Notes to Consolidated Financial Statements

Note 1: Significant accounting policies

These general purpose financial statements for the interim half-year reporting period ended 31 December 2021 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001, as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2021 and any public announcements made by the company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

New and amended accounting standards and Interpretations adopted

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Going concern

The Group's net loss after taxation attributable to the members of Star Phoenix Group Ltd for the period end to 31 December 2021 was US$124,732 (loss for half-year ended 31 December 2020: US$2,221,335). The Group also reports a net liability position of US$4,400,572 (30 June 2021: net liability of US$3,942,962) and cash of US$1,517,581 (30 June 2021: US$1,911,072).

These conditions indicate a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

The ability of the group to continue as a going concern is principally dependent upon:

-     The Group receiving funds from the disposal of the remaining assets classified as held for sale;

The Group's ability to raise additional funds through equity or debt financing;

-     The Group achieving a favourable outcome in regards to the Landocean Arbitration and/or being ableto negotiate a repayment plan with the tax authorities both in Australia and Trinidad in regards to settlement of the outstanding withholding tax balances.

The financial statements have been prepared on the basis that the group is a going concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business.

The Directors believe that sufficient funds will be available to meet the Group's working capital requirements and to continue operations in the normal course of business as at the date of this report, due to the following factors:

-     Expecation to raise funds through the disposal of assets held for sale at period end;

-     The ability to raise additional capital through equity or debt financing;

-     Achieve a favourable outcome in relation to ongoing litigation for amounts the Group intends to recover from Land Ocean(also refer Note 14 Subsequent events) which will be used to settle the  witholding tax liabilities as disclosed in Note 10 Other liabilities $3,693,416 . Should the case outcome with Landocean be not in favour of the group, the Directors expect to be able to negotiate with the tax authorities both in Australia and Trinidad to a repayment plan to settle these liabilities.

In the event that the Company is not able to realise the above factors or secure additional funds and secure new projects, it casts significant doubt on the ability of the Group to continue as Going concern.

Should the Group not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business and at amounts that differ from those stated in the financial statements.

The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities that might be necessary if the Group does not continue as a going concern.

Non-current assets classified as held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use.  They are measured at the lower of their carrying amount and fair value less costs to sell.  For non-current assets to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable.

An impairment loss is recognised for any initial or subsequent write down of the non-current assets to fair value less costs to sell.  A gain is recognised for any subsequent increases in fair value less costs to sell of a non-current asset, but not in excess of any cumulative impairment loss previously recognised.

Non-current assets are not depreciated or amortised while they are classified as held for sale.  Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised.

Non-current assets classified as held for sale are presented separately on the face of the consolidated statement of financial position, in current assets.  The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities.

Discontinued operations

A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

·      represents a separate major line of business or geographical area of operations;

·      is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; and

·      is a subsidiary acquired exclusively with a view to re-sale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale.

When an operation is classified as a discontinued operation, the comparative consolidated statement of profit or loss and other comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year.

Note 2: Significant estimates and judgements

Impairment of rigs and related inventory

At 31 December 2021, the Directors did not deem necessary to undertake an impairment assessment during the reporting period as per AASB 136 as no impairment indicators were noted. The basis of the recoverable value remains the same as at 30 June 21 and the Company continues the sale process of the remaining three production and five drilling rigs.

Deferred tax liability

The carrying value of the deferred tax liability is US$449,153 at 31 December 2021. In the event that the manner by which the carrying value of these assets is recovered differs from that which is assumed for the purpose of this estimation, the associated tax charges may be significantly less than this amount.

Recoverability of deferred tax assets

Deferred tax assets are recognised only if it is probable that future taxable amounts will be

available to utilise those temporary differences and losses. Management considers that currently it is not probable that future taxable profits will be available to utilise those temporary differences. Judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future profits.

Allowance for expected credit losses

The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent experience and historical collection rates, the impact of the Coronavirus (COVID-19) pandemic and forward-looking information that is available. The allowance for expected credit losses is calculated based on the information available at the time of preparation.

IFRIC 23 Uncertain tax position and tax-related contingency

Following the disposal of Range Resources Trinidad Limited and the settlement of liabilities in multiple jurisdictions which formed part of the consideration for the disposal, the group has estimated that these transactions may give rise to the possible payment of withholding tax and late payment penalties. The group considers it possible that a withholding tax liability of US$1,341,122 may be payable in Australia and withholding tax liability of US$3,095,008 payable in Trinidad. As at 31 December 2021, both amounts have been provided for in full. Also refer note 2a.

