STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 30 SEPTEMBER 2014

 

		Year ended	Year ended
		30 September 2014	30 September 2013
		£'000	£'000
Cash flow from operating activities
Loss from operations		(889)	(2,479)
Losses on disposal of subsidiary		-	2,230
Share based payment charge		351	-
(Increase) in trade and other receivables		(1,044)	-
Increase in trade and other payables		375	114
Net cash (outflow) from operating activities		(1,207)	(135)
Cash flows from investing activities
Payments to acquire available for sale investments		(1,200)	-
Loans advanced to investee companies		(370)	-
Loan advanced to subsidiary		-	(136)
Net cash (outflow) from investing activities		(1,570)	(136)
Cash flows from financing activities
Proceeds from issue of share capital		4,129	277
Share issue costs		(212)	(6)
Payments to acquire derivative financial instrument		(250)	-
Receipts from settlements of financial instrument		92	-
Net cash inflow from financing activities		3,759	271
Net change in cash and cash equivalents		982	-
Cash and cash equivalents at beginning of period		-	-
Cash and cash equivalents at end of period		982	-

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.         Principal Accounting Policies

 

Basis of Preparation

UK Oil and Gas Investments PLC is a company incorporated in the United Kingdom. The Company's shares are listed on the AIM market of the London Stock Exchange.

 

The Financial Statements are for the year ended 30 September 2014 and have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRS").  These Financial Statements (the "Financial Statements") have been prepared and approved by the Directors on 17 November 2014 and signed on their behalf by Mr. David Lenigas.

 

The accounting policies have been applied consistently throughout the preparation of these Financial Statements, and the financial report is presented in Pound Sterling (£) and all values are rounded to the nearest thousand pounds (£'000) unless otherwise stated.

 

First-time Adoption

The Company has adopted IFRS from 1 October 2012, being the date of the transition.

 

This is the first year in which the Company has prepared its financial statements under IFRS and the comparatives have been restated from UK Generally Accepted Accounting Practice (GAAP) to comply with IFRS.

 

The details of exemptions and changes to accounting policies have been fully described in Note 19 to the Financial Statements.

 

Adoption of New or Amended IFRS

In the current year, the following new and revised Standards and Interpretations have been adopted and have affected the amounts reported in these financial statements.

 

IFRS 13 Fair Value Measurement

The Company has applied IFRS13 for the first time in the current year.  IFRS13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements.  IFRS13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions.  Fair value under IFRS13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique.  Also, IFRS13 includes extensive disclosure requirements.

 

IFRS13 requires prospective application from 1 January 2013.  In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard.

 

In accordance with these transitional provisions, the Company has not made any new disclosures required by IFRS13 for the 2013 comparative period.  Other than the additional disclosures, the application of IFRS13 has not had any impact on the amounts recognised in the consolidated financial statements.

 

Amendments to IFRS7 Disclosures

The Company has applied the amendments to IFRS7 Disclosures-Offsetting Financial Assets and Financial Liabilities for the first time in the current year.  The amendments to IFRS7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

 

As the Company does not have any offsetting arrangements in place, the application of the amendments has had no impact on the disclosures or on the amounts recognised in the financial statements.

 

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

 

IFRS9                                        Financial Instruments

IFRS10                                      Consolidated Financial Statements

IFRS12                                      Joint Arrangements#

IAS28 (revised)                       Investments in Associates and Joint Ventures

IAS32 (revised)                       Offsetting Financial Assets and Financial Liabilities

IAS36 (revised)                       Recoverable Amount Disclosures for Non-Financial Assets

IAS39 (revised)                       Novation of Derivatives and Continuation of Hedge Accounting

IFRIC Interpretation21          Levies

 

The directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Company in future periods, except as that IFRS9 will impact both the measurement and disclosures of Financial Instruments.  Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

 

Sources of Estimation and Key Judgements

 

The preparation of the Financial Statements requires the Company to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.  The Directors base their estimates on historic experience and various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

 

Revenue

 

Revenue is measured by reference to the fair value of consideration received or receivable by the Company for services provided, excluding VAT and trade discounts.  Revenue is credited to the Income Statement in the period it is deemed to be earned.

