TIDMKNB
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
FR EAPKAEAAFEEA
(END) Dow Jones Newswires
June 02, 2021 04:26 ET (08:26 GMT)
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