Exhibit 99.1
CONTINENTAL ENERGY CORPORATION
INTERIM FINANCIAL STATEMENTS
31 March 2019
Expressed in U.S. Dollars
(Unaudited – Prepared by Management)
INTERIM FINANCIAL STATEMENTS
The financial statements included herein are management prepared, unaudited, condensed, consolidated, interim financial statements and are hereinafter referred to as the "Interim Financial Statements". These Interim Financial Statements are filed on SEDAR concurrently with Management's Discussion and Analysis ("MD&A") of the results for the same period, and may be read in conjunction with the MD&A.
NOTICE OF NO AUDITOR REVIEW
In accordance with National Instrument 51-102 Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of our Interim Financial Statements, then such statements must be accompanied by a notice indicating that they have not been reviewed by an auditor.
Neither the accompanying Interim Financial Statements as presented herein nor the accompanying MD&A have been reviewed by our auditors. Both the Interim Financial Statements and the MD&A have been prepared by and are the responsibility of the management of Continental Energy Corporation.
Continental Energy Corporation
Financial Statements
(Unaudited – Prepared by Management and expressed in US Dollars)
STATEMENTS OFFINANCIALPOSITION
Note | 31 March | 30 June | |||
ASSETS | 2019 | 2018 | |||
Current | $ | $ | |||
Cash | 143,980 | 30,887 | |||
Receivables | 9,028 | 7,606 | |||
Prepaid expenses and deposits | 27,523 | 39,456 | |||
180,531 | 77,949 | ||||
LIABILITIES | |||||
Current | |||||
Accounts payable and accrued liabilities | 7 | 253,500 | 527,125 | ||
Loan from related party | 7 | 87,500 | 87,500 | ||
341,000 | 614,625 | ||||
Non-current assets | |||||
Promissory notes | 0 | 79,942 | - | ||
420,942 | 614,625 | ||||
DEFICIENCY | |||||
Share capital | 6 | 18,238,161 | 17,841,522 | ||
Share-based payment and other reserve | 6 | 10,535,182 | 10,277,321 | ||
Deficit | (29,013,754 | ) | (28,655,519 | ) | |
(240,411 | ) | (536,676 | ) | ||
180,531 | 77,949 |
Nature of Operations and Going Concern(Note1)
Subsequent Events(Note 10)
ON BEHALF OF THE BOARD:
“Richard L. McAdoo”, Director & CEO
“Phillip B. Garrison”, Director & Acting CFO
- See Accompanying Notes –
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Continental Energy Corporation
Financial Statements
(Unaudited – Prepared by Management and expressed in US Dollars)
STATEMENTS OFLOSS ANDCOMPREHENSIVELOSS
For the Three | For the Three | For the Nine | For the Nine | ||||||
Months | Months | Months | Months | ||||||
Ended | Ended | Ended | Ended | ||||||
31 March | 31 March | 31 March | 31 March | ||||||
Note | 2019 | 2018 | 2019 | 2018 | |||||
EXPENSES | $ | $ | $ | $ | |||||
Consulting | 10,811 | 12,500 | 10,811 | 12,500 | |||||
Depreciation | - | 91 | - | 274 | |||||
Interest and bank charges | 0 | 2,414 | 425 | 16,656 | 9,034 | ||||
Management and consulting fees | 7 | 47,188 | 14,907 | 119,047 | 98,324 | ||||
Office and investor relations | 9,575 | 21,547 | 63,108 | 122,504 | |||||
Professional fees | 6,077 | 4,157 | 24,346 | 66,995 | |||||
Rent, maintenance and utilities | 9,139 | 760 | 16,531 | 3,309 | |||||
Share-based payments | 6 | 92,250 | - | 92,250 | 41,950 | ||||
Travel and accommodation | 5,590 | 4,424 | 25,331 | 42,702 | |||||
(183,044 | ) | (58,811 | ) | (368,080 | ) | (397,592 | ) | ||
Other income (expenses) | |||||||||
Interest and foreign exchange | 6,493 | (438 | ) | 4,595 | (1,448 | ) | |||
Financing cost | - | - | - | (151,110 | ) | ||||
Settlement of debt | 6 | - | 204,000 | 5,250 | 382,838 | ||||
Transaction cost | - | - | - | (534,425 | ) | ||||
Net loss and comprehensive loss for the period | (176,551 | ) | 144,751 | (358,235 | ) | (701,737 | ) | ||
Loss Per Share – Basic and Diluted | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | ||
Weighted Average Number of Shares | 174,715,381 | 163,232,048 | 169,887,644 | 149,052,607 |
- See Accompanying Notes -
