Annual Report and
Financial Statements
2016
TomCo Energy plc
For further questions visit us online at:
www.tomcoenergy.uk.com or email us at: info@tomcoenergy.uk.com
2
COMPANY DETAILS
TOMCO ENERGY PLC
Company Number
Isle of Man
6969V
England and Wales
FC022829
Country of Incorporation
Isle of Man
Registered Office
2nd Floor
Sixty Circular Road
Douglas
Isle of Man IM1 1AE
Broker
SVS Securities PLC
20 Ropemaker Street London
EC2Y 9AR
Nominated Adviser
Strand Hanson Limited
26 Mount Row
Mayfair
London W1K 3SQ
Registrars
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Board of Directors
Andrew Jones – Executive Chairman
Christopher R. Brown – Chief Executive Officer
Alexander Benger – Non-Executive Director
Malcolm Groat – Non-Executive Director
CHAIRMANS STATEMENT
I am pleased to present to the shareholders of TomCo Energy plc (“TomCo” or
the “Company”), the Annual Report and Financial Statements for the year
ended 30 September 2016.
As a result of the cost reductions implemented in 2015/16 and the modest convertible loan note and equity
capital raise undertaken in May 2016 and September 2016 respectively, the Company is in a stronger
financial position relative to the prior year.
IN March 2017, the Company
incorporated a new Utah-based subsidiary company, TurboShale
Inc.
(“TurboShale”), which has entered into a non-binding letter of intent to create a strategic partnership with JR
Technologies LLC ("JR Technologies") and Venture Development Partners Ltd ("VDP") to seek to develop
and commercialise new propriety
technologies
for processing oil
shale.
Subject
to
entering
a
binding agreement with
JR Technologies and VDP, and TurboShale then completing a proposed fundraising
of up to $1.5 million, the Company will hold a 40% interest in TurboShale and will receive a monthly management
fee for its services to TurboShale.
The Company’s average monthly overheads have now been reduced to under £20,000, being less than a third of
what they were before I joined the Company. The Board continues to monitor liquidity closely and, whilst
the planned management fee receipts from TurboShale are expected to provide operational cash flow, the
Company’s cash flow forecasts indicate that an additional fundraising will be required over the next twelve
months, the timing of which will depend on, inter alia, the receipt of any such management fees and level of cost
savings implemented, as detailed in the Directors’ Report under ‘Going Concern’.
I was delighted to welcome Christopher Brown to the board in April 2016. His tireless efforts and dedication to
TomCo’s future have been significant and instrumental in moulding the Company’s future strategic plans.
In July 2016, we were delighted to announce that our application to extend the construction permit relating to the
Group’s Ground Water Discharge Permit UGW 470003 for our Holliday Block oil shale project, was successful. In
addition, in February 2017, the Company received approval of its routine extension request in respect of the
Holliday Block Project exploration licence, E/047/0061, to November 2017. So, whilst the oil and gas sector
continues to face challenging times, the costs of maintaining our oil shale assets are minimal. In addition, the
current environment has allowed us to evaluate other related (and non-related) opportunities, such
as TurboShale. I have found the time I have spent in Utah, over the past 18 months, most valuable;
especially in developing relationships with TomCo’s partners and advisors there.
As previously announced on 14 June 2016, TomCo’s technology partner, Red Leaf Resources, Inc. (“Red Leaf”)
completed its Seep Ridge Preliminary Front End Engineering Design (“pre-FEED”) study. While the capsule
costs were in line with expectations, the Seep Ridge processing plant costs were higher than originally
budgeted resulting in the total costs per barrel being at the higher end of expectations. In addition, Red
Leaf’s joint venture partner and shareholder, TOTAL E&P USA Oil Shale, LLC (“TOTAL”), announced it was not
prepared to move forward with the new-generation Early Production System Capsule (“EPS”). Since June 2016,
Red Leaf has experienced further delays in the EPS at their Seep Ridge site. Furthermore, significant
uncertainty remains with regards to the ongoing involvement of its joint venture relationship with TOTAL. As a
result TomCo has had to re-evaluate its future strategy for the commercialisation of its Holliday Block oil shale
project. This has included seeking alternative technological solutions which could have the potential to, not
only be effective, scalable and environmentally benign but also be economically viable at today’s oil prices.
TomCo has researched various alternative oil shale technologies to retort oil shale in-situ, and is seeking,
through TurboShale, to focus on Radio Frequency (RF) heating technology, oxidation heating technology and oil
upgrading technology.
In addition the Board have reviewed the carrying value of the technology licence and investment in Red Leaf and
have determined that it is appropriate to make a full provision against each of these assets. Accordingly, the
Company’s loss for the year of £5,143,000 includes £4,576,000 of impairments in respect of these assets.
On the 16 July 2016, we announced our plans to diversify into the production of Palm Oil in Sierra Leone. This project
was intended to generate free cash flows whilst being low cost to establish. Whist a lot of work was undertaken
concerning this project, only a modest sum of money was spent, being under £35,000. Later in the year, a
number of factors emerged causing us to re-evaluate our work in Sierra Leone. The Board have decided not to
proceed with the palm oil project.
The Company’s strategic objective remains focused on using innovative technology to unlock unconventional
hydrocarbon resources.
TomCo Energy plcAndrew JonesChairman, TomCo Energy PLC DIRECTORS REPORT
The Directors submit their report and the financial statements of the Company and of the Group for the year
ended 30 September 2016.
PRINCIPAL ACTIVITY
The principal activity of the Group is that of developing its 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 was obtained in 2012 and shows 126 million barrels of oil in surface mineable JORC Measured
Resource.
