RM GOLD (SERVICES) LIMITED Directors’ Report and Audited Financial Statements For the year ended 31 December 2018 Company Number: 07473457 win *LaFARNZN 01082019 COMPANIES HOUSEContents Officers and Professional Advisors 2 Directors’ Report 35 Indeperident Auditérs' Report 67 Statement of Financial Position. a Statement of Comprehensive income 9 Statement of Changes in Equity 8 Statement of Cash Flows 10 Notes to the Financial Statements, 41-20Officers and Professional Advisors Directors: Company Secretary: Bankers: Solicitors: Registered Office: Independent Auditors: Jonathan Henry (Irish) (Resigned 9 July 2018) Max Vaughan (British) (Resigned 5 April 2019) Richard Brown (British) ‘Simon Lusty (British) (Appointed 5 Apri 2018) Dragos Tanase (Romanian) (Appointed 5 April 2019) Field Fisher Waterhouse LLP National Westminster Bank Ple City of London Office 1 Princes Street London EC2R BPA United Kingdom Field Fisher Waterhouse LLP Riverbank House 2 Swan Lane London ECAR ST United Kingdom Riverbank House 2 Swan Lane London ECAR 3TT United Kingdom PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors 4 Embankment Place London WG2N 6RH Unites KingdomDirectors’ Report ‘The directors present their report and the aucited Financial Statements for RM Gold (Services) Limited (RMGS" or the “Company’) for the year ended 31 December 2018 (‘Financial Statements") Business Review and Principal Activities The Company is a private limited company and a wholly-owned direct subsidiary of Gabriel Resources Ltd. (‘Gabriel’). The Company is domiciled in England and was incorporated there on 20 December 2010, The Company maintains an office in London, United Kingdom and commenced operations on 1 January 2011. The Company provides management and support services on behalf of other companies in the group headed by Gabriel (the Group’), which is engaged in the exploration and development of mineral properties in Romania. The Company is remunerated for these services on a cost plus basis, consequently margin based KPIs are not a relevant measure of performance. The Company submits an annual operating plan for approval to its parent company, including financial budgets and other operational targets. The ‘Company monitors and measures its performance against its agreed budget and operational targets, The financial results of the Company show revenue of £3,992,687 (2017: £3,064,958) and a pre and post-tax profit for the financial year of £226,001 (2017: £173,488). No dividends were paid or declared (2017: Ni), ‘The Company has net current assets of £141,228 (2017: net current liabilities of £74,664) and total assets of £560,128 (2017: £563,567). Future Outlook During 2018 the Company's level of business and its year-end financial results were satisfactory. Gabriel has sufficient resources to support the Group to continue in operations over the longer term. Gabriel will continue to require the continued services of the Company. The directors expect that the present level of activity in management and support services to Gabriel will be sustained for the foreseeable future, Principal Risks and Uncertainties : ‘The Company exists to provide various management services including, inter alfa, he provision of the following advisory services to Gabriel and fellow Group affiliates: = group accounting, taxation, treasury, inter-company and financial reporting services; ‘+ investor, public and stakeholder relations services; + business development related advisory services; ‘+ compliance services; * corporate secretarial services; * assisting in preparing and co-ordinating consolidated corporate group information for Board and Board Committee meetings; and ‘+ providing treasury and cash management services. The fortunes of the Company are therefore closely linked to those of the Group. The principal risks and uncertainties faced by the Company in the medium term relate to the arbitration case brought by Gabriel and another Group affliate against the Romanian state which was registered by the Intemational Court for Settlement of Investment Disputes in July 2015 (see note 1 for details). The political risks and uncertainty which the Group faces are detailed in note 1 to the Financial Statements. The financial risks and policies which the Company follows to mitigate these risks are disclosed in note.17 to the Financial Statements,Directors’ Report (cont.) ‘The directors are satisfied that the Company, and the Group to which it belongs, has properly considered the potential challenges posed by these risks and uncertainties and has planned its activities accordingly. Going Concern The directors believe that preparing the Financial Statements on the going concern basis is ‘appropriate due tothe continued financial suppor of Gabriel, the parent company. The directors have received confirmation that Gabriel intends to support the Company financially for at least ‘one year after these Financial Statements are signed. ‘The Financial Statements do not reflect the adjustments to the carrying values of assets or liabilities and the reported expenses and consolidated statement of financial position Classifications that would be necessary if the Company were unable to realise its assets and settle its liabilities as 2 going concem in the normal course of operations. Such adjustments could be material Directors The directors, who held office during