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Kanabo Group PLC Annual Financial Report

02/06/2021 9:26am

UK Regulatory (RNS & others)


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RNS Number : 5580A

Kanabo Group PLC

02 June 2021

2 June 202 1

Kanabo Group Plc

(formerly: Spinnaker Opportunities Plc.)

(" Kanabo " or the "Company")

Annual Report & Financial Statements for the Year Ended 31 December 20 20

Kanabo Group plc (LON: KNB ), a medical cannabis R&D Company that focuses on the distribution of cannabis-derived products for medical patients, and non-THC products for CBD consumers , is pleased to announce its Full Year Audited Results for the year ended 31 December 20 20 .

Period Highlights

-- A Share Purchase Agreement covering the acquisition of Kanabo was signed on 18 December 2020;

   --      Kanabo received a pre-reverse takeover investment of GBP300,000; 

-- During the year ended 31 December 2020, the Company issued convertible loan notes in the amount of GBP165,000.

P ost Period Highlights

-- Publication of an FCA approved prospectus setting out the final details of the acquisition of Kanabo;

-- Approval of the Kanabo acquisition on 15 February 2021, by shareholders of Spinnaker Opportunities Plc ;

-- Admission of the Enlarged Company to trading on the Standard List segment of London Stock Exchange on 16 February 2021, wherein the Company raised gross proceeds of GBP6 million through an oversubscribed fundraising.

   Kanabo, CEO , Avihu Tamir , said   : 

"The annual report provides the results of the cash shell prior to the closing of the Kanabo transaction. At the beginning of 2021, we completed the transaction and successfully raised GBP6 million pounds to support our growth plans. We look forward to the future and to executing our business plan. Kanabo continues to work on several significant initiatives that will create value for shareholders. "

For further information, please visit http://www.kanabogroup.com/ or contact the following:

Kanabo Group Plc

Tel: +(972)52-3173-633

press@kanabogroup.com

Meirav Horn

Peterhouse Capital Limited (Financial Adviser)

Tel: +44 (0)20 7469 0930

Eran Zucker / Guy Miller / Allie Feuerlein

K anabo Group Plc

(formerly : Spinnaker Opportunities Plc)

Annual Report & Financial Statements

for the year ended 31 December 2020

Company Registration No. 10485105 (England and Wales)

Company information

Directors

Andrew Morrison

Anthony Harpur (resigned on 16 February 2021)

Alan Hume (resigned on 16 February 2021)

Uziel Danino (appointed on 16 February 2021)

David Tsur (appointed on 16 February 2021)

Avihu Tamir (appointed on 16 February 2021)

Company Secretary

Howard Rubenstein

Registered Office

Churchill House

137-139 Brent Street

London

NW4 4DJ

Registered Number

10485105

Brokers

Peterhouse Capital Limited

3(rd) Floor

80 Cheapside

London

EC2V 6EE

Independent Auditor

PKF Littlejohn LLP

Statutory Auditor

15 Westferry Circus

Canary Wharf

London

E14 4HD

Solicitors

Asserson

Churchill House

137-139 Brent Street

London

NW4 4DJ

Principal Bankers

Metro Bank

One Southampton Row

London

WC1 5HA

Registrars

Neville Registrars

Neville House

Steelpark Road

Halesowen

B62 8HD

Chairman's Statement

I am pleased to present the audited financial statements to shareholders for the year ended 31 December 2020.

Since the year-end, the Company published a prospectus setting out the final details of the acquisition of Kanabo Research Ltd ("Kanabo") and the re-admission of the enlarged Company to trading on the Standard List segment of London Stock Exchange. The general meeting that took place on 15 February 2021 approved the transaction. I am proud to be a part of this historical moment and share the achievement of being one of the first medical cannabis admissions to London Stock Exchange.

The Company's shares were suspended from trading for the entire financial year ended 31 December 2020 pending completion of the proposed transaction.

During the COVID-19 pandemic, Kanabo has implemented appropriate policies to protect the health of its staff and to manage costs. In the meantime, business development activities directed towards expanding the list of qualified suppliers of raw materials and sales through its distributor network in the target markets have continued in line with Kanabo's business plan.

The key transaction milestones passed during the year were:

-- To facilitate the execution of Kanabo's business plan while waiting for completion of the acquisition and re-admission to trading, the Company supplied three further tranches each of GBP100,000 to Kanabo during the period, under its Loan Facility Agreement, secured against the intellectual property of the business. This brought the total loan financing advanced to GBP400,000.

-- The total loan financing came from internal funds together with GBP165,000 raised through convertible loan notes issued in March and April 2020 to new and existing subscribers to the Company.

-- Following an announcement made on 18 September 2020 by the Financial Conduct Authority covering the eligibility of certain categories of cannabis-related businesses for admission to the Official List, the Company confirmed on 21 September 2020 that it had re-started all project work-streams with the objective of completing its proposed acquisition as quickly as possible.

-- On 18 December 2020, the Company confirmed that it had conditionally agreed to acquire the entire issued share capital of Kanabo. The executed Share Purchase Agreement ("SPA") was a restatement of the agreement that was originally signed on 2 December 2019, updated for the passage of time.

Following the year end, the Company confirmed that a marketing exercise was under way and the results of this, including the significant over-subscription were announced to the market with the prospectus on 29 January 2021. Admission to trading to London Stock Exchange took effect from 16 February 2021.

Founded on the successful fund-raise and over-subscription, the Company has additional funds to deploy, over and above the minimum that it set at the beginning of the exercise. The Company is therefore able to accelerate the roll-out of its business plan and take advantage of new growth opportunities as they arise.

Clearly the transaction with Kanabo took much longer to complete than we initially expected. As a cash shell, with the objective of making a single acquisition, the Company was well positioned to adopt a patient approach in order to help pioneer a dynamic new sector. We were admirably supported in this approach by our legal advisers Hill Dickinson, our auditors PKF Littlejohn, our financial advisers Peterhouse Capital, SI Capital and the whole transaction team. Their efforts and stamina were much appreciated.

The business development activities during the year were undertaken by the Company by a team comprising the Directors and retained advisers. Retained advisers provided the benefit of their experience on issues such as target quality, potential capital expenditure requirements, commodity market dynamics and business development to assist the Directors in formulating an investment decision. In common with the Directors, retained advisers did not receive any fees for their ordinary duties prior to completion of the acquisition of Kanabo. We take this opportunity to thank each of them for their dedication and hard work.

None of the above would have been possible, of course, without the trust and patience of shareholders and the hard work of Andy Morrison, the former chairman of the Company, and the directors. It has been a monumental effort from everyone. Following completion of the acquisition on 16 February 2021, Andy continues as a non-executive director of the Company.

On behalf of the Board, I thank you for your support of our company and we look forward to the exciting opportunities in front of us.

................................

David Tsur

Chairman

01 June 2021

Board of Directors and Senior Management

Andrew Morrison - Non-Executive Director

Formerly Chairman of Spinnaker Opportunities, Mr Morrison has focused on managing and developing junior public companies, largely in the energy sector including Xtract Energy Plc, Silvermere Energy Plc and Zeta Petroleum Plc, an ASX quoted firm with operations in Romania.

He began his career at Shell in oil products and in 1999, joined BG Group Plc as a New Ventures Director. Subsequently he held senior New Business Development roles for the industrial gases group BOC Group Plc until its acquisition in 2007. Mr Morrison has a BSc in Chemical Engineering and Fuel Technology from the University of Sheffield and a Diploma in Company Direction from the Institute of Directors.

Uziel Danino, Non-Executive Director ( appointed on 16 of February 2021).

Mr. Danino has over 35 years of experience in the financial sector, including capital markets. Mr. Danino began his career at Bank Mizrahi in 1981 and worked in all of the bank's business units filling a variety of managerial positions. In his last position with the bank, Mr. Danino served as the manager of the customer asset division, which includes the bank's investment management company.

In 2012, Mr. Danino was appointed to head the Excellence Investment House that had NIS80 billion (approximately GBP 17 billion) in customer assets under management at the time. In the framework of his position, he also serves as a chairperson of provident funds, trust funds, a Stock Exchange Member Brokerage, and serves as a member of the Israeli Federation of Investment Houses.

Mr. Danino is currently a member and director of Rosario Capital, an underwriting company. In addition, Mr. Danino is a director in two public companies, UMI and Spacecom, and serves a member of theUniversity of Ariel Finance Committee.

Avihu Tamir, Chief Executive Officer ( appointed on 16 February 2021)

Mr. Tamir is a cannabis entrepreneur with over five years of hands-on experience in multiple cannabis ventures and vast experience in consulting for international cannabis projects. Mr. Tamir began his career and built his reputation as a senior strategy consultant at Accenture. He is also the founder of Teva Nature, the leading vaporiser company in Israel.

Mr. Tamir founded Kanabo Research in 2017 and since then has served as CEO of the company. His expertise includes biotechnology, new agriculture and agro-tech, and other breakthrough technologiesin the dynamic field of medical cannabis.

Mr. Tamir holds a B.A. in Finance and Risk Management (Magna Cum Laude), and a M.A. in Political Science (Magna Cum Laude) from the IDC Herzliya.

David Tsur, Non-Executive Chairman ( appointed on 16 February 2021)

Mr. Tsur is the co-founder of Kamada Ltd, a public company listed on both the NASDAQ and Tel-Aviv Stock Exchange. He served as its Chief Executive Officer and on its board of directors from the company's inception in 1990 until July 2015.

Mr. Tsur served as a Board member and Chairman of Collplant listed on the NASDAQ.

Prior to co-founding Kamada, Mr. Tsur was the Chief Executive Officer of Arad Systems and RAD Chemicals Inc. He has also held various positions in the Israeli Ministry of Economy (formerly named the Ministry of Industry and Trade), including Chief Economist and Commercial Attaché in Argentina and Iran.

Mr. Tsur holds a BA degree in Economics and International Relations and an MBA in Business

Management from the Hebrew University of Jerusalem.

Directors' Report

The Directors present their report with the audited financial statements of the Company for the year ended 31 December 2020. A commentary on the business for the year is included in the Chairman's Statement on page 3. A review of the business is also included in the Strategic Report on pages 12 to 16.

