Final Results

RNS Number : 5724V

Chalkwell Investments PLC

04 November 2010

 

4 November 2010

Chalkwell Investments plc

("Chalkwell" or the "Company")

Final Results for the Year Ended 31 May 2010

Chalkwell, the AIM-quoted investment company, with a focus on the resource sector, today announces its final results for the year ended 31 May 2010.

The Company would also like to inform shareholders that it will post its annual report and accounts for the year ended 31 May 2010, notice of annual general meeting and proxy to shareholders by 5 November 2010.  The annual general meeting of the Company will be held at 11.00 am on 29 November 2010 at Finsgate, 5-7 Cranwood Street, London EC1V 9EE.

In addition downloadable versions of this announcement, the report and accounts and the notice of annual general meeting will shortly be available from the following web address:

 http://www.chalkwellinvestementsplc.co.uk

ENDS

For further information please contact:

Chalkwell Investments plc

Nigel Weller, Director                                                                                             [phone]

Religare Capital Markets (Nomad)

Nick Harriss/Emily Staples                                                                                     [phone]

Religare Capital Markets (Broker)

Daniel Briggs                                                                                                           [phone]

Bishopgate Communications

Michael Kinirons                                                                                                      [phone]

Chairman's Review

Introduction

The year has seen considerable change in the position of your company.

We ceased prior operations in September 2009, following which, on 25 January 2010, our operating subsidiary was placed into liquidation.  On 23 March 2010 we came to an arrangement with creditors through the medium of a Company Voluntary Arrangement of the Company.  This enabled us to compromise our creditors' and financiers' liabilities, resulting in a reduction in the accumulated deficit of £963,896 in foregone liabilities.  At the same time we reorganised the share capital of the company, which has led to a leaner and more advantageous profile which gives us flexibility for acquisitions.

Investing Strategy

Following approval of the Company Voluntary Arrangement the Company introduced an investing strategy which it is working towards implementing;

The investing strategy of the Company is to seek suitable acquisition opportunities in the natural resources sector on a worldwide basis.  Your Board believes that the Directors have relevant experience in identifying and conducting such acquisitions. The Directors believe that their broad collective experience in this sector, in acquisitions, accounting, corporate and financial management together with their wide industry contacts will enable the Company to achieve its objectives.

The primary objective of the Company will be to invest its funds in securities and in businesses and assets that meet the policies summarised within the investing strategy insofar as they concern asset allocation and risk diversification.  The principal features of the investing strategy are summarised below;

The Directors may choose to modify or amend the investing strategy, either generally or in relation to any particular investment, but may not do so in a manner that would materially change the overall objective and risk profile of the existing investing strategy.

The funds of the Company for the time being, including any additional funding raised by the Company will be invested by means of the acquisition of shares and other equity investment instruments or debt securities of the Company and other corporate entities or directly by acquiring assets, licences or other rights.

The Directors will adopt a strategy of seeking suitable acquisition and investment opportunities by means of their connections and their expertise in identifying and conducting such acquisitions.  They may also engage advisers and intermediaries to source suitable opportunities.  The Directors have experience in the conduct of comparable business and the Company is considered to have sufficient available working capital to conduct the due diligence and other preparatory work needed to conduct transactions of this kind.

Investment and acquisitions carried out by the Company are likely to involve the acquisition of substantial interests in the business and assets that are to be acquired, combined with the introduction of new directors with executive responsibility for the management of those businesses and assets.  Investments of this kind are likely to be held in the long term with a view to development and capital growth.

It is likely that the Company will make a single substantial acquisition or a series of acquisitions of businesses and assets that are to be combined within a single grouping.  It is not contemplated that maximum exposure limits would be applied within the investing strategy.

In making acquisitions and investments, the Directors would expect to offer the issue of shares in the Company in exchange for the acquisition of shares, businesses and assets, but would need to satisfy any requirement for cash consideration or future funding of the resulting group by raising additional funding by means of placing of shares in the Company and, if required, by issuing debt securities or incurring borrowings.

The nature and extent of any borrowings would correspond to the security provided by the shares, businesses or assets to be acquired.

The Company would consider cross holdings of shares and other equity securities in circumstances that would benefit the broader strategy of the investing strategy.

The Company would not contemplate investments or acquisitions that carry a high degree of contingent risk or liability that is capable of imposing financial obligations upon the Company that it could not reasonably expect to meet.  The Company would also not entertain investments or acquisitions that would cause the Company to cease to be admitted to AIM or listed on any comparable securities exchange.

The Directors intend to be involved and active.  Accordingly, the Company is likely to seek participation in the management of the board of directors of a company in which the Company invests with a view to improving its performance and use of its assets in such ways as should result in an increase in the value of such a company.  The Directors hope that the resulting benefit would provide a satisfactory return to the Shareholders.