In March 2010, TomCo signed a licence agreement with Red Leaf, a Delaware Corporation, to use the
EcoShale® Technology, whereby oil shale is open-pit mined, placed into a clay-lined excavation and
covered the shale with layers of impermeable clay and soil, then the oil shale is heated with natural
gas via steel pipes to the point at which pyrolysis occurs and oil, condensate and natural gas are
produced. In April 2012, TomCo invested $5 million in Red Leaf as part of a $100 million raising by
Red Leaf in conjunction with the closing of its joint venture with Total E&P USA Oil Shale, LLC
(“TOTAL”). In July 2015, TomCo received full permission from the regulatory authorities to start
mining at its Holliday Block oil shale project, subject to Red Leaf commencing production. Having built
and tested a pilot plant in 2008 and completed
the Seep Ridge project,
Red Leaf completed
its preliminary Front End Engineering Design (“pre-FEED”) study in 2016 and
elected to proceed with a basis of design study for its commercial demonstration project or Early
Production System (“EPS”). However, TOTAL advised Red Leaf that it is not prepared to move forward
with the EPS and in September 2016, Red Leaf declared that it still does not know what TOTAL’s intention
are with respect to the joint venture. Due to this uncertainty, TomCo has decided to make a full
provision against its investment into Red Leaf and the EcoShale® Technology asset.
its permitting
for
In July 2016, TomCo’s mining permits for Holliday Block were extended to 15 July 2020, and the Group
continues to pursue other appropriate oil shale technologies. In March 2017, TomCo announced that
it had signed a Letter of Intent with Massachusetts-based JR Technologies and UK-based VDP, to
raise up
to develop new oil shale technologies through a newly
incorporated Utah-based company, TurboShale. The oil shale technologies, which TurboShale intend to
develop, remain conceptual in nature until demonstrated in the laboratory and in the field.
to $1.5million
to begin
Risks relating to Environmental, health and safety and other regulatory standards
future extraction activities are subject
laws and
The Group’s
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.
federal and state
to various
3
Directors’ report
Liquidity and interest rate risks
The Group is ultimately dependent on sources of equity or debt funding to develop its exploration assets
and meet its day to day capital commitments. 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.
For further information regarding the Group's cash resources and future funding requirements, refer to the
‘Going Concern’ section below.
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, any movements in the exchange rate of foreign currencies against
sterling may 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 and has decided to make full provision against the value of its
investment. Further details can be found in Note 10.
It was not considered an appropriate policy for the Group to enter any hedging activities or trade in any
financial instruments. Further information can be found in Note 18.
RESULTS AND DIVIDENDS
The statement of comprehensive income is set out on page 9. The loss of £5,143,000 includes £4,576,000 of
impairments in respect of the Red Leaf investment and technology licence. The Directors do not propose the
payment of a dividend (2015: £nil).
REVIEW OF THE KEY EVENTS DURING THE YEAR
Oil Shale
In February 2015, The Utah Division of Oil, Gas and Mining (“DOGM”) approved TomCo’s Notice of
Intention to Commence Large Mining Operations (“LMO”) at its Holliday Block oil shale lease. TomCo
agreed to only commence full-scale operations under the LMO at such time as the results of Red Leaf
Resources Inc.’s nearby Early Production System capsule are available and must submit a reclamation
surety to DOGM before beginning any mining operations.
In July 2015, the Utah Division of Water Quality (“DWQ”) issued TomCo with a Ground Water Discharge
Permit (“GWDP”) and a Construction Permit, the last of the major permits required from the various Utah
State departments to begin development and production at the Holliday Block lease. In July 2016, the
DWQ extended these permits to 15 July 2020.
In respect of the developments to Red Leaf’s EcoShale™ In-Capsule technology, please refer
to the Chairman’s Statement.
After examining the Pre-Feed commercial study in detail, TomCo decided to examine other oil
shale technologies that could be adopted at the Holliday Block lease. In March 2017, TomCo announced
that it signed a Letter of Intent with JR Technologies and VDP, to raise up to $1.5million to
shale technologies through a new company called TurboShale. JR
begin to develop new oil
Technologies will supply its Radio Frequency technology, knowhow and patents; TomCo will supply its
management, strategic vision, technical knowhow and the use of its Holliday Block for testing; and
VDP will assist with raising the capital for TurboShale and will supply
it marketing services.
Further to completion of final agreements and the fund raising, the Company will hold a 40% interest in
TurboShale.
4
Directors’ report
Palm Oil
During the financial year, TomCo examined other opportunities to generate medium-term cash flows. In
July 2016, TomCo received the results of an independent report by Astratec Africa Ltd to look at the palm
oil industry in Sierra Leone and the feasibility of setting up a small palm oil plant at Makarie in Sierra Leone.
Based on this report, TomCo decided to set up a new palm oil division, TomCo Palm Oil Ltd (“TPO”) based
in Sierra Leone. However, TomCo was not able to secure the requisite debt finance for TPO and the Board
decided to divert its limited management resources towards the formation of TurboShale, so the palm oil
project was suspended in November 2016. It has since been decided to write-off the full value of its
investment in TPO.
Financing
In May 2016, Christopher Brown, TomCo’s Chief Executive, provided the Company a convertible loan of
£150,000 (the “Convertible Loan”) (further details of which can be found in Note 16). In September 2016,
the Company raised gross proceeds of £0.4 million (before expenses) through the placing (the “Placing”) of
571,428,571 new ordinary shares at 0.07 pence per placing share (the "Placing Price"). At the same time the
in
Convertible Loan was converted into 214,285,714 new ordinary shares at the Placing Price and,
accordance with the Convertible Loan Agreement, 107,142,857 warrants were issued to Mr Brown, giving him
the right to acquire new shares at a price of 0.17 pence for a period of two years from that date. The net
proceeds of the Placing and Convertible Loan were applied to the oil shale and palm oil divisions, and for general
working capital purposes.
