Gunsynd PLC - Final Results
RNS Number : 2797W
Gunsynd PLC
10 December 2019
 

Gunsynd plc

 

("Gunsynd" or the "Company")

 

Final Results for the year ended 31 July 2019

 

 

Gunsynd (AIM: GUN, NEX: GUN) is pleased to announce that its Final Results for the year ended 31 July 2019 will be posted shortly to shareholders and are available on the Company's website: http://www.gunsynd.com/

 

Review of Investments

 

Human Brands Inc. ("HB")

 

HB continued to build on its foundation in 2019. Its revenues are up over 25%-30% year over year on a non-audited like for like basis

 

A key focus in 2019 was the launch of its flagship brand, Shinju Japanese Whisky. HB believes there is a huge opportunity in Japanese Whisky and the market reception for Shinju has proved that. HB has been very careful and strategic with how it is launching the Brand, selecting only key markets and certain distributors to start. In less than a year HB has sold over 6,000 bottles of Shinju. In early 2019, Shinju started off only selling in Washington DC. It has now expanded into many key markets including New York, Boston, Las Vegas, and California.

 

Shinju has commitments to launch in New Jersey, Virginia, and Mexico in Q1, 2020. HB has also formed a marketing partnership with Sapporo Beer, Japan's oldest brewery. Both brands will market together in New York City, with a goal of taking the partnership nationwide.

 

HB saw significant growth in its wine portfolio in 2019 and sold multiple containers this year. At the start of the year HB was selling its wine, Miolo, into twenty US States and has since added five more. A key driver of this growth has been 'mandatory' product placements into national chains like Fogo de Chao and Rodizio Grill.

 

HB spent a lot of 2019 continuing to build a core foundation around its tequila business. As, what the Directors believe to be, one of the fastest growing spirits, with very minimal worldwide acceptance 'yet', HB is adding assets to capitalize on tequila's current growth and its future.

 

Copa Imperial, the HB's flagship super premium tequila aged for 8 years is expected to launch in Q1 2020.  The final bottle design is being completed with a number of sample bottles already having been made.

 

To complement Copa and fill a demand in the mid-tier market, HB acquired 51% of Armero Tequila. Armero is a high-quality tequila produced at one of the top distilleries in Mexico. The Brand currently sells throughout Mexico, in many tourist destinations like Cancun, Puerto Vallarta, Mexico City, and Acapulco. HB recently launched Armero in Washington DC and will look to expand throughout the US in 2020.

 

One key area of opportunity in tequila is agave. Tequila cannot be produced without agave, and the agave must be a certain agave from a certain location. Because of the growing popularity of tequila, there is a shortage in the supply of agave, which is causing an increase in the price of the plants. Noticing this, HB has acquired 209,000 agave plants, which are projected to provide anywhere from £5m - £7m in sales over the next five years. HB has an option on an additional 300,000 plants.

 

HB is in the process closing of its Thailand operations as part of its focus on developing its own brands rather than distribution. HB believes that moving valuable resources from Thailand to put into the fast-growing US market and its launch into the UK market will achieve far greater comparative returns in 2020.

 

HB had intended to IPO by the end of this year but due to particularly difficult market conditions brought about, in large part by Brexit.  This now has been delayed until 2020 and as such time that market conditions improve.  HB will also re-domicile from the US to the UK and change its name to Rogue Baron Limited, which has already been set up as a UK company.  A presentation for Rogue Baron will be posted on the Gunsynd website.

 

United Oil and Gas Plc ("UOG")

 

UOG is an independent oil & gas company established in 2015 by a former Tullow Oil team. Its strategy is to acquire assets where the management team's experience can drive near-term activity and unlock previously untapped value. 

 

In September it was awarded four blocks in a North Sea licensing round which follows on from UOG signing a non-binding Heads of Terms on an agreement to sell North Sea blocks 15/18d and 15/19b to Anasuria Hibiscus UK Limited for a headline consideration of up to $5 million.

 

Subsequent to that, UOG announced a conditional acquisition by UOG of Rockhopper Egypt Pty Ltd ("Rockhopper Egypt") for US$ 16 million.  According to UOG the acquisition will deliver over 1,100 barrels of oil equivalent per day net

 

Gunsynd currently holds 2.64 million shares in UOG representing 0.8% of its issued share capital.

 

Sunshine Minerals Limited ("Sunshine")

 

Sunshine is a nickel and bauxite exploration company focussing on the Solomon Islands. During the period under review, Metminco Ltd, an ASX listed company, conditionally agreed to acquire 100% of Sunshine.  However, it subsequently withdrew from the transaction. On 2 December 2019, the Company announced that an ASX listed company called Malachite Resources ("Malachite") had entered into a conditional share subscription agreement with Malachite Resources to acquire 15% of Sunshine.

 

As announced in 2018, Axiom Mining Limited is seeking judicial review of the decision to award the Jejevo prospecting licence to Sunshine Nickel, Sunshine's 100% owned subsidiary.  Axiom's Statement of Claim for judicial review names Sunshine as a defendant alongside the Ministry of Mines, Energy and Rural Electrification and one other party.

 

Gunsynd currently holds a 18.22% stake in Sunshine Minerals Limited which would fall to 15.5% if the Malachite share subscription were to proceed.

 

Kolosori Nickel Limited ("Kolosori")

 

On 4 December 2019, the Company announced it had purchased a 7.67% stake in Kolosori which owns 80% of the nickel prospecting licence PL05/19 over the Kolosori Prospect in the Solomon Islands. In addition, the Company has been granted a 90 day option to purchase a further 22.33% of Kolosori for GBP135,000.

