Final Results

RNS Number : 7617I

Chalkwell Investments PLC

20 June 2011

 



20June 2011

Chalkwell Investments plc

("Chalkwell" or the "Company")

Final Results for the Seven Month Period Ended 31 December 2010

Chalkwell today announces its final results for the seven month period ended 31 December 2010. These figures are being released in accordance with the change of financial year end as reported on 14 February 2011.

The Company would also like to inform shareholders that it will tomorrow post its annual report and accounts for the period ended 31 December 2010, notice of annual general meeting and proxy to shareholders.  The annual general meeting of the Company will be held at the offices of Merchant Securities Limited at 51-55 Gresham Street, London EC2V 7HQ on 14 July 2011.

In addition downloadable versions of this announcement, the report and accounts and the notice of annual general meeting will shortly be available from the following web address:

 http://www.chalkwellinvestementsplc.co.uk 

ENDS

For further information please contact:

Chalkwell Investments plc Bruce Evers, Executive Chairman	[phone]
Merchant Securities Limited (Nominated Adviser and Broker) Lindsay Mair/Virginia Bull Old Park Lane Capital Luca Tenuta	+ 44(0)20 7628 2200 [phone]
Bishopgate Communications Nick Rome/Michael Kinirons	[phone]

Chairman's Review

Financial Results

The accounts for the period to 31 December 2010 show a loss of £152,826; loss per share was 17p.

Business Review

During the period the Company continued to pursue its stated investment strategy to seek suitable acquisition opportunities in the natural resources sector in order to build value for its shareholders.

As such the Company has focused on identifying and assessing acquisition opportunities in the natural resources sector on a worldwide basis. We have strengthened the Board with John Roddison joining the Company in November 2010. Additionally Reinhold Heus and I joined the Board in December bringing with us over 50 years of experience in the oil and gas sector.

Shareholders will be aware that during the period under review and following the period end, the Company raised a total of £2.6 million (£600,000 before the period end and £2 million after the period end). Of those funds, Chalkwell has lent £1,760,674 in secured loans to Core Oil & Gas Inc ("Core") to assist it with the acquisition of a 33.3 per cent working interest and a 25 per cent net revenue interest in respect of Mustang Island in Kleburg County, Texas (State of Texas Oil and Gas Lease numbers 108873 and 108877) ("Mustang Assets") and to enable Core to pay for drilling commitments in connection with the Mustang Island assets. The Mustang Island assets are shallow inshore oil and gas assets, located in the Gulf of Mexico, with infrastructure in place and nearby oil and gas pipelines available.

The financial statements have been prepared on a going concern basis.

When assessing the foreseeable future, the directors have looked at a period of twelve months from the date of approval of this report. The financial statements of the Company have been prepared on the basis that the Company will be able to discharge its forward obligations and continue its business activities. The ability of the Company to carry out its planned business objectives is dependent on the ability to raise adequate financing from shareholders, other investors and lenders and to control expenditure in relation to existing cash resources. There can be no assurances that the Company will continue to obtain additional financial resources necessary and in the short term, achieve positive cash flows.

Post period, in January 2011 Mr Knifton and Mr Weller tendered their resignations from the Board of Directors.  The remaining Directors would like to express their appreciation to Mr Knifton and Mr Weller for their contribution since their appointment.

As announced on 16 May 2011 Core has granted an option to Chalkwell to acquire the Mustang Assets.  The proposed transaction would be classified as a reverse takeover of Chalkwell under the AIM rules. Chalkwell is working with its professional advisers on the necessary documentation to allow it to complete the acquisition of the assets from Core and seek readmission of its ordinary shares to trading on AIM.

The Company became an investing company for the purposes of the AIM Rules following the liquidation of its principal trading subsidiary in January 2010. Pursuant to Rule 15 of the AIM Rules, trading in the Company's shares and warrants was suspended on 26 January 2011 owing to the Company having been an investing company for 12 months. The Company now has six months from the date of suspension to complete a transaction which constitutes a reverse takeover in accordance with Rule 14 of the AIM Rules or trading in the Company's shares and warrants will be cancelled.

The Board is enthused about the potential of the Mustang Island Assets and looks forward to completing this transaction in the near future.

I would like to thank you, our shareholders, for your continued support throughout the period  The Board is working hard to ensure the Core transaction is completed and the Company can move forward with the accelerated development of Mustang Island towards commercial production.

