share
warrants
-
-
-
1,295,301
-
25,250,000
10,000,000
2,278,647
7,595,492
-
-
-
-
2,278,647
7,595,492
-
1,295,301
9,874,139
25,250,000
19,874,139
Details of the share warrants can be found in note 20.
*Sir Nicholas Bonsor has an option to acquire 10 million Ordinary Shares from Kenglo One Limited at a price of 3p per Ordinary
Share. The option period commenced on 1 April 2010 and ends on 31 March 2013.
** Miikka Haromo has an option to acquire 15 million Ordinary Shares from Kenglo One Limited at a price of 3p per Ordinary
Share. The option period commenced on 21 July 2012 and ends on 31 December 2014.
Payments of payables
The Group’s policy is to negotiate payment terms with its suppliers in all sectors to ensure that they know the terms on which
payment will take place when the business is agreed and to abide by those terms of payment.
The Group’s payment days as at 30 September 2012 for trade payables was 23 days (2011: 36 days).
4
Directors’ report
Going concern
The Directors are confident that the Group has sufficient funds to meet its working capital requirements and commitments for a
period of not less than twelve months from the date of signing of these financial statements. The Group’s working capital and
commitments are closely monitored by the directors and monthly forecasts are prepared in order to ensure that the Group has
cash available to meet planned development expenditure. There are no contractual commitments for minimum development
spend within any of the Group’s licences and therefore the pace of development of the asset can be adjusted within the
availability of cash resources to contract with the relevant consultants. As a result of the review performed by the directors, the
monitoring of the cash position and the forecast cash at the end of the twelve month period under review from the date of signing
the directors have confirmed that it is appropriate for the financial statements to be prepared on the going concern basis.
Insurance of key management
The Group maintains Directors’ and officers’ liability insurance cover for TomCo Energy Plc’s Directors in respect of their
duties as Directors of the Group.
Directors’ responsibilities
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the
financial position of the company and Group and enable them to ensure that the financial statements comply with the
requirements of the Isle of Man Companies Act 2006. They are also responsible for taking steps for the prevention and
detection of fraud and other irregularities.
The Directors are also required to prepare financial statements for the Group in accordance with International Financial
Reporting Standards.
International Accounting Standard 1 requires that financial statements present fairly for each financial year the Group's financial
position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other
events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set
out in the International Accounting Standards Board's 'Framework for the preparation and presentation of financial statements'.
In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. A fair presentation also
requires the directors to:
consistently select and apply appropriate accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information; and
provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial
statements.
The Directors confirm that they have complied with these requirements, and, having a reasonable expectation that the Group
has adequate resources to continue in operational existence for the foreseeable future and continue to adopt the going concern
basis in preparing the financial statements.
5
Directors’ report
Auditors
All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information
needed by the Company's auditors for the purposes of their audit and to establish that the auditors are aware of that information.
The Directors are not aware of any relevant audit information of which the auditors are unaware.
The external auditors are required to rotate the Senior Statutory Auditor responsible for the company audits every five years. In
certain circumstances, it is permissible to extend that tenure by up to two years. The board believes that due to significant
strategic change the group has undergone over the last 18 months and the developments anticipated by the Group merits
having a continuity of the Senior Statutory Auditor that this extension provides.
BDO LLP and the Company have agreed to extend the term of the Senior Statutory Auditor for a sixth year in line with the
guidance as to how long a responsible individual may remain the Senior Statutory Auditor for a client as set out in Ethical
Standard 3 ‘Long Association with the Audit Engagement’ issued by the Audit Practices Board. There are specific provisions
relating to the extension of tenure for listed companies with which the Company complies.
BDO LLP have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the
annual general meeting.
By order of the Board
Sir Nicholas Bonsor
Non-Executive Chairman
20 March 2013
6
Independent auditors’ report
to the shareholders of TomCo Energy Plc
We have audited the financial statements of TomCo Energy plc for the year ended 30 September 2012 which comprise the
consolidated statement of comprehensive income, the consolidated and company statement of financial position, the
consolidated and company statement of changes in equity, the consolidated and company statement of cash flows and the
related notes. The financial reporting framework that has been applied in their preparation is applicable Isle of Man company
law and International Financial Reporting Standards as adopted by the European Union (IFRS).
This report is made solely to the Company’s members as a body, in accordance with Section 80C of the Isle of Man
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company, and the Company’s members as a body for our audit
work, for this report, or for the opinion we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable Isle of Man company law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of
www.frc.org.uk/apb/scope/private.cfm
the scope of an audit of
Opinion on the financial statements
In our opinion the financial statements:
financial statements
is provided on
the APB’s website at
•
•
give a true and fair view of, in all material respects the state of the company’s affairs as at 30 September 2012
and of its loss for the year then ended; and
have been properly prepared in accordance with International Financial Reporting Standards as adopted by the
European Union.
BDO LLP
Chartered Accountants
London
United Kingdom
20 March 2013
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
7
Consolidated statement of comprehensive income
for the financial year ended 30 September 2012
2012
2011
Note
£’000
£’000
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating loss
Finance income
Finance costs
Derivative expense
Loss on ordinary activities before taxation
Taxation
Loss for the year attributable to equity
shareholders of the parent
Total comprehensive loss attributable to equity
shareholders of the parent
Loss per share attributable to the equity
shareholders of the parent
Basic & diluted loss per share from total and
continuing operations
2
2
5
3
4
4,16
6
13
(4)
9
(1,013)
(1,004)
1
(9)
(556)
(1,568)
-
(1,568)
16
(5)
11
(1,687)
(1,676)
131
(356)
(295)
(2,196)
-
(2,196)
(1,568)
(2,196)
2012
Pence
2011
Pence
per share
per share
8
(0.10)
(0.25)
The Company has elected to take exemption under the Companies Act not to present the parent company’s statement of
comprehensive income. The loss for the parent company for the year was £1,530,787 (2011: £2,248,251).