 

Oyster Oil and Gas Limited ("Oyster") now ZTR Acquisition Corporation ("ZTR")

 

Gunsynd initially invested £250,000 into Oyster by way of a convertible loan on 21 July 2017. In addition to the convertible loan note, Gunsynd held 2,311,000 ordinary shares in Oyster representing approximately 5.29% of Oyster's issued share capital.

 

It was announced on 4 March 2019 that Northbay Capital Partners Corp. and Gunsynd had reached conditional agreement ("Agreement") with Oyster to settle aggregate debts of CAD1,426,500 owed to them by Oyster in exchange for the outstanding share capital of Oyster's wholly-owned operating subsidiary, Oyster Oil & Gas Limited ("Subco"), established under the laws of the British Virgin Islands.  Oyster's production sharing contracts in Madagascar and Djibouti are held through Subco. Northbay and Gunsynd are currently in discussions with a third party to raise money for the Subco to progress further work on the Madagascar licence.  We maintain our belief that this asset has great potential.  This change in strategy will hopefully see that realised.

 

On 2 July 2019, the Company announced it had invested a further US$130,000 to take the Company's total holding in Subco to 333 shares being 30%.

 

On 29 November 2019, the Company announced it had entered into a binding term sheet with Sajawin Pty Ltd ("Sajawin") to conditionally sell all of its shares in Subco for circa £260,000 subject to various conditions. The Production Sharing Contract for Blocks 1-4 in the Republic of Djibouti are not included in the above transaction and will be transferred to a party of Northbay and Gunsynd's choosing before completion of the sale to Sajawin.

Brazil Tungsten Holdings Limited ("BTHL")

 

BTHL has now completed a 2,000 metre drill program.

 

Re-logging of the old drill core has now been completed with a total of 4025.5m of drill core in 69 drill holes checked.  BTHL is still waiting on the assay results from much of the drilling.

 

Assay results have been received for 394 samples and significant tungsten mineralisation has been identified in core not previously sampled. 

Results ranged from 0.6m @  0.10% WO3 to 0.8m at 0.61% WO3

Minimal production of 1-2 tonnes a month of ore is still being produced from underground and processed at the plant.

 

Due to falling tungsten prices the company has written down the investment by £100,000 (2018: nil)

 

Gunsynd currently holds 6.18% of BTHL.

 

All of our investments are minority investments.  Certain of these investments may seek to IPO.  Whilst we may offer advice to management of investee companies in this regard they can and sometimes do ignore such advice. Similarly, private companies don't have the disclosure requirements of public companies and are under no obligation to keep us constantly updated. This seems to be lost on many. Whilst it can be frustrating not least for us, the regulatory hurdles to IPO are substantial and time consuming. There are also market conditions to consider. Together these can severely impact the potential of any IPO. Management may also feel they can achieve a far higher valuation by waiting for an improvement in market timing.  This has been very evident lately due to market conditions in general and Brexit uncertainty. All these things can and do impact expectations of timings of any IPO. Decisions are ultimately made by investee companies not by us.

 

Finance Review

 

The Company made a loss for the year of £556,000 (2018: loss £939,000) after taxation, which included an impairment charge of £100,000 in respect of Brazil Tungsten Ltd.  The Company had net assets of £2,363,000 (2018: £2,423,000) at 31 July 2019, and cash balances of £568,000 (2018: £337,000).

 

Outlook

 

Whilst conditions have been far from perfect, it is pleasing that we managed to sell our Horse Hill Developments stake and finally made progress on the Oyster and Sunshine investments where we have strengthened our position.  We are particularly pleased with progress at Human Brands and excited by its future potential.

 

The Board would also like to take this opportunity to thank shareholders for their continued support.

 

Hamish Harris

Chairman

10 December 2019

 

 

The information contained within this announcement is deemed by the Company to constitute Inside Information under the Market Abuse Regulation (EU) No. 596/2014.

 

 

For further information please contact:

 

Gunsynd plc

Hamish Harris

+44 20 7440 0640 

 

 

Cairn Financial Advisers LLP

James Caithie / Liam Murray

 +44 20 7213 0880

 

 

Peterhouse Corporate Finance

Lucy Williams

+44 20 7469 0930

 

FINANCIAL STATEMENTS

 

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 JULY 2019

 

 

 

2019

2018

 

 

 

 

 

Note

£000

£000

Continuing operations

 

 

 

 

 

 

 

Income

 

 

 

Unrealised (loss) on financial investments

 

(224)

(535)

Realised Profit on financial investments

 

35

41

 

 

(189)

(494)

 

 

 

 

Administrative expenses

 

 

 

Salaries and other staff costs

6

(176)

(163)

Other costs

8

(169)

(198)

Share based payment charge

20

-

(100)

Total administrative expenses

 

(345)

(461)

 

 

 

 

Share of associate losses

12

(6)

-

Impairment of financial investments

11

(100)

-

Other income

7

50

-

Finance income

 

34

16

(Loss) before tax

 

(556)

(939)

Taxation

9

-

-

(Loss) for the period attributable to equity shareholders of the Company

 

(556)

(939)

 

 

 

 

Other comprehensive (expenditure) for the period net of tax

 

-

-

 

 

 

 

Total comprehensive (expenditure) for the period

 

(556)

(939)

 

 

 

 

(Loss) per ordinary share

 

 

 

Basic (pence)

10

(0.011)

(0.019)

Diluted (pence)

 

(0.011)

(0.019)

 

 

STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 2019

 

 

