TIDMKNB
RNS Number : 9639X
Kanabo Group PLC
02 May 2023
2 May 2023
Kanabo Group Plc
("Kanabo", the "Group" or the "Company")
FULL YEAR RESULTS FOR THE TWELVE MONTHSED 31 DECEMBER 2022
-- Kanabo is now a fully focused health-tech company; combining
a digital healthcare platform and treatment portfolio with a focus
on medicinal cannabis products
-- Successful integration of The GP Service and launch of an
online pain management clinic, a key strategic pivot for the
Group
-- Now building a substantial operational base for future growth
Kanabo Group plc (LSE: KNB) , the patient focused healthcare
technology and medicinal cannabis company, announces results for
the year results for the year ended 31 December 2022 ("FY
2022").
Having delivered significant progress against its strategic
objectives across FY 2022, Kanabo uniquely combines a digital
healthcare platform that facilitates access to healthcare
professionals, and a treatment portfolio which includes medicinal
cannabis products, providing seamless access to high-quality
medical treatments for pain management.
2022 Key Highlights:
-- Ongoing progress to improve the financial stability of the Group:
o Revenues increased 726 % to GBP 603k (2021: GBP 73k )
o Operating loss totaled GBP6. 8 m (2021: operating loss of
GBP4.6m)
o Cash at 31 December 2022 of GBP 3.2 m (31 December 2021: GBP
4.4m )
o Raised GBP2.25m (in February 2022), by way of an
oversubscribed Placing
-- Acquisition of The GP Service Ltd ("GP Service") now fully
integrated into the Group, expanding the Group's activities and
skillset across the digital health services arena
-- Launched two new 'prescription only' cannabis-derived formulations for pain management
-- Launched a dedicated eCommerce platform, Kanabo. Store ,
focused initially at the UK market, with plans already underway to
expand into additional European markets
-- Formation of Kanabo Agritec - in which Kanabo holds a 40%
share - dedicated to providing consulting services around the
production, operation and management of medical cannabis production
facilities
Post Period End and Outlook:
-- Launch of Treat It, the Company's new online clinic for pain
management. The service allows patients direct access to
high-quality medical treatments, including medicinal cannabis, and
enables patients to take control of their own personalised care
-- Appointment of MHA MacIntyre Hudson as the Company's auditors
-- Continue to deliver further ongoing strategic progress, which
includes the process of obtaining CE Mark certification for the
Group's cannabis inhaler which remains on track
-- Through aligning the growing demand for digital medical
access and Kanabo's knowledge of the medicinal cannabis industry,
the Board remains confident in both short-term and medium-term
growth prospects for the Company, and remains committed to
developing a scaled business capable of fully exploiting a number
of near term growth opportunities
Avihu Tamir, Chief Executive Officer of Kanabo, commented:
"2022 has proved to be one of the most strategically important
years for our business, as we seek to further expand our
operational footprint across both the medicinal cannabis and
digital health services arenas.
"Our acquisition of GP Service will now provide the bedrock of
our activities as we continue to evolve Kanabo into a wellness and
healthcare specialist, whilst fully leveraging our market leading
expertise in the development, and distribution of cannabis-derived
medicinal products.
"2023 has started well, and we were delighted to announce the
launch of our online medicinal cannabis clinic for pain management
in March - leveraging our proprietary technology to provide access
to pain management treatments for patients across the UK. I believe
we now have the right strategic and operational focus to deliver
further financial progress and I look forward updating all our key
stakeholders throughout the year."
Enquiries:
Kanabo Group plc via Vigo Consulting
Avihu Tamir, Chief Executive Officer +44 (0)20 7390 0230
Assaf Vardimon, Chief Financial Officer
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
kanabo@vigoconsulting.com 0230
About Kanabo Group Plc
Kanabo Group Plc (LSE:KNB) is a healthtech company committed to
revolutionising patient care through its innovative technology
platform and disruptive 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. The Company is a leader
in its field, focusing on improving patient outcomes and providing
more accessible healthcare experiences.
In March 2023, Kanabo successfully launched its Pain Clinic,
Treat It, under the expert guidance of its technological and
product expertise. Treat It initially focuses on chronic pain
management using plant-based medicine and treatments that are
currently unavailable through traditional channels.
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.
Chair's Statement
I am delighted to report on the significant strategic progress
of the Company. Since the beginning of 2022 we have continued to
further strengthen the business, with the development and launch of
new products, acquisitive growth with the addition of The GP
Service to the Group, and the launch of a Kanabo Agritec Ltd
("Agritec"), a new, partly owned subsidiary offering one-stop-shop
consultancy services regarding the design, build, operation and
management of the production of medicinal cannabis. The Group is
now well positioned to leverage its skillset and products and
capitalise on the market opportunity.
In February 2022, we announced the acquisition of The GP
Service, and I would like to take this opportunity to welcome the
team from The GP Service to our growing group - we look forward to
working together to broaden our reach and leveraging The GP
Service's platform to expand our overall accessible market. This
collaboration will undoubtedly strengthen our position in the
healthcare sector and benefit our stakeholders.
The acquisition of The GP Service has been immediately boosted
earnings, contributing to an improved financial performance., We
are pleased to report revenue growth of GBP603 thousands, compared
to GBP73 thousands the previous year. This is before fully
completing the post-merger integration, which concluded in Q1
2023.
The acquisition of The GP Service has expanded the Group's
service offering in the healthcare space. With an existing network
of over 40,000 patients and approximately 4,500 registered
pharmacies, the platform presents an opportunity to leverage The GP
Service to further promote the sales of the Group's
cannabis-derived products for medical patients and other
specialised treatment portfolios. We have already seen a
significant increase in the number of monthly consultations and
look forward to further driving the reach of the service.
In August, we announced the formation of a new subsidiary,
Agritec, in which the Group has a 40% shareholding. Kanabo Agritec
will provides consultancy services, leveraging the experience and
knowledge of our team in areas such as cultivation, processing, and
production of cannabis products to advise other cultivators on
maximising their potential. Furthermore, these consultancy services
enable the Group to enhance the security of its cannabis supply by
diversifying its range of suppliers and generating a new revenue
stream in the short term.
The Group was pleased to complete a GBP2,250 thousands
oversubscribed Placing in February 2022, following strong demand
from both new and existing shareholders. Following the
well-supported fundraising in February 2022, our cash balance at 31
December 2022 was GBP3,204 thousands (31 December 2021: GBP4,477
thousands).
Following the acquisition of The GP Service, the Group
strengthened the team with the appointment of Dr Mehran Afshar as
Clinical Director of the Group. Dr Afshar's primary role is to
manage compliance policies and procedures regarding the supply of
medicinal cannabis through The GP Service.
In March 2022, Uziel Danino retired from the Board of Directors
and in December, it was announced that Andrew Morrison stood down
as Non-Executive Director. Both Uziel and Andrew were instrumental
in the successful listing of Kanabo on the London Stock Exchange.
In March 2023, it was additionally announced that Daniel Poulter
had stepped down as Non-Executive Director, with Kanabo confirming
it was at an advanced stage of discussions regarding the
appointment of a UK-based NED. I would like to thank Uziel, Andrew
and Daniel for their support and contribution to Kanabo and wish
them well with their future endeavours. Gil Efron, who has
considerable capital markets and healthcare expertise was appointed
to the Board of Directors in March 2022.
Following the year end, the Group was delighted to announce the
launch of Treat It, a dedicated online clinic for pain management,
which leverages our proprietary technology to extend our market
reach for our medicinal cannabis products. Furthermore, we
announced the appointment of MHA MacIntyre Hudson as the Group's
auditors.
The Group remains focused on the following key strategic
priorities:
-- Continue to capitalise on demand for access to healthcare
professionals to drive growth of the GP Services business;
-- Leverage a number of cross sell opportunities of the GP Service;
-- Ongoing development of the Group's healthcare services,
including our recently launched online pain management clinic, to
further grow market share;
-- Maintain existing product development activities to further
strengthen the Group's medicinal cannabis product footprint;
-- Focus on achieving medical device CE mark approval for our inhaler product;
-- Continue to explore opportunities to further expand Kanabo's
sales reach and online distribution channels.
The Kanabo team continue to be critical to the success and drive
of the business and to that end, I would like to extend my sincere
thanks for their contribution over the past year. It is testament
to the team and their continued drive that Kanabo is so well placed
to capitalise on the market opportunity in the provision of digital
health services and cannabis products across Europe.
The Chair's statement is an integral part of the Company's
Strategic Repot.
David Tsur
Chair
27 April 2023
Chief Executive Officer's Review
2022 has been a year of significant progress for Kanabo. Not
only have we launched new products and seen further demand for our
core products, but we have also extended the Group's capabilities
with the addition of the telehealth services provided by The GP
Service. Furthermore, we have leveraged our in-house expertise
through Kanabo Agritec, which adds strength and depth to our supply
chain for core products.
Having completed the acquisition of The GP Service, Kanabo is
now uniquely placed to provide access to high-quality medical
treatment for pain management. Kanabo combines a digital healthcare
platform that allows patients access to healthcare professionals,
with a treatment portfolio which includes medicinal cannabis and
other products not usually available to patients.
The Group continues to provide a "product-to-patient" solution
for cannabis-derived products, now with a platform to prescribe
medicinal products directly to patients. The Group develops and
commercialises high quality cannabis formulas that are delivered to
the patient via medical grade vaporisers and non-combustible
inhalation solutions, either through direct sales or via
prescription. Following the acquisition of The GP Service, we see
great potential to grow sales via the prescription channel.
Furthermore, through the Group's advisory and consultation services
in Kanabo Agritec, we are able to bolster and secure the supply of
quality raw product. Our pharmaceutical grade production standards
ensure high quality, high potency medical-grade products.
The corporate activity undertaken throughout the year
demonstrates the Group's continued focus on our strategy to be a
digital healthcare provider and leading supplier of innovative
medical solutions to patients suffering from conditions including
chronic pain, anxiety and central nervous system diseases.
The GP Service
We were delighted to announce the acquisition of The GP Service
in February 2022. Utilising an online consultation platform, The GP
Service offers the services of online doctors to help diagnose and
treat common conditions. The system, already an approved provider
on the NHS digital framework, allows patients to consult with
qualified doctors, who then are able to provide prescriptions,
referral letters and fit notes.
As well as providing access to GP appointments, The GP Service
also partners with certain UK corporations to provide services to
employees as part of benefits packages and in June 2022, it was
confirmed it had extended its contract with one of the UK's largest
group of retail businesses. The service now provides live video
consultation appointments with registered GPs, and prescriptions
are available through the platform's partner network of over 4,000
pharmacies across the UK. Given the increasing pressure experienced
by the NHS, we anticipate seeing continued demand for our private
GP appointments through The GP Service as individuals seek access
to medical advice.
Following the acquisition, we have invested in technology to
support its suite of digital tools, including video consultations,
digital prescriptions and access to primary care services. This
investment supported the service in seeing a steady growth in the
number of monthly users of the digital health services, with more
an 100% increase in the number of consultations on a monthly basis
since the acquisition of the GP Service.
The GP Service (cont.)
Under the new management of Kanabo, The GP Service's core
activities have shown a growth of over 100% in monthly revenue from
acquisition to the end of the year. This growth is expected to
continue as we add new treatments to the platform and invest in
additional IT developments.
The acquisition of The GP Service has provided the Group with a
solid foundation in the UK digital health market and presents an
opportunity to capitalise on the footprint to expand our activities
and further strengthen our UK market position.
Products
In March 2022, we unveiled our cutting-edge eCommerce platform,
Kanabo.store. Initially targeting the UK market, the platform
allows customers to purchase Kanabo's devices and pods directly.
Our unique VapePod, a first-of-its-kind medical-grade vaporiser,
offers users a convenient and precise dosing experience.
Since the launch, we have been dedicated to broadening our
product offerings. We introduced two new medical cannabis extract
formulas for inhalation, specifically designed for pain management
and compatible with the VapePod. As the only products of their kind
currently available in the UK market, these innovative solutions
have garnered positive feedback from our customers.
We are making significant progress towards acquiring CE Mark
approval for our proprietary VapePod MD delivery device. Once
approved, the VapePod MD will become Europe's first medical
device-certified cannabis inhaler of its kind, paving the way for
increased sales throughout Europe and rapid expansion into Germany
and other EU markets. In the coming months, we anticipate providing
an update on this development.
Our partnership with Medocann, a leading premium cultivator in
Israel, continues to strengthen as we collaborate on a unique,
high-end product line of cannabis-based products for medicinal use.
The products in development will target specific medical
conditions, and Kanabo has exclusive distribution rights to the
co-developed products in the German and UK markets.
Agritec
As a Group, we have acquired extensive expertise in designing,
building, operating and managing medicinal cannabis facilities. By
setting up Kanabo Agritec, we can leverage this expertise to boost
and diversify the supply chain through key offtake agreements,
reducing the risk of overreliance on any particular supplier.
Alongside the launch of Kanabo Agritech, we announced our first
contract for the subsidiary - an MoU for the design, build, and
operation of a 4,000kg per annum indoor cultivation and processing
facility in Madrid, Spain, dedicated exclusively to medicinal
cannabis. The negotiations to formalise the MoU with a signed
contract continue to progress well.
Corporate activity
Our Placing in February 2022 was well supported by both existing
shareholders and new investors and we will use the GBP2,250
thousands proceeds to accelerate our strategy to become one of
Europe's leading digital healthcare providers, with access to a
broad treatment portfolio, including medicinal cannabis.
Early in 2022, we announced the decision not to proceed with the
acquisition of the European businesses of Canada-based Materia,
comprising the Maltese EU GMP certified facility, German medical
cannabis wholesaler and a UK CBD eCommerce platform, with the
preference to proceed with a strategic partnership instead. In
March 2023, the Company received notice that 11157353 Canada Corp.,
which trades under the name Materia ("Materia"), has been put into
receivership.
On 25 July 2021, Kanabo signed a head of terms agreement for the
acquisition of Materia. As part of this agreement, the Group loaned
Materia CAD$1,000 thousands, as announced on 6 June 2022, the loan
given to Materia by the Company was fully impaired based on the
Directors' assessment of Materia's ability to repay the debt. The
Company will continue to work to extract as much value as possible
in the form of cash or assets for the benefit of Kanabo.
Kanabo, as a Group, explores acquisition opportunities and
strategic partnerships that will help us improve our expertise,
enhance our digital healthcare services, and speed up bringing our
products to market. Our strategic preference is to acquire
companies in the "last mile", which will help us increase our sales
and profits when integrated to the broader Group.
Broader industry involvement
Kanabo continues to be highly respected within the industry,
which is reflected in it being selected as a steering group member
for the- development of a British Standard for CBD non-tobacco Vape
products. It is expected that a Publicly Available Specifications
("PAS") document will be published in 2023, with a standardisation
document defining best practice in the industry. We firmly believe
regulation and policy are critical as the use of cannabis for
medical and wellness purposes continues to gain momentum. We want
to ensure we remain at the forefront of the industry, guaranteeing
the highest standards in both our production processes and final
market products.
Post Period end
In March 2023, following the year end, we realised our plan to
cross pollinate our business, through leveraging The GP Service's
fully compliant digital framework to prescribe the Group's
medicinal cannabis products with the launch of our Treat It
platform. Treat It is a dedicated online pain management clinic,
with access to a broad treatment portfolio including medicinal
cannabis. The clinic affords patients suffering from chronic pain
conditions greater access to our medicinal cannabis treatments.
In March 2023, the Group appointed MHA MacIntyre Hudson as the
new auditors for the Group after the Group was informed that
Jeffreys Henry - the previous auditor - was no longer eligible to
undertake LSE audits.
Outlook
As we look forward to 2023, we believe the business is now well
balanced with both our core cannabis capabilities and The GP
Services division. Since we acquired The GP Service, we have seen a
significant increase in demand for the services, with demand for
services up 72% when comparing Q1 2023 versus Q1 2022. We believe
this demand will not abate in the near future for various reasons
including the continued pressure on nationalised services. We are
also cognizant of the opportunity to leverage the established and
extensive network within GP Service to expand the potential
audience for our UK prescription products.