the year and up to the date of signing the Financial Statements, are shown on page 2. . Statement of Directors’ Responsibilities ‘The directors are responsible for preparing the Ditectors’ Report and the Finacial 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 dlectors have prepared the Financial Statements in accordance with Intemational Financial Reporting Standards (IFRS) 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 period. In preparing these Financial Statements, the directors are required to: + select suitable accounting policies and then apply them consistently; ‘+ make judgements and accounting estimates that are reasonable and prudent; + state whether applicable IFRS as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the Financial Statements; ‘© prepare the Financial Statements on the going concer 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 disciose with reasonable accuracy at any time the financial position of the ‘Company and enable them to ensure that the Financial Statements 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. Directors’ indemnity The Company indemnifies the directors to the extent allowed under section 234 of the ‘Companies Act 2006. The indemnity was in force throughout the last financial year and is, current in force.Directors’ Report (cont.) Disclosure of information to Auditors In the case of each director in office at the date’the Directors’ Report is approved: So far a8 each of the directors is aware, there is no relevant audit information of which the Company's auditors are. unaware. In addition, the directors have taken all the’steps that they ‘ought fo have taken as direciors of the Company in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information. Independent Auditors The independent auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office. ‘Special Provisions Relating to Small Companiés ‘This report has been prepared in accordance with the special provisions relating to small ‘companies within part 15 of the Companies Act of 2006. The Company is not required to prepare a Strategic Report ‘Oh behalf of the Board Ride Richard Brown Director 30 September 2019, Company Number: 07473457Independent auditors’ report to the members of RM Gold (Services) Limited Report on the audit of the financial statements Opinion In our opinion, RM Gold (Services) Limited's financial statements: + givea true and fair view of the state of the company’s affairs as at 31 December 2018 and of its profit and cash flows for the year then ended; + have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and + have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements, included within the Directors’ Report and Audited Financial Statements (the “annual Report”), which comprise: the statement of financial position as at 31 December 2018; the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended; notes to the financial statements, which include a description of the significant accounting policies. nd the Basis for opinion ‘We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit ofthe financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Conclusions relating to going concern ISAs (UK) require us to report to you when: + the directors’ use ofthe going concern basis of accounting in the preparation of the financial statements is not appropriate; or + the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. We have nothing to report in respect ofthe above matters, However, because not all future events or conditions can be predicted, this statement is not @ guarantee as to the company’s, ability to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union are not clear, and itis difficult to evaluate all of the potential implications on the company’s trade, customers, suppliers and the wider economy. Reporting on other information ‘The other information comprises all ofthe information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible forthe other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon, In connection with our audit of the financial statements, our responsibility isto 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 an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of 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 based on these responsibilities. With respect to the Directors’ Report, we also considered whether the disclosures req sd by the UK Companies Act 2006 have been included. Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain opinions and matters as described below.Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Directors’ Report for the year ended 31 December 2038 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In ight of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not identify any material misstatements in the Directors’ Report. Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements ‘As explained more fully in the Statement of Directors’ Responsibilities set out on page 4, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they 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 concer 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. Auditors’ responsibilities for the audit of the financial statements ur objectives are to obtain reasonable assurance about whether the financial statements ds a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance isa 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. ‘A further description of our responsibilities for the audit ofthe financial statements is located on the FRC’s website at: \worw.fre-org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report ‘This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do nat, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it ‘may come save where expressly agreed by our prior consent in writing, Other required reporting Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, in our opinion ‘+ we have not received all the information and explanations we require for our audit; or + adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or + certain disclosures of directors’ remuneration specified by law are not made; or + the financial statements are not in agreement with the accounting records and returns. ‘We have no exceptions to report arising from this responsibility Entitlement to exemptions Under the Companies Act 2006 we are required to report to you if, in our opinion, the directors were not entitled to take advantage of the small companies exemption from preparing a strategic report. We have no exceptions to report arising from this responsibility. Erni ‘Timothy McAllister (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London o>: September 2019RM GOLD (SERVICES) LIMITED Statement of Financial Position As at 31 December (Expressed in GBP) Note 2018 2017 ASSETS Current assets Cash and cash equivalents 5 512,900 516,958 Other receivables 6 8,798, 7477 Prepaid expenses 4,642 1,408 Deposits Zz - 19,500 Total current assets 526,340 545,043; Non-current assets Deposits 7 20,480 - Property and equipment 8 413,308 18,524 Total non-current assets 33,788 18,524 TOTAL ASSETS 360,128, 563,567, LIABILITIES Current liabilities Trade and other payables 9 385,112 619,707, Total current liabilities 385,112 619,707, Non-current liabilities Intercompany foan, 10 2,253,557 2,248,402, Total non-current liabilities 2,253,557 2,248,402, TOTAL LIABILITIES. 2,638,669, 2,868,109) EQUITY Equity attributable to owners of the parent Share capital 14 1 1 Accumulated losses (2,078,542) (2,304,543) TOTAL EQUITY (2,078,541) (2,304,542) TOTAL EQUITY AND LIABILITIES 560,128 563,567, Nature of operations and going concem — Note 1 The notes on'pages 11 to 20 are an integral part of the Financial Statements. The Financial Statements on pages 8 to 20 were approved by the Board of Directors on 30 September 2019, Signed on behalf of the Board of Directors by fe RDP, ‘Simon Lusty Richard Brown . 8 GRM GOLD (SERVICES) LIMITED Statement of Comprehensive Income For the year ended 31 December : (Expressed in GBP) Note 2018 2017 Revenue 2 3,992,687 3,064,958, Expenses Corporate, general and administrative 14 (3,701,975) (2,825,889) ‘Operating profit 290,712, 239,069 ‘Other (experises) / Income Finance costs 10 (29,431) (79,358) Finance income : 26 10 34,720 13,752 Foreign exchange Profit before income taxes 226,001 173,488 Income tax 5 = zs Profit and total comprehensive income for the year. attributable to owners of the parent 226,001 173,488 Statement of Changes in Equity For the year ended 31 December (Expressed in GBP) Note 2018 2017 Share capital AU January 1 4 ‘At31 December it 4 1 Accumulated losses Att January (2,304,543) (2,478,031) Profit and total comprehensive income for the year 226,001, 173,488 ‘At31 December (2,078,542) (2,304,543) Total equity at 31 December (2,078,541) (2,304,542)RM GOLD (SERVICES) LIMITED Statement of Cash Flows For the year ended 31 December (Expressed in GBP) Note 2018 2017, Cash flows (utilised in) / provided by operating activities. Profit before income taxes, 226,001 173,488 Items not affecting cash Depreciation 12,518 12,220 Unrealised foreign exchange gain (34,720) (18.255) 808,78 «A Net changes in non-cash working capital__18. (239,450) 530,480 (35,651) 697,933 Cash flows Deposits on property leases (980) (872) Purchase of property and equipment (7,302) (42,910) (8,282) (13.482) Gash flows provided by / (utilised in) financing activities Proceeds from / (Repayment of) intercompany loan 39,875 (318,797) 39,875 318,797) (Becrease) / Increase in cash and cash equivalents (4,058) 365,654 Effect of foreign exchange on cash and cash equivalents - (6.765) Cash and cash equivalents — beginning of year 516,958 158,069 Cash and cash equivalents — end of year 512,900 516,958RM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 1. Nature of operations and going concern RM Gold (Services) Limited ("RMGS" or the “Company’)is a United Kingdom incorporated and domiciled entity. The Company was incorporated on 20 December 2040 and is a wholly-owned direct subsidiary of Gabriel. The Company provides management and support services to Gabriel and the Group. Gabriel Resources Ltd. (‘Gabriel’) is a TSX Venture Exchange listed Canadian resource company, whose activities were previously focused on permitting and developing the Rosia ‘Montana gold and silver project (the Project") in Romania, and are now principally focused on an intemational bilateral investment treaty claim against Romania, as explained further below. The exploitation licence for the Project (‘Licence’) is held by Rosia Montana Gold Corporation S.A. CRMGC"), @ Romanian company in which Gabriel owns an 80.68% equity interest, with the 19.31% balance held by Minvest Rosia Montana S.A. (‘Minvest RM"), a