On behalf of the board

B.G.A Evers

Executive Chairman

Statement of comprehensive Income

for the 7 months ended 31 December 2010

							7 months to 31 Dec 2010		Year to 31 May 2010
					Notes		£		£
Revenue			-Discontinued		4		-		229,182
Cost of sales			-Discontinued		4		-		(178,640)
Gross profit							-		50,542
Administration costs			-Discontinued		4		-		(261,300)
			-Continuing		4		(152,826)		(32,389)
Operating loss					6		(152,826)		(243,147)
Analysed as:
Operating loss before exceptional items
Exceptional items					7		-		963,896
Operating profit/(loss) after exceptional items							(152,826)		720,749
Financial income					8		-		-
Financial expense					8		-		(5,157)
Profit/(loss) before tax							(152,826)		715,592
Income tax credit/(expense)					9		-		-
Profit/(loss) for the period							(152,826)		715,592
Since there is no other comprehensive income, the profit/(loss) for the period is same as the total comprehensive income for the period.
Attributable to:
Owners of the parent							(152,826)		715,592
Profit/(Loss) per share
Basic							(17 pence)		1,500 pence
Diluted							(17 pence)		96 pence
Basic and diluted			(prior to exceptional items)
			Discontinued activities				-		(452 pence)
			Continuing activities				(17 pence)		(68 pence)

Statement of Financial Position

for the 7 months ended 31 December 2010

				31 Dec  2010		31 May  2010
				£		£
Assets
Non-current assets				-		-
Current assets
Trade and other receivables				123,397		101,756
Debtors: Amounts falling due after more than one year				308,608		-
Cash and cash equivalents				133,396		-
				565,401		101,756
Total assets				565,401		101,756
Equity and liabilities
Equity attributable to the Company's equity holders
Share capital				1,269,821		1,267,490
Share premium				1,796,690		1,189,106
Shares to be issued				-		12,033
Retained earnings				(2,625,959)		(2,473,133)
				440,552		(4,504)
Current liabilities
Trade and other payables				43,202		24,613
Non-current liabilities
Convertible loan notes				81,647		81,647
Total liabilities				124,849		106,260
Total equity and liabilities				565,401		101,756

Statement of changes in equity

for the 7 months ended 31 December 2010

	Called up
	share		Share		Shares to		Retained		Total
	capital		premium		be issued		earnings		equity
	£		£		£		£		£
Balance at 1 June 2009	1,267,410		1,182,681		-		(3,188,725)		(738,634)
Changes in equity
Transactions with owners
Issue of share capital	80		6,425		-		-		6,505
Shares to be issued	-		-		12,033		-		12,033
Total comprehensive income	-		-		-		715,592		715,592
Balance at 31 May 2010	1,267,490		1,189,106		12,033		(2,473,133)		(4,504)
Changes in equity
Transactions with owners
Issue of share capital	2,331		607,584		(12,033)		-		597,882
Total comprehensive income	-		-		-		(152,826)		(152,826)
Balance at 31 December 2010	1,269,821		1,796,690		-		(2,625,959)		440,552

Share Capital

The amount subscribed for shares at nominal value.

Share Premium

This represents the excess of the amount subscribed for share capital over the nominal value of the respective shares net of share issue expenses.

Share Capital to be Issued

This represents the amounts of shares committed to be issued at the period end but not yet issued.

Retained earnings

Cumulative loss of the company attributable to owners of the parent.

Statement of Cash flow

for the 7 months ended 31 December 2010

		7 months to 31 Dec 10		Year to  31 May 10
		£		£
Cash flows from operating activities
Cash (used in)/generated from operations		(465,521)		46,281
Interest paid		-		(5,157)
Net cash from operating activities		(465,521)		41,124
Cash flows from investing activities
Purchases of property, plant and equipment		-		(42,063)
Net cash from investing activities		-		(42,063)
Cash flows from financing activities
Amount introduced by directors		1,035		-
Net proceeds on issues of shares		597,882		-
Net cash from financing activities		598,917		-
Increase in cash and cash equivalents		133,396		(939)
Cash and cash equivalents at beginning of period		-		939
Cash and cash equivalents at end of period		133,396		-

Notes to the financial statements

for the 7 months ended 31 December 2010

	7 months to 31 Dec 2010			Year to 31 May 2010
1.       Loss from operations has been arrived at after charging:	£			£
Depreciation Auditor's remuneration - Audit services - Other services	- 11,000 -			52,451 18,800 411
2.       Exceptional items

Exceptional items are events or transactions that fall within the activities of the Company and which by virtue of their size or incidence have been disclosed in order to improve a reader's understanding of the financial statements.

