29 September 2023
Kanabo Group Plc
("Kanabo", the "Group" or the "Company")
UNAUDITED HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
Kanabo Group plc (LSE: KNB), the patient-focused provider of digital health services and specialist medicines, including medicinal cannabis, announces results for the six months ended 30 June 2023 ("H1 2023").
Kanabo has evolved to be a digital health platform and is seeking to be a key player in advancing innovative and accessible healthcare solutions and treatments. Headquartered in the UK, Kanabo provides patients with accessible, personalised care through its innovative end-to-end platform across both digital primary and secondary care clinics. Primary care services provide the first point of contact in the healthcare system and secondary care services is the provision of more specialist expertise and care in respect of a particular medical problem. The Group delivers digital primary care via The GP Service telehealth platform and the recently launched Treat It online pain clinic provides personalised secondary care services. Both are integrated with a supply chain that delivers medications directly to patients and includes Kanabo's unique metered dose inhaler products.
Through its end-to-end solution, Kanabo enables patients to seamlessly access consultations, prescriptions, and treatments tailored to their needs. The Company is continually identifying additional treatments not readily available through traditional NHS channels to add to its portfolio, responding to growing patient demand for personalised care and medicine.
As a patient-first business, Kanabo aims to empower people with their own healthcare choices and make the process efficient, educational and accessible for all.
H1 2023 Key Highlights:
? Revenue increased 88% to £0.45m (H1 2022: £0.24m), demonstrating ongoing commercial progress.
? Operating loss reduced 63% to £1.4m (H1 2022: £3.72m), with strategic initiatives driving improved financial performance.
? Cash at 30 June 2023 of £4.4m (31 Dec 2022: £3.2m), to support the Group's growth plans.
? Completed a £2.74m fundraising by way of an oversubscribed Placing in April 2023, reflecting investor confidence.
? Strengthened the Board with the Appointment of Ian Mattioli as Chair and Sharon Malka as Non-Executive Director
Post Period End and Outlook:
? Medical inhaler completes all necessary stages for CE Mark, certification pending - Our distinctive medical device inhaler has successfully completed all necessary stages to become the first of its kind to achieve CE mark certification. We anticipate formal certification to be awarded in the coming months.
? Major contract for Kanabo Agritec ("Agritec") - In July, Agritec secured a landmark deal to provide consultancy services for a cultivation and production facility in Madrid.
? Kanabo now focused on growing two distinct but highly complementary divisions which are founded on the team's combined knowledge of the medicinal cannabis industry and digital health services.
? Positive outlook for growth - The Board remains confident in both the short and medium-term prospects for the Company. We remain steadfast in our commitment to increasing sales in existing markets while exploring opportunities to expand into new geographies, whilst simultaneously further developing our product and service offering.
Future milestones:
Over the next six months, our key priorities include:
· Expansion of primary care platform - launching a significant expansion of our primary care platform, enhancing the patient experience by facilitating direct access to treatments and medications without a preliminary consultation. The initiative implements cutting edge technology to streamline the process, which in turn will expand patient capacity in our clinics.
· Expansion of secondary care platform - leveraging our technology and experience with launching Treat It to launch a similar service to tackle additional areas where there is a significant unmet medical need. We have identified the UK's mental health sector as the first additional sector into which we will roll out our services. The UK mental health sector is under well-documented pressure, and our intention is to expand our services in the coming months to that area, addressing patient demand.
· Partnership with UK high street pharmacies - undertake a pilot programme that will see Kanabo collaborate with physical high street pharmacies to trial in-pharmacy consultations via our Treat It clinic, tapping into the pharmacies' existing patient networks to broaden Kanabo's outreach and addressable market.
· EU product expansion - pending receipt of CE mark for our VapePod MD medical device inhaler, build on our UK footprint and expand our distributor network outside of the UK across Europe to launch into appropriate new territories, expanding our footprint and driving geographic diversification.
Avihu Tamir, Chief Executive Officer of Kanabo, commented:
"I'm excited about the progress we made in the first half of 2023, as we build our position as a key player in primary and secondary digital health services in the UK. With The GP Service and 'Treat It' fully integrated, we're not just broadening our reach but also enhancing our capabilities. We're in the final stages of rolling out new technology that will improve patient access to GP treatments, making healthcare more accessible than ever.
