REG - Jupiter Energy - Final Results <Origin Href="QuoteRef">JPR.AX</Origin> - Part 4
29/10/2014 13:45
- Part 4: For the preceding part double click ID:nRSW3515Sc
of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
(m) Financial liabilities
Financial liabilities within the scope of AASB 139 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives
designated, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised
initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs. The Group's financial liabilities include trade and other
payables, loans and borrowings and derivative financial instruments. Derivative Financial InstrumentsDerivatives are fair valued using appropriate valuation techniques.
Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; a
discounted cash flow analysis or other valuation techniques.
(n) Share-based payment transactions
Share-based compensation benefits are provided to directors and executives. OptionsThe fair value of options granted to directors and executives is recognised as an
employee benefit expense with a corresponding increase in contributed equity. The fair value is measured at grant date and recognised over the vesting period during which
the directors and/or executives becomes entitled to the options. The fair value at grant date is determined using an option pricing model that takes into account the
exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant
date and expected price volatility of the underlying share, the expected divided yield and the risk-free interest rate for the term of the option. Performance RightsThe
cost of performance rights are measured by reference to the fair value at the date at which they are granted. The fair value is determined using a Monte Carlo
methodology, which considers the incorporation of market based hurdles. Non-market conditions are not factored into the fair value of the performance rights at grant.
Probability factors are assigned to the vesting expense as to whether non market conditions will be met.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(o) Revenue recognition
Sales revenueRevenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Incidental
revenue generated during the development stage of an asset, is offset against the carrying value of the asset, rather than recognised in the statement of comprehensive
income. InterestRevenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.
(p) Convertible Note
A Convertible Note is split into two components: a debt component and a component representing the embedded derivatives in the Convertible Note. The debt component
represents the Group's liability for future interest coupon payments and the redemption amount. The embedded derivatives represent the value of the option that note
holders have to convert into ordinary shares in the Company.
(q) Income tax
The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit adjusted for any non-assessable or disallowed items. Deferred tax is accounted for using the liability method in respect of
temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income
statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will
be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and
the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(r) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except: · where the GST incurred on a purchase of
goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as applicable; and · receivables and payables are stated with the
amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement on a gross basis and the GST
component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation
authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST
recoverable from, or payable to, the taxation authority.
(s) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t) Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted
to exclude any costs of servicing equity (other than dividends) and preference share dividends,
divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted
earnings per share is calculated as net profit attributable to members of the parent, adjusted for: ·
the after tax effect of dividends and interest associated with dilutive potential ordinary shares
that have been recognised as expenses; and· other non-discretionary changes in revenues or
expenses during the period that would result from the dilution of potential ordinary shares; divided
by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for
any bonus element.
(u) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in the income statement net of
any reimbursement. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments
of the time value of money and, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is recognised as a
finance cost. Employee leave benefitsLiabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the
reporting date are recognised in provisions in respect of employees' services up to the reporting
date. They are measured at the amounts expected to be paid when the liabilities are settled.
Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at
the rates paid or payable. RestorationCosts of site restoration are provided over the life of the
facility from when exploration commences and are included in the costs of that stage. Site restoration
costs include the dismantling and removal of plant, equipment and building structures, waste removal,
and rehabilitation of the site in accordance with clauses of the permits. Such costs have been
determined using estimates of future costs, current legal requirements and technology on an
undiscounted basis. Any changes in the estimates for the costs are accounted on a prospective basis.
