NOTES TO THE FINANCIAL STATEMENTS

 

1.      Accounting policies

a)         General information        

Tower Resources plc is a public company incorporated in the United Kingdom under the UK Companies Act. The address of the registered office is 134 Buckingham Palace Road, London, SW1W 9SA. The Company and the Group are engaged in the exploration for oil and gas.

These financial statements are presented in US dollars as this is the currency in which the majority of the Group's expenditures are transacted and the functional currency of the Company and have been prepared in accordance with UK-adopted International Accounting Standards, and in compliance with the requirements of the Companies Act 2006.

b)        Basis of accounting and adoption of new and revised standards

Changes in accounting policies

A number of new standards are effective from 1 January 2022 but they do not have material effect on the Group's financial statements.

New and amended standards

The following amended standards and interpretation are effective for financial years commencing on or after 1 January 2023. The Group does not intend to adopt the standards below, before their mandatory application date.

 

Standard	Description	IASB Issue Date	IASB Effective Date	Secretary of State Adoption Date
IAS 1 (amendments)	Classification of Liabilities as Current or Non-current.	23 January 2020	1 January 2023	Endorsed
IFRS 17	Insurance contracts.	25 June 2020	1 January 2023	Endorsed
IAS 12 (amendments)	Deferred tax related to assets and liabilities arising from a single transaction.	7 May 2021	1 January 2023	Endorsed
IAS 8 (amendments)	Definition of accounting estimates.	12 February 2021	1 January 2023	Endorsed
IAS 1 and IFRS Practice Statement 2 (amendments)	Disclosure of accounting policies.	12 February 2021	1 January 2023	Endorsed
IFRS 16 (amendments)	Lease Liability in a Sale and Leaseback		1 January 2024

Future accounting pronouncements

The Company intends to adopt the above listed standards and interpretations in its financial statements for the annual period beginning 1 January 2023. The Company does not expect the implementation to have a material impact on the financial statements.

c)         Going concern

The Group will need to complete a farm-out and/or another asset-level transaction within the coming months, or otherwise raise further funds, in order to meet its liabilities as they fall due, particularly with respect to the forthcoming drilling programme in Cameroon. The Directors believe that there are a number of options available to them through either, or a combination of, capital markets, farm-outs or asset disposals with respect to raising these funds. There can, however, be no guarantee that the required funds may be raised or transactions completed within the necessary timeframes, which raises uncertainty as to the application of going concern in these accounts. Having assessed the risks attached to these uncertainties on a probabilistic basis, the Directors are confident that they can raise sufficient finance in a timely manner and therefore believe that the application of going concern is both appropriate and correct.

This point is also discussed in note 2 of the financial statements.

d)        Basis of consolidation

The consolidated financial statements incorporate the accounts of the Company and its subsidiaries and have been prepared by using the principles of acquisition accounting ("the purchase method") which includes the results of the subsidiaries from their date of acquisition. Intra-group sales, profits and balances are eliminated fully on consolidation.

The results of subsidiaries acquired or disposed of are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

As a Consolidated Statement of Comprehensive Income is published, a separate Statement of Comprehensive Income for the Parent Company has not been published in accordance with section 408 of the Companies Act 2006.

e)        Jointly controlled operations

Jointly controlled operations are arrangements in which the Group holds an interest on a long-term basis which are jointly controlled by the Group and one or more ventures under a contractual arrangement. The Group's exploration, development and production activities are sometimes conducted jointly with other companies in this way. Since these arrangements do not constitute entities in their own right, the consolidated financial statements reflect the relevant proportion of costs, revenues, assets and liabilities applicable to the Group's interests.

f)         Oil and Gas Exploration and Evaluation Expenditure

Costs incurred before the acquisition of a license or permit to explore an area are expensed to the income statement.

All exploration and evaluation costs incurred following a license or permit to explore being obtained or acquired on the acquisition of a subsidiary are capitalised in respect of each identifiable project area. These costs are classified as intangible assets and 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 which permits reasonable assessment of the existence of economically recoverable reserves (successful efforts).

Costs incurred by Directors' and employees of the parent Company on the exploration activities are recharged to the subsidiaries and capitalised as exploration assets accordingly.

Other costs are expensed unless commercial reserves have been established or the determination process has not been completed. 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 transferred from intangible assets to tangible assets as 'Developed Oil and Gas Assets' and amortised over the life of the area according to the rate of depletion of the economically recoverable costs.

g)         Impairment of Oil and Gas Exploration and Evaluation assets

The carrying value of unevaluated areas is assessed when there has been an indication that impairment in value may have occurred. The impairment of unevaluated prospects is assessed based on the Directors' intention with regard to future exploration and development of individual significant areas and the ability to obtain funds to finance such exploration and development.

h)        Decommissioning costs

Where a material liability for the removal of production facilities and site restoration at the end of the field life exists, a provision for decommissioning is made. The amount recognised is the present value of estimated future expenditure determined in accordance with local conditions and requirements. An asset of an amount equivalent to the provision is also created and depreciated on a unit of production basis. Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated asset.

i)          Property, plant and equipment

Property, plant and equipment is stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life as follows:

Computers and equipment, fixtures, fittings and equipment: straight line over 4 years.

Leasehold and office refurbishment costs: over duration of lease.