"In addition to revolutionising secondary care with affordable, quick, specialist consultations, we're exploring opportunities to expand beyond pain management into other medical fields with significant unmet demand. As we look ahead, our focus remains on growing our patient numbers and revenue while staying committed to personalised, accessible healthcare."
Enquiries:
| Kanabo Group plc Avihu Tamir, Chief Executive Officer Assaf Vardimon, Chief Financial Officer Ian Mattioli, Non-Executive Chair of the Board
| via Vigo Consulting +44 (0)20 7390 0230 |
| Peterhouse Capital Ltd (Financial Adviser) Eran Zucker / Lucy Williams / Charles Goodfellow
| +44 (0)20 7469 0930 |
| Vigo Consulting (Financial Public Relations/Investor Relations) Jeremy Garcia / Fiona Hetherington / Verity Snow | +44 (0)20 7390 0230 |
About Kanabo Group plc
Kanabo Group plc (LSE:KNB) is a digital health company committed to transforming patient care through its innovative technology platform and specialised treatment offerings. Since its inception in 2017, Kanabo has been focused on researching, developing, and commercialising regulated medicinal cannabis-derived formulations and therapeutic inhalation devices.
Kanabo's NHS-approved online telehealth platform, The GP Service, provides patients with video consultations, online prescriptions, and primary care services. Leveraging its telehealth capabilities, in February 2023, Kanabo launched Treat It - an online clinic focused on chronic pain management providing patients with secondary care.
With its two complementary business divisions, Kanabo has established itself as an end-to-end digital health provider, offering telehealth consultations, prescriptions, alongside the delivery of tailored treatments.
The Company's partially owned subsidiary, Kanabo Agritec Ltd, is a cultivation consultancy supporting cannabis businesses in developing new farms through infrastructural, research, and product guidance. These farms deliver high-quality raw materials for Kanabo's formulas and product line.
At Kanabo Group Plc, we are dedicated to providing patients with the highest quality medical treatments and more accessible healthcare experiences.
Visit www.kanabogroup.com for more information.
Operational Review
I am delighted to report that Kanabo has continued to make significant progress in the first half of 2023 and continued its strategic evolution to becoming a digital health provider, giving patients access to a wide range of treatment pathways, including primary and secondary care. The Group has delivered a strong performance across both operating divisions in H1 2023, resulting in an increase in revenues of 88% to £0.45m (H1 2022: £0.24m).
The Group has now fully embedded The GP Service (acquired in February 2022) into its operations, creating a balanced business with two distinct but complementary operating divisions with significant overlap: medicinal cannabis and digital health services. Within the medicinal cannabis division, we have continued to launch new products and deliver strong sales. Additionally, Kanabo now has an established digital health services platform, which provides customers access to online consultations with healthcare professionals. In March of this year, we announced the launch of Treat It, our online medicinal cannabis clinic, which symbolised the combination of both divisions. Patients seeking treatment plans for chronic pain management are able to access online consultations with healthcare professionals who, in turn, are able to prescribe medicinal cannabis products, among others, as part of an innovative treatment pathway, which is currently unavailable through other channels.
The Group remains focused on building an end-to-end digital health services company that enables patients to take control of their own healthcare pathway through providing access to personalised medical treatments and innovative healthcare solutions, including medicinal cannabis. Furthermore, we are developing additional technologies for the digital health platform that will further improve access to secondary care - seeking to offer affordable specialist consultations at a fraction of the cost and without the traditional waiting times. Additionally, we are exploring opportunities to leverage our expertise with our online chronic pain clinic and expand into complementary medical fields.
Digital Health Services
We are delighted to report the digital health services division continues to perform strongly following the integration of The GP Service. We are cognisant of the platform's need to deliver a high-quality and seamless interface for our customers and, to that end, we have invested in the suite of technology tools, which enables customers to benefit from video consultations, digital prescriptions and access to primary and secondary care services. Looking forward, we will seek to expand the breadth of our online health services, aiming to increase our addressable market and boost revenue through medication sales.
Since the integration of The GP Service, we have seen demand for online consultations increase exponentially, and the platform is now delivering more than 1,000 monthly consultations (H1 2022: ~700 monthly consultations). Furthermore, the network of pharmacies connected to our NHS-approved digital health platform has grown to over 4,000 pharmacies.
