Gunsynd PLC - Final Results
RNS Number : 6040B
Gunsynd PLC
21 September 2018
 

Gunsynd plc

 

("Gunsynd" or the "Company")

 

Final Results for the year ended 31 July 2018

Gunsynd (AIM: GUN, NEX: GUN) is pleased to announce that its Final Results for the year ended 31 July 2018 will be posted shortly to shareholders and are available on the Company's website: http://www.gunsynd.com/.

Review of Investments

 

Horse Hill Developments Limited ("HHDL")

 

The Company currently owns a 2% direct interest in Horse Hill Developments Limited ("HHDL").  HHDL is a special purpose company that owns a 65% participating interest and operatorship of Licence PEDL137 and the adjacent Licence PEDL246 in the UK Weald Basin.  This holding, subject to HHDL shareholders' approval, has an agreement to be sold to UK Oil & Gas Investments Plc ("UKOG") for a total consideration receivable by the Company of £600,000, made up of £50,000 in cash and the balance of £550,000 by way of the issue of 31,171,898 shares in UKOG.

Sunshine Minerals Limited ("Sunshine")

 

Gunsynd holds a 10% equity stake in Sunshine Minerals Limited ("Sunshine"), and a loan note convertible into a further 10% shareholding. Sunshine is a nickel and bauxite exploration company focussing on the Solomon Islands.  On 19 September 2018 it was announced that Metminco Ltd ("Metminco") proposed to acquire 100% of the existing share capital in Sunshine through the issue of shares on a staged basis (and subject to certain conditions).

The consideration for Metminco's Acquisition of Sunshine is as follows:

 

(a)   A non-refundable deposit of A$50,000 to be paid within 10 days.

(b)   A$1,500,000 less the Deposit and any agreed debts in Sunshine which will be satisfied through the issue of up to 250,000,000 fully paid ordinary shares in the capital of Metminco (Metminco Shares) at a deemed issue price of A$0.006 each (Upfront Consideration Shares);

(c)   A further 250,000,000 Metminco Shares upon announcement to the ASX by Metminco of an initial JORC compliant resource estimate at Jejevo Nickel Project of at least 125,000 tonnes of contained nickel metal at a cut-off grade of not less than 0.7% nickel, which must be based upon exploration information delivered to Metminco by Sunshine and exploration work undertaken by Metminco in the amount of not greater than A$500,000 (Stage 1 Deferred Consideration Shares); and

(d)   The issue of 500,000,000 Metminco Shares upon the receipt of a mining license over the Jejevo Nickel Project located in the Santa Isabel Province, Solomon Islands (Stage 2 Deferred Consideration Shares).

 

United Oil and Gas Limited ("UOG")

UOG is an independent oil & gas start-up 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.  Two deals have been completed since August 2016, providing UOG with a material stake in two licences: PL090 onshore UK, and Podere Gallina onshore Italy.  UOG is listed on the main market of the by way of a standard listing.  Since its listing date, UOG has made a number of investments and its share price has increased considerably.  Gunsynd has sold down a portion of its holding at a healthy profit.

 

Brazil Tungsten Holdings Limited ("BTHL")

After an unfortunate accident earlier in the year operations recommenced in May.    BTHL has achieved production of 12 tonnes per month ("tpm") in both June and July 2018.  BTHL has now paid down $400,000 of debt and has $350,000 remaining. It is also in the process of seeking alternative improved off-take arrangements, and pre-payments which will allow BTHL to finance its exploration programme earlier than previously planned.   BTHL is still progressing its Tarantula licence application.

 

Human Brands Inc. ("Human Brands")

 

Gunsynd has, to date, invested £289,000 by way of convertible loan notes in Human Brands, a private US company that produces, distributes, and markets premium spirits, wine, and beer in the USA and Asia.  One of its flagship products is Copa Imperial Tequila, a premium tequila.  2018 has been a year of much progress for Human Brands with increased distribution in the USA from its tie up with Miolo Wine and in Asia with Milestone Beverages as well as marketing rights for a bar at the Florida Panthers stadium in Miami.  The company also expects to launch its own premium tequila Copa Imperial and its Japanese Whisky by the end of the year.  Human Brands is currently in preparation for an IPO which is targeted to be completed by H2 2019. 