8
Consolidated and Company Statement of Financial Position
as at 30 September 2012
Group Company
2012
2012
Group
Company
2011
2011
Note
£’000
£’000
£’000
£’000
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment in subsidiaries
Available for sale financial assets
Current assets
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
Convertible loan
Derivative liability
Net current assets
Non current liabilities
Other liabilities
TOTAL LIABILITIES
Total net assets
Shareholders’ equity
Share capital
Share premium
Warrant reserve
Retained deficit
Total equity
9
10
11
12
13
14
15
16
16
15
18
19
20
8,095
1,314
7,945
9
-
3,262
9
6,781
3,262
13
-
-
1,314
13
6,631
-
11,366
11,366
7,958
7,958
52
411
463
52
396
448
11,829
11,814
(41)
(41)
-
-
(41)
422
-
(41)
-
-
(41)
407
-
(41)
202
1,363
1,565
9,523
(327)
(888)
(295)
202
1,348
1,550
9,508
(327)
(888)
(295)
(1,510)
(1,510)
55
-
40
(37)
(1,510)
(1,547)
11,788
11,773
8,013
7,961
8,105
8,105
13,629
13,629
361
361
6,555
10,573
492
6,555
10,573
492
(10,307)
(10,322)
(9,607)
(9,659)
11,788
11,773
8,013
7,961
The accounts on pages 8 to 28 were approved and authorised for issue by the Board of Directors on 20 March 2013.
Paul Rankine
Director
M Haromo
Director
9
Consolidated statement of changes in equity
for the financial year ended 30 September 2012
Group
Company
Share
capital
Share
Warrant
Retained
premium reserve
Deficit
Total
Share
capital
Share
Warrant
premium reserve
Retained
deficit
Total
Note
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Balance at 1 October 2010
3,798
7,907
928
(7,854)
4,779
3,798
7,907
928
(7,854)
4,779
Total comprehensive loss for the
year
Issue of warrants
Expired warrants
-
-
-
-
-
-
Issue of share capital
18,19
2,757
2,666
-
7
(443)
-
(2,196)
(2,196)
-
443
7
-
-
-
-
-
-
-
-
5,423
2,757
2,666
-
7
(443)
-
(2,248)
(2,248)
-
443
7
-
-
5,423
Balance at 30 September 2011
6,555
10,573
492
(9,607)
8,013
6,555
10,573
492
(9,659)
7,961
Total comprehensive loss for the
year
Warrants exercised and expired
Issue of share capital
Conversion of loan
20
18,19
18,19
-
173
872
505
-
-
(1,568)
(1,568)
347
(131)
2,205
504
-
-
131
-
737
520
3,077
1,746
-
173
872
505
-
-
(1,531)
(1,531)
347
(131)
2,205
504
-
-
131
-
737
520
3,077
1,746
At 30 September 2012
8,105
13,629
361
(10,307)
11,788
8,105
13,629
361
(10,322)
11,773
The following describes the nature and purpose of each reserve within owners' equity:
Reserve
Descriptions and purpose
Share capital
Amount subscribed for share capital at nominal value.
Share premium
Amount subscribed for share capital in excess of nominal value.
Warrant reserve
Amounts resulting from the issue of warrants.
Retained deficit
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
10
Consolidated and company statements of cash flows.
for the financial year ended 30 September 2012
Note
Group
Company
Group Company
2012
£’000
2012
2011
£’000
£’000
2011
£’000
Cash flows from operating activities
Loss after tax
Depreciation
Share-based payments
Non-cash transactions settled as shares
Finance income
Finance costs
Decrease/(increase) in trade and other
receivables
2
10
20
18
3
4
13
(Decrease)/increase in trade and other payables
15/18
Cash used in operations
Cash flows from investing activities
Purchase of technology licence
Investment in oil & gas assets
Direct costs incurred in purchase of available for
sale financial assets
Purchase of available for sale financial assets
Net cash used in investing activities
Cash flows from financing activities
9
9
12
12
(1,568)
(1,531)
(2,196)
(2,248)
4
-
120
(1)
565
150
(246)
(976)
-
(150)
(114)
(190)
(454)
4
-
120
(1)
565
150
4
7
-
(131)
651
(164)
4
7
-
(131)
651
(164)
(283)
109
151
(976)
(1,720)
(1,730)
-
(150)
(114)
(190)
(454)
(647)
(249)
(647)
(249)
-
-
-
-
(896)
(896)
Issue of share capital
18,19
478
478
3,435
16
16
16
-
-
-
478
(952)
1,000
3,435
1,000
(1,000)
(1,000)
(68)
(68)
-
-
-
478
3,367
3,367
(952)
751
741
Proceeds from issue of loan note
Loan repayment
Loan interest paid
Net cash generated from financing activities
Net (decrease)/ increase in cash and cash
equivalents
Cash and cash equivalents at beginning of
financial period
Cash and cash equivalents at end of financial
period
1,363
1,348
612
607
411
396
1,363
1,348
11
Notes to the financial statements
for the financial year ended 30 September 2012
1.
Accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise stated.
1.1
Basis of preparation
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations and with those parts of the Isle of Man
Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the
historic cost convention modified by the revaluation of certain financial instruments to fair value including derivatives and
available for sale financial assets.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the
reporting amounts of assets and liabilities at the date of the financial statements and the reported amount of revenue and
expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount,
event or actions, actual results ultimately may differ from those estimates. Details of the Group’s significant accounting
judgments and critical accounting estimates are set out in these financial statements and include:
- Commercial reserves estimates; (see Note 9)
- Impairment of intangible assets (Note 9);
- Convertible Loan Note - The carrying value of the derivative financial instrument in the Statement of Financial Position is
derived from a valuation model. Assumptions used in this model are subject to inherent uncertainties and may change
significantly if the volatility in the Company’s share price changes (see Note 16).
- Share based payments (Note 20);
- Available for sale financial assets (Note 12)
The Group has consistently applied all applicable accounting standards.
