Notes to the Financial Statements

For the Year Ended 30 June 2020

1          GENERAL INFORMATION

Mila Resources Plc (the "Company'') looks to identify potential companies, businesses or asset(s) that will increase shareholder value.

The Company is domiciled in the United Kingdom and incorporated and registered in England and Wales as a public limited company. The Company's registered office is Lockstrood Farm, Ditchling Common, Burgess Hill, West Sussex, RH15 0SJ. The Company's registered number is 09620350.

2          ACCOUNTING POLICIES

2.1      Basis of preparation

The Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretations Committee ("IFRS IC") as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS.

The Financial Statements have been prepared un the historical cost convention. The principal accounting policies are set out below and have, unless otherwise stated, been applied consistently for all periods presented in these Financial Statements. The Financial Statements are prepared in pounds Sterling and presented to the nearest pound.

2.2      Going concern

The Financial Statements have been prepared under the going concern assumption, which presumes that the Company will be able to meet its obligations as they fall due for at least the next twelve months from the date of the signing of the Financial Statements.

The Company had a net cash outflow from operating activities for the year of £242,357 (2019: £272,877) and at 30 June 2020 had cash and cash equivalents balance of £186,316 (2019: £428,673).

Notwithstanding the loss incurred and net cash outflow during the year under review, the Directors are confident that the Company will be able to meet its obligations as they fall due for at least the next twelve months as they believe the Company will be able to raise further finance regardless of the completion of the proposed transaction or any other such transactions during this period.

The Directors do acknowledge that the dependence on obtaining finance leads to there being a material uncertainty regarding the Company's going concern status, however, they still believe the application of the going concern basis of preparation to be appropriate due to their confidence that further finance will be able to be obtained as required during the going concern period.

The Directors have made enquires and assessed the potential impact of the COVID-19 virus on the

Company. As such, whilst they acknowledge that COVID-19 could continue to have long lasting and significant impacts on the global economy, the Directors believe that the Company will be able to raise sufficient finance to meet their obligations as they fall due for a period of at least 12 months from the date of approval of the financial statements.

The Financial Statements do not include any adjustments that may be required should the Company be unable to continue as a going concern.

The auditors have made reference to going concern by way of a material uncertainty within their audit report.

2.3      Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

New standards, amendments to standards and interpretations:

During the financial year, the Company has adopted the following new IFRSs (including amendments thereto) and IFRIC interpretations that became effective for the first time.

No new standards, amendments or interpretations, effective for the first time for the financial year beginning on or after 1 July 2019 have had a material impact on the Company.

Standards issued but not yet effective:

At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Company and which have not been applied in these financial statements, were in issue but were not yet effective. In some cases, these standards and guidance have not been endorsed for use in the European Union.

The directors do not consider that these standards will impact the financial statements of the Company.

2.4      Foreign currency translation

The financial information is presented in Sterling which is the Company's functional and presentational currency.

Transactions in currencies other than the functional currency are recognised at the rates of exchange on the dates of the transactions.  At each balance sheet date, monetary assets and liabilities are retranslated at the rates prevailing at the balance sheet date with differences recognised in the Statement of comprehensive income in the period in which they arise.

2.5      Financial instruments

Initial recognition

A financial asset or financial liability is recognised in the statement of financial position of the Company when it arises or when the Company becomes part of the contractual terms of the financial instrument.

Classification

Financial assets at amortised cost

The Company measures financial assets at amortised cost if both of the following conditions are met:

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

(2)  the contractual terms of the financial asset generating cash flows at specified dates only pertain to capital and interest payments on the balance of the initial capital.

Financial assets which are measured at amortised cost, are measured using the Effective Interest Rate Method (EIR) and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

Financial liabilities at amortised cost

Financial liabilities measured at amortised cost using the effective interest rate method include current borrowings and trade and other payables that are short term in nature. Financial liabilities are derecognised if the Company's obligations specified in the contract expire or are discharged or cancelled.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate ("EIR"). The EIR amortisation is included as finance costs in profit or loss. Trade payables other payables are non-interest bearing and are stated at amortised cost using the effective interest method.

Derecognition

A financial asset is derecognised when:

(1)   the rights to receive cash flows from the asset have expired, or

(2)  the Company has transferred its rights to receive cash flows from the asset or has undertaken the

       commitment to fully pay the cash flows received without significant delay to a third party under an   

       arrangement and has either (a) transferred substantially all the risks and the assets of the asset or (b

       has neither transferred nor held substantially all the risks and estimates of the asset but has

       transferred the control of the asset.

Impairment

The Company recognises a provision for impairment for expected credit losses regarding all financial assets. Expected credit losses are based on the balance between all the payable contractual cash flows and all discounted cash flows that the Company expects to receive. Regarding trade receivables, the Company applies the IFRS 9 simplified approach in order to calculate expected credit losses. Therefore, at every reporting date, provision for losses regarding a financial instrument is measured at an amount equal to the expected credit losses over its lifetime without monitoring changes in credit risk. To measure expected credit losses, trade receivables and contract assets have been grouped based on shared risk characteristics.

