UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE
SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2014
Commission File No. 000-30087
ADIRA ENERGY LTD.
(Translation of registrant's name into English)
120 Adelaide Street West, Suite 800, Toronto, Ontario,
Canada M5H 1T1
(Address of principal executive office)
[Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F]
Form 20-F
[X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(1) [ ]
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(7) [ ]
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes [ ]
No [X]
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): N/A
SUBMITTED HEREWITH
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ADIRA ENERGY LTD.
Date: December 3, 2014
/s/ Alan
Friedman |
|
Alan Friedman |
|
Executive Vice President, Corporate Development |
|
ADIRA ENERGY LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2014
UNAUDITED
U.S. DOLLARS IN THOUSANDS
INDEX
- - - - - - - - - - - - - - - -
1
NOTICE TO SHAREHOLDERS
The accompanying unaudited condensed consolidated interim
financial statements of Adira Energy Ltd. for the nine month period ended
September 30, 2014 have been prepared by management in accordance with
International Financial Reporting Standards applicable to consolidated interim
financial statements (see note 2 to the unaudited condensed consolidated interim
financial statements). Recognizing that the Company is responsible for both the
integrity and objectivity of the unaudited condensed consolidated interim
financial statements, management is satisfied that these unaudited condensed
consolidated interim financial statements have been fairly presented.
Under National Instrument 51-102, part 4, sub-section
4.3(3)(a), if an auditor has not performed a review of the interim financial
statements, they must be accompanied by a notice indicating that the financial
statements have not been reviewed by an auditor.
The Companys independent auditor has not performed a review of
these financial statements in accordance with standards established by the
Canadian Institute of Chartered Accountants for a review of interim financial
statements by an entitys auditor.
2
ADIRA ENERGY LTD. |
|
CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION |
U.S. dollars in thousands |
|
|
September 30, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
Unaudited |
|
|
Audited |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
452 |
|
$ |
617 |
|
Restricted deposits |
|
9 |
|
|
35 |
|
Other receivables and prepaid expenses |
|
61
|
|
|
2,513
|
|
|
|
|
|
|
|
|
Total current assets |
|
522
|
|
|
3,165
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS: |
|
|
|
|
|
|
Property and equipment, net
|
|
16 |
|
|
61 |
|
|
|
|
|
|
|
|
Total non-current assets |
|
16 |
|
|
61 |
|
|
|
|
|
|
|
|
Total assets |
$ |
538 |
|
$ |
3,226 |
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
Trade payables |
$ |
191 |
|
$ |
2,817 |
|
Other accounts payable and
accrued liabilities |
|
28 |
|
|
986 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
219 |
|
|
3,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
|
Share capital |
|
- |
|
|
- |
|
Additional paid-in capital |
|
34,041 |
|
|
34,023 |
|
Accumulated deficit |
|
(33,722 |
) |
|
(34,600 |
) |
|
|
|
|
|
|
|
Total equity (deficit) |
|
319 |
|
|
(577 |
) |
|
|
|
|
|
|
|
Total liabilities and equity |
$ |
538 |
|
$ |
3,226 |
|
The accompanying notes are an integral part of the interim
consolidated financial statements.
3
ADIRA ENERGY LTD. |
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE PROFIT AND LOSS |
U.S. dollars in thousands, except share and per share
data |
|
|
Nine months ended |
|
|
Three months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and other income |
$ |
- |
|
$ |
17 |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Exploration expenses |
|
- |
|
|
1,843 |
|
|
- |
|
|
114 |
|
General and administrative
expenses *) |
|
318 |
|
|
2,560 |
|
|
161 |
|
|
682 |
|
Impairment charge (reversal) |
|
(1,126 |
) |
|
4,216 |
|
|
- |
|
|
1,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
(808 |
) |
|
8,619 |
|
|
161 |
|
|
2,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
808 |
|
|
(8,602 |
) |
|
(161 |
) |
|
(2,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
77 |
|
|
3,028 |
|
|
77 |
|
|
48 |
|
Finance expense |
|
(7 |
) |
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) before income tax expense |
|
878 |
|
|
(5,574 |
) |
|
(84 |
) |
|
(2,478 |
) |
Income tax expense |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive profit (loss) |
$ |
878 |
|
$ |
(5,574 |
) |
$ |
(84 |
) |
$ |
(2,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive profit (loss) attributed to: |
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the parent |
$ |
878 |
|
$ |
(5,574 |
) |
$ |
(84 |
) |
$ |
(2,478 |
) |
Non-controlling interests |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
878 |
|
$ |
(5,574 |
) |
$ |
(84 |
) |
$ |
(2,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net earnings (loss) per share **)
attributable to equity holders of the parent |
$ |
0.07 |
|
$ |
(0.46 |
) |
$ |
(0.01 |
) |
$ |
(0.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares **)
used in
computing basic and diluted net loss per share |
|
12,117,290 |
|
|
12,052,073 |
|
|
12,117,290 |
|
|
12,052,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*) Includes share-based compensation |
$ |
(42 |
) |
$ |
21 |
|
$ |
6 |
|
$ |
2 |
|
**) Post Share Consolidation- See Note 4a.
The accompanying notes are an integral part of the condensed
consolidated interim financial statements.
4
ADIRA ENERGY LTD. |
|
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY (DEFICIT) |
U.S. dollars in thousands, except share data
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
Non- |
|
|
Total |
|
|
|
Number of |
|
|
Share |
|
|
paid in |
|
|
Accumulated |
|
|
|
|
|
controlling |
|
|
Equity |
|
|
|
shares *) |
|
|
capital |
|
|
capital |
|
|
deficit |
|
|
Total |
|
|
interests |
|
|
(deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2013 |
|
12,052,021 |
|
$ |
- |
|
$ |
33,966 |
|
$ |
(28,956 |
) |
$ |
5,010 |
|
$ |
- |
|
$ |
5,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
- |
|
|
- |
|
|
57 |
|
|
- |
|
|
57 |
|
|
- |
|
|
57 |
|
Net loss and comprehensive loss |
|
- |
|
|
- |
|
|
- |
|
|
(5,644 |
) |
|
(5,644 |
) |
|
- |
|
$ |
(5,644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2013 |
|
12,052,021 |
|
|
- |
|
|
34,023 |
|
|
(34,600 |
) |
|
(577 |
) |
|
- |
|
|
(577 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in Private Placement, net |
|
240,000 |
|
|
- |
|
|
60 |
|
|
- |
|
|
60 |
|
|
- |
|
|
60 |
|
Share-based compensation |
|
- |
|
|
- |
|
|
(42 |
) |
|
- |
|
|
(42 |
) |
|
- |
|
|
(42 |
) |
Net loss and comprehensive profit |
|
- |
|
|
- |
|
|
- |
|
|
878 |
|
|
878 |
|
|
- |
|
|
878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2014 (unaudited) |
|
12,292,021 |
|
$ |
- |
|
$ |
34,041 |
|
$ |
(33,722 |
) |
$ |
319 |
|
$ |
- |
|
|
319 |
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
Number of |
|
|
Share |
|
|
paid in |
|
|
Accumulated |
|
|
|
|
|
controlling |
|
|
Total |
|
|
|
Shares *) |
|
|
capital |
|
|
capital |
|
|
deficit |
|
|
Total |
|
|
interests |
|
|
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2013 |
|
12,052,073 |
|
$ |
- |
|
$ |
33,966 |
|
$ |
(28,956 |
) |
$ |
5,010 |
|
$ |
- |
|
$ |
5,010 |
|
Share-based compensation |
|
- |
|
|
- |
|
|
19 |
|
|
- |
|
|
19 |
|
|
- |
|
|
19 |
|
Net loss and comprehensive
loss |
|
- |
|
|
- |
|
|
- |
|
|
(5,574 |
) |
|
(5,574 |
) |
|
- |
|
|
(5,574 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30,
2013 (unaudited) |
|
12,052,073 |
|
$ |
- |
|
$ |
33,985 |
|
$ |
(34,530 |
) |
$ |
(545 |
) |
$ |
- |
|
$ |
(545 |
) |
*) Post Share Consolidation- See Note 4a.
