SPEX_GROUP_HOLDINGS_LIMIT - Accounts

The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true

For the financial year ended 31 December 2019 the company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies.

The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and the preparation of financial statements.

The members have not required the company to obtain an audit of its financial statements for the year in question in accordance with section 476.

These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.

SPEX Group Holdings Limited is a private company limited by shares incorporated in Scotland. The registered office is Blackwood House, Union Grove Lane, Aberdeen, AB10 6XU. The company's registration number is SC528327. The trading address is Ground Floor, Unit 2 Dunnottar House, Howe Moss Drive, Kirkhill Industrial Estate, Aberdeen, AB21 0FN.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest pound sterling.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

In the current year the company recorded an operating profit of £99,424 before and a loss of £278,035 after interest payable and similar expenses.  The company has net assets of £1,676,422 at the balance sheet date. Following the year end the company has raised additional equity and has converted certain shareholder debt balances to equity along with revising repayment dates due on remaining shareholder loan notes (see note 17). true

Subsidiary companies continue to develop new products for the oil & gas industry. The directors have prepared and considered projections for a period of 12 months from the date of approval of the financial statements. Projections by their nature, contain certain assumptions regarding the outcome of future events, particularly as a result of the COVID-19 pandemic, and as such there is a possibility that there will be insufficient cash in the business to continue to fund obligations.

The directors have made enquiries of the two largest shareholders and based on existing knowledge and subject to certain other factors they remain supportive of the business should it require additional cash. Taking this into consideration the directors have concluded that there is a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. As a result, the directors have continued to adopt the going concern basis of accounting when preparing the annual financial statements.

Turnover is recognised as services are provided at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes.

Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company.

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors, amounts due from group companies and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans and amounts due to group companies are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The tax expense represents the sum of the tax currently payable and deferred tax.

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

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.

Exceptional items

Exceptional items are identified by the directors as transactions through profit or loss out with the normal course of business and which are considered material to the financial statements, and as such require separate identification in order to provide necessary explanation to the results of the company.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following are considered to be either judgements that have had the most significant effect on amounts recognised in the financial statements, or estimates that are dependent upon assumptions which could change in the next financial year and have a material effect on the carrying amounts of assets and liabilities recognised at the balance sheet date:

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The going concern assumption is a judgement exercised by management (see note 1.2).

The company makes an assessment of the recoverable value of amounts due from fellow group undertakings. When assessing the recoverability of these amounts owed, management considers factors such as the expected future trading performance of the group.

The Directors have made a critical judgement regarding a potential contingent liability, please see note 16.

The average monthly number of persons (including directors) employed by the company during the year was 17 (2018 - 17).

Details of the company's subsidiaries at 31 December 2019 are as follows:

Amounts owed by group undertakings are interest free and repayable on demand. There were no repayments made within the following 12 months.

Amounts owed to group undertakings are interest free and repayable on demand.

The long-term loans are unsecured.

During the prior year, the company agreed revised terms with the loan note holders. Loan notes accrue interest at a fixed rate of 14% and are repayable in instalments from 30 June 2020 to 31 December 2021 or repayable in full on a change of ownership. A fixed redemption premium is payable on 31 March 2020, along with a further redemption premium of 20% on capital outstanding at 31 March 2020. The value of the loan notes outstanding at 31 December 2019 was £3,666,666, of this £2,444,444 is included within other creditors due within one year at the year end.

No interest is accrued on the remaining loan and this is repayable in 3 equal instalments to 31 December 2021. In the financial statements, the loan is carried at the discounted effective rate of interest value.

See note 17 for details regarding restructure subsequent to the year end.

During the year, the company raised additional funding by way of a rights issue. 83 Ordinary shares of 1p each and 5 'A' Ordinary shares of 1p each were issued and share premium of £41,656 has been recognised.

142 Ordinary shares have been issued as NIL paid shares. The remainder of the share capital is fully paid.

Enhanced voting rights are attached to the 'A' shares, whereby the voting rights are increased to 51% of the voting rights attached to all the shares in the capital of the company, upon notice of an Enhanced Voting Event.

The share premium account represents premiums received on issue of share capital.

Profit and loss reserves represent cumulative realisable profits and losses.

The bank hold a bond and floating charge over the whole assets of the company.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, as follows:

The company and certain other group companies have been named in litigation regarding an alleged breach of a licence agreement by former group companies. The litigation started in the US legal system and is now in the Scottish legal system.  At this stage it is too early in proceedings to conclude on the likely outcome either in terms of the likelihood of success in refuting the claims and if unsuccessful in so doing what the financial impact would be on the company and group. The company and group have not made a provision in the accounts for any liability that could arise if they were unsuccessful as they do not believe they have any liability and are continuing to refute the allegations.

Subsequent to the year end in May 2020, as part of their ongoing support of the business, the shareholders of the company participated in a corporate re-organisation. The key components of the reorganisation was as follows:

• Additional funding provided to the business through subscription of new shares by way of a Rights Issue;

• Debt to equity conversion of certain existing shareholder debt balances;

• Long Term dividend due to be paid to the holders of certain share classes was satisfied by the issue of new shares;

• Revision to the terms of the remaining shareholder loan notes, including an extended repayment through to June 2022; and

• Revision to the terms associated with certain share classes.

Additionally, in February 2021, existing shareholders of the company participated in a fund raising and issuing of further A ordinary shares (under an exit only agreement) and further B ordinary shares by the company. A further funding round is proposed in March 2021.

Subsequent to the balance sheet date, the COVID-19 pandemic has had an impact on the business, further details are provided within note 1.2.

Loans were advanced to shareholders in a prior period. The balance due from these shareholders as at 31 December 2019 was £39,741 (2018 - £39,741). The amounts due are interest free with no fixed repayment terms.

A loan of £89,073 was advanced to a director in a prior period. The balance due from this director at 31 December 2019 was £89,073 (2018 - £89,073). The amounts due are interest free with no fixed repayment terms.

A loan was advanced to a director and shareholder in a prior period. The balance due from this director and shareholder at 31 December 2019 was £3,620 (2018 - £3,620). The amounts due are interest free with no fixed repayment terms.

During 2014, a director and shareholder advanced a loan of £200,000 to the company. This loan is interest-free. The balance due to this director at 31 December 2019 was £136,777 (2018 - £124,343). The movement in the year represents notional interest as the loan is valued in the accounts at its discounted present value.

During 2014, the company issued loan notes of £333,333 to a director and shareholder. The loan notes accrue interest of 14%. The total balance due to this director at 31 December 2019 was £691,959 (2018 - £450,871).

The company also issued loan notes of £3,333,333 to a shareholder, in 2014. The loan notes accrue interest of 14%. The total balance due to this shareholder at 31 December 2019 was £5,676,160 (2018 - £4,508,717).

No one individual controls the Company.