4 Nov 2011 12:36
4 November 2011 Red Emperor Resources NL ("Red Emperor" or "the Company") Final Results
The Company is pleased to announce its final results for the year ended 30 June 2011.
For further information please visit www.redemperorresources.com or contact:
Red EmperorGreg Bandy +61 8 9225 2826Cairn Financial Advisers LLP (Nominated Adviser)Jo Turner +44 20 7148 7900Tony RawlinsonOld Park Lane Capital plc (Broker)Luca Tenuta +44 20 7493 8188Michael ParnesTavistock CommunicationsPaul Youens +44 20 7920 3150Ed Portman
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2011
2011 2010 $ $ Revenue from continuing operations 193,655 20,512 Other income 5,947 - Finance costs (9,207) - Employee and director benefits expense (167,244) (74,400) Financial and company secretarial expenses (90,110) - Consultants (813,317) (711,214) Loss on sale of financial assets - (37,093) Audit fees (14,314) - Legal fees (63,270) - Insurance (15,596) - ASX and AIM and share registry fees (421,997) (56,249) Travel (218,970) - Accounting fees (16,898) - Occupancy expense (4,000) (24,087) Share based payments expense (583,973) - Share of net loss of associate (189,024) - Forestry expenditure written off - (55,487) Mineral project generation written off - (153,034) Exploration expenditure written off - (2,830) Unrealised FX (gain)/loss (250,230) - Other expenses (111,210) (56,544) Loss before income tax (2,769,759) (1,150,426) Income tax expense - - Loss for the year (2,769,759) (1,150,426) Exchange difference on translation of foreign (31,161) -operations Revaluation increment - 25,580 Other Comprehensive Income (31,161) 25,580 Total Comprehensive Income for the year (2,800,920) (1,124,846) Total loss attributable to the owners of Red (2,800,920) (1,124,846)Emperor Resources NL Cents. Cents. Loss per share for loss attributable to the ordinary equity holders of the company: Basic loss per share (cents per share) (3.5) (2.95) Diluted loss per share (cents per share) n/a n/a
Consolidated Statement of Financial Position
As at 30 June 2011 2011 2010 $ $ ASSETS Current Assets Cash and cash equivalents 7,942,356 60,001 Trade and other receivables 2,816,113 76,394 Total Current Assets 10,758,469 1,143,590 Non-Current Assets Financial assets at fair value through profit and 400 781,615loss Available-for-sale financial assets - 225,580 Investment accounted for using the equity method 3,208,487 - Exploration and evaluation expenditure 1,950,369 768,120 Total Non-current Assets 5,159,256 768,120 TOTAL ASSETS 15,917,725 1,911,710 LIABILITIES Current Liabilities Trade and other payables 596,964 467,025 Total Current Liabilities 596,964 467,025 TOTAL LIABILITIES 596,964 467,025 NET ASSETS 15,320,761 1,444,685 EQUITY Issued Capital 21,976,015 5,299,019 Accumulated Losses (6,649,673) (3,879,914) Reserves (5,581) 25,580 TOTAL EQUITY 15,320,761 1,444,685
Consolidated Statement of Cash Flows
For the year ended 30 June 2011
2011 2010 $ $ Cash flows from operating activities Payments to suppliers and employees (1,160,582) (482,850) Payments for exploration and evaluation - (83,734) Payments for forestry evaluation - (61,461) Payments for mineral project evaluation - (175,080) Interest received 193,655 21,125 Finance cost (9,207) - Net cash flows generated from / (used in) (976,134) (782,000)operating activities Cash flows from investing activities Payments for acquisition of financial assets (24,016) (118,339) Proceeds from sale of financial assets 1,027,927 228,835 Loans to other entities - (65,000) Payments for exploration and evaluation (1,182,250) - Payments to asset acquisition escrow account (2,206,775) - Payments for investment in associate (2,557,511) -
Net cash flows used in investing activities (4,942,625) 45,496
Cash flows from financing activities Proceeds from issue of shares and options 14,600,000 1,000 Standby loan facility funds returned - (355,000) Repayment of loan to other entities - 5,000 Payment of share issue and IPO costs (888,004) - Net cash flows from financing activities 13,711,996 (349,000) Net increase/ (decrease) in cash and cash 7,793,237 (1,085,504)equivalents Cash and cash equivalents at beginning of year 60,001 1,145,505 Effects of exchange rate changes on cash and 89,118 -cash equivalents Cash and cash equivalents at end of year 7,942,356 60,001
Consolidated Statement of Changes in Equity
For the year ended 30 June 2011
Issued Accumulated Forex Option Financial Total Capital Losses Reserve Reserve Asset Reserve $ $ $ $ $ Balance at 1 July 5,103,029 (2,729,488) - 194,990 - 2,568,5312009 Loss for the year - (1,150,426) - - - (1,150,426) Revaluation - - - - 25,580 25,580increment Total Comprehensive - (1,150,426) - - 25,580 (1,124,846)Income Transaction with their owners, in their capacity as owners: Exercise of options 1,040 - - (40) - 1,000 Lapse of options 194,950 - - (194,950) - -
Balance at 30 June 5,299,019 (3,879,914) - - 25,580 1,444,685 2010
Balance at 1 July 5,299,019 (3,879,914) - - 25,580 1,444,6852010 Loss for the year - (2,769,759) - - - (2,769,759) Exchange difference - - (31,161) - - (31,161)on foreign operations Total Comprehensive - (2,769,759) (31,161) - - (2,800,920)Income Transaction with 18,105,000 - - - - 18,105,000owner, directly recorded in equity: Issue of shares Share issue costs (1,428,004) - - - - (1,428,004)
Balance at 30 June 21,976,015 (6,649,673) (31,161) - 25,580 15,320,761 2011
Notes to the Consolidated Financial Statements
1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
Red Emperor Resources NL is a listed public company, incorporated and domiciled in Australia.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. The financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below and have been consistently applied unless otherwise stated.
