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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Highlands Natural Resources Plc | LSE:HNR | London | Ordinary Share | GB00BWC4X262 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 4.70 | 4.60 | 4.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMZOE
RNS Number : 7428X
Zoetic International PLC
23 December 2019
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
23 December 2019
Zoetic International plc
("Zoetic" or the "Company" or the "Group")
Interim Results
Zoetic, the London-listed vertically integrated CBD and natural resources company, is pleased to present its interim results for the six months ended 30 September 2019.
Highlights
-- Revenue of GBP1.15 million in H1 2019 (H1 2018: GBP0.52 million) -- 89 stores in the US now stocking Zoetic and Chill products -- Mr. Checkout trial underway -- Greater advertising of Zoetic with the brand appearing in EasyJet's magazine in Q1 next year -- 25 product lines across Zoetic and Chill brands -- Feminised seed production remains on track for the 2020 growing season -- Natural resources division trading profitably
Nick Tulloch, Chief Executive of Zoetic, said:
"Our interim results and our achievements during the remainder of 2019 have positioned us as the only vertically integrated CBD company listed on the London Stock Exchange. To that, we added trading on the OTC in New York in November. Our task now is to deliver on the business lines we have created.
"In a short time, we have established the popularity of Chill in the US, especially the chew pouches. We take nothing for granted but it appears for the time being that our limitation is not on customer demand but rather our own supply. As we work towards securing a significant increase in our manufacturing capabilities, we are optimistic about potential future sales.
"In the UK, our Zoetic brand has launched 15 product lines since August and, with the launch of CBD gummies in the UK, a further four coming under the Chill brand. Our range of products now gives us far greater scope to engage with retailers in the UK and Europe and that is our immediate focus.
"In the meantime, following a radical restructuring, our natural resources division is now profitable and therefore a valuable support to our developing CBD operations. We continue to assess interest from prospective buyers but the urgency to dispose of this division has now abated and so we will ensure a compelling price is paid before sanctioning any sale.
"We have a great deal of work to do but the efforts from the entire Zoetic team this year have presented us with a platform from which we have every opportunity to develop our revenue streams and, from there, profitable growth."
Enquiries
Zoetic International plc +44 (0) 1738 472 029
Nick Tulloch
IFC Advisory Ltd +44 (0) 20 3934 6630
Tim Metcalfe
Graham Herring
Florence Chandler
Chief Executive Officer's statement
It is a pleasure to present Zoetic's interim results for six months ended 30 September 2019. This six month period is perhaps the most significant in the Company's history to date in that it has seen a radical reshaping of our business. We established our CBD business at the beginning of the period, we have changed our name and redefined our strategy as we completed the transformation from our natural resources heritage to a vertically integrated CBD company. As we enter 2020, we have the following achievements to look back on:
-- 25 retail product lines (19 in the UK and 6 in the US) across our two retail brands of Zoetic and Chill
-- Successful first outdoor grow and harvest
-- Commencement of feminised hemp seeds programme with first production expected early next year
Of perhaps greater significance, in a matter of months we have established Zoetic and Chill as recognised brands in their respective markets and we have done so with only limited spending on marketing and promotional material. Our clear objective in 2020 is to turn this recognition into sales. In both the UK and US the level of interest and enquiry from retailers and distributors has increased significantly. We will support both of our brands with increased advertising and, for Chill, bespoke display cases for stores.
In addition to this rapid development of our CBD business, we have significantly restructured our natural resources business. This division now trades profitably month to month and, at present, remains the Group's largest revenue stream.
Away from our business operations, we also successfully began trading on the OTC in New York in November this year, being the first London-listed CBD company to do so, and our investor relations activities now include the United States as well as the UK. Given the size of that investor community, this will take time to develop, but our plans for 2020 include greater dissemination of announcements in the US, specialist public relations and investor relations support, virtual investor conferences and attendance at investor shows. By trading on the OTC, we have given ourselves a platform and the onus is now on us to use it effectively.
CBD Division
Since we commenced CBD retail sales, at the end of June 2019 in the US and the beginning of August 2019 in the UK, total revenue is marginally over GBP65,000. Of this, GBP36,000 was generated during the period to 30 September 2019. Our CBD business remains in its early phase and our primary objective in 2019 has been to establish our two brands, Zoetic and Chill, and develop within them successful product lines. Whilst revenue remains modest at present, the key performance indicator that the management team are focused on is revenue growth and, in this regard, performance has been satisfactory with revenue in the past 30 days being equivalent to around one third of total CBD revenue generated to date.
