Annual Financial Report.

HIGHWAY CAPITAL plc

Corporate governance continued

Year ended 28 February 2023

Remuneration committee

During the year under review the remuneration committee was headed by Ludwik Sobolewski, the Chairman, and also comprised Maciej Szytko.

The committee's primary function is to review the performance of directors and senior employees and to set their remuneration and other terms of employment. It is also responsible for administering any share option and bonus schemes.

Relations with shareholders

The company encourages two-way communication with both its institutional and private investors and responds promptly to all queries received.  An understanding of the views of the major shareholders of the company has been developed, including through meeting at the AGM.

Internal controls 

The directors are responsible for internal control in the company and for reviewing its effectiveness. Procedures have been designed for safeguarding assets against unauthorised use or disposition; for maintaining proper accounting records; and for the reliability of financial information used within the business or for publication. Such procedures are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material error, losses or fraud. In addition, there is an ongoing process in place for identifying, evaluating and managing the significant risks faced by the company.

The key procedures that the directors have established are designed to provide effective internal control within the company and are regularly reviewed by the board. This is in accordance with The Turnbull Guidance provided by the Institute of Chartered Accountants in England and Wales. Such procedures have been in place throughout the period under review and up to the date of approval of the annual report and accounts.

Due to the size of the company, all key decisions are made by the board and the assessment and management of risk is an integral part of the board's decision-making process.

The company's organisational structure has clear lines of responsibility and the board continues to review systems to monitor and investigate the major business risks facing the company.

The board has established control procedures for all key financial areas of the business, which enable the board to maintain full and effective control. These controls include defined procedures for seeking and obtaining approval for major transactions and controls relating to the security of assets. The company operates a comprehensive budgeting and financial reporting system.

The directors have reviewed the effectiveness of the company's systems of internal control as they operated during the period under review and consider that there have been no material losses, contingencies or uncertainties caused by weaknesses in internal controls. The directors do not consider that an internal audit function is presently necessary as the company is a "cash shell".

LSE listing suspension

On 22 September 2016, Highway Capital Plc was suspended from the Official List and from trading on the Main Market due to the change in the strategic direction of the company's business away from its stated aim; to find an acquisition that would enhance shareholder value. On 11 October 2016, the company announced it entered into a non-legally binding head of terms for the acquisition of the Targets which if completed would have constituted a reverse takeover under the Listing Rules. Highway Capital Plc currently complies with its obligations and UKLR 21.1.5 rule as a suspended issuer. The suspension prevents its stakeholders from trading the company's shares on the London Stock Exchange. The Board remains optimistic that once the outstanding annual reports are released and a successful Corporate Restructuring completed, the company's suspension will be lifted.

HIGHWAY CAPITAL plc

Corporate governance continued

Year ended 28 February 2023

Going concern

The Directors have reviewed projections for a period of at least 12 months from the date of approval of the Financial Statements.

In making their assessment of going concern, the Directors have considered the Company's position carefully and discussed it with its shareholders, noteholders, creditors, investors and professional advisors.

The Company has made significant progress, since announcing termination of the Reverse Takeover transaction and commencement of the Corporate Restructuring as announced on 25 September 2025.

The Directors strongly believe that Company will be in a much stronger position to pursue potential strategic opportunities after completing a successful Company Voluntary Arrangement ("CVA"). The Directors believe that, a Company Voluntary Arrangement, if approved, would reduce Highway Capital Plc's net liabilities and allow for the Company to continue as an entity for the benefit of all stakeholders.

Highway Capital Plc, between February and April 2025, raised £45,334 to fund its professional costs related to publishing the annual accounts. On a successful conclusion of the CVA process and restoration of the full listing on the London Stock Exchange, the company will raise additional funds to cover working capital.

However, the successful implementation of a strategic opportunity or ongoing or future funding have been identified as material uncertainties which may cast doubt over the going concern assessment. Whilst acknowledging this uncertainty, based on their expectations of future successful fund raising and continued financial support from interested investors, the Directors consider it appropriate to continue to prepare the financial statements on a going concern basis.

Statement of compliance

In the opinion of the directors, the company has complied throughout the year ended 28 February 2023 with all provisions relevant to a company of its size set out in the UK Corporate Governance Code, except for the items outlined below.