The assets' residual values and useful lives are reviewed and adjusted if necessary at each year-end. Profits or losses on disposals of plant and equipment are determined by comparing the sale proceeds with the carrying amount and are included in the statement of comprehensive income. Items are reviewed for impairment if and when events indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset's net selling price and value in use.

j)          Investments

The Parent Company's investments in subsidiary companies are stated at cost less any expected credit loss for impairment and are shown in the Company's Statement of Financial Position.

k)         Share-based payments

The Company makes share-based payments to certain Directors, employees and consultants by the issue of share options or warrants. The fair value of these payments is calculated either using the Black Scholes option pricing model or by reference to the fair value of the remuneration settled by way of the grant of such options or warrants. The expense is recognised on a straight-line basis over the period from the date of award to the date of vesting, based on the Company's best estimate of shares that will eventually vest.

l)          Foreign currency translation

i            Functional and presentational currency

Items included in the financial statements are shown in the currency of the primary economic environment in which the Company operates ("the functional currency") which is considered by the Directors to be the U.S Dollar. The exchange rate at 31 December 2022 was £1 / $1.2026 (2021: £1 / $1.3479).

ii           Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

Transactions in the accounts of individual Group companies are recorded at the rate of exchange ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rates ruling at the year-end. All differences are taken to the statement of comprehensive income.

m)       Taxation

i            Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible on other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

ii              Deferred taxation

Deferred income taxes are provided in full, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income taxes are determined using tax rates that have been enacted or substantially enacted and are expected to apply when the related deferred income tax asset is realised or the related deferred income tax liability is settled.

The principal temporary differences arise from depreciation or amortisation charged on assets and tax losses carried forward. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

n)        Financial instruments

The Group's Financial Instruments comprise of cash and cash equivalents, loans and receivables. There are no other categories of financial instrument.

i               Cash and cash equivalents

Cash and cash equivalents are carried at cost and comprise cash in hand, cash at bank, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

ii              Receivables

Receivables are measured at amortised cost unless the time value of money is immaterial. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the assets' carrying amount and the recoverable amount. Expected credit losses for impairment of receivables are included in the statement of comprehensive income.

iii             Payables

Payables are recognised initially at fair values and subsequently measured at amortised cost using the effective interest method.

o)        Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the asset of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

p)        Share capital

Ordinary shares are classified as equity. Proceeds received from the issue of ordinary shares above the nominal value are classified as Share Premium. Costs directly attributable to the issue of new shares are shown in equity as a deduction from the Share Premium account.

q)        Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group would be required to settle that obligation. Provisions are measured at the managements' best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material.

r)         Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision makers have been identified as the executive Board members.

s)         Leases

The Group do not have any leases with a term of 12-months or more that contain an option to purchase or where the underlying asset has anything other than a low value and has elected for exemption to the reporting requirements of IFRS 16 (Leases).

 

2.    Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with International Financial Reporting Standards requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on managements' best knowledge of current events and actions, actual results ultimately may differ from those estimates. IFRS also require management to exercise its judgement in the process of applying the Group's accounting policies.

The prime areas involving a higher degree of judgement or complexity, where assumptions and estimates are significant to the financial statements, are as follows:

Recoverability of inter-company balances

Determining whether inter-company balances are impaired requires an estimation of whether there are any indications that their carrying values are not recoverable details of which are included in note 13.

Impairment of capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether it successfully recovers the related exploration and evaluation asset through sale. Factors which could impact the future recoverability include the level of proved, probable and inferred resources, future technological changes which could impact the cost of drilling and extraction, future legal changes (including changes to environmental restoration obligations), changes to commodity prices and licence renewal dates and commitments.

To the extent that capitalised exploration and evaluation expenditure is determined to be irrecoverable in the future, this will reduce profits and net assets in the period in which this determination is made. In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage which permits reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent that it is determined in the future that this capitalised expenditure should be written off, this will reduce profits and net assets in the period in which this determination is made. Details of impairments of capitalised exploration and evaluation expenditure are included in note 12.

VAT receivable

Following the favourable ruling from the Upper Tribunal received on 21 May 2021, upholding the First-Tier Tax Tribunal's decision in the Company's favour and dismissing HMRC's appeal against the First-Tier Tax Tribunal's decision, the Company released most of its provisions which had previously been recorded in respect of VAT payable.

At the accounts date there remained three further appeals to the First-Tier Tax Tribunal by HMRC, which were yet to be heard. The two earlier appeals concerned time periods not covered by the original Tribunal decisions, to which HMRC had raised procedural objections which it subsequently withdrew prior to the accounts date, and these appeals were formally settled after the accounts date, resulting in a payment (after the accounts date) to the Company of $422,359 (£351,212) which has been recorded in the accounts as receivable. The third more recent appeal concerns a revised assessment in respect of time periods covered by the Upper Tribunal's 21 May 2021 decision. The legal advice received by the Company is that this revised assessment is incorrect, which is why the Company only recognises a provision for a potential liability in respect of this assessment in the 2022 accounts (as opposed to a liability for VAT in the accounts payable note).

Capital markets / going concern

The Group relies on the UK equities market and the market for equity participations in oil and gas exploration assets in order to raise the funds required to operate as a listed entity and complete the respective work programmes for its oil and gas exploration assets. From time to time, and especially in light of the repercussions of events in the Ukraine, general economic and market conditions may deteriorate to a point where it is not possible to raise equity finance to fund exploration projects, nor debt to develop projects.

Additional financing may therefore not be available to the Group restricting the scope of operations, risking both its long-term expansion programme, its obligations under contracts which may be withdrawn or terminated for non-compliance and ultimately the financial stability of the Group to continue as a going concern.

Please see note 1 (c) for a more detailed discussion of going concern matters.

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 using the Black Scholes model and by reference to the value of the fees or remuneration settled by way of granting of warrants. The determination of fair value using the Black Scholes methodology is based on the input parameters chosen and will therefore contain an element of judgement and uncertainty. Details of share-based payment transactions are included in note 21.

