XSTATE RESOURCES LIMITED

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ABN 96 009 217 154
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11 September 2015

ASX Release Electronic lodgement ASX Code: XST

INTERIM FINANCIAL REPORT

We attach the interim financial report for Xstate Resources Limited for the half year ended 30 June 2015.

For and on behalf of the Board

Level 2, 55 Carrington Street, Nedlands WA 6009 PO Box 985, Nedlands, WA 6909 Tel + 61 8 9423 3200 Fax +61 8 9389 8327 www.xstate.com.au

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ABN 96 009 217 154

INTERIM FINANCIAL REPORT 30 JUNE 2015

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | CONTENTS

Page Company Directory ................................................................................................................................. 1 Directors’ Report ..................................................................................................................................... 2 Auditor’s Independence Declaration ....................................................................................................... 5 Condensed Consolidated Statement of Financial Position ..................................................................... 6 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income ................... 7 Condensed Consolidated Statement of Changes in Equity .................................................................... 9 Condensed Consolidated Statement of Cash Flows ............................................................................ 12 Notes to the Condensed Consolidated Financial Statements .............................................................. 13 Directors’ Declaration ............................................................................................................................ 20 Independent Review Report.................................................................................................................. 21

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | COMPANY DIRECTORY

COMPANY DIRECTORY

DIRECTORS AND COMPANY SECRETARY:

Chris Hodge Managing Director

Ian Tchacos

Non-executive Director

David McArthur

Non-executive Director and Company Secretary

REGISTERED OFFICE:

PO Box 985 Nedlands WA 6909

Level 2 55 Carrington Street Nedlands WA 6009

Telephone: +61 8 9423 3200 Facsimile: +61 8 9389 8327

SHARE REGISTRY:

Advanced Share Registry Services 150 Stirling Highway Nedlands WA 6009 Telephone: +61 8 9389 8033 Facsimile: +61 8 9389 7871

AUDITORS:

KPMG Level 8 235 St George’s Terrace Perth WA 6000

DOMICILE AND COUNTRY OF INCORPORATION:

Australia

PRINCIPAL OFFICE:

OCTO Building PO Box 805 Level 2, Unit 14 Subiaco WA 6904 210 Bagot Road Subiaco WA 6008

Telephone: +61 8 9388 2654

BANKERS:

ANZ Banking Group Limited Level 6, 77 St Georges Terrace Perth WA 6000

SOLICITORS:

Steinepreis Paganin Level 4, The Read Building 16 Milligan Street Perth WA 6000

WEBSITE AND EMAIL:

www.xstate.com.au [email protected]

SECURITIES EXCHANGE:

Xstate Resources Limited shares are listed on the Australian Securities Exchange (ASX)

Ordinary Shares - XST

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | DIRECTOR’S REPORT

DIRECTORS’ REPORT

The Directors present their report together with the financial report of Xstate Resources Limited for the six months ended 30 June 2015 and the review report thereon.

DIRECTORS

The Directors of the Company at any time during or since the end of the interim period are:

Name	Period of Directorship
Executive
Chris Hodge	Director since 12 November 2013
Non-executive
David McArthur	Director since 4 September 2013
Ian Tchacos	Director since 12 August 2014

PRINCIPAL ACTIVITIES

The principal activity of the Group during the interim period was oil and natural gas exploration.

RESULTS

The net loss of the Group for the interim period after income tax expense was $286,992 (2014 loss: $1,040,914).

The Company remains acutely aware of the current economic climate and continues to implement cost-reduction measures across the business.

DIVIDENDS

No dividend was paid during the interim period and the Directors do not recommend payment of a dividend.

REVIEW OF OPERATIONS

Xstate Resources Limited is an oil and gas exploration company, headquartered in Perth, Western Australia and is listed on the Australian Securities Exchange (ASX).

During the 6 months ended 30 June 2015 the Company continued with its objective to explore for hydrocarbons onshore California.

Dempsey Conventional Gas Prospect (XST 10% WI)

The Dempsey prospect remains the current focus of the Joint Venture’s plans – primarily because of the potential for near term production. This is because it is located beneath existing Xstate’s production facilities.