Directors
Directors who served on the Board during the year to 30 September 2016 were as follows:
Andrew Jones
Miikka Haromo (resigned 7 April 2016)
Christopher R. Brown (appointed 6 April 2016)
Simon Corney
Directors’ interests in the shares of the Group, including family interests, were as follows:
30 September 2016
30 September 2015
C Brown*
M Haromo**
A Jones
S Corney
Ordinary
shares
Share
of Nil par value
warrants
Ordinary
shares
of 0.5p par
value
Share
warrants
214,285,714
107,142,857
n/a
-
-
-
-
-
3,000,000
-
-
214,285,714
107,142,857
3,000,000
-
-
-
-
-
Details of remuneration and share warrants can be found in Note 6 and Note 17.
* Mr. Brown is also the life tenant and settlor of the BBCK Family Trust in Jersey, and therefore an indirect
beneficiary of Kenglo One Ltd, a Jersey-based company that is the largest shareholder of TomCo with an
interest in 492,920,548 ordinary shares in the capital of TomCo.
** Resigned 7 April 2016
5
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 2016 for trade payables was 8 days (2015: 8 days).
Going Concern
to meet
The Directors have prepared cash flow forecasts for the twelve months following the date of signing of these
financial statements. Under these forecasts the Group requires additional funding by calendar Q1 2018 to have
sufficient cash
flow
its
forecasts assume management
few months
and
receipts are dependent upon
the Company, JR Technologies and VDP and TurboShale
final agreements being reached between
successfully
in a proposed fundraising. If management fee receipts do not occur, are
delayed or cost reductions cannot be implemented as planned, or if there are any additional unforeseen
costs, then the Group will require additional funding by August 2017.
fall due. However, the cash
the next
further cost reductions are implemented. The management
from TurboShale begin
fee
liabilities and commitments as
raising equity
receipts
they
fee
in
The Directors remain confident that they can secure additional funding, either through debt or equity
finance, which would provide sufficient funds to meet operating expenditure for the next twelve months. These
conditions are considered to represent a material uncertainty which may cast significant doubt over the
going concern assessment. Whilst acknowledging this material uncertainty, the Directors remain confident of
raising additional funds as required and therefore the Directors consider it appropriate to prepare the financial
statements on a going concern basis. The financial statements do not include the adjustments that would result
if the Group and Company was unable to continue as a going concern.
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.
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 AIM 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.
6
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.
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
Andrew Jones
Chairman
Christopher Brown
Chief Executive
7
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 2016 which
comprise the consolidated statement of comprehensive income, the consolidated and company statement of
financial position, the consolidated and company statements of changes in equity, the consolidated and company
statements 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 (IFRS) as
adopted by the European Union.
This report is made solely to the Company’s members as a body, in accordance with our engagement letter dated
2 November 2016. 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
Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the annual report to identify material inconsistencies with
the audited financial statements and to identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become
aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on the financial statements
In our opinion the financial statements:
•
•
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 2016 and of the Group’s loss for the year then ended; and
have been properly prepared in accordance with IFRSs as adopted by the European Union.
Emphasis of Matter – Going Concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the
disclosures made in Note 1 to the financial statements concerning the Group’s ability to continue as a
going concern. The Group’s cash flow forecasts indicate that it needs to successfully raise further funds, either
through equity or debt finance, to meet its liabilities and commitments as they fall due for a period of at least the
next 12 months, although the timing of such a funding requirement within that 12 month period is in turn
dependent on the Group’s ability to generate management fee income receipts and reduce costs as detailed in
Note 1. While the Directors are confident of being able to raise the necessary funding these conditions indicate
the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a
going concern. The financial statements do not include the adjustments that would result if the Group was
unable to continue as a going concern.
BDO LLP
Chartered Accountants
London, United Kingdom
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
8
Consolidated statement of comprehensive income
for the financial year ended 30 September 2016
Note
2
2
8,10
4
3
5
Revenue
Cost of sales
Gross loss
Administrative expenses
Impairment of assets
Operating loss
Finance costs
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
2016
£’000
-
-
-
(495)
(4,576)
(5,071)
(72)
(5,143)
-
(5,143)
(5,143)
2015
£’000
3
(8)
(5)
(710)
-
(715)
(1)
(716)
-
(716)
(716)
2016
Pence
2015
Pence
per share
per share
Basic & diluted loss per share
7
(0.21)
(0.04)
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 £5,117,723 (2015: £668,395), which included an
impairment charge of £4,575,502.
The Notes on pages 13 to 28 form part of these financial statements.
9
Consolidated and Company Statement of Financial Position
as at 30 September 2016
Group Company
Group
Company
2016
2016
2015
2015
Note
£’000
£’000
£’000
£’000
Assets
Non-current assets
Intangible assets
Investment in subsidiaries
Available for sale financial assets
Other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
8
9
10
11
11
12
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
13
Net current assets
TOTAL LIABILITIES
Total net assets
Shareholders’ equity
Share capital
Share premium
Warrant reserve
Retained deficit
Total equity
7,627
-
-
20
-
7,627
-
-
8,933
-
3,262
-
1,314
7,619
3,262
42
7,647
7,627
12,195
12,237
38
381
419
97
378
475
42
272
314
12
271
283
8,066
8,102
12,509
12,520
(232)
(232)
(225)
(225)
187
250
(232)
(225)
(136)
(136)
178
(136)
(129)
(129)
154
(129)
7,834
7,877
12,373
12,391
15
16
17
-
-
25,125
25,125
57
57
10,133
14,457
42
10,133
14,457
42
(17,348)
(17,305)
(12,259)
(12,241)
7,834
7,877
12,373
12,391
The accounts on pages 9 to 28 were approved and authorised for issue by the Board of Directors on 30th March 2017.