The accompanying notes are an integral part of the condensed
consolidated interim financial statements.
5
ADIRA ENERGY LTD. |
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
U.S. dollars in thousands, except share data
|
|
|
Nine months ended |
|
|
Three months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Unaudited |
|
|
|
|
Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) |
$ |
878 |
|
$ |
(5,574 |
) |
|
(84 |
) |
|
(2,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net
cash
used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to the profit or loss items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on balances of cash
and
cash equivalents |
|
4 |
|
|
20 |
|
|
1 |
|
|
10 |
|
Depreciation |
|
45 |
|
|
116 |
|
|
14 |
|
|
22 |
|
Impairment charge (reversal) for
exploration and
evaluation assets |
|
(1,126 |
) |
|
4,415 |
|
|
- |
|
|
1,545 |
|
Revaluation of warrants |
|
- |
|
|
(3,013 |
) |
|
- |
|
|
- |
|
Share-based payment |
|
(42 |
) |
|
19 |
|
|
6 |
|
|
(162 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,119 |
) |
|
1,557 |
|
|
21 |
|
|
1,415 |
|
Changes in asset and liability items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable, other
receivables and prepaid expenses |
|
2,452 |
|
|
4,253 |
|
|
11 |
|
|
342 |
|
Increase (decrease) in trade payables |
|
(1,500 |
) |
|
(1,829 |
) |
|
5 |
|
|
(1,108 |
) |
Increase (decrease) in other accounts payable and
accrued
liabilities |
|
(958 |
) |
|
(158 |
) |
|
1 |
|
|
(236 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
2,266 |
|
|
17 |
|
|
(1,002 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
(247 |
) |
|
(1,751 |
) |
|
(46 |
) |
|
(2,065 |
) |
The accompanying notes are an integral part of the condensed
consolidated interim financial statements.
6
ADIRA ENERGY LTD. |
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
U.S. dollars in thousands |
|
|
Nine months ended |
|
|
Three months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure on exploration and evaluation
assets |
|
- |
|
|
(2,638 |
) |
|
- |
|
|
- |
|
Proceeds from sale of equipment and other assets |
|
- |
|
|
1,824 |
|
|
- |
|
|
796 |
|
Purchase of property and equipment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Decrease in restricted deposits |
|
26 |
|
|
1,022 |
|
|
11 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
26 |
|
|
208 |
|
|
11 |
|
|
796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issue of shares, net of issuance expenses |
|
60 |
|
|
- |
|
|
60 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
60 |
|
|
- |
|
|
60 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on balances of cash and cash
equivalents |
|
(4 |
) |
|
(20 |
) |
|
(1 |
) |
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
(165 |
) |
|
(1,563 |
) |
|
24 |
|
|
(1,279 |
) |
Cash and cash equivalents at the beginning
of the period |
|
617 |
|
|
2,394 |
|
|
428 |
|
|
2,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the
period |
$ |
452 |
|
$ |
831 |
|
$ |
452 |
|
$ |
831 |
|
The accompanying notes are an integral part of the condensed
consolidated interim financial statements.
7
ADIRA ENERGY LTD. |
|
NOTES TO
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
U.S. dollars in thousands, except share and per share
data |
|
a. |
Nature of operations: |
|
|
|
|
|
Adira Energy Ltd. and its subsidiaries (individually and
collectively, as the context requires, "Adira" or "the Company"), is an
oil and gas early-stage exploration company. Through its subsidiary, Adira
Energy Israel Ltd. (Adira Israel), the Company holds license No. 380
(Yitzhak or the License). These financial statements have been
prepared in a condensed format as of September 30, 2014, for the nine
months then ended ("interim consolidated financial statements"). These
financial statements should be read in conjunction with the Company's
annual financial statements as of December 31, 2013, and for the year then
ended and the accompanying notes. |
|
|
|
|
|
In 2013, as a result of challenging markets and
difficulty in raising funds to drill multi well program, the Company
significantly reduced its activity, relinquished license No. 388
(Samuel) to the Ministry of Energy and Water of the State of Israel
(Ministry), and ceased operations on the Gabriella license. Furthermore,
there was nominal exploration activity in the Yitzhak license. During the
2014 the Company focused on further reducing its liabilities and seeking
additional financing opportunities |
|
|
|
|
b. |
Significant events during the
period |
|
(i) |
On February 16, 2014, the Ministry published new
guidelines in respect of security guarantee payments (Security Deposits)
for all offshore petroleum licenses, requiring each license consortium to
deposit $2,500 per offshore license with the Ministry by March 31, 2014.
On June 26, 2014, the Ministry extended the implementation of the
Guidelines to September 17, 2014. In September 2014, the Ministry further
revised the new guidelines in respect of the Security Deposits to be paid
in two installments: 50% by November 30, 2014 and 50% by March 31, 2015.
If the Company seeks an extension for the Yitzhak License and such
extension is approved, the Company will be required to pay its pro rata
share of the Security Deposit. As of the date hereof, the Company does not
believe that it will be able to pay its pro rata share of the Security
Deposit. Should the consortium on the Yitzhak License fail to meet this
payment requirement, the Ministry will view such failure as a default and
will have the right to retract the Yitzhak License. |
|
|
|
|
(ii) |
On September 22, 2014, the Petroleum Commissioner advised
Modiin Energy Limited Partnership that license No. 378 (the Gabriella
License) and the license No. 383 (the Yam Hadera License) expired,
without further extension being granted, due to the milestones in their
work program not being achieved. Adira Israel held a 15% working interest
in the Gabriella License and had an option to acquire up to a 15%
participating interest on the Yam Hadera License. |
8
ADIRA ENERGY LTD. |
|
NOTES TO
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
U.S. dollars in thousands, except share and per share
data |
|
c. |
Financial position: |
|
|
|
|
|
As reflected in the consolidated financial statements, as
of September 30, 2014, the Company had an accumulated deficit of $33,722.
