Half-year Report

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 £0.24m (H1 21: £0.02m) post acquisition of GPS

· Cash and cash equivalents as of 30 June 2022 of £4.96m (FY 21: £4.48m)

 

 

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 Adviser)

Tel: +44 (0)20 7469 0930

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 £2. 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 £13,499,000 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 £144,000.

 

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 £239,000, of which £208,000 came from the sale of Primary Care services with the remaining £31,000 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 £88,000.

 

During the period, the Company invested £181,000 (H1 21; £116,000) in Research & Development. £153,000 of which was directly related to staff compensation, including salaries and share based payments, with approximately £19,000 invested in laboratory and testing equipment.

 

Sales and Marketing expense increased during the period to £511,000 (H1 21; £187,000). £294,000 of which was directly related to staff compensation with the remaining £217,000 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 £2,166,000 (H1 21: £888,000) during the period, largely due to the addition of the GP Service. £639,000 of which was directly related to staff and share based payments. However, the Company incurred circa £610,000 of exceptional professional services costs (consulting, legal and accounting). £680,000 non-cash expenses generated from amortization goodwill and intangible assets.

 

Acquisition-related exceptional costs, related to the acquisition of GPS, was £1,067,000 and is presented as "other expenses"in the income statement.

 

Reported operating loss was therefore £3,837,000 with Net Loss of £3,773,000 after £57,000 finance costs, including £20,000 loss in foreign exchange, and taxation of £121,000 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 £2,039,000. However, the balance sheet remained strong by raising £2,137,000 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 £323,000 via the exercise of certain warrants in the Company resulting in reported cash and cash equivalents, as of 30 June 2022, of £4,959,000.

 

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

£ '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

£ '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 capital

Share premium

Share based payments reserve

Share to be issued reserve

Reverse acquisition reserve

Foreign exchange reserve

Retained deficit

Total

 

£ '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 capital

Share premium

Share based payments reserve

Share to be issued reserve

Reverse acquisition reserve

Foreign exchange reserve

Retained deficit

Total

 

 

£ '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 capital

Share premium

Share based payments reserve

Share to be issued reserve

Reverse acquisition reserve

Foreign exchange reserve

Retained deficit

Total

 

£ '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

£ '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 £4,959 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

 

£ '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

 

£ '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 13,498 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 (£1,591 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

 

£'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 £758 thousands.

 

8.  Share-based payments

 

a.  Warrants

 

During the reporting period 3,231,501 warrants exercise to shares, the net proceeds summed to £323 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 £12 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 £354 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 30 June

For the year ended 31 December

 

2022

2021

2021

 

£ '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 30 June

For the year ended 31 December

 

2022

2021

2021

 

£ '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 £1,067 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 six months ended 30 June

 For the year ended 31 December

 

2022

2021

2021

 

Unaudited

Audited

Loss attributable to equity holders of the Company (£'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 £2,250 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 £327 thousand (ILS 1,399 thousand). To secure the lease agreement, the company provided a deposit in the amount of £33 thousand (ILS 132 thousand).

 

During 2022, the Kanabo Research recognized depreciation expenses in the amount of approximately £18 thousand as well as financing expenses in the amount of £12 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 £24 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 £25 thousands in exchange for a waiver of all potential claims.

 

 

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