30 September 2024

Kanabo Group Plc

("Kanabo", the "Group" or the "Company")

UNAUDITED HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024

Kanabo Group plc (LSE: KNB), a health tech company with digital health services and specialist medicines, announces results for the six months ended 30 June 2024 ("H1 2024").

Throughout H1 2024, Kanabo has continued its mission to be a key player in advancing innovative and accessible healthcare solutions and treatments. This comprises digital primary and secondary care clinics, including The GP Service telehealth platform and the Treat-It clinics, which are integrated with a supply chain that delivers medications directly to patients and includes Kanabo's unique metered dose inhaler products.

Kanabo's major achievement in H1 2024 was to launch the first Treat-It clinic, a walk-in clinic offering specialised medicines, including medicinal cannabis, for pain and mental health concerns. Over the course of H1 2024, the Treat-It clinic franchise has been expanded to 14 further in-person locations. These walk-in pain clinics will leverage the online Treat-It services to address pain and mental health concerns. This forms part of Kanabo's expansion plan, as set out in the 2023 yearly report, to expand the in-pharmacy clinic franchise and provide accessible healthcare solutions.

Kanabo has also made significant progress in its ambitions to introduce safe yet innovative technologies to the digital health space. These include:

·    A new pilot programme was launched for an AI chat-to-prescription service, which has already seen some prescriptions successfully dispensed. The Company believes this could assist medical professionals with the triage process and help streamline prescriptions.

·    The G.P. Services (UK) Ltd, the Company's fully owned subsidiary, has upgraded the e-Script system, allowing patients to have their prescription filled at any pharmacy in the UK.

Other H1 2024 Highlights:

●    Kanabo signed with over 250 referral pharmacies, who will be able to refer patients to the online Treat-It clinic, further expanding the reach and accessibility of Kanabo's services, as announced on 4 June 2024.

●    Kanabo has introduced a new medical cannabis formulary system, with real-time supply chain inventory management which will improve both product information availability for medical professionals and product access for patients, to select partners as part of an initial trial.

●    Kanabo's partially owned subsidiary, Kanabo Agritec Ltd ("Agritec"), received a payment of approximately €292 from the project during H1 2024, representing 77% of the payments of Phase 1. The Group continue to work with Taima to complete Phase 1 of the project, at which point, the Spanish Agency of Medicines and Medical Devices ("AEMPS") will inspect the facility. Subject to successfully passing the inspection, AEMPS will grant a licence for the production and manufacturing of cannabis and its products. With the Group's support, Taima will then move on to the delivery of Phase 2, which - upon successful conclusions would result in the facility being fully operational for the production of cannabis flowers.

H1 2024 Financial update:

●    Kanabo achieved a substantial 55% increase in revenues over the same period last year, reaching £694k in H1 2024 (H1 2023: £449k), demonstrating ongoing commercial progress.

●    The operating EBITDA loss for H1 2024 was £0.98m; this was reduced 10% compared to H1 2023 (£1.1m) and 42% compared to H1 2022 (£1.7m) with strategic initiatives driving improved financial performance.

●    On 30 June 2024, the cash position of the group was £2,086,000 (cash and cash equivalents of £1,544,000 and short-term deposits of £542,000).

Post Period End and Outlook:

●    Medical inhaler certification pending - Our partner team, responsible for corresponding with the Notified Body, has submitted revisions to the application file for our medical device, pursuant to a request from the Notified Body. At this time the issuance of a certification is pending the Notified Body's further review of the application.

●    Positive outlook for growth - The Board remains confident in both the short and medium-term prospects for the Company. We believe our innovative new products and commitment to technological innovation will help the Company grow during this period of sustained pressure on the medical sector.

Looking forward, the company aims to build upon the strategic goals set out in the 2024 annual financial report, including:

1.    Launching New Medical Cannabis Products to enhance patient offerings and increase profit margins.

2.    Expanding adoption of our E-script system across more pharmacies in the U.K. and exploring international opportunities.