Continental Energy Corporation
Financial Statements
(Unaudited – Prepared by Management and expressed in US Dollars)
STATEMENTS OFCASHFLOWS
For the Nine | For the Nine | ||||
Months Ended | Months Ended | ||||
31 March | 31 March | ||||
2019 | 2018 | ||||
Cash Resources Provided By (Used In) | Note | $ | $ | ||
Operating Activities | |||||
Loss for the period | (358,235 | ) | (701,737 | ) | |
Items not affecting cash | |||||
Depreciation | - | 274 | |||
Interest on debt | 0 | 14,861 | 7,486 | ||
Settlement of debt | 6 | (5,250 | ) | (382,838 | ) |
Financing cost | - | 151,110 | |||
Share-based payment expense | 6 | 92,250 | 41,950 | ||
Transaction cost | - | 534,425 | |||
Changes in non-cash working capital | |||||
Receivables | (1,422 | ) | (4,718 | ) | |
Prepaid expenses and deposits | 11,933 | (120,919 | ) | ||
Accounts payable and accrued liabilities | (156,125 | ) | 133,219 | ||
(401,988 | ) | (341,748 | ) | ||
Financing Activities | |||||
Private placement | 6 | 550,000 | 350,000 | ||
Promissory note principal repayment | 5 | (30,000 | ) | - | |
Interest paid on promissory notes | 5 | (4,919 | ) | - | |
Proceeds from exercise of warrants | - | 20,000 | |||
Advances from joint venture partner | - | 74,426 | |||
Proceeds from (repayment of) loans from related parties | - | (13,100 | ) | ||
515,081 | 431,326 | ||||
Change in cash | 113,093 | 89,578 | |||
Cash Position – Beginning of Period | 30,887 | 25,158 | |||
Cash Position – End of Period | 143,980 | 114,736 |
Supplemental cash flow information(Note 8)
- See Accompanying Notes -
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Continental Energy Corporation
Financial Statements
(Unaudited – Prepared by Management and expressed in US Dollars)
STATEMENTS OFCHANGES INDEFICIENCY
Share Capital | |||||||||||
Share-Based Payment | Conversion Rights | ||||||||||
Number | Amount | and Other Reserve | Reserve | Deficit | Total | ||||||
$ | $ | $ | $ | $ | |||||||
Balance on 30 June 2017 | 123,015,381 | 16,201,630 | 9,927,687 | 92,966 | (27,942,808 | ) | (1,720,525 | ) | |||
Acquisition of Continental Hilir Indonesia Pte. Ltd. | 14,000,000 | 700,000 | 204,400 | - | - | 904,400 | |||||
Convertible debt settlement | 10,350,000 | 517,500 | 151,110 | - | - | 668,610 | |||||
Reallocation of conversion right reserve on settlement of convertible debt | - | 92,966 | - | (92,966 | ) | - | - | ||||
Exercise of warrants | 2,000,000 | 20,000 | - | - | - | 20,000 | |||||
Reallocation of share-based payment and other reserves on exercise of warrants | - | 26,200 | (26,200 | ) | - | - | - | ||||
Private placement – cash | 7,000,000 | 325,430 | 24,570 | - | - | 350,000 | |||||
Settlement of debt | 7,000,000 | 116,000 | - | - | - | 116,000 | |||||
Share-based payments | - | - | 41,950 | - | - | 41,950 | |||||
Loss for the period | - | - | - | - | (701,737 | ) | (701,737 | ) | |||
Balance on 31 March 2018 | 163,365,381 | 17,999,726 | 10,323,517 | - | (28,644,545 | ) | (321,302 | ) | |||
Balance on 30 June 2018 | 163,365,381 | 17,841,522 | 10,277,321 | - | (28,655,519 | ) | (536,676 | ) | |||
Private placement – cash | 6 | 11,000,000 | 384,389 | 165,611 | - | - | 550,000 | ||||
Settlement of debt | 6 | 350,000 | 12,250 | - | - | - | 12,250 | ||||
Share-based payments | 6 | - | - | 92,250 | - | - | 92,250 | ||||
Loss for the period | - | - | - | - | (358,235 | ) | (358,235 | ) | |||
Balance on 31 March 2019 | 174,715,381 | 18,238,161 | 10,535,182 | - | (29,013,754 | ) | (240,411 | ) |
- See Accompanying Notes -
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Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 MARCH 2019
1. | Nature of Operations and Going Concern |
Continental Energy Corporation (“Continental” or the “Company”) is incorporated under the laws of the Province of British Columbia, Canada. The Company’s registered address and records office is 1500-1055 West Georgia Street, Vancouver, British Columbia, Canada V6E 4N7.