 

Finance Income and Costs

 

Finance income and costs are reported on an accruals basis.

 

Taxation

 

Current tax is the tax currently payable based on taxable profit for the year.

 

Deferred income taxes are calculated using the liability method on temporary differences.  Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases.  However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.  Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Company and it is probable that reversal will not occur in the foreseeable future.  In addition, tax losses available to be carried forward as well as other income tax credits to the Company are assessed for recognition as deferred tax assets.

 

Deferred tax liabilities are provided in full, with no discounting.  Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income.  Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

 

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

 

Financial Assets

Financial assets are divided into the following categories: loans and receivables and available-for-sale financial assets.  Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired, and are recognised when the Company becomes party to contractual arrangements.  Both loans and receivables and available for sale financial assets are initially recorded at fair value.

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  Trade, most other receivables and cash and cash equivalents fall into this category of financial assets.  Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment.  Any change in their value through impairment or reversal of impairment is recognised in the income statement.

 

Provision against trade receivables is made when there is objective evidence that the Company will not be able to collect all amounts due to it in accordance with the original terms of those receivables.  The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

 

A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition.  A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Company retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients.  A financial asset that is transferred qualifies for derecognition if the Company transfers substantially all the risks and rewards of ownership of the asset, or if the Company neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

 

Financial Liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Company becomes a party to the contractual provisions of the instrument. 

 

All financial liabilities initially recognised at fair value less transaction costs and thereafter carried at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the income statement.  A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

 

Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

 

Share-Based Payments

The Company operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Company.  The fair value of the employee services received in exchange for the grant of the options is recognised as an expense.  The total amount to be expensed is determined by reference to the fair value of the options granted:

 

·      Including any market performance conditions;

·      Excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period; and

·      Including the impact of any non-vesting conditions (for example, the requirement for employees to save).

 

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest.  The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. 

 

In addition, in some circumstances, employees may provide services in advance of the grant date, and therefore the grant-date fair value is estimated for the purposes of recognising the expense during the period between service commencement period and grant date.

 

At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions.  It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

 

When the options are exercised, the Company issues new shares.  The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium.

 

Equity

Equity comprises the following:

 

"Share capital" representing the nominal value of equity shares.

"Share premium" representing the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

"Share based payment reserve" represents the value of equity benefits provided to employees and directors as part of their remuneration and provided to consultants and advisors hired by the Company from time to time as part of the consideration paid.

"Revaluation reserve" represents the unrealised gain or loss on fair/market value movement on available for sale investments, derivative financial instruments and other assets which are valued at their fair value at the balance sheet date.

"Retained earnings" represents retained profits and (losses).

 

Foreign Currencies

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date.  Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.  Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.  Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise.  Exchange differences on non-monetary items are recognised in other comprehensive income to the extent that they relate to a gain or loss on that non-monetary item taken to other comprehensive income, otherwise such gains and losses are recognised in the income statement.

 

The Company's functional currency and presentational currency is Sterling.

 

Going Concern

The company is therefore deemed to be an investing company.  It now has a low cost base and no borrowings. The Directors have prepared cash flow forecasts and budgets that show that for a period of at least twelve months from the date of these Financial Statements, the Company has sufficient resources to continue in business, and will seek to raise additional funds through a placing as conditions require for working capital or further investment opportunities.  Accordingly, the Directors believe that it is appropriate to prepare the Financial Statements on a going concern basis.

 

2.         Segment Reporting

 

The Company is now operating as a single UK based segment with a single primary activity to invest in businesses so as to generate a return for the shareholders.  The revenue from this segment, generated from management services in the UK, was £7,000 (2013 - nil).

 

Subject to further acquisitions and disposals, the Company expects to further review its segmental information during the forthcoming financial year, as it begins to see the full impact of its acquisitions and/or disposals.