The Company is an early-exploration stage company and its operating
revenues are currently insufficient to finance its future operating
expenses and exploration funding commitments. |
|
|
|
|
|
The ability of the Company to continue as a going concern
depends upon the discovery of economically recoverable reserves, the
ability of the Company to obtain financing to complete development, and
upon future profitable operations from the properties or proceeds from
their disposition. There can be no assurance that the Company will be able
to continue to raise funds from the aforementioned sources in which case
the Company may be unable to meet its obligations. These factors raise
substantial doubts about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments to the
carrying amounts and classifications of assets and liabilities that would
result if the Company was unable to continue as a going
concern. |
NOTE 2:- |
SIGNIFICANT ACCOUNTING
POLICIES |
|
|
|
The interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
the preparation of financial statements for interim periods, as prescribed
in IAS 34, "Interim Financial Reporting". |
|
|
|
The significant accounting policies and methods of
computation adopted in the preparation of the interim consolidated
financial statements are consistent with those followed in the preparation
of the annual consolidated financial statements. |
|
|
NOTE 3: |
EXPLORATION AND EVALUATION
ASSETS |
|
a. |
The Company's accounts reflect only its proportionate
interests in its oil and gas activities. The following is a summary of the
Companys exploration and evaluation assets: |
|
|
Oil and Gas |
|
|
|
Licenses |
|
|
|
|
|
Balance as of January 1, 2013 |
$ |
5,887 |
|
Net additions |
|
2,243 |
|
Reclassification to Other receivables and
prepaid expenses |
|
(3,695 |
) |
Impairment of exploration and evaluation assets |
|
(4,435 |
) |
|
|
|
|
Balance as of Sept 30, 2013 (unaudited) |
$ |
- |
|
|
|
Oil and Gas |
|
|
|
Licenses |
|
|
|
|
|
Balance as of January 1, 2014 |
$ |
- |
|
Net additions |
|
- |
|
Impairment of exploration and evaluation
assets |
|
- |
|
|
|
|
|
Balance as of September 30, 2014
(unaudited) |
$ |
- |
|
9
ADIRA ENERGY LTD. |
|
NOTES TO
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
U.S. dollars in thousands, except share and per share
data |
NOTE 3: |
EXPLORATION AND EVALUATION
ASSETS (CONT.) |
|
b. |
The Yitzhak License covers 31,555 acres (127.7 sq. km)
and is located approximately 9km offshore Israel. The Yitzhak License was
issued in October 2009 to Adira Israel for an initial three year
exploration period with optional renewals upon fulfillment of certain
conditions. Thereafter, a 30-50 year lease may be pursued if a discovery
(as defined in the Israeli Petroleum Law) is made. On October 15, 2013,
Adira Israel received an extension on the license through to October 15,
2014. Adira Israel and its joint operating partners have not yet received
formal notice from the Ministry regarding the status of the Yitzhak
License and are evaluating the options available, including the filing of
an extension with the Ministry. |
|
|
|
|
|
Adira Israel has a 70% working interest in the Ytizhak
License, Brownstone has a 15% interest, AGR Group ASA (AGR) has a 5%
interest and Ellomay Oil and Gas 2011 LP a 10%
interest. |
|
a. |
On August 9, 2013, the Company completed a consolidation
of the Companys Common Shares on the basis of one post-consolidation
Common Share for every three pre- consolidation Common Shares (the "Share
Consolidation"). On September 29, 2014, the Company completed a second
consolidation of the Companys Common Shares on the basis of one
post-consolidation Common Share for every five pre-consolidation Common
Shares (the "Second Share Consolidation"). All share and per share data
for all periods presented have been adjusted to reflect the decrease in
number of shares outstanding after the Consolidation and the Second
Consolidation. |
|
|
|
|
d. |
On July 23, 2014, the Company completed a non- brokered
private placement by issuing 240,000 common shares at a price of US$0.25
per common share for gross proceeds of $60. |
|
|
|
|
c. |
Stock Option Plan: |
|
|
|
|
|
The movement in stock options during the six months ended
September 30, 2014, was as follows: |
|
|
|
Number of |
|
|
|
|
|
|
|
options |
|
|
Weighted average |
|
|
|
|
outstanding |
|
|
exercise price |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
(audited) |
|
548,533 |
|
|
5.45 |
|
|
Options forfeited |
|
(242,533 |
) |
|
4.74 |
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2014 (unaudited) |
|
416,000 |
|
|
5.99 |
|
10
ADIRA ENERGY LTD. |
|
NOTES TO
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
U.S. dollars in thousands, except share and per share
data |
|
c. |
Stock Option Plan (cont.): |
|
|
|
|
|
The following table summarizes information about stock
options outstanding and exercisable as of September 30, 214
(unaudited): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
Number of |
|
Number of |
|
remaining |
|
|
|
|
|
Grant date |
|
Exercise |
|
options |
|
options |
|
contractual |
|
Grant date
|
|
Expiry date |
|
fair value |
|
price *) |
|
outstanding |
|
exercisable |
|
life |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28, 2010 |
|
January 27, 2015 |
|
$ 8.40 |
|
$ 9.00 |
|
58,000 |
|
58,000 |
|
0.33 |
|
July 22, 2010 |
|
July 21, 2015 |
|
$ 3.75 |
|
$ 9.00 |
|
16,666 |
|
16,666 |
|
0.81 |
|
January 11, 2011 |
|
January 10, 2016 |
|
$ 9.90 |
|
$
12.07 |
|
70,000 |
|
61,250 |
|
1.28 |
|
March 18, 2011 |
|
March 17, 2016 |
|
$ 8.85 |
|
$ 10.80 |
|
6,667 |
|
5,833 |
|
1.47 |
|
May 3, 2011 |
|
May 2, 2016 |
|
$ 7.80 |
|
$ 9.00 |
|
16,667 |
|
12,500 |
|
1.59 |
|
December 1, 2011 |
|
November 30, 2016 |
|
$ 3.30 |
|
$ 7.50 |
|
2,000 |
|
1,500 |
|
2.17 |
|
August 22, 2012 |
|
August 21, 2017 |
|
$ 1.05 |
|
$ 3.00 |
|
246,000 |
|
246,000 |
|
2.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416,000 |
|
401,749 |
|
|
|
*) |
The exercise price of all options granted from 2011 is
denominated in Canadian Dollars and was translated to USD in the table
above using the exchange rate as of September 30,
2014. |
|
b. |
Share purchase warrants: |
|
|
|
|
|
The following table summarizes information applicable to
warrants and broker warrants entitling the holders to acquire common share
outstanding as of September 30, 2014
(unaudited): |
|
|
|
|
|
|
Grant date |
|
|
Exercise |
|
|
Number of |
|
|
Issue date
|
|
Expiry date |
|
|
fair value |
|
|
price |
|
|
warrants *) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 9, 2012 |
|
August 9, 2015 |
|
$ |
0.07 |
|
$ |
0.20**) |
|
|
79,012,640 |
|
|
*) |
Following the Share Consolidation and Second Share
Consolidation, every 15 previously issued warrants will be convertible
into one Common Share of the Company. |
|
|
|
|
**) |
The exercise price of the warrants are denominated in
Canadian Dollars and were translated to USD in the table above using the
exchange rate as of September 30, 2014. |
NOTE 6:- |
RELATED PARTY TRANSACTIONS |
|
|
|
During the nine month period ended September 30, 2014,
the Company incurred $171 in consulting fees and operating expenses to
private companies which are controlled by directors or officers of the
Company, as compared to $309 during the nine month period ended September
30, 2013 ($56 for the three month period ended September 30, 2014 as
compared to $96 for the three month period ended September 30, 2013).
|
|
|
|
These transactions are in the ordinary course of business
and are measured at the amount of consideration set and agreed by the
related parties. |
# # # # #
11
Adira Energy Ltd.
MANAGEMENTS DISCUSSION AND
ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three and nine month periods ended September 30,
2014
The following is a discussion and analysis of the
activities, consolidated results of operations and financial condition of Adira
Energy Ltd. (Adira, we,
our, us, or the
Company) for the three and nine month periods ended
September 30, 2014, which has been prepared on the basis of information
available up until November 28, 2014. This Managements Discussion and Analysis
(MD&A) should be read in conjunction with the
Companys interim consolidated financial statements for the three and nine month
periods ended September 30, 2014, as well as the annual consolidated financial
statements for the year ended December 31, 2013, together with the notes
thereto, available under the Companys profile on the System for Electronic
Document Analysis and Retrieval (SEDAR) website at www.sedar.com.