3.    Move from pilot to full-scale launch by year-end, enhancing consultation capacity and patient retention.

4.    Expanding distribution in Germany led by the medical device vape once fully certified and registerd.

Avihu Tamir, Chief Executive Officer of Kanabo, commented:

"The first half of 2024 has been a key milestone for Kanabo Group as we continue to advance our strategic plan. Achieving a 55% increase in revenues underscores the strong demand for our digital health services and specialised medicines. After a period of infrastructure building, our development and clinical teams are now executing exceptionally well. Our expansion of in-pharmacy clinics and the launch of innovative systems, like our upgraded e-script and AI-powered services, will greatly improve patient access and operational efficiency. These developments will strengthen our revenue streams and enhance our market position, providing greater value to our shareholders."

Enquiries:

About Kanabo Group plc

Kanabo Group plc (LSE: KNB) is a digital health company committed to transforming patient care through its innovative technology platform and specialised treatment offerings. Since its inception in 2017, Kanabo has been focused on researching, developing, and commercialising regulated medicinal cannabis-derived formulations and therapeutic inhalation devices.

Kanabo's NHS-approved online telehealth platform, The GP Service, provides patients with video consultations, online prescriptions, and primary care services. Leveraging its telehealth capabilities, in February 2023, Kanabo launched Treat-It, an online clinic focused on chronic pain management that provides patients with secondary care. In June 2024, the Treat-It partnership was expanded to 14 other in-pharmacy locations.

With its two complementary business divisions, Kanabo has established itself as an end-to-end digital health provider. It offers telehealth consultations, prescriptions and tailor-made treatments.

The Company's partially owned subsidiary, Kanabo Agritec Ltd, is a cultivation consultancy supporting cannabis businesses in developing new farms through infrastructural, research, and product guidance. These farms deliver high-quality raw materials for Kanabo's formulas and product line.

At Kanabo Group Plc, we are dedicated to providing patients with the highest quality medical treatments and more accessible healthcare experiences.

Visit www.kanabogroup.com for more information.

Operational Review

We are pleased to report significant progress during the H1 2024 as we continue to establish Kanabo Group as a leading end-to-end provider of digital health services and specialised medicines. Leveraging our extensive pharmacy network and innovative platforms, we have expanded the reach of our digital health services and enhanced our medicinal cannabis product portfolio. We are focused on delivering steady financial growth and improving the operational efficiencies.

Our operations remain concentrated on two core divisions:

1.    Digital Health Services

2.    Specialised Medicines, including medicinal cannabis

Digital Health Services

Development and Pilot of AI-powered Chat-to-Prescription Service

The Company has been developing an AI-powered chat-to-prescription service for streamlined triage in medicinal consultations. We have made significant progress in the development and deployment of this service:

·      Pilot Program Initiated: The Company has started the pilot with our first client and have observed patients successfully receiving medication through our service.

·      Future Plans:

·      The Board believes the gross margin from the new service could be 300% higher than that of some traditional video- based healthcare services.

·      The Board believes that by the end of 2024, 70% of The GP Service patients will be using the new AI-powered chat-to-prescription service.

The Board believes this innovative service lays the groundwork for scaling our consultation services and enhances efficiency in patient care.

Expansion of In-Pharmacy Clinics and Strengthening Referral Network

In alignment with our strategic goals, the Company has significantly expanded our in-pharmacy clinic network and strengthened our referral network:

·      We launched 14 new in-pharmacy clinics across the U.K., complementing our online consultation services.

·      We also opened a physical clinic in partnership with 360 Med Medical Centre in Muswell Hill, London, on 4 June 2024.

·      Our referral network has grown to over 250 pharmacies in the U.K., enabling seamless patient referrals to our Treat-It online clinic.

These clinics enhance patient access to medical cannabis treatments and offer in-person consultations for those who prefer face-to-face interactions. The 360 Med Medical Centre provides a broad range of services, including primary care, mental health, women's health, men's health, pain management, and health screening tests.