In March 2023, we announced an exciting expansion of the online consultation service with the launch of Treat It, Kanabo's dedicated online medicinal cannabis clinic. The clinic - which is regulated by the Care Quality Commission ("CQC") - aims to directly address the issue of limited access to pain management treatments for those suffering from chronic pain. There are estimated to be more than 8 million chronic pain patients in the UK, and they often face difficulties accessing medical treatment as a result of long waiting times, bureaucracy and affordability. The Treat It clinic enables patients to access healthcare professionals via our digital healthcare platform, who are able to prescribe a wide range of personalised treatments, including the prescription of medicinal cannabis where appropriate.
As well as providing access to GP appointments for private individuals, the Group also has a number of agreements with UK corporations to provide services to its employees as part of a broader benefits package. Given the continued pressures being experienced by the National Health Service in the UK, we anticipate further demand for our online consultations going forward.
Specialised Medications
Kanabo's research and development ("R&D") team continue to develop and launch additional products into the Group's portfolio, and in January announced the launch of two new medicinal cannabis extract formulas for inhalation. These have been specifically developed for patients suffering from severe pain and are delivered via the Group's VapePod MD delivery device, our medical-grade vaporiser, that ensures precise dosing. The R&D team continually develops new formulae and products to ensure Kanabo retains its reputation as a developer of innovative and cutting-edge products.
Post-period end, we were informed that the Group's VapePod MD delivery device has made further progress towards achieving CE Mark approval. We expect the device to be the first medical device-certified cannabis inhaler of its kind to have achieved the CE Mark status, which will open up a wealth of opportunities for Kanabo to expand its footprint across Europe. Upon receipt of a CE Mark accreditation, the Group intends to progress the rollout across certain European markets and will make further announcements in due course.
During the first half, the Group established a strategic partnership with the largest independent wholesaler of medications to UK pharmacies. This, in turn, provides Kanabo with robust import and distribution capabilities across the country. This new partnership validates our truly end-to-end solution by solidifying last-mile delivery and enabling future import of additional specialised medications as we expand our online clinic offerings.
Kanabo Agritec
Kanabo Agritec ("Agritec") - a cannabis cultivation consultancy firm in which Kanabo has a 40% stake -delivered first contract win in July 2023. Agritec will work alongside its Spanish partner, Taima Growth S.L. ("Taima") to establish a cultivation centre and will receive payment upon achieving certain milestones across the project. Agritec is a dedicated consultancy focused on the design build, operation and management of medicinal cannabis facilities.
The contract with Taima is for the development of an indoor medicinal cannabis cultivation and processing facility in Madrid, Spain. The contract - split over two phases - will see the facility granted a license for production and manufacturing of cannabis, and once completed, will be capable of producing up to 3,000kg of cannabis flowers annually.
Through our involvement with Agritec, Kanabo is not only able to leverage its extensive knowledge and experience in establishing and optimising medicinal cannabis facilities, but it also ensures that the Group has a diversified supply chain through key offtake agreements.
Directorate & Personnel Changes
Over the course of the first half, we have significantly strengthened our Board, most notably with the appointment of Ian Mattioli as Non-Executive Chair. As co-founder and CEO of a leading UK pensions and wealth management consultancy, Ian brings extensive experience in financial services, wealth management and capital markets. Following Ian's appointment, Mr David Tsur, who has served as Kanabo's Non-Executive Chair, moved to the role of Deputy Chair, where we can continue to benefit from his knowledge and expertise as we have done since the Company came to market.
Additionally, we announced the appointment of Sharon Malka, who has gained significant experience with international healthcare and technology companies, as Non-Executive Director.
We would like to thank both Dan Poulter and Gil Efron, who both stepped down from the Board in the first half for their contributions to the business. We wish Dan all the best as he focuses on his existing commitments outside of the business and continue to send our best wishes to Gil as he continues with rehabilitation following his accident.
Across the period, the Group has also transitioned a number of key roles out of Israel, where employees typically command a higher salary, to the UK. This move has not only simplified the operating structure of the business but has also immediately triggered a reduction in the cost base.
Corporate activity
In May 2023, we announced a £2.74 million fundraising, which received strong support from both existing and new investors, and also saw participation from key members of the team, including Ian Mattioli (Chair), David Tsur (Deputy Chair), Avihu Tamir (CEO) and Suleman Sacranie (CTO and Founder of The GP Service).
Proceeds of this fundraising will enable Kanabo to pursue its key strategic initiatives: to capitalise on the opportunity in both digital healthcare services and the rising demand for medicinal cannabis products and other innovative products. Proceeds have been allocated to expand the digital health services division and to invest in product development, technology and network growth.