Code provision A.2.1 - Since the disposal of the company's trading subsidiary on 24 January 2001 the company has not had a Chief Executive. The board intends to appoint a Chief Executive when a new business is acquired.

Code provision B.2.1 - A nomination committee has not been set up, as the directors consider that it is not appropriate while the company is a "cash shell" without any employees. The board intends to set up a nomination committee when a new business is acquired.

Code provision C.3.1 - Since the appointment of Ludwik Sobolewski as non-executive Chairman on 22 January 2016, the company has had one rather than at least two independent non-executive directors on the audit committee.

FCA DTR.4.1.3 - On 22 September 2016, Highway Capital Plc was suspended from the Official List and from trading on the Main Market due to the change in the strategic direction of the company's business away from its stated aim; to find an acquisition that would enhance shareholder value. The Board remains optimistic that once the outstanding annual reports are released and a successful Corporate Restructuring completed, the company's suspension will be lifted.

15

HIGHWAY CAPITAL plc

Independent Auditors' Report to the members of Highway Capital plc

Year ended 28 February 2023

Qualified opinion 

We have audited the financial statements of Highway Capital plc (the "Company") for the year ended 28 February 2023, which comprise the statement of financial position, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows, and notes to the financial statements, including a summary of significant accounting policies. 

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice). 

In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the financial statements: 

     give a true and fair view of the state of the Company's affairs as at 28 February 2023 and of its loss for the year then ended;

     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for qualified opinion

The Company has prepared its financial statements on a going concern basis, as disclosed in Note 1. The Company is in a net liability position of £1.85 million, has no cash reserves, and a large portion of creditor balances are classified as current. The Company entered into negotiations for a Company Voluntary Arrangement (CVA) during the year, the outcome of which remains inconclusive. Furthermore, the non-disclosure of the details and extent of the CVA process constitute lack of sufficient disclosure relating to the going concern ability of the entity. The shares of Highway Capital plc remain suspended from trading on the London Stock Exchange. 

Management has obtained a non-binding financial letter of support from a related party that partially addresses the Company's short-term obligations. However, the financial statements do not adequately disclose the existence of a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. In our view, this constitutes a material misstatement of the financial statements due to inadequate disclosure. 

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for the auditor's opinion.  

Conclusions relating to going concern

In auditing the financial statements, we have concluded that management's use of the going concern basis of accounting is appropriate. However, as described in the Basis for Qualified Opinion section, we identified a material misstatement due to the inadequate disclosure of a material uncertainty related to going concern. 

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 

HIGHWAY CAPITAL plc

Independent Auditors' Report to the members of Highway Capital plc

Year ended 28 February 2023

1. Going Concern and Material Uncertainty 

Key audit matter 

The group's ability to continue as a going concern is dependent on securing sufficient financial support and managing its liabilities as they fall due. At year end, the group was in a net liabilities position, had no available cash reserves, and had classified all creditors as current. In addition, the group entered into a Company Voluntary Arrangement (CVA) with creditors during the year. 

Management's going concern assessment is supported by a non-binding financial letter of support from a related party covering only a portion of outstanding liabilities, and there is no executed financing agreement for the balance. These factors give rise to a material uncertainty related to going concern. We consider this a key audit matter due to the significant judgement involved and the potential impact on the basis of preparation of the financial statements. 

How our audit addressed the key audit matter 

Our procedures included: 

·      Evaluating management's forecasts, underlying assumptions, and the robustness of the cash flow projections. 

·      Reviewing the terms and implications of the CVA and whether liabilities had been legally restructured. 

·      Assessing the credibility and sufficiency of the letter of support and its enforceability. 

·      Performing stress testing on cash flow scenarios to assess the group's ability to meet liabilities as they fall due. 

·      Reviewing the adequacy of disclosures in the financial statements regarding going concern and the related material uncertainty. 

Based on our work, we consider that the financial statements appropriately disclose the existence of a material uncertainty that may cast significant doubt on the group's ability to continue as a going concern. 

2. Accounting for Convertible Loan Notes 

Key audit matter 

During the year, the group issued convertible loan notes (CLNs). These were initially accounted for entirely as liabilities. Upon review, we identified that the conversion feature had not been appropriately assessed under IAS 32: Financial Instruments: Presentation. The instruments were subsequently corrected to reflect both a liability and an equity component, with a material adjustment and restatement of comparative figures. 