Outlook

On 1 November 2010 the Company announced that it successfully completed a placing of 2,000,000 ordinary shares in the capital of the Company raising £600,000, the proceeds being used as to £100,000 for the general working capital needs of the Company and as to up to £500,000 as an unsecured loan made by Chalkwell to Core Oil & Gas, Inc. ("Loan")

Core is a US-focused oil and gas company, which has acquired a 33.3% working interest and a 29.13% net revenue interest in respect of Mustang Island in Kleburg County, Texas ("Mustang Interest").  Mustang Island is a shallow inshore oil and gas asset, located in the Gulf of Mexico, with infrastructure in place and nearby oil and gas pipelines available.  Mustang Island is a proven behind-pipe asset, comprised of four shut-in wells previously drilled by Chevron Corporation. Core estimates that the Mustang Island asset contains total initial P90 reserves of up to 11.8 million barrels of oil equivalent ("boe") (Core's share of reserves).

The Company understands that Core intends to acquire, following completion of the Placing and granting of the Loan, participation interests in respect of Budde Ferry 27.3 (Oceana County, Michigan), Baron 14-15 (Oceana County, Michigan), and Paradise 4 (Grand Traverse County, Michigan). Core estimates that these assets contain additional total initial P90/P50 reserves of up to 6.38 million boe (Core's share of reserves).

Core will use the Loan to pay the first tranche of a total consideration of US$1,333,000 being US$133,000 to Seadrift Management, LLC and WellMaster Exploration & Production Co., LLC (the "Vendors") in respect of the Mustang Interest and to provide payment for a detailed reserve review of Core's oil and gas reserves by RPS Energy.  The remaining US$1.2 million consideration is payable by the end of April 2011 and will be paid in loan notes. Core will execute and deliver at completion a promissory note made payable to the order of the Vendors in the principal amount of US$1.2 million.  The Vendors retain in proportion to their undivided interests, an overriding royalty interest free and clear of all costs and expenses of production and all post-production expenses equal to 1% of 8/8ths of all oil and gas produced and sold from the leases.

The Company is evaluating opportunities and undertaking due diligence that may or may not result in further developing the commercial and corporate relationship between the Company and Core.

Summary

We have refinanced the business to enable us to go forward and are optimistic of being able to inform shareholders of an acquisition shortly, as well as enabling us to meet all routine expenditure for the next year.

W.N.V Weller

Chairman

3 November 2010.

 

CHALKWELL INVESTMENTS PLC

(FORMERLY THE CORE BUSINESS PLC)

Statement of Comprehensive Income
for the year ended 31 May 2010

					2010	2009
		Notes			£	£
Revenue                         - Discontinued		4			229,182	1,501,170
Cost of sales                   - Discontinued		4			(178,640)	(730,394)
					────────	────────
Gross profit					50,542	770,776
Administration costs        - Discontinued		4			(261,300)	(956,133)
- Continuing		4			(32,389)	(131,232)
					────────	────────
Operating loss		6			(243,147)	(316,589)
Analysed as:
Operating loss before exceptional items
Exceptional items		7			963,896	(2,075,536)
					────────	────────
Operating Profit/(loss) after exceptional items					720,749	(2,392,125)
Financial income		8			-	277
Financial expense		8			(5,157)	(68,970)
					────────	────────
Profit/(Loss) before tax					715,592	(2,460,818)
Income tax credit/(expense)		9			-	-
					────────	────────
Profit/(Loss) for the year					715,592	(2,460,818)
					════════	════════
Since there is no other comprehensive income, the profit for the year is same as the total comprehensive income for the year.
Attributable to:
Owners of the parent				715,592			(2,460,818)
				═══════			═══════
Profit/(Loss) per share
Basic			10		1,500 pence		(5,880 pence)
Diluted			10		96 pence		(5,880 pence)
Basic and diluted (prior to exceptional Items)
Discontinued activities			10		(452 pence)		(605 pence)
Continuing activities			10		(68 pence)		(312 pence)

CHALKWELL INVESTMENTS PLC

(FORMERLY THE CORE BUSINESS PLC)

Statement of Financial Position
As at 31 May 2010

			2010	2009
Assets	Notes		£	£
Non-current assets
Property, plant and equipment	11		-	155,730
Investment in subsidiary	12		-	-
			────────	────────
			-	155,730
			────────	────────
Current assets
Trade and other receivables	13		101,756	47,175
Cash and cash equivalents	14		-	939
			────────	────────
			101,756	48,114
			────────	────────
Total assets			101,756	203,844
			════════	════════
Equity and liabilities
Equity attributable to the Company's equity holders
Share capital	15		1,267,490	1,267,412
Share premium			1,189,106	1,182,681
Shares to be issued			12,033	-
Retained earnings			(2,473,133)	(3,188,727)
			────────	────────
			(4,504)	(738,634)
			────────	────────
Current liabilities
Trade and other payables	16		24,613	313,428
Convertible loan notes	17		-	629,050
			────────	────────
			24,613	942,478
			────────	────────
Creditors:  Amounts falling due after more than one year
Convertible loan notes	17		81,647	-
			────────	────────
Total liabilities			106,260	942,478
			────────	────────
Total equity and liabilities			101,756	203,844
			════════	════════

The financial statements were approved and authorised for issue by the Board of Directors on 3 November 2010 and were signed on its behalf by:

W.N.V. Weller

Director

Company number 05131386

   

CHALKWELL INVESTMENTS PLC

(FORMERLY THE CORE BUSINESS PLC)