The Company's Ordinary Shares were admitted to listing on the London Stock Exchange, on the Official List pursuant to Chapters 14 of the Listing Rules, which sets out the requirements for Standard Listings.

Directors

The Directors of the Company during the year and their beneficial interest in the Ordinary shares of the Company at 31 December 2020 were as follows:

 
 Director      Position           Appointed      Resigned    Ordinary     Options   Warrants 
                                                               shares 
 Andrew        Non-Executive 
  Morrison*     Chairman         17/11/2016             -   4,600,080   1,250,000          - 
 Anthony       Non-Executive 
  Harpur        Director         21/02/2017    16/02/2021   1,400,000     350,000    500,000 
               Non-Executive 
 Alan Hume      Director         17/09/2018    16/02/2021     400,000     270,000          - 
 

* 2,600,080 Ordinary Shares held by Andrew Morrison were held by Platform Securities Nominees Ltd on behalf of his Self-Invested Personal Pension (SIPP).

On February 16, 2021 Uziel Danino, David Tsur and Avihu Tamir were appointed to serve as Directors in the Company with David Tsur replacing Andrew Morrison as Chairman.

 
 Director       Position          Appointed    Resigned     Ordinary     Options   Warrants 
                                                              shares 
                Non-Executive 
 David Tsur      Chairman         16/2/2021           -    9,061,102   2,700,000          - 
 Uziel          Non-Executive 
  Danino         Director         16/2/2021           -    3,683,382   1,800,000          - 
 Avihu Tamir    Non-Executive     16/2/2021           -   97,263,870           -          - 
                 Director 
 

As a part of the Kanabo transaction the company granted Andrew Morrison 900,000 options for future services as Non-Executive Director.

Qualifying Third Party Indemnity Provision

At the date of this report, the Company has a third-party indemnity policy in place for all four Directors.

Substantial shareholders

As at 31 December 2020, the total number of issued Ordinary Shares with voting rights in the Company was 29,400,120. Details of the Company's capital structure and voting rights are set out in note 10 to the financial statements.

The Company has been notified of the following interests of 3 per cent or more in its issued share capital as at the date of approval of this report.

 
                                          Number of Ordinary            % of 
  Party Name                                          Shares   Share Capital 
 
  DARTINGTON PORTFOLIO NOMINEES LIMITED 
  Des:DPN                                        218,250,753          62.09% 
 
 HARGREAVES LANSDOWN (NOMINEES) LIMITED 
 Des:HLNOM                                        15,115,945           4.30% 
 
 HARGREAVES LANSDOWN (NOMINEES) LIMITED 
 Des:15942                                        16,764,734           4.77% 
 

Financial instruments

Details of the use of the Company's financial risk management objectives and policies as well as exposure to financial risk are contained in the Accounting policies and note 15 of the financial statements.

Greenhouse Gas (GHG) Emissions

The Company is aware that it needs to measure its operational carbon footprint in order to limit and control its environmental impact. However, given the very limited nature of its operations during the year under review, it has not been practical to measure its carbon footprint.

In the future, the Company will only measure the impact of its direct activities, as the full impact of the entire supply chain of its suppliers cannot be measured practically.

Dividends

The Directors do not propose a dividend in respect of the year ended 31 December 2020 (2019: nil).

Future developments and events subsequent to the year end

Further details of the Company's future developments and events subsequent to the year-end are set out in the Strategic Report on pages 12 to 16.

Corporate Governance

The Governance report forms part of the Director's Report and is disclosed on pages 17 to 24.

Going Concern

The Company's business activities, together with facts likely to affect its future operations and financial and liquidity positions are set out in the Chairman's Statement and also note 2 of the financial statements. In addition, note 15 to the financial statements disclose the Company's financial risk management policy.

The Directors, having made due and careful enquiry, are of the opinion that the Company and the newly formed group have as a result of the successful RTO and significant funds raised, adequate working capital to execute its operations over the next 12 months. As a result, the Directors have adopted the going concern basis of accounting in the preparation of the annual financial statements.

Principal Activities

The Company's principal activity in the reporting period was to seek an acquisition in the energy and industrial sectors, with focus since September 2018 on the cannabis processing industry.

Auditors

The Board appointed PKF Littlejohn LLP as auditors of the Company on 12 December 2018. They have expressed their willingness to continue in office and a resolution to reappoint them will be proposed at the Annual General Meeting.

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report alongside the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies with a Standard Listing.

In preparing these financial statements, the Directors are required to:

   --       Select suitable accounting policies and then apply them consistently; 
   --       Make judgments and accounting estimates that are reasonable and prudent; 

-- State whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

-- Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Remuneration Committee Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are also responsible to make a statement that they consider that the annual report and accounts, taken as a whole, is fair, balanced, and understandable and provides the information necessary for the shareholders to assess the Company's position and performance, business model and strategy.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.

Statement of Directors' responsibilities pursuant to Disclosure and Transparency Rule

Each of the Directors, whose names and functions are listed on page 5 and 6 confirm that, to the best of their knowledge and belief:

-- the financial statements prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

-- the Annual Report and financial statements, including the Strategic Report, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.

Disclosure of Information to Auditors

So far as the Directors are aware, there is no relevant audit information of which the Company's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

This directors' report was approved by the Board of Directors on 01 June 2021 and is signed on its behalf by:

.................................

David Tsur

Chairman

Strategic Report

The Directors present the Strategic Report of the Company for the year ended 31 December 2020.

Section 172(1) Statement - Promotion of the Company for the benefit of the members as a whole

The Directors believe they have acted in the way most likely to promote the success of the Company for the benefit of its members as a whole, as required by s172 of the Companies Act 2006.

The requirements of s172 are for the Directors to:

   --    Consider the likely consequences of any decision in the long term; 
   --    Act fairly between the members of the Company; 
   --    Maintain a reputation for high standards of business conduct; 
   --    Consider the interests of the Company's employees; 
   --    Foster the Company's relationships with suppliers, customers and others; and 
   --    Consider the impact of the Company's operations on the community and the environment. 

The Company operated as a cash shell, which was successful in sourcing a business to acquire and was in the process of applying to the FCA to re-admit to the LSE main market. The pre-revenue nature of the business prior to the acquisition of Kanabo is important to the understanding of the Company by its members and suppliers, and the Directors were as transparent about the cash position and funding requirements as is allowed under LSE regulations.

The application of the s172 requirements can be demonstrated in relation to some of the key decisions made during 2020:

-- Any contracts for services provided have been undertaken with a clear cap on financial exposure;

   --    Maintaining a policy of no remuneration for the Directors prior to admission; 

-- In January 2020 the FCA announced that it was conducting a review of undisclosed issues relating to the prospective listing on the London Stock Exchange of cannabis-related companies. Despite not receiving a clear timeline from the FCA on how long this review would take, the Directors resolved to continue to work with Kanabo since discussions with the FCA were already well-advanced and the Directors and their advisers were confident that the FCA would, in due course, agree that the listing should be allowed to proceed.

-- In order to lend support to Kanabo during this further delay the Directors arranged for loans to be made to Kanabo both from its own cash reserves and also by raising an additional GBP165,000 by way of collaterised loan notes.

-- In September 2020 the FCA finally issued guidelines on the listings of cannabis related companies and the Directors decided to proceed 'full speed ahead' to secure approval of the prospectus with the FCA.

-- As a result of these efforts the Company succeeded in executing an updated Share Purchase Agreement with Kanabo on December 17 2020 and this was announced to the market on the following day.

As a Company, the Board seriously considers its ethical responsibilities to the communities and environment.

Review of Business in the Period

Operational Review

The Company's principal activity is set out in the Directors' Report on page 9.

On 27 February 2019, the Company requested suspension of its listing following the signing of a non-binding Heads of Terms to acquire the entire issued share capital of Kanabo Research Limited. Following the announcement from the FCA on 18 September 2020, the Company re-started all project work streams with the intention of completing its proposed acquisition of Kanabo. On 18 December 2020 the Company confirmed that it had conditionally agreed to acquire the entire issued share capital of Kanabo.

Business Strategy

The Company has been focused on delivering a material acquisition in the cannabis processing industry and a number of opportunities had been evaluated before the decision to proceed with the Kanabo transaction was taken.

The completion of the Kanabo transaction took place on 15 February 2021 with admission to trading on London Stock Exchange the following day.

COVID-19

The impact of the Covid-19 pandemic had little effect on the business of the Company during 2020 as the Company was suspended from trading during the entire year. Work continued using phone communications and video conference facilities to minimize risk to participants. The Directors believe that the global vaccination programmes taking place and the widespread existence of on-line purchasing will not hinder the business of the enlarged organization.

Event since the year end

On 29 January 2021 the Company published the prospectus in relation to the acquisition of Kanabo and called for a General Meeting of shareholders on the 15 February 2021. The completion of the Kanabo transaction took place on 15 February 2021 with admission to trading on London Stock Exchange the following day.

Financial review

Results for the 2020 period

The Company incurred a loss for the year to 31 December 2020 of GBP131,000 (2019 - loss of GBP363,000).

The loss for the year occurred as a result of on-going administrative expenses required to operate the Company and costs in relation to pursuing the completion of the identified acquisition transaction.

Cash flow

Net cash outflow for 2020 was GBP238,000 (2019 - GBP444,000 outflow).

Closing cash

As at 31 December 2020, the Company held GBP359,000 of cash (31 December 2019 - GBP597,000).

Key Performance Indicators

The sole KPI for the Company has been to source a suitable acquisition target. This KPI was met with the identification of Kanabo as the RTO target.

Position of Company's Business

At the year end

At the year end the Company's Statement of Financial Position shows net assets totaling GBP738,000 (31 December 2019 - GBP674,000). The Company has few liabilities and is considered to have a strong cash position at the reporting date.

Environmental matters

The Board contains personnel with a good history of running businesses that have been compliant with all relevant laws and regulations and there have been no instances of non-compliance in respect of environmental matters.

Employee information

At present, there are no female Directors in the Company. The Company has a Chairman and two Non-Executive Directors. There are also two Board advisers. The Company is committed to gender equality and, if future roles are identified, a wide-ranging search would be completed with the most appropriate individual being appointed irrespective of gender.

