Final Results for the year to 31 March 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014 (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018), AS AMENDED BY REGULATION 11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310.
30 September 2022
Chill Brands Group plc
("Chill Brands" or the "Company")
Final Results for the year to 31 March 2022
Chill Brands Group, the international consumer packaged goods company, is pleased to announce its final results and the publication of its audited annual report and accounts for the year to 31 March 2022 (the "Annual Report"). A copy of the Annual Report has been published on the Company's website, https://chillbrandsgroup.com , in accordance with its articles of association, and can also be viewed through the link below.
http://www.rns-pdf.londonstockexchange.com/rns/3155B_1-2022-9-30.pdf
Key extracts from the Annual Report can be viewed below.
-ENDS-
About Chill Brands Group
Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is an international company concerned with the development, production, and distribution of best-in-class hemp-derived CBD products, tobacco alternatives and other consumer packaged goods (CPG) products. The Company operates primarily in the US, where its products are distributed online and via some of the nation's most recognisable convenience retail outlets. The Group's strategy is anchored around lifestyle marketing that is designed to enhance the popularity of its products, channelling visitors to its landmark chill.com website.
Publication on website
A copy of this announcement is also available on the Group's website at http://www.chillbrandsgroup.com
Media enquiries:
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Chill Brands Group plc |
contact@chillbrandsgroup.com |
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Allenby Capital Limited (Financial Adviser and Broker) |
+44 (0) 20 3328 5656 |
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Nick Harriss/Nick Naylor (Corporate Finance) |
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Chief Executive's Review and Strategic Report
Introduction
I am pleased to present the Group's results for the financial year ended 31 March 2022 ("FY22"). After what has been an undeniably difficult period for Chill Brands, now is a time for reflection and change with a view to positioning the Group as an agile business with many factors to set us apart from our competitors.
Both as a result of shifting strategies and changing market conditions, this period has been transformational. The Group has emerged into the new financial year as an ambitious contender within the pharmaceuticals sector of the Standard List with aspirations to establish itself as a leading supplier of natural, functional consumer products.
The difficulties encountered by the Group during the financial year were laid bare by the fundraising activity announced in late April 2022. Complex distribution arrangements and a flawed operating model made it difficult for the Group to deliver on the levels of growth that management had hoped for. In particular, financial and logistical constraints meant that it was not possible to continue pursuing a swift and aggressive rollout of products to US retail stores. Many of those stores that were activated failed to generate consistent product sales as a result of challenging market conditions in combination with a deficient sales support program.
Since the end of the period in review, the Group has taken strides to reduce spending and address issues with its distribution model. Marketing schemes that did not yield consistent results have been replaced with strategies that are intended to provide a firm foundation for growth, with an emphasis on reaffirming the position of the Group's products within the retail environment. Our continuing base of activity can now be broadly categorised as brand building on a budget, where it is understood that each penny spent must push us closer to self-sufficiency.
Before providing more specific commentary on the Group's financial performance and operations, I would like to take this opportunity to outline some of the key events that characterised the Group's financial year.
A Digital Home for Chill
In June 2021, the Group entered into an agreement to acquire the Chill.com domain name for $1,600,000. As of 31 March 2022, $800,000 had been paid with the remaining balance of $800,000 (£594,199) being paid on 9 June 2022. In purchasing this domain, the Group started the journey to becoming a digitally native business with the opportunity to establish a world-class online destination for the functional products and relaxed, 'Chill' lifestyle that we promote.
As an intangible asset, it is understandable that many question the value of this web domain despite its commonality with other domains that have previously been bought and sold for significantly more. In the case of Chill.com, it is our belief that we have acquired a highly advantageous anchor for the Chill brand that provides the Group with a platform from which to grow.
An iconic and memorable name is the cornerstone of effective branding. In Chill.com we have a monosyllabic, easy to spell, and near-unforgettable online home that has already started to attract thousands of monthly visitors with traffic, conversions, and repeat purchases trending continuously upwards since acquisition. Given these attributes, the Group's management has designated Chill.com as an asset of exceptional commercial value with a long lifespan of 25 years. In making this decision, the Group has considered the value ascribed to other comparable domains, the perceived value of the Chill.com domain to its eponymous brand, and the potential to release additional financial value upon any future sale of this digital asset.
Many of our future commercial efforts and investments will be focused on developing Chill.com as the centerpiece of our digital strategy. Where in the past the Group has pursued a wide range of sponsorship deals and other big-ticket campaigns, it is important not to allow basic marketing principles to go unserviced. Greater attention will therefore be paid to search engine optimisation (SEO), brand consistency, and the targeting of relevant customers going forward.
Marketing Activities
In concert with the acquisition and development of Chill.com, FY22 saw more investment in the expansion of Chill's brand than during any prior period. Through strategic partnerships and relationship building, the Group activated sporting properties to advertise our products and engaged with affiliate marketers to develop a wider social media presence.
Despite surprising some members of the UK investment community, the Group's sponsorship of ambassadors in the Western Heritage and rodeo space provided a connection to one of the most prolific demographics for tobacco chew pouch use in the United States. Access to users of tobacco chew pouches provided the Group with the opportunity to market our tobacco-alternative products to relevant consumers while introducing our brand to the Western Heritage community at the grassroots level. These efforts were aided significantly by the performance of our athletic ambassadors, most notably Creek Young who finished the season fifth in the World Rankings and as PRCA Bull Riding Rookie of the Year.
The period also saw the Group sponsor the US Major Arena Soccer League (MASL) which provided an additional opportunity to improve brand recognition and market our CBD products as a natural way to unwind after rigorous sporting activity. This partnership saw Chill brand assets applied to hoardings, kits, and stadium fixtures not only in the MASL, but also to other sporting properties including the Connecticut Whale - a popular team within the US Premier Hockey Federation. Once again, our strategy of supporting sports communities in their infancy prevailed as the MASL season closed with the establishment of a franchise team by all-time great Ronaldinho which attracted significant attention to the league and, by extension, to Chill.
While the aforementioned sporting sponsorships aided brand recognition within certain subsets of US consumers, they did not ultimately yield any significant measurable return by way of product sales. Going forward, the Company will seek to pursue less costly strategies that are targeted at those consumers who are statistically most likely to engage with our brands and purchase our products.
During the period, the Group expanded its online marketing activities whilst operating within the strict rules set by the major social media platforms in respect of products containing CBD and other such compounds. In order to extend its online reach, the Group has partnered with over 200 sites and online groups as part of an extensive affiliate marketing program. Adopting the same 'grassroots' strategy as seen in its sporting properties, the Group has sought to create an organic following through relationships with micro-influencers who create authentic content that is relevant to, and well received by, key target demographics.