The Company is a developer of modular, small-scale crude oil refineries that are co-located with smaller and/or stranded oil and gas producing fields. Each refinery will be designed to refine high demand motor fuels for supply to underserved local markets in the Republic of Indonesia. The Company operates its primary business activities through two subsidiaries in Indonesia. Each of these subsidiaries has received the necessary investment licenses to permit foreign direct investment in Indonesia and one has received the required licenses from the Indonesian Ministry of Mines and Energy to build, own, and operate a petroleum refining business. The Company is now working towards securing financing to begin construction.
These Interim Financial Statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company is a development stage company and has incurred operating losses over the past several fiscal years and has no current source of operating cash flows. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the financing necessary to acquire and develop its projects as well as fund ongoing administration expenses. There are no assurances that sufficient funding will be available.
Management intends to obtain additional funding primarily by issuing common and preferred shares in private placements, and/or by joining with strategic partners and joint venture partners in its refinery developments. There can be no assurance that management’s future financing actions will be successful. Management is not able to assess the likelihood or timing of raising capital for future expenditures or acquisitions.
These uncertainties indicate the existence of material uncertainty that casts substantial doubt on the Company’s ability to continue as a going concern in the future. If the going concern assumption were not appropriate for these Interim Financial Statements, liquidation accounting would apply, and adjustments would be necessary to the carrying values and classification of assets, liabilities, the reported income and expenses, and such adjustments could be material.
2. | Basis of Preparation |
These Interim Financial Statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, and are based on the principles of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations thereof made by the International Financial Reporting Interpretations Committee (“IFRIC”).
These Interim Financial Statements should be read in conjunction with the audited financial statements for the last fiscal year ended 30 June 2018, which were also prepared in accordance with the same methods of application and include all of the Company’s accounting policies and other required disclosures.
The Company’s Board of Directors has delegated the responsibility and authority for approving quarterly financial statements and MD&A to its Audit Committee. The Audit Committee approved these Interim Financial Statements on 30 May 2019.
These Interim Financial Statements are consolidated and include the accounts of the Company's subsidiaries as described in its annual audited financial statements for the last fiscal year ended 30 June 2018.
These Interim Financial Statements have been prepared on a historical cost basis and presented in United States (“US”) dollars, the functional currency of the Company, except where otherwise indicated.
3. | Significant Accounting Estimates and Judgments |
The preparation of these Interim Financial Statements in accordance with IFRS requires that the Company’s management make judgments and estimates and form assumptions that affect the amounts in the financial statements and related notes to those financial statements. Actual results could differ from those estimates. Judgments, estimates and assumptions are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to judgments, estimates and assumptions are accounted for prospectively.
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Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 MARCH 2019
In preparing these Interim Financial Statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited financial statements for the last fiscal year ended 30 June 2018.
4. | Recent Accounting Pronouncements |
Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC.
The Company adopted the following standard on 1 July 2018.
IFRS 9 Financial Instruments
This standard and its consequential amendments have replaced IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, rather than within profit or loss. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39.
Due to the nature of the Company’s financial instruments, i.e. cash being the only financial asset and the loan from a related party and other accounts payable being the only financial liabilities, the adoption of the standard did not have any impact on the Company’s financial statements. The classification and measurement of the Company’s financial instruments under IAS 39 and the new measurement categories under IFRS 9 are described below:
Measurement Category | ||
Original (IAS 39) | New (IFRS 9) | |
Financial Assets: | ||
Cash | Amortized cost | Amortized cost |
Financial Liabilities: | ||
Accounts payable and accrued liabilities | Amortized cost | Amortized cost |
Loans from related parties | Amortized cost | Amortized cost |
Promissory notes | N/A | Amortized cost |
The following new standards and amendments to standards have been issued but are not effective during the Company’s current fiscal year.