Upgrade of the E-Script System

Our subsidiary, The G.P. Service (U.K.) Ltd has developed and launched a pilot for an upgraded e-script system for secure prescription dispensing:

·      Launched across the U.K. in September 2024, this upgrade enables patients to use their prescriptions at any pharmacy in the U.K.

·      Key benefits include:

·      Secure, efficient, and accurate prescription dispensing across pharmacies;

·      Compliance with all relevant healthcare regulations and data protection standards;

·      Potential to significantly reduce prescription errors and improve patient safety; and

·      Enhanced patient convenience by allowing prescription fulfilment at any pharmacy nationwide.

We expect this upgraded system to mark a significant advancement in digital healthcare solutions, enhancing the efficiency of our services and further solidifying our position as a leader in digital health.

Specialised Medicines

Introduction of Medical Cannabis Formulary System

Continuing our commitment to technological innovation, we have unveiled an advanced medical cannabis formulary system featuring real-time supply chain inventory management to address challenges in the U.K. medical cannabis supply chain:

·      Key features include:

·      Real-time inventory tracking from pharmacies to doctors and patients.

·      Enables healthcare providers to make informed prescribing decisions based on current product availability.

·      Improves patient access to medicinal cannabis products.

·      Rollout:

·      Currently being rolled out to select partners, with plans for wider implementation in the coming weeks.

The Directors believe this system represents an advancement in the medical cannabis sector, streamlining the prescription process and enhancing supply chain efficiency to overcome existing challenges.

New medical cannabis products in the UK market 

The Company has signed a distribution agreement with a German wholesaler to bring new premium medical cannabis flowers to the U.K. market, expected to be available by the end of the year. This partnership will enhance the offering to patients and increase profit margins for the Company.

Medical Device CE Mark Progress

The Company has made progress towards obtaining CE Mark accreditation for the medicinal inhaler device.

·      The Notified Body has reviewed the device file and requested revisions. Our team and partners have addressed these corrections to ensure compliance.

·      After submitting the updated documentation, we await the Notified Body's response. Although the certification process has been delayed, we remain focused on obtaining the CE Mark accreditation.

Kanabo Agritec ("Agritec")

Our partially owned subsidiary (40%), Agritec, continues to make progress:

●     Development of Indoor Medical Cannabis Cultivation Facility: Progressing with the development of a cannabis cultivation facility in Madrid, Spain, in partnership with Taima Growth S.L.; This highlights Kanabo's agricultural technology and consultancy growth, and a revenue in a total amount of €380K is expected to be recorded.

●     Financial Milestones: Received a payment of €292,000 from the project during H1 2024, and additional €29,000 from the project during Q3 2024 (out of €380,000), with additional payments in a total amount of €59,000 expected in Q4 2024 or early Q1 2025.

●     Project Timeline: Completion of the build is expected by October 2024, after which an inspection by the Spanish Agency of Medicines and Medical Devices (AEMPS) will take place.

●     Operational Plans: Cultivation and production are scheduled to commence within 3-6 months following successful inspection and licensing.

●     Production Capacity: Upon successful licensing and being fully operational, the facility will have the capacity to yield up to 3,000 kg of cannabis flowers annually.

Corporate Activity

Significant Cost Efficiency Improvements Through Automation

Operational efficiency activities have marked significant advancements, driven by the recent implementation of automation across our business functions. Since May 2024, Kanabo has embarked on a strategic cost-saving initiative that has enhanced the Company's cost efficiency and should position the Company for sustained growth.

·      Strategic Automation Implementation:

·      Initiated in May 2024, our automation strategy targets key business areas to optimise operations and reduce costs.

·      Focus Areas: Customer Support and Clinical Activities.

·      Key Achievements and Benefits:

·      Cost Reduction: Implementing advanced I.T. automation tools has led to cost savings in customer support and clinical operations. We anticipate these savings will improve our overall profitability.