There is significant opportunity in the medicinal cannabis
market for companies with innovative products, particularly as
regulation is introduced across more European markets. The Group's
proprietary VapePod MD system has been submitted for CE Mark
approval and we hope to be in a position to announce progress on
the certification in the coming months. There is also the potential
for more markets - such as France and Spain, where any use of
cannabis is currently prohibited - to open up. Furthermore, The GP
Service platform has significant cross-selling potential for our
wellness and medical products.
We continue to recognise the importance of developing new
products to bring to market, and to that end, our scientists are
focused on delivering innovative formulas aimed at both the medical
and wellness markets. In addition to leveraging The GP Service
platform, we are committed to introducing new treatments to both
primary and secondary care, ensuring that we stay at the forefront
of providing cutting-edge solutions to our customers.
We have made a positive start to 2023 and remain excited by the
significant market opportunity ahead of us. We believe the Group
now has the capabilities and potential to truly capitalise on it
given our position as one of the leading providers of cannabis for
medical and wellness services.
We believe there is significant potential to drive our market
share in both the direct sale of cannabis products and our online
GP platform, The GP Service, alongside our recently launched Treat
It platform, which combines both elements of the business and
provides access to medical professionals who can prescribe
medicinal cannabis.
As we head into 2023, we have a more diverse business
proposition. The combined expertise and offering presents a unified
platform that uniquely combines a digital healthcare platform and
treatment portfolio, connecting patients with accessible,
affordable, and personalised healthcare.
The Board remains confident in both short-term and medium-term
growth prospects for the Company and remains committed to
developing a scaled business capable of fully exploiting a number
of near-term growth opportunities.
The Chief Executive Officer's review is an integral part of the
Company's Strategic Repot.
Avihu Tamir
Chief Executive Officer
27 April 2023
Chief Financial Officer's Review
Financial results for 2022 reflect a year of transition for
Kanabo. Alongside investment in the underlying business, with the
launch of new products, a dedicated online marketplace, and a more
secure supply chain via Kanabo Agritec, we have undertaken a
strategically important acquisition, bringing the GP Service into
the Group. The acquisition not only provides an additional revenue
stream to the Group, but a significant network of GPs and
pharmacies which we can leverage to drive sales of our medicinal
cannabis products. A summary of the financial performance for the
year is given below.
Kanabo revenues in 2022 totaled GBP603 thousands (2021: GBP73
thousands), an increase of 726% compared to the previous year
primarily due to the contribution of revenues generated from The GP
Service.
Operating loss for 2022 was GBP6,781 thousands (2021: operating
loss of GBP4,574 thousands), representing a 48% increase, largely
due to one off expenses, including acquisition-related transaction
costs which were expensed as incurred.
During the period, the Company invested GBP597 thousands (2021:
GBP242 thousands) in Research and Development, GBP361 thousands of
which was directly related to staff compensation, including
salaries and share based payments.
Sales and Marketing expense increased during the period to
GBP1,190 thousands (2021: GBP569 thousands), GBP752 thousands of
which was directly related to staff compensation with the remainder
due to the increased marketing costs for wellness products
following the launch of the Company's UK eCommerce site.
General and administration expenses for 2022 were GBP3,804
thousands (2021: GBP2,000 thousands). General and administration
expenses increased mainly due to the increase in the Group's
activity following the acquisition of GP Service. Out of the
General and administration expenses a total amount of GBP1,581
thousands (2021: GBP443 thousands) was for non-cash expenses (i.e.,
amortisation, depreciation, and other share-based payments
expenses).
Net financing expenses for 2022 were GBP89 thousands (2021:
GBP23 thousands gains), reflecting interest on interest bearing
loans and finance cost over lease.
At 31 December 2022, the Company had GBP3,204 thousands in cash
(31 December 2021: GBP4,477 thousands). The decrease in cash
balances can be primarily attributed to the GBP3,776 thousands used
in operating activities, offset by GBP2,250 thousands raised in
February 2022.
2022 was a significant year of progress for Kanabo. The
acquisition of The GP Service has created a second revenue stream
for the business, but also bolstered our business model by creating
a robust, established and legitimate route to market for our
medicinal cannabis products through the significant GP and pharmacy
network. We have also launched our dedicated online marketplace,
and created Kanabo Agritec which seeks to both diversify and
de-risk our supply chain. We believe the business now has strong
foundations and is well placed to capitalise on the opportunity and
provide access to GP services for those who need it, and also
enable chronic pain sufferers more access to medicinal cannabis
products. We have maintained the momentum as we have moved into
2023 and remain optimistic about the Group's prospects in the years
ahead.
On 25 July 2021, Kanabo signed a head of terms agreement for the
acquisition of 11157353 Canada Corp., which trades under the name
Materia ("Materia"). As part of this agreement, the Group loaned
Materia CAD$1.0m, as announced on 6 June 2022, the loan given to
Materia by the Company was fully impaired based on the Directors'
assessment of Materia's ability to repay the debt.
Post-period end, the Company received notice that Materia, has
been put into receivership. The Company will continue to work to
extract as much value as possible in the form of cash or assets for
the benefit of Kanabo.
The Chief Financial Officer's review is an integral part of the
Company's Strategic Repot.
Assaf Vardimon
Chief Financial Officer
27 April 2023
Consolidated Statement of Profit or Loss
For the year ended 31 December 2022 2021
========================================= ===== ======== ========
Note GBP 000 GBP 000
===== ======== ========
Revenue 7 603 73
===== ======== ========
Cost of sales 8 404 66
===== ======== ========
Gross profit 199 7
===== ======== ========
Research and development expenses 9 597 242
===== ======== ========
Sales and marketing expenses 10 1,190 569
===== ======== ========
General and administration expenses 11 3,804 2,000
===== ======== ========
Impairment (reverse impairment) of
financial assets carried at amortised
cost 24 (59) 598
===== ======== ========
Other expenses - including acquisition
and listing costs 13 1,448 1,172
===== ======== ========
Operating loss (6,781) (4,574)
===== ======== ========
Net finance income (expenses) 14 ( 8 9) 23
===== ======== ========
Loss for the year (6,870) (4,551)
===== ======== ========
Attributable to:
===== ======== ========
Equity holders of the parent (6,867) (4,551)
===== ======== ========
Non-controlling interests (3) -
===== ======== ========
(6,870) (4,551)
===== ======== ========
Loss (basic and diluted) per share
from operations attributable to the
equity owners
===== ======== ========
Basic and diluted loss per share (pence
per share) 16 (1.65) (1.40)
===== ======== ========
The notes to the financial statements form an integral part of
these financial statements.
Consolidated Statement of Comprehensive Loss
For the year ended 31 December 2022 2021
======================================================================= ======== ========
Note GBP 000 GBP 000
====================================================================== ======== ========
Loss for the year (6,870) (4,551)
======== ========
Other comprehensive income (loss) for the year
======== ========
Foreign operations - foreign currency translation differences 21 (82)
======== ========
Total items that may be reclassified to profit or loss 21 (82)
======== ========
Total comprehensive loss (6,849) (4,633)
======== ========
Attributable to:
======== ========
Equity holders of the parent (6,846) (4,551)
======== ========
Non-controlling interests (3) -
======== ========
(6,849) (4,551)
====================================================================== ======== ========
The notes to the financial statements form an integral part of
these financial statements.
Consolidated Statement of Financial Position
As at 31 December 2022 2021
Note GBP 000 GBP 000
========= ========= ==========
ASSETS
========= ========= ==========
Non-current assets
========= ========= ==========
Intangible assets and goodwill 17 10,044 -
========= ========= ==========
Property, plant, and equipment 18 9 6 42
========= ========= ==========
Right-of-use asset 31 282 -
========= ========= ==========
Long-term deposit 31 31 -
========= ========= ==========
Financial asset through profit or loss 20 - 750
========= ========= ==========
10,453 792
========= ========= ==========
Current assets
========= ========= ==========
Inventories 21 81 63
========= ========= ==========
Trade receivables 22 43 10
========= ========= ==========
Other receivables 23 156 237
========= ========= ==========
Financial asset through profit or loss 20 491 -
========= ========= ==========
Short-term deposits 24 20
========= ========= ==========
Cash and cash equivalents 26 3,204 4,477
========= ========= ==========
3,999 4,807
========= ========= ==========
Total assets 14,452 5,599
========= ========= ==========
EQUITY AND LIABILITIES
========= ========= ==========
Equity
========= ========= ==========
Issued capital 27 10,573 9,249
========= ========= ==========
Share premium account 27 6,850 (*) 5,169
========= ========= ==========
Merger reserve 27 11,393 (*) 9,231
========= ========= ==========
Share-based payments reserve 28 1,715 758
========= ========= ==========
Share to be issued reserve 6.a, 6.c 10,476 2,500
========= ========= ==========
Reverse acquisition reserve (14,968) (14,968)
========= ========= ==========
Foreign currency translation reserve 10 (7)
========= ========= ==========
Retained deficit (13,605) (6,748)
========= ========= ==========
Equity attributable to equity holders of the parent 12,448 5,184
========= ========= ==========
Non-controlling interests (3) -
========= ========= ==========
Total equity 12,445 5,184
========= ========= ==========
Non- current liabilities
========= ========= ==========
Interest-bearing loan and borrowings 29 509 -
========= ========= ==========
509 -
========= ========= ==========
Current liabilities
========= ========= ==========
Trade payables 153 42
========= ========= ==========
Other payables 30 1,147 373
========= ========= ==========
Interest-bearing loan and borrowings 29 198 -
========= ========= ==========
1,497 415
========= ========= ==========
Total liabilities 2,007 415
========= ========= ==========
Total equity and liabilities 14,452 5,599
========= ========= ==========
(*) Reclassified, see note 27.
The notes to the financial statements form an integral part of
these financial statements .
The financial statements were approved and authorised for issue
by the Board of Directors on 27 April 2023 and were signed on their
behalf by:
David Tsur
Chair
Company's Statement of Financial Position
As at 31 December 2022 2021
Note GBP 000 GBP 000
========= ========= ==========
ASSETS
========= ========= ==========
Non-current assets
========= ========= ==========
Property, plant, and equipment 18 17 21
========= ========= ==========
Investments in subsidiary 19 23,746 14,676
========= ========= ==========
Intercompany receivables 2 5 1,097 -
========= ========= ==========
Financial asset through profit or loss 20 - 750
========= ========= ==========
24,860 15,447
========= ========= ==========
Current assets
========= ========= ==========
Inventories 21 81 63
========= ========= ==========
Trade receivables 22 35 10
========= ========= ==========
Other receivables 23 69 210
========= ========= ==========
Intercompany receivables 25 3,192 834
========= ========= ==========
Financial asset through profit or loss 20 491 -
========= ========= ==========
Cash and cash equivalents 26 937 4,148
========= ========= ==========
4,805 5,265
========= ========= ==========
Total assets 29,665 20,712
========= ========= ==========
EQUITY AND LIABILITIES
========= ========= ==========
Equity
========= ========= ==========
Issued capital 27 10,573 9,249
========= ========= ==========
Share premium account 27 6,850 (*) 5,169
========= ========= ==========
Merger reserve 27 11,393 (*) 9,231
========= ========= ==========
Share-based payments reserve 28 1,715 750
========= ========= ==========
Share to be issued reserve 6.a, 6.c 10,476 2,500
========= ========= ==========
Retained deficit (12,326) (6,360)
========= ========= ==========
Total equity 28,681 20,539
========= ========= ==========
Current liabilities
========= ========= ==========
Trade payables 79 24
========= ========= ==========
Other payables 30 905 149
========= ========= ==========
98 4 173
========= ========= ==========
Total liabilities 98 173
========= ========= ==========
Total equity and liabilities 29,665 20,712
========= ========= ==========
The notes to the financial statements form an integral part of
these financial statements.
As permitted by section 408 of the Companies Act 2006, the
parent company's income statement has not been included in these
financial statements. The loss for the parent Company was GBP5,976
thousands (2021: loss of GBP5,584 thousands).
The financial statements were approved and authorised for issue
by the Board of Directors on 27 April 2023 and were signed on their
behalf by:
David Tsur
Chair
Company Registration No. 10485105
Consolidated Statement of Changes in Equity
Attributable to owners of the Company
=============== ===== ======== =========================================================================================== ================ ==========
Share Share Merger Share Shares Reverse Foreign Retained Total Non-controlling Total
capital premium reserve based to be acquisition currency deficit interests equity
account payments issued reserve translation
reserve reserve reserve
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Note GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
As at 1
January 2021 - 2,098 805 - - 75 (3,017) (39) - (39)
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Loss for the
year - - - - - - - (4,551) ( 4,551 ) - ( 4,551 )
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Other
comprehensive
loss - - - - - - (82) - (82) - (82)
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Total
comprehensive
loss - - - - - - (82) (4,551) (4,633) - (4,633)
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Transfer to
reverse
acquisition
reserve 6.c - (2,098) - - - 2,098 - - - - -
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Recognition of
plc equity at
acquisition
date 6.c 735 592 - - - 434 - - 1,761 - 1,761
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Acquisition of
a subsidiary 6.c 5,769 - 9,231 - - (15,000) - - - - -
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Issue of
shares in
settlement of
fees 15 25 - - - - - - 40 - 40
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Issue of share
capital 27 2,600 4,775 - - - - - - 7,375 - 7,375
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Shares to be
issued 27 - - - - 2,500 (2,500) - - - - -
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Cost of share
issue - (634) - - - - - - (634) - (634)
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Exercise of
options 28 4 - - (820) - - - 820 4 - 4
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Exercise of
warrants 28 126 411 - - - - - - 537 - 537
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Issue of
warrants 28 - - - 113 - - - - 113 - 113
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Share-based
payments 28 - - - 660 - - - - 660 - 660
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
As at 31
December 2021 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 6.a 533 - 2,162 - 7,976 - - - 10,671 - 10,671
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Issue of share
capital 27 703 1,434 - - - - - - 2,137 - 2,137
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Exercise of
options 28 7 5 - (10) - - - 10 12 - 12
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Exercise of
warrants 28 81 242 - - - - - - 323 - 323
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
Share-based
payments 28 - - - 967 - - - - 967 - 967
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
As at 31
December 2022 10,573 6,850 11,393 1,715 10,476 (14,968) 14 (13,605) 12,448 (3) 12,445
===== ======== ======== ======== ========= ======== ============ ============ ========== ========== ================ ==========
The notes to the financial statements form an integral part of
these financial statements.