Romanian state- ‘owned mining company. (On 21 July 2016, pursuant to the provisions of international bilateral investment protection treaties which the Romanian State entered into with each of Canada and the United Kingdom of Great Britain and Northern Ireland for the Promotion and Reciprocal Protection of Investments, (together the “Treaties"), Gabriel and its subsidiary company, Gabriel Resources (Jersey) Limited (’Ciaimants’), filed a request for arbitration ("Arbitration Request’) before the World Bank's International Centre for Settlement of Investment Disputes (ICSID") against the Romanian State (ICSID Arbitration’). The Arbitration Request was registered by ICSID on July 30, 2016 and the presiding trisunal for the ICSID Arbitration Tribunal") was constituted on June 21, 2016. The ICSID Arbitration seeks compensation forall of the loss and damage resulting from the Stale’s wrongful conduct and its breaches of the Treaties’ protections against expropriation, unfair and inequitable treatment and discrimination in respect of the Project and the related licences. Going concern As of the date of these Financial Statements, the Company believes that it has sufficient funding to cover its planned activities over the longer term. The Company, as a wholly-owned subsidiary of Gabriel, and fully funded by Gabriel, is subject to the same risks associated with the Group. These Financial Statements have been prepared using IFRS applicable to a “going concern’, which assume that the Company will continue in operation fora period of twelve months from the date of approval of the Financial Statements. The directors have reviewed the Financial Statements of RMGS, and of the Group. The Financial Statements do not reflect the adjustments to.the carrying values of assets or lablities and the reported expenses and the statement of financial positon classifications that would be necessary if the Company were unable to realise its assets and settle its liabliies es a going concer in the normal course of ‘operations. Such adjustments could be material. The directors have received confirmation that Gabriel intends to support the Company financially for at least one year after these Financial Statements have been signed. nRM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 2. Basis of preparation ‘The Financial Statements have been prepared in accordance with IFRS as adopted by the European Union, IFRS Interpretations Committee (IFRS IC’) interpretations and the Companies Act 2006 applicable {o companies reporting under IFRS. The Company has adopted all relevant standards, amendments and interpretations that are effective for accounting years ‘commencing 1 January 2018. The Company does not expect the new IFRS 9 or IFRS 15 guidance to affect the classification and measurement of financial assets or revenues. ‘There has been no early adoption of forthcoming standards. The Financial Statements have been prepared under the historical cost convention. The accounting policies applied in the presentation of the Financial Statements have been consistently applied to all the periods presented, unless otherwise stated. 3. Critical accounting estimates, risks and uncertainties The Company performs an analysis of risk factors, which, if any should erystalise, would materially and adversely affect the results and financial position of the Group and therefore of the Company. ‘The preparation of Financial Statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and labilties at the date of the Financial Statements and the reported amount of revenue, expenses and other income for the year. These estimates and assumptions are based on management's knowledge of the relevant facts and awareness of circumstances, having regard to prior experience. Going concem Management exercises judgement in assessing the ability of the Company to continue as a going concem based on analysis of expected future cash flows of the Group and the continued financial support of Gabriel, the parent company. 4. Significant accounting policies Property and equipment Property and equipment are recorded at cost less accumulated depreciation and accumulated impairment fosses. Cost includes expenditures that are directly attributable to the acquisition.of the asset. Subsequent costs are included in the asset's carrying amount or recognised as @ separate asset, as appropriate, only when itis probable that future economic benefits associated ‘with the item will low to the Company and the cost can be measured reliably. Depreciation is recorded using the straight-line method based on an estimated useful life of three years for office equipment and computer equipment. Leasehold improvements are amortised on a straightine basis over the term of the respective lease. ‘Where parts (components) of an item of property, plant and equipment have different useful lives or for which different depreciation rates would be appropriate, they are accounted for as ‘separate items of property and equipment. 