 

3.         Operating segments

The Group has two reportable operating segments: Africa and Head Office. Non-current assets and operating liabilities are located in Africa, whilst the majority of current assets are carried at Head Office. The Group has not yet commenced production and therefore has no revenue. Each reportable segment adopts the same accounting policies. In compliance with IFRS 8 'Operating Segments' the following table reconciles the operational loss and the assets and liabilities of each reportable segment with the consolidated figures presented in these Financial Statements, together with comparative figures for the year-ended 31 December 2022.

	Africa		Head Office		Total
	2022	2021	2022	2021	2022	2021
	$	$	$	$	$	$
Administrative expenses 1	(55,120)	73,931	(709,024)	598,396	(764,144)	672,327
Share-based payment charges	-	-	(242,896)	(475,780)	(242,896)	(475,780)
Interest income	-	-	(931)	(1,226)	(931)	(1,226)
Financing costs	(641)	(643)	(510)	(147,379)	(1,151)	(148,022)
Loss by reportable segment	(55,761)	73,288	(953,361)	(25,989)	(1,009,122)	47,299
Total assets by reportable segment 2 / 3	31,905,433	28,784,388	634,203	14,469	32,539,636	28,798,857
Total liabilities by reportable segment 4	(2,544,748)	(2,110,144)	(631,569)	(286,541)	(3,176,317)	(2,396,685)

 

¹ Administrative expenses include credits of $nil million (2021: expense $1.4 million) of VAT provision write-backs following the successful defence of VAT claims made against the Company by HMRC at the chambers of the second-tier tax tribunal.

² Included within total assets of $32.5 million (2021: $28.8 million) are $17.4 million Cameroon (2021: $14.3 million) , $751k Namibia (2021: $368k) and $13.7 million South Africa (2021: $14.1 million).

³ Carrying amounts of segment assets exclude investments in subsidiaries.

⁴ Carrying amounts of segment liabilities exclude intra-group financing.

 

4.         Group operating profit / (loss)

(Loss) / profit from operations is stated after charging/(crediting):
			2022	2021
			$	$
Share-based payment charges included within staff costs			242,897	475,780
Share-based payment charges included within professional costs			51,228	67,364
Loss / (gain) on foreign currencies			69,299	(21,367)
An analysis of auditor's remuneration is as follows:
Fees payable to the Group's auditors for the audit of the Group and subsidiary annual accounts			57,136	49,095
Fees payable to the Group's auditors for non-audit assurance services			-	4,442
Total audit fees			57,136	53,537

 

5.         Employee information

The average monthly number of employees of the Group (including Directors) was:

 

			2022	2021
Head office			3	3
Africa			3	3
			6	6

 

Group employee costs during the year (including executive Directors) amounted to:

			2022	2021
			$	$
Share-based payment charges			242,897	475,780
			242,897	475,780

 

During 2022, no awards were made under the Group share incentive scheme.

Key management personnel include the executive and non-executive Directors whose remuneration, including non-cash share-based payment charges of $k243 (2021: $481k), was $243k (2021: $481k); see Directors' Report for additional detail. During the year $271k (2021: $581k) of the full-year share-based payment charge of $363k (2021: $969k) related to employees and their remuneration as employees.

The highest paid Director was Jeremy Asher $187k (2021: $401k).

 

6.         Finance costs

During the year covered by these financial statements the Group incurred finance costs of $2k (2021: $149k). The Company incurred finance costs of $1k (2021: $147k).

 

7.         Taxation

 

			2022	2021
			$	$
Current tax
UK Corporation tax			-	-
Total current tax charge			-	-
The tax charge for the period can be reconciled to the loss for the year as follows:
Group loss before tax			1,009,122	(47,299)
Tax at the UK Corporation tax rate of 19% (2021: 19%)			(191,733)	8,986
Tax effects of:
Expenses not deductible for tax purposes			46,150	90,398
Tax losses carried forward not recognised as a deferred tax asset			145,583	(99,384)
Current tax charge			-	-

 

 

8.         Deferred tax

At the reporting date the Group had an unrecognised deferred tax asset of $4.8 million (2021: $4.1 million) relating to unused tax losses. No deferred tax asset has been recognised due to the uncertainty of future profit streams against which these losses could be utilised.

 

9.         Parent company income statement

For the year-ended 31 December 2022 the Parent Company made a loss of $312k (2021: profit of $250k) including financing costs of $1k (2021: $147k). The Company charged finance interest on intercompany loan accounts of $536k (2021: $185k) and fees with respect to the provision of strategic advice and support of $105k (2021: $91k). In accordance with the provisions of Section 408 of the Companies Act 2006, the Parent Company has not presented a statement of comprehensive income.

10.       (Loss) / profit per share

The fully diluted weighted average number of shares in issue and to be issued as at 31 December 2022 is 2,165,197,663 (2021: 1,900,696,681). At 31 December 2022 the dilutive effect of share options outstanding was nil (2021: 35,416,521). At 31 December 2022, the fully diluted loss per share has been kept the same as the basic loss per share because the conversion of share options and share warrants would decrease the basic loss per share and is thus anti-dilutive. The number of anti-dilutive shares that were excluded from this computation of profit per share was 7,688,323 (2021: nil).

