TIDMKNB
RNS Number : 2439B
Kanabo Group PLC
30 September 2022
Kanabo Group PLC
("Kanabo" or the "Company"),
Half Yearly Report (Unaudited)
For the Period Ended 30 June 2022
Kanabo Group plc (LSE:KNB) the pan-European medical cannabis
company that focuses on developing and commercialising
cannabis-derived products for medical patients and wellness
consumers, announces its half yearly results for the period ended
30 June 2022.
Operating Highlights
-- Acquisition of the entire share capital of the GP Service Ltd ("GPS")
-- Expanded sales and service teams across the group to support accelerated growth
-- Formation of Agritec Ltd as a consulting company which will
secure supply of high-quality medicinal cannabis to Kanabo
-- Appointment of a UK specialist doctor as the clinical
Director to manage medicinal cannabis compliance policies and
procedures for GPS
Financial Highlights
-- Revenue increased to GBP0.24m (H1 21: GBP0.02m) post acquisition of GPS
-- Underlying operating loss, before exceptional costs relating
to the placing and acquisition, of GBP2.77m (H1 21: GBP1.19m)
-- Reported loss per share of 0.92p (H1 21:0.85p)
-- Cash and cash equivalents as of 30 June 2022 of GBP4.96m (FY 21: GBP4.48m)
Chief Executive, Avihu Tamir, commented; "The first half of 2021
was an extremely busy and productive period for the Company. Most
importantly, the integration of GPS has gone according to plan, and
I wish to give my thanks to all the staff at GPS for their
assistance on making this as seamless as possible.
Our highly differentiated value proposition of Telehealth with a
fully compliant medicinal Cannabis prescription platform paves the
way for us to leverage our IP to demonstrate the intrinsic value of
full supply chain ownership, from manufacturing to delivery. We
will now focus our efforts during the second half of the year to
scaling our capacity to meet anticipated demand from both our
primary and secondary healthcare and wellbeing markets."
Kanabo Group Plc
Avihu Tamir, CEO Via Vox Markets
Peterhouse Capital Ltd (Financial Tel: +44 (0)20 7469 0930
Adviser)
Eran Zucker / Lauren Riley
Vox Markets (Investor Relations)
Kat Perez / Richard Fabris KanaboGroup@voxmarkets.co.uk
About Kanabo Group Plc
Kanabo Group Plc is a leading developer and distributer of
cannabis-derived products and inhalation technologies for medical
patients and wellness consumers. Kanabo Group Plc, which was the
first medicinal cannabis company to complete an IPO on the London
Stock Exchange, is a vertically integrated platform comprising
cultivation consultancy, product R&D and formula development,
and marketing and distribution. Its subsidiaries include:
-- Kanabo Agritec Ltd, a cultivation consultancy supporting
cannabis businesses in developing new farms through infrastructure,
research, and product guidance. These farms deliver high-quality
raw materials for Kanabo's formulas and product line.
-- Kanabo Research Ltd, a wholly owned subsidiary of Kanabo
Group Plc, responsible for R&D, regulation, and quality
assurance procedures.
-- The GP Service - a Kanabo Group Plc owned telehealth
provider, offering NHS approved online consultations, online
prescriptions, treatment forms and access to both Kanabo
medical-cannabis & wellbeing products.
CHAIRMAN'S STATEMENT
The first half of 2022 was transformational for the Group with
the successful acquisition and integration of The GP Service
("GPS"). GPS will form an integral part of the group providing both
the technology and services required to bring medicinal cannabis
prescriptions to the mainstream in the UK.
The Company also successfully completed an equity placing and
converted certain tranches of warrants to raise GBP2. 4 6m (net) in
aggregate which ensured the Company is well funded to execute its
strategy to become a leading vertically integrated European
medicinal cannabis Company.
The Board of Kanabo was strengthened during the period with the
appointment of Gil Efron as a non-executive director. Gil is
currently serving as President and Chief Financial Officer of
NASDAQ and TASE dual-listed Purple Biotech Ltd., a clinical-stage
company (PPBT) since June 2021, having previously held the position
of Deputy Chief Executive Officer and Chief Financial Officer from
October 2018. Prior to his current tenure at Purple Biotech, Gil
served as Deputy CEO and CFO of Kamada Ltd., a NASDAQ and TASE
dual-listed plasma-derived protein therapeutics company between
2011 and 2017.
Gil therefore brings Kanabo a wealth of experience across both
healthcare and equity capital markets, which I believe will be
invaluable for the Company going forward. Gil will also take over
as chair of the Audit Committee.