 

2019

2018

 

 

 

 

 

Note

£000

£000

ASSETS

 

 

 

Non-current assets

 

 

 

Financial investments

11

1,238

2,098

Investment in associate

12

350

-

Total non-current assets

 

1,588

2,098

 

 

 

 

Current assets

 

 

 

Trade and other receivables

13

333

296

Cash and cash equivalents

18

568

337

Total current assets

 

901

633

 

 

 

 

Total assets

 

2,489

2,731

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

14

(126)

(308)

Total current liabilities

 

(126)

(308)

 

 

 

 

Total liabilities

 

(126)

(308)

 

 

 

 

Net assets

 

2,363

2,423

 

 

 

 

Equity attributable to equity holders of the company

 

 

 

Ordinary share capital

15

633

489

Deferred share capital

15

1,729

1,729

Share premium reserve

15

10,890

10,536

Share based payments reserve

 

205

234

Retained earnings

 

(11,094)

(10,565)

Total equity

 

2,363

2,423

 

 

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2019

 

 

 

Deferred

Share

Share-based

 

 

 

Share

Share

premium

payments

Retained

 

 

capital

capital

reserve

reserve

earnings

Total

 

£000

£ 000

£000

£000

£000

£000

At 31 July 2017

489

1,729

10,540

174

(9,666)

3,266

 

 

 

 

 

 

 

Loss for the year

-

-

-

-

(939)

(939)

Total comprehensive income for the period

-

-

-

-

(939)

(939)

 

 

 

 

 

 

 

Transactions with owners:

 

 

 

 

 

 

Issue of share capital

-

-

-

-

-

-

Share issue costs

-

-

(4)

-

-

(4)

Share options issued

-

-

-

100

-

100

Share options cancelled

-

-

-

(40)

40

-

At 31 July 2018

489

1,729

10,536

234

(10,565)

2,423

 

 

 

 

 

 

 

Loss for the year

-

-

-

-

(556)

(556)

Total comprehensive income for the period

-

-

-

-

(556)

(556)

 

 

 

 

 

 

 

Transactions with owners:

 

 

 

 

 

 

Issue of share capital

144

-

393

-

-

537

Share issue costs

-

-

(39)

-

-

(39)

Share options lapsed

-

-

-

(29)

29

-

At 31 July 2019

633

1,729

10,890

205

(11,094)

2,365

 

 

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2019

 

 

 

2019

2018

 

 

 

 

 

Note

£000

£000

Cash flow from operating activities

 

 

 

(Loss) after tax

 

(556)

(939)

Tax on losses

 

-

-

Finance income net of finance costs

 

(34)

(11)

Unrealised Revaluation of financial investments

 

224

535

(Profit) on sale of financial investments

 

(35)

(41)

Share based payment

 

-

100

Share of associate loss

 

6

-

Impairment provision

 

100

-

Changes in working capital:

 

 

 

Decrease in trade and other receivables

 

79

190

(Decrease) / increase in trade and other payables

 

(182)

141

Cash outflow from operations

 

(400)

(25)

Taxation received

 

-

-

Net cash outflow from operating activities

 

(400)

(25)

 

 

 

 

Cash flow from investing activities

 

 

 

Payments for financial investments

11

(358)

(365)

Disposal proceeds from sale of financial investments

11

600

358

Unsecured loans to investee company

 

(109)

-

Finance income

 

-

11

Net cash inflow from investing activities

 

133

4

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds on issuing of ordinary shares

15

537

-

Cost of issue of ordinary shares

 

(39)

(14)

Net cash inflow from financing activities

 

498

(14)

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

18

231

(35)

Cash and cash equivalents at the beginning of the year

 

337

372

Cash and cash equivalents at the end of the year

18

568

337

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1    Presentation of the financial statements

 

Description of business & Investing Policy

Gunsynd plc is public limited company domiciled in the United KingdomThe Company's registered office is 78 Pall Mall, London SW1Y 5ES.

 

The Company's Investing Policy is to invest in and/or acquire companies and/or projects within the natural resources sector which the Board considers, in its opinion, has potential for growth.  The Company will consider opportunities in all sectors as they arise if the Board considers there is an opportunity to generate potential value for Shareholders.  The geographical focus will primarily be in Europe, however, investments may also be considered in other regions to the extent that the Board considers that valuable opportunities exist and potential value can be achieved.

 

Where appropriate, the Board may seek to invest in businesses where it may influence the business at a board level, add their expertise to the management of the business, and utilise their industry relationships and access to finance.

 

The Company's interests in an investment and/or acquisition may range from a minority position to full ownership and may comprise one investment or multiple investments.  The investments may be in either quoted or unquoted companies; be made by direct acquisitions or farm-ins; and may be in companies, partnerships, earn-in joint ventures, debt or other loan structures, joint ventures or direct or indirect interests in assets or projects.  The Board may focus on investments where intrinsic value may be achieved from the restructuring of investments or merger of complementary businesses.

 

The Board expects that investments will typically be held for the medium to long term, although short term disposal of assets cannot be ruled out if there is an opportunity to generate a return for Shareholders.  The Board will place no minimum or maximum limit on the length of time that any investment may be held.  The Company may be both an active and a passive investor depending on the nature of the individual investment.  There is no limit on the number of projects into which the Company may invest, and the Company's financial resources may be invested in a number of propositions or in just one investment, which may be deemed to be a reverse takeover under the AIM Rules.  The Board intends to mitigate risk by appropriate due diligence and transaction analysis.  Any transaction constituting a reverse takeover under the AIM Rules will also require Shareholder approval.  The Board considers that, as investments are made and new investment opportunities arise, further funding of the Company may also be required.