IFRS 16, Leases
This standard and its consequential amendments have replaced IAS 17 – Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. IFRS 16 is effective for annual periods beginning on or after January 1, 2019. The Company is currently evaluating the impact of this standard and will apply it from 1 July 2019.
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Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 MARCH 2019
5. | Promissory Notes |
On 1 September 2018 the Company issued three promissory notes to unrelated arms-length parties for an aggregate principal amount of $100,000 in respect of unpaid accounts payable and accrued liabilities of Continental Hilir Indonesia Pte. Ltd. assumed by the Company during the fiscal year ended 30 June 2018. The notes each have a term of two years and bear non-compounding simple interest at a rate of nine (9%) per year on the unpaid balance commencing from 1 September 2017. A continuity of the promissory notes payable is as follows:
$ | ||
Balance - 30 June 2018 | - | |
Issuance of promissory notes | 100,000 | |
Interest | 14,861 | |
Repayments | (34,919 | ) |
Balance - 31 March 2019 | 79,942 |
6. | Share Capital |
Authorized Share Capital
500,000,000 common shares without par value and without special rights or restrictions attached. 500,000,000 preferred shares without par value and with special rights or restrictions attached.
Shares issued
On 26 September 2018, pursuant to a private placement, the Company issued 7,000,000 units of the Company at $0.05 per unit, for proceeds of $350,000. Each unit consisted of one common share of the Company and one warrant to purchase an additional common share at a fixed price of $0.05 per common share for a term expiring on 30 June 2021. The Company allocated $228,545 to common shares and $121,455 to the share purchase warrants based on management’s estimate of relative fair values. The fair value of the share purchase warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield: 0%, expected stock price volatility: 100%, risk-free interest rate: 2.18%, expected life of warrants: 2.76 years.
On 26 September 2018, the Company also issued 350,000 common shares to settle a payable to an officer of $17,500. These common shares had a fair value of $0.035 per share on the date of issuance for a total value of $12,250, resulting in a gain on settlement of debt of $5,250.
On 16 December 2018, pursuant to a private placement, the Company issued 4,000,000 units of the Company at $0.05 per unit, for proceeds of $200,000. Each unit consisted of one common share of the Company and one warrant to purchase an additional common share at a fixed price of $0.05 per common share for a term expiring on 30 June 2021. The Company allocated $155,844 to common shares and $44,156 to the share purchase warrants based on management’s estimate of relative fair values. The fair value of the share purchase warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield: 0%, expected stock price volatility: 100%, risk-free interest rate: 1.95%, expected life of warrants: 2.54 years.
Stock options
The Company has an approved incentive stock option plan under which the Board of Directors may, from time to time, grant options to directors, officers, employees or consultants. Options granted must be exercised within a period as determined by the board. Options vest on the grant date unless otherwise determined by the board. The aggregate number of common shares which may be reserved as outstanding options shall not exceed 25,000,000, and the maximum number of options held by any one individual at any one time shall not exceed 7.5% of the total number of the Company's issued and outstanding common shares and 15% of same for all related parties (officers, directors, and insiders) as a group.
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Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 MARCH 2019
A reconciliation of the Company’s stock options outstanding is as follows:
Weighted Average | ||||
Number of | Exercise Price | |||
Options | $ per Share | |||
Outstanding on 30 June 2018 | 4,500,000 | 0.15 | ||
Granted | 7,500,000 | 0.05 | ||
Expired | (4,500,000 | ) | 0.15 | |
Outstanding on 31 March 2019 | 7,500,000 | 0.05 |
On 11 February 2019, the Company granted a total of 7,500,000 stock options to directors and officers of the Company, with and exercise price of $0.05 and term expiring 30 June 2021. The fair value of these stock options was determined to be $92,250, which was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield: 0%, expected stock price volatility: 100%, risk-free interest rate: 1.79%, expected life of warrants: 2.38 years.