Statement of changes in equity
for the year ended 31 May 2010

	Attributable to owners of the parent
	Non distributable                        Distributable
	Share capital	Equity reserve	Share premium	Share capital to be issued	Retained earnings	Total
	£	£	£	£	£	£
Balance as at 31 May 2008	1,017,410	10,722	1,096,431	-	(727,907)	1,396,656
Total comprehensive loss in year	-	-	-	-	(2,460,818)	(2,460,818)
Transaction with owners
Equity component of convertible loan	-	(10,722)	-	-	-	(10,722)
Issue of share capital	250,000	-	86,250	-	-	336,250
	──────	──────	──────	─────	───────	───────
Balance as at 31 May 2009	1,267,410	-	1,182,681		(3,188,725)	(738,634)
Total comprehensive income for the year	-	-	-	-	715,592	715,592
Transactions with owners
Issue of share capital	80	-	6,425	-	-	6,505
Share capital to be issued	-	-	-	12,033	-	12,033
	──────	──────	──────	─────	───────	───────
Balance at 31 May 2010	1,267,490	-	1,189,106	12,033	(2,473,133)	(4,504)
	══════	══════	══════	══════	════════	═══════

Share Capital

The amount subscribed for shares at nominal value.

Equity Reserve

This reserve relates to increase in equity for services received in equity-settled share based payment transactions.

Share Premium

This represents the excess of the amount subscribed for share capital over the nominal value of the respective shares net of share issue expenses.

Share Capital to be Issued

This represents the amounts of shares committed to be issued at the year end but not yet issued.

Retained earnings

Cumulative loss of the company attributable to owners of the parent.

CHALKWELL INVESTMENTS PLC

(FORMERLY THE CORE BUSINESS PLC)

Statement of Cash flow

for the year ended 31 May 2010

			2010	2009
	Notes		£	£
Cash flows from operating activities
Cash (used in)/generated from operations	22		46,281	(110,243)
Interest paid			(5,157)	(68,970)
Tax paid			-	-
			──────	───────
Net cash used in operating activities			41,124	(179,213)
			──────	───────
Cash flows from investing activities
Purchases of property, plant and equipment			(42,063)	(159,420)
Interest received			-	277
			──────	───────
Net cash used in investing activities			(42,063)	(159,143)
			──────	───────
Cash flows from financing activities
Net proceeds on issues of shares			-	336,250
			──────	───────
Net cash from financing activities			-	336,250
			──────	───────
Net (decrease) in cash and cash equivalents			(939)	(2,106)
Cash and cash equivalents at beginning of year			939	3,045
			──────	───────
Cash and cash equivalents at end of year			-	939
			══════	═══════

CHALKWELL INVESTMENTS PLC

(FORMERLY THE CORE BUSINESS PLC)

Notes to the financial statements

for the year ended 31 May 2010

1.      Accounting policies

         The principal accounting policies adopted in the preparation of these financial statements are set out below.

         1.1     General information

                  Chalkwell Investments Plc is currently an investment company.

                   The Company is a public limited company listed on AIM, a market of that name operated by the London Stock Exchange plc and incorporated in England and Wales.

                        The address of its registered office is Finsgate, 5-7 Cranwood Street, London EC1V 9EE.

                        Items included in the financial statements of the Company are measured in Pound Sterling

which is the currency of the primary economic environment in which the entity operates. The financial statements are also presented in Pound Sterling which is the Company's presentational currency.

         1.2     Basis of preparation

                  The financial statements of Chalkwell Investments Plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) applied in accordance with the provisions of the Companies Act 2006.  The company has not prepared consolidated accounts in view of the cessation of trade in its subsidiaries and also the worthlessness of its investment therein, for which full provision has been made.  Comparative figures for 2009 are, therefore, for the company only.  The company appointed administrators under the Insolvency Act 1986 on 25 September 2009 and proposed a Company Voluntary Arrangement on 25 January 2010, which was concluded on 23 March 2010.

                  IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) and there is an ongoing process of review and endorsement by the European Commission. The financial statements have been prepared on the basis of the recognition and measurement principles of IFRS that were applicable at 31 May 2010.

                  The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

                  The accounts have been prepared under the historical cost convention. The principal accounting policies set out below have been consistently applied to all periods presented.

                  Going concern

                  The financial statements have been prepared on a going concern basis.

                  When assessing the foreseeable future, the directors have looked at a period of twelve months from the date of approval of this report. The ability of the company to meet its working capital obligations is contingent upon available finance and the directors consider that the company is fully compliant.

(a)  Standards, amendments and interpretations effective at 1 June 2009

·     The following standards and amendments to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after 1 June 2009 or later periods:

·      IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the Statement of Changes in Equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the Statement of Comprehensive Income) or two statements (the Income Statement and Statement of Comprehensive Income).The Company has elected to present one performance statement (the Statement of Comprehensive Income).

·      IFRS 2 (amendment), 'Share-based payment' deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and other providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The amendment does not have a material impact on the Company's financial statements.

·      IFRS 7, 'Financial instrument: Disclosures'. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share.

·      IFRS 8 'Operating segments'. IFRS 8 replaces IAS 14 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes.  Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the executive committee that makes strategic decisions. In the opinion of the Directors the Company's core activities comprise one business segment which reflects the profiles of the risks, rewards and internal reporting structures within the Company.