Having spoken so much about the potential of the Chill brand during the past few years, it is only right that we exhaust every opportunity to deliver it to the widest possible group of consumers through effective marketing. These efforts will continue and indeed multiply as the months go on.
Steady Growth of Retail Distribution
Until a recent pivot in focus to digital sales channels, most of the Group's commercial activities related to bricks and mortar retail stores.
During the year in review, sales into the convenience store channel via the Group's master distributor remained the primary revenue generator for the business. Despite the Group having now climbed back from an initially planned rollout to around 10,000 stores, FY22 saw Chill products reach the doors and counters of more than 2,000 individual retail outlets in various regions throughout the United States.
While our physical footprint is now substantially higher with product making an initial entrance to more than 1,500 stores during the financial period (2021: 500), it is important to note that the performance of Chill products has not been consistent across all stores. At the time of publication, our time and resources in this channel are allocated to a core group of around 500 locations. These are representative of our best stores, and we will seek to replicate their performance across any and all future retail activations.
Following the end of the financial year, the Group terminated its distribution agreement with Ox Distributing. By ending their master distributor status the Group intends to simplify its distribution operations and its approach to revenue generation and recognition. Going forward, sales into the physical retail channel will be made to distribution agents closer to the final customer or to retail stores themselves. It is expected that this will provide the Group with better oversight of its retail operations and the performance of its products within retail locations.
Fulfilment Innovation
In line with these changes to our operating model and commercial strategy, the Group engaged with Fabric - an innovative product fulfilment company providing state-of-the-art pick and pack services from centres across the United States.
As part of this agreement, Chill products entered Fabric's Dallas facility from which they are dispatched to all consumers ordering via Chill.com. Going forward, the Group's products will enter other fulfilment centres across the United States as the Chill.com platform furnishes us with sales data. This approach facilitates the rapid delivery of Chill products to consumers across the country, ensuring that we are able to provide an exemplary customer experience that is befitting of a premier e-commerce brand.
Regulatory Challenges
In September 2021, the Group announced the planned launch of a range of synthetic nicotine chew pouches. These products were intended to position the Group as a direct competitor to major tobacco companies, providing an attractive alternative to more traditional tobacco-derived oral tobacco. Despite international logistical issues causing a delay to the intended launch date, Chill tobacco-free nicotine pouches made a market debut in December 2021.
At the time of their launch, Chill tobacco-free nicotine pouches were not subject to the same regulations or restrictions as regular tobacco products. In March 2022, however, a federal funding bill that amended the definition of "tobacco product" was passed by the US Congress. This statutory change gave the US Food and Drug Administration (FDA) authority over synthetic nicotine and brought the Company's new product line within the scope of tobacco regulations.
As a result of these changes, manufacturers and marketers of synthetic nicotine products must now submit Premarket Tobacco Applications (a "PMTA") for their products to legally remain on sale. Following an extensive consultation process, it was determined that the Group would need to incur significant costs in excess of US $1.5 million in order to obtain the necessary regulatory approvals for the continued sale of its synthetic nicotine range. Such an expense was not deemed to be commercially viable and so the decision was made that the Group would not continue with the development of tobacco-free nicotine products. The Group continues to work with its network of brokers to sell the remaining inventory of synthetic nicotine products, however provisions have been made for a decline in the value of the remaining tobacco-free nicotine products within this report of accounts.
The discontinuation of Chill's range of synthetic nicotine products so soon after its launch underscores the challenges of operating in an uncertain regulatory environment. Now more than ever, it is important for the Group to take a well-considered and deliberate approach to all the activities it engages in to ensure full compliance and the best possible understanding of the market landscape.
Following the decision to bring an end to the Chill line of synthetic nicotine products, the Group's efforts have been firmly refocused around CBD and the commercialization of holistic wellness products and more recreational tobacco alternatives.
Building a Brand for the Future
Looking to the months ahead, I firmly believe that the Group is now in strong position to move forward as an agile consumer packaged goods competitor with many unique advantages. Chief among these is the brand and community that we are building, both with our customers and investors.
Since the end of FY22, we have been working to eliminate costs and sharpen our operating model to ensure we are able to maximise the impact of available funds while seeking new revenue generation opportunities through both our digital and physical retail channels.
It is important that we recognise past mistakes and failures while looking to the future with enthusiasm. We have the opportunity to create lasting brands and products that resonate with consumers and produce recurring revenues. Nobody should be in any doubt as to the challenges ahead and it takes a substantial amount of time, investment, and effort to elevate consumer brands into the consciousness of consumers and ultimately profitability. With that being said, we are confident that our brands have what it takes to excel and we are determined to demonstrate their potential no matter how challenging the route to success may be.
Against the backdrop of trying market conditions and a changing consumer landscape, it is our aim to diversify and differentiate Chill Brands Group for the benefit of all stakeholders. I am grateful to the Group's shareholders for their ongoing support and look forward to an exciting and fruitful year ahead.
Callum Sommerton
Chief Executive Officer - Chill Brands Group PLC
Chief Executive's Financial Review
During the period the Group increased its physical retail footprint and enjoyed a gradual increase in online sales made predominantly via the Chill.com website. The Group recorded revenues, net of promotional discounts of £624,187, up 95% from the prior year (2021: £320,875). It is important to note that £447,814 of this revenue is due to an agreement with Ox Distributing, LLC, a related party. See further discussion of this in the revenue section below on page 8.
The Group's financial performance was adversely affected by the high cost of slotting fees, promotional activities, and logistics which elevated the cost of goods sold. Significant promotional discounts were also offered in combination with free sample products in order to facilitate the entry of Chill products into select retail locations. Combined with the lower margins achieved on sales to distributors amongst other factors, this ultimately led to the Group incurring a gross loss.
In addition to the above, the Group incurred significant non-cash costs relating to the issue of shares such as those issued to the Major Arena Soccer League (MASL) for marketing services and the share options issued to Viridian Capital Advisors LLC for strategic advisory services. The Group also incurred cash costs in respect of acquiring rights to the Chill.com domain, in launching new product categories, and in expanding its retail distribution network.
Key Developments
On 4 May 2021, the Group announced that it had raised £6,000,000 through an oversubscribed subscription round for 10,000,000 new shares of 1 pence each at a price of 60 pence per Ordinary Share. The net proceeds of that subscription round were used in part to settle an outstanding termination fee for a prior finance agreement with LDA Capital. The termination fee for the LDA Capital finance agreement totaled £1,200,000, a liability that was settled shortly after the 4 May 2021 and recognised in the prior year accounts.
In July, the Group announced that it had signed a contract to acquire the Chill.com domain name. The total purchase price was £1,226,119 ($1,600,000 cash paid) of which the Group had paid half by the close of the Financial Year. Alongside this acquisition, the Group invested heavily in the development of the Chill.com website while further efforts were made to redesign and redevelop the Zoetic website.