12RM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 4. Significant accounting policies (continued) Foreign currency transactions and balances Monetary assets and liabilities denominated in foreign currencies are traislated at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities, expenses and other income arising from foreign currency transactions are translated at the exchange rate in effect at the date of the transaction. Exchange gains or losses arising from the translation are included in the Statement of Comprehensive income.Financial instruments At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value, through profit or loss, transaction costs thal are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Subsequent measurement of debt instruments depends on the classification of financial assets determined at initial recognition. Classification of financial assets depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows. At intial recognition, the Company classifies its financial instruments in the following categories: Financial assets at fair value through profit or loss include principally the Company's cash and cash equivalents. A financial asset is classified in this category iit does not meet the criteria for amortized cost or fair value through other comprehensive income, or is a derivative instrument not designated for hedging. Gains and losses arising from changes in fair value are presented in the statements of loss in the period in which they arise. Financial assets at amortised cost are financial assets with thé objective to hold assets in order to collect contractual cash flows, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, This includes the company's other receivables. ‘At each balance sheet date, on a forward looking basis, the Company assesses the expected credit losses associated with its financial assets carried at amortized cost and fair value through ‘other comprehensive income. The impairment methodology applied depends on whether there thas been a significant increase in credit risk Cash and cash equivalents Cash and cash equivalents comprise cash at banks and cash on hand, Impairment of non-financial assets Non-financial assets to be held and used by the Company are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount isthe higher of an asset's fair value less costs to sell and its value in use, which is the present value of the future cash flows expected to be derived from an asset. Estimated future cash flows are calculated using estimated future revenues and operating costs, using appropriate discount rates. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are ‘separately identifiable cash flows (each a ‘cash-generating unit’) 1BRM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 4. Significant accounting policies (continued) ‘An impairment loss recognised in prior years to an asset or cash generating unit is reversed if there has been a change in the estimates used to determine the respective recoverable amount. since the last impairment loss was recognised. The. reversal of previously recognised impairment losses is limited to the original carrying value of the asset including any amortization which would have accrued. Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, itis probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. These provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre- {ax risk free rate. The increase in the provision due to passage of time is recognised as interest expense. Revenue Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for services supplied net of applicable taxes. Management services revenue is recognised on an accruals basis in accordance with management service agreements with Group companies. Leases Leases which do not transfer a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. Payments made under operating leases are charged to the Statement of Comprehensive income on a straight-line basis over the period of the lease. In January 2016, the IASB issued IFRS 16 Leases, which requires lessees to recognize assets and liabilities for most leases. Application of the standard is mandatory for annual reporting periods beginning on or after January 1, 2019, Managements in the process of completing its ‘assessment of the impact that this new standard will have on the Financial Statements of the ‘Company. The preliminary conclusion is that the impact will not be material. Income taxes The currentincome tax charge is calculated on the basis ofthe tax laws enacted or substantively enacted at the balance sheet date, plus any adjustment to taxes payable in respect of previous years. Deferred income taxes are recognised in respect of temporary differences arising between the financial reporting and tax basis of assets and liabilities, and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred income tax assets are recognised only to the extent that itis probable the assets will be realised in the foreseeable future. Deferred tax assets and liabilities are presented as non-current 14RM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 4. Significant accounting policies (continued) Accounting standards and amendments issued and adopted There are no revised standards and amendments which have an impact on the Company, effective for annual years beginning on 1 January 2018. There is no.impact from adopting either IFRS 9 or IFRS 15 in the 2018 Financial Statements, Accounting standards and amendments issued but not yet adopted IFRS 16 Leases is effective for annual years beginning on or after 1 January 2019. The ‘Company has not elected to early adopt the standard, and does not expect it to have a material impact on the results. There are no other standards or interpretations that are not yet effective that would be expected to have a material impact on the Company. Ultimate parent undertaking and controlling party ‘The immediate, and ultimate, parent undertaking is Gabriel Resources Lid, a company incorporated in’ Canada. The results of the Company are consolidated into the Gabriel consolidated financial statements, a copy of which can be obtained from its company secretary ‘at 25 Southampton Buildings, London, WC2A 1AL, United Kingdom. Gabriels the smallest and largest entity to consolidate these Financial Statements. 