Social/Community/Human rights matters

The Company ensures that employment practices take into account the necessary diversity requirements and compliance with all employment laws. The Board has experience in dealing with such issues and sufficient training and qualifications to ensure they meet all requirements.

Anti-corruption and anti-bribery policy

The government of the United Kingdom has issued guidelines setting out appropriate procedures for companies to follow to ensure that they are compliant with the UK Bribery Act 2010. The Company has conducted a review into its operational procedures to consider the impact of the Bribery Act 2010 and the Board has adopted an anti-corruption and anti-bribery policy.

Principal Risks and Uncertainties

The Company operates in an uncertain environment and is subject to a number of risk factors. The Directors consider the following risk factors are of particular relevance to the Company's

activities although it should be noted that this list is not exhaustive and that other risk factors not presently known or currently deemed immaterial may apply.

 
 Risks/Uncertainties to the Company 
 Issue                    Risk/Uncertainty                      Mitigation 
                         ------------------------------------  ---------------------------------- 
 The Company may          There may be significant              The growth prospects 
  face significant         competition faced by the              in the cannabis industry 
  competition in           Company. The Company is               are widely regarded 
  its chosen industry      currently focussed on the             as very strong, which 
                           cannabis processing industry          may help to reduce the 
                           which received considerable           effect of competition. 
                           publicity in recent years.            By consulting with knowledgeable 
                           There is a risk that by               experts in the industry, 
                           the time the product is               carrying out thorough 
                           brought to market, there              due diligence on potential 
                           will be a large number                targets and extensive 
                           of competitors. A number              market research, the 
                           of these competitors may              Company may reduce this 
                           possess greater technical,            risk. 
                           financial and other resources 
                           than the Company. 
                         ------------------------------------  ---------------------------------- 
 The Company relies       The successful management             The Company offers incentives 
  on the experience        and operations of the Company         to Directors through 
  and talent of            are reliant upon the contributions    participation in share 
  its management           of directors and advisors.            offerings, which makes 
  and advisors             In addition, the Company's            them linked to the long-term 
                           future success depends                success of the business. 
                           in part on its ability 
                           to continue to recruit, 
                           motivate and retain highly 
                           experienced and qualified 
                           directors and consultants. 
                         ------------------------------------  ---------------------------------- 
 The Company may          The cannabis processing               The Company monitors 
  be subject to            industry in which the Company         legislative and regulatory 
  changes in regulation    is focussed on is controversial       changes and alters its 
  affecting its            and is highly regulated.              business practices where 
  target industry          Against a backdrop of overall         appropriate. In the 
                           liberalisation, the industry          event that the Company 
                           will likely continue to               becomes subject to specific 
                           be the subject of regulatory          regulation regarding 
                           oversight. Compliance with            its activities the Company 
                           various laws and regulations          will put in place such 
                           may impose compliance costs           procedures as are necessary 
                           and restrictions on the               to ensure it complies 
                           Company, with fines and/or            with such regulation. 
                           sanctions for non-compliance. 
                         ------------------------------------  ---------------------------------- 
 The Covid-19             The uncertainty and any               With the core of the 
  pandemic                 future restrictions resulting         Company's operations 
                           from the Covid-19 pandemic            based in Europe and 
                           may disrupt the Company's             Israel, the Company 
                           operations.                           is vigilantly monitoring 
                                                                 the situation and the 
                                                                 health of our staff. 
                                                                 The company have implemented 
                                                                 appropriate policies 
                                                                 to protect and best 
                                                                 manage the health of 
                                                                 our staff. The Company 
                                                                 has experienced minor 
                                                                 disruptions to parts 
                                                                 of its raw materials 
                                                                 supply chain, which 
                                                                 is being managed on 
                                                                 a daily basis to mitigate 
                                                                 any disruption to manufacturing 
                                                                 operations. 
                         ------------------------------------  ---------------------------------- 
 Brexit                   The uncertainty arising               The Company monitors 
                           from Brexit may impose                legislative and regulatory 
                           new costs and requirements            changes relating to 
                           on the Company                        the Brexit and alters 
                                                                 its business practices 
                                                                 where appropriate. 
                         ------------------------------------  ---------------------------------- 
 

Composition of the Board

A full analysis of the Board, its function, composition and policies, is included in the Governance Report.

Capital structure

The Company's capital consists of ordinary shares which rank pari passu in all respects which are traded on the Standard segment of the Main Market of the London Stock Exchange. There are no restrictions on the transfer of securities in the Company or restrictions on voting rights and none of the Company's shares are owned or controlled by employee share schemes. There are no arrangements in place between shareholders that are known to the Company that may restrict voting rights, restrict the transfer of securities, result in the appointment or replacement of Directors, amend the Company's Articles of Association or restrict the powers of the Company's Directors, including in relation to the issuing or buying back by the Company of its shares or any significant agreements to which the Company is a party that take effect after or terminate upon, a change of control of the Company following a takeover bid or arrangements between the Company and its Directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) that may occur because of a takeover bid.

Approved by the Board on 01 June 2021

.................................

David Tsur

Chairman

Governance Report

Introduction

The Company recognises the importance of, and is committed to, high standards of Corporate Governance. Whilst the Company is not formally required to comply with the UK Corporate Governance Code, the Company has voluntarily applied the requirements of the UK Code of Corporate Governance published in July 2018 (the Code). The following sections explain how the Company has applied the Code:

Compliance with the UK Code of Corporate Governance

The UK Corporate Governance Code, as published by the Financial Reporting Council, is the corporate governance regime for England and Wales. The Company has stated that, to the extent practicable for a company of its size and nature, it follows the UK Corporate Governance Code. The Directors are aware that there are currently certain provisions of the UK Corporate Governance Code that the Company is not in compliance with, given the size and early stage nature of the Company. These include:

-- Provision 24 of the Code requires that the board should establish an Audit Committee with at least two independent non-executive directors. The Audit Committee comprises of one non-executive director who cannot be assessed as independent. The Directors consider the present composition to be adequate given the size of the Company and volume of transactions. After the Kanabo transaction took place in February 2021, two non-executive directors were appointed, however, as they hold shares in the company they cannot at present be deemed as fully independent under the code.

-- Provision 24 of the Code requires that at least one member of the Audit Committee must have the relevant financial experience. The Committee consisted of one Non-Executive Director at the year-end, who does not directly have experience in accounting or auditing. However, his experience of finance gained in the industry is considered sufficient given the present size and stage of development of the Company. After the Kanabo transaction took place in February 2021, this provision was also met. Mr. Uziel Danino was appointed to lead the Audit committe

-- Provision 32 of the Code requires that the board should establish a Remuneration Committee with at least two independent non-executive directors. The Remuneration Committee comprises of one non-executive director who cannot be assessed as independent . The Directors consider the present composition to be adequate given the size of the Company and volume of transactions. After the Kanabo transaction took place on 16 February 2021, two non-executive directors were appointed, however, as they hold shares in the company they cannot be deemed as fully independent under the code.

-- Provision 11 of the Code requires that at least half of the board should be non-executive directors whom the board considers to be independent.The Non-Executive Directors in place at the year end held ordinary shares in the company and cannot therefore be considered fully independent under the code. The non-executive directors appointed on 16 February 2021 also hold shares in the company and therefore cannot at present be considered fully independent under the code.

-- As a consequence of the above, where provisions of the Code require the appointment of independent directors, for example as chairman or as senior independent director, the Company is not in full compliance with the Code - this applies in relation to various provisions of the Code including 9 and 12.

-- The roles of Chairman and Chief Executive were undertaken by the same individual. This is outside of provision 9 of the Corporate Governance Code applicable to smaller companies, which requires that these roles should not be exercised by the same individual. However, the Directors considered the structure and arrangements to be adequate given the size and stage of development of the Company during the period under review. Following completion of the acquisition of Kanabo, the roles were separated and the Company now complies with this provision.

-- Provision 17 states that the board should establish a Nomination Committee of which the majority of members of the committee should be independent non-executive directors. The Nomination Committee comprises of one non-executive director who cannot be assessed as independent. As set out in page 21, an informal induction is considered sufficient given the size and limited complexity of the Company. See point on independence above.

The UK Corporate Governance Code can be found at www.frc.org.uk.

Set out below are the Company's corporate governance practices for the year ended 31 December 2020. Following completion of an acquisition, these corporate governance practices are being considered and reviewed to ensure they remain appropriate.

Leadership

The Company is headed by an effective Board which is collectively responsible for the long-term success of the Company.

The role of the Board - The Board sets the Company's strategy, ensuring that the necessary resources are in place to achieve the agreed strategic priorities, and reviews management and financial performance. It is accountable to shareholders for the creation and delivery of strong, sustainable financial performance and long-term shareholder value. To achieve this, the Board directs and monitors the Company's affairs within a framework of controls which enable risk to be assessed and managed effectively. The Board also has responsibility for setting the Company's core values and standards of business conduct and for ensuring that these, together with the Company's obligations to its stakeholders, are widely understood throughout the Company. The Board has a formal schedule of matters reserved which is provided later in this report.

Board Meetings - The core activities of the Board are carried out in scheduled meetings of the Board. These meetings are timed to link to key events in the Company's corporate calendar and regular reviews of the business are conducted. Additional meetings and conference calls are arranged to consider matters which require decisions outside the scheduled meetings. During the year, the Board met on 12 occasions. Outside the scheduled meetings of the Board, the Directors maintain frequent contact with each other to discuss any issues of concern they may have relating to the Company or their areas of responsibility, and to keep them fully briefed on the Company's operations. Where Directors have concerns which cannot be resolved about the running of the company, or a proposed action, they will ensure that their concerns are recorded in the Board minutes.

Matters reserved specifically for Board - The Board has a formal schedule of matters reserved that can only be decided by the Board. The key matters reserved are the consideration and approval of:

   --    The Company's overall strategy; 
   --    Financial statements and dividend policy; 

-- Management structure including succession planning, appointments and remuneration; material acquisitions and disposals, material contracts, major capital expenditure projects and budgets;

   --    Capital structure, debt and equity financing and other matters; 
   --    Risk management and internal controls; 
   --    The Company's corporate governance and compliance arrangements; and 
   --    Corporate policies. 