	7 months to  31 Dec 2010		Year to  31 May 2010
	£		£
Net liabilities reduction arising on settlement through Company Voluntary Arrangement approved on 23 March 2010	-		963,896
Total exceptional items	-		963,896

3.	Profit/(Loss) per share
		31 Dec 2010		31 May 2010
		£		£
	Profit for the purpose of basic and diluted profit for share	-		715,592
	Loss for the purpose of basic and diluted loss per share	152,826		-
	Loss before exceptional items Discontinued activities	-		(215,915)
	Continuing activities	152,826		(32,389)
	Number of shares	31 Dec 2010		31 May 2010
	Weighted average number of ordinary shares: - for the purposes of basic and diluted loss per share	No. 904,525		No. -
	- Basic	-		47,720
	- Diluted	-		747,324

4.         Convertible Loan Notes
	31 Dec 2010		31 May 2010
	£		£
At 1 June 2010	81,647		-
Additions during the period	-		81,647
At 31 December 2010	81,647		81,647

The Convertible loan notes are interest free, unsecured and repayable on 31 December 2015. A redemption premium of 20 per cent of the principal amount is to be paid by the Company on any balance of the Convertible Loan Notes not converted into New Ordinary Shares within two years from the date of issue of the Convertible Loan Notes. The noteholders will have the right to convert any amount of the principal amount of the convertible loan notes at any time within two years from date of issue of the Convertible Loan Notes into New Ordinary Shares at the exercise price of 20 pence per share. The New Ordinary shares to be issued on conversion of the Convertible Loan Notes (assuming full conversion) would amount to 408,234 New Ordinary Shares. The Convertible Loan Notes are freely transferable and may be transferred to new note holders who will then be able to exercise the conversion rights attaching to the Convertible Loan Notes.

5.          Number of Outstanding Existing Warrants at 31 December 2010:

Date of grant	At 1 June 2010	Granted	Exercised /vested	Forfeits	At 31 Dec 2010	Exercise /Share price	Exercise/ Vesting date
Warrants							From	To
08.03.06	1,083	-	-	-	1,083	36,000p	08.03.06	08.03.11
27.07.07	14,479	-	-	-	14,479	6,000p	27.07.07	27.07.12
	15,562	-	-	-	15,562
No. of Outstanding Existing Warrants at 31 May 2010.
Date of grant	At 1 June 2010	Granted	Exercised /vested	Forfeits	At 31 Dec 2010	Exercise /Share price	Exercise/ Vesting date
Warrants							From	To
08.03.06	1,083	-	-	-	1,083	36,000p	08.03.06	08.03.11
27.07.07	14,479	-	-	-	14,479	6,000p	27.07.07	27.07.12
	15,562	-	-	-	15,562

The estimated fair value of the warrant issue was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

Date of grant Share price at date of grant Exercise price Shares under warrant Expected volatility Expected dividend Contractual life Risk free rate Estimated fair value of each option

27 July 2007 2.5 pence 1.0 pence 19, 500, 000 78% Nil 5 years 5% 2.0175 pence

The expected volatility is based on historical volatility over the last 7 months. There was no charge in the period in respect of the existing warrants as it was believed that none of those warrants were exercised in the period to 31 December 2010.

Under the Company Voluntary Arrangement of 23 March 2010, additional warrants were granted:

23.03.10      3,239,697     -             -            -      3,239,697     £0.001      23.03.10     22.03.15

Included within the 3,239,697 new warrants are 239,697 relating to services that the Company has received in exchange for these warrants. The estimated fair value of the warrant issue was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

Date of grant Share price at date of grant Exercise price Shares under warrant Expected volatility Expected dividend Contractual life Risk free rate Estimated fair value of each option

23 March 2010 1.0 pence 1.0 pence 239,697 1% Nil 5 years 1.5% 0.57 pence

The expected volatility is based on historical volatility over the last 7 months adjusted for any unusual movement in the share price on the announcements of finalisation of the CVA. This resulted in an immaterial charge in the period in respect of the new warrants in the period to 31 December 2010.

6.    Related party transactions

Brown McLeod Limited a company where J. Roddison is a Director provided financial and accounting services to Chalkwell Investments PLC. During the period the value of services provided amounted to £5,000 (31 May 2010: nil). No amounts were outstanding at the period end (31 May 2010: nil)

Included within other creditors at the period end is amounts due to B.G.A. Evers of £1,035 (31 May 2010:nil) in respect of business expenses incurred personally during the period.

