Annual Report and
Financial Statements
2019
TomCo Energy plc
For further information visit us online at:
www.tomcoenergy.com or email us at: info@tomcoenergy.com
COMPANY DETAILS
TOMCO ENERGY PLC
Company Numbers
Isle of Man
England & Wales
Country of
Incorporation
6969V
FC022829
Isle of Man
Board of Directors
Stephen West
John Potter
Alexander Benger
Malcolm Groat
Non-Executive Chairman
Chief Executive Officer
Non-Executive Director
Non-Executive Director
Registered Office
2nd Floor
Sixty Circular Road
Douglas
Isle of Man IM1 1AE
Broker
Turner Pope Investments (TPI) Ltd
6th Floor, Becket House
Old Jewry
London EC2R 8DD
Nominated Adviser
Strand Hanson Limited
26 Mount Row
London
W1K 3SQ
Registrars
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
CONTENTS
Chairman’s statement
Directors’ report
Corporate governance statement
Audit committee report
Remuneration committee report
Independent auditors’ report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Page
1
3
7
13
14
15
19
20
21
22
23
3
CHAIRMAN’S STATEMENT
I am pleased to be delivering my first Chairman’s Statement to the
shareholders of TomCo Energy plc (“TomCo” or the “Company” or, with its
subsidiaries, the “Group”), together with the Annual Report and Financial
Statements for the year ended 30 September 2019.
Market Conditions
During the year we saw a marked
improvement in market conditions for
global capital markets and the oil and
gas industry. However, at the time of
this statement we have
writing
witnessed
unforeseen
the
emergence of the COVID-19 virus,
which has had a dramatic effect on
the global capital markets and, for the
foreseeable future, this will have an
impact on all industries including the
oil and gas industry.
technology
TurboShale RF Technology
With the completion of the field test of
TurboShale’s RF
in
September 2019 (“Field Test”) on the
Group’s Holliday A Block, the Group
progressed its assessment of its
unconventional oil shale resources in
Utah.
team,
significant
the expansion of
The lessons learnt from the Field
the
Test and
Group’s advisory
including
IGES Inc. as the Groups Geological
Services advisor, Matt Himes as the
Groups Field Operations adviser,
and the close support of Continental
Electronics, meant the Field Test
delivered
data.
Unfortunately, the main aim of the
Field Test to recover enough oil for
testing was not met, though sufficient
evidence was generated to show the
process did heat the oil shale. The
analysis completed post the Field
Test, with Continental Electronics,
has
design
improvements needed to the antenna
and how these improvements can be
implemented. However, with the
global effects of the COVID-19 virus
determined
the
still developing, the Company has
taken the decision to postpone the
next
test of TurboShale’s RF
The Company will
technology.
continue to explore its potential with
laboratory-based
testing until a
further field test can, subject to
funding, be planned and undertaken.
Valkor Oil Sands Opportunity
In December 2019, the Company
signed a non-binding memorandum
of understanding (“MoU”) with Valkor
Technology LLC (“Valkor”) to explore
the oil sands potential across the
Group’s oil shale leases within the
Uintah Basin, Utah, USA (“Leases”).
Valkor
international
an
is
procurement,
engineering,
construction and installation and field
operations company, with operations
in the US, South America and Africa
both on and offshore and the owner
and operator of gas and oil fields in
Trinidad, USA, Turkey and Ukraine.
Through
their subsidiary, Valkor
Energy Services, they have assisted
with the design improvements of
Petroteq Energy Inc’s (“Petroteq”)
closed loop system for use in the
recovery of oil from oil sands (the “Oil
Sands Technology”) and has a
licence from Petroteq to utilise the Oil
Sands Technology in the USA.
the
results of
Based on
the
preliminary work undertaken to date
in accordance with the MoU, TomCo
entered into a exclusivity agreement
with Valkor on 19 March 2020,
pursuant to which the Company and
Valkor have agreed, inter alia, to
study the potential to deploy the Oil
Sands Technology at a suitable
____
1
third party,
location and to jointly fund a Pre-
FEED study. The Pre-FEED study
will be undertaken by Valkor and be
to
verified by a
demonstrate the economic viability of
the Oil Sands Technology, with a
gross budget of US$250,000 to be
funded equally by the parties. Should
the results of the Pre-FEED study be
sufficiently favourable, the Company
anticipates entering into a binding
agreement with Valkor to establish a
JV company by the end of June 2020,
with TomCo and Valkor each holding
a 50% equity interest, to pursue the
development of a plant using the Oil
Sands Technology on land yet to be
determined.
study
it
Under normal circumstances,
would be expected that the Pre-
take
FEED
approximately
to
complete. However, with the effects
of the COVID-19 virus still unfolding
and the resultant travel restrictions, it
is likely the study will take longer.
would
four weeks
step into the role of Non-Executive
Chairman. On behalf of the Board, I
would like to thank Andrew for his
hard work as Executive Chairman
over the last five years and the
integral
the
role he played
development of the Company and
wish him all the best with his future
endeavours.
in
Outlook and Summary
the general
As already outlined,
sector backdrop has entered an
unprecedented challenge due to the
impact of the COVID-19 virus on
Where
global capital markets.
possible, we will seek to reduce costs
in every aspect of the business whilst
ensuring we operate as efficiently
and effectively as possible.
like
for
to
thank all
We would
shareholders
their continued
support and look forward to providing
positive updates throughout 2020
and into 2021.
Corporate
TomCo witnessed a busy year in
terms of corporate activity. Four
equity fundraises were completed
during the year, raising, in aggregate,
£1.7 million
(gross), with an
additional £0.9 million (gross) raised
post year end in December 2019.
Stephen West
Non-Executive Chairman
26 March 2020
its cash
forecasts,
Following the fundraise in December,
as at 26 March 2020, the Company
had cash of approximately £745,000
and the Directors believe that based
on
the
flow
Company has sufficient funds for its
present requirements through to the
end of March 2021. If the Company
seeks to advance the RF technology
or undertake further work in respect
of the oil sands over and above the
Pre-FEED study, the Company will
need to raise further funds.
Further, post the year end Andrew
Jones stepped down as Executive
Chairman
other
opportunities and I was pleased to
pursue
to
____
2
DIRECTORS’ REPORT
The Directors submit their report and the financial statements of the Group for the year ended 30 September
2019.
PRINCIPAL ACTIVITY
The principal activity of the Group is that of deploying technology on its oil shale leases and other
unconventional oil resources 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, with the key risks for the year ended 30 September 2019 set out below.
Operational risk
SRK Consulting (Australasia) Pty Ltd undertook an independent resource assessment in relation to the Group’s
oil shale leases ML 49570 and ML 49571 (the “Leases”) in 2019. This assessment showed a best estimate
Contingent Resources (2C) of, in aggregate, 131.3 MM bbl of oil assessed under Petroleum Resources
Management System (“PRMS”) guidelines, plus a best estimate Prospective Resource (2U) of, in aggregate,
442.8 MM bbl oil across the Leases. This estimate included the Holliday A Block, where the Field Test took
place, with 2C Contingent Resources of 57.3 MM bbl of oil and 2U Prospective Resources of 84.7 MM bbl of
oil using in situ recovery methods aligned to TurboShale RF technologies which continues to be under
development.
In March 2017, TomCo incorporated a new US company, TurboShale Inc. (“TurboShale”), and entered into
agreements with JR Technologies LLC (“JRT”) to seek to advance the radio frequency (“RF”) technology used
in the BART Programme. TurboShale acquired the rights from JRT over patent US7891421B Method and
Apparatus for In-Situ Radiofrequency Heating (US Application 62/017/408), and patent application
US2015/035433A1 Subsurface Multiple Antenna Radiation Technology (SMART), which are the two key
patents relating to TurboShale’s RF technology and process. The patent application was granted in full in
January 2019.
The completion of the Field Test identified a number of changes required to be made to TurboShale’s RF
technology to ensure its safe operation and to successfully complete the objective of recovery of oil from the
Company’s Holliday A Block. The Company is further evaluating the technology during 2020 before starting to
plan the next field test.
The Directors have identified the following main risks in relation to the Field Test and TurboShale’s RF
technology:
•
•
•
Notwithstanding the successful outcome of the BART Programme, the Company is seeking to
demonstrate that TurboShale’s RF technology can be used to recover oil and gas on an economic basis
with the ultimate goal of moving towards commercial production of the Company’s oil shale assets. The
Field Test, completed in 2019, represents an important step in this process. The primary objective of
the Field Test was the recovery of oil from the Company’s Holliday A Block through the application of
TurboShale’s RF technology. Notwithstanding the Board’s confidence in TurboShale’s RF technology
proving successful, we have yet to prove it on our asset. Accordingly, there can be no certainty that the
technology will be successful and/or recover any oil. Even if it does recover oil, it may not recover
sufficient volumes to be able to complete the necessary analysis and/or such analysis may determine
that the process is not commercial or scalable.
The Group has been advancing the development of TurboShale’s RF technology and has made a
significant investment in acquiring specialised equipment, including radio frequency transmitters.