Certain other matters are delegated to the Board Committees, namely the Audit, Nomination and Remuneration Committees.

Summary of the Board's work in the year - During the year, the Board considered all relevant matters within its remit, but focused in particular on the establishment of the Company and the identification of suitable investment opportunities for the Company to pursue, the associated due diligence work as required and the decisions thereon.

Attendance at meetings:

 
 Member            Position                 Meetings attended 
----------------  -----------------------  ------------------ 
 Andrew Morrison   Non-Executive Chairman   12 of 12 
 Anthony Harpur    Non-Executive Director   12 of 12 
 Alan Hume         Non-Executive Director   12 of 12 
----------------  -----------------------  ------------------ 
 

The Board is pleased with the high level of attendance and participation of Directors at Board and committee meetings. Attendance at Committee meetings is detailed in the respective Committee reports.

The Chairman, Andrew Morrison, proposed and sought agreement to the Board Agenda and ensured adequate time for discussion.

Directors appointed by the Board are subject to election by shareholders at the Annual General Meeting of the Company following their appointment and thereafter are subject to re-election in accordance with the Company's articles of association.

The terms and conditions of appointment of Non-Executive Directors will be made available upon written request.

Remuneration Committee

The Company has established a Remuneration Committee, to assist the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the policy on remuneration.

The report of the Remuneration Committee is included in this Annual Report. Formal terms of reference for the Remuneration Committee have been documented and are made available for review at the AGM.

As of the 16 February 2021, Andrew Morrison and Uziel Danino, as independent Non-Executive Directors, replaced Anthony Harpur

Audit Committee

The Company has established an Audit Committee with delegated duties and responsibilities. Due to the size and nature of the Company and Board during the period, there was only one member of the Audit Committee being Anthony Harpur, a non-Executive Director. Anthony is an experienced senior business leader who has officiated on many committees during his business life. He has held budget and P&L responsibilities and fully understands the requirements of independent audit. The Audit Committee is responsible, amongst other things, for making recommendations to the Board on the appointment of auditors and the audit fee, monitoring and reviewing the integrity of the Company's financial statements and any formal announcements on the Company's financial performance as well as reports from the Company's auditor on those financial statements. In addition, the Audit Committee will review the Company's internal financial control and risk management systems to assist the Board in fulfilling its responsibilities relating to the effectiveness of those systems, including an evaluation of the capabilities of such systems in light of the expected requirements for any specific acquisition target.

The Audit Committee meets with the auditors at least twice a year and more frequently if required.

Terms of reference of the Audit Committee will be made available upon written request.

The Audit Committee report is included on pages 29-30.

As of the 16 February 2021, Andrew Morrison and Uziel Danino, as independent Non-Executive Directors, replaced Anthony Harpur

Nominations Committee

The Company has established a Nominations Committee, the members of which are Andrew Morrison, David Tsur and Avihu Tamir. The committee meets as required to fulfil its duties of reviewing the Board structure and composition and identifying and nominating candidates to fill Board vacancies as they arise.

Terms of reference of the Nominations Committee will be made available upon written request.

The Nominations Committee report is included on page 31.

Other governance matters - All of the Directors are aware that independent professional advice is available to each Director in order to properly discharge their duties as a Director. In addition, each Director and Board committee has access to the advice of the Company Secretary.

The Company Secretary - The Company Secretary is Howard Rubenstein who is responsible for the Board complying with UK procedures.

Effectiveness

For the period under review the Board comprised of a Chairman and 2 Non-Executive Directors. Biographical details of the Board members are set out on page 5 and 6 of this report.

The Directors are of the view that the Board and its committees consist of Directors with an appropriate balance of skills, experience, independence and diverse backgrounds to enable them to discharge their duties and responsibilities effectively.

Independence - The non-executive Directors bring a broad range of business and commercial experience to the Company. The Board considers all the non-executive Directors to be independent in character and judgement; this has been explored in more detail on pages 17-18.

Appointments - the Board is responsible for reviewing the structure, size and composition of the Board and making recommendations to the Board with regards to any required changes.

Commitments - All Directors have disclosed any significant commitments to the Board and confirmed that they have sufficient time to discharge their duties.

Induction - All new Directors received an informal induction as soon as practical on joining the Board. No formal induction process exists for new Directors, given the size of the Company, but the Chairman ensures that each individual is given a tailored introduction to the Company and fully understands the requirements of the role.

Conflict of interest - A Director has a duty to avoid a situation in which he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the interests of the Company. The Board had satisfied itself that there is no compromise to the independence of those Directors who have appointments on the Boards of, or relationships with, companies outside the Company. The Board requires Directors to declare all appointments and other situations which could result in a possible conflict of interest.

Board performance and evaluation - The Chairman normally carries out an annual formal appraisal of the performance of the other Directors which takes into account the objectives set in the previous year and the individual's performance in the fulfilment of these objectives.

Although the Board consisted of three male Directors, the Board supports diversity in the Boardroom and the Financial Reporting Council's aims to encourage such diversity. Aside from the Directors, there are no employees in the Company. The following table sets out a breakdown by gender at 31 December 2020:

 
             Male   Female 
----------  -----  ------- 
 
 Directors      3        - 
----------  -----  ------- 
 

The Board will pursue an equal opportunity policy and seek to employ those persons most suitable to delivering value for the Company.

Accountability-

The Board is committed to providing shareholders with a clear assessment of the Company's position and prospects. This is achieved through this report and as required other periodic financial and trading statements. The Board has made appropriate arrangements for the application of risk management and internal control principles. The Board has delegated to the Audit Committee oversight of the relationship with the Company's auditors as outlined in the Audit Committee report on pages 29-30.

Going concern - The preparation of the financial statements requires an assessment on the validity of the going concern assumption.

In making their assessment of going concern, the Directors have reviewed forecasts for the newly formed group, for a period of at least 12 months from the date of approval of these financial statements. The Directors recognise the modest committed cost base of the newly formed group relative to its current working capital. As a result the Directors consider that the Company and the newly formed group has sufficient funds for the required timeframe and as such they consider it appropriate to adopt the going concern basis in the preparation of the financial statements.

The Board will pursue an equal opportunity policy and seek to employ those persons most suitable to delivering value for the Company.

Accountability-

The Board is committed to providing shareholders with a clear assessment of the Company's position and prospects. This is achieved through this report and as required other periodic financial and trading statements. The Board has made appropriate arrangements for the application of risk management and internal control principles. The Board has delegated to the Audit Committee oversight of the relationship with the Company's auditors as outlined in the Audit Committee report on pages 29-30.

Going concern - The preparation of the financial statements requires an assessment on the validity of the going concern assumption.

In making their assessment of going concern, the Directors have reviewed forecasts for the newly formed group, for a period of at least 12 months from the date of approval of these financial statements. The Directors recognise the modest committed cost base of the newly formed group relative to its current working capital. As a result the Directors consider that the Company and the newly formed group has sufficient funds for the required timeframe and as such they consider it appropriate to adopt the going concern basis in the preparation of the financial statements.In making their assessment of going concern, the Directors have reviewed forecasts for the newly formed group, for a period of at least 12 months from the date of approval of these financial statements. The Directors recognise the modest committed cost base of the newly formed group relative to its current working capital. As a result the Directors consider that the Company and the newly formed group has sufficient funds for the required timeframe and as such they consider it appropriate to adopt the going concern basis in the preparation of the financial statements.

Internal controls - The Board of Directors reviews the effectiveness of the Company's system of internal controls in line with the requirement of the Code. The internal control system is designed to manage the risk of failure to achieve its business objectives. This covers internal financial and operational controls, compliance and risk management. The Company had necessary procedures in place for the year under review and up to the date of approval of the Annual Report and financial statements. The Directors acknowledge their responsibility for the Company's system of internal controls and for reviewing its effectiveness. The Board confirms the need for an ongoing process for identification, evaluation and management of significant risks faced by the Company. The Directors carry out a risk assessment before signing up to any commitments.

The Directors are responsible for taking such steps as are reasonably available to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

At the present, due to the size of the Company, there is no internal audit function. The requirement for internal audit will be considered following the completion of a transaction.

Shareholder relations

Communication and dialogue - Open and transparent communication with shareholders is given high priority and there is regular dialogue with institutional investors, as well as general presentations made at the time of the release of the annual and interim results. All Directors are kept aware of changes in major shareholders in the Company and are available to meet with shareholders who have specific interests or concerns. The Company issues its results promptly to individual shareholders and also publishes them on the Company's website. Regular updates to record news in relation to the Company and the status of its exploration and development programmes are included on the Company's website. Shareholders and other interested parties can subscribe to receive these news updates by email by registering online on the website free of charge.

The Directors are available to meet with institutional shareholders to discuss any issues and gain an understanding of the Company's business, its strategies and governance. Meetings are also held with the corporate governance representatives of institutional investors when requested.

Annual General Meeting - At every AGM individual shareholders are given the opportunity to put questions to the Chairman and to other members of the Board that may be present. Notice of the AGM is sent to shareholders at least 21 working days before the meeting. Details of proxy votes for and against each resolution, together with the votes withheld are announced to the London Stock Exchange and are published on the Company's website as soon as practical after the meeting.

This Governance Report was approved by the Board and signed on its behalf by:

.............................

David Tsur

Non-Executive Chairman

01 June 2021

Remuneration Committee Report

The Remuneration Committee presents its report for the year ended 31 December 2020.

Membership of the Remuneration Committee

During the year ended 31 December 2020 and until 16 February 2021, the Remuneration Committee was comprised of one Non- Executive Director, Anthony Harpur. The Remuneration Committee is currently comprised of Non-Executive Directors Andrew Morrison (Chair) and Uziel Danino.

During the year ended 31 December 2020, no formal meeting of the Remuneration Committee was held.

Subject to what appears below, no other third parties have provided advice that materially assisted the Remuneration Committee during the year.

The items included in this report are unaudited unless otherwise stated.

Remuneration Committee's main responsibilities

-- The Remuneration Committee considers the remuneration policy, employment terms and remuneration of the Board and advisors;

-- The Remuneration Committee's role is advisory in nature and it makes recommendations to the Board on the overall remuneration packages;

-- The Remuneration Committee, when considering the remuneration packages of the Company's Board, will review the policies of comparable companies in the industry.