 

3.         Operating Loss

 

Operating loss is stated after charging:

	2014	2013
	£'000	£'000
Directors remuneration	472	38
Employee Benefit Trust charge	13	-
Auditor's fees:
Audit	14	32
Other compliance services	-	5
Tax compliance	-	6

 

4.         Directors and Employees

 

The company employs the services of 3 Directors (2013: 6).

 

Remuneration in respect of these executive and non-executive Directors was:

	2014	2013
	£000	£000
Employment costs, including Directors, during the year:
Wages and salaries	52	18
Consultancy fees	188	20
Social security costs	-	2
Share based payments	232	-
	472	40
Average number of persons, including executive Directors employed	No.	No.
Administration	3	3
	3	3
Directors' remuneration	£000	£000
Emoluments	470	20
	No.	No.
Number of Directors in money purchase pension schemes	-	-

 

The amounts set out above include remuneration in respect of the directors' are as follows:

	2014	2013
	£'000	£'000
David Lenigas	142	-
Donald Strang	142	-
Jason Berry	118	-
Geoff Shingles	-	20
David Wither	70	-
Dr Oliver Leisten	-	-
Nicola Malyon	-	-
John Uttley	-	8
Philip David	-	10
Total Directors Emoluments	472	38

 

5.         Tax on Profit on Ordinary Activities

 

There is no tax credit on the loss for the current or prior period.  The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows:

	2014	2013
	£000	£000
Loss for the year before tax	(907)	(2,479)
Tax rate	21/23%	23/24%
Expected tax credit	(200)	(582)
Differences between capital allowances and depreciation	-	-
Expenses not deductible for tax purposes	77	4
Future income tax benefit not brought to account	123	578
Actual tax expense	-	-
No deferred tax asset has been recognised because there is uncertainty of the timing of suitable future profits against which they can be recovered.

 

6.         Loss per Share

 

The calculation of the basic loss per share is calculated by dividing the consolidated loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 

	2014	2013
	£'000	£'000
(Loss) attributable to ordinary shareholders	(907)	(2,479)
	Number	Number
Weighted average number of ordinary shares for calculating basic loss per share	841,904,149	(*) 966,992,986
	Pence	Pence
Basic and diluted loss per share	(0.11)	(0.26)

(*) Pre 25 November 2013 capital re-organisation.

 

As inclusion of the potential ordinary shares would result in a decrease in the earnings per share they are considered to be anti-dilutive, as such, a diluted earnings per share is not included..

 

 

7.         Investment in Subsidiaries

 

	2014	2013
	£'000	£'000
Cost and net book amount
At 1 October	-	2,076
Increase in share scheme reserve	-	18
Disposal/Impairment	-	(2,094)
At 30 September	-	-

 

Losses on disposal of subsidiary:	2014	2013
	£'000	£'000
Investment in subsidiary undertaking written off	-	2,094
Loan to subsidiary undertaking written off	-	136
Total losses charged to income statement	-	2,230

 

At 30 September 2013, the Company no longer had control of its subsidiary undertaking, Sarantel Ltd. Consequently, the carrying value had been treated as fully impaired and subsequently disposed of in the year ended 30 September 2013.

 

On 13 June 2013, the Board of the Company, announced that it had appointed an administrator to Sarantel Ltd, the operating subsidiary of the Company, after a demand for the repayment of the secured £2,000,000 HSBC loan facility.  This resulted in the disposal of the Company's entire interest in the subsidiary, and operating business, with no recovery of loans to/or investment in the subsidiary for the Company, thus the entire value of the investment in, and loan to were fully written-off in the year ended 30 September 2013.

 

The Company was formerly released from the secured £2,000,000 liability, noted above, on 18 December 2013.

 

The Company as at 30 September 2014 had no interest in any subsidiary companies.

 

8.         Available for Sale Investments

 

	2014	2013
	£'000	£'000
Investment in unlisted securities
Valuation at 1 October	-	-
Additions at cost	1,568	-
Disposal/Impairment	-	-
Valuation at 30 September	1,568	-

 

On 19 December 2013, the Company completed the acquisition of a 7.5% shareholding in Horse Hill Development Ltd.("Horse Hill") , a company incorporated and resident in the UK, with farm in interests in the Weald Basin UK, for exploration and production of petroleum under licence within the Horse Field , for a cash consideration of £450,000.