 

Where the Company builds a portfolio of related assets, it is possible that there may be cross holdings between such assets.  The Company does not currently intend to fund any investments with debt or other borrowings but may do so if appropriate.  Investments in early stage assets are expected to be mainly in the form of equity, with debt potentially being raised later to fund the development of such assets.  Investments in later stage assets are more likely to include an element of debt to equity gearing.  The Board may also offer New Ordinary Shares by way of consideration as well as cash, thereby helping to preserve the Company's cash for working capital and as a reserve against unforeseen contingencies including, for example, delays in collecting accounts receivable, unexpected changes in the economic environment and operational problems.

 

Investments may be made in all types of assets and there will be no investment restrictions on the type of investment that the Company might make or the type of opportunity that may be considered.  The Company may consider possible opportunities anywhere in the world.

 

The Board will conduct initial due diligence appraisals of potential business or projects and, where they believe further investigation is warranted, intend to appoint appropriately qualified persons to assist.  The Board believes its expertise will enable it to determine quickly which opportunities could be viable and so progress quickly to formal due diligence.  The Company will not have a separate investment manager.

 

Compliance with applicable law and IFRS

The financial statements have been prepared in accordance with the Companies Act 2006 and International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) and related interpretations, as adopted by the European Union.

 

Composition of the financial statements

The Company financial statements are drawn up in Sterling, the functional currency of Gunsynd plc and in accordance with IFRS accounting presentation.  The level of rounding for financial information is the nearest thousand pounds.

 

Accounting convention

The financial statements have been prepared using the historical cost convention, as modified by the revaluation of certain items, as stated in the accounting policies.

 

Basis of preparation - Going concern

The financial statements have been prepared on a going concern basis, notwithstanding the loss for the year ended 31 July 2019.  This basis assumes that the company will have sufficient funding to enable it to continue to operate for the foreseeable future and the Directors have taken steps to ensure that they believe that the going concern basis of preparation remains appropriate.

 

The Company made a loss for the year of £556,000 (2018: loss £939,000) after taxation.  The Company had net assets of £2,363,000 (2018: £2,423,000) and cash balances of £568,000 (2018: £335,000) at 31 July 2019.  The Directors have prepared financial forecasts which cover a period of at least 12 months from date that these financial statements are approved to 30 December 2020.  These forecasts show that the Company expects to have sufficient financial resources to continue to operate as a going concern.

 

In forming the conclusion that it is appropriate to prepare the financial statements on a going concern basis the Directors have made the following assumptions that are relevant to the next twelve months:

-    In the event that the Company's investments require further funding, sufficient funding can be obtained; and

-    In the event that operating expenditure increases significantly as a result of successful progress with regards to the Company's investments, sufficient funding can be obtained.

 

The cost structure of the Company comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Company to operate within its available funding.  As a junior investment exploration company, the Directors are aware that the Company must go to the marketplace to raise cash to meet its investment plans, and/or consider liquidation of its investments and/or assets as is deemed appropriate. The Company has previously constantly demonstrated its ability to raise further cash by way of completing placings during the prior years, and are confident of further equity fund raising should the company require such cash injection. .  Therefore they are confident that existing cash balances, along with the any new funding would be adequate to ensure that costs can be covered.

 

Consequently, the Directors have a reasonable expectation that the Company has adequate resources to continue to operate for the foreseeable future and that it remains appropriate for the financial statements to be prepared on a going concern basis.

 

Financial period

These financial statements cover the financial year from 1 August 2018 to 31 July 2019, with comparative figures for the financial year from 1 August 2017 to 31 July 2018.

 

Accounting principles and policies

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

The financial statements have been prepared in accordance with the Company's accounting policies approved by the Board and signed on their behalf by Hamish Harris and Donald Strang, and described in Note 2, 'Accounting principles and policies'.  Information on the application of these accounting policies, including areas of estimation and judgement is given in Note 3, 'Key accounting judgements and estimates'.  Where appropriate, comparative figures are reclassified to ensure a consistent presentation with current year information.
 

2    Accounting principles and policies

 

Revenue

Revenue is recognised when persuasive evidence of an arrangement exists, delivery of products has occurred or services have been rendered, prices are fixed or determinable and there is a probability that economic benefits will flow to the Company.

 

Segment 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.  Further details are set out in Note 5.

 

Share capital

Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability.  The Company's ordinary shares are classified as equity instruments.

 

Share-based payments

Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income over the vesting period.  Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.

 

Market vesting conditions are factored into the fair value of the options granted.  As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.  The cumulative expense is not adjusted for failure to achieve a market vesting condition.

 

Financial instruments

 

Financial investments

Non-derivative financial assets comprising the Company's strategic financial investments in entities not qualifying as subsidiaries, associates or jointly controlled entities.  They are carried at fair value with changes in fair value recognised through the income statement.  Where there is a significant or prolonged decline in the fair value of a financial investment (which constitutes objective evidence of impairment), the full amount of the impairment is recognised in the income statement. 

 

Listed investments are valued at closing bid price on 31 July 2019.  For measurement purposes, financial investments are designated at fair value through income statement.  Gains and losses on the realisation of financial investments are recognised in the income statement for the period.  The difference between the market value of financial instruments and book value to the Company is shown as a gain or loss in the income statement for the period.

 

Investment in associates

Associates are all entities over which the Company has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting (see below), after initially being recognised at cost.

 

Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Company's share of the post-acquisition profits or losses of the investee in profit or loss, and the Company's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

 

When the Company's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.