The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.
Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Red Emperor Resources NL (`'company'' or `'parent entity'') as at 30 June 2011 and the results of all subsidiaries for the year then ended. Red Emperor Resources NL and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.
Intercompany transactions, balance and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction proves evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Subsidiaries are accounted for in the parent entity financial statements at cost.
Associates
Associates are all entities over which the group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The group's investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.
The group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as reduction in the carrying amount of the investment.
When the group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the group and its associates are eliminated to the extent of the group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group.
Income Tax
The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).
Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. 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 assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
Exploration and Evaluation Expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
Costs 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 mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining 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.
Investments & financial instruments
Classification
* The group classifies its investments in the following categories; * Loan receivables; * Financial assets at fair value through profit and loss; and * Available-for-sale financial assets.
The classification depends on the purpose for which the investments were acquired. Management determine the classification of its investments at initial recognition.
i. Financial assets at fair value through profit or loss
Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise.
ii. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method.
iii. Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.
Recognition and de-recognition
Regular purchases and sales of financial assets are recognised on trade-date being the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities.
Impairment
At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income.
Impairment of Assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Employee Benefits
i. Wages and salaries, annual leave and sick leave
Liabilities 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 other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.
ii. Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
iii. Share-based payments
Share-based compensation benefits are provided to employees of Red Emperor Resources NL at the Directors' discretion.
The fair value of options granted by Red Emperor Resources NL is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets).
Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the statement of comprehensive income with a corresponding adjustment to equity.
Provisions
Provisions for legal claims, service warranties and make good obligations are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even of the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision die to the passage of time is recognised as interest expense.
Cash and Cash Equivalents
For statement of cashflows presentation proposed, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in rate and bank overdrafts.
Revenue and Other Income
Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue.
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established.
Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting.
All revenue is stated net of the amount of goods and services tax (GST).
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.
Critical accounting estimates and judgments
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definitions, seldom equal the related actual results.
Key Estimate - Taxation
Balances disclosed in the financial statements and the notes thereto, related to taxation, are based on the best estimates of directors. These estimates take into account both the financial performance and position of the Group as they pertain to current income taxation legislation, and the directors understanding thereof. No adjustment has been made for pending or future taxation legislation. The current income tax position represents that directors' best estimate, pending an assessment by the Australian Taxation Office.
Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation using Black-Scholes option pricing model.
Exploration and Evaluation Expenditure
The Group capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the directors are of the continued belief that such expenditure should not be written off since feasibility studies in such areas have not yet concluded.
Segment Reporting
Operating segments are identified and segment information disclosed on the basis of internal reports that are regularly provided to, or reviewed by, the Group's chief operating decision maker which, for the Group, is the board of directors. In this regard, such information is provided using different measures to those used in preparing the Statement of Comprehensive Income and Statement of Financial Position. Reconciliations of such management information to the statutory information contained in the annual financial report have been included.
New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2011 reporting periods. The Group's assessment of the impact of these new standards and interpretations is set out below.