5, Cash and cash equivalents 2018 2017 Cash at bank — GBP currency 512,900 816,958, 512,900 ___ 516,958, Cash at bank and on hand earns interest at floating rates based on daily bank deposit rates. ‘The cash is deposited at reputable financial institutions of a good credit standing 6. Other receivables 2018 2017 Vat 3797 7.176 Other receivables 4 1 77 38, Allreceivables are denominated in UK pounds sterling. At31 December 2018 no amounts were past due, and no impairment has been raised as the amounts are expected to be recovered in full 15RM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 7. Deposits 2018 2017 25 Southampton Buildings 20,480 19,500 20,480 19,500 ‘The deposit for 25 Southampton Buildings is in respect of the lease of the office space used by the Company since 1 Januiary 2016. The deposit is held in trust with the managing agent, to be released, with the mutual consent of the landlord, upon the termination, or sub-let, of the lease. In October 2018 the lease was extended for a further 18 months. 8. Property and equipment Office Computer Leasehold ment _equipment_improvements TOTAL COST ‘Att January 2017 63,945 122,308 175,632 961,885 Additions, - 42:910 ~__ 12,910 ‘At31 December 2017 63,945 135,218 175632 374,795 ‘Additions. - 7.302 ieee 7902) ‘At 31 December 2018. 63,945 142,520 175,632. 382,097 ACCUMULATED DEPRECIATION Att January 2017 63,454 104,965, 175632 344,051 Depreciation 256 11,964 =~ 12.220 ‘At31 December 2017 63,710 116,929 175,832 356,271 Depreciation 235 42,283 = 12,518 ‘At 31 December 2018 63,945 729,212, 175,632 368,789 CARRYING VALUE At31,December 2016 491 17,343 - 17,834 ‘At31 December 2017 235 18,289 = 18,524 At 31 December 2018 13,308 13,308 9. Trade and other payables 2018 2017 ‘Trade payables 7,806 296, Payroll liabilities 320,710 595,175 Accrued expenses 62,596 24,236 385,112 ___ 619,707 ‘Trade and other payables have maturities of 12 months or less from the statement of financial position date and are denominated as follows: 2018 2017 UK pound sterling (GBP) 385,112 616,525 Canadian dollar (CAD) 5 1,182 365,112 619,707RM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 410. intercompany loan ‘The Company has a CAD denominated loan facility with the parent company, Gabriel, for a maximum available amount of CADS10 milion. The Company is exposed to potential foreign exchange gains and losses on this loan facility. Interest on the loan facility is charged on the outstanding loan baleince at the Canadian Depository Offer Rate ("CDOR’) plus 1.5% and is repayable at the mutual agreement of the parties. 44. Share capital ‘Authorised: One share (2017: one) at a par value of £1 Issued: One share (2017: one) to Gabriel Resources Ltd. 12. Revenue ‘The Company's revenue comprises management service fees charged in accordance with management services agreement between the Company and Gabriel, and representing a fixed percentage over expenditures incurred, 13, Employees and directors 2018 2017 ‘Salaries and other short-term employee benefits 2,853,401 2,276,436 Social security costs 483,102 274,571 3,396,503 2,493,007, Number of employees 6 7 Monthly average number of employees 6 7 ‘All employees are involved in the provision of management and other services. Key management compensation: 2018 2017 Directors salaries and short term employee benefits 2,600,357 1,819,266 Highest paid director 1,860,067 "894,509 Key management compensation is for the three directors of the Company: On 9 July 2018 Jonathan Henry resigned as a director of the Company. Settlement expenses of £1.7 million were paid to Mr. Henry in July 2018, which included compensation for the forfeiture of all Gabriel related Options, RSUs and DSUs held by Mr. Henry at the time of hs leaving the Company. 14. Expenses: corporate, general and administrative 2018 2017 Employee costs 3,386,503 2,403,007 Depreciation 12.518 12,220 Technical and other advisory services 14,207 15,979 Legal fees 13,396 26,880 Office rent and utilities 123,346 117,121 Travel and accommodation 114,109 61,355 Other expenses 87,896 99,327 3701,975 2,825,889 "The Auditors’ fees for the 2016 audit are £10,000 (2017: £10,000), 7RM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 15. Income taxes ‘The following table reconciles the expected income tax at the statutory Income tax rate to the ‘amounts recognised in the Statement of Comprehensive Income: 2018. 