All monetary amounts are reported in United States dollars
and in accordance with International Financial Reporting Standards
(IFRS) unless otherwise noted. This MD&A is dated November 28, 2014.
Forward-Looking Statements
This MD&A (including, without limitation, the sections
discussing Adiras Financial Conditions and Results of Operations) contains
certain forward-looking statements. All statements other than statements of
historical fact that address activities, events or developments that the Company
believes, expects or anticipates will or may occur in the future are
forward-looking statements. Forward-looking statements are often, but not
always, identified by the use of words such as seek, anticipate,
contemplate, target, believe, plan, estimate, expect and intend
and statements that an event or result may, will, can, should, could
or might occur or be achieved and other similar expressions. These statements
are based upon certain assumptions and analyses made by management in light of
its experience and perception of historical trends, current conditions and
expected future developments, as well as other factors management believes are
appropriate in the circumstances. However, whether actual results and
developments will conform with managements expectations is subject to a number
of risks and uncertainties, including the considerations discussed herein and in
other documents filed from time to time by the Company with Canadian security
regulatory authorities, general economic, market or business conditions, the
opportunities (or lack thereof) that may be presented to and pursued by
management, competitive actions by other companies, changes in laws or
regulations and other factors, many of which are beyond the Companys control.
These factors may cause the actual results of the Company to differ materially
from those discussed in the forward-looking statements and there can be no
assurance that the actual results or developments anticipated by management will
be realized or, even if substantially realized, that they will have the expected
results on Adira. All of the forward-looking statements made herein are
qualified by the foregoing cautionary statements. The Company expressly
disclaims any obligation to update or revise any such forward-looking
statements.
Information on the Company
Adira is a Canadian oil and gas exploration company with a
focus on early-stage exploration in the State of Israel. The Companys current
trading symbol on the TSX Venture Exchange (the Exchange) is ADL. The
Company also trades on the OTC Bulletin Board with the trading symbol ADENF
and on the Frankfurt Stock Exchange with the trading symbol OAM1.
Significant Developments
On September 22, 2014, the Petroleum Commissioner of Israel
(the Commissioner) advised Modiin Energy Limited Partnership
(MELP), one of the Companys joint operating partners, that license No.
378 (the Gabriella License) and the license No. 383 (the Yam Hadera
License) expired, without further extension being granted, due to the
milestones in their work program not being achieved. Adira Israel held a 15%
working interest in the Gabriella License and had an option to acquire up to a
15% participating interest on the Yam Hadera License.
1
Effective September 29, 2014, the Company completed a
consolidation of its issued and outstanding common shares on the basis of one
post-consolidation common share for every five pre-consolidation common shares
(the Consolidation). As a result, the Companys 61,460,318
pre-Consolidation Shares were reduced to 12,292,021 post-Consolidation common
shares. The exercise price and the number of common shares issuable under any of
the Companys outstanding common share purchase warrants and incentive stock
options were proportionately adjusted to reflect the Consolidation.
Overall Performance
Business Overview
Yitzhak License
The Yitzhak License covers 31,555 acres (127.7 sq. km) and is
located approximately 9 km offshore Israel. The Yitzhak License was issued in
October 2009 to Adira Israel for an initial three year exploration period with
optional renewals upon fulfillment of certain conditions. Thereafter, a 30-50
year lease may be pursued if a discovery (as defined in the Israeli Petroleum
Law) is made. On October 15, 2013, Adira Israel received an extension on the
Yitzhak License through to October 15, 2014. Adira Israel and its joint
operating partners have not yet received formal notice from the Ministry of
Energy and Water of the State of Israel (the Ministry) regarding the
status of the Yitzhak License and are evaluating the options available,
including the filing of an extension with the Ministry.
Adira Israel has a 70% working interest in the Ytizhak License,
Brownstone has a 15% interest, AGR Group ASA (AGR) has a 5% interest
and Ellomay Oil and Gas 2011 LP a 10% interest.
On June 13, 2012, Adira Israel granted to MELP an option
(MELP Yitzhak Option) to purchase from Adira Israel a 15% participating
interest in the Yitzhak License (the MELP Yitzhak Option Interest). The
MELP Yitzhak Option may be exercised until 14 days before signing of the rig
contract for the Yitzhak License.
Myra and Sara Option
The Company has an option to acquire up to a 5% participating
interest in two licenses called the Myra License and Sara License (the
M&S Option). The Company currently ascribes no value to the Myra
and Sara Licenses and as such it does not consider it to be material to its
operations.
Capital Expenditures and Divestitures
During the nine month period ended September 30, 2014, the
Company incurred no capital expenditures or disposition of material property and
equipment.
The Company's currently has no planned capital expenditures for
the next twelve months.
Additional Disclosure for Venture Issuers without
Significant Revenues:
|
|
Nine Month Period Ended |
|
|
Three Month Period Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
U.S. dollars in thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized and expensed Exploration costs |
$ |
- |
|
$ |
4,960 |
|
$ |
- |
|
$ |
2,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
(including share based compensation) |
$ |
318 |
|
$ |
2,560 |
|
$ |
161 |
|
$ |
682 |
|
2
Discussion of Operations
The following is a discussion of the results of operations
which have been derived from the interim consolidated financial statements of
the Company for the nine and three month periods ended September 30, 2014:
|
|
Nine months ended |
|
|
Three months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and other income |
$ |
- |
|
$ |
17 |
|
$ |
- |
|
$ |
- |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Exploration expenses |
|
- |
|
|
1,843 |
|
|
- |
|
|
114 |
|
General and administrative expenses *) |
|
388 |
|
|
2,560 |
|
|
161 |
|
|
682 |
|
Impairment charge (reversal) |
|
(1,126 |
) |
|
4,216 |
|
|
- |
|
|
1,730 |
|
Total expenses |
|
(808 |
) |
|
8,619 |
|
|
161 |
|
|
2,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
808 |
|
|
(8,602 |
) |
|
(161 |
) |
|
(2,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
77 |
|
|
3,028 |
|
|
77 |
|
|
48 |
|
Finance expense |
|
(7 |
) |
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) before income tax expense |
|
878 |
|
|
(5,574 |
) |
|
(84 |
) |
|
(2,478 |
) |
Income tax expense |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive profit (loss ) |
$ |
878 |
|
$ |
(5,574 |
) |
$ |
(84 |
) |
$ |
(2,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive profit (loss) attributed to: |
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the parent |
$ |
878 |
|
$ |
(5,574 |
) |
$ |
(84 |
) |
$ |
(2,478 |
) |
Non-controlling interests |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
878 |
|
$ |
(5,574 |
) |
$ |
(84 |
) |
$ |
(2,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net earnings (loss) per share **)
attributable
to equity holders of the parent |
$ |
0.07 |
|
$ |
(0.46 |
) |
$ |
(0.01 |
) |
$ |
(0.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares used in
computing basic and diluted net loss per share |
|
12,117,290 |
|
|
12,052,073 |
|
|
12,117,290 |
|
|
12,052,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*) Includes share-based compensation |
$ |
(42 |
) |
$ |
21 |
|
$ |
6 |
|
$ |
2 |
|
3
Three month period ended September 30, 2014, compared
to the three month period ended September 30, 2013
Revenues and Other Income
Revenues and other income amounted to nil for the three month
period ended September 30, 2014 and 2013 as no exploration activities took place
during these periods that generated operator or management fees.