UK retail - Zoetic
Initial sales of Zoetic-branded CBD products were made in the UK in early August which, significantly, marked the first occasion the Company had generated revenue outside of the US. Since August, we have been selling four flavours of oral tinctures which are available in two strengths and, in October, we added massage oil to our product line up. This quickly became our best-selling product line during the month of November and vindicated our decision to develop and launch a range of cosmetics. In the final week of that month, we began selling our night cream, face drops, lip balm and hand cream. We also introduced softgels in two strengths in the same week, taking our number of product lines in the UK to 15.
As we announced on 25 November, we also decided to commence sales of CBD gummies. These edible sweets are currently being packaged and will be available for sale at the start of the new year in two strengths of 10mg and 25mg. Our intention is now to sell the gummies in two flavour combinations, lemon-lime & mango and strawberry & raspberry. Significantly, the gummies are branded "Chill" and this is that brand's first introduction to the UK and Europe. Even before launch, we are in receipt of several enquiries regarding the gummies and so we are optimistic about the performance of this new product line.
All of our oral CBD products, as well as our lip balm, are suitable for vegans.
With a wider range of products, the attractions of the Zoetic brand in the UK and Europe have increased and already we are seeing considerably more traction with retail outlets, particularly those larger organisations that have a preference for few suppliers but with multiple product lines. We are matching this with increased engagement in marketing and advertising, the most significant of which is that we have secured a page in EasyJet's in-flight magazine for the months of January, February and March 2020. With the airline carrying 8 million passengers per month, this represents a substantial publicity opportunity for the brand, as well as being good value for money based on cost per number of potential views. We will continue to assess other means of promoting our brand and products during the year.
Our plans for the Zoetic brand are to continue to focus on the beauty and cosmetics market and, with that in mind, we have booked to present our products at the Natural & Organic Products Europe show in London in April and the Beauty UK Show in Birmingham in May. As with our advertising plans, we will examine the merits of attending other trade fairs, including specialist Hemp and CBD shows, throughout the year.
Online sales of Zoetic products have been pleasing to date but our primary objective is to place the products with major retailers in 2020. Naturally this is lower margin than direct sales but the increased volume and, even more importantly, the independent validation that this gives the brand are essential as we seek to grow in the UK and Europe. As previously announced, we plan to improve the user experience at www.zoetic.uk.com in early 2020 as well as continue to develop our social media presence in support of our brand.
US retail - Chill
Chill branded products commenced sales in the US at the end of June, initially in a small number of Schrader Oil convenience stores. We now have six product lines (three flavours of chew pouches and three blends of smokables) and Chill products are now sold in 89 convenience stores across seven states in the US, as well as online at www.thechillway.com. Our new blends of smokables were released for sale today and the two new flavours of chew pouches should be available for sale by the end of this year. Indicative orders received prior to launch for these new products from our retail partners currently stand at just under US$12,000.
It is significant that our most successful product to date across the Group is the mint flavoured chew pouch. Many new product launches are based on extensive market research and formula changes but, from the date we launched it, our chew pouch has required no alterations to either the ingredients or packaging. We cannot expect such instant success with every product but it is testament to the entire team that we got this one right at the first attempt.
Our partnership with LeafyQuick, who offer a same day delivery service in the Chicago area, has got off to a promising start. Our respective teams are in regular communication and, as LeafyQuick's own business develops and grows in scale, we are well placed to benefit.
In October we announced our partnership with Mr. Checkout, a national group of distributors in the US, operating direct store distribution from the manufacturer. It represents products in over 60 major retailers in the US and manages 13 industry associations with over 150,000 independent retail members, visiting over 50,000 locations bi-weekly. Our initial trial with Mr. Checkout is now underway with 15 distributors. Naturally, we all hoped to be underway sooner but, on an objective view, setting up a plan for national distribution in under three months is far faster than many in the retail sector experience. Assuming a successful outcome, Chill products could extend further into their network.