Trade and other receivables

Trade and other receivables are initially recognised at fair value when related amounts are invoiced then carried at this amount less any allowances for doubtful debts or provision made for impairment of these receivables.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and are subject to an insignificant risk of changes in value.

Trade payables

These financial liabilities are all non-interest bearing and are initially recognised at the fair value of the consideration payable.

2.6      Equity

Share capital is determined using the nominal value of shares that have been issued.

The Share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the Share premium account, net of any related income tax benefits.

Equity-settled share-based payments are credited to a share-based payment reserve as a component of equity until related options or warrants are exercised or lapse.

Retained losses includes all current and prior period results as disclosed in the income statement.

2.7      Share-based payments

The Company has issued warrants to the initial investors and certain counter parties and advisers.

Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at date of grant. The fair value so determined is expensed on a straight-line basis over the vesting period, based on the Company's estimate of the number of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions. Fair value is measured using the Black Scholes pricing model. The key assumption used in the model have been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

2.8      Taxation

Tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

2.9      Critical accounting judgements and key sources of estimation uncertainty

In the process of applying the entity's accounting policies, management makes estimates and assumptions that have an effect on the amounts recognised in the financial information. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The Directors consider that there are no critical accounting judgements or key sources of estimation uncertainly relating to the financial information of the Company. 

2.10    Earnings per share

Basic earnings per share is calculated as profit or loss attributable to equity holders of the parent for the period, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

2.11    Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board as a whole.

All operations and information are reviewed together so that at present there is only one reportable operating segment.

3.         SEGMENT REPORTING

 As identifying and assessing investment projects is the only activity the Company is involved in and is therefore considered as the only operating/reporting segment. Therefore the financial information of the single segment is the same a set out in the statement of comprehensive income and statement of financial position.

4.         OPERATING LOSS

This is stated after charging:

5.         AUDITOR'S REUMERATION

6.         DIRECTORS AND STAFF COSTS

During the year the only staff of the Company were the Directors and as such key management personnel. Management remuneration, other benefits supplied and social security costs to the Directors during the year was as follows:

7.         INTEREST RECEIVABLE

8.         TAXATION

Estimated tax losses of £817,118 (2019: £597,747) are available for relief against future profits and a deferred tax asset of £155,252 (2019: £109,381) has not been provided for in the accounts due to the uncertainty of future profits.

Factors affecting the future tax charge

The standard rate of corporation tax in the UK is 19%. Accordingly, the Company's effective tax rate for the period was 19% (2019: 19%).

9.         EARNINGS PER SHARE

The calculation of the earnings per share is based on the loss for the financial period after taxation of £219,371 (2019: loss £259,395) and on the weighted average of 23,200,000 (2019: 23,200,000) ordinary shares in issue during the period.

The warrants outstanding at 30 June 2020 and 30 June 2019 are considered to be non-dilutive in that their conversion into ordinary shares would not increase the net loss per share. Consequently, there is no diluted earnings per share to report for the period.

10.      TRADE AND OTHER RECEIVABLES

The Directors consider that the carrying value amount of trade and other receivables approximates to their fair value. 

11.      OTHER CURRENT ASSETS

The Loan to E-Tech Metals ('E-Tech') Limited was a secured loan that was provided to allow E-Tech to fund its working capital requirements through the RTO process. When E-Tech terminated the discussions, the loan was called in and was subsequently repaid in full in November 2020, see note 22 - Events subsequent to year end.

The Directors consider that the carrying value amount of trade and other receivables approximates to their fair value. 

12.      CASH AND CASH EQUIVALENTS

Cash at bank comprises balances held by the Company in current bank accounts. The carrying value of these approximates to their fair value.

13.         TRADE AND OTHER PAYABLES

Trade payables and accruals principally comprise amounts outstanding in respect of costs incurred in the Company's endeavours to find a suitable target and execute a relating transaction.

14.      DEFERRED TAXATION

No deferred tax asset has been recognised by the Company due to the uncertainty of generating sufficient future profits and tax liability against which to offset the tax losses. Note 8 above sets out the estimated tax losses carried forward and the impact of the deferred tax asset not accounted for.  

15.      SHARE CAPITAL / SHARE PREMIUM

The Company has only one class of share. All ordinary shares have equal voting rights and rank pari passu for the distribution of dividends and repayment of capital.

At 30 June 2020, there were warrants and options over 15,825,000 unissued ordinary shares (2019: 15,825,000).Details of the warrants outstanding are as follows:

* The warrants were issued conditional upon the Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities which occurred on 7 October 2016.

The Directors held the following warrants at the beginning and end of the year:

Warrants held by former Directors have been set out on page 16.

The market price of the shares at year end was £0.016 per share.

During the year, the minimum and maximum prices were £0.0125 and £0.0245 per share respectively.

16.      SHARE BASED PAYMENT RESERVE

The Company did not issue any warrants during the current or prior year.