Expenses
Exploration Expenses
For the three month period ended September 30, 2014,
exploration expenses amounted to nil as compared to a recovery of $114 thousand
recorded for the three months ended September 30, 2013. The decrease in 2014
reflects the suspension of operations on all of our licenses.
General and Administrative Expenses
For the three month period ended September 30, 2014, general
and administrative expenses amounted to $161 thousand as compared to $682
thousand for the three month period ended September 30, 2013. The decrease in
general and administrative expenses resulted primarily from the decrease of the
Companys exploration activities since the suspension of operations on all of
our licenses. Management has taken active steps to reduce all general and
administrative expenses, including salaries, rent and other office expenses.
Impairment Charge (Reversal)
For the three month period ended September 30, 2014, the
Company recorded an impairment charge of nil compared to a charge of $1.7
million for the three month period ended September 30, 2013. The impairment in
2013 relates primarily to costs that had been capitalized to exploration and
evaluation assets, prior to the decision to suspend operations on the Gabriella
License, and which have subsequently been writtenoff and the decision by the
Company to write off expenses on the Yitzhak license.
Financing Income/Expense
For the three month period ended September 30, 2014, financing
income amounted to $77 thousand as compared to $48 thousand for the three month
period ended September 30, 2013, and financing expenses of nil for the three
month period ended September 30, 2014, as compared to nil for the three month
period ended September 30, 2013.
The Company is exposed to financial risk related to the
fluctuation of foreign exchange rates. The Company operates in Israel, most of
its monetary assets are held in U.S. dollars and most of its expenditures are
made in U.S. dollars. However, it also has expenditures in New Israeli Shekels
(NIS) and Canadian dollars. The Company has not hedged its exposure to
currency fluctuations.
Net Profit/Loss
The Company reported a net loss and comprehensive loss for the
three month period ended September 30, 2014, of $84 thousand as compared to a
net loss and comprehensive loss of $2.5 million for the three month period ended
September 30, 2013. The primary reason for the decrease in losses in 2014 is the
significant reduction in activities.
Inflation
During the three month periods ended September 30, 2014, and
September 30, 2013, inflation has not had a material impact on the Companys
operations.
4
Nine month period ended September 30, 2014, compared
to the nine month period ended September 30, 2013
Revenues and Other Income
For the nine month period ended September 30, 2014, revenues
and other income amounted to nil as compared to $17 thousand for the nine month
period ended September 30, 2013. The decrease in revenues in 2014 is due to the
fact that there were no exploration activities on the license during 2014. In
early 2013 the Company ceased the planned drilling operations on the Gabriella
License, and there were minimal activities on the Yitzhak License and License
No. 388 (the Samuel License), which was relinquished to the Ministry
during 2013.
Expenses
Exploration Expenses
For the nine month period ended September 30, 2014, exploration
expenses amounted to nil as compared to $1.8 million for nine month period ended
September 30, 2013. The decrease in 2014 reflects the suspension of operations
on all of our licenses.
General and Administrative Expenses
For the nine month period ended September 30, 2014, general and
administrative expenses amounted to $318 thousand as compared to $2.6 million
for the nine month period ended September 30, 2013. The decrease in general and
administrative expenses in 2014 resulted primarily from the decrease of the
Companys exploration activities since the suspension of operations on all of
our licenses. Management has taken active steps to reduce all general and
administrative expenses, including salaries, rent and other office expenses.
Impairment Charge (Reversal)
For the nine month period ended September 30, 2014, the Company
recorded an impairment charge reversal of $1.1 million as compared to a charge
of $4.2 million for the nine month period ended September 30, 2013. The reversal
of the impairment relates to discounts that Adira negotiated with suppliers in
respect of outstanding obligations on its licenses. The amount in 2013 relates
primarily to costs that had been capitalized to exploration and evaluation
assets prior to the suspension of operations on the Gabriella License, and which
have subsequently been writtenoff, and the Companys decision to write off
expenses on the Yitzhak License due to the low probability of realization of the
asset from either the successful development or sale of the Yitzhak License in
the near future.
Financing Income/Expense
For the nine month period ended September 30, 2014, financing
income amounted to 77 as compared to $3 million for the nine month period ended
September 30, 2013, and financing expenses of $7 thousand for the nine month
period ended September 30, 2014, as compared to nil for the nine month period
ended September 30, 2013.
The Company is exposed to financial risk related to the
fluctuation of foreign exchange rates. The Company operates in Israel, most of
its monetary assets are held in U.S. dollars and most of its expenditures are
made in U.S. dollars. However, it also has expenditures in NIS and Canadian
dollars. The Company has not hedged its exposure to currency fluctuations.
Net Profit/Loss
The Company reported a net profit and comprehensive profit for
the nine month period ended September 30, 2014, of $878 thousand as compared to
a net loss and comprehensive loss of $5.6 million for the nine month period
ended September 30, 2013. The primary reason for the profit in 2014 is due to
the reversal of impairment charges made in prior years which relate to discounts
that Adira negotiated with suppliers in respect of outstanding obligations on
the Licenses.
Inflation
During the nine month periods ended September 30, 2014, and
September 30, 2013, inflation has not had a material impact on the Companys
operations.
5
Government Regulation
The Companys licenses have been granted, through various
subsidiaries, by the State of Israel under the Israeli Petroleum Law, and its
evaluation and exploration activities in the areas covered by its licenses must
be undertaken in compliance with work plans approved by the Commissioner.
Summary of Quarterly Results
|
|
|
|
|
Quarter ended |
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
|
June 30, 2014 |
|
|
March 31, 2014 |
|
|
December 31, 2013 |
|
|
|
U.S dollars in thousands, except per share data |
|
Revenues |
$ |
- |
|
|
- |
|
|
- |
|
|
- |
|
Net Profit (loss) |
$ |
(84 |
) |
|
516 |
|
|
446 |
|
|
(70 |
) |
Net Profit (loss) per share* |
$ |
(0.01 |
) |
|
0.04 |
|
|
0.04 |
|
|
(0.01 |
) |
*Attributable to equity holders of the Company, post
Consolidation
|
|
|
|
|
Quarter ended |
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
|
June 30, 2013 |
|
|
March 31, 2013 |
|
|
December 31, 2012 |
|
|
|
U.S dollars in thousands, except per share data |
|
Revenues |
$ |
- |
|
|
4 |
|
|
13 |
|
|
318 |
|
Net Profit (loss) |
$ |
(2,478 |
) |
|
32 |
|
|
(3,128 |
) |
|
(7,264 |
) |
Net Profit (loss) per share* |
$ |
(0.21 |
) |
|
0.01 |
|
|
(0.26 |
) |
|
(0.60 |
) |
*Attributable to equity holders of the Company, post
Consolidation
Net profit (loss) per quarter is a function of the exploration
and operational activity during that quarter. There is no seasonal trend. Net
losses in the quarter ended December 31, 2012, were significantly higher than
the preceding periods due to an impairment charge in respect of the Samuel
License. The net loss for the quarter ended March 31, 2013, resulted primarily
from an impairment charge in respect of the Gabriella License and the net profit
for the quarter ended June 30, 2013, is due to reduced general and
administrative expenses and finance income recorded in respect of the
re-measurement of the warrants issued in August 2012. The net loss for the
quarter ended September 30, 2013, resulted primarily from an impairment charge
in respect of the Yitzhak License and the net loss for the quarter ended
December 31, 2013, was significantly reduced in line with the reduced activities
of the Company. The profit during the first and second quarters of 2014 is due
primarily to the reversal of impairment write-offs made in previous years. The
loss during the third quarter of 2014 is as a result of no change in the
impairment write-off, and no revenues to offset against general and
administrative expenses.