The Directors are confident that the Group has sufficient funds to meet its working capital requirements and commitments for a
period of not less than twelve months from the date of signing of these financial statements. The Group’s working capital and
commitments are closely monitored by the directors and monthly forecasts are prepared in order to ensure that the Group has
cash available to meet planned development expenditure. There are no contractual commitments for minimum development
spend within any of the Group’s licences and therefore the pace of development of the asset can be adjusted within the
availability of cash resources to contract with the relevant consultants. As a result of the review performed by the directors, the
monitoring of the cash position and the forecast cash at the end of the twelve month period under review from the date of signing
the directors have confirmed that it is appropriate for the financial statements to be prepared on the going concern basis.
1.2
Future changes in accounting standards
The IFRS financial information has been drawn up on the basis of accounting standards, interpretations and amendments
effective at the beginning of the accounting period.
There were no new standards, interpretations and amendments to published standards effective in the year which had a
significant impact on the Group.
Standards, Interpretations and amendments, which are effective for future reporting periods:
International Accounting Standards (IAS/IFRS)
IAS 12
IAS 1
IAS 19
IFRS 13
IAS 1
IFRS 10
IFRS 11
IFRS 12
IAS 32
IFRS 9
Deferred Tax: Recovery of Underlying Assets
Amendment - Presentation of Items of Other Comprehensive Income
Employee Benefits
Fair Value Measurement
Annual Improvements to IFRSs (2009 - 2011 cycle)
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Offsetting Financial Assets and Financial Liabilities
Financial instruments
These standards are not expected to have a material impact on future financial statements.
Effective date
(periods beginning
on or after)
1 Jan 2012
1 July 2012
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jan 2014
1 Jan 2014
1 Jan 2014
1 Jan 2014
1 Jan 2015
12
Notes to the financial statements
for the financial year ended 30 September 2012
1.3
Basis of consolidation
The Group accounts consolidate the accounts of the parent company, TomCo Energy Plc, and all its subsidiary undertakings
drawn up to 30 September 2012. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
The acquisition of subsidiaries is accounted for on the purchase basis. A subsidiary is consolidated where the Company has the
power, either directly or indirectly, to govern the financial and operating activities of another entity or business, so it is able to
obtain benefits from its activities. On acquisition all the subsidiary’s assets and liabilities which existed at the date of acquisition
are recorded at their fair values reflecting their condition at the time. If, after re-assessment, the Group’s interest in the net fair
value of the identifiable assets liabilities and contingent liabilities exceeds the cost of the business combination, the excess is
recognised immediately in the statement of comprehensive income.
1.4
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision maker has been identified as the management team including the Chief Executive Officer,
and the Finance Director.
Based on an analysis of risks and returns, the Directors consider that the Group has one principle business segment based on
geographical location. The Group’s revenue arises within the US. The profit /(loss) before taxation arises within the UK and US.
Net assets are in the UK and the US.
1.5
Revenue
Turnover represents the Group’s share of sales of oil during the year, excluding sales tax and royalties. Income arises from the
US and is recognised when the oil is delivered to the customer, and is net of taxes and royalty interests.
1.6
Finance income
Finance income is accounted for on an effective interest basis.
1.7
Property, plant and equipment
Office fixtures, fittings and equipment are stated at cost of purchase. Depreciation of office fixtures, fittings and equipment is
provided at 33.3% straight line per annum on cost.
Oil & Gas development and production assets are accumulated on a field-by-field basis and represent the cost of developing the
commercial reserves discovered and bringing them into production, together with any decommissioning asset. They are
presented as oil properties in Note 9.
The net book values of producing assets are depreciated on a field-by-field basis using the unit of production method by
reference to the ratio of production in the period to the related commercial reserves of the field, taking into account estimated
future development expenditures necessary to bring those reserves into production.
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable. Impairments are charged to administrative expenses within the statement of
comprehensive income.
1.8
Intangible assets
The Company applies the full cost based method of accounting for oil and gas operations. For evaluation properties, all lease
and licence acquisition costs, geological and geophysical costs and other direct costs of exploration appraisal and development
are capitalised as intangible fixed assets in appropriate cost pools. Costs relating to unevaluated properties are held outside the
relevant cost pool, and are not amortised until such time as the related property has been fully appraised. When a cost pool
reaches an evaluated and bankable feasibility stage, the assets are transferred from intangible to oil properties within property,
plant and equipment.
Depreciation is not charged on the technology licences as the technology is not yet available for use. The technology produced
by Red Leaf is currently unique within the marketplace and until extraction commences, the viability of this technology will not be
determinable.
1.9
Impairment
An impairment test on intangible assets is performed whenever events and circumstances arising during the development or
production phase indicate that the carrying value of a development or production asset may exceed its recoverable amount. The
aggregate carrying value is compared against the expected recoverable amount of the cash generating unit, generally by
reference to the present value of the future net cash flows expected to be derived from production of commercial reserves. The
cash generating unit applied for impairment test purposes is generally the field, except that a number of field interests may be
grouped as a single cash generating unit where the cash flows of each field are interdependent.
13
Notes to the financial statements
for the financial year ended 30 September 2012
1.10
Asset disposals
Proceeds from the disposal of an asset, or part thereof, are taken to the statement of comprehensive income together with the
requisite net book value of the asset, or part thereof, being sold.
1.11
Taxation
Taxation expense represents the sum of current tax and deferred tax.
Current tax is based on taxable profits for the financial period using tax rates that have been enacted or substantively enacted
by the reporting date. Taxable profit differs from net profit as reported in the statement of comprehensive income because it
excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes. If deferred tax arises from initial recognition
of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit nor loss, it is not accounted for. Deferred tax is determined using tax rates that have been enacted
or substantively enacted at the reporting date and are expected to apply when the related deferred income tax asset is realised
or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing
of the reversals of the temporary differences is controlled by the Group and it is probable that the temporary differences
will not reverse in the foreseeable future.
Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity.