The Group appointed MHA MacIntyre Hudson ("MHA") in March as the Company's auditors, replacing Jeffreys Henry LLP ("Jeffreys Henry"), the Company's previous auditors, following Jeffreys Henry's decision not to register themselves with the Financial Reporting Council as an eligible auditor to undertake Public Interest Entity audits.
Summary & Outlook
Kanabo is a well-balanced business boasting growing primary and secondary digital healthcare services, alongside our core cannabis product development competencies.
Our development and launch of new products remain a cornerstone of our business and in maintaining our market leading position. We are recognised for having cutting edge products and solutions and, to that end, our R&D team continues to focus on the delivery of innovative formulae aimed at both the medical and wellness markets.
The recently launched Treat It platform, which combines both elements of our business, is also extremely well placed for growth. According to Statista, the value of the medicinal cannabis market in Europe is expected to grow from $300 million in 2019 to over $2.5 billion in 2024[1].
Furthermore, there is increased demand in the UK for private health services, as outlined previously. Over 8 million people in the UK used online GP services last year[2], and the digital health market in the UK is expected to reach £25 billion by 2025[3]. With our innovative end-to-end solution, Kanabo is well-placed to benefit from this shift and demand for accessible, personalised digital healthcare.
Over the next six months, our key priorities include:
· Expansion of primary care platform - launching a significant expansion of our primary care platform, enhancing the patient experience by facilitating direct access to treatments and medications without a preliminary consultation. The initiative implements cutting edge technology to streamline the process, which in turn will expand patient capacity in our clinics.
· Expansion of secondary care platform - leveraging our technology and experience with launching Treat It to launch a similar service to tackle additional areas where there is a significant unmet medical need. We have identified the UK's mental health sector as the first additional sector into which we will roll out our services. The UK mental health sector is under well-documented pressure, and our intention is to expand our services in the coming months to that area, addressing patient demand.
· Partnership with UK high street pharmacies - undertake a pilot programme that will see Kanabo collaborate with physical high street pharmacies to trial in-pharmacy consultations via our Treat It clinic, tapping into the pharmacies' existing patient networks to broaden Kanabo's outreach and addressable market.
· EU product expansion - pending receipt of CE mark for our VapePod MD medical device inhaler, build on our UK footprint and expand our distributor network outside of the UK across Europe to launch into appropriate new territories, expanding our footprint and driving geographic diversification.
As a team, Kanabo believes there is a significant market opportunity for the Group across both divisions. Demand for access to healthcare professionals continues to rise, with the widely reported pressures on national health systems resulting in increased waiting times and frustration from patients, particularly those suffering from chronic pain. Our medicinal cannabis products are also gaining traction in a growing market, and we believe there is a real opportunity to expand our sales channels to other geographies both within and outside of Europe.
Whilst we recognise the broader socio-economic pressures that are being felt worldwide, the Board of Kanabo believe we are well placed to develop a scaled business addressing demand across our sector, and in capitalising on a number of near-term growth opportunities. We thank shareholders for their continued support and look forward to continuing to update them on our progress.
Ian Mattioli & Avihu Tamir
Chair of the Board & Chief Executive Officer
29 September 2023
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 2023
| | For the six months ended 30 June | For the year ended 31 December |
| |
|
| 2023 | 2022 | 2022 |
|
| | £ 000 | £ 000 | £ 000 |
|
|
| | | |
|
| Revenue | 449 | 239 | 603 |
|
| Cost of sales | 372 | 151 | 404 |
|
| Gross profit | 77 | 88 | 199 |
|
|
| | | |
|
| Research and development expenses | 214 | 181 | 597 |
|
| Sales and marketing expenses | 275 | 511 | 1,190 |
|
| General and administration expenses | 1,270 | (*) 2,045 | 3,804 |
|
| Reverse impairment of financial assets carried at amortised cost | - | - | (59) |
|
| Other expenses (gains) - including acquisition and listing costs | (322) | 1,067 | 1,448 | |
| | | | | |
| Operating loss | (1,360) | (3,716) | (6,781) | |
| | | | | |
| Net finance expenses | (201) | (57) | (89) | |
| | | | | |
| Loss before taxation from continuing operations | (1,561) | (3,773) | (6,870) | |
|
| | | | |
| Income tax benefits | - | (*)- | - | |
| | | | | |
| Loss for the period | (1,561) | (3,773) | (6,870) | |
|
| | | | |
| Attributable to: | | | | |
| Equity holders of the parent | (1,557) | (3,778) | (6,867) | |
| Non-controlling interests | (4) | 5 | (3) | |
| | (1,561) | (3,773) | (6,870) | |
|
| | | | |
| Loss (basic and diluted) per share from continuing operations attributable to the equity owners |
| | | |
| Basic and diluted loss per share (pence per share) | (0.35) | (0.92) | (1.65) | |
(*) A reclassification was carried out in accordance with 2022 audited annual reports.