Andrew Jones
Director
Alexander Benger
Director
10
Consolidated statement of changes in equity
for the financial year ended 30 September 2016
Group
Company
Share
capital
Share Warrant
reserve
premium
Retained
Deficit
Total
Share
capital
Share Warrant
reserve
premium
Retained
deficit
Total
Note
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Balance at 1 October 2014
9,931
14,578
42
(11,543)
13,008
9,931
14,578
42
(11,573)
12,978
Total comprehensive loss for the year
Issue of share capital
15,16
At 30 September 2015
Total comprehensive loss for the year
Issue of shares
Redenomination of share capital to nil
par value
Issue of shares (net of costs)
Issue of Warrants
Conversion of loan notes
At 30 September 2016
-
202
(121)
10,133
14,457
-
-
15,16
174
(132)
15,16
(10,307)
10,307
16
17
16
-
-
-
-
343
-
150
25,125
-
-
42
-
-
-
15
-
57
(716)
(716)
-
81
(12,259)
(5,143)
12,373
(5,143)
42
-
343
15
204
-
-
-
54
(17,348)
7,834
-
202
-
(121)
10,133
14,457
-
-
174
(132)
(10,307)
10,307
-
-
-
-
343
-
150
25,125
-
-
42
-
-
-
15
-
57
(668)
(668)
-
81
(12,241)
(5,118)
12,391
(5,118)
42
-
343
15
204
-
-
-
54
(17,305)
7,877
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, together with transfers to share premium upon redenomination of the shares to nil par value.
Share premium
Amount subscribed for share capital in excess of nominal value, together with transfers from share capital upon redenomination of the shares to nil par 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 13 to 28 form part of these financial statements.
11
Consolidated and company statements of cash flows
for the financial year ended 30 September 2016
Cash flows from operating activities
Loss after tax
Adjustments for:
Finance costs
Impairment
(Increase)/decrease in trade and other
receivables
Increase/(decrease) in trade and other
payables
Note
Group
Company
Group
Company
2016
£’000
2016
£’000
2015
£’000
2015
£’000
2
3
(5,143)
(5,118)
(716)
(668)
72
4,576
(16)
72
4,576
(43)
1
-
93
1
-
51
95
95
(86)
(92)
Cash (used in) / generated by operations
(416)
(418)
(708)
(708)
8
9
15,16
16
Cash flows from investing activities
Investment in oil & gas assets
Additions to investment in subsidiary
Net cash used in investing activities
Cash flows from financing activities
Issue of shares (net of issue costs)
Issue of convertible loan notes
Interest paid on convertible loan notes
Net cash generated from financing activities
Net increase 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 13 to 28 form part of these financial statements.
(8)
-
(8)
385
150
(2)
533
109
272
381
-
(8)
(8)
385
150
(2)
533
107
271
(118)
-
(118)
-
(118)
(118)
1,008
1,008
-
-
-
-
1,008
1,008
182
90
182
89
378
272
271
12
Notes to the financial statements
for the financial year ended 30 September 2016
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 as
adopted by the European Union (“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.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions. 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; (Note 8);
- Impairment of intangible assets (Note 8);
- Impairment of available for sale financial assets (Note 10);
The Group has consistently applied all applicable accounting standards.
The Directors have prepared cash flow forecasts for the next twelve months from the date of signing of these financial
statements. Under these forecasts the Group requires additional funding by calendar Q1 2018 to have sufficient cash to meet its
liabilities and commitments as they fall due. The cash flow forecasts assume management fee receipts from TurboShale begin in
the next few months and further cost reductions are implemented. The management fee receipts are dependent upon final
agreements being reached between the Company, JR Technologies LLC and Venture Development Partners Ltd and in
TurboShale Inc successfully raising equity in a proposed fundraising. If management fee receipts do not occur, are delayed or
cost reductions cannot be implemented as planned then the Group will require additional funding by August 2017.
The Directors remain confident that they can secure additional funding, either through debt or equity finance, which would
provide sufficient funds to meet operating expenditure for the next twelve months. These conditions are considered to represent
a material uncertainty which may cast significant doubt over the ability to continue as a going concern. Whilst acknowledging
this material uncertainty, the Directors remain confident of raising additional funds as required and therefore the Directors
consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the
adjustments that would result if the Group and Company was unable to continue as a going concern.
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.
The International Accounting Standards Board (IASB) has issued the following new and revised standards, amendments and
interpretations to existing standards that are not effective for the financial year ending 31 December 2016 and have not been
adopted early.
International Accounting Standards (IAS/IFRS)
•
•
•
IFRS 15
IFRS 9
IFRS 16*
Revenue from contracts with customers
Financial instruments
Leases
* Not yet adopted by European Union
Effective date
(periods beginning
on or after)
1 Jan 2018
1 Jan 2018
1 Jan 2019
IFRS 15 is intended to introduce a single framework for revenue recognition and clarify principles of revenue recognition. This
standard modifies the determination of when to recognise revenue and how much revenue to recognize. The core principle is
that an entity recognises revenue to depict the transfer of promised goods and services to the customer of an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
IFRS 16 introduces a single lease accounting model. This standard requires lessees to account for all leases under a single on-
balance sheet model. Under the new standard, a lessee is required to recognise all lease assets and liabilities on the balance
sheet; recognise amortisation of leased assets and interest on lease liabilities over the lease term; and separately present the
principal amount of cash paid and interest in the cash flow statement.