		Basic & Diluted
		2022	2021
		$	$
(Loss) / profit for the year		(1,009,122)	47,299
Weighted average number of ordinary shares in issue during the year		2,165,197,663	1,865,280,160
Dilutive effect of share options outstanding		-	35,416,521
Fully diluted average number of ordinary shares during the year		2,165,197,663	1,900,696,681
(Loss) / profit per share (USc)		(0.05c)	0.00c

 

 

11.       Property, plant and equipment

		Group	Company
Year-ended 31 December 2022		$	$
Cost
At 1 January 2022		1,046	1,046
At 31 December 2022		1,046	1,046
Depreciation
At 1 January 2022		1,046	1,046
At 31 December 2022		1,046	1,046
Net book value
At 31 December 2022		-	-
At 31 December 2021		-	-

 

		Group	Company
Year-ended 31 December 2021		$	$
Cost
At 1 January 2021		1,046	1,046
At 31 December 2021		1,046	1,046
Depreciation
At 1 January 2021		1,046	1,046
At 31 December 2021		1,046	1,046
Net book value
At 31 December 2021		-	-
At 31 December 2020		-	-

 

12.       Intangible Exploration and Evaluation (E&E) assets

 

	Exploration and evaluation assets	Goodwill	Total
Year-ended 31 December 2022	$	$	$
Cost
At 1 January 2022	100,788,853	8,023,292	108,812,145
Additions during the year	3,053,280	-	3,053,280
At 31 December 2022	103,842,133	8,023,292	111,865,425
Amortisation and impairment
At 1 January 2022	(72,008,462)	(8,023,292)	(80,031,754)
Impairment during the year	-	-	-
At 31 December 2022	(72,008,462)	(8,023,292)	(80,031,754)
Net book value
At 31 December 2022	31,833,671	-	31,833,671
At 31 December 2021	28,780,391	-	28,780,391

 

 

	Exploration and evaluation assets	Goodwill	Total
Year-ended 31 December 2021	$	$	$
Cost
At 1 January 2021	99,088,664	8,023,292	107,111,956
Additions during the year	1,700,189	-	1,700,189
At 31 December 2021	100,788,853	8,023,292	108,812,145
Amortisation and impairment
At 1 January 2021	(72,008,462)	(8,023,292)	(80,031,754)
Impairment during the year	-	-	-
At 31 December 2021	(72,008,462)	(8,023,292)	(80,031,754)
Net book value
At 31 December 2021	28,780,391	-	28,780,391
At 31 December 2020	27,080,202	-	27,080,202

 

During the year the Group capitalised amounts totalling $1.5 million (2021: $1.7 million) with respect to the following assets:

	2022	2021
	$	$
Cameroon	3,085,434	1,314,854
Namibia	383,193	47,880
South Africa	(415,347)	337,455
Total	3,053,280	1,700,189

 

Cameroon

The $3.1 million of capitalised expenditure comprised ongoing NJOM-3 appraisal drilling preparation costs plus the capitalised cost of operating the local office in Douala.

In South Africa, Rift Petroleum Limited, Tower's wholly owned subsidiary, and its JV partner and operator New African Global Energy SA (Pty) Ltd, continued to work on planning the forthcoming seismic acquisition. The JV partners also negotiated the settlement of certain charges made to the JV, resulting in a credit of costs historically charged of $565k and a net credit for the year of $415k.

The Directors have not provided for any impairment of the Group's investment in the Thali license, because potential transactions and funding discussions with third parties and the Company's internal cash flow projections for the license support the Directors' view that the current carrying value is recoverable. Furthermore, the operating company, Tower Resources Cameroon SA, has applied for a 12-month extension of the First Exploration Period of the license to May 2024 and has been informed by the Government of the Republic of Cameroon that this extension is being processed. Final formal confirmation of the extension has yet to be received but is expected during Q3 of 2023.

Namibia

The Group made various licence commitment and training payments to the Government of the Republic of Namibia in addition to commencing basin modelling work and other work in line with the work programme commitments.

The Company's investment in the current license is currently just $588k (2021: $368k), which appears well supported by the valuations implied by recent transactions in the region, allowing for the early stage of the evaluation and appraisal process. Furthermore, the Directors continue to believe firmly that the relatively modest amounts of expenditure incurred on acquiring and securing tenure to the licence is fully supported by their initial view of its prospectivity based on the information that is currently available

South Africa

In South Africa, the Petroleum Authority of South Africa ("PASA") formally approved the application to enter the second renewal period, submitted by the Operator NewAge Energy Algoa (Pty) Ltd, on 17 November 2020, having confirmed that the first renewal period work programme had been completed to its satisfaction. The second renewal period commits the JV to the acquisition of 700km of 2D seismic acquisition or the acquisition of 300km of 3D seismic. The minimum spend is $5.0 million in total to the JV and this period will conclude upon the completion of the work programme, representing a commitment to acquire a minimum of 700km 2D or 300km of 3D seismic over the block. Acquiring the additional seismic data in 2023 is now no longer possible, and as a result, the JV partners do not expect to acquire the new 3D seismic data over the block until 2024 at the earliest. The operator has told the Company that PASA accepts this position and merely requires that the seismic acquisition obligation is completed before the JV enters the next renewal period.

The Directors' view is that the recent TotalEnergies discoveries at Brulpadda and Luiperd, and the analysis conducted by the JV indicating that the deepwater lead in the JV license area conducted in 2021, support the current valuation of the license.

Impairment

In accordance with the Group's accounting policies and IFRS 6 'Exploration for and Evaluation of Mineral Resources' the Directors have reviewed each of the exploration license areas for indications of impairment. Having done so, it was concluded that a full impairment review was not required on the Cameroon, South Africa or Namibian licences.