Unaudited consolidated statement of financial position as at 30 June 2023
| | 30 June | 31 December | |
| | 2023 | 2022 | 2022 |
|
| Unaudited | Unaudited | Audited |
|
| £ 000 | £ 000 | £ 000 |
| ASSETS |
| | |
| Non-current assets |
| | |
| Intangible assets and goodwill | 9,575 | (*)13,286 | 10,044 |
| Property, plant, and equipment | 82 | 100 | 96 |
| Right-of-use asset | 255 | 309 | 282 |
| Long-term deposit | 28 | - | 31 |
| Non-current financial asset | - | 750 | - |
| | 9,940 | 14,445 | 10,453 |
| Current assets |
| | |
| Inventories | 77 | 69 | 81 |
| Trade receivables | 42 | 18 | 43 |
| Other receivables | 259 | 254 | 156 |
| Current financial asset | - | - | 491 |
| Short-term deposits | 13 | 51 | 24 |
| Cash and cash equivalents | 4,441 | 4,959 | 3,204 |
| | 4,832 | 5,351 | 3,999 |
| Total assets | 14,772 | 19,796 | 14,452 |
| | | | |
| EQUITY AND LIABILITIES |
| | |
| Equity |
| | |
| Issued capital | 14,331 | 10,573 | 10,573 |
| Share premium account | 7,169 | (*) 6,850 | 6,850 |
| Merger reserve | 15,957 | (*) 14,221 | 11,393 |
| Share-based payments reserve | 963 | 1,077 | 1,715 |
| Share to be issued reserve | 4,691 | (*)10,476 | 10,476 |
| Reverse acquisition reserve | (14,968) | (14,968) | (14,968) |
| Foreign currency translation reserve | 183 | (2) | 14 |
| Retained deficit | (14,541) | (10,491) | (13,605) |
| Equity attributable to equity holders of the parent | 13,785 | 17,736 | 12,448 |
| Non-controlling interests | (7) | 5 | (3) |
| Total equity | 13,778 | 17,741 | 12,445 |
|
| | | |
| Non- current liabilities |
| | |
| Interest-bearing loan and borrowings | 397 | 568 | 509 |
| | 397 | 568 | 509 |
| Current liabilities |
| | |
| Trade payables | 88 | 139 | 153 |
| Other payables | 317 | 1,096 | 1,147 |
| Interest-bearing loan and borrowings | 192 | 252 | 198 |
| | 597 | 1,487 | 1,498 |
| Total liabilities | 994 | 2,055 | 2,007 |
| Total equity and liabilities | 14,772 | 19,796 | 14,452 |
(*) A reclassification was carried out in accordance with 2022 audited annual reports.
