UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW

FOR THE NINE MONTHS ENDED 30 JUNE 2021

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED 30 JUNE 2021

Note 1: General information

MAST Energy Developments plc ('MAST' or the 'Company') is incorporated in England & Wales as a public Ltd company. The Company's registered office is located at 55 Ludgate Hill, London, United Kingdom, EC4M 7JW.

The principal activity of MAST, through its subsidiaries (together the 'Group'), is to acquire and develop a portfolio of flexible power plants in the UK and become a multi-asset operator in the rapidly growing Reserve Power ('RP') market.

The Group has acquired its first site which will comprise a 5 MW gas-fuelled power generation plant supported by a Grid Connection Offer and a Gas Connection Offer.  The second Site acquired has immediate phased in approach to operate the engines on load with 24/7 availability (subject to planned maintenance) to be synchronous with the terms of the power off-take agreement, and be installed as operational in steady state status.

The third site acquired has planning consent with the capability to be developed as a RP Gas Reciprocating facility, a hybrid RP and battery site or preferably as a long duration battery storage site due to its unique location with access to both District Network Operator ('DNO') and Private Wire.

Note 2: Basis of Preparation

The condensed interim consolidated financial statements are prepared on the historical cost basis, unless otherwise stated. The Group's accounting policies used in the preparation of these financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2020 of the ultimate holding Company, except for the adoption of new or amended standards applicable from 1 January 2021, which had no material impact on the financial statements of the Group.

The condensed consolidated interim financial statements of the Company have been prepared in compliance with the framework concepts and the measurement and recognition requirements of IAS 34, IFRS as issued by the International Accounting Standards Board.

The consolidated financial information of the Group is presented in Pounds Sterling, which is the functional and presentation currency for the Group and its related subsidiaries.

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016.

The condensed interim consolidated financial statements have not been audited or reviewed by the Group's auditors, thus no assurance is provided therein.

The Directors acknowledge they are responsible for the fair presentation of these condensed interim consolidated financial statements.

Note 3: Basis of Presentation and Consolidation

On 14 September 2020, the Company became the legal parent of Sloane Developments Ltd following the acquisition by the Company of the entire issued share capital of Sloane Developments Ltd (the Acquisition). The comparative results for the year ended 31 December 2020 and for the 9 months period ended 30 June 2020 represent the consolidated position of Sloane Developments Ltd and its Subsidiaries ('the Sloane SubGroup') prior to this acquisition.

The Acquisition of the Sloane SubGroup by MAST is deemed to be outside the scope of IFRS 3 and not considered a business combination as the Acquisition is seen as a common control transaction, following from the fact that Kibo Energy plc continues to retain control over the Sloane SubGroup subsequent to the disposal of the Sloane SubGroup to MAST.

On this basis, the Directors have developed an accounting policy for the Acquisition, applying the principles set out in IAS 8.10-12, in that the policy adopted is:

·      relevant to the users of the financial information;

·      more representative of the financial position, performance and cash flows of the Group;

·      reflects the economic substance of the transaction, not merely the legal form; and

·      free from bias, prudent and complete in all material aspects.

As MAST is only an investment holding company, incorporated for the purposes of raising capital funding for its investee projects, and the majority shareholder before and after the Acquisition continue to be Kibo Energy plc, the transaction is considered to be a common control transaction, outside the scope of IFRS 3, seen as a capital reorganisation, where predecessor valuation accounting was applied with regard to the incorporation of historic financial information.

Accordingly, the following accounting treatment and terminology has been applied in respect of the Acquisition:

·      the assets and liabilities of the legal subsidiary the Sloane SubGroup are recognised and measured in the Group financial statements at the pre-combination carrying amounts, without reinstatement to fair value;

·      the retained earnings recognised in the Group financial statements reflect the retained earnings of the Sloane SubGroup immediately before the Acquisition, and the results of the period from 1 October 2019 to the date of the Acquisition, being 14 September 2020, are those of the Sloane SubGroup.

