REG - Chill Brands Group - Annual Financial Report to 31 March 2024
23/06/2025 07:00
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RNS Number : 9326N Chill Brands Group PLC 23 June 2025
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
EU REGULATION 596/2014 (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE
EUROPEAN UNION (WITHDRAWAL) ACT 2018), AS AMENDED BY REGULATION 11 OF THE
MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310.
23 June 2025
Chill Brands Group plc
("Chill Brands" or the "Company")
Final Results for the year to 31 March 2024
Update on publication of Half Year results to 30 September 2024
Update on suspension of shares
Final Results for the year to 31 March 2024
Chill Brands, the consumer packaged-goods distribution company, announces its
final results and the publication of its audited annual report and accounts
for the year to 31 March 2024 (the 'Annual Report').
The Annual Report will be published today on the Company's website in
compliance with its articles of association and the electronic communications
provisions of the Companies Act 2006.
Please click on the link below for a full text version of the Chill Brands
Group plc audited annual report and accounts for the year to 31 March 2024:
https://chillbrandsgroup.com/wp-content/uploads/2025/06/CBG-FY24-Annual-Report.pdf
(https://chillbrandsgroup.com/wp-content/uploads/2025/06/CBG-FY24-Annual-Report.pdf)
The financial year ending 31 March 2024 was a period of substantial
operational change and commercial progress for Chill Brands. Below is a
summary of key developments and financial highlights during the reporting
period:
· Revenue Growth: The Company recorded a significant increase in
revenue to £1,908,020, up from £82,840 in the prior financial year -
representing a 23-fold increase (approximately 2,203%). This uplift was
primarily driven by the successful launch and commercialisation of
Chill-branded nicotine-free vape products in the UK.
· Reduced Losses: While investing heavily in commercial activities,
including expanded sales and marketing efforts, the Group succeeded in
reducing its loss for the year to £3.4 million, down from £4.2 million in
FY23.
· Strategic Pivot: The Group completed its pivot from a prior focus on
own-brand CBD product category, reorienting towards more commercially viable
product lines.
· Prospectus and CLN Conversion: During the period, the Company
published a prospectus which facilitated the conversion of convertible loan
notes (CLNs) issued in 2022, resulting in the issue of 154,675,220 new
ordinary shares.
· Regulatory Landscape and Strategy Shift: The UK regulatory
environment for vape and disposable vape products has evolved significantly.
In response, the Company has adjusted its strategy accordingly as further
described below and continues to monitor developments closely.
· Outlook for the Subsequent Period: While FY24 saw substantial
top-line growth, the Company expects revenues for the subsequent period
commencing 1 April 2024 to be materially lower. Revenues during this
subsequent period were impacted significantly by well documented corporate
issues and regulatory headwinds relating to disposable vape products. Chill
Brands' management believes that the Company is now progressing in a more
positive direction as it has responded to the challenges of the previous year
by leveraging the sales infrastructure and retail relationships developed
through its own brand activities to establish Chill Connect, a distribution
and route-to-market platform for third-party brands in the FMCG space. A full
strategy and business update will be provided in due course.
Key elements from the Annual Report can also be viewed at the bottom of this
announcement.
As disclosed in the Company's notice of Annual General Meeting ('AGM')
announced on 5 September 2024, delays to the preparation of the Company's
audited report and accounts resulted in the 2024 AGM being adjourned in
relation to resolutions concerning the content of the Annual Report. As a
result, the Company will reconvene the AGM to address the remaining
resolutions and will announce the time, date and venue for the reconvened AGM
in due course.
Following the completion of the Annual Report and Accounts, the Company has
engaged a third-party vendor to prepare the report in the required inline XBRL
(iXBRL) format. This step is being taken to ensure compliance with DTR 4.1.15R
and 6.2.10R of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules, which requires that annual financial reports be tagged and
filed in a structured electronic format. The iXBRL-tagged version of the
report will be uploaded to the National Storage Mechanism as soon as this
process is complete.
Update on publication of Half Year results to 30 September 2024
Following the completion of the audit of the Company's annual report and
accounts for the year to 31 March 2024, the Company can now finalise the
preparation of its half year results to 30 September 2024.
The Company expects to publish these interim accounts in early July 2025.
Update on suspension of the Company's shares
Trading in the Company's shares has been suspended for over a year primarily
due to the delay in the publication of its audited accounts for the year ended
31 March 2024, and the subsequent delay in the publication of its interim
results for the six months ended 30 September 2024. Under the Listing Rules,
it is a condition of trading that the Company remains up to date with its
financial reporting obligations.
The Company's audited annual accounts for the year ended 31 March 2024 have
now been published. The Company expects to publish its unaudited interim
results for the six months ended 30 September 2024 in early July 2025.
With these publications, the Company will have brought its financial reporting
obligations fully up to date. Following the release of its interim results,
the Company intends to submit a formal request to the Financial Conduct
Authority (FCA) for the suspension of trading in its shares to be lifted. The
Company will engage with the FCA to agree the process, requirements and
timetable for restoration and will provide further updates to shareholders as
appropriate.
-ENDS-
About Chill Brands Group
Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is a distribution-led
consumer packaged goods company focused on bringing novel fast-moving consumer
products (FMCG) to market. The Company specialises in the sale and
distribution of tobacco alternatives, functional beverages, and other
innovative consumer goods, with a particular emphasis on the convenience store
channel. Chill Brands partners with a mix of established FMCG businesses and
emerging high-potential brands to provide comprehensive route-to-market
solutions. Chill Brands also operates the chill.com e-commerce website, on
which it is building a marketplace of products from third-party brands.
Publication on website
A copy of this announcement is also available on the Group's website
at http://www.chillbrandsgroup.com (http://www.chillbrandsgroup.com/)
Media enquiries:
Chill Brands Group plc contact@chillbrandsgroup.com (mailto:contact@chillbrandsgroup.com)
Harry Chathli, Chairman
+44 (0)20 5482 3500
Callum Sommerton, CEO
Allenby Capital Limited (Financial Adviser and Broker) +44 (0) 20 3328 5656
Nick Harriss/Nick Naylor/Lauren Wright (Corporate Finance)
Kelly Gardiner (Equity Sales)
FULL COPY OF CHILL BRANDS' ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 MARCH
2024
Chill Brands Group PLC
Annual Report and Consolidated Financial Statements
For the year ended 31 March 2024
CHILL BRANDS GROUP PLC
("Chill", the "Company", or the "Group")
ANNUAL REPORT AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
Company Registered Number: 09309241
Table of Contents
Page
1 Officers and Professional Advisers
2 Chief Executive's Review and Strategic Report
11 Chief Executive's Financial Review
15 Chief Executive's Review and Strategic Report - Other Matters
28 Key Personnel
31 Directors' Report
35 Directors' Remuneration Report
42 Directors' Responsibilities Statement
47 Independent Auditor's Report to the Members of Chill Brands Group PLC
55 Consolidated Statement of Comprehensive Income
56 Consolidated Statement of Financial Position
57 Company Statement of Financial Position
58 Consolidated Statement of Changes in Equity
59 Company Statement of Changes in Equity
60 Consolidated Statement of Cash Flows
61 Company Statement of Cash Flows
62 Notes to the Financial Statements
Officers and Professional Advisers
Directors Callum Sommerton
Aditya Chathli
Graham Duncan
Nicholas Tulloch
Company Secretary MSP Corporate Services Limited
Registered Office Eastcastle House
27/28 Eastcastle Street
London W1W 8DH
Independent Auditor PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
London E14 4HD
Brokers and Financial Advisors Allenby Capital Limited
5 St Helen's Place
London EC3A 6AB
Solicitors DMH Stallard LLP
6 New Street Square
New Fetter Lane
London EC4A 3BF
Registrars Share Registrars Limited
The Courtyard
17 West Street
Farnham
Surrey GU9 7DR
Company Website www.chillbrandsgroup.com
Product Websites www.chill.com
CHIEF EXECUTIVE'S REVIEW AND STRATEGIC REPORT
Introduction
I am pleased to present the Group's results for the financial year ended 31
March 2024 ("FY24" or the "Period"), a year marked by substantial operational
progress against the backdrop of challenging conditions in both the capital
and consumer markets.
During the Period, Chill Brands achieved a number of significant commercial
milestones, most notably the launch of our Chill ZERO nicotine-free vape
products in the UK market. This initiative drove a material increase in
revenue from £82,840 to over £1.9 million, while reducing our overall loss
from £4.2 million to £3.4 million.
While the progress made during the financial period has been somewhat
overshadowed by proposed regulatory changes in vaping and corporate challenges
after the year end, the advancements made by the Company demonstrate our
ability to secure distribution in a competitive consumer market and deliver
in-demand products that generate value for the Company and its shareholders.
Our pivot from a prior focus on CBD products to our current base of business
exemplifies the Company's adaptability in the face of market changes. This
proven ability to evolve while maintaining strong retail relationships gives
us confidence that we can continue to utilise our sales and distribution
capabilities to take advantage of trends in highly regulated market segments.
When operating in a complex regulatory environment we will need to rely on
that same agility in identifying and pursuing emerging opportunities to enable
us to adapt to future market dynamics. This is particularly true following a
period of regulatory change for the Company's core range of vaping products
and a year of corporate and legal hurdles. After its recent history, the
Company must now focus on creating long-term value by strengthening its
distribution network, establishing a scalable platform that remains a constant
asset irrespective of future shifts in product category or consumer trends.
I acknowledge that this report comes much later than the customary reporting
timeframe, however this delay reflects a period of significant upheaval both
during and after the financial year. The Company has faced and overcome
substantial challenges during this time, emerging as a resilient organisation
with strengthened governance through the involvement and input of experienced
capital markets professionals who now populate the Board. In navigating this
turbulent period, we have developed robust foundations for future growth. This
report therefore aims to provide a comprehensive overview of the events and
factors that shaped our year, their impact on our business, and importantly,
how they inform our strategy and prospects going forward.
Overview of the Financial Year
The Period began with the foundations already laid for us to execute on our
strategy which had developed during the previous year from a focus on CBD
products towards an interest in the wider wellness and alternative products
market. Prior to FY24, we had successfully launched our first-generation
600-puff nicotine-free disposable vapes in the US market, where our team had
started to establish distribution channels. February 2023 marked our first
step into marketplace operations, with the introduction of our inaugural
third-party brand products on Chill.com, cementing our commitment to
developing a comprehensive e-commerce platform.
We entered the year well-capitalised, supported by new investors focused on
providing growth capital for our twin objectives: the development and
commercialisation of our vape products, and resourcing marketing initiatives
to drive relevant consumer traffic to the Chill.com e-commerce website.
A significant milestone was reached through our partnership with The Vaping
Group to develop our UK distribution model. This collaboration included the
establishment of a dedicated field sales team to build a network of
independent retail stores, complemented by comprehensive marketing support -
key operational areas that were taken back in-house during the final quarter
of 2024. Relative to our status as a fledgling brand with a new product, our
Chill ZERO range quickly gained traction following its UK launch in August
2023, with our focus on nicotine-free products filling a largely overlooked
market niche.
This early success paved the way for the rapid expansion of our UK retail
presence. In October 2023, just months after launch, we secured listings in
high-footfall WH Smith travel stores, providing valuable exposure for building
brand recognition. This was swiftly followed by our launch on Amazon.co.uk and
the commencement of distribution partnerships securing the sale of our
products into Morrisons supermarket and convenience stores, as well as Rontec
forecourt locations operating under various major fuel retail brands including
Shell, BP and Esso. By the end of the Period, our products were available in
thousands of retail locations across the UK.
Despite a successful launch and strong retail distribution partnerships, our
first foray into the UK vape market came amidst tempestuous conditions in the
domestic vaping industry. After months of adverse media coverage largely
focused on illegitimate operators and their non-compliant products and
activities, the landscape shifted dramatically in January 2024 when the UK
government announced its intention to ban disposable vape products. This
effectively paused our efforts to expand our distribution network with
additional major retailers, as many procurement departments stopped to
reassess their approach to the industry. These circumstances were also partly
responsible for delays in the receipt of a proportion of funds owed to the
Company in connection with sales made into major distribution channels, a
portion of which in the spirit of prudence we have chosen to make a provision
for in these accounts despite our confidence that those outstanding funds
remain recoverable. The majority of the remaining balance due to the Company
was remitted between April and October 2024, and the Company continues to work
with its distribution partners to create a path forward that will recover
residual values owed while maintaining as broad a route to market as possible
in an industry that has been rocked by regulatory change.
In light of the apparent trajectory of the UK and European vaping industry, we
began to make early-stage plans relating to the development and release of new
non-disposable vaping products. During this same period, the Company made good
headway with distribution into Smoker Friendly Stores, which despite reduced
sales compared to previous periods established a market for our vaping
products in the United States where no comparable restrictions on disposable
devices existed.
Parallel to our vaping business, we continued to develop the Chill.com
e-commerce marketplace. What began with a single third-party brand, Mad Tasty,
in February 2023, has grown into a diverse collection of both new, emerging
and market-leading brands from the US and UK. Our product offering expanded
well beyond our original CBD focus to encompass the broader wellness category
including nootropics, nutritional supplements, sleep aids, and various other
products.
The Period also saw important developments in our capital structure, including
the completion of the Company's prospectus and the conversion of CLNs into
shares, as planned since our 2022 fundraising. Despite challenging market
conditions and negative media sentiment surrounding vaping, we engaged in
additional fundraising activity in January 2024, demonstrating continued
investor confidence in our strategic direction.
Vaping: Market Entry and Operational Progress
The Company's expansion into the vaping industry was an organic development
stemming from our endeavour to create and launch a product focused on tobacco
and smoking cessation, while ensuring compliance with regulations in our
primary markets.
In early 2023, the Company launched a nicotine-free disposable vape product in
the United States, featuring a 2-milliliter tank delivering roughly 600 puffs
per device, with three initial flavours. The device was designed to be legally
sold in the United States without the need for a costly Premarket Tobacco
Product Application (PMTA), which would have been required for a device
containing nicotine or capable of having nicotine added to it. Subsequently,
the Company developed devices for the UK market, which were also nicotine-free
disposable vapes. These included a 4-milliliter 1500 puff device and a
7-milliliter 3000 puff device, both available in five flavours. The high puff
count of these products was a unique selling point since a product containing
nicotine would be confined to a tank size of 2-milliliters, limiting it to
delivering roughly 600 puffs.
The UK launch of our Chill ZERO nicotine-free vape products in August 2023
marked a pivotal moment for the Group. Through strategic partnerships and
focused execution, we rapidly secured distribution across significant retail
channels including WH Smith travel stores, Morrisons supermarkets and
convenience stores, and Rontec forecourt stores. This swift market penetration
demonstrates both the appeal of our products and the effectiveness of our
aggressive commercial strategy when applied to a high-growth product category.
The UK vaping market is valued at more than £1.7 billion (although some
statistics place its value much higher) and comprises over 4.5 million users.
Within this market, and in a relatively short space of time, Chill ZERO has
established itself as a leading nicotine-free brand available in mainstream
retail channels. This validates our strategic focus on this growing but niche
segment and, while sales of nicotine-free products represent a small
proportion of the overall vaping market, there is a clear demand for them both
from retailers and their customers.
While demonstrating the potential of our business model, the rapid expansion
of our distribution network required significant capital investment,
particularly in the form of slotting fees and the resourcing of personnel and
marketing collateral. We operate in a highly competitive landscape alongside
long-standing businesses, some with over a century of market presence and in
particular the traditional 'big' tobacco companies who possess substantial
resources to deploy in this sector. Despite our comparably limited reach, we
have successfully carved out our position through a unique proposition,
focused strategy and efficient execution.
As explained below, the regulatory changes that coincided with the launch of
our products into mainstream retail channels created a highly disrupted market
environment, leaving us without sufficient time in stores during orderly
market conditions to secure material re-orders from major distributors. Upon
news of the regulatory shift, retailers rapidly switched their focus toward
damage limitation and evaluating their next steps beyond disposables, leaving
limited time for the usual commercial follow-through. Despite this, we have
maintained our retail relationships and, importantly, established the Company
as a credible operator within this tier of national distribution. This
experience has broadened our commercial reach and, while any future retail
rollout will come with its own costs of renewal - particularly in major
supermarket channels - we believe we are now better positioned to secure
wide-scale retail distribution in future product cycles.
Looking ahead, we consider it important to engage consumers earlier in their
tobacco cessation journey, which may necessitate the launch of products that
contain nicotine. As regulators tighten controls on the marketing and
positioning of vaping and nicotine products, it is also clear that brand name
and visual design alone may no longer be sufficient. To compete effectively,
we will need to deliver something genuinely novel, whether in format,
formulation, or function. We remain confident in our ability to do so, but
this will require time, investment, and careful execution. For this reason, we
have continued to diversify the Company's interests by working closely with
partners and customers, allowing us to support their growth through our
established network while simultaneously generating value for our own
business.
Regulatory Changes and Retail Trends
The wider vaping market has experienced significant turbulence, particularly
following media attention and regulatory scrutiny regarding disposable vapes.
The UK government's January 2024 announcement of proposed restrictions on
disposable vapes presents both challenges and opportunities. We have been
proactive in our response, focusing on the development of compliant, reusable
vape products and seeking collaboration opportunities with external brands to
broaden our exposure both to vape products and other products in the
fast-moving consumer goods category. We have also expanded our product
portfolio to include vape e-liquid products that were first launched during
March 2025.
The regulatory landscape continues to evolve, with the UK government's
announced ban on disposable vaping having taken effect on 1 June 2025. While
this will impact our legacy generation of Chill ZERO products, we continue to
advance our plans to distribute new rechargeable, reusable pod devices. We
have also developed the aforementioned nicotine-free e-liquids specifically
targeted at specialist vape stores and their consumers. Our aim is to ensure
that our product offering can translate into a wide and varied distribution
network spanning both the mass market of supermarkets and convenience stores,
along with more specialised channels such as vape stores and pharmacies. We
have already commenced sales of new, fully compliant rechargeable pod-based
vaping products and expect to continually expand and evolve the range of
products we distribute in this category, whether through the release of our
own proprietary innovations or in collaboration with trusted partners.
We have broken into the market, gaining recognition among trade customers who
understand our focus on cessation products that provide low or no nicotine
strength options. Direct conversations with some retailers reveal that we are
their preferred choice for zero nicotine products, which are increasingly seen
as an essential part of a comprehensive vaping range. This foundation of brand
awareness provides a solid platform for us to continue building our name and
expanding our offering.
We have observed significant shifts in both retailer preferences and consumer
behaviour during the Period. The market has seen increasing demand for larger
multi-pod devices, alongside a surge in the popularity of oral nicotine
pouches. While we anticipate that the pouch market will likely face regulatory
scrutiny in the near future, we see significant opportunity within this
segment. Rather than developing our own products in this category, we intend
to explore these opportunities through partnerships with third-party brands
who can benefit from exposure to our growing network and the expertise of our
sales team. This approach aligns with our broader strategy of leveraging our
distribution capabilities and market presence to create new revenue stream,
which I will elaborate on further later in this report.
Looking ahead, we will continue to focus on vaping products, particularly in
the low and no-nicotine segment. There are interesting parallels to be drawn
with the evolution of the low and no-alcohol beverage market. Not long ago,
alcohol-free alternatives were dismissed as an uncommercial fad, yet today
they command significant shelf space in every major supermarket, with
dedicated aisle sections and premium positioning. This transformation reflects
a broader societal shift towards healthier lifestyle choices and increased
consumer demand for alternatives to traditional products. We see similar
potential in the nicotine-free vaping category. Just as consumers now actively
seek out alcohol-free options for social occasions or as part of a balanced
lifestyle, we believe there is growing demand for no and low-nicotine
alternatives in the vaping sector. This parallel gives us confidence in our
strategic focus and the long-term commercial viability of our position in this
ever-changing market.
Chill.com - Developing an Online Wellness Destination
During the Period, we made significant progress in expanding our e-commerce
marketplace on Chill.com, growing from a single third-party brand in February
2023 to now hosting more than 65 brands offering hundreds of products. This
expansion in brand partnerships reflects a clear market demand for additional
digital sales channels from both wellness brands from market leaders to
ambitious start-ups, all seeking to improve their reach through exposure to
new consumers.
The evolution of our marketplace strategy is rooted in our experience of the
market dynamics of consumer products. Our origins as a CBD company provided
valuable insights into how wellness trends operate cyclically, with various
ingredients and product types moving in and out of consumer favour. CBD, often
cited as a wellness trend, exemplifies this pattern. While we maintain our
belief in CBD's potential and continue to value this market segment, we
recognise that building a business solely exposed to any one such cyclical
trend does not provide a foundation for reliable, sustained growth. These
trends are often characterised by speculative bubbles, leading to volatile
boom-and-bust cycles that can be challenging for product manufacturers and
brands. Our marketplace approach represents a more balanced strategy - rather
than committing significant resources to product development across multiple
categories, we can provide a platform that showcases a diverse range of
wellness products and brands. This model allows us to capitalise on emerging
trends and benefit from consumer interest in various wellness categories,
while significantly reducing our exposure to the inherent risks of product
development and inventory management. When certain ingredients or product
types gain popularity, our marketplace can quickly adapt to meet demand, and
when trends subside, we can pivot without the burden of obsolete stock or
stranded development costs.
The willingness of brands to join our platform proves out our marketplace
model, but also highlights the potential we must now work to realise. A
successful e-commerce marketplace requires several key elements: a diverse and
quality product selection, which we have now established; an intuitive user
experience; efficient fulfilment capabilities; and most critically, a steady
flow of engaged consumers. While we have accomplished the first of these
elements, we recognise that attracting and retaining customers requires
significantly more focus and resources.
Our marketplace currently operates on a dropshipping model, where brands
integrate with our e-commerce website. When an order is placed, we process the
payment and route the order to the respective brand for fulfilment, taking a
commission from the sale. This approach is functional and allows us to offer a
wide range of products without holding large inventories. However, the
dropshipping model has its drawbacks. Leading marketplaces like Amazon operate
their own fulfilment centres, giving them control over many aspects of the
consumer experience and associated logistics. They can ship orders containing
multiple products from different brands in a single box with the same courier,
saving on shipping fees. They also control packaging standards and simplify
the returns process.
Recognising these advantages, we are exploring ways to achieve a similar
approach to fulfilment on a smaller scale. This will likely involve setting up
our own fulfilment facilities, where brands would need to allocate inventory.
While this approach offers greater control over the consumer experience, it
also comes at a higher cost than dropshipping. Moreover, it requires brands to
buy into the platform on a deeper level, as they would need to allocate
inventory to our facility without us purchasing it. Despite these challenges,
we believe that this model could enhance our service quality and provide a
more cohesive and efficient experience for our customers.
We must also be candid in acknowledging that while we have succeeded in
creating an attractive platform for brands, we have not yet achieved the level
of consumer engagement necessary for the marketplace to reach its full
potential. Simply waiting for organic growth will not be sufficient to achieve
our ambitions for the platform. This requires dedicated attention and
appropriate resource allocation to drive meaningful traffic and conversion.
Historically, our e-commerce marketing efforts have been hampered by material
restrictions from major platforms regarding the promotion of CBD products,
vaping products, and other regulated items. These constraints have limited our
ability to deploy traditional digital marketing techniques effectively.
However, we have now identified viable solutions to overcome these challenges
and have developed a comprehensive marketing strategy that we are in the
process of implementing.
Looking ahead, we are committed to resourcing a full range of marketing
activities to drive traffic and engagement. This includes a renewed focus on
search engine optimisation, an expanded content creation programme designed to
attract and inform potential customers, and targeted pay-per-click advertising
campaigns to reach relevant audiences.
We are also developing programmes to drive awareness and engagement with
Chill.com by partnering with gyms, offices, and other similar venues to
provide membership benefits. During the final quarter of the 2024 calendar
year, the Company engaged with over 100 branches of one of the UK's leading
gym brands, each of which was keen to offer exclusive, limited-time Chill.com
discounts to their members. While these initiatives will require ongoing
investment, we view this expenditure as critical to unlocking the value of our
digital asset and establishing Chill.com as a destination for wellness
consumers.
As I commented in our annual financial report for the period ending 31 March
2023, the growth and development of the Chill.com marketplace remains a
long-term endeavour. If scale (both of user numbers and sales volumes) can be
achieved, the project has vast potential. Goop, the luxury lifestyle and
health marketplace, reportedly generated £81,000 of sales in 2011 but has
since increased that figure to many millions of pounds each year. While
celebrity endorsement has certainly been a factor in their success, it is
clear that there are other parts of the formula that we can and should follow.
It is incumbent on us to chase growth by enticing more relevant consumers to
our site by delivering more engaging content, more frequently and across more
platforms than we have done in the past.