As previously announced, we are in contract negotiations with a further major distributor and also have interest from a third. If we proceed with these two further major distributors, as well as Mr. Checkout, then demand for Chill products will almost certainly exceed the Company's existing manufacturing capacity. With that in mind, we have been exploring solutions, including both outsourcing some manufacturing and expanding our in-house capacity. Our preliminary conclusion is that the former solution is most appropriate, mainly due to the speed at which we can increase manufacturing with an outsource partner. This route also has a capital expenditure saving and, provided volumes are sufficient, should enable us to maintain our current margins on the finished products.
Our relationship with Schrader Oil continues to be important and the team there provide us with valuable market feedback on our products. Significantly, seven out of 10 samples given to retailers have resulted in a repeat order and we understand that Chill is outselling a national CBD brand in Schrader Oil stores (on a per stock unit basis). As we continue to build data of this type, we gain confidence that Chill products have the potential to build a meaningful market share in the US. With this level of interest from distributors, we have high expectations for performance of the brand in 2020. As I said above, our challenge is to match our manufacturing capabilities with this faster than expected demand.
Feminised seed programme
As we announced on 25 November, in anticipation of commencing sales of feminised hemp seeds in the first quarter of next year, we have started developing framework arrangements with seed distributors in the United States and we are now well positioned in this regard ahead of the growing season. Since our last update, progress has been in line with our expectations and the management team continue to anticipate that our first high quality feminised seeds will be ready in early 2020. Importantly we remain on target to sell into the 2020 growing season and to reach maximum capacity at our indoor facility in DeBeque in the coming months.
As I have said several times in recent months, we are dealing with a living organism and by altering its natural development there can be no guarantees; however the work that the team have put in during 2019 is remarkable for its thoroughness and attention to detail. There have been some disputes elsewhere in the US over the quality of feminised seeds that have been sold. In line with our retail products, protection of our brand is paramount and we remain focused on ensuring that our feminised seeds, when available for sale, will be of the highest quality.
Natural resources division
On 4 September, we announced a plan to carry out an orderly sale or closure of our natural resources business. The principal reason for this was that this division carried several liabilities that needed to be addressed, particularly potential taxes on production at our East Denver project and the likely plugging and abandonment costs at our Montana operations. The division had also accumulated a significant number of invoices that were unpaid at that time. Over the past three months, we have implemented a series of cost cutting measures within the natural resources division, comprising a reduction of staff, the elimination of retained consultants and the cessation of all prospecting activities.
What became apparent very quickly is that the division was carrying a far greater weight of cost than was necessary for it to operate and, consequently, we were able to effect our proposed cost cuts faster and to a greater degree than we initially envisaged. Today the division employs one person full time and a second member of staff part time and requires only limited assistance from other parts of the Group. Consequently, for the first time in the Company's history, we have a profitable natural resources business. The monthly revenue from our East Denver project exceeds salaries, all expenses associated with our Denver office and our share of operating costs at the project. Costs for maintaining our other natural resources interests are negligible.
Out of the positive cashflow generated from our East Denver project, we have been able to satisfy all overdue invoices and bring the Group as a whole onto a far more stable financial footing. Certain liabilities associated with the division remain but the Company is now far better placed to address these as they fall due.
The marketing of our natural resources division has produced three meaningful expressions of interest to date. However, in light of the dramatically improved performance of the division since September, the Board is no longer minded to sell its natural resources projects, and particularly our East Denver project, for anything other than a compelling price. We will continue to assess interest in the projects but, for so long as the division is cash positive and supporting the Company's other activities, there is no longer any urgency to conclude a sale.
Despite that, the Board continues to review the ongoing viability of certain projects and, with that in mind, we have concluded that our natural gas and helium project in Montana should be closed down. I recognise this will be a disappointment to many of our long term shareholders but the speculative nature of the project, along with the considerable capital expenditure it would require for further investigation, means that we cannot justify continuance as being a good use of shareholder funds, particularly given our new focus as a vertically integrated CBD company. Once the weather improves in the spring of next year, we will plug and abandon the well and allow all leases in Montana to expire. We are currently exploring methods of selling certain physical assets that we own in Montana and Kansas which, if realised, could cover some or potentially exceed all of the costs of plugging and abandoning the well and reclaiming the location. There is no cost to the Company in allowing the leases to expire.
