SOLO.L Regulatory News (SOLO)

22 Feb 2007 11:10

St James's Energy PLC22 February 2007 Company number 05542880 St James's Energy plc REPORT AND FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006 TABLE OF CONTENTS Pages Directors, advisers and officers 2 Chairman's statement 3 Directors' report 4 Directors' responsibilities in the preparation of financial statements 7 Independent auditors' report 8 Income statement 10 Balance sheet 11 Statement of changes in equity 12 Cash flow statement 12 Notes to the financial statements 13 DIRECTORS, ADVISERS AND OFFICERS DIRECTORSChris Lambert (Chairman)Kiran Morzaria (Executive Director)Tim Wall (Non - Executive Director) COMPANY SECRETARY Caroline Owen REGISTERED OFFICE Level 5, 22 Arlington StreetLondonSW1A 1RD NOMINATED ADVISER AND BROKER Nabarro Wells & CoSaddlers HouseGutter LaneLondonEC2V 6HS AUDITORS MRI Moores Rowland LLP3 Sheldon SquareLondonW2 6PS SOLICITORS Wedlake Bell52 Bedford RowLondonWC1R 4LR BANKERS HSBC Bank plc39 Tottenham Court RoadLondonW1T 2AR CHAIRMAN'S STATEMENT St James's Energy plc was incorporated on the 22 August 2005, with the view tomaking investments in the upstream energy and utilities sector. Sinceincorporation the company successfully listed on AIM on 19 May 2006, havingraised gross funds of £4.3m. Since May 2006 the Directors have been pursuing the company strategy byreviewing a number of up stream energy opportunities where a considerable amountof investment has already occurred with the anticipation that revenue stream isnear. These projects have varied from traditional coal based power stations andBio Diesel projects to Geothermal Reservoir Technology and Ground Source Heatpumps, all of which had some excellent merits but did not match the investmentcriteria of St James's Energy. Post the period end we embarked on detailed negotiations with a renewable energytechnology company which had significant market potential. During the duediligence stage of the process the Directors determined that the transaction maynot deliver above average returns that our shareholders would require and as aconsequence the Company withdrew form negotiations. During this process the Directors utilised the advice of various industryspecific consultants in reviewing and concluding on the validity of theinvestment opportunities, their current and future usefulness, market potentialand potential revenue streams. Operational and Financial Review During the course of the period the Company received investment income of£61,951 and incurred administrative expenses of £146,649 resulting in a loss forthe period of £84,698. The main administrative expenses consisted of £26,000 ofDirectors fees, £24,217 of industry specific consultant fees, £33,000 of fullyserviced office fees and, £36,458 of irrecoverable VAT. Chris Lambert Non Executive Chairman DIRECTORS' REPORT The directors submit their report and the financial statements of St James'sEnergy plc for the period ended 31 August 2006. St Jame's Mining Limited was incorporated in the United Kingdom under theCompanies Act 1985 on 22 August 2005. The company changed its name to StJames's Mining Limited on 31 August 2005, then to St James's Mining plc on 3November 2005 and then to St James's Energy plc on 29 March 2006. The address ofthe registered office is given on page 2. The nature of the company'soperations and its principal activities are set out below. PRINCIPAL ACTIVITIES The company's principal activities during the period were the raising of equityand reviewing investments opportunities in the upstream energy and utilitiessector. RESULTS: OPERATING AND FINANCIAL REVIEW AND DIVIDENDS The company has not made any acquisitions during the period since listing on 19May 2006 and therefore has not been trading. The company's focus has been toreview potential investment opportunities in the upstream energy sector pursuantto its investment strategy. The company's loss for the period was £84,698. Interest income on cash depositswas £61,951. The major expenditures have been directors' fees of £26,000,consultancy fees of £24,217 and office rent of £33,000. The directors have not declared a dividend for the period. KEY PERFORMANCE INDICATORS The company has successfully raised £4.3million of gross equity funds in theperiod under review and was admitted to the AIM market on 19 May 2006. DIRECTORS The following directors have held office since 22 August 2005 Christopher Lambert - Non-executive Chairman (appointed 26 April 2006) Kiran Morzaria - Executive Director (appointed 1 September 2005) Timothy Wall - Non-executive Director (appointed 1 September 2005) Anthony