Liquidity
Liquidity is a measure of a companys ability to meet potential
cash requirements. The Company has historically met its capital requirements
through the issuance of common shares.
The Company has an accumulated deficit of $33.7 million as of
September 30, 2014 ($34.5 million as of September 30, 2013), and the Company had
negative cash flows from operations of $165 thousand during the nine month
period ended September 30, 2014 compared to $1.6 million during the nine month
period ended September 30, 2013. The ability of the Company to continue a going
concern depends upon the discovery of economically recoverable reserves, the
ability of the Company to obtain financing to complete development, and upon
future profitable operations from the properties or proceeds from their
disposition. The Company is an exploration stage company and has not earned any
revenues from its oil and gas properties to date.
6
There can be no assurance that the Company will be able to
continue to raise funds, in which case the Company may be unable to meet its
obligations. The Company is considering various alternatives with respect to
raising additional capital to remedy any future shortfall in capital, but to
date has made no specific plans or arrangements. Because of the early stage of
the Company's operations and the Company's absence of any material oil and
natural gas reserves, there can be no assurance this capital will be available
and if it is not, the Company may be forced to substantially curtail or cease
exploration, appraisal and development expenditures.
In 2013, as a result of challenging markets and difficulty in
raising funds to drill multi well program, the Company significantly reduced its
activity, relinquished the Samuel License, and ceased operations in the
Gabriella License. Furthermore, there was nominal exploration activity in the
Yitzhak License. During the 2014 there was no operational activity on the
Companys licenses.
Three month period ended September 30, 2014, compared to
the three month period ended September 30, 2013
During the three month period ended September 30, 2014, the
Companys overall position of cash and cash equivalents increased by $24
thousand. This increase in cash can be attributed to the following:
The Companys net cash used in operating activities during the
three month period ended September 30, 2014, was $46 thousand as compared to $2
million for the three month period ended September 30, 2013. This decrease is
due to the significantly reduced activities during 2014 as compared to 2013.
Cash provided from investing activities during the three month
period ended September 30, 2014, was $11 thousand as compared to $796 thousand
during the three month period ended September 30, 2013. The generation of cash
from investment activities in 2014 relates to the release of restricted deposits
and in 2013 to the sale of equipment and other assets.
Cash provided by financing activities for the three month
periods ended September 30, 2014 amount to $60 thousand and was in respect of a
private placement which took place during the quarter. Cash provided by
financing activities for the three month periods ended September 30, 2013, was
nil.
There are no legal restrictions on transferring funds between
Canada and Israel.
Nine month period ended September 30, 2014, compared to
the nine month period ended September 30, 2013
During the six month period ended September 30, 2014, the
Companys overall position of cash and cash equivalents decreased by $165
thousand. This decrease in cash can be attributed to the following:
The Companys net cash used from operating activities during
the nine month period ended September 30, 2014, was $247 thousand as compared to
$1.8 million for the nine month period ended September 30, 2013. This decrease
is due to the significantly reduced activities during 2014 as compared to
2013.
Cash provided from investing activities during the nine month
period ended September 30, 2014, was 26 thousand as compared to $208 thousand
during the nine month period ended September 30, 2013. The generation of cash
from investment activities in 2014 relates to the release of restricted
deposits, and in 2013, to the release of deposits, the sale of equipment and
other assets, which were offset by expenditure on license activities.
Cash provided by financing activities for the nine month
periods ended September 30, 2014 amount to $60 thousand and was in respect of a
private placement that took place during the third quarter of 2014. Cash
provided by financing activities for the nine month periods ended September 30,
2013, was nil.
There are no legal restrictions on transferring funds between
Canada and Israel.
7
Capital Resources
At September 30, 2014, the Companys cash and cash equivalents
were $452 thousand (September 30, 2013 - $831 thousand). The majority of this
balance is being held in US Dollars. Our working capital at September 30, 2014,
was $303 thousand as compared to a negative working capital of a negative
working capital of $615 at September 30, 2013.
Commitments
Adira Israel has Ministry mandated commitments to complete work
programs for each of the Licenses. As of the date hereof, the Company has failed
to meet these mandated commitments and is evaluating the options available,
including the filing of an extension for the Yitzhak License with the
Ministry.
If Company seeks an extension for the Yitzhak License and such
extension is approved by the Ministry, then in order to maintain the Yitzhak
License, the Company will be required to expend amounts in respect of
exploration expenditures for certain milestones on each of the Licenses. As of
the date hereof, the Company does not believe that it will be able to meet all
of the milestones as they became due.
As of September 30, 2014, the Companys share of the remaining
contractual commitments for its licenses was nil.
On February 16, 2014, the Ministry published new guidelines in
respect of security guarantee payments (Security Deposits) for all offshore
petroleum licenses, requiring each license consortium to deposit US$2,500,000
per offshore license with the Ministry by March 31, 2014. On June 26, 2014, the
Ministry extended the implementation of the Guidelines to September 17, 2014. In
September 2014, the Ministry further revised the new guidelines in respect of
the Security Deposits to be paid in two installments: 50% by November 30, 2014
and 50% by March 31, 2015. If the Company seeks an extension for the Yitzhak
License and such extension is approved, the Company will be required to pay its
pro rata share of the Security Deposit. As of the date hereof, the Company does
not believe that it will be able to pay its pro rata share of the Security
Deposit. Should the consortium on the Yitzhak License fail to meet this payment
requirement, the Ministry will view such failure as a default and will have the
right to retract the Yitzhak Licenses.
Approved Expenditures Relating to the Gabriella and Yitzhak
As of September 30, 2014, all budgeted and planned expenses for
the advancement of the drilling programs on the Licenses have been
suspended.
Disclosure of Outstanding Share Data
As of the date hereof, the Company has 12,292,021 common shares
outstanding, 79,012,640 warrants outstanding (each fifteen warrants are
convertible into one common share) and 416,000 stock options granted to
directors, officers and employees.
Management of Capital
The Company is an early-stage exploration company and currently
does not generate significant cash flows from operations. The Companys primary
source of funds comes from the issuance of share capital. The Company does not
use other sources of financing that require fixed payments of interest and
principal and is not subject to any externally imposed capital requirements.
The Company defines its capital as share capital plus warrants.
To effectively manage the Companys capital requirements, the Company has a
planning and budgeting process in place to ensure that adequate funds are
available to meet its strategic goals. The Company monitors actual expenses to
budget to manage its costs and commitments.
8
The Companys capital management objective is to maximize
investment returns to its equity-linked stakeholders within the context of
relevant opportunities and risks associated with the Companys operations.
Achieving this objective requires management to consider the underlying nature
of exploration activities, the availability of capital, the cost of various
capital alternatives and other factors. Establishing and adjusting capital
requirements is a continuous management process.
Although the Company has been successful at raising funds in
the past through the issuance of share capital, there can be no assurance that
future financings will be successful.
Off-Balance Sheet arrangements
See Commitments above.
Transactions with Related Parties
No director or senior officer of the Company, and no associate
or affiliate of the foregoing persons, and no insider has or has had any
material interest, direct or indirect, in any transactions, or in any proposed
transactions, which in either such case has materially affected or will
materially affect the Company or the Company's predecessors since the beginning
of the Company's last completed fiscal year except as follows:
During the nine month period ended September 30, 2014, the
Company incurred $171 thousand in consulting fees and operating expenses to
private companies which are controlled by directors or officers of the Company,
as compared to $309 thousand during the nine month period ended September 30,
2013.
