ACN 119 749 647 Half-year Financial Report - 31 December 2011
Corporate directory 31 December 2011 Directors Company secretary Registered office Principal place of business Share register Auditor Stock exchange listing Cosimo Damiano (Non-Executive Chairman) Craig Martin (Non-Executive Director) Dr Jaap Poll (Non-Executive Director) Melanie Leydin Suite 304 22 St Kilda Road St Kilda VIC 3182 Ph : (03) 9692 7222 & Fax : (03) 9529 8057 Suite 304 22 St Kilda Road St Kilda VIC 3182 Ph : (03) 9692 7222 & Fax : (03) 9529 8057 Computershare Investor Services Pty Ltd Level 2 Reserve Bank Building 45 St George Street Bank Building Perth WA 6000 Tel : (08) 9323 2000 Fax : (08) 9323 2033 BDO Audit (WA) Pty Ltd 38 Station Street Subicao WA 6008 Tel (08) 9360 4200 Fax (08) 9481 2524 Sprint Energy Limited shares are listed on the Australian Securities Exchange (ASX code: SPS) (ASX code options: SPSOA) 2
Directors' report 31 December 2011 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Sprint Energy Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled for the half-year ended 31 December 2011. Directors The following persons were directors of Sprint Energy Limited during the whole of the financial half-year and up to the date of this report, unless otherwise stated: Jaap Poll - (appointed on 6 January 2012) Anthony Hamilton (resigned 28 July 2011) Andrew Waller (appointed 3 August 2011 and resigned 19 September 2011) Craig Willis - (appointed 3 August 2011 and resigned on 24 October 2011) James Row (resigned 28 July 2011) Tony Izelaar (resigned 19 September 2011) Douglas Jendry - (resigned 1 August 2011) Cameron Edwards (appointed 19 September 2011 and resigned on 15 November 2011) Cosimo Damiano (appointed 19 September 2011) Andrew Mattin - (appointed on 24 October 2011 and resigned 8 March 2012) Craig Martin - (appointed on 24 October 2011) Principal activities During the financial half-year the principal continuing activities of the consolidated entity consisted of: management of onshore and offshore oil and gas production assets in the USA. Review of operations The profit for the consolidated entity after providing for income tax amounted to $832,341 (31 December 2010: loss of $2,464,115). Refer to the Review of Operations directly following this Director's Report. Significant changes in the state of affairs During the year the Company issued 40,446,770 fully paid shares through placements raising $736,000 before costs. The Company also issued 48,375,000 fully paid shares following the conversion of convertible notes, as approved by shareholders at the Company's December 2011 General Meeting. There were no other significant changes in the state of affairs of the consolidated entity during the financial half-year. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act 2001. On behalf of the directors Cosimo Damiano Non Executive Chairman 14 March 2012 Perth 3
Review of operations For the half-year ended 31 December 2011 HIGHLIGHTS Sprint raises $2,500,00 through convertible loans during the half-year The Board of Directors has undergone significant changes A highly skilled and experienced new Company Secretary has been appointed The new Board commenced a detailed review of the Company s assets and strategy The registered office moved to Melbourne Shareholders approved name change from Modena Resources Ltd to Sprint Energy Ltd Gas production recommenced on Padre Island and at Sullivan City Debt reduction and restructuring reduces convertible loans by over $2.8 million Significantly improved financial position Assessing new venture growth opportunities OVERVIEW The half-year ended 31 December 2011 was a challenging period for the Company. The Company changed its name Sprint Energy Ltd. ( Sprint ) and the Board focussed on implementing its recovery plan.. This report provides the details and progress of this work, along with information on the status of a number of issues surrounding the Company. Over all it has been a very successful half-year. Most significantly the Company is in a substantially better financial position than it was at the end of the last financial year (30 June 2011) and work continues to improve this further. PRODUCTION OPERATIONS During the half-year production on Padre Island and at Sullivan City totalled 7.2 MMcf of gas and some 521 barrels of crude oil, generating revenue of almost $70,000 for the Company. LEASE AND ASSET REVIEW An initial technical and economic review of all of the Company s Padre Island assets was commenced during the half-year. This review is ongoing and it is anticipated it will be completed conclude during 1Q 2012. As advised during the half-year a significant number of the Padre Island leases were terminated due to nonproduction. It should be noted that the Sprint retains ownership of all wells, production facilities and equipment on all of the lost leases. NEW VENTURES During the half-year the Company advised that it is the Board s view from its initial asset review that the Padre Island and Sullivan City assets will assist the Company with short to medium-term production and cash flow, but new assets will be required for longer-term sustained growth of the Company. With this in mind Sprint commenced investigations into a number of new opportunities to enhance the Company s portfolio and provide low to medium risk exploration, development, and production in the near to medium term. Subsequent to the end of the half-year the Company reported that it has entered into a no cost, 60 day option to purchase Eternal Resources Ltd and its oil and gas assets in Louisiana. Due diligence for this acquisition is now underway and it is anticipated that this will be completed during April 2012. 4
