ISLE OF MAN ‐ COMPANY NUMBER 6969V
ENGLAND AND WALES ‐ COMPANY NUMBER FC022829
TomCo Energy plc
Annual report and financial statements 2013
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
Fox-Davies Capital
1 Tudor Street
London EC4Y 0AH
Registrars
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Solicitors
Gowlings (UK) LLP
125 Old Broad Street
London EC2N 1AR
Bankers
Barclays Bank plc
Bridgewater House
Counterslip
Bristol BS1 6BX
Chase Bank
9100 S Redwood Road
West Jordan
UT 84088
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 2013.
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 obtained resource assessments in relation to its oil shale leases, the latest of which shows 126 million bbl of oil
in surface mineable JORC Measured Resource.
TomCo has entered into a license with Red Leaf Resources Inc (“Red Leaf”), 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 pilot
plant in 2008, Red Leaf is currently completing its permitting for the Seep Ridge project. Following this, Red Leaf is expected to
start constructing a one-off Early Production System capsule, which is 75% of the planned full scale commercial capsules used
to produce 9,800 barrels of oil per day (bopd), to demonstrate scalability of the process and economic viability of its Utah
projects. 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.
Environmental, health and safety and other regulatory standards
The Group’s future extraction activities are subject to various federal and state laws and regulations relating to the protection of
the environment including the obtaining of appropriate permits and approvals by relevant environmental authorities. Such
regulations typically cover a wide variety of matters including, without limitation, prevention of waste, pollution and protection of
the environment, labour regulations and worker safety. Furthermore, the future introduction or enactment of new laws,
guidelines and regulations could serve to limit or curtail the growth and development of the Group’s business or have an
otherwise negative impact on its operations. The Group ensures it complies with the relevant laws and regulations in force in the
jurisdictions in which it operates.
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. The Group
holds some cash in US dollars to mitigate the foreign exchange risk.
Financial instruments
The Group holds an investment in Red Leaf. There is a risk that in the future this investment falls in value and the Group is
unable to realise its accounting value. TomCo continues to monitor the progress of Red Leaf and in the event that the value is
deemed by the Group to have declined, an impairment will be recognised. No such impairment has occurred to date. Further
details can be found in Note 12.
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 21.
Results and dividends
The statement of comprehensive income is set out on page 8. The Directors do not propose the payment of a dividend (2012:
£Nil).
The Group made no charitable or political donations in the year (2012: £Nil).
3
Directors’ report
Review of the key events during the year
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. After suspending the
Liquidity Facility on 28 May 2013, it was reinstated on 23 September 2013 and amended by way of introducing a floor price of
2p per share and limiting the maximum net amount raised following the announcement to one million pounds. Shares that are
not sold during the life of the Facility will be returned to the Group and cancelled. The Liquidity Facility allows the Group to
access capital using the natural liquidity that is available in the Group’s shares in a more cost-effective manner than a traditional
equity line product.
On 7 March 2013, 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 certain existing shareholders. The net proceeds from the Placing are being used by
TomCo to advance the permits required for commercial production at the Group’s Holliday project and for general working
capital purposes.
Oil Shale
During the year the Group completed drilling activities on its Holliday Block to appraise the water quality, quality of any aquifers
and the permeability of rock below surface of the Holliday lease area. Utah State law requires that any facility that discharges or
may potentially discharge pollutants to ground water must have an approved Groundwater Discharge Permit from the Utah
Division of Water Quality (“DWQ”). The results of water quality and permeability testing are expected by this calendar year end.
TomCo was also granted a Small Mine Permit by the Utah Division of Oil, Gas and Mining (“DOGM”) to carry out trial mining
during 2014. In addition, work on its Large Mine Permit application is progressing well, with its submission to DOGM expected
before this calendar year end. This is another important step to securing all necessary permits required for commercial
production.
TomCo is actively advancing towards the goal of obtaining all the relevant permitting required by Utah State law. The Group is
working closely with DWQ and the DOGM to ensure its Groundwater Discharge Permit and Large Mine Permit applications
meet the required standards and are issued as soon as possible. Once these two key permits have been granted, TomCo will
be well placed to continue development efforts and will have the same approved legal documentation as Red Leaf is expected
to have in the near future.