These transactions are in the normal course of operations and
are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
Proposed Transactions
There are currently no proposed transactions that are expected
to affect the financial condition, results of operations and cash flows of the
Company.
Critical Accounting Policies and Estimates
The Companys results of operation and financial condition are
based on its consolidated financial statements, which are presented in
accordance with IFRS. Certain accounting principles require it to make certain
estimates, judgments and assumptions. Management believes that the estimates,
judgments and assumptions upon which it relies are reasonable based upon
information available to it at that time. These estimates, judgments and
assumptions can affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
periods presented. To the extent there are material differences between these
estimates, judgments or assumptions and actual results, the Companys financial
statements will be affected. The significant accounting policies and estimates
that Management believes are the most critical to aid in fully understanding and
evaluating the Companys reported financial results include the following:
- Exploration and evaluation assets;
- Share-based payment transactions;
- Joint oil and gas ventures;
- Farm out arrangements in the exploration and evaluation phase;
- Impairment of financial assets; and
- Revenue recognition.
The key assumptions made in the financial statements concerning
uncertainties at the end of the reporting period and the critical estimates
computed by the Group that may result in a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
9
Exploration and evaluation assets
Pre-license costs
Pre-license costs are expensed in the period in which they are
incurred.
Exploration and evaluation costs
Oil and natural gas exploration and development expenditure is
accounted for using the successful efforts method of accounting.
During the geological and geophysical exploration phase, costs
are charged against income as incurred. Costs directly associated with an
exploration well in its drilling phase, for which it has not yet been determined
whether there are proved reserves or it is not commercially viable, are
capitalized as exploration and evaluation intangible assets until the drilling
of the well is complete and the results have been evaluated. These costs include
employee remuneration, materials and fuel used, rig costs and payments made to
contractors. If no reserves are found, the exploration asset is tested for
impairment. If extractable hydrocarbons are found and, subject to further
appraisal activity (e.g., by drilling further wells), are likely to be developed
commercially, the costs continue to be carried as an intangible assets while
sufficient and continued progress is made in assessing the commerciality of the
hydrocarbons. All such costs are subject to technical, commercial and management
review as well as review for impairment at least once a year to confirm the
continued intent to develop or otherwise extract value from the discovery. When
this is no longer the case, the costs are written off. When proved reserves of
oil are determined and development sanctioned, the relevant expenditure is
transferred to oil and gas properties after impairment is assessed and any
resulting impairment loss is recognized.
Share-based payment transactions
The Company's employees and other service providers are
entitled to remuneration in the form of equity-settled share-based payment
transactions.
The cost of equity-settled transactions with employees is
measured at the fair value of the equity instruments granted at grant date. The
fair value is determined using an appropriate pricing model. As for other
service providers, the cost of the transactions is measured at the fair value of
the goods or services received as consideration for equity instruments. In cases
where the fair value of the goods or services received as consideration of
equity instruments cannot be measured, they are measured by reference to the
fair value of the equity instruments granted.
The cost of equity-settled transactions is recognized in profit
or loss, together with a corresponding increase in equity, during the period
which the performance and service conditions are to be satisfied, ending on the
date on which the relevant employees become fully entitled to the award (the
vesting period). The cumulative expense recognized for equity-settled
transactions at the end of each reporting period until the vesting date reflects
the extent to which the vesting period has expired and the Company's best
estimate of the number of equity instruments that will ultimately vest. The
expense or income recognized in profit or loss represents the movement in the
cumulative expense recognized at the end of the reporting period.
If the Company modifies the conditions on which
equity-instruments were granted, an additional expense is recognized for any
modification that increases the total fair value of the share-based payment
arrangement or is otherwise beneficial to the employee/other service provider at
the modification date. If a grant of an equity instrument is cancelled, it is
accounted for as if it had vested on the cancellation date, and any expense not
yet recognized for the grant is recognized immediately. However, if a new grant
replaces the cancelled grant and is identified as a replacement grant on the
grant date, the cancelled and new grants are accounted for as a modification of
the original grant, as described above.
10
Joint oil and gas ventures
The Company, through certain subsidiaries, conducts petroleum
and natural gas exploration activities jointly with other participants who each
have direct interests in the assets and each are directly obligated for the
liabilities of the ventures. Consequently, these financial statements reflect
only the Company's proportionate interest in such activities.
The Company accounts for its share of the joint venture's
assets, liabilities it has incurred, income from the sale or use of its share of
the joint venture's output, together with its share of the expenses incurred by
the joint venture and any expenses it incurs in relation to its interest in the
joint venture.
Farm-out arrangements in the exploration and evaluation
phase
A farm-out is the transfer of an oil and gas interest in
consideration for an agreement by the transferee (the farmee) to meet,
absolutely, certain expenditures which would otherwise have to be undertaken by
the original interest holder (the farmor). Farm-out transactions
generally occur in the exploration or development phase and are characterized by
the transferor (i.e. farmor) giving up future economic benefits, in the form of
reserves, in exchange for a reduction in future funding obligations.
Accordingly, the farmee recognizes its expenditure under the
arrangement in respect of its interest and that retained by the farmor, as and
when the costs are incurred.
The Company, as the farmor, accounts for the farm-out
arrangement as follows:
- the Company does not record any expenditure made by the farmee on its
behalf;
- the Company does not recognize a gain or loss on the farm out arrangement,
but rather designates any costs capitalized in relation to the whole interest
as relating to the partial interest retained; and
- any cash consideration received is credited against costs previously
capitalized in relation to the whole interest with any excess accounted for by
the farmor as a gain on disposal.
Impairment of financial assets
At the end of each reporting period, the Company assesses
whether there is objective evidence of impairment of a financial asset or group
of financial assets carried at amortized cost.
As of the date hereof, there is objective evidence of
impairment of debt instruments and receivables as a result of one or more events
that has occurred after the initial recognition of the asset and that loss event
has an impact on the estimated future cash flows. Evidence of impairment may
include indications that the debtor is experiencing financial difficulties,
including liquidity difficulty and default in interest or principal payments.
The amount of the loss recorded in profit or loss is measured as the difference
between the asset's carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not yet been incurred)
discounted at the financial asset's original effective interest rate (the
effective interest rate computed at initial recognition). If the financial asset
has a variable interest rate, the discount rate is the current effective
interest rate. The carrying amount of the asset is reduced through the use of an
allowance account (see allowance for doubtful accounts above). In a subsequent
period, the amount of the impairment loss is reversed if the recovery of the
asset can be related objectively to an event occurring after the impairment was
recognized. The amount of the reversal, up to the amount of any previous
impairment, is recorded in profit or loss.
Revenue recognition
Revenues are recognized in the statement of comprehensive loss
when the revenues can be measured reliably, it is probable that the economic
benefits associated with the transaction will flow to the Company and the costs
incurred or to be incurred in respect of the transaction can be measured
reliably.
11
The Companys revenues have mainly derived from:
1. Operator fees - The Company acts as
the operator or joint operator on the Licenses and is entitled to operator fees
and revenues are recognized in accordance with the terms of the JOAs, as
exploration expenses are incurred in the UJVs.
2. Consulting fees The Company
provides consulting services in respect of the Licenses on a time and
materials basis. Consulting fees are recognized as revenues as the services are
rendered to the respective UJVs.