In determining the costs of site restoration, there is uncertainty regarding the nature and extent of
the restoration due to community expectations and future legislation. Accordingly the costs have been
determined on the basis that the restoration will be completed within one year of abandoning the site.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(v) Foreign Currency Transactions and Balances
(i) Functional and presentation currencyBoth the functional and presentation currency of Jupiter
Energy Limited and its Australian subsidiaries are Australian dollars ($). The Singapore subsidiaries'
functional currency is United States Dollars which is translated to the presentation currency. The
functional currency of the Branch of the Singapore subsidiary is Tenge (see below for consolidated
reporting). (ii) Transactions and balancesTransactions in foreign currencies are initially recorded in
the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange
ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate as at the date of the initial transaction. Non
-monetary items measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value was determined. (iii) Translation of Group Companies' functional
currency to presentation currencyThe results of the Singapore subsidiaries are translated into
Australian Dollars (presentation currency) as at the date of each transaction. Assets and liabilities
are translated at exchange rates prevailing at reporting date. Exchange variations resulting from the
translation are recognised in the foreign currency translation reserve in equity. On consolidation,
exchange differences arising from the translation of the net investment in the Singapore subsidiaries
and its Branch are taken to the foreign currency translation reserve. If a Singapore subsidiary was
sold, the proportionate share of exchange differences would be transferred out of equity and
recognised in the statement of comprehensive income.
(w) Segments
An operating segment is a component of an entity that engages in business activities from which it may
earn revenue and incur expenses (including revenues and expenses relating to transactions with other
components of the same entity), whose operating results are regularly reviewed by the Board of
Directors (the chief operating decision makers) to make decisions about resources to be allocated to
the segment and assess its performance and for which discrete financial information is available.
Management will also consider other factors in determining operating segments such as the existence of
a line manager and the level of segment information presented to the executive management team.
Operating segments are identified based on the information provided to the chief operating decision
makers, being the Board of Directors. Currently the Group has only one operating segment, being the
Group.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(x) Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Where funds are borrowed specifically to finance a
project, the amount capitalised represents the actual borrowing costs incurred. Where surplus funds are available for a short term out of money borrowed specifically to
finance a project, the income generated from the temporary investment of amounts is also capitalised and deducted from the total capitalised borrowing cost. Where the
funds used to finance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant general
borrowings of the Group during the period. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Even though exploration
and evaluation assets can be qualifying assets, they generally do not meet the -probable economic benefits test and also are rarely debt funded. Any related borrowing
costs are therefore generally recognised in profit or loss in the period they are incurred.
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's principal financial instruments comprise receivables, borrowings, payables, cash and short-term deposits.
Risk Exposures and Responses
The main purpose of these financial instruments is to provide finance for the Group's operations. The Group has various
other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its
operations. The main risks arising from the Group's financial instruments are cash flow interest rate risk, liquidity risk,
foreign currency risk and credit risk.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews the risks
identified below, including the setting of limits for trading in derivatives, hedging cover of foreign currency and
interest rate risk, credit allowances, and future cash flow forecast projections.
Interest rate risk
The Group's exposure to market risk for changes in interest rates is only on short term deposits and cash and cash
equivalents.
At balance date, the Group had the following mix of financial assets and liabilities exposed to interest rate risk:
Consolidated
2014 2013
$ $
Financial Assets
Cash and cash equivalents 1,285,358 4,131,731
Net exposure 1,285,358 4,131,731
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
The following table summarises the sensitivity of the fair value of the financial instruments held at balance date, if
interest rates had moved, with all other variables held constant, post tax profit would have been affected as follows:
Consolidated
Post - tax gain / (loss) 2014 2013
$ $
+1% 12,853 41,317
-1% (12,853) (41,317)
Foreign currency risk
The Group has transactional currency exposures. Such exposure arises from sales or purchases by an operating entity in
currencies other than the functional currency.