Review of operations For the half-year ended 31 December 2011 FINANCIAL POSITION AND AUDIT PROGRESS UPDATE Audit and Restated 2011 Annual Report One of the most significant issues the Company has undertaken during the half-year was the completion of audit of the accounts in Australia and the USA. As announced on 13 January 2012, a restated annual report for the financial year ended 30 June 2011 was completed by BDO and an unqualified audit opinion was provided. This was a significant milestone for Sprint and the Company was subsequently reinstated on the ASX. Fund Raising On 19 September 2011 the Company executed a mandate to raise $1,250,000 by way of a convertible loan to provide additional working capital subject to Shareholder approval. Shareholders approved this fund raising mandate at the General Meeting held on 16 December 2011. On 30 December 2011, the Company allotted 48,375,000 ordinary shares upon the conversion of these convertible loans. Subsequent to the end of the halfyear a further 14,150,000 shares were issued as the final part of the conversion of this loan. In December 2011, the Company raised a further $1,250,000 by way of another convertible loan to be converted following approval of the raising by shareholders at the Company's annual general meeting in February 2012. Funds raised by the convertible loans were used to provide additional working capital, for the retirement of some of the Company s debt and creditor management. Debt Reduction and Restructuring of Convertible Loans Throughout the half-year the Board undertook intensive negotiations in an attempt to reduce and restructure convertible loans totalling some $6.7 million. These negotiations were successfully completed during the halfyear and on 10 January 2012, following the execution of the necessary legal agreements, the Company announced that it had finalised these negotiations thereby reducing the total debt by over $2.8 million. In addition, the maturity date for all of the loans was reset to 31 December 2012 and the interest rate reduced to nil for loans totalling $1,349,011 and 8.5% pa for loans totalling $2,500,000. Creditor and Cash Flow Management When the new Board was appointed to the Company (between 19 September and 24 October 2011) some 100 creditors in Australia and the USA were awaiting payments to a total value of just over $2.1 million. During the half-year considerable effort has been put into creditor management and by 31 December 2011 the creditor list had been reduced by almost 50%, with an associated value of approximately $0.843 million. Sprint s management will continue this process of prudent creditor management. In parallel an analysis of the use of funds was completed and changes were made throughout the organisation to reduce overheads, increase efficiency and reduce overheads by between 60% to 80%. This has enabled the careful application of funds towards production operations and creditor management. CORPORATE AND LEGAL Legal Review During the half-year, the Board has been carefully reviewing the legal proceedings in which the Company is involved. The Board has taken a proactive and prudent approach to these proceedings and has attempted, wherever possible and in the best interests of shareholders, to settle each action as soon as reasonably possible. Change of Company Name The shareholders of the Company approved the change of name to Sprint Energy Ltd. (ASX Code: SPS) at a General Meeting held on 16 December 2011. This change of name was executed on 20 December 2011. 5
Review of operations For the half-year ended 31 December 2011 Board Changes During the half-year, there was a significant change in the Board and strengthening through the appointment of important technical oil and gas experience, in addition to key commercial and financial appointments. On 20 September 2011, the Board of Modena has undergone significant changes over the last month introducing important technical oil and gas experience, in addition to key commercial and financial appointments. The Board appointed a new Non-executive Chairman, Mr Cosimo Damiano and Mr Cameron Edwards as an Executive Director. Mr Edwards resigned on 16 November 2011. On 24 October 2011 Mr Craig Martin and Mr Andrew Mattin were appointed directors of the Company. Mr Mattin was appointed Managing Director on 10 November 2011. These three new Board members bring extensive international oil and gas exploration, appraisal, development, production, and management experience to the Company. Mr Tony Izelaar, Mr Craig Willis and Mr Andrew Waller resigned as Directors during the half-year. Subsequent to the end of the half-year Dr Jaap Poll was appointed to the Board as an Independent Non- Executive Director. In addition, on 7 March 2012 Mr Mattin resigned as an Executive Director of the Company and will continue as Chief Executive Officer during his three-month notice period ending on 7 June 2012. Corporate Governance During the half-year a complete review of the Company s corporate governance policies and procedures was completed. As a consequence of this review a number of new policies have been developed and are being implemented. Also, subsequent to the end of the half-year the Board of Directors has established an Audit and Risk Committee and a Remuneration and Nomination Committee. Change of Registered Office During the half-year the Company changed its registered office from 1186 Hay Street, West Perth to Suite 304, 22 St. Kilda Road, St. Kilda, Victoria. 6
Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia 14 March 2012 The Board of Directors Sprint Energy Limited Suite 304, 22 St Kilda Road St Kilda VIC 3182 Dear Sirs, DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF SPRINT ENERGY LIMITED As lead auditor of Sprint Energy Limited for the half year ended 31 December 2011, I declare that, to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the review; and any applicable code of professional conduct in relation to the review. This declaration is in respect of Sprint Energy Limited and the entities it controlled during the period. Peter Toll Director BDO Audit (WA) Pty Ltd Perth, Western Australia BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
Financial report For the half-year ended 31 December 2011 Contents Financial report Statement of comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration Independent auditor's review report to the members of Sprint Energy Limited Page 9 10 11 12 13 20 21 General information The financial report covers Sprint Energy Limited as a consolidated entity consisting of Sprint Energy Limited and the entities it controlled. The financial report is presented in Australian dollars, which is Sprint Energy Limited's functional and presentation currency. The financial report consists of the financial statements, notes to the financial statements and the directors' declaration. Sprint Energy Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Suite 304 22 St Kilda Road St Kilda VIC 3182 Ph : (03) 9692 7222 & Fax : (03) 9529 8057 A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial report. The financial report was authorised for issue, in accordance with a resolution of directors, on 14 March 2012. The directors have the power to amend and reissue the financial report. 8
Statement of comprehensive income For the half-year ended 31 December 2011 Note 31/12/11 31/12/10 $ $ Revenue Other income Expenses Cost of sales Administration, consulting and other expenses Exploration and evaluation expenditure Employee benefits expense Depreciation and amortisation expense Directors fees and benefits expenses Impairment of receivables Finance costs Profit/(loss) before income tax expense Income tax expense Profit/(loss) after income tax expense for the half-year attributable to the owners of Sprint Energy Limited Other comprehensive income Foreign currency translation Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year attributable to the owners of Sprint Energy Limited 4 174,180 262,437 5 3,573,183 - (161,919) - (1,108,621) (846,232) (99,266) (1,113,621) (421,404) (357,267) (3,075) (18,922) (134,315) - (644,152) - (342,270) (390,510) 832,341 (2,464,115) - - 832,341 (2,464,115) (273,551) (1,043,685) (273,551) (1,043,685) 558,790 (3,507,800) Cents Cents Basic earnings per share Diluted earnings per share 0.29 (0.30) 0.29 (0.30) The above statement of comprehensive income should be read in conjunction with the accompanying notes 9
Statement of financial position As at 31 December 2011 Note 31/12/11 30/06/11 $ $ Assets Current assets Cash and cash equivalents Trade and other receivables Financial assets at fair value through profit or loss Total current assets Non-current assets Receivables Property, plant and equipment Total non-current assets Total assets 464,633 30,298 6 563,824 1,355,629 57,500 27,500 1,085,957 1,413,427-28,089 47,834 168,880 47,834 196,969 1,133,791 1,610,396 Liabilities Current liabilities Trade and other payables Borrowings Employee benefits Provisions Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net liabilities Equity Contributed equity Reserves Accumulated losses Total deficiency in equity 7 2,734,673 3,940,110 8 5,382,011 6,696,583 3,843 40,261 1,122,727 1,226,745 9,243,254 11,903,699 880,905 807,386 880,905 807,386 10,124,159 12,711,085 (8,990,368) (11,100,689) 9 57,091,716 55,540,185 (2,415,844) (2,142,293) (63,666,240) (64,498,581) (8,990,368) (11,100,689) The above statement of financial position should be read in conjunction with the accompanying notes 10