·      However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent (MAST Energy Developments plc), including the equity instruments issued under the share for share exchange to effect the Acquisition.

Note 4: Going concern

The Company currently generates no revenue and had net equity of £4,366,641 as at 30 June 2021.

Following the recent successful IPO, where the Group raised cash in the amount of £5,124,500, the Group has adequate cash and cash equivalents (financial resources) to ensure the Group is able to continue as a going concern for the foreseeable future.

Furthermore, after reviewing the Group's financial position and forecast financial projections, the directors of the Company (the 'Directors') have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future.

For this reason, they adopted the going concern basis in preparing the Group Financial Information.

The effective implementation of COVID-19 vaccination protocol within the key areas the Group operations has led to an increase in operational activity for the Group. As at the time of preparing these results, the Group does not anticipate any further significant foreseeable disruption from the COVID-19 pandemic, and expects operational activities to normalise in the coming months.

Note 5: Loss per share

The calculation of loss per share is based on the following loss and number of shares:

The Group presents basic and diluted earnings per share on the basis that the current issued ordinary shares in issue have always been in place.

The Group has no dilutive instruments in issue, thus the dilutive loss per share equals the basic loss per share.

Note 6: Share Capital

The called-up and fully paid share capital of the Company is as follows:

A reconciliation of the number of shares in issue set out below:

Note 7: Intangible Assets

The following reconciliation serves to summarise the composition of intangible assets as at period end:

Sloane Developments Ltd ('Sloane') initially acquired a direct 100% equity interest in shovel-ready reserve power generation project, Bordersley, which will comprise a 5 MW gas-fuelled power generation plant for the consideration of £175,000 settled through the issue of shares. St Anderton on Vaal ('St Anderton'), the previous shareholder of Bordersley, retained an interest in the shovel-ready reserve power generation project in Bordersley, via a Royalty Agreement in which it would receive a 5% royalty payment calculated on the net revenue, which comprises power generation revenue less directly related expenses incurred ('Net Revenue').

Subsequent to the acquisition of the direct equity interest in Bordersley, Sloane acquired all of St Anderton's remaining indirect interests, in the form of a Royalty Agreement in the Bordersley power project described above, giving it a 100% economic and 100% equity interest in Bordersley (the 'Acquisition').  Consideration for the Acquisition consists of the allotment and issue of 46,067,206 ordinary shares in the capital of Kibo Energy plc ('Kibo') to St Anderton at an issue price of £0.0525 per share and payable in five tranches ('Consideration Shares') such that the full consideration is only payable in the event that Bordersley is progressively derisked.

The issue price of the Consideration Shares and the associated number to be issued to St. Anderton was determined by using the methodology set out in the original MAST vendor agreement as guidance, and was calculated as c. £2,420,000 comprising:

·      100% of the net present value of the Project Royalties (being the royalty equal to 5% of the gross revenue less gas and trading costs) amounting to c. £370,000; and

·      40% of the net present value of the Project Revenue (being net profit before tax) flowing to St Anderton from Bordersley through MAST amounting to c. £2,050,000.

St Anderton continued to provide consulting services to the Group.

Note 8: Goodwill

In the 2018 financial period the Group acquired a 60% equity interest in MAST Energy Projects Ltd, previously known as MAST Energy Developments Ltd, for £300,000, settled through the issue of 5,714,286 ordinary shares in Kibo Energy plc effective on 19 October 2018. The acquisition of MAST Energy Development Ltd falls within the ambit of IFRS 3: Business Combinations. The net assets acquired were valued at £Nil, with the resultant purchase price being allocated to Goodwill on date of acquisition.

Various shovel ready sites have already been identified in the UK, capable of sustaining gas fired power generators and ancillary structures from 20 MW upwards. Financial modelling indicates projected IRRs of 13-16% and NPVs of £16-19m for the initial assets.