At balance date, the Group had the following exposure to United States Dollars (USD), Kazakhstan Tenge (KZT), Great Britain
Pound (GBP) and Singapore Dollars (SGD) foreign currency that is not designated in cash flow hedges:
Consolidated
2014 2013
$ $
Financial Assets
Cash and cash equivalents
- USD 1,072,868 3,029,199
- KZT - 798,661
- SGD 1,859 1,859
- GBP 21,706 281,854
Liquidation Fund 468,155 418,349
1,564,588 4,529,922
Financial Liabilities
Other financial liabilities (16,931,066) (11,893,890)
Derivative (229,400) (763,177)
(17,160,466) (12,657,067)
Net exposure (15,595,878) (8,127,145)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
The following table summarises the sensitivity of financial instruments held at balance date to movement in the exchange
rate of the Australian dollar to the United States Dollar, Singapore Dollar and Kazakhstan Tenge, with all other variables
held constant. The 5% sensitivity is based on reasonably possible changes, over a financial year, using the observed range
of actual historical rates for the preceding 5 periods.
Consolidated
Post - tax gain / (loss) 2014 2013
$ $
+5% (779,794) (406,357)
-5% 779,794 406,357
Credit risk
Credit risk represents the loss that would be recognised if counterparties fail to perform as contracted.
Part of the Group's receivables balances are represented by GST input tax credits, which are received on a quarterly basis,
and deposits held in trust in respect of leases for office premises.
With respect to credit risk arising from the financial assets of the Group, which comprise cash and cash equivalents and
trade receivables, the Group's exposure to credit risk arises from default of the counter party, with a maximum exposure
equal to the carrying amount of these instruments.
There are no significant concentrations of credit risk within the Group.
Liquidity Risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through use of bank
overdrafts, bank loans, finance leases and hire purchase contracts.
The contractual maturities of the Group's financial liabilities are shown in the table below. Undiscounted cash flows for
the respective years are presented.
Consolidated
2014 2013
$ $
Financial Assets
Within one year - -
After one year but not more than five years - -
More than five years 468,155 418,349
468,155 418,349
Financial Liabilities
Within one year (229,400) (3,280,160)
After one year to two years - (9,376,907)
More than two years (16,931,066) -
(17,160,466) (12,657,067)
Net Exposure (16,692,311) (12,238,718)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Management and the Board monitor the Group's liquidity on the basis of expected cash flow. The information that is prepared
by senior management and reviewed by the Board includes monthly and annual cash flow budgets.
Fair value
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
Level 1 - the fair value is calculated using quoted prices in active markets.
Level 2 - the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3 - the fair value is estimated using inputs for the asset or liability that are not based on observable market
data.
All of the Group's other financial liabilities are carried at amortised cost, where the carrying value approximates the
fair value.
The fair value of the derivative was determined using the level 3 method.
The convertible notes are sensitive to the changes in currency volatility. The table below outlines the impact a change in
the USD volatility input has on the fair value of the convertible notes.
30 June 2014$
5% increase in volatility 846,553
5 % decrease in volatility (846,553)
Equity Price Risk
The Group has exposure in equity risk through the convertible notes, which is susceptible to market price risk arising from
uncertainties about future values of the Company's share price.
At the reporting date, the exposure to market price risk at fair value was $229,400. A decrease in the company's share
price by 10% could have an impact of approximately $22,940 on profit and loss or equity attributable to the Group,
depending on whether the decline is significant or prolonged. An increase in the company's share price by 10% could have an
impact of approximately $22,940 on profit and loss or equity attributable to the Group, depending on whether the decline is
significant or prolonged.