13
Notes to the financial statements
for the financial year ended 30 September 2016
IFRS 9 “Financial instruments” addresses the classification and measurement of financial assets and financial liabilities. The
complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and
measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three
primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income (OCI) and
fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow
characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit
or loss with the irrevocable option at inception to present changes in fair value in OCI. There is now a new expected credit loss
model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to
classification and measurement except for the recognition of changes in credit risk in other comprehensive income, for liabilities
designated at fair value through profit or loss. Contemporaneous documentation is still required but is different to that currently
prepared under IAS 39. Management are currently assessing the standard’s full impact.
The Group is currently assessing the impact of these standards but based on the Group’s current operations do not expect them
to have a material impact on the financial statements noting that the investment in available for sale assets have been impaired.
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 2016. 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
control over an investee. The company controls an investee if all three of the following elements are present: power over the
investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable
returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements
of control. 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 Board of Directors.
Based on an analysis of risks and returns, the Directors consider that the Group has one principal business segment based on
geographical location. The loss before taxation arises principally within the UK and US. Net assets are principally in the UK
and the US.
Revenue
1.5
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.
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.
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
Exploration and development licences
The Company applies the full cost method of accounting for oil and gas operations. For evaluation properties, all mineral
leases, permits, acquisition costs, geological and geophysical costs and other direct costs of exploration appraisal,
renewals 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.
Technology licences
Depreciation is not charged on technology licences associated with oil and gas assets until they are available for use.
14
Notes to the financial statements
for the financial year ended 30 September 2016
1.9
Impairment
Exploration and development licences
Exploration and development assets are assessed for impairment when facts and circumstances suggest that the
carrying amount may exceed the recoverable amount. In accordance with IFRS 6 the Group firstly considers the following
facts and circumstances in their assessment of whether the Group’s exploration and evaluation assets may be impaired,
whether:
§
the period for which the Group has the right to explore in a specific area has expired during the period or will expire in
the near future, and is not expected to be renewed;
substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither
budgeted nor planned;
exploration for and evaluation of hydrocarbons in a specific area have not led to the discovery of commercially viable
quantities of hydrocarbons and the Group has decided to discontinue such activities in the specific area; and
sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying amount
of the exploration and evaluation assets is unlikely to be recovered in full from successful development or by sale.
§
§
§
If any such facts or circumstances are noted, the Group perform an impairment test in accordance with the provisions of IAS 36.
The aggregate carrying value is compared against the expected recoverable amount of the cash generating unit, which is
generally the field, except that a number of field interests may be grouped as a single cash generating unit where the cash flows
are independent . The recoverable amount is the higher of value in use and the fair value less costs to sell.
Any impairment loss would be recognised in the income statement and separately disclosed.
Technology licence
The carrying amount of the Group’s other intangible asset, its technology licence, is 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.
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
Convertible loan notes
When the terms of a convertible loan arrangement are such that the option will not be settled by the Company exchanging a
fixed number of its own equity instruments for a fixed amount of cash, the convertible loan (the host contract) is accounted for as
a hybrid financial instrument and the option to convert is an embedded derivative.
The embedded derivative is separated from the host contract as its risks and characteristics are not closely related to those of
the host contract. At each reporting date, the embedded derivative is measured at fair value with changes in fair value
15
Notes to the financial statements
for the financial year ended 30 September 2016
recognised in the Income Statement 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 derivative and is subsequently carried at
each reporting date at amortised cost. The embedded derivative and host contract are presented under separate headings in
the statement of financial position.
Prior to conversion the embedded derivative is revalued at fair value. 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 redemption
value is recognised within share capital and share premium. Any resulting difference is recognised in retained earnings.
1.13
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.
Transactions entered into by Group entities in a currency other than the functional currency of the entity are recorded at the
rates ruling when the transactions occur. Exchange differences arising from the settlement of monetary items are included in the
statement of comprehensive income for that period.
1.14
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.
1.15
Available-for-sale financial assets
The Group classifies its investments as available-for-sale financial assets.
The available for sale financial assets are carried at fair value when the fair value can be measured reliably 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. These assets are then assessed for
impairment. If there is evidence that an impairment loss has been incurred on an equity instrument that does not have a quoted
price in an active market and that is not carried at fair value because its fair value cannot be reliably measured, the amount of
the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of
estimated future cash flows discounted at the current market rate of return for a similar financial asset. Any such impairment is
recognised in the profit or loss. Such impairment losses shall not be reversed.
1.16
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
statement of financial position.
1.17
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.
1.18
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.
16
Notes to the financial statements
for the financial year ended 30 September 2016
1.19
Share capital
Ordinary shares are classified as equity. Ordinary shares allotted under a Liquidity Facility Agreement and
associated Promissory Notes are recorded as issued shares at the time the shares are allotted but are only recognised as
equity within share capital and share premium on sale and issue to a third party. Upon cancellation of such a facility the number
of shares in issue is reduced.
Where the proceeds from the sale of shares under a Liquidity Facility is below the par value of the shares the difference
between the proceeds and the par value of the shares is recorded as a reduction in share premium.
1.20 Warrants
Warrants issued as part of financing transactions in which the holder receives a fixed number of shares on exercise of the
warrant are fair valued at the date of grant and recorded within the warrant reserve. Fair value is measured by the use of the
Black Scholes model.
1.21
Investments in subsidiaries
Investments in subsidiary undertakings are stated at cost less impairment provisions.
17
Notes to the financial statements
for the financial year ended 30 September 2016
2.
Segmental reporting - Analysis by geographical segment
The Group’s revenue in 2015 arose within the US. The loss before taxation arises within principally the UK and US. Net assets are principally in the UK and US. The results associated with
the Group’s activities in Sierra Leone are immaterial and included within the United Kingdom below. 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 primarily 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 Board of Directors. The Directors therefore consider that no further
segmentation is appropriate.