Note 9: Acquisition of minority interest

During the period, effective from 14 April 2021, the Group acquired the remaining equity interest in MAST Energy Projects Ltd for the consideration equal to 36,917,076 shares at a total value of £4,065,586.

As the controlling stake in the entity had already been acquired, the transaction was seen as a transaction with owners, and the financial impact recognised directly in equity.

Note 10: Right of use asset and Lease liability

The Group has one lease contract for land it shall utilise to construction a 5MW gas-fuelled power generation plant. The land is located at Bordersley, Liverpool Street, Birmingham. The lease of the land has a lease term of 20 years, with an option to extend for 10 years which the Group has opted to include due to the highly likely nature of extension as at the time of the original assessment. The Group's obligations under its leases are secured by the lessor's title to the leased assets. The Group's incremental borrowing rate implicit to the lease is 8.44%.

Note 11: Subsequent events

The following subsequent events have been noted:

·      MAST entered into a Sale and Purchase Agreement to acquire Pyebridge Power Ltd , a Special Purpose Vehicle comprising an installed and commissioned synchronous gas-powered standby generation facility with 9 MW export capacity; and

·      MAST entered into a definitive Sale and Purchase Agreement to acquire a 100% interest in Rochdale Power Ltd, a Special Purpose Vehicle from Balance Power Projects Ltd, for the installation of a 4.4 MW flexible gas power project.

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Note 12: Commitments and contingencies

There are no material contingent assets or liabilities as at 30 June 2021.

Note 13: Segment report

As the Group currently operates from a single geographical location, and there are no varying internal operating segments within the group, no segmental reporting is being disclosed currently.

Note 14: Principal risks

The principal risks and uncertainties identified in the last Annual Report of Kibo Energy plc, the holding company of Mast Energy Development plc, issued in June 2021, have not materially changed in the interim period of Mast Energy Development plc.

Note 15: Related Parties

Related parties of MAST comprise subsidiaries, joint ventures, significant shareholders, the MAST Directors and related parties in terms of the listing requirements.

Transactions with related parties are effected on a commercial basis and related party debts are repayable on a commercial basis.

Transactions between MAST and its subsidiaries, which are related parties, have been eliminated on consolidation.

Relationships

Ultimate holding company                               Kibo Energy plc incorporated in Ireland

Holding company                                             Kibo Mining Cyprus Ltd incorporated in Cyprus

Other entities related parties:                          St Anderton on Vaal Ltd provides consulting services. Paul

                                                                        Venter is a director and shareholder of St Anderton on Vaal.

                                                                        Sloane Developments Ltd is a subsidiary

MAST Energy Projects Ltd is a subsidiary

                                                                        Bordersley Power Ltd is a subsidiary

The transactions during each year between MAST and its subsidiaries included the settlement of expenditures to and from its subsidiaries, and working capital funding. The loans to and from MAST Group companies do not have fixed repayment terms are unsecured and interest free.

Note 16: Use of Estimates and Judgements

The preparation of these condensed interim consolidated financial statements in conformity with EU IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

In particular, there are significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements.

The following key areas of estimation uncertainty exist:

• Valuation of Goodwill and intangible assets with an indefinite useful life.

The following key areas of judgement exist:

• Recognition and measurement of exploration and evaluation expenditure; and

• Share based payment transactions.

The principal estimates and judgements identified in the last Annual Report of Kibo Energy plc, the holding company of Mast Energy Development plc, issued in June 2021, have not materially changed/altered in the interim period of Mast Energy Development plc.

Note 17: Financial instruments - Fair value and Risk Management

The carrying amount of all financial assets and liabilities approximates the fair value. Directors consider the carrying value of financial instruments of a short-term nature, that mature in 12 months or less, to approximate the fair value of such assets or liability classes.

The carrying values of longer-term assets are considered to approximate their fair value as these instruments bear interest at interest rates appropriate to the risk profile of the asset or liability class.

The Group does not carry any financial instruments measured in the statement of financial position at fair value at 30 June 2021.