Events After the Financial Period
While the Financial Period itself was highly significant for Chill Brands, the
dramatic events in the months immediately following have been extremely
tasking on the Company and its investors.
The chain of events commenced in mid-April 2024, when the Company received a
requisition letter from its largest shareholder, Jonathan Swann, seeking by
way of shareholder vote to remove Antonio Russo and Trevor Taylor, and to
instate two new directors in their place.
Following the announcement of this requisition notice, the Board at the time
took the decision to suspend me as the Company's CEO pending an investigation
into allegations relating to the use of inside information. This investigation
ultimately determined that the allegations made were unsubstantiated and
absolved me of wrongdoing, but not before both the Company and I had attracted
significant adverse media attention and coverage. I was reinstated on 4 June
2024 after a new Board of Directors had been constituted following a
shareholder vote which resulted in the removal of our previous Chief
Commercial Officer Antonio Russo and Chief Operating Officer Trevor Taylor,
and the appointment of Non-Executive Chairman Harry Chathli and Finance
Director Graham Duncan.
The Company's shares were suspended from trading on 3 June 2024, a day prior
to the General Meeting and the constitution of the new Board. This suspension
was at the Company's request as the directors actively managing the business
at the time were unable to provide the market with an accurate update
regarding the Company's trading status. This suspension continued as the newly
constituted Board could not issue a trading update until such time as it had
resumed control of, and access to, the Company's bank accounts and financial
records - thereby enabling the Board to provide an accurate update regarding
the Company's financial and trading position. This was a protracted process as
a result of the Company's legacy banking providers determining that they would
no longer offer banking facilities to the business. This prevented the Company
from issuing payments to vendors and effectively halted most trading
activities for a period of time. While the Company has ultimately been able to
secure alternative banking facilities, these challenges delayed our ability to
continue with the audit process and publish our annual financial report for
the Period by the required reporting deadline of 31 July 2024. The suspension
of the Company's shares has therefore been ongoing pending the completion and
publication of our 2024 annual financial report.
Logistical issues relating to the transfer of company management and
third-party providers were not the only challenges for the new Board. It was
identified that a transfer of the Company's largest asset, the Chill.com
domain, had been effected alongside the transfer of other cash assets prior to
the 3 June 2024 General Meeting and the constitution of the new Board. This
discovery prompted the Company to instruct leading US Counsel to commence
legal action in the U.S. District Court for the District of Colorado on 24
July 2024. The legal action concluded in December 2024 with an out-of-court
settlement between the Company and its former Directors, Antonio Russo and
Trevor Taylor. As a result, the Chill.com domain and related trademarks are
now under the Company's ownership and management.
I do not have any further useful comment to provide on this matter. It is in
everyone's best interest to move forward after this challenging episode, and
we are pleased to have avoided a more protracted legal battle. The Company can
now focus its time and resources on the development of its business. What's
done is done, and we can now channel our efforts towards future growth and
opportunities.
New Opportunities and a Refined Operating Model
Since my reinstatement, I have been working diligently with the new Board of
Directors to put the Company back on an even footing. Our internal challenges,
coupled with the volatility in our industry over the past 18 months, have
given us significant pause for thought regarding our future direction. This
period has prompted us to reassess and redefine our corporate governance
structure and our broader vision for the business, ensuring that we are
well-positioned to develop Chill Brands into a performing asset that delivers
value for all shareholders.
On a corporate level, we have elected a non-executive Chairman in Harry
Chathli and re-established audit, remuneration, and nominations committees. We
have also welcomed the Company's former CEO from 2019-2020, Nick Tulloch, to
the Board as an independent non-executive Director, following the resignations
of Eric Schrader and Scott Thompson on 7 June 2024 and 30 September 2024
respectively. Nick brings with him a wealth of listed company and capital
markets experience, alongside knowledge of the Company's history. We have also
been working to establish new, more robust financial controls, bookkeeping,
and financial reporting functions under the guidance of our finance director,
Graham Duncan.
There have also been major operational changes for Chill Brands. One of the
most notable adjustments is that we have taken our UK sales team in-house,
having previously relied on The Vaping Group to provide us with a swift route
to market and activation of our new brand. This strategic move allows us to
save costs by hiring directly and grants us complete control over this
critical human resource. Given the extensive changes and shocks to the vaping
industry in recent times, having an in-house team enables us to scale flexibly
in line with market conditions, ensuring that we can respond swiftly and
efficiently to industry dynamics.
Furthermore, this transition has opened up new income opportunities for Chill
Brands. As highlighted in this report, wellness trends are cyclical, bringing
a constant influx of new products and active ingredients that require
effective exposure and distribution to succeed. This need is as pertinent in
the retail world as it is online, where our solution is the development of the
chill.com marketplace. Just as they may struggle with generating online sales,
many brands often lack the resources, knowledge, and connections to establish
a solid retail distribution footprint. Having launched our own brand in the UK
market, and in a challenging and often controversial industry, we have
developed substantial expertise and networks. We can now leverage this asset
by contracting with other brands, providing them with sales personnel,
contacts, and a route to market for a monthly fee. This not only provides
recurring revenue to Chill Brands but also offers the potential upside of
commissions from sales generated through strong performance. Our catalogue
approach, where our sales personnel build a distribution network into which
multiple complementary products can be sold, allows us to offer this service
at an affordable rate, making it accessible to a wide range of brands who may
not be in a position to resource a dedicated sales team.
We have achieved early traction with this new business activity, securing a
number of clients, including leading suppliers of oral nicotine pouches, a
European brand launching a line of sugar-free energy drinks, and a prominent
vape e-liquid brand. Our ongoing efforts to develop our pipeline and attract
additional potential clients are very promising and we expect this
business-to-business revenue stream to make a substantial contribution to the
Company's financial growth. Partnering with third party brands also provides
an opportunity to diversify our offering, helping to ensure that we are not
solely exposed to the unpredictability of the vape market.
Besides enabling us to identify and pursue new opportunities, this period of
reflection has also provided us a chance to assess non-performing elements of
the business. The Company now intends to shutter its US retail operations
while it focuses on developing its core business. The vaping market in the
United States is particularly tough due to the patchwork of regulations and
the approach taken by the US Food and Drug Administration, which imposes the
obligation of a costly PMTA on any brand wishing to sell a product containing,
or even capable of containing, nicotine. These difficulties have a major
impact on the industry, making it difficult for businesses to plan for the
future. This has led to the closure of many, including the Company's primary
US distributor based in Denver. However, there are shoots of hope as a number
of legal challenges to the status quo have been mounted, including some
reaching the Supreme Court. We are actively working to identify distribution
partners in the US and, on a longer-term basis, operators for a business unit
there. In the meantime, however, we will focus on development in the UK and
Europe - believing it better not to stretch our limited resources over
multiple territories and in doing so deny each the full and proper attention
they deserve.
Strategic Outlook
The 2024 financial period was marked by substantial growth for Chill Brands,
despite the turbulence faced in its core market of vaping and corporate
challenges post-year-end. Once again, the business has faced adversity and
external headwinds during the critical early stages of its journey into the
consumer goods sector. The Company has had to continually reinvent itself to
survive and remain relevant, rather than finding itself able to rely on the
compounding effect of slow but stable growth. This would not have been
possible without the continued support of investors, and I believe the
Company's adaptive approach can be viewed positively. This ability to pivot
has allowed the Company to remain trading and pick up various assets and
strengths along the way. During this Period, the Company developed UK business
infrastructure and built a robust retail network that will enable it to
capitalise on opportunities relating to current and future vaping products
while diversifying into other categories of consumer goods.
Looking ahead, Chill Brands is now positioned with three clear divisions, each
with distinct growth potential:
1. Chill-Branded Vaping Products: our focus within this remains the
development and distribution of compliant, reusable vape products and
e-liquids for the UK market - both under our own brand and those of external
partners. This builds on our successful entry into the vaping sector while
adapting to evolving regulatory requirements.
2. Chill.com E-Commerce Marketplace: With renewed focus on driving traffic
and user engagement, our Chill.com platform represents a significant
opportunity for growth after the onboarding of a multitude of brands during
and after the Period. Enhanced marketing efforts, including paid advertising
initiatives, aim to unlock the full potential of this digital asset.
3. Third-Party Brand Distribution: Leveraging our established retail
relationships and sales expertise, we are expanding our role as a services
business, representing other brands in the UK market. This division has
already experienced promising growth into categories such as oral nicotine
pouches and energy drinks, providing an additional revenue stream without
incurring the costs of developing and launching these products ourselves.
This summary distils the focus of our business into three core areas, yet the
Company is more complex than it may appear due to the legacy left by its
previous iterations. Until relatively recently, we were still addressing
administrative matters related to the former oil and gas operations of
Highlands Natural Resources, while also concluding the feminised hemp seed
project initiated in 2019, when CBD-rich hemp seeds were in high demand. While
addressing these legacy issues has at times been difficult, it has also
brought some associated benefits. Notably, during the latter part of 2024,
after the end of the Period, the Company reached an agreement with a former
project partner for the return of more than $40,000. These funds, connected
with maturing bonds issued in relation to natural resources sites in Colorado,
provided welcome financial support. Despite these legacy issues, we remain
determined to push ahead with a more focused and streamlined approach as
outlined in this report.
Although challenges remain, the entire Chill Brands team remains driven to
develop the Company into the scaled, stable business that it ought to be. We
are committed to growth and will execute on the focus areas I have outlined in
this report while continuing to adapt to the ever-changing market landscape.
We are dedicated to building a robust and resilient company that can weather
industry fluctuations and emerge stronger, ensuring long-term success for our
stakeholders.
I would like to extend my gratitude to our shareholders for their ongoing
support and look forward to brighter times ahead.
Callum Sommerton
Chief Executive Officer - Chill Brands Group PLC
EXECUTIVE'S FINANCIAL REVIEW
During the Period, the Group concentrated on the launch, marketing, and
distribution of its nicotine-free vape products. Alongside this, efforts were
made to develop an online e-commerce marketplace for wellness products from
third-party brands, accessible on the Company's the Chill.com website. The
Company significantly ramped up its distribution efforts during this time,
particularly in the UK, where it established critical sales and distribution
infrastructure for the first time.
The Group recorded a reduced loss for the year of £3,370,293 (2023:
£4,312,132), a 22% decrease that is largely reflective of Chill Brands'
improved sales performance during the Period. The Period also saw the Group
generate a gross profit on the sales made of £472,810 (2023 loss: £206,859).
While the Group made an overall loss, the Period was the first since the year
ending 31 March 2020 in which the Group was able to achieve a gross profit on
the sale of its products.
The loss recorded during the Period can be primarily attributed to the ongoing
costs associated with the Company's operations and maintaining its listed
status. Additionally, significant investments were made in the development of
new business activities, particularly the establishment of distribution
networks in the US and UK for the Company's nicotine-free vape products. These
strategic expenditures are essential for positioning the Company for future
growth, despite their impact on the current financial results.
During the year, the Company undertook significant commercial activities that
reflected a strategic shift away from its legacy interests in CBD towards the
sale of vape products. The first batch of these products was introduced in the
US at the end of March 2023, just prior to the reporting period. This launch
laid the groundwork for the Company's future endeavours in the vape product
market and demonstrated that there was a demand amongst relevant consumers for
nicotine-free alternatives to more standard vape products containing nicotine.
Throughout the Period the Company continued to expand the distribution of its
vape products in the US, including through Smoker Friendly stores. The Company
supported the launch of its product with promotional offers to secure consumer
trial, along with visits to individual retail stores and regional meetings of
convenience location operators to educate them on the products and facilitate
informed conversations with consumers. As explained elsewhere in this report,
and due to a combination of factors including the corporate challenges that
have limited our operational capacity in the US and the need to allocate
resources where they are likely to generate the greatest return, the Company
expects to place less strategic emphasis on the US market in the near term.
In May 2023, the Company extended its reach by entering into an agreement with
The Vaping Group to provide comprehensive sales and distribution services in
anticipation of a UK launch of the nicotine-free vape products. This
collaboration was crucial as it enabled the Company to leverage a specialised
UK field sales team, secure warehousing, and efficient fulfilment of both
online and offline orders. The Vaping Group's focus on the independent
convenience store market aligned with the Company's objective to penetrate
this specific retail sector. The Vape Group also provided marketing services,
including email marketing campaigns, representation at trade shows, and
advertising in digital and print media. In Q4 2024, the Company brought its UK
sales function in-house to build on the groundwork laid by The Vaping Group.
Establishing these capabilities internally has since enabled the Company to
diversify its operations by offering sales and distribution services to
third-party brands, further leveraging its growing retail network.
The importance of having a turnkey launch cannot be overstated. This
partnership allowed the Company to swiftly establish its UK operations, a feat
that would have been challenging given that the Company had not previously
developed its own UK trading infrastructure. Historically, the Company's
commercial focus had been almost entirely on the US market. The Vaping Group's
infrastructure enabled the Company to stand up the UK operation efficiently
and effectively, ensuring that the nicotine-free vape products were introduced
smoothly to the market upon their launch in August 2023.
As a result of these efforts, the Company was able to quickly gain a foothold
in the UK market, developing distribution networks that increased its store
distribution footprint from a fresh start in August to more than 2,365
committed retail stores in less than a year. This included arrangements with
the leading distributor of vaping products, Phoenix 2 Retail, which saw the
Company's products sold into WH Smith travel stores, Morrisons stores, and
Rontec forecourt stores. Each of these landmark retail accounts came with an
associated slotting fee, as is typical for brands entering established high
street retail stores. Sales into these major retailers accounted for the
majority of sales made during the Period, during which the Company delivered
the products. The regulatory changes and resulting market upheaval in the
vaping sector contributed to delays in the receipt of payments from certain
distribution partners, particularly in relation to sales made through major
retail channels. These disruptions created uncertainty across the supply chain
and led some partners to adopt a more cautious financial posture. The majority
of the outstanding amounts due to the Company were remitted between April and
October 2024. The Company continues to work collaboratively with its
distribution partners to recover residual balances while preserving and
strengthening its access to key routes to market during a period of ongoing
industry transition.
Revenue
During the Period the Company recorded revenues of £1,908,020 (2023:
£82,840), a 23-fold increase. The material increase in revenue is largely a
result of the sales of the Company's nicotine-free disposable vape products,
which were launched in the UK during August 2023. A significant portion of
this revenue comes from sales into WH Smith's travel stores, Morrisons
supermarkets and convenience stores, and Rontec-operated forecourt stores -
all of which were facilitated through a distributor relationship with Phoenix
Wholesale and Distribution. Additionally, sales were made into independent
retail stores including convenience stores, pharmacies and specialist vape
shops. In the US, the Company's nicotine-free vape products were predominantly
sold into Smoker Friendly stores. While there were online sales both through
Amazon.co.uk and the Company's own chill.com website, they did not constitute
a material part of the Company's overall revenue during the year.
Certain trade receivables remain outstanding following the end of the Period.
Due to recent changes in the vaping industry, which have impacted distributors
and retailers, the Company has agreed to offer extended and flexible payment
arrangements to these remaining debtors. The Company maintains confidence in
the recoverability of these trade receivables and believes that the adjusted
payment terms will facilitate their eventual collection along with a positive
ongoing relationship with these key distribution partners.
In line with the Company's commitment to prudent financial management and in
accordance with applicable accounting standards, an expected credit loss
provision of £180,000 has been recognised in respect of outstanding
receivables from a major distribution partner. While the total balance
outstanding is circa £361,000, management believes that, on balance, the full
amount remains recoverable. The provision reflects the extended period since
the original due date and the Company's desire to present a conservative and
responsible financial position. The Company continues to engage constructively
with the counterparty, and discussions regarding future strategic cooperation
are ongoing.
Due to changes in the vaping regulatory environment and events that occurred
after the end of the financial year, as outlined in this report, the Company
will record considerably lower revenues in the financial year ending 31 March
2025. Going forward, the Company's revenue will be generated by three
divisions: sales of own-branded vaping products, sales of products from
third-party brands on the chill.com e-commerce marketplace, and fees for the
provision of sales services to clients.
Expenditure
During the year, the Group's administrative expenses rose to £3,523,507
(2023: £2,636,115). This increase in expenses was primarily driven by
expanded trading activity, particularly in the UK, where the Company's
commercial activities were almost entirely established during the Period. The
launch of new products, the development of distribution channels, and the
marketing efforts necessary to introduce these products to the market
significantly contributed to the rise in costs and correlate to an associated
increase in revenue.
These costs reflect payments to vendors and expenses associated with the
establishment of distribution channels, including payments for the development
and management of a sales team by The Vaping Group, slotting fees for major
retail accounts, and logistics. The majority of these additional costs relate
to the launch and distribution of the Company's nicotine-free vaping products.
At the same time, there was a reduction in costs relating to the marketing and
distribution of legacy CBD products as the Group's focus shifted away from
that category.
In line with an increase in sales to £1,908,020 (2023: £82,840) there was an
associated increase in the cost of sales to £1,040,053 (2023: £61,798). This
increase reflects the costs of inventory acquisition, freight, warehousing and
other matters relating to the sale of the Company's nicotine-free vape
products.
As is common among businesses engaged in the retail of consumer goods, the
Company faced cash flow challenges throughout the Period. This was primarily
due to the necessity of funding the large-scale rollout of its products, which
involved the payment of slotting fees and inventory procurement, while selling
to major retail stores under typical payment terms that often result in a
delay of more than 90 days between the ordering of inventory by the Company
and receipt of payment from distributors and retailers. These conditions
require meticulous financial planning and careful liquidity management to
ensure the Company sustains its operations and continues to grow its market
presence.
During the financial year commencing on 1 April 2024, the Group incurred costs
relating to the corporate events outlined in the Chief Executive's Review and
Strategic Report, including significant legal costs. Going forward, the
Company will incur costs relating to the maintenance of its listing on the
London Stock Exchange and the development of its business, primarily in the
UK.
Liquidity, Cash and Cash Equivalents
At the year end, the Group held £1,315,289 at the bank (2023: £3,767,426).
Funding and Going Concern
During the Period the Group's activities were resourced by fundraising
activity immediately prior to the commencement of the financial year. On 16
March 2023, during the prior period, the Company raised £560,000 before costs
from the issue of 16,000,000 new ordinary shares at a price of 3.5 pence per
share. On 31 March 2023, and as announced on 3 April 2023, the Company raised
a further £2,600,000 (before costs). This was comprised of a subscription for
25,000,000 new ordinary shares at a price of 4 pence per share (for a total of
£1,000,000) and the issue of unsecured convertible loan notes with a value of
£1,600,000. The convertible loan notes originally carried a coupon of 12% per
annum for a term of three years from the date of issue on 31 March 2023 and
were convertible into Ordinary Shares at 8 pence per share. The first annual
interest payment due in respect of the convertible loan notes was capitalised
into new ordinary shares as part of fundraising activity in January 2024, as
explained below. As announced on 23 May 2025, the Company and lender mutually
agreed to vary the terms of these convertible loan notes such that their
maturity date is extended to 15 May 2028, and their conversion price is
amended to 2.15 pence per ordinary share, resulting in a potential issuance of
up to 74,418,605 conversion shares.
On 20 December 2023, the Company announced that it had secured a supply chain
debt financing facility from its major shareholder, Mr Jonathan Swann. The
unsecured debt facility had a total credit limit of £1,000,000 and carried a
monthly interest rate of 2% on funds drawn down. The funds were drawn to
finance inventory acquisition and commercial slotting agreements connected
with the sale of the Company's nicotine-free vape products into major
retailers, as announced in December 2023. Liabilities accrued in connection
with the debt facility were capitalised in line with fundraising activity in
January 2024, as explained further below.
On 26 January 2024, the Company announced a new equity fundraising of
approximately £2,400,000. This consisted of a placing of 28,553,800 new
ordinary shares and a subscription for 3,466,700 new ordinary shares for a
total of 32,000,000 shares, each priced at 3.75 pence and raising in
aggregated £1,200,018 (before costs). Concurrently, the Company capitalised
£1,200,000 of liabilities to Mr Jonathan Swann, comprising the first annual
interest payment accrued against the convertible loan notes issued to Mr Swann
in April 2023, and the £1,000,000 debt facility provided in December 2023
along with interest accrued against that facility.
As a result of capitalising Mr Swann's debt financing facility, the Company
was able to use the proceeds from the sale of its nicotine-free vape products
into major UK retailers for working capital purposes. This strategic decision
meant that the funds did not need to be earmarked for the repayment of the
previously accrued liabilities linked to Mr Swann's facility. Consequently,
the Company could use these financial resources for general working capital
purposes. During the financial year beginning 1 April 2024, the Company's
operations have been sustained by a combination of the funds raised in January
2024 and payments from retailers, wholesalers and distributors connected with
the sale of its nicotine-free vape products.
In the time since the end of the Period, the Company's operations were
primarily supported through revenue generated from commercial activities
undertaken in the prior financial year, supplemented by funds raised in a
financing round completed in January 2024. This period required particularly
careful cash management, as the Company's financial position was impacted by
the significant legal and professional costs incurred in relation to corporate
disputes and associated matters.
Looking ahead to the financial year commencing 1 April 2025, the Board expects
the Company's financial requirements to be met through further capital raising
activities. On 23 May, the Company announced that it had raised £1 million
from subscriptions for the issue of convertible loan notes carrying an annual
interest rate of 10%, a three-year maturity, and convertible into ordinary
shares at a price of 1.5 pence per share. In addition, investors will receive
warrants attached to the CLNs, priced in line with the volume-weighted average
price (VWAP) of the Company's shares at the time of each drawdown.
The Board considers that the capital provided under the current financing
facility will be sufficient to support the continuation of the Company's core
commercial operations throughout the financial year ending 31 March 2026.
Nevertheless, it may be necessary for the Company to raise additional funding
in the future in order to remain viable as a going concern, particularly in
the event of unforeseen operational costs or if strategic growth opportunities
are to be pursued.
Based on the Company's demonstrated ability to secure financial backing from
both new and existing investors in recent periods, and the continued support
of major shareholders, the Directors are confident in their ability to raise
further funds if and when required.
However, there remains a material uncertainty which may cast significant doubt
on the Company's ability to continue as a going concern. The ability of the
Company to continue its operations is dependent on the successful raising of
additional funding as and when required. These conditions indicate the
existence of a material uncertainty which may cast significant doubt upon the
Company's ability to continue as a going concern and, therefore, it may be
unable to realise its assets and discharge its liabilities in the normal
course of business.
Notwithstanding this material uncertainty, after making enquiries and
considering the options available to the Company, the Directors have a
reasonable expectation that the Company has adequate resources to continue in
operational existence for at least 12 months from the date of approval of
these financial statements. Accordingly, the Directors continue to adopt the
going concern basis of accounting in preparing these financial statements.
CHIEF EXECUTIVE'S REVIEW AND STRATEGIC REPORT - OTHER MATTERS
Board Changes and Operational Composition
On 4 June 2024, the Group announced a reorganisation of its executive
management team with the removal of the Company's Chief Commercial Officer,
Antonio Russo, and Chief Operating Officer, Trevor Taylor, and the appointment
of Aditya Chathli and Graham Duncan as Non-Executive Chairman and Chief
Finance Officer, respectively. On 7 June 2024, Eric Schrader resigned as a
Non-Executive Director and Nick Tulloch was appointed as a Non-Executive
Director on 5 September 2024.
Development of New Compliant Vaping Products
During the Period and in the months since, the UK government announced
significant changes to the regulation of vapes in the UK. In particular, a ban
on the sale of disposable vape products was implemented from 1 June 2025.
Disposable vape products are defined as products that are either not
rechargeable, not refillable, or neither rechargeable nor refillable. In
practice, this means that for a vape product to be considered compliant for
sale in the UK after 1 June 2025, users must be able to recharge the battery,
replace the coil (the heating element that enables the device to produce
vapour), and refill the device either with e-liquid or a new replacement pod.
This regulatory change directly impacts the Company's Chill ZERO range of
nicotine-free disposable vapes. Despite the 7ml 3,000 puff products being
capable of recharging via a USB-C charging port, they are not refillable. As a
result, the Company is phasing out its existing range of Chill ZERO disposable
vape products.
In response to these regulatory changes, as announced in December 2024, the
Company launched a new range of nicotine-free e-liquid products in March 2025.
These products are predominantly intended to be sold into specialist vape
shops where there is a market for shortfill e-liquids. Shortfills are larger
bottles of the fluids used to produce vapour, with space to add nicotine shots
if desired, thus providing flexibility for users while complying with
regulatory restrictions.
