CHILL BRANDS GROUP PLC

(FORMERLY KNOWN AS ZOETIC INTERNATIONAL PLC)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended 30 September 2021

NOTE 1 -       GENERAL INFORMATION

Chill Brands Group PLC ("the Company") (formerly Zoetic International PLC) and its subsidiaries (together "the Group") are involved in the development, production and distribution of premium cannabidiol (CBD) products. The Company, a public limited company incorporated and domiciled in England and Wales, is the Group's ultimate parent company. The Company was incorporated on 13 November 2014 with Company Registration Number 09309241 and its registered office and principal place of business is 27/28 Eastcastle Street, London W1W 8DH. The principal executive offices are located at 1601 Riverfront Drive, Grand Junction, Colorado 81501.

NOTE 2 -       ACCOUNTING POLICIES

Basis of preparation

The interim condensed unaudited consolidated financial statements for the period ended 30 September 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting. The comparative figures for 31 March 2021 are extracted from the Group's audited accounts to that date. The comparative figures for the period ended 30 September 2020 are unaudited.

The condensed unaudited consolidated interim financial statements of the Group have been prepared on the basis of the accounting policies, presentation, methods of computation and estimation techniques used in the preparation of the audited accounts for the period ended 31 March 2021 and expected to be adopted in the financial information by the Group in preparing its annual report for the year ending 31 March 2022.

The financial information in this statement relating to the six months ended 30 September 2021 and the six months ended 30 September 2020 has neither been audited nor reviewed by the auditors pursuant to guidance issued by the Auditing Practices Board. The financial information presented for the year ended 31 March 2021 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 March 2021 have been filed with the Registrar of Companies.

The financial information of the Group is presented in British Pounds Sterling ("£").

NOTE 3 -       EXITING FROM OIL AND GAS

In September 2020, the Group reached an agreement regarding the disposal of its East Denver oil and gas assets to the operator of those facilities, True Oil LLC. The proceeds of sale from the East Denver assets was agreed at US $376,000, although the Group had a loan secured on the assets of US $276,574 from ANB Bank. Following the execution of this agreement, the ANB Bank loan has been settled in full. In the same month the Group finalized the closure of the legacy Highlands Natural Resources Corporation office in Denver, Colorado, along with the termination of a number of employment and consultancy contracts for personnel concerned with the management of the Group's former natural resources assets. The Group's Colorado-based hemp cultivation and CBD production center has also been closed.

In May 2020, an asset purchase agreement was reached between the Company and Path Investments plc ("Path"), the latter of which will acquire the Group's 75% interest in the patented hydrocarbon well stimulation and protection technology, DT Ultravert (DTU) with the final agreement reached on 5 November 2020.

NOTE 4 -       INCOME TAX EXPENSE

No tax is applicable to the Group for the period ended 30 September 2021. No deferred income tax asset has been recognized in respect of the tax losses carried forward, due to the uncertainty as to whether the Group will generate sufficient profits in the foreseeable future to prudently justify this.

NOTE 5 -       LOSS PER SHARE

Basic loss per ordinary share is calculated by dividing the loss attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. There are currently no dilutive potential ordinary shares.

NOTE 6 -       INVENTORIES

Inventories comprise finished products and raw materials either developed by the Group or bought in from third parties. All inventory items are stated at their cost of production or acquisition, or at net realizable value if this is lower. There are no biological assets being grown for the six month period ended September 30, 2021. For the period ended September 30, 2021, the Group had no impairments on inventory.

NOTE 7 -       NOTE RECEIVABLE - RELATED PARTY

During the six month period ended 30 September 2021, the Group entered into a note agreement with a related party. The note receivable consists of a note from an entity owned and operated by a shareholder of the Group. The note carries interest on the unpaid principal balance of 0% interest from 30 September 2021 through 31 January 2022 and shall bear interest at the short term rate of 0.18 percent per annum from 1 February 2022 until the note is paid in full on 1 May 2023. The total balance due from the related parties note receivable at 30 September 2021 was £943,874.

NOTE 8 -       INTANGIBLE ASSETS

On 22 June 2021, the Group entered into an agreement to purchase the domain name "Chill.com" and all intellectual property rights that it has accrued in connection with the domain name. The domain is intended to serve as a worldwide marketing anchor for the Group's range of consumer products. The intangible assets are valued as of 30 September 2021 at £1,195,898. Management has assessed the asset for impairment as of 30 September 2021 and believe the asset is not impaired.

NOTE 9 -       LOANS

On 10 June 2020, the Group entered into a BBLS managed by the British Business Bank on benefit of and with the financial backing of the Secretary of State for Business, Energy and Industrial Strategy. The BBLS loan of £50,000 carries an interest of 2.50% rate per annum with repayment over 60 months beginning July 2021. The loan balance was £47,500 and £50,000 as of 30 September 2021 and 31 March 2021, respectively.