Unaudited consolidated statement of changes in equity for the period ended 30 June 2023
| | Attributable to owners of the Company |
| |||||||||
| | Share capital | Share premium account | Merger reserve | Share based payments reserve | Share to be issued reserve | Reverse acquisition reserve | Foreign currency translation reserve | Retained deficit | Total | Non-controlling interests | Total equity |
|
| £ 000 | £ 000 | £ 000 | £ 000 | £ 000 | £ 000 | £ 000 | £ 000 | £ 000 |
|
|
|
| | | | | | | | | | | |
| As at 1 January 2022 (audited) | 9,249 | 5,169 | 9,231 | 758 | 2,500 | (14,968) | (7) | (6,748) | 5,184 | - | 5,184 |
|
| | | | | | | | | | | |
| Loss for the year | - | - | - | - | - | - | - | (6,867) | (6,867) | (3) | (6,870) |
| Other comprehensive income | - | - | - | - | - | - | 21 | - | 21 | - | 21 |
| Total comprehensive loss | - | - | - | - | - | - | 21 | (6,867) | (6,846) | (3) | (6,849) |
| Acquisition of a subsidiary | 533 | - | 2,162 | - | 7,976 | - | - | - | 10,671 | - | 10,671 |
| Issue of share capital | 703 | 1,434 | - | - | - | - | - | - | 2,137 | - | 2,137 |
| Exercise of options | 7 | 5 | - | (10) | - | - | - | 10 | 12 | - | 12 |
| Exercise of warrants | 81 | 242 | - | - | - | - | - | - | 323 | - | 323 |
| Share-based payments | - | - | - | 967 | - | - | - | - | 967 | - | 967 |
| As at 31 December 2022 (audited) | 10,573 | 6,850 | 11,393 | 1,715 | 10,476 | (14,968) | 14 | (13,605) | 12,448 | (3) | 12,445 |
|
| | | | | | | | | | | |
| Loss for the period | - | - | - | - | - | - | - | (1,557) | (1,557) | (4) | (1,561) |
| Other comprehensive income | - | - | - | - | - | - | 169 | - | 169 | - | 169 |
| Total comprehensive loss | - | - | - | - | - | - | 169 | (1,557) | (1,388) | (4) | (1,392) |
| Issue of share capital | 1,910 | 210 | - | - | 540 | - | - | - | 2,660 | - | 2,660 |
| Acquisition of a subsidiary | 1,821 | - | 4,564 | - | (6,385) | - | - | - | - | - | - |
| Debt settlements | 27 | 109 | - | - | 60 | - | - | - | 196 | - | 196 |
| Expiration of options | - | - | - | (621) | - | - | - | 621 | - | - | - |
| Share-based payments | - | - | - | (131) | - | - | - | - | (131) | - | (131) |
| As at 30 June 2023 (unaudited) | 14,331 | 7,169 | 15,957 | 963 | 4,691 | (14,968) | 183 | (14,541) | 13,785 | (7) | 13,778 |
| |
| Attributable to owners of the Company | |||||||
|
| Share capital | Share premium | Merger reserve | 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 | (*)5.169 | (*) 9,231 | 758 | 2,500 | (14,968) | (7) | (6,748) | 5,184 |
|
| | | | | | | | | |
| Loss for the period | - | - | - | - | - | - | - | (3,773) | (3,773) |
| Other comprehensive income | - | - | - | - | - | - | 5 | - | 5 |
| Total comprehensive loss | - | - | - | - | - | - | 5 | (3773) | (3,768) |
| Acquisition of a subsidiary | 533 | - | 4,990 | - | 7,976 | - | - | - | 13,499 |
| Issue of share capital | 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 |
| As at 30 June 2022 (unaudited) | 10,573 | 6,850 | 14,221 | 1,077 | 10,476 | (14,968) | (2) | (10,486) | 17,741 |
(*) A reclassification was carried out in accordance with 2022 audited annual reports.
Unaudited consolidated statement of cash flows for the period ended 30 June 2023
| | For the six months ended 30 June | For the year ended 31 December | ||
|
| 2023 | 2022 | 2022 | |
|
| £ 000 | £ 000 | £ 000 | |
| Operating activities |
| | | |
| Loss before tax | (1,561) | (3,773) | (6,870) | |
| Adjustments to reconcile profit before tax to net cash flows: |
| | | |
| Net reverse losses on financial assets | - | - | (59) | |
| Share-based payment expense | (131) | 354 | 967 | |
| Depreciation of property, plant and equipment and right-of-use assets | 38 | 27 | 69 | |
| Amortisation of intangible assets and impairment of goodwill | 678 | 559 | 976 | |
| Provision for bad debts | 1 | - | 3 | |
| Loss on current financial asset | 158 | - | 259 | |
| Net finance expenses | 27 | 30 | 56 | |
| Working capital changes: |
| | | |
| Change in trade receivable | - | 5 | (3) | |
| Change in other receivable | (103) | 60 | 155 | |
| Change in inventories | 4 | (6) | (18) | |
| Change in trade payables | (65) | 78 | 92 | |
| Change in other payables | (634) | 646 | 677 | |
| Change in long term deposit | 3 | (31) | (31) | |
| | (1,585) | (2,051) | (3,727) | |
| Interest paid | (27) | (19) | (52) | |
| Net cash flows used in operating activities | (1,612) | (2,070) | (3,779) | |
|
| | | | |
| Investing activities |
| | | |
| Purchase of property, plant, and equipment | (3) | (58) | (68) | |
| Proceeds from sale financial asset | 333 | - | - | |
| Acquisition of a subsidiary, net of cash acquired | - | 235 | 235 | |
| Investment in short term deposits | 11 | - | (4) | |
| Development expenditures | (209) | (86) | (86) | |
| Net cash flows from investing activities | 132 | 91 | 77 | |
|
| | | | |
| Financing activities |
| | | |
| Share issue net of issuing cost | 2,660 | 2,137 | 2,137 | |
| Proceeds from exercise of warrants | - | 323 | 323 | |
| Proceeds from exercise of share options | - | 12 | 12 | |
| Receipts of short and long-term loans | - | 9 | 68 | |
| Repayment of lease liability | (22) | (14) | (37) | |
| Repayment of borrowings | (67) | (17) | (100) | |
| Net cash flows from financing activities | 2,571 | 2,450 | 2,403 | |
|
| | | | |
| Net increase (decrease) in cash and cash equivalents | 1,091 | 471 | (1,299) | |
| Net foreign exchange difference | 146 | 11 | 26 | |
| Cash and cash equivalents at 1 January | 3,204 | 4,477 | 4,477 | |
| Cash and cash equivalents at end of the period | 4,441 | 4,959 | 3,204 | |
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 2023 were authorized for issue in accordance with a resolution of the directors on 27 September 2023.