Report Approval

A resolution to approve this report will be proposed at the AGM of the Company. The vote will have advisory status, will be in respect of the remuneration policy and overall remuneration packages and will not be specific to individual levels of remuneration.

Remuneration policy

In accordance with the commitments made in the Company's IPO prospectus in 2017, the Company did not remunerate any of its Directors or Retained Advisers for their ordinary duties during the year ended 31 December 2020 and had no employees. At that stage of the Company's growth there was therefore no remuneration policy in place. Following the acquisition of Kanabo on 16 February 2021 the Remuneration Committee has been working on a remuneration policy to apply to Directors and employees.

On 16 February 2021, the Company entered into a service contract with its Chief Executive, Avihu Tamir on terms as set out in the prospectus published on 29 January 2021.

There was no vote taken during the last general meeting with regard to the Directors' remuneration policy. This is considered reasonable given that the Company was suspended pending direction from the FCA on its proposed acquisition.

Non-executive Directors

The Company policy is that the Non-Executive Directors are expected to attend scheduled board meetings and attend committee meetings as required. The Company issued fresh letters of appointment to its Non-Executive Directors, effective 16 February 2021 on terms as set out in the prospectus published on 29 January 2021.

Other Employees

During the year ended 31 December 2020, there were no employees in the Company other than the Directors, so this policy only applies to the Board.

Terms of appointment

The services of the Directors during the year ended 31 December 2020 were provided in accordance with their appointment letters. Directors were expected to devote such time as was necessary for the proper performance of their duties, but as a minimum they were expected to commit at least one day per month, which should include attendance at all meetings of the Board and any sub-committees of the Board.

 
Director            Year of appointment   Number of years 
                                                completed 
Andrew Morrison                    2016                 5 
Anthony Harpur                     2017                 4 
Alan Hume                          2018                 2 
 
 

Directors' emoluments and compensation (audited)

Set out below are the emoluments of the Directors for the year ended 31 December 2020 (GBP):

 
                                               Annual bonus     Pension 
                    Salary and     Taxable         and long     related 
 Name of Director         fees    benefits    term benefits    benefits   Other   Total 
                           GBP         GBP              GBP         GBP     GBP     GBP 
 Andrew Morrison             -           -                -           -       -       - 
 Anthony Harpur              -           -                -           -       -       - 
 Alan Hume                   -           -                -           -       -       - 
 

Set out below are the emoluments of the Directors for the year ended 31 December 2019 (GBP):

 
                                                    Annual bonus          Pension 
                         Salary       Taxable           and long          related 
 Name of Director      and fees      benefits      term benefits         benefits     Other     Total 
                              GBP           GBP                GBP          GBP       GBP       GBP 
 Andrew Morrison                -             -                  -            -         -         - 
 Anthony Harpur                 -             -                  -            -         -         - 
 Alan Hume                      -             -                  -            -         -         - 
 
 

Pension contributions (audited)

The Company does not currently have any pension plans for any of the Directors and does not pay pension amounts in relation to their remuneration.

The Company has not paid out any excess retirement benefits to any Directors or past Directors.

Payments to past directors (audited)

The Company has not paid any compensation to past Directors.

Payments for loss of office (audited)

No payments were made for loss of office during the year.

UK Remuneration percentage changes

As the remuneration for the preceding financial year is nil for all Directors, no percentage changes for remuneration have been set out in this report.

UK 10-year performance graph

The Directors have considered the requirement for a UK 10-year performance graph comparing the Company's Total Shareholder Return with that of a comparable indicator. The Directors do not currently consider that including the graph will be meaningful because the Company has only been listed since 2017, is not paying dividends, is currently incurring losses as it gains scale and its focus during the year ended 31 December 2020 was to seek an acquisition. In addition and as mentioned above, the remuneration of Directors was not linked to performance and we therefore do not consider the inclusion of this graph to be useful to shareholders at the current time. The Directors will review the inclusion of this table for future reports.

UK 10-year CEO table and UK percentage change table

The Directors have considered the requirement for a UK 10-year CEO table. The Directors do not currently consider that including these tables would be meaningful given that the Directors were not remunerated for their services. The Directors will review the inclusion of this table for future reports.

Relative importance of spend on pay

The Directors have considered the requirement to present information on the relative importance of spend on pay compared to shareholder dividends paid. Given that the Company does not currently pay dividends we have not considered it necessary to include such information.

UK Directors' shares (audited)

The interests of the Directors who served during the year in the share capital of the Company at 31 December 2020 and at the date of this report has been set out in the Directors' Report on pages 7-11.

Other matters

In accordance with the Company's 2017 IPO Prospectus, subject to completion of an acquisition the Board may award a bonus to one or more Directors and/or Retained Advisers in recognition of their contribution(s) to such acquisition. To be clear, Retained Advisors do not include any professional legal or audit service providers. Any such bonus will be contingent on completion of the acquisition, will be disclosed to the vendors of the acquired business and will also appear in the prospectus associated with re-admission of the enlarged business to trading. Any sums paid as a bonus will not be material in the context of an acquisition and will not in any event exceed 2% of the aggregate of the total consideration paid in connection with acquisition and the gross proceeds of any fundraising associated with the acquisition.

The Remuneration Committee proposed, and it was resolved by the Directors during the period that the success bonus above would be capped at an aggregate amount of GBP200,000 and would be settled in the form of shares rather than in cash.

A success bonus of GBP200,000 was approved and settled by the issue of shares on 16 February 2021 as set out in the prospectus published on 29 January 2021.

The Company does not currently have any other annual or long-term incentive schemes in place for any of the Directors and as such there are no disclosures in this respect.

Approved on behalf of the Board of Directors by:

.............................

Andrew Morrison

Non-Executive Director

01 June 2021

Audit Committee Report

During 2020, The Audit Committee comprised only one Non-Executive Director, Anthony Harpur. It oversaw the Company's financial reporting and internal controls and provided a formal reporting link with the external auditors. The ultimate responsibility for reviewing and approving the annual report and financial statements and the half-yearly report remains with the Board.

After the completion of the Kanabo transaction the company appointed Uziel Danino (Chair) and Andrew Morrison as members of the Audit Committee to replace Anthony Harpur.

Main Responsibilities

The Audit Committee acts as a preparatory body for discharging the Board's responsibilities in a wide range of financial matters by:

-- monitoring the integrity of the financial statements and formal announcements relating to the Company's financial performance;

-- reviewing significant financial reporting issues, accounting policies and disclosures in financial reports, which are considered to be in accordance with the key audit matters identified by the external auditors;

-- overseeing that an effective system of internal control and risk management systems are maintained;

-- ensuring that an effective whistle-blowing, anti-fraud and bribery procedures are in place;

-- overseeing the Board's relationship with the external auditor and, where appropriate, the selection of new external auditors;

-- monitoring the statutory audit of the annual financial statements, in particular, its performance, taking into account any findings and conclusions by the competent authority;

-- approving non-audit services provided by the external auditor, or any other accounting firm, ensuring the independence and objectivity of the external auditors is safeguarded when appointing them to conduct non-audit services; and

-- ensuring compliance with legal requirements, accounting standards and the Listing Rules and the Disclosure and Transparency Rules.

Governance

The Code requires that at least one member of the Audit Committee has recent and relevant financial experience. Anthony Harpur has over 40 years of experience working with a wide variety of companies. As a result the Board is satisfied that the Audit Committee has recent and relevant financial experience.

Members of the Audit Committee are appointed by the Board and whilst shareholders, the Company believes they are considered to be independent in both character and judgement.

The Company's external auditor is PKF Littlejohn LLP and the Audit Committee will closely monitor the level of audit and non-audit services they provide to the Company.

Meetings

In the year to 31 December 2020 the Audit Committee has met with the auditors on 2 occasions.

The key work undertaken by the Audit Committee is as follows:

   --       interview of external auditors and recommendation to the Board 
   --       review of audit planning and update on relevant accounting developments; 

-- consideration and approval of the risk management framework, appropriateness of key performance indicators;

   --       consideration and review of full-year results; 
   --       review of the effectiveness of the Audit Committee; 
   --       review of internal controls; and 

-- consider whether an internal audit function is required and confirmed not considered necessary given the present size of the Company

The Code states that the Audit Committee should have primary responsibility for making a recommendation on the appointment, reappointment or removal of the external auditor.

External auditor

The Company's external auditor is PKF Littlejohn LLP. The external auditor has unrestricted access to the Audit Committee Chairman. The Committee is satisfied that PKF Littlejohn LLP has adequate policies and safeguards in place to ensure that auditor objectivity and independence are maintained. The external auditors report to the Audit Committee annually on their independence from the Company. In accordance with professional standards, the partner responsible for the audit is changed every five years. The current auditor, PKF Littlejohn LLP was first appointed by the Company in 2018 following a tender process, and therefore the current partner is due to rotate off the engagement after completing the audit for the year ended 31 December 2022. Having assessed the performance objectivity and independence of the auditors, the Committee will be recommending the reappointment of PKF Littlejohn LLP as auditors to the Company at the 2020 Annual General Meeting.

.............................

Uziel Danino

Chairman of the Audit Committee

01 June 2021

Nomination Committee Report

The Nomination committee is comprised of Andrew Morrison (Chair), David Tsur and Avihu Tamir.

The committee considers potential candidates for appointment to the Company's Board who maintain the highest standards of corporate governance and have sufficient time to commit to the role.

Nomination committee evaluation

The nomination committee evaluates the composition, skills, and diversity of the Board and its committees and identifies a requirement for a Board appointment.

Identify suitable candidates

The nomination committee undertakes a review of each candidate and their experience in accordance with the Company's 'director's profile' and suitable candidates are identified.

For the appointment of a Chairman, the Nomination Committee will prepare a job specification, including an assessment of the time commitment expected, recognising the need for availability in the event of crises.

Nomination committee recommendation

Following interviews with a candidate conducted by the Chairman, and other members of the Board, the nomination committee makes a recommendation on a preferred candidate to the Board.