Further changes to the system have been identified and before further funding is deployed, testing these
changes together with further analysis of the system will be carried out. The cost of this analysis has yet
to be determined and may require the Company to raise further funding to allow the work to be carried
out.
This RF process does not use surface mining and instead works in situ, through the use of Radio
Frequency Antennas located within drilled boreholes. The Field Test has been completed using
exploration permits that have a minimal cost and time in securing. To expand the operations into a
commercial operation, a Small Mining Operating permit (“SMO”) will be required.
____
3
Directors’ report
Risks relating to 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
The Group is ultimately dependent on sources of equity or debt funding to develop TurboShale or any other
recovery technology and in turn its exploration assets and meet its day to day capital commitments. Cash
forecasts identifying the liquidity requirements of the Group are produced frequently and are reviewed regularly
by management and the Board. 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 and keeps its currency profile under review.
COVID-19 risk
The full effect and impact of the COVID-19 pandemic will take time to be understood. At the time of the
publication of these accounts, the full effects are not yet known, though it is clear that the effects will be
significant. Already we have seen a slowing of the global economy and a material reduction in both the demand
for and the price of oil, which will likely have an impact on the attractiveness of exploration assets, including the
Group’s, which may result in future funding for projects being harder to secure. In respect of the Group’s current
operations, being the Pre-FEED study, this will likely take longer to be completed than initially anticipated due
to the current imposed travel restrictions. In the event that the pandemic continues into the second half of 2020,
the Board will consider what cost reduction measures are needed and can be implemented to ensure the Group
can continue to trade.
Financial instruments
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 19.
RESULTS AND DIVIDENDS
The statement of comprehensive income is set out on page 19. The Directors do not propose the payment of
a dividend (2018: £nil).
REVIEW OF THE KEY EVENTS DURING THE YEAR
TurboShale
The Field Test of TurboShale’s RF technology was completed on the Groups Holliday A Block in September
2019. The results of the Field Test, while they didn’t result in the recovery of any oil, did produce a significant
amount of data. The data is continuing to be used to develop the system and has already identified a number
of improvements that should, in the Directors’ opinion, lead to the successful operation of the technology when,
subject to funding, it is next tested.
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4
Directors’ report
Financing
During the financial year, TomCo completed four equity fundraises of a total of 63,351,796 new ordinary shares,
which raised a total of £1.7 million before costs. The proceeds were used for the advancement of the
TurboShale field test and for general working capital.
In addition, unsecured loans of, in aggregate, £250,000, provided by Chris Brown, were settled in January 2019
by the issue of 5 million new ordinary shares at 2p per share and £150,000 in cash. In addition, warrants were
exercised for a total of 2,839,091 which raised £66,600. In addition, TomCo sold its entire interest in Red Leaf
Resources Inc. in October 2018 for a total consideration of US$133,333.
Since the end of the financial year there has been a further placing of 142,307,692 new ordinary shares, raising
£925,000 (gross). These funds have been deployed to working capital and the Pre-FEED study to be
undertaken by Valkor.
As at 26 March 2020, the Company had cash of approximately £745,000 and cash flow forecasts indicate that
the Company has sufficient funds through to the end of March 2021 as detailed below under Going Concern
and in Note 1.1 to the financial statements.
Directors
Directors who served on the Board during the year to 30 September 2019 and to date were as follows:
Andrew Jones (resigned 16 March 2020)
John Potter
Alexander Benger
Malcolm Groat
Laurence Read (appointed 1 January 2019; resigned 28 June 2019)
Post the period end, Stephen West was appointed as a Non-Executive Director on 17 February 2020
Directors’ interests in the ordinary shares of the Company, including family interests, as at 30 September
2019 were as follows:
A Jones*
J Potter
A Benger
M. Groat
L. Read
30 September 2019
30 September 2018 (or date of appointment)
Ordinary shares
of nil par value
380,838
26,500
18,293
11,887
-
437,518
Share
warrants
-
-
-
-
-
-
Share options
2,666,666
1,714,285
380,952
380,952
-
5,142,855
Ordinary shares
of nil par value
38,146
26,500
18,293
11,887
-
94,826
Share
warrants
-
-
-
-
-
-
Share
options
2,666,666
1,714,285
380,952
380,952
-
5,142,855
Details of remuneration, share warrants and share options can be found in the Remuneration Committee
Report, Notes 6,17 and 18 to the financial statements.
* The number for Mr. Jones includes 342,692 Ordinary shares held in his Self-Invested Personal Pension
Scheme (“SIPP”).
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.
Going Concern
The Directors have prepared cash flow forecasts for the next 15 months from the date of signing of these
financial statements. Under the forecasts, the Group plans to engage Valkor to evaluate the commercial viability
of a commercial scale plant based on the Petroteq oil recovery system. The forecasts indicate the Group has
sufficient funds to complete the engagement and has sufficient funds to meet its liabilities as they fall due until
March 2021. Further funding will be required if the Directors decide to explore the opportunity to develop a
commercial scale oil sands plant or to further advance the RF technology and to ensure the Company can
____
5
Directors’ report
continue to meet its liabilities and commitments through to March 2021.
The Director’s note that COVID-19 has had a significant negative impact on the global economy and oil prices
have fallen significantly, which may mean it is harder to secure additional funding than it has historically been.
Notwithstanding this, the Directors have a reasonable expectation that they can secure additional funding,
based on recent fundraisings, which would provide sufficient funds to meet operating expenditure beyond March
2021 or in the event that the Company sought further funds to explore the opportunity to develop a commercial
scale oil sands plant or to further advance the RF technology. However, these conditions are necessarily
considered to represent a material uncertainty which may cast significant doubt over the Group’s ability to
continue as a going concern. Whilst acknowledging this material uncertainty, the Directors remain confident of
raising any additional funds 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 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 Group’s transactions and disclose, with reasonable accuracy at any time, the financial position of the Group
and enable them to ensure that financial statements may be prepared, in accordance with the Isle of Man
Companies Act 2006. They are also responsible for safeguarding the assets of the Group and for taking steps
for the prevention and detection of fraud and other irregularities.
The Directors are required to prepare financial statements in accordance with the rules of the London Stock
Exchange for companies trading securities on the AIM market. In accordance with those rules, the Directors
have elected to prepare the Group financial statements in accordance with International Financial Reporting
Standards (IFRSs), as issued by the International Accounting Standards Board. 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 of the profit or loss of the Group for that year. 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;
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.
Auditors
All 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
John Potter
CEO
26 March 2020
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6
CORPORATE GOVERNANCE STATEMENT
As Chairman, I am pleased to present the Company’s Governance Statement under the QCA Corporate Governance
Code (“the QCA Code” or the “Code”). Establishing effective corporate governance structures that evolve with the
business and protect shareholder value is a key element of my role, together with the Board as a whole. Set out
below are details of the Company’s governance framework benchmarked against the QCA Code principles.
The Board of Directors of TomCo monitors the business affairs of the Company and its subsidiaries on behalf of its
shareholders. The Board currently consists of the Chief Executive Officer and three Non-Executive Directors. None
of the Non-Executive Directors have previously held an executive position with the Company. The Directors have
responsibility for the overall corporate governance of the Company and recognise the need for the highest standards
of behaviour and accountability. The Directors are committed to the principles underlying best practice in corporate
governance and have adopted the QCA Code.
This statement explains, at a high level, how the QCA Code is applied by the Company and how its application
supports the Company’s medium to long-term success. Further information on the application of the Code can be
found on the Company’s website at https://tomcoenergy.com/investors/governance/.
The Board is responsible for the stewardship of the Company through consultation with the management of the
Company. Management represents the Executive Director. Any responsibility that is not delegated to management
or to the committees of the Board remains with the Board, subject to the powers of the shareholder meetings. The
frequency of Board meetings, as well as the nature of agenda items, varies depending on the state of the Company’s
affairs and in light of opportunities or risks which the Company faces. Members of the Board are in frequent contact
with one another and meetings of the Board are held as deemed necessary.
Statement of compliance with the QCA Code
Throughout the year ended 30 September 2019, the Company has been in compliance with the provisions set out in
the QCA Code.
Statement about applying the principles of the Code
The Company has applied the principles set out in the Code, by complying with the Code as reported above. Further
explanations of how the principles have been applied is set out below.
Principle One – Business Model and Strategy
TomCo is an unconventional oil exploration and development company focused on using innovative technology to
unlock hydrocarbon resources, initially in Utah, USA.
Its objective is to become the leading development company in the use of RF technology in the extraction of oil &
gas from oil shale and to commercialise its current oil shale assets.
The Company believes that the RF technology, held through TurboShale in which the Company has an 80% interest,
will benefit from being economically attractive, carrying significant lower costs than other methods of retorting and
will be environmentally benign. The Company believes this will prove to be a disruptive technology and one with the
potential to unlock TomCo’s oil shale assets. Details of key operational and strategic risks that impact the delivery of
the future strategy are set out in the Directors’ Report together with mitigating actions.
Post the year end the Company has expanded its strategy to include the potential of oil sands resources and the
recovery of oil from them.
Principle Two – Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communications and having constructive dialogue with its shareholders.
Shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the
Company and management.