Disclosure Controls and Procedures and Internal Controls
over Financial Reporting
There were no changes to the Companys internal controls over
financial reporting in the nine month period ended September 30, 2014, which
have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
As of September 30, 2014, the Company evaluated its disclosure
controls and procedures and internal control over financial reporting, as
defined by the Canadian Securities Administrators. These evaluations were
carried out under the supervision of and with the participation of management,
including the Companys chief financial officer. Based on these evaluations, the
chief financial officer concluded that the design of these disclosure controls
and procedures and internal control over financial reporting were effective.
Financial Instruments and Other Instruments
The Companys financial instruments have been designated as
follows:
Cash and cash equivalents |
- Held-for-trading; |
Restricted Cash |
- Held-for-trading; |
Accounts receivable |
- Receivables; |
Accounts payable and accrued liabilities |
- Other financial liabilities;
|
The carrying values of cash and cash equivalents, restricted
cash and accounts receivable and accounts payable approximate their fair values
due to the short-term maturity of these financial instruments.
Risks and Uncertainties
Credit risk
The Company manages credit risk, in respect of cash and cash
equivalents, and restricted cash, by holding them at major Canadian and Israeli
financial institutions in accordance with the Companys investment policy. The
Company places its cash and cash equivalents with high credit quality Israeli
and Canadian financial institutions. Concentration of credit risk exists with
respect to the Companys cash and cash equivalents and accounts receivable. As
at September 30, 2014, the Companys exposure is for cash held in bank accounts,
including restricted deposit, in the amount of $461 thousand and on accounts and
other receivable of $61 thousand. None of the Companys accounts receivable is
overdue as at September 30, 2014.
12
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in obtaining funds to meet current obligations and future
commitments. The Company's approach to managing liquidity risk is to forecast
cash requirements to provide reasonable assurance that it will have sufficient
funds to meet its liabilities when due. As at September 30, 2014, the Company
had cash and cash equivalents of $452 thousand, restricted deposits of $9
thousand and accounts and other receivables of $61 against current trade and
other payables in the amount of $219 thousand.
Market risk
Market risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market
prices. Market risk is comprised of two types of risk: interest rate risk, and
foreign currency risk.
|
(i) |
Interest rate risk |
|
|
|
|
|
The Company is not exposed to significant interest rate
risk due to the short-term maturity of its cash equivalents. |
|
|
|
|
(ii) |
Foreign currency risk |
|
|
|
|
|
The Company is exposed to financial risk related to the
fluctuation of foreign exchange rates. The Company operates in Israel.
Most of the Companys monetary assets are held in US dollars and most of
the Companys expenditures are made in US dollars. However, the Company
also has expenditures in NIS and Canadian dollars. The Company has not
hedged its exposure to currency fluctuations. An increase or decrease of
5% of the NIS or the Canadian Dollar relative to the U.S dollar would not
have a significant effect on the Company. |
Environmental Risk
Environmental regulations affect the cost of exploration and
development, as well as future development operations; however, management does
not believe that any provision against environmental regulations is currently
required.
For a complete discussion on risk factors, please refer to the
Companys Form 20-F dated April 30, 2014, filed on www.sedar.com.
Other Information
Additional information about the Company, the Companys
quarterly and annual consolidated financial statements, annual information form,
technical reports and other disclosure documents, is accessible at the Companys
website www.adiraenergy.com or through the Companys public filings at
www.sedar.com.
# # # #
13
FORM 52-109FV2
CERTIFICATION OF INTERIM FILINGS
VENTURE ISSUER BASIC CERTIFICATE
I, Gadi Levin, Chief Financial Officer of Adira Energy
Ltd., certify the following:
1. |
Review: I have reviewed the interim financial
report and interim MD&A (together, the interim filings) of Adira
Energy Ltd. (the issuer) for the interim period ended September
30, 2014. |
|
|
2. |
No misrepresentations: Based on my knowledge,
having exercised reasonable diligence, the interim filings do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated or that is necessary to make a statement not
misleading in light of the circumstances under which it was made, with
respect to the period covered by the interim filings. |
|
|
3. |
Fair presentation: Based on my knowledge, having
exercised reasonable diligence, the interim financial report together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial
performance and cash flows of the issuer, as of the date of and for the
periods presented in the interim filings. |
Date: November 28, 2014
/s/ Gadi Levin
_____________________
Gadi
Levin
Chief Financial Officer
NOTE TO READER |
|
In contrast to the certificate required for non-venture
issuers under National Instrument 52- 109 Certification of Disclosure
in Issuers Annual and Interim Filings (NI 52-109), this
Venture Issuer Basic Certificate does not include representations relating
to the establishment and maintenance of disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as
defined in NI 52-109. In particular, the certifying officers filing this
certificate are not making any representations relating to the
establishment and maintenance of |
|
i) |
controls and other procedures designed to provide
reasonable assurance that information required to be disclosed by the
issuer in its annual filings, interim filings or other reports filed or
submitted under securities legislation is recorded, processed, summarized
and reported within the time periods specified in securities legislation;
and |
|
|
ii) |
a process to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with the issuers GAAP.
|
|
The issuers certifying officers are responsible for
ensuring that processes are in place to provide them with sufficient
knowledge to support the representations they are making in this
certificate. Investors should be aware that inherent limitations on the
ability of certifying officers of a venture issuer to design and implement
on a cost effective basis DC&P and ICFR as defined in NI 52-109 may
result in additional risks to the quality, reliability, transparency and
timeliness of interim and annual filings and other reports provided under
securities legislation. |
FORM 52-109FV2
CERTIFICATION OF INTERIM FILINGS
VENTURE ISSUER BASIC CERTIFICATE
I, Alan Friedman, Executive Vice President - Corporate
Development of Adira Energy Ltd., certify the following:
1. |
Review: I have reviewed the interim financial
report and interim MD&A (together, the interim filings) of Adira
Energy Ltd. (the issuer) for the interim period ended September
30, 2014. |
|
|
2. |
No misrepresentations: Based on my knowledge,
having exercised reasonable diligence, the interim filings do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated or that is necessary to make a statement not
misleading in light of the circumstances under which it was made, with
respect to the period covered by the interim filings. |
|
|
3. |
Fair presentation: Based on my knowledge, having
exercised reasonable diligence, the interim financial report together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial
performance and cash flows of the issuer, as of the date of and for the
periods presented in the interim filings. |
Date: November 28, 2014
/s/ Alan Friedman
____________________
Alan
Friedman
Executive Vice President - Corporate Development
NOTE TO READER |
|
In contrast to the certificate required for non-venture
issuers under National Instrument 52- 109 Certification of Disclosure
in Issuers Annual and Interim Filings (NI 52-109), this
Venture Issuer Basic Certificate does not include representations relating
to the establishment and maintenance of disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as
defined in NI 52-109. In particular, the certifying officers filing this
certificate are not making any representations relating to the
establishment and maintenance of |
|
i) |
controls and other procedures designed to provide
reasonable assurance that information required to be disclosed by the
issuer in its annual filings, interim filings or other reports filed or
submitted under securities legislation is recorded, processed, summarized
and reported within the time periods specified in securities legislation;
and |
|
|
ii) |
a process to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with the issuers GAAP. |
|
The issuers certifying officers are responsible for
ensuring that processes are in place to provide them with sufficient
knowledge to support the representations they are making in this
certificate. Investors should be aware that inherent limitations on the
ability of certifying officers of a venture issuer to design and implement
on a cost effective basis DC&P and ICFR as defined in NI 52-109 may
result in additional risks to the quality, reliability, transparency and
timeliness of interim and annual filings and other reports provided under
securities legislation. |
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