 

On 12 August 2014, the Company acquired an additional 12.5% interest in Horse Hill for a further cash consideration of £750,000, thus increasing the Company's holding to 20%.

 

On 16 May 2014, the Company completed the acquisition of a strategic 6% shareholding in Angus Energy Ltd, a company incorporated in Scotland and resident in the UK, for a consideration of £368,000, payable by the issue of 46million shares in the Company.

 

Horse Hill Development Ltd and Angus Energy Ltd are not listed on any stock exchange.

 

9.         Trade and Other Receivables

 

	2014	2013
Current trade and other receivables	£'000	£'000
Trade debtors	6	-
Other debtors	787	-
Loans to related parties (see Note 17)	370	-
Prepayments and accrued income	251	-
Total	1,414	-

The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

 

10.       Trade and Other Payables

 

	2014	2013
Current trade and other payables	£'000	£'000
Trade creditors	102	107
Other taxation and social security	-	1
Accruals and deferred income	394	13
Total	496	121

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

 

11.       Derivative Financial Instrument

 

	2014	2013
Equity Swap Agreement	£'000	£'000
Fair value at 1 October	-	-
Cost of equity swap arrangement	250	-
Settled during the year	(92)	-
(Loss) on settled instalments	(18)	-
Fair value adjustment at 30 September	44	-
Fair value carried forward at 30 September	184	-

 

On 13 December 2013 the Company announced that it had entered into an equity swap agreement ("the Equity Swap Agreement") with YAGM over 62,499,996 of the Subscription Shares ("the Swap Shares"). In return for a payment by the Company to YAGM of £250,000, twelve monthly settlement payments in respect of such payment were to be made by YAGM to the Company, or by the Company to YAGM, based on a formula related to the difference between the prevailing market price (as defined in the Equity Swap Agreement) of the Company's ordinary shares in any month and a 'benchmark price' that is 10% above the Subscription Price of 0.8p. Thus the funds received by the Company in respect of the Swap Shares are dependent on the future price performance of the Company's ordinary shares.

 

YAGM may elect to terminate the Equity Swap Agreement and accelerate the payments due under it in certain circumstances. The Company may pause a monthly payment under the Equity Swap Agreement once in each six month period.

 

YAGM has agreed that it and its affiliates will refrain from holding any net short position in respect of the Company's ordinary shares and has agreed restrictions on the volume of ordinary shares in the Company that it can trade from time to time until the expiry or if earlier termination of the Equity Swap Agreement.

 

By 30 September 2014, 26,041,665 shares had been closed out for net proceeds of £92,000 which resulted in a loss of £18,000 against the benchmark price, taken to the income statement.  The remaining balance has been fair valued at 30 September 2014, resulting in a fair uplift adjustment based on the benchmark price and formula of the arrangement, with the unrealised gain credited to revaluation reserve and highlighted in other comprehensive income.

 

After the year end, the Company agreed to close out the equity swap agreement on 27 October 2014, for a single final payment of £201,250, resulting in a gain above the benchmark price of £61,250.

 

12.          SHARE CAPITAL

 