All shareholders are encouraged to attend and participate in all shareholder meetings called by the Company, in
particular its Annual General Meeting (AGM). Investors also have access to current information on the Company and
the Group through its website, www.tomcoenergy.com.
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Corporate Governance Statement
Principle Three – Considering wider stakeholder and social responsibilities
The Board recognises that the long-term success of the Group is reliant upon the efforts of the employees of the
Group, its partners, consultants, contractors, suppliers, regulators and other stakeholders. The Board have put in
place a range of processes and systems to ensure that there is close oversight and contact with its key stakeholders.
The Group is subject to oversight by a number of different U.S. State and other regulatory bodies, who directly or
indirectly are involved with the permitting and approval process of its Oil & Gas operations in Utah. Additionally,
given the nature of the Group’s business, there are other parties who, whilst not having regulatory power, nonetheless
have interest in seeing that the Group conducts its operations in a safe, environmentally responsible, ethical and
conscientious manner.
The Group makes all reasonable efforts, directly or through its advisers, to engage in and maintain active dialogue
with each of these governmental and non-governmental bodies, to ensure that any issues faced by the Group,
including but not limited to regulations or proposed changes to regulations, are well understood and ensuring to the
fullest extent possible that the Group is in compliance with all appropriate regulation, standards and specific licensing
obligations, including environmental, social and safety, at all times.
Principle Four – Risk Management
In addition to its other roles and responsibilities, the Board is responsible for ensuring that procedures are in place
and are being implemented effectively to identify, evaluate and manage the significant risks faced by the Group.
As a result of the process described above, a number of risks have been identified. The principal risks and the
manner in which the Company and its Board seek to mitigate these are set out below. The Board reviews the principal
risks facing the business as part of its meetings through the year and changes to those risks as the Company
develops. Where risks change or new risks are identified the Board implements risk management strategies as
applicable.
Risk
Operational risks
Comment
See Directors Report.
Mitigation
The Company is reducing its reliance on one recovery
method with the development of TurboShale and its RF
technology.
The Company has engaged with established contractors
to carry out the various elements of the project. The Board
carefully monitors performance and the results of work
being carried out on an ongoing basis.
Risks related to
Environmental, health
and safety and other
regulatory standards
Liquidity risk
See Directors Report.
The Company has employed leading advisors to assist it
in securing any relevant permits or licences to operate.
The Company maintains ongoing oversight of health &
safety and environmental compliance.
See Directors’ Report
including ‘Going Concern
section.
The Company maintains a detailed cashflow forecast and
carefully monitors expenditure and may seek to raise
additional funding as referred to in Note 1.1.
Currency risk
See Directors Report.
The Company aims to manage currency exposures by
holding funds in the applicable currency to match
anticipated expenditure.
The Board consider that an internal audit function is not necessary or practical due to the size of the Group and the
close day to day control exercised by the Executive Director. However, the Board will continue to monitor the need
for an internal audit function. The Executive Director has established appropriate reporting and control mechanisms
to ensure the effectiveness of the Group’s control systems for the size of the business and its activities. The Board
obtains regular updates on risks from the Executive Director, which allows it to monitor the effectiveness of risk
____
8
Corporate Governance Statement
management and through its regular engagement and review of reporting on areas such as status of the Company’s
projects, budgets, results and cash flow position of the Company it considers the effectiveness of controls on an
ongoing basis.
Principle Five – A Well-Functioning Board of Directors
The Board currently comprises the Chief Executive, John Potter, and three independent Non-Executive Directors,
Stephen West, Alexander Benger and Malcolm Groat.
Biographies for each of the current Directors are set out on the Company’s website. Executive and Non-Executive
Directors are subject to re-election usually at the Company’s Annual General Meeting, at intervals of no more than
three years.
The Board meets on a regular basis, typically at least once a month.
The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and corporate
actions. As such, the Company has established separate Audit and Remuneration Committees.
The Audit Committee comprises Malcolm Groat (Chairman) and Alexander Benger. The Audit Committee meets at
least twice a year to consider the integrity of the financial statements of the Company, including its annual and interim
accounts; the effectiveness of the Company’s internal controls and risk management systems; auditor reports; and
terms of appointment and remuneration for the auditor.
The Company’s Remuneration Committee comprises Alexander Benger (Chairman) and Malcolm Groat. The
Remuneration Committee meets from time to time, but not less than once a year, to review and determine, amongst
other matters, the remuneration of Executives on the Board and any share incentive plans of the Company.
The QCA Code recommends that the Chair must have adequate separation from the day-to-day business to be able
to make independent decisions. Stephen West is the Company’s Non-Executive Chairman and the Board believes
that he has adequate separation from the day-to-day business of the Company to be able to make independent
decisions. As the Board is comprised of only four members, one of whom is Executive and three of whom are
independent Non-Executive Directors, one of whom is the Chairman, the Board does not believe it is currently
necessary to appoint a senior independent director.
The Chief Executive is a full-time employee of the Company. Whilst each of the Non-Executive Directors are
considered to be part time, they are expected to provide as much time to the Company as is required.
The attendance record of the Directors at Board and committee meetings held during the year ended 30 September
2019 was as follows:
Main
Board
Audit
Committee
Remuneration
Committee
Meetings held
Attendance:
Andrew Jones
John Potter
Alex Benger
Malcom Groat
Laurence Read (appointed 1 January 2019; resigned 28 June 2019)
12
12
11
11
2
2
2
2
2
Principle Six – Appropriate Skills and Experience of the Directors
The Company believes that the current balance of skills in the Board as a whole, reflects a very broad range of
commercial and professional skills across geographies and industries and each of the Directors has previous
experience in public markets.
The Board believes that the Directors are well suited to the Company’s fundamental objective of enhancing and
preserving long-term shareholder value and ensuring that the Group conducts its business in an ethical and safe
manner. The Board is considered to be of sufficient number to provide more than adequate experience and
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9
Corporate Governance Statement
perspective to its decision-making process and given the size and nature of the Group, the Board does not consider
at this time that it is appropriate to increase the size of the Board or amend its composition.
As the Board is not currently anticipating any change to its size or composition, it has not yet implemented a written
policy regarding the identification and nomination of female directors. In the event that one of the existing members
of the Board stands down from their current position, the Company will, at that time, give further consideration to the
specific selection of a female member of the Board and the adoption of a formal policy relating to the positive
appointment of additional female members of the Board for future opportunities.
The Board is responsible for: (a) ensuring that all new Directors receive a comprehensive orientation, that they fully
understand the role of the Board and its committees, as well as the contribution individual directors are expected to
make (including the commitment of time and resources that the Company expects from its directors) and that they
understand the nature and operation of the Group’s business; and (b) providing continuing education opportunities
for all directors, so that individuals may maintain or enhance their skills and abilities as directors, as well as to ensure
that their knowledge and understanding of the Group’s business remains current.
Given the size of the Company and the in-depth experience of its Directors, the Company has not deemed it
necessary to develop a formal process of orientation for new Directors but encourages all its Directors to visit the
Group’s operations to ensure familiarity and proper understanding.
Skills & Experience of Board Members
Stephen West (appointed 17 February 2020)
Stephen is a Chartered Accountant Fellow (CA ANZ) and Chartered Accountant (ICAEW) with over 26 years of
financial and corporate experience gained in public practice, oil and gas, mining and investment banking. Before
joining TomCo, Stephen was instrumental in establishing and growing a number of resource companies in the UK,
Australia and Norway. Stephen was appointed to the Board in February 2020 and assumed the role of Non-Executive
Chairman on 16 March 2020.
John Potter
Accomplished Chief Executive and project manager with many years’ experience working within the energy sector.
John brings a wide range of skills, knowledge and industry connections. John’s proficiencies in understanding and
identifying best technologies in projects and his proven abilities in developing relationships with stakeholders,
including operators, politicians, financiers, technology providers, regulators and so on, are well proven and have
brought great value to the companies he has previously worked with.
Alexander Benger
Small-cap sector focused Corporate Financier. Initially having focused on Operational Management within financial
services companies, Alex moved into corporate finance in 2003 and has been involved in numerous fundraising,
stock market flotations and corporate actions for both private and public companies. For 12 years he has
concentrated predominately on London small-cap businesses, including four and a half years working for SME Stock
Exchanges.
Malcolm Groat
Malcolm is a Chartered Accountant and has a wide range of experience in corporate life, with roles as Chairman,
Non- Executive Director, Chair of Audit, CEO, COO and CFO for a number of companies. He is an adviser on
compliance and governance, strategy and operational improvement, and managing the risks of rapid change.
Andrew Jones (resigned 16 March 2020)
Andrew has over 13 years’ experience in capital markets and corporate finance. He is a member of the UK’s
Chartered Institute of Securities and Investment (CISI). Before joining TomCo, Andrew was instrumental in growing
a number of companies in a variety of sectors including technology, media and energy.
Principle Seven – Evaluation of Board Performance
The Board has determined that it shall be responsible for assessing the effectiveness and contributions of the Board
as a whole, its committees (which currently comprise the Audit Committee and the Remuneration Committee). The
small size of the Board allows for open discussion. The Chairman has regular dialogue with the Chief Executive
whereby the Board’s role and effectiveness can be considered.