Following efforts during prior reporting periods, the vast majority of the Group's legacy natural resources assets were closed or divested during the financial year or shortly thereafter. Through a cautious and well-considered approach to the winding down of its activities in the natural resources space, the Group is now solely focused on its consumer packaged goods business and has not incurred any significant financial liabilities in respect of its previous operations.
In December 2021, the Group announced its sponsorship of the Major Arena Soccer League (MASL). This marketing deal saw Chill products and logos advertised to thousands of fans and many more online followers, both of MASL and of the Connecticut Whale women's hockey team. The cost of the sponsorship package included equity-based remuneration totalling 500,000 ordinary shares of 1 pence in addition to further cash costs.
In its Half-Year Report for the period ending 30 September 2021, the Group announced that it had entered into a related party agreement with Ox Distributing LLC - its master distributor and a major shareholder. The agreement provided extended payment terms to Ox Distributing to provide them with additional time to sell Chill products and release funds for payment following logistical delays and challenges within the retail distribution environment. More specifically, Ox placed a large order for Chill products during the financial year for the forecasted activation of new convenience store locations in line with the Group's existing agreements with large distribution partners. In ordinary circumstances, the Group would have received numerous smaller payments in respect of retailer orders, however logistical issues delayed delivery of products to Ox and the Group could not therefore meet its contractual performance obligations until a later date. As a result of this, a significant balance fell due to the Group on the eventual delivery of products to Ox. The Group entered into the extended credit terms agreement with Ox to provide them with an adequate opportunity to sell the delayed products downstream to distributors and generate funds with which to settle the outstanding liability to Chill. This resulted in a large one-off revenue generation event as the full value of the credit provided to Ox was recognised and recorded. Given that the majority of revenue generated during the financial period can be attributed to this sale and transfer of products to Ox, it cannot be said that the year in review was one of extensive financial growth as the Group did not make significant sales to downstream distributors or retailers on its own behalf.
Following the end of the financial period, work has continued to establish a more effective revenue model. The agreement appointing Ox as the Group's master distributor was terminated during May 2022, however they continue to pay all outstanding balances as they fall due under the aforementioned extended credit terms. The Group is now focused on establishing and extending direct relationships with retail and distribution partners that will enable it to take a more conventional path to generating revenues from product sales.
During the period, the Group launched a new range of synthetic nicotine products under the commercial name 'Tobacco Free Nicotine' or 'TFN'. As discussed elsewhere in this report, the US Congress legislated during March 2022 to regulate all forms of nicotine in the same way as tobacco. As a result of this regulatory change, manufacturers and markets of synthetic nicotine products must now submit a premarket tobacco application (PMTA) in order for their products to remain on sale in the US. While the Group has submitted a PMTA in respect of its TFN products, the cost of pursuing the application through to completion may be prohibitively expensive and so there is no guarantee that the Group's synthetic nicotine products will be able to remain on sale. In light of this, the Group's financial reports include an obsolete inventory expense that effectively reduces the retail value of the remaining synthetic nicotine inventory by 80%. It is hoped that the remaining 20% can be sold either at a discount or to alternative distributors in jurisdictions where comparable regulations do not apply.
Following the end of the period, on 26 April 2022 the Group announced that it had conditionally raised £3,500,000 (before costs) from new and existing investors through fundraising consisting of two parts. The first part was by means of Subscription for 29,166,699 new ordinary shares of 1 pence each at a price of 2 pence each. The second part comprised convertible loan notes of 2 pence each with an aggregate value of £2,916,670 which will convert automatically on the publication of a prospectus or the passing of legislation that means a prospectus is no longer required. Shareholder approval was sought and gained at a General Meeting held on 12 May 2022, where all resolutions were duly passed.
Further to the aforementioned fundraising, the Group announced its intention to issue an Open Offer to enable long-term shareholders to participate on equivalent terms. As announced on 17 June 2022, the Open Offer raised a total of £212,201 (before expenses).
Although the Group recorded a loss after taxation of £5,572,324, this figure is comparable with the previous reporting period net of non-cash share expenses for options granted totaling £3,437,163 (2021: £1,410,268). This included the granting of options for 10,391,432 shares to Viridian Capital Advisors LLC. Going forward, the Group's Board of Directors intends to reduce operational costs while seeking to scale both retail and digital channels with the expectation of improved sales.
In preparing these financial statements, it has been determined that a significant balance of loans to the Group's subsidiaries (totaling GBP £9,299,301) should be written off. Since its inception, the Group has raised funds in the UK but incurred the majority of its costs in the US where its operational subsidiaries are incorporated. Transfers of funds from the UK bank accounts of Chill Brands Group PLC to the US accounts of its subsidiaries are recorded as intra-group loans. The total balance written off is reflective of funds transferred to these operational entities over a period of several years. While the Group's management anticipates that its financial performance will improve over time, it is expected that revenues will be reinvested back into the company to facilitate further growth for the foreseeable future. It is not considered appropriate to plan for repayment of sums invested into the Group's subsidiaries to the parent company at this time. As a result of this, the balance of funds paid from Chill Brands Group PLC to its subsidiaries has been written off.
Revenue
The Group recorded revenues, net of promotional discounts of £624,187. These were largely derived from sales of products into the retail channel to Ox Distributing, a related party which made onward sales to distribution partners and retailers. While this represents an increase of 95% as compared to revenues generated during the previous reporting period, it is not reflective of sustained repeat sales to retailers as explained in the 'Key Developments' section of this Financial Review. The Group did not generate revenue from any of its remaining natural resources assets during the year.
Going forward, the Group's revenues will continue to center around consumer sales into the digital and physical retail channels. It is expected that sales will increase gradually over time as the Group refines its retail sales model and scales its online marketing activities.
In its Mid-Year Financial Report for the six-month period to 30 September 2021, the Group reported revenues of £1,073,872. This value largely comprised the value of the related party agreement promissory note entered into by the Group with Ox Distributing LLC.
The sales made to Ox Distributing (in respect of which the Group extended its credit terms) were based on product requirements for projected store counts in line with the Group's major distribution relationships with AATAC and other organisations. As a result of supply chain and logistics issues, shipments to these stores were delayed and the Group subsequently determined that it was not financially equipped for the widespread activation of additional convenience stores.
While Ox Distributing continues to pay all sums owed under the related party agreement, the value of the note has been reduced in line with promotional offers and free fills provided to retailers as part of the Group's rollout strategy. These promotional offers and free product fill initiatives are an established feature of the consumer packaged goods landscape and in many cases are a condition of entering new stores to enable operators to trial products. The Group's decision to modify its operating model and pivot towards the digital retail channel was partly based on the major expense incurred as a result of these standard practices.