Highlands Water Resources Corporation, a subsidiary formed last year to provide recycled fresh water for oil and gas operations, was sold on 24 July 2019. The buyer paid no cash consideration but the Company retains a 10% interest in the business. Revenues from that Company have been negligible but, should it achieve the necessary scale in the future to be a meaningful industry participant, we may receive some return on our investment. In the meantime, we have divested any responsibility for managing that company or addressing any of its obligations and, specifically, we have no liability to contribute to any future funding.
Our office in Denver is now too large for the team based there and, in line with cost cutting activities elsewhere in the Group, we have appointed a real estate agent to sublet the office. Marketing for potential new tenants began last month. Once a suitable sub-tenant has been secured, the Denver team will relocate to a smaller office.
Financial Review
The unaudited consolidated statement of financial position as at 30 September 2019 and the consolidated statement of comprehensive income for the six months to that date are set out below. Zoetic generated revenues of GBP1.15 million in H1 2019, with the natural resources division accounting for GBP1.12 million and the CBD division, which commenced sales at the end of June 2019 in the US and the beginning of August 2019 in the UK, reporting GBP36,000. Revenue in the year to date is GBP1.27 million from the natural resources division and GBP65,000 from the CBD division.
East Denver, in common with most oil and gas projects, is a declining asset and, in the absence of unexpected movements in oil and gas prices, the Company expects second half revenues to be lower in its natural resources division. However, as explained above, largely due to much reduced employment costs and the cessation of all prospecting activities, the division is trading profitably and the Board expects it to remain so throughout the second half of the year. Going forward, we are mindful that planned workovers, as well as unexpected interruptions, will inevitably continue to influence results in this division but, of considerable importance, is that the operator, True Oil, is successfully managing operating costs and these have continued to decline in recent months as we anticipated.
In the CBD division, sales comprised those made in convenience stores in the US and those made online in the UK
through www.zoetic.uk.com. Since the end of the period, Chill products have been sold online at www.thechillway.com and Zoetic products have been sold in stores in the UK. These are early days for both brands but we are encouraged by the customer feedback and growing levels of repeat orders and the management team continues to have confidence in our opportunities here.
Cash balances at 30 September 2019 were a little over GBP1.0 million. Whilst the Group remains cash consuming overall, we have prudently managed our cash and have supplemented this since that date with:
-- Further revenues from our natural resources and CBD divisions
-- Recovery of approximately US$149,500 of performance bonds and recovered project costs, with a further US$49,500 expected in the coming weeks
-- Receipt of US$44,854 from Diversion Technologies LLC ("Diversion") in satisfaction of a debt owed to the Company
Expenses for the first half of the year totalled GBP2.9 million. A considerable proportion of these relate to the establishment of our CBD business but, in addition, there was extensive use of consultants and professional advisers, primarily within the natural resources division. One of my first actions following taking on the role of CEO was to bring these arrangements to an end and they will not be repeated going forward.
Since August, the Board has also implemented a wide range of cost cutting measures. These have been concentrated on the natural resources division although I have personally conducted a review of the spending practises across the entire Group and we have sought to streamline our costs and find more efficient methods in all that we do down to the smallest expenses. We previously announced that our pro forma operating costs are in the region of GBP2.5 million per annum and this remains the case. We also predicted that, as our CBD operations expand, we should expect some cost increases primarily relating to the purchase of raw materials, manufacturing and higher headcount. However, the Company now operates to a far greater degree of discipline and the Board will only sanction further increases in operating costs if it is satisfied that the revenue opportunities they will bring are clearly identifiable and can be delivered profitably. In the meantime, we have continued to assess further cost reduction opportunities to offset this expected expansion and, by way of example, this month we have identified a further annualised savings of over US$15,000 in our IT commitments.
Our review also revealed a greater number of performance bonds that could be reclaimed from the US states in which they were lodged. The Company has previously paid approximately US$419,000 of performance bonds (versus the US$360,000 we have previously quoted). As I explained above, approximately US$149,500 has already been refunded and we are waiting for a further payment of US$49,500 which is due any day now. The remainder should be recovered during 2020.
In October, we put into effect a longstanding plan to grant share options to all permanent members of staff in both the UK and US. This forms an important part of our ongoing remuneration arrangements as well as aligns the interests of the staff with our shareholders. 7,155,000 share options were granted at an exercise price of 10 pence per share, being the price of the last fundraising carried out prior to the AGM, and challenging performance conditions were set including setting a share price of 18 pence for full vesting of all options. We will continue to grant share options to new members of staff and to reward our existing team and future options will have similar conditions to those granted this year.