Following the successful integration of the GPS into the wider
Group, GPS's CEO has now handed over day to day control of GPS to
Kanabo Group's CEO and is leaving the Group. I would like to take
this opportunity to thank GPS's CEO for his contribution throughout
the integration process and wish him well with his other business
interests.
The Group continues to build a disruptive healthcare business
that harnesses cutting edge technology and product innovation
around medicinal cannabis to meet the substantial unmet need from
patients and consumers alike who are seeking to enhance their
overall wellness.
We will continue to challenge the norms of traditional
healthcare and wellbeing delivery, providing new points of access
to benefit patients.
Whilst I would not normally comment on the equity markets in
general or our share price in particular, I think it's important
for investors to understand that we continually review our
performance and one of the measures we monitor is our share price.
We are therefore extremely disappointed, as I'm sure are you, in
our recent share price performance.
As the Cannabis industry matures, and more companies engaged in
similar activities to Kanabo list on the London Stock Exchange, we
will be better able to compare our performance against our peers.
Indeed, along with the wider equity markets around the world, I can
confirm as of today Kanabo and our currently listed peers have all
suffered double digit decreases in share prices over the period.
Whilst it is little comfort to know we are not alone, we remain
committed to our strategic plan which should generate significant
returns for our shareholders.
Outlook
We are aiming for another period of operational and financial
growth through the second half of the current fiscal year as
revenue from GPS continues to increase, we continue to work toward
achieving CE accreditation for our VapePod medical device and
further develop our vertically integrated business model.
I therefore look forward to updating shareholders throughout the
remainder of the year as to the continued product development and
the progress made building our routes to market as regulation
around medicinal cannabis matures across Europe and the UK.
In the interim, the launch of our UK ecommerce site, will enable
sales of our cannabis-derived wellness products to build within the
recreational markets of Europe, UK, and Israel.
Despite the difficult macro-economic environment around the
globe, I believe Kanabo remains well positioned to deliver
attractive returns for our shareholders.
Chairman,
David Tsur
CHIEF EXECUTIVE'S REPORT
The six-month period under review was obviously dominated by the
acquisition and integration of the GP Service (GPS), which is
transformational for the Group.
However, in addition to this acquisition, we also continued to
deliver our stated growth strategy. We signed a strategic MoU with
Forbe Ltd for the sale of wellness products in Israel, formed a new
subsidiary, Agritec Ltd, to secure supply of medicinal cannabis and
took the strategic decision to abort the highly dilutive
acquisition of Materia.
Operating Review
The strategy to build a fully vertically integrated
cannabis-derived product company for the global health and wellness
markets continues to be executed at an increasing pace.
Perhaps most importantly, the acquisition of GPS has been
transformational for the Group and fully aligned with our long-term
mission to enable greater patient access to medicinal cannabis
products across the UK.
The acquisition and integration of GPS has been a complete
success with both companies now working seamlessly together
according to our original plan set out at the beginning of the
year. The objective during the second half of the current financial
year for GPS is to rapidly scale its existing digital and
telemedicine business whilst establishing a fully compliant channel
to market for our medicinal cannabis products.
As mentioned before, we believe by improving patient access to
regulated medicinal cannabis with dosing controlled by medical
grade devices, the Company can make a substantial contribution to
improving outcomes for thousands of patients across the UK and
Europe and beyond.
To ensure the Company remains at the forefront of medicinal
cannabis supply, the Company formed Agritec Ltd, a subsidiary
dedicated to providing the know-how needed the design, built,
operating, and management of the production of medicinal cannabis.
Agritec signed its first agreement with a Spanish operator and
expecting to generate revenues toward the beginning of 2023.
The Company also demonstrated its international reach by signing
a Memorandum of Understanding for the marketing and distribution of
its cannabis-derived wellness products with Forbe Ltd, thereby
taking the Company into the emerging consumer market in Israel. We
expect this MoU to immediately position the Company as a leader in
this high growth market where the regulatory landscape for the sale
of cannabis-derived wellness products is on an increasingly
positive trajectory. Israel's deregulated market is now estimated
to be worth up to US$475 million by 2025, which provides the
Company ample opportunity to rapidly grow.
During the period we also launched the Company's first dedicated
eCommerce platform, 'The Kanabo Store', for the distribution of
cannabis derived wellness products to consumers. The roll-out plan
will have an initial focus on the UK before the website launches
across Europe, clearly demonstrating how focused we are to bringing
our proprietary wellness products to market with an accelerated
path to commercial sales volumes during 2023.