As a result of the above, the Group was only able to recognize £624,187 of revenue for the full financial period, a reduction of £447,814 from the figure recorded in the Group's Half-Year report.
Expenditure
During the period, the Group's expenditure increased as compared to the last full financial year. Additional cash costs related to advisory agreements, securing intellectual property rights including those over the Chill.com domain, and launching the synthetic nicotine product category.
The Group also incurred very substantial legal costs in relation to ongoing regulatory matters in relation to the legality and marketing of CBD products, restrictions relating to synthetic nicotine products, and the Group's corporate rebrand exercise from Zoetic International to Chill Brands Group PLC. These, along with costs relating to the Group's London Stock Exchange listing, represent a significant portion of its ongoing costs base.
In addition to cash costs and those relating to share-based awards, the Company also incurred additional costs in respect of providing free sample products to retail stores upon entry into new locations, and in respect of increased shipping and logistics costs.
Liquidity, Cash and Cash Equivalents
At the year end, the Group held £420,045 at the bank (2021: £333,176).
Funding and Going Concern
During the year the Group was financially sustained by funding obtained through an oversubscribed subscription round for 10,000,000 new ordinary shares of 1 pence each at a price of 60 pence per share.
In May 2022, the Group received shareholder approval for fundraising activity that raised a total of £3,500,000 before costs through a combination of subscription shares at 2 pence per share and through convertible loan notes of 2 pence each with an aggregate value of £2,916,670 which will convert automatically on the publication of a prospectus or the passing of legislation that means a prospectus is no longer required. The loan note aspect of the fundraising activity was made necessary by the Group's listing rules which limited the Board's ability to issue subscription shares to that value. Further funds were raised from an Open Offer to the Group's long-term shareholders totaling £212,201before costs.
It is the intention of the Directors to substantially reduce the Group's expenditure by limiting monthly retainer fees and implementing strict standard operating procedures to ensure that funds spent are directed towards revenue-generating activities.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Further details are given in Note 2.2 to the Financial Statements and in the Directors' Report. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.
The Directors have also considered the recoverability of loans made from Chill Brands Group PLC to its subsidiaries. Given the that the Group's subsidiaries have a continuing need for capital investment and support, the Directors do not believe it is appropriate to plan for a repayment of these intra-company loans at this time. As a result of this, the balance of loans made by Chill Brands Group PLC to its subsidiary companies has been written off as discussed elsewhere in the 'Key Developments' section of this Financial Review.
Based on the considerations above, the Directors consider the Group to be a going concern.
Chief Executive's Review and Strategic Report- Our Operating Model
The Group's primary focus is the sale of consumer packaged goods that contain functional, natural compounds like cannabidiol (CBD). Sales are made both online and via bricks and mortar retail locations.
Those who have followed the Group for some time will be aware that its strategy has changed on a number of occasions. This has been due in part to the nature of the retail landscape, which is rapidly evolving, particularly for products containing cannabinoids which are highly regulated and subject to intense scrutiny. It was only in 2018 that the Agriculture Improvement Act legalized the farming of industrial hemp in the United States, making way for businesses to commence the legal marketing of CBD products. The Group was an early entrant to this emerging industry and continues to seek opportunities for diversification and differentiation that will set it apart from its competitors.
During the year in review, the Group embarked on an ambitious retail rollout schedule but encountered both logistical and other challenges that prompted the Board to pivot towards a digital-led sales model. It is expected that this new approach will prove to be effective during the current financial year as the Group seeks to build out the revenue generating capabilities of its landmark Chill.com domain.
Product Focus
The Group's existing range of products can be categorised into two categories, namely tobacco alternatives and wellness products. While the products are within two categories, the products are considered to be one segment as they are both analysed in total as the products are both marketed and sold to the same end user.
CBD Tobacco Alternative Products
In the United States the Group sells its Chill brand CBD chew pouches. While they cannot legally be pitched as a licensed smoking or tobacco cessation product, the pouches are marketed as an alternative to the 'dip' or 'chew' pouches that are popular among many users of traditional tobacco products.
The Group also sells a unique line of herbal cigarettes that are infused with CBD using a proprietary method. As with the pouch products, the cigarettes cannot be marketed directly as a smoking cessation product however they are used by many smokers while also supporting a recreational use case. The mint variety of the smokes have proven to be particularly popular in regions where traditional menthol tobacco cigarettes are no longer available.
Synthetic Nicotine Tobacco Alternative Products
In December 2021 the Group launched a new range of synthetic nicotine pouches that have since been marketed as 'tobacco-free nicotine' or 'TFN'. Sales of the pouches increased incrementally following their launch, however in March 2022 the US Congress unexpectedly voted to amend the definition of tobacco products to include "nicotine from any source that is intended for human consumption". This legislative change effectively brought synthetic nicotine products like Chill's TFN under the regulatory scope of the FDA.
Following this change, the FDA applied a timeline for manufacturers and brands to gain authorization to continue marketing synthetic nicotine products to the US public. The deadline for submission of a completed Pre-Market Tobacco Application (PMTA) was 14 May 2022. Products that are part of an accepted PMTA remained on sale until 22 September 2022. Eligibility after that time will be at the discretion of the regulators. As of 22 September 2022, the Group has not received communication from the regulators. As such, they are able to continue marketing and selling synthetic nicotine products to the US public.
While the Group lodged a PMTA application in respect of its TFN products, it was subsequently determined that the costs of progressing that application through to regulatory approval could total in excess of US $1.5 million. In addition to this, it was also found that the application of tobacco regulations to these products would significantly elevate the Group's costs while complicating distribution and logistical arrangements. In light of these considerations, the Group has now ceased development of its range of synthetic nicotine pouches and its remaining inventory of TFN has been withdrawn from sale to US consumers.
As referenced elsewhere in this report, the Group's management have made a provision within the accounts to write off 80% of the value of the remaining TFN inventory while at least a portion of the product may be saleable either at a discounted rate or to retailers in jurisdictions where synthetic nicotine products are not subject to such licensing requirements.
CBD Wellness Products
The Group also sells CBD wellness products branded under its Chill and Zoetic ranges. In the UK, the Zoetic range comprises a variety of CBD-infused topical creams and beauty products, alongside ingestible CBD tinctures (oils) in a number of flavors and strengths.
A range of CBD gummies are also marketed in the UK and the United States under the Chill brand. The Group's gummies are supplied by an exclusive partner who manufacture the products using a time-tested recipe using CBD isolate to ensure every gummy passes strict quality controls.