The Company is working with its manufacturing partners to scope and develop
compliant vaping devices with replaceable pods that will be both rechargeable
and refillable. These efforts are aimed at ensuring that the Company's own
proprietary product offerings remain compliant with the new regulations while
continuing to meet the needs and preferences of its customers. Since the end
of the Period, the Company has also begun to offer sales and distribution
support services to other brands including those involved in the development
and sale of vape and other novel nicotine products. Following the UK ban on
disposable vape products commencing 1 June 2025, the Company has continued
selling compliant products from brand partners.
Feminised Hemp Seed Programme
Under its previous guise as Zoetic International the Group had a significant
focus on cannabidiol (CBD) products. During this period, the Group planned to
develop, cultivate, and sell its own varieties of hemp seeds. The Company's
accounts therefore reflect a notable carrying value of feminised hemp seeds
and specifically an inventory of proprietary varieties of seeds intended to
yield plant matter high in CBD content and low in tetrahydrocannabinol (THC -
the principal psychoactive compound found in cannabis). These particular
traits were considered highly attractive at the time, especially when the
market for CBD products was projected to grow exponentially.
To effectively market these seed varieties within Europe, it was necessary for
them to undergo rigorous testing to secure entry into the European Seed
Catalogue. Inclusion on this register would have allowed for the sale of these
seeds to licensed cultivators within the European Union. However, during a
final testing cycle, the Company's testing partners identified anomalies
relating to the colour of the plant matter and the presence of off types
within the cultivation area.
As the Company's strategic focus began to shift away from CBD products towards
other categories of consumer goods, it was determined that further resources
should not be allocated to potentially costly testing exercises. This
strategic pivot was further supported by an observed decline in the market for
hemp seeds, specifically those rich in CBD but low in THC content. The market
dynamics had dramatically changed from the initial projections in 2019 and
2020. For instance, the downstream market for CBD isolate saw a steep
reduction in value, where a kilogram of CBD isolate that once exceeded £1,000
in 2020 could be sourced for as little as a few hundred pounds by 2024.
Due to the sustained decline in the market for raw materials rich in CBD and
analogous non-intoxicating cannabinoids, coupled with the strategic shift of
the Group's focus away from CBD production and towards other consumer goods,
it was not considered appropriate to allocate significant additional resources
to the attempted commercialisation of the hemp seed project. Consequently, the
Directors have determined that there is limited prospect of realising
significant value from the Group's inventory of feminised hemp seeds.
As a result of this decision, the carrying value of the seeds has been
impaired in its entirety. While the Company will continue its attempts to
either liquidate or find a commercial use for the inventory of hemp seeds, it
cannot guarantee that any funds will be realisable from them.
UK Novel Foods Authorisation
In order to sell ingestible CBD products in the UK, the Company has progressed
through the novel foods application process by submitting relevant
applications to the Food Standards Agency (FSA). Novel Foods are defined as
food items were not widely consumed in the European Union before May 1997.
The Company's Zoetic tinctures and Chill gummies have now been added to an
updated FSA list of CBD food products that are linked to a credible
application for authorisation. Products that have reached the validation stage
undergo risk assessments and further examination by the FSA to determine their
safety profile and suitability for sale in the UK market. The FSA has provided
that the products can remain on sale during this stage of the Novel Foods
application process.
During the Period, the Food Standards Agency (FSA) updated its precautionary
advice on CBD, recommending that healthy adults limit their consumption to
just 10mg per day. This adjustment represents a significant reduction from the
previous limit of 70 mg per day. The Company's application relating to CBD
gummies involves a product with a CBD content of 25mg per gummy. It is not
feasible for the Company to make adjustments to its product to reflect this
recommended dosage, as pursuant to the FSA's Novel Foods regime, only products
that were on the market prior to February 13 2020, and had applications
submitted by March 31 2021, are allowed to remain on sale pending validation
and further approval.
While the Company will continue to maintain its Novel Foods applications in
concert with its manufacturing partners, its strategic focus has shifted away
from this product category. Furthermore, it is not expected that the
conclusion of the Novel Foods application process and subsequent approval
would lead to uptake of the Company's products by major retailers without
significant further investment, including the payment of slotting fees and
allocation of marketing budgets. A number of major UK retailers including
supermarkets and highstreet health and beauty stores have previously sold CBD
products from other brands however in many cases these have since been removed
from their ranges demonstrating a declining appetite by retailers to
distribute CBD products.
The Company will provide further updates relating to the progress of the Novel
Foods process as appropriate, however own-brand CBD products are no longer a
significant area of focus for the Group.
Zoetic
During the Period, the Company continued to sell its remaining inventory of
Zoetic CBD oils on its chill.com e-commerce marketplace website. Sales of
these products were not material as a proportion of the Company's overall
revenue.
Further development of the Zoetic brand was not a strategic priority during
the Period while the Company predominantly worked on the development and
distribution of its Chill ZERO line of nicotine-free vapes. Going forward it
is management's view that, rather than applying further resources to this
brand, the Company should focus its efforts on the development of Chill
own-branded products, the chill.com marketplace of third-party wellness
products, and the provision of sales services to other brands. The Company has
already substantively concluded its prior strategy of developing and
distributing CBD products and, in line with this strategy, the Zoetic brand
will continue only as a range of CBD tinctures sold on the chill.com website.
The Company will reassess this position should there be a change or update to
the Novel Foods regime that governs the sale of ingestible cannabidiol
products.
Risks and Uncertainties Facing the Group
As a business involved in the development, marketing, and supply of consumer
packaged goods products, the Group faces risks typical of other consumer goods
brands. This is particularly relevant for the Group's vaping products, which
are subject to evolving regulatory risks. Additionally, the Group faces
general financial risks that are common amongst similar enterprises at an
early stage of their development and growth.
The Board continues to monitor and mitigate a detailed list of risks that face
the Group, but those listed below are considered to be of the highest
importance given the likelihood of their occurrence or the materiality of
their potential impact.
General Risks Relating to the Group's Financial Position
While revenues from the Group's consumer-facing activities have grown during
the Period in review, the Group anticipates a decline in revenues during the
financial year commencing 1 April 2024. This expectation reflects a
combination of factors, including regulatory changes in the markets in which
the Group operates (particularly relating to disposable vaping products),
recent strategic shifts in market focus, and corporate and operational
challenges which have impacted the pace of the Company's commercial
development.
The Board has considered a range of trading scenarios, including those that
assume continuing reductions or stagnation in sales volumes, limited uptake of
new products, and delays in implementing its broader commercial strategy. In
response to such scenarios, the Board is prepared to take appropriate
mitigating actions, including the reduction or elimination of certain
operational expenditures such as staffing costs, marketing, and retail
activities, in order to preserve the Group's financial position.
The Group has historically been, and continues to be, reliant on access to
external financing, including through the issuance of new equity and debt
instruments, to fund its ongoing operations and strategic initiatives. Whilst
the Directors remain confident in their ability to secure further funding,
there is no certainty that such funding will be available in the necessary
amounts or on acceptable terms at the required time.
As such, the Group's continued operation remains dependent on timely access to
additional capital. If the Group is unable to secure such funding as and when
required, it may not be able to continue to operate at its current scale, and
may be required to significantly curtail, restructure or cease certain aspects
of its commercial activities. These factors represent a material uncertainty
which may cast significant doubt on the Group's ability to continue as a going
concern.
Risks Relating to Logistics and the Supply of Products
Various geopolitical events pose a risk to the Group's supply chain and
logistics activities. Industry-wide issues relating to driver shortages,
warehousing, international logistics, and transport may affect the
availability and timely movement of the Group's products. Furthermore, some of
the finished products sold by the Group are sourced from multiple component
parts that are manufactured internationally. As a result of this, there
remains a risk that local regulations could prevent the timely export of
products, resulting in delays and disruption to the Group's operations.
The Company is involved in the sale of a product portfolio primarily
consisting of goods that are manufactured overseas - most notably in China -
and subsequently imported into the countries where they are sold. As a result,
the Group is exposed to the impact of international tax regimes, customs
duties, and any changes in tariffs or trade policies that may affect
cross-border commerce. Fluctuations in these areas could influence the
Company's cost base, pricing strategy, and overall margin structure.
The Board has engaged with all suppliers and partners to secure the continuity
of its operations and continues to develop controls and procedures to limit
the impact of any such risks.
Risks Associated with Laws and Regulations Relating to Vaping Products
Given the Group's focus on vape products, it is subject to risks that are
specific to this category of goods. Vaping products are subject to evolving
regulations, including age restrictions, packaging requirements, advertising
restrictions, and product safety standards. Failure to comply with these
regulations can result in fines, and penalties along with reputational damage
that could hamper the Group's ability to operate in the space.
Vape products are complex electronic devices, and any defects or malfunctions
could result in injuries or property damage. Furthermore, the sale of vape
products may expose the Group to risks related to public health concerns as
the long-term effects of vaping are still being studied. A significant body of
evidence suggests that vape products are significantly safer than cigarettes
and other tobacco products, however it cannot be asserted that there are no
health risks related to vaping.
Finally, the volatile nature of the regulatory landscape can affect the
availability and accessibility of vape products. Changes in laws or public
sentiment may restrict sales channels, limit product availability, or impose
additional taxes, which could significantly impact the Group's financial
performance.
Between August 2023 and January 2025, the UK implemented and proposed several
regulatory changes concerning vaping products, focusing particularly on
disposable vapes and youth access.
In January 2024, the UK government announced a proposed ban on the sale and
supply of disposable vapes. The ban was implemented on 1 June 2025. This ban
includes both nicotine and non-nicotine disposable vapes and has been prepared
under existing frameworks for environmental law. Retailers had until 1 June
2025 to sell existing stock, after which time any further sales would be
illegal necessitating the destruction or disposal of any residual stocks.
The UK Government is currently progressing its proposed Tobacco and Vapes Bill
with the aim of creating a smoke-free generation by prohibiting the sale of
tobacco products to anyone born on or after 1 January 2009. This legislation
also seeks to implement several measures to address concerns regarding the
appeal of vape products to minors. The proposed measures include restricting
vape flavours, packaging, and display to decrease their appeal to children;
banning many advertising and sponsorship initiatives; implementing fixed
penalty notices for retailers who sell vapes to individuals under the age of
18; and introducing a new retail licensing scheme for both tobacco and vape
products.
The proposed measures, including the ban on the sale of disposable vapes, may
significantly impact the Group's ability to generate reliable revenues from
the sale of vaping products. These regulations could limit the viability of
the Group's proposed future products, the breadth of available channels into
which those products can be sold, impose additional compliance costs, and
decrease the appeal of vape products to consumers. Consequently, the Group may
face reduced market opportunities and increased operational challenges,
affecting its overall financial performance.
The regulatory landscape for vaping products in the United States is equally
complex and brings its own risks to the Group's business. Oversight is
exercised through a combination of federal, state, and local regimes, each
with their own set of requirements and restrictions. At the federal level, the
Food and Drug Administration (FDA) regulates vaping products under the Tobacco
Control Act, mandating that any product containing nicotine or capable of
being used with nicotine must undergo the costly and unpredictable Premarket
Tobacco Product Application (PMTA) process. Only a limited number of products
have successfully navigated this pathway. Simultaneously, state and local
authorities impose additional layers of regulation, including flavour bans,
taxation, sales restrictions, and varying enforcement practices. This
fragmented and frequently evolving regulatory environment creates uncertainty
for manufacturers and distributors, significantly increases the cost of doing
business, and may limit the Company's ability to launch or sustain product
lines in this category in the US market.
Product Viability
If the products the Group sells are not perceived to have the effects expected
by the end-user, its business may suffer. Many of the Group's products contain
innovative ingredients or combinations of such ingredients. There is little
long-term data with respect to efficacy, unknown side effects and/or
interaction with individual human biochemistry. Whilst the Group conducts
extensive testing of its product stocks, there remains a risk that its
products may not have the desired effect.
Product Liability
The Group's products are produced for sale to end consumers, and therefore
there is an inherent risk of exposure to product liability claims, regulatory
action and litigation if the products are alleged to have caused loss or
injury. Accordingly, the Group maintains product liability insurance policies
to safeguard against the implications of any claims that may arise.
Success of Quality Control Systems
The quality and safety of the Group's products are critical to the success of
its business and operations. As such, it is imperative that the Group's (and
its service providers) quality control systems operate effectively and
successfully. Although the Group strives to ensure that all of its service
providers have implemented and adhere to high calibre quality control systems,
any significant failure or deterioration of such quality control systems could
have a materially adverse effect on the Group's business and operating
results.
Product Recalls
Manufacturers and distributors of products are sometimes subject to the recall
or return of their products for a variety of reasons, including product
defects, such as contamination, unintended harmful side effects or
interactions with other substances, packaging safety and inadequate or
inaccurate labelling disclosure.
If any of the Group's products are recalled for any reason, the Group could
incur adverse publicity, decreased demand for the Group's products and
significant reputational and brand damage. Although the Group has detailed
procedures in place for testing its products, there can be no assurance that
any quality, potency or contamination problems will be detected in time to
avoid unforeseen product recalls.
Industry Competition
The consumer-packaged goods industry is competitive and evolving, particularly
for emerging products including vape and wellness products. The Group faces
strong competition from both existing and emerging companies that offer
similar products. Some of its current and potential competitors may have
longer operating histories, greater financial, marketing and other resources
and larger customer bases than the Group has. Given the rapid changes
affecting the global, national, and regional economies generally, the Group
may not be able to create and maintain a competitive advantage in the
marketplace.
Risks Relating to Legacy Oil and Gas Assets
Despite having discontinued the operation of its legacy natural resource
assets, the Group continues to monitor for risks relating to any liabilities
arising from its former activities.
While the Group no longer owns any of its former legacy assets or sites, there
remains a risk that the Group may be subject to costs and liabilities arising
from any lawsuit, civil or regulatory action that may commence in respect of
historical mining, drilling, extraction or other activities that the Group may
have previously engaged in.
IT Security and Brand Protection Risks
As the Group's activities and profile expand, its digital assets and
intellectual property rights - including the ownership of website domains and
trademarks - may be challenged both legally by competitors and illegally by
bad actors. With these risks in mind, the Group has engaged with numerous
initiatives, protections, and countermeasures to ensure that its interests and
those of its shareholders and customers are insulated against these risks. Our
intellectual property rights are well protected through a series of
international trade marks and patent applications. Since the end of the
Period, the Company has taken additional steps to secure its IT facilities,
has engaged with IT security professionals, and has secured additional
protection packages to prevent any removal or wrongful divestment of its
digital assets.
Statement of the Directors in Performance of Their Statutory Duties in
Accordance with s172(1) Companies Act 2006
The Directors are mindful of their duties under Section 172(1) of the
Companies Act 2006 to promote the success of the Company for the benefit of
its members as a whole, having regard to the interests of stakeholders in
their decision-making. The Board continues to take account of the impact of
its decisions on all our stakeholders, who include employees, customers,
suppliers, partners, regulatory bodies, and the wider community. We explain
below how the Board has discharged its duties under Section 172 during the
year.
Product Portfolio Evolution and Environmental Responsibility
The Board oversaw significant expansion in the distribution and sales of the
Company's nicotine-free disposable vape products during the Period.
Recognising our environmental responsibilities, we actively engaged with our
major distribution partners to identify and work towards participation in
recycling and battery reclaim programmes. This decision reflected our
commitment to reducing environmental impact while growing our business
sustainably.
The Directors have maintained active oversight of emerging regulatory
developments, particularly the proposed UK ban on disposable vapes. In
response, we have invested in research and development of new compliant
products, including e-liquids and non-disposable vapes. This proactive
approach demonstrates our commitment to long-term business sustainability
while ensuring compliance with evolving regulations and meeting changing
consumer needs.
Public Health Considerations
In line with our commitment to responsible business practices, the Board made
the strategic decision to cease sales of legacy combustible CBD hemp products.
While primarily driven by commercial considerations, this decision aligned
with our broader objective to minimise any potential contribution to negative
public health outcomes associated with combustible products.
Stakeholder Engagement
Throughout the year, the Company maintained consistent dialogue with its
distribution partners to understand their operational capabilities and
requirements regarding environmental responsibility. This engagement has been
crucial in developing effective environmental initiatives that work within
existing retail infrastructure and the Company has been fortunate that many of
its distribution partners already implement environmentally-focused product
return programmes by providing retailers with collection point infrastructure.
We have also invested in product development to ensure we can continue serving
our customer base effectively as the regulatory landscape evolves, maintaining
our commitment to providing high-quality, compliant products that meet
consumer needs.
Throughout the Period we have closely monitored legislative developments
affecting our industry. This vigilant approach has enabled us to anticipate
and prepare for regulatory changes, particularly regarding disposable vape
products. We continue to invest in product development to ensure we remain
well-positioned to meet both current and anticipated regulatory requirements.
The Company's approach to product development is fundamentally driven by
consumer demand as communicated by our distribution partners and retailers.
Since the end of the Period, we have increasingly reinforced our objective of
offering a genuine alternative to combustible smoking products through our
vaping products. This commitment was exemplified by our participation in the
2024 Pharmacy Show, where we actively engaged with pharmacists, medical
professionals, and operators of health-focused retail outlets to better
understand the evolving needs and preferences of our consumers.
The Company recognises its responsibility to all stakeholders, including
shareholders. After the end of the Period, shareholders exercised their
democratic rights by calling a general meeting, at which they voted to remove
two former directors - Chief Commercial Officer Antonio Russo and Chief
Operating Officer Trevor Taylor - and appoint two new directors, Non-Executive
Chairman Harry Chathli and Finance Director Graham Duncan. This
shareholder-led governance action illustrates that the Company is subject to
open and transparent corporate processes.
The Company's Chief Executive Officer maintains regular correspondence with
investors of all sizes, discussing a broad range of topics from operational
performance and strategic direction to product availability, branding, and
digital presence. Where appropriate, shareholder feedback is shared with the
wider Board for consideration. This open and responsive approach is a key
feature of the Company's stakeholder engagement model and reflects the Board's
intention to remain accessible and accountable.
Looking Forward
The Board remains committed to maintaining an effective dialogue with all
stakeholders and taking their interests into account in its decision-making.
We will continue to adapt our business model and practices to meet evolving
regulatory requirements while maintaining our focus on sustainable growth and
responsible business practices.
The Board acknowledges the importance of balancing the needs and expectations
of stakeholders but is often required to make difficult decisions based on
competing priorities where the outcome may not be positive for all
stakeholders. Decisions are always taken with the utmost regard and respect
for all stakeholders, and the decision-making process has been formulated to
ensure directors evaluate the merits and risks of proposed activities and
their likely consequences over the short, medium and long-term. The Directors
recognise the importance of acting fairly between shareholders and are
committed to promoting the success of the Company for the benefit of its
members as a whole even if certain decisions do not provide short-term
benefits to individual members.
Key Performance Indicators
Given the evolving nature of the Group's operations and the ongoing changes to
its business model and product mix, the Board has not yet established a formal
suite of key performance indicators (KPIs) applicable to all aspects of the
Group's activities. However, at this stage of development, the primary KPI
used by the Board to assess overall performance has been revenue generation.
Revenue is considered the most relevant measure at this stage, as it reflects
the Group's ability to attract and retain customers, secure distribution
relationships, and generate cash inflows to support ongoing operations and
investment. Given the pace of change in the Group's commercial strategy and
the regulatory environment, more detailed operational KPIs are being monitored
on an informal basis but have not yet been formalised for external reporting.
The Board anticipates that as the Group's activities become more established
and its operations stabilise, additional KPIs will be introduced to monitor
performance across sales, marketing, operational efficiency, customer
engagement, and environmental responsibility. In the digital channel, such
KPIs may include website traffic, conversion and retention rates, and average
customer spend. In respect of physical retail sales, relevant KPIs may include
unit sell-through rates and distribution footprint metrics.
The Board continues to review its internal and external reporting framework to
ensure that appropriate KPIs are adopted and disclosed as the business
matures.
Gender Analysis During the Financial Year Ending 31 March 2024
The Group is committed to establishing a diverse Board of Directors but is
equally conscious of the importance of appointing the people best suited to
those roles. A split of our employees and Directors by gender at the year-end
is shown below:
Male Female
Directors 5 None
Employees 1 3
The data presented in the diversity and inclusion disclosures, including the
table below, has been collected through internal records maintained by the
Group. Given the size and structure of the Group, personal data relating to
gender and related characteristics is obtained at the point of appointment for
Directors and during onboarding for employees, typically through
self-identification or documentation provided at hire.
The Board considers the information to be reliable and complete based on the
current size and scope of the Group's operations, and no external verification
or third-party assurance has been obtained in respect of the reported data. At
present, the Group does not operate formal diversity monitoring systems or
collect data beyond binary gender identification. As the Group develops and
grows, its approach to diversity data collection and monitoring may be
reviewed and enhanced in line with regulatory requirements and best practice
standards.
The Company acknowledges that, as at the end of the reporting period, the
gender composition of its Board does not meet the targets specified under the
UK Listing Rules and DTR requirements. Specifically, the Board was composed
entirely of male directors, while the wider Group included one male and three
female employees.
The Directors consider that the current gender imbalance on the Board
primarily reflects the early-stage nature of the Company's operations and the
significant resource constraints and challenges it has faced in recent periods
-including navigating complex regulatory changes, commercial volatility, and
corporate restructuring. During this time, the primary focus of the Board has
been on stabilising the business and ensuring operational continuity. As such,
Board composition has not been a strategic priority.
Nonetheless, the Board recognises the importance of gender diversity and
remains committed to aligning with best practice over time. As the business
matures and becomes more stable, the Company intends to broaden the
composition of the Board through future appointments, including with respect
to gender diversity, in accordance with the expectations of the Listing Rules
and associated governance frameworks.
Corporate Social Responsibility
The Company maintains an unwavering commitment to operating with transparency
and integrity in all aspects of its business. We recognise our responsibility
to balance the interests of all stakeholders, including shareholders,
employees, customers, and the wider community. Through regular engagement and
clear communication, we strive to keep our shareholders informed of material
developments while maintaining appropriate commercial confidentiality.
Our employees are fundamental to our success, and we are dedicated to
fostering a safe, healthy, and inclusive working environment. We understand
that different individuals have different needs and circumstances, and we
endeavour to provide appropriate flexibility where possible. This approach
allows us to attract and retain talented individuals while ensuring we
maintain our operational effectiveness and meet our business objectives. Our
flexible working practices and remote working policies are designed to support
both individual well-being and business performance.
As a company operating in the vaping industry, we recognise our heightened
responsibility to ensure our products are developed and marketed responsibly.
While vaping remains a topic of public debate, our position is clear: vaping
products serve a vital role in tobacco harm reduction and smoking cessation.
Our strategic focus has been to support individuals not only in their journey
away from tobacco products but also in reducing nicotine dependency
altogether. This is reflected in our core product range of zero-nicotine
vaping products, which provide the sensory aspects of vaping that many users
find helpful in their cessation journey, without perpetuating nicotine
addiction.
We take our responsibility to prevent youth access to our products extremely
seriously. Our approach includes several deliberate measures to minimise this
risk. We have implemented strict distribution controls, preferentially
partnering with retailers who maintain Challenge 25 policies. Our product
development strategy specifically avoids confectionery-based flavours that
might disproportionately appeal to young people. Furthermore, our pricing
strategy positions our products at a premium price point that places them
outside the pocket money spending range. Looking ahead, we are evolving our
brand identity to adopt a more sophisticated, adult-oriented aesthetic,
beginning with our forthcoming shortfill e-liquid range. This forms part of
our ongoing commitment to responsible product development and marketing.
Corporate Environmental Responsibility
As a consumer goods company with heritage in the natural resources sector, we
maintain an acute awareness of our environmental responsibilities and the
importance of sustainable business practices. We recognise that our activities
have an environmental impact and are committed to continuously improving our
environmental performance through thoughtful strategic decisions and
operational improvements.
A key focus of our environmental strategy centers on our transition from
disposable vape products towards reusable, rechargeable devices. This shift
represents a significant opportunity to reduce our environmental footprint,
particularly regarding electronic waste and battery disposal. Reusable devices
substantially reduce the volume of batteries and electronic components
entering the waste stream, as a single device can potentially replace hundreds
of disposable units over its lifetime. This transition aligns with both our
commercial objectives and our environmental responsibilities.
We recognise that our environmental impact extends beyond our direct
operations. Where possible, we carefully select suppliers and partners who
demonstrate strong environmental credentials and compliance with regulatory
requirements.
While our business model relies on third-party manufacturers and logistics
providers, we maintain oversight of the environmental impact of these
operations. We do not operate retail locations directly, and our use of
outsourced storage and transportation services attempts to balance
environmental considerations with the commercial needs of the business.
We intend to develop more comprehensive systems to measure and report our
environmental impact, enabling us to set meaningful targets for improvement
and track our progress towards these goals. This includes monitoring our
carbon footprint, waste generation, and resource usage across our value chain.