·      Scalability: The automation tools deployed are scalable, enabling Kanabo to efficiently manage growth and expand our services without proportionate increases in operational costs.

·      Financial Impact and Future Outlook:

·      Cost Efficiency: Early indicators show a reduction in operational costs within the first few months of automation implementation.

R&D / Investment

the Company's commitment to innovation remains unwavering.

·      The Company is continuously seeking to enhance its development capabilities and have a better capacity and speed for development.

·      The Company has also upgraded the e-script system, the medical cannabis formulary system, and the AI-powered chat-to-prescription service, which the is expects to give the Company technological advancements in prescription management, supply chain efficiency, and patient triage.

Post Period End

Since 30 June 2024, we have:

·      Upgraded the e-script system in September 2024, enhancing our service delivery and operational efficiency.

·      Introduced the medical cannabis formulary system, currently rolling out to select partners.

·      Initiated the pilot of our AI-powered chat-to-prescription service, with successful adoption by the first client, enhancing patient access and operational efficiency.

·      Launch of new medical cannabis products in the U.K. market.

Summary and Outlook

Reflecting on our objectives set six months ago, we have achieved significant milestones:

1.    In-Pharmacy Clinic Expansion

·      The Company has exceeded its target by launching 14 new clinics, ahead of schedule.

2.    Primary Care Platform Expansion

·      Successfully initiated the pilot of the Company's AI-powered chat-to-prescription service with the first client, observing successful adoption.

3.    German Market Distribution Launch

·      Prepared for distribution expansion into Germany upon CE Mark approval.

4.    Treat-It Platform Expansion

·      Launching a Software as a Service (SaaS) solution to enable other providers to utilize the Treat-It platform, which is expected to launch by the end of the year.

·      Extends service capabilities beyond direct offerings.

Future Milestones for 2024

1.    Launch of New Medical Cannabis Products in the UK Market

·      Introduce new premium medical cannabis flowers to enhance patient offerings and increase profit margins.

2.    Full Deployment of AI-powered Chat-to-Prescription Service

·      Transition 70% of The GP Service patients to the new AI-powered chat-to-prescription service by the end of 2024.

·      Capitalise on the potential 300% increase in gross margin compared to some traditional video-based healthcare services.

3.    Wider Implementation of Technological Innovations

·      E-script system: Expand adoption across more pharmacies in the U.K. and explore international opportunities.

·      AI-powered chat-to-prescription service: Move from pilot to full-scale launch by year-end, enhancing consultation capacity and patient retention.

The Directors believe that the persistent pressures on the UK's National Health Service (NHS) will likely sustain and increase the demand for independent healthcare services like ours.

The recent upgrade of the Company's state of the art e-script system (a new pilot programme), coupled with its innovative medical cannabis formulary system and AI-powered chat-to-prescription service (a new pilot programme), positions the Company firmly within the market.

These advancements streamline the prescription and supply chain processes and improve patient access and satisfaction, thereby driving growth and profitability. As a result, the Directors believe Kanabo Group is well-equipped to meet the evolving demands of the healthcare sector and deliver substantial value for shareholders.

The Board remains steadfast in its confidence in our strategic direction and ability to scale the business effectively. We are committed to addressing the dynamic needs of the healthcare industry through continuous innovation and operational excellence. We greatly value the continued support of shareholders and are excited to share future successes as we advance our mission to transform healthcare.

Ian Mattioli & Avihu Tamir

Chair of the Board & Chief Executive Officer

30 September 2024

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a)  the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting'.

(b)   the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year; and

(c)   the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

CAUTIONARY STATEMENT

This Interim Management Report (IMR) has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

1.    Corporate information

The interim condensed consolidated financial statements of Kanabo Group Plc. and its subsidiaries (collectively, the Group) for the six months ended 30 June 2024 were authorised for issue in accordance with a resolution of the Directors on 30 September 2024.