In recent weeks, we have completed the buy back of 950,000 shares from Diversion and have received a payment of US$44,854 which, together, fully satisfy Diversion's outstanding debt to Zoetic. This was an important piece of housekeeping as well as cash management. As it post-dates the period under review, it will be reflected in our year end results. The Diversion debt arose from the development of the Company's re-fracking and parent well protection technology, DT Ultravert, which is 25% owned by Diversion but for which the Company bore the costs in full. We do not envisage any further expenditure on DT Ultravert for the foreseeable future and, in any event, it is the Board's new policy to ask Diversion to cover its share of costs at the time they fall due. Consequently we do not expect this debt to recur.
As I explained above, we have taken the decision to close our natural gas and helium project in Montana and we have written off our entire investment in that project. As previously announced, we are no longer actively pursuing a strategy in natural resources and therefore we are also writing down to zero the value of certain peripheral projects at this time, including those in Utah and North Dakota. The consequential effect is a fair value provision on our profit and loss account of GBP2.3 million. Notwithstanding this write down, we continue to assess all means of monetising these projects, either through a sale of the project as a whole or by selling certain assets associated with them.
Under its previous name and strategy, Highlands Natural Resources was a high spending company that committed too much capital to speculative projects. With the launch of Zoetic, we have changed the culture in recent months and much of my time, and that of the executive team, has been spent on reappraising our corporate strategy and ensuring we take measures to deliver best value for our shareholders. Much of this has been directed at establishing a business that can live within its means. As our CBD division grows in stature and, we believe, in revenue, Zoetic will approach self-sufficiency. Whilst nothing is certain at this time, the distribution contacts we are negotiating and our plans to sell feminised seeds can each produce a marked change in our financial results. Until that time, shareholders should expect Zoetic to continue down the path of sensible cost management and responsible handling of our shareholders' investment.
Outlook
The progress we have made in establishing our CBD business this year has surpassed our expectations. The rapid roll out of our brands and product lines has been achieved on a considerably faster timetable than we envisaged at the outset; the successful outdoor harvest in our first year, particularly when many of our neighbours struggled with growing conditions, has established us as a true "seed to shelf" business. The impending launch of our feminised seeds business also offers a potential new revenue stream.
Despite these achievements, I have regularly reminded investors that we continue to face a number of challenges and there is no time for complacency. It is right and proper that the success of our CBD operations is judged on revenue creation and, in time, cashflow. A realistic objective for 2019 was to establish our brands, Zoetic and Chill, in their respective markets. Based on the number of product lines, distribution opportunities and overall feedback on the brands, we have hit that target but the next step is to generate volume sales and all of the management team are mindful that this is the true test for our brands. The platform that we have created could not be better and the onus is now on us to turn the positive feedback into revenue for the Company.
Away from the operational side of the business, we have throughout the period under review, and since, increased our investor relations activities, including using social media and a variety of investor communication platforms. We will continue to do this during 2020, and in particular will expand these activities into the US to support our trading on the OTC. Zoetic has an exciting story to tell and we will invest time in developing a wider investor following.
Shareholders have come to know me for my conservative approach and I am not one for grand predictions but I remain confident that our multi-channel sales approach can bring success to our Company. We have a number of key events in the first quarter of 2020 and I will look forward to providing regular updates.