Digital Channel Strategy
In January 2022, the Group announced that it had shifted its focus towards sales made digitally via Chill.com. Having first taken carriage of the domain and its associated rights in July 2021, the Group has refrained from making any major financial investment into the development and growth of this platform. Despite this, the site ranks highly in search engine results for certain relevant terms and now attracts in excess of 10,000 visitors each month.
Going forward, the Group has radical plans to broaden its base of activities within the digital channel with a view to improving consumer recognition of the Chill brand and therefore the revenue that it can generate. In the immediate future this will result in the launch of digital marketing campaigns, redevelopment of the Chill.com domain, and a renewed focus on search engine optimization (SEO).
Over the longer the term, it is the Group's intention to onboard selected partners to the Chill.com platform. Analogous and complementary products will be carried via an online marketplace model with the intention of creating a single destination for quality, trusted, and highly differentiated products containing functional ingredients like CBD.
While there is no present intention to sell the Chill.com domain, the Board also believes that it has inherent value as a digital asset. Many comparable domains are sold as stand-alone intellectual property assets despite there being no underlying business to support their value. It is therefore the Board's opinion that the Chill.com domain could arguably attract a premium to the price paid.
Retail Channel Strategy
To date the Group's largest base of sales activity has occurred within the physical retail channel, where its products are sold into convenience stores, gas stations, and specialist outlets across multiple US States. During 2020 and 2021, the Group signed a number of distribution agreements with the intention of pursuing an ambitious rollout plan that would see its products enter thousands of outlets. As a result of various factors, however, the Group has since modified its strategy to focus on targeted sales within select high-performing outlets, prioritising volume of unit sales over store count.
The impact of the COVID-19 pandemic on the retail environment cannot be understated and it has undoubtedly had a significant effect on the Group's progress. Consumer behaviors changed as a result of public health measures, with the majority of people prioritising the purchase of essential items over novel recreational products such as those sold by the Group. These behaviors were also reflected by retail distribution businesses and store operators who, as part of their own pandemic continuity plans, sought to stock tried and tested brands with a strong track record and demonstrable sales performance spanning years if not decades. As a result of this, it was very difficult for a comparatively new brand to gain traction within this rapidly changing ecosystem.
In addition to the above, logistical issues delaying the import of the Group's products to the United States prevented additional sales from being made during the year. This meant that the Group was unable to fulfil orders in a timely fashion, which frustrated certain sales opportunities throughout the period. Even once the products had entered the United States, it was not possible to backfill retail locations with a surplus of inventory that might otherwise have been sold during the period when Chill products were absent from those locations.
In certain cases, the Group's distribution relationships did not prove to be fit for purpose. In one specific case, it was found that a distribution partner had effectively ceased all operations involving CBD products without informing the Group of this change. As a result of this, stores within a specific region that had been assigned to the distributor were not adequately served and opportunities to maintain sales relationships and enter new transactions were missed.
Despite these challenges, the physical retail sales channel remains the Group's primary source of revenue. During the year in review, the majority of the Group's recognized revenue was derived from sales to the Group's former master distributor, Ox Distributing LLC, which continues to sell products on to downstream distributors and retailers.
Given continuing sales and encouraging anecdotal feedback from retail partners and distributors, the Group will continue to expand its physical retail channel albeit with a modified strategy that is more appropriate for its size and level of resources. Although the Group remains in contract for an ambitious multi-thousand store rollout, the costs of pursuing such a high store count footprint represent a major barrier to entry. For every store entered, the Group is typically subject to slotting fees, an obligation to provide an initial fill of sample products free of charge, and the need to provide educational materials and marketing collateral. These start-up costs often reach or exceed $1,000 per location while ongoing investment is required to ensure that stores continue to stock and sell Chill products. To make a success of such a large retail footprint, the Group would also need to develop the internal infrastructure necessary to effectively manage relationships with thousands of stores.
In light of these observations, the Group's forward-facing strategy will involve focusing more closely on a smaller number of retail outlets before scaling in a sustainable way over a longer period of time. This will enable the Group to generate commercial insights and verifiable sales data that can be used when establishing new distribution relationships, all whilst building goodwill and brand recognition among consumers in a more concentrated way.
UK Operations
While the vast majority of the Group's revenue is generated in the United States, its Chill and Zoetic brands are also sold in the UK.
During the year in review, the Group launched its Chill-branded CBD-infused herbal cigarettes to the UK market with sales made exclusively via thechillwayuk.com. To date the Group's investment in the growth of the Chill brand within the UK has been negligible, however it now intends to extend its operations within the UK market in concert with the onboarding of the UK sales portal to the master Chill.com domain.
The Group's Zoetic brand of luxury CBD cosmetics and tinctures has also continued to generate interest, with appearances in a variety of publications and media reviews including The Telegraph, The Daily Mail, and Metro. Having launched a new range of anti-aging balms and creams during the period, the Zoetic brand now offers an extensive selection of luxury CBD products that are pitched at wellness enthusiasts. Given the continued growth of the UK's CBD sector, however, it has become increasingly important for brands to differentiate themselves from competitors. With this in mind, the Board intends to consolidate the Zoetic product range in order to prioritise the best-selling products while making room for novel product category entrants that may be better able to seize market share.
Without any significant level of investment from the Group, the Zoetic and Chill brands have continued to slowly expand in the UK. Going forward the Board intends to assign greater attention to the opportunities at hand in the UK with the hope of generating additional revenues and further expanding its consumer brands.
UK Novel Foods Authorisation
In order to sell ingestible CBD products in the UK, the Group has progressed through the novel foods application process by submitting relevant applications to the Food Standards Agency (FSA).
In April 2022, the Group's Zoetic tinctures and Chill gummies were added to an updated FSA list of CBD food products that are linked to a credible application for authorization. This means that the Group's products can remain on sale and that they have reached the penultimate stage to full validation.
The Group hopes that its products will receive full novel foods validation in the near future and will provide further updates as the situation progresses.
Feminised Seed
In addition to sales of its consumer products, the Group also carries a significant inventory of feminised hemp seeds that are currently undergoing extensive testing following a successful first trial season.
While there is no guarantee that the Group's inventory of seeds will grow and progress as expected, the Board hopes that these unique feminised assets will make good on their strong cultivation potential. Should the growing season prove to be a success, the Group may be able to rely on an additional stream of revenue from sales of its seeds which boast exclusive genetics and have previously been used to produce premium quality CBD isolate.
Chief Executive's Review and Strategic Report- Other Matters
Board Changes and Operational Composition
During FY22, the Group was led by Antonio Russo and Trevor Taylor as joint Chief Executive Officers. Following the end of the period, I was appointed to the Board of Directors on 15 April 2022 and now serves as the Group's Chief Executive Officer. Mr Taylor now serves as the Group's Chief Operating Officer, while Mr Russo is now the Group's Chief Commercial Officer with responsibility for sales and marketing.