Kanabo Group Plc. (the Company) is a limited company, incorporated and domiciled in England and Wales, whose shares are publicly traded on the London Stock Exchange in the standard segment.

The registered office is located at Churchill House, 137-139 Brent Street, London, NW4 4DJ.

The Group principal activities are the distribution and development of cannabis derived medical and wellness products.

2.    Basis of preparation and changes to the Group's accounting policies

a.     Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2024 have been prepared in accordance with IAS 34 Interim Financial Reporting. The Group has prepared the financial statements on the basis that it will continue to operate as a going concern. The Directors consider that there are no material uncertainties that may cast significant doubt over this assumption. They have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and not less than 12 months from the end of the reporting period. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual consolidated financial statements as at 31 December 2023.

b.    New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2023.

3.    Estimates and Judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.

Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended 31 December 2023.

4.    Financial risk management

The Group's activities expose it to a variety of financial risks, including - market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2023. There have been no changes in any risk management policies since the year end.

5.    Going concern  

The preparation of the financial statements requires an assessment on the validity of the going concern assumption.

The Board of Directors is required to satisfy themselves that it is reasonable for them to conclude whether it is appropriate to prepare the financial statements on a going concern basis, and as part of that process they have followed the Financial Reporting Council's guidelines ("Guidance on the Going concern Basis of Accounting and Reporting on Solvency and Liquidity Risk" issued April 2016).

As at 30 June 2024, the Group's cash position was £2,086,000 (cash and cash equivalents of £1,544,000 and short-term deposits of £542,000). Based on the above and the Group's current cash reserves and detailed cash forecasts produced, the Board of Directors is confident that the Group will be able to meet its obligations as they fall due over the course of the next 12 months at the current rate of expenses, due to the expected income streams, possible fund raise and the low level of committed expenditure relative to the forecasted discretionary expenditure, which could be reduced or deferred.

However, the uncertainty relating to the timing of the new income streams and any possible fund raise might cast a material doubt over the Group's ability to continue as a going concern. The Chair of the Group committed to providing financial support to the Group up to the maximum required amount in order to allow its ongoing operations over the next twelve (12) months from the 30 September 2024, in accordance with the detailed cash forecasts produced.

6.    Segment information

Following the acquisition of GP Service (UK) Limited ("The GP Service"), for management purposes, the Group is organized into business units based on its products and services and has two reportable segments, as follows:

        - Primary case segment - the tele pharma services provided by The GP Service.

        - Secondary case segment - distribution and development of cannabis derived medical and wellness products.

No operating segments have been aggregated to form the above reportable operating segments.

The following tables present revenue and loss information for the Group's operating segments for the six months ended 30 June 2024:

For the six months ended 30 June 2024:

(*) Including income from Agritec in a total amount of £226,000.

For the six months ended 30 June 2023:

The following table presents assets and liabilities information for the Group's operating segments.

As at 30 June 2024:

As at 30 June 2023:

7.    Share-based payments

The total share-based payment charge in the period was £103,000 (loss). The share-based payment charge was calculated using the Black-Scholes model. All granted options have an exercise period between two and three years from the date of issue. The total of the share-based payment charge has been simultaneously credited to retained earnings.

As of 30 June 2024, none of the options or warrants have been converted into shares.

Share-based payments charge for the reporting period:

8.    General and administration

9.    Other expenses

10.  Loss per share

The basic earnings per share is calculated by dividing the loss attributable to the ordinary shareholders of the Company by the weighted average number of Ordinary shares in issue during the period, excluding Ordinary shares purchased by the Company and held as treasury shares.

Due to the loss incurred in the period under review, the dilutive securities have no effect on 30 June 2024.

11.  Events after the reporting period

In August 2024, the Group's Chair and the Group's CTO purchased 150,000 and 75,187 the Group's ordinary shares, at the shares price of £0.0123 and £0.0133, respectively.

After the purchase both hold 2.85% and 1.81%, respectively, of the issued share capital of the Company.

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