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 2023 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 2022.
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 2022, except for the adoption of new standards effective as of 1 January 2023. 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 2023, 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 2022.
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 2022. There have been no changes in any risk management policies since the year end or as disclosed in the prospectus.
5. Going concern
The preparation of the financial statements requires an assessment on the validity of the going concern assumption.
The Directors are required to satisfy themselves that it is reasonable for them to conclude whether it is appropriate to prepare the financial statements on a going concern basis, and as part of that process, they have followed the Financial Reporting Council's guidelines ("Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risk" issued April 2016).
As at 30 June 2023, the Group's cash position was £4,441 thousand and it was in a strong net current asset position. Based on the above, 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 their obligations as they fall due in the event of no further funding being obtained due to the low level of committed expenditure relative to the forecasted discretionary expenditure, which could be reduced or deferred.
The impact of the risk factors such as high-interest rates and high inflation, declining consumer power, Russia's invasion of Ukraine, and supply chain disruptions had little effect on the business of the Group during 2022 and the first half of 2023, following that the Directors do not believe that these risks will have a significantly adverse impact on the Group in the foreseeable future.
6. Segment information
Following the acquisition of GP Service (UK) Limited ("GPS"), 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 2023:
For the six months ended 30 June 2023:
| | Primary care | Secondary care | Total segments | Adjustments and eliminations | Consolidated |
| | £ '000 | ||||
| Revenue | | | | | |
| External customer | 395 | 54 | 449 | - | 449 |
| Inter-segment | - | - | - | - | - |
| Total revenue | 395 | 54 | 449 | - | 449 |
| | | | | | |
| Results | | | | | |
| Segment loss | (1,009) | (552) | (1,561) | - | (1,561) |
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 2023:
| | Primary care | Secondary care | Total segments | Adjustments and eliminations | Consolidated |
| | £ '000 | ||||
| Assets | 10,051 | 6,472 | 16,523 | (1,751) | 14,772 |
| | | | | | |
| Liabilities | 2,211 | 534 | 2,745 | (1,751) | 994 |
As at 30 June 2022:
| | Primary care | Secondary care | Total segments | Adjustments and eliminations | Consolidated |
| | £ '000 | ||||
| Assets | (*) 13,841 | 6,445 | 20,286 | (490) | 19,796 |
| | | | | | |
| Liabilities | (*) 1,114 | 1,431 | 2,545 | (490) | 2,055 |
(*) A reclassification was carried out in accordance with 2022 audited annual reports.
7. Share-based payments
During the reporting period, 25,050,00 share options were granted to employees and senior executives under the options plans.
The total share-based payment charge in the period was £131 thousand (gain). The share-based payment charge was calculated using the Black-Scholes model. All granted options have an exercise period between two and three years from the date of issue. The total of the share-based payment charge has been simultaneously credited to retained earnings.
During the reporting period, 34,722,222 warrants were granted to investors. After the reporting period addition 12,847,221 warrants were granted see note 11.a. 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.
As of 30 June 2023, none of the options or warrants have been converted into shares.