Company's Statement of Changes in Equity
Share Share Merger Shares Shares Convertible Retained Total
capital premium reserve based to be loan notes deficit equity
account payments issued reserve
reserve reserve
Note GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
===== ========== ========== ========== ========= ========= ============ ========== ==========
As at 1
January 2021 735 592 - 33 - 162 (784) 738
===== ========== ========== ========== ========= ========= ============ ========== ==========
Total
comprehensive
loss - - - - - - (5,584) (5,584)
===== ========== ========== ========== ========= ========= ============ ========== ==========
Acquisition of
a subsidiary 6.c 83 79 - - - (162) - -
===== ========== ========== ========== ========= ========= ============ ========== ==========
Issue of
shares in
settlement of
fees 15 25 - - - - - 40
===== ========== ========== ========== ========= ========= ============ ========== ==========
Issue of share
capital 27 5,769 - 9,231 - - - - 15,000
===== ========== ========== ========== ========= ========= ============ ========== ==========
Shares to be
issued 6.c - - - - 2,500 - - 2,500
===== ========== ========== ========== ========= ========= ============ ========== ==========
Cost of share
issue - (634) - - - - - (634)
===== ========== ========== ========== ========= ========= ============ ========== ==========
Exercise of
options 28 2,455 4,634 - - - - - 7,089
===== ========== ========== ========== ========= ========= ============ ========== ==========
Exercise of
warrants 28 192 473 - (41) - - 8 632
===== ========== ========== ========== ========= ========= ============ ========== ==========
Issue of
warrants 28 - - - 113 - - - 113
===== ========== ========== ========== ========= ========= ============ ========== ==========
Share-based
payments 28 - - - 645 - - - 645
===== ========== ========== ========== ========= ========= ============ ========== ==========
As at 31
December 2021 9,249 5,169 9,231 750 2,500 - (6,360) 20,539
===== ========== ========== ========== ========= ========= ============ ========== ==========
Total
comprehensive
loss - - - - - - (5,976) (5,976)
===== ========== ========== ========== ========= ========= ============ ========== ==========
Acquisition of
a subsidiary 6.a 533 2,162 2,162 - 7,976 - - 10,671
===== ========== ========== ========== ========= ========= ============ ========== ==========
Issue of share
capital 27 703 1,434 - - - - - 2,137
===== ========== ========== ========== ========= ========= ============ ========== ==========
Exercise of
options 28 7 5 - (10) - - 10 12
===== ========== ========== ========== ========= ========= ============ ========== ==========
Exercise of
warrants 28 81 242 - - - - - 323
===== ========== ========== ========== ========= ========= ============ ========== ==========
Share-based
payments 28 - - - 975 - - - 975
===== ========== ========== ========== ========= ========= ============ ========== ==========
As at 31
December 2022 10,573 6,850 11,393 1,715 10,476 - (12,326) 28,681
===== ========== ========== ========== ========= ========= ============ ========== ==========
The notes to the financial statements form an integral part of
these financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022 2021
Note GBP 000 GBP 000
======= ======== ========
Operating activities
======= ======== ========
Loss before tax (6,870) (4,551)
======= ======== ========
Adjustments to reconcile profit before tax to net cash flows:
======= ======== ========
Reverse acquisition share-based payment expense 13,6.c - 1,172
======= ======== ========
Net impairment (reverse) losses on financial assets 24 (59) 598
======= ======== ========
Share-based payment expense 28 967 660
======= ======== ========
Depreciation of property, plant and equipment and right-of-use assets 18,31 69 7
======= ======== ========
Amortisation of intangible assets and impairment of goodwill 17 1,109 -
======= ======== ========
Impairment charge on receivables 22 3 -
======= ======== ========
Loss on current financial asset 13,20 259 -
======= ======== ========
Net finance expenses 56 13
======= ======== ========
Working capital changes:
======= ======== ========
Change in trade receivables (3) (10)
======= ======== ========
Change in other receivables 155 (194)
======= ======== ========
Change in inventories (18) (35)
======= ======== ========
Change in trade payables 92 6
=======
Change in other payables 677 256
======= ======== ========
Change in long-term deposit (31) -
======= ======== ========
(3,727) (2,078)
======= ======== ========
Interest paid (52) -
======= ======== ========
Net cash flows used in operating activities (3,779) (2,078)
======= ======== ========
Investing activities
======= ======== ========
Purchase of property, plant, and equipment 18 (68) (35)
======= ======== ========
Purchase of financial asset 20 - (750)
======= ======== ========
Acquisition of a subsidiary, net of cash acquired 6 235 358
======= ======== ========
Investment in short term deposits (4) (2)
======= ======== ========
Development expenditures 17 (86) -
======= ======== ========
Net cash flows from/ (used in) investing activities 77 (429)
======= ======== ========
Financing activities
======= ======== ========
Share issue net of issuing cost 27 2,137 6,608
======= ======== ========
Proceeds from exercise of warrants 27 323 529
======= ======== ========
Proceeds from exercise of share options 27 12 102
======= ======== ========
Receipts of long-term loans 29 68 -
======= ======== ========
Repayment of borrowings - (582)
======= ======== ========
Repayment of lease liability 31 (37) -
======= ======== ========
Repayment of borrowings 29 (100) -
======= ======== ========
Net cash flows from financing activities 2,403 6,657
======= ======== ========
Net increase (decrease) in cash and cash equivalents (1,299) 4,150
======= ======== ========
Net foreign exchange difference 26 (53)
======= ======== ========
Cash and cash equivalents at 1 January 4,477 380
======= ======== ========
Cash and cash equivalents at 31 December 26 3,204 4,477
======= ======== ========
The notes to the financial statements form an integral part of
these financial statements.
Company's Statement of Cash Flows
For the year ended 31 December 2022 2021
Note GBP 000 GBP 000
====== ======== ============
Operating activities
====== ======== ============
Loss before tax (5,976) (*) (5,584)
====== ======== ============
Adjustments to reconcile profit before tax to net cash flows:
====== ======== ============
Net impairment (reverse) losses on financial assets 24 (59) 598
====== ======== ============
Share-based payment expense 28 205 193
====== ======== ============
Depreciation of property, plant, and equipment 18 4 2
====== ======== ============
Impairment charge on receivables 22 3 -
====== ======== ============
Loss on current financial asset 13,20 259 -
====== ======== ============
Net finance (expenses) income 54 (57)
====== ======== ============
Share of loss of an associate 19 2,371 (*) 3,275
====== ======== ============
Working capital changes:
====== ======== ============
Change in trade receivables (28) (10)
====== ======== ============
Change in other receivables 141 (200)
====== ======== ============
Change in inventories (18) (63)
====== ======== ============
Change in trade payables 55 9
====== ======== ============
Change in other payables 756 110
====== ======== ============
Change in intercompany receivables (3,509) (368)
====== ======== ============
Net cash flows used in operating activities (5,742) (2,095)
====== ======== ============
Investing activities
====== ======== ============
Purchase of property, plant, and equipment 18 - (23)
====== ======== ============
Purchase of financial asset 20 - (750)
====== ======== ============
Net cash flows used in investing activities - (773)
====== ======== ============
Financing activities
====== ======== ============
Share issue net of issuing cost 27 2,137 6,608
====== ======== ============
Proceeds from exercise of warrants 27 323 529
====== ======== ============
Proceeds from exercise of share options 27 12 102
====== ======== ============
Repayment of borrowings - (582)
====== ======== ============
Receipts of short-term loans 29 59 -
====== ======== ============
Net cash flows from financing activities 2,531 6,657
====== ======== ============
Net increase (decrease) in cash and cash equivalents (3,211) 3,789
====== ======== ============
Cash and cash equivalents at 1 January 4,148 359
====== ======== ============
Cash and cash equivalents at 31 December 26 937 4,148
====== ======== ============
(*) Reclassification of the share of loss Kanabo research
Ltd.
The notes to the financial statements form an integral part of
these financial statements.
Notes to the Financial Statements
1. Corporate information
The consolidated financial statements of Kanabo Group Plc and
its subsidiaries (collectively, the Group) for the year ended 31
December 2022 were authorised for issue in accordance with a
resolution of the Directors on 27 April 2023.
Kanabo Group Plc (the Company or the parent) is a limited
company incorporated and domiciled in England and 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, United Kingdom.
The Group's principal activities are the distribution and
development of cannabis derived medical and wellness products.
2. Significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all the periods presented, unless
otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted for use in the United Kingdom and those
parts of the Companies Act 2006 applicable to companies reporting
IFRS, expect as otherwise stated.
The consolidated financial statements are prepared under the
historical cost convention with the exception of certain
investments which are carried at fair value.
The consolidated financial statements are presented in GBP (GBP)
and all values are rounded to the nearest thousand (GBP000), except
when otherwise indicated.
2.2 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 31 December
2022. Control is achieved when the Group is exposed, or has rights,
to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only
if, the Group has:
-- Power over the investee (i.e., existing rights that give it
the current ability to direct the relevant activities of the
investee).
-- Exposure, or rights, to variable returns from its involvement with the investee.
-- The ability to use its power over the investee to affect its returns.
2. Significant accounting policies (cont.)
2.2 Basis of consolidation (cont.)
Generally, there is a presumption that a majority of voting
rights results in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement(s) with the other vote holders of the investee.
-- Rights arising from other contractual arrangements.
-- The Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income, and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of OCI are attributed to the
equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the
non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies in line with the Group's accounting
policies. All intra-group assets and liabilities, equity, income,
expenses, and cash flows relating to transactions between members
of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises
the related assets (including goodwill), liabilities,
non-controlling interest, and other components of equity, while any
resultant gain or loss is recognised in profit or loss. Any
investment retained is recognised at fair value.
2.3 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 31 December 2022, the Group's cash position was GBP3,204
thousands 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.
2. Significant accounting policies (cont.)
2.3 Going concern (cont.)
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 a little effect on the
business of the Group during 2022 following that the Directors do
not believe that these risks will have a significantly adverse
impact on the Group in the foreseeable future.
2.4 Estimates and assumptions
Significant accounting estimations
The Group's consolidated financial statements includes the use
of estimates and assumptions. The significant accounting estimates
with a significant risk of a material change to the carrying value
of assets and liabilities within the next year in terms of IAS 1
are:
-- Depreciation of PPE and amortisation of intangible assets
The directors are required to review the estimated useful of PPE
and amortisation periods of intangible assets. Were useful lives
and amortisation periods to be shorter, or were there impairments
of PPE or intangible assets, this would cause an acceleration in
depreciation and amortisation charges in future periods. See note
17 for further information.
Other areas of judgement and accounting estimates
While these areas do not meet the definition under IAS 1 of
significant accounting estimates or critical accounting judgements,
the recognition and measurement of certain material assets and
liabilities are based on assumptions and/or are subject to longer
term uncertainties. The other areas of judgement and accounting
estimates are:
-- Share-based payments
In respect of service conditions, the company is required to
assess how many share options will eventually vest. As this
estimation changes over time this may require a re-estimation of
share-based payment charges reflected in profit or loss. The
cumulative charge will reflect the amount of share options that
ultimately vest. See note 28 for more details including the
company's approach to valuing share options and the inputs to the
valuations model.
-- Impairments of financial and non-financial assets
See disclosures in note 2.5.o.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies
a) Business combinations and goodwill
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, which is measured at acquisition
date fair value, and the amount of any non-controlling interests in
the acquiree. For each business combination, the Group elects
whether to measure the non-controlling interests in the acquiree at
fair value or at the proportionate share of the acquiree's
identifiable net assets. Acquisition-related costs are expensed as
incurred and included in administrative expenses.
The Group determines that it has acquired a business when the
acquired set of activities and assets include an input and a
substantive process that together significantly contribute to the
ability to create outputs. The acquired process is considered
substantive if it is critical to the ability to continue producing
outputs, and the inputs acquired include an organised workforce
with the necessary skills, knowledge, or experience to perform that
process or it significantly contributes to the ability to continue
producing outputs and is considered unique or scarce or cannot be
replaced without significant cost, effort, or delay in the ability
to continue producing outputs.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances, and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host
contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date.
Contingent consideration classified as equity is not remeasured and
its subsequent settlement is accounted for within equity.
Contingent consideration classified as an asset or liability that
is a financial instrument and within the scope of IFRS 9 Financial
Instruments, is measured at fair value with the changes in fair
value recognised in the statement of profit or loss in accordance
with IFRS 9. Other contingent consideration that is not within the
scope of IFRS 9 is measured at fair value at each reporting date
with changes in fair value recognised in profit or loss.
3. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
a) Business combinations and goodwill (cont.)
Goodwill is initially measured at cost (being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interests and any previous interest
held over the net identifiable assets acquired and liabilities
assumed). If the fair value of the net assets acquired is in excess
of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to
measure the amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of the fair value of
net assets acquired over the aggregate consideration transferred,
then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group's cash-generating
units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree
are assigned to those units.
Where goodwill has been allocated to a cash-generating unit
(CGU) and part of the operation within that unit is disposed of,
the goodwill associated with the disposed operation is included in
the carrying amount of the operation when determining the gain or
loss on disposal. Goodwill disposed in these circumstances is
measured based on the relative values of the disposed operation and
the portion of the cash-generating unit retained.
b) Reverse takeover accounting
On 16 February 2021, the Company acquired Kanabo Research Ltd
via a reverse takeover which resulted in the Company becoming the
ultimate holding company of the Group. The transaction was
accounted for as a reverse acquisition since it did not meet the
definition of a business combination under IFRS 3. In accordance
with IFRS 2, a share-based payment expense equal to the deemed cost
of the acquisition less the fair value of the net assets of the
Company at acquisition was recognised.
When considering how the acquisition of Kanabo Research Ltd via
a reverse takeover should be accounted for, the Directors have been
required to make a judgment on whether the acquisition falls within
the scope of IFRS 3 or not. The Directors assessed the accounting
acquiree, Kanabo Group Plc, at the time of acquisition to not be a
business as defined by IFRS 3. As a result, the acquisition was
assessed as falling outside the scope of IFRS 3. See note 6.c.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
c) Current versus non-current classification
The Group presents assets and liabilities in the statement of
financial position based on current/non-current classification. An
asset is current when it is:
-- Expected to be realised or intended to be sold or consumed in the normal operating cycle.
-- Held primarily for the purpose of trading.
-- Expected to be realised within twelve months after the reporting period.
-- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve months
after the reporting period.
All other assets are classified as non-current.
A liability is current when:
-- It is expected to be settled in the normal operating cycle.
-- It is held primarily for the purpose of trading.
-- It is due to be settled within twelve months after the reporting period.
-- There is no unconditional right to defer the settlement of
the liability for at least twelve months after the reporting
period.
The terms of the liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
d) Fair value measurement
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
Fair value measurement is based on the assumption that the
transaction will take place in the asset's or the liability's
principal market, or in the absence of a principal market, in the
most advantageous market.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
Fair value measurement of a non-financial asset takes into
account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset
in its highest and best use.
The Company uses valuation techniques that are appropriate in
the circumstances and for which sufficient data are available to
measure fair value, maximizing the use of relevant observable
inputs and minimising the use of unobservable inputs.
All assets and liabilities measured at fair value or for which
fair value is disclosed are categorised into levels within the fair
value hierarchy based on the lowest level input that is significant
to the entire fair value measurement:
Level 1 - quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Level 2 - inputs other than quoted prices included within
Level 1 that are observable directly or indirectly.
Level 3 - inputs that are not based on observable market
data (valuation techniques which use inputs
that are not based on observable market data).
On 21 February 2022, the Company acquired 100% of the voting
rights of GP Service (UK) Limited ("GPS") a non-listed company
based in UK. The acquisition price was determine based on the
closing bid prices which are level 1 fair value measurements.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
e) Revenue from contracts with customers
Revenue from contracts with customers is recognised when control
of the goods or services are transferred to the customer at an
amount that reflects the consideration to which the Group expects
to be entitled in exchange for those goods or services. The Group
has generally concluded that it is the principal in its revenue
arrangements, except for the procurement services below, because it
typically controls the goods or services before transferring them
to the customer.
In determining the amount of revenue from contracts with
customers, the Company evaluates whether it is a principal or an
agent in the arrangement. The Company is a principal when the
Company controls the promised goods or services before transferring
them to the customer. In these circumstances, the Company
recognises revenue for the gross amount of the consideration. When
the Company is an agent, it recognises revenue for the net amount
of the consideration, after deducting the amount due to the
principal.
Revenue from the sale of goods:
Revenue from the sale of goods is recognised when significant
risks and rewards of ownership of the goods have transferred to the
buyer, the amount of revenue can be measured reliably, it is
probable that the economic benefits associated with the transaction
will flow to the Company and the costs incurred or to be incurred
in respect of the transaction can be measured reliably. Revenue is
measured at the fair value of the consideration received or
receivable, net of returns, trade discounts and volume rebates.
Revenue from selling agreements is recognised when the revenue
recognition criteria have been met and only to the extent the
consideration is not contingent upon other deliverables in the
agreements.
Revenue from consultations:
The Group is providing online medical services. Revenue is
measured based on the consideration specified in a contract with a
customer and excludes amounts collected on behalf of third parties.