Year ended 30 September
Revenue
Cost of sales
Gross loss
Impairment
Administrative expenses
Operating loss
Financial income
Finance costs
Financial expense
Total loss
Non-Current assets:
– Exploration and development licences
– Other
– Technology licence
- Available for sale financial assets
Current assets:
Trade and other receivables
Cash and cash equivalents
Cash and cash equivalents
Total assets
Current liabilities:
Trade and other payables
Total liabilities
United
States
2016
£’000
-
-
-
-
(8)
(8)
-
-
(8)
7,627
-
-
-
7,627
-
-
7,627
(7)
(7)
United
Kingdom
Company
2016
£’000
-
-
-
(4,576)
(487)
(5,063)
-
(72)
(5,135)
-
20
-
-
20
38
381
439
(225)
(225)
Total
2016
£’000
-
-
-
(4,576)
(495)
(5,071)
-
(72)
(5,143)
7,627
20
-
-
7,647
38
381
8,066
(232)
(232)
United
States
2015
£’000
3
(8)
(5)
-
(42)
(47)
-
-
(47)
7,619
-
-
-
7,619
30
1
7,650
(7)
(7)
United
Kingdom
2015
£’000
-
-
-
-
(688)
(668)
-
(1)
(669)
1,314
3,262
4,576
12
271
4,859
(129)
(129)
Total
2015
£’000
3
(8)
(5)
-
(710)
(715)
-
(1)
(716)
7,619
-
1,314
3,262
12,195
42
272
12,509
(136)
(136)
18
Notes to the financial statements
for the financial year ended 30 September 2016
3.
Finance costs
Bank charges
Loan note interest (Note 16)
Warrant expense
Loss on derivative (Note 16)
Total Finance Costs for the financial year
4.
Operating loss
The following items have been charged in arriving at operating loss:
Auditors’ remuneration: (audit services)
Rentals payable in respect of land and buildings
5.
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 20%
(2015: 20.0%)
Effects of:
Non deductible items (impairments)
Excess management expenses carried forward
Tax charge for the financial year
6.
Employees and Directors
2016
£’000
1
2
15
54
72
2016
£’000
29
7
2016
£’000
(5,143)
(1,029)
915
114
-
2015
£’000
1
-
-
-
1
2015
£’000
27
6
2015
£’000
(716)
(143)
-
143
-
The Group has no employees other than the directors, whose emoluments comprise fees paid for services.
The amounts for their services are detailed below:
Salaries
Salaries
C Brown (Appointed 6 April 2016)
M Haromo (Resigned 6 April 2016)
A Jones
S Corney
N Bonsor
P Rankine
Total remuneration
2016
£’000
20
87
30
30
-
-
167
2015
£’000
-
104
7
6
63
113
293
19
Notes to the financial statements
for the financial year ended 30 September 2016
7.
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.
Weighted
average
Number
of shares
‘000
Losses
£’000
Per share
Amount
Pence
(5,143)
2,394,339
(0.21)
(5,143)
2,394,339
(0.21)
Financial year ended 30 September 2016
Basic and Diluted EPS
Losses attributable to ordinary shareholders on
continuing operations
Total losses attributable to ordinary
shareholders
Financial year ended 30 September 2015
Basic and Diluted EPS
Losses attributable to ordinary shareholders on
continuing operations
(716)
1,999,455
(0.04)
(0.04)
Total losses attributable to ordinary shareholders
(716)
1,999,455
The warrants which were issued in the current and prior year (Note 17) are anti-dilutive. As the warrants would be anti-
dilutive a separate diluted loss per share is not presented.
8.
Intangible assets
Cost
At 1 October 2014
Additions
At 30 September 2015
Additions
Impairment of technology licence
Net book value
At 30 September 2016
At 30 September 2015
At 30 September 2014
Oil & Gas
Oil & Gas
Oil & Gas
Exploration and
development
licences
Technology
licence
Total
£’000
£’000
£’000
7,501
118
7,619
8
-
7,627
7,619
7,501
1,314
-
1,314
-
8,815
118
8,933
8
(1,314)
(1,314)
-
1,314
1,314
7,627
8,933
8,815
The oil and gas technology licence was signed in 2010 and grants to TomCo an exclusive, site-specific licence
of certain patent rights and “know how” relating to the EcoShale™ In-Capsule Process, developed by Red
Leaf Resources Inc. (“Red Leaf”). Under the terms of the licence, Red Leaf has agreed to provide TomCo with all
new patents, techniques, information and new discoveries in relation to the EcoShale™ system. The Directors
have considered the carrying value of the technology licence as at 30 September 2016. As detailed in the
Group’s announcement in June 2016, Red Leaf’s joint venture partner, TOTAL, have decided not to support Red
Leaf’s second
20
Notes to the financial statements
for the financial year ended 30 September 2016
Early Production System. Whilst Red Leaf has completed permitting of its Seep Ridge site and is constructing the
Early Production System, the Directors consider there to be significant uncertainty around the viability of the technology
and its commercialisation in the near term and based on these developments the Directors have determined it
appropriate to provide, in full, for the value of this asset.
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 in 2012. 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 exploration licence at the reporting date, the Directors
concluded that it was not appropriate to book an impairment given the JORC Measured Resource, the licence term and
the continued plans to explore and develop the block. The outcome of ongoing exploration, and therefore whether the
carrying value of the exploration licence will ultimately be recovered, is inherently uncertain. 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
Directors considered the impact of the decision to impair the technology licence on the carrying value of the
exploration asset and, given the JORC Measured Resource and strategic plans being progressed for the asset,
including the new technologies which TurboShale intend to develop, concluded that no impairment was considered
appropriate.