On 22 April 2020, Highlands Natural Resources Corporation entered into a Paycheck Protection Program (PPP) loan with the U.S. Small Business Administration (SBA) for £154,078 with an interest of 1.00% rate per annum with principal and accrued interest due and payable on 22 April 2022. During the period ended 31 March 2021, the Group received partial forgiveness of the SBA loan. The loan balance was £29,924 and £30,424 as of 30 September 2021 and 31 March 2021, respectively.

On 20 April 2020, Zoetic Corporation entered into a PPP loan of £93,100 with an interest of 1.00% rate per annum with principal and accrued interest due and payable on 20 April 2022. During the period ended 31 March 2021, the Group received full forgiveness of the SBA loan.

NOTE 10 -     LEASES

The Group determines if an arrangement is a lease at inception if the contract conveys the right to control the use and obtain substantially all the economic benefits from the use of an identified asset for a period of time in exchange for consideration.

The Group identifies a lease as a finance lease if the agreement includes any of the following criteria: transfer of ownership by the end of the lease term; an option to purchase the underlying asset that the lessee is reasonably certain to exercise; a lease term that represents 75 percent or more of the remaining economic life of the underlying asset; a present value of lease payments and any residual value guaranteed by the lessee that equals or exceeds 90 percent of the fair value of the underlying asset; or an underlying asset that is so specialized in nature that there is no expected alternative use to the lessor at the end of the lease term. A lease that does not meet any of these criteria is considered an operating lease.

Lease right-of-use assets represent the Group's right to use an underlying asset for the lease term and lease liabilities represent the Group's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the commencement date of a lease based on the present value of lease payments over the lease term. Lease terms may include options to extend or terminate the lease. The Group includes these extension or termination options in the determination of the lease term when it is reasonably certain that we will exercise that option. The Group does not recognize leases having a term of less than one year in the consolidated statements of financial position.

For purposes of determining the present value of the lease payments, the Group use a lease's implicit interest rate when readily determinable. As leases do not provide an implicit interest rate, the Group used an incremental borrowing rate based on available information at the commencement of the lease. Lease cost for operating leases is recognized on a straight-line basis over the lease term.

On 5 May 2021, the Group entered into an office lease agreement between the Company and Bonsai Development LLC. The operating lease is a five year lease with an option to extend up to five years. The Group believes the option to extend up to five years is not probable as of 30 September 2021. The Group recorded a right of use lease asset and corresponding liability using an incremental borrowing rate to determine the discount rate. As of 30 September 2021, the right of use lease asset had a balance of £285,559.

NOTE 11 -     SHARE CAPITAL & RESERVES

Allotted, called up and fully paid Ordinary shares of £0.01 each:

The Company has only one class of share and all shares rank pari passu in every respect.

NOTE 12 -     EQUITY-SETTLED SHARE-BASED PAYMENTS RESERVE

NOTE 13 -     SUBSEQUENT EVENTS

During the Annual General Meeting held on 30 September 2021, the Group established a long-term incentive plan (LTIP) to grant awards to eligible employees. The awards can take the form of options to acquire Ordinary Shares with an exercise price determined by the Board or conditional rights to acquire Ordinary Shares for no or nominal consideration. All employees, including executive directors, of the Group are eligible and may be granted awards under the LTIP. The Board has discretion at the time of the grant of an award to determine the basis on which an award will vest and to determine whether an award will be subject to a holding period. 

On 22 November 2021, the Group announced that its ordinary shares are now trading on the US OTCQB® Venture Market under the symbol ZOEIF. The Group's ordinary shares will continue to trade on the London Stock Exchange under the symbol CHLL.

On 14 December 2021, the Group announced that its ordinary shares are now trading on the US OTCQB® Venture Market under the symbol CHBRF. The Group's ordinary shares will continue to trade on the London Stock Exchange under the symbol CHLL.

On 15 December 2021, the Group entered into a finance agreement with gotoPremiumFinance for directors and officers (D&O) insurance. The policy premiums are $136,725 (United States Dollars) with $100,669 financed at an annual percentage rate of 8.75% over the term of the policy ending 13 December 2022.

On 20 December 2021, the Group announced a sponsor partnership with the U.S. Major Arena Soccer League (MASL), to offer the Company's CBD products to the league and member teams. Total consideration from the Group was $162,500 (United States Dollars) which consisted of $100,000 in cash and 500,000 ordinary shares at 12.50p valued as of the closing price on 11 November 2021. 

On 4 January 2022, the Group announced the addition of Mr. Michael Sandore as Chief Commercial Officer.

On 27 January 2022, the Group announced the appointment of Mr. Scott E. Thompson as a Non-Executive Director.

Responsibility Statement

Trevor Taylor and Antonio Russo, Co-CEOs confirm that to the best of their knowledge that the condensed set of financial statements, which has been prepared in accordance with IAS 34 as contained in UK adopted IFRS and the interim management report includes a fair review of the information required by the Disclosure Guidance and Transparency Rules.

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