Ordinary Shares	Number of ordinary shares	Nominal Value £	Total Value £'000
Issued at 30 September 2012	829,439,991	0.001	829
On 3 April 2013, placing for cash at 0.1p per share	276,825,440	0.001	277
On 23 April 2013, conversion of B ordinary shares at a price of 0.1p per share	852,438	0.001	1
Issued at 30 September 2013	1,107,117,869	0.001	1,107
Capital Reorganisation on 25 November 2013 (see (1) below);
- Sub-division into deferred shares of 0.001p	109,604,669,031	0.00001	1,096,047
- Sub-division into ordinary shares of 0.001p	1,107,117,869	0.00001	11
Consolidation on 10:1 basis, A ordinary shares of 0.01p each	110,711,787	0.0001	11
A Ordinary shares carried forward at 25 November 2013	110,711,787	0.0001	11
On 25 November 2013, placing for cash at 0.03p per share	500,000,000	0.0001	50
On 5 December 2013, placing for cash at 0.3p per share	66,666,666	0.0001	7
On 16 December 2013, placing for cash at 0.8p per share	130,000,000	0.0001	13
On 6 January 2014, conversion of B ordinary shares at 0.01p per share	18,390	0.0001	-
On 3 February 2014, issue of shares at 0.8p per share for acquisition	46,000,000	0.0001	4
On 28 May 2014, placing for cash at 0.3p per share	233,333,333	0.0001	23
On 27 June 2014, warrants exercised at 0.35p per share	6,499,999	0.0001	1
On 25 July 2014, placing for cash at 1p per share	200,000,000	0.0001	20
On 13 August 2014, warrants exercised at 0.35p per share	833,333	0.0001	-
On 29 September 2014, issue for cash at 0.01p per share	129,000,000	0.0001	13
Issued at 30 September 2014	1,423,063,508	0.0001	142

 

(1)   On 25 November 2013, at a General Meeting the shareholders approved a capital reorganisation. The existing ordinary shares of 0.1p were subdivided into one A ordinary share of 0.001p each and 99 deferred shares of 0.001p.  These 0.001p A ordinary shares were then each consolidated into 0.01p A ordinary shares on an 10:1 basis.  The rights attached to the new A ordinary shares are in all material aspects the same as the rights attaching to the existing A ordinary shares.  In addition the B ordinary shares were also subdivided and consolidated on the same basis as the A ordinary shares into 0.01p B Ordinary shares and deferred shares of 0.001p.

(2)   On 31 March 2014, A ordinary shares were re-designated as Ordinary shares from that date, and remained in all material aspects the same as the rights which previously attached to the A ordinary shares.

 

B Ordinary Shares

At 1 October 2013, there were 183,902 B ordinary shares in issue, post the General Meeting of 25 November 2013 capital reorganisation, there were 18,390 B ordinary shares in issue, which were converted to A ordinary shares on 6 January 2014.  After the conversion this class of share was subsequently cancelled.

 

Deferred shares

At 1 October 2013, there were 10,487,624,769 deferred shares of 0.1p in issue. Post the General Meeting of 25 November 2013 capital reorganisation, and the resultant conversion and subdivisions by way of relating to the A ordinary and B ordinary shares, the existing 0.1p deferred shares were subdivided into 0.001p deferred shares totalling 1,048,762,476,900.  As a result of the reorganisation of the A and B ordinary shares, a further 109,604,669,031 and 18,206,298 deferred shares of 0.001p were issued.   These deferred shares do not carry voting rights.

 

Total Ordinary and Deferred Shares

The issued share capital as at 30 September 2014 is as follows:

 

	Number of shares	Nominal Value £	Total Value £'000
Ordinary shares	1,423,063,508	0.0001	142
Deferred shares	1,158,385,352,229	0.00001	11,584
			11,726

 

Share Options

During the year 70 million options were granted (2013: nil).

 

As at 30 September 2014 the options in issue were:
Exercise price	Expiry date	Options in issue
		30 September 2014
0.4p	28 November 2020	60,000,000
1.15p	22 August 2019	10,000,000
		70,000,000

 

No options were exercised or cancelled during the year (2013: nil).

82,970,045 options lapsed during the year (2013: nil).

 

Warrants

5 million warrants lapsed during the year. (2013: 1,776,029).

On 6 December 2013, 66,666,666 warrants with an exercise price of 0.35p were issued. During the year 7,333,332 of these warrants were exercised. As at 30 September 2014, 59,333,334 of these warrants remain in issue. These warrants expire on 31 December 2014.