During the year, DWQ solicited comments on its request to issue a Groundwater Discharge Permit to Red Leaf and is currently
reviewing these comments. DOGM has already approved its Notice of Intention to Commence Large Mining Operations at Red
Leaf's Seep Ridge project, conditional on a Groundwater Discharge Permit, which means that once DWQ issues the permit,
Red Leaf will be fully permitted to progress with capsule construction and commence production from its block.
Directors
Directors who served on the Board during the year to 30 September 2013 were as follows:
Sir Nicholas Bonsor
Paul Rankine
Miikka Haromo
Directors’ interests in the shares of the Group, including family interests, were as follows:
30 September 2013
30 September 2012
Ordinary
0.5 pence
Ordinary
Share
0.5 pence
shares
warrants
shares
N Bonsor *
M Haromo**
P Rankine
-
-
1,295,301
1,295,301
-
-
-
-
-
-
1,295,301
1,295,301
9,874,139
Details of the share warrants can be found in note 20.
*Sir Nicholas Bonsor had 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 ended 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.
4
Share
warrants
2,278,647
7,595,492
-
Directors’ report
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 2013 for trade payables was 11 days (2012: 23 days).
Going concern
The Directors are confident that the Group has sufficient funds to meet its working capital requirements and known commitments
for a period of 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 known project and overhead commitments. 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. 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 from the date of signing the financial statements, 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.
Directors’ responsibilities
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and 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 safeguarding the assets of the company and the group and 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.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of
the Group for that year. The Directors are also required to prepare financial statements in accordance with the rules of the
London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial
statements, the directors are required 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 changes 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
12 November 2013
6
Independent auditors’ report
to the members of TomCo Energy plc
We have audited the financial statements of TomCo Energy plc for the year ended 30 September 2013 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 the terms of our engagement. 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 which 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 Group and the Company’s affairs as at 30
September 2013 and of the Group’s 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 and registered auditors
London
United Kingdom
12 November 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 2013
2013
2012
Note
£’000
£’000
2
2
5
3
4
4,16
6
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
11
(4)
7
(872)
(865)
1
(1)
-
(865)
-
(865)
(865)
13
(4)
9
(1,013)
(1,004)
1
(9)
(556)
(1,568)
-
(1,568)
(1,568)
2013
Pence
2012
Pence
per share
per share
Basic & diluted loss per share
8
(0.05)
(0.10)
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 £863,153 (2012: £1,530,787).
The notes on pages 12 to 27 form part of these financial statements.
8
Consolidated and Company Statement of Financial Position
as at 30 September 2013
Group Company
Group
Company
2013
2013
2012
2012
Note
£’000
£’000
£’000
£’000
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment in subsidiaries
Available for sale financial assets
Other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
9
10
11
12
13
13
14
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
15
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
15
18
19
20
8,421
1,314
8,095
1,314
-
-
3,262
-
-
7,107
3,262
137
9
-
3,262
-
9
6,781
3,262
-
11,683
11,820
11,366
11,366
63
1,236
1,299
34
933
967
52
411
463
52
396
448
12,982
12,787
11,829
11,814
(221)
(221)
1,078
-
(221)
(34)
(34)
933
(5)
(39)
(41)
(41)
422
-
(41)
(41)
(41)
407
-
(41)
12,761
12,748
11,788
11,773
8,894
8,894
14,636
14,636
42
42
8,105
13,629
361
8,105
13,629
361
(10,811)
(10,824)
(10,307)
(10,322)
12,761
12,748
11,788
11,773
The accounts on pages 8 to 27 were approved and authorised for issue by the Board of Directors on 12 November 2013.