 

Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Company.

 

The carrying amount of equity-accounted investments is tested for impairment at each reporting date.
 

Trade and other receivables

Trade and other receivables are accounted for at original invoice amount less any provisions for doubtful debts.  Provisions are made where there is evidence of a risk of non-payment, taking into account the age of the debt, historical experience and general economic conditions.  If a trade debt is determined to be uncollectable, it is written off, firstly against any provisions already held and then to the statement of comprehensive income.  Subsequent recoveries of amounts previously provided for are credited to the statement of comprehensive income.

 

Trade and other payables

Trade and other payables are held at amortised cost which equates to nominal value.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, current balances with banks and similar institutions and liquid investments generally with maturities of 3 months or less.  They are readily convertible into known amounts of cash and have an insignificant risk of changes in values.

 

Taxation

 

The tax expense for the period comprises current and deferred tax.  Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.  In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

 

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company's subsidiaries and associates operate and generate taxable income.  Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

Deferred income 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 in the consolidated financial statements.  However, the deferred income tax is not accounted for if it 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.  Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

 

Deferred income 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 income tax is provided on temporary differences arising on disallowed expenses, expect where the timing of the reversal of the temporary difference is controlled by the company and it is probable that the temporary difference will not reverse in the foreseeable future.

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

Impairment of non-current assets

The carrying values of all non-currents assets are reviewed for impairment when there is an indication that the assets might be impaired.  Any provision for impairment is charged to the statement of comprehensive income in the year concerned.

 

Impairment losses on other non-current assets are only reversed if there has been a change in estimates used to determine recoverable amounts and only to the extent that the revised recoverable amounts do not exceed the carrying values that would have existed, net of depreciation or amortisation, had no impairments been recognised.

 

3    Key accounting judgements and estimates

 

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

 

Actual results may differ from these estimates.  The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Significant estimates and assumptions that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities at 31 July 2019 are set out below:

 

Share Based Payments

The Company did not awards any options over its unissued share capital to the directors during the year to 31 July 2019.  (2018: 330 million share options issued)

 

The fair value of share based payments is calculated by reference to Black Scholes model.  Inputs into the model are based on management's best estimates of appropriate volatility, dividend yields, discount rate and share price.  During the year, the Company incurred £nil share based payment charge (2018: £nil charge).

 

4    New accounting requirements

 

At the date of authorisation of these financial statements, the following IFRSs, IASs and Interpretations were in issue but not yet effective.  Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

 

·    IFRS 16 Leases (effective date 1 January 2019);

·    IFRS 17 Insurance Contracts (effective date 1 January 2021).

 

5    Segmental analysis

 

Segmental analysis is not applicable as there is only one operating segment of the continuing business - investment activities.  The performance measure of investment activities is considered by the Board to be profitability and is disclosed on the face of the statement of comprehensive Income.  The Board will continually review the segmental analysis of the business on an ongoing basis and at each reporting date.

 

6    Information regarding Directors and employees

 

 

2019

2018

 

£000

£000

Included within continuing operations

 

 

Fees and salaries

174

159

Social security costs

2

4

Share based payment expense

-

100

 

176

263

 

 

2019

2018

 

Number

Number

Average number of persons employed by the Company (including Directors) during the year

 

 

Directors

3

3

Administrative staff

1

1

Total

4

4

 

The compensation of the Directors, in aggregate, was as follows:

2019

2018

 

£000

£000

Wages and salaries

153

147

Social security costs

1

3

Share based payment expense

-

100

 

154

250

 

Full details of the remuneration of individual directors, including the highest paid director, are set out below:

 

 

Fees &

Share Based

Total

Total

 

salary

Payments

2019

2018

 

£000

£000

£000

£000

Directors

 

 

 

 

Mr H Harris

72

-

72

112

Mr D Strang

72

-

72

112

Mr D Ormerod (resigned 16 January 2018)

-

-

-

5

Mr G Garnett (appointed 16 January 2018)

9

-

9

18

 

153

-

153

247

 

Director's fees totalling £53,000 have been accrued and remain unpaid at 31 July 2019.  (2018: £102,000)

 

7    Other income

 

 

2019

2018

 

£000

£000

Other fees & services

50

-

Total other income

50

-

 

8     (Loss)/profit for the year

 

The following items have been included in operating (loss)/profit:

 

 

2019

2018

 

£000

£000

Fees payable to the company's auditors, Chapman Davis LLP in relation to the Company:

 

 

Audit and assurance services:

 

 

- Audit of parent Company financial statements

10

10

- Other services

-

-

Total auditor's fees

10

10

 

 

 

Analysis of other costs:

 

 

Legal and professional fees

5

15

Foreign exchange (gains)

-

-

Other general overheads

164

183

 

169

198

 

9    Taxation

 

 

2019

2018

 

 

 

Taxation charge based on losses for the year

£000

£000

UK Corporation tax

-

-

Deferred taxation

-

-

Total tax expense

-

-

 

 

 

Factors affecting the tax charge for the year:

 

 

(Loss)/profit on ordinary activities before taxation

(556)

(939)

Loss on ordinary activities at the average UK standard rate of 19% (2018: 19%)

(106)

(178)

Effect of non-deductible expenses

22

21

Future income tax benefit not brought to account

84

157

Other deductions for tax purposes including prior year losses

-

-

Current tax charge

-

-

 

As set out in Note 2, the Company has not recognised a deferred tax asset in the financial statements as there is no certainty that taxable profits will be available against which these assets could be utilised.