The Group recognises revenue when it transfers control of a s
service to a customer. Revenue is recognised at a point in time
(i.e., upon receipt of the customer of the equipment) because this
is when the customer benefits from the Group's consultation
services.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
f) Government grants
Government grants are recognised where there is reasonable
assurance that the grant will be received, and all attached
conditions will be complied with. When the grant relates to an
expense item, it is recognised as income on a systematic basis over
the periods that the related costs, for which it is intended to
compensate, are expensed. When the grant relates to an asset, it is
recognised as income in equal amounts over the expected useful life
of the related asset.
When the Group receives grants of non-monetary assets, the asset
and the grant are recorded at nominal amounts and released to
profit or loss over the expected useful life of the asset, based on
the pattern of consumption of the benefits of the underlying asset
by equal annual instalments.
g) Taxes
Current income tax
Current income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the taxation
authorities. The tax rates (England's statutory income tax rate of
19% and Israel: 23%) and tax laws used to compute the amount are
those that are enacted or substantively enacted at the reporting
date in the countries where the Group operates and generates
taxable income.
Current income tax relating to items recognised directly in
equity is recognised in equity and not in the statement of profit
or loss. Management periodically evaluates positions taken in the
tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date. Deferred tax liabilities are recognised in full
using the balance sheet liability method on temporary differences
except:
When the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable
profit or loss.
-- In respect of taxable temporary differences associated with
investments in subsidiaries, associates, and interests in joint
arrangements, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
g) Taxes (cont.)
Deferred tax (cont.)
Deferred tax assets are recognised for all deductible temporary
differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that
it is probable that taxable profit will be available against which
the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilised,
except:
-- When the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.
-- In respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in joint
arrangements, deferred tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
In assessing the recoverability of deferred tax assets, the
Group relies on the same forecast assumptions used elsewhere in the
financial statements and in other management reports, which, among
other things, reflect the potential impact of climate-related
development on the business, such as increased cost of production
as a result of measures to reduce carbon emission.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax relating to items recognised outside profit or loss
is recognised outside profit or loss. Deferred tax items are
recognised in correlation to the underlying transaction either in
other comprehensive income or directly in equity.
Tax benefits acquired as part of a business combination, but not
satisfying the criteria for separate recognition at that date, are
recognised subsequently if new information about facts and
circumstances change. The adjustment is either treated as a
reduction in goodwill (as long as it does not exceed goodwill) if
it was incurred during the measurement period or recognised in
profit or loss.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
g) Taxes (cont.)
Deferred tax (cont.)
The Group offsets deferred tax assets and deferred tax
liabilities if and only if it has a legally enforceable right to
set off current tax assets and current tax liabilities and the
deferred tax assets and deferred tax liabilities relate to income
taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities which intend either to
settle current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered.
h) Foreign currencies
The Group's consolidated financial statements are presented in
British Pound (GBP). For each entity, the Group determines the
functional currency and items included in the financial statements
of each entity are measured using that functional currency. The
Group uses the direct method of consolidation and on disposal of a
foreign operation, the gain or loss that is reclassified to profit
or loss reflects the amount that arises from using this method.
(i) Transactions and balances
Transactions in foreign currencies are initially recorded by the
Group's entities at their respective functional currency spot rates
at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency spot rates of
exchange at the reporting date.
Differences arising on settlement or translation of monetary
items are recognised in profit or loss with the exception of
monetary items that are designated as part of the hedge of the
Group's net investment in a foreign operation. These are recognised
in OCI until the net investment is disposed of, at which time, the
cumulative amount is reclassified to profit or loss. Tax charges
and credits attributable to exchange differences on those monetary
items are also recognised in OCI.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of the gain
or loss on the change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is recognised in
OCI, or profit or loss are also recognised in OCI or profit or
loss, respectively).
In determining the spot exchange rate to use on initial
recognition of the related asset, expense, or income (or part of
it) on the derecognition of a non-monetary asset or non-monetary
liability relating to advance consideration, the date of the
transaction is the date on which the Group initially recognises the
nonmonetary asset or non-monetary liability arising from the
advance consideration. If there are multiple payments or receipts
in advance, the Group determines the transaction date for each
payment or receipt of advance consideration.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
h) Foreign currencies (cont.)
(ii) Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into British Pound (GBP) at the rate of
exchange prevailing at the reporting date and their statements of
profit or loss are translated at exchange rates prevailing at the
dates of the transactions or average for the required period. The
exchange differences arising on translation for consolidation are
recognised in OCI and recognised in a separate reserve - foreign
currency translation reserve.. On disposal of a foreign operation,
the component of OCI relating to that particular foreign operation
is reclassified to profit or loss.
Any goodwill arising on the acquisition of a foreign operation
and any fair value adjustments to the carrying amounts of assets
and liabilities arising on the acquisition are treated as assets
and liabilities of the foreign operation and translated at the spot
rate of exchange at the reporting date.
(iii) Financial Risk Management Objectives and Policies
The Company does not enter into any forward exchange rate
contracts.
The main financial risks arising from the Company's activities
are market risk, interest rate risk, foreign exchange risk, credit
risk, liquidity risk and capital risk management. Further details
on the risk disclosures can be found in note 32.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
i) Property, plant, and equipment
Property, plant, and equipment are measured at cost, including
directly attributable costs, less accumulated depreciation,
accumulated impairment losses and excluding day-to-day servicing
expenses. Cost includes spare parts and auxiliary equipment that
are used in connection with plant and equipment.
The cost of an item of property, plant and equipment comprises
the initial estimate of the costs of dismantling and removing the
item and restoring the site on which the item is located.
Depreciation is estimated to write off the cost of assets to
their residual value on straight line basis over the estimated
useful lives of the assets as follows:
%
Leasehold improvements 15%
========
Equipment and furnishing 15%
========
Computers and electronic
equipment 15%-33%
========
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in profit or
loss.
j) Leases
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration.
Group as a lessee The Group applies a single recognition and
measurement approach for all leases. The Group recognises lease
liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use
assets are depreciated on a straight-line basis over the shorter of
the lease term and the estimated useful life of the asset.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
j) Leases (cont.)
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating the lease, if
the lease term reflects the Group exercising the option to
terminate.
Variable lease payments that do not depend on an index or a rate
are recognised as expenses (unless they are incurred to produce
inventories) in the period in which the event or condition that
triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses its incremental borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the lease
payments (e.g., changes to future payments resulting from a change
in an index or rate used to determine such lease payments) or a
change in the assessment of an option to purchase the underlying
asset. The Group's lease liabilities are included in
Interest-bearing loans and borrowings.
k) Financial assets at fair value through profit and loss
Financial assets are stated at fair value, which reflects market
conditions at the reporting date. Gains or losses arising from
changes in the fair values of investment properties are included in
profit or loss in the period in which they arise, including the
corresponding tax effect. Fair values are determined based on an
annual valuation performed by an accredited external independent
valuer applying a valuation model recommended by the International
Valuation Standards Committee.
Financial assets are derecognised either when they have been
disposed of (i.e., at the date the recipient obtains control) or
when they are permanently withdrawn from use and no future economic
benefit is expected from their disposal. The difference between the
net disposal proceeds and the carrying amount of the asset is
recognised in profit or loss in the period of derecognition.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
l) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles, excluding
capitalised development costs, are not capitalised and the related
expenditure is recognised in profit or loss in the period in which
the expenditure is incurred.
The useful lives of intangible assets are assessed as either
finite or indefinite.
Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the end of
each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits
embodied in the asset are considered to modify the amortisation
period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible assets
with finite lives is recognised in profit or loss in the expense
category that is consistent with the function of the intangible
assets.
Intangible assets with indefinite useful lives are not
amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment
of indefinite life is reviewed annually to determine whether the
indefinite life continues to be supportable. If not, the change in
useful life from indefinite to finite is made on a prospective
basis.
An intangible asset is derecognised upon disposal (i.e., at the
date the recipient obtains control) or when no future economic
benefits are expected from its use or disposal. Any gain or loss
arising upon derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying
amount of the asset) is included in the statement of profit or
loss.
Research and development costs
Research costs are expensed as incurred. Development
expenditures on an individual project are recognised as an
intangible asset when the Group can demonstrate:
-- The technical feasibility of completing the intangible asset
so that the asset will be available for use or sale.
-- Its intention to complete and its ability and intention to use or sell the asset.
-- How the asset will generate future economic benefits.
-- The availability of resources to complete the asset.
-- The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as
an asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation of the
asset begins when development is complete, and the asset is
available for use. It is amortised over the period of expected
future benefit. Amortisation is recorded in cost of sales. During
the period of development, the asset is tested for impairment
annually.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
m) Financial Assets
Classification
The Group classifies its financial assets in the following
categories: at amortised cost (including trade receivables and
other financial assets at amortised cost) fair value through other
comprehensive income or fair value through profit or loss. The
classification depends on the financial asset's contractual cash
flow characteristics and the business model for managing them.
Management determines the classification of its financial assets at
initial recognition.
Financial assets at amortised cost
(i) Classification of financial assets at amortised cost
The Company classifies its financial assets as at amortised cost
only if both of the following criteria are met:
-- the asset is held within a business model whose objective is
to collect the contractual cash flows; and
-- the contractual terms give rise to cash flows that are solely
payments of principal and interest on the principal amount
outstanding.
Financial assets at amortised cost are initially measured at
fair value and subsequently measured using the effective interest
rate method less impairment.
(ii) Impairment and risk exposure
All of the financial assets at amortised cost are denominated in
Pounds Sterling. As a result, there is no exposure to foreign
currency risk. There is also no exposure to price risk.
For the Directors' justification for there being no expected
credit loss charge required in respect of the loan due from Materia
and the amounts due from the subsidiary, note 24.
There is no definition of default at present. This will be
reassessed as and when repayments are due in respect of financial
assets at amortised cost held.
n) Inventories
Inventories are valued at the lower of cost and net realisable
value.
Costs incurred in bringing each product to its present location
and condition are accounted for, as follows:
-- Raw materials: purchase cost on a first-in/first-out basis.
-- Finished goods and work in progress: cost of direct materials
and labour and a proportion of manufacturing overheads based on the
normal operating capacity but excluding borrowing costs.
Initial cost of inventories includes the transfer of gains and
losses on qualifying cash flow hedges, recognised in OCI, in
respect of the purchases of raw materials. Net realisable value is
the estimated selling price in the ordinary course of business,
less estimated costs of completion and the estimated costs
necessary to make the sale.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
o) Impairment of non-financial assets
The Group assesses at each reporting date, whether there is an
indication that an asset may be impaired. If any indication exists,
or when annual impairment testing for an asset is required, the
Group estimates the asset's recoverable amount. An asset's
recoverable amount is the higher of an asset's or CGU's fair value
less costs of disposal and its value in use. The recoverable amount
is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from
other assets or groups of assets. When the carrying amount of an
asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable
amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. In determining fair value less
costs of disposal, recent market transactions are taken into
account. If no such transactions can be identified, an appropriate
valuation model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly traded
companies or other available fair value indicators.
The Group bases its impairment calculation on most recent
budgets and forecast calculations, which are prepared separately
for each of the Group's CGUs to which the individual assets are
allocated. These budgets and forecast calculations generally cover
a period of five years. A long-term growth rate is calculated and
applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in the
statement of profit or loss in expense categories consistent with
the function of the impaired asset, except for properties
previously revalued with the revaluation taken to OCI. For such
properties, the impairment is recognised in OCI up to the amount of
any previous revaluation.
For assets excluding goodwill, an assessment is made at each
reporting date to determine whether there is an indication that
previously recognised impairment losses no longer exist or have
decreased. If such indication exists, the Group estimates the
asset's or CGU's recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since
the last impairment loss was recognised. The reversal is limited so
that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is
recognised in the statement of profit or loss unless the asset is
carried at a revalued amount, in which case, the reversal is
treated as a revaluation increase.
Goodwill and intangible assets are tested for impairment
annually and when circumstances indicate that the carrying value
may be impaired.
Depreciation of PPE and amortisation of intangible assets
The directors are required to review the estimated useful of PPE
and amortisation periods of intangible assets. Were useful lives
and amortisation periods to be shorter, or were there impairments
of PPE or intangible assets, this would cause an acceleration in
depreciation and amortisation charges in future periods. See notes
6.a and 17 for further information
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
o) Impairment of non-financial assets (cont.)
Impairment is determined for goodwill by assessing the
recoverable amount of each CGU (or group of CGUs) to which the
goodwill relates. When the recoverable amount of the CGU is less
than it is carrying amount, an impairment loss is recognised.
Impairment losses relating to goodwill cannot be reversed in future
periods.
The Group assesses where climate risks could have a significant
impact, such as the introduction of emission-reduction legislation
that may increase manufacturing costs. These risks in relation to
climate related matters are included as key assumptions where they
materially impact the measure of recoverable amount, these
assumptions have been included in the cash-flow forecasts in
assessing value-in-use amounts.
Recoverability of the investment in subsidiary (note 19)
As at 31 December 2022 the carrying value of the Company's
investment in Kanabo Research Ltd was GBP14,142 thousands (2021:
GBP17,951 thousands). The recoverable value of this investment is
not considered to be less than it is carrying value as at 31
December 2022 and therefore no impairment has been have recognised.
The Directors have made this assessment through reviewing
forecasts, other available financial information available and
developments during the year and since the year-end. The key inputs
within the forecast include revenue growth, gross profit margins
and overheads.
Recoverability of amounts due from the subsidiary (note 25)
By 31 December 2022 the parent Company had advanced GBP506
thousands (including interest) as a loan to Kanabo Research Ltd and
GBP2,686 thousands as an ongoing operational balance. The Directors
expect this balance to be fully recoverable and have thus not
recognised any IFRS 9 expected credit loss charges. They made this
assessment through reviewing forecasts, other financial information
available and developments during the year and since the year-end.
The Board asset the loan on individual basis to examine
impairment.
By 31 December 2022 the parent Company had advanced GBP1,097
thousands (including interest) as a loan to GPS. The Directors
expect this balance to be fully recoverable and have thus not
recognised any IFRS 9 expected credit loss charges. They made this
assessment through reviewing forecasts, other financial information
available and developments during the year and since the year-end.
The Board asset the loan on individual basis to examine
impairment.
Recoverability of amounts due from Materia (note 24)
By 31 December 2022 the Group had advanced CAD 1,000 thousand
(GBP582 thousands) to Materia Ventures ("Materia"), a company
incorporated in Canada.
When assessing whether the loan receivable and accrued interest
is recoverable or not, the Directors identified a number of
impairment indicators. Whilst no repayments of the loan are due, or
yet to have been received and whilst through communications with
Materia the Directors understand Materia is willing to repay the
balance, there is not sufficient evidence to demonstrate that it is
probable that Materia can make full repayment of the balance. The
Directors have therefore taken a prudent view and decided to fully
impair the loan, however, the Company and Materia will continue to
discuss their future collaboration and a strategic partnership
through which the Company hope to recover the loan balance.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
p) Cash and short-term deposits
Cash and short-term deposits in the statement of financial
position comprise cash at banks and on hand and short-term highly
liquid deposits with a maturity of three months or less, that are
readily convertible to a known amount of cash and subject to an
insignificant risk of changes in value.
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and short-term deposits,
as defined above, net of outstanding bank overdrafts as they are
considered an integral part of the Group's cash management.
q) Provisions
A provision in accordance with IAS 37 is recognised when the
Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. When the Company expects part or all of the expense to
be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense is recognised in
the statement of profit or loss net of any reimbursement.
r) Trade and other payables
Trade and other payables are obligations to pay for goods or
services that have been acquired in the ordinary course of business
from suppliers. Accounts payable are classified as current
liabilities if payment is due within one year or less (or in the
normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Trade and other payables are recognised initially at fair value,
and subsequently measured at amortised cost using the effective
interest method.
s) Share-based payments
Employees (including Directors senior executives) of the Group
receive remuneration in the form of share-based payments, whereby
employees render services as consideration for equity instruments
(equity-settled transactions).