Activities during the last 6 months have involved firming up the prospect from both a geological and drilling planning perspective, for potential drilling in 2015. In addition, Xstate has given several presentations to interested prospective farm-out parties.

Dempsey’s proposed drilling depth is approximately 3,200m and is estimated to cost US$4.5 to US$5.5M to drill. (100% cost). The total (100%) unrisked recoverable prospective resource from 7 interpreted reservoir zones, on a best estimate deterministic basis, is approximately 1TCF.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | DIRECTOR’S REPORT

REVIEW OF OPERATIONS (continued)

Alvares Conventional Gas Prospect (XST 25% WI)

The Alvares gas appraisal prospect is located close to large natural gas pipelines and involves the appraisal drilling of a large anticline originally drilled in 1982 and which had extensive gas shows and flowed gas to surface. It contains a total (100%) unrisked recoverable prospective resource on a best estimate deterministic basis of 2.4TCF.

Activities during the last 6 months have been focussed on geological work on the Alvares -1 logs as wells as more detailed economic evaluation and farm-out activity.

SCU #1- 24 water disposal project (XST 13.25%)

Xstate continues to await Government approvals which have been slow in forthcoming because of the strict regulations regarding produced water injection in California. The Company and JV plan to continue working on evaluation of the well and to contract a local engineer to accelerate the licensing of the well for water disposal. The work for the next 12 months has been funded by a previously paid cash call. Once licensed the well will either be put into service, funded by available cash from shareholder funding or the asset may be sold to another local operator to raise fund for exploration projects.

Porter Ranch Project (XST 22.5% Working Interest )

The Porter Ranch oil exploration project in San Luis Obispo County consists of a gross 9,051 acres leased over a number of surface anticlines in the prospect area.

During the prior 6 months, the permitting process has continued with a view to the drilling of an exploration well to a planned total depth of 1,500 metres to test the Monterey oil reservoirs.

The County continues to assess our application to drill an exploration well on the Porter Ranch leases.

SACRAMENTO BASIN Rancho Capay Gas Field (XST 10% WI in 5 wells) & Los Medanos Gas Field (XST 10% WI in 2 wells)

Xstate acquired a working interest in minor gas production rights in the Sacramento Basin onshore California in 2013 primarily to use the leases for further exploration via access an extensive 3D seismic database from which to generate new exploration opportunities.

No significant operations were carried out during the 6 monthly period.

Competent Person Statement

The technical information provided has been compiled by Chris Hodge, Managing Director of Xstate Resources Limited. He is a qualified geologist with over 30 years technical, commercial and management experience in exploration for, appraisal and development, and transportation of oil and gas and mineral and energy resources. Mr Hodge has reviewed the results, procedures and data contained in this report. Mr Hodge consents to the inclusion in this report of the information in the form and context in which it appears.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | DIRECTOR’S REPORT

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Xstate Resources Limited support and have adhered to the principles of corporate governance. The Group’s corporate governance statement is contained within the 31 December 2014 Annual Report and can be viewed on the Company’s website.

EVENTS SUBSEQUENT TO REPORTING DATE

Other than the matters disclosed in note 10 of the notes to the condensed interim financial statements, there have been no matters or circumstances that have arisen since the end of the reporting period that have significantly affected, or may significantly affect, the operations of the Company, the results of these operations, or the state of affairs of the Company in future financial years.

LEAD AUDITOR’S INDEPENDENCE DECLARATION

The lead auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on the next page and forms part of the Directors’ report, for the six months ended 30 June 2015.

Dated at Perth, Western Australia this 11[th] day of September 2015.

Signed in accordance with a resolution of the directors.

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DAVID MCARTHUR Director

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Xstate Resources Limited

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 30 June 2015 there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and
(ii) no contraventions of any applicable code of professional conduct in relation to the review.