 

Oyster Oil and Gas Limited ("Oyster")

 

Oyster is an international energy group focused on oil and gas exploration and production activities in underexplored hydrocarbon basins.  Oyster currently operates 4 blocks in the Republic of Djibouti (100% interest); 3 blocks are located onshore and 1 block offshore, also the sole interest holder in 1 onshore block in the Republic of Madagascar.

The Oyster IPO as previously detailed is as yet to make the progress we envisaged by this date. To say we are displeased with the efforts of management in this endeavour would be a gross understatement.  Our hands were tied to a large extent in supporting the IPO due to a lack of disapplication of pre-emption rights within Gunsynd.  Unfortunately this has had a very negative impact on the value of our holding . We do however believe in the Madagascar asset and are hopeful that value can be extracted from it via an IPO or more likely by a trade sale.

 

Alba Mineral Resources ("Alba") and Zenith Energy ("Zenith")

 

Gunsynd maintains very small residual holdings in both these companies.  Neither are considered to be long term holdings.

Fastbase Inc ("Fastbase")

 

We have been informed by Fastbase that they still intend to target an IPO this year but we have no further guidance regarding the IPO details that were indicated in our RNS of the 24th of May 2018.  It must be stressed that Gunsynd has not invested in Fastbase in any form.

 

All of our investments are minority investments.  Certain of these investments 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.  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 £939,000 (2017: profit of £492,000) after taxation.  This loss originated from realised gains on disposals of its listed investments of £41,000 (2017: gain £408,000) along with market value revaluation losses of £535,000 (2017: gain 417,000).  The Company had net assets of £2,423,000 (2017: £3,266,000) including cash balances of £337,000 (2017: £372,000) at 31 July 2018.

During the period, the Company did not raise any equity capital, but managed its cashflow through the existing balances and listed investment sales. 

 

Outlook

Despite the maelstrom of economic uncertainty and difficult markets the board remains optimistic with regard to the future.  The board have successfully managed to convert two illiquid holdings in to liquidity traded stock lately. We intend to continue this policy in the next six months.

Hamish Harris

Chairman

 

21 September 2018

 

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 2018

 



2018

2017






Note

£000

£000

Continuing operations








Income




Unrealised (loss)/profit on available for sale assets


(535)

417

Realised Profit on available for sale assets


41

408



(494)

825





Administrative expenses




Salaries and other staff costs

6

(163)

(91)

Other costs

8

(198)

(261)

Share based payment charge

19

(100)

-

Total administrative expenses


(461)

(352)





Other income

7

-

18

Finance income


16

1

(Loss)/profit before tax


(939)

492

Taxation

9

-

-

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


(939)

492





Other comprehensive (expenditure)/income for the period net of tax


-

-





Total comprehensive (expenditure)/income for the period


(939)

492





(Loss)/earnings per ordinary share




Basic (pence)

10

(0.019)

0.018

Diluted (pence)


(0.019)

0.017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 2018

 



2018

2017






Note

£000

£000

ASSETS




Non-current assets




Available-for-sale investments

11

2,098

2,585

Total non-current assets


2,098

2,585





Current assets




Trade and other receivables

12

296

486

Cash and cash equivalents

17

337

372

Total current assets


633

858





Total assets


2,731

3,443





Current liabilities




Trade and other payables

13

(308)

(177)

Total current liabilities


(308)

(177)





Total liabilities


(308)

(177)





Net assets


2,423

3,266





Equity attributable to equity holders of the company




Ordinary share capital

14

489

489

Deferred share capital

14

1,729

1,729

Share premium reserve

14

10,536

10,540

Share based payments reserve


234

174

Retained earnings


(10,565)