That cost is recognised in employee benefits expense, together
with a corresponding increase in equity (other capital reserves),
over the period in which the service and, where applicable, the
performance conditions are fulfilled (the vesting period). The
cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Group's best estimate
of the number of equity instruments that will ultimately vest. The
expense or credit in the statement of profit or loss for a period
represents the movement in cumulative expense recognised as at the
beginning and end of that period.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
s) Share-based payments (cont.)
Service and non-market performance conditions are not taken into
account when determining the grant date fair value of awards, but
the likelihood of the conditions being met is assessed as part of
the Group's best estimate of the number of equity instruments that
will ultimately vest. Market performance conditions are reflected
within the grant date fair value. Any other conditions attached to
an award, but without an associated service requirement, are
considered to be non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an immediate
expensing of an award unless there are also service and/or
performance conditions.
No expense is recognised for awards that do not ultimately vest
because non-market performance and/or service conditions have not
been met. Where awards include a market or non-vesting condition,
the transactions are treated as vested irrespective of whether the
market or non-vesting condition is satisfied, provided that all
other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the
minimum expense recognised is the grant date fair value of the
unmodified award, provided the original vesting terms of the award
are met. An additional expense, measured as at the date of
modification, is recognised for any modification that increases the
total fair value of the share-based payment transaction, or is
otherwise beneficial to the employee. Where an award is cancelled
by the entity or by the counterparty, any remaining element of the
fair value of the award is expensed immediately through profit or
loss.
The fair value is measured by use of the Black-Scholes model as
the Directors view this as providing the most reliable measure of
valuation. The expected life used in the model has been adjusted,
based on management's best estimates, for the effects of
non-transferability, exercise restrictions and behavioural
considerations. The market
price used in the model is the issue price of Company shares at
the last placement of shares immediately preceding the calculation
date. The fair value calculated is inherently subjective and
uncertain due to the assumptions made and the limitations of the
calculation used.
t) Equity
Equity instruments issued by the Company are recorded at the
value of net proceeds after direct issue costs.
u) Shares to be issued
Obligations which are to be settled via the issue of the
Company's shares at the year-end which meet the definition of
equity per IAS 32 are classified as shares to be issue within
equity and are held at fair value.
3. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
v) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulating sick leave that are
expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service are
recognised in respect of employees' services up to the end of the
reporting period and are measured at the amounts expected to be
paid when the liabilities are settled. Leave obligations are
calculated by multiplying the average days of outstanding leave at
the period end by the daily salary rate of the employee concerned.
The liabilities are presented as current employee benefit
obligations in the balance sheet.
Other long-term employee benefit obligations
There are no other long-term employee benefit obligations.
Post-employment obligations
The Group operates one post-employment scheme, a defined
contribution pension plan available to all employees. The Group
pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The
Group has no further payment obligations once the contributions
have been paid. The contributions are recognised as employee
benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available.
Share-based payments
Share-based compensation benefits are provided to employees via
the Group Employee Option Plan, an employee share scheme, the
executive short term incentive scheme and share appreciation
rights. Information relating to these schemes is set out in note
28.
Employee options
The fair value of options granted under the Group Employee
Option Plan is recognised as an employee benefit expense, with a
corresponding increase in equity. The total amount to be expensed
is determined by reference to the fair value of the options
granted:
-- including any market performance conditions (e.g. the Company's share price);
-- excluding the impact of any service and non-market
performance vesting conditions (e.g. profitability, sales growth
targets and remaining an employee of the entity over a specified
time period); and
-- including the impact of any non-vesting conditions (e.g. the
requirement for employees to save or hold shares for a specific
period of time).
The total expense is recognised over the vesting period, which
is the period over which all of the specified vesting conditions
are to be satisfied. At the end of each period, the entity revises
its estimates of the number of options that are expected to vest
based on the non-market vesting and service conditions. It
recognises the impact of the revision to original estimates, if
any, in profit or loss, with a corresponding adjustment to
equity.
2. Significant accounting policies (cont.)
2.5 Summary of significant accounting policies (cont.)
w) Employee benefits (cont.)
Employee options (cont.)
The Employee Option Plan is accounted for as detailed in note
28. When the options are exercised, the appropriate amount of
shares are transferred to the employee. The proceeds received, net
of any directly attributable transaction costs, are credited
directly to equity.
Bonus plans
Where contractually obliged or where there is a past practice
that has created a constructive obligation to give staff bonuses,
the Group recognises a liability and an expense for bonuses based
on a formula that takes into consideration certain financial and
operational objectives.
3. Segment information
Following the acquisition of The GP Service (UK) Limited ("GPS")
(see note 6.a), For management purposes, the Group is organised
into business units based on its products and services and has
three reportable segments, as follows:
-- Primary Care - Tele pharma services provided by GPS.
-- Secondary Care - Development and distribution of cannabis
derived medical and wellness products.
No operating segments have been aggregated to form the above
reportable operating segments.
The Executive Management Committee is the Chief Operating
Decision Maker (CODM) and monitors the operating results of its
business units separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance
is evaluated based on profit or loss and is measured consistently
with profit or loss in the consolidated financial statements. Also,
the Group's financing (including finance costs, finance income and
other income) and income taxes are managed on a Group basis and are
not allocated to operating segments. Transfer prices between
operating segments are on an arm's-length basis in a manner similar
to transactions with third parties.
3. Segment information (cont.)
Year ended 31 December 2022:
Primary Secondary Total segments Adjustments Consolidated
care care and eliminations
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
======== ========== =============== ================== =============
Revenue
======== ========== =============== ================== =============
External customers 505 98 603 - 603
======== ========== =============== ================== =============
Inter-segment - - - - -
======== ========== =============== ================== =============
Total revenue 505 98 603 - 603
======== ========== =============== ================== =============
Expenses
======== ========== =============== ================== =============
Cost of sales (349) (55) (404) - (404)
======== ========== =============== ================== =============
Depreciation
and amortisation (90) (955 ( (1,045) - (1,045)
======== ========== =============== ================== =============
Segment loss (1,185) (5,685) (6,870) - (6,870)
======== ========== =============== ================== =============
Total assets 496 13,956 14,452 - 14,452
======== ========== =============== ================== =============
Total liabilities 609 1,398 2,007 - 2,007
======== ========== =============== ================== =============
The Group's operation does not include any reconciling
items.
Geographical location:
Primary Secondary Total segments
care care
=================== ======== ========== ===============
GBP 000 GBP 000 GBP 000
======== ========== ===============
Assets
======== ========== ===============
United Kingdom 496 11,558 12,054
======== ========== ===============
Israel - 2,398 2,398
======== ========== ===============
Total assets 496 13,956 14,452
======== ========== ===============
Liabilities
======== ========== ===============
United Kingdom 609 987 1,596
======== ========== ===============
Israel - 411 411
======== ========== ===============
Total liabilities 609 1,398 2,007
======== ========== ===============
4. Capital management
For the purpose of the Group's capital management, capital
includes issued capital, share premium and all other equity
reserves attributable to the equity holders of the parent. The
primary objective of the Group's capital management is to maximise
the shareholder value.
The Group manages its capital structure and makes adjustments in
light of changes in economic conditions and the requirements of the
financial covenants. The Group includes within net debt, interest
bearing loans and borrowings, trade and other payables, less cash,
and short-term deposits.
2022 2021
GBP 000 GBP 000
======== ========
Interest-bearing loan and borrowings (note 29) 198 -
======== ========
Trade payables 153 42
======== ========
Other payables (note 30) 1,147 373
======== ========
Less: cash and short-term deposits (3,228) (4,497)
======== ========
Net asset (1,730) (4,082)
======== ========
Total equity 12,445 5,184
======== ========
Gearing ratio -14% -79%
======== ========
There have been no breaches of the financial covenants of any
interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies, or processes
for managing capital during the years ended 31 December 2022 and
2021.
5. Group information
The consolidated financial statements of the Group include:
% equity interest
Name Principal activities Country of incorporation 2022 2021
============================= ====================== ========================== ========= =========
Kanabo Research Ltd. R&D Israel 100 100
====================== ========================== ========= =========
Kanabo Agritec Ltd. Consulting Israel 40 -
====================== ========================== ========= =========
The GP Service (UK) Limited Telemedicine UK 100 -
====================== ========================== ========= =========
Kanabo GP Limited Holding company UK 100 -
====================== ========================== ========= =========
(*) The Company holds 40% of the equity in Kanabo Agritec Ltd.
but consolidates 100% of this entity. See note 6.b for details on
interest held in Kanabo Agritec Ltd.
6. Business combinations and acquisition of non-controlling interests
(a) Acquisition of The GP Service (UK) Limited
On 21 February 2022, the Company acquired 100% of the voting
rights of GP Service (UK) Limited ("GPS") a non-listed company
based in UK and specialising in care telemedicine provider in
exchange for a net consideration of GBP13,499 thousands ("Net
Consideration") with a fair value of GBP10,671 thousands. The Net
Consideration was satisfied by the allotment of 94,133,645 B
ordinary shares of 0.00001 pence each in the capital of Kanabo GP
Limited, a subsidiary of Kanabo Group Plc, at a price of 12.65
pence per share ("Consideration Shares"). It has been agreed as
part of the acquisition that the principal and interest owed as at
completion by GPS to MEIF WM Debt LP (GBP1,591 thousands) will be
repayable by the Company by the allotment of 12,574,931 ordinary
shares within 18 months based on the same price of GBP0.1265 per
share.
The Group's acquisition of the GPS will facilitate the rapid
growth of its existing digital and telemedicine business and will
establish a new and fully compliant channel to market for THE
Group's products for medical patients. Through improved access to
these products, the Group hopes to make a substantial contribution
to improving outcomes for thousands of patients in the UK and
Europe.
As of the signature date of the report, total amount of
85,406,117 shares have not yet been issued and the contingent
consideration has been included in the "shares to issued" reserve
within equity.
The fair values of the identifiable assets and liabilities of
GPS as at the date of acquisition were:
Fair value recognised on
acquisition
GBP000
=========================
Assets
=========================
Property, plant, and equipment 11
=========================
Intangible assets 116
=========================
Cash and cash equivalents 235
=========================
Trade receivables 33
=========================
Other receivables 74
=========================
469
=========================
Liabilities
=========================
Interest-bearing loan (500)
=========================
Trade payables (19)
=========================
Other payables (97)
=========================
(616)
=========================
Total identifiable net liabilities at fair value (147)
=========================
Other intangible assets arising on acquisition 6,763
=========================
Goodwill arising on acquisition 4,055
=========================
Fair value of purchase consideration transferred 10,671
=========================
6. Business combinations and acquisition of non-controlling interests (cont.)
(a) Acquisition of The GP Service (UK) Limited (cont.)
Other intangible assets arising on acquisition include the
technology which was acquired through business combinations. The
management assessment the lifetime of these assets for a minimum of
7 years and as a result recorded amortisations expenses in the
amount of GBP891 thousands.
As agreed between the parties, the net liabilities recognised on
the acquisition date were based on GPS results as of 31 January
2022, starting 1 February 2022 the results of GPS are being
consolidated in the Group's financial statements.
The revenue of GPS and net loss for the period since acquisition
were GBP505 thousands and GBP1,185 thousands respectively.
(b) Investment in an associate
In March 2022, Kanabo Research Ltd ( " KNR " ) (a wholly owned
subsidiary of the Company) and a third-party partner formed an
entity, Kanabo Agritec Ltd. ("Agritec"), to enter into agreements
with third parties at minimal cost to leverage the Company's
Intellectual Property for the cultivation, processing, and
production of cannabis products. KNR holds 40% of the voting shares
in this entity. The third-party hold the remaining 60% of the
voting shares. KNR committed to finance Agritec up to an amount
equal to 75% of the principal amount requested by Agritc, the other
Founders, together, will lend up to the remaining 25% of the
principal amount in equal portions among them. As of the reporting
period KNR loaned Agritec total amount of ILS 100 thousand (GBP24
thousands).
Under the contractual arrangement with the third-party partners,
KNR has a majority representation on the entity's board of
Directors and the KNR's approval is required for all major
operational decisions, the KNR assessed that the voting rights in
Agritc are not the dominant factor in deciding who controls the
entity. Therefore, KNR concluded Agritc is a structured entity
under IFRS 10 Consolidated Financial Statements and that KNR
controls it with non-controlling interests. Therefore, Agritc is
consolidated in the Group's consolidated financial statements. The
shares of the third-party partner are recorded under the equity as
non-controlling interests and the return on investment is recorded
as non-controlling interests under the profit and loss.
(c) Reverse acquisition
On 16 February 2021, the Company formerly known as Spinnaker
Opportunities Plc, acquired through a share for share exchange the
entire share capital of Kanabo Research Ltd ( " KNR " ), whose
principal activity is the provision of THC-Free retail CBD products
and Vaporization devices.
Although the transaction resulted in KNR becoming a wholly owned
subsidiary of the Company, the transaction constituted a reverse
acquisition, as the previous shareholders of KNR own a substantial
majority of the Ordinary Shares of the Company and the executive
management of KNR became the executive management of Kanabo Group
Plc.
In substance, the shareholders of KNR acquired a controlling
interest in the Company and the transaction has therefore been
accounted for as a reverse acquisition. As the Company's activities
prior to the acquisition were purely the maintenance of the LSE
Listing, acquiring KNR and raising equity finance to provide the
required funding for the operation of the acquisition, it did not
meet the definition of a business in accordance with IFRS 3.
6. Business combinations and acquisition of non-controlling interests (cont.)
(c) Reverse acquisition (cont.)
Accordingly, this reverse acquisition does not constitute a
business combination and was accounted for in accordance with IFRS
2 "Share-based Payments" and associated IFRIC guidance. Although,
the reverse acquisition is not a business combination, the Company
has become a legal parent and is required to apply IFRS 10 and
prepare consolidated financial statements. The Directors have
prepared these financial statements using the reverse acquisition
methodology, but with the result that rather than recognising
goodwill, the difference between the equity value given up by KNR
's shareholders and the share of the fair value of net assets
gained by these shareholders, is charged to the consolidated
statement of comprehensive income as a share-based payment on
reverse acquisition and represents in substance the cost of
acquiring an LSE listing.
On 16 February 2021, the Company issued 230,769,231 ordinary
shares to acquire the 237,261 ordinary shares of KNR based on a
share price of GBP0.065 (the price at which those shares issued as
part of the placing that day were issued at), the Company's
investment in KNR is valued at GBP15,000 thousands prior to the
consideration of contingent consideration and share based payments
charges for the year recognised in the subsidiary - see note 2 for
further commentary regarding this component of the carrying value
of the investment in the subsidiary as at 31 December 2022 .
On 16 November 2021, the Company achieved two of its deferred
consideration share milestones under the terms of the share
purchase agreement. The achievement entitles the sellers to
38,461,492 deferred consideration shares with a total value of
GBP2,500 thousands which increases the total investment to
GBP17,500 thousands. The Company had not issued the shares as at 31
December 2022 and as this obligation met the 'fixed for fixed' rule
under IAS 32, the contingent consideration has been included in the
"shares to issued" reserve within equity.
Because the legal subsidiary, KNR, was treated on consolidation
as the accounting acquirer and the legal Parent Company, Kanabo
Group Plc, was treated as the accounting subsidiary, the fair value
of the shares deemed to have been issued by KNR was calculated at
GBP1,911 thousands based on an assessment of the purchase
consideration for a 100% holding of Kanabo Group Plc
According to the IFRS 2 the value of the share-based payment is
calculated as the difference between the deemed cost and the fair
value of the net assets as at the acquisition date. During the
period between 1 January 2021 to 16 February 2021 several
shareholders exercised their warrants. The exercised warrants
indicated that in the event the RTO acquisition would not be
completed the funds would be returned to the shareholders. For that
reason, it was decided that it would be more appropriate to use the
Company's value of the net assets as of 1 January 2021.
GBP 000
Deemed cost 1,911
========
Trade and other receivables 434
========
Cash and cash equivalents 359
========
Trade and other payables (54)
========
Total identifiable net liabilities at fair value 739
========
Total RTO expenses 1,172
========
6. Business combinations and acquisition of non-controlling interests (cont.)
(c) Reverse acquisition (cont.)