1.12
Foreign currencies
The accounts have been prepared in pounds sterling being the presentational currency of the Group and Company. The
functional currency of the holding Company is also pounds sterling. Assets and liabilities held in the Company or overseas
subsidiaries in US dollars are translated into pounds sterling at the rate of exchange ruling at the reporting date and statement
of comprehensive income items are translated at the average rate for the year. The exchange difference arising on the
retranslation of the opening capital and reserves are recognised as a separate component of equity.
On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net
assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity and accumulated in
the foreign exchange reserve.
Exchange differences arising from the settlement of monetary items are included in the statement of comprehensive income for
that period.
1.13 Operating leases
Rentals payable under operating leases, net of lease incentives, are charged to the statement of comprehensive income on a
straight-line basis over the period of the lease.
1.14
Available-for-sale financial assets
The Group classifies its investments as available-for-sale financial assets.
They are carried at fair value with changes in fair value recognised directly in equity within the available-for-sale reserve;
exchange differences on available-for-sale financial assets denominated in a foreign currency are recognised in other
comprehensive income. Where there is a significant or prolonged decline in the fair value of an available for sale financial asset
(which constitutes objective evidence of impairment), the full amount of the impairment, including any amount previously
recognised directly in equity within the available-for-sale reserve, is recognised in profit or loss. Purchases and sales of
available for sale financial assets are recognised on settlement date with any change in fair value between trade date and
settlement date being recognised in the available-for-sale reserve. On sale, the cumulative gain or loss recognised in other
comprehensive income is reclassified from the available-for-sale reserve to profit or loss.
14
Notes to the financial statements
for the financial year ended 30 September 2012
1.15
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate
other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method,
less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the
counterparty or default or significant delay in payment) that the Group or Company will be unable to collect all of the amounts
due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the
present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are
reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative
expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off against the associated provision.
The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated
balance sheet.
1.16
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at the bank and other short term liquid investments with original
maturities of three months or less.
1.17
Trade payables
Trade payables, defined as financial liabilities in accordance with IAS 39, are recognised at amortised cost.
All of the trade payables are non-interest bearing.
1.18
Convertible bond – hybrid financial instruments
Following a deed of amendment signed in August 2010 the terms of the convertible loan arrangement were modified such that
the option was not settled by the Company exchanging a fixed number of its own equity instruments for a fixed amount of cash.
The impact of this was that the convertible loan no longer met the definition of a compound financial instrument and was
reclassified as a hybrid financial instrument with the option to convert classified as an embedded derivative.
The embedded derivatives are separated from the host contract as their risks and characteristics are not closely related to those
of the host contract and the host contract is not carried at fair value. The embedded derivatives are measured at fair value with
changes in fair value recognised in the statement of comprehensive income as they arise. The host contract carrying value on
initial recognition is based on the net proceeds of issuance of the convertible loan reduced by the fair value of the embedded
derivatives and is subsequently carried at each reporting date at amortised cost. The embedded derivatives and host contract
are presented under separate headings in the statement of financial position and the fair values of any embedded derivative are
calculated using Black-Scholes or other simulation models depending on the characteristics of the loan notes. At the year end,
the value of the embedded derivative has been separately disclosed on the face of the statement of financial position to due to
material nature of the balance.
Where the terms and conditions of conversion are substantially modified before the instrument matures, the difference, at the
date the terms are amended, between the carrying value of the instrument and the fair value of the instrument under the revised
terms is recognised as a loss in the statement of comprehensive income.
Upon conversion of the loan, the liability, including the derivative liability, is derecognised in the statement of financial position.
At the same time, an amount equal to the cash redemption value is recognised within share capital and share premium. Any
resulting difference is recognised in reserves.
Warrants issued in consideration as part of the arrangement fee are valued in accordance with the share based payment policy
and considered as part of the overall convertible loan note financing costs. Direct finance costs are charged against the loan
and amortised over the life of the loan.
1.19
Share capital
Ordinary shares are classified as equity.
1.20
Share based payments and warrants
For equity-settled share-based payments, the fair value determined at the date of grant is expensed on a straight-line basis over
the vesting period. Fair value is measured by the use of the Black Scholes model. The calculation of this fair value is detailed in
Note 20.
1.21
Investments in subsidiaries
Investments in subsidiary undertakings are stated at cost less impairment provisions.
15
Notes to the financial statements
for the financial year ended 30 September 2012
2.
Segmental reporting - Analysis by geographical segment
The Group’s revenue arises within the US. The loss before taxation arises within the UK and US. Net assets are in the UK and US. Based on an analysis of risks and returns, the
Directors consider that the Group has one principle business segment based on geography, with the UK representing head office costs of the Group. Operating segments are reported in
a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including
the Chief Executive Officer, and the Finance Director. The Directors therefore consider that no further segmentation is appropriate.
Year ended 30 September
Revenue
Cost of sales
Gross profit
Depreciation
Administrative expenses
Operating (loss)/profit
Financial income
Finance costs
Profit/(Loss) for the year
Total profit/(loss)
Non-Current assets:
– property, plant and equipment
– exploration and development licences
– technology licence
- Available for sale financial assets
Current assets:
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities:
Trade and other payables
Convertible loan
Total liabilities
United
States
2012
£’000
United
Kingdom
2012
£’000
13
(4)
9
-
9
-
-
9
9
-
6,781
1,314
-
8,095
-
15
8,110
-
-
-
-
-
-
(4)
(1,009)
(1,013)
1
(565)
(1,577)
(1,577)
9
-
-
3,262
3,271
52
396
3,719
(41)
-
(41)
Total
2012
£’000
13
(4)
9
(4)
(1,009)
(1,013)
1
(565)
(1,568)
(1,568)
9
6,781
1,314
3,262
11,366
52
411
11,829
(41)
-
(41)
United
States
2011
£’000
16
(5)
11
-
11
-
-
11
11
-
6,631
1,314
-
7,945
-
15
7,960
-
-
-
United
Kingdom
2011
£’000
-
-
-
(4)
(1,683)
(1,687)
131
(651)
(2,207)
(2,207)
13
-
-
-
13
202
1,348
1,563
(327)
(1,009)
(1,336)
Total
2011
£’000
16
(5)
11
(4)
(1,683)
(1,676)
131
(651)
(2,196)
(2,196)
13
6,631
1,314
-
7,958
202
1,363
9,523
(327)
(1,009)
(1,336)
16
Notes to the financial statements
for the financial year ended 30 September 2012
3.