 

Factors affecting the tax charge in future years

Changes to tax legislation could impact on the Company's effective tax rate.  The UK Government has in recent years proposed some significant changes to the UK taxation system.  The UK Government announced a phased reduction in the main rate of corporation tax to 18% and the deferred tax balances reflect that reduction in the UK tax rate, as is appropriate to the Company's circumstances.
 

10   (Loss) per share

 

(Loss) attributable to ordinary shareholders

2019

2018

 

 

 

The calculation of loss per share is based on the loss after taxation divided by the weighted average number of shares in issue during the period:

 

 

(Loss) from operations (£000)

(556)

(939)

Total (£000)

(556)

(939)

 

 

 

Number of shares

 

 

Weighted average number of ordinary shares for the purposes of basic (loss)/earnings per share (millions)

5,082.7

4,882.9

Weighted average number of ordinary shares for the purposes of diluted (loss)/earnings per share (millions)

5,424.4

5,225.6

 

 

 

Basic (loss) per share (expressed in pence)

(0.011)

(0.019)

Diluted (loss) per share (expressed in pence)

(0.011)

(0.019)

 

As the inclusions of the potential Ordinary Shares would result in a decrease in the loss per share they are considered to be anti-dilutive and as such not included.

 

11  Financial investments

 

 

£000

Fair Value at 31 July 2017

2,585

Additions

365

Market value Revaluations

(535)

Gains on disposals

41

Disposal

(358)

Impairment provision

-

Fair Value at 31 July 2018

2,098

Additions

935

Market value Revaluations

(224)

Gains on disposals

35

Disposal

(1,150)

Transfer to investment in associate

(356)

Impairment provision

(100)

Fair Value at 31 July 2019

1,238

 

 

The available for sale investments splits are as below:

 

Non-current assets - listed

143

Non-current assets - unlisted

728

Non-current assets - unlisted convertible loans

367

 

1,238

 

The Directors carried out an impairment review as at 31 July 2019 (31 July 2018 :£nil), and determined a further impairment was required in regards to its investment in Brazil Tungsten Holdings Ltd of £100,000, as a result of the valuation implied by BTH's most recent successful fund-raising. More details regarding the companies' progress are detailed within the strategic review.

 

Financial investments comprise investments in listed and unlisted Companies, of which the listed investments are traded on stock markets throughout the world, and are held by the Company as a mix of strategic and short term investments.  The listed investments have been valued at bid price, as quoted on their respective Stock Exchanges, at 31 July 2019.  The market value of the listed investments at 1 December 2019 was circa £140,000.
 

12  Investment in associate

 

 

2019

2018

Changes in equity accounted investment

£000

£000

Carrying value at the beginning of the year

-

-

Transfer from Financial investments

356

-

Share of retained (losses) attributable to the company

(6)

-

Carrying value at the end of the year

350

 

 

The following entity has been included in the consolidated financial statements using the equity method:

 

Name

Place of Incorporation

Proportion held

Date associate interest acquired

Reporting Date of associate

Principal activities

Oyster Oil & Gas Ltd

BVI

30.05%

02/07/19

31/12/18

Oil & gas exploration

 

The Company acquired an initial 22.5% shareholding in Oyster Oil & Gas Ltd on 20 June 2019, in exchange for the Company's interest in a convertible loan in ZTR Acquisition Corporation.  A further 7.55% interest was acquired on 2 July 2019 following a share subscription, for £105,000.

 

Summarised financial information for Oyster Oil & Gas Ltd;

 

As at 31 December 2018

 

C$'000

Non-current assets

Current assets

 

12

Current liabilities

 

(547)

Non-current liabilities

 

(6,593)

 

 

 

Net assets/(liabilities) (100%)

Company share of net assets/(liabilities) (30.05%)

 

(559)

 

Period ended 31 December 2018

 

 

Revenue

 

-

(Loss) from continuing operations

 

(395)

 

 

13  Trade and other receivables

 

2019

2018

 

£000

£000

Loan to Investee Company

116

-

Other receivables

80

190

Prepayments

137

106

 

333

296

 

14  Trade and other payables

 

 

2019

2018

Amounts due within one year

£000

£000

Trade payables

46

36

Other creditors

9

93

Accruals and deferred income

71

179

 

126

308

 

15  Share capital and share premium account

 

 

Number

Ordinary

Deferred

Share

 

of shares

share

share

premium

 

 

capital

capital

 

 

 

£000

£000

£000

Share capital issued and fully paid

 

 

 

 

At 31 July 2017

4,882,924,490

489

1,729

10,540

Less: costs of share placing

-

-

-

(4)

There were no shares issued during the year

 

 

 

 

At 31 July 2018

4,882,924,490

489

1,729

10,536

Issue of new ordinary shares on 10 June 2019

1,351,351,351

134

-

366

Less: costs of share placing

-

-

-

(39)

Issue of new ordinary shares on 21 June 2019

100,000,000

10

-

27

At 31 July 2019

6,334,275,841

633

1,729

10,890

 

16  Movements in equity

 

Share capital represents the nominal value of the amount subscribed for shares.  Share premium represents the amount subscribed for shares in excess of their nominal value less costs of subscription.  Ordinary shares carry the rights to one vote per share at general meetings of the Company and the rights to share in any distributions of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up.

 

The share-based payment reserve represents amounts arising from the requirement to expense the fair value of share-based remuneration in accordance with IFRS 2 'Share-based Payments'.

 

Retained earnings are the cumulative net losses recognised in the income statement and other comprehensive income.

 

Movements on these reserves are set out in the statement of changes in equity.