Statement of changes in equity For the half-year ended 31 December 2011 Balance at 1 July 2010 Other comprehensive income for the half-year, net of tax Loss after income tax expense for the half-year Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Securities issued during the year Capital raising costs Balance at 31 December 2010 Balance at 1 July 2011 Other comprehensive income for the half-year, net of tax Profit after income tax expense for the half-year Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Securities issued during the year Capital raising costs Balance at 31 December 2011 Contributed Accumulated Total equity Reserves losses equity $ $ $ $ $ $ 48,162,388 864,910 (24,932,003) 24,095,295 - - - (1,043,685) - (1,043,685) - - - - (2,464,115) (2,464,115) - - - (1,043,685) (2,464,115) (3,507,800) 4,514,350-4,514,350 (155,881) - - (155,881) - - 52,520,857 (178,775) (27,396,118) 24,945,964 Contributed Accumulated Total equity Reserves losses equity $ $ $ $ $ $ 55,540,185 (2,142,293) (64,498,581) (11,100,689) - - - (273,551) - (273,551) - - - - 832,341 832,341 - - - (273,551) 832,341 558,790 1,703,500 - - 1,703,500 (151,969) - - (151,969) - - 57,091,716 (2,415,844) (63,666,240) (8,990,368) The above statement of changes in equity should be read in conjunction with the accompanying notes 11
Statement of cash flows For the half-year ended 31 December 2011 Note 31/12/11 31/12/10 $ $ Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers (inclusive of GST) Interest received Interest and other finance costs paid Net cash used in operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for exploration and evaluation Advances to related parites Repayment of advances non related entity Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Share issue transaction costs Repayment of borrowings Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial half-year Cash and cash equivalents at the end of the financial half-year 201,626 - (2,558,288) (2,239,206) 4,501 2,420 (107,203) (74,182) (2,459,364) (2,310,968) - (70,074) (40,695) (3,433,238) - (431,278) - 859,061 (40,695) (3,075,529) 511,000 3,015,600 2,423,394 2,421,173 - (31,500) - (358,196) 2,934,394 5,047,077 434,335 (339,420) 30,298 621,512 464,633 282,092 The above statement of cash flows should be read in conjunction with the accompanying notes 12
Notes to the financial statements 31 December 2011 Note 1. Significant accounting policies These general purpose financial statements for the interim half-year reporting period ended 31 December 2011 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001. 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 2011 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. New, revised or amending Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. 13
Notes to the financial statements 31 December 2011 Note 1. Significant accounting policies (continued) Going concern The financial report has been prepared on the basis of accounting principles applicable to a going concern, which assumes the commercial realisation of the future potential of the Company s and consolidated entity s assets and the discharge of their liabilities in the normal course of business. Notwithstanding the fact that the company has a working capital deficiency of $8,157,297 and negative net assets of $8,990,368 the directors are of the opinion that the company is a going concern for the following reasons. The working capital deficiency has improved by $2,332,975 from $10,490,272. The negative net assets has improved by $2,110,321 from $11,100,689 at 30 June 2011. The Company has in place an equity draw down facility for an amount up to $10,000,000 expiring on 22 September 2012. The Company currently has $8.25 million of this facility available for use. On 10 January 2012 the Company announced that it had successfully renegotiated the terms of many of its convertible notes. This renegotiation has reduced the total payable by over $2.8 million to approximately $3.9 million. In addition, one of the loans has been extinguished, the applicable interest rate on loans totalling $1,349,011 has been reduced to nil and the interest rate on a loan totalling $2,500,000 has been reduced to 8.5% pa. The maturity of the remaining loans has also been extended until December 2012. Also, during the last quarter of the 2011 calendar year, production was restarted from the 3 serviceable Sullivan City gas wells in Hidalgo County, as well as the Dunn-McCampbell A4 well on Padre Island. Production from these wells is now generating revenue for the Company. The Board considers that the Company is a going concern and recognises that additional funding is required to ensure that the Company can continue to fund its and the consolidated entity s operations and further develop their gas exploration and evaluation assets during the twelve month period from the date of this financial report. Such additional funding, as occurred during the year ended 30 June 2011, can be derived from either one or a combination of the following: The placement of securities under ASX Listing Rule 7.1 or otherwise; An excluded offer pursuant to the Corporations Act 2001; or The sale of assets. Accordingly, the Directors believe that subject to prevailing equity market conditions, the Company will obtain sufficient funding to enable it and the consolidated entity to continue as going concerns and that it is appropriate to adopt that basis of accounting in the preparation of the financial report. Should the company be unable to obtain sufficient funding as outlined above, there is significant uncertainty whether or not the entity will be able to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts or classification of liabilities that might be necessary should the Company and the consolidated entity not be able to continue as going concerns. The following is a summary of the significant accounting policies adopted by the consolidated group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. 14