Finance income
Bank interest
Gain on derivative element of loan note (Note 16)
4.
Finance costs
Interest on loan note
Bank charges
Derivative expense (Note 16)
5.
Operating loss
2012
£’000
1
-
1
2012
£’000
7
2
9
556
565
2011
£’000
-
131
131
2011
£’000
352
4
356
295
651
2012
2011
The following items have been charged in arriving at operating loss:
£’000
£’000
Depreciation of property, plant and equipment
Directors’ fees (Note 7)
Share-based payments charge – statement of comprehensive income
Auditors’ remuneration:
– audit services
–non audit services
Rentals payable in respect of land and buildings
4
449
-
29
-
66
4
489
7
62
36
60
17
Notes to the financial statements
for the financial year ended 30 September 2012
6.
Taxation
There is no tax charge in the year due to the loss for the year.
Factors affecting the tax charge:
Loss on ordinary activities before tax
Loss on ordinary activities at standard rate of corporation tax in the UK of 25%
(2011 - 26%)
Effects of:
Excess management expenses carried forward
Expenses not deductible for tax purposes
Tax charge for the financial year
2012
2011
£’000
(1,568)
(392)
392
-
-
£’000
(2,196)
(571)
571
-
-
The Company has tax losses in respect of excess management expenses of £7,532,122 (2011: £6,001,335) available for offset
against future Company income. This gives rise to a potential deferred tax asset at the reporting date of £1,883,030 (2011:
£1,560,347). No deferred tax asset has been recognised in respect of the tax losses carried forward as the recoverability of this
benefit is dependent on the future profitability of the Company, the timing of which cannot reasonably be foreseen.
7.
Employees and Directors
The Group has no employees other than the directors, whose emoluments comprise fees paid for services. Share-based
payments relate to warrants issued, further details of which are included in Note 20. The amounts paid for their services are
detailed below:
Salaries Compensation
payments
Total
Salaries
2012
£’000
71
70
57
104
-
-
302
N Bonsor
P Rankine
S A Komlosy*
M Haromo
J J May**
P Hughes**
Total
remuneration
2012
£’000
-
-
147
-
-
-
2012
£’000
2011
£’000
71
70
204
104
-
-
69
-
121
83
85
21
147
449
379
Share
based
payments
2011
£’000
1
-
-
3
-
1
5
Compensation
payments
2011
£’000
-
-
-
-
98
7
105
Total
2011
£’000
70
-
121
86
183
29
489
* Resigned as director on 6 March 2012. Under a 3 month consultancy agreement entered into on resignation, £20,000 was
paid in shares.
** Resigned during 2011
18
Notes to the financial statements
for the financial year ended 30 September 2012
8.
Loss per share
Basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the year. Reconciliations of the losses and weighted average number of shares used in
the calculations are set out below.
Financial year ended 30 September 2012
Basic and Diluted EPS
Losses attributable to ordinary shareholders on continuing
operations
Weighted
average
Number
of shares
‘000
Losses
£’000
Per share
Amount
Pence
(1,568)
1,517,977
(0.103)
Total losses attributable to ordinary shareholders
(1,568)
1,517,977
(0.103)
Financial year ended 30 September 2011
£’000
‘000
Pence
Basic and Diluted EPS
Losses attributable to ordinary shareholders on continuing
operations
(2,196)
877,371
(0.250)
Total losses attributable to ordinary shareholders
(2,196)
877,371
(0.250)
The warrants which were in issue at the year end (Note 20) are considered anti-dilutive. As the options and warrants would be
anti-dilutive a separate diluted loss per share is not presented.
9.
Intangible assets
Cost
At 1 October 2010
Additions
At 30 September 2011
Additions
Net book value
At 30 September 2012
At 30 September 2011
At 30 September 2010
Oil & Gas
Oil & Gas
Oil & Gas
Exploration and
development
licence
Technology
licence
Total
£’000
£’000
£’000
6,382
249
6,631
150
6,781
6,631
6,382
667
647
1,314
-
1,314
1,314
667
7,049
896
7,945
150
8,095
7,945
7,049
The exploration and development licences comprise two State of Utah oil shale leases covering approximately 2,919 acres and
independent natural resources consultants SRK Consultants Ltd, part of the internationally recognised SRK Group, has
declared a surface mineable JORC compliant Measured Resource of 126 million barrels on the main tract of TomCo's Holliday
Block lease. The claim areas and the Group’s interest in them is:
Asset
ML 49570
ML 49571
Per cent
Interest
100
100
Licence
Status
Prospect
Prospect
Expiry Date
31/12/2024
31/12/2024
Licence Area (Acres)
1,638.84
1,280.00
19
Notes to the financial statements
for the financial year ended 30 September 2012
9.
Intangible assets (continued)
In performing an assessment of the carrying value of the licences at the reporting date, the Directors concluded that, although
no exploration activity has been undertaken during the year ended 30 September 2012, it was not appropriate to book an
impairment. The Directors do not consider the asset to be impaired as there is a planned programme of development work for
the next year which will add to the Company's knowledge and understanding of the asset. As the data from this programme is
collated and analysed we will inform our shareholders through the Regulatory News Service of the results. As shareholders you
are aware of the potential for these assets but the directors draw your attention to the likely need to raise additional funds in the
future in order to continue to explore and develop the asset and bring it into commercial production. At this early stage of the
project the Directors do not consider that there is any need for any impairment of the valuation of the asset. If the required
additional funding was not to be made available to the company, the carrying value of the asset might need to be impaired.
10.
