NOTES TO THE INTERIM FINANICAL INFORMATION

1.  Accounting policies

a)       Basis of preparation

This interim financial report, which includes a condensed set of financial statements of the Company and its subsidiary undertakings ("the Group"), has been prepared using the historical cost convention and based on International Financial Reporting Standards ("IFRS") including IAS 34 'Interim Financial Reporting' and IFRS 6 'Exploration for and Evaluation of Mineral Reserves', as adopted by the European Union ("EU").

The condensed set of financial statements for the six months ended 30 June 2021 is unaudited and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. They have been prepared using accounting bases and policies consistent with those used in the preparation of the audited financial statements of the Company and the Group for the year ended 31 December 2020 and those to be used for the year ending 31 December 2021. The comparative figures for the half year ended 30 June 2020 are unaudited. The comparative figures for the year ended 31 December 2020 are not the Company's full statutory accounts but have been extracted from the financial statements for the year ended 31 December 2020 which have been delivered to the Registrar of Companies and the auditors' report thereon was unqualified and did not contain a statement under sections 498(2) and 498(3) of the Companies Act 2006.

This half-yearly financial report was approved by the Board of Directors on 29 September 2021.

b)       Going concern

The Group will need to raise further funds sufficient to meet its financial and operating commitments for the 12-month period commencing immediately subsequent to the date of signature of these interim financial statements and is planning to do this through:

·      Completion of the Beluga Energy Limited farmout transaction for which heads of agreement were signed and announced on 10 August 2021; and

·      A farm-out of its South African license sufficient to cover its share of 3D acquisition work programme costs which are approximately £2 million; or

·      Receipt of further funds from the exercise of warrants or the issuance of shares in order to provide partial funding of the proposed 3D acquisition work programme in South Africa.

The Directors are confident that the above initiatives will be concluded satisfactorily within the necessary timeframes and the financial statements have, therefore, been prepared on a going concern basis.

There can, however, be no guarantee that the required funds may be raised or transactions completed within the necessary timeframes. Consequently, a material uncertainty exists that may cast doubt on the Group's ability to continue to operate and to meet its commitments and discharge its liabilities in the normal course of business for a period of not less than twelve months from the date of this report. The financial statements do not include the adjustments that would result if the Group was unable to continue in operation such as the impairment of the exploration assets.

2.  Operating segments

The Group has two reportable operating segments: Africa and Head Office. Non-current assets and operating liabilities are located in Africa, whilst the majority of current assets are carried at Head Office. The Group has not yet commenced production and therefore has no revenue. Each reportable segment adopts the same accounting policies. In compliance with IAS 34 'Interim Financial Reporting' the following table reconciles the operational loss and the assets and liabilities of each reportable segment with the consolidated figures presented in these Financial Statements, together with comparative figures for the period-ended 30 June 2020.

¹ Carrying amounts of segment assets exclude investments in subsidiaries.

² Carrying amounts of segment liabilities exclude intra-group financing.

3.  Loss per ordinary share

4.  Intangible Exploration and Evaluation (E&E) assets

In accordance with the Group's accounting policies and IFRS 6 the Directors' have reviewed each of the exploration license areas for indications of impairment. Having done so, based on the financial constraints on the Group, and specific issues associated with each license it was concluded that a full ongoing impairment was only necessary in the case of the Zambian licenses 40 and 41, the circumstances of which have not changed since previous reporting period.

The additions during the period represent $600k (2020: $1.2 million), $197k in South Africa (2020: $80k), $77k in Namibia (2020: $21k) and $nil in Zambia (2020: $nil). The focus of the Group's activities during this period has been on preparing for and acquiring inventory and services with respect to the anticipated drilling of the Njonji-3 appraisal well.

5.  Trade and other receivables

Trade and other receivables comprise prepaid expenditures.

6.  Trade and other payables

The future ability of the Group to recover UK VAT was confirmed by the Upper Tier Tribunal in its judgement in favour of the Company on 20 May 2021 and is no longer the subject of a dispute with HMRC. Previously, on 8 July 2019, the Company had received an initial judgement in its favour from the First-Tier Tribunal (Tax Chamber). HMRC have chosen not appeal this latest ruling against them.

This ruling covers the Group's current and future VAT returns and also the past returns up to the period covered by our original appeal to the First Tier Tribunal ("FTT").  There are a number of returns for periods after those covered by the original FTT appeal that are covered by two further appeals that remain with the FTT, which is why the Directors have made the judgement to continue to provide against certain recoverable amounts until such time as the case has been formally closed. The Company has, therefore, continued to provide against $638k / £461k (2020: $1.2 million / £903k) of VAT recoverable within these financial statements.

