REG-ECR Minerals plc Annual Financial Report <Origin Href="QuoteRef">ECRE.L</Origin> - Part 2

ECR MineralsAnnouncement

05/03/2015 12:22

- Part 2: For the preceding part double click  ID:nBwP39Fsa 

services received in exchange for the grant of any share-based
payment which vested after the Company`s transition to IFRSs are measured at
their fair values. Where employees are rewarded using share-based payments, the
fair values of employees` services are determined indirectly by reference to the
fair value of the instrument granted to the employee. 

The fair value is appraised at the grant date and excludes the impact of
non-market vesting conditions. Fair value is measured by use of the Black
Scholes model. 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. 

All equity-settled share-based payments are ultimately recognised as an expense
in the income statement with a corresponding credit to "other reserves". 

If vesting periods or other non-market vesting conditions apply, the expense is
allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Estimates are subsequently revised if
there is any indication that the number of share options expected to vest
differs from previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period. No adjustment is made to any expense
recognised in prior years if share options ultimately exercised are different to
that estimated on vesting. 

Upon exercise of share options the proceeds received net of attributable
transaction costs are credited to share capital and, where appropriate, share
premium. 

Financial instruments

The Group`s financial assets comprise cash and cash equivalents, investments and
loans and receivables. Financial assets are assigned to the respective
categories on initial recognition, depending on the purpose for which they were
acquired. This designation is re-evaluated at every reporting date at which a
choice of classification or accounting treatment is available. 

The Group`s loans, investments and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in an active
market. Loans and receivables are measured at fair value on initial recognition.
After initial recognition they are measured at amortised cost using the
effective interest rate method, less any provision for impairment. Any change in
their value is recognised in profit or loss. The Group`s receivables fall into
this category of financial instruments. Discounting is omitted where the effect
of discounting is immaterial. All receivables are considered for impairment on a
case-by-case basis when they are past due at the Statement of Financial Position
date or when objective evidence is received that a specific counterparty will
default. 

Investments that are held as available for sale financial assets are financial
assets that are not classified in any other categories. After initial
recognition, available for sale financial assets are measured at fair value. Any
gains or losses from changes in fair value of the financial asset are recognised
in equity, except that impairment losses, foreign exchange gains and losses on
monetary items and interest calculated using the effective interest method are
recognised in the income statement. 

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 consolidated income statement. The
Directors consider a significant decline to be one in which the fair value is
below the weighted average cost by more than 25%. A prolonged decline is
considered to be one in which the fair value is below the weighted average cost
for a period of more than twelve months. 

If an available for sale equity security is impaired, any further declines in
the fair value at subsequent reporting dates are recognised as impairments.
Reversals of impairments of available for sale equity securities are not
recorded through the income statement. Upon sale, accumulated gains or losses
are recycled through the income statement. 

Other financial assets comprise warrants. After initial recognition, other
financial assets are measured at fair value. Any gains or losses from changes in
fair value of the other financial asset are recognised in the income statement. 

Financial liabilities, which are measured at amortised cost, and equity
instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all of its
financial liabilities. Any instrument that includes a repayment obligation is
classified as a liability. 

Where the contractual liabilities of financial instruments (including share
capital) are equivalent to a similar debt instrument, those financial
instruments are classed as financial liabilities, and are presented as such in
the Statement of Financial Position. Finance costs and gains or losses relating
to financial liabilities are included in the income statement. Finance costs are
calculated so as to produce a constant rate of return on the outstanding
liability. 

Where the contractual terms of share capital do not have any features meeting
the definition of a financial liability then such capital is classed as an
equity instrument. Dividends and distributions relating to equity instruments
are debited direct to equity. 

Compound financial instruments

Compound financial instruments comprise both liability and either equity
components or embedded derivatives. 

For compound instruments including equity components, at issue date the fair
value of the liability component is estimated by discounting its future cash
flows at an interest rate that would have been payable on a similar debt
instrument without any equity conversion option. The liability component is
accounted for as a financial liability. The difference between the net issue
proceeds and the liability component, at the time of issue, is the residual or
equity component, which is accounted for as an equity reserve. 

Embedded derivatives included within compound instruments are calculated using
the Black Scholes model and are also included within liabilities, but are
measured at fair value in the Statement of Financial Position, with changes in
the fair value of the derivative component recognised in the consolidated income
statement. The amounts attributable to the liability components equal the
discounted cash flows. 

Transaction costs that relate to the issue of a compound financial instrument
are allocated to the liability and equity components of the instrument in
proportion to the allocation of the proceeds. 

The interest expense on the liability component is calculated by applying the
effective interest rate for the liability component of the instrument. The
difference between any repayments and the interest expense is deducted from the
carrying amount of the liability. 

Upon conversion of loan note debt the corresponding carrying value of loan note
liability and equity reserve is released, and the difference between these and
the nominal value of the shares issued on conversion is recognised as a share
premium. 

Critical accounting estimates and judgements

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 on-going basis.
Revisions to accounting estimates are recognised in the year in which the
estimate is revised if the revision affects only that year or in the year of the
revision and future years if the revision affects both current and future years.


The most critical accounting policies and estimates in determining the financial
condition and results of the Group are those requiring the greater degree of
subjective or complete judgement. These relate to: 

• fair values and impairment of investments in THEMAC Resources Group Ltd (Note
9); 

• impairment reviews covering other investments (Note 9); 

• capitalisation of exploration costs (Note 10); 

• recovery of amount due from former subsidiary (Note 11); 

• share-based payments (Note 14); 

• conversion of YA Global loan into ordinary shares (Note 16). 
 