4. EXPENSES
Consolidated
2014 2013
$ $
Administration and compliance expenses 2,555,319 2,795,630
Consulting fees 178,189 210,989
Depreciation and amortisation expenses 2,582 142,201
Directors fees 239,862 239,450
Legal fees 108,642 108,405
Occupancy expenses 258,224 226,536
Share based payments 447,468 776,081
Total expenses 3,790,286 4,499,291
During the year, employee benefits were $929,240. This is included in administration and compliance expenses.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
5. TAXATION
Prima facie income tax on operating (loss) is reconciled to the income tax benefit provided in the financial statements as
follows:
Consolidated
2014 2013
$ $
Prima facie income tax benefit on operating (loss) at the Australian tax rate of 30% (2013: 30%) (764,181) (1,465,749)
Non-deductible expenditure:
- Effect of tax rates in foreign jurisdictions 1,101,686 203,065
- Share Based payments 134,240 232,825
- Administration expenses - -
Temporary differences and tax losses not bought to account as a deferred tax asset (471,745) 1,029,859
Income tax expense - -
Deferred Income Tax
Deferred income tax at 30 June relates to the following:
Consolidated -
Deferred tax liabilities - -
Deferred tax assets
Unrealised FX (gain) / loss (242,961) 213,444
Unrealised derivative (gain) / loss 184,290 48,433
Share issue costs 20,139 145,455
Revenue tax losses - Australia 6,945,693 6,580,747
Revenue tax losses - Kazakhstan 3,859,022 1,655,650
Interest expense 933,763 -
Deferred tax assets not recognised (11,699,947) (8,643,729)
Deferred tax (income)/expense - -
Net deferred tax recognised in Balance Sheet - -
The Consolidated Group has tax losses of $11,352,797 (2013: $8,643,729) that are available indefinitely for offset against
future taxable profits of the companies in which the losses arose.
The potential deferred tax asset will only be realised if:
(a) The relevant Company derives future assessable income of a nature and an amount sufficient to enable the asset to be
realised, or the asset can be utilised by another Company in the consolidated entity in accordance with Division 170 of
the Income Tax Assessment Act 1997;
(b) The relevant Company and/or consolidated entity continues to comply with the conditions for deductibility imposed by
the Law; and
(c) No changes in tax legislation adversely affect the relevant Company and/or consolidated entity in realising the asset.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
6. CASH AND CASH EQUIVALENTS
Consolidated
2014 2013
$ $
Cash at bank and in hand 1,285,358 4,131,731
1,285,358 4,131,731
The bank accounts are at call and pay interest at a weighted average interest rate of 0.88% at 30 June 2014 (2013: 1.54%)
7. TRADE AND OTHER RECEIVABLES
Consolidated
2014 2013
Current $ $
Trade receivables 159,083 23,222
VAT receivable 1,126,212 1,084,938
Other debtors 11,336 11,336
1,296,631 1,119,496
Non-current
VAT receivable 2,522,291 3,818,391
The Group's exposure to credit and currency risks is disclosed in Note 3. The majority of the non-current other debtor
balance is VAT receivable which will be offset against future taxes payable on oil revenue.
At 30 June, the aging analysis of receivables is as follows:
Total 0 - 30Days 31 - 60 days 61 - 90days 90+days
2014 3,818,922 159,083 - - 3,659,839
2013 4,937,887 23,222 - - 4,914,665
There are no receivables as at 30 June 2014 that are impaired.
8. OTHER CURRENT ASSETS
Consolidated
2014 2013
$ $
Prepayment 106,396 58,815
Other 162,484 205,902
268,880 264,717
9. INVENTORIES
Raw Material 49,514 59,750
Crude oil 13,952 16,805
Provision of obsolete items (13,860) (17,468)
49,606 59,087
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
10. OIL AND GAS PROPERTIES
Consolidated
$
Cost as at 30 June 2013 26,599,737
Net exchange differences (4,850,662)
Cost as at 30 June 2014 21,749,075
Depletion and impairment as at 30 June 2013 (690,760)
Charge for the year (774,522)
Depletion and impairment as at 30 June 2014 1,465,282
Net book value as at 30 June 2014 20,283,793
11. PLANT AND EQUIPMENT
Year ended 30 June 2014
At 1 July 2013 net of accumulated depreciation 1,617,096
Additions 20,461
Depreciation charge for the year (293,531)
Net exchange differences (301,518)
At 30 June 2014 net of accumulated depreciation 1,042,508
At 30 June 2014
Cost 1,819,160
Accumulated depreciation (776,653)
Net carrying amount 1,042,508
Year ended 30 June 2013
At 1 July 2012 net of accumulated depreciation 926,336
Additions 843,706
Depreciation charge for the year (142,201)
Net exchange differences (10,745)
At 30 June 2013 net of accumulated depreciation 1,617,096
At 30 June 2013
Cost 2,040,995
Accumulated depreciation (423,899)
Net carrying amount 1,617,096
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
12. EXPLORATION AND EVALUATION EXPENDITURE
Consolidated
2014 2013
$ $
Exploration expenditure carried forward in respect of areas of interest in:
Exploration and evaluation expenditure at cost 31,986,316 34,710,757
Movements during the year
Balance at beginning of year 34,710,757 25,014,521
Expenditure incurred during the year 3,954,596 16,627,189
Reclassification to oil and gas properties - (9,782,935)
Foreign exchange translation (6,679,037) 2,851,982
Balance at end of year 31,986,316 34,710,757
Oil sales revenue capitalised into exploration and evaluation expenditure for the year was $nil (2013: $1,506,193).