Notes to the financial statements 31 December 2011 Note 2. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Provision for impairment of receivables The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and specific knowledge of the individual debtors financial position. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Environmental provision A provision has been made for the present value of anticipated costs of the remediation work that will be required to comply with environmental and legal obligations. The provision is estimated based on currently available facts, technology expected to be available at the time of the clean up, laws and regulations presently or virtually certain to be enacted and prior experience in remediation of contaminated sites. Provision for legal claims Based on the directors' best estimates a current provision of $1,122,727 (2010: $1,226,745) has been made for the present value of anticipated costs required to settle outstanding legal disputes. The calculation of this provision requires assumptions to determine the best estimates of the amounts payable to settle known outstanding claims. The timing of the settlement and amounts to be settled and potential costs incurred on settlement may vary from that which is provided. Note 3. Operating segments Identification of reportable operating segments AASB 8 requires operating segments to be identified on the basis of internal reports about the components of the Company that are regularly reviewed by the chief decision maker in order to allocate resources to the segment and to assess its performance. The Board have been deemed to be the chief decision makers. Sprint Energy Limited operates in the development of oil and gas within the USA. The Company s activities are therefore classified as one business segment. 15
Notes to the financial statements 31 December 2011 Note 4. Revenue 31/12/11 31/12/10 $ $ Sales revenue Natural gas sales Other revenue Interest Other revenue Revenue 103,554 260,017 4,501 2,420 66,125 - - - 70,626 2,420 - - 174,180 262,437 Note 5. Other income 31/12/11 31/12/10 $ $ Fair value gain of assets designated as fair value through profit or loss Gain on renegotiation of loan (1) Prior year over provision for legal claims Other income 30,000-2,718,981-824,202 - - - 3,573,183 - (1) refer to Note 7 for further details. Note 6. Current assets - trade and other receivables 31/12/11 30/06/11 $ $ Trade receivables Other receivables Security deposits for lease restoration Amount owing by other entites (1) Allowance for impairment of receivable GST and other tax recoverable 147,677 179,624 905 130,880 393,144 377,460 1,316,177 1,316,177 (1,316,177) (672,035) 22,098 23,523 - - 563,824 1,355,629 (1) the directors believe that there is considerable doubt in relation to the collectability of these debts and as a result have decided to impair it in full. 16
Notes to the financial statements 31 December 2011 Note 7. Current liabilities - trade and other payables 31/12/11 30/06/11 $ $ Bankruptcy settlement outstanding debt guarantee (1) Share capital refundable Purchase price payable Interest payable Trade and other payables (2) 49,143 943,650-189,000 614,091 589,593 54,770 486,499 2,016,669 1,731,368 - - 2,734,673 3,940,110 (1) during the period the company has paid $US400,000 in relation to the bankruptcy settlement. In addition during February 2012 the company paid a further $US50,000 to settle this balance in full. This means that the estimate was over accrued at 30 June 2011 and a reversal of this amount has been recognised in the current period resulting in a revenue of $566,638. This is included in the $824,202 "prior year over provision of legal claims" in note 5. (2) this balance includes $355,000 accrued in relation to shares issued after period end. The shares issued relate to the renegotiation of the loans payable. Note 8. Current liabilities - borrowings 31/12/11 30/06/11 $ $ Loans - unsecured (1) Convertible notes payable (2) 1,349,011 4,119,477 4,033,000 2,577,106 - - 5,382,011 6,696,583 (1) these loans were renegotiated during the period and a gain of $2,736,202 has been recognised in the statement of comprehensive income. These loans have been extended until 31 December 2012 and no interest is payable. (2) convertible notes totalling $1,533,000 have been converted to equity since period end. The remaining $2,500,000 is due for repayment on 31 December 2012 and interest is payable at 8.5% per annum from 1 January 2012. Note 9. Equity - contributed 31/12/11 30/06/11 31/12/11 30/06/11 Shares Shares $ $ Ordinary shares - fully paid 337,114,426 248,292,656 57,091,716 55,540,185 17
Notes to the financial statements 31 December 2011 Note 9. Equity - contributed (continued) Movements in ordinary share capital Details Balance 1 July 11 22 July 11 30 December 2011 Balance Date 1 July 2011 Share issue Truestone drawdown facility Loan conversion Cost of capital raising 31 December 2011 No of shares Issue price $ 248,292,656 55,540,185 1,800,000 $0.02 36,000 38,646,770 $0.02 700,000 48,375,000 $0.02 967,500 (151,969) 337,114,426 57,091,716 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Note 10. Equity - dividends There were no dividends paid or declared during the current or previous financial half-year. Note 11. Contingent liabilities There were no contingent liabilities at 31 December 2011 or 30 June 2011. 18