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KPMG

Grant Robinson

Partner

Perth

11 September 2015

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015

Note	30 June 2015 $ 31 December 2014 $
Assets Cash and cash equivalents Other receivables 5 Prepayments Total current assets Exploration and evaluation asset Property, plant and equipment Other receivables 5 Total non-current assets Total assets Liabilities Trade and other payables Employee benefits Total current liabilities Site restoration provision Total liabilities Net assets Equity Share capital 8 Reserves Accumulated losses Total equity attributable to equity holders of the company	48,281 490,147 125,282 45,524 40,749 17,527
	214,312 553,195
	897,321 897,321 6,410 10,472 15,000 15,000
	918,731 922,793
	1,133,043 1,475,988
	62,715 111,876 1,834 16,109
	64,549 127,985
	67,646 63,496
	67,646 63,496
	132,195 191,481
	1,000,848 1,284,507
	43,577,877 43,571,491 658,958 662,011 (43,235,987) (42,948,995)
	1,000,848 1,284,507

The condensed notes on pages 13 to 19 are an integral part of these financial statements.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2015

Note	30 June 2015 $ 30 June 2014 $
Other income Production revenue Production costs Administrative expenses 6 Other expenses 7 Exploration expenditure incurred Results from operating activities Finance income Net finance income Loss before income tax Income tax expense Loss from continuing operations Loss for the period Other comprehensive expense Items that will not be reclassified to profit or loss Gain on acquisition of non-controlling interest Total items that will not be reclassified to profit or loss Items that may be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations Total items that may be reclassified subsequently to profit or loss Other comprehensive income for the period, net of income tax Total comprehensive loss for the period	16,270 - 35,430 75,500 (25,892) (45,161) (139,076) (801,929) (138,498) (185,027) (34,435) (86,255)
	(286,201) (1,042,872)
	232 1,958
	232 1,958

	(285,969) (1,040,914)

	(1,023) -
	(286,992) (1,040,914)

	(286,992) (1,040,914)



	- 53,258
	- 53,258


	(3,053) 66
	(3,053) 66

	(3,053) 53,324

	(290,045) (987,590)

The condensed notes on pages 13 to 19 are an integral part of these financial statements.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2015 (continued)

Note	30 June 2015 $ 30 June 2014 $
Loss attributable to: Owners of the Company Non-controlling interests Total items that will not be reclassified to profit or loss Total comprehensive loss attributable to: Owners of the Company Non-controlling interests Loss per share Basic and diluted (cents per share)
	(286,992) (1,040,665)
	- (249)
	(286,992) (1,040,914)


	(290,045) (987,341)
	- (249)
	(290,045) (987,590)


	(0.16) (0.59)

The condensed notes on pages 13 to 19 are an integral part of these financial statements.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2015

	Attributable to equity holders of the Company	Attributable to equity holders of the Company	Attributable to equity holders of the Company
	Share capital $ Translation reserve $	Options reserve $	Share based payments reserve $ Accumulated losses(1) $	Total $
Balance at 1 January 2015			- (42,948,995)
	43,571,491 2,811	659,200		1,284,507
Total comprehensive expense for the period
Loss for the period Other comprehensive income Exchange differences arising on translation of foreign operations Total comprehensive income Total comprehensive loss for the period Transactions with owners, recorded directly in equity Contributions by and distributions to owners Issue of 1,000,000 shares at 0.8 cents each to a consultant Capital raising costs Total contributions by and distributions to owners Total changes in ownership interests in subsidiaries Total transactions with owners Balance at 30 June 2015	- -	-	- (286,992) - -	(286,992)


	- (3,053)	-		(3,053)
	- (3,053)	-	- -	(3,053)
	- (3,053)	-	- (286,992)	(290,045)
			- - - -



	8,000 -	-		8,000
	(1,614) -	-		(1,614)
	6,386 -	-	- -	6,386
	- -	-	- -	-
	6,386 -	-	- -	6,386
	43,577,877 (242)	659,200	- (43,235,987)	1,000,848

The condensed notes on pages 13 to 19 are an integral part of these financial statements.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2014