 

17  Related party transactions

 

The Company had the following transactions with related parties:

 

Name of related party

Relationship

Nature of transaction

Transactions with
related party

Amounts owed from related party

 

 

 

At 31 July

At 31 July

At 31 July

At 31 July

 

 

 

2019

2018

2019

2018

 

 

 

£000

£000

£000

£000

Horse Hill Developments Ltd ("HHDL")

Investee Company

Cash call Loan to HHDL

(190)

108

-

190

Human Brands Inc.

Investee Company

Short term Loan

116

-

116

-

 

Terms and conditions of transactions with related parties

Outstanding balances that relate to trading balances are unsecured, interest free and settlement occurs in cash.  There have been no guarantees provided or received for any related party receivables or payables.

 

The Company has the outstanding amounts due as at 31 July 2019 as disclosed in the table above.  The loans outstanding are included within trade and other receivables, Note 13. 

 

The loan to HHDL was made in accordance with the terms of the investment agreement whereby it accrued interest daily at the Bank of England base rate and was repayable out of future cashflows.  On disposal of the Company's interest in HHDL, the shareholder loan was novated to the acquiring company, and no further loan balance is repayable.

 

The loan to Human Brands Inc, is a short term loan accruing interest at 12% per annum, and repayable in accordance with the terms of the loan agreements.

 

Compensation of key management personnel of the Company

The Company considers the directors to be its key management personnel.  Full details of the remuneration of the directors are shown in Note 6.

 

18  Reconciliation of net cash flow to movement in net funds

 

 

2019

2018

 

£000

£000

Net funds at beginning of the year

337

372

Increase/(decrease) in cash

231

(35)

Net funds at end of the year

568

337

 

Analysis of changes in net funds

 

 

At 31

 

At 31

 

July

Cash

July

 

2018

Flow

2019

 

£000

£000

£000

Cash and cash equivalents

337

231

568

Net funds

337

231

568

 

Significant non-cash transactions

 

During the year the significant non-cash transactions during the year were as follows:

 

·      £100,000 impairment provision in regards to Brazil Tungsten Holdings Limited was expensed through the income statement.

·      £224,000 of unrealised losses in movement in the market value of the Company's listed financial investments were expensed through the income statement.

 

19  Financial instruments and related disclosures

 

General objectives, policies and processes

 

The Board has overall responsibility for the determination of the Company's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company's finance function.  The Board receives monthly reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

 

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company's competitiveness and flexibility.

 

The Company reports in Sterling.  Internal and external funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors.  The Company does not use derivative financial instruments such as forward currency contracts, interest rate and currency swaps or similar instruments.  The Company does not issue or use financial instruments of a speculative nature.

 

Capital management

The Company's objectives when maintaining capital are:

·      to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

·      to provide an adequate return to shareholders.

 

The capital structure of the Company consists of total shareholders' equity as set out in the 'Statement of changes in equity'.  All working capital requirements are financed from existing cash resources.

 

Capital is managed on a day to day basis to ensure that all entities in the Company are able to operate as a going concern.  Operating cash flow is primarily used to cover the overhead costs associated with operating as an AIM and NEX-listed company.

 

Liquidity risk

Liquidity risk arises from the Company's management of working capital.  It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due.

 

The Directors consider that there is no significant liquidity risk faced by the Company.  The Company maintains sufficient balances in cash to pay accounts payable and accrued expenses.

 

The Board receives forward looking cash flow projections at periodic intervals during the year as well as information regarding cash balances.  At the balance sheet date the Company had cash balances of £568,000 and the financial forecasts indicated that the Company expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances and will not need to establish overdraft or other borrowing facilities.

 

Interest rate risk

As the Company has no borrowings, it only has limited interest rate risk.  The impact is on income and operating cash flow and arises from changes in market interest rates.  Cash resources are held in current, floating rate accounts.

 

Market risk

Market price risk arises from uncertainty about the future valuations of financial instruments held in accordance with the Company's investment objectives.  These future valuations are determined by many factors but include the operational and financial performance of the underlying investee companies, as well as market perceptions of the future of the economy and its impact upon the economic environment in which these companies operate.  This risk represents the potential loss that the Company might suffer through holding its financial investment portfolio in the face of market movements, which was a maximum of £1,238,000 (2018: £2,098,000).

 

The investments in equity of quoted companies that the Company holds are less frequently traded than shares in more widely traded securities.  Consequently, the valuations of these investments can be more volatile. 

 

Market price risk sensitivity

The table below shows the impact on the return and net assets of the Company if there were to be a 20% movement in overall share prices of the financial investments held at 31 July 2019.

 

 

2019

2018

 

Other comprehensive income and

Net assets

Other comprehensive income and

Net assets

 

£000

£000

Decrease if overall share price falls by 20%, with all other variables held constant

(29)

(76.3)

Decrease in other comprehensive earnings and net asset value per Ordinary share (in pence)

(0.0005)p

(0.0015p)

 

 

 

Increase if overall share price rises by 20%, with all other variables held constant

29

76.3

Increase in other comprehensive earnings and net asset value per Ordinary share (in pence)

0.0005p

0.0015p

 

The impact of a change of 20% has been selected as this is considered reasonable given the current level of volatility observed, and assumes a market value is attainable for the Company's unlisted investments.

 

Currency risk

The Directors consider that there is no significant currency risk faced by the Company.  The only current foreign currency transactions the Company enters into are denominated in US$ in relation to transactions with or relating to its investment in Human Brands Inc., and no balances at 31 July 2019 are denominated in foreign currencies.