Due diligence

After a candidate has been recommended to the Board by the nomination committee, the company secretary undertakes appropriate background checks on a candidate. The Board of directors meets any candidate recommended by the nomination committee and the candidate is given an opportunity to make a presentation to the Board prior to deciding on their appointment.

Board appointment

The Board formally approves a candidate's appointment to the Board.

Approach to Diversity

The nomination committee believes in the benefits of diversity, including the need for diversity in order to effectively represent shareholders' interests. This diversity is not restricted to gender but also includes geographic location, nationality, skills, age, educational and professional background. The Board's policy remains that selection should be based on the best person for the role.

On behalf of the nomination committee

................................

Andrew Morrison

Chairman

01 June 2021

Independent Auditors' Report to the Members of Kanabo Group Plc

Opinion

We have audited the financial statements of Kanabo Group Plc (the 'company') for the year ended 31 December 2020 which comprise Statement of Comprehensive Income, the Statement of Financial Positions, the Statement of Cashflows, the Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the financial statements:

-- give a true and fair view of the state of the company's affairs as at 31 December 2020 and of its loss for the year then ended;

   --    have been properly prepared in accordance with IFRSs as adopted by the European Union; and 
   --    have been prepared in accordance with the requirements of the Companies Act 2006. 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statement, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the company's ability to continue to adopt the going concern basis of accounting included reviewing the forecasts covering the going concern period, ascertaining the latest cash position and discussing with directors the progress of the proposed reverse takeover of Kanabo and the associated placing.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months form when the financial statements are authorised for issue.

In relation to the company's reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the director's statement in the financial statements about whether the directors' considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Our application of materiality

The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. Materiality for the financial statements was set as GBP28,000 (2019: GBP33,000) based upon 5% of net assets (2019: 5% of net assets). Materiality was based on net assets due to the company's lack of trading in the year rendering the balances in the Statement of Financial Position being of greater importance than expenses or the loss for the year. Performance materiality and the triviality threshold for the financial statements was set at GBP19,600 (2019: GBP23,100) and GBP1,400 (2019: GBP1,650) respectively.

We have agreed with the directors that we would report to the committee individual audit differences in excess of GBP1,400 as well as differences below these thresholds that, in our view, warranted reporting on qualitative grounds.

An overview of the scope of our audit

In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular we looked at areas involving significant accounting estimates and judgements by the directors and considered future events that are inherently uncertain. These areas include the recoverable value of loan receivables and judgements made in assessing the company's going concern status. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

The company's key accounting function is based in the United Kingdom and our audit was performed from our office with regular contract with the company throughout.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 
 Key Audit Matter                         How the scope of our audit responded 
                                           to the key audit matter 
 Recoverability and treatment 
  of Kanabo Loan 
                                         ========================================= 
 As at 31 December 2020 amounts           We enquired with management 
  receivable from acquisition              to ascertain their justification 
  target Kanabo Research Limited           for no IFRS 9 expect credit 
  in respect of funds advanced             loss model charge being recognised 
  in 2020 and 2019 and relating            in the year and challenged management's 
  accrued interest totalled GBP424,000     key assumptions made in their 
  - see note 8.                            assessment of the recoverable 
  Due to Kanabo's stage of development     value of the loan. 
  and the fact that no repayments          We recalculated the interest 
  had been made up to 31 December          income that was required to 
  2020, there is a risk that that          be recognised in the year using 
  loan receivable may not be fully         the amortised cost method and 
  recoverable and that an IFRS             compared this to the interest 
  9 expect credit loss model impairment    recognised. 
  charge is required to be recognised.     We ensured that the loan was 
  There is also a risk that the            correctly classified and disclosed 
  amounts advanced in 2020 have            in the financial statements 
  not been accounted for on issue          in accordance with IFRS 9 and 
  and during the year in accordance        was correctly split between 
  with IFRS 9.                             current and non-current based 
                                           on the expected repayment date. 
                                           We vouched the advance of funds 
                                           to Kanabo to bank statements. 
                                           See note 2e for the Directors' 
                                           commentary on the judgments 
                                           made in assessing the recoverability 
                                           of the loan. The determining 
                                           factor in the directors' assessment 
                                           of the loan being fully recoverable, 
                                           and our agreement with this 
                                           assessment, is that the successful 
                                           completion of the proposed transaction 
                                           and the significant funds raised 
                                           upon completion of the transaction 
                                           will highly likely provide Kanabo 
                                           with sufficient working capital 
                                           to make full repayment of the 
                                           balance due. 
                                         ========================================= 
 

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the directors' remuneration committee report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

-- the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-- the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

-- adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-- the financial statements and the part of the directors' remuneration report to be audited are not in agreement with the accounting records and returns; or

   --    certain disclosures of directors' remuneration specified by law are not made; or 
   --    we have not received all the information and explanations we require for our audit. 

Corporate governance statement

The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the company's compliance with the provision of the UK Corporate Governance Statement specific for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:

-- Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainty identified (page 22);

-- Directors' explanation as to its assessment of the company's prospects, the period this assessment covers and why the period is appropriate (page 22);

   --    Directors' statement on fair, balance and understandable (page 10); 

-- Board's confirmation that is has carried out robust assessment of the emerging and principal risks (page 15)

-- The section of the annual report that describes the review of effectiveness of risk management and internal controls system (page 21); and

   --    The section describing the work of the audit committee (page 29) 

Responsibilities of directors

As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with the Directors. We considered the event of compliance with those laws and regulations as part of our procedures on the related financial statement items. We communicated laws and regulations throughout our audit team and remained alert to any indications of non-compliance throughout the audit.

As with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal controls.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Other matters which we are required to address

We were appointed by the Audit Committee on 26 June 2019 to audit the financial statements for the period ending 31 December 2019. Our total uninterrupted period of engagement is 3 years, covering the periods ending 31 December 2018 to 31 December 2020.

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the company and we remain independent of the company in conducting our audit.

Our audit opinion is consistent with the additional report to the audit committee.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Joseph Archer (Senior Statutory Auditor) 15 Westferry Circus

For and on behalf of PKF Littlejohn LLP Canary Wharf

Statutory Auditor London E14 4HD

01 June 2021

Statement of Comprehensive Income

 
                                                      Year ended     Year ended 
                                                31 December 2020    31 December 
                                                                           2019 
                                        Note             GBP'000        GBP'000 
 Continuing operations 
 
 Operating expenses                      3                 (156)          (365) 
 
 Operating loss                                            (156)          (365) 
 
 Interest income                                              25              2 
 
 
 Loss before taxation                                      (131)          (363) 
 Taxation                                5                     -              - 
  Loss for the year                                        (131)          (363) 
 
 Other comprehensive income                                    -              - 
  for the year 
 
 Total comprehensive income 
  for the year attributable 
  to the equity owners                                     (131)          (363) 
                                              ==================  ============= 
 
 Earnings per share from 
  continuing operations attributable 
  to the equity owners 
  Basic and diluted earnings 
   per share (pence per share)            6               (0.44)          (1.2) 
                                              ==================  ============= 
 

The notes to the financial statements form an integral part of these financial statements.

Statement of Financial Position

 
                                                             As at               As at 
                                                  31 December 2020    31 December 2019 
                                         Note              GBP'000             GBP'000 
 Assets 
 Non-current assets 
 Other receivables                        7                      -                 100 
 
 Total non-current assets                                        -                 100 
                                                ------------------  ------------------ 
 Current assets 
 Trade and other receivables              8                    433                  13 
 Cash and cash equivalents                   9                 359                 597 
 
 Total current assets                                          792                 610 
                                                ------------------  ------------------ 
 Total assets                                                  792                 710 
                                                ------------------  ------------------ 
 
 Equity and liabilities 
 Equity attributable to shareholders 
 Share capital                            10                   735                 735 
 Share premium                            10                   592                 592 
 Share based payments reserve             12                    33                  59 
 Convertible loan notes                   13                   162                   - 
 Retained deficit                                            (784)               (712) 
 
 Total equity                                                  738                 674 
                                                ------------------  ------------------ 
 
 Liabilities 
 
 Current liabilities 
 Trade and other payables                 11                    54                  36 
 
 Total liabilities                                              54                  36 
                                                ------------------  ------------------ 
 
 Total equity and liabilities                                  792                 710 
                                                ------------------  ------------------ 
 

The notes to the financial statements form an integral part of these financial statements .

This report was approved by the board and authorised for issue on 01 June 2021 and signed on its behalf by:

...........................

Andrew Morrison

Director

Company Registration Number: 10485105

Statement of Changes in Equity

 
                                                         Share based  Convertible 
                                                            payments   loan notes  Retained 
                           Share capital  Share premium      reserve      reserve   deficit  Total equity 
                                 GBP'000        GBP'000      GBP'000      GBP'000   GBP'000       GBP'000 
 
On 1 January 2019                    735            592           59            -     (349)         1,037 
Total comprehensive 
 loss for the period                   -              -            -            -     (363)         (363) 
-------------------------  -------------  -------------  -----------  -----------  --------  ------------ 
Balance as at 31 
 December 2019                       735            592           59            -     (712)           674 
-------------------------  -------------  -------------  -----------  -----------  --------  ------------ 
Total comprehensive 
 loss for the year                     -              -            -            -     (131)         (131) 
-------------------------  -------------  -------------  -----------  -----------  --------  ------------ 
Shares options issued                  -              -           33                      -            33 
Lapsed share options                   -              -         (59)            -        59             - 
Loan notes issued                      -              -            -          165         -           165 
Loan note issue costs                  -              -            -          (3)         -           (3) 
Total transactions 
 with owners, recognised 
 directly in equity                    -              -         (26)          162        59           195 
Balance as at 31 
 December 2020                       735            592           33          162     (784)           738 
-------------------------  -------------  -------------  -----------  -----------  --------  ------------ 
 

Share capital comprises the ordinary issued share capital of the Company.

Share premium represents consideration less nominal value of issued shares and costs directly attributable to the issue of new shares.

Share based payments represents the value of equity settled share-based payments provided to employees, including key management personnel, and third parties for services provided.

Retained deficit represents the cumulative retained losses of the Company at the reporting date.