13. OTHER FINANCIAL ASSETS
Liquidation fund 468,155 418,349
Other 14,660 42,602
482,815 460,951
The Group has a deposit for the purpose of a Liquidation fund in the amount of $468,155. The deposit is to be used for
land restoration when required. Under the laws of Kazakhstan, the deposit must be replenished in the amount of 1% of the
annual investments.
14. TRADE AND OTHER PAYABLES
Trade creditors 474,226 889,235
Accrued expenses 73,417 364,154
Other payables 482,579 1,425,250
1,030,222 2,678,639
15. DEFERRED REVENUE
As at 1 July 1,642,837 1,192,039
Deferred during the year 868,776 9,424,424
Released during the year (1,340,499) (9,093,730)
Foreign exchange translation (326,341) 120,104
At 30 June 844,773 1,642,837
The deferred revenue refers to an amount received in advance for oil sales. As at 30 June 2014, there is 5,777 tonnes of
oil to be delivered under contracts.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
16. PROVISIONS
Consolidated
2014 2013
$ $
Current
Annual leave 58,061 86,574
58,061 86,574
Non - current
Provision for rehabilitation 294,538 452,942
294,538 452,942
The Group accrues provisions for the forthcoming costs of rehabilitation of the territory. On the basis of forecasts the
cost of rehabilitation of the oilfield would be $294,538.
Movements in rehabilitation provision
Carrying amount at beginning of the year 452,942 356,594
Unwinding of discount rate (67,650) 21,334
Foreign exchange translation (90,754) 31,305
Provision for the year - 43,709
Carrying amount at the end of year 294,538 452,942
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
17. DERIVATIVES AND OTHER FINANCIAL LIABILITIES
Consolidated
2014 2013
$ $
Current
Unsecured loans - 3,280,160
Derivative liability 229,400 763,177
229,400 4,043,337
Non-Current
Convertible note 16,931,066 8,613,730
16,931,066 8,613,730
Promissory Notes
On 28 March 2013, Jupiter entered into a second unsecured loan agreement with Mobile Energy Limited. The Loan was for US$3
million via 3 Promissory Notes, each with exactly the same terms and each with a face value of US$1m. The Loan was
repayable on 31 March 2014 or at such time that the Company raised additional funding of a minimum of $20 million via debt,
equity or other funding. The Loan had a coupon rate of 15% per annum, payable quarterly in arrears, with the first
interest payment due on 30 June 2013. During the period, the Promissory Notes were converted into Convertible Notes (Series
B).
US$9m Convertible Notes (Series A):
On 31 May 2013, Jupiter issued US$9m Series A convertible notes.