FINANCIAL REVIEW
On 21 February 2022, the Company acquired 100% of the voting
rights of GP Service (UK) Limited ("GPS") at a price of 12.65 pence
per share. The net consideration of GBP13,499,000 was settled with
the issue of 106,708,577 shares, of which 21,302,460 have already
been issued. The book value of the acquisition sum to net
liabilities was GBP144,000.
This is therefore the first period we are reporting with
business combinations of Kanabo and the GP Service (UK) Ltd post
acquisition. Segmental information is therefore now presented in
terms of Primary and Secondary care:
-- Primary Care - Tele pharma services provided by GPS
-- Secondary Care - Development and distribution of cannabis
derived medical and wellness products
Total revenue for the six-month period was GBP239,000, of which
GBP208,000 came from the sale of Primary Care services with the
remaining GBP31,000 from Secondary Care, predominantly being the
sale of wellness products.
Cost of Sales, which comprised mostly of the provision of
telemedicine services, resulting in total gross profit for the
Group of GBP88,000.
During the period, the Company invested GBP181,000 (H1 21;
GBP116,000) in Research & Development. GBP153,000 of which was
directly related to staff compensation, including salaries and
share based payments, with approximately GBP19,000 invested in
laboratory and testing equipment.
Sales and Marketing expense increased during the period to
GBP511,000 (H1 21; GBP187,000). GBP294,000 of which was directly
related to staff compensation with the remaining GBP217,000 due to
the increased marketing costs for wellness products following the
launch of the Company's UK eCommerce site.
Underlying General & Administrative costs increased to
approximately GBP2,166,000 (H1 21: GBP888,000) during the period,
largely due to the addition of the GP Service. GBP639,000 of which
was directly related to staff and share based payments. However,
the Company incurred circa GBP610,000 of exceptional professional
services costs (consulting, legal and accounting). GBP680,000
non-cash expenses generated from amortization goodwill and
intangible assets.
Acquisition-related exceptional costs, related to the
acquisition of GPS, was GBP1,067,000 and is presented as " other
expenses " in the income statement.
Reported operating loss was therefore GBP3,837,000 with Net Loss
of GBP3,773,000 after GBP57,000 finance costs, including GBP20,000
loss in foreign exchange, and taxation of GBP121,000 generated from
movements in deferred taxes during the period.
Loss per share reduced to 0.92p per share due to the weighted
average shares in issue increasing to 28,125,000 and the issue of
21,302,460 to satisfy the net consideration of the GP service.
Net cash outflow from operating activities for the period was
GBP2,039,000. However, the balance sheet remained strong by raising
GBP2,137,000 of net new capital by way of a placing of 28,125,000
new ordinary shares in the Company at a price of 8 pence per share
and raising a further GBP323,000 via the exercise of certain
warrants in the Company resulting in reported cash and cash
equivalents, as of 30 June 2022, of GBP4,959,000.
On 25 July 2021, the Company signed a head of terms agreement
for the acquisition of 11157353 Canada Corp. a company incorporated
in Canada ("Materia"). During these negotiations, the Company
loaned Materia CAD$1.0m. During the audit of FY21, the Company
prudently fully impaired the loan based on the Directors assessment
of Materia's ability to repay the debt.
During the period the Company decided not to proceed with the
proposed acquisition of Materia while continuing negotiations for
full repayments of the loans granted during 2021. During the
reporting period, the Company has received interest payments of
CAD$ 55,000 and remains in negotiations for full repayment of the
loans.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting'.
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year; and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
CAUTIONARY STATEMENT
This Interim Management Report (IMR) has been prepared solely to
provide additional information to shareholders to assess the
Company's strategies and the potential for those strategies to
succeed. The IMR should not be relied on by any other party or for
any other purpose.