____
10
Corporate Governance Statement
No formal assessments have been prepared in the year. However, the Board assesses its effectiveness on an
ongoing basis. The Board will keep this matter under review and especially if either the size of the Board or the
number of committees increases, which in turn may require a more formalised assessment and evaluation process
to be established to ensure continued effectiveness.
Principle Eight – Corporate Culture
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Group
as a whole and that this will impact the performance of the Group. The Board is very aware that the tone and culture
set by the Board will greatly impact all aspects of the Group as a whole. The corporate governance arrangements
that the Board has adopted are designed to ensure that the Group delivers long-term value to its shareholders and
that shareholders have the opportunity to express their views and expectations for the Company in a manner that
encourages open dialogue with the Board.
A large part of the Group’s activities is centred upon what needs to be an open and respectful dialogue with partners,
suppliers, consultants and other stakeholders. Therefore, the importance of sound ethical values and behaviour is
crucial to the ability of the Group to successfully achieve its corporate objectives.
The Directors consider that at present the Group has an open culture facilitating comprehensive dialogue and
feedback and enabling positive and constructive challenge.
Principle Nine – Maintenance of Governance Structures and Processes
Ultimate authority for all aspects of the Group’s activities rests with the Board, with the responsibilities of the
Executive Director arising as a consequence of delegation by the Board.
The Board has adopted appropriate delegations of authority which set out matters which are reserved to the Board.
The Chairman is responsible for the effectiveness of the Board and compliance with the Code, while management
of the Group’s business and primary contact with shareholders has been delegated by the Board to the Chief
Executive Officer.
Non-Executive Directors
The Board evaluates its performance and composition on a regular basis and will make adjustments as and when
indicated. When assessing the independence of each Non-Executive Director, length of service is one of the
considerations. The Board will, when assessing new appointments in the future, consider the need to balance the
experience and knowledge that each independent director has of the Group and its operations, with the need to
ensure that independent directors can also bring new perspectives to the business.
In accordance with the Isle of Man Companies Act 2006, the Board complies with: a duty to act within their powers;
a duty to promote the success of the Company; a duty to exercise independent judgement; a duty to exercise
reasonable care, skill and diligence; a duty to avoid conflicts of interest; a duty not to accept benefits from third parties
and a duty to declare any interest in a proposed transaction or arrangement.
Principle Ten – Shareholder Communication
The Board is accountable to the Company’s shareholders and as such it is important for the Board to appreciate the
aspirations of the shareholders and equally that the shareholders understand how the actions of the Board and short-
term financial performance relate to the achievement of the Group’s longer-term goals.
The Board reports to the shareholders on its stewardship of the Group through the publication of interim and final
financial results. The Company announces significant developments which are disseminated via various outlets
including, before anywhere else, RNS. In addition, the Company maintains a website (www.tomcoenergy.com) on
which RNS announcements, press releases, corporate presentations and the Report and Financial Statements are
available to view.
Enquiries from individual shareholders on matters relating to the business of the Group are welcomed. Shareholders
and other interested parties can subscribe to receive notification of news updates and other documents from the
Company via email.
____
11
Corporate Governance Statement
The Annual General Meeting, and other meetings of shareholders that may be called by the Company from time to
time, provide an opportunity for communication with all shareholders and the Board encourages the shareholders to
attend and welcomes their participation. The Board is committed to maintaining good communication and having
constructive dialogue with its shareholders. The Company has close ongoing relationships with its private
shareholders.
Stephen West
Non-Executive Chairman
26 March 2020
____
12
AUDIT COMMITTEE REPORT
Overview
The Committee met twice during the year. The external auditor also attended the meetings at the invitation of the
Committee Chairman.
Malcolm Groat was appointed chairman of the Committee by the Board, with the other Committee member being
Alex Benger.
Financial Reporting
The Committee monitored the integrity of the interim and annual financial statements and reviewed the significant
financial reporting issues and accounting policies and disclosures in the financial reports. The external auditor
attended the Committee meetings as part of the full year and interim accounts approval process. The process
included the consideration of reports from the external auditor identifying the primary areas of accounting judgements
and key audit risks identified as being significant to the 2019 accounts.
Audit Committee Effectiveness
The Board considers the effectiveness of the Committee on a regular basis but not as formal process.
External Audit
The Committee is responsible for managing the relationship with the Company’s external auditor, BDO LLP.
The objectivity and independence of the external auditors is safeguarded by reviewing the auditors’ formal
declarations, monitoring relationships between key audit staff and the Group and reviewing the non-audit fees
payable to the auditor. Non-audit services are not performed by the auditor. During the year, audit fees were paid to
BDO LLP of £31,000 (2018: £31,000).
Internal Audit
The Committee considered the requirement for an internal audit function. The Committee considered the size of the
Group, its current activities and the close involvement of senior management. Following the Committee’s review, it
did not deem it necessary to operate an internal audit function during the year.
Malcolm Groat
Chairman, Audit Committee
26 March 2020
____
13
REMUNERATION COMMITTEE REPORT
This report is on the activities of the remuneration committee for the ended 30 September 2019.
The Remuneration Committee comprises Alexander Benger (Chairman) and Malcolm Groat. The Remuneration
Committee meets from time to time, but not less than once a year, to review and determine, amongst other matters,
the remuneration of Executives on the Board and any share incentive plans of the Company.
The Group has no employees other than the Directors, whose emoluments comprise fees paid for services. The
amounts for their services are detailed below:
A Jones (resigned 16 March 2020)
J Potter
A Benger
M Groat
L Read (appointed 1 January 2019;
resigned 28 June 2019)
Salaries
2019
£’000
Salaries
2018
£’000
98
74
18
18
12
73
38
16
16
-
As detailed in Note 18, the Company has in place a share option scheme for its Directors.
The Committee met twice during the year.
Alex Benger
Chairman, Remuneration Committee
26 March 2020
____
14
Independent auditor’s report to the members of TomCo
Energy plc
Independent auditor’s report to the members of TomCo Energy plc
Opinion
We have audited the financial statements of TomCo Energy plc (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 30 September 2019 which comprise the consolidated statement of comprehensive
income, the consolidated statement of financial position, the consolidated statement of changes in equity and the
consolidated statements of cash flows and notes to the financial statements including a summary of significant
accounting policies. The financial reporting framework that has been applied in the preparation of the financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
International Accounting Standards Board.
In our opinion the financial statements:
•
•
give a true and fair view of the state of the Group’s affairs as at 30 September 2019 and of its loss for the
year then ended; and
have been properly prepared in accordance with IFRSs as adopted by the International Accounting Standards
Board.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Material uncertainty in relation to going concern
We draw attention to the disclosures made in Note 1.1 to the financial statements concerning the Group’s ability
to continue as a going concern. The Group’s cash flow forecasts indicate that the group will need further funding
in order to meet its liabilities as they fall due until March 2021 and to continue as a going concern. In addition to
this, the Group have noted further uncertainty created by the COVID-19 pandemic which could impact the ability
the raise further funds and cause delays to the project. 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. Our opinion
is not modified in respect of this matter.
We identified going concern as a key audit matter based on our assessment of the significance of the risk and
the effect on our audit strategy.
Our audit procedures in response to this key audit matter included the following:
•
•
•
•
We reviewed the latest cash flow forecasts for the Group, which covered 15 months from the date of
approval of these financial statements. Our work included assessment of the cash outflows against historical
data and publicly stated plans for further development of the exploration assets.
We verified receipt of the proceeds of equity placing post the year end as supporting evidence.
We discussed with the Directors how they intend to raise the funds necessary for the Group to continue as
a going concern in the required timeframe and considered their judgment in light of the Group’s previous
successful fundraisings and strategic financing.
In respect of the COVID-19, we have reviewed management’s assessment of the likely impact of the
pandemic on the cash flows, as well as the ability of the Group to raise further finance.
____
15
•
We reviewed the disclosures in Note 1.1 to the financial statements against the requirements of the
accounting standards to check that the disclosures accurately reflect the going concern position of the
Group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the going concern,
key audit matter described in the Material uncertainty related to going concern section above, the following
matter was identified:
Key Audit Matter
Carrying value of intangible assets:
How we
addressed the
Key Audit Matter
in the Audit
As detailed in Note 8 to the financial statements, the Group holds significant intangible
assets, primarily the exploration and development licence costs, which the Directors are
required to assess for indicators of impairment at each reporting date. There are a large
number of estimates and judgments used by management in assessing these assets for
impairment under the accounting standards. These are set out in Note 1.9 to the financial
statements, and the subjectivity of these estimates along with the material carrying value
of the assets make this a key area of focus for our audit.
We have assessed management’s impairment review and our procedures included the
following:
• We reviewed the licence documentation to check that the licences remain valid and
to confirm the expiry and licence obligations.
• We noted that the competent persons report on reserves and resources does not
suggest there are any indicators of impairment for the project.
• We performed procedures to assess the independence and competence of the
competent person as management’s expert.
• We made specific enquires of management and reviewed market announcements,
budgets and plans which demonstrated that the Group plans to invest in its TurboShale
RF technologies and subsequently develop the Holliday A Block subject to sufficient
funding being available.