Property, plant and equipment
Group
Cost
At 1 October 2010
At 30 September 2011
At 30 September 2012
Depreciation
At 1 October 2010
Charge in year
At 30 September 2011
Charge in year
At 30 September 2012
Net book value
At 30 September 2012
At 30 September 2011
At 30 September 2010
Oil properties
Fixtures, fittings
and equipment
£’000
102
102
102
102
-
102
-
102
-
-
-
£’000
32
32
32
15
4
19
4
23
9
13
17
Total
£’000
134
134
134
117
4
121
4
125
9
13
17
20
Notes to the financial statements
for the financial year ended 30 September 2012
10.
Property, plant and equipment (continued)
Company
Cost
At 1 October 2010, 2011 and 2012
Depreciation
At 1 October 2010
Depreciation
At 1 October 2011
Depreciation
At 30 September 2012
Net book value
At 30 September 2012
At 30 September 2011
At 30 September 2010
11.
Company investment in subsidiaries
Shares in Group undertakings
Cost
At 1 October 2010
Additions
At 30 September 2011
Additions
At 30 September 2012
Fixtures, fittings
and equipment
£’000
32
15
4
19
4
23
9
13
17
Total
£’000
32
15
4
19
4
23
9
13
17
Total
£’000
6,382
249
6,631
150
6,781
TomCo Energy PLC holds interests in the following subsidiaries:
Subsidiary Undertaking Country of incorporation or
registration
LKH Limited
Isle of Man, UK
Luton-Kennedy Ltd
Israel
Proportion of voting rights
and ordinary share capital
held
Nature of business
100%
100%
Dormant
Participation in oil production
in Israel
The Oil Mining Company Inc
Utah, USA
100%
Holding of oil shale leases
TomCo I LLC
Delaware, USA
100%
Holding company of TomCo
II
TomCo II LLC
Delaware, USA
100% indirect holding
TomCo II is engaged in the
exploration and extraction of
oil and gas through joint
investment in oil leases
During the year the company transferred ownership of Bury Street Services Limited. Following the year end, application has
been made to the relevant Company Registries to dissolve Luton Kennedy Ltd. LKH Limited was dissolved on 15 January 2013.
21
Notes to the financial statements
for the financial year ended 30 September 2012
12.
Available-for-sale financial assets
Cost or valuation
At 30 September 2011
Additions
At 30 September 2012
Provisions
At 30 September 2011 and 2012
Fair value
At 30 September 2012
At 30 September 2011
Unlisted
investments
£’000
180
3,262
3,442
180
180
3,262
-
During the year the Company invested $5 million (£3,147,735) in Red Leaf Resources Inc (Equity securities US (3)) at $1,500
per share as part of a $100 million raising by Red Leaf in conjunction with the closing of a Joint Venture ("JV") with Total E&P
USA Oil Shale, LLC, an affiliate of Total SA, the 5th largest international integrated oil and gas company. The purchase of the
investment in Red Leaf was funded partly by the subscription by Altima Global Special Situations Master Fund Ltd , Dominic
Redfern and Mark Donegan of 169 million TomCo shares at 1.75p per ordinary share for £2,957,500 (Note 18). The balance of
the Investment was financed from TomCo's existing cash resources. Direct costs associated with the investment amounted to
£113,976, of which £100,000 was paid in shares (Note 18). The value attributable to the investment is stated at fair value. Red
Leaf is currently completing its permitting for Seep Ridge. Following this they are expected to start constructing an Early
Production System capsule. The Directors therefore have concluded there has been no material change in the fair value of the
investment since acquisition.
Details of unlisted investments
Name
Equity securities US (1)
Equity securities UK
Equity securities US (2)
Equity securities US – Red Leaf
Share
holding
number
9,751
471,070
1,000,000
3,333.33
Percentage
Average cost
holding
per share
%
0.78
3.47
8.12
0.43
31pence
20 pence
5 pence
1,500 dollars
Cost
£’000
30
94
56
3,148
The Directors provided in full for the investment in equity securities in the US (1) in 2007 due to the uncertain future of the
Company. The Equity securities, US (2) and UK, classed as investing activities, were also provided in full in 2008 due to
uncertainties about the future of those Companies.
13.
Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Total Receivables
Group
2012
£’000
-
19
33
52
Company
2012
£’000
-
19
33
52
Group
2011
£’000
33
148
21
202
Company
2011
£’000
33
148
21
202
As at 30 September 2012 there were no receivables considered past due (2011: £Nil). Having considered the carrying value of
amounts owing from Group undertakings against net realisable value, the Board has made a provision against these amounts in
the year of £nil (2011: £nil). The maximum exposure to credit risk at the reporting date is the fair value of each class of
receivable including cash and cash equivalents as disclosed in Note 21.
All current receivable amounts are due within 6 months.
22
Notes to the financial statements
for the financial year ended 30 September 2012
14.
Cash and cash equivalents
Cash at bank and in hand
Group
2012
£’000
411
Company
2012
£’000
396
Group
2011
£’000
1,363
Company
2011
£’000
1,348
The Group earns 0.05% (2011: 0.05%) interest on their cash deposits, consequently the Group’s exposure to interest rate
volatility is not considered material.
15.
Trade and other payables
Current
Trade payables
Other payables
Accruals
Non-Current Payables
Amounts owed to Group undertakings
Total Payables
Group
2012
£’000
Company
2012
£’000
2
8
31
41
-
41
2
8
31
41
-
41
Group
2011
£’000
268
17
42
327
-
327
Company
2011
£’000
268
17
42
327
37
364
All current amounts are payable within 6 months and the Board of Directors considers that the carrying values adequately
represent the fair value of all payables. In the opinion of the directors the carrying value of the financial liabilities approximates
to their fair value.
16.
Financial liabilities
In January 2010, TomCo issued a Convertible Loan of £2m to Kenglo One Ltd with a term of 12 months and convertible at any
time, at 1.5p per share (a total of 133,333,333 shares), with an interest rate of 12% per annum. The terms of this Agreement
were varied in August 2010 whereby the conversion price was redefined as the lower of (i) 3p per share (ii) the IPO price,
defined as the price per share offered pursuant to a public offering or (iii) the investment price, being defined as the lowest price
per share paid by any party investing any amount into TomCo between the date of signing the agreement and date of admission
to AIM. This amendment resulted in the conversion option no longer meeting the fixed or fixed criteria for a convertible bond
(compound financial instrument) and being reclassified as a hybrid financial instrument with an embedded derivative element.