Paul Rankine
Director
Miikka Haromo
Director
9
Consolidated statement of changes in equity
for the financial year ended 30 September 2013
Group
Company
Share
Share
Warrant
Retained
Share
Share
Warrant
Retained
capital
premium reserve
Deficit
Total
capital
premium reserve
deficit
Note
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Total
£’000
Balance at 1 October 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
Balance at 30 September 2012
8,105
13,629
361
(10,307)
11,788
8,105
13,629
361
(10,322)
11,773
Total comprehensive loss for the
year
Issue of warrants
Expired warrants
Issue of share capital
At 30 September 2013
20
20
18,19
-
-
-
-
(42)
-
42
-
(361)
(865)
(865)
-
361
-
-
-
-
-
-
(42)
-
42
-
(361)
(863)
(863)
-
361
-
-
789
1,049
8,894
14,636
-
42
-
1,838
789
1,049
(10,811)
12,761
8,894
14,636
-
42
-
1,838
(10,824)
12,748
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 credited to equity in respect of warrants to acquire ordinary shares in the Company.
Retained deficit
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
The notes on pages 12 to 27 form part of these financial statements.
10
Consolidated and company statements of cash flows
for the financial year ended 30 September 2013
Note
Group
Company
Group Company
2013
£’000
2013
2012
£’000
£’000
2012
£’000
Cash flows from operating activities
Loss after tax
Depreciation
Share-based payments
Non-cash transactions settled as shares
Finance income
Finance costs
(Increase)/decrease in trade and other
receivables
2
10
20
18
3
4
13
Decrease 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
Issue of share capital (net of issue costs)
18,19
Net cash generated from financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of
financial year
Cash and cash equivalents at end of financial
year
The notes on pages 12 to 27 form part of these financial statements.
(865)
(863)
(1,568)
(1,531)
9
-
-
(1)
1
(11)
(7)
(874)
-
(139)
-
-
9
-
(1)
1
(306)
(2)
(1,162)
-
(139)
-
-
(139)
(139)
1,838
1,838
825
1,838
1,838
4
-
120
(1)
565
150
(246)
(976)
-
(150)
(114)
(190)
(454)
478
478
4
-
120
(1)
565
150
(283)
(976)
-
(150)
(114)
(190)
(454)
478
478
537
(952)
(952)
411
396
1,363
1,348
1,236
933
411
396
11
Notes to the financial statements
for the financial year ended 30 September 2013
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);
- Impairment of available for sale financial assets (Note 12);
- Share based payments (Note 20);
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 known commitments
for a period of 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
funds available to meet known project and overhead commitments. 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. 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 from the date of signing the financial statements, 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 19
IFRS 13
IAS 1
IFRS 7
IFRS 10
IFRS 11
IFRS 12
IAS 32
IAS 27
IAS 36
IFRS 9
Employee Benefits
Fair Value Measurement
Annual Improvements to IFRSs (2009 - 2011 cycle)
Disclosures - Offsetting Financial Assets and Financial Liabilities
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Disclosures - Offsetting Financial Assets and Financial Liabilities
Separate Financial Statements
Recoverable amounts disclosures for non-financial assets
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 2013
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jan 2014
1 Jan 2014
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 2013
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 2013. 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 10.
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 full scale viability of this technology
will not be determinable.
1.9
Impairment
An impairment test on intangible oil & gas 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 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.
The carrying amounts of the Group’s assets, other than oil & gas assets (described above), are reviewed at each reporting date
to determine whether there is any indication of impairment. If such indication exists, the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses
are recognised in the income statement.
13
Notes to the financial statements
for the financial year ended 30 September 2013
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 and the Company’s subsidiaries 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.
If the fair value of available for sale financial assets can be reliably measured then 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. If the fair value of available for sale
financial assets cannot be reliably measured then they are carried at historic cost. Where there is a significant or prolonged
decline in the carrying 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 carrying 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 2013
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 such as receivables from subsidiaries. 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. Ordinary shares allotted under a Liquidity Facility Agreement and an associated
Promissory Note (Note 18) are only recognised as equity on sale and issue to a third party. Shares which remain unsold at the
reporting date are not included within the share capital and share premium account as they are not considered called up.