Affected Title of Nature of Change Application Impact on Initial Standard Affected Date * Application Standard AASB 2010-4 Further Clarifies the 1 January There will be no Amendments to disclosure 2011 impact as there (issued June Australian requirements for a has been no prior2010) Accounting change of accounting 1 January Annual Report. Standards policy in year of 2011 * AASB 1 arising from adoption. Use of There will be no the Annual deemed cost for 1 January impact as the * AASB 7 Improvements operations subject to 2011 only financial Project rate regulation. instruments the * AASB 101 1 January entity holds are First-time Emphasises the 2011 cash and cash * AASB 134 Adoption of interaction between equivalents and Australian quantitative and these are Accounting qualitative adequately Standards disclosures and the disclosed. nature and extent of Financial risks associated with This has affected Instruments: financial instruments. the layout of the Disclosures Statement of Clarifies that an changes in equity Presentation entity will present an with the FX of Financial analysis of other Translation Statements comprehensive income reserve shown for each component of separately. Interim equity either in the Financial notes or statement of On adoption, any Reporting changes in equity. significant events or Provides guidance to transactions will illustrate how to need to be apply disclosure adequately principles for disclosed and significant events and explained in the transactions. Interim Financial Report. AASB 9 Financial Amends the 1 January Due to the recent(issued Instruments requirements for 2013 release of these December classification and amendments and 2010) measurement of that adoption is financial assets only mandatory for the 30 June 2014 year end, the entity has not yet made an assessment of the impact of these amendments. AASB 124 Related Party Clarifies the 1 January As this is a (issued Disclosures definition of a 2011 disclosure December related party standard only, 2009) there will be no impact on amounts recognised in the financial statements.
AASB 10 Consolidated Builds on existing 1 January Due to the recent
Financial principles by 2013 release of these (issued Statements identifying the amendments and September concept of control as that adoption is 2011) the determining factor only mandatory in whether an entity for the 30 June should be included 2014 year end, within the the entity has consolidated financial not yet made an statements of the assessment of the parent company. impact of these Provides additional amendments. guidance to assist in the determination of control. AASB 11 Joint Provides for a 1 January Due to the recent Arrangements realistic reflection 2013 release of these (issued of joint arrangements amendments and September by focussing on the that adoption is 2011) rights and obligations only mandatory of the arrangement, for the 30 June rather than its legal 2014 year end, form. Addresses the entity has inconsistencies in the not yet made an reporting of joint assessment of the arrangements by impact of these requiring a single amendments. method to account for interests in jointly controlled entities. AASB 12 Disclosure of Updates disclosure 1 January As this is a interest in requirements for all 2013 disclosure (issued other forms of interests in standard only, September entities other entities there will be no 2011) including impact on amounts subsidiaries, joint recognised in the arrangements, financial associated and statements. unconsolidated structured entities. IAS 1 IASB and FASB Requires companies 1 July 2012 As this is a Align preparing financial disclosure (issued 16 presentation statements in standard only, June 2011) requirements accordance with IFRSs there will be no for other to group together impact on amounts comprehensive items within OCI that recognised in the income may be reclassified to financial the profit or loss statements. section of the income statement. The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements AASB 119 Employee Clarifies the 1 January Due to the recent Benefits accounting for 2013 release of these (issued pensions and other amendments and September post employment that adoption is 2011) benefits. only mandatory for the 30 June 2014 year end, the entity has not yet made an assessment of the impact of these amendments. AASB 7 Financial Deletes various 1 January There will be no Instruments disclosures relating 2011 impact on initial Disclosures to credit risk, adoption to renegotiated loans and amounts receivables and the recognised in the fair value of financial collateral held statement as the amendments result in fewer disclosures. AASB 1054 Australian Moves additional 1 July 2011 When this (issued May Additional Australian specific Standard is 2011) Disclosures disclosure adopted for the requirements for first time for for-profit entities the year ended 30 from various June 2012, the Australian Accounting financial Standards into this statements will Standard as a result no longer include of the Trans-Tasman disclosures about Convergence Project. capital and other Removes the expenditure requirement to commitments as disclose each class of these are no capital commitment and longer required expenditure commitment by AASB 1054. contracted for at the end of the reporting period (other than commitments for the supply of inventories).
All other pending Standards issued between the previous financial report and the current reporting dates have no application to the Group.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates (`the functional currency'). The consolidated financial statements are presented in Australian dollars, which is Red Emperor Resources NL's functional and presentation currency.