Unaudited consolidated statement of comprehensive income for the
period ended 30 June 2022
For the six months ended 30 June For the year ended 31 December
----------------------------------- -------------------------------
2022 2021 2021
----------------- ---------------- -------------------------------
Unaudited Audited
-----------------------------------
Note GBP '000
----- --------------------------------------------------------------------
Revenue 239 15 73
Cost of sales 151 19 66
----------------- ---------------- -------------------------------
Gross profit (loss) 88 (4) 7
Research and development 181 116 242
Sales and marketing 511 187 569
General and administration 9 2,166 888 2,000
Other expenses 10 1,067 - -
Net impairment losses on financial
assets 14.a - - 598
----------------- ---------------- -------------------------------
Operating loss (3,837) (1,195) (3,402)
Reverse acquisition expenses - (1,172) (1,172)
Finance income/(expense) (57) (10) 23
----------------- ---------------- -------------------------------
Loss before taxation from continuing
operations (3,894) (2,377) (4,551)
Taxation 121 - -
Loss for the period (3,773) (2,377) (4,551)
================= ================ ===============================
Other comprehensive income for the
period
Foreign operations - foreign currency
translation differences 5 45 (82)
----------------- ---------------- -------------------------------
Total items that may be reclassified
to profit or loss 5 45 (82)
----------------- ---------------- -------------------------------
Total comprehensive loss (3,768) (2,332) (4,633)
----------------- ---------------- -------------------------------
Loss (basic and diluted) per share
from continuing operations
attributable to the equity
owners
Basic and diluted loss per share
(pence per share) 11 (0.92) (0.85) (1.40)
----------------- ---------------- -------------------------------
Unaudited consolidated statement of financial position as at 30
June 2022
30 June 31 December
2022 2021 2021
--------- ----------- ------------
Unaudited Audited
-----------------
Note GBP '000
--------- ------------------------------------
ASSETS
Non-current assets
Intangible assets and goodwill 7 14,876 - -
Property, plant, and equipment 100 34 42
Right-of-use assets 13.b 309 - -
Financial asset held at fair value through other comprehensive
income 750 750 750
Long term deposit - 13 -
16,035 797 792
--------- ----------- ------------
Current assets
Inventories 69 59 63
Trade receivables 18 4 10
Other receivables 254 85 237
Short-term deposits 51 7 20
Cash and cash equivalents 4,959 5,945 4,477
5,351 6,100 4,807
--------- ----------- ------------
Total assets 21,386 6,897 5,599
========= =========== ============
EQUITY
Equity attributable to shareholders
Issued capital 10,573 9,213 9,249
Share premium 26,912 14,190 14,400
Share-based payments reserve 1,077 266 758
Share to be issued reserve 4,635 2,500 2,500
Reverse acquisition reserve (14,968) (14,968) (14,968)
Foreign currency reserve (2) 30 (7)
Retained deficit (10,486) (4,582) (6,748)
--------- ----------- ------------
Total equity 17,741 6,649 5,184
--------- ----------- ------------
LIABILITIES
Non- current liabilities
Interest-bearing loan 12 312 - -
Lease liability 13.b 256 - -
Deferred taxes 1,590 - -
--------- ----------- ------------
2,158 - -
--------- ----------- ------------
Current liabilities
Trade payables 139 33 42
Other payables 1,096 215 373
Interest-bearing loan and borrowings 12, 13.b 252 - -
1,487 248 415
--------- ----------- ------------
Total liabilities 3,645 248 415
--------- ----------- ------------
Total equity and liabilities 21,386 6,897 5,599
========= =========== ============
Unaudited consolidated statement of changes in equity for the
period ended 30 June 2022
Attributable to owners of the Company
-----------------------------------------------------------------------------------------------------
Share
based Share to Reverse Foreign
Share Share payments be issued acquisition exchange Retained
capital premium reserve reserve reserve reserve deficit Total
----------- ------------ ----------- ----------- ------------ ----------- ----------- --------
GBP '000
-----------------------------------------------------------------------------------------------------
As at 1
January 2022
(audited) 9,249 14,400 758 2,500 (14,968) (7) (6,748) 5,184
Total
comprehensive
loss for the
period - - - - - 5 (3,773) (3,768)
Acquisition of
a subsidiary 533 10,831 - 2,135 - - - 13,499
Shares issued 703 1,434 - - - - - 2,137
Exercise of
options 7 5 (10) - - - 10 12
Exercise of
warrants 81 242 - - - - - 323
Share-based
payments - - 329 - - - 25 354
Total
transactions
with owners,
recognised in
equity 1,324 12,512 319 2,135 - 5 (3,738) 12,557
----------- ------------ ----------- ----------- ------------ ----------- ----------- --------
As at 30 June
2022
(unaudited) 10,573 26,912 1,077 4,635 (14,968) (2) (10,486) 17,741
=========== ============ =========== =========== ============ =========== =========== ========
Attributable to owners of the Company
-------------------------------------------------------------------------------------
Share Share
based to be Reverse Foreign
Share Share payments issued acquisition exchange Retained
capital premium reserve reserve reserve reserve deficit Total
-------- -------- --------- -------- ------------ --------- --------- --------
GBP '000
-------------------------------------------------------------------------------------