 

13.       Investment in subsidiaries

			Loans to subsidiary undertakings		Shares in subsidiary undertakings			Total
	Company		$		$			$
	Cost
	At 1 January 2022		82,338,029		32,216,739			114,554,768
	Net advances during the year		3,383,484		-			3,383,484
	At 31 December 2022		85,721,513		32,216,739			117,938,252
	Provision for impairment							-
	At 1 January 2021		(64,862,126)		(19,908,973)			(84,771,099)
	At 31 December 2022		(64,862,126)		(19,908,973)			(84,771,099)
	Net book value							-
	At 31 December 2022		20,859,387		12,307,766			33,167,154
	At 31 December 2021		17,475,903		12,307,766			29,783,669

 

Included within loans made to subsidiary undertakings during the year of $3.4 million (2021: 2.1 million) are amounts of $2.5 million Cameroon (2021: $1.3 million), $158k South Africa (2021: $394k), $616k Rift Petroleum Holdings (2021: $415k) and $131k (2021: $51k) Namibia.

Loans made by the parent company to subsidiary undertakings are interest-bearing in accordance with loan agreements made in 2015, and are repayable to the parent company on demand.

The subsidiary undertakings at the year-end are as follows (these undertakings are included in the Group accounts):

	Country of	Class of	Proportion of voting rights held		Nature of business
	incorporation	shares held
	2022	2022	2022	2021	2022
Tower Resources Cameroon Limited 1	England & Wales	Ordinary	100%	100%	Holding company
Tower Resources Cameroon SA 2	Cameroon	Ordinary	100%	100%	Oil and gas exploration
Rift Petroleum Holdings Limited 1	Isle of Man	Ordinary	100%	100%	Holding company
Rift Petroleum Limited 3	Zambia	Ordinary	100%	100%	Oil and gas exploration
Rift Petroleum Limited 3	Isle of Man	Ordinary	100%	100%	Oil and gas exploration
Tower Resources (Namibia) Holdings Limited 1	England & Wales	Ordinary	100%	100%	Holding company
Tower Resources (Namibia) Limited 4	England & Wales	Ordinary	100%	100%	Oil and gas exploration
1 Held directly by the Company, Tower Resources plc
2 Held directly or indirectly through Tower Resources Cameroon Limited
3 Held directly or indirectly through Rift Petroleum Holdings Limited
4 Held directly or indirectly through Tower Resources (Namibia) Holdings Limited
5 Dissolved 10 August 2021

 

14.       Trade and other receivables

	Group		Company
	2022	2021	2022	2021
	$	$	$	$
Trade and other receivables	474,749	8,239	474,747	8,237

 

Trade and other receivables include VAT recoverable from HMRC on late appeals owed to the Company totalling £351k ($422k) which was received in May 2023.

 

15.       Trade and other payables

	Group		Company
	2022	2021	2022	2021
	$	$	$	$
Trade and other payables	195,776	344,601	77,042	173,172
Accruals	2,484,630	1,991,735	58,618	53,022
Loans from subsidiary undertakings	-	-	-	-
	2,680,406	2,336,336	135,660	226,194

 

Accruals include UK $59k (2021: $53k); Cameroon $2.1 million (2021: $1.2 million); Namibia $167k (2021: $2k) and South Africa $190k (2021: $723k) and comprise operational and other asset related costs due plus amounts payable to Ministerial bodies with respect to licence tenure, most of which has been settled subsequent to the year-end.

Group creditor payment days are approximately 30 days (2021: 32 days).

 

16. Provision for liabilities and charges  

	Group		Company
	2022	2021	2022	2021
	$	$	$	$
VAT appeals	502,972	-	502,972	-
	502,972	-	502,972	-

 

Following the favourable ruling from the Upper Tribunal received on 21 May 2021, upholding the First-Tier Tax Tribunal's decision in the Company's favour and dismissing HMRC's appeal against the First-Tier Tax Tribunal's decision, the Company released most of its provisions which had previously been recorded in respect of VAT payable.

At the accounts date there remained three further appeals to the First-Tier Tax Tribunal by HMRC, which were yet to be heard. The two earlier appeals concerned time periods not covered by the original Tribunal decisions, to which HMRC had raised procedural objections which it subsequently withdrew prior to the accounts date, and these appeals were formally settled after the accounts date, resulting in a payment (after the accounts date) to the Company of $422,359 (£351,212) which has been recorded in the accounts as receivable. The third more recent appeal concerns a revised assessment in respect of time periods covered by the Upper Tribunal's 21 May 2021 decision. The legal advice received by the Company is that this revised assessment is incorrect, which is why the Company only recognises a provision for a potential liability in respect of this assessment in the 2022 accounts (as opposed to a liability for VAT in the accounts payable note).

 

17. Borrowings

Total borrowings for the Group and Company are noted below:

	Group		Company
	2022	2021	2022	2021
	$	$	$	$
Principal balance at beginning of year	59,532	1,338,726	59,532	1,338,726
Amounts drawn down during the year	-	-	-	-
Principal repaid during the year	(12,294)	(1,278,451)	(12,294)	(1,278,451)
Currency revaluations at year end	(6,149)	(743)	(6,149)	(743)
Principal balance at end of year	41,088	59,532	41,088	59,532
Financing costs at beginning of year	818	(7,026)	818	(7,026)
Changes to financing costs during the year	-	47,383	-	47,383
Interest expense	925	99,997	925	99,997
Interest paid during the year	(1,220)	(139,516)	(1,220)	(139,516)
Currency revaluations at year end	(81)	(20)	(81)	(20)
Financing costs at the end of the year	442	818	442	818
Carrying amount at end of period	41,530	60,349	41,530	60,349
Current	12,244	13,801	12,243	13,802
Non-current	29,286	46,548	29,286	46,548
PRINCIPAL REPAYMENT DATES	Group		Company
	2022	2021	2022	2021
	$	$	$	$
Due within 1 year	12,244	13,801	12,243	13,802
Due within years 2-5	29,286	46,548	29,286	46,548
Due in more than 5 years	-	-	-	-
	41,530	60,349	41,530	60,349

 

During the year, the Group and Company entered into no new facilities (2021: $nil).