We also evaluated the adequacy of the disclosures provided within the financial statements
in relation to the impairment assessment against the requirements of the accounting
standards.
Key observations
We found management’s conclusion that no impairment was required to be acceptable
and the disclosures included in the financial statements to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial, as we also take
account of the nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Group materiality was set at £150,000 (2018: £135,000) being 1.5% of total assets. We considered total assets to
be the most significant determinant of the Group’s financial performance by users of the financial statements.
____
16
Performance materiality is the application of materiality at the individual account or balance level set at an
amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole. Performance materiality was set at
£112,500 (2018: £100,000), which represents 75% of the above materiality level. The level of performance
materiality was set after considering a number of factors, including the expected value of known and likely
misstatements and management’s attitude towards proposed adjustments.
Component materiality ranged from £75,000 to £130,000 (2018: £75,000 to £120,000).
We agreed with the Audit Committee that we would report to them individual audit differences identified during
the course of our audit in excess of £3,000 (2018: £2,700). We also agreed to report differences below this
threshold which warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-
wide controls, and assessing the risks of material misstatement at the Group level. We also addressed the risk of
management override of internal controls, including assessing whether there was evidence of bias by the Directors
that may have represented a risk of material misstatement due to fraud. Our Group audit focused on the Group’s
principle operating locations, being the United Kingdom and USA. The Group is comprised of two significant
components, TomCo Energy plc and TurboShale Inc.
The Group audit team carried out a full scope audit on both of the significant components and performed all the
work necessary to issue the Group audit opinion including undertaking all of the audit work on the key audit
matters and other risk areas.
Other information
The Directors are responsible for the other information and financial statements. The other information comprises
the information included in the annual report and financial statements, other than the financial statements and
our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement, within the Directors’ report, the Directors
are responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists.
____
17
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with our engagement letter
dated 29 January 2020. Our audit work has been undertaken so that we might state to the Parent 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 Parent
Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions
we have formed.
BDO LLP
Chartered Accountants
London, UK
26 March 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
____
18
Consolidated Statement of Comprehensive Income
for the financial year ended 30 September 2019
Note
£’000
Revenue
Cost of sales
Gross loss
Administrative expenses
Operating loss
Finance costs
Loss on ordinary activities before taxation
Taxation
Loss for the year attributable to:
Equity shareholders of the parent
2
2
2
4
3
5
Non-controlling interests
1.19
Items that may be reclassified
subsequently to profit or loss
Exchange differences on translation of
foreign operations
Items that will not be reclassified
subsequently to profit or loss
Fair value gain on non-derivative equity
investment
10
Other comprehensive income for the year
attributable to:
Equity shareholders of the parent
Non-controlling interests
1.19
Other comprehensive income
Total comprehensive loss attributable to:
Equity shareholders of the parent
Non-controlling interests
1.19
2019
£’000
-
-
-
(778)
(778)
(4)
(782)
-
(782)
£’000
2018
£’000
-
-
-
(857)
(857)
(12)
(869)
-
(869)
(749)
(33)
(770)
(99)
(782)
(869)
408
2
227
102
333
(4)
410
329
(437)
(103)
2019
Pence
(540)
2018
Pence
per share
per share
417
(7)
(332)
(40)
Total comprehensive loss
(372)
Loss per share attributable to the equity
shareholders of the parent
Basic & diluted loss per share
7
(0.73)
(1.84)
The Notes on pages 23 to 37 form part of these financial statements.
____
19
Consolidated Statement of Financial Position
as at 30 September 2019
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Other receivables
Current assets
Trade and other receivables
Investment in unquoted equity securities
Cash and cash equivalents
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
Net current assets/(liabilities)
TOTAL LIABILITIES
Total net assets
Shareholders’ equity
Share capital
Share premium
Warrant reserve
Translation reserve
Retained deficit
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Note
8
9
11
11
10
12
13
15
16
17
1.19
Group
2019
£’000
9,222
431
27
9,680
97
-
639
736
10,416
(615)
(615)
121
(615)
9,801
-
28,247
65
638
(19,012)
9,938
(137)
9,801
The financial statements were approved and authorised for issue by the Board of Directors on 26 March 2020.
The Notes on pages 23 to 37 form part of these financial statements.
John Potter
Director
Malcolm Groat
Director
Group
2018
£’000
8,075
313
23
8,411
47
102
262
411
8,822
(504)
(504)
(93)
(504)
8,318
-
26,542
43
223
(18,393)
8,415
(97)
8,318
____
20
Consolidated Statement of Changes in Equity
for the financial year ended 30 September 2019
Group
Equity attributable to equity holders of the parent
Note
Share capital Share premium
Balance at 1 October 2017
Loss for the year
Comprehensive income for the year
Total comprehensive loss for the
year
Issue of shares (net of costs)
Change in non-controlling interest
Expiry of warrants
Share-based payment charge
At 30 September 2018
Loss for the year
Comprehensive income for the year
Total comprehensive loss for the
year
Issue of shares (net of costs)
Exercise of warrants
Share-based payment charge
At 30 September 2019
15, 16
1.19
17
18
15, 16
17
18
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
£’000
25,354
-
-
-
1,188
-
-
-
26,542
-
-
-
1,638
67
-
28,247
Warrant
reserve
£’000
Translation
reserve
£’000
57
-
-
-
-
1
(15)
-
43
-
-
-
59
(37)
-
65
-
-
223
223
-
-
-
-
223
-
415
415
-
-
-
638
Retained Deficit
£’000
(17,748)
(770)
110
(660)
-
(37)
15
37
(18,393)
(749)
2
(747)
-
35
93
(19,012)
Total
£’000
7,663
(770)
333
(437)
1,188
(36)
-
37
8,415
(749)
417
(332)
1,697
65
93
9,938
Non-controlling
interest
£’000
(31)
(99)
(4)
(103)
-
37
-
-
(97)
(33)
(7)
(40)
-
-
-
(137)
The following describes the nature and purpose of each reserve within owners' equity:
Descriptions and purpose
Reserve
Amount subscribed for share capital at nominal value, together with transfers to share premium upon redenomination of the shares to nil par value.
Share capital
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 Group.
Translation reserve Gains and losses on the translation of foreign operations.
Retained deficit
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income less transfers to retained deficit on expiry.
Non-controlling interest
Non-controlling interest share of losses of TurboShale Inc., together with adjustments associated with the initial recognition of, and changes in, the
non-controlling interest. Refer Note 1.19.
The Notes on pages 23 to 37 form part of these financial statements.
Total
Equity
£’000
7,632
(869)
329
(540)
1,188
1
-
37
8,318
(782)
410
(372)
1,697
65
93
9,801
____
21
Consolidated Statement of Cash Flows
for the financial year ended 30 September 2019
Cash flows from operating activities
Loss after tax
Adjustments for:
Finance costs
Amortisation
Share based payment charge
Costs settled by the issue of shares
Increase in trade and other receivables
Increase in trade and other payables
Cash used in operations
Interest paid
Net cash outflow from operating activities
Cash flows from investing activities
Investment in intangibles
Sale of investments
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Issue of shares
Costs of share issue
(Repayment)/receipt of loan finance
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Foreign currency translation differences
Cash and cash equivalents at end of financial year
The Notes on pages 23 to 37 form part of these financial statements.
Note
2
3
8
9
15, 16
Group
2019
£’000
(782)
4
6
93
5
(55)
232
(497)
(4)
(501)
(642)
104
(95)
(633)
1,767
(109)
(150)
1,508
374
262
3
639
Group
2018
£’000
(869)
12
6
37
-
(48)
71
(791)
(12)
(803)
(204)
-
(303)
(507)
1,250
(62)
250
1,438
128
128
6
262
____
22
Notes to the financial statements
for the financial year ended 30 September 2019
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 and going concern
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board 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 are set out in these
financial statements and include:
Judgements
-
Impairment indicator assessment on intangible assets
In determining whether indicators of impairment on intangible assets existed judgment was required. The directors
have considered the remaining licence term and standing, future plans for exploration, the measured resources within
the mineral leases owned by the Company; and the likelihood of commercially viable extraction technology being
developed and sufficient funding being available to the Company to develop and exploit such technology. The Board
concluded that no impairment indicator existed at 30 September 2019. Refer to Note 8.
Estimates
- Share based payments
Estimates were required in determining the fair value of share options granted in the year including future share price
volatility and the instrument life. Refer to Note 18.
The Group has consistently applied all applicable accounting standards.
Going concern
Since the end of the financial year, the Company raised a further £925,000 gross of expenses though the placing of, in
aggregate, 142,307,692 ordinary shares. As a result, as at 26 March 2020, the Group had cash of approximately
£745,000.
The Directors have prepared cash flow forecasts for the next 15 months from the date of signing of these financial
statements. Under the forecasts, the Group plans to engage Valkor to evaluate the commercial viability of a
commercial scale plant based on the Petroteq oil recovery system. The forecasts indicate the Group has sufficient
funds to complete the engagement and has sufficient funds to meet its liabilities as they fall due until March 2021.