 

Credit risk

Credit risk is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Company.  The Company's maximum exposure to credit risk is:

 

 

2019

2018

 

£000

£000

Cash at bank

568

337

Other receivables

333

296

 

901

633

 

The Company's cash balances are held in accounts with Barclays Bank plc, and with its Investment Broker accounts.

 

Fair value of financial assets and liabilities

Financial assets and liabilities are carried in the Statement of Financial Position at either their fair value (financial investments) or at a reasonable approximation of the fair value (trade and other receivables, trade and other payables and cash at bank).

 

The fair values are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

 

Trade and other receivables

The following table sets out the fair values of financial assets within Trade and other receivables. 

 

 

2019

2018

Financial assets (Note 13)

£000

£000

Trade and other receivables  - Non interest earning

217

296

Loan to investee company - interest earning @ 12%p.a

116

-

 

There are no financial assets which are past due and for which no provision for bad or doubtful debts has been made.

 

Trade and other payables

The following table sets out financial liabilities within Trade and other payables.  These financial liabilities are predominantly non-interest bearing.  Other liabilities include tax and social security payables and provisions which do not constitute contractual obligations to deliver cash or other financial assets.

 

 

2019

2018

Financial liabilities (Note 14)

£000

£000

Trade and other payables

126

308

 

20  Share schemes

 

The Company has a share option scheme for all employees (including Directors).  Options are exercisable at a price agreed at the date of grant.  The vesting period is usually between zero and five years.  The exercise of options is dependent upon eligible employees meeting performance criteria.  The options are settled in equity once exercised.

 

If the options remain unexercised after their expiry date, the options expire.  Options lapse if the employee leaves the Company before the options vest.

 

Options issued, cancelled, & outstanding for the year ended 31 July 2019

 

 

Weighted

 

 

 

 

average

 

 

 

 

exercise

 

 

 

Number

price

At 31 July 2017

 

 

32,650,840

0.60p

Options granted

 

 

330,000,000

0.05p

Options cancelled

 

 

(20,000,000)

0.22p

At 31 July 2018

 

 

342,650,840

0.11p

Options lapsed

 

 

(1,031,990)

0.0865p

At 31 July 2019

 

 

341,618,850

0.08p

Range of exercise prices

 

 

0.05p - 5.25p

Weighted average remaining contractual life

 

 

2.89 years

 

Options outstanding & exercisable at 31 July 2019

 

 

 

 

 

Exercise

Expiry

Date of grant

Number

price (p)

date

1 December 2010

1,618,850

5.25p

30/11/2020

1 April 2015

10,000,000

0.22p

01/04/2020

7 August 2017

300,000,000

0.05p

30/06/2022

12 February 2018

30,000,000

0.05p

11/02/2023

Total

341,618,850

 

 

 

A modified Black-Scholes model has been used to determine the fair value of the share options on the date of grant.  The fair value is expensed to the income statement on a straight-line basis over the vesting period, which is determined annually.  The model assesses a number of factors in calculating the fair value.  These include the market price on the date of grant, the exercise price of the share options, the expected share price volatility of the Company's share price, the expected life of the options, the risk-free rate of interest and the expected level of dividends in future periods.

 

For those options granted where IFRS 2 "Share-Based Payment" is applicable, the fair values were calculated using the Black-Scholes model.  The inputs into the model were as follows:

 

 

Risk free rate

Share price volatility

Expected life

Share price at date of grant

7 August 2017

1.4%

91.4%

4.9 years

£0.00045

12 February 2018

1.4%

84.9%

5 years

£0.00041

 

Expected volatility was determined by calculating the historical volatility of the Company's share price for 12 months prior to the date of grant.  The expected life used in the model is the term of the options.

 

Charges to the statement of comprehensive income

 

2019

2018

 

£000

£000

Share based payment charges

-

100

 

Warrants in issue

 

As at 31 July 2019 and at 31 July 2018, no warrants remained outstanding, no warrants expired during the year.  (2018: nil). No warrants were issued during the year (2018: nil).

 

21  Commitments and contingencies

 

The Directors have confirmed that there were no contingent liabilities or capital commitments which should be disclosed at 31 July 2019.

 

22  Ultimate controlling party

There is not considered to be an ultimate controlling party of the Company.

 

23  Events after the end of the reporting period

 

On 6 November 2019 the Company announced Mr Peter Ruse had joined the Board as a Non-Executive Director.

 

On 26 November 2019 the Company announced that Mr George Garnett had resigned from the Board.

 

On 29 November 2019, the Company announced it had entered into a binding term sheet ("Term Sheet") with Sajawin Pty Limited ("Sajawin") to conditionally sell all of the 333 shares Gunsynd holds in Oyster Oil and Gas Limited ("Oyster BVI") as set out below (the "Transaction"):

a)    Sajawin shall pay to Gunsynd the sum of A$39,151 (approximately £20,000) in clear funds within 5 working days of the signing of the Term Sheet.

b)    In consideration of the sale of the shares in Oyster BVI to Sajawin, it will undertake to pay Gunsynd the sum of A$457,647 (approximately £240,000) of which 80% is to be paid within 5 working days of completion of the Transaction ("Completion") and 20% is to be paid within 60 days of Completion.

 

On 2 December 2019, the Company announced that an ASX listed company, Malachite Resources had entered into a share subscription agreement with Sunshine Minerals Limited to elect to earn into 15% of it for circa A$300,000 subject to various conditions.

 

On 4 December 2019, the Company announced it had purchased 7.67% of Kolosori Nickel limited for GBP45,000.


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