Business combinations
The acquisition method of accounting is used to account for all business combinations. Consideration is measured at the fair value of the assets transferred, liabilities incurred and equity interests issued by the group on acquisition date. Consideration also includes the acquisition date fair values of any contingent consideration arrangements, any pre-existing equity interests in the acquiree and share-based payment awards of the acquiree that are required to be replaced in a business combination. The acquisition date is the date on which the group obtains control of the acquiree. Where equity instruments are issued as part of the consideration, the value of the equity instruments is their published market price at the acquisition date unless, in rare circumstances it can be demonstrated that the published price at acquisition date is not fair value and that other evidence and valuation methods provide a more reasonable measure of fair value.
Identifiable assets acquired and liabilities and contingent liabilities assumed in business combinations are, with limited exceptions, initially measured at their fair values at acquisition date. Goodwill represents the excess of the consideration transferred and the amount of the non-controlling interest in the acquiree over fair value of the identifiable net assets acquired. If the consideration and non-controlling interest of the acquiree is less than the fair value of the net identifiable assets acquired, the difference is recognised in profit or loss as a bargain purchase price, but only after a reassessment of the identification and measurement of the net assets acquired.
For each business combination, the group measures non-controlling interests at either fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets.
Acquisition-related costs are expensed when incurred. Transaction costs arising on the issue of equity instruments are recognised directly in equity and transaction costs arising on the issue of debt as part of the consideration are accounted for in accordance with note 1(r).
Where the group obtains control of a subsidiary that was previously accounted for as an equity accounted investment in associate or jointly controlled entity, the group remeasures its previously held equity interest in the acquiree at its acquisition date fair value and the resulting gain or loss is recognised in profit or loss. Where the group obtains control of a subsidiary that was previously accounted for as an available-for-sale investment, any balance on the available-for-sale reserve related to that investment is recognised in profit or loss as if the group had disposed directly of the previously held interest.
Where settlement of any part of the cash consideration is deferred, the amounts payable in future are discounted to present value at the date of exchange using the entity's incremental borrowing rate as the discount rate.
Assets and liabilities from business combinations involving entities or businesses under common control are accounted for at the carrying amounts recognised in the group's controlling shareholder's consolidated financial statements.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
Earnings per share
i. Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
ii. Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Parent entity financial information
The financial information for the parent entity Red Emperor Resources NL, disclosed in note 23 has been prepared on the same basis as the consolidated financial statements.
The financial report was authorised for issue on 30 September 2011 by the board of directors.
1. Loss per Share (EPS)
Basic earnings per share amounts are calculated by dividing net profit/ (loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
The following reflects the income and share data used in the total operations basic and diluted earnings per share computations:
2011 2010 $ $ Loss after income tax (2,769,759) (1,150,426)
Basic loss per share attributable to equity holders (0.035) (0.0295)
Diluted loss per share attributable to equity holders n/a n/a
No. No. Weighted average number of ordinary shares 79,198,915 39,005,003 outstanding during the year used in calculating basic and diluted loss per share
As the Group has made a loss for the year ended 30 June 2011, all options on issue are anti dilutive and have not been included in the calculation of diluted loss per share. These options could potentially dilute basic loss per share in the future.
There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements.
2. Dividends Paid or Proposed
The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report.
3. Events occurring after the reporting period
As a result of the magnitude of the Company's proposed investment pursuant to the Puntland Acquisition Agreement and the Georgian Acquisition Agreement, the Company was required to obtain Shareholder approval for a change of nature of activities and to comply with Chapters 1 and 2 of the ASX Listing Rules.
On 5 July 2011 the Company issued a Prospectus to raise a total of $1 million at $0.35. As part of the Company's recompliance with Chapters 1 and 2 of the ASX Listing Rules.
On 15 July 2011 the Company held a General Meeting of Shareholders to approve a change of nature in accordance with Chapters 1 and 2 of the ASX Listing Rules amongst other things and all resolutions were passed by a show of hands. As part of the General Meeting held on 15 July 2011, shareholders approved the issue of 4.5 million Unlisted Options (exercisable at $0.30 on or before 30 June 2012) to directors.
The Company successfully completed its capital raising of $1 million, satisfied its obligations under Chapters 1 and 2 of the ASX listing Rules and was requoted on the ASX on 27 July 2011.
On 14 July 2011 the first well in Georgia spudded and has since reached a depth of 1,452m to date.
On 18 August 2011 the Company announced its joint venture partner in Puntland, Africa Oil Corp had signed a drilling service contract. Spudding of the first well in Puntland, Somalia is expected to occur in Q4 2011 calendar year.
No other matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.
4. Notice of AGM
The Annual General Meeting for the Company has been convened for 09:00 (WST) on Friday, 4 November 2011 to be held at 35 Richardson Street, West Perth Western Australia.
XLON