Notes to the financial statements 31 December 2011 Note 12. Events after the reporting period On 16 January 2012, the company issued a further 17,970,000 shares. Of these shares 14,150,000 were for the conversion of $283,000 worth of convertible notes which were received by the company in September 2011. The remaining 3,820,000 shares were in settlement of $76,400 of trade and other payables at 31 December 2011. On 27 January 2012, the company was re-admitted onto the official list of the Australian Securities Exchange. On 7 February 2012, the company issued a further 7,380,000 shares settling a $147,600 of capital raising costs from the Company's September and December covertible loan agreements. On 27 February 2012, the Company issued 62,500,000 fully paid shares for the conversion of $1,250,000 worth of convertible loans received in December 2011 following shareholder approval at the Company's 2011 Annual General Meeting. On 27 February 2012, the Company also issued 55,000,000 unlisted options to Truestone Capital Limited following approval at the 2011 Annual General Meeting. On 27 February 2012, the Company issued 5,000,000 fully paid shares to Truestone Capital Limited for their assistance and advice during the re-negotiations of the convertible loans. A liability has been recognised in relation to these shares at 31 December 2011. On 1 March 2012, the Company issued 10,000,000 fully paid ordinary shares to the lenders in relation to the reduction of loans following approval at the Company's 2011 Annual General Meeting. A liability has been recognised in relation to these shares at 31 December 2011. On 8 March 2012, Mr Andrew Mattin resigned as Managing Director of the Company. He will step down from his role as an Executive Director immediately and will remain as Chief Executive Officer during his three-month notice period. No other matter or circumstance has arisen since 31 December 2011 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. 19
Directors' declaration In the directors' opinion: the attached financial statements and notes thereto comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes thereto give a true and fair view of the consolidated entity's financial position as at 31 December 2011 and of its performance for the financial half-year ended on that date; and there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of directors made pursuant to section 303(5) of the Corporations Act 2001. On behalf of the directors Cosimo Damiano Non Executive Chairman 14 March 2012 Perth 20
Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia Report on the Half-Year Financial Report INDEPENDENT AUDITOR S REVIEW REPORT TO THE MEMBERS OF SPRINT ENERGY LIMITED We have reviewed the accompanying half-year financial report of Sprint Energy Limited, which comprises the statement of financial position as at 31 December 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a statement of significant accounting policies and other explanatory information, and the directors declaration of the consolidated entity comprising the disclosing entity and the entities it controlled at the half-year s end or from time to time during the half-year. Directors Responsibility for the Half-Year Financial Report The directors of the disclosing entity are responsible for the preparation of the half-year financial report in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Sprint Energy Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Sprint Energy Limited, would be in the same terms if given to the directors as at the time of this auditor s report. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Sprint Energy Limited is not in accordance with the Corporations Act 2001 including: (a) giving a true and fair view of the consolidated entity s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001. Emphasis of Matter Without qualifying our conclusion, we draw attention to the net working capital deficiency of $8,157,297 as at 31 December 2011. This condition, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty which may cast significant doubt about the consolidated entity s ability to continue as a going concern and whether they will realise their assets, extinguish their liabilities in the normal course of business and at the amounts stated in the financial report. Emphasis of Matter Without qualifying our conclusion, we draw attention to Note 2 of the financial statements, which indicates the provision for legal claims has been based on the present value of the anticipated costs required to settle outstanding legal disputes. The calculation of this provision requires assumptions to determine the best estimates of the amounts payable to settle known outstanding claims and therefore indicate the existence of an uncertainty in relation to the outcome of such claims. BDO Audit (WA) Pty Ltd Peter Toll Director Perth, Western Australia Dated this 14 th day of March 2012