The convertible loan note reserve consists of the fair value of convertible loan notes issued and outstanding which meet the definition of equity as per IAS 32.

The notes to the financial statements form an integral part of these financial statements.

Statement of Cash Flows

 
                                                           Year ended     Year ended 
                                                          31 December    31 December 
                                                                 2020           2019 
                                                 Note         GBP'000        GBP'000 
 Cash flow from operating activities 
 Loss before taxation                                           (131)          (363) 
 Adjustments for: 
 Share-based payment                                               33              - 
 
 Net cash used in operating activities                           (98)          (363) 
                                                        -------------  ------------- 
 
 Changes in working capital 
 (Increase) in trade and other receivables                       (20)              - 
 Increase/(decrease) in trade and other 
  payables                                                         18             19 
 
 Net cash (used) in/generated from operating 
  activities                                                    (100)             19 
                                                        -------------  ------------- 
 
 Cash flows from investing activities 
 
 Loan advanced                                     7/8          (300)          (100) 
 
 Net cash used in investing activities                          (300)          (100) 
                                                        -------------  ------------- 
 
 Cash flows from financing activities 
 
 Proceeds from issue of convertible                               162              - 
  loan notes 
 
 Net cash generated from financing activities                     162              - 
                                                        -------------  ------------- 
 
 Decrease in cash and cash equivalents                          (238)          (444) 
 
 Cash and cash equivalents at beginning 
  of period                                                       597          1,041 
 
 Cash and cash equivalents at end of 
  period                                           9              359            597 
                                                        -------------  ------------- 
 

A net debt reconciliation has not been included as the Company had no debt during the year.

The notes to the financial statements form an integral part of these financial statements .

Notes to the Financial Statements

   1.      General Information 

The Company's principal activity is to seek an acquisition in the energy and industrial sectors, with a focus since September 2018 on the cannabis processing industry. A suitable acquisition target was identified and on 27(th) February 2019 the Company was suspended from trading pending completion of the acquisition.

The Company is incorporated and domiciled in England and Wales as a public limited company and operates from its registered office at 59-60 Russell Square, London WC1B 4HP, and is listed on the London Stock Exchange on the standard segment.

   2.      Summary of Significant Accounting Policies 

The principle accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

   a)      Basis of Preparation 

The financial statements of Kanabo Group Plc. have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretations Committee (IFRS IC) interpretations as adopted for use by the European Union, and the Companies Act 2006.

The financial statements have been prepared under the historical cost convention.

   b)     New Standards and Interpretations 
                     i)   New and amended standards adopted by the Company 
 
                                                             Effective 
 Standard                   Impact on initial application     date 
 
 IFRS 3 (amendments)        Definition of a Business         1 January 
                                                              2020 
  IFRS standards             References to the Conceptual     1 January 
   (amendments)               Framework                        2020 
 IAS 1 (amendments)         Definition of Material           1 January 
                                                              2020 
 IAS 8 (amendments)         Definition of Material           1 January 
                                                              2020 
 IFRS 9, IAS 39             Interest Rate Benchmark Reform   1 January 
  and IFRS 7 (amendments)                                     2020 
 IFRS 3 (amendments)        Definition of a Business         1 January 
                                                              2020 
  IFRS standards             References to the Conceptual     1 January 
   (amendments)               Framework                        2020 
 

No new standards, amendments or interpretations, effective for the first time for the financial year beginning on or after 1 January 2020 have had a material impact on the Company.

ii) New standards, amendments and Interpretations in issue but not yet effective or not yet endorsed and not early adopted

The standards and interpretations that are issued, but not yet effective and (in some cases) have not yet been endorsed by the EU, up to the date of issuance of the financial statements are listed below. The Company intends to adopt these standards, if applicable, when they become effective.

 
                                                          Effective 
 Standard               Impact on initial application      date 
 IFRS standards         Interest rate benchmark reform    1 January 
  (amendments)                                             2021 
 IFRS 3 (amendments)    Business combinations             1 January 
                                                           2022 
 IAS 37 (amendments)    Onerous contracts                 1 January 
                                                           2022 
 IFRS standards         2018-2020 annual improvement      1 January 
  (amendments)           cycle                             2022 
 IAS 16 (amendments)    Proceeds before intended use      1 January 
                                                           2022 
 IFRS 17                Insurance Contracts               1 January 
                                                           2023 
 IFRS 17 (amendments)   Insurance contracts               1 January 
                                                           2023 
 IAS 1 (amendments)     Reclassification of liabilities   1 January 
                         as current or non-current         2023 
 
 
 

The Directors are evaluating the impact of the new and amended standards above. The Directors believe that these new and amended standards are not expected to have a material impact on the financial statements of the Company.

   c)    Going Concern 

The preparation of the financial statements requires an assessment on the validity of the going concern assumption.

The Directors, having made due and careful enquiry, are of the opinion that the Company and the newly formed Group have, as a result of the successful RTO and significant funds raised, adequate working capital to execute its operations over the next 12 months. As a result, the Directors have adopted the going concern basis of accounting in the preparation of the annual financial statements.

Furthermore, the Directors acknowledge that COVID-19 has had, and will continue to have, a significant adverse impact on the global economy. The Directors do not believe that COVID-19's impact on the global economy gives rise to a material uncertainty in respect of the Company's going concern status due to the Company not being dependent on future financing being obtained in the going concern period.

   d)    Foreign Currency Translation 

i) Functional and Presentation Currency

The financial statements are presented in Pounds Sterling (GBP000), which is the Company's functional and presentation currency.

ii) Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

   e)    Significant accounting judgements, estimates and assumptions 

The preparation of the financial statements in conformity with International Financial Reporting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies.

Estimates and judgements are continually evaluated, and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors consider the significant accounting judgements, estimates and assumptions used within the financial statements to be:

Recoverability of loan

By 31 December 2020 the Company had advanced GBP400,000 to Kanabo Research Limited in accordance with the signed loan agreement with the borrower. The amount expected to be recovered in respect of this loan is a judgement that the Directors have made based on the forecasts, other financial information available and developments since the year-end.

The Directors have estimated that the full loan balance repayable will be recovered within the repayment period. This was based on the likelihood of the proposed reverse takeover taking place in 2021, the anticipated funds that would be raised subsequent to this transaction and the forecasted subsequent cashflows of the newly formed group.

The proposed reverse takeover successfully completed in February 2021 with significant funds being raised subsequent to this transaction.

See note 8 for further commentary.

Share Based Payments

In the year-end 31 December 2020 1,960,000 share options were granted. When accounting for the share based payment expense in respect of those share options granted, Management must calculate the fair value of the share options issued. Management have done so using the black scholes model, however, a number of the inputs in this model are subjective and thus management must make estimates.

   f)     Financial Assets 

(a) Classification

The Company classifies its financial assets in the following categories: at amortised cost (including trade receivables and other financial assets at amortised cost) fair value through other comprehensive income or fair value through profit or loss. The classification depends on the financial asset's contractual cash flow characteristics and the business model for managing them. Management determines the classification of its financial assets at initial recognition.

Financial assets at amortised cost

                    (i)   Classification of financial assets at amortised cost 

The Company classifies its financial assets as at amortised cost only if both of the following criteria are met:

-- the asset is held within a business model whose objective is to collect the contractual cash flows; and

-- the contractual terms give rise to cash flows that are solely payments of principal and interest

Financial assets at amortised cost are initially measured at fair value and subsequently measured using the effective interest rate method less impairment.

(ii) Impairment and risk exposure

All of the financial assets at amortised cost are denominated in Pounds Sterling. As a result, there is no exposure to foreign currency risk. There is also no exposure to price risk.

It is the Directors' opinion that any calculation of an expected credit loss charge in respect of financial assets at amortised cost would be immaterial at present. This is a result of the Directors' strong belief that the RTO will be successful and sufficient funds will be

raised in the process thus enabling Kanabo to repay the loans in full and by the scheduled repayment date should the RTO be successful. The Directors deem it not to be practical to incorporate future macroeconomic factors into the expected credit loss model calculation without incurring undue cost.

There is no definition of default at present. This will be reassessed as and when repayments are due in respect of financial assets at amortised cost held. The loan receivable held as at the year-end has a repayment term of two years and as such there will be no possibility of default until November 2021.

   g)    Financial Liabilities 

Trade and other Payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer. If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

   h)    Convertible loan notes 

Convertible loan notes are classified as either equity, financial liabilities or a mixture of both in accordance with the contractual agreement.

Where a convertible loan note is deemed to meet the definition of equity as per IAS 32, the proceeds receive less any associated issue costs are recognised directly within equity and is not subsequently remeasured.

   i)     Taxation 

Current Tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date.

Deferred Tax

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

-- where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting nor taxable profit or loss;

-- in respect of taxable temporary differences associated with investment in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

-- deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.

Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the statement of comprehensive income.

            k)     Segmental Reporting 

At this point, identifying and assessing investment projects is the only activity the Company is involved in and is therefore considered as the only operating/reportable segment.

Therefore the financial information of the single segment and is the same as that set out in the statement of comprehensive income, statement of financial position.

             l)    Share-based payments 

The Company has applied the requirements of IFRS 2 Share-based payments.

The Company issues equity settled share based payments to the directors and to third parties for the provision of services provided for assistance in raising private equity. Equity settled share based payments are measured at fair value at the date of grant, or the date of the service provided. The fair value determined at the grant date or service date of the equity settled share based payment is recognised as an expense, or recognised against share premium where the service received relates assistance in raising equity, with a corresponding credit to the share base payment reserve. The fair value determined at the grant date of equity settled share based payment is expensed on a straight line basis over the life of the vesting period, based on the company's estimate of shares that will eventually vest. Once an option vests, no further adjustment is made to the aggregate expensed.

The fair value is measured by use of the Black Scholes model as the Directors view this as providing the most reliable measure of valuation. The expected life used in the model has been adjusted, based on management's best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. The market

price used in the model of issue price of Company shares at the last placement of shares immediately preceding the calculation date. The fair value calculated is inherently subjective and uncertain due to the assumptions made and the limitation of the calculation used.

           m)     Financial Risk Management Objectives and Policies 

The Company does not enter into any forward exchange rate contracts.

