MEC Resources : Annual Report to shareholders

For personal use only

MEC RESOURCES LTD

ABN 44 113 900 020

Directors' Report

MEC Resources Ltd

Page Number

For personal use only

Directors' Report...................................................................................................................................................	1
Auditor's Independence Declaration .............................................................................................................	26
Corporate Governance Statement.................................................................................................................	27
Consolidated Statement of Profit or Loss and Other Comprehensive Income ..........................................	28
Consolidated Statement of Financial Position ...............................................................................................	29
Consolidated Statement of Changes in Equity..............................................................................................	30
Consolidated Statement of Cash Flows ..........................................................................................................	31
Notes to the Consolidated Financial Statements ..........................................................................................	32
Directors' Declaration........................................................................................................................................	67
Independent Auditor's Report..........................................................................................................................	68
Additional Securities Exchange Information ...................................................................................................	72

Directors	Auditor
Douglas Verley - Non-Executive Director (appointed 11	Moore Australia Audit (WA)
February 2020)	Level 15
Andrew Jones - Non-Executive Director (appointed 23	Exchange Plaza
September 2020)	2 The Esplanade
David Breeze - Managing Director (appointed22	PERTH WA 6000
October 2020)
Anthony Hudson - Non-Executive Director (appointed 22	Share Registry
October 2020)	Boardroom Pty Ltd
Geoffrey Murray - Non-Executive Director (appointed 22	Level 12
October 2020)	225 George Street
	Sydney NSW 2000
Company Secretary
Robert Marusco	Australian Securities
	Exchange Listing
Registered Office	Australian Securities Exchange Limited
Level 1, 9 Bowman Street	(Home Exchange: Perth, Western
South Perth WA 6151	Australia)
	ASX Code: MMR
Principal Business Address
Level 1, 9 Bowman Street	Australian Business Number
South Perth WA 6151	44 113 900 020
Telephone: [phone]
Facsimile: [phone]
Website: www.mecresources.com.au
E-mail:[e-mail]

Directors' Report

MEC Resources Ltd

The directors of MEC Resources Ltd ("MEC" or the "Company") present their report on the Company for the financial year ended 30 June 2021.

For personal use only

Directors

The names of directors in office at any time during or since the end of the year are:

D Breeze - Managing Director (appointed 22 October 2020)

1. Verley - Non-Executive Director (appointed 11 February 2020) A Jones - Non-Executive Director (appointed 23 September 2020) A Huston - Non-Executive Director (appointed 22 October 2020) G Murray - Non-Executive Director (appointed 22 October 2020)
   R Marusco - Non-Executive Director (appointed 23 September 2020 - resigned 22 October 2020) M Sandy - Non-Executive Director (resigned 31 July 2020)
   A Bald - Non-Executive Director (resigned 23 September 2020)
   A Hamilton - Non-Executive Director (resigned 23 September 2020) S Harrison - Non-Executive Director (resigned 2 September 2020)

Company Secretary

Robert Marusco was appointed as company secretary 18 September 2019.

Principal Activities

MEC was formed to invest into a variety of industries, including companies in the energy and mineral resources sector. Up until 8 February 2021 it was registered as a Pooled Development Fund ("PDF") under the Pooled Development Fund Act (1992).

MEC will provide carefully selected Australian companies with funding and is focused on opportunities with a number of specific characteristics including: strong growth and near term cash flow potential; a stage of development that permits a strategic investor or IPO within several years; strong and experienced management team and a definitive competitive advantage.

MEC's current major investment lies in unlisted Australian oil and gas exploration investee company, Advent Energy Ltd.

On 8 February 2021 the Company announced that it was notified by the Innovation Investment Committee of Innovation and Science Australia (the "Committee") that the Committee had revoked MEC's PDF registration as a result of the Company contravening ss19(1), 27, 27A and 42 of the Pooled Development Fund Act 1992 ("PDF Act"). This was followed by the Company exercising its right of review which was announced to market 1 March 2021 following which MEC made various additional submissions to the Department of Industry, Science, Energy and Resources.

On 13 May 2021 MEC confirmed that it had applied, through its legal representative, to the Administrative Appeals Tribunal under the Administrative Appeals Tribunal Act 1975 for review of the decision by the PDF Board. The Company continues to develop and compile material for this appeal through its legal representative with a Stay Hearing set for 18 October 2021.

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Directors' Report

MEC Resources Ltd

Advent Energy Ltd - Oil and Gas

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MEC has a non-controlling interest in the unlisted energy explorer Advent of 47.6%.

Advent holds a range of hydrocarbon permits which contain near term production opportunities with pre- existing infrastructure and exploration upside.

Advent's assets include EP386 and RL1 (100%) in the onshore Bonaparte Basin in the north of Western Australia and Northern Territory and PEP11 (85%) in the offshore Sydney Basin.