On 1 August 2021, Eric Schrader was appointed to the Board as a Non-Executive Director and representative of his family company - Ox Distributing LLC - the Group's single largest shareholder. He is also joined on the Board by Mr Scott E Thompson who was appointed as an Independent Non-Executive Director on 27 January 2022.
Mr Thompson is an intellectual property attorney with almost forty years of experience having previously worked to protect and extend some of the world's largest brands. He is currently recognized by the World Trademark Reporter as one of the top 300 trademark attorneys in the world and most recently acted as General Counsel, Intellectual Property/Marketing Properties for Mars Inc. He has also worked for Philip Morris Companies, Colgate-Palmolive, and GlaxoSmithKline. The Group welcomes Mr Thompson, whose extensive experience of the consumer packaged goods industry and brand protection will no doubt serve us well.
While the Board is now more populated than during previous financial periods, it is the Group's intention to continue searching for reputable and experienced candidates who may be able to provide value in particular as a Chairman or UK-based independent non-executive director. More specifically, the Group is keen to attract individuals with financial management experience both to assist with operational efficiency and to guide and improve its approach to forecasting and reporting.
More information regarding the Board of Directors can be found in the key personnel section of this report on page 20.
Changes to Listings of the Group's Shares
In August 2021, the Group completed a corporate rebranding exercise during which it changes its trading name from Zoetic International PLC to Chill Brands Group PLC. In line with this change, the Group's ticker (TIDM) for the London Stock Exchange changed from 'ZOE' to 'CHLL' on 17 August 2021.
In November 2021, the Group's shares commenced trading on the US OTCQB Venture Market. Having previously traded on the OTCQX Best Market, this relisting relates to the Group's share price and market capitalisation which did not meet the standards required for a listing on the OTCQX market. On 14 December 2021, the Group's OTCQB listing was updated to reflect its corporate rebrand, with shares now trading on the US market under the updated ticker symbol 'CHBRF'.
In April 2022 the Group was re-categorised as a cannabis producer within the HealthCare, Pharmaceuticals and Biotechnology category of the London Stock Exchange. This change followed an extensive review period by the exchange, which could only commence this assessment following the publication of the prior year financial results. Following this adjustment, the Group is now trading within a more appropriate sector category that is representative of its commercial activities.
Risks and Uncertainties Facing the Group
The Group's continued evolution has seen its risk profile change significantly. Having pivoted away from the natural resources sector during previous financial years, the Group now faces risks that relate predominantly to its operations within the consumer packaged goods space. As with other companies of its size, the Group also faces an overriding financial risk.
The Board continues to monitor and mitigate a detailed list of risks that face the Group, but those listed below are considered to be of the highest importance given the likelihood of their occurrence or the materiality of their potential impact.
General Risks Relating to the Group's Financial Position
While revenues from the Group's consumer-facing activities continue to grow, the risk remains that sales will be insufficient to maintain the Group's current level of expenditure on an ongoing basis. In light of this, the Board has engaged in a cost-cutting exercise to ensure that the Group's business model remains lean while ensuring all commercial infrastructure is properly resourced. The Board has considered a variety of scenarios including a scenario of limited online sales without growth and a linked reduced cost base, and is prepared to execute further cost-cutting contingency plans to mitigate such risks should they arise.
Supply and Logistics Challenges
Various geopolitical events pose a risk to the Group's supply chain and logistics activities in its core areas of operation across North America and the UK. Industry-wide issues relating to driver shortages, warehousing, international logistics, and transport may affect the availability and timely movement of the Group's products. Furthermore, some of the finished products sold by the Group are sourced from multiple component parts that are manufactured internationally. As a result of this, there remains a risk that local regulations could prevent the timely export of CBD and other products, resulting in delays and disruption to the Group's operations.
The Board has engaged with all suppliers and partners to secure the continuity of its operations and continues to develop controls and procedures to limit the impact of any such risks.
Risks Associated with Laws and Regulations Relating to CBD
The production, labelling and distribution of the products that the Group distributes are regulated by various federal, state and local agencies. As the Group expands its CBD operations, it must keep up with the evolving compliance environments of the territories in which it operates. This entails the building and maintaining of robust systems which ensure that our products and operations comply with the regulatory regimes of multiple jurisdictions.
Should the Group's operations be found to violate any such laws or other governmental regulation, the Group may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of the Group's operations, any of which could adversely affect the Group's business and financial results.
The Group may be required to obtain and maintain certain permits, licenses, and approvals in the jurisdictions where its products are licensed and into which its operations expand. There can be no assurance that the Group will be able to obtain or maintain any necessary licenses, permits or approvals.
Product Viability
If the products the Group sells are not perceived to have the effects intended by the end-user, its business may suffer. Many of the Group's products contain innovative ingredients or combinations of ingredients. There is little long-term data with respect to efficacy, unknown side effects and/or interaction with individual human biochemistry. Whilst the Group conducts extensive testing of its product stocks, there remains a risk that its products may not have the desired effect.
Product Liability
The Group's products are produced for sale directly to end consumers, and therefore there is an inherent risk of exposure to product liability claims, regulatory action and litigation if the products are alleged to have caused loss or injury. Accordingly, the Group maintains product liability insurance policies to safeguard against the implications of any claims that may arise.
Success of Quality Control Systems
The quality and safety of the Group's products are critical to the success of its business and operations. As such, it is imperative that the Group's (and its service providers) quality control systems operate effectively and successfully. Although the Group strives to ensure that all of its service providers have implemented and adhere to high calibre quality control systems, any significant failure or deterioration of such quality control systems could have a materially adverse effect on the Group's business and operating results.
Product Recalls
Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labelling disclosure.
If any of the Group's products are recalled for any reason, the Group could incur adverse publicity, decreased demand for the Group's products and significant reputational and brand damage. Although the Group has detailed procedures in place for testing its products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls.
Industry Competition
The CBD industry is competitive and evolving. The Group faces strong competition from both existing and emerging companies that offer similar products. Some of its current and potential competitors may have longer operating histories, greater financial, marketing and other resources and larger customer bases than the Group has. Given the rapid changes affecting the global, national, and regional economies generally and the CBD industry, in particular, the Group may not be able to create and maintain a competitive advantage in the marketplace.
Risks Relating to Legacy Oil and Gas Assets
Despite having now discontinued the operation of its legacy natural resource assets, the Group continues to monitor for risks relating to any liabilities arising from its former activities.
While the Group no longer owns or operates any of its former legacy assets or sites, there remains a risk that the Group may be subject to costs and liabilities arising from any lawsuit, civil or regulatory action that may commence in respect of historical mining, drilling, extraction or other activities that the Group may have previously engaged in.