Nick Tulloch
CEO
23 December 2019
ZOETIC INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHSED 30 SEPTEMBER 2019
Hot Features
Premium
Notes Unaudited Unaudited Audited
Six months ended 30 Six months ended 30 Year ended 31 March 2019
September 2019 September 2018
GBP GBP GBP
Revenue 1,159.975 522,408 1,016,399
Administrative expenses (2,885,870) (3,028,735) (5,511,418)
___________ ___________ ___________
Operating loss (1,725,895) (2,506,327) (4,495,019)
Fair value provision
against exploration
assets 3 (2,313,913) - -
Loss on disposal of
intangible asset - (1,883,820) (1,276,178)
Finance income 1,043 308 473
___________ ___________ ___________
Loss on ordinary
activities before
taxation (4,038,765) (4,389,839) (5,770,724)
Taxation on loss on
ordinary activities 4 - - -
___________ ___________ ___________
Loss for the period (4,038,765) (4,389,839) (5,770,724)
Items that may be
re-classified
subsequently to profit
or loss: Foreign
exchange adjustment
on consolidation 162,167 1,076,070 1,060,393
___________ ___________ ___________
Total comprehensive loss
for the period
attributable to the
equity holders (3,876,598) (3,313,769) (4,710,331)
Loss per share (basic and
diluted) attributable to
the equity holders
(pence) 5 (2.86) p (3.74) p (4.88) p
ZOETIC INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
AS AT 30 SEPTEMBER 2019
Notes Unaudited Unaudited Audited
At 30 September 2019 At 30 September 2018 At 31 March 2019
GBP GBP GBP
NON -CURRENT ASSETS
Tangible assets 6 1,534,966 60,659 1,503,499
Intangible assets 7 1,198,237 4,126,719 3,432,536
___________ ___________ ___________
2,733,203 4,187,378 4,936,035
CURRENT ASSETS
Inventory 474,342 - -
Trade and other receivables 1,752,056 784,854 1,186,814
Cash and cash equivalents 1,076,810 1,993,973 1,508,649
___________ ___________ ___________
3,303,208 2,778,827 2,695,463
Total assets 6,036,411 6,966,205 7,631,498
CURRENT LIABILITIES
Trade and other payables 2,724,080 712,313 1,314,370
___________ ___________ ___________
2,724,080 712,313 1,314,370
___________ ___________ ___________
NET ASSETS 3,312,331 6,253,892 6,317,128
EQUITY
Share capital 8 1,478,700 1,181,644 1,364,831
Share premium account 8 2,018,616 - 1,276,611
Share based payments reserve 674,383 826,140 793,218
Foreign currency translation reserve (260,399) (406,889) (422,566)
Retained profit/(loss) (598,969) 4,652,997 3,305,124
___________ ___________ ___________
TOTAL EQUITY 3,312,331 6,253,892 6,317,128
ZOETIC INTERNATIONAL PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHSED 30 SEPTEMBER 2019
Share capital Share premium Share based Foreign Retained profit / Total
account payments reserve currency (loss)
translation
reserve
GBP GBP GBP GBP GBP GBP
At 31 March 2018 5,824,885 12,819,639 887,541 (1,482,959) (8,681,445) 9,367,661
Comprehensive
income for the
period
Loss for the
period - - - - (4,389,839) (4,389,839)
Other
comprehensive - - - - - -
income
Translation
adjustment - - - 1,076,070 - 1,076,070
Total
comprehensive
loss for the
period
attributable to
the equity
holders - - - 1,076,070 (4,389,839) (3,313,769)
Issue of - - - - - -
warrants
Exercise of
warrants 83,333 116,667 (61,401) - 61,401 200,000
Shares issued in - - - - - -
the period
Cost relating to - - - - - -
share issues
Re-organisation
of share
capital in
period (4,726,574) (12,936,306) - - 17,662,880 -
_________ _________ _________ _________ _________ _________
At 30 September
2018 1,181,644 - 826,140 (406,889) 4,652,997 6,253,892
Comprehensive
income for the
period
Loss for the
period - - - - (1,380,885) (1,380,885)
Other
comprehensive - - - - - -
income
Translation
adjustment - - - (15,677) - (15,677)
Total
comprehensive
loss for the
period
attributable to
the equity
holders - - - (15,677) (1,380,885) (1,396,562)
Lapse of
warrants - - (33,012) - 33,012 -
Exercise of - - - - - -
warrants
Shares issued in
the period 183,187 1,373,903 - - - 1,557,090
Cost relating to
share issues - (97,292) - - - (97,292)
_________ _________ _________ _________ _________ _________
At 31 March 2019 1,364,831 1,276,611 793,128 (422,566) 3,305,124 6,317,128
Comprehensive
income for the
period
Loss for the
period - - - - (4,038,765) (4,038,765)
Other
comprehensive - - - - - -
income
Translation
adjustment - - - 162,167 - 162,167
Total
comprehensive
loss for the
period
attributable to
the equity
holders - - - 162,167 (4,038,765) (3,876,598)
Issue of
warrants - - 15,927 - - 15,927
Exercise of
warrants 50,000 375,000 (15,927) - 15,927 425,000
Lapse of
warrants - - (118,745) - 118,745 -
Shares issued in
the period 63,869 407,830 - - - 471,699
Cost relating to
share issues - (40,825) - - - (40,825)
_________ _________ _________ _________ _________ _________
At 30 September
2019 1,478,700 2,018,616 674,383 (260,399) (598,969) 3,312,331
ZOETIC INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHSED 30 SEPTEMBER 2019