	Attributable to equity holders of the Company
	Share capital $ Translation reserve $ Options reserve $ Share based payments reserve $ Accumulated losses $ Total $
Balance at 1 January 2014	41,586,203 - 92,050 55,004 (41,460,652) 272,605
Total comprehensive expense for the period
Loss for the year Other comprehensive income Gain on acquisition of non-controlling interest Exchange differences arising on translation of foreign operations Total comprehensive income Total comprehensive loss for the period Transactions with owners, recorded directly in equity Contributions by and distributions to owners Issue of 1,571,547 shares at 5.3 cents each in lieu of 50% of directors’ fees Issue of 12,892,082 shares at 5.3 cents each in consideration for acquisition of 75.9% of Bombora Energy Pty Ltd Placement of 20 million shares at 5 cents each for working capital	- - - - (987,656) (987,656) - - - - 53,258 53,258 - 66 - - - 66
	- 66 - - 53,258 53,324
	- 66 - - (987,656) (987,590)
	83,292 - - (55,004) - 28,288 683,280 - - - - 683,280 1,000,000 - - - - 1,000,000

The condensed notes on pages 13 to 19 are an integral part of these financial statements.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2014 (continued)

	Attributable to equity holders of the Company
	Share capital $ Translation reserve $ Options reserve $ Share based payments reserve $ Accumulated losses $	Total $
Contributions by and distributions to owners (continued) Issue of 921,488 shares at 4.2 cents each in lieu of 50% of director fees Issue of 4,092,502 shares at 4 cents each in consideration for acquisition of remaining 24.1% of Bombora Energy Pty Ltd Share-based payment transactions Capital raising costs Total contributions by and distributions to owners Total changes in ownership interests in subsidiaries Total transactions with owners Balance at 30 June 2014	38,703 - - - - 163,700 - - - - - - 567,150 26,858 - (59,206) - - - -

		38,703
		163,700
		594,008
		(59,206)
	1,909,769 567,150 - -	2,448,773
	- - - - -	-
	1,909,769 - - (28,146) -	2,448,773
	43,495,972 66 659,200 26,858 (42,448,308)	1,733,788

The condensed notes on pages 13 to 19 are an integral part of these financial statements.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2015

	30 June 2015 $ 30 June 2014 $
Cash flow from operating activities Cash paid to suppliers and employees and customers Payments for exploration, evaluation and development Interest received Income taxes paid Net cash used in operating activities Cash flows from investing activities Payments to associate Payments for property, plant and equipment Acquisition of subsidiary, net of cost Net cash (used in) / from investing activities Cash flow from financing activities Proceeds from issue of shares and options Other short-term loans Capital raising costs Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held Cash and cash equivalents at 30 June
	(300,711) (262,509)
	(99,107) (59,006)
	249 899
	(1,023) -
	(400,592) (320,616)


	(6,074) (3,897)
	- (279)
	- 2,430
	(6,074) (1,746)


	8,000 1,000,000
	(56,424) -
	(1,614) (64,706)
	(50,038) 935,294

	(456,704) 612,932
	490,147 258,484
	(14,838) (53,123)
	48,281 818,293

The condensed notes on pages 13 to 19 are an integral part of these financial statements.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2015

1. REPORTING ENTITY

Xstate Resources Limited (the “Company”) is a company domiciled in Australia. The condensed consolidated interim financial report of the Company as at and for the six months ended 30 June 2015 comprises the Company and its subsidiaries (together referred to as the “Group” and individually as “Group Entities”). The Group is primarily involved in oil and gas exploration in California, USA.

The consolidated financial report of the Group as at and for the year ended 31 December 2014 is available upon request from the Company’s registered office at Level 2, 55 Carrington Street, Nedlands, Western Australia, 6009 and is available for review on the Company’s website.

2. BASIS OF PREPARATION

(a) Statement of compliance

The condensed consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001 . It does not include all of the information required for a full annual financial report and should be read in conjunction with the annual consolidated financial report of the Group as at and for the year ended 31 December 2015 and any public announcements made by Xstate Resources Limited during the interim reporting period.

Xstate Resources Limited is a for profit entity for the purpose of preparing the financial statements.

The condensed consolidated interim financial report was approved by the Board of Directors on 11 September 2015.

(b) Judgements and estimates

The preparation of interim financial reports requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial report, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2014.