9.
Company investment in subsidiaries
Shares in Group undertakings
Cost
At 30 September 2014
Additions
At 30 September 2015
Additions
At 30 September 2016
Total
£’000
7,501
118
7,619
8
7,627
The investments in subsidiaries relate to companies involved in the development of the exploration asset. The
Directors consider these investments are supported by their assessment of the carrying value of the intangible oil and
gas assets in the subsidiary and are not considered impaired. For further details see Note 8.
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 Palm Oil
Limited
TomCo I LLC
TomCo II LLC
Utah, USA
100%
Holding of oil shale leases
Sierra Leone
100%
TomCo Palm Ltd was
incorporated in June 2016 for
the purposes of exploring the
viability of establishing a Palm
Oil production company
Delaware, USA
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
21
Notes to the financial statements
for the financial year ended 30 September 2016
10.
Available-for-sale financial assets
Cost
At 1 October 2014
Additions
At 30 September 2015
Additions
At 30 September 2016
Provisions
At 1 October 2014 and 30 September 2015
Impairment
At 30 September 2016
Net book value
At 30 September 2016
At 30 September 2015
At 30 September 2014
Unlisted
Investments
£’000
3,442
-
3,442
-
3,442
180
3,262
3,442
-
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 Directors considered that the fair value of the investment cannot be reliably measured and so, as permitted by
IFRS, the asset was stated at original cost less any provision for impairment. The directors consider that the carrying
value of the investment in Red Leaf is dependent on the success of the EcoShale™ technology. Whilst Red Leaf has
completed its permitting for Seep Ridge and has started constructing the Early Production System Capsule its joint
venture partner, TOTAL, have decided not to support Red Leaf’s second Early Production System. Tomco have
continued to monitor Red Leaf’s design and development of the EPS capsule and the Directors consider there to be
significant uncertainty around the viability of the technology and its commercialisation and based on the developments
in the year the Directors have determined it appropriate to impair the investment.
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 were also provided in full in 2008 due to uncertainties about the
future of those Companies. Refer to details above on Red Leaf.
22
Notes to the financial statements
for the financial year ended 30 September 2016
11.
Trade and other receivables
Current
Other receivables
Amounts owed from Group
undertakings
Prepayments and accrued
income
Non- current
Other receivables
Amounts owed from Group
undertakings
Total Receivables
*
Group
2016
£’000
Company
2016
£’000
Group
2015
£’000
Company
2015
£’000
33
-
5
38
20
-
58
33
59
5
97
-
-
97
34
-
8
42
-
-
42
4
-
8
12
-
42
54
As at 30 September 2016 there were no receivables considered past due (2015: £Nil). The maximum exposure to
credit risk at the reporting date is the fair value of each class of receivable and cash and cash equivalents as disclosed
in Note 18.
All current receivable amounts are due within 6 months.
12.
Cash and cash equivalents
Cash at bank and in hand
Group
2016
£’000
381
Company
2016
£’000
378
Group
2015
£’000
272
Company
2015
£’000
271
The Group earns 0.05% (2015: 0.05%) interest on their cash deposits, consequently the Group’s exposure to interest
rate volatility is not considered material.
13.
Trade and other payables
Current
Trade payables
Other payables
Accruals
Group
2016
£’000
70
5
157
232
Company
2016
£’000
63
5
157
225
Group
2015
£’000
10
1
125
136
Company
2015
£’000
3
1
125
129
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.
14.
Deferred tax
Unrecognised losses
The Company has tax losses in respect of excess management expenses of £10,383,135 (2015: £9,813,137) available
for offset against future Company income. This gives rise to a potential deferred tax asset at the reporting date of
£2,076,627 (2015: £1,962,627). 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 but the excess management expenses have no expiry date.
23
Notes to the financial statements
for the financial year ended 30 September 2016
15.
Share capital
Issued and fully paid at 1 October and 30 September
2,072,455,744
Less Shares issued under Promissory Note
Total share capital
-
-
Number of shares
in Issue
Balance of Shares issued under Promissory Note not called up:
At 1 October
Called up in current year
At 30 September
90,675,831
(40,490,000)
45,780,831
Number of shares
in issue
2015
£
10,362,279
(228,904)
10,133,375
(431,354)
202,450
(228,904)
2016
£
Issued and fully paid at 1 October
2,072,455,744
10,362,279
Less Shares issued under Promissory Note at 1 October
Shares issued in the year via Promissory Note
-
-
Cancellation of shares in Promissory Note
(10,980,831)
(228,904)
174,000
-
Transfer to share premium upon redenomination the ordinary
shares them having a nil par value
September 2016 – placing (Note 16)
September 2016 – conversion of loan notes (Note 16)
At 30 September
Balance of Shares issued under Promissory Note not called up:
At 1 October
Called up in the year
-
(10,307,375)
571,428,571
214,285,714
2,847,189,198
45,780,831
(34,800,000)
-
-
-
(228,904)
174,000
In 2013 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 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. 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.
During the period, the Group raised a net amount of £42,231 (2015: £81,357) under the facility by the sale of
34,800,000 ordinary shares (2015: 40,490,000). Where the proceeds were below the par value of share capital the
difference was recorded as a reduction in share premium. On 15 July 2016 the Group cancelled the Liquidity Facility
and the remaining 10,980,831 ordinary shares were cancelled, resulting in a capital reduction.
24
Notes to the financial statements
for the financial year ended 30 September 2016
16.