(b)  Standards, amendments and interpretations effective at 1 June 2009, but not relevant

      The following interpretations to existing standards have been published that are mandatory for the Company's accounting periods beginning on or after 1 June 2009 or later periods but are not relevant to the Company's operations:

IAS 20 - Amendment, 'Government grants and disclosure of government assistance'.

IAS 23 - Revised, 'Borrowing costs'.

IAS 29 - Amendment, 'Financial reporting in hyperinflationary economies'.

IAS 32 and IAS 1 - Amendment, 'Puttable financial instruments and obligations arising from liquidation'.

IAS 39 - Amendment, 'Financial Instruments: Recognition and Measurement - Eligible hedged items'.

IAS 40 - Amendment, 'Investment property'.

IAS 41 - Amendment, 'Agriculture'.

IFRIC 15 - 'Agreement for Construction of Real Estate'.

IFRIC 16 - 'Hedges of a Net Investment in a Foreign Operation'.

(c)  Standards and amendments early adopted by the Company

      The Company has not early adopted any standards or amendments.

(d)  Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company

     The following standards and amendments to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after 1 June 2010 or later periods, but the Company has not early adopted them:

IAS 1 - Revised 'Consolidated and separate financial statements' (effective date 1 July 2009)

    IAS 7 - Revised, 'Statement of cash flows' (effective from 1 January 2010).

    IAS 17 - 'Leases' (effective from 1 January 2010).

    IAS 24 - Revised, 'Related Party Disclosures' (effective from 1 January 2011).

                   IAS 28 - Amendment, 'Investment in associates'(effective date from 1 July 2009)

                   IAS 31 - Amendment, 'Interest in joint ventures'(effective date from 1 July 2009)

IAS 32 - Amendment, 'Classification of Rights Issues' (effective from 1 February 2010).

    IAS 38 - Amendment, 'Intangible Assets' (effective date 1 July 2009)

    IFRS 1 - Amendment, 'First-time Adoption of International Financial Reporting Standards - Additional Exemptions for First-time Adopters' (effective from 1 January 2010).

    IFRS 3 - Revised, 'Business combinations' (effective date 1 July 2009)

    IFRS 2 - 'Group Cash-settled Share-based Payment Arrangements' (effective from 1 January 2010).

                   IFRS 1 and IAS 27 - Amendment, 'Cost of an investment on first-time adoption' (effective date 1 July 2009)

                   IFRS 5 - Amendment, 'Non-current assets held for sale and discontinued operations (effective date 1 July 2009)

    IFRS 9 - 'Financial instruments: Presentation' (effective from 1 January 2013).

    IFRIC 14 - Amendment, 'The limit on a defined benefit asset' (effective from 1 January 2011).

                   IFRIC 17 - 'Distribution of Non-cash Assets to Owners' (effective date 1 July 2009)

                   IFRIC 18 - 'Transfers of Assets from Customers' (effective date 1 July 2009)

     IFRIC 19 - 'Extinguishing financial liabilities with equity instruments' (effective from 1 July 2010).

     Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The 
 effective dates vary standard by standard but most are effective 1 January 2011.

      The changes to IAS 7, 17 and 24 appear to be relevant to the Company but no impact on the financial 
statements is anticipated.

      1.3     Consolidation

               For the reasons detailed in section 1.1 above, the results, assets and liabilities of the Company's subsidiary have not been consolidated and therefore these accounts are for the Company only.

      1.4     Revenue recognition

               Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services provided in the ordinary course of the Company's activities. Revenue derived from the Company's principal activities (which is shown exclusive of applicable sales taxes, where applicable) is recognised as follows:

               Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on despatch of the goods.

               Interest income is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable.

      1.5     Exceptional items

               Exceptional items are events or transactions that fall within the activities of the Company and which by virtue of their size or incidence have been disclosed in order to improve a reader's understanding of the financial statements.

      1.6     Foreign currencies

               Transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in the net profit or loss for the year.

      1.7     Taxation

               The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date.

               Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit.

               Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interest in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

               Deferred tax is calculated at the rates that are expected to apply when the asset or liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

               Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

      1.8     Property, plant and equipment

               Fixtures and equipment are stated at cost less accumulated depreciation.

               Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method, on the following basis.

               Office equipment                           3 years

               Fixtures and fittings                       3 years

               Display stands                              3 years

               The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

               Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the income statement.

      1.9     Financial instruments

               The Company classifies its financial instruments in the following categories: at fair value through profit or loss, held to maturity, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial instrument was acquired. Management determines the classification of its financial instruments at initial recognition and re-evaluates this designation at each financial year end.

               When financial assets are recognised initially, they are measured at fair value, being the transaction price plus directly attributable transaction costs.

               Financial assets at fair value through profit or loss

               Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets are carried in the balance sheet at fair value with gains or losses on financial assets at fair value through profit or loss recognised in the income statement.

               Held to maturity investments

               Non derivative financial assets with fixed or determinable payments and fixed maturity are classified as held to maturity when the Company has the positive intention and ability to hold to maturity. Held to maturity investments are carried at amortised cost using the effective interest rate method. Gains or losses are recognised in income when the investment is derecognised or impaired, as well as through the amortisation process. Investments intended to be held for an undefined period are not included in this classification.