COVID-19 pandemic

The impact of the COVID-19 pandemic is ongoing and it has impacted the Group financially. It is not practicable to estimate the potential impact as the situation is continuously developing and is dependent on measures imposed by the governments of different countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

Non-current assets classified as held for sale and discontinued operations

2022 and 2021: Rigs and related inventory

The Group has been marketing the rigs and equipment in the financial year, therefore all rigs and related equipment were classified as held for sale assets as it is highly probable that these assets will be sold within 12 months.

Note 2a: Restatement of comparatives

During the half year ended 31 December 2021, an error was discovered in the recognition of withholding tax payable relating to prior years. Detailed calculation were carried out in this period and  this resulted in an increase of $360,731 in the withholding tax liability for the year ended 30 June 2020, an increase of $182,803 in the withholding tax liability for the year ended 30 June 2021, an increase of $91,401 withholding tax expense for the half year ended 31 December 2020. The impact of the restatement is noted below

Note 3: Revenue

Revenue from third party services is solely generated in the Republic of Trinidad and Tobago.

Note 4: Expenses

(i)         Impairment

Following the sale of Range Resources Trinidad Limited (which held interests in the upstream assets in Trinidad) to LandOcean Energy Services Co Ltd (LandOcean), certain sums remain due and payable to the Group.

At 31 December 2020, the Board made the decision to fully impair the receivable from LandOcean to adhere to accounting standards given the situation and age of the balances, resulting to an impairment of US$1,722,462. No further payments have been received to date.

In the current year, the group's legal advisers Dentons UK and Middle East LLP have now filed an arbitration request in the London Court of International Arbitration against LandOcean. The group remains confident that part of these sums might be recovered.

Note 5: Contingent liabilities
There are no contingent liabilities as at 31 December 2021.

Note 6: Discontinued operations

The discontinued operations relate to Range Resources Drilling Services Ltd

Note 7a: Assets  classified as held for sale

During the half year ended 31 December 2021, management have not carried out any assessment to determine the fair value less costs to sell for these assets. The Directors have determined the carrying amount of these assets approximates the fair value less costs to sell.

Note 7b: Liabilities directly associated with assets classified as held for sale

Note 8: Trade and other receivables

(i) Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. 

Fair value approximates the carrying value of trade and other receivables at 31 December 2021.

Note 9: Property, plant & equipment

Note 10: Trade and other payables

(i)            Amount relates to withholding taxes payable as a result of debt eliminations.

Note 11: Provisions

(i) Provision relates to an estimate of the potential land taxes that may be payable by the Company on expired exploration licences in Trinidad.

Note 12: Contributed equity

Note 13: Segmental reporting

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, plant and equipment. While most assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of payables, employee benefits, accrued expenses, provisions.

(i) Unallocated assets

Note 14: Events after the reporting date

Annual general meeting

On 31 January 2022, the Board of the company advised that its Annual General Meeting ("AGM") was held earlier that day. The sole resolution proposed related to the re-election of Dr Mu (Robin) Luo as a director. The resolution was passed and therefore the composition of the Board remains unchanged.

Georgia litigation

The Company and Strait Oil and Gas Limited (SOG), a private company incorporated in Gibraltar, in which Star Phoenix holds a 65% interest had been working with their legal advisers on progressing an arbitration claim against the government of Georgia.

Further to the Company's announcements, negotiations with parties for securing funds to commence the Georgia litigation process are still in progress. However, progress in respect of the arbitration claim is taking longer than originally anticipated due to the disruption resulting from the COVID-19 pandemic. The Company continues to be advised by Enyo Law LLP in relation to this process.

LandOcean outstanding payment

On 14 July 2021, the Company announced that its legal advisers Dentons UK and Middle
East LLP have now filed an arbitration request in the London Court of International
Arbitration ("LCIA"), which officially marks commencement of arbitration proceedings against LandOcean. The final court hearing is scheduled for May 2022 by LCIA and the decision of Stage 1 of the Arbitration will be most likely made by LCIA during the final court hearing if no other circumstances change in the following months.

As detailed in the Company's announcement on 7 September 2021, Star Phoenix continues to pursue the monies owed to it by LandOcean Energy Service Co. Limited. A court trial is scheduled by the London Court of International Arbitration in Q2 2022. At this point in time, the Directors remain confident that the Stage 1 claims will be recovered in this financial year, however there can be no guarantee that will be achieved. The cash preservation measures previously stated remain in place while this process is ongoing.

Directors' Declaration

The Directors of the company declare that:

The financial statements, comprising the consolidated statement of profit or loss and other comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity, accompanying notes, are in accordance with the Corporations Act 2001 and:

a)   comply with Accounting Standard AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

b)   give a true and fair view of the consolidated entity's financial position as at 31 December 2021 and of its performance for the half-year ended on that date.

In the Directors' opinion that subject to the matters disclosed in Note 1 there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:

Zhiwei Gu

Chairman

28 April 2022