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 2013
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
Total liabilities
United
States
2013
£’000
11
(4)
7
-
(8)
(1)
-
-
(1)
(1)
-
7,107
1,314
-
8,421
28
303
8,752
(187)
(187)
United
Kingdom
2013
£’000
-
-
-
(9)
(855)
(864)
1
(1)
(864)
(864)
-
-
-
3,262
3,262
35
933
4,230
(34)
(34)
Total
2013
£’000
11
(4)
7
(9)
(863)
(865)
1
(1)
(865)
(865)
-
7,107
1,314
3,262
11,683
63
1,236
12,982
(221)
(221)
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)
(1,004)
1
(565)
(1,568)
(1,568)
9
6,781
1,314
3,262
11,366
52
411
11,829
(41)
(41)
16
Notes to the financial statements
for the financial year ended 30 September 2013
3.
Finance income
Bank interest
4.
Finance costs
Interest on loan note
Bank charges
Derivative expense (Note 16)
5.
Operating loss
The following items have been charged in arriving at operating loss:
Depreciation of property, plant and equipment
Directors’ fees (Note 7)
Auditors’ remuneration:
– audit services
Rentals payable in respect of land and buildings
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
23.5% (2012 - 25%)
Effects of:
Excess management expenses carried forward
Tax charge for the financial year
2013
£’000
1
1
2013
£’000
-
1
1
-
1
2012
£’000
1
1
2012
£’000
7
2
9
556
565
2013
2012
£’000
9
316
24
38
2013
£’000
(865)
(203)
203
-
£’000
4
449
29
66
2012
£’000
(1,568)
(392)
392
-
The Company has tax losses in respect of excess management expenses of £8,395,275 (2012: £7,532,122) available for offset
against future Company income. This gives rise to a potential deferred tax asset at the reporting date of £2,098,819 (2012:
£1,883,030). 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.
17
Notes to the financial statements
for the financial year ended 30 September 2013
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
2013
£’000
71
141
-
104
316
Salaries Compensation
payments
2012
£’000
71
70
57
104
302
2012
£’000
-
-
147
-
147
Total
2012
£’000
71
70
204
104
449
N Bonsor
P Rankine
S A Komlosy*
M Haromo
Total
remuneration
* Resigned as director on 6 March 2012. Under a 3 month consultancy agreement entered into on resignation, £20,000 was
paid in shares.
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 2013
Basic and Diluted EPS
Weighted
average
Number
of shares
‘000
Losses
£’000
Losses attributable to ordinary shareholders on continuing
operations
(865)
1,709,363
Total losses attributable to ordinary shareholders
(865)
1,709,363
Per share
Amount
Pence
(0.05)
(0.05)
Financial year ended 30 September 2012
£’000
‘000
Pence
Basic and Diluted EPS
Losses attributable to ordinary shareholders on continuing
operations
(1,568)
1,517,977
Total losses attributable to ordinary shareholders
(1,586)
1,517,977
(0.10)
(0.10)
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.
18
Notes to the financial statements
for the financial year ended 30 September 2013
9.
Intangible assets
Cost
At 1 October 2011
Additions
At 30 September 2012
Additions
Net book value
At 30 September 2013
At 30 September 2012
At 30 September 2011
Oil & Gas
Oil & Gas
Oil & Gas
Exploration and
development
licence
Technology
licence
Total
£’000
£’000
£’000
6,631
150
6,781
326
7,107
6,781
6,631
1,314
-
1,314
-
1,314
1,314
1,314
7,945
150
8,095
326
8,421
8,095
7,945
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
In performing an assessment of the carrying value of the licences at the reporting date, the Directors concluded that 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. The Group has obtained resource assessments in relation to its oil shale leases, the latest of which shows 126 million bbl
of oil in surface mineable JORC Measured Resource. 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.
The oil and gas technology licence was signed in 2010 and grants to TomCo an exclusive, site-specific license of certain patent
rights and “know how” relating to the EcoShale In-Capsule Process ™, developed by Red Leaf Resources Inc. Under the terms
of the License, Red Leaf has agreed to provide TomCo with all new patents, techniques, information and new discoveries in
relation to the EcoShale™ system. The directors consider that as the testing of the EcoShale™ technology continues to
progress as planned, with initial test results showing that the technology works on a small scale, no impairment of the oil and
gas technology licence is required.
19
Notes to the financial statements
for the financial year ended 30 September 2013
10.