Further funding will be required if the Directors decide to explore the opportunity to develop a commercial scale
oil sands plant or to further advance the RF technology and to ensure the Company can continue to meet its
liabilities and commitments through to March 2021.
The Director’s note that COVID-19 has had a significant negative impact on the global economy and oil prices
have fallen significantly, which may mean it is harder to secure additional funding than it has historically been.
Notwithstanding this, the Directors have a reasonable expectation that they can secure additional funding, based
on recent fundraisings, which would provide sufficient funds to meet operating expenditure beyond March 2021
or in the event that the Company sought further funds to explore the opportunity to develop a commercial scale
oil sands plant or to further advance the RF technology. However, these conditions are necessarily considered
to represent a material uncertainty which may cast significant doubt over the Group’s ability to continue as a
going concern. Whilst acknowledging this material uncertainty, the Directors remain confident of raising any
additional funds 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
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
____
23
Notes to the financial statements
for the financial year ended 30 September 2019
amendments effective at the beginning of the accounting period.
IFRS 15 “Revenue from contracts with customers” was effective for the first time in the year ended 30 September 2019.
The group currently has no external revenues and therefore this standard currently has no impact on the Group.
IFRS 9 “Financial instruments” was also effective for the first time in the year ended 30 September 2019. In applying
IFRS 9 for the first time, the directors have classified the group’s equity investment in Red Leaf, which was not held for
trading, as held at fair value through other comprehensive income. The investment was sold during the year.
Prior periods’ results have not been restated for the implementation of IFRS 9. Disclosures concerning the
implementation of IFRS 9 are given in note 19.
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 ended 30 September
2019 and have not been adopted early, which, when effective, might have an impact upon the group’s financial
statements.
•
•
IFRS 16
IFRIC 23
Leases
Uncertainty over Income Tax Treatments
Effective date (periods
beginning on or after)
1 Jan 2019
1 Jan 2019
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. Management
is currently reviewing the impact of the standard but do not anticipate it having a material effect given the very limited
exposure of the group to leases within the scope of IFRS16. Leases to explore for or use minerals, oil and gas are
outside the scope of IFRS 16.
The Group is currently assessing the impact of these standards.
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 2019. 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 Group 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 two principal business segments
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.
1.5 Revenue
Revenue 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. No revenue has arisen in the current or prior
year.
____
24
Notes to the financial statements
for the financial year ended 30 September 2019
1.6 Finance income
Finance income is accounted for on an effective interest basis.
1.7 Property, plant and equipment
Property, plant and equipment employed in exploration and evaluation activities are carried at cost. No depreciation has
been provided on these assets as they had not been brought into use by the end of the financial year. Subsequent
depreciation will be capitalised to exploration and development costs.
1.8
Intangible assets
Exploration and development licences
The Group 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, with the exception of
tangible assets, which are classed as property, plant and equipment. 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
Amortisation is not charged on technology licences associated with oil and gas assets until they are available for use.
Patents and patent applications
Patents and patent applications acquired in consideration for combination of cash and the issue of shares in subsidiary
undertakings are recognised at fair value, and amortised over their expected useful lives, which is 12 years being the
patent term.
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 interdependent. 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 patents and 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 Taxation
Taxation expense represents the sum of current tax and deferred tax.
____
25
Notes to the financial statements
for the financial year ended 30 September 2019
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.
1.11 Foreign currencies
The accounts have been prepared in pounds sterling being the presentational currency of the Group. The functional
currency of the holding company is also pounds sterling. The functional currency of the US subsidiaries is US dollars.
Assets and liabilities held in the Group or overseas subsidiaries in currencies other than the functional currency are
translated into the functional currency 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.
The assets and liabilities of subsidiaries with functional currencies other than sterling are translated at balance sheet
date rates of exchange. Income and expense items are translated at the average rates of exchange for the period.
Exchange differences arising are recognised in other comprehensive income (attributed to the parent equity holder and
non-controlling interests as appropriate).
1.12 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.
1.13 Non-derivative equity instruments
The Group classifies its non-derivative equity instruments as at fair value through other comprehensive income. Gains
or losses on disposals of these items are recognised in other comprehensive income.
1.14 Debt instruments at amortised cost
These assets are non-derivative financial assets which are held in a business model whose objective is to collect
contractual cashflows and whose contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal outstanding. They arise principally through types of contractual monetary asset
such as receivables. 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 based on expected credit losses over the asset’s life.
The Group’s assets held at amortised cost comprise trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position.
1.15 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at the bank and other short-term liquid investments with
original maturities of three months or less.
____
26
Notes to the financial statements
for the financial year ended 30 September 2019
1.16 Trade payables
Trade payables are recognised at amortised cost. All of the trade payables are non-interest bearing.
1.17 Share capital
Ordinary shares are classified as equity. Shares issued in the period are recognised at the fair value of the consideration
received.
1.18 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.
On expiry or exercise, the fair value of warrants is credited to reserves as a change in equity.
1.19 Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of
non-controlling shareholders that are present ownership interests entitling their holders to a proportionate share of net
assets upon liquidation may initially be measured at fair value or at the non-controlling interests’ proportionate share of
the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-
acquisition basis. Other non-controlling interests are initially measured at fair value. Subsequent to acquisition, the
carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling
interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests
even if this results in the non-controlling interests having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity
transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and
attributed to the owners of the Group.
Details concerning non-wholly owned subsidiaries of the Group that have material non-controlling interests are as
follows:
Name of subsidiary
Proportion of
ownership interests
and voting rights
held by non-
controlling interests
2018
2019
%
%
Total
comprehensive loss
allocated to non-
controlling interest
2018
2019
£’000
£’000
Change in non-
controlling interest
2018
2019
£’000
£’000
Accumulated non-
controlling interest
2018
£’000
2019
£’000
TurboShale Inc.
20
20
(40)
(103)
-
37
(137)
(97)
During the year ended 30 September 2018, certain shares in TurboShale Inc issued to non-controlling interests were
cancelled, resulting in an increase in the Company’s effective interest from 66.7% to 80%. Given the net deficit of the
subsidiary this resulted in a reduced share of the Group’s losses attributable to the non-controlling interest in accordance
with the Group’s accounting policy. The effects of the change in the non-controlling interest are recognised in reserves.
Included in total comprehensive loss is £nil (2018: £99,000) of losses with the remainder reflecting other comprehensive
expense.
1.20 Share-based payments
Equity-settled share-based payments to directors are measured at the fair value of the equity instruments at the grant
date. Details regarding the determination of the fair value of equity-settled share-based transactions is set out in Note
18.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period or periods, based
on the Group’s estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises
its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates,
if any, is recognised in profit or loss such that the cumulative expenses reflects the revised estimate, with a
corresponding adjustment to equity reserves.
____
27
Notes to the financial statements
for the financial year ended 30 September 2019
2. Segmental reporting – Analysis by geographical segment
The loss before taxation arises within principally the UK and US. Net assets are principally in the UK and US. Based on an analysis of risks and returns, the Directors consider that
the Group has two principal business segments 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
External revenue
Inter-segment sales
Cost of sales
Gross profit/(loss)
Impairment
Administrative expenses
Operating loss
Financial income
Finance costs
Total loss
Non-Current assets:
– Exploration and development assets
– Other
– Property, plant and equipment
– Patents
Current assets:
Trade and other receivables
Investment in unquoted securities
Cash and cash equivalents
Total assets
Current liabilities:
Trade and other payables
Total liabilities
2019
£’000
-
United States United Kingdom
2019
£’000
-
94
-
94
-
(695)
(601)
1
(5)
-
-
-
(177)
(177)
-
-
(177)
(605)
9,200
27
431
22
9,680
-
-
21
9,701
(389)
(389)
-
-
-
-
-
97
-
618
715
(226)
(226)
Eliminations
2019
£’000
(94)
(94)
94
-
Total
2019
£’000
-
-
-
-
-
(778)
(778)
1
(5)
(782)
9,200
27
431
22
9,680
97
-
639
10,416
(615)
(615)
United States
2018
£’000
-
-
-
-
(387)
(387)
-
-
(387)
8,047
23
313
28
8,411
-
-
128
8,539
(17)
(17)
Eliminations
2018
£’000
(92)
(92)
92
-
United Kingdom
2018
£’000
-
92
-
92
-
(562)
(470)
-
(12)
(482)
-
-
-
-
-
47
102
134
283
(487)
(487)
Total
2018
£’000
-
-
-
-
-
(857)
(857)
-
(12)
(869)
8,047
23
313
28
8,411
47
102
262
8,822
(504)
(504)
____
28
Notes to the financial statements
for the financial year ended 30 September 2019
3. Finance costs
Interest income
Loan note interest (Note 20)
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 19% (2018: 19%)
Effects of:
Losses carried forward
Tax charge for the financial year
2019
£’000
(1)
5
4
2019
£’000
31
37
2019
£’000
(782)
(149)
149
-
2018
£’000
-
12
12
2018
£’000
31
6
2018
£’000
(869)
(165)
165
-
A reduction in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020)
were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantially
enacted on 6 September 2016. This will reduce the Group’s future current tax charge accordingly in the event of profits.