The difference between the deemed cost (GBP1,911 thousands) and
the fair value of the net assets assumed per above of GBP739
thousands resulted in GBP1,172 thousands being expensed within
"reverse acquisition expenses" in accordance with IFRS 2, Share
Based Payments, reflecting the economic cost to KNR's shareholders
of acquiring a quoted entity.
The reverse acquisition reserve which arose from the reverse
takeover is made up as follows:
GBP 000
Pre-acquisition equity (a) (739)
=========
Kanabo Research Ltd share capital at acquisition (b) 2,099
=========
Investment in Kanabo Research Ltd (c) (17,500)
=========
Reverse acquisition expense (d) 1,172
=========
Total (14,968)
=========
(a) Recognition of pre-acquisition equity of Kanabo Group Plc as
at 1 January 2021.
(b) KNR had issued share capital of GBP2,099 thousands. As these
financial statements present the capital structure of the legal
parent entity, the equity of KNR is eliminated.
(c) The value of the shares issued by the Company in exchange
for the entire share capital of KNR, the entry is required to
eliminate the balance sheet impact of this transaction.
(d) The shares to be issued to the vendors upon the meeting of
two of the agreed milestones had not been issued as at 31 December
2022. Since the obligation in question is to be settled by the
Company through an issue of a fixed number of shares for a fixed
consideration, this obligation has been treated as an equity
instrument and has been included within equity under the "shares to
be issued reserve".
7. Revenues
2022 2021
GBP 000 GBP 000
======== ========
Services 505 -
======== ========
Sale of products 98 73
======== ========
Total 603 73
======== ========
During 2022 and 2021 the revenues were generated only from the
sale of products (sale of CBD and THC products) and services (p
rimary care ) and were made to customers in the United Kingdom.
All revenues were recognised at a point in time.
8. Cost of sales
2022 2021
GBP 000 GBP 000
======== ========
Salaries and related expenses 317 -
======== ========
Share-based payment expense 13 -
======== ========
Cost of sales 48 55
======== ========
Depreciation - 2
======== ========
IT Development and licenses 12 1
======== ========
Impairment changes on receivables 3 -
======== ========
Other 11 8
======== ========
Total 404 66
======== ========
9. Research and development expenses
2022 2021
GBP 000 GBP 000
======== ========
Salaries and related expenses 293 163
======== ========
Share-based payment expense 68 6
======== ========
IT development 181 -
======== ========
Lab expenses - 9
======== ========
Rent and related expenses 39 36
======== ========
Professional services 2 26
======== ========
Other 14 2
======== ========
Total 597 242
======== ========
The GPS capitalise research and development expenses incurred
during 2022 as Management have taken the prudent view that it is
probable that the technology and products upon which the research
and development expenditure related to will bring in future
economic benefits to the Group.
10. Sales and marketing expenses
2022 2021
GBP 000 GBP 000
======== ========
Salaries and related expenses 403 144
======== ========
Share-based payment expense 349 218
======== ========
Subcontractors 60 14
======== ========
Marketing expenses 364 129
======== ========
Professional services - 31
======== ========
Conferences 14 12
======== ========
Business development - 16
======== ========
Other - 5
======== ========
Total 1,190 569
======== ========
11. General and administration expenses
2022 2021
GBP 000 GBP 000
======== ========
Salaries and related expenses 778 676
======== ========
Share-based payment expense 537 436
======== ========
Insurance 82 100
======== ========
Professional services 1,005 599
======== ========
Rent and related expenses (*) 81 52
======== ========
Depreciation 69 7
======== ========
Amortisation (note 17) 975 -
======== ========
IT Development and licenses 45 12
======== ========
Travel and accommodation 128 54
======== ========
Patent - 13
======== ========
Other 104 51
======== ========
Total 3,804 2,000
======== ========
(*) Rent and related expenses refer to expenses which are out of
the scope of IFRS 16, see note 31.
12. Auditor's remuneration
During the reporting period, the Company incurred the following
costs in respect of services provided by the current and previous
auditor:
2022 2021
GBP 000 GBP 000
======== ========
Fees payable to the Company's auditor for:
======== ========
- The audit of parent company and consolidated financial statements 155 (a) 43 (c)
======== ========
- Due diligence services in respect of acquisition targets - 15 (c)
======== ========
- Interim review of the Group for the six-month period ended 30 June 2022 and 30 June 2021
in accordance with ISRE 2410 8 (b) 15 (c)
======== ========
(a) The services for audit in 2022 were provided by MHA
MacIntyre Hudson.
(b) The services for interim review in 2022 were provided by
Jeffreys Henry LLP.
(c) The services for audit and interim review in 2021 were provided by PKF Littlejohn LLP .
13. Other operating expenses
2022 2021
GBP 000 GBP 000
======== ========
Acquisition and listing costs 1,189 -
======== ========
Reverse acquisition expenses ( note 6.c ) - 1,172
======== ========
Loss on current financial asset ( note 20 ) 259 -
======== ========
Total 1,448 1,172
======== ========
Other expenses comprise acquisition-related transaction costs
which were expensed as incurred and included (note 6.a) as other
expenses and expenses generated from the preparations of the
Group's prospectus.
14. Net finance expenses (income)
2022 2021
GBP 000 GBP 000
======== ========
Finance income
======== ========
Interest on loans to related parties - (15)
======== ========
- (15)
======== ========
Finance costs
======== ========
Bank charges 15 4
======== ========
Interest on interest bearing loans 32 -
======== ========
Interest on finance lease (note 31) 24 -
======== ========
71 4
======== ========
Net foreign exchange (gain) losses 1 8 (12)
======== ========
Net finance (income) expenses recognised in profit or loss 8 9 (23)
======== ========
15. Income tax
a. Analysis of charge in the year
Reconciliation of tax expense and the accounting profit
multiplied by United Kingdom's domestic tax rate for 2022 and
2021:
2022 2021
GBP 000 GBP 000
======== ========
Accounting loss before income tax (6,870) (4,551)
======== ========
At England's statutory income tax rate of 19% (2021: 19%) (1,305) (865)
======== ========
Non-deductible expenses for tax purposes:
======== ========
Non-deductible expenses (11) 336
======== ========
Amortisation of intangible assets 169 -
======== ========
Effect of higher tax rates in Israel (47) (43)
======== ========
Current year losses for which no deferred tax asset is recognised 1,194 572
======== ========
Income tax benefits reported in the statement of profit or loss - -
======== ========
15. Income tax (cont.)
b. Reconciliation of deferred tax liabilities, net
Group Company
2022 2021 2022 2021
======== ======== ======== ==========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ==========
As at 1 January - - - -
======== ======== ======== ==========
Deferred taxes acquired in business combinations (note 6.a) 1,651 - - -
======== ======== ======== ==========
Deferred tax asset on losses recognised due to offset of liability under (1,651) - -
IAS 12
======== ======== ======== ==========
As at 31 December - - - -
======== ======== ======== ==========
The Group has accumulated tax losses of approximately GBP10,099
thousands (2021: GBP4,646 thousands) that are available, under
current legislation, to be carried forward indefinitely against
future profits.
A deferred tax asset has not been recognised in respect of these
losses of the Company due to the uncertainty of future profits. The
amount of the deferred tax asset not recognised is approximately
GBP2,448 thousands (2021: GBP715 thousands).
16. Earnings per share (EPS)
Basic EPS is calculated by dividing the profit for the year
attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the
year.
2022 2021
Loss attributable to ordinary equity holders of the parent (GBP000) (6,870) (4,551)
============ ============
Weighted average number of ordinary shares for basic EPS 415,187,814 324,287,001
============ ============
Basic and diluted loss per share (pence per share) (1.65) (1.40)
============ ============
There is no difference between the basic and diluted earnings
per share as a loss has been made in the year.
17. Intangible assets and goodwill
Group:
Development Intangible Goodwill Total
costs asset
GBP 000 GBP 000 GBP 000 GBP 000
============ =========== ========= ========
Cost
============ =========== ========= ========
At 1 January 2022 - - - -
============ =========== ========= ========
Additions - internally
developed 85 - - 85
============ =========== ========= ========
Acquisition of a subsidiary
(note 6.a) 1,352 6,764 5,959 14,075
============ =========== ========= ========
Deduction against deferred
tax asset on losses recognised
due to offset of liability
under IAS 12 - - (1,904) (1,904)
============ =========== ========= ========
At 31 December 2022 1,437 6,764 4,055 12,256
============ =========== ========= ========
Amortisation and impairment
============ =========== ========= ========
At 1 January 2022 - - - -
============ =========== ========= ========
Amortisation 85 891 - 976
============ =========== ========= ========
Acquisition of a subsidiary
(note 6.a) 1,236 - - 1,236
============ =========== ========= ========
At 31 December 2022 1,321 891 - 2,212
============ =========== ========= ========
Net book value
============ =========== ========= ========
At 31 December 2022 116 5,873 4,055 10,044
============ =========== ========= ========
At 31 December 2021 - - - -
============ =========== ========= ========
17. Intangible assets and goodwill (cont.)
Acquisition during the year
Intangible asset arising on acquisition include the technology
which was acquired through business combinations. The management
assessment the lifetime of this asset for a minimum of seven (7)
years and as a result recorded amortisations expenses in the amount
of GBP891 thousands.
Impairment review disclosures
Goodwill is allocated to the Group's cash-generating units
(CGUs) identified according to business segment. The carrying
amounts of goodwill by segment as at 31 December 2022 and 2021 are
as follows:
2022 2021
========== ======== ========
GBP 000 GBP 000
======== ========
PFS PFS
======== ========
Goodwill 4,055 -
======== ========
During the year, the acquired goodwill was tested for impairment
in accordance with IAS 36 on the basis of the relevant CGUs.
Following the impairment tests there has been no change to the
carrying values. The recoverable amount of a CGU is determined
based on value-in-use calculations. These calculations use cash
flow projections based on current business plans. The key
assumptions for the value-in-use calculations are those regarding
revenue growth rates, discount rates & long-term growth rates
over a period of five years from the Statement of Financial
Position date and thereafter. Management determined revenue growth
based on past performance and its expectations for the market
development. Discount rates were determined using pre-tax rates
that reflect current market assessments of the time value of money
and the risks specific to the CGUs. Terminal value is calculated as
cash flows beyond the five-year period extrapolated using estimated
long-term growth rates. Additionally, these value-in-use
calculations were stress tested on a more prudent basis (assuming a
mixture of 75% or 95% of revenue growth dependent upon the relevant
CGU) and gave rise to no change in the carrying value of goodwill.
There are no reasonably possible changes to any key assumptions
used within the impairment reviews that would cause the carrying
value of a CGU to exceed its recoverable amount.
The revenue growth rate does not exceed the long-term average
growth rate for the businesses in which the CGUs operate.
2022 2021
=========================== ====== =====
% %
====== =====
Post-tax discounted rates 28.3% -
====== =====
Pre-tax discounted rates 37.7% -
====== =====
Long-term growth rates 2% -
====== =====
18. Property, plant, and equipment
Group:
Computers and electronic Equipment and furnishing Leasehold improvement Total
equipment
GBP 000 GBP 000 GBP 000 GBP 000
=========================== ========================= ====================== ========
Cost
=========================== ========================= ====================== ========
At 1 January 2021 12 17 - 29
=========================== ========================= ====================== ========
Additions 13 21 1 35
=========================== ========================= ====================== ========
Exchange differences 1 1 - 2
=========================== ========================= ====================== ========
At 31 December 2021 26 39 1 66
=========================== ========================= ====================== ========
Acquisition of subsidiary
(note 6.a) 13 16 - 29
=========================== ========================= ====================== ========
Additions 18 19 31 68
=========================== ========================= ====================== ========
Exchange differences - (2) (1) (3)
=========================== ========================= ====================== ========
At 31 December 2022 57 7 2 31 16 0
=========================== ========================= ====================== ========
Depreciation
=========================== ========================= ====================== ========
At 1 January 2021 9 7 - 16
=========================== ========================= ====================== ========
Depreciation charge for the
year 3 4 - 7
=========================== ========================= ====================== ========
Exchange differences 1 - - 1
=========================== ========================= ====================== ========
At 31 December 2021 13 11 - 24
=========================== ========================= ====================== ========
Acquisition of subsidiary
(note 6.a) 7 11 - 18
=========================== ========================= ====================== ========
Depreciation charge for the
year 11 7 4 22
=========================== ========================= ====================== ========
At 31 December 2022 31 29 4 64
=========================== ========================= ====================== ========
Net book value
=========================== ========================= ====================== ========
At 31 December 2021 13 28 1 42
=========================== ========================= ====================== ========
At 31 December 2022 26 4 3 2 7 9 6
=========================== ========================= ====================== ========
18. Property, plant, and equipment (cont.)
Company :
Computers and electronic equipment Total
GBP 000 GBP 000
=================================== ========
Cost
=================================== ========
At 1 January 2021 - -
=================================== ========
Additions 23 23
=================================== ========
At 31 December 2021 23 23
=================================== ========
Additions - -
=================================== ========
At 31 December 2022 23 23
=================================== ========
Depreciation
=================================== ========
At 1 January 2021 - -
=================================== ========
Depreciation charge for the year 2 2
=================================== ========
At 31 December 2021 2 2
=================================== ========
Depreciation charge for the year 4 4
=================================== ========
At 31 December 2022 6 6
=================================== ========
Net book value
=================================== ========
At 31 December 2021 21 21
=================================== ========
At 31 December 2022 17 17
=================================== ========
19. Investment in subsidiaries
Company :
2022 2021
GBP 000 GBP 000
======== ========
As at 1 January 14,676 -
======== ========
Additions 11,441 17,951
======== ========
Equity results (2,371) (3,275)
======== ========
As at 31 December 23,746 14,676
======== ========
On 21 February 2022, the Company acquired 100% of the voting
rights of The GP Service (UK) Limited ("GPS"), an UK-based private
company specialising in care telemedicine, via a share-for-share
exchange. The carrying value of investment comprises of GBP13,499
thousands in respect of share consideration (carry a fair value of
GBP10,671 thousands), of which GBP2, 135 thousands remains unissued
as at 31 December 2022.
During 2022, GBP122 thousands was recognised in respect of
share-based payment charges recognised in the subsidiary during the
reporting period. As there is no agreement in place for GPS to
reimburse the Company for share options issued to and exercised by
employees of GPS, the share-based payment charged recognised in the
subsidiary in the year is recognised as a capital contribution in
the subsidiary and thus an investment in the Company.
No impairments have been recognised in the year as the Directors
do not believe the recoverable value of the investment to be below
it is carrying value.
The Company owns 100% of the share capital of GPS and the
subsidiary's registered address is Coventry University Technology
Park the Technocentre, CV1 2TT, Coventry, United Kingdom.
On 16 February 2021, the Company acquired 100% of the voting
rights of Kanabo Research Ltd ("KNG"), an Israeli-based private
company operating the CBD industry, via a share-for-share exchange.
The carrying value of investment comprises of GBP17,500 thousands
in respect of share consideration, of which GBP2, 500 thousands
remains unissued as at 31 December 2022.
During 2022, GBP648 thousands was recognised in respect of
share-based payment charges recognised in the subsidiary during the
reporting period. As there is no agreement in place for KNG to
reimburse the Company for share options issued to and exercised by
employees of KNG, the share-based payment charged recognised in the
subsidiary in the year is recognised as a capital contribution in
the subsidiary and thus an investment in the Company.
No impairments have been recognised in the year as the Directors
do not believe the recoverable value of the investment to be below
it is carrying value.
The Company owns 100% of the share capital of KNG and the
subsidiary's registered address is 21A Habarzel street, Tel-Aviv,
Israel.