Share premium
At 1 October
Deficit on shares issued below par (note 15)
Transfer from Share Capital account of redenomination of the
Ordinary Shares to nil par value
September 2016 – placing at 0.07 pence per share (i)
September 2016 – conversion of loan notes at 0.07 pence per share
(ii)
2016
£’000
14,457
(132)
10,307
343
150
2015
£’000
14,578
(121)
-
-
-
At 30 September
25,125
14,457
(i)
Placing
On 2 September 2016 the company raised £400,000 (£343,000 net of costs) through a share placing of
571,428,571 new Ordinary Shares of no par value at 0.07p per Ordinary Share. The placing completed
in full on 2 September 2016 with all cash proceeds received in the same month.
(ii) Conversion of loan notes
On 20 May 2016 the Company entered into an agreement with Christopher Brown, CEO of the
Company, to provide £150,000 by way of a loan, convertible into ordinary shares in the Company.
Under the terms of the loan agreement interest accrued on the loan notes at 5% per annum. The loan
was convertible into ordinary shares of the Company either automatically if an equity placing was to
take place within six months from the issuance of the Convertible Loan, or at the election of the holder
should no placing occur. Further, the conversion could be either at the placing price (in the event that
an equity placing occurring), or at the average share price from the 20 trading days immediately prior to
the conversion date (in the absence of any equity placing). As such, the terms were such that a
variable number of shares could be issued. In addition, the Company agreed to issue Chris warrants at
the conversion date as a term of the convertible loan note (the terms of which are detailed in Note 17).
The option to convert to a variable number of shares represented an embedded derivative which was
recognised at a fair value of £10,153. The residual £139,847 was recognised as the fair value of the
loan note on inception.
The Placing on 2 September 2016 triggered the conversion of the loan notes. Prior to conversion the
instrument was revalued with a resulting in a finance charge of £53,571 in the income statement. The
loan liability was converted into 214,285,713 new ordinary shares at the placing price of 0.07p in
accordance with the agreed terms noted above. The loan note and embedded derivative were de-
recognised and included in reserves. At the date of conversion, the loan interest accrued was £2,158
this interest amount was paid in cash.
25
Notes to the financial statements
for the financial year ended 30 September 2016
17.
Warrants
At 30 September 2016, the following share warrants are outstanding in respect of the ordinary shares:
2016
2016
Weighted average
exercise price
2015
2015
Weighted average
exercise price
number
Pence
number
Pence
Outstanding at 1 October
19,420,326
0.6
7,420,326
Expired during the year
Granted during the year
(7,420,326)
107,142,857
Outstanding at 30 September
119,142,857
Exercisable at 30 September
119,142,857
Issue of Warrants
1.2
0.17
0.18
0.18
-
12,000,000
19,420,326
19,420,326
1.2
0.5
0.5
0.6
0.6
Upon conversion of the loan as detailed in Note 16, Chris Brown, CEO of the Company, was issued with 1 warrant for
every 2 shares into which the loan converted giving him the right to acquire new shares at an exercise price of 0.17p
(representing a 21.4% premium to the closing mid-price as at 18 May 2016 being the loan note issue date). These
warrants have a life of two years and can be exercised from the date of issue in September 2016. The fair value
of £15,000 was recorded in equity and expensed.
On completion of the placing on 2 October 2014. the Company issued 12,000,000 warrants with an exercise price of
0.5p and a contractual life of 5 years. On 12 March 2016, 7,420,326 warrants expired. The fair value of the warrants
issued in the prior year was insignificant and therefore not recognised.
Each warrant in issue 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 warrants outstanding at 30 September 2016 had
a weighted average exercise price of 0.18p (2015: 0.6p) and a weighted average remaining contractual life of 2.1
years (2015: 2.23 years). On completion of the loan conversion (Note 16), on 2 September the Company issued
107,142,857 warrants with an exercise price of 0.17p and a contractual life of 2 years.
The inputs into the Black-Scholes model for calculating estimated fair value were:
Share price (pence)
Exercise price (pence)
Expected volatility
Risk-free rate
Contractual life (years)
2016
0.095
0.17
55%
2.5%
2
2015
0.18
0.1
55%
3%
5
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.
18.
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.
26
Notes to the financial statements
for the financial year ended 30 September 2016
There is no material difference between the book value and fair value of the Group and Company’s cash and other
financial
Instruments except the available-for-sale asset which is held at cost at 30 September 2015 as it could not be reliably
fair valued and has subsequently been impaired at 30 September 2016.
Currency risk
The Group has overseas subsidiaries which operate in the United States include expenses 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
2016
£’000
378
3
381
Company
2016
£’000
378
-
378
Group
2015
£’000
271
1
272
Company
2015
£’000
271
-
271
Liquidity risk arises from the Group and Company’s management of working capital. It is the risk that the Group and
Company will encounter difficulty in meeting its financial obligations as they fall due. Refer to note 1 for details of going
concern.
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.
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 principally exposed to credit risk on
cash and cash equivalents with banks and financial institutions. For banks and financial institutions, only independently
rated parties with an acceptable rating are utilised.
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 2016
19.
Related party disclosures
The Directors are Key Management and information in respect of key management is given in Note 6. Details of
transactions with related parties regarding financing are provided in Notes 16 and 17.
Transactions between the Company and its subsidiaries and related parties during the year are summarised below:
Inter-group receivable outstanding at year end
2016
59
2016
£’000
2015
£’000
59
42
20.
Ultimate controlling party
As at 30 September 2016 and 30 September 2015 there is no ultimate controlling party
- ENDS -
28
O NLINE
www.tomcoenergy.uk.com
info@tomcoenergy.uk.com
T ELEPH O NE
+44 20 3823 3635
A DDR E S S
TomCo Energy plc
60 Circular Road
Douglas Isle of Man IM1 1SA