Risks Associated with Laws and Regulations Relating to Synthetic Nicotine
Following new legislation enacted by the US government on 15 March 2022, synthetic nicotine now falls under the regulatory jurisdiction of the US Food and Drug Administration (FDA). As of 14 April 2022, manufacturers, distributors, and retailers of products that contain non-tobacco derived nicotine must comply with all relevant regulatory provisions relating to the supply, marketing, and sale of such products.
As a result of this legislative change, the FDA now requires those marketing synthetic nicotine products to submit a premarket tobacco application (PMTA) and obtain authorization to market their product. While the Group has submitted a regulatory dossier in line with initial FDA requirements, there is an overriding risk that this application will not be approved or will otherwise require very substantial financial investment in order to maintain the saleability of Chill's synthetic nicotine products. As discussed in the Group's financial review contained within this report, the Group has made a provision for the value of its existing synthetic nicotine inventory to be written down by 80% as a direct consequence of the commercial challenges resulting from this change to US regulations.
As with its other products in other categories, the Group may also be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, or the curtailment or restructuring of the curtailment of its operations if its operations are found to violate any such laws or other governmental regulations in respect of synthetic nicotine products.
IT Security and Brand Protection Risks
As the Group's activities and profile expand, its digital assets and intellectual property rights may be challenged both legally by competitors and illegally by bad actors. With these risks in mind, the Group has engaged with numerous initiatives, protections, and countermeasures to ensure that its interests and those of its shareholders and customers are insulated against these risks. Our intellectual property rights are well protected through a series of international trade marks and patent applications, while our core systems and flagship Chill.com web domain are guarded by IT security professionals and robust protective frameworks.
Statement of the Directors in Performance of Their Statutory Duties in Accordance with s172(1) Companies Act 2006
Section 172 Statement (Companies Act 2006) Under Section 172 of the Companies Act 2006, a director has a duty to promote the success of the company. The directors confirm that the deliberations of the Board, which underpin its decisions, incorporate appropriate consideration with due regard to the matters detailed in Section 172 of the Companies Act 2006.
As a result of its policies and procedures, the Board of Chill Brands Group PLC considers that they have acted in a way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172(1)(a-f) of the Companies Act 2006) in decisions taken during the year ended 31 March 2022.
The Board and each director acknowledge that the success of the Company's strategy is dependent on the support and commitment of all the Company's stakeholders including employees, suppliers, advisers, vendors, distributors, shareholders, and other parties. The Group engages directly with stakeholders when it is necessary and appropriate to do so both through the medium of formal shareholder assemblies and through direct dialogue with advisers and other stakeholders.
During the year in review, the Board considered information from across its business when making decisions. Information, presentations, and reports were provided by the Group's management and Board Advisers. In addition to this, the Board reviewed papers and reports from key stakeholders and expert industry groups to understand the impact of its operations. These activities, in concert with direct engagement by the Board and individual directors with certain key stakeholders and shareholders, assisted the Board in the decision-making process.
The Board acknowledges the importance of balancing the needs and expectations of stakeholders but is often required to make difficult decisions based on competing priorities where the outcome may not be positive for all stakeholders. Decisions are always taken with the utmost regard and respect for all stakeholders, and the decision-making process has been formulated to ensure directors evaluate the merits and demerits of proposed activities and their likely consequences over the short, medium and long-term. It is the aim of the Board to safeguard the Company so that it can continue in existence while fulfilling its operational purpose and creating value for stakeholders.
During 2021, the Company engaged with certain key stakeholders regarding certain key strategic matters, including the need to refine its model. As a result of this, the Company developed a new direct to its retail strategy that removed additional layers of distributor contracts from this sales channel. These changes were announced in early 2022 and continue to be acted upon with the intention of generating reliable revenues.
Key Performance Indicators
The Group's current focus is on the continued development of its core business and the Board has yet to set key performance indicators as applicable to overall operations. The Board will seek to identify and measure such indicators as the Group's activities become more settled.
In the future, it is likely that specific indicators will be assigned to reflect progress within the Group's sales channels. For digital sales, major indicators are likely to include website traffic, conversion and retention rates, and average spend per consumer. In respect of physical retail sales, major indicators may include unit sell-through rates. More generally, the Group will report on revenue generated from across its full base of commercial activities.
Once established, the Group's financial, operational, health and safety and environmental key performance indicators will be measured and reported as appropriate.
|
Chill Brands Group PLC (Formerly Zoetic International PLC) |
||||||||
|
Consolidated Statement of Comprehensive Income |
||||||||
|
For the years ended 31 March 2022 and 2021 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes |
|
Year ended 31 March 2022 £ |
|
|
Year ended 31 March 2021 £ |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
3 |
|
624,187 |
|