This matter was significant due to the complexity of classification under IAS 32, the risk of material misstatement, and the need for management to correct the error during the audit process. 

How our audit addressed the key audit matter 

Our procedures included: 

·      Reviewing the CLN agreements and evaluating whether the terms met the definition of a compound financial instrument. 

·      Engaging internal specialists to advise on the technical application of IAS 32. 

·      Recalculating the equity and liability split using the residual value method. 

·      Assessing the restatement's accuracy and the appropriateness of the related disclosures. 

We found that the revised accounting treatment and disclosures were appropriate and compliant with the applicable financial reporting framework. 

                      HIGHWAY CAPITAL  plc

Independent Auditors' Report to the members of Highway Capital plc

Year ended 28 February 2023

Other information

The directors are responsible for the other information. The other information comprises the information in the Report of the directors but does not include the financial statements and our Report of the auditors thereon. 

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard. 

Opinions on other matters prescribed by the Companies Act 2006  

In our opinion, based on the work undertaken in the course of the audit, the information given in the Report of the directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and the Report of the directors has been prepared in accordance with applicable legal requirements. 

Matters on which we are required to report by exception 

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report. 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: 

·      adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or 

·      the financial statements are not in agreement with the accounting records and returns; or 

·      certain disclosures of directors' remuneration specified by law are not made; or 

·      we have not received all the information and explanations we require for our audit. 

Responsibilities of Directors 

As explained in the Statement of directors' responsibilities set out on page 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. 

 HIGHWAY CAPITAL  plc

Independent Auditors' Report continued

Year ended 28 February 2023

Auditor's Responsibilities for the Audit of the Financial Statements 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. 

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 

As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism throughout the audit. 

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. 

The objectives of our audit in respect of fraud are to: 

·      Identify and assess the risks of material misstatement in the financial statements due to fraud; 

·      Obtain sufficient appropriate audit evidence regarding those assessed risks through designing and implementing appropriate responses; and 

·      Respond appropriately to fraud or suspected fraud identified during the audit. 

However, the primary responsibility for the prevention and detection of fraud rests with management and those charged with governance. 

Our approach to detecting irregularities, including fraud, involved the following: 

·      Obtaining an understanding of the legal and regulatory framework applicable to the entity and how the Company is complying with that framework. The most significant laws and

·      regulations we considered included the Companies Act 2006, FRS 102 Section 1A, and relevant UK tax legislation. 

·      Discussions with management and those charged with governance to understand procedures and controls established to prevent and detect fraud. 

·      Discussions among the audit engagement team regarding risk of fraud, including management override of controls. 

·      Performing specific procedures to respond to these risks, including: 

o  Testing journal entries and other adjustments; 

o  Evaluating the business rationale of significant transactions; 

o  Performing analytical procedures on key estimates; 

o  Confirming group balances and significant transactions; 

o  Assessing the adequacy and compliance of disclosures in the financial statements. 

There are inherent limitations in the audit procedures described above. Irregularities, including fraud, may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. As such, there is a risk that audit procedures may not detect a material misstatement arising from fraud, particularly the further the audit date is from the date of the underlying transactions. 

The risks of material misstatement that had the greatest effect on our audit included the accounting treatment of the convertible loan notes and going concern. 

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at:  www.frc.org.uk/auditorsresponsibilities 
 

This description forms part of our auditor's report. 

HIGHWAY CAPITAL  plc 

Independent Auditors' Report continued

Year ended 28 February 2023

Use of our report

This report is made solely to the Company's members, as a body, in accordance with chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Pankaj Rajani (Senior Statutory Auditor)                                     

For and on behalf of Macalvins Limited                                                   

Chartered Accountants & Statutory Auditors

7 St John's Road 

Harrow 

Middlesex 

HA1 2EY 

19 June 2025

HIGHWAY CAPITAL  plc

Statement of comprehensive income

Year ended 28 February 2023

Continuing operations

There are no acquired or discontinued operations in the above two financial periods.

Statement of comprehensive income

The company has no items of other comprehensive income other than the profit or loss for the above two financial periods.

The notes on pages 25 to 31 form part of these Financial Statements.