Samaha (appointed 1 September 2005, resigned 1 December 2005) Gower Nominees Limited (appointed 22 August 2005, resigned 15 September 2005) DIRECTORS' INTERESTS IN SHARES AND DEBENTURES Directors' interests in the shares of the Company, including family interests,were as follows:- At 31 August 2006 At 22 August 2005 Number of Percentage (%) Number of Percentage (%) Shares SharesBeneficial and non-beneficial Kiran Morzaria 4,000,000 1.17 - - Timothy Wall * 4,000,000 1.17 - - Christopher Lambert 2,000,000 0.58 - - * Of which 4,000,000 shares are registered in a third party company,(Horseford Limited), over which Timothy Wall has an option to acquire the wholeor part of the issued share capital therein. The option expires in 2015. DIRECTORS' REPORT (continued) POLICY ON PAYMENT OF CREDITORS The company's policy is to ensure that, in the absence of dispute, all suppliersare dealt with in accordance with its standard payment practice whereby alloutstanding trade accounts are settled within the term agreed with the supplierat the time of the supply or otherwise 30 days from receipt of the relevantinvoice. Trade creditor days, based on actual average days to pay per supplierpayment history, were 41 days at 31 August 2006. SUBSTANTIAL SHAREHOLDINGS As at 11 February 2007 the company has been notified of the following interestsof 3% or more in the issued ordinary share capital of the Company: Number of Percentage Shares of issued share capitalE\* TRADE SECURITIES LIMITED a/c UNDESIGN 44,346,392 12.94%CREDIT SUISSE CLIENT NOMINEES (UK) LIMITED a/c D6M5PB 9.24% 31,666,666GILTSPUR NOMINEES LIMITED a/c BUNS 27,100,000 7.91%EUROCLEAR NOMINEES LIMITED a/c EOC01 18,160,000 5.30%SECURITIES SERVICES NOMINEES LIMITED a/c 2060038 17,000,000 4.96%T. HOARE NOMINEES LIMITED a/c THNNOM 16,160,000 4.71%BREWIN NOMINEES (CHANNEL ISLANDS) LIMITED a/c JPAL 13,800,000 4.03%SASSEY PTY LIMITED 12,000,000 3.50%FITEL NOMINEES LIMITED a/c C054696 11,900,000 3.47%FITEL NOMINEES LIMITED a/c C052452 11,000,000 3.21% FINANCIAL RISK MANAGEMENT The company's operations expose it to a variety of financial risks that includethe effects of changes in market prices of commodities, credit risks, liquidityrisks and interest rate risk. The company has in place a risk management programme that seeks to limit theadverse effect on the financial performance of the company by monitoring levelsof debt finance and the related finance costs. The company does not usederivative financial instruments to manage interest rate costs, and as such, nohedge accounting is applied. Given the size of the company, the directors have not delegated theresponsibility of monitoring financial risk management to a sub-committee of theboard. The company's finance department implements policies set by the board ofdirectors. The department has guidelines agreed by the directors to manageinterest rate risk, credit risk and circumstances where it would be appropriateto use financial instruments to manage these. Price risk The directors do not consider there is a price risk to the business. Thecompany has no exposure to equity securities price risk as it holds no listed orother equity investment. Credit risk The company has implemented policies that require appropriate credit checks tobe carried out. Where debt finance is utilised, this is subject to pre-approvalby the board of directors and such approval is limited to financial institutionswith a high rating. The amount of exposure to any individual counterparty is subject to a limit,which is reassessed annually by the board. DIRECTORS' REPORT (continued) Liquidity risk The company actively maintains its working finance that is designed to ensurethe company has sufficient available funds for operations and plannedexpansions. Interest rate cash flow risk The company has both interest bearing assets and liabilities. Interest bearingassets are only cash balances that are earning interest at a floating rate. The company has a policy of holding debt at a floating rate. The directors willrevisit the appropriateness of this policy should the company's operationschange in size or nature. The directors do not consider there to be a material cash flow risk. DIRECTORS' INDEMNITY INSURANCE Directors' and officers' liability insurance is held by the company. AUDITORS MRI Moores Rowland LLP were appointed as auditors to the company and inaccordance with section 385 of the Companies Act 1985, a resolution to reappointthem as auditors will be put to the members at the annual general meeting. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS So far as the directors are aware, there is no relevant audit information ofwhich the company's auditors are unaware, and they have taken all the steps thatthey ought to have taken as directors in order to make themselves aware of anyrelevant audit information and to establish that the company's auditors areaware of that information. By order of the board Kiran MorzariaExecutive Director DIRECTORS' RESPONSIBILITIES IN THE PREPARATION OF FINANCIAL STATEMENTS The directors are responsible for preparing the annual report and the financialstatements in accordance with applicable laws and regulations. The company financial statements are required by law and IFRS adopted by the EUto present fairly the financial position and performance of the company; theCompanies Act 1985 provides in relation to such financial statements thatreferences in the relevant part of that Act to financial statements giving atrue and fair view are references to their achieving a fair presentation. UK company law requires the directors to prepare company financial statementsfor each financial year which give a true and fair view of the state of affairsof the company and of the profit or loss of the company for that period. Inpreparing the company financial statements, the directors are required to: a. select suitable accounting policies and then apply them consistently; b. make judgements and estimates that are reasonable and prudent; c. state whether they have been prepared in accordance with IFRSs adopted by the EU; d. prepare the financial statements on the going concern basis unless it isinappropriate to presume that the company will continue in business. The directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of thecompany and to enable them to ensure that the financial statements comply withthe requirements of the Companies Act 1985. They are also responsible forsafeguarding the assets of the company and hence for taking reasonable steps forthe prevention and detection of fraud and other irregularities. The directors are responsible for ensuring that the Directors' report and otherinformation included in the annual report is prepared in accordance with companylaw in the United Kingdom. INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ST JAMES'S ENERGY PLC We have audited the company's financial statements which comprise the IncomeStatement, the Balance Sheet, Cash Flow Statement, Statement of Changes inShareholders' Equity, and the related notes. This report is made solely to the company's members, as a body, in accordancewith section 235 of the Companies Act 1985. Our audit work has been undertakenso that we might state to the company's members those matters we are required tostate to them in an auditor's report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the company and the company's members as a body, for our audit work,for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the annual report and thefinancial statements in accordance with applicable law and those InternationalFinancial Reporting Standards (IFRSs) adopted for use in the European Union areset out in the Statement of Directors' Responsibilities. We report to you our opinion as to whether the financial statements give a trueand fair view and whether the financial statements to be audited have beenproperly prepared in accordance with the Companies Act 1985, and whether theinformation given in the directors' report is consistent with the financialstatements. We also report to you if, in our opinion, the company has not keptproper accounting records, if we have not received all the information andexplanations we require for our audit, or if information specified by lawregarding directors' remuneration and other transactions is not disclosed. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the financial statements. It also includes an assessment of thesignificant estimates and judgements made by the directors in the preparation ofthe financial statements, and of whether the accounting policies are appropriateto the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financial statements. INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ST JAMES'S ENERGY PLC (CONTINUED) Opinion In our opinion: • the company financial statements give a true and fair view,in accordance with those IFRSs adopted for use in the European Union, of thestate of the company's affairs as at 31 August 2006 and of its loss for theperiod then ended; • the financial statements have been properly prepared inaccordance with the Companies Act 1985; and • the information in the directors' report is consistent withthe financial statements. MRI MOORES ROWLAND LLPRegistered AuditorChartered