As at 1 January 2021 (audited) - 2,098 805 - - 75 (3,017) (39)
Total comprehensive loss for
the period - - - - - (45) (2,377) (2,422)
Transfer to reverse
acquisition reserve - (2,098) - - 2,098 - - -
Exercise of options - - (812) - - - 812 -
Recognition of plc equity at
acquisition date 735 592 - - 434 - - 1,761
Acquisition of a subsidiary 5,769 9,231 - - (15,000) - - -
Shares issued 2,600 4,775 - - - - - 7,375
Shares to be issued - - - 2,500 (2,500) - - -
Exercise of warrants 94 314 - - - - - 408
Issue of shares in settlement
of fees 15 25 - - - - - 40
Cost of share issue - (747) - - - - - (747)
Issue of warrants - - 113 - - - - 113
Share-based payments - - 160 - - - - 160
Total transactions with
owners, recognised in equity 9,213 12,092 (539) 2,500 (14,968) (45) (1,565) 6,688
-------- -------- --------- -------- ------------ --------- --------- --------
As at 30 June 2021 (unaudited) 9,213 14,190 266 2,500 (14,968) 30 (4,582) 6,649
======== ======== ========= ======== ============ ========= ========= ========
Attributable to owners of the Company
-----------------------------------------------------------------------------------------------------
Share
based Share to Reverse Foreign
Share Share payments be issued acquisition exchange Retained
capital premium reserve reserve reserve reserve deficit Total
----------- ------------ ----------- ----------- ------------ ----------- ----------- --------
GBP '000
-----------------------------------------------------------------------------------------------------
As at 1
January 2021
(audited) - 2,098 805 - - 75 (3,017) (39)
Total
comprehensive
loss for the
year - - - - - (82) (4,551) (4,633)
Transfer to
reverse
acquisition
reserve - (2,098) - - 2,098 - - -
Exercise of
options 4 - (820) - - - 820 4
Recognition of
plc equity at
acquisition
date 735 592 - - 434 - - 1,761
Acquisition of
a subsidiary 5,769 9,231 - - (15,000) - - -
Shares issued 2,600 4,775 - - - - - 7,375
Shares to be
issued - - - 2,500 (2,500) - - -
Exercise of
warrants 126 411 - - - - - 537
Issue of
shares in
settlement of
fees 15 25 - - - - - 40
Cost of share
issue - (634) - - - - - (634)
Issue of
warrants - - 113 - - - - 113
Share-based
payments - - 660 - - - - 660
Total
transactions
with owners,
recognised in
equity 9,249 12,302 (47) 2,500 (14,968) (82) (3,731) 5,223
----------- ------------ ----------- ----------- ------------ ----------- ----------- --------
As at 31
December 2021
(audited) 9,249 14,400 758 2,500 (14,968) (7) (6,748) 5,184
=========== ============ =========== =========== ============ =========== =========== ========
Unaudited consolidated statement of cash flows for the period
ended 30 June 2022
For the six months ended 30
June For the year ended 31 December
-------------------------------- --------------------------------
2022 2021 2021
Unaudited Audited
--------------------------------
Note GBP '000
----- ------------------------------------------------------------------
Operating activities
Loss for the period (3,773) (2,377) (4,551)
Adjustments to reconcile profit before tax
to net cash flows:
Reverse acquisition share-based payment
expense - 1,172 1,172
Net impairment losses on financial assets - - 598
Share-based payment expense 354 160 660
Depreciation of property, plant and
equipment and right-of-use assets 27 5 7
Amortisation goodwill and intangible
assets 680 - -
Finance income, net 30 11 13
Taxation (121) - -
Working capital changes:
Change in trade receivable 5 (4) (10)
Change in other receivable 60 (46) (194)
Change in inventories (6) (32) (35)
Change in trade payables 78 (1) 6
Change in other payables 646 107 256
----------------------- --------------- ------------------------
(2,020) (1,005) (2,078)
Interest paid (19) - -
----------------------- --------------- ------------------------
Net cash flows used in operating
activities (2,039) (1,005) (2,078)
----------------------- --------------- ------------------------
Investing activities
Purchase of property, plant, and equipment (58) (24) (35)
Investment in financial asset held at fair
value through other comprehensive income - (750) (750)
Acquisition of a subsidiary, net of cash
acquired 7 235 358 358
Investment in short term deposits (31) (2) (2)
Investment in intangible assets (86) - -
Short term loan - - (582)
Net cash flows from/ (used in) investing
activities 60 (418) (1,011)
----------------------- --------------- ------------------------
Financing activities
Share Issue, net of issuing cost 13.a 2,137 6,520 6,608
Proceeds from exercise of warrants 323 374 529
Proceeds from exercise of share options 12 98 102
Receipts of long-term loans 13.c 9 - -
Repayment of lease liability 13.b (14) - -
Repayment of interest-bearing loan 12 (17) - -
Net cash flows from financing activities 2,450 6,992 7,239
----------------------- --------------- ------------------------
Net increase in cash and cash equivalents 471 5,569 4,150
Net foreign exchange difference 11 (4) (53)
Cash and cash equivalents at beginning of
the period 4,477 380 380
Cash and cash equivalents at end of the
period 4,959 5,945 4,477
======================= =============== ========================
Notes to the consolidated financial statements
1. Corporate information
The interim condensed consolidated financial statements of
Kanabo Group Plc. and its subsidiaries (collectively, the Group)
for the six months ended 30 June 2022 were authorized for issue in
accordance with a resolution of the directors on 28 September
2022.