As the terms of the convertible loans were modified the accounting was re-assessed which resulted in a premium being charged
to the consolidated statement of comprehensive income of £110,591, representing the difference between the carried and fair
value of the loan note. The equity reserve was credited (£313,765) to the retained deficit reserve for the modified instrument. In
August 2010, TomCo issued a further Convertible Loan of £500,000 to Kenglo One Ltd on the same terms as those varied for
the initial Convertible Loan and on 31 December 2010, the terms of the Agreements were further varied whereby the repayment
date applicable of 29 December 2010 was extended to 31 May 2011 for both the £2m and £500,000 convertible loans.
In July 2011, £1,490,795 of the bonds, together with £429,205 of unpaid interest were converted into ordinary shares at 1p per
share in accordance with the terms of the bond. On the same date, another deed of amendment was issued which resulted in
the final repayment date being extended until December 2014. This extension resulted in the difference at the date the terms
were amended between the carrying value of the instrument and the fair value of the extended contractual payments being in
excess of 10% which is an IAS 39 trigger for de-recognition of the convertible bond and re-recognition at the adjusted value
under the modified terms. This resulted in a gain on modification for the year of £131,224 which has been recognised within the
consolidated statement of comprehensive income and the recognition of a derivative liability which has been recognised on the
face of the Statement of Financial Position.
In October 2011 the remaining convertible loan, together with all accrued interest, was converted into ordinary shares at 1p per
share, in accordance with the August 2010 Variation Agreement described above. Immediately prior to conversion the derivative
liability was revalued resulting in an expense of £556k recognised in the statement of comprehensive income. Upon conversion
the liability was derecognised in the statement of financial position and an amount of £1,009k, being the cash redemption value,
was recognised within share capital and share premium.
23
Notes to the financial statements
for the financial year ended 30 September 2012
16.
Financial liabilities (continued)
The convertible bond recognised in the Statement of Financial Position is calculated as follows:
Group and Company
Group and Company
Convertible loan brought forward
Derivative liability brought forward
Repayment
Interest expense
Gain on modification
Derivative expense
Settlement for shares
Convertible loan carried forward
Derivative liability carried forward
17.
Deferred tax
Unrecognised losses
2012
£’000
888
295
-
6
-
556
(1,745)
-
-
2011
£’000
2,689
-
(1,920)
250
(131)
295
-
888
295
The Company has not provided deferred tax for excess management expenses. These remain un-provided as it is not
anticipated that the Company will make qualifying profits against which these may be offset in the foreseeable future but they
are available indefinitely for offset against future taxable income.
Losses carried forward
2012
£’000
7,532
2011
£’000
6,001
24
Notes to the financial statements
for the financial year ended 30 September 2012
18.
Share capital
Number of
shares
2012
£
2011
£
Authorised
2,000,000,000 (2011: 2,000,000,000) ordinary shares of 0.5p
each
Issued and fully paid
At 1 October
Allotted during year:
July 2011 at 1p per share
October 2011 - Loan conversion at 1p per share
January 2012 - Warrant conversion at 1.5p per share
January 2012 - Warrant conversion in lieu of expenses at 1.5p
per share *
551,346,803
100,920,548
31,866,667
2,800,000
March 2012 - Subscription at 1.75p per share (Note 12)
169,000,000
April 2012 - In lieu of expenses at 2.2p per share*
July 2012 - In lieu of expenses at 1.8p per share *
4,454,938
1,111,111
1,621,049,218 (2011: 1,310,895,954) ordinary shares of 0.5p
each
* These are non-cash transactions
10,000,000
10,000,000
10,000,000
10,000,000
6,554,480
3,797,746
-
2,756,734
504,603
159,333
14,000
845,000
22,275
5,555
1,550,766
8,105,246
-
-
-
-
-
2,756,734
6,554,480
Following the year end (Note 23), the Group announced the issue of 100 million ordinary shares in exchange for a Promissory
Note and 148,406,526 ordinary shares through a share placing. The issued share capital at the date of signing of these
accounts is 1,869,455,744 ordinary shares.
19.
Share premium
At 1 October
Premium on shares issued in the year
Expenses on shares issued in the year
At 30 September
2012
2011
£’000
10,573
3,056
-
13,629
£’000
7,907
2,757
(91)
10,573
25
Notes to the financial statements
for the financial year ended 30 September 2012
20.
Share-based payments
At 30 September 2012, the following share warrants granted for services and shares are outstanding in respect of the ordinary
shares:
2012
2012
2011
2011
Outstanding at 1 October
126,309,364
number
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 30 September
Exercisable at 30 September
-
(26,217,919)
(34,666,667)
65,424,778
65,424,778
Weighted average
exercise price
Pence
2.2
-
-
-
2.5
2.5
Weighted average
exercise price
number
pence
146,177,802
31,451,714
(51,320,152)
-
126,309,364
126,309,364
2.5
2.5
-
-
2.2
1.6
Each warrant is governed by the provisions of warrant instruments representing the warrants which have been adopted by the
Company. The rights conferred by the warrants are transferable in whole or in part subject to and in accordance with the
transfer provisions set out in the Articles. The holders of warrants have no voting right, pre-emptive right or other right attaching
to Ordinary Shares. All warrants issued vest in full. The warrants outstanding at 30 September 2012 had a weighted average
exercise price of 2.5p (2011: 2.2p) and a weighted average remaining contractual life of 0.65 years (2011: 1.11 years).
Following the placing announced following the year end (Note 23) 7,420,326 warrants were issued at an exercise price of 1.2p
with an expiry date of 12 March 2016.