We acknowledge that environmental responsibility requires ongoing commitment
and continuous improvement. We remain dedicated to identifying and
implementing new ways to reduce our environmental impact, whether through
product innovation, operational improvements, or supply chain optimisation.
Further information regarding the Group's carbon emissions can be found at
page 37 of this report.
Task Force on Climate-Related Financial Disclosures (TCFD) Statement
The Company acknowledges its obligations under the Financial Conduct
Authority's Listing Rule 6.6.6R regarding climate-related disclosures
consistent with the recommendations of the Task Force on Climate-Related
Financial Disclosures (TCFD). This statement provides a summary of the Group's
current position with reference to the four TCFD pillars: Governance,
Strategy, Risk Management, and Metrics and Targets. As an early-stage growth
business operating in a highly regulated and rapidly evolving sector, our
focus has been on building a stable and compliant operating model. We do,
however, recognise the increasing importance of environmental factors and are
committed to progressively enhancing our climate-related governance and
disclosure practices over time.
1. Governance
The Board of Directors is responsible for overseeing climate-related risks and
opportunities. Given the Company's size and the direct involvement of Board
members in day-to-day operations, climate-related issues are monitored
alongside other operational and regulatory matters.
To date, climate-related risks have not formed a material part of the Board's
formal consideration of strategy, budgets, performance objectives or capital
expenditure. This is primarily due to the early-stage nature of the Company,
the regulatory and commercial turbulence it has faced, and the urgent need to
focus on operational viability, regulatory compliance, and financial
performance.
Nonetheless, the Board remains mindful of the importance of aligning with
climate goals. It has acknowledged that, as the business matures, more
structured oversight mechanisms must be developed. These will include clear
internal objectives, regular reviews, and progress tracking against
climate-related performance indicators.
In recent times, the Company has ensured compliance with applicable
environmental regulations such as the Waste Electrical and Electronic
Equipment (WEEE) Regulations and battery recycling schemes. These have been
the primary focus of the Board's environmental oversight to date.
2. Strategy
The Group recognises that climate-related risks and opportunities will play a
more prominent role in its future strategic and operational planning,
particularly as a consumer packaged goods business. The immediate impact of
climate change on our operations is currently limited, but medium to long-term
risks relating to packaging waste, product lifecycle sustainability, and
consumer preference shifts are anticipated.
Climate-related risks and opportunities are particularly relevant to
businesses involved in selling consumer-packaged goods (CPG), where supply
chains, packaging choices, and end-of-life product treatment directly affect
environmental impact and stakeholder perception. In the future, the Board
expects to give greater weight to climate-related considerations when
reviewing strategic decisions, including product design, materials sourcing,
logistics, and retail partnerships. For example, rising consumer and
regulatory expectations around recyclability and carbon footprint may shape
our packaging strategy, while increased scrutiny on supplier emissions could
influence our procurement policies. As the business matures, we anticipate
developing a climate-informed (if not climate led) approach to innovation,
where product development and marketing strategies align with sustainability
goals. Over time, climate performance may become integrated into strategic
KPIs, investment decisions, and brand positioning, as this will support
long-term competitiveness in an environmentally conscious marketplace.
3. Risk Management
The Company does not yet maintain a standalone climate risk register, and
climate-related risks are currently assessed by the Board alongside broader
business risks. All principal risk matters are addressed collectively by the
Board due to the Company's size and the integrated nature of its management
structure. As our governance framework evolves, we intend to formalise climate
risk assessment processes in line with broader enterprise risk management
practices.
The most significant environmental risk identified to date has been the impact
of disposable vape products on electronic and battery waste output. This has
informed the Company's decision to develop and commercialise more sustainable
reusable alternatives, working with manufacturing partners to improve product
design, recyclability, and consumer disposal behaviours. While our intended
transition to reusable products and reduced reliance on disposable formats was
primarily driven by regulatory changes, it also reflects our approach to
responding to any risks identified, reviewing all key matters at a Board level
before executing across the business.
As part of its broader risk management efforts, the Company intends to
introduce more structured processes to identify, evaluate, and mitigate
climate-related risks. This includes building internal capacity, formalising
risk governance procedures, and integrating these into enterprise risk
management as part of the Group's evolution.
4. Metrics and Targets
The Company has not yet developed climate-specific metrics or targets. Several
practical factors have contributed to this:
· The Company's ongoing strategic transformation has made historical
data irrelevant for future measurement;
· Supply chain volatility has complicated data collection and
environmental performance tracking;
· Resource constraints have required prioritisation of commercial,
regulatory, and financial status over environmental concerns;
· Climate-related matters have not been integrated into business KPIs,
capital allocation decisions, or performance reviews.
Despite its current status, the Company recognises that in order to
effectively manage climate-related risks and opportunities, these limitations
must be addressed. In future, the Board plans to:
· Establish baseline measurements of environmental impact;
· Develop key performance indicators relevant to climate-related
priorities;
· Integrate environmental data into operational systems and reporting
frameworks;
· Set medium and long-term targets for emissions, packaging waste, and
product lifecycle sustainability.
Notwithstanding the above, the Company does monitor and estimate the
environmental impact attributable to certain core activities in line with the
Streamlined Energy and Carbon Reporting (SECR) regulations. Further
information can be found on page 43 of this report.
Current State of Compliance and Forward Commitment
The Company is at a critical stage in its development, characterised by
strategic adaptation to evolving regulatory requirements and market
conditions. During and since the Period, we have had to make fundamental
decisions about our business model and product offering, particularly in
response to regulatory changes in the vaping industry. While we maintain a
strong commitment to environmental responsibility, the immediate demands of
business transformation and regulatory compliance have necessarily taken
precedence in our resource allocation and strategic planning.
As a public company committed to responsible growth, we understand that
alignment with TCFD principles is essential. This disclosure reflects our
current position and outlines the steps we are taking to improve compliance.
As our business stabilises and scales, we expect our TCFD disclosures and
climate governance to evolve in tandem with the Group's operational maturity
and sustainability commitments.
The Company views this statement as a foundation for future development. While
climate-related concerns have not yet formed a central part of our strategic
planning, we are committed to integrating them more formally as our capacity
and maturity increases. Future disclosures will build on the principles
outlined here, reflecting our intention to meet the expectations of investors,
regulators, and other stakeholders regarding responsible environmental
stewardship and climate risk management.
The Company recognises the UK's legally binding net zero target and is
committed to aligning with it over time. As our operations mature, we will
assess our emissions, embed decarbonisation into planning, and develop a
credible roadmap to support the national transition in a commercially
sustainable way.
We believe this approach represents a realistic and responsible balance
between our growth objectives and our environmental responsibilities, while
acknowledging the practical limitations faced by early-stage companies in
achieving comprehensive TCFD compliance.
Disclosures and Considerations Relating to Vape Products
As part of its ongoing commitment to responsible environmental stewardship,
the Company recognises the importance of complying with all applicable
environmental regulations, particularly those relating to the handling and
disposal of electrical and electronic equipment. This includes obligations
under the Waste Electrical and Electronic Equipment (WEEE) Regulations and
similar requirements that apply to businesses importing and distributing vape
products containing batteries.
The Company acknowledges that the disposal of batteries associated with vape
devices presents a material environmental risk if not managed appropriately.
Accordingly, the Board is committed to ensuring that the Group's operations
remain fully compliant with environmental law, including the proper
registration, reporting, and financing of battery collection and recycling
schemes where required.
In line with this commitment, the Company's strategic approach will be to
minimise battery waste wherever possible. This includes working with suppliers
and manufacturing partners to explore alternatives to single-use formats,
improving product design to facilitate recyclability, and engaging with
customers and retailers to raise awareness about responsible disposal
practices. The Company will also continue to monitor evolving regulatory
frameworks in its key markets to ensure that it remains compliant and aligned
with best practice in environmental management.
These initiatives form part of a broader sustainability strategy that aims to
reduce the environmental impact of the Company's operations and support the
transition to a more circular economy. The Board recognises that responsible
management of environmental risks, including those related to climate and
waste, is essential to the Group's long-term resilience and value creation.
The Company recognises that climate-related regulation and shifting consumer
preferences present both risks and opportunities to its long-term strategy. In
the short to medium term, our transition towards reusable vaping formats is
expected to reduce environmental exposure and align with anticipated
regulatory shifts in the UK and other core markets. Over the longer term, we
believe our focus on sustainable product innovation will offer a strategic
advantage as environmental criteria become increasingly important to
consumers, distributors, and regulators alike. As such, climate-related
considerations are expected to play a growing role in our financial and
operational planning.
KEY PERSONNEL
Callum Sommerton
Chief Executive Officer
As a former legal professional with brand protection and regulatory
experience, Callum has helped to create, develop and protect major brands in
multiple industries and across numerous jurisdictions. Prior to joining the
Company he worked within the intellectual property team of renowned London law
firm Mishcon de Reya where he gained extensive exposure to brand protection,
litigation and corporate matters.
He went on to establish his own digital marketing and business growth
consultancy practice providing strategic direction and support to a client
base of public and private companies operating within the consumer goods,
luxury lifestyle, and professional services sectors.
Before being appointed to his current position, Mr Sommerton served as
International Brand Director providing holistic support to the Group's
business both in the UK and the United States.
Harry Chathli
Non-Executive Chairman
Harry is a capital markets and media strategist who has developed and designed
successful communication campaigns to raise the profile of organisations,
companies and government policies over the past 25 years.
Harry has been the key PR adviser to clients ranging from FTSE 100 to
AIM-listed businesses. He has a demonstrable track record of success in
technology-led businesses (TMT, Cleantech, Med-tech, Biotech), FMCG,
Healthcare, Industrial & Support Services and Property sectors across UK,
Europe, Middle East, Asia, US and Africa.
He is also an entrepreneur with a track record of growing successful
businesses, mentoring start-up management teams and identifying sources of
growth capital for businesses. He founded his first PR agency, Corfin Public
Relations, which was acquired by Luther Pendragon in October 2011. After eight
years at Luther, in 2019 he conducted a management buy out to set up the
company now trading as Gracechurch Group.
Graham Duncan
Finance Director
Graham is a UK-based chartered accountant with more than 25 years' of capital
markets experience. He also holds a Corporate Finance Diploma issued by the
Institute of Chartered Accountants in England and Wales.
Since 2013, Graham has operated a consultancy business providing transactional
support and financial reporting advice to growing private and public companies
in the UK and internationally, including advising on new admissions to the
Official List of the London Stock Exchange.
He is Chairman of RentGuarantor Holdings Plc, a company listed on the Apex
segment of the Aquis Stock Exchange. Prior to this, Graham was a capital
markets director with a major firm of Chartered Accountants in London. Graham
has considerable international experience, including four years in Hong Kong
where he advised on corporate transactions in the Asia Pacific region.
Nick Tulloch
Non-Executive Director
Nick Tulloch advised companies on the UK capital markets for over 20 years,
working for several well-known investment banks and stockbrokers, including
Cazenove, Arbuthnot and Cantor Fitzgerald.
He is CEO of Mendell Helium plc (formerly Voyager Life plc), which he founded
as a plant based health & wellness company before overseeing its
transformation into a helium business with production assets in Kansas, USA.
This marks the second time in his career that he has carried out a business
transformation. He was finance director and then subsequently CEO of Chill
Brands Group plc in 2019 - 2020 (at which time it was called Highlands Natural
Resources plc and then Zoetic International plc) when he led the company's
pivot from oil & gas and into what became its current operations.
Nick began his career as a solicitor with Gouldens and he holds a masters in
law from Oxford University. Nick is also Chairman of ECR Minerals plc.
DIRECTORS' REPORT
The Directors present their report and the financial statements for the year
ended 31 March 2024.
Principal Activities
The Group's principal activities are the development, production and
distribution of nicotine-free vape products and other consumer packaged goods.
The Group is also focused on the development of an e-commerce marketplace for
wellness and recreational products made with natural, functional ingredients
including CBD products, nootropics, supplements and others.
A detailed review of the activities for the period is given in the Chief
Executive's Review and Strategic Report.
Results
The Group recorded a loss for the period after taxation from continuing and
discontinued activities of £3,370,293 (2023: loss £4,287,891) and further
details are given in the preceding Financial Review. No dividend has been
paid during the period nor do the Directors recommend the payment of a final
dividend (2023: nil).
Directors
The Directors who served at any time during the period up to the date of
publication were:
C Sommerton
Chief Executive Officer
A Russo Chief Commercial Officer
(Removed 4 June 2024)
T Taylor Chief Operating Office
(Removed 4 June 2024)
E Schrader Non-Executive Director
(Resigned 7 June 2024)
Scott E. Thompson Independent Non-Executive Director
(Resigned 30 September 2024 )
A Chathli Non-Executive Chairman
(Appointed 4 June 2024)
G Duncan Finance Director
(Appointed 4 June 2024)
N Tulloch Non-Executive Director
(Appointed 5 September 2024)
Details of the Directors' interests in the shares and warrants of the Company
are set out in the Directors' Remuneration Report on page 34.
Further details of the interests of the Directors in the share options and
warrants are set out in Note 20 to the financial statements.
Substantial Interests
At 30 May 2025 the Company had been informed of the following substantial
interests in the issued share capital of the Company:
Number of Issued Shares Percentage of Capital
Jonathan Mark Swann* 68,075,000 13.45
Ox Distributing** 42,739,994 8.44
* Mr Swann also holds convertible unsecured loan notes with a value of £1.6
million. The convertible loan notes carry a coupon of 12% annuum, have a
maturity date on 15 May 2028, and will be convertible into Ordinary Shares at
2.15 pence per Ordinary Share, representing a further 74,418,605 potential
shares on conversion of the loan notes. The terms of these £1.6 million
convertible loan notes were revised by mutual agreement with Mr Swann during
May 2025.
**Includes shares held personally by members of the Schrader family.
Share Capital
Chill Brands Group PLC is incorporated as a public limited company and is
registered in England and Wales with the registered number 09309241. Details
of the Company's issued share capital, together with the details of the
movements during the period, are shown in Note 19. The Company has one class
of ordinary shares and all shares have equal voting rights and rank pari passu
for the distribution of dividends and repayment of capital.
Corporate Governance Statement
The Board is committed to maintaining appropriate standards of corporate
governance, recognising its responsibility to ensure effective oversight and
management of the Group's affairs in the interests of shareholders and other
stakeholders. The statement below explains how the Company has approached
corporate governance during the period and includes the information required
under section 7 of the Disclosure Guidance and Transparency Rules of the UK
Financial Conduct Authority.
The Company is listed on the Main Market of the London Stock Exchange and is
aware of the provisions of the UK Corporate Governance Code ("the Code").
However, the Company has not formally adopted the Code and does not apply it
in full, given its current size, scale and resources. The Board instead seeks
to observe and apply the principles of good governance contained in the Code
to the extent considered appropriate and proportionate to the Company's
circumstances. The Board continues to review its corporate governance
framework regularly and intends to adopt additional elements of the Code as
the Group grows and its operations mature.
Approach to Governance, Strategy and Risk Management
The Group operates as a consumer packaged goods distribution company, focused
on the distribution of wellness products and fast-moving consumer goods
(FMCG), including nicotine pouches, vapes, beverages, supplements and wellness
products through both its e-commerce platform and its Chill Connect
distribution division.
The Board recognises that effective governance plays a central role in
supporting the Group's ability to deliver its strategic objectives and create
long-term shareholder value. The Board maintains oversight of all key matters,
including capital allocation, entry into material contracts and partnerships,
regulatory compliance, and financial reporting. The Board receives regular
updates from the executive team and engages in active oversight of business
performance, strategic direction, key transactions and risk exposure.
The principal strategic risks considered by the Board include:
· The regulatory environment in relation to the sale, marketing and
distribution of regulated consumer products, for which the Group obtains legal
advice as appropriate;
· Cash flow and working capital management, common to all product-based
trading businesses, now addressed through enhanced financial planning under
the oversight of the Group's Chief Financial Officer;
· The viability and market acceptance of product lines, requiring
active management of product mix and commercial partnerships.
The Board actively monitors these risks and oversees management's response to
them as part of its regular cycle of meetings and decision-making.
Sustainability of the Business Model
The Board is focused on building a resilient and scalable operating platform
to support the Group's long-term growth. In prior years, many of the Group's
business functions were outsourced to external partners. The current strategic
focus is on building internal operational capabilities and diversifying the
product offering to adapt to changing consumer preferences and evolving
regulatory requirements. The Board considers that these steps are critical to
the long-term sustainability of the business model.
While the Group does not yet operate formal ESG or sustainability programmes,
the Board recognises the growing importance of such considerations and will
keep its approach to sustainability, governance and stakeholder engagement
under review as the Group grows.
Board Composition and Committees
Since the constitution of the new Board of Directors on 4 June 2024, steps
have been taken to strengthen the Company's corporate governance framework.
The Board currently comprises four directors, including two independent
non-executive directors. Following recent changes, the Audit Committee and the
Remuneration Committee have both been reconstituted, although further
development of their roles and procedures is ongoing. The Board is informed
regularly by the executive team to ensure that non-executive directors are
kept abreast of material developments and operational performance.
The Board remains committed to keeping its governance arrangements under
regular review and will seek to implement further governance measures as
appropriate to the Group's size, complexity and stage of development.
Board of Directors
During the year ended 31 March 2024, the Group's Board consisted of three
Executive Directors and two Non-Executive Directors. Mr Callum Sommerton
serves as the Group's Chief Executive Officer. Subsequent to the year-end, Mr
Antonio Russo and Mr Trevor Taylor, Chief Commercial Officer and Chief
Operating Officer, respectively were removed from the Board of Directors and
replaced by Aditya Chathli and Graham Duncan as Non-Executive Chairman and
Finance Director, respectively. Mr Eric Schrader, a Non-Executive Director
resigned from his position on 7 June 2024 and Mr Scott E. Thompson resigned on
30 September 2024. Nick Tulloch was appointed as a Non-Executive Director on 5
September 2024.
The Board meets regularly throughout the year to discuss key issues and to
monitor the overall performance of the Company. All corporate and operational
matters are considered by the Board as a whole while consideration of matters
relating to the preparation of financial statements, audit of such statements,
the nomination of directors and their remuneration are deferred to the
relevant committees. More information about the Board can be found on the
Group's corporate website www.chillbrandsgroup.com.
The Board confirms that it has carried out a robust assessment of the
Company's emerging and existing risks, including those that could threaten its
business model, future performance, solvency or liquidity. The principal risks
and uncertainties facing the Group are described elsewhere in this report. The
Board continues to monitor these risks on an ongoing basis and ensures that
appropriate controls and mitigating actions are in place to support the
Company's long-term viability.
As the Company continues to expand its operations and build internal
capabilities, the Board recognises the importance of investing in and
incentivising its growing workforce. In support of this, the Board intends to
establish a range of incentive structures designed to attract, motivate and
retain talent. These will include performance-driven cash incentive schemes,
particularly focused on rewarding the sales teams for commercial success, as
well as the development of a broader equity-based incentive plan that will
allow employees to participate in the long-term growth and value creation of
the Company by receiving a direct stake in its future performance.
The Board is committed to adopting a formal Code of Corporate Governance when
it is appropriate to do so.
Audit Committee
The Board seeks to present a balanced and understandable assessment of the
Group's position and prospects in all interim, final and price-sensitive
reports and information required to be presented by statute.
The Group established an audit committee during the Period, comprising Callum
Sommerton, Trevor Taylor, and Scott Thompson. Following Trevor Taylor's
removal from the Board, and Scott Thompson's resignation, the audit committee
now comprises the Company's Non-Executive Directors, Harry Chathli and Nick
Tulloch. For a business of the Company's size, the UK Corporate Governance
Code states that an audit committee should comprise of at least two
independent non-executive directors and that the chair of the Board should not
be a member of the committee. Whilst the audit committee is not formed of
members in accordance with Corporate Governance guidelines, the Group believe
the composition is commensurate with the size and scope of the Group and its
operations. In particular, the Board presently consists of two executive
directors and two non-executive directors, including the non-executive
Chairman. On that basis it is considered appropriate for the Chairman to sit
as part of the audit committee until such time as the Company appoints
additional independent non-executive directors. The committee is in the
process of establishing its rules and operating procedures. This annual report
and the financial statements contained herein were considered by the Board as
a whole.
External Independent Auditor
The audit committee will meet with the auditor at least twice a year to
consider the results, internal procedures and controls and matters raised by
the auditor. The Board considers auditor independence and objectivity and the
effectiveness of the audit process. It also considers the nature and extent of
the non-audit services supplied by the auditor reviewing the ratio of audit to
non-audit fees and ensures that an appropriate relationship is maintained
between the Company and its external auditor. The Company has a policy of
controlling the provision of non-audit services by the external auditor in
order that their objectivity and independence are safeguarded.
As part of the decision to recommend the appointment of the external auditor,
the Board takes into account the tenure of the auditor in addition to the
results of its review of the effectiveness of the external auditor and
considers whether there should be a full tender process. There are no
contractual obligations restricting the Board's choice of external auditor.
During the Period, PKF Littlejohn LLP was engaged Reporting Accountant in
connection with the Company's prospectus. This task was specifically allocated
to PKF Littlejohn's capital markets team, ensuring that there was appropriate
separation from the audit team to maintain auditor independence and
objectivity.
Remuneration Committee
There was no separate Remuneration Committee during the Period, instead all
remuneration matters were to be considered by the Board as a whole. Since the
end of the Period, the Company has established a Remuneration Committee that
initially comprises the Company's Non-Executive Directors, Harry Chathli and
Nick Tulloch. The Remuneration Committee will meet when required to consider
all aspects of directors' and staff remuneration, share options and service
contracts.
Nominations Committee
The Company has not yet established a nominations committee. Instead,
nominations are considered by the Board as a whole with input from
professional advisors and other key stakeholders. The Company intends to
establish a Nominations Committee which is expected to initially comprise of
the Company's Non-Executive Directors.
Internal Financial Control
The Company has instituted a range of internal financial controls aimed at
safeguarding its assets and ensuring the maintenance of accurate and reliable
accounting records. The Company is committed to continuous improvement and
enhancement of these measures to protect its assets effectively and the policy
outlined here has been adopted by the current Board as constituted on 4 June
2024.
The maintenance of proper records is a key component of these internal
financial controls. This responsibility is overseen by the Finance Director,
Graham Duncan, and the records are meticulously prepared by an independent
bookkeeper appointed specifically for this function in the UK. This separation
of duties ensures that the records are not only accurate but also impartial,
providing a strong foundation for the Company's financial reporting and
decision-making processes.
To further safeguard assets, the Company involves the entire Board and its
advisors in all decisions related to the treatment and potential disposal of
any assets. This collective approach ensures that all perspectives are
considered, and the best possible decisions are made in the interest of the
Company and its stakeholders.
Additionally, a stringent payments policy has been implemented wherein all
payments require the approval of both the CEO and the Finance Director. This
dual-approval mechanism acts as a critical checkpoint, preventing unauthorised
or potentially detrimental financial transactions.
The Board continues to evaluate procedures to ensure thorough transaction
approval, comprehensive risk assessment, and careful consideration of capital
expenditures. By adopting these strategies, the Board aims to maintain robust
financial controls that are suitable for a business of the Company's size.
This proactive approach is designed to create a secure financial environment
that supports the Company's growth and operational integrity.
The Board is particularly mindful of the need for these measures, and for
additional financial safeguards, in light of the issues that arose in the
months following the year end - specifically those relating to the treatment
of the Company's capital and assets. These events have reinforced the Board's
commitment to rigorous internal controls and heightened oversight of all
financial transactions.
Shareholder Communications
The Company considers open and transparent communication with its shareholders
to be a high priority and is committed to sharing as much information as
possible while protecting the Company's legitimate interests and position with
vendors, suppliers, customers, and partners. The Group uses its corporate
website (www.chillbrandsgroup.com) to publish information relating to the
company, providing a feed of RNS announcements and relevant company documents
to all stakeholders. The Company's Directors also seek to engage with other
forms of media that may be helpful in promoting the Company and investment
case, alongside providing news and context. These include webinars, such as
the session held in response to the Government's proposals to ban disposable
vape products, podcasts, and other media formats. Through this multi-channel
approach the Company aims provide a more discursive and transparent insight
into the business and its operations.
The Group also makes use of social media, both to provide non-material
corporate updates regarding its activities and to market its products to
relevant consumers. Content posted to social media platforms such as Instagram
are intended as a form of engagement with customers and not as a forum for the
discussion of corporate matters, however such posts may also be of interest to
shareholders.
DIRECTORS' REMUNERATION REPORT
The Directors' Remuneration Report for the year ended 31 March 2024 and the
Directors' Remuneration Policy will be proposed for approval by shareholders
at the Group's reconvened Annual General Meeting that will be announced
shortly.