6. Employees and Directors
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
2019
£’000
Share-based
payment
expense
2019
£’000
Share-based
payment
expense
2018
£’000
Salaries
2018
£’000
A Jones (resigned 16 March 2020)
J Potter
A Benger
M Groat
L Read (appointed 1 January 2019; resigned 28
June 2019)
Total remuneration
98
74
18
18
12
220
48
31
7
7
-
93
73
38
16
16
-
143
19
12
3
3
-
37
____
29
Notes to the financial statements
for the financial year ended 30 September 2019
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.
Financial year ended 30 September 2019
Basic and Diluted EPS
Losses
£’000
Weighted
average
number of
shares
Per share
Amount
Pence
Losses attributable to ordinary shareholders on continuing operations
(749)
102,524,614
Total losses attributable to ordinary shareholders
(749)
102,524,614
(0.73)
(0.73)
Financial year ended 30 September 2018
Basic and Diluted EPS
Losses attributable to ordinary shareholders on continuing operations
Total losses attributable to ordinary shareholders
(770)
(770)
41,719,121
41,719,121
(1.84)
(1.84)
The warrants and share options which were issued or for which entitlement to warrants was established in the current and
prior years (Notes 17 and 18) are anti-dilutive. As these instruments would be anti-dilutive a separate diluted loss per share
is not presented.
8.
Intangible assets
Oil & Gas
Exploration and
development
licences
£’000
7,627
193
227
8,047
643
510
9,200
-
-
-
-
-
9,200
8,047
7,627
Cost
At 1 October 2017
Additions
Translation differences
At 30 September 2018
Additions
Translation differences
At 30 September 2019
Amortisation/Impairment
At 1 October 2017
Amortisation
At 30 September 2018
Amortisation
At 30 September 2019
Net book value
At 30 September 2019
At 30 September 2018
At 30 September 2017
Oil & Gas
Oil & Gas
Oil & Gas
Technology licence
Patents and
patent
applications
£’000
£’000
1,314
-
-
1,314
1,314
1,314
-
1,314
-
1,314
-
-
-
23
11
-
34
(1)
1
34
-
6
6
6
12
22
28
23
Total
£’000
8,964
204
227
9,395
642
511
10,548
1,314
6
1,320
6
1,326
9,222
8,075
7,650
The exploration and development licences comprise nine Utah oil shale leases covering approximately 15,488 acres. In
respect of leases ML 49570 and ML 49571, independent natural resources consultants SRK Consulting (Australasia) Pty
Ltd, part of the internationally recognised SRK Group, reported in March 2019 best estimate Contingent Resources (2C) of,
in aggregate, 131.3 million barrels (“MM bbl”) of oil assessed under Petroleum Resources Management System (“PRMS”)
guidelines, plus a best estimate Prospective Resource (2U) of, in aggregate, 442.8 MM bbl oil across the Leases. This
____
30
Notes to the financial statements
for the financial year ended 30 September 2019
included the Holliday A Block, where the Field Test has been undertaken, with 2C Contingent Resources of 57.3 MM bbl of
oil and 2U Prospective Resources of 84.7 MM bbl of oil. The Directors continue to consider the Holliday A Block to be
prospective and are seeking methods of extracting the shale oil through development of TurboShale’s RF technologies.
The claim areas and the Group’s interest in them is:
Licence
Status
Prospect
Prospect
Prospect
Prospect
Prospect
Prospect
Prospect
Prospect
Prospect
Asset
ML 49570
ML 49571
ML 48801
ML 48802
ML 48803
ML 48806
ML 49236
ML 49237
ML 50151*
Per cent
Interest
100
100
100
100
100
100
100
100
100
Expiry Date
31/12/2024
31/12/2024
01/10/2021
01/10/2021
01/10/2021
01/12/2023
01/12/2023
01/12/2023
22/06/2020
Licence Area
(Acres)
1,638.84
1,280.00
1,918.50
1,920.00
1,920.00
1,880.00
2,624.21
1,666.67
640.00
In performing an assessment of the carrying value of the exploration licences at the reporting date, the Directors concluded
that it was not appropriate to book an impairment given the measured resource, the licence term and the continued plans to
explore and develop the block, including the new technologies which TurboShale is seeking to develop.
The outcome of ongoing exploration, and therefore whether the carrying value of the exploration licences will ultimately be
recovered, is inherently uncertain and is dependent upon successful development of commercially viable extraction
technology. If the required additional funding was not to be made available to the Group or commercially viable extraction
technologies cannot be developed, the carrying value of the asset might need to be impaired.
During the 2018/2019 financial year, the Field Test was carried out.
* Lease ML 50151 is expected to be extended.
9. Property, plant and equipment
Cost at 30 September 2017
Additions
Translation differences
At 30 September 2018
Additions
Translation differences
At 30 September 2019
At 30 September 2018
At 30 September 2017
10.
Investment in unquoted equity securities
Fair value
At 1 October 2017
Fair value gain
At 30 September 2018
Fair value gain
Disposals
At 30 September 2019
Net book value
At 30 September 2019
At 30 September 2018
At 30 September 2017
Exploration and evaluation equipment
Total
£’000
-
303
10
313
95
23
431
313
-
Unlisted
Investments
£’000
-
102
102
2
(104)
-
-
102
-
____
31
Notes to the financial statements
for the financial year ended 30 September 2019
During the year to 30 September 2012, the Group invested US$5.0 million (£3.1 million) in Red Leaf (Equity securities US –
Red Leaf) at US$1,500 per share as part of a US$100 million raising by Red Leaf in conjunction with the closing of a joint
venture with Total E&P USA Oil Shale, LLC, an affiliate of Total SA.
In previous years the Directors considered that the fair value of the investment could not be reliably measured and so, as
permitted by IFRS, the asset was stated at original cost less any provision for impairment and has been fully impaired for a
number of years. The investment was eventually realised in October 2018 for a price of US$133,333 (£104,000). Changes
in fair value at 30 September 2018 and to the date of disposal have been recognised in other comprehensive income.
11. Trade and other receivables
Current
Other receivables
Prepayments and accrued income
Non- current
Other receivables
Total Receivables
Group
2019
£’000
50
47
97
27
124
Group
2018
£’000
37
10
47
23
70
As at 30 September 2019 there were no receivables considered past due (2018: £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 19.
All current receivable amounts are due within six months.
12. Cash and cash equivalents
Cash at bank and in hand
Group
2019
£’000
639
Group
2018
£’000
262
The Group earns 0.05% (2018: 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
Loans (Note 20 & 21)
Accruals
Group
2019
£’000
408
17
-
190
615
Group
2018
£’000
58
10
250
186
504
All current amounts are payable within six months and the Directors considers that the carrying values adequately represent
the fair value of all payables. Refer to Note 20 and 21 for terms of the loans.
14. Deferred tax
Unrecognised losses
The Group has tax losses in respect of excess management expenses of approximately £9.8 million (2018: £9.8 million)
available for offset against future Company income. Trading losses of £1.3 million (2018-£0.9 million) are also
available. This gives rise to a potential deferred tax asset at the reporting date of £1.9 million (2018: £1.8 million). 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. Subsidiary entities have accumulated losses of approximately
£660,000 for which no deferred tax asset is recorded given uncertainty of future profits.
____
32
Notes to the financial statements
for the financial year ended 30 September 2019
15. Share capital
Issued and fully paid at 1 October 2017-shares of no par value
April 2018 – placing of new ordinary shares (note 16)
April 2018 – issue of shares in settlement of professional fees
June 2018 – placing of new ordinary shares (note 16)
At 30 September 2018
Issued and fully paid at 1 October 2018-shares of no par value
October 2018 – subscription of new ordinary shares (note16)
December 2018 – placing of new ordinary shares (note 16)
January 2019 – issue of shares in part settlement of loan (note 16)
March 2019 - placing of new ordinary shares (note 16)
May 2019-exercise of warrants (notes 16 and 17)
July 2019-exercise of warrants (notes 16 and 17)
August 2019 - placing of new ordinary shares (note 16)
August 2019 - issue of shares in settlement of professional fees (note 16)
At 30 September 2019
16. Share premium
At 1 October
October 2018 – subscription of new shares at 8.5 pence per share
December 2018 – placing of new ordinary shares at 2 pence per share net of
costs
January 2019 – issue of shares in part settlement of loan at 2 pence per share
March 2019 - placing of new ordinary shares at 2.75 pence per share net of
costs
May 2019-exercise of warrants (note 17)
July 2019-exercise of warrants (note 17)
August 2019 - placing of new ordinary shares at 3.5 pence net of costs
August 2019 - issue of shares in settlement of professional fees at 3.5 pence
Issue of warrants as part of placing fees (note 17)
April 2018 – placing at 3 pence per share, amount raised net of costs
April 2018 –issue of shares at 3 pence per share
June 2018-placing at 5 pence per share, amount raised net of costs
Number of shares
in issue
2018
£
28,917,800
20,000,000
199,999
13,000,000
62,117,799
-
-
-
-
-
Number of shares
in issue
2019
£
62,117,799
1,176,471
27,500,000
5,000,000
21,818,182
1,530,000
1,309,091
12,857,143
142,857
133,451,543
-
-
-
-
-
-
-
-
-
-
2019
£’000
26,542
2018
£’000
25,354
100
514
100
559
31
36
419
5
(59)
-
-
-
-
-
-
-
-
-
-
-
-
567
6
615
At 30 September
28,247
26,542
____
33
Notes to the financial statements
for the financial year ended 30 September 2019
17. Warrants
At 30 September 2019 the following share warrants were outstanding in respect of ordinary shares:
2019
2019
2018
2018
Weighted average
exercise price
Pence
14.0
(21.2)
2.6
(2.3)
4.4
4.4
number
356,000
(160,000)
3,610,520
(2,839,091)
967,429
967,429
Weighted
average
exercise price
Pence
24.8
(21.2)
10.0
-
14.0
14.0
number
1,113,200
(857,200)
100,000
-
356,000
356,000
Outstanding at 1 October
Expired during the year
Granted during the year
Exercised during the year
Outstanding at 30 September
Exercisable at 30 September
Issue of Warrants
On completion of a 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. The exercise price of the warrants adjusted to 6.25p and the number of warrants
adjusted to 96,000 post a share consolidation in 2017. These warrants expired shortly after 30 September 2019.