      Loans and receivables

      Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated as either fair value through profit or loss or available-for-sale. Such assets are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

      Available-for-sale financial assets

      After initial recognition available-for-sale financial assets are measured at fair value with gains and losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the income statement. The fair value of unquoted investments is based on appropriate valuation techniques. These include using recent arm's length transactions, discounted cash flow analysis and pricing models. Otherwise assets will be carried at cost.

      The company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

      Impairment of non-financial assets

      Non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Value in use is based on the present value of the future cash flows relating to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

      Impairment of financial assets

      Available-for-sale financial assets

      If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost and its fair value is transferred from equity to the income statement. Any reversal of an impairment of an equity instrument classified as available-for-sale is not recognised in the income statement.

      Assets carried at amortised cost

      If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced, with the amount of the loss recognised in administration costs.

      If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment charge was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

      Assets carried at cost

      If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

      1.10   Trade receivables

      Trade receivables are recognised initially at fair value less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

      1.11   Cash and cash equivalents

      Cash and cash equivalents are carried in the balance sheet at cost. Cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the balance sheet.

      1.12   Trade payables

      Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

      1.13   Equity instruments

      Equity instruments are recorded at the proceeds received net of direct issue costs.

      1.14   Dividend distribution

      Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the year in which they are approved.

      1.15   Share based payments

      The cost of warrant based equity transactions is measured with reference to the fair value of the services provided for which the warrant was granted using a Black-Scholes pricing model. Further details are set out in note 20.  In accordance with IFRS 2 'Share-based Payments' the resulting cost is charged to the income statement over the vesting period of the warrants.

2.   Financial risk management

      The Company uses a limited number of financial instruments, comprising cash, short-term deposits, loans and overdrafts and various items such as trade receivables and payables, which arise directly from operations. The Company does not trade in financial instruments.

      2.1     Financial risk factors

      The Company's activities expose it to a variety of financial risks: foreign exchange risk, credit risk and cash flow interest rate risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

a)  Foreign exchange risk

           The Company no longer operates internationally and thus no longer incurs expenses to foreign currency fluctuations.

b)  Credit risk

           Credit risk arises from cash and cash equivalents and deposits with banks and other financial institutions as well as credit exposures to wholesale and retail customers, including outstanding receivables. The Company's credit risk is primarily attributable to its trade receivables. Management assesses the credit quality of customers taking into account their financial position, past experience and other factors. The amounts presented in the balance sheet are net of any allowances for doubtful receivables. The credit risk on

 liquid funds is limited because the counterparties are banks with high credit ratings   assigned by international credit-rating agencies.

c)  Cash flow and interest rate risk

           As the Company has no significant interest bearing assets, the Company's income and operating cash flows are substantially independent of changes in market interest rates.

           The Company's interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. All of the Company's borrowings are at fixed rates.

           The Company finances its operations through a mix of borrowings, cash flow from current operations and cash on deposit.

           The following table shows the contractual maturities of the Company's financial liabilities, all of which are measured at amortised cost.

As at 31 May 2010	Trade and other Payables £	Convertible Loans £	Total £
6 months or less	24,613	-	24,613
6 to 12 months	-	-	-
1 to 2 years	-	-	-
2 to 5 years	-	-	-
More than 5 years	-	81,647	81,647
	────────	────────	───────
Total contractual cash flows	24,613	81,647	106,260
	════════	════════	═══════

      2.2     Capital risk management

               The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure appropriate for its growth plans.

               In order to maintain or adjust the capital structure the Company may issue new shares or alter debt levels.

      2.3     Fair value estimation

               The nominal value less impairment provision of trade receivables and payables is assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.

3.   Critical accounting estimates and judgements

      Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

      The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The 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 outlined below.

a)   Income taxes

            Judgement is required in determining the Company's provision for income tax. Where the final tax outcome is different from the amounts that were initially recorded, the differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

b)   Fair value of financial instruments

            The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to make assumptions that are mainly based on market conditions existing at each balance sheet date.

4.   Segmental reporting

      The Company's business segments are beauty products distribution and the provision of consultancy services on brand development of beauty products.  The directors do not consider that the expense of preparing a segmental analysis is worth the expenditure in view of the Company Voluntary Arrangement.

5.   Staff costs

Staff costs for the Company during the year.	2010 £	2009 £
Wages and salaries	49,126	329,936
Social security costs	-	37,319
	───────	────────
Total staff costs	49,126	367,255
	═══════	════════

      The average number of people (including executive directors) employed by the Company during the year was:

	2010 No.	2009 No.
Head office and administration	5	5
Warehouse and distribution	1	3
	───────	────────
Total	6	8
	═══════	════════

      Directors' and executives' remuneration

      Remuneration paid to directors and other members of key management during the year was as follows:

	2010 £	2009 £
Directors' remuneration
- Salaries and benefits	62,840	157,607
- Consultancy fees	-	104,820
	───────	────────
Total directors' remuneration	62,840	262,427
	───────	────────
Total key management remuneration	62,840	262,427
	═══════	════════

      Highest paid director, amounts included above:

		2009 £
Salaries and benefits		128,167
Share based payment		-
		────────
Total		128,167
		════════

6.   Loss from operations

      Loss from operations has been arrived at after charging:

	2010 £	2009 £
Depreciation	52,451	90,540
Auditor's remuneration
-  Audit services	18,800	34,952
-  Other services	411	10,350

7.   Exceptional items

      Exceptional items are events or transactions that fall within the activities of the Company and which by virtue of their size or incidence have been disclosed in order to improve a reader's understanding of the financial statements.