 3 Operating loss                                                                                                                                                                                                                         Year ended      Year ended      
                                                                                                                                                                                                                                          30 September    30 September    
 The operating loss is stated after charging:                                                                                                                                                                                             2014            2013            
                                                                                                                                                                                                                                          £               £               
 Depreciation of property, plant and equipment                                                                                                                                                                                                                            
 - continuing operations                                                                                                                                                                                                                  358             1,663           
 Operating lease expenses                                                                                                                                                                                                                 13,815          13,815          
 Share-based payments                                                                                                                                                                                                                     -               130,000         
 Auditors' remuneration:                                                                                                                                                                                                                                                  
 Fees payable to current auditor and its associates for audit of the Group`s annual financial statements (including £15,000 (2013: £15,000) in respect of the Company and £9,000 (2013: £5,000) in respect of subsidiary undertakings)    24,000          20,000          
 
 
 4 Loss per share                                                                           Year ended       Year ended       
                                                                                            30 September     30 September     
                                                                                            2014             2013             
                                                                                                                              
 Weighted number of shares in issue during the year                                         3,260,089,969    1,526,068,537    
                                                                                            £                £                
 (Loss) from continuing operations                                                          (1,746,397)      (7,520,872)      
 Profit from discontinued operations attributable to owners of the parent                   -                209,501          
 (Loss) from continuing and discontinued operations attributable to owners of the parent    (1,746,397)      (7,311,371)      
 
 
For both the continuing operations and for the continuing and discontinued
operations, the disclosure of the diluted loss per share is the same as the
basic loss per share as the conversion of share options decreases the basic loss
per share thus being anti-dilutive. 

5Corporation tax expense

The relationship between the expected tax expense based on the corporation tax
rate of 22% for the year ended 30 September 2014 (2013: 23.5%) and the tax
expense actually recognised in the income statement can be reconciled as
follows: 
 
                                                                                 Year ended      Year ended      
                                                                                 30 September    30 September    
                                                                                 2014            2013            
                                                                                 £               £               
 Group loss for the year                                                         (1,746,397)     (7,320,596)     
 Loss on activities at effective rate of corporation tax of 22% (2013: 23.5%)    (384,207)       (1,720,340)     
 Expenses not deductible for tax purposes                                        205,045         1,566,932       
 Income not taxable                                                              (144)           (18)            
 Depreciation in excess of capital allowances                                    79              391             
 Loss carried forward                                                            179,227         153,035         
 Tax income / expense, net                                                       -               -               
 
 
The Company has unused tax losses of £2,600,000 (2013: £1,850,000) and other
temporary differences amounting to losses of £Nil (2013: £3,000). The related
deferred tax asset has not been recognised in respect of these losses as there
is no certainty in regards to the level and timing of future profits. No
deferred tax adjustment arises on the fair value movements on the available for
sale investments as any gain/loss on disposal will be exempt from tax. 

6Staff numbers and costs 
 
                   Year ended      Year ended      
                   30 September    30 September    
                   2014            2013            
                   Number          Number          
 Directors         3               3               
 Administration    2               2               
                                                   
 Total             5               5               
 
 
The aggregate payroll costs of these persons were as follows: 
 
                                     £          £          
 Staff wages and salaries            48,468     69,292     
 Directors` cash based emoluments    333,315    247,507    
 Share-based payments                -          130,000    
                                                           
                                     381,783    446,799    
 
 
The remuneration of the directors, who are the key management personnel of the
Group, in aggregate for each of the categories specified in IAS 24 `Related
Party Disclosures` was as follows: 
 
                                                £          £          
 Directors` cash based emoluments               333,315    247,507    
 Employer`s national insurance contributions    34,561     20,529     
 Short-term employment                          367,876    268,036    
 Share-based payments                           -          102,386    
                                                367,876    370,422    
 
 
Directors` remuneration

As required by AIM Rule 19, details of remuneration earned in respect of the
financial year ended 30 September 2014 by each Director are set out below: 

Year ended 30 September 2014 
 
 Director     Salary     Bonus     Share-based payments    Total      
              £          £         £                       £          
 S Clayson    141,667    35,799    -                       177,466    
 P Johnson    70,833     17,900    -                       88,733     
 R Watts      54,229     12,887    -                       67,116     
              266,729    66,586    -                       333,315    
 
 
Year ended 30 September 2013 
 
 Director       Salary     Bonus     Share-based payments    Total      
                £          £         £                       £          
 P A Harford    5,833      -         -                       5,833      
 S Clayson      90,641     34,404    55,046                  180,091    
 L Tenuta       5,000      -         -                       5,000      
 K Irons        12,000     -         -                       12,000     
 P Johnson      41,194     17,202    27,523                  85,919     
 R Watts        28,844     12,389    19,817                  61,050     
                183,512    63,995    102,386                 349,893    
 
 
The highest paid Director received remuneration of £177,466 (2013: £125,045),
excluding share-based payments. R Watts received remuneration totalling £67,116
(2013 £61,050) via a service company. 

Details of each Director`s share options and interests in the Company`s shares
are shown in the Directors` Report. 

7Finance income and costs 
 
                                                                             Year ended      Year ended      
                                                                             30 September    30 September    
 Finance costs                                                               2014            2013            
                                                                             £               £               
 Issue costs of convertible loan