The Annual Report was not published prior to the AGM held on 30 September
2024, as a result, the AGM will be adjourned in relation to those resolutions
connected to the Annual Report (including the Directors' Remuneration Report
for the year ended 31 March 2024 and the Directors' Remuneration Policy).
It is the intention of the Board to balance the incentivisation of Directors
for future success with the current financial performance of the Company when
determining rates of remuneration. The Renumeration Policy has also been
reviewed in line with the wider working and pay conditions for employees
across the Group with a view to implementing a policy that is substantively
fair and reflective of performance.
The current Executive Directors' remuneration comprises a basic fee which is
reviewed semi-annually and which may be taken as salary or pension
contribution, plus suitable health insurance provision for US Directors.
Future policy table
Base Salary Pension Contribution Benefits in kind Bonus or incentive plan
Executive Directors
C Sommerton GBP £85,000 Statutory Minimum Nil Ad hoc basis
see below
G Duncan GBP £36,000 Statutory Minimum Nil Ad hoc basis
see below
Non-Executive Directors
GBP £24,000 Nil Nil Nil
A Chathli
N Tulloch GBP £24,000 Nil Nil Nil
The service contracts are reviewed annually.
Benefits in Kind
During the Period, the Group paid healthcare premiums for its US staff at the
prevailing rates.
Bonus or Incentive Plan
Executive Directors are eligible to participate in the Long Term Incentive
Plan (LTIP) established by the Company to align the interests of shareholders
with the interests and incentives of the executive management team, under
which share options and conditional share awards (restricted share units) may
be granted on a discretionary basis. There is no maximum opportunity under the
LTIP. Awards will normally vest over a number of years, subject to time-based
and/or performance conditions. Under the LTIP the Board has discretion to
adjust the vesting of awards to avoid formulaic outcomes. Vested and unvested
awards are subject to malus and claw back provisions. Annual bonuses may also
be awarded at the discretion of the Board under the Company's Short Term
Incentive Plan (STIP) which is intended to motivate exceptional performance
and effort over the short term. Cash awards made under the STIP may be subject
to performance conditions and must be approved by the Board as a whole.
During the Period, the Company proposed the grant of options to its executive
Directors, as announced on 11 September 2023 and considered by Shareholders at
the 2023 Annual General Meeting. Subsequently, the Enterprise Management
Incentive (EMI) plan relevant to the award to the Company's CEO was not
formally adopted by the Board, and no award certificates or letters were
issued under the Company's Long Term Incentive Plan (LTIP). The Board intends
to consider appropriate management incentives in light of the Company's
current status and will provide further information in the future. It is not
expected that the Company will choose to enact or adopt those proposals
announced on 11 September 2023.
Service Contracts
Mr. Sommerton was initially employed from 1 December 2021 in his previous
capacity as International Brand Director. His Director's Service Contract in
relation to his role as Chief Executive Officer commenced on 15 April 2022.
Mr. Sommerton is paid at an annual rate of GBP £85,000 per annum plus
contributions to the Group's statutory workplace pension scheme and the
ability to participate in any bonus awards.
Mr. Russo and Mr. Taylor were employed on an initial fixed term of one year
from 1 April 2019 and their contracts automatically renewed annually for a
further one year period unless either party gave at least 60 days' notice of
termination prior to a renewal date, save in the case of a material breach of
contract when the Executive could be dismissed without notice. Mr. Russo was
paid at a rate of $175,000 per annum. Mr. Taylor was paid at a rate of
US$100,000 per annum with provisions for his salary to increase in line with
revenue and at the confirmation of the Board. Both Mr. Russo and Mr. Taylor
received healthcare benefits and participated in any bonus awards.
Mr. Thompson was appointed as an Independent Non-Executive Director in
accordance with the terms of an appointment letter dated 21 January 2021. For
his service, he was entitled to fees amounting to $15,000 and did not receive
any additional financial benefits. Upon his appointment, he was awarded
100,000 ordinary shares.
Mr. Schrader was appointed as a Non-Executive Directors in accordance with the
terms of an appointment letter dated 27 May 2022. For his service on the Board
he was entitled to fees amounting to $10,000 and was further contracted to
provide sales services at a rate of $2,500 per month. This fee was revised to
$5,000 per month from February 2024.
Mr. Duncan was appointed on 4 June 2024 following a General Meeting of the
Company's shareholders. He has provided his services to the Company at a rate
of £2,000 per month pending the issuance of an employment contract for his
services as an executive director. Henceforth, he will be paid at a rate of
£36,000 per annum to be reviewed by the Company's remuneration committee
during Summer 2025 and semi-annually thereafter.
Mr. Chathli was appointed on 4 June 2024 following a General Meeting of the
Company's shareholders. He provides his services to the Company in accordance
with a letter of appointment dated 16 July 2024 and is paid at a rate of
£24,000 per annum.
Mr. Tulloch was appointed to the Board on 5 September 2024 and he provides his
services to the Company in accordance with a letter of appointment dated 4
September 2024. He is paid at a rate of £24,000 per annum for his services.
In the event of a termination or loss of office the Director is entitled only
to payment of his basic salary (plus contractual benefits if applicable) in
respect of his notice period. In the event of a termination or loss of office
in the case of a material breach of contract the Director is not entitled to
any further payment. Executive Directors are allowed to accept external
appointments with the consent of the Board, provided that these do not lead to
conflicts of interest. Executive Directors are allowed to retain the fees
paid. The service contracts are available for inspection at the Company's
registered office.
Approval by Members
The Group's remuneration policy will be put before the members for approval at
the reconvened Annual General Meeting to be held on the earliest practical
date in 2025 following the publication of this report. Further information
regarding this reconvened meeting will be announced in due course.
IMPLEMENTATION REPORT
Particulars of Directors' Remuneration (audited)
Particulars of directors' remuneration, including directors' warrants which,
under the Companies Act 2006 are required to be audited, are given in Notes 6
and 21 and further referenced in the Directors' report.
Remuneration paid to the Directors during the year ended 31 March 2024 was:
Executive Director Base Salary Benefits in Kind Pension contributions Compensation for Loss of Office Total
£ £ £ £ £
C Sommerton* 85,000 - 2,642 Nil 87,642
A Russo 140,382 23,998 - Nil 164,380
T Taylor 82,720 25,223 - Nil 107,943
E Schrader 25,986 - - Nil 25,986
S Thompson 13,993 - - Nil 13,993
The benefits in kind represents healthcare and pension premiums that the Group
pays for its directors at the prevailing rates.
Remuneration paid to the Directors during the year ended 31 March 2023 was:
Executive Director Base Salary Benefits in Kind Pension contributions Compensation for Loss of Office Total
£ £ £ £ £
C Sommerton* 90,000 - - - 90,000
A Russo 142,344 22,835 - - 165,179
T Taylor 112,972 23,452 - - 136,424
E Schrader 7,833 - - - 7,833
S Thompson 11,749 2,350 - - 14,099
The benefits in kind represents healthcare and pension premiums that the Group
pays for its directors at the prevailing rates.
*C Sommerton was appointed as a director in April 2022. In June 2022, his
salary was adjusted to £85,000 from a previous salary of £115,000.
Payments to Past Directors (audited)
There were no payments to past directors during the year ended 31 March 2024.
Payments for Loss of Office (audited)
There were no payments to past directors for loss of office during the year
ended 31 March 2024.
Bonus and Incentive Plan (audited)
On 11 September 2023, the Company announced a new Management Incentive Plan
aimed at aligning the interests of its executive directors with those of its
shareholders. The plan involved granting share options to the three Executive
Directors, subject to shareholder approval at the Annual General Meeting (AGM)
held on 19 September 2023. Following approval by shareholders, the plan was
subject to final authorisation by the Board. The plan was not formally adopted
by the Board and no award certificates or letters were issued. As a result,
the options proposed to be issued under the new Management Incentive Plan were
not ultimately granted.
Percentage Change in the Remuneration of the Chief Executive (audited)
The following table shows the percentage change in the remuneration of the
Chief Executive in 2024 and 2023 compared to that of all employees, except
directors, within the Group.
2024 2023 Change
£ £ %
Base Salary Chief Executive 85,000 90,000 (5.55%)
All* 384,359 446,049 (13.83%)
Bonuses Chief Executive - - 0.00%
All* - - 0.00%
Benefits in Kind Chief Executive - - 0.00%
All* 57,281 46,287 23.75%
Total Remuneration Chief Executive 85,000 90,000 (5.55%)
All* 441,640 519,386 (14.96%)
*The figure for "all employees" excluding the Chief Executive.
Relative Importance of Expenditure on Remuneration
2024 2023 Year on Year
£ £
Total Chief Executive's Remuneration (including share based payments) 85,000 90,000 (5.55%)
Distributions to Shareholders N/A
Included in total remuneration is salary, bonuses, issued shares, compensation
for loss of office and benefits.
Total Shareholder Return
The following graph illustrates the percentage movement in the Company's share
price over the year compared to the percentage movements over the same period
of the S&P/ASX 200 and FTSE-Small Cap indices.
Historic Remuneration of the Chief Executive
Year Salary Bonus Benefits in Kind Share Based Payments Total
£ £ £ £ £
2020 193,151 - 39,718 - 232,869
2021* 152,673 - 36,998 1,410,268 1,599,939
2022* 188,829 - 53,831 470,090 712,750
2023 90,000 - - 90,000
2024 85,000 - - - 85,000
*The role of Chief Executive was fulfilled by two individuals concurrently
during the years ended 31 March 2022 and 2021. The figures for "Chief
Executive" are the combined total payments for the two individuals during the
period. Additionally in the year ended 31 March 2020, the Chief Executive role
was performed by other individuals.
Directors' Interest in Shares (audited)
The Company has no Director shareholding requirement.
The beneficial interest of the Directors in the ordinary share capital of the
Company at both 31 March 2024 and 31 March 2025 was:
Number of Shares Percentage of Issued Shared Capital Percentage Change
Director 31 March 2024 31 March 2025 31 March 2024 31 March 2025
A Russo 6,950,000 6,950,000 2.67% 2.42% (0.25%)
T Taylor 6,950,227 6,950,227 2.67% 2.42% (0.25%)
C Sommerton 266,668 266,668 0.00% 0.00% 0.00%
E Schrader 26,755,416 26,755,416 10.25% 9.41% (0.84%)
S Thompson 100,000 100,000 0.00% 0.00% 0.00%
G Duncan - - - - -
A Chathli - - - - -
N Tulloch - - - - -
The below Directors held the following options and warrants at the beginning
and end of the period:
Director At 1 April 2023 Granted in the Period Exercised in the Period Lapsed in the Period At 31 March 2024
A Russo 2,887,500 - - - 2,887,500
T Taylor 2,887,273 - - - 2,887,273
Total 5,775,000 - - - 5,775,000
Remuneration Committee
The Remuneration Committee, which was formed after the end of the Period in
review following the appointment of new directors on 4 June 2024, is comprised
of the Company's two non-executive directors, Harry Chathli and Nick Tulloch.
The Committee meets as required to consider all aspects of directors' and
staff remuneration, including share options and service contracts.
Where appropriate, the Committee may consult with the wider Board and external
advisors, but decisions on remuneration are taken independently by the
non-executive members.
Shareholder Voting at the Annual General Meeting
The Directors' Remuneration Report for the year ended 31 March 2023 and the
Directors' Remuneration Policy were approved by the shareholders at the Annual
General Meeting held on 19 September 2023.
The votes cast were as follows:
Directors' Remuneration Report Number of Votes % of Votes Cast
For 78,693,137 99.87%
Against 37,278 0.05%
Number of Votes Withheld 65,248 0.08%
Total Votes Cast 78,795,663 100%
Directors' Remuneration Policy
For 78,667,131 99.84%
Against 63,284 0.08%
Number of Votes Withheld 65,248 0.08%
Total Votes Cast 78,795,663 100%
This is the Company's eighth period of operation. There have been no major
changes during the period either in the policy on directors' remuneration or
its implementation, including terms of service for the Directors.
This Directors' Remuneration Report was approved by the Board and signed on
its behalf by:
Callum Sommerton, Chief Executive Officer
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
THE FINANCIAL STATEMENTS
The Directors are responsible for preparing this report and the financial
statements in accordance with applicable United Kingdom law and regulations
and those UK adopted International Accounting Standards ("IAS"). Company law
requires the Directors to prepare financial statements for each financial
period which present fairly the financial position of the Company and the
financial performance and cash flows of the Company for that period.
In preparing those financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· state whether applicable UK adopted IAS have been followed, subject
to any material departures disclosed and explained in the financial
statements;
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business; and
· provide additional disclosures when compliance with the specific
requirements in UK adopted IAS is insufficient to enable users to understand
the impact of particular transactions, other events and conditions on the
entity's financial position and financial performance.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Company financial statements comply with the
Companies Act 2006 and Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that comply with that law and those
regulations, and for ensuring that the Annual Report includes information
required by the Listing Rules of the Financial Conduct Authority.
So far as the Directors are aware, there is no relevant audit information, as
defined by Section 418 of the Companies Act 2006, of which the Group's
auditors are unaware and each Director has taken all the steps that he ought
to have taken as a director to make himself aware of any relevant audit
information and to establish that the Group's auditors are aware of that
information.
The Consolidated Financial Statements are published on the Group's website
http://www.chillbrandsgroup.com. The Directors are responsible for the
maintenance and integrity of the website. Visitors to the website need to be
aware that legislation in the United Kingdom covering the preparation and
dissemination of the financial statements may differ from legislation in their
jurisdiction.
We confirm that to the best of our knowledge:
· the Company financial statements, prepared in accordance with UK
adopted IAS give a true and fair view of the assets, liabilities, financial
position and profit of the Company;
· this Annual Report includes a fair review of the development and
performance of the business and the position of the Company together with a
description of the principal risks and uncertainties that it faces; and
· the Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the Company's performance, business model and strategy.
ENVIRONMENTAL RESPONSIBILITY AND GREENHOUSE GAS DISCLOSURES
The Directors recognise the importance of assessing and managing the impact of
the business and its operations on the environment. Given that the Company is
at an early stage of its growth under its current business model, it has it
not always appropriate or possible to fully measure the Company's emissions
and environmental impact as its operations are in a state of transition. The
Company is committed, however, to adopting a compliant approach to all
relevant rules and regulations.
The primary environmental risks that are relevant to the Company include the
production of carbon emissions from manufacturing processes, transportation
and energy consumption; the management of waste including from packaging and
products; and the sourcing of raw materials. As the Company's vape products
business develops, sourcing and waste management will become ever more
important issues, especially in relation to the batteries contained within the
devices. The Directors are committed to working with stakeholders and partners
to ensure that the environmental impact of these products is minimised.
Under the Companies (Directors' Report) and Limited Liabilities Partnerships
(Energy & Carbon Report) Regulations 2019, we are mandated to disclose our
UK energy use and associated greenhouse gas (GHG) emissions. Specifically, and
as a minimum, we are required to report those GHG emissions relating to
natural gas, electricity and transport fuel as well as an intensity ratio,
under the Streamlined Energy & Carbon Reporting (SECR) Regulations.
In calculating its greenhouse gas emissions, the Company used The Climate
Registry's default electricity and natural gas square footage emission
intensities to estimate electricity and natural gas usage for each office
space. The result in kilowatt hours of electricity or cubic feet of natural
gas used was multiplied by appropriate default emission factors to calculate
metric tonnes of carbon dioxide equivalent (CO2e). Owing to the Company's use
of a model that outsources most major operational functions to third party
vendors, it has confined its measurement and reporting approach to those
direct outputs from the Company's staff, calculated in line with the
methodology used by external experts engaged to quantify the Company's output
in the prior year. The Directors consider it appropriate to adopt this
approach as no material changes to those operations of Company that are
captured by this reporting obligation took place during the Period.
For reporting purposes, emissions have been classified in accordance with the
Greenhouse Gas Protocol. The Company did not record any Scope 1 emissions
during the period, as it does not own or operate any vehicles, combustion
facilities or refrigeration equipment. Scope 2 emissions arose from the
purchase of electricity for office space and home working arrangements used by
Company staff. Scope 3 emissions, including those associated with supply chain
activity and product distribution, have not been calculated, as the majority
of such operations remain outsourced to third-party vendors.
All reported energy consumption and associated greenhouse gas emissions during
the period occurred outside the United Kingdom, reflecting the geographic
location of the Company's internal workforce during the period. The principal
energy efficiency measure undertaken remains the Company's use of a remote
working model, which reduces energy consumption associated with office
occupancy, business travel and commuting.
The table below provides more information relating to the Company's greenhouse
gas emissions and energy usage for its offices globally.
Consumption: kWh Consumption: Cubic Feet of Gas Emissions: tC02e
Electricity 65,174 - 30.60
Natural Gas - 109,853 5.99
Total: 36.59
The Company will continue to monitor its environmental footprint and seek to
minimise its carbon emissions, balancing commercial needs with environmentally
responsible choices. In particular, we intend to take proactive steps to
reduce environmental harms associated with the production and distribution of
batteries in our vape products. As part of our broader energy efficiency
strategy, we are planning to reduce reliance on air freight by shifting to sea
and consolidated freight wherever feasible, and to adopt more efficient
packaging and distribution practices across our consumer goods portfolio.
Further reporting, analysis and commentary will be provided in future reports
as the Company's operations mature.
DISCLOSURE AND TRANSPARENCY RULES
Details of the Company's share capital and share options and warrants are
given in Notes 20 and 21 respectively. There are no restrictions on transfer
or limitations on the holding of the ordinary shares. None of the shares carry
any special rights with regard to the control of the Company. There are no
known arrangements under which the financial rights are held by a person other
than the holder and no known agreements or restrictions on share transfers and
voting rights.
As far as the Company is aware there are no persons with significant direct or
indirect holdings other than the Directors and other significant shareholders
as shown on page 24.
The provisions covering the appointment and replacement of directors are
contained in the Company's articles, any changes to which require shareholder
approval. There are no significant agreements to which the Company is party
that take effect, alter or terminate upon a change of control following a
takeover bid and no agreements for compensation for loss of office or
employment that become effective as a result of such a bid.
REQUIREMENTS OF THE LISTING RULES
The following table provides references to where the relevant information
required by listing rule 9.8.4R is disclosed:
Listing Rule requirement
Details of long-term incentive schemes as required by Listing Rule 9.4.3R See Directors' Remuneration Report page 36
Details of any arrangement under which a Director of the Company has waived n/a
emoluments from the Company
Details of any allotment for cash of equity securities made during the period
otherwise than to the holders of such equity shares other than in proportion
to their holdings of such equity shares and which has not been specifically Note 19 on page 82
authorised by the Company's shareholders
Details of any contract of significance subsisting during the period to which
the Company is a party and to which a Director of the Company is or was
materially interested Note 26 on page 89
Details of remaining service contract period for director standing for See service contracts details on page 36
re-election this year
FINANCIAL INSTRUMENTS
The Company has exposure to credit risk, liquidity risk and market risk. Note
25 presents information about the Company's exposure to these risks, along
with the Company's objectives, processes and policies for managing the risks.
EVENTS AFTER THE REPORTING PERIOD
Following the end of the Period, there was a dispute related to the removal of
certain Directors by shareholder vote, prompted by the receipt of a
requisition letter calling for a General Meeting on 16 April 2024. This
dispute resulted in the withdrawal of almost $400,000 from the Company's
accounts and increased professional advisory costs, particularly for legal
advice in the UK and US. Additionally, it led to the temporary removal of the
Company's intangible domain asset, Chill.com, from its ownership and control
between June 2024 and December 2024, when an out-of-court settlement was
reached. The Chill.com domain asset is now under the management and control of
the Company.
Since the end of the Period, the UK Government has introduced legislation that
banned the sale of disposable vapes in the UK with an effective date of 1 June
2025. The Company's existing range of Chill ZERO nicotine-free disposable
vapes will be included in this ban and the Company will therefore need to
develop and launch new, complaint devices in order to maintain a revenue
stream derived from sales of vape products in the UK.
On 24 April 2025, the Company announced that its largest shareholder, Jonathan
Swann, had committed to underwrite a convertible loan note facility with a
principal value of £1,000,000. Other investors were invited to subscribe for
convertible loan notes on identical terms, with those investing up to £50,000
required to remit funds at the point of subscription, and those investing more
than £50,000 subject to drawdown mechanics at the discretion of the Company.
The Convertible Loan Notes were priced at 1.5 pence per loan note, have a term
of three years, and carry interest of 10 per cent per annum. Each entitles the
subscriber to a new ordinary share of 1 pence per share. As part of the
fundraising, subscribers are also entitled to a 1-1 warrant priced at 125% of
the 10-day moving average at the time of funds being drawn. For any funds
drawn prior to the Company's shares returning to trading following their
suspension commenced on 3 June 2024, the average share price used for
calculation of the warrant price shall be 1.5 pence per share.
No other matters or events occurring after 31 March 2024 are expected to have
an impact on the Company's financial statements for the Period.
DIRECTORS' INDEMNITY PROVISIONS
The Group has implemented Directors and Officers Liability Indemnity insurance
throughout the Period.
GOING CONCERN
The Directors have considered the appropriateness of preparing the financial
statements on a going concern basis. In conducting this assessment, they have
taken into account the Group's current financial position, recent and
anticipated fundraising activities, and the forecast cash flows for the
foreseeable future.
During the period following the end of the financial year, the Group's
operations were principally supported by revenue derived from commercial
activity undertaken in the previous financial year, together with proceeds
received pursuant to a financing round completed in January 2024. The period
was characterised by constrained liquidity, due in part to substantial legal
and professional costs arising from corporate dispute matters. Despite these
pressures, the Group maintained continuity of operations through prudent cash
management and targeted capital deployment.
In respect of remainder of the 2025 calendar year and financial periods
commencing during that time, the Board anticipates that the Group's
operational funding requirements will be met through further capital raising
initiatives. Notably, the Group's largest shareholder, Jonathan Swann, has
underwritten a commitment of up to £1 million, which is being made available
to other through a Convertible Loan Note (CLN) facility. The CLNs carry a
fixed annual interest rate of 10%, mature after three years, and are
convertible into ordinary shares at a price of 1.5 pence per share. Warrants
are attached to each CLN tranche, with the exercise price to be determined
based on the volume-weighted average price (VWAP) of the Company's shares at
the time of drawdown.
The Board believes that the capital available under this facility will provide
adequate financial resources to support the Group's core commercial operations
for the duration of the next financial year. However, the Board acknowledges
that further funding may be required in due course in order to respond to
unforeseen challenges or to pursue future strategic opportunities.
The Directors have assessed the Group's ability to continue as a going concern
and, in doing so, have considered the Group's current cash position, expected
trading performance, committed funding arrangements and the requirement for
further fundraising activities. Based on this assessment, the Directors have
concluded that a material uncertainty exists that may cast significant doubt
on the Group's ability to continue as a going concern. In particular, the
Group's continued ability to operate is dependent on securing additional
funding beyond the resources currently committed, and there can be no
certainty that such funding will be available at the necessary time or on
acceptable terms.
Notwithstanding this material uncertainty, having considered the mitigating
actions available to the Group, including the ability to reduce operating
costs if required, and having regard to the Group's historical ability to
raise external finance, the Directors have a reasonable expectation that the
Group will have access to adequate resources to continue in operational
existence for at least twelve months from the date of approval of these
financial statements. Accordingly, the financial statements continue to be
prepared on a going concern basis.
DONATIONS
The Company made no political donations during the period.
These statements of the Directors' Responsibilities were approved by the Board
and signed on its behalf by:
Callum Sommerton, Chief Executive Officer
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CHILL BRANDS GROUP PLC
Opinion
We have audited the financial statements of The Chill Brands Plc (the 'parent
company') and its subsidiaries (the 'group') for the year ended 31 March 2024
which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated and Parent Company Statements of Financial Position, the
Consolidated and Parent Company Statements of Changes in Equity, the
Consolidated and Parent Company Statement of Cashflows and notes to the
financial statements, including significant accounting policies. The financial
reporting framework that has been applied in the preparation of the group and
Parent Company financial statements is applicable law and UK-adopted
international accounting standards.
In our opinion, the financial statements:
· give a true and fair view of the state of the group's and of the
parent company's affairs as at 31 March 2024 and of the group's loss for the
year then ended;
· have been properly prepared in accordance with UK-adopted
international accounting standards; and
· have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2.2 in the financial statements, which indicates
that the going concern status is dependent on the group's ability to raise
further funds across the going concern period where actual revenue is lower
than forecasted amounts by management. Alongside this matter, the Group
incurred a net loss of £3,370,293 during the year ended 31 March 2024 (2023:
£4,287,891) and has historically been loss making in prior financial periods,
indicating an inability of the underlying business to support the parent
company and group. As stated in Note 2.2, these events or conditions, along
with the other matters as set forth in note 2.2, indicate that a material
uncertainty exists that may cast significant doubt on the Company's ability to
continue as a going concern. Our opinion is not modified in respect of this
matter.