|
320,875 |
|
|
Cost of sales |
|
|
|
(738,555) |
|
|
(361,517) |
|
|
Obsolete inventory expense |
|
15 |
|
(664,442) |
|
|
- |
|
|
Gross loss |
|
|
|
(778,810) |
|
|
(40,642) |
|
|
Administrative expenses |
|
|
|
(2,837,400) |
|
|
(2,151,391) |
|
|
Share expenses for options granted |
|
21 |
|
(1,958,076) |
|
|
(1,410,268) |
|
|
Other Expense |
|
24 |
|
- |
|
|
(1,200,000) |
|
|
Operating Loss |
|
5 |
|
(5,574,286) |
|
|
(4,802,301) |
|
|
Finance income |
|
|
|
1,962 |
|
|
1,762 |
|
|
Loss on ordinary activities before taxation |
|
|
|
(5,572,324) |
|
|
(4,800,539) |
|
|
Taxation on loss on ordinary activities |
|
8 |
|
- |
|
|
- |
|
|
Loss for the period from continuing activities |
|
|
|
(5,572,324) |
|
|
(4,800,539) |
|
|
Loss for the period from discontinued activities |
|
9 |
|
(139,179) |
|
|
(49,762) |
|
|
Loss for the period |
|
|
|
(5,711,503) |
|
|
(4,850,301) |
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
Items that may be re-classified subsequently to profit or loss: |
|
|
|
(271,869) |
|
|
231,644 |
|
|
Total comprehensive income for the |
|
|
|
(5,983,372) |
|
|
(4,618,657) |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributed to the equity holders: |
|
|
|
|
|
|
|
|
|
Attributable to continuing activities |
|
|
|
(2.65) |
p |
|
(2.48) |
p |
|
Attributable to discontinued activities |
|
|
|
(0.06) |
p |
|
(0.03) |
p |
|
Total |
|
10 |
|
(2.71) |
p |
|
(2.51) |
p |
|
|
|
|
|
|
|
|
|
|
|
The financial Statements were approved by the Board of Directors on and signed on their behalf by:
|
||||||||
|
Chill Brands Group PLC |
|
||||||||||
|
Registered Number: 09309241 |
|
||||||||||
|
Consolidated Statement of Financial Position |
|
||||||||||
|
At 31 March 2022 and 2021 |
|
||||||||||
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||
|
|
|
Notes |
|
At 31 March 2022 £ |
|
At 31 March 2021 £ |
|
||||
|
Non-Current Assets |
|
|
|
|
|
|
|
||||
|
Property, plant, and equipment |
|
11 |
|
54,173 |
|
54,597 |
|
||||
|
Right of use lease asset |
|
12 |
|
260,376 |
|
- |
|
||||
|
Intangible assets |
|
13 |
|
1,190,225 |
|
- |
|
||||
|
Total Noncurrent Assets |
|
|
|
1,504,774 |
|
54,597 |
|
||||
|
Current Assets |
|
|
|
|
|
|
|
||||
|
Inventories, net |
|
15 |
|
636,294 |
|
1,238,779 |
|
||||
|
Trade and other receivables |
|
16 |
|
700,199 |
|
136,093 |
|
||||
|
Cash and cash equivalents |
|
17 |
|
420,045 |
|
333,176 |
|
||||
|
Total Current Assets |
|
|
|
1,756,538 |
|
1,708,048 |
|
||||
|
Total Assets |
|
|
|
3,261,312 |
|
1,762,645 |
|
||||
|
Non-Current Liabilities |
|
|
|
|
|
|
|
||||
|
Loans, excluding current maturities |
|
23 |
|
50,463 |
|
72,042 |
|
||||
|
Right of use lease liability, net of current portion |
|
12 |
|
205,672 |
|
- |
|
||||
|
Total Noncurrent Liabilities |
|
|
|
256,135 |
|
72,042 |
|
||||
|
Current Liabilities |
|
|
|
|
|
|
|
||||
|
Current maturities of loans |
|
23 |
|
18,494 |
|
8,382 |
|
||||
|
Trade and other payables |
|
18 |
|
730,184 |
|
661,653 |
|
||||
|
Right of use lease liability, non-current portion |
|
12 |
|
62,390 |
|
- |
|
||||
|
Accrued liabilities |
|
18 |
|
654,071 |
|
1,244,750 |
|
||||
|
Total Current Liabilities |
|
|
|
1,465,139 |
|
1,914,785 |
|
||||
|
Total Liabilities |
|
|
|
1,721,274 |
|
1,986,827 |
|
||||
|
Net Assets |
|
|
|
1,540,038 |
|
(224,182) |
|
||||
|
Equity |
|
|
|
|
|
|
|
||||
|
Share capital |
|
19 |
|
2,120,700 |
|
2,020,700 |
|
||||
|
Share premium account |
|
19 |
|
10,298,440 |
|
4,698,441 |
|
||||
|
Share based payments reserve |
|
20 |
|
3,389,762 |
|
1,431,686 |
|
||||
|
Shares to be issued reserve |
|
21 |
|
89,517 |
|
- |
|
||||
|
Foreign currency translation reserve |
|
|
|
260,777 |
|
532,646 |
|
||||
|
Retained loss |
|
|
|
(14,619,158) |
|
(8,907,655) |
|
||||
|
Total Equity |
|
|
|
1,540,038 |
|
(224,182) |
|
||||
|
|
|
|
|
|
|
|
|
||||
|
The financial Statements were approved by the Board of Directors on and signed on their behalf by:
|
|
||||||||||
|
Chill Brands Group PLC |
|||||||||||
|
Consolidated Statement of Cash Flows |
|||||||||||
|
For the years ended 31 March 2022 and 2021 |
|||||||||||
|
|
|
|
|
|
|||||||
|
|
|
2022 £ |
|
2021 £ |
|||||||
|
|
|
|
|
|
|||||||
|
Cash Flows From Operating Activities |
|
|
|
|
|||||||
|
Loss for the period |
|
(5,711,503) |
|
(4,850,301) |
|||||||
|
Adjustments for: |
|
|
|
|
|||||||
|
Depreciation and amortization charges |
|
113,090 |
|
20,677 |
|||||||
|
Impairment provision |
|
664,441 |
|
206,685 |
|||||||
|
Loss on disposal of property, plant, and equipment and intangible assets |
|
226 |
|
- |
|||||||
|
Share expenses for options granted |
|
1,958,076 |
|
1,410,268 |
|||||||
|
Shares issued as compensation |
|
89,517 |
|
- |
|||||||
|
Foreign exchange translation adjustment |
|
(319,545) |
|
193,717 |
|||||||
|
Operating cash flow before working capital movements |
|
(3,205,698) |
|
(3,018,954) |
|||||||
|
Increase in inventories |
|
(61,957) |
|
(275,743) |
|||||||
|
(Increase)/decrease in trade and other receivables |
|
(564,106) |
|
1,301,039 |
|||||||
|
Increase/(decrease) in trade and other payables |
|
68,531 |
|
(235,732) |
|||||||
|
(Decrease)/increase in accrued liabilities |
|
(1,199,600) |
|
1,244,750 |
|||||||
|
Net Cash outflow from Operating Activities |
|
(4,962,830) |
|
(984,640) |
|||||||
|
|
|
|
|
|
|||||||
|
Cash Flows From Investing Activities |
|
|
|
|
|||||||
|
Proceeds from sale of assets held for sale |
|
- |
|
301,891 |
|||||||
|
Purchase of property, plant, and equipment |
|
(27,443) |
|
(1,352) |
|||||||
|
Purchase of intangible assets |
|
(617,198) |
|
- |
|||||||
|
Net Cash generated from/(used in) Investing Activities |
|
(644,641) |
|
300,539 |
|||||||
|
|
|
|
|
|
|||||||
|
Cash Flows From Financing Activities |
|
|
|
|
|||||||
|
Net proceeds from issue of shares |
|
5,699,999 |
|
542,825 |
|||||||
|
Loans made by the Company |
|
(11,467) |
|
80,424 |
|||||||
|
Payments of lease liability |
|
(52,801) |
|
- |
|||||||
|
Net Cash Generated from Financing Activities |
|
5,635,731 |
|
623,249 |
|||||||
|
|
|
|
|
|
|||||||
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|||||||
|
As above |
|
28,260 |
|
(60,852) |
|||||||
|
Cash and cash equivalents at beginning of period |
|
333,176 |
|
349,006 |
|||||||
|
Foreign exchange adjustment on opening balances |
|
58,609 |
|
45,022 |
|||||||
|
Cash and cash equivalents at end of period |
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420,045 |
|
333,176 |
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