	2010 £	2009 £
Impairment of valuation of subsidiary	-	(2,035,207)
Inventories obsolescence provision	-	(40,329)
Net liabilities reduction arising on settlement through Company
Voluntary Arrangement approved on 23 March 2010	963,896	-
	───────	────────
Total exceptional items	963,896	(2,075,536)
	═══════	════════

8.   Finance income and expense

	2010 £	2009 £
Interest income - bank deposits	-	277
Interest expense - loan notes	(5,157)	(68,970)
	───────	────────
Net financing income / (expense)	(5,157)	(68,693)
	═══════	════════

9.   Income tax (credit)/expense

	2010 £	2009 £
Current tax	-	-
Under/(over) provision from prior year	-	-
	───────	────────
Taxation attributable to the Company	-	-
	═══════	════════

      Domestic income tax is calculated at 20 per cent. of the estimated assessable profit for the year.

      The charge for the year can be reconciled to the profit per the income statement as follows:

	2010 £	2009 £
Profit/(Loss) before tax	715,592	(2,460,818)
	═══════	════════
Tax at the domestic income tax rate	143,118	(492,164)
Other tax adjustments	(143,118)	492,164
	───────	────────
Tax (credit)/expense	-	-
	═══════	════════

10.   Profit/(Loss) per share

	2010 £	2009 £
Profit for the purpose of basic and diluted profit for share	715,592	-
Loss for the purpose of basic and diluted loss per share	-	(2,460,818)
Loss before exceptional items
Discontinued activities	(215,915)	(254,054)
Continuing activities	(32,389)	(131,232)
Number of shares	2010	2009
	No.	No.
Weighted average number of ordinary shares:
- for the purposes of basic and diluted loss per share	-	42,005
- Basic	47,720	-
- Diluted	747,324	-

11.          Property, plant and equipment

Year ended 31 May 2010	Fixtures and fittings £	Office equipment £	Display stands £	Total 2010 £
Cost
At 31 May 2008	-	3,848	110,599	114,447
Additions	350	4,806	154,264	159,420
Disposal	-	(1,218)	-	(1,218)
	──────	──────	──────	──────
At 31 May 2009	350	7,436	264,863	272,649
Additions
Disposal	(350)	(7,436)	(306,924)	(314,710)
	──────	──────	──────	──────
At 31 May 2010	-	-	-	-
	──────	──────	──────	──────
Accumulated depreciation
At 31 May 2008	-	3,019	24,578	27,597
Charge for the year	117	2,136	88,287	90,540
Disposals	-	(1,218)	-	(1,218)
	──────	──────	──────	──────
At 31 May 2009	117	3,937	112,865	116,919
Charge for the period	58	1,239	51,154	52,451
Disposal	(175)	(5,176)	(164,019)	(169,370)
	──────	──────	──────	──────
At 31 May 2010	-	-	-	-
	══════	══════	══════	══════
Net book value
At 31 May 2009	233	3,499	151,998	155,730
	══════	══════	══════	══════
At 31 May 2010	-	-	-	-
	══════	══════	══════	══════

         The Net Book Value of assets held under finance leases or hire purchases amounts to Nil (2009: £33,731) and the depreciation charge relating to those assets in the year amount to Nil (2009: £9,638).

12.     Investment in subsidiary

			£	£
At 1 June 2007				-
Additions				3,168,901
				────────
At 31 May 2008				3,168,901
Impairment				(3,168,901)
				────────
At 31 May 2009 and 2010				-
				════════

        On 25 January 2010, the Company's only subsidiary, Amirose International Limited, a beauty products distributor incorporated and operating in the UK went into liquidation. The cost of investment of the Company in the subsidiary was fully written off as the recoverable value was deemed to be nil.

13.     Trade and other receivables

			2010 £	2009 £
Trade receivables			-	-
Other debtors			101,756	47,175
			───────	───────
Total			101,756	47,175
			═══════	═══════

         The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

         The other classes within trade and other receivables do not contain impaired assets.

         The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Company does not hold any collateral as security.

14.     Cash and cash equivalents

			2010 £	2009 £
Cash at bank and on hand			-	939
			═══════	═══════

         Cash and cash equivalents comprise cash and short-term deposits held by the Company treasury function. The carrying amount of these assets approximates their fair value.