Work programme-related accruals of $2.0 million (2020: $1.9 million) comprise $1.1 million with respect to Cameroon (2020: $1.1 million) and $900k with respect to South Africa (2020: $758k).

7.  Borrowings

Repayment dates

During the period, the Group and Company entered into no new facilities (2020: $562k) and repaid its Shard Merchant Capital Ltd loan in January 2021.

On 21 January 2021, the Company repaid in full the $500k loan facility with Shard Merchant Capital Ltd. The terms of the Shard Facility included the issue of 31,446,541 attached three-year warrants at a strike price of 0.6 pence and 5,761,198 shares to pre-pay interest charged at 12% per annum. The loan was secured by a fixed and floating charge over the Company's assets in favour of Shard Merchant Capital Ltd. The repayment of the loan included facility transaction costs of $35k. During the period the Company recognised interest charges totalling $21k (2020: $43k) and made repayments totalling $535k (2020: $30k).

On 4 March 2021, the Pegasus Petroleum Limited loan facility, to which Jeremy Asher is a controlling party, was extended to the end of November 2021. Consideration for the extension comprised an increase in the production-based payments, the amount depending on whether the loan would be repaid by 15 July or only in November 2021. Additionally, simple interest would accrue at 12% per annum pro rata, commencing on 4 March 2021, and would only be paid at the end of the facility period. The 15 July date was subsequently extended to 20 August 2021, with the production-based payments effectively limited to 3.75% of the Contractor share of revenues from the production sharing contract, net of the Government share and net of all Petroleum Taxes, and the facility was fully repaid on 20 August 2021.

8.  Share capital

The share capital issues during the period are summarised below:

9.  Share-based payments

 Options

Details of share options outstanding at 30 June 2021 are as follows:

These options vest in the beneficiaries in equal tranches on the first, second and third anniversaries of grant.

Warrants

Details of warrants outstanding at 30 June 2021 are as follows:

10.        Subsequent events

10 August 2021: Execution of a binding Heads of Agreement in respect of a farm-out to Beluga Energy Limited ("Beluga") of a 49% non-operating working interest in its Thali Production Sharing Contract in Cameroon, conducted through its wholly-owned subsidiary Tower Resources Cameroon S.A. The farm-out covers $15 million towards the cost of the NJOM-3 well that Tower is planning to drill on the Thali block. Beluga will receive a 49% working interest in the Production Sharing Contract, subject to production-based payments of 10%. The well cost is currently expected to be approximately $16.8 million, of which approximately $3 million has already been spent. Costs in excess of $15 million, and future costs, will be funded pro-rata with respect to each party's working interest.

11 August 2021: Placing for cash of £1.5 million via a placing of 352,941,176 new ordinary shares of 0.001p each at a price of 0.425 pence per share, a discount of 14% to the closing share price on 10 August 2021. Novum Securities Limited ("Novum"), acted as sole broker on this Placing was appointed to serve as Joint Broker to the Company going forwards. The Company has used the net proceeds of the Placing to repay the $750,000 loan facility from Pegasus Petroleum Ltd (whose ultimate beneficial owner is the Company's Chairman and CEO, Jeremy Asher) together with accrued interest and fees of $102,500, and to cover working capital requirements going forward, which will include; work programme costs in Namibia (for license PEL 96); South Africa (for the Algoa-Gamtoos license operated by 50% partner New Age Energy Algoa (Pty) Ltd and which adjoins the Total-operated blocks 11B/12B); funding maintenance and planning expenditure in Cameroon to maintain the long-lead items inventory ready for the commencement of drilling and testing of the NJOM-3 well, pending completion of the farm-out with Beluga; and general working capital purposes.

 21 September 2021: Documentation of its farm-out to Beluga of a 49% non-operating working interest in its Thali Production Sharing Contract in Cameroon, conducted through its wholly-owned subsidiary Tower Resources Cameroon S.A was finalised, and the package of documents submitted to the Minister of Mines, Industry and Technological Development per the Cameroon Petroleum Code. Completion of the farm-out is still subject to two conditions precedent: the financing contingency requiring Beluga's shareholders' approval, and the Minister of Mines, Industry and Technological Development's approval. The Company would notify the market when both conditions precedent have been met.