Property, plant and equipment
Group
Cost
At 1 October 2011
At 30 September 2012
At 30 September 2013
Depreciation
At 1 October 2011
Charge in year
At 30 September 2012
Charge in year
At 30 September 2013
Net book value
At 30 September 2013
At 30 September 2012
At 30 September 2011
Company
Cost
At 1 October 2011, 2012 and 2013
Depreciation
At 1 October 2011
Depreciation
At 1 October 2012
Depreciation
At 30 September 2013
Net book value
At 30 September 2013
At 30 September 2012
At 30 September 2011
Oil properties
Fixtures, fittings
and equipment
£’000
102
102
102
102
-
102
-
102
-
-
-
£’000
32
32
32
19
4
23
9
32
-
9
13
Fixtures, fittings
and equipment
£’000
32
19
4
23
9
32
-
9
13
Total
£’000
134
134
134
121
4
125
9
134
-
9
13
Total
£’000
32
19
4
23
9
32
-
9
13
20
Notes to the financial statements
for the financial year ended 30 September 2013
11.
Company investment in subsidiaries
Shares in Group undertakings
Cost
At 1 October 2011
Additions
At 30 September 2012
Additions
At 30 September 2013
Total
£’000
6,631
150
6,781
326
7,107
The investments in subsidiaries are not considered impaired. For further details see note 9.
TomCo Energy plc holds interests in the following subsidiaries:
Subsidiary Undertaking Country of incorporation or
registration
Proportion of voting
rights and ordinary share
capital held
Nature of business
The Oil Mining Company Inc
TomCo I LLC
TomCo II LLC
Utah, USA
Delaware, USA
100%
Holding of oil shale leases
100%
Holding company of TomCo II
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 dissolved its Isle of Man registered dormant subsidiary LKH Limited on 15 January 2013 and
Luton Kennedy Ltd, its Israeli subsidiary on 2 May 2013.
12.
Available-for-sale financial assets
Cost
At 30 September 2011
Additions
At 30 September 2012
Additions
At 30 September 2013
Provisions
At 30 September 2012 and 2013
Net book value
At 30 September 2013
At 30 September 2012
At 30 September 2011
Unlisted
investments
£’000
180
3,262
3,442
-
3,442
180
180
3,262
3,262
-
During the year to 30 September 2012, 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).
21
Notes to the financial statements
for the financial year ended 30 September 2013
12.
Available-for-sale financial assets (continued)
The Directors consider that the fair value of the investment cannot be reliably measured and so, as permitted by IFRS, the asset
is stated at original cost. There is a risk that in the future this investment falls in value and the Group is unable to realise its
accounting value. TomCo continues to monitor the progress of Red Leaf and in the event that the value is deemed by the Group
to have declined, an impairment will be recognised. No such impairment has occurred to date.Red Leaf is currently completing
its permitting for Seep Ridge. Following this they are expected to start constructing an Early Production System capsule. The
value of the Red Leaf investment also depends upon the viability of the EcoShale technology, further details of which are
included in Note 9.
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
3,262
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
Current
Other receivables
Prepayments and accrued income
Non- current
Amounts owed from Group undertakings
Total Receivables
Group
2013
£’000
47
16
63
-
63
Company
2013
£’000
18
16
34
137
171
Group
2012
£’000
19
33
52
-
52
Company
2012
£’000
19
33
52
-
52
As at 30 September 2013 there were no receivables considered past due (2012: £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 (2012: £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.
14.
Cash and cash equivalents
Cash at bank and in hand
Group
2013
£’000
1,236
Company
2013
£’000
933
Group
2012
£’000
411
Company
2012
£’000
396
The Group earns 0.05% (2012: 0.05%) interest on their cash deposits, consequently the Group’s exposure to interest rate
volatility is not considered material.
22
Notes to the financial statements
for the financial year ended 30 September 2013
15.
Trade and other payables
Current
Trade payables
Other payables
Accruals
Non-current
Amounts owed to Group undertakings
Total Payables
Group
2013
£’000
3
8
210
221
-
221
Company
2013
£’000
Group
2012
£’000
Company
2012
£’000
3
8
23
34
5
39
2
8
31
41
-
41
2
8
31
41
-
41
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.