15.     Share capital

	2010 No.	2009 No.	2010 £	2009 £
Authorised:
Ordinary shares of 0.5 pence each	-	1,000,000,000		5,000,000
Ordinary shares of 0.1 pence each	3,732,632,000	-	3,732,632	-
Deferred shares of £29.99 pence each	42,247	-	1,267,368	-
			────────	────────
			5,000,000	5,000,000
			════════	════════

Issued and fully paid			2010 £	2009 £
253,482,454 ordinary shares of £0.005			-	1,267,410
122,158        ordinary shares of £0.001			122	-
42,247          deferred shares of £29.999			1,267,368	-
			────────	────────
			1,267,490	1,267,410
			════════	════════

          Under the Company Voluntary Arrangement, approved on 23 March 2010, the existing ordinary shares of £0.005 were subdivided into new ordinary shares of £0.001 each.  Then each 29.999 resulting ordinary shares of £0.001 each was consolidated into one Deferred share of £29.999 each.  The deferred shares have negligible value, being subject to restrictions as to voting, participation and redemption according to the new Articles of Association then adopted, nor are they quoted on the Stock Exchange.

         On 7 May 2010, 79,911 ordinary shares of £0.001 each were issued for a total consideration of £6,504.

16.     Trade and Other payables

			2010 £	2009 £
Trade payables			16,701	71,841
Other payables			113	46,314
Other taxes and social security			-	104,948
Accruals			7,799	90,325
			────────	────────
Total			24,613	313,428
			════════	════════

The directors consider that the carrying amount of trade payables approximates to their fair value.

17.     Convertible Loan Notes

Current			2010 £	2009 £
Convertible loan notes			-	618,328
Add/(less) equity component of convertible loans			-	10,722
			────────	────────
Convertible loans			-	629,050
			════════	════════

         The loan notes include secured liabilities of £Nil (2009: £553,037) which are secured by the assets of the Company

         These loan notes have been settled under the CVA in the year.

			2010 £	2009 £
At 1 June 2009			-	-
Additions during the year			81,647	-
			────────	────────
At 31 May 2010			81,647	-
			════════	════════

         The Convertible loan notes are interest free, unsecured and repayable on 31 December 2015.  A redemption premium of 20 per cent of the principal amount is to be paid by the Company on any balance of the Convertible Loan Notes not converted into New Ordinary Shares within two years from the date of issue of the Convertible Loan Notes.  The noteholders will have the right to convert any amount of the principal amount of the convertible loan notes at any time within two years from date of issue of the Convertible Loan Notes into New Ordinary Shares at the exercise price of 20 pence per share.  The New Ordinary shares to be issued on conversion of the Convertible Loan Notes (assuming full conversion) would amount to 408,234 New Ordinary Shares.  The Convertible Loan Notes are freely transferable any may be transferred to new note holders who will then be able to exercise the conversion rights attaching to the Convertible Loan Notes.

18.     Deferred tax

Deferred income tax assets have not been recognised for tax losses carried forward due to the uncertainty of future taxable profits arising.

19.     Operating lease commitments

         At 31 May 2010 the Company has lease commitments in respect of display stands for which the payments extend over a number of years.

	2010 £	2009 £
Commitments under non cancellable operating leases due:
Within one year	-	41,417
Within two to five years	-	12,086
After five years	-	-
	──────	──────
Total	-	53,503
	══════	══════

         Operating lease payments represent rentals for display stands under non cancellable operating lease agreements.

20.     Share-based payment

         At 31 May 2010, existing warrants over 15,562 (adjusted following the share split and consolidation see Note 15) ordinary shares were outstanding as follows:

         Number of Outstanding Existing Warrants at 31 May 2010:

Date of grant	At 1 June 2009	Granted	Exercised /vested	Forfeits	At 31 May 2010	Exercise/ Share price	Exercise/ Vesting date
							From	To
Warrants
08.03.06	1,083	-	-	-	1,083	36,000p	08.03.06	08.03.11
27.07.07	14,479	-	-	-	14,479	6,000p	27.07.07	27.07.12
	──────	────	─────	─────	─────
	15,562	-	-	-	15,562
	══════	════	═════	═════	═════

         Number of Outstanding Existing Warrants at 31 May 2009:

Date of grant	At 1 June 2008	Granted	Exercised /vested	Forfeits	At 31 May 2009	Exercise/ Share price	Exercise/ Vesting date
							From	To
Warrants
08.03.06	1,083	-	-	-	1,083	36,000p	08.03.06	08.03.11
27.07.07	14,479	-	-	-	14,479	6,000p	27.07.07	27.07.12
	──────	────	─────	─────	─────
	15,562	-	-	-	15,562
	══════	════	═════	═════	═════

         The estimated fair value of the warrant issue was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

Date of grant		27 July 2007
Share price at date of grant		2.5 pence
Exercise price		1.0 pence
Shares under warrant		19,500,000
Expected volatility		78%
Expected dividend		Nil
Contractual life		5 years
Risk free rate		5%
Estimated fair value of each option		2.0175 pence

The expected volatility is based on historical volatility over the last 12 months. There was no charge in the year in the respect of the existing warrants as it was believed that none of those warrants were exercised in the year to 31 May 2010.