(9,666)

Total equity


2,423

3,266

 

The financial statements were approved and authorised for issue by the Board of Directors on 21 September 2018 and were signed on its behalf by:

 

 

 

Hamish Harris                                                                                        Donald Strang

Chairman                                                                                               Director

 

Company number: 05656604

 

 

 

 

 

 

 

 

 

 

 

 

 



 

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2018

 



Deferred

Share

Share-based




Share

Share

premium

payments

Retained



capital

capital

reserve

reserve

earnings

Total


£000

£ 000

£000

£000

£000

£000

At 31 July 2016

123

1,729

9,439

174

(10,158)

1,307








Profit for the year

-

-

-

-

492

492

Total comprehensive income for the period

-

-

-

-

492

492








Transactions with owners:







Issue of share capital

366

-

1,185

-

-

1,551

Share issue costs

-

-

(84)

-

-

(84)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2018

 



2018

2017






Note

£000

£000

Cash flow from operating activities




(Loss)/profit after tax


(939)

492

Tax on losses


-

-

Other income


-

(15)

Finance income net of finance costs


(11)

(1)

Unrealised Revaluation of AFS assets


535

(417)

(Profit) on sale of AFS Asset


(41)

(408)

Share based payment


100

-

Changes in working capital:




Decrease in trade and other receivables


190

6

Increase in trade and other payables


141

15

Cash outflow from operations


(25)

(328)

Taxation received


-

-

Net cash outflow from operating activities


(25)

(328)





Cash flow from investing activities








Payments for investments in AFS assets

11

(365)

(1,873)

Disposal proceeds from sale of AFS Asset

11

358

1,137

Finance income


11

1

Net cash inflow/(outflow) from investing activities


4

(735)





Cash flows from financing activities




Proceeds on issuing of ordinary shares

14

-

1,161

Cost of issue of ordinary shares


(14)

(84)

Net cash inflow from financing activities


(14)

1,077









Net (decrease)/increase in cash and cash equivalents

17

(35)

14

Cash and cash equivalents at the beginning of the year


372

358

Cash and cash equivalents at the end of the year

17

337

372

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

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 Kingdom.  The Company's registered office is 2 Chapel Court, London SE1 1HH.

 

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 2018.  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 £939,000 (2017: profit £492,000) after taxation.  The Company had net assets of £2,423,000 (2017: £3,266,000) and cash balances of £335,000 (2017: £372,000) at 31 July 2018.  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 September 2018.  These forecasts show that the Company expects to have sufficient financial resources to continue to operate as a going concern.

 

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.  The Company also raised, conditional upon completion, £600,000 in cash and shares after the year end by the sale of its 2% interest in HHDL.  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 2017 to 31 July 2018, with comparative figures for the financial year from 1 August 2016 to 31 July 2017.

 

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.

 

Other/Royalty income is recognised on an accruals basis in accordance with the economic substance of the agreement and is reported as part of revenue.  Other revenues are recorded as earned or as the services are performed.  As part of the disposal of assets agreement in March 2014, the Company retained a right to receive contingent consideration in the form of royalties arising on any revenues generated by those assets during the 3 year period ending 18 March 2017 or from the sale or licence of the SYN1113 asset at any time, this agreement was settled in full during the year ended 31 July 2017 for £18,000 as detailed in Note 7.

 

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

 

Available-for-sale investments

Non-derivative financial assets comprising the Company's strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities.  They are carried at fair value with changes in fair value recognised directly in a separate component of equity (available-for-sale reserve).  Where there is a significant or prolonged decline in the fair value of an available-for-sale financial asset (which constitutes objective evidence of impairment), the full amount of the impairment, including any amount previously charged to equity, is recognised in the statement of comprehensive income.  On sale, the amount held in the available-for-sale reserve associated with that asset is removed from equity and recognised in the statement of comprehensive income.

 

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.