(c) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurable date. Fair value for measurement and / or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurable date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. BASIS OF PREPARATION (continued)

(d) Going concern

The directors have prepared the condensed consolidated interim financial report on a going concern basis, which contemplates the realisation of assets and payment of liabilities in the normal course of business. The Group has no debt obligation at 30 June 2015 and a working capital surplus of $149,763 including $48,281 of cash and cash equivalents. The Group incurred a loss for the period of $286,992.

The Group is focused on securing further land leases in California and pursuing and assessing new venture opportunities which are complementary with its existing asset position. The directors are aware that additional funds will need to be sourced for the Group to continue its business as budgeted, including meeting its exploration and development activities. The ability of the Group to continue as a going concern, and thereby be able to pays its debts as and when they fall due, is dependent on the Group successfully securing further working capital through additional equity funding, financing facilities or entering into farm-out or joint venture arrangement’s in relation to its assets.

Given the financial position of the Group and its demonstrated ability to raise funding through the satisfactory raising of $150,000 through a Share Purchase Plan which closes on 11 September 2015 (refer note 10), the Directors have reviewed the Group’s financial position and forecast cash flows and reasonably expect that the Group will be able to raise additional funds to meet future costs to support business plans for at least the next 12 months. If necessary, the Group has the capacity to delay or cancel a number of expenses that are discretionary in nature, including administrative costs, exploration programs and development expenditure that are not contractually committed. The timing of raising additional capital will depend on the investment markets, current and future planned exploration and development activities. The directors are therefore of the opinion that the use of the going concern basis is appropriate in the circumstances. Notwithstanding this assessment there is significant uncertainty regarding the outcomes of the future funding alternatives.

The financial report does not contain any adjustments to the amounts or classification of recorded assets or liabilities which might be necessary if the Group was not to continue as a going concern.

3. SIGNIFICANT ACCOUNTING POLICIES

Except as described below, the accounting policies applied by the Group in the consolidated interim financial report are the same as those applied by the Group in its consolidated financial report as at and for the year ended 31 December 2014. The following changes in accounting policy are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending 31 December 2014.

AASB 2014-1 Amendments to Australian Accounting Standards. The change amends a number of pronouncements as a result of the 2010-2012 and 2011-2013 annual improvements cycle. These changes do not impact the financial statements.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. OPERATING SEGMENTS

At the reporting date the Group had one reportable segment, being the exploration and evaluation of oil and gas interests.

Reconciliation of reportable segment loss, assets and liabilities and other material items

	30 June 2015 $	30 June 2014 $
Loss Total loss for reportable segments Central administration and directors’ remuneration Finance income Consolidated loss before income tax		(96,972) (945,900) 1,958
	(24,897)
	(261,304)
	232
	(285,969)	(1,040,914)

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since 31 December 2014.

Reconciliation of reportable segment loss, assets and liabilities and other material items (continued)

	30 June 2015 $ 31 December 2014 $
Assets Total assets for reportable segments Cash and cash equivalents Other central administration assets Consolidated total assets Liabilities Total liabilities for reportable segments Employee entitlements Other liabilities Consolidated total liabilities	977,927 928,094 48,281 490,147 106,835 57,747
	1,133,043 1,475,988
	(66,281) (63,496) (1,834) (16,109) (64,080) (111,876)
	(132,195) (191,481)

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since 31 December 2014.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. OTHER RECEIVABLES

Note	30 June 2015 31 December 2014
	$ $
Net production revenue distribution Bank interest income Receivable from government institutions Deposits and bonds Loan receivable (i) Other receivables Office rent and amenities Current Non-current	42,901 30,773 86 103 13,168 7,261 15,000 15,000 56,424 - 12,703 7,387
	140,282 60,524
	125,282 45,524 15,000 15,000
	140,282 60,524

(i) Loan receivable is due from another party to the project for a cash call made on their behalf. This amount was repaid during August 2015.