On 21 January 2021, the Company repaid in full the $500k loan facility with Shard Merchant Capital Ltd. The terms of the Shard Facility included the issue of 31,446,541 attached three-year warrants at a strike price of 0.6 pence and 5,761,198 shares to pre-pay interest charged at 12% per annum. The loan was secured by a fixed and floating charge over the Company's assets in favour of Shard Merchant Capital Ltd. The repayment of the loan included facility transaction costs of $35k.

On 4 March 2021, the Pegasus Petroleum Limited loan facility, to which Jeremy Asher is a controlling party, was extended to the end of November 2021. Consideration for the extension comprised an increase in the production-based payments, the amount depending on whether the loan would be repaid by 15 July or only in November 2021. Additionally, simple interest would accrue at 12% per annum pro rata, commencing on 4 March 2021, and would only be paid at the end of the facility period. The 15 July date was subsequently extended to 20 August 2021, with the production-based payments effectively limited to 3.75% of the Contractor share of revenues from the production sharing contract, net of the Government share and net of all Petroleum Taxes, and the facility was fully repaid on 20 August 2021.

 

18.       Share capital

			2022	2021
			$	$
Authorised, called up, allotted and fully paid
3,554,137,955 (2021: 2,109,172,592) ordinary shares of 0.001p			18,283,317	18,264,803

 

The share capital issues during 2022 are summarised as follows:

		Number of shares	Share capital at nominal value	Share premium
			$	$
At 1 January 2022		2,109,172,592	18,264,803	148,747,595
Shares issued for cash		1,434,065,363	18,383	3,870,791
Shares issued on settlement of third party fees		11,200,000	131	29,393
Shares issued in settlement of loan interest		-	-	-
Share issue costs		-	-	(311,476)
At 31 December 2022		3,554,437,955	18,283,317	152,336,303

 

In January 2022, the Company raised $2.1 million by placing 576,923,077 shares for cash at 0.260 pence per share.

In August 2022, the Company raised $1.9 million by placing 857,142,286 shares for cash at 0.175 pence per share.

In August 2022, the Company raised £30k by placing 11,200,000 shares in settlement of third fees at 0.225 pence per share.

 

19.       Reserves

Reserves within equity are as follows:

Share capital

Amounts subscribed for share capital at nominal value.

Share premium account

The share premium account represents the amounts received by the Company on the issue of its shares which were in excess of the nominal value of the shares.

Retained losses

Cumulative net gains and losses recognised in the Statement of Comprehensive Income less any amounts reflected directly in other reserves.

 

20.       Financial instruments

Capital risk management and liquidity risk

Capital structure of the Group and Company consists of cash and cash equivalents held for working capital purposes and equity attributable to the equity holders of the Parent, comprising issued capital, reserves and retained losses as disclosed in the Statement of Changes in Equity. The Group and Company uses cash flow models and budgets, which are regularly updated, to monitor liquidity risk.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each material class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

Due to the short-term nature of these assets and liabilities such values approximate their fair values at 31 December 2022 and 31 December 2021.

		Carrying amount / fair value
		2022	2021
Group		$	$
Financial assets (classified as loans and receivables)
Cash and cash equivalents		231,216	10,227
Trade and other receivables		474,749	8,239
Total financial assets		705,965	18,466
Financial liabilities at amortised cost
Trade and other payables		2,680,406	2,336,336
Borrowings		41,530	60,349
Total financial liabilities		2,721,936	2,396,685

 

		Carrying amount / fair value
		2022	2021
Company		$	$
Financial assets (classified as loans and receivables)
Cash and cash equivalents		159,456	6,232
Trade and other receivables		474,747	8,237
Loans to subsidiary undertakings		20,859,388	17,475,903
Total financial assets		21,493,591	17,490,372
Financial liabilities at amortised cost
Trade and other payables		87,069	226,194
Borrowings		41,530	60,349
Total financial liabilities		128,599	286,543

 

Financial risk management objectives

The Group's and Company's objective and policy is to use financial instruments to manage the risk profile of its underlying operations. The Group continually monitors financial risk including oil and gas price risk, interest rate risk, equity price risk, currency translation risk and liquidity risk and takes appropriate measures to ensure such risks are managed in a controlled manner including, where appropriate, through the use of financial derivatives. The Group and Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Interest rate risk management

The Group and Company borrowings carry a fixed interest rate of 1% per month and are therefore not exposed to any sensitivity risk.

Interest rate sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and assuming the amount of the balances at the reporting date were outstanding for the whole year.

A 100-basis point change represents management's estimate of a possible change in interest rates at the reporting date. If interest rates had been 100 basis points higher and all other variables were held constant the Group's profits and equity would be impacted as follows:

	Group		Company
	Increase		Increase
	2022	2021	2022	2021
	$	$	$	$
Cash and cash equivalents	1,122	484	782	419
Borrowings	500	7,725	500	7,725
	1,622	8,209	1,282	8,144

 

The Group's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates on classes of financial assets and financial liabilities, was as follows:

	2022	2022	2021	2021
	Floating interest rate	Non-interest bearing	Floating interest rate	Non-interest bearing
	$	$	$	$
Cash and cash equivalents	172,782	58,434	6,935	3,292

Foreign currency risk

The Group's and Company's reporting currency is the US dollar, being the currency in which the majority of the Group's revenue and expenditure is transacted. The US dollar is the functional currency of the Company and the majority of its subsidiaries. Less material elements of its management, services and treasury functions are transacted in pounds sterling. The majority of balances are held in US dollars with transfers to pounds sterling and other local currencies, as required to meet local needs. The Group does not enter into derivative transactions to manage its foreign currency translation or transaction risk as it does not believe such risks are material.