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2019
2019 2018
Cash flow from operating activities GBP GBP GBP
Loss for the period (4,038,765) (4,389,839) (5,770,724)
Adjustments for:
Depreciation and amortisation
charges 236,393 73,317 323,842
Write off costs of lapsed leases - - 242,329
Loss on disposal of intangible
assets 1,883,820 1,276,178
Fair value adjustment on unproved
assets 2,313,913
Charge for the period in respect
of share based payments 15,927 - -
Net exchange adjustments (63,992) 408,396
Costs settled by issue of shares 17,700 - -
__________ __________ __________
Operating cash flow before working
capital movements (1,518,824) (2,432,702) (3,519,979)
Increase in inventories (474,342) - -
(Increase)/decrease in trade
and other receivables (708,316) 1,748,457 1,346,493
Increase/(decrease) in trade
and other payables 1,552,784 (2,001,236) (1,399,179)
__________ __________ __________
Net cash flow from operating
activities (1,148,698) (2,685,481) (3,572,665)
Cashflows from investing activities
Purchase of tangible fixed assets (147,957) (2,746) (18,913)
Investment in intangible assets,
exploration and drilling rights (4,047) (830,017) (1,426,609)
Proceeds from sale of exploration
and drilling rights - 4,269,504 4,239,126
__________ __________ __________
Net cash generated/(absorbed)
by investing activities (152,004) 3,436,741 2,793,604
Cashflows from financing activities
Net proceeds from issue of shares 855,874 200,000 1,659,798
Net increase in cash and cash
equivalents
As above (444,828) 951,260 880,737
Cash and cash equivalents at
beginning of period 1,508,649 602,814 602,814
Foreign exchange adjustment on
opening balances 12,989 439,889 25,098
__________ __________ __________
Cash and cash equivalents at
end of period 1,076,810 1,993,973 1,508,649
ZOETIC INTERNATIONAL PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 SEPTEMBER 2019
1. GENERAL INFORMATION
Zoetic International plc ("the Company") and its subsidiary companies (together "the Group") are primarily involved in the oil and gas development sector.
The Company is incorporated and registered in England and Wales as a public limited company under the Companies Act 2006 ("the Act") with registered number 09309241. The registered office is 25 Walbrook, London EC4N 8AF and the principal place of business in the United Kingdom is Suite 2/09, King James VI Business Centre, Friarton Road, Perth PH2 8DY.
2. ACCOUNTING POLICIES
Basis of preparation
The interim condensed unaudited consolidated financial statements for the period ended 30 September 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting. The comparative figures for 31 March 2019 are extracted from the Group's audited accounts to that date. The comparative figures for the period ended 30 September 2018 are unaudited.
The condensed unaudited consolidated interim financial statements of the Group have been prepared on the basis of the accounting policies, presentation, methods of computation and estimation techniques used in the preparation of the audited accounts for the period ended 31 March 2019 and expected to be adopted in the financial information by the Company in preparing its annual report for the year ending 31 March 2020.
The financial information of the Company is presented in British Pounds Sterling ("GBP").
Leases
IFRS 16 Leases became applicable for the current reporting period and the Group has complied with this accounting standard for the first time. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
-- Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
-- Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;
-- Amounts expected to be payable by the group under residual value guarantees;
-- The exercise price of a purchase option if the group is reasonably certain to exercise that option; and
-- Payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease, where applicable. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period.
Right-of-use assets are measured at cost which comprises the following:
-- The amount of the initial measurement of the lease liability;
-- Any lease payments made at or before the commencement date less any lease incentives received;
-- Any initial direct costs; and -- Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.
Payments associated with short-term leases (term less than 12 months) and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Low-value assets comprise office equipment and furniture.
Impact
The Directors reviewed all the Group's leasing arrangements and identified one applicable contract, a property lease, which commenced during the period and which has been recognised as a lease liability in the 30 September 2019 balance sheet. An associated right-of-use asset was recognised for that lease.
The directors consider that all other leasing arrangements in force during the current and previous periods are short term or of low value.
Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate, which was taken as being 5%.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
-- Use of a single discount rate to a portfolio of leases with reasonably similar characteristics; and
-- The accounting for operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases.
On 1 April 2019, the Group recognised the following lease liabilities:
$'000
Current 264
Non-current 930
Total 1,194
The associated right-of-use assets for the property lease was measured at the amount equal to the lease liability. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
Right-of-use assets recognised on 1 April 2019 were:
$'000
Property 1,194
At 30 September 2019, included in both assets and liabilities are balances of $1,087 in respect of future discounted lease liabilities and future right-of-use asset.
3. IMPAIRMENT PROVISION
The Company has decided to close down its natural gas and helium project in Montana. The project remains speculative in nature and will require a considerable level of capital expenditure for further investigation and it is no longer considered a good use of shareholder funds to continue with it. Furthermore, as Zoetic is no longer actively pursuing a strategy in natural resources, it is also writing down to zero the value of certain peripheral projects, primarily those in Utah and North Dakota. The consequential effect of these actions is that the Company has taken a fair value provision of GBP2.3 million on its profit and loss account. Notwithstanding this write down, Zoetic continues to assess all means of monetising these projects, either through a sale of the project as a whole or by selling certain assets associated with them.
4. INCOME TAX EXPENSE
No tax is applicable to the Company for the period ended 30 September 2019. No deferred income tax asset has been recognised in respect of the tax losses carried forward, due to the uncertainty as to whether the Company will generate sufficient profits in the foreseeable future to prudently justify this.
5. LOSS PER SHARE
Basic loss per ordinary share is calculated by dividing the loss attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. There are currently no dilutive potential ordinary shares.
Earnings Weighted average Loss per
GBP number of shares share
(pence)
Loss per share attributed
to ordinary shareholders (4,038,765) 141,287,214 (2.86)
6. TANGIBLE ASSETS
Tangible assets comprise producing oil assets plus sundry plant and office equipment.
Total
GBP
Cost at 31 March 2019 1,885,836
Additions during the period 147,957
Disposals during the period -
Exchange adjustment 113,662
_________
Cost carried forward 2,147,455
Amortisation at 31 March 2019 382,337
Charge during the period 207,108
Eliminated on disposals during the -
period
Exchange adjustment 23,044
_________
Amortisation carried forward 612,489
Net book value brought forward 1,503,499
Net book value carried forward 1,534,966
7. INTANGIBLE ASSETS
Intangible assets comprise the 75% stake in certain granted and pending patents acquired from Diversion Technologies LLC ("Diversion") plus various leases and mining rights together with exploration and development costs paid during the period.
Patent rights Exploration Total
and evaluation
assets
GBP GBP GBP
Cost at 31 March 2019 706,500 2,996,861 3,703,361
Additions during the
period - 4,047 4,047
Disposals during the - - -
period
Exchange adjustment - 180,623 180,623
_________ _________ _________
Cost carried forward 706,500 3,181,531 3,888,031
Amortisation at 31 March
2019 270,825 - 270,825
Charge during the period 35,325 - 35,325
Fair value provision
during the period - 2,383,644 2,383,644
Exchange adjustment - - -
_________ _________ _________
Amortisation carried
forward 306,150 2,383,644 2,689,794
Net book value brought
forward 436,375 2,996,861 3,432,536
Net book value carried
forward 400,350 797,887 1,198,237
8. SHARE CAPITAL & RESERVES
Allotted, called up and fully paid Ordinary shares of GBP0.01 each:
Number of shares Share Capital Share Premium
GBP GBP
Balance at 31 March
2019 136,483,080 1,364,831 1,276,611
6 June 2019 - issue
of shares at 8.5p on
exercise of warrants 5,000,000 50,000 375,000
6 June 2019 - placing
of shares at 10p per
share 1,000,000 10,000 90,000
27 August 2019 - placing
of shares at 6.9p per
share less costs 5,386,954 53,869 277,005
____________ ___________ ___________
Balance at 30 September
2019 147,870,034 1,478,700 2,018,616
The Company has only one class of share and all shares rank pari passu in every respect.
9. SUBSEQUENT EVENTS
There have been no events since the period end that require disclosure or inclusion in this statement.
**ENDS**
This information is provided by RNS, the news service of the London Stock Exchange. 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
IR VLLFLKLFZFBE
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December 23, 2019 02:00 ET (07:00 GMT)
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