6. ADMINISTRATIVE EXPENSES

	30June 2015	30 June 2014
	$	$
Directors and executives remuneration Personnel expenses (staff) Advertising and publicity Communication and information services Travelling expenses Office administration Bank charges Share registry and statutory fees		743,618 13,666 5,248 7,711 755 17,595 892 12,444
	86,320
	5,318
	78
	16,352
	1,336
	9,418
	1,569
	18,685
	139,076	801,929

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. OTHER EXPENSES

	30June	30 June 2014
	2015
	$	$
Professional fees Depreciation and amortisation Site restoration Net foreign exchange loss Impairment investment in associate		85,985 3,865 37,159 54,121 3,897
	128,362
	4,062
	-
	-
	6,074
	138,498	185,027

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. CAPITAL AND RESERVES

(a) Share capital

	Ordinary shares	Ordinary shares	Ordinary shares
	Number		Amount
	2015	2014	2015 2014
	Number	Number	$ $
On issue at 1 January Issue of shares in lieu of deferred directors’ fees Issue of shares in consideration for acquisition of Bombora Energy Pty Ltd Placement for working capital Issue of shares to a consultant Capital raising costs On issue at 30 June		140,327,429 2,493,035 16,984,584 20,000,000 - -	43,571,491 41,586,203 - 121,994 - 846,980 - 1,000,000 8,000 - (1,614) (59,205)
	182,129,185
	-
	-
	-
	1,000,000
	-
	183,129,185	179,805,048	43,577,877 43,495,972

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. CAPITAL AND RESERVES (continued)

(b) Reserves

Equity-based benefits reserve

The equity based benefits reserve represents the cost of options that have been granted and vested as share-based payments but not exercised. This reserve may be transferred to accumulated losses should these options be exercised or reversed through profit and loss should certain vesting conditions not be met.

This reserve also represents shares that are to be issued to directors in lieu of director fees.

(c) Options

At the date of this report, there are 39,000,000 options on issue in Xstate Resources Limited. The exercise price ranges from 4 cents to 10 cents, and the exercise dates range from December 2015 to December 2016.

9. SHARE-BASED PAYMENT PLANS

Description of the share-based payment arrangements

Shares issued in lieu of consultancy fees

On 5 May 2015 Directors approved the issue of 1,000,000 “effort” shares at 0.8 cents each to secure the services of a consultant.

10. EVENTS SUBSEQUENT TO REPORTING DATE

On 21 August 2015, the Company announced a share purchase plan which closes on 11 September 2015 and has demonstrated its ability to raise funding through the satisfactory raising of $150,000.

Other than the above, there have been no matters or circumstances that have arisen since the end of the reporting period that have significantly affected, or may significantly affect, the operations of the Company, the results of these operations, or the state of affairs of the Company in future financial years.

XSTATE RESOURCES LIMITED | INTERIM FINANCIAL REPORT | 30 JUNE 2015 | DIRECTORS’ DECLARATION

DIRECTORS’ DECLARATION

In the opinion of the Directors of Xstate Resources Limited (the “Company”):

(1) the financial statements and notes set out on pages 6 to 19 are in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s financial position as at 30 June 2015 and of its performance for the six months ended on that date; and
(ii) complying with Australian Accounting AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and
(2) as set out in note 2(d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors:

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DAVID MCARTHUR Director

Dated at Perth this 11th day of September 2015

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Independent auditor’s report to the members of Xstate Resources Limited

Report on the financial report

We have audited the accompanying interim financial report of Xstate Resources Limited, which comprises the condensed consolidated statement of financial position as at 30 June 2015, condensed consolidated statement of profit or loss and other comprehensive income condensed consolidated statement of changes in equity and condensed statement of cash flows for the halfyear ended on that date, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company and the entities it controlled at the half-year’s end or from time to time during the half-year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 30 June 2015 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As auditor of Xstate Resources Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Xstate Resources Limited is not in accordance with the Corporations Act 2001 , including:

(a) giving a true and fair view of the Group’s financial position as at 30 June 2015 and of its performance for the half-year ended on that date; and

(b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

Material uncertainty regarding continuation as a going concern

Without modifying our opinion expressed above, attention is drawn to note 2(d) in the financial report. The matters set forth in note 2(d) indicate the existence of material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business.

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KPMG

Grant Robinson Partner

Perth

11 September 2015

AI assistant

XSTATE RESOURCES LIMITED — Interim / Quarterly Report 2015

66107_rns_2015-09-10_760fd4ac-ed8d-4ada-b6a0-cfda4f86c722.pdf

INTERIM FINANCIAL REPORT