On 7 October 2016 the Company entered an agreement in which the counterparty was entitled to subscribe for
20,000,000 ordinary shares at 0.17p per share (subsequently consolidated to 160,000 warrants exercisable at 21.25p
per share following the share consolidation) for services. These warrants expired during the year.
In April 2018 the Company issued 100,000 warrants with a life of two years and an exercise price of 10p as part
consideration for settlement of its contract with Venture Development Partners Limited concerning a framework
agreement relating to TurboShale concluded in 2017. The fair value of these warranted was assessed to be immaterial
at approximately £1,000.
3,610,520 new warrants were issued during 2019 in connection with the placing of new shares. The fair value of these
warrants was assessed at £59,000. Of the new warrants issued during 2019, warrants over 2,839,091 ordinary shares
were exercised during the year.
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 2019 had a
weighted average exercise price of 4.4p (2018: 14p) and a weighted average remaining contractual life of 1.55 years
(2018: 0.71 years).
The Company intends, following publication of these accounts, to issue 425,000 warrants to an adviser which were
intended to be issued following the publication of last year’s account, giving them the right to acquire such number of
new ordinary shares at an exercise price of 2.75 pence for a period of two years.
18. Share-based payments
The Company implemented a share option scheme for its Directors during the year ended 30 September 2018. Options
are exercisable at a price equal to the quoted market price of the Company’s shares at the date of grant. The vesting
period is between four months and 2.3 years. If the options remain unexercised after a period of ten years from the
date of grant the options expire. Options are forfeited if the director leaves the Company before the options vest.
Details of the share options issued during the year and outstanding at the year end are as follows:
Outstanding at 1 October
Granted during the year
Outstanding at 30 September
Exercisable at 30 September
2019
2019
2018
2018
Weighted average
exercise price
Pence
5.25
-
5.25
5.25
number
5,142,855
-
5,142,855
1,714,286
number
-
5,142,855
5,142,855
-
Weighted average
exercise price
Pence
-
5.25
5.25
-
Details of the options held by each Director are given in the Directors’ Report on page 5.
____
34
Notes to the financial statements
for the financial year ended 30 September 2019
The inputs into the Black-Scholes model for calculating the estimated fair value of options granted, at their grant date,
were as follows:
Share price (pence)
Exercise price (pence)
Expected volatility
Risk-free rate
Expected period before exercise (years)
2019
5.25
5.25
98.8%
0.82%
3
Expected volatility was determined by calculating the historical volatility of the Company’s share price. 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.
The fair value of each option granted during the year was estimated at 3.2 pence at the date of grant. The weighted
average unexpired life of the options at 30 September 2019 was 8.83 years (2018-9.83 years).
The charge recognised in profit or loss for 2019 was £93,000 (2018: £37,000).
19. Financial instruments
Implementation of IFRS 9
Upon implementation of IFRS 9, there were no reclassifications of financial assets or liabilities, save for the transfer
from “available for sale” assets to “fair value through other comprehensive income” of the Group’s investment in
unquoted equity investments, with a value of £102,000 at implementation. No remeasurement of this or other financial
assets or liabilities was required.
Other disclosures
The Group’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’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. No formal policies have been put
in place in order to hedge the Group’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 assets.
Currency risk
The Group has overseas subsidiaries which operate in the United States and include expenses, assets and liabilities
denominated in US$. Foreign exchange risk is inherent in the Group’s activities and is accepted as such. The effect
of a 10% strengthening or weakening of the US dollar against sterling at the reporting date on the dollar denominated
balances would, all other variables held constant, would result in a gain or loss of approximately £10,000 (2018:
£20,000).
Interest rate risk
The Group and Company manage the interest rate risk associated with the Group cash assets by ensuring that interest
rates are as favourable as possible, whether this is through investment in floating or fixed interest rate deposits, whilst
managing the access the Group requires to the funds for working capital purposes.
The Group’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. The Group has no borrowings as at 30 September
2019.
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.
____
35
Notes to the financial statements
for the financial year ended 30 September 2019
Liquidity risk
At the year end the Group and Company had cash balances comprising the following:
Bank balances
British Pounds
US Dollars
Total
Group
2019
£’000
326
313
639
Group
2018
£’000
134
128
262
All financial liabilities of the group mature in less than 12 months: details of the analysis of such liabilities is given in
Note 13.
Liquidity risk arises from the Group management of working capital. It is the risk that the Group will encounter difficulty
in meeting its financial obligations as they fall due. Refer to Note 1.1 for details of going concern.
The Group 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 if a customer or a counter party to a financial instrument fails to meet
its contractual obligations. The Group 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’s primary objective is to maintain a sufficient funding base to enable the Group 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 considers not only its short-term position but also its long-
term operational and strategic objectives.
20. Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-
cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will
be, classified in the cash flow statement as cash flows from financing activities:
1 October
Financing cash flows
Group 2019
Loans from related parties
(Note 21)
Total
Group 2018
Loans from related parties
(Note 21)
Total
£’000
250
250
-
-
£’000
(150)
(150)
250
250
Non-cash
transactions
£’000
30 September
£’000
(100)
(100)
-
-
-
-
250
250
Repayment of loans during the year ended 30 September 2019 was partly financed by the issue of new equity with a
fair value of £100,000. Interest accrued of £5,000 (2018: £12,000) which was paid in the year.
21. Related party disclosures
The Directors are Key Management and information in respect of key management is given in Note 6.
Mr Chris Brown, who is directly and indirectly beneficially interested in, in aggregate, 3.86% of the issued share capital
of the Company, and was a former director of the Company, provided unsecured loans of, in aggregate, £250,000,
applied to general working capital purposes. The loans incurred interest of 8% per annum, payable monthly in arrears.
____
36
Notes to the financial statements
for the financial year ended 30 September 2019
The loans were repaid during the year by £150,000 in cash and £100,000 by conversion into 5,000,000 new ordinary
shares at 2p per share.
22. Ultimate controlling party
As at 30 September 2019 and 30 September 2018 there is no ultimate controlling party.
23. Operating lease commitments
At 30 September 2019, the Group was committed to operating lease payments due within one year of £39,000 (2018-
nil). The charge for the year ended 30 September 2019 was £39,000.
24. Subsequent events
In December 2019, the Company raised £925,000 gross of expenses by a placing of 142,307,692 new ordinary shares
at 0.65p per share. 71,153,846 warrants were issued with the placing, entitling the holder to purchase a further ordinary
share at a subscription price of 1.5p per share. A further 8,538,462 warrants were issued to Turner Pope Investments,
giving them the right to acquire the same number of ordinary shares at an exercise price of 0.65p for two years.
The placing was intended in part to fund a resources report and engineering study into a new oil sands opportunity in
the Uintah Basin, Utah, USA as well as to complete the necessary design revisions of the TurboShale system and to
provide general working capital.
On 19 March 2020, the Company entered into an agreement with Valkor for a Pre-FEED study for which the Company’s
contribution is $125,000.
The full effect and impact of the COVID-19 pandemic will take time to be understood. At the time of the publication of
these accounts, the full effects are not yet known, though it is clear that the effects will be significant. Already we have
seen a slowing of the global economy and a material reduction in both the demand for and the price of oil, which will
likely have an impact on the attractiveness of exploration assets, including the Group’s, which may result in future
funding for projects being harder to secure. In respect of the Group’s current operations, being the Pre-FEED study,
this will likely take longer to be completed than initially anticipated due to the current imposed travel restrictions. In the
event that the pandemic continues into the second half of 2020, the Board will consider what cost reduction measures
are needed and can be implemented to ensure the Group can continue to trade.
____
37
ONLINE
www.tomcoenergy.com
info@tomcoenergy.com
TELEPHONE
+44 20 3823 3635
ADDRESS
TomCo
Energy plc
60 Circular
Road
Douglas
Isle of Man
IM1 1SA
____
38