Kanabo Group Plc. (the Company) is a limited company,
incorporated and domiciled in England and Wales, whose shares are
publicly traded on the London Stock Exchange in the standard
segment.
The registered office is located at Churchill House, 137-139
Brent Street, London, NW4 4DJ.
The Group principal activities are the distribution and
development of cannabis derived medical and wellness products.
2. Basis of preparation and changes to the Group's accounting policies
a. Basis of preparation
The interim condensed consolidated financial statements for the
six months ended 30 June 2022 have been prepared in accordance with
IAS 34 Interim Financial Reporting. The Group has prepared the
financial statements on the basis that it will continue to operate
as a going concern. The Directors consider that there are no
material uncertainties that may cast significant doubt over this
assumption. They have formed a judgement that there is a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, and not less than
12 months from the end of the reporting period. The interim
condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's
annual consolidated financial statements as at 31 December 2021
b. New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2021, except for the adoption of new standards effective as of 1
January 2022. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet
effective. Several amendments apply for the first time in 2022, but
do not have an impact on the interim condensed consolidated
financial statements of the Group.
3. Estimates and Judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates. In preparing
these condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the financial statements for
the year ended 31 December 2021.
4. Financial risk management
The Group's activities expose it to a variety of financial
risks, including - market risk (including currency risk and
interest rate risk), credit risk and liquidity risk. The condensed
consolidated interim financial statements do not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group's annual financial statements as at 31 December
2021. There have been no changes in any risk management policies
since the year end or as disclosed in the prospectus.
5. Going concern
As at 30 June 2022, the Group's cash position totaling GBP4,959
thousand and it was in a strong net current asset position. Based
on the Group's current cash reserves and detailed cash forecasts
produced, the Directors are confident that the Group will be able
to meet its obligations as they fall due over the course of the
next 12 months. Whilst the Group may seek to raise further funds in
the next 12 months, the Directors are confident that the Group
would be able to meet its obligations as they fall due in the event
that no further funding is obtained because of low level committed
expenditure relative to the forecasted discretionary expenditure,
which could be reduced or deferred.
The Directors also acknowledge that the COVID-19 pandemic has
had, and will likely continue to have, adverse impacts on the
global economy and capital markets. However, the Directors are
confident that the Group will continue to remain a going concern as
they do not believe the Group is dependent on raising further funds
to remain a going concern.
6. Segment information
Following the acquisition of GP Service (UK) Limited ("GPS")
(see note 7), for management purposes, the Group is organized into
business units based on its products and services and has two
reportable segments, as follows:
- Primary case segment - the tele pharma services provided by GPS.
- Secondary case segment - distribution and development of
cannabis derived medical and wellness products.
No operating segments have been aggregated to form the above
reportable operating segments.
The following tables present revenue and loss information for
the Group's operating segments for the six months ended 30 June
2022:
Primary care Secondary care Total segments Adjustments and eliminations Consolidated
------------- --------------- --------------- ----------------------------- -------------
GBP '000
---------------------------------------------------------------------------------------------
Revenue
External customer 208 31 239 - 239
Inter-segment - - - - -
Total revenue 208 31 239 - 239
============= =============== =============== ============================= =============
Results
Segment loss (932) (2,841) (3,773) - (3,773)
============= =============== =============== ============================= =============
The following table presents assets and liabilities information
for the Group's operating segments as at 30 June 2022:
Primary care Secondary care Total segments Adjustments and eliminations Consolidated
------------- --------------- --------------- ----------------------------- -------------
GBP '000
---------------------------------------------------------------------------------------------
Assets
30 June 2022 15,431 6,445 21,876 (490) 21,386
============= =============== =============== ============================= =============
Liabilities
30 June 2022 2,704 1,431 4,135 (490) 3,645
============= =============== =============== ============================= =============
7. Business combinations
Acquisition of GP Service (UK) Limited
On 21 February 2022, the Company acquired 100% of the voting
rights of GP Service (UK) Limited ("GPS") a non-listed company
based in UK and specialising in care telemedicine provider in
exchange for a net consideration of GBP13,498 thousand ("Net
Consideration"). The Net Consideration was satisfied by the
allotment of 94,133,645 B ordinary shares of 0.00001 pence each in
the capital of Kanabo GP Limited, a subsidiary of Kanabo Group Plc,
at a price of 12.65 pence per share ("Consideration Shares"). It
has been agreed as part of the acquisition that the principal and
interest owed as at completion by GPS to MEIF WM Debt LP (GBP1,591
thousand) will be repayable by the Company by the allotment of
12,574,931 ordinary shares within 18 months based on the same price
of 12.65 pence per share.