2017 Profit before income taxes, 726,001 173,488 Income tax rate 19% 19.25% Income tax at statutory rates 42,940 33,398 ‘Tax effect of unrecognised tax losses. (42,940) (33,396) Income tax charge ‘The cumulative unrecognised tax losses of £2.1 million (2017: £2.3 milion), with no specified expiry date, will be carried fonward for use against future profits. No deferred tax asset has been recognised. Deferred tax assets are only recognised to the extent that future profits are probable. Factors affecting future tax charges ‘The standard rate of corporation tax in the UK changed from 20% to 19% with effect from 1 April 2017. There was no current income tax payable at 31 December 2018 (2017: £nil) ‘A change to the UK corporation tax rate was announced in the Chancellor's Budget on 16 March 2016. The change announced is to reduce the main rate to 17% from 1 April 2020. Changes to reduce the UK corporation tax rate to 19% from 1 April 2017 and to 18% from 1 April 2020 had already been substantively enacted on 26 October 2016. As the change to 17% had not been substantively enacted at the balance sheet date its effects are not included in these financial statements. 16. Commitments and contingencies ‘The following is a summary of contractual commitments of the Company including payments due for each of the next five years and thereafter. There Total 2019 2020 _ 2021 2022 2023 _ after Operating lease commitments 153,600 122,880 30,720 - Lease commitments are in respect of the lease of 25 Southampton Buildings property."Other ‘operating leases for equipment are capable of termination at short notice.RM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 17. Financial instruments ‘As at 31 December 2018 the Company's financial instruments consisted of cash and cash equivalents, deposits, accounts payable and accrued liabilities and intercompariy loans. With respect to all of these financial instruments, the Company estimates that their fair values approximate their carrying values at 31 December 2018 based on the nature of those instruments, ‘The Company's risk exposures and the impact on the Company's financial instruments are summarised below: Credit risk The Company's credit risk is primary attrbutable to cash, which is held in British banks, and deposits on lease agreements. Cash is deposited at repulable financial institutions of a good quality credit standing. The leases which the Company has entered are with reputable property lease companies. Liquidity risk The Company does not have sufficient funds, as at 31 December 2018, to settie all current and long-term lables. The Compariy has access to a CAD$10 milion loan facility with Gabriel which Management considers suficent to sete is iabiies and fund the Company's operating activites for he foreseeable future. Market risk (2) Interest rate risk ‘The Company has cash balances and intercompany debt. Cash balances do not generate ‘material amounts of interest. Intercompany loan balances attract interest at CDOR plus 1.5% and therefore the Company is exposed to changes in the CDOR rate. (b)_ Foreign currency risk The intercompany loan is CAD denominated and the GBP equivalent is, therefore, subject to variations in the foreign exchange rate. Funds drawn down against the CAD$10 million loan facility with Gabriel are retained in CAD until such time as they are required by the Company. Capital management The Group's objective when managing capital is to safeguard the Group's ability to continue as ‘a going concem and fund its long-term activities including in respect of the ICSID Arbitration. To maintain or adjust the capital structure, Gabriel has, when required, raised additional capital {rom shareholders. The Company has not paid dividends, nor returned capital tothe shareholder to date. ‘The Company is not subject to externally imposed capital requirements, 19RM GOLD (SERVICES) LIMITED Notes to the Financial Statements For the year ended 31 December 2018 (Amounts in GBP, unless otherwise stated) 47. Financial instruments (continued) Sensitivity analysis As of 31 December 2018 the carrying amount of the financial instruments equals fair market value. Based on management's knowledge and experience of the financial markets, the Company believes, based on its balance of cash, cash equivalents and intercompany loan as at 31 December 2018 the following movements are “reasonably possible” over a twelve-month period: ‘©The intercompany loan attracts interest at CDOR plus 1.5%. A plus or minus 0.5% change in CDOR would affect finance charges by approximately £10,406 (2017: £11,242), ‘= The intercompany loan is denominated in CAD, which gives rise to exposure to foreign exchange risk. As of 31 December 2018 a plus or minus 1% change in foreign exchange rates would affect net income by approximately £20,813 (2017: £22,484). 18. Net changes in non-cash working capital 2018 2017 Operating activites: Other receivables (1,621) Prepaid expenses (3.233) Accounts payable and accrued liabilities (234,596) (239,450) 19. Related party transactions Sales of Services The Company provides management and support services to the Group. To date ail of the invoiced revenue has been to Gabriel in accordance with a management services contract, which stipulates arm's length trade conditions between the companies. Balances outstanding with related parties Details of the intercompany loan with Gabriel are disclosed in note 10. Key management personnel Details of the transactions with key management personnel are disclosed in note 13, 20, Post Balance Sheet Events (On 6 August 2019 Gabriel announced that it had entered into definitive subscription agreements, with certain investors in connection with a private placement to raise US$20m. On 13 September 2019 the private placement closed successfully. 20