 

Financial investments

Listed investments are valued at closing bid price on 31 July.  For measurement purposes, financial investments are designated at fair value through statement of comprehensive income.  Gains and losses on the realisation of financial investments are recognised in the statement of comprehensive income for the period and taken to retained earnings.  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.

 

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 2018 are set out below:

 

Fair value of contingent consideration

The consideration for the sale of intellectual property assets to Venn Life Science Holdings plc in March 2014 included an element of contingent consideration that is based on a future royalty stream from commercialisation of those assets by Venn.  An estimate of the fair value of the contingent consideration has not been included in these financial statements.  However the actual amounts of royalties receivable in future years is dependent upon a number of factors, all of which are outside the Company's control.  These include Venn's ability to be able to generate commercial revenues from the intellectual property assets, the demand for those products and other economic factors, and as such, the Company has taken a prudent basis and not accounted for any potential future royalties.  This was fully settled during the year ended 31 July 2017 for £18,000 as detailed in Note 7.

 

Share Based Payments

The Company made awards of 330 million options over its unissued share capital to the directors during the year to 31 July 2018.  (2017: £nil 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 £100,000 share based payment charge (2017: £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 9 Financial Instruments (effective date 1 January 2018);

·      IFRS 15 Revenue from Contracts with Customers (effective date 1 January 2018);

·      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

 


2018

2017


£000

£000

Included within continuing operations



Fees and salaries

159

87

Social security costs

4

4

Share based payment expense

100

-


263

91

 


2018

2017


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:

2018

2017


£000

£000

Wages and salaries

147

75

Social security costs

3

2

Share based payment expense

100

-


250

77

 

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

 


Fees &

Share Based

Total

Total


salary

Payments

2018

2017


£000

£000

£000

£000

Directors





Mr H Harris

66

46

112

26

Mr D Strang

66

46

112

26

Mr C Gordon (resigned 16 June 2017)

-

-

-

19

Mr D Ormerod (resigned 16 January 2018)

5

-

5

4

Mr G Garnett (appointed 16 January 2018)

10

8

18

-


147

100

247

75

 

Directors fees totalling £102,000 have been accrued and remain unpaid at 31 July 2018.  (2017: £5,000)

 

7    Other income

 


2018

2017


£000

£000

Royalty settlement

-

18

Total other income

-

18




On 26 February 2014, the Company announced that it was, subject to shareholder approval, disposing of certain intellectual property assets to Venn Life Sciences plc (the "Disposal").  As part of the terms of the Disposal, the Company was entitled to receive additional potential consideration based on future net sales made by Venn.  Subsequently, on 20 February 2015, the Purchaser sold the intellectual property assets the subject of the Disposal to Innovenn, which is a subsidiary of Integumen plc ("Integumen"), which was admitted to trading on AIM on 5 April 2017.  Integumen at that date agreed to pay £3,000 and has also issued 300,000 new ordinary shares in Integumen to the Company at a price of 5 pence per new ordinary share, in full and final settlement of any rights to additional consideration.

 

8    (Loss)/profit for the year

 

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

 


2018

2017


£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

15

10

Foreign exchange (gains)

-

(23)

Other general overheads

183

274


198

261

 

9    Taxation

 


2018

2017




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

(939)

Loss on ordinary activities at the average UK standard rate of 19% (2017: 19/20%)

(178)

97

Effect of non-deductible expenses

21

-

Future income tax benefit not brought to account

157

(82)

Other deductions for tax purposes including prior year losses

-

(15)

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 17% and the deferred tax balances reflect that reduction in the UK tax rate, as is appropriate to the Company's circumstances.