Warrants
A reconciliation of the Company’s warrants outstanding is as follows:
Weighted Average | ||||
Number of | Exercise Price | |||
Warrants | $ per Share | |||
Outstanding on 30 June 2018 | 31,350,000 | 0.10 | ||
Issued | 11,000,000 | 0.05 | ||
Expired | (10,350,000 | ) | 0.10 | |
Outstanding on 31 March 2019 | 32,000,000 | 0.05 |
During the period ended 31 March 2019, the term and exercise price of 21,000,000 outstanding and unexercised share purchase warrants were amended to reflect a reduction in exercise price from $0.10 each to $0.05 each and an extension of their term and expiry date from 31 August 2018 (14,000,000) and 8 September 2018 (1,000,000) until a new expiry date on 30 June 2020, and from 28 November 2018 (6,000,000) until a new expiry date on 30 June 2021. As the share purchase warrants were issued originally to investors the modification of the terms was a transaction with the Company’s shareholders and therefore the incremental value resulting from such amendment did not result in any impact on the Company’s statement of loss.
A summary of the Company’s warrants outstanding on 31 March 2019 is as follows:
Number of Shares | Price Per Share | Expiry Date |
14,000,000 | $0.05 | 30 June 2020 |
1,000,000 | $0.05 | 30 June 2020 |
6,000,000 | $0.05 | 30 June 2021 |
7,000,000 | $0.05 | 30 June 2021 |
4,000,000 | $0.05 | 30 June 2021 |
32,000,000 |
7. | Related Party Transactions |
Key management personnel include persons having the authority and responsibility for planning, directing and controlling the activities of the Company as a whole, and includes the Company’s CEO, CFO, VP of Business Development, and its directors.
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Continental Energy Corporation
NOTES TO THEINTERIMFINANCIALSTATEMENTS
(Unaudited – Prepared by Management and expressed in US Dollars)
31 MARCH 2019
As at 31 March 2019, $185,653 (30 June 2018 - $320,951) was payable to the directors and officers of the Company as salary, fees, or other compensation. These amounts are included in accounts payable and accrued liabilities and are unsecured and non-interest bearing.
During the nine months ended 31 March 2019, the Company paid or accrued salary, fees, or other compensation to the directors and officers of the Company in the amount of $107,995 (2018 - $81,653).
During the nine months ended 31 March 2019, the Company’s VP of Business Development agreed to convert $17,500 in accrued and unpaid salaries into 350,000 common shares of the Company (Note 6).
During the nine months ended 31 March 2018, the CEO of the Company forgave $75,000 in accrued and unpaid salary. The Company’s CEO also agreed to convert $150,000 in accrued and unpaid salaries into 3,000,000 common shares of the Company.
During the nine months ended 31 March 2018, the previous CFO of the Company forgave $72,494 in accrued and unpaid salary and expenses and agreed to convert $200,000 in accrued and unpaid salaries into 4,000,000 common shares of the Company.
As at 31 March 2019, the Company has a loan payable to its CEO to $87,500, which was originally provided to the Company for assistance with working capital. The loan is interest free with no fixed repayment terms.
8. | Supplemental cash flow information |
Nine Months Ended | Nine Months Ended | |||
Non-Cash Investing and | Note | 31 March 2019 | 31 March 2018 | |
Financing Activities | $ | $ | ||
Acquisition of CHI | - | 904,400 | ||
Convertible debt settlement | - | 668,610 | ||
Conversion of accounts payable into long-term promissory notes | 5 | 100,000 | - | |
Common shares issued in settlement of accrued and unpaid salaries | 6 | 12,250 | 116,000 | |
Reallocation of conversion rights reserve on settlement of convertible debt | - | 92,966 | ||
Reallocation of share-based payment and other reserve on warrant exercise | - | 26,200 |
9. | Segmented Information |
The Company currently operates in only one segment which is geographically concentrated within the Republic of Indonesia.
10. | Subsequent Events |
In a letter to the Company dated 21 February 2018 the Canadian Securities Exchange ("CSE") approved the Company for listing subject to the Company a) providing acceptable emerging markets issues disclosure, b) confirmation of its audit committee composition, c) completion of financing sufficient to meet 12 month objectives (approximately $1 million, and d) completion of any and all outstanding CSE application documentation and payment of fees pursuant to the CSE's policies. A date for trading is to be determined upon confirmation of the conditions being met. As at the date of these Interim Financial Statements the Company is making arrangements to satisfy the conditions and complete the CSE listing.
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