 

Employee Benefit Trust

The Company established on 29 September 2014, an employee benefit trust called the UK Oil & Gas Employee Benefit Trust ("EBT") to implement the use of the Company's existing share incentive plan over 10% of the Company's issued share capital from time to time in as efficient a manner as possible for the beneficiaries of that plan.  The EBT is a discretionary trust for the benefit of directors, employees and consultants of the Company.

 

Accordingly, the trustees of the EBT subscribed for 129,000,000 new ordinary shares of 0.01p each in the Company, at par value per share at an aggregate cost to the Company of £12,900, such shares representing 9.07% of the existing issued share capital of the Company (at that date).  The shares held in the EBT are intended to be used to satisfy future awards made by the Company's Remuneration Committee under the share incentive scheme.

 

13.       Share-based Payments

 

Details of share options and warrants granted to Directors over the ordinary shares are as follows:

 

	At	Issued	Cancelled	At	Exercise	Date from
	1 October	during	during	30 September	price	which	Expiry
	2013	the year	the year	2014		exercisable	date
	No.	No.	No.	No.	£
Share options	'000	'000	'000	'000
Donald Strang	-	10,000	-	10,000	0.0040	28/11/2013	28/11/2020
David Lenigas	-	10,000	-	10,000	0.0040	28/11/2013	28/11/2020
David Withers	-	10,000	-	10,000	0.0040	28/11/2013	28/11/2020
Jason Berry	-	10,000	-	10,000	0.0115	22/08/2014	22/08/2019
	-	40,000	-	40,000
Consultants	-	30,000	-	30,000	0.0040	28/11/2013	28/11/2020
	-	30,000	-	30,000

 

The share price range during the year was £0.0006 to £0.0170 (2013 - £0.0006 to £0.0033).

 

The disclosure of Weighted Average Exercise Prices, and Weighted Average Contractual Life analysis is not viewed as informative because of the minimal variation of options currently in issue, and has accordingly not been disclosed.

 

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
28 November 2013	2.3%	248.6%	7 years	£0.0040
22 August 2014	2.3%	248.6%	5 years	£0.0112

 

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 has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

The Company recognised total expenses of £351,000 (2013: £18,000) relating to equity-settled share-based payment transactions during the year, and £866,000 was transferred via equity to retained earnings on the lapse of options during the year (2013: nil).

 

14.       Financial Instruments and Risk Analysis

 

Financial Assets by Category

The IAS 39 categories of financial asset included in the balance sheet and the headings in which they are included are as follows:

 

Current assets	2014	2013
	£000	£000
Loans and receivables	1,414	-
Derivative financial instrument	184	-
Cash and cash equivalents	982	-
	2,580	-

 

Financial Liabilities by Category

The IAS 39 categories of financial liability included in the balance sheet and the headings in which they are included are as follows:

 

Current liabilities
Financial liabilities measured at amortised cost	496	121

 

The Company is exposed to market risk through its use of financial instruments and specifically to credit risk, and liquidity risk which result from both its operating and investing activities.  The Company's risk management is coordinated at its headquarters, in close co-operation with the board of Directors, and focuses on actively securing the Company's short to medium term cash flows by minimising the exposure to financial markets. Long term financial investments are managed to generate lasting returns.  The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options.  The most significant financial risks to which the Company is exposed to are described below.

 

Interest Rate Sensitivity

The Company is not substantially exposed to interest rate sensitivity, other than in relation to interest bearing bank accounts.

 

Credit Risk Analysis

The Company's exposure to credit risk is limited to the carrying amount of trade receivables. The Company continuously monitors defaults of customers and other counterparties, identified either individually or by Company, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. Company's policy is to deal only with creditworthy counterparties. Company management considers that trade receivables that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.

 

None of the Company's financial assets are secured by collateral or other credit enhancements.

 

The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

 

Liquidity risk analysis

The Company's continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital. The Directors are confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed.

 

Capital Management Policies

The Company's capital management objectives are to:

 

·      Ensure the Company's ability to continue as a going concern; and

·      Provide a return to shareholders

 

The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents.