The inputs into the Black-Scholes model for calculating estimated fair value were:
Weighted average share price (pence)
Weighted average exercise price (pence)
Expected volatility
Risk-free rate
Weighted average remaining contractual
life (years)
2012
-
-
-
-
-
2011
0.83
2.80
55%
3%
1.11
Expected volatility was determined by calculating the historical volatility of the Company’s share or the volatility of a basket of
similar listed companies where the historic volatility was not available. The expected life used in the model has been adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
21.
Financial instruments
The Group and Company’s financial instruments, other than its investments, comprise cash and items arising directly from its
operation such as trade receivables, and trade payables.
Management review the Group and Company’s exposure to currency risk, interest rate risk, liquidity risk and credit risk on a
regular basis and consider that through this review they manage the exposure of the Group and Company. No formal policies
have been put in place in order to hedge the Group and Company’s activities to the exposure to currency risk or interest risk,
however, this is constantly under review.
There is no material difference between the book value and fair value of the Group and Company’s cash and other financial
instruments.
26
Notes to the financial statements
for the financial year ended 30 September 2012
21.
Financial instruments (continued)
Currency risk
The Group has overseas subsidiaries which operate in the United States and whose expenses are mainly denominated in US$.
Foreign exchange risk is inherent in the Group and Company’s activities and is accepted as such. The majority of Company
expenses are denominated in pounds sterling. The effect of a 10% strengthening or weakening of the US dollar against sterling
at the reporting date on the sterling denominated balances would, all other variables held constant, not result in a significant
exchange gain or loss in the period.
Interest rate risk
The Group and Company manage the interest rate risk associated with the Group cash assets by ensuring that interest rates
are as favourable as possible, whether this is through investment in floating or fixed interest rate deposits, whilst managing the
access the Group requires to the funds for working capital purposes. The Group has no interest rate exposure on its convertible
loan which is issued at a fixed rate.
The Company’s cash and cash equivalents are subject to interest rate exposure due to changes in interest rates. Short-term
receivables and payables are not exposed to interest rate risk.
A 1% increase or decrease in the floating rate attributable to the cash balances held at the year end would not result in a
significant difference on interest receivable.
Liquidity risk
At the year end the Group and Company had cash balances comprising of the following:
Current
British Pounds
US Dollars
Total
Group
2012
£’000
396
15
411
Company
Group
Company
2012
£’000
396
-
396
2011
£’000
1,347
16
1,363
2011
£’000
1,347
1
1,348
Liquidity risk arises from the Group and Company’s management of working capital and the finance charges and principal
repayments on its debt instruments. It is the risk that the Group and Company will encounter difficulty in meeting its financial
obligations as they fall due.
The Group and Company policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a
period of at least 90 days. The group seeks to reduce liquidity risk by fixing interest rates (and hence cash flows) on any long
term borrowings.
Credit Risk
Credit risk is the risk of financial loss to the Group and Company if a customer or a counter party to a financial instrument fails to
meet its contractual obligations. The Group and Company is exposed to credit risk from its relationship with its partners and is
mainly exposed to credit risk from credit sales. It is Group and Company policy, implemented locally, to assess the credit risk of
new customers before entering contracts in accordance with best local business practices, and seek external credit ratings
where applicable and when available. Credit risk of existing customers is assessed when deemed necessary.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial
institutions, only independently rated parties with an acceptable rating are utilised.
Price Risk
The Group is exposed to commodity price risk on its income and assets relating to oil exploration and production.
Capital management policies
In managing its capital, the Group and Company’s primary objective is to maintain a sufficient funding base to enable the Group
and Company to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to
achieve these aims, through new share issues or debt, the Group and Company considers not only its short-term position but
also its long-term operational and strategic objectives.
27
Notes to the financial statements
for the financial year ended 30 September 2012
22.
Related party disclosures
The Directors are considered to be Key Management and information in respect of key management is given in note 7.
Transactions between the Company and its subsidiaries and related parties during the year are summarised below:
Inter-group payable outstanding at year end
Shareholder loans payable
Fees paid to shareholder and advisor under
project finance and management agreement
2012
£
-
-
62,000
2011
£
36,515
1,009,205
26,838
Amounts outstanding at 30 September 2011 were settled during the year.
23.
Post reporting events
On 28 January 2013 the Group announced it had entered into a Liquidity Facility Agreement and an associated Promissory
Note (together the “Liquidity Facility”) with Windsor Capital Partners Limited (“Windsor Capital”). Under the Liquidity Facility
TomCo has issued and allotted 100 million ordinary shares of 0.5p each (“Ordinary Shares”), representing an increase of 6% on
the current number of shares in issue, to Windsor Capital in exchange for the Promissory Note. The Liquidity Facility allows the
Company to access capital using the natural liquidity that is available in the Company’s shares in a more cost-effective manner
than a traditional equity line product.
At the closing mid-market share price of 1.575p on 25 January 2012, the value of the Ordinary Shares issued to Windsor Capital
was estimated at £1.575 million. The Promissory Note delivers to TomCo the proceeds of the sale of the Ordinary Shares over
the life of the Promissory Note based on the occurrence of “Liquidity Trigger Days”. Liquidity Trigger Days are those days on
which the volume of shares traded is greater than 80% of the trailing 90 day weighted average daily trading volume. On Liquidity
Trigger Days, Windsor Capital will seek to sell Ordinary Shares, up to a maximum of 10% of the daily volume averaged over any
5 day period, on a best effort basis at the AIM Market offer-price or higher. The Liquidity Facility can be suspended at the
Company’s discretion in periods of adverse market conditions and minimum share prices can also be stipulated. To date the
Group has raised a gross amount of £153,275 under the facility at an average price of 1.67p.
On 7 March the Group also announced that it has successfully raised £1.781 million before expenses through a share placing
on admission, of 148,406,526 new ordinary shares of 0.5p each at a price of 1.2p per share. The Placing was supported by a
number of new financial institutions as well as other existing shareholders. The gross proceeds from the Placing are to be used
by TomCo for advancing permitting required for commercial production at the Company’s Holliday project, and for general
working capital purposes. Following the placing, 7,420,326 warrants were issued at an exercise price of 1.2p with an expiry date
of 12 March 2016.
28