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the company's ability to continue to adopt the going concern
basis of accounting included, but was not limited to, the following
procedures:
· Obtaining and documenting our understanding of the controls in
place around the preparation of the going concern forecast and future plans
for the group through discussions with management;
· Obtaining management's assessment for going concern for the
15-month period to 31 October 2026 and checking the mathematical accuracy of
the cash flow forecasts and budgets prepared;
· Comparing budgeted performance for the year ended 31 March 2024
against actual to assess management's historical forecasting accuracy;
· Challenging management where appropriate on the reasonableness of
key inputs and assumptions underpinning the going concern model. These
challenges included but not limited to:
o Performing sensitivity analysis on key inputs and assumptions to assess
the headroom across the going concern period. Key inputs and assumptions
included: (i) sales growth rates, (ii) long-term profitability/margins, (iii)
levels of operating expenditure, and (iv) cost-saving initiatives;
o Assessing management's worst-case scenario testing performed and
corresponding mitigating actions;
o Assessing management's assumptions against external factors and market
trends for appropriateness;
o Agreeing the opening cash position at 1 May 2025 in the going concern
forecast; and
o Assessing the prospective accuracy of management's forecast in 2025
against post year-end bank statements and management accounts;
· Reviewing the terms of debt financing facilities within the group
to confirm their availability across the forecast period;
· Undertaking a review of subsequent events on matters impacting the
going concern assessment; and
· Considering the adequacy of the disclosures and accounting policies
in the financial statements.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We
set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and
the nature, timing and extent of audit procedures on the individual financial
statement line items and disclosures in evaluating the effect of
misstatements, both individually and in aggregate, on the financial statements
as a whole.
Financial statements - group Financial statements - parent company
Overall materiality £225,000 (2023: £221,000) £99,000 (2023: £59,000)
Basis for determining overall materiality 8% (2023: 8%) of loss before taxation adjusted for non-recurring transactions
8% (2023: 8%) of loss before taxation adjusted for unusual and non-recurring
transactions
Rationale for the benchmark applied We considered the nature of the group and its business operations, being one Rationale for the parent company overall materiality parallels with that of
of development, marketing and distribution of wellness and recreational the group.
products. The group's core activities result in profitability being the main
driver, with profit or loss before taxation being deemed a key metric for
measure of performance by both group management and external users of the
financial statements, shareholders and wider stakeholders as the group seeks
to reduce their cost base and refocus their business strategy in light of
legislative and operational changes.
On this basis, adjusted loss before taxation was determined to be an
appropriate basis for determining overall materiality.
Financial statements - group Financial statements - parent company
Performance materiality £157,000 (2023: £154,200) £69,000 (2023: £41,300)
Basis for determining performance materiality 70% (2023: 70%) of overall group materiality 70% (2023: 70%) of overall parent company materiality
Rationale for the benchmark applied In determining the performance materiality, we have considered the following
factors:
· The level of significant judgements and estimates;
· The risk assessment and aggregation of risk and the effectiveness
of controls;
· The control environment and the group's financial reporting
controls and processes; and
· The stability of key management personnel.
We use performance materiality to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in
determining the nature and extent of our testing of account balances, classes
of transactions and disclosures, for example in determining sample sizes.
We agreed with the Audit Committee that we would report to them misstatements
identified during our audit above £11,000 for the audit of the group and
£4,000 for the parent company as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
Our approach to the audit
In designing our audit approach, we determined materiality and assessed risk
of material misstatement in the financial statements. In particular, we looked
at areas involving significant accounting estimates and judgements by the
directors, including the recognition of revenue, the carrying value and
recoverability of intangible assets and going concern. Procedures were then
performed to address the risk identified and for the most significant assessed
risks of misstatement, the procedures performed are outlined below in the key
audit matters section of this report. We re-assessed the risks throughout the
audit process and concluded that the scope remained in line with that
determined at the planning stage of the audit.
The group includes the listed parent company and US-based subsidiaries, of
which only Chill Corporation was considered to be a financially significant
component. We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the group and the company, the
accounting processes and controls, and the industry in which they operate.
No component auditors have been used and as group auditors we audited the
significant component in the United States for the year ended 31 March 2024.
This gave us sufficient appropriate audit evidence for our audit opinion on
the group financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In addition to the matter
described in the Material uncertainty related to going concern section we
have determined the matters described below to be the key audit matters to be
communicated in our report.
Key Audit Matter How our scope addressed this matter
Revenue recognition (note 3)
Under ISA (UK) 240, there is a rebuttable presumption that revenue recognition Our work in respect of this key audit matter included:
is a significant fraud risk.
· Obtaining and documenting an understanding of the internal control
During the year ended 31 March 2024 the parent company entered into a series environment in operation and undertaking walk-throughs to assess whether key
of sales and distribution agreements in the UK. These new agreements allowed controls within the revenue processes and systems have been designed and
the Group to penetrate the vaping industry, with revenue increasing to £1.9m implemented effectively;
in the financial period (2024: £0.1m).
· Reviewing the revenue recognition policies against the requirements
We consider the risk in relation to the potential manipulation of revenue of IFRS 15 Revenue from contracts with customers and assessing the adequacy of
arises from the incorrect recognition of revenue transactions and postings of disclosures made within the financial statements;
inappropriate journal entries via management override. The performance
obligations within the main sales and distribution agreements are both · Analysing the population of all material journals posted to revenue
satisfied at a point in time, either upon delivery to Phoenix 2 Retail or upon nominal codes using data analytics to identify instances of manipulation or
delivery to final consumer under The Vaping Group agreement. While there is incorrect recognition;
limited judgement required by management in applying the Group's revenue
recognition policy, the differences in the timing of when revenue is to be · Performing, on a sample basis, substantive tests of detail on
recognised increases the risk of inappropriate revenue recognition under IFRS revenue transactions to ensure the accuracy and occurrence of revenue through
15 Revenue from contracts with customers. to supporting documents including sales invoices, shipping documentation and
bank statements; and
A material error in this balance could affect the financial statement user's
decision, and therefore revenue recognition is deemed to be a key audit matter · Testing the cut-off of revenue for the year by selecting samples
for the year ended 31 March 2024. from pre and post yearend revenue reports to ensure that revenue was
appropriately recognised in the correct period.
Key observations
Based on the audit procedures performed above, we did not identify any
instances of management override and are satisfied that revenue has been
recognised in accordance with the recognition criteria set out in IFRS 15.
Carrying value and recoverability of intangible assets (note 13)
The group has recognised an intangible asset of £1.1m at the year-end, Our work in respect of this key audit matter included:
pertaining to the domain name "Chill.com" which was acquired by the Group in
the year ended 31 March 2022. · Evaluating the carrying value as at 31 March 2024 in line with the
requirements of IAS 38 Intangible Assets;
The domain name is considered by management to be critical to the long-term
success of the group, with value being attributed to future cash inflows · Reviewing for indicators of impairment in accordance with the
derived directly from the intangible fixed asset. requirements of IAS 36;
Under IAS 36 Impairment of Assets, the domain name should be assessed at the · Obtaining management's impairment assessment and reviewing for
end of each reporting period for indicators of impairment. Where indicators of mathematical accuracy;
impairment are subsequently identified in the financial period, an assessment
of the asset's carrying value must be performed by management against its · Reviewing and challenging management's assessment of impairment of
recoverable amount. the intangible asset and all underlying inputs and assumptions used therein;
There is a prevailing risk that the carrying value of the domain name exceeds · Discussing with management the rationale and usage of the domain
the recoverable amount as at 31 March 2024, given that the group has made a name as part of considerations of the wider business operations and future
significant trading loss for the year ended 31 March 2024 and historically in plans; and
successive financial periods.
· Considering the adequacy of the disclosures and accounting policies
Any impairment assessment on the carrying value of the Chill.com domain name in respect of intangible assets in the financial statements.
will involve significant judgement and estimation from management due to the
inherent uncertainty and subjectivity around key assumptions incorporated into Key observations
the assessment.
Based on the audit procedures performed, we are satisfied with management's
Due to the estimation uncertainty on the determination of an appropriate assessment and conclusion that no impairment is required on the intangible
recoverable amount and the material nature of the carrying value of the domain asset.
name, this was considered to be a key audit matter in the audit for the year
ended 31 March 2024.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the group and parent company financial
statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received from
branches not visited by us; or
· the parent company financial statements and the part of the
directors' remuneration report to be audited are not in agreement with the
accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the group and parent company
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors
are responsible for assessing the group's and the parent company's ability to
continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the group and parent company and
the sector in which they operate to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial statements. We
obtained our understanding in this regard through discussions with management,
industry research, application of cumulative audit knowledge and experience of
the sector.
· We determined the principal laws and regulations relevant to the
group and parent company in this regard to be those arising from Companies Act
2006, Listing Rules, Disclosure and Transparency Rules, The Proceeds of Crime
Act, The Food Standards Agency (FSA), The Federal Food, Drug, and Cosmetic Act
(FD&C Act) as regulated by the FDA which regulates the synthetic nicotine
in the USA.
· We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by the group
and parent company with those laws and regulations. These procedures included,
but were not limited to:
o Enquiries of management;
o Review of Board and other Committee minutes;
o Review of Regulatory News Announcements (RNS); and
o Review of legal and regulatory correspondence.
· We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override
of controls.
· As in all of our audits, we addressed the risk of fraud arising
from management override of controls by performing audit procedures which
included, but were not limited to: the testing of journals; reviewing
accounting estimates for evidence of bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the
normal course of business. In this context we view the significant estimates
as being the carrying value and recoverability of the intangible asset, the
valuation of inventory and the valuation and classification of convertible
loan notes and the valuation of share-based payments.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor's report.
Other matters which we are required to address
We were appointed by the Board of Directors on 2 April 2024 to audit the
financial statements for the period ending 31 March 2024 and subsequent
financial periods. Our total uninterrupted period of engagement is 6 years,
covering the periods ending 31 March 2019 to 31 March 2024.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the group or the parent company and we remain independent of the
group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
Timothy Harris (Senior Statutory Auditor)
15 Westferry Circus
For and on behalf of PKF Littlejohn
LLP
Canary Wharf
Statutory
Auditor
London E14 4HD
20 June 2025
Chill Brands Group PLC
Consolidated Statement of Comprehensive Income
For the years ended 31 March 2024 and 2023
Notes Year ended 31 March 2024 £ Year ended 31 March 2023 £
Revenue 3 1,908,020 82,840
Cost of sales (61,798)
(1,040,053)
Obsolete inventory expense 15 (395,157) (227,901)
Gross profit / (loss) 472,810 (206,859)
Administrative expenses (3,523,507) (2,636,115)
Share expenses for options granted 20 - (1,126,846)
Operating Loss 5 (3,050,697) (3,969,820)
Finance income 87,033 24,159
Finance cost (377,082) (323,556)
Other income 270 6,203
Loss on ordinary activities before taxation (3,340,476) (4,263,014)
Taxation on loss on ordinary activities 8 - -
Loss for the period from continuing activities (3,340,476) (4,263,014)
Loss for the period from discontinued activities 9 (29,817) (24,877)
Loss for the period (3,370,293) (4,287,891)
Other comprehensive income
Items that may be re-classified subsequently to profit or loss: (32,832) (24,241)
Foreign exchange adjustment on consolidation
Total comprehensive income for the (3,403,125) (4,312,132)
period attributable to the equity holders
Basic and diluted earnings per share attributed to the equity holders:
Attributable to continuing activities (0.96) p (1.75) p
Attributable to discontinued activities (0.01) p (0.01) p
Total 10 (0.97) p (1.76) p
The notes on pages 62 to 90 form an integral part of the
financial statements.
Chill Brands Group PLC
Registered Number: 09309241
Consolidated Statement of Financial Position
At 31 March 2024 and 2023
Notes At 31 March 2024 At 31 March
£ 2023
£
Non-Current Assets
Property, plant, and equipment 11 28,780 42,612
Right of use lease asset 12 178,118 210,216
Intangible assets 13 1,135,497 1,209,424
Total Noncurrent Assets 1,342,395 1,462,252
Current Assets
Inventories, net of provisions 15 139,838 464,028
Trade and other receivables 16 2,467,704 447,367
Cash and cash equivalents 17 1,315,289 3,767,426
Total Current Assets 3,922,831 4,678,821
Total Assets 5,265,226 6,141,073
Non-Current Liabilities
Long-term debt, excluding current maturities 24 1,411,755 4,034,726
Right of use lease liability, net of current portion 12 92,243 149,755
Total Non-current Liabilities 1,503,998 4,184,481
Current Liabilities
Current maturities of long-term debt 24 211,017 468,893
Trade, other payables and accrued liabilities 18 886,941 540,641
Right of use lease liability, current portion 12 92,393 68,386
Total Current Liabilities 1,190,351 1,077,920
Total Liabilities 2,694,349 5,262,401
Net Assets 2,570,877 878,672
Equity
Share capital 19 4,953,169 2,611,153
Share premium account 19 14,755,570 10,923,000
Shared based payment reserve 21 4,516,608 4,516,608
Compound loan note equity component reserve 22 19,052 419,168
Shares to be issued reserve - 1,079,256
Foreign currency translation reserve 203,704 236,536
Other reserve 400,116 -
Retained loss (22,277,342) (18,907,049)
Total Equity 2,570,877 878,672
The notes on pages 62 to 91 form an integral part of the
financial statements. The financial Statements were approved by the Board of
Directors on 20 June 2025 and signed on their behalf by:
Callum Sommerton - Chief Executive Officer
Chill Brands Group PLC
Registered Number: 09309241
Company Statement of Financial Position
At 31 March 2024 and 2023
Notes At 31 March At 31 March
2024 2023
£ £
Current Assets
Inventories, net of provisions 15 106,735 21,082
Trade and other receivables 16 2,314,002 122,647
Cash and cash equivalents 17 1,225,912 3,544,243
Total Current Assets 3,646,649 3,687,972
Total Assets 3,646,649 3,687,972
Non-Current Liabilities
Long-term debt, excluding current maturities 24 1,411,001 4,024,766
Total Noncurrent Liabilities 1,411,001 4,024,766
Current Liabilities
Current maturities of long-term debt 24 202,000 459,792
Trade and other payables 18 528,403 164,463
Total Current Liabilities 730,403 624,255
Total Liabilities 2,141,404 4,649,021
Net Assets / (Liabilities) 1,505,245 (961,049)
Equity
Share capital 19 4,953,169 2,611,153
Share premium account 19 14,755,570 10,923,000
Shared based payment reserve 21 4,516,608 4,516,608
Compound loan note equity component reserve 22 19,052 419,168
Shares to be issued reserve - 1,079,256
Other reserve 400,116 -
Retained loss (23,139,270) (20,510,234)
Total Equity 1,505,245 (961,049)
The Company has taken advantage of Section 408 of the Companies Act 2006 and
has not included its own profit and loss account in these financial
statements. The loss for the financial period dealt with in the accounts of
the Company amounted to £2,629,036 (2023: loss £4,588,573). The Parent
Company has elected to prepare its financial statements in accordance with
UK-adopted IAS.
The notes on pages 62 to 91 form an integral part of the
financial statements.
The financial Statements were approved by the Board of Directors on 20 June
2025 and signed on their behalf by:
Callum Sommerton - Chief Executive Officer
Chill Brands Group Plc Consolidated Statement of Changes in Equity for the
years ended 31 March 2024 and 2023
Share capital Share premium Share Loan Note Equity Component reserve Shares to be issued reserve Foreign currency translation reserve Other reserve Retained Total
based payment losses
reserve
£ £ £ £ £ £ £ £ £
At 1 April 2022 2,120,700 10,298,440 3,389,762 - 89,517 260,777 - (14,619,158) 1,540,038
Loss for the year - - - - - - - (4,287,891) (4,287,891)
Other comprehensive loss - - - - - (24,241) - - (24,241)
Transactions with owners:
Issue of warrants and options - - 1,126,846 - - - - - 1,126,846
Shares to be issued - - - - 1,072,743 - - - 1,072,743
Issue of shares 490,453 799,471 - - (83,004) - - - 1,206,920
Costs of share issues (174,911) - - - - - - (174,911)
Equity component of loan notes - - - 419,168 - - - - 419,168
At 31March 2023 2,611,153 10,923,000 4,516,608 419,168 1,079,256 236,536 - (18,907,049) 878,672
Loss for the year - - - - - - - (3,370,293) (3,370,293)
Other comprehensive loss - - - - - (32,832) - - (32,832)
Transactions with owners:
Issue of shares 2,342,016 3,992,025 - - (1,060,000) - - - 5,274,041
Costs of share issues - (159,455) - - - - - - (159,455)
Transfer on conversion of convertible loan notes - - - (400,116) - - 400,116 - -
Termination of shares to be issued - - - - (19,256) - - - (19,256)
At 31 March 2024 4,953,169 14,755,570 4,516,608 19,052 - 203,704 400,116 (22,277,342) 2,570,877
The notes
on pages 62 to 91 form an integral part of the financial statements.
Chill Brands Group Plc Company Statement of Changes in Equity for the years
ended 31 March 2024 and 2023
Share capital Share premium Share Loan Note Equity Component reserve Shares to be issued reserve Other reserve Retained Total
based payment losses
reserve
£ £ £ £ £ £ £ £
At 1 April 2022 2,120,700 10,298,440 3,389,762 - 89,517 - (15,921,661) (23,242)
Loss for the year - - - - - - (4,588,573) (4,588,573)
Other comprehensive loss - - - - - - - -
Transactions with owners:
Issue of warrants and options - - 1,126,846 - - - - 1,126,846
Shares to be issued - - - - 1,072,743 - - 1,072,743
Issue of shares 490,453 799,471 - - (83,004) - - 1,206,920
Costs of share issues (174,911) - - - - - (174,911)
Equity component of loan notes - - - 419,168 - - - 419,168
At 31March 2023 2,611,153 10,923,000 4,516,608 419,168 1,079,256 - (20,510,234) (961,049)
Loss for the year - - - - - - (2,629,036) (2,629,036)
Other comprehensive loss - - - - - - - -
Transactions with owners:
Issue of shares 2,342,016 3,992,025 - - (1,060,000) - - 5,274,041
Costs of share issues - (159,455) - - - - - (159,455)
Transfer on conversion of convertible loan notes - - - (400,116) - 400,116 - -
Termination of shares to be issued - - - - (19,256) - - (19,256)
At 31 March 2024 4,953,169 14,755,570 4,516,608 19,052 - 400,116 (23,139,270) 1,505,245
The
notes on pages 62 to 91 form an integral part of the financial statements.
Chill Brands Group PLC
Consolidated Statement of Cash Flows
For the years ended 31 March 2024 and 2023
2024 £ 2023 £
Cash Flows From Operating Activities
Loss for the period (3,370,293) (4,287,891)
Adjustments for:
Depreciation and amortisation charges 216,760 132,779
Inventory impairment provision 395,157 227,901
Provision for expected credit losses 180,000 -
Promotional product in lieu of fees - 41,818
Share expenses for options granted - 1,126,846
Termination of shares to be issued (19,256) -
Imputed interest on convertible loan notes 343,300 177,722
Shares issued as compensation - 40,739
Foreign exchange translation adjustment (14,908) 1,157
Operating cash outflow before working capital movements (2,269,240) (2,538,929)
Increase in inventories (63,181) (30,029)
(Increase)/decrease in trade and other receivables (2,200,336) 288,864
Increase/(decrease) in trade and other payables 346,300 (234,692)
Net Cash outflow from Operating Activities (4,186,457) (2,514,786)
Cash Flows From Investing Activities
Payment on purchase of intangible assets - (639,192)
Net Cash generated from/(used in) Investing Activities - (639,192)
Cash Flows From Financing Activities
Net proceeds from issue of shares and shares to be issued 2,037,197 2,004,013
Proceeds from issue of convertible loan notes - 4,693,504
Payments on long-term debt (19,289) (18,859)
Interest paid (127,490) -
Payments of lease liabilities (151,873) (66,173)
Net Cash generated from Financing Activities 1,749,912 6,612,485
Net (decrease) / increase in cash and cash equivalents (2,447,912) 3,458,507
Cash and cash equivalents at beginning of period 3,767,426 420,405
Foreign exchange adjustment on opening balances (4,225) (111,486)
Cash and cash equivalents at end of period 1,315,289 3,767,426
Non-cash Items (not included in the cash flows above)
Shares to be issued for prepaid consulting fees - 60,000
Conversion of loan notes to ordinary shares 3,285,505 -
The notes on pages 62 to 91 form an integral part of the financial statements.
Chill Brands Group PLC
Company Statement of Cash Flows
For the years ended 31 March 2024 and 2023
2024 £ 2023 £
Cash Flows From Operating Activities
Loss for the period (2,629,036) (4,588,573)
Adjustments for:
Share expense for options granted - 1,126,846
Termination of shares to be issued (19,256) -
Shares issued as compensation - 40,739
Imputed interest on convertible loan notes 331,933 177,722
Inventory impairment provision 27,650 88,564
Provision for expected credit losses 180,000 -
Impairment provision of advances made to subsidiary 1,093,789 2,251,265
Operating cash flow before working capital movements (1,014,920) (903,437)
(Increase)/decrease in inventories (113,303) 14,964
(Increase)/decrease in trade and other receivables (2,371,354) 35,023
Increase/(decrease) in trade, other payables and accrued liabilities 363,961 (218,825)
Net Cash outflow from Operating Activities (3,135,616) (1,072,275)
Cash Flows From Investing Activities
Investment in and loan to subsidiary (1,093,789) (2,251,265)
Net Cash Used from Investing Activities (1,093,789) (2,251,265)
Cash Flows From Financing Activities
Net proceeds from issue of shares and shares to be issued 2,048,564 2,004,013
Proceeds from issuance of loan notes - 4,693,504
Payments on long-term debt (10,000) (10,000)
Interest paid (127,490) -
Net Cash Generated from Financing Activities 1,911,074 6,687,517
Net increase (decrease) in cash and cash equivalents (2,318,331) 3,363,977
Cash and cash equivalents at beginning of period 3,544,243 180,266
Cash and cash equivalents at end of period 1,225,912 3,544,243
Non-cash Items (not included in the cash flows above)
Shares to be issued for prepaid consulting fees - 60,000
Conversion of loan notes to ordinary shares 3,285,505 -
The notes on pages 62 to 91 form an integral part of the
financial statements.
Notes to the Financial Statements
1. General Information
1.1 Group
Chill Brands Group, PLC ("the Company") and its subsidiaries (together "the
Group") are involved in the sale and distribution of nicotine-free vape
products and other fast-moving consumer packaged-goods products. The Company,
a public limited company incorporated and domiciled in England and Wales, is
the Group's ultimate parent company. The Company was incorporated on 13
November 2014 with Company Registration Number 09309241 and its registered
officed and principle place of business is 27/28 Eastcastle Street, London W1W
8DH.
1.2 Company Income Statement
The Company has taken advantage of Section 408 of the Companies Act 2006 and
has not included its own profit and loss account in these financial
statements. The loss for the financial period dealt with in the accounts of
the Company amounted to £2,448,403 (2023: loss £4,588,573). The Parent
Company has elected to prepare its financial statements in accordance with
UK-adopted IAS.
2. Basis of
Preparation
The Consolidated Financial Statements of the Group have been prepared in
accordance with UK-adopted International Accounting Standards . The
Consolidated Financial Statements have been prepared under the historical cost
convention as adjusted to fair values where applicable. The principal
accounting policies are set out below and have, unless otherwise stated, been
applied consistently for all periods presented in these Consolidated Financial
Statements. The financial statements are prepared in pounds sterling and
presented to the nearest pound.
2.1 Basis of Consolidation
The Group financial information incorporates the financial information of the
Company and its controlled subsidiary undertakings, drawn up to 31 March 2024.
Control is achieved where the Company:
· Has power over the investee;
· Is exposed, or has rights, to variable return from its involvement
with the investee; and
· Has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins when the Company obtains control over the
subsidiary and ceases when the Company loses control of the subsidiary.
Where necessary, adjustments are made to the financial information of
subsidiaries to bring accounting policies into line with those used for
reporting the operations of the Group. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
2.2 Going Concern
The financial statements have been prepared on a going concern basis, which
assumes that the Group will continue in operational existence for the
foreseeable future, being a period of at least twelve months from the date of
approval of these financial statements. In forming their conclusion, the
Directors have undertaken a comprehensive assessment of the Group's current
financial position, cash flow forecasts, available funding arrangements, and
associated risks.