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
Interest expense
Derivative expense
Settlement for shares
Convertible loan carried forward
Derivative liability carried forward
2013
£’000
-
-
-
-
-
-
-
2012
£’000
888
295
6
556
(1,745)
-
-
23
Notes to the financial statements
for the financial year ended 30 September 2013
17.
Deferred tax
Unrecognised losses
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
18.
Share capital
Authorised
2,000,000,000 (2012: 2,000,000,000) ordinary shares of 0.5p
each
Number of
shares
Issued and fully paid
At 1 October
Allotted during prior year:
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 *
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 *
Allotted during current year:
January 2013 – Liquidity Facility
March 2013 – subscription at 1.2 pence per share
4,454,938
1,111,111
100,000,000
148,406,526
1,869,455,744 (2012: 1,621,049,218) ordinary shares of 0.5p
each
Shares issued under Promissory Note not called up:
January 2013 – Liquidity Facility
90,675,831
* These are non-cash transactions
2013
£’000
8,395
2013
£
2012
£’000
7,532
2012
£
10,000,000
10,000,000
10,000,000
10,000,000
8,105,246
6,554,480
-
-
-
-
-
-
500,000
742,033
1,242,033
9,347,279
504,603
159,333
14,000
845,000
22,275
5,555
-
-
1,550,766
8,105,246
(453,379)
8,893,900
-
8,105,246
24
Notes to the financial statements
for the financial year ended 30 September 2013
18.
Share capital (continued)
During the period, the Group 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 issued and
allotted 100 million ordinary shares of 0.5p each (“Ordinary Shares”) to Windsor Capital in exchange for the Promissory Note.
The Promissory Note delivers 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 was suspended on 28 May 2013, and reinstated on 23 September 2013
amended by way of introducing a floor price of 2p per share and limiting the maximum net amount raised following the
announcement to one million pounds. Shares which remain unsold at the reporting date are not included within the share capital
and share premium account as they are not considered called up.
To date, the Group has raised a net amount of £153,275 under the facility at an average price of 1.67p by the sale of 9,324,169
ordinary shares.
During the period, the Group also 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.
19.
Share premium
At 1 October
Premium on shares issued in the year
Expenses on shares issued in the year
At 30 September
20.
Share-based payments
2013
2012
£’000
13,629
1,140
(133)
14,636
£’000
10,573
3,056
-
13,629
At 30 September 2013, the following share warrants granted for services and shares are outstanding in respect of the ordinary
shares:
2013
2013
2012
2012
Outstanding at 1 October
Granted during the year
number
65,424,778
7,420,326
Lapsed during the year
(65,424,778)
Exercised during the year
Outstanding at 30 September
Exercisable at 30 September
-
7,420,326
7,420,326
Weighted average
exercise price
Weighted average
exercise price
Pence
number
Pence
2.5
1.2
2.5
-
1.2
1.2
126,309,364
-
(26,217,919)
(34,666,667)
65,424,778
65,424,778
2.2
-
2.5
2.5
2.5
2.5
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 2013 had a weighted average
exercise price of 1.2p (2012: 2.5p) and a weighted average remaining contractual life of 2.45 years (2012: 0.65 years).
25
Notes to the financial statements
for the financial year ended 30 September 2013
20.
Share-based payments (continued)
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)
2013
1.5
1.2
55%
3%
2.45
2012
-
-
-
-
-
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 other 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.
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. Some of the Company’s
expenses are denominated in US Dollars. 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 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
2013
£’000
929
307
1,236
Company
2013
£’000
929
4
933
Group
2012
£’000
396
15
411
Company
2012
£’000
396
-
396
26
Notes to the financial statements
for the financial year ended 30 September 2013
21.
Financial instruments (continued)
Liquidity risk arises from the Group and Company’s management of working capital and the finance charges and principal
repayments on any 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.
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 receivable outstanding at year end
Inter-group payable outstanding at year end
Fees paid to shareholder and advisor under
project finance and management agreement
2013
£
137,800
5,666
112,000
2012
£
-
-
62,000
27