 

10  (Loss)/earnings per share

 

(Loss)/profit attributable to ordinary shareholders

2017

2017




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)/profit from operations (£000)

(939)

492

Total (£000)

(939)

492




Number of shares



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

4,882.9

2,783.3

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

5,225.6

2,815.9




Basic (loss)/earnings per share (expressed in pence)

(0.019)

0.018

Diluted (loss)/earnings per share (expressed in pence)

(0.019)

0.017

 

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  Available-for-sale investments

 


£000

Fair Value at 31 July 2016

1,009

Additions

1,888

Market value Revaluations

408

Gains on disposals

417

Disposal

(1,137)

Impairment provision

-

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



The available for sale investments splits are as below:


Non-current assets - listed

382

Non-current assets - unlisted

965

Non-current assets - unlisted convertible loans

751


2,098

 

The Directors carried out an impairment review as at 31 July 2018 (31 July 2017 :£nil), and determined no further impairment was required in regards to its unlisted investments, as a result of the progress made by the companies and detailed within the strategic review.

 

Available-for-sale 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 2018.  The market value of the listed investments at 19 September 2018 was £308,000.

 

12  Trade and other receivables

 


2018

2017


£000

£000

Trade receivables

-

-

Other receivables

190

472

Prepayments

14


296

486

 

13  Trade and other payables

 


2018

2017

Amounts due within one year

£000

£000

Trade payables

36

65

Other creditors

93

-

Accruals and deferred income

179

112


308

177

 

14  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 2016

1,224,675,828

123

1,729

9,439

All share issues for cash via Placings;





Issue of new ordinary shares on 12 October 2016

545,454,545

55

-

245

Issue of new ordinary shares on 11 January 2017

1,752,500,000

175

-

525

Issue of new ordinary shares on 16 January 2017

141,176,471

14

-

46

Issue of new ordinary shares on 16 January 2017

94,117,646

9

-

31

Issue of new ordinary shares on 21 July 2017

1,125,000,000

113

-

338

Less: costs of share placing

-

-

-

(84)

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

 

15  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.

 

16  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




2018

2017

2018

2017




£000

£000

£000

£000

Horse Hill Developments Ltd ("HHDL")

Investee Company

Cash call Loan to HHDL

108

-

190

82

 

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 only has the outstanding amounts due from HHDL as at 31 July 2018.  The loan outstanding is included within trade and other receivables, Note 12.  The loan to HHDL has been made in accordance with the terms of the investment agreement whereby it accrues interest daily at the Bank of England base rate and is repayable out of future cashflows.

 

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.

 

17  Reconciliation of net cash flow to movement in net funds

 


2018

2017


£000

£000

Net funds at beginning of the year

372

358

(Decrease)/increase in cash

(35)

14

Net funds at end of the year

337

372

 

Analysis of changes in net funds

 


At 31


At 31


July

Cash

July


2017

Flow

2018


£000

£000

£000

Cash and cash equivalents

372

(35)

337

Net funds

372

(35)

337



 

 

18  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 £337,000 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 available-for-sale investment portfolio in the face of market movements, which was a maximum of £2,098,000 (2017: £2,585,000).

 

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 available-for-sale investments held at 31 July 2018.

 


2018

2017


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

(76.3)

(427.0)

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

(0.0015p)

(0.015p)




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

76.3

427.0

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

0.0015p

0.015p

 

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 2018 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:

 


2018

2017


£000

£000

Cash at bank

337

372

Other receivables

296

486


633

858

 

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 (available-for-sale 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 in scope of IAS 39

The following table sets out financial assets within Trade and other receivables which fall within the scope of IAS39.  These assets are non-interest earning.

 


2018

2017

Financial assets in scope of IAS39

£000

£000

Trade and other receivables (Note 12)

296

486

 

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 in scope of IAS39

The following table sets out financial liabilities within Trade and other payables which fall within the scope of IAS39.  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, which are outside the scope of IAS39.