20. Financial asset through profit or loss
Group Company
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
As at 1 January 750 - 750 -
======== ======== ======== ========
Additions - 750 - 750
======== ======== ======== ========
Loss on financial asset at fair value through profit or loss (note 13) (259) - (259) -
======== ======== ======== ========
As at 31 December 491 750 491 750
======== ======== ======== ========
Current 491 - 491 -
Non-current - 750 - 750
==== ==== ==== ====
On 24 May 2021, the Company entered into an agreement to receive
shares in Hellenic Dynamics S.A ("HD") following a reverse takeover
by HD of a listed company. HD is a company incorporated in Greece
and is a medical cannabis cultivator which is in the process of
securing admission to the London Stock Exchange through a Reverse
Take Over ("RTO").
As part of the agreement, for consideration of GBP750 thousands
the Company has acquired 5,000 shares in HD's parent company, Samos
Investments Ltd, and will be entitled to receive shares in HD as
part of HD's proposed listing on the London Stock Exchange. The
number of HD shares that will be issued to the Company shall be
calculated as GBP750 thousands divided by the RTO valuation share
price less a 30% discount.
On 15 November 2022, the Financial Conduct Authority ("FCA") has
approved the prospectus issued by UK SPAC in connection with its
acquisition of Hellenic and the proposed re-admission of UK SPAC
(to be renamed Hellenic Dynamics Plc) to the standard listing
segment of the Official List and to trading on the London Stock
Exchange's Main Market.
Following the RTO, the Company received 357,142,857 shares in
Hellenic representing 2.9% of Hellenic share capital.
The fair value of the quoted notes is based on price quotations
at the reporting date.
21. Inventories
Group Company
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
Finished goods 61 49 61 49
======== ======== ======== ========
Raw materials 20 17 20 17
======== ======== ======== ========
Write-down of slow moving and obsolete inventory - (3) - (3)
======== ======== ======== ========
Total 81 63 81 63
======== ======== ======== ========
During 2021, GBP3 thousands was recognised as an expense for
provision of slow moving and obsolete inventory. The obsolete
inventory has been eliminated during 2022.
22. Trade receivables
Group Company
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
Trade receivables 48 10 38 10
======== ======== ======== ========
Allowance for expected credit losses (5) - (3) -
======== ======== ======== ========
Total 43 10 35 10
======== ======== ======== ========
Trade receivables are non-interest bearing and are generally on
terms of 30 to 90 days.
23. Other receivables
Group Company
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
Prepaid expenses 17 172 5 165
======== ======== ======== ========
VAT recoverable 66 55 64 45
======== ======== ======== ========
Tax receivables 73 10 - -
======== ======== ======== ========
Total 156 237 69 210
======== ======== ======== ========
24. Short term loan
Group and the Company:
31 December 31 December
2022 2021
============== ========= ============ ============
Interest rate Currency GBP 000 GBP 000
============== ========= ============ ============
Fixed rate loan 10% CAD 611 583
============== ========= ============ ============
Accumulated interest 15 15
============== ========= ============ ============
626 598
============== ========= ============ ============
Less impermeant allowance/ECL (626) (598)
============== ========= ============ ============
Total - -
============== ========= ============ ============
On 25 July 2021 the Company signed a head of agreement with
11157353 Canada Corp. a company incorporated in Canada
("Materia").
As part of the agreement the Company agreed to extend Materia a
GBP1.7 million (CAD 3 million) credit facility which was to be
drawn down in tranches based upon agreed uses.
Under the agreement, amounts loaned are due for repayment twelve
months after the drawdown date. No repayments were received in the
year, and none have been received post year-end.
According to the loan agreement, Materia is obliged to receive
the Company's approval for any additional investment from a 3rd
party (excluding current investors). The loan is secured by a
General Security Agreement under which all the Materia's assets
from time to time constitute a floating collateral for the Loan.
The collateral is shared equally with another lender to Materia
(unconnected to the Group) and the relationship between the two
lenders is regulated by an inter-creditor agreement.
Additionally, the agreement states that should the proposed
transaction not complete within six months of the signing of the
heads of terms, interest of 10% per annum would be charged on
amounts drawn down from the date of drawdown. As at the year-end
the Directors believed the transaction would not complete by 25
January 2022, and therefore, interest income at 10% per annum has
been recognised for the period from drawdown to the year-end.
As of 31 December 2021, the Company transferred Materia CAD
1,000 thousand (GBP582 thousands) in three tranches. As of the
reporting period the Company recorded interest income in the total
amount of GBP15 thousands. The loan receivable has been impaired in
full.
After the reporting period, the Group received notice that
Materia, has been put into receivership process in Canada.
25. Intercompany receivables
Company :
31 December 31 December
============================= ============== ========= ============ ============
2022 2021
============== ========= ============ ============
Interest rate Currency GBP 000 GBP 000
============== ========= ============ ============
The GP Service (UK) Limited 9% GBP 1,097 -
============== ========= ============ ============
Kanabo Research Ltd. - GBP 3,192 834
============================= ============== ========= ============ ============
Total 4,289 834
============== ========= ============ ============
Current 3,192 834
Non-current 1,097 -
====== ====
When conducting their IFRS 9 expected credit loss assessment,
the Directors have assessed there are no indications that an
impairment is required to be recognised and thus the intercompany
receivables remain at carrying value.
26. Cash and cash equivalents
Group Company
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
Cash at bank and in hand 3,204 4,477 937 4,148
======== ======== ======== ========
Total 3,204 4,477 937 4,148
======== ======== ======== ========
The Directors consider the carrying amount of cash and cash
equivalents approximates to their fair value.
27. Issued capital
a. Authorised shares
As at 31 December 2022 the Company had 422,916,056 allotted and
fully paid ordinary shares.
The ordinary shares have attached to them full voting, dividend,
and capital distribution rights (including on a winding up). The
ordinary shares do not confer any rights of redemption.
2022 2021
Number of ordinary shares of GBP0.025 each
=============================================
As at 1 January 369,966,277 29,400,120
====================== =====================
Shares issued in the year for RTO (a) - 230,769,210
====================== =====================
Shares issued in placing and subscriptions (b) - 92,307,693
====================== =====================
Shares issued to settled debt - 615,384
====================== =====================
Share issued in placing and subscriptions (c) - 4,545,454
====================== =====================
Shares issued due to option and warrant exercises 3,522,319 9,028,416
====================== =====================
Shares issue to settle convertible loans - 3,300,000
====================== =====================
Share issued in placing and subscriptions (d) 28,125,000 -
====================== =====================
Issue of shares for acquisition of subsidiary (e) 21,302,460 -
====================== =====================
As at 31 December 422,916,056 369,966,277
====================== =====================
2022 2021
GBP 000 GBP 000
======== ========
As at 1 January 9,249 734
======== ========
Shares issued in the year for RTO (a) - 5,769
======== ========
Shares issued in placing and subscriptions (b) - 2,308
======== ========
Shares issued to settled debt - 15
======== ========
Share issued in placing and subscriptions (c) - 114
======== ========
Shares issued due to option and warrant exercises 88 226
======== ========
Shares issue to settle convertible loans - 83
======== ========
Share issued in placing and subscriptions (d) 703 -
======== ========
Issue of shares for acquisition of subsidiary (e) 533 -
======== ========
As at 31 December 10,573 9,249
======== ========
27. Issued capital (cont.)
a. Authorised shares (cont.)
(a) On 16 February 2021, the company completed its reverse
takeover ("RTO") process with Spinnaker Opportunities Plc ("SOP").
The RTO was completed in the form of a share for share exchange and
the ratio was approximately 1:972.64.
(b) On 16 February 2021, the Company issued 92,307,693 ordinary
shares raising GBP6,000 thousands before costs.
(c) On 24 May 2021, the Company issued 4,545,454 ordinary shares
raising GBP1,000 thousands before costs.
(d) On 21 February 2022, the Company issued 28,125,000 ordinary
shares raising GBP2,250 thousands before costs.
(e) On 21 February 2022, the Company acquired 100% of the voting
rights of The GP Service (UK) Limited ("GPS"), note 6.a.
(f) As of 31 December 2022, 38,461,492 consideration shares and
85,406,117 share for the acquisition of GPS still need to be
issued.
b. Share premium account
2022 2021
GBP 000 GBP 000
======== ========
As at 1 January 5,169 592
======== ========
Shares issued in placing and subscriptions 1,434 4,634
======== ========
Shares issued to settled debt - 21
======== ========
Shares issued to settle convertible loan notes - 83
======== ========
Share issue costs - (634)
======== ========
Shares issued due to option and warrant exercises 247 473
======== ========
As at 31 December 6,850 5,169
======== ========
27. Issued capital (cont.)
c. Merger reserve
2022 2021
=================================================== ======== ========
GBP 000 GBP 000
======== ========
As at 1 January 9,231 -
======== ========
Shares issued in the year for RTO - 9,231
======== ========
Shares issued in the year for subsidiary purchase 2,162 -
=================================================== ======== ========
As at 31 December 11,393 9,231
======== ========
Restatement - Group and Company
The directors have reviewed the accounting treatment of the
shares issued in the prior year revere takeover and have concluded
that on the basis that this was an acquisition of at least 90% of
the equity shares of an undertaking for the issue of equity shares,
then under section 612 Companies Act 2006 the excess of the fair
value of the shares issued over their nominal value should have
been recorded in a merger reserve and that the prior recording of
that excess in the share premium account was precluded under that
section of the Companies Act 2006. This restatement has reduced the
share premium account by GBP9,231 which has been recorded in a
merger reserve instead. There was no other impacts on the financial
statements.
Nature and purpose of each reserve in equity - disclosure under
SOCIEs
The merger reserve arises when the company acquires at least a
90% interest in the shares of another company and under s612
Companies Act 2006 the excess of fair value of the shares issued in
excess of their nominal value is precluded from being recognised in
the share premium account. This reserve is not distributable.
28. Share-based payments
Warrants
The following table illustrates the number and weighted average
exercise prices (WAEP) of, and movements in, the granted warrants
during the year:
2022 2021
Number WAEP Number WAEP
============ ===== ============ =====
Outstanding at 1 January 13,505,931 0.09 - -
============ ===== ============ =====
Granted 28,125,000 0.20 19,051,774 0.09
============ ===== ============ =====
Realised (3,231,501) 0.10 (5,545,843) 0.10
============ ===== ============ =====
Expired (6,422,711) 0.10 - -
============================ ============ ===== ============ =====
Outstanding at 31 December 31,976,719 0.43 13,505,931 0.09
============ ===== ============ =====
Exercisable at 31 December 31,976,719 0.43 13,505,931 0.09
28. Share-based payments (cont.)
Warrants (cont.)
a. On 21 February 2022 ( " admission date " ), the authorised
share capital was increased by GBP2,250 thousands (before costs) by
the issue of 28,125,000 ordinary shares of GBP0.025 each. On the
admission date, the Group additionally granted a half warrant to
the noteholders to subscribe for an additional half a new ordinary
share at an exercise price of GBP0.16 for period of 18 months
following Admission Date. And additional half warrant to the
noteholders to subscribe for an additional half a new ordinary
share at an exercise price of GBP0.24 for period of 18 months
following Admission Date. Total warrants issued sum to 28,125,000.
The warrants were not issued for goods or services provided and
therefore fall outside the scope of IFRS 2 and do not require fair
valuing.
As of 31 December 2022, none of the warrants have been converted
into shares.
b. On 17 February 2021 ("date of admission") the Group granted a
warrant over one new Ordinary Share for every two Ordinary Shares
registered in the name of an existing Shareholder of the Company as
at the date of the RTO. The warrants granted under the terms of the
RTO Warrant Instrument shall be exercisable in the period
commencing on the date of Admission until the date 12 months after
the date of Admission. The warrants are exercisable at GBP0.1 per
Ordinary Share. Total warrants issued sum to 14,700,055. 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.
During the reporting period part of the warrants have been
exercised and the remaining has expired, following which as of 31
December 2022 the remaining granted warrants is nil.
c. On 17 February 2021 ("date of admission") the Group granted a
warrant to the noteholders to subscribe for one Ordinary Shares for
every two Conversion Shares issued to the noteholder. The warrants
are exercisable at the Conversion Price (GBP0.05) and will be valid
for a period of three years. Total warrants issued sum to
1,650,000. The warrants were not issued for goods or services
provided and therefore fall outside the scope of IFRS 2 and do not
require fair valuing.
As of 31 December 2022, 1,150,000 warrants have not been yet
converted into shares.
d. On 27 January 2021, the Company entered a financial adviser
warrant deed entitling Peterhouse Capital Limited to warrants over
a number of ordinary shares, representing approximately 0.75 per
cent of the enlarged Issued Share Capital (the share capital on the
date of the RTO) in accordance with their engagement letter. The
warrants are exercisable at the fundraising price, exercisable for
a period of 7 years from the date of admission. Total warrants
issued sum to 2,701,719. As the warrants were issued to the brokers
assisting with the raise upon re-listing, the fair value of these
warrants, GBP113 thousands, was treated as a share issue cost and
debited against share premium.
As of 31 December 2022, none of these warrants have been
converted into shares.
28. Share-based payments (cont.)
Warrants (cont.)
The following table list the inputs to the model used for the
warrants plan for the year ended 31 December 2021:
27 January 2021
Weighted average fair values at the measurement date GBP 0.042
================
Dividend yield 0%
================
Expected volatility 70%
================
Risk-free interest rate (%) 0.32
================
Expected life of warrant (years) 7
================
Weighted average share price GBP0.065
================
Model used Black-Scholes
================
The expected volatility reflects the assumption that the
historical volatility over a period similar to the life of the
options is indicative of future trends, which may not necessarily
be the actual outcome.
Share options
The following table illustrates the number and weighted average
exercise prices (WAEP) of, and movements in, share options during
the year:
2022 2021
Number WAEP Number WAEP
============ ===== ============ =====
Outstanding at 1 January 15,988,895 0.16 1,960,000 0.05
============ ===== ============ =====
Granted 22,759,150 0.08 16,408,102 0.15
============ ===== ============ =====
Forfeited and expired (1,555,211) - (273,555) -
============ ===== ============ =====
Exercised (290,818) - (2,105,652) -
============================ ============ ===== ============ =====
Outstanding at 31 December 36,902,016 0.12 15,988,895 0.16
============ ===== ============ =====
Exercisable at 31 December 13,733,577 0.1 1 2,728,865 0. 07
a. On 28 March 2021, the Group approved an Israeli appendix to
the share-based payment plan ("The Israeli new plan"). The plan
will include a replacing of existing options granted by Kanabo
Research Ltd to three of its employees and consultants and for
future grants for Kanabo Research Ltd employees. The plan is for 10
years forming the date of approval.
28. Share-based payments (cont.)
Share options (cont.)
b. During the period ended 31 December 2018, the Company had a
share-based payment plan. The plan was approved in February 2018
and has a 10-year duration. The terms of vesting vary according to
the grant agreement subject to approval by the Board of Directors.
Some grants mature immediately, and others vest over up to 4
years.
c. During the reporting period 290,818 options exercise to
shares, the net proceeds summed to GBP12 thousands.
d. On 30 August 2022, 22,759,150 share options were granted to
employees and senior executives under the options plans.
e. The following tables list the inputs to the models used for
the three plans for the years ended 31 December 2022 and 2021,
respectively:
Year ended 31 December 2022
30 August 30 August 30 August 30 August 30 August
2022 2022 2022 2022 2022
Weighted average GBP 0.023 GBP 0.02 GBP0.025 GBP0.022 GBP0.021
fair values at the 2
measurement date
============== ============== ============== ============== ==============
Dividend yield 0% 0% 0% 0% 0%
============== ============== ============== ============== ==============
Expected volatility 91.3 % 91.3 % 91.3 % 91.3 % 91.3 %
============== ============== ============== ============== ==============
Risk-free interest
rate (%) 2.7 2.7 2.7 2.7 2.7
============== ============== ============== ============== ==============
Expected life of
share option (years) 10 10 10 10 10
============== ============== ============== ============== ==============
Weighted average GBP0.065 GBP0.08 GBP0.025 GBP0.1015 GBP0.1265
share price
============== ============== ============== ============== ==============
Model used Black-Scholes Black-Scholes Black-Scholes Black-Scholes Black-Scholes
============== ============== ============== ============== ==============
28. Share-based payments (cont.)
Share options (cont.)
e. (cont.)