Accountants3 Sheldon SquareLondonW2 6PS ................................. INCOME STATEMENT FOR THE PERIOD ENDED 31 AUGUST 2006 Notes Period ended 31 August 2006 £ Revenue - Administrative expenses (146,649)Loss from operations 3 (146,649)Investment income 6 61,951 (84,698) Loss before tax Income tax expense 5 - Loss after tax (84,698) Loss for the period (84,698) Loss per shareBasic and diluted 7 0.05 pence BALANCE SHEET AS AT 31 AUGUST 2006 NOTES 2006 £ASSETS Current assetsTrade and other receivables 8 34,203Cash and cash equivalents 8 3,728,679 3,762,882 Total assets 3,762,882 LIABILITIES Current liabilities Trade and other payables 9 52,229 52,229Net current assets 3,710,653 Net assets 3,710,653 EQUITY Share capital 10 342,762Share premium reserve 11 3,399,406Share-based payment reserve 14 53,183Accumulated losses 12 (84,698)Total equity 3,710,653 The financial statements on pages 10 to 20 were approved by the board of directors and are signed on its behalf by: Kiran MorzariaExecutive Director ....................... STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 AUGUST 2006 Attributable to equity holders of the company Share Share Accumulated Share based Total Premium losses payments capital equity £ £ £ £ £Balance at 22 August 2005 - - - - -Share issue 342,762 3,937,086 - - 4,279,848Costs of share issue - (484,497) - - (484,497)Share based payments to advisors - (53,183) - 53,183 -Net loss for the period - - (84,698) - (84,698)Balance at 31 August 2006 342,762 3,399,406 (84,698) 53,183 3,710,653 CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 AUGUST 2006 Notes Period ended 31 August 2006 £OPERATING ACTIVITIES Cash used in operation 13 (128,623) NET CASH USED IN OPERATING ACTIVITIES (128,623)INVESTING ACTIVITIES Interest received 61,951NET CASH FROM INVESTING ACTIVITIES 61,951FINANCING ACTIVITIES Proceeds on issue of ordinary shares 4,279,848 Cost of issue of ordinary shares (484,497) NET CASH FROM FINANCING ACTIVITIES 3,795,351 NET INCREASE IN CASH AND CASH EQUIVALENTS 3,728,679 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - CASH AND CASH EQUIVALENTS AT END OF PERIOD 3,728,679 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006 1 SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements, the company's first, have been prepared in accordancewith and comply with International Financial Reporting Standards adopted by theEuropean Union. These financial statements are presented in Sterling since that is the currencyin which the majority of the Company's transactions are denominated. Basis of preparation The measurement basis used in the preparation of the financial statements ishistorical cost, except for financial assets at fair value through profit orloss, which have been measured at fair value. Revenue recognition Interest income is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the ratethat exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset's net carrying amount. Foreign currencies Transactions in currencies other than Sterling are recorded at the rates ofexchange prevailing on the dates of the transactions. At each balance sheetdate, monetary assets and liabilities that are denominated foreign currenciesare retranslated at the rates prevailing on the balance sheet date. Gains andlosses arising on retranslation are included in the income statement for theperiod. Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. Thecompany's liability for current tax is calculated by using tax rates that havebeen enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are recognised for all taxable temporary differences anddeferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction whichaffects neither the tax profit nor the accounting profit. Deferred tax is calculated at the tax rates that are expected to apply to theperiod when the asset is realised or the liability is settled. Deferred tax ischarged or credited in the income statement, except when it relates to itemscredited or charged directly to equity, in which case the deferred tax is alsodealt with in equity. NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006- CONTINUED 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial instruments Financial assets and financial liabilities are recognised on the Company'sbalance sheet when the Company has become a party to the contractual provisionsof the instrument. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash at bank and short termdeposits with banks and similar financial institutions. Trade and other receivables Trade and other receivables do not carry any interest and are stated at theirnominal value as reduced by appropriate allowances for estimated irrecoverableamounts. Financial liability and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the companyafter deducting all of its liabilities. Trade and other payables Trade and other payables are non interest bearing and are stated at theirnominal value. Equity instruments Equity instruments issued by the company are recorded at the proceeds received,net of direct issue costs. Share-based payments The company has applied the requirements of IFRS 2 Share-based payments. The company issues equity-settled share-based payments to certain advisors tothe company. Equity-settled share-based payments are measured at fair value atthe date of grant except if the value of the service can be reliablyestablished. The fair value determined at the grant date of equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the company's estimate of shares that will eventually vest. Fair value is measured by using the Black-Scholes option pricing model. For allgrants of share options, the fair value as at the date of grant is calculatedtaking into account the terms and conditions upon which the options weregranted. The amount recognised as an expense is adjusted to reflect the actualnumber of share options that are likely to vest, based on management's bestestimate, for the effect of non-transferability, exercise restrictions, andbehavioural considerations except where forfeiture is only due to market-basedconditions not achieving the threshold for vesting. NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006- CONTINUED 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. Critical accounting estimates and assumptions The company makes estimates and assumptions concerning the future. Theresulting accounting estimates and assumptions will, by definition, seldom equalthe related actual results. 2 BUSINESS AND GEOGRAPHICAL SEGMENTS Business segments For management purposes, the company is currently organised into one operating company in theUK and carries out only one principal activity being the making of investments in theupstream energy sector. Geographical segments The company's operations are located only in the UK. 3 LOSS FROM OPERATIONS Loss from operations has been arrived at after charging: Period ended 31 August 2006 £ Directors' fees 26,000 Consultancy costs 24,217 Office Rent 33,000 Irrecoverable VAT 36,458 Auditors' remuneration for audit services (see below) 8,000 Amounts payable to MRI Moores Rowland LLP and their associates in respect of both audit and non-audit services: 2006 £ Audit services - statutory audit 8,000 Tax services - compliance services 2,000 10,000 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006- CONTINUED 4 STAFF COSTS The average monthly number of employees (including executive directors) for the period for thecompany was 3. Period ended 31 August 2006 £Directors' remuneration 26,000 5 INCOME TAX EXPENSE Period ended 31 August 2006 £ Current tax charge - Domestic income tax is calculated at 30 percent of the estimated assessable loss for the period. The charge for the period can be reconciled to the loss per the income statement as follows: Period ended 31 August 2006 £Loss before tax (84,698) Tax at the domestic income tax rate of 30% (25,409) Tax effect of expenses that are not deductible in determining taxable profit 6,911Capital allowances (85)Tax losses carried forward 18,583 25,409 Tax expense for the period - At the balance sheet date, the company has unused tax losses of £61,943 available for offset against futureprofits. No deferred tax asset has been recognised in respect of these losses due to the unpredictability offuture profit streams. Losses may be carried forward indefinitely for use against profits of the same trade. NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006- CONTINUED 6 INVESTMENT INCOME Period ended 31 August 2006 £Interest on bank deposits 61,951 7 LOSS PER SHARE The calculation of the basic and diluted loss per share is based on the following data: Period ended 31 August 2006 £Loss Loss for the purposes of basic loss per share (net loss for the period (84,698)attributable to equity holders of the parent) Number of shares Weighted average number of ordinary shares for the purposes of basic loss per 182,171,649share Basic & diluted loss per share (pence) 0.05 Diluted loss per share is equal to the basic loss per share as there were nodilutive potential ordinary shares in issue. 