Under the Company Voluntary Arrangement of 23 March 2010, additional warrants were granted:
23.03.10	3,239,697		-	-	-		3,239,697		£0.001	23.03.10	22.03.15
	═══════		════	════	════		══════

Included within the 3,239,697 new warrants are 239,697 relating to services that the Company has received in exchange for these warrants. The estimated fair value of the warrant issue was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

Date of grant		23 March 2010
Share price at date of grant		1.0 pence
Exercise price		1.0 pence
Shares under warrant		239,697
Expected volatility		1%
Expected dividend		Nil
Contractual life		5 years
Risk free rate		1.5%
Estimated fair value of each option		0.57 pence

The expected volatility is based on historical volatility over the last 12 months adjusted for any unusual movement in the share price on the announcements of finalisation of the CVA. This resulted in an immaterial charge in the year in the respect of the new warrants in the year to 31 May 2010.

21.     Related party transactions

There were no transactions during the year to be reported.

22.     Note to the cash flow statement

			2010 £	2009 £
Loss for the year			(243,147)	316,589)
Adjustments for:
- Depreciation			52,451	90,540
Changes in working capital:
- (Increase)/decrease in trade and other receivables			(16,076)	817
- Increase/(decrease) in trade and other payables			253,053	114,989
			────────	────────
Cash generated from /( used in) operations			46,281	(108,279)
			════════	════════

23.     Events after the balance sheet date

During July, August and September, an additional 195,296 ordinary shares of £0.001 each were issued.

The company has a commitment to issue a further 135,403 ordinary shares of £0.001 each.

         On 1 November 2010, the Company announced that it has completed a placing of 2,000,000 new ordinary shares of £0.001 each ("New Ordinary Shares") at a price of 30p per share, (the "Placing") for a total value of £600,000. The proceeds will be used as to £100,000 for the general

          working capital needs of the Company and as to up to £500,000 as an unsecured loan made by Chalkwell to Core Oil & Gas, Inc. ("Core") ("Loan"). 

Core is a US-focused oil and gas company, which has acquired a 33.3% working interest and a 29.13% net revenue interest in respect of Mustang Island in Kleburg County, Texas (State of Texas Oil and Gas Lease numbers 108873 and 108877) ("Mustang Interest").

          Mustang Island is a shallow inshore oil and gas asset, located in the Gulf of Mexico, with infrastructure in place and nearby oil and gas pipelines available.  Mustang Island is a proven behind-pipe asset, comprised of four shut-in wells previously drilled by Chevron Corporation. Core estimates that the Mustang Island asset contains total initial P90 reserves of up to 11.8 million barrels of oil equivalent ("boe") (Core's share of reserves).

          The Company understands that Core intends to acquire, following completion of the Placing and granting of the Loan, participation interests in respect of Budde Ferry 27.3 (Oceana County, Michigan), Baron 14-15 (Oceana County, Michigan), and Paradise 4 (Grand Traverse County, Michigan). Core estimates that these assets contain additional total initial P90/P50 reserves of up to 6.38 million boe (Core's share of reserves).

Core will use the Loan to pay the first tranche of a total consideration of US$1,333,000 being US$133,000 to Seadrift Management, LLC and WellMaster Exploration & Production Co., LLC (the "Vendors") in respect of the Mustang Interest and to provide payment for a detailed reserve review of Core's oil and gas reserves by RPS Energy.  The remaining US$1.2 million consideration is payable by the end of April 2011 and will be paid in loan notes. Core will execute and deliver at completion a promissory note made payable to the order of the Vendors in the principal amount of US$1.2 million.  The notes bear interest at the rate of 6% before default.  All principal and accrued and unpaid interest is due and payable on said notes on 30th April 2011. In the event the principal or interest on said note is not paid when due, said note shall bear interest at the lesser of 18% per annum or the maximum non-usurious rate of interest that applies to the indebtedness evidenced by the notes. In addition, the Vendors retain in proportion to their undivided interests, an overriding royalty interest free and clear of all costs and expenses of production and all post-production expenses equal to 1% of 8/8ths of all oil and gas produced and sold from the leases.

In addition, the Company has been notified today that Germiston Investments Limited has today sold 135,403 Ordinary Shares, 1,300,000 warrants in respect of Ordinary Shares and £40,514.50 of convertible unsecured loan notes to Channel Equity Partners (BVI) Limited (representing an aggregate of approximately 26.8% of the issued share capital of the Company on a fully diluted basis) and that Trafalgar Specialized Investment Fund FIS (in liquidation) has today sold 90,068 Ordinary Shares and 900,000 warrants in respect of Ordinary Shares to John Roddison (representing 16.2% of the issued share capital of the Company on a fully diluted basis). Channel Equity Partners (BVI) Limited and John Roddison are unconnected.

It is intended that John Roddison will be appointed as director of the Company at the next annual general meeting of the Company to be held on 29 November 2010.

Following the issue of the New Ordinary Shares, the Company's total issued share capital will be 2,452,857 ordinary shares of £0.001 each ("Ordinary Shares").  Application has been made to the London Stock Exchange for the New Ordinary Shares which are expected to be admitted to trading on AIM with effect from 5 November 2010.

24.     The financial information set out above does not constitute Chalkwell Investment plc's statutory accounts for the years ended 31 May 2010 or 2009 but is derived from those accounts. Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for 2009 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2010. The financial information in this announcement has been prepared on the basis of the accounting policies set out in the last published set of annual financial statements. The announcement was approved by the board of directors on 3 November 2010.

 

END

 

 

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