Share-based payments charge for the reporting period:
| | For the six months ended 30 June | For the year ended 31 December | ||
| | 2023 | 2022 | 2022 | |
| | £ '000 | |||
| Cost of sales | 8 | - | 13 | |
| Research and development | 20 | 17 | 68 | |
| Sales and marketing | (75) | 129 | 349 | |
| General and administration | (84) | 208 | 537 | |
| Total | (131) | 354 | 967 | |
| | | | | |
8. General and administration
| | For the six months ended 30 June | For the year ended 31 December | |
| | 2023 | 2022 | 2022 |
| | £ '000 | ||
| Salaries and related expenses | 240 | 431 | 778 |
| Share-based payment expense | (84) | 208 | 537 |
| Insurance | 49 | 35 | 82 |
| Professional services | 209 | 610 | 1,005 |
| Rent and related expenses | 34 | 40 | 81 |
| Depreciation | 38 | 27 | 69 |
| Amortization | 678 | 680 | 976 |
| IT Development and licenses | 28 | 45 | 45 |
| Travel and accommodation | 53 | 70 | 128 |
| Other | 25 | 20 | 103 |
| Total | 1,270 | 2,166 | 3,804 |
9. Other expenses
| | For the six months ended 30 June | For the year ended 31 December | |
| | 2023 | 2022 | 2022 |
| | £ '000 | ||
| Acquisition and listing costs | 158 | 395 | 514 |
| Loss on current financial asset | 158 | - | 259 |
| Expense (reverse) provision for brokerage fees | (524) | 675 | 675 |
| Research and development tax credit | (114) | - | - |
| Total | (322) | 1,067 | 1,448 |
10. 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 | ||
| | 2023 | 2022 | 2022 | |
| | Unaudited | Audited | ||
| Loss attributable to equity holders of the Company (£'000) | (1,561) | (3,773) | (6,870) | |
| Weighted average number of shares in issue | 445,982,665 | 408,018,768 | 415,187,814 | |
| Loss per share pence | (0.35) | (0.92) | (1.65) | |
| | | | | |
Due to the loss incurred in the period under review, the dilutive securities have no effect on 30 June 2023.
11. Events during the reporting period
a. On 9 May 2023 and 10 May 2023 ("admission dates"), the Company raised £2,740 thousand (before costs) by the issue of 95,138,889 ordinary shares of 2.5 pence each. 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 5.76 pence for 24 months following the Admission Dates.
Participants in the fundraising include a new institutional investor as well as the Group's Directors and Senior Officers of the Company. The issue of the shares to the Directors and Senior Officers of the Company in the fundraise was conditional upon the approval by the Company's shareholders of certain resolutions to be proposed at the annual general meeting of the Group (the "AGM").
On 30 June 2023, the AGM approved the issue of the shares as a result, after the reporting period additional 18,749,999 ordinary shares of 2.5 pence each out of the 95,138,889 have been issued.
The total warrants issued sum to 47,569,443 (see also note 7).
b. On 13 June 2023, the Company published a prospectus (the "Prospectus") in relation to the proposed issue of 38,461,492 Ordinary Shares ("2020 Deferred Consideration Shares") in connection with the acquisition of Kanabo Research Limited for 6.5 pence and proposed issue of 72,831,186 Ordinary Shares ("Outstanding Consideration Shares") in connection with the acquisition of The GP Service (UK) Ltd at for 12.65 pence.
On 28 June 2023 the "Outstanding Consideration Shares" were issued.
On 10 July 2023 the "The 2020 Deferred Consideration Shares" were issued.
c. On 23 May 2023 the Company signed a settlement agreement with one of its previous service providers. According to the agreement, the Company will issue 5,000,000 new ordinary shares in exchange for removing all mutual claims.
The shares will be issued for the provision of brokerage services in relation to the acquisition of The GP Service ("GPS"). 4LLC will receive their shares in two tranches, with 3,000,000 shares ("First Tranche") and the remaining 2,000,000 shares ("Second Tranche") to be received within three months.
Of the First Tranche, 337,192 new ordinary shares ("4LLC Shares") were issued by the Company. The remaining 2,662,808 ordinary shares of the First Tranche will be transferred from the shares previously held by Mr. Atul Devani, Co-founder of GPS., Based on the compromise agreement signed with Mr. Devani, on his leaving the Company he returned 25% of the shares received as consideration for the acquisition of GPS. As such, in the settlement of the First Tranche, the Company issued only 337,192 new ordinary shares.
After the reporting period, the shares agreed on the Second Tranche have been issued.
Following the settlement agreement, the company reversed the previous booked provision and as a result, recorded income of £524 thousand booked under "Other expenses".
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