In the time since the end of the Period, the Company's operations were
primarily supported through revenue generated from commercial activities
undertaken in the prior financial year, supplemented by funds raised in a
financing round completed in January 2024. This period required particularly
careful cash management, as the Company's financial position was impacted by
the significant legal and professional costs incurred in relation to corporate
disputes and associated matters.
Looking ahead to the financial year commencing 1 April 2025, the Board expects
the Company's financial requirements to be met through further capital raising
activities. On 23 May, the Company announced that it had raised £1 million
from subscriptions for the issue of convertible loan notes carrying an annual
interest rate of 10%, a three-year maturity, and convertible into ordinary
shares at a price of 1.5 pence per share. In addition, investors will receive
warrants attached to the CLNs, priced in line with the volume-weighted average
price (VWAP) of the Company's shares at the time of each drawdown.
The Board considers that the capital provided under the current financing
facility will be sufficient to support the continuation of the Company's core
commercial operations throughout the financial year ending 31 March 2026.
Nevertheless, it may be necessary for the Company to raise additional funding
in the future in order to remain viable as a going concern, particularly in
the event of unforeseen operational costs or if strategic growth opportunities
are to be pursued.
Based on the Company's demonstrated ability to secure financial backing from
both new and existing investors in recent periods, and the continued support
of major shareholders, the Directors are confident in their ability to raise
further funds if and when required.
However, there remains a material uncertainty which may cast significant doubt
on the Company's ability to continue as a going concern. The ability of the
Company to continue its operations is dependent on the successful raising of
additional funding as and when required. These conditions indicate the
existence of a material uncertainty which may cast significant doubt upon the
Company's ability to continue as a going concern and, therefore, it may be
unable to realise its assets and discharge its liabilities in the normal
course of business.
The Directors have reviewed detailed cash flow projections covering the period
to 30 June 2026, which take into account the anticipated timing of drawdowns
under the CLN facility and the projected cost base of the Group under various
trading scenarios. These projections indicate that the Group will have
sufficient financial resources to meet its liabilities as they fall due,
subject to successful execution of the fundraising strategy and timely access
to committed capital.
However, the Directors acknowledge that material uncertainty exists in
relation to the Group's ability to raise additional capital beyond the
currently committed facility in the event that revenue growth does not
accelerate in line with management expectations. In such a scenario, it may be
necessary to implement further cost reduction measures to preserve liquidity.
These may include the deferral or reduction of Directors' remuneration, the
scaling back of commercial operations to a core cost base, the renegotiation
or termination of supplier agreements, and a reduction in personnel. While
these actions could have an adverse impact on commercial performance, they are
expected to materially reduce operating expenses and thereby extend the
Group's cash runway.
Notwithstanding this material uncertainty, after making enquiries and
considering the options available to the Company, the Directors have a
reasonable expectation that the Company has adequate resources to continue in
operational existence for at least 12 months from the date of approval of
these financial statements. Accordingly, the Directors continue to adopt the
going concern basis of accounting in preparing these financial statements.
2.3 Business Combinations
There were no Business Combinations as defined by IFRS 3 (revised) during the
period.
The acquisition of subsidiaries is accounted for using the acquisition method
of accounting. The cost of acquisition is measured at the aggregate of the
fair values, at the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of
the acquiree, plus any costs directly attributable to the business
combination. The acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3 are
recognised at their fair values at the acquisition date.
2.4 Revenue Recognition
The Group has received revenue during the period from the sale of
nicotine-free vape products and other related products. The Group has both
online sales of these products and retail sales through distribution channels
in the United States and United Kingdom.
Online sales; the Group recognises revenues from the sales of products as
the performance obligations are met. These performance obligations are met
once the product has been invoiced and shipped to the purchaser under the
terms of the contract and the significant risks and rewards of ownership have
been transferred to the customer.
Retail sales; the Group has distribution agreements with wholesale
distributors who distribute the products to retail stores throughout the
United States and United Kingdom. Revenue on distributor sales is recognised
as the performance obligation is satisfied when the distributor initiates a
purchase order and the product has shipped. For retail customer revenue, the
performance obligation is satisfied when all contractual terms are met and
ownership has been transferred to the customer.
Market Place Arrangement Sales; the Group has marketplace agreements with
vendors who sell products on the Chill.com domain and pay Chill a commission
fee. Revenue on Market Place Arrangement sales is recognised as the
performance obligation is satisfied once the product owned by the vendor has
been delivered to the purchaser under the terms of the contract and the
significant risks and rewards of ownership have been transferred to the
customer.
All revenues have been recognised at a point in time under IFRS 15 Revenue
from Contracts with Customers.
2.5 Segmental Reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker ("CODM"). The CODM,
who is responsible for allocating resources and assessing performance of the
operating segments, is Callum Sommerton, CEO.
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other operating segments.
The Board of Directors assess the performance of the operating segments (by
geographical location, being the UK and US) based on the measures of revenue,
gross profit, operating profit and assets employed.
2.6 Foreign Currency Translation
The Company's consolidated financial statements are presented in Sterling
(£), which is also the functional currency of the parent company. The
individual financial statements of each group entity are presented in the
currency of the primary economic environment in which the entity operates (its
functional currency). For UK based companies the functional currency is
Sterling and for all USA based companies the functional currency is US
Dollars.
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity's functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary items denominated in
foreign currencies are retranslated at the rates prevailing on the balance
sheet date. Non-monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing on the date when
the fair value was determined.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in the income statement for the
period. When a gain or loss on a non-monetary item is recognised directly in
equity, any exchange component of that gain or loss is also recognised
directly in equity. When a gain or loss on a non-monetary item is recognised
in the income statement, any exchange component of that gain or loss is also
recognised in the income statement.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations (including comparatives) are
expressed in Sterling using exchange rates prevailing on the balance sheet
date. Income and expense items (including comparative) are translated at the
average exchange rates for the period. Exchange differences arising, if any,
are recognised in equity. Cumulative translation differences are recognised in
profit or loss in the period in which the foreign operation is disposed of.
2.7 Defined Contribution Pension Funds
The Group pays contributions related to salary to certain UK employees'
individual pension schemes. The pension cost charged against profits
represents the amount of the contributions payable to the schemes in
respect of the accounting period. No separate provision is made in respect of
non-UK employees.
2.8 Investment In Subsidiaries
Investment in subsidiaries comprises shares in the subsidiaries stated at cost
less provisions for impairment.
2.9 Property, Plant, and Equipment
All plant and machinery is stated in the financial statements at cost of
acquisition less a provision for depreciation and impairment.
Depreciation is charged to write off the cost less estimated residual values
of plant and equipment on a straight line basis over their estimated useful
lives and included in administrative expenses in the statement of
comprehensive income. Estimated useful lives and residual values are reviewed
each year and amended if necessary.
Fixed Assets Useful lives
Office and field equipment and furniture 3-7 years
Right of Use Lease Assets
The Group determines if an arrangement is a lease at inception if the contact
conveys the right to control the use and obtain substantially all the economic
benefits from the use of an identified asset for a period of time in exchange
for consideration.
The Group identifies a lease as a finance lease if the agreement includes any
of the following criteria: transfer of ownership by the end of the lease term;
an option to purchase the underlying asset that the lessee is reasonably
certain to exercise; a lease term that represents 75 percent or more of the
remaining economic life of the underlying asset; a present value of lease
payments and any residual value guaranteed by the lessee that equals or
exceeds 90 percent of the fair value of the underlying asset; or an underlying
asset that is so specialised in nature that there is no expected alternative
use to the lessor at the end of the lease term. A lease that does not meet any
of these criteria is considered an operating lease.
Lease right-of-use assets represent the Group's right to use an underlying
asset for the lease term and lease liabilities represent the Group's
obligation to make lease payments arising from the lease. Right-of-use assets
and liabilities are recognised at the commencement date of a lease based on
the present value of lease payments over the lease term. The Group's lease
terms may include options to extend or terminate the lease. The Group includes
these extension or termination options in the determination of the lease term
when it is reasonably certain that the Group will exercise that option. The
Group does not recognise leases having a term of less than one year in our
consolidated statement of financial position.
Lease modifications are accounted for as a separate lease if the modification
increases the scope of the lease by adding the right to use one or more
underlying assets, and the consideration for the lease increases by an amount
commensurate with the stand-alone price for the increase in scope. Other
modifications are remeasured by adjusting the lease liability and the
right-of-use asset using a revised discount rate at the effective date of the
modification.
2.10 Intangible Fixed Assets
The Group purchased the domain name Chill.com on 22 June 2021. This domain
name is the only intangible asset held by the Group.
This domain name is stated in the financial statements at its cost of
acquisition less accumulated amortisation. The domain name is amortised over
25 years using the straight line method. The amortisation expense is included
in administrative expenses in the statement of comprehensive income. The
balance as at 31 March 2024 is £1,135,497 (2023: £1,209,424). The
amortisation expense for the year ended 31 March 2024 is £51,521 (2023:
£50,470). The net impact of translation adjustments on the intangible asset
in the year ended 31 March 2024 was £22,406 (2023: £69,669) .
In accordance with IAS 36 Impairment of Assets, the Group assesses impairment
of the intangible asset if internal or external factors or events cause the
discounted fair value to be below the carrying value of the intangible asset.
Assessment is performed as to whether indicators are met; at which point if
they are an impairment assessment is performed whereby the Company assesses
the carrying value versus the recoverable amount. Any impairment is recognised
within administrative expenses in the statement of comprehensive income.
Management has deemed the recoverable amount to be the value in use, which is
determined via discounting future cash flows using an appropriate discount
rate.
2.11 Impairment Testing of Property, Plant and Equipment
At each balance sheet date, the Group assesses whether there is any indication
that the carrying value of any asset may be impaired. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units).
Individual assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not
be recoverable.
An impairment loss is recognised for the amount by which the asset's or
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use, based on in internal discounted cash
flow evaluation. Any remaining impairment loss is charged pro rate to the
other assets in the cash generating unit.
2.12 Inventories
Inventories are stated at lower of cost and net realisable value. Costs of
inventories are determined on a first-in-first-out basis. Net realisable value
represents the estimated selling price for inventories less all estimated
costs of competition and costs necessary to make the sale.
Given the shelf‐life of the Company's products, along with their relative
saleability depending on remaining useful life, the following inventory
provisioning policies shall apply. Exceptions may be applied at the discretion
of the Board.
Label Life Remaining Recognised Value (%)
Receipt of Product 100%
Six Months 75%
Four Months 50%
Two Months 25%
One Month 10%
Post-Expiry Date 0%
2.13 Long-Term Debt
Government Loans
The Group received a Paycheck Protection Program (PPP) loan during the year
ended 31 March 2021 from the Small Business administration (SBA) as part of
the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The loan is
designed for qualifying businesses for amounts up to 2.5 times of the average
monthly payroll expense of the qualifying business. The SBA will forgive PPP
loans if all employee retention criteria are met and the funds are used for
eligible expenses. The PPP loan initially is recorded as debt on the
financials and 100% unsecured. If the loan is not forgiven, the Group must pay
monthly principal and interest payments loan at a stated interest rate per
year. The Group recognises grant income equal to PPP proceeds received upon
forgiveness of the loan.
The Group received a Bounce Back Loan Scheme (BBLS) loan during the year ended
31 March 2021 managed by the British Business Bank on benefit of and with the
financial backing of the Secretary of State for Business, Energy and
Industrial Strategy. The BBLS loan initially is recorded as debt on the
financials and the Group pay monthly principal and interest payments at a
stated interest rate.
See Note 24 for additional information regarding these loans.
Convertible Loan Notes
The convertible loan note agreements, entered into by the Company in the prior
financial year ended 31 March 2023, have been classified as compound financial
instruments under IAS 32 Financial Instruments: Presentation. The fair value
of the liability component is valued at the net present value of the
contracted future cash flows, discounted at the Group's estimated cost of
borrowing and is reported within loans and current maturity of loans.
Interest imputed on the liability component is amortised to the statement of
comprehensive income on a straight-line basis over the life of the
instrument. The equity component represents the residual amount after
deducting the amount for the liability from the value of the loan note
principal. Further details of the loan note can be found in Note 24.
2.14 Equity
Share capital is determined using the nominal value of shares that have been
issued.
The Share premium account includes any premiums received on the initial
issuing of the share capital. Any transaction costs associated with the
issuing of shares are deducted from the Share premium account, net of any
related income tax benefits. Equity-settled share-based payments are credited
to a Share-based payment reserve as a component of equity until related
options or warrants are exercised.
Shares to be issued are credited to the shares to be issued reserve as a
component of equity until related shares are issued.
Retained loss includes all current and prior period results as disclosed in
the income statement.
2.15 Share-based Payments
The Group has issued warrants to investors and certain counterparties and
advisors as well as share options to its Directors and US based staff.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non-market based vesting conditions) at the date of grant. The fair
value so determined is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of the number of shares that will
eventually vest and adjusted for the effect of non-market based vesting
conditions.
Fair value is measured using either a Black Scholes or Monte Carlo pricing
model, depending upon which methodology is most appropriate in relation to the
terms and conditions of the options or warrants granted. The key assumptions
used in the models have been adjusted, based on management's best estimate,
for the effects of non-transferability, exercise restrictions and behavioral
considerations.
The Group issues shares allocated as compensation to its US based staff and
Directors. Upon vesting date, the shares are valued at the stated par value
and share premium and recorded as compensation expense and share premium in
the financial statements.
2.16 Taxation
Tax currently payable is based on taxable profit for the period. Taxable
profit differs from profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilized. Such
assets and liabilities are not recognised if the temporary difference arises
from initial recognition of goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit not the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is
charged or credited to profit or loss, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt
with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
2.17 Financial Assets and Liabilities Financial Assets
(a) Classification
The Group classifies its financial assets at amortised cost. The
classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at
initial recognition.
(b) Recognition and measurement
Amortised cost
Regular purchases and sales of financial assets are recognised at cost on the
trade date, the date on which the Group commits to purchasing or selling the
asset. Financial assets are derecognised when the rights to receive cash flows
from the assets have expired or have been transferred, and the Group has
transferred substantially all of the risks and rewards of ownership.
(c) Impairment of Financial Assets
The Group recognises an allowance for expected credit losses ("ECLs") for all
debt instruments not held at fair value through profit or loss. ECLs are based
on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original expected interest rate ("EIR").
The expected cash flows will include cash flows from the sale of collateral
held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has
not been a significant increase in credit risk since initial recognition. ECLs
are provided for credit losses that result from default events that are
possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For trade receivables (not subject to provisional pricing) and other
receivables due in less than 12 months, the Group applied the simplified
approach in calculation ECLs, as permitted by IFRS 9. Therefore, the Group
does not track changes in credit risk, but instead, recognised a loss
allowance based on the financial asset's lifetime ECL at each reporting date.
The Group considers a financial asset to be in default when internal or
external information indicates that the Group is unlikely to receive the
outstanding contractual amounts in full before taking into account any credit
enhancements held by the Group. A financial assets is written off when there
is no reasonable expectation of recovering the contractual cash flows and
usually occurs when past due for more than one year and not subject to ongoing
negotiations or enforcement activity.
Additionally, the Group will also take into account any circumstances relating
to trade debtors when determining whether an asset is in default or not. Where
the Group considers there to be a reasonable prospect of recovery, especially
where there is an ongoing trading relationship with the debtor, the Group may
consider it appropriate not to deem an asset in default.
(d) Derecognition
The Group derecognises a financial asset only when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset
and substantially all the risks and rewards of ownership of the asset to
another entity.
On derecognition of a financial asset measured at amortised cost, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss.
Financial liabilities
(a) Classification
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate. All financial liabilities are recognised initially at
fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs. The Group's financial liabilities
include trade and other payables and loans.
(b) Subsequent measurement
The measurement of financial liabilities depends on their classification, as
described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial
liabilities designated upon initial recognition as at fair value through
profit or loss. Financial liabilities are classified as held for trading if
they are incurred for the purpose of repurchasing in the near term. This
category also includes derivative financial instruments entered into by the
Group that are not designated as hedging instruments in hedge relationships as
defined by IFRS 9. Separated embedded derivatives are also classified as held
for trading unless they are designated as effective hedging instruments. Gains
or losses on liabilities held for trading are recognised in the statement of
profit or loss and other comprehensive income.
Trade and other payables
After initial recognition, trade and other payables are subsequently measured
at amortised cost using the EIR method. Gains and losses are recognised in the
statement of profit or loss and other comprehensive income when the
liabilities are derecognised, as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss
and other comprehensive income.
(c) Derecognition
A financial liability is derecognised when the associated obligation is
discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in profit or loss and other
comprehensive income.
Liabilities within the scope of IFRS 9 are classified as financial liabilities
at fair value through profit and loss or other liabilities, as appropriate. A
financial liability is derecognised when the obligation under the liability is
discharged or cancelled or expires. Financial liabilities included in trade
and other payables are recognized initially at fair value and subsequently at
amortised cost.
2.18 Significant estimates and judgements
In the process of applying the entity's accounting policies, management makes
estimates and assumptions that have an effect on the amounts recognised in the
financial information. Although these estimates are based on management's best
knowledge of current events and actions, actual results may ultimately differ
from those estimates. The key assumptions concerning the future, and other key
sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial period, are those relating
to:
· the carrying value and recoverability of investments in, and
loan to, subsidiary companies (Note 14)
· Fair value of options and warrants granted (Note 20)
· Useful life, lifespan and carrying value of the domain name
Chill.com (Note 13)
· the provisions for inventory assets (Note 15)
· the calculation of the debt and equity component of the
convertible loan notes (Note 22)
Carrying Value and recoverability of Investment in, and Loan to, Subsidiary
Companies
The Company has invested in the subsidiary companies which, whilst generating
revenues, are not yet profitable or providing cash flows. The estimates used
in forecasting the potential future cash generation by the own-branded product
operations focus on business sensitive factors such as distribution
agreements, sales volume, pricing and cost of sales. The Directors considered
the recoverability of the loans to subsidiaries and do not expect to recover
the loans in the near future. Due to this the Group has considered it
necessary to impair the entirety of the loans to subsidiary companies.
Fair Value of Options and Warrants Granted
Fair value is measured using either a Black Scholes or Monte Carlo pricing
model, depending upon which methodology is most appropriate in relation to the
terms and conditions of the options or warrants granted. The key assumptions
used in the models have been adjusted, based on management's best estimate,
for the effects of non-transferability, exercise restrictions and behavioral
considerations, see Note 20.
Useful life and Recoverability of the Carrying Value of the Domain Name
The domain name is amortised over 25 years using the straight line method,
which was determined to be the estimated useful life of the domain name asset
by the Group based on industry analysis. The Group analyses impairment of
the domain name if internal or external factors or events cause the
recoverable amount to be below the carrying value of the intangible asset. An
impairment loss is recognised within administrative costs within the statement
of comprehensive income for the amount by which the asset's carrying amount
exceeds its estimated recoverable amount less costs to sell. The discounted
cash flow approach was undertaken in assessing the domain name impairment.
We have prepared a discounted cash flow model projecting cash flows from 2025
to 2045, incorporating annual sales growth, gross margins, a present value
discount at the rate of 14.44% based on the Capital Asset Pricing Model
(CAPM), and a terminal value as at 2045.
Provisions for Inventory Assets
Given the shelf‐life of the Company's products, along with their relative
salability depending on remaining useful life, the Group provides inventory
provisions based on estimated shelf live, discussed above in note 2.12.
Provisions for inventory are recorded when events or changes in circumstances
indicate the carrying cost of inventories will not be fully realised.
Convertible Loan Note Classification
The convertible loan note agreements, entered into by the Company in prior
financial period have been classified as compound financial instruments
under IAS 32. The fair value of the liability component is valued at the net
present value of the contracted future cash flows, discounted at the Group's
estimated cost of borrowing of 12.5%. The equity component represents the
residual amount after deducting the amount for the liability from the value of
the funds received.
Measurement of expected credit losses
The measurement of both the initial and ongoing ECL allowance for trade
receivables measured at amortised cost is an area that requires the use of
significant assumptions about credit behaviour such as likelihood of customers
defaulting and the resulting losses. In assessing the probability of default,
the Board has taken note of the experience and loss history of its customers
which may not be indicative of future losses. The default probabilities are
based on a number of factors including customer and sectoral trends which the
Board believes to be a good predictor of the probability of default. The Group
has applied the simplified approach to recognise lifetime expected credit
losses for its trade receivables as required or permitted by IFRS 9.
Management has performed a calculation to ascertain the expected credit loss
provision, which for the year ended 31 March 2024 amounted to £180,000 (2023:
£nil). The movement has been recognised in the statement of comprehensive
income.
2.18 Standards, Amendments and Interpretations to Existing Standards that
are not yet Effective and Have not been Early Adopted by the Group
(a) New and amended Standards and Interpretations adopted by the Group
and Company
No standards or Interpretations that came into effect for the first time for
the financial year beginning 1 April 2023 have had an impact on the Group.
(b) New and amended Standards and Interpretations issued but not
effective for the financial year beginning 1 April 2024
At the date of approval of these financial statements, the following standards
and interpretations which have not been applied in these financial statements
were in issue but not yet effective (and in some cases had not been adopted by
the UK):
- Amendments to IAS 21: Lack of exchangeability - effective 1 January
2025*
- Amendments to IFRS 18: Presentation and Disclosures in Financial
Statements - effective 1 January 2027*
- Amendments to IFRS 19: Subsidiaries without Public Accountability:
Disclosures - effective 1 January 2027*
*subject to UK endorsement
The new and amended Standards and Interpretations which are in issue but not
yet mandatorily effective are not expected to be material.
3. Revenue
2024 2023
£ £
Sales of consumer packaged goods products 1,908,020 82,840
The geographical split of revenues which all related to nicotine-free vapes or
sales of third party branded products can be seen in note 4 below.
Approximately 85% of the Company's sales during the year ended 31 March 2024
were derived from one UK customer.
4. Segment Reporting
Under IFRS 8, there is a requirement to show profit or loss for each
reportable segment and total assets and total liabilities for each reportable
segment if such amounts are regularly provided to the CODM, being the Chief
Executive Officer. The Company considers there is only one business segment
and the Group has analysed the Group's activity based on geographical
location.
Results by geographical location:
US Operations UK Operations Intra-Group Eliminations Total
Year ended 31 March 2024 £ c £ £
Revenue 68,719 1,839,301 - 1,908,020
Cost of revenue (83,541) (956,512) - (1,040,053)
Obsolete inventory expense (367,507) (27,650) - (395,157)
Gross profit (loss) (382,329) 855,139 - 472,810
Other operating costs (1,461,021) (2,072,934) 10,448 (3,523,507)
Finance costs (5,149) (371,933) - (377,082)
Finance income 12 87,021 - 87,033
Other income 25 245 - 270
Recovery (impairment) of intercompany loan 1,104,240 (1,093,792) (10,448) -
Net loss from continuing activities (744,222) (2,596,254) -
(3,340,476)
Total assets 1,618,577 3,646,648 - 5,265,225
Net assets 1,065,635 1,505,241 - 2,570,876
US Operations UK Operations Intra-Group Eliminations Total
Year ended 31 March 2023 £ c £ £
Revenue 64,167 18,673 - 82,840
Cost of revenue (33,964) (27,834) - (61,798)
Obsolete inventory expense (139,337) (88,564) - (227,901)
Gross profit (loss) (109,134) (97,725) - (206,859)
Share-based payments charge - (1,126,846) - (1,126,846)
Other operating costs (1,822,625) (813,490) - (2,636,115)
Finance costs (323,556) (323,556)
Other income 6,053 24,309 - 30,362
Recovery (impairment) of intercompany loan 2,184,257 (2,251,265) 67,008 -
Net income (loss) from continuing activities 258,551 (4,588,573) 67,008
(4,263,014)
Total assets 2,453,101 3,687,972 - 6,141,073
Net assets / (liabilities) 1,839,721 (961,049) - 878,672
All of the Group's activities related to its business in the United States
and UK. Information relating to the CBD activities are shown in the primary
statements, therefore all IFRS disclosures are incorporated within other notes
to the financial statements.