7.	Note to the cash flow statement
		7 months to Dec 2010		Year to 31 May 2010
		£		£
Loss for the period		(152,826)		(243,147)
Adjustments for: - Depreciation		-		52,451
Changes in working capital: - (Increase)/decrease in trade and other receivables		(330,249)		(16,076)
- Increase/(decrease) in trade and other payables		17,554		253,053
Cash generated from/(used in) operations		(465,521)		46,281

8.         Post Balance Sheet Events

On 4 February 2011 the company issued 2,222,223 Ordinary shares of 0.1p at a premium of £997,778.

On 7 February 2011 the board of Chalkwell announced it has offered Core Oil & Gas Inc a further loan of £300,000.

On 24 February 2011 the company made a further loan to Core of £428,000, as a result of unforeseen cost over-runs, taking the aggregate advanced to Core to £1,228,000 (excluding interest). The terms of the loan were the same as those of the previous loan made to Core: it was unsecured, carried interest at a rate of ten per cent per annum and was repayable on 1 October 2012 or earlier in certain circumstances.

On 29 April 2011 Chalkwell entered into an option agreement with Core, pursuant to which Core granted an option to Chalkwell to acquire the Mustang Island assets, the key terms of which are as follows:

Ÿ The option can be exercised at any time up to 31 July 2011, and must be completed within five days thereof:

Ÿ The purchase price to be:.

Ÿ Cancellation of all advances made to Core;

Ÿ Reimbursement of Core's legal fees up to £20,000;

Ÿ Payment of consultancy fees to Kevin Collins and Anthony Mason, who own   Core, of £230,000;

Ÿ Reimbursement of Core's cost in connection with re-entering the Mustang Island           assets, estimated at £159,333;

Ÿ Payment of US$1.2m of indebtness incurred by Core in acquiring the Mustang Island    assets;

Ÿ Following the acquisition of the Mustang Island assets, an ongoing royalty of 4% of all revenues therefrom, and 16.65% of revenues attributable to the interest in the Mustang             Island I-1 ST well ("I-1 well").

The Option Agreement gives certain rights and imposes certain obligations on the parties thereto for the period of the Option Agreement.

On 29 April 2011 Chalkwell entered into a promissory note with Core, pursuant to which Core agreed to grant security over the advances made to Core by Chalkwell, on the following key terms:

Ÿ Principal £1,568,000 (to include expected further advance to be made to Core);

Ÿ Maturity date 31 January 2012;

Ÿ Security to be granted over a portion of Core's interest in the I-1 well, ranked behind the charge given to the vendors of the Mustang Island assets;

Ÿ Interest rate 0.55% per annum.

On the same day and further to the above, Core and Chalkwell entered into a Deed of Trust, Mortgage, assignment of Production, Security Agreement and Financing Statement which provides security over the I-1 well, for the loans previously provided to Core by Chalkwell amounting to £1,228,000, the effect of which is that, the loans are now secured, although the original signed contract must be notarized and the charge recorded Chalkwell's security sits behind a charge on the I-1 well held by WellMaster Exploration & Production Co., LLC, from which Core bought a portion of its working interest, in the amount of $866,750, being the amount that it is owed. The Directors of Chalkwell are of the view that the value of the I-1 well exceeds the £2 million (approximately) of liens secured against it.

On 26 May 2011 Chalkwell announced that it had raised £1 million before expenses through the issue of 2,857,143 new ordinary shares of 0.1p each in the Company at a price of 35p per share ("Subscription"). In addition the Company has issued the same number of warrants to subscribing shareholders on the basis of one warrant per ordinary share. The warrants are exercisable at 45p per share for a period of one year from the date of issue. Following the Subscription, the Company has 7,532,223 ordinary shares in issue.

Also following the Subscription, funds under the discretionary management of T1ps Investment Management ("T1ps"), hold 1,285,476 Ordinary Shares (being 17.06 per cent. of the issued share capital of Chalkwell). Chalkwell has made secured advances to Core of £1,760,674 to enable Core to pay for drilling commitments in connection with the Mustang Island assets. The proceeds will also be utilised to provide working capital for Chalkwell itself - including the payment of professional fees associated with seeking readmission of its ordinary shares to trading on AIM.

In this regard, Chalkwell is working with its professional advisers on the necessary documentation to allow it to complete the acquisition of Core and seek readmission of its ordinary shares to trading on AIM which is expected to be combined with a fund raising to provide working capital for the enlarged group.

 

END

 

 

FR URASRANANUAR