8 OTHER FINANCIAL ASSETS 2006 £ Prepayments 34,203 34,203 The directors consider that the carrying amount of trade and other receivables approximates theirfair value. Bank balances and cash comprise cash held by the company treasury function. The carrying amount of these assetsapproximates their fair value. Credit risk- The company's principal financial assets are bank balances and cash, trade and other receivables, whichrepresent the company's maximum exposure to credit risk in relation to financial assets. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned byinternational credit-rating agencies. NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006- CONTINUED 9 OTHER FINANCIAL LIABILITIES 2006 £Trade payables 19,376Accruals 22,217Other tax and social security 4,686Other payables 5,950 52,229 Trade and other payables principally comprise amounts outstanding for trade purchases and ongoingcosts. The average credit period taken for trade purchases is 41 days. The directors consider that the carrying amount of trade payables approximates to their fair value. 10 SHARE CAPITAL 2006 £Ordinary shares of £0.001 each Authorised: 1,000,000,000 ordinary shares of £0.001 each 1,000,000 Issued and Fully Paid: 342,761,601 ordinary shares of £0.001 each 342,762 All of the following share capital was issued in order to incorporate the company and provideworking capital. (1) On 22 August 2005 the company issued 2 ordinary shares at £0.001 per share for cashconsideration. (2) On 27 October 2005 the company issued 53,299,998 ordinary shares at £0.001 per share for cashconsideration. (3) On 15 November 2005 the company issued 98,700,000 ordinary shares at £0.001 per share for cashconsideration. (4) On 21 March 2006 the company issued 55,000,000 ordinary shares at £0.001 per share for cashconsideration. (5) On 19 May 2006 the company issued 135,761,601 ordinary shares at £0.03 per share for cashconsideration. 11 SHARE PREMIUM RESERVE 2006 £ Balance as at 22 August 2005 - Premium arising on issue of equity shares Capital raising (135,761,601 ordinary shares issued at £0.03) 3,937,086 Expenses on issue of equity shares Legal and professional fees (484,497) Fair value of options issued to professional advisors (53,183) Balance as at 31 August 2006 3,399,406 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006- CONTINUED 11 SHARE PREMIUM RESERVE (CONTINUED) Amounts payable to MRI Moores Rowland LLP in respect of reporting accountants' services charged tothe share premium reserve during the period were £30,075 12 ACCUMULATED LOSSES 2006 £Balance at 22 August 2005 -Net loss for the period (84,698)Balance at 31 August 2006 (84,698) 13 RECONCILIATION OF LOSS FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES 2006 £Loss from operations (146,649) Adjustments for: Increase in receivables (34,203) Increase in payables 52,229 Cash used in operations (128,623) 14 SHARE-BASED PAYMENTS Details of the share options outstanding during the period are as follows: Grant Date Granted Exercised Forfeited Outstanding at Expiry Date Weighted during the during the during the 31/08/2006 average period period period exercise price 19/05/2006 5,141,424 - - 5,141,424 18/05/2011 £0.03 The options outstanding at 31 August 2006 had a weighted average exercise price of £0.03, and aweighted average remaining contractual life of 4.75 years. The company has rebutted the assumption that the fair value of goods and services received can beestimated reliably. The assumption was rebutted because the supplier of goods and services cannotplace a fair value on their goods and services supplied. Therefore the fair value is measuredindirectly using the Black-Scholes model. The inputs into the Black-Scholes model are as follows: 2006 Weighted average share price £0.03 Weighted average exercise price £0.03 Expected volatility 30% Expected life 5 years Risk free rate 4.25% Expected dividends £nil Expected volatility was determined by using the volatility rate used by listed companies in similarindustries and those companies with similar sizes. The company recognised total expenses of £53,183 relating to equity-settled share-based paymenttransactions for advisory services on its Initial Public Offering. These were off-set into the sharepremium reserve. NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 AUGUST 2006- CONTINUED 15 RELATED PARTY TRANSACTIONS Remuneration of key management personnelThe remuneration of the directors, who are the key management personnel of the company, is set outbelow in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. 2006 £ Directors' remuneration 26,000 16 ULTIMATE CONTROLLING PARTY In the opinion of the directors there is no ultimate controlling party. This information is provided by RNS The company news service from the London Stock Exchange