The key terms of the Convertible Notes are as follows:
· Term: 3 years
· Conversion Price: US$1.25 per share (maximum of 7.2 million shares may be issued)
· Coupon Rate: 12% per annum, payable quarterly in arrears
· The Convertible Notes may be redeemed by Jupiter at any time with a minimum of 12 months interest payable if the
Convertible Notes are redeemed within the 1st 12 months of their Term
· The issue of the Convertible Notes was carried out under Jupiter's 15% capacity in accordance with ASX Listing Rule
7.1
The breakdown of subscriptions for the Convertible Notes were as follows:
· Waterford Petroleum Limited: US$3m
· SNG Investments Limited: US$2m
· Midocean Holdings Limited: US$1m
· Mobile Energy Limited: US$3m
The net cash proceeds of the fundraising was US$5.7m, following the repayment of US$3m of the December 2013 Promissory
Notes held by Mobile Energy Limited and the payment of a fee of 3% of the proceeds of the raising (US$270,000) by the
Company to Waterford Petroleum Limited for its role in arranging the funding.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
US$6.5m Convertible Notes (Series B)
On 23 September 2013, the Company announced details regarding the issue of US$6.5million of Series B Convertible Notes,
issued on 20 September 2013. The key terms of these Convertible Notes were as follows:
· Term: 3 years
· Conversion Price: US$1.25 per share (maximum of 5.2 million shares may be issued)
· Coupon Rate: 12% per annum, with the interest accruing from and including the Issue Date until the earlier of the
Conversion Date, Redemption Date or Maturity Date of the Note.
· The Convertible Notes may be redeemed by Jupiter at any time with a minimum of 12 months interest payable if the
Convertible Notes are redeemed within the 1st 12 months of their Term
· The issue of the Convertible Notes is carried out under Jupiter's 15% capacity in accordance with ASX Listing Rule
7.1
The breakdown of subscriptions for the Convertible Notes is as follows:
· Waterford Petroleum Limited: US$1.5m
· Mid Ocean Limited US$0.5m
· Mobile Energy Limited: US$4m
· Other Private Investors: US$0.5m
The net cash proceeds of the fundraising was US$3.305m, following the repayment of US$3m of Promissory Notes held by Mobile
Energy Limited and the payment of a fee of 3% of the proceeds of the raising (US$195,000) by the Company to Waterford
Petroleum Limited for its role in arranging the funding.
The holders of Series A Convertible Notes issued on 31 May 2013 also agreed to convert their notes to Series B Convertible
Notes, effective from 20 September 2013.
This means that all interest payable on the entire US$15.5m Convertible Notes now outstanding will be deferred and accrue
from and including the Issue Date of the Series B Convertible Notes until the earlier of the Conversion Date, Redemption
Date or Maturity Date of the Note. However, if there is a capital raising prior to the conversion of the notes and the
raising is at less than US$1.25 per share, then the note holders can elect to convert the notes at the lower price, subject
to shareholder approval.
Valuation Techniques of Convertible Notes
The Notes have an embedded derivative in the form of a call option for the holder to convert the Notes at US$1.25 into
Jupiter ordinary shares.
The convertible equity feature of the Notes has been separated from the liability component of the Notes for financial
reporting purposes. The call option to convert the notes into shares does not meet the definition of an equity instrument,
as the exercise price is denominated in foreign currency to the company's functional currency. The convertible call option
is classified as a Derivative liability and measured at fair value through the income statement.
The Derivative component of the Notes was valued using the Black Scholes option valuation methodology. The Black Scholes
option valuation methodology calculates the expected benefit from acquiring the shares outright less the present value of
paying the exercise price for the options at expected exercise date. An input into the Black Scholes option valuation is
the expected share price volatility over the remaining term of the options. The expected share price volatility used in the
option valuation at reporting date was 55% which was based on historical share price volatility.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
The fair value of the embedded derivative is sensitive to changes in share price volatility. The table below outlines the
impact a change in the share price volatility input has on the fair value of the embedded derivative.
30 June 2014$
15% increase in volatility 263,810
15 % decrease in volatility (194,990)
Fair value hierarchy
All financial instruments, such as the Series B convertible notes, for which fair value is recognised or disclosed are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to
the fair value measurement as a whole:
Level 1 - Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities
Level 2 - Valuation techniques (for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable)
Level 3 - Valuation
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