At the year-end the Group and Company maintained the following cash reserves:

	Group		Company
	2022	2021	2022	2021
Cash and cash equivalents	$	$	$	$
Cash and cash equivalents held in US$	55,874	921	55,874	921
Cash and cash equivalents held in GBP	156,448	8,337	103,582	5,311
Cash and cash equivalents held in XAF	13,326	703	-	-
Cash and cash equivalents held in other currencies	5,568	266	-	-
	231,216	10,227	159,456	6,232

 

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group or Company. The Group and Company reviews the credit risk of the entities that it sells its products to or that it enters into contractual arrangements with and will obtain guarantees and commercial letters of credit as may be considered necessary where risks are significant to the Group or Company.

The Group has cash and cash equivalents of $243k as at 31 December 2022 (2021: $10,054). The cash and cash equivalents are held with financial institutions which are rated below. Wherever possible ratings are provided by Fitch Ratings, however, where no rating was available from either Fitch Ratings or either of the other major international credit rating agencies such as Standard & Poors or Moodys, the bank's local credit rating was used:

		Group		Company
		2022	2021	2022	2021
Cash and cash equivalents	Rating	$	$	$	$
Barclays Bank plc	A+	159,456	6,232	159,456	6,232
Royal Bank of Scotland	A	58,434	3,292	-	-
First Afriland Bank	No rating	12,947	324	-	-
BGFI Bank	A+	379	379	-	-
		231,216	10,227	159,456	6,232

 

21.       Share-based payments

		2022	2021
		$	$
In the statement of comprehensive income the Group recognised the following charge with respect to its share-based payments		363,047	968,711

 

The share-based payments include the cost of warrants issued in respect of the company's equity financings and bridging loan, and also share-based payments for a number of services to the Group's various contractors and brokers and payments in lieu of Director fees.

Options

Details of share options outstanding at 31 December 2022 are as follows:

			Number in issue
At 1 January 2022			244,000,000
Awarded during the year			148,000,000
At 31 December 2022			392,000,000

 

Date of grant	Number in issue 1	Option price (pence)	Latest           exercise date	WAOP
24 Jan 2019	70,000,000	1.250	24 Jan 2024	87,500,000
18 Dec 2020	86,000,000	0.450	18 Dec 2025	38,700,000
01 Apr 2021	88,000,000	0.450	01 Apr 2026	39,600,000
16 Aug 2022	148,000,000	0.300	16 Aug 2027	44,400,000
	392,000,000			210,200,000

¹ These options vest in the beneficiaries in equal tranches on the first, second and third anniversaries of grant.

The following Directors held interests, directly or indirectly, in share options at the year-end:

		2022	2021
		No.	No.
Jeremy Asher		280,000,000	180,000,000
Total		280,000,000	180,000,000

 

Warrants

Details of warrants outstanding at 31 December 2022 are as follows:

						Number in issue
At 1 January 2022						806,635,644
Awarded during the year						97,773,291
Lapsed during the year						(304,439,912)
At 31 December 2022						599,969,023
Date of grant	Number in issue	Warrant price (pence)			Latest           exercise date
01 Jan 2018	2,542,372	1.000			01 Jan 2023
01 Apr 2018	2,083,333	1.500			01 Apr 2023
01 Jul 2018	2,272,726	1.780			30 Jun 2023
01 Oct 2018	4,687,500	1.575			30 Sep 2023
24 Jan 2019	19,999,999	1.200			23 Jan 2024
16 Apr 2019	90,000,000	1.000			14 Apr 2024
30 Jun 2019	4,285,714	1.000			28 Jun 2024
30 Jul 2019	3,000,000	1.000			28 Jul 2024
15 Oct 2019	10,990,933	0.500			13 Oct 2024
31 Mar 2020	49,816,850	0.200			30 Mar 2025
29 Jun 2020	19,719,338	0.350			28 Jun 2025
28 Aug 2020	78,616,352	0.600			28 Aug 2023
01 Oct 2020	10,960,907	0.390			30 Sep 2025
01 Dec 2020	4,930,083	0.375			30 Nov 2025
31 Dec 2020	12,116,316	0.450			30 Dec 2025
01 Apr 2021	16,998,267	0.450			31 Mar 2026
01 Jul 2021	24,736,149	0.250			30 Jun 2026
14 Jan 2021	128,205,128	0.650			14 Jan 2023
01 Oct 2021	16,233,765	0.425			30 Sep 2026
01 Jan 2022	17,329,020	0.425			01 Jan 2027
13 Jan 2022	7,058,824	0.425			12 Jan 2027
01 Apr 2022	19,851,774	0.263			01 Apr 2027
01 Jul 2022	16,831,240	0.295			01 Jul 2027
01 Aug 2022	10,588,228	0.425			31 Jul 2024
03 Oct 2022	26,114,205	0.250			03 Oct 2027
	599,969,023

 

The following table shows the interests of the Directors in the share warrants in issue:

		2022	2021
		No.	No.
Jeremy Asher		217,875,279	281,164,127
Paula Brancato		33,238,104	17,212,856
Mark Enfield		31,394,256	15,369,008
Total		282,507,639	313,745,991

 

The weighted average exercise price of the share warrants was 0.59p (2021: 0.89p) with a weighted average contractual life of 1.8 years (2021: 2.4 years). At 31 December 2022 and 2021 all warrants had fully vested.

In its Statement of Comprehensive Income, the Company recognised share-based payment charges of $208k (2021: $446k).

In compliance with the requirements of IFRS 2 on share-based payments, the fair value of options or warrants granted during the year is calculated using the Black Scholes option pricing model. For this purpose, the volatility applied in calculating the above charge varied between 20% and 111% (2021: 20% and 111%), depending upon the date of grant, and the risk-free interest rate was 0.50% (2021: 0.25%) and the Dividend Yield was nil% for 2022 and 2021.