Operating Results

The loss attributable to the owners of the Company after tax for the year was $1,034,051 (2020: Loss $2,669,798).

Dividends

The Directors recommend that no dividend be paid in respect of the current period and no dividends have been paid or declared since the commencement of the period.

Financial Position

The net assets of the Company have decreased by $1,034,051 to $7,282,268 at 30 June 2021.

Going Concern

The Company has assessed its ability to continue as a going concern, taking into account all available information, for a period of 12 months from the date of issuing of the financial report.

The Company's financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities, including the realisation of assets and settlement of liabilities in the normal course of business.

Based on the Company's cash flow forecast, the Company will require additional funding in the next 12 months to enable it to continue its normal business activities and to ensure the realisation of assets and extinguishment of liabilities as and when they fall due.

The continuing viability of the Company and its ability to continue as a going concern and meet its debts and commitments as they fall due is therefore dependent upon:

• the Company's operating cash requirements not exceeding its historical levels; and
• the Directors being successful in obtaining future funding to meet the Company's objectives and payment obligations as and when they fall due by engaging with parties in raising additional capital or issuing debt, in relation to which the Company has demonstrated a history of success in this regard.
• The Company has negotiated a satisfactory outcome in relation to the writs and demands issued by Advent Energy Ltd and Asset Energy Pty Ltd as announced to ASX on 14 December 2020, whereby subject to shareholder approval Advent and Asset would be issued shares in the Company as debt for equity conversion in the sum of a total of $872,288.

After consideration of the above factors, the Directors are of the opinion that it is appropriate for the Company to prepare the financial statements on a going concern and, as a result, the financial statements do not include any adjustments relating to the recoverability and classification of the recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Company not be able to continue as a going concern basis.

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Directors' Report

MEC Resources Ltd

Notwithstanding this assessment, there exists a material uncertainty that may cast doubt on the Company's ability to continue as a going concern for at least the next 12 months and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

The independent auditor's report has highlighted this matter by including an Emphasis of Matter paragraph noting the existence of material uncertainty in relation to the Company's ability to continue as a going concern.

Developments during the year included:

MEC Resources Ltd

• On 17 January 2020, the securities of MEC were suspended from quotation on the ASX. The Company has been in dialogue with the ASX following its two announcements made on 14 December 2020 (note below). On 16 December 2020, the Company made a formal submission to the ASX which included a shareholder meeting seeking approval of various resolutions the aim of which is to have MEC readmitted to trading status. The Company remains in discussions with the ASX and notes that on 22 June 2021 the Company made an announcement to market indicating that the ASX had advised that
  "Should Advent be successful in the extension of its PEP11 oil and gas exploration lease and MEC be successful in its appeal to reinstate its status as a PDF, ASX could consider conditions for reinstatement on the basis of continuation of MEC's existing business". The shares in MEC remain suspended from trading.
• Following suspension from the ASX from the 1 July 2020 to 30 June 2021 the Company has provided the market with Voluntary Suspension updates on 3 July 2020, 20 July 2020, 3 August 2020, 14 August 2020, 31 August 2020, 14 September 2020, 8 October 2020, 26 October 2020, 6 November 2020, 15 December 2020, 5 January 2021 and 22 June 2021.
• On 6 July 2020 9,696,476 unlisted Options with an exercise price of $0.04 had expired and on 17 July 2020 1,111,110 unlisted Options with an exercise price of $0.04 had expired.
• On 31 July 2020 the Company announced a Board restructure with both Stephen Harrison and Anthony Hamilton joining the Board and Micheal Sandy concurrently resigning. Following this on 2 September 2020 Stephen Harrison resigned as a director.
• On 13 August 2020 the Company received a notification under Sec 249D of the Corporations Act calling for a meeting of shareholders to remove Messrs Andrew Bald, Stephen Harrison and Anthony Hamilton from the Board and appoint Messrs Roderick Corps, Andrew Jones and Andrew Coloretti as directors of the Company. Following this the Sec 249D notification was withdrawn on 11 September 2020 and the proposed shareholder meeting was cancelled.
• On 27 August 2020 the Company announced it had received a writ of summons from Asset Energy Pty Ltd in the amount of $593,796 following notices of demand issued by Advent Energy Ltd and Asset Energy Pty Ltd as announced 24 June 2020.
• On 7 September 2020 the Company received a notification under Sec 249F of the Corporations Act that a group of Convening Shareholders intend to call a meeting of shareholders to remove Messrs. Andrew Bald, Stephen Harrison and Anthony Hamilton from the Board and appoint Messrs. Geoffrey Murray, Andrew Jones, David Breeze and Anthony Huston as directors of the Company. Following changes to the Board announced on 22 October 2020 the Convening Shareholders withdrew the Sec 249F requisition notice on 26 October 2020.

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