 


2018

2017

Financial liabilities in scope of IAS39

£000

£000

Total trade and other payables (Note 13)

308

177

 

19  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 2018



Weighted





average





exercise




Number

price

At 31 July 2016



32,650,840

0.60p

Options granted



-

-

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

Range of exercise prices



0.05p - 8.65p

Weighted average remaining contractual life



3.89 years



 

 

19  Share schemes continued

 

Options outstanding & exercisable at 31 July 2018






Exercise

Expiry

Date of grant

Number

price (p)

date

6 August 2008

1,031,990

8.65p

06/08/2018

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

342,650,840



 

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


2018

2017


£000

£000

Share based payment charges

100

-

 

Warrants in issue

 

As at 31 July 2018 and at 31 July 2017, no warrants remained outstanding, no warrants expired during the year.  (2017: nil). No warrants were issued during the year (2017: nil).

 

20  Commitments and contingencies

 

The directors have confirmed that there were no contingent liabilities or capital commitments which should be disclosed at 31 July 2018.

 

21  Ultimate controlling party

 

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



 

 

22  Events after the end of the reporting period

 

On 20 August 2018 the Company made an announcement regarding the conditional disposal of its 2% interest in Horse Hill Developments Limited ("HHDL") to UK Oil and Gas plc ("UKOG").  Subsequently, on 30 August 2018, the Company announced that, as a result of an agreement by UKOG regarding its acquisition of an additional 15% of HHDL from Solo Oil plc ("Solo Transaction") stating that, to ensure parity with the acquisition of 2% of HHDL announced on 20 August 2018, UKOG had  agreed with the Company to issue it with a further 2,600,469 new ordinary shares in UKOG in order that both the Solo Transaction and the Company's transaction will be completed at £300,000 per 1% of HHDL. The Company is therefore pleased to announce that it has been advised that it will receive increased sale consideration of £50,000 by way of the additional 2,600,469 UKOG shares. As a result of this increase the total consideration receivable by the Company is £600,000, made up of £50,000 in cash and the balance of £550,000 by way of 31,171,898 UKOG shares.  This is conditional on the written consent of each of the members of HHDL to the sale of shares as set out in HHDL's articles of association.

 

On 19 September 2018, the Company announced an update regarding its investee company, Sunshine Minerals ("Sunshine"). The Company had been informed by the management of Sunshine that Metminco Limited (AIM: MNC, ASX: MNC) has entered into a binding term sheet with Sunshine to conditionally acquire 100% of the shares in Sunshine as set out below (the "Transaction"):

a)    a non-refundable deposit of A$50,000 to be paid within 10 days, which is to be used to pay part of the surface access fees payable for the Jejevo Project;

b)    A$1,500,000 less the deposit and any agreed Sunshine debt through the issue of 250,000,000 Metminco shares at a deemed issue price of A$0.006 each;

c)     A further 250,000,000 Metminco shares upon announcement to the ASX by Metminco of an initial JORC compliant resource estimate at Jejevo Nickel Project of at least 125,000 tonnes of contained nickel metal at a cut-off grade of not less than 0.7% nickel, which must be based upon exploration information delivered to Metminco by Sunshine and exploration work undertaken by Metminco in the amount of not greater than A$500,000; and

d)    the issue of 500,000,000 Metminco Shares upon the receipt by Sunshine of a mining licence over its Jejevo Nickel Project.

 

The Transaction is conditional, inter alia, on completion of due diligence on Sunshine to the satisfaction of Metminco, the completion of a minimum of A$3m equity capital raising by Metminco and receipt of various waivers and regulatory approvals.

 

Currently, the Company holds 10% of the issued share capital of Sunshine and a £200,000 convertible loan note which converts into a further 10% of Sunshine's issued share capital.  As part of the Transaction, the Company has agreed to convert its convertible loan note.  This will result in the Company owning 4,200,000 shares in Sunshine out of a total of 21,230,000 shares representing approximately 19.8% of the issued share capital.

 

Metminco is raising A$3,000,000 in conjunction with the Transaction and the Company has agreed to subscribe for A$50,000 of shares. Metminco has also stated its intention to apply for the cancellation of the admission of its shares to trading on AIM.

 


This information is provided by RNS, the news service of the . RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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