The fair values of the identifiable assets and liabilities of
GPS as at the date of acquisition were:
Fair value recognised
on acquisition
----------------------
GBP'000
----------------------
Assets
Property, plant, and equipment 11
Intangible assets 116
Cash and cash equivalents 235
Trade receivables 13
Other receivables 77
452
----------------------
Liabilities
Interest-bearing loan (500)
Trade payables (19)
Other payables (77)
Total liabilities (596)
----------------------
Total identifiable net liabilities
at fair value ( 144 )
Other intangible assets arising
on acquisition 9,007
Deferred taxes over amortised
assets (1,711)
Goodwill arising on acquisition 6,347
----------------------
Purchase consideration transferred 13,499
======================
Other intangible assets arising on acquisition include the
technology and GPS's brand which was acquired through business
combinations. The management assessment the lifetime of these
assets for a minimum of 5 years and as a result recorded
amortizations expenses in the amount of GBP758 thousands.
8. Share-based payments
a. Warrants
During the reporting period 3,231,501 warrants exercise to
shares, the net proceeds summed to GBP323 thousands. In addition,
6,422,711 warrants forfeited.
See note 9.a regarding warrants issued during the reporting
period.
b. Options
During the reporting period 290,818 options exercise to shares,
the net proceeds summed to GBP12 thousands.
No new options were issued during the reporting period.
After the reporting period, 22,759,150 share options were
granted to employees and senior executives under the options
plans.
The total share-based payment charge in the period was GBP354
thousand. The share-based payment charge was calculated using the
Black-Scholes model. All warrants and options have an exercise
period between one and three years from the date of issue. The
total of the share-based payment charge has been simultaneously
credited to retained earnings.
Share-based payments charge for the reporting period:
For the six months ended For the year
30 June ended 31 December
--------------------------- -------------------
2022 2021 2021
------------ ------------ --------------------
GBP '000
------------------------------------------------
Research and development 17 3 6
Sales and marketing 129 41 218
General and administration 208 116 436
------------ ------------ --------------------
354 160 660
============ ============ ====================
9. General and administration
For the six months ended For the year
30 June ended 31 December
--------------------------- -------------------
2022 2021 2021
------------ ------------ --------------------
GBP '000
------------------------------------------------
Salaries and related expenses 431 295 676
Share-based payment expense 208 116 436
Insurance 35 82 100
Professional services (*) 610 324 599
Rent and related expenses 40 20 52
Depreciation 27 5 7
Amortization 680 - -
IT Development and Licenses 45 4 12
Travel and accommodation 70 9 54
Patent - 8 13
Other 20 25 51
------------ ------------ --------------------
Total 2,166 888 2,000
============ ============ ====================
10. Other expenses
Other expenses include acquisition-related transaction costs
which were expensed as incurred and included as other expenses in
total amount of GBP1,067 thousands.
11. Loss per share
The basic earnings per share is calculated by dividing the loss
attributable to the ordinary shareholders of the Company by the
weighted average number of Ordinary shares in issue during the
period, excluding Ordinary shares purchased by the Company and held
as treasury shares.
For the
For the six months ended year ended
30 June 31 December
------------------------------ --------------
2022 2021 2021
------------ ------------ ------------------
Unaudited Audited
------------------------------ --------------
Loss attributable to equity
holders of the Company
(GBP'000) (3,773) (2,377) (4,551)
Weighted average number
of shares in issue 408,018,768 278,192,783 324,287,001
------------ ------------ ------------------
Loss per share pence (0.92) (0.85) (1.40)
============ ============ ==================
Due to the loss incurred in the period under review, the
dilutive securities have no effect at 30 June 2022.
12. Interest bearing loan
Interest-bearing loan represent a Coronavirus Business
Interruption Loan Scheme (CBILS) granted to GP Service (UK) Limited
on 22 January 2021, carry a fixed rate interest of 9% and repayable
by instalments over a 3-year period commencing March 2022.