The warrants outstanding at the year-end have a weighted average remaining contractual life of 0.5 years. The exercise prices of the warrants are £0.05 and £0.10 per share.

17.      CAPITAL COMMITMENTS

There were no capital commitments at 30 June 2019 and 30 June 2020

18.      CONTINGENT LIABILITIES

There were no contingent liabilities at 30 June 2019 and 30 June 2020

19.      COMMITMENTS UNDER OPERATING LEASES

There were no commitments under operating leases at 30 June 2019 and 30 June 2020

20.      FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company's financial instruments comprise primarily cash and various items such as trade debtors and trade payables which arise directly from operations. The main purpose of these financial instruments is to provide working capital for the Company's operations. The Company does not utilise complex financial instruments or hedging mechanisms.

Financial assets by category

The Loan to E-Tech Metals ('E-Tech') Limited was a secured loan that was provided to allow E-Tech to fund its working capital requirements through the RTO process. When E-Tech terminated the discussions, the loan was called in and repaid in full in November 2020, see note 22 - Events subsequent to year end.

Financial liabilities by category

All amounts are short term and payable in 0 to 3 months.

Credit risk

The maximum exposure to credit risk at the reporting date by class of financial asset was:

Capital management

The Company considers its capital to be equal to the sum of its total equity. The Company monitors its capital using a number of key performance indicators including cash flow projections, working capital ratios, the cost to achieve development milestones and potential revenue from partnerships and ongoing licensing activities.

The Company's objective when managing its capital is to ensure it obtains sufficient funding for continuing as a going concern. The Company funds its capital requirements through the issue of new shares to investors.

Interest rate risk

The maximum exposure to interest rate risk at the reporting date by class of financial asset was:

The nature of the Company's activities and the basis of the funding are such that until a suitable target is acquired, the Company raises finance as and when required to meet its obligations as they fall due.

The Company is not financially dependent on the income earned on these resources and therefore the risk of interest rate fluctuations is not significant to the business and the Directors have not performed a detailed sensitivity analysis.

All deposits are placed with main clearing banks, with 'A' ratings, to restrict both credit risk and liquidity risk. The deposits are placed for the short term, between one and three months, to provide flexibility and access to the funds.

Credit and liquidity risk

Credit risk is managed on a Company basis. Funds are deposited with financial institutions with a credit rating equivalent to, or above, the main UK clearing banks. The Company's liquid resources are invested having regard to the timing of payment to be made in the ordinary course of the Company's activities. All financial liabilities are payable in the short term (between 0 to 3 months) and the Company maintains adequate bank balances to meet those liabilities.

20.      FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Currency risk

The Company operates in a global market with income and costs possibly arising in a number of currencies. The majority of the operating costs are incurred in £GBP. The Company does not hedge due to the Company incurring very few foreign currency denominated costs and thus the cost and time taken to hedge would be far greater than the benefit. The Company did not have foreign currency exposure at year end.

21.      RELATED PARTY TRANSACTIONS

Key management personnel compensation

The Directors are considered to be key management personnel. Detailed remuneration disclosures are provided in the remuneration report on pages 14 - 16.

Amounts due from/to related parties

There were amounts due to directors totalling £11,954 as at 30 June 2020 (2019: £3,185). No amounts were due from directors as at 30 June 2020 (2019: £1,642)

There were no other related party transactions.

22.      EVENTS SUBESQUENT TO YEAR END

Collapse of Negotiations with E-Tech Metals Limited ('E-Tech') Limited and recovery of outstanding loan.

The transaction with E-Tech Metals Limited was materially advanced following due diligence and the preparation of a prospectus; however, E-Tech gave notice that they wished to terminate the transaction without cause. Mila is receiving legal advice with regard to the termination notice provided by E-Tech.

Mila has recovered the loan of £87,402 (which includes all accrued interest) advanced to E-Tech. 

Suspension and Heads of Terms with New Generation Minerals Limited ("NGM')

Mila entered into non-binding Heads of Terms with regard to the possible acquisition of 100% of the share capital of New Generation Minerals Limited ("NGM') to be satisfied by the issue of New Ordinary Shares of the Company.

NGM is a UK private company, whose principal asset is the Kathleen Valley gold project ("Project") in Western Australia. The Project is located in the prolific Wiluna-Norseman gold belt which hosts several world-class mines owned by a number of premier Australian gold companies including Northern Star and St Barbara. NGM holds other nickel and cobalt assets in Western Australia including a JORC inferred resource of 3.8 Mt Nickel-Cobalt project and one copper-gold project in Argentina.

Extension of Warrants

Mila announced that it has amended the terms of certain warrants granted at the time of its IPO on 7 October 2016 by extending the life of certain warrants. The series 1 warrants granted to the founders will expire on 31 December 2020 as scheduled.

Warrant Amendments

23.      CONTROL

In the opinion of the Directors there is no single ultimate controlling party.

**ENDS**

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