 

15.       Events after the Reporting Date

 

On 8 October 2014, the Company completed a placing of 166,666,667 ordinary shares at 1.2p per share, raising gross proceeds of £2 million.

 

On 20 October 2014, the Company announced the completion of the acquisition of Northern Petroleum Plc's ("Northern Petroleum") UK production and exploration oil and gas licence interests for a total consideration of £1.5 million.  As previously announced on 24 July 2014, the transaction was structured as the acquisition by UKOG of Northern Petroleum's three UK subsidiary companies, Northern Petroleum (GB) Limited ("NPGBL"), NP Solent Limited ("NPSL") and NP Weald Limited ("NPWL"), subject to the completion of certain conditions. The base consideration paid by the Company in cash for each of NPGBL, NPSL and NPWL, was £1,311,999, £1 and £188,000 respectively.

 

On 27 October 2014, the Company agreed the closure and settlement of the YAGM equity swap as detailed in note 11.

 

On 29 October 2014, the Company announced it had entered into an unsecured US$10million debt facility with YA Global Master SPV Ltd ("YAGM"), and has drawn down US$1 million under the YAGM Facility, which is repayable at the rate of US$83,333 per month on or before 1 November 2015, together with accrued interest.

 

16.       Capital Commitments & Contingent Liabilities

 

There were no capital commitments nor any contingent liabilities at 30 September 2014 or at 30 September 2013.

 

17.       Related Party Transactions

 

The company had the following amounts outstanding from its investee companies (Note 8) at the year end:

 

	2014 £'000	2013 £'000
Horse Hill Development Ltd ("Horse Hill")	260	-
Angus Energy Ltd ("Angus")	110	-
	370	-

 

The above loans outstanding are included within trade and other receivables, Note 9.  The loan to Horse Hill 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.  The loan to Angus is a short term loan repayable on demand.

 

Remuneration of Key Management Personnel
The remuneration of the directors, and other key management personnel of the Company, is set out below in aggregate for each of the categories specified in IAS24 Related party Disclosures
	2014	2013
	£'000	£'000
Short-term employee benefits	240	38
Share-based payments	232	-
	472	38

 

18.       Ultimate Controlling Party

 

In the opinion of the directors there is no controlling party.

 

19.       Explanation of Transition to IFRSs

 

For all periods up to and including the year ended 30 September 2013, the Company prepared its financial statements in accordance with UK GAAP.  These financial statements for the year ended 30 September 2014, are the first the Company has opted to prepare in accordance with IFRSs as adopted by the European Union (EU).

 

Accordingly, the Company has prepared financial statements which comply with IFRSs applicable for all periods since 30 September 2012 and the significant accounting policies meeting those requirements are described in note 1. In preparing these financial statements, the Company has started from 1 October 2012, the Company's date of transition to IFRSs, and made those changes in accounting policies and other restatements required by IFRS 1 for the first time adoption of IFRSs.  This note explains the principal adjustments made by the Company in restating its previously published UK GAAP financial statements for the year ended 30 September 2013.

 

Exemptions Applied

IFRS 1 allows first time adopters certain exemptions from the general requirement to apply IFRSs as effective for 30 September 2012 years there ending retrospectively.  The Company has taken the following exemptions:

 

• IFRS 3 'Business Combinations' has not been applied to acquisitions of subsidiaries or interests in associates or joint ventures that occurred before 1 October 2012.

 

Adjustments to Balances on the Transition to IFRS

The have been no changes deemed necessary to the assets, liabilities, equity, or losses of the Company in the transition to IFRS. The previously reported financial statements under UK GAAP have not been adjusted on the transitional process.

 

Cashflow Statement

As a result of the transition to IFRS, there were no material differences between the cashflow statement presented under IFRS and that presented under UK GAAP.

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2014 or 2013.  The financial information for the year ended 30 September 2013 is derived from the statutory accounts for that year.  The audit of statutory accounts for the year ended 30 September 2014 is complete.  The auditors reported on those accounts, their report was unqualified and did not include references to any matters to which the auditors drew attention to by way of emphasis without qualifying their report.