13. Events during reporting period
a. On 21 February 2022 ("admission date"), the authorized share
capital was increased by GBP2,250 thousand (before costs) by the
issue of 28,125,000 ordinary shares of 2.5 pence each. On the
admission date, the Group additionally granted a half warrant to
the noteholders to subscribe for an additional half a new ordinary
share at an exercise price of 16 pence for period of 18 months
following Admission Date. And additional half warrant to the
noteholders to subscribe for an additional half a new ordinary
share at an exercise price of 24 pence for period of 18 months
following Admission Date. Total warrants issued sum to 28,125,000.
The warrants were not issued for goods or services provided and
therefore fall outside the scope of IFRS 2 and do not require fair
valuing.
b. On 22 December 2021, Kanabo Research Ltd ("Kanabo Research")
(a wholly owned subsidiary of the Company) signed a lease agreement
with a third party to rent space in Israel, in exchange for a total
ILS 24 thousand per month linked to the Consumer Price Index. The
start date of the rental agreement was agreed between the parties
on 17 March 2022. The lease agreement is for three years and
includes an extension option for three more years. If the Kanabo
Research exercising the rent extension option, the monthly rent
will be updated with an increase of 6%. Kanabo Research exercises
significant discretion in examining whether it is reasonably
certain that extension option will be exercised. At date the lease
began, the company recognized a right of use in the property
against a lease obligation in the amount of GBP327 thousand (ILS
1,399 thousand). To secure the lease agreement, the company
provided a deposit in the amount of GBP33 thousand (ILS 132
thousand).
During 2022, the Kanabo Research recognized depreciation
expenses in the amount of approximately GBP18 thousand as well as
financing expenses in the amount of GBP12 thousand. The annual
interest rate for capitalization that was applied for the purpose
of calculating the obligation at the start of the lease was
7.5%.
c. In March 2022, Kanabo Research Ltd ("Kanabo Research") (a
wholly owned subsidiary of the Company) ("Kanabo Research") and a
third-party partners formed an entity, Kanabo Agritec Ltd.
("Agritec"), to enter into agreements with third parties at minimal
cost to leverage the Company's Intellectual Property for the
cultivation, processing, and production of cannabis products.
Kanabo Research holds 40% of the voting shares in this entity. The
third-party hold the remaining 60% of the voting shares. Kanabo
Research committed to finance Agritic up to an amount equal to 75%
of the principal amount requested by Agritc, the other Founders,
together, will lend up to the remaining 25% of the principal amount
in equal portions among them. As of the reporting period Kanabo
Research loaned Agritec total amount of ILS 100 thousand
(approximately GBP24 thousand).
Under the contractual arrangement with the third-party partners,
Kanabo Research has a majority representation on the entity's board
of directors and the Kanabo Research's approval is required for all
major operational decisions, the Kanabo Research assessed that the
voting rights in Agritc are not the dominant factor in deciding who
controls the entity. Therefore, the Kanabo Research concluded
Agritc is a structured entity under IFRS 10 Consolidated Financial
Statements and that the Kanabo Research controls it with no
non-controlling interests. The voting shares of the third-party
partner are accounted for as a financial liability. Therefore,
Agritc is consolidated in the Group's consolidated financial
statements. The shares of the third-party partner are recorded as a
long-term loan and the return on investment is recorded as interest
expense.
14. Subsequent events
a. On 25 July 2021 the Company signed a head of agreement with
11157353 Canada Corp. a company incorporated in Canada ("Materia").
During the reporting period the Company decided not to proceed with
the proposed acquisition of Materia. The Company has now decided
that the benefits of working with Materia, including its GMP
facility in Malta, are now most effectively executed through a
non-dilutive Strategic Partnership between the two independent
companies, as opposed to the previously proposed all-share
acquisition. The Company started the negotiations with Materia for
full repayments of the loans granted during 2021 in the total
amount of CAD 1,000 thousand. After the reported period a repayment
of CAD 55 thousand has been received. The parties remain in
negotiations for full repayment of the loans. During the annual
reports of 2021, following the assessment of the Company, the loan
receivable has been impaired in full following assessment made by
the Directors.
b. After the reporting period, the Company signed a compromise
agreement with GPS's founder and former CEO under which he left the
Group's employment. Under the agreement, he will return 25% of the
shares in the Company that he received as consideration for the
acquisition. The Company also agreed to make a one-off termination
payment of GBP25 thousands in exchange for a waiver of all
potential claims.
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END
IR BKCBPABKDQCB
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