The Company's share price ranged between 0.2p and 0.4p (2021: 0.2p and 0.5p) during the year. The closing price on 31 December 2021 was 0.2p per share (2021; 0.4p). The weighted average exercise price of the share options was 0.5p (2021: 0.7p) with a weighted average contractual life of 3.3 years (2021: 3.5 years). The total number of options vested at the end of the year was 185.3 million (2021: 131.8 million).

 

22.       Related party transactions

The key management of the Group comprises the Directors of the Company. Except as disclosed, there are no transactions with the Directors other than their remuneration and interests in shares, share options and warrants. As noted in the Directors' Report, Pegasus Petroleum Ltd ("Pegasus"), a company owned and controlled by Jeremy Asher, received $381k (2021: $232k) in fees for management services Further information on Directors' remuneration is detailed in the Directors' Report and their total remuneration in each of the categories specified in IAS 24 'Related Party Disclosures' is shown below:

	Group		Company
	2022	2021	2022	2021
	$	$	$	$
Fees charged by companies associated with Jeremy Asher 1	381,428	231,952	-	-
Interest charged on borrowings by companies associated with Jeremy Asher 1	-	124,743	-	124,743
Share-based payments 2	242,896	481,042	242,896	481,042
Finance interest on intercompany loan accounts	536,375	184,873	536,375	184,873
Fees charged with respect to the provision of strategic advice and support  by the parent	104,911	90,975	104,911	90,975
	1,265,610	1,113,585	884,182	881,633

¹ Charged by Pegasus Petroleum Limited ("Pegasus"), a company registered in the Channel Islands, to Rift Petroleum Holdings Limited, a wholly owned subsidiary of Tower Resources plc and registered in the Isle of Man. Pegasus Petroleum Limited ("Pegasus") is owned and controlled by a family trust of which Jeremy Asher is the settlor and lifetime beneficiary.

 

The following amounts were owed by subsidiary undertakings at the balance sheet date:

	Rift Petroleum Holdings Limited ($000)	Rift Petroleum Limited ($000)	Tower Resources (Namibia) Holdings Limited ($000)	Tower Resources Namibia Limited ($000)	Tower Resources Cameroon Limited ($000)	Tower Resources Cameroon SA ($000)	TOTAL ($000)
2022	2,616	1,885	18	362	6	15,974	20,861
2021	1,999	1,727	15	234	4	13,498	17,477

 

 

23.       Control

The Company is under the control of its shareholders and not any one party.

 

24.       Leases and capital commitments

The Group is committed to funding the following exploration expenditure commitments as at 31 December 2022:

	Country	Interest	2023	2024 onwards
Cameroon Thali 1	Cameroon	100%	$8.40 million	-
South Africa Algoa-Gamtoos 2	South Africa	50%	$3.39 million	-
Namibia Blocks 1910A, 1911 and 1912B 3	Namibia	80%	$4.50 million	-
			$16.29 million	-

¹ to 11 May 2023

² period ends on completion of work programme commitments

³ to November 2023, right of extension available

 

 

25.       Subsequent events

16 January 2023: Facility Agreement with Energy Exploration Capital Partners LLC ("EECP") to raise $1.25 million. The facility provides for further convertible advances of up to $4.75 million subject to certain conditions.

15 February 2023: Issue of 23.2 million warrants in lieu of £30,000 (in aggregate) of Directors fees in respect of the period January-March 2023, to conserve the Company's working capital. The warrants are exercisable at a strike price of 0.175 pence (0.21¢) per share. The warrants are exercisable for a period of five years from the date of issue.

30 March 2023: Share issuance in accordance with the terms of the investment deed with EEPC announced on 16 January 2023, of 102,543,067 ordinary shares of 0.001 pence each. The purchase price of 0.12 pence (0.15¢) per Ordinary Share for the settlement amount of $150,000 had been prepaid by EEPC as part of the 16 January advance.

27 April 2023: Cameroon operational update covering:

·    Application for a one-year extension of the initial exploration period of the PSC, following positive discussions with the Minister of Mines, Industry and Technological Development and the Prime Minister of the Republic of Cameroon.

·    Ongoing discussions with rig owners and operators with the aim to secure rig availability in the third and fourth quarter of this year to drill at NJOM-3.

·    Ongoing negotiations for a term loan of approximately $7 million with BGFI Bank Group and asset-level financing with several other parties.

·    Updated resource estimates and risks for the reservoirs connected to the NJOM-1 and the NJOM-2 discovery wells, substantially lowering risk attributed to PS9 Sup and PS3 HW reservoirs, and increasing total risked pMean prospective resources to 35.4 million bbls.

·    Deployment of software to conduct detailed attribute analysis of the reprocessed 3D seismic data to identify the oil and gas elements of the reservoirs in the Njonji-1 and Njonji-2 fault blocks, resulting in a clearer picture of the pay zones in both fault blocks.

2 May 2023: Issue of 34.4 million warrants in lieu of £30,000 (in aggregate) of Directors fees in respect of the period April-June 2023, to conserve the Company's working capital. The warrants are exercisable at a strike price of 0.1425 p (0.18¢) per share, a premium of 24% over the mid-point closing share price on 28 April 2023. The warrants are exercisable for a period of five years from the date of issue.

16 May 2023: Placing and subscription of 4,600 million shares to raise £2.3 million ($2.9 million) at a price of 0.05p (0.06¢) per share.

16 June 2023: Namibia technical update setting out initial conclusions from basin modelling work prior to and after the accounts date.