Year ended 31 December 2021
27 January 27 January 28 19 24 October
2021 2021 April July 2021
2021 2021
Weighted average GBP 0.0 GBP 0.02 GBP 0.173 GBP 0.11 GBP 0.12
fair values at the 3 2
measurement date
============== ============== ============== ============== ==============
Dividend yield 0% 0% 0% 0% 0%
============== ============== ============== ============== ==============
Expected volatility 105% 105% 105% 105% 105%
============== ============== ============== ============== ==============
Risk-free interest
rate (%) 0.18 0.18 1.63 1.19 1.66
============== ============== ============== ============== ==============
Expected life of
share option (years) 3 3 10 10 10
============== ============== ============== ============== ==============
Weighted average GBP0.065 GBP0.1 GBP0.2721 GBP0.197 GBP0.165
share price
============== ============== ============== ============== ==============
Model used Black-Scholes Black-Scholes Black-Scholes Black-Scholes Black-Scholes
============== ============== ============== ============== ==============
The expected volatility reflects the assumption that the
historical volatility over a period similar to the life of the
options is indicative of future trends, which may not necessarily
be the actual outcome.
The risk-free rate of return is based on zero yield government
bonds for a term consistent with the option life.
f. During the period the Group recognised total amount of GBP739
thousands (2021: GBP660 thousands) for share-based payment
expenses.
The amount was recorded in the profit and loss as follows:
2022 2021
GBP 000 GBP 000
======== ========
Cost of sales (note 8) 13 -
======== ========
Research and development expenses (note 9) 68 6
======== ========
Sales and marketing expenses (note 10) 349 218
======== ========
General and administration expenses (note 11) 537 436
======== ========
Total 967 660
======== ========
29. Interest-bearing loans and borrowings
Group:
2022 2021
Interest rate Currency Maturity GBP 000 GBP 000
============== ========= ========================= ======== ========
Current interest-bearing loans and
borrowings
============== ========= ========================= ======== ========
Lease liability (note 31) 7.5% ILS 2023 65 -
============== ========= ========================= ======== ========
CBILS loan 9% GBP 2023 133 -
============== ========= ========================= ======== ========
Total 198 -
============== ========= ========================= ======== ========
Non-current interest-bearing loans and
borrowings
============== ========= ========================= ======== ========
Lease liability (note 31) 7.5% ILS 2024-2028 233 -
============== ========= ========================= ======== ========
CBILS loan 9% GBP 2024-2025 267 -
============== ========= ========================= ======== ========
Loans from a third parties' investors in
subsidiary (note 6.b) 3.23% ILS No maturity date was set 9 -
============== ========= ========================= ======== ========
Total 509 -
============== ========= ========================= ======== ========
Total interest-bearing loans and borrowings 707 -
========================= ======== ========
CBILS loan
On 22 January 2021, The GP Service (UK) Limited received a
Coronavirus Business Interruption Loan Scheme (CBILS) which carry a
fixed rate interest of 9% and repayable by instalments over a
3-year period commencing March 2022.
The loan is recognised as a financial liability at amortised
cost. Interest is calculated under the effective interest method.
The initial recognition at fair value was not materially different
to the proceeds received.
30. Other payables
Group Company
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
Payroll and related expenses 41 82 - -
======== ======== ======== ========
Accrued expenses 99 1 186 859 149
======== ======== ======== ========
Provision for accrued bonus 56 57 22 -
======== ======== ======== ========
Provision for accrued vacation and convalescence 43 48 24 -
======== ======== ======== ========
Other 16 - - -
======== ======== ======== ========
Total 1,14 7 373 905 149
======== ======== ======== ========
31. Leases
On 22 December 2021, Kanabo Research Ltd ( " KNR " ) (a wholly
owned subsidiary of the Company) signed a lease agreement with a
third party to rent space in Israel, in exchange for a total ILS 24
thousand per month linked to the Consumer Price Index. The start
date of the rental agreement was agreed between the parties on 17
March 2022. The lease agreement is for three years and includes an
extension option for three more years. If KNR exercising the rent
extension option, the monthly rent will be updated with an increase
of 6%. KNR exercises significant discretion in examining whether it
is reasonably certain that extension option will be exercised. At
date the lease began, the company recognised a right of use in the
property against a lease obligation in the amount of GBP327
thousands (ILS 1,399 thousand). To secure the lease agreement, the
company provided a deposit in the amount of GBP 31 thousands (ILS
132 thousand). The deposit is being classified as long-term deposit
in the Group's statements of financial position.
During 2022, the KNR recognised depreciation expenses in the
amount of GBP47 thousands as well as financing expenses in the
amount of GBP24 thousands. The annual interest rate for
capitalisation that was applied for the purpose of calculating the
obligation at the start of the lease was 7.5%.
Set out below are the carrying amounts of right-of-use asset
recognised and the movements during the period:
2022 2021
GBP 000 GBP 000
======== ========
As at 1 January - -
======== ========
Additions 327 -
======== ========
Depreciation expense (47) -
======== ========
Exchange differences 2 -
======== ========
As at 31 December 282 -
======== ========
31. Leases (cont.)
Set out below are the carrying amounts of lease liability
(included under interest-bearing loans and borrowings) and the
movements during the period:
2022 2021
GBP 000 GBP 000
======== ========
As at 1 January - -
======== ========
Additions 327 -
======== ========
Accretion of interest 24 -
======== ========
Payments (57) -
======== ========
Effect of movement in exchange rate 4 -
======== ========
As at 31 December 298 -
======== ========
Current 65 -
Non-current 233 -
====
32. Financial instruments risk management objectives and policies
The Group's principal financial liabilities, comprise loans and
borrowings, and trade and other payables. The main purpose of these
financial liabilities is to finance the Group's operations. The
Group's principal financial assets include trade receivables, and
cash and short-term deposits that derive directly from its
operations.
The Group is exposed to market risk, credit risk and liquidity
risk. The Group's senior management oversees the management of
these risks. The Group's senior management is supported by a
financial risk committee that advises on financial risks and the
appropriate financial risk governance framework for the Group. The
financial risk committee provides assurance to the Group's senior
management that the Group's financial risk activities are governed
by appropriate policies and procedures and that financial risks are
identified, measured, and managed in accordance with the Group's
policies and risk objectives. All derivative activities for risk
management purposes are carried out by specialist teams that have
the appropriate skills, experience, and supervision. It is the
Group's policy that no trading in derivatives for speculative
purposes may be undertaken. The Board of Directors reviews and
agrees policies for managing each of these risks, which are
summarised below.
32. Financial instruments risk management objectives and
policies (cont.)
The following table sets out the categories of financial
instruments held by the Group as at 31 December 2022 and 31
December 2021:
Group Company
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
Financial assets
======== ======== ======== ========
Financial assets held at amortised cost
======== ======== ======== ========
Intercompany receivables - - 4,289 834
======== ======== ======== ========
Trade receivables 43 10 35 10
======== ======== ======== ========
Long term deposit 31 - - -
======== ======== ======== ========
Short-term deposits 24 20 - -
======== ======== ======== ========
Cash and cash equivalents 3,204 4,477 937 4,148
======== ======== ======== ========
Financial assets held at fair value
======== ======== ======== ========
Financial asset through profit or loss 491 750 491 750
======== ======== ======== ========
Total financial assets 3,793 5,257 5,752 5,742
======== ======== ======== ========
Current 3,762 4,507 5,752 4,992
Non-current 31 750 - 750
====== ====== ====== ======
Group Company
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
Financial liabilities
======== ======== ======== ========
Financial liabilities held at amortised cost
======== ======== ======== ========
Trade payables 153 42 79 24
======== ======== ======== ========
Other payables 1,147 373 905 149
======== ======== ======== ========
Interest-bearing loan and borrowings 707 - - -
======== ======== ======== ========
Total financial liabilities 2,007 415 984 173
======== ======== ======== ========
Current 1,498 415 984 173
Non-current 509 - - -
====== ==== ==== ====
32. Financial instruments risk management objectives and
policies (cont.)
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
market prices. Market risk comprises three types of risk: interest
rate risk, currency risk and other price risk, such as equity price
risk and commodity risk. Financial instruments affected by market
risk include loans and borrowings, deposits, debt and equity
investments and derivative financial instruments.
The sensitivity analyses in the following sections relate to the
position as at 31 December in 2022 and 2021.
The sensitivity analyses have been prepared on the basis that
the amount of net debt, the ratio of fixed to floating interest
rates of debt and derivatives and the proportion of financial
instruments in foreign currencies are all constant and on the basis
of the hedge designations in place at 31 December 2022.
The analyses exclude the impact of movements in market variables
on the carrying values of provisions, and the non-financial assets
and liabilities of foreign operations. The Group is not materially
exposed to market risk as it has yet to commence trading.
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group's exposure to the risk
of changes in market interest rates relates primarily to the
Group's long-term debt obligations with floating interest
rates.
The Group is not materially exposed to interest rate risk
because it does not have any funds at floating interest rates, all
the Group borrowings are at fixed interest rate.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of an exposure will fluctuate because of changes in
foreign exchange rates. The Group's exposure to the risk of changes
in foreign exchange rates relates primarily to the Group's
operating activities (when revenue or expense is denominated in a
foreign currency) and the Group's net investments in foreign
subsidiaries.
The Group doesn't hedge its exposure to fluctuations on the
translation into British Pound of its foreign operations.
The Directors do not believe that the Group have a material
exposure to foreign currency risk. The only notable foreign
currency risk is that of the loan receivable due from Materia. The
loan receivable due from Materia does represent a foreign currency
risk as the balance is denominated in Canadian Dollars. See note 24
for further commentary on the terms of this loan.
32. Financial instruments risk management objectives and
policies (cont.)
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its operating activities (primarily trade receivables) and
from its financing activities, including deposits with banks and
financial institutions, foreign exchange transactions and other
financial instruments.
The Group's maximum exposure to credit risk in relation to each
class of recognised asset is the carrying amount of those assets as
indicated in the balance sheet. At the reporting date, there was no
significant concentration of credit risk. Receivables at the
year-end were not past due, and the Directors consider there to be
no significant credit risk arising from these receivables.
Liquidity risk
The Group monitors its risk of a shortage of funds using a
liquidity planning tool.
Cash flow working capital forecasting is performed for regular
reporting to the Directors. The Directors monitor these reports and
forecasts to ensure the Group has sufficient cash to meet its
operational needs.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted
payments:
Year ended 31 December 2022
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
============================ ========== =================== =============== ============= ========== ========
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
========== =================== =============== ============= ========== ========
Interest-bearing loans and
borrowings - - 133 267 9 409
========== =================== =============== ============= ========== ========
Lease liability - 11 36 251 - 298
========== =================== =============== ============= ========== ========
Trade payables 153 - - - - 153
========== =================== =============== ============= ========== ========
Other payables 1,14 7 - - - - 1,14 7
========== =================== =============== ============= ========== ========
Total 1,300 11 169 518 9 2,007
========== =================== =============== ============= ========== ========
Year ended 31 December 2021
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
================ ========== =================== =============== ============= ========== ========
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
========== =================== =============== ============= ========== ========
Trade payables 42 - - - - 42
========== =================== =============== ============= ========== ========
Other payables 373 - - - - 373
========== =================== =============== ============= ========== ========
Total 415 - - - - 415
========== =================== =============== ============= ========== ========
32. Financial instruments risk management objectives and
policies (cont.)
Capital risk management
The Company defines capital based on the total equity of the
Company. The Company manages its capital to ensure that the Company
will be able to continue as a going concern while maximising the
return to stakeholders through the optimisation of the debt and
equity balance.
To maintain or adjust the capital structure, the Company may
adjust the number of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt, in
the future.
33. Related party transactions
The Group is headed by Kanabo Group Plc, the ultimate parent
entity. There is no ultimate controlling party. The Directors have
determined that there is no controlling party as no individual
shareholder holds a controlling interest in the Company.
Controlling party is defined as a shareholder which holds more than
25% ownership of shares in the Company.
Key management personnel compensation
For the details of the Directors' remuneration in 2022 and 2021,
please see the Director's Remuneration Report on the annual
report.
The amounts outstanding at the period end due to Non-Executive
Directors was GBPnil (2021: GBPnil).
During 2021, following the completion of the RTO, the Company
paid bonuses to the Directors Alan Hume, Andrew Morrison and
Anthony Harpur totalling GBP180 thousands. The bonuses were paid
directly to the Directors and to entities which are wholly owned by
them.
Trading transactions
During the year Group companies did not enter any transactions
with related parties who are not members of the Group.
Transactions with Group undertaking
2022 2021
GBP 000 GBP 000
======== ========
With Kanabo Research Ltd:
======== ========
Purchase of services 729 576
======== ========
Purchase of inventories - 46
======== ========
Total 729 622
======== ========
Sale and purchases to the Group undertaking were carried out on
commercial terms and conditions based on the transfer price
work.
34. Employees
The monthly average number of employees in the Group was 20
(2021: 10 ), which excludes Non-Executive Directors and portion
allocation between eth diff departments.
Group Company
============================ ================ ================
2022 2021 2022 2021
======= ======= ======= =======
Number Number Number Number
======= ======= ======= =======
Research and development 2 2 - -
======= ======= ======= =======
Sales and marketing 3 3 - -
======= ======= ======= =======
General and administration 15 5 2 -
============================ ======= ======= ======= =======
Total number of employees 20 10 2 -
======= ======= ======= =======
Their aggregate remuneration, including Executive Directors'
remuneration, comprised:
Group Company
=========================== ================== ==================
2022 2021 2022 2021
======== ======== ======== ========
GBP 000 GBP 000 GBP 000 GBP 000
======== ======== ======== ========
Wages and salaries 1,345 396 116 -
======== ======== ======== ========
Pension 51 19 6
======== ======== ======== ========
Social security costs 113 24 18 -
======== ======== ======== ========
Share-based payment 783 472 17 -
=========================== ======== ======== ======== ========
Total number of employees 2,292 911 157 -
======== ======== ======== ========
35. Standards issued but not yet effective
The new and amended standards and interpretations that are
issued, but not yet effective, up to the date of issuance of the
Group's financial statements are disclosed below. The Group intends
to adopt these new and amended standards and interpretations, if
applicable, when they become effective.
Newly effective EU-endorsed standards for 1 January 2022 to 31
December 2022
Standard Impact on initial application Effective date
================== ================================== ===============
Amendment to IFRS COVID-19-Related Rent Concessions 1 April 2021
16 beyond 30 June 2021
================================== ===============
Amendments to Onerous Contracts - Cost of 1 January 2022
IAS 37 Fulfilling a Contract
================================== ===============
IFRS Standards Annual Improvements to IFRS 1 January 2022
Standards 2018-2020
================================== ===============
Amendments to Property, Plant and Equipment: 1 January 2022
IAS 16 Proceeds before Intended Use
================================== ===============
Amendments to Reference to the Conceptual 1 January 2022
IFRS 3 Framework
================================== ===============
Standards available for early adoption
Standard Impact on initial application Effective date
==================== ================================== ===============
IFRS 17 Insurance Contracts 1 January 2023
================================== ===============
Amendments to Disclosure of Accounting Policies 1 January 2023
IAS 1 and IFRS
Practice Statement
2
================================== ===============
Amendments to Definition of Accounting Estimate 1 January 2023
IAS 8
================================== ===============
36. Copies of the annual report
Copies of the annual report are available on the Company's
website at www.kanabogroup.com and from the Company's registered
office Churchill House, 137-139 Brent Street, London, NW4 4DJ,
United-Kingdom.
***
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END
FR PPUQGCUPWGBR
(END) Dow Jones Newswires
May 02, 2023 02:00 ET (06:00 GMT)
Kanabo (LSE:KNB)
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