The main financial risks arising from the Company's activities are market risk, interest rate risk, foreign exchange risk, credit risk, liquidity risk and capital risk management. Further details on the risk disclosures can be found in Note 15.

       n)    Equity 

Equity instruments issued by the Company are recorded at the value of net proceeds after direct issue costs.

Please see page 40 for a definition of each equity reserve.

       o)    Cash and Cash Equivalents 

Cash and cash equivalents comprise cash held in bank. This definition is also used for the Statement of Cash Flows.

The Company considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. The Company only keeps its holdings of cash and cash equivalents with institutions which have a minimum credit rating of 'A-'.

The Company considers that it is not exposed to major concentrations of credit risk.

   3.        Expenses by Nature 
 
                                                                 Year ended                Year ended 
                                                                31 December               31 December 
                                                                       2020                      2019 
                                                                    GBP'000                   GBP'000 
 
              S   Directors' share-based payment                         33                         - 
              A   Audit fees                                             15                        15 
 Professional and consultancy fees                                      105                       345 
 Other expenses                                                           3                         5 
 Operating expenses                                                     156                       365 
                                                              -------------  ------------------------ 
 
    4.             Auditors' remuneration 
 
 
                                                                 Year ended                Year ended 
                                                                31 December               31 December 
                                                                       2020                      2019 
                                                                    GBP'000                   GBP'000 
 
 Fees payable to the Company's current 
  auditor for the audit of the Company's 
  financial statements                                                   15                      15 
   Fees payable to the Company's current 
    auditor in respect of the provision of 
    services in connection to the proposed 
    transaction                                                           -                        38 
                                                              -------------  ------------------------ 
 
   5.      Income tax 

Analysis of charge in the year

 
                                            Year ended    Year ended 
                                           31 December   31 December 
                                                  2020          2019 
                                               GBP'000       GBP'000 
 
Current tax                                          -             - 
Deferred tax                                         -             - 
 
Total tax                                            -             - 
                                          ------------  ------------ 
 
 Loss on ordinary activities before 
  tax                                            (131)           (363) 
 
 Analysis of charge in the year/period 
 Loss on ordinary activities multiplied 
  by rate of corporation tax in 
  the UK of 19% (2019: 19%)                       (25)            (69) 
 
 Non-deductible expenses                             -               - 
 Tax losses carried forward                         25              69 
 
 Total tax                                           -               - 
                                          ------------  -------------- 
 
 
 

The company has accumulated tax losses of approximately GBP764,000 (2019: GBP633,000) that are available, under current legislation, to be carried forward indefinitely against future profits.

A deferred tax asset has not been recognised in respect of these losses due to the uncertainty of future profits. The amount of the deferred tax asset not recognised is approximately GBP145,000 (2019: GBP120,000).

   6.      Earnings per share 

The calculation of the basic and diluted earnings per share is calculated by dividing the loss for the year/period from continuing operations of GBP131,000 (2019: GBP363,000) for the Company by the weighted average number of ordinary shares in issue during the year of 29,400,120 (2019: 29,400,120):

 
                                                    2020         2019 
                                                    GBP          GBP 
----------------------------------------------  -----------  ----------- 
 Loss for the year from continuing operations    (131,000)    (363,000) 
 
 Weighted average number of shares in 
  issue                                          29,400,120   29,400,120 
 
 Basic and diluted earnings per share               (0.44p)       (1.2p) 
----------------------------------------------  -----------  ----------- 
 

There is no difference between the basic and diluted earnings per share as the effect would be to decrease earnings per share.

As at the end of the financial period there were 1,960,000 share options in issue, which could potentially have an anti-dilutive impact depending on the results of the Company.

7. Other receivables - non-current

 
                         As at   As at 31 December 
                   31 December                2019 
                          2020 
                       GBP'000             GBP'000 
  Other loans                -                 100 
                             -                 100 
 -----------------------------  ------------------ 
 

There are no material differences between the fair value of other loans and their carrying value at the year end.

No receivables were past due or impaired at the year end.

8. Trade and other receivables - current

 
                        As at   As at 31 December 
                  31 December                2019 
                         2020 
                      GBP'000             GBP'000 
  Other loans             424                   - 
  Other taxes               5                   - 
  Prepayments               4                  13 
                          433                  13 
                -------------  ------------------ 
 

There are no material differences between the fair value of trade and other receivables and their carrying value at the year end.

No receivables were past due or impaired at the year end.

9. Cash and cash equivalents

 
                         As at   As at 31 December 
                   31 December                2019 
                          2020 
                       GBP'000             GBP'000 
 
  Cash at bank             359                 597 
                 -------------  ------------------ 
                           359                 597 
                 -------------  ------------------ 
 

The Directors consider the carrying amount of cash and cash equivalents approximates to their fair value.

10. Called up share capital

As at 31 December 2020 the Company had 29,400,120 allotted and fully paid ordinary shares.

The ordinary shares have attached to them full voting, dividend and capital distribution rights (including on a winding up). The ordinary shares do not confer any rights of redemption.

 
                            Number of   Share Capital   Share Premium 
                             Ordinary          GBP000          GBP000 
                            Shares of 
                             GBP0.025 
                                 each 
 
 As at 31 December 2019    29,400,120             735             592 
 As at 31 December 2020    29,400,120             735             592 
                          -----------  --------------  -------------- 
 

11. Trade and other payables

 
                                      As at    As at 31 
                                31 December    December 
                                       2020        2019 
                                    GBP'000     GBP'000 
 
             Trade payables              15          13 
             Accruals                    39          23 
                                         54          36 
                              -------------  ---------- 
 

12. Share based payments

 
            Warrants                                                              Weighted average 
                                                    Number of awards                exercise price 
             At 31 December 2019                          26,590,500                      GBP0.074 
            Lapsed                                      (26,590,500) 
            At 31 December 2020                                    - 
----------------------------------------  --------------------------  ---------------------------- 
             Exercisable at 31 December 
              2020                                                 -                             - 
 
 
            Share options                                            Weighted average 
                                                   Number              exercise price 
             At 31 December 2019                2,440,000                     GBP0.05 
            Lapsed                            (2,440,000)                     GBP0.05 
            Granted                             1,960,000                     GBP0.05 
--------------------------------  -----------------------  -------------------------- 
            At 31 December 2020                 1,960,000                     GBP0.05 
--------------------------------  -----------------------  -------------------------- 
 
 
            Exercisable at 31 December 
             2020                                   1,960,000            GBP0.05 
--------------------------------------  ---------------------  ----------------- 
 

12. Share based payments (continued)

The options outstanding at 31 December 2020 have a weighted average remaining contractual life of 2.4 years, a share price of 5p, a volatility of 50%, an initial life of options of 3 years and a risk free interest rate of 0.2%.

The fair value of the options issued during the period was determined using the Black-Scholes valuation model and a share-based payment charge of GBP33,000 (2019: GBPNil) has been recognised in the income statement.

13. Convertible loan notes

During the year ended 31 December 2020, the Company issued convertible loan notes in the amount of GBP165,000. In the event of the proposed transaction completing or the company re-admitting onto the London Stock Exchange on or before 31 March 2021, the convertible loan notes issued are automatically converted into ordinary share capital at a fixed price. Should neither event take place then the convertible loan notes must be settled in cash.

The convertible loan notes have therefore been classified as equity and held at fair value.

14. Directors' emoluments

No salaries or fees were paid to the directorsin either period.

The Directors are considered to be the key management personnel.

15. Financial instruments

The following table sets out the categories of financial instruments held by the Company as at 31 December 2020 and 31 December 2019:

 
                                               2020      2019 
                                            GBP'000   GBP'000 
-----------------------------------------  --------  -------- 
 Financial Assets held at amortised cost 
 
 Other loans                                    424       100 
 Cash and cash equivalents                      359       597 
 
 Financial liabilities held at amortised 
  cost 
 
 Trade and other payables                        15        13 
 
 
   a)      Market risk 

The Company is not materially exposed to market risk as it has yet to commence trading. Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company's income or value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

   b)   Interest rate risk 

The Company is not materially exposed to interest rate risk because it does not have any funds at either fixed or floating interest rates.

   c)      Foreign currency risk 

The Company is not currently materially exposed to foreign currency risk.

   d)      Credit risk 

The Company's maximum exposure to credit risk in relation to each class of recognised asset is the carrying amount of those assets as indicated in the balance sheet. At the reporting date, there was no significant concentration of credit risk. Receivables at the year-end were not past due, and the Directors consider there to be no significant credit risk arising from these receivables.

   e)      Liquidity risk 

Cash flow working capital forecasting is performed for regular reporting to the directors. The directors monitor these reports and forecasts to ensure the Company has sufficient cash to meet its operational needs.

   f)       Capital risk management 

The Company defines capital based on the total equity of the Company. The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt, in the future.

16. Average number of people employed

 
 Average number of people employed, including Directors: 
                                             2020        2019 
                                           Number      Number 
 Office and management                          3           3 
 
 

17. Contingent liability

Post year end, the Company entered into a Heads of Terms agreement for the acquisition of Kanabo Research Limited. Upon successful completion of this transaction, there will be a bonus payable to the current Directors, which has been capped at GBP200,000.

18. Ultimate Controlling Party

The Directors have determined that there is no controlling party as no individual shareholder holds a controlling interest in the Company.

19. Related Party Transactions

Of the 165 Convertible Loan Notes issued during the year, Mr Anthony Harpur, a director of the Company contributed 50 Loan Notes for consideration totaling GBP50,000. For the details of the Directors' remuneration in 2020 and 2019, please see note 14.

20. Post balance sheet events

On 29 January 2021 the Company published the prospectus in relation to the purchase of all the issued equity in Kanabo Research Ltd and issued the Notice of General Meeting in relation to the transaction to be held on 15 February 2021.

On 16 February 2021, the proposed reverse takeover of Kanabo Research Ltd completed. This acquisition falls outside the scope of IFRS 3 and therefore the net asets and liabilities arising from the acquisition have not been disclosed.

21. Copies of the Annual Report

Copies of the annual report are available on the Company's website at http://www.kanabogroup.com and from the Company's registered office Churchill House, 137-139 Brent Street , London , NW4 4DJ

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END

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