5. Nature of Expenses
2024 2023
£ £
Within administrative expenses and share expenses for options granted, the
following non-cash expenses are included:
Depreciation of property, plant and equipment 13,150 14,405
Depreciation of right of use asset 150,200 67,904
Amortisation of the domain name "Chill.com" 51,521 50,470
Provision for expected credit losses 180,000 -
Finance costs 377,082 323,556
Share-based payments charge - 1,126,846
Lease operating expenses - 48,669
Auditor's remuneration
- Audit of Group (note 7) 122,000 122,000
- Non-audit services 45,000 -
Director's remuneration (including share-based payment charge) 427,347 434,277
Staff costs (including Directors) 550,558 609,386
6. Directors and Staff Costs
The average number of staff during the year, including Directors, was 7 (2023:
5). As shown staff costs for the Group, for the year, including Directors,
were:
2024 2023
£ £
Salaries 469,359 536,049
Pension contributions 2,642 2,311
Healthcare Costs 57,281 46,287
529,282 584,647
Social Security and other payroll tax costs 21,277 24,739
550,559 609,386
The Directors have determined that there are no key management personnel other
than the Directors during the year. Management remuneration paid and other
benefits supplied to the Directors during the period plus the associated
social security costs were as follows:
2024 2023
£ £
Salaries 348,081 367,247
Pension contributions 2,642 2,311
Healthcare Costs 49,221 46,287
399,944 415,846
Social Security and other payroll tax costs 27,403 18,431
427,347 434,277
7. Auditor's Remuneration
2024 2023
Chill Brand Group PLC £ £
Fees payable to the company's auditor for the audit of the individual and 67,200 67,200
group accounts
Non-audit services 45,000 -
Chill Corporation
Fees payable to the company's auditor for the audit of the individual accounts 54,800 54,800
8. Taxation
2024 2023
£ £
Current tax - -
Deferred tax - -
Total - -
The charge/credit for the period is made up as follows:
Corporate taxation on the results for the period - -
UK - -
Non-UK - -
Taxation charge/credit for the period - -
A reconciliation of the tax charge/credit appearing in the income statement to
the tax credit that would result from applying the standard rate of tax to the
results for the period is:
Loss per accounts (3,370,293) (4,287,891)
Tax credit at the standard rate of corporation tax at a combined rate of 24% (808,870) (857,578)
(2023:20%)
Impact of unrelieved tax losses carried forward 808,870 (857,578)
Taxation credit for the period - -
The Directors consider that there are no material disallowable costs or timing
differences in respect of the current year.
Estimated tax losses of £14.9 million (2023: £11.9 million) may be
available for relief against future profits, however, the estimated tax losses
are dependent on eradication of losses on the change from a natural resources
business to a consumer packaged-goods business. The deferred tax asset not
provided for in the accounts based on the estimated tax losses and the
treatment of temporary timing differences, is approximately £3.2 million
(2023: £2.4 million). Utilisation of these losses in future may or may not be
possible depending upon future profitability within the Group and the
continued availability of the losses due to the change in the Group's core
activities. The losses from the previous oil and gas activities have been
excluded from the above due to the uncertainty of the value of the losses due
to the change in activities.
No deferred tax asset has been recognised by the Group due to the uncertainty
of generating sufficient future profits and tax liability against which to
offset the tax losses. Although current tax rates in the U.S. differ to those
in the UK, due to the uncertainty of timing of any available relief and the
Corporation tax rates that would be applicable at that time in either the UK
or the U.S., where the Group's operations principally occur, the Directors
have assumed that the applicable tax rate will be 24%, which is a blended rate
given that the tax rate in the USA is 21 percent and the main profits rate
in the UK is 25 percent.
9. Loss for the Period from Discontinued Activities
During the year ended 31 March 2020, the Board decided that the Group should
withdraw from all oil and gas activities due to the continued volatility in
the sector and the lack of progress in establishing profitable niche positions
for the Group. The Group disposed of its interest in its East Denver producing
wells, its Kansas operations and its patent portfolio along with its premises
leases during the current year. The Group continues to incur costs on this
sector in relation to the growing of the vegetation of the land in order to
retrieve the bond deposit with the state.
The results of the discontinued operations which have been included in the
consolidated income statement were as follows:
Year ended 31 March 2024 Year ended 31 March 2023
£ £
Revenue and other income - -
Administrative expenses (29,817) (24,877)
Operating loss (29,817) (24,877)
Loss on ordinary activities before taxation (29,817) (24,877)
Taxation on loss on ordinary activities - -
Loss for the period from discontinued activities (29,817) (24,877)
Cash flows from discontinued activities
Operating activities (29,817) (24,877)
Investing activities - -
Financing activities - -
(29,817) (24,877)
10. Loss Per Share
Loss (£) Weighted average number of shares Per share amount (£)
For the year ended 31 March 2024
Basic loss per share:
Continuing activities (3,340,476) 345,693,745 (0.96)p
Discontinued activities (29,817) 345,693,745 (0.01)p
Totals (3,370,293) 345,693,745 (0.97)p
For the year ended 31 March 2023
Basic loss per share
Continuing activities (4,263,014) 242,977,694 (1.75)p
Discontinued activities (24,877) 242,977,694 (0.01)p
Totals (4,287,891) 242,977,694 (1.76)p
The calculation of the loss per share is based on the weighted average of
345,693,745 shares (2023: 242,977,694 shares). The calculation includes
ordinary shares in issue during the period and on the loss for the financial
period after taxation of £3,370,294 (2023: £4,287,891) split between the
loss on continuing activities of £3,340,476 (2023: £4,263,014) and the
loss on discontinued activities of £29,817 (2023: £24,877).
Basic earnings per share is based on net income and is calculated based upon
the daily weighted-average number of common shares outstanding during the
periods presented, Also, this calculation includes fully vested stock awards
that have not been issued as common stock.
Diluted loss per share is calculated by dividing the results after tax
attributable to members by the weighted average number of shares in issue,
adjusted for potentially dilutive share options. Given that the Group is in a
loss position, diluted loss per share has not been presented and the basic
measure has been used.
11. Property, Plant and Equipment
Group Cost Plant and Equipment Total
£ £
At 31 March 2022 90,048 90,048
Translation adjustment 5,462 5,462
At 31 March 2023 95,510 95,510
Depreciation
At 31 March 2022 35,875 35,875
Charge for the year 14,405 14,405
Translation adjustment 2,618 2,618
At March 31 2023 52,898 52,898
Cost
At 31 March 2023 95,510 95,510
Translation adjustment (1,808) (1,808)
At 31 March 2024 93,702 93,702
Depreciation
At 31 March 2023 52,898 52,898
Charge for the year 13,150 13,150
Translation adjustment (1,126) (1,126)
At 31 March 2024 64,922 64,922
Net book Value
At 31 March 2022 54,173 54,173
At 31 March 2023 42,612 42,612
At 31 March 2024 28,780 28,780
12. Right-of-Use Asset
Asset Liability
£ £
As of 31 March 2023 210,216 (218,141)
Lease additions 94,703 (94,703)
Lease modifications 27,826 (27,826)
Depreciation of right of use assets (152,089) -
Lease liability principal repayments - 151,873
Foreign currency differences (2,538) 4,161
As of 31 March 2024 178,118 (184,636)
Future minimum lease payments under non-cancellable operating leases 31 March 2024
£
Within one year 92,393
Within two to five years 92,243
Total 184,636
The Group leases an office and warehouse space under non-cancelable operating
leases with remaining lease terms expiring on 30 April 2026 ( with an option
to extend for another 5 years) and 31 May 2024, respectively. The right of
use assets are carried at £178,118 and is reported within non-current assets
in the Consolidated Statement of Financial Position. Operating liabilities are
reported within the non-current liabilities in the Consolidated Statement of
Financial Position. The Group has not entered into any finance leases.
Operating lease costs under this lease for the year ended 31 March 2024
totalled £nil (2023: £68,124).
For leases with a term of 12 months or less (short-term leases) with no
purchase option, IFRS 16 permits a lessee to make an accounting policy
election by class of underlying asset not to recognise lease assets and lease
liabilities. If a lessee makes this election, it should recognise the lease
expense for such leases generally on a straight line basis over the lease
term. In the year ended 31 March 2023, the Group made this accounting policy
election related to short-term leases for all classes of underlying assets and
therefore the Group did not recognise lease assets and lease liabilities
related to the lease with Racquette Hanger, LLC as discussed in note 26. In
the year ended 31 March 2024, the Group agreed to lengthen the agreed lease
terms with Racquette Hanger, LLC by 12 months. These modifications have
resulted in an increase in the total amounts payable under the existing lease
and a corresponding recognition to both of the right-of-use asset and lease
liabilities with effect from the date of modification (9 June 2023).
Accordingly, the Group recognised a right-of-use asset and lease liability of
£94,733 based on the modified lease payments using the discount rate on the
modification date.
13. Intangible Assets
Domain Name "Chill.com"
£
Cost
Balance at 31 March 2023 1,300,456
Translation adjustments (24,616)_
Balance at 31 March 2024 1,275,840
Accumulated amortisation
Balance at 31 March 2023 (91,032)
Charge for the year (51,521)
Translation adjustments 2,210
Balance at 31 March 2024 (140,343)
Intangible Asset, net at 31 March 2023 1,209,424
Intangible Asset, net at 31 March 2024 1,135,497
The Group entered into an agreement to purchase the domain name "Chill.com"
and all intellectual property rights that it has accrued in connection with
the domain name and its use. The Group values the intangible assets at cost in
accordance with IAS 38 Intangible Assets.
For the purposes of recognition of the asset's value, the Group has determined
that the Chill.com domain has an estimated useful life of 25 years, and its
value should therefore be amortised over that same period. As at 31 March
2024, the remaining useful life was approximately 22 years.
In determining the appropriate estimated useful life of the Asset, the Group's
management has given consideration to the following factors:
· the treatment of domain assets by international regulatory
bodies;
· the impact of the Asset on revenues generated by the Group;
· the continued development of an e-commerce platform under the
Asset;
· the commercial opportunities attracted by ownership of the Asset;
and
· the likelihood of realising the assets full purchase value on any
future disposal.
In accordance with IAS 36 Impairment of Assets, the Group assesses impairment
of the intangible asset if internal or external factors or events cause the
recoverable amount to be below the carrying value of the intangible asset.
Assessment is performed as to whether indicators are met; at which point if
they are an impairment assessment is performed whereby the Company assesses
the carrying value versus the recoverable amount. Impairment charges are
recognised within administrative expenses in the statement of comprehensive
income.
The following potential indicators of impairment were highlighted by this
review:
- Sales through the website in the year ended 31 March 2024 were below
forecasts produced in the prior year.
- Legislation enacted by the UK government prohibited the sale of
disposable vape products from 1 June 2025, impacting on the Company's prior
intentions to continue sales of such products.
Whilst sales of third-party brands made through the domain during the
financial year were lower than previously forecasted, the bearing of this
performance on future growth is, in the opinion of the Company's management,
limited. This is because while the domain was acquired with ambitious growth
aspirations, little was done in practice to realise these goals or to deliver
growth. In particular, the Company did not:
· Consistently execute a search engine optimisation strategy to enhance
the organic visibility of the site on search engines;
· Execute any paid advertising program to drive targeted traffic to the
site from Google or Meta platforms, including Instagram and Facebook;
· Operate an effective affiliate or influencer marketing campaign;
· Allocate any meaningful budget to attract user traffic to the site or
build an extended email marketing list.
Consequently, we do not consider that the past performance of the domain
reflects its potential under a properly resourced and executed strategy.
With regard to the recent legislative changes, the Company recognises that
previously provided projections were in part predicated on the expectation of
continued sales of the Company's first generation of Chill ZERO branded vape
products. However, as a result of legislation brought forward by the UK
government, disposable vape products became prohibited in the UK from 1 June
2025.
While this means that sales of the existing product will cease, it does not
change the Company's mid to long-term view of the vaping industry or the
potential of the Company's brand and products within it. The Company has
developed and procured its own range of e-liquids for use in refillable vapes
and is progressing towards the launch of rechargeable, reusable pod-based
vaping products that will be a direct replacement for the company's existing
disposable products.
Although this legislative change has introduced short-term turbulence to the
market for vape products, the Company actually considers that the prohibition
on disposable vapes and the introduction of various regulations concerning
vaping products will bring more stability and predictability to the market.
This regulatory environment will enable retail buyers to confidently engage
with brands, given that the market will be settled and more predictable.
Management have deemed the recoverable amount to be the value in use, which is
determined via discounting future cash flows. The discounted cash flow model
prepared by the Company has projected cash flows from 2025 to 2045,
incorporating annual sales growth, gross margins and a present value discount
at the rate of 14.44% based on the Capital Asset Pricing Model (CAPM), and a
terminal value as at 2045. On the basis of this assessment, no impairment was
deemed necessary.
14. Investment in Subsidiary and Loan to Group Companies
Company 2024 2023
£ £
Investment in subsidiaries at cost 15,746,468 15,746,468
Less: impairment provision (15,746,468) (15,746,468)
Investment in subsidiaries - -
The Company has three subsidiaries for the years end 31 March 2024 and 2023.
All subsidiary companies are consolidated in the Group's financial statements.
Name Place of Incorporation and Operation Proportion of Ownership Interest Profit (Loss) for the Year Aggregate Capital and Reserves at 31 March 2024
Highlands Natural Resources Corporation USA 100% (29,817) (832,214)
Highlands Montana Corporation* USA 100% - (£3,685,668)
Chill Corporation* USA 100% (744,272) (1,358,647)
*Owned by Highlands Natural Resources Corporation
The principal activity of Chill Corporation is as a developer and producer of
nicotine-free vape products and other consumer packaged-goods products.
Highlands Natural Resources Corporation and Highlands Montana Corporation were
dormant throughout the year ended 31 March 2024. The registered office of the
USA based subsidiaries is 1601 Riverfront Drive Suite 201, Grand Junction,
Colorado 81501. The ownership in all cases is 100% of the issued ordinary
shares of each company and in all cases represents 100% of the voting rights.
The investments in the shares of the subsidiaries are long term holdings and
were initially made for the long term financing of the Group's oil and gas
activities. Given the withdrawal of the Group from the oil and gas sector, and
the associated losses generated from those discontinued activities, the Board
has taken the view that there is no certainty of any significant sums being
generated in the future from those activities to support the initial
investment values. Consequently, the Company has made full provision against
the investment in the shares of its US based subsidiaries.
During the year, the Company made further loans to Chill Corporation and
Highlands Natural Resource Corporation to fund the US operations. The Board
does not consider that in due course such loans will be recoverable in full.
In particular, management has assessed the non-performative elements of the
business and the Company now intends to shutter its US operations while it
focuses on developing its core business. Due to this, it was considered
reasonable to impair the loans as of 31 March 2024. See Critical accounting
judgements and key sources of estimation uncertainty at note 2.18.
Loan to Group Undertaking Loan at Cost Impairment Provision Net Total
£ £ £
At 31 March 2023 11,580,990 (11,580,990) -
Additions 1,093,789 - 1,093,789
Impairment - (1,093,789) (1,093,789)
At 31 March 2024 12,674,779 (12,674,779) -
15. Inventories
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Finished goods 667,807 222,949 650,921 109,646
Raw materials 351,129 - 357,903 -
Impairment charges (879,098) (116,214) (544,796) (88,564)
Totals 139,838 106,735 464,028 21,082
Obsolete inventory expense (Group) 2024 2023
Impairment of hemp inventory 351,129 -
Inventory provisions based on "best by" date 29,835 170,905
Provision of inventory due to slow movement 14,193 56,996
Total charge for the year 395,157 227,901
The Group's inventory of hemp seeds was fully impaired in the year ended 31
March 2024. Despite the seeds' strong genetic profile, proven cultivation
viability, and potential for alternative applications, the Company
acknowledged the uncertainty surrounding their commercialisation. The failure
to meet EU uniformity standards limits their immediate marketability in
Europe, while regulatory and market dynamics in other regions, such as the
United States, remain subject to external factors. Given the uncertainty
introduced by these factors, the Directors have elected to fully impair the
value of the feminised hemp seed inventory in the current financial year. This
decision does not diminish the seeds' inherent potential but reflects a
cautious approach given the challenges associated with their immediate
monetisation.
Below is a reconciliation of the movement of the accumulated provision for
obsolete inventory for the Group for the year ended 31 March 2024.
Accumulated provision for obsolete inventory at 1 April 2023 (544,796)
Provisions during the period (395,157)
Inventory allowance released in the year 53,068
Translation adjustment 7,787
Accumulated provision at 31 March 2024 (879,098)
Management reviews inventory best by dates and creates a provision for
inventory based on the inventory provisioning policy discussed in Note 2.12.
16. Trade & Other Receivables
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Trade receivables (gross) 1,546,308 1,501,808 16,331 842
ECL provision (180,000) (180,000) - -
Trade receivables (net of ECL provision) 1,366,308 1,321,808 16,331 842
Prepayments & other debtors 1,101,396 992,193 431,036 121,805
2,467,704 2,314,001 447,367 122,647
All amounts in trade receivables are due within 3 months and are stated at
amortised cost.
The Group applies the IFRS9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables.
To measure expected credit losses on a collective basis, trade receivables are
grouped based on similar credit risk and ageing. The Group's customer base is
of a similar bracket and share the same characteristics, as such these have
been treated as one population. The expected lifetime losses in respect of
trade receivables are considered to be £180,000 (2023: £nil).
The expected credit losses have been based on historical, current and
forward-looking information. The Group does not change the classification of a
trade receivable if payment is delayed where the value is considered to be
recoverable. The Group assesses trade receivables and the associated debtors
to determine the appropriateness of this treatment and the likelihood of
recovery.
Provision for expected credit losses (Group) 2024 2023
As at 1 January - -
Movement in expected credit loss provision 180,000 -
As at 31 December 180,000 -
17. Cash & Cash Equivalents
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Cash at bank 1,315,289 1,225,912 3,767,426 3,544,243
Cash at bank comprises of balanced held by the Group in current bank accounts.
The carrying amount of these assets approximated to their fair value.
The credit ratings for Virgin Money UK Plc were:
Rating Agency Rating
Fitch A-
Moody's Baa2
Credit ratings were not available for Timberline Bank.
18. Trade & Other Payables
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Trade and other payables 658,143 439,131 418,641 97,264
Accruals 228,798 89,272 122,000 67,200
886,941 528,403 540,641 164,464
Trade payables, accruals and other payables principally comprise amounts
outstanding for trade purchases and continuing costs and are stated at
amortised cost. The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
19. Share Capital
2024 2023
£ £
Allotted called up and fully paid:
506,291,025 ordinary 1p shares (2023: 261,115,305 ordinary 1p shares) 4,953,169 2,611,153
The Company has only one class of share. All ordinary shares have equal voting
rights and rank pari passu for the distribution dividends and repayment of
capital.
Par Value of Shares Issued
Number £
At 31 March 2023 261,115,305 2,611,153
15 May 2023 issue of shares at 4.0p per share 26,500,000 265,000
5 December 2023 issue of shares at 2.0p per share 154,675,220 1,546,752
Adjustment on convertible loan note conversion - (109,741)
26 January 2024 issue of shares at 3.75p per share 64,000,500 640,005
Total number of shares in issue at 31 March 2024 506,291,025 4,953,169
Share Premium Account
Shares £
At 31 March 2023 261,115,305 10,923,000
15 May 2023 issue of shares at 4p per share 26,500,000 795,000
5 December 2023 issue of shares at 2.0p per share 154,675,220 1,546,752
Adjustment on convertible loan note conversion - (109,741)
26 January 2024 issue of shares at 3.75p per share 64,000,500 1,760,014
Less: costs relating to share issue - (159,455)
At 31 March 2024 506,291,025 14,755,570
On 15 May 2023, the Group announced that it had issued 1,500,000 new ordinary
shares of 1 pence each to a service provider at a price of 4 pence per share.
The shares were issued in settlement of an invoice for investor relations and
connected services, following the aforementioned fundraise and ongoing work to
assist the Group in communicating with investors.
On 15 May 2023, the Group issued 25,000,000 of new ordinary shares at 1 pence
each to an investor from the March 2023 fundraise at a price of 4 pence per
share.
On 5 December 2023, the Company issued 154,675,220 ordinary shares of 1 pence
each on the conversion of the Company's Convertible Loan Notes at an effective
price of 2 pence per share. On the same date, the Company sought admission to
trading of up to a further 19,750,574 ordinary shares pursuant to Warrant
previously issued, as follows:
Description Number of warrants Date of grant Exercise period Exercise price per Ordinary Share
Series 1 10,000,000 13 May 2022 13 May 2025 10.0 pence
Series 2 400,000 13 May 2022 13 May 2025 5.0 pence
Series 3 9,350,574 13 May 2022 30 May 2025 2.0 pence
Total 19,750,574
On 26 January 2024, the Company undertook a conditional placing of
28,533,800 new ordinary shares of 1p each in the Company (the "Placing
Shares") at a price of 3.75 pence per share (the "Issue Price") (the
"Placing"), and conditional subscription of 3,466,700 new Ordinary Shares (the
"Subscription") at the Issue Price, together raising £1,200,019 before
expenses for the Company.
The Company also announced the conversion of the coupon amount to be repaid on
the convertible loan notes in the sum of £192,000 (together with accrued
interest of £8,000) and the capitalisation of £1,000,000 of liabilities
predominantly comprised of inventory debt financing by existing significant
shareholder, Mr Jonathan Swann for 32,000,000 new Ordinary Shares (the
"Capitalisation", together with the Placing and Subscription, the
"Fundraise"), in aggregate 64,000,500 new Ordinary Shares (the "Fundraise
Shares"), at the Issue Price.
20. Share Options and Warrants
At 31 March 2024 there were options and warrants outstanding over 39,146,205
unissued ordinary shares (2023: 48,496,779). Details of the options and
warrants outstanding are as follows:
Issued Exercisable From Exercisable Until Number Outstanding Exercise Price (p)
12 October 2016 Any time until 11 October 2026 250,000 27.75
8 October 2019 8 October 2021 8 October 2029 5,839,773 10.00
8 October 2019 8 October 2022 8 October 2029 65,000 10.00
8 October 2019 Any time until 8 October 2029 1,000,000 10.00
28 May 2021 Any time until 28 May 2026 10,000,000 60.00
1 June 2021 1 June 2022 1 May 2026 1,200,000 10.00
27 September 2021 23 September 2022 23 September 2026 10,391,432 10.00
26 April 2022 26 April 2022 26 April 2025 400,000 5.00
26 April 2022 26 April 2022 26 April 2025 10,000,000 10.00
Total 39,146,205
The Directors held the following options and warrants at the beginning and end
of the period:
Director At 31 March 2023 Granted in the Period Exercised in the Period Lapsed in the Period At 31 March 2024 Exercise price (p)
T Taylor 2,887,273 - - - 2,887,273 4-10p
A Russo 2,887,500 - - - 2,887,500 4-10p
C Sommerton - - - - - -
Total 5,774,773 - - - 5,774,773
The options held by T. Taylor and A. Russo issued in October 2019 are
exercisable until 8 October 2029. All other options are exercisable between 8
September 2024 and 8 September 2029.
The market price of the shares at the year-end was 2.40 p per share.
21. Equity-settled Share-based Payments Reserve
2024 2023
£ £
Brought forward 4,516,608 3,389,762
Share based payment charge on options and warrants in the year - 1,126,846
Carried forward 4,516,608 4,516,608
The details of the exercise price and exercise period of options outstanding
at the year-end are given in Note 20 above.
Details of the options and warrants outstanding at the period end are as
follows:
Options and Warrants 2024 Number 2024 Weighted average exercise price - pence 2023 Number 2023 Weighted average exercise price-pence
Outstanding at the beginning of the period 48,496,779 24.23p 28,746,432 36.68p
Granted - - 19,750,574 6.11 p
Lapsed during the period (9,350,574) 2.0p - -
Exercised during the period - - (227) 10p
Outstanding at the period end 39,146,205 29.54p 48,496,779 24.23p
Exercised at the period end 250,227 27.75p 250,227 27.75p
The options and warrants outstanding at the period end have a weighted average
remaining contractual life of 2.55 years.
Full details of the exercise price and potential exercise dates are given in
Note 20 above.
22. Compound Loan Note Equity Component Reserve
The Company issued convertible loan notes in the year ended 31 March 2023
which constituted a compound financial instrument under IAS 32.
A further breakdown of the equity component of the loan notes that have been
recorded in the Compound Loan Note Equity Component Reserve is shown in Note
24.
23. Capital Commitments
There were no capital commitments at 31 March 2024 or 31 March 2023.
24. Long Term Debt
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Government loans 22,500 22,500 32,500 32,479
Other 9,771 - 19,040 -
Convertible loan notes 1,590,501 1,590,501 4,452,079 4,452,079
1,622,772 1,613,001 4,503,619 4,484,558
Current 211,017 202,000 468,893 459,792
Non-current 1,411,755 1,411,001 4,034,726 4,024,766
1,622,772 1,613,001 4,503,619 4,484,558
Government Loans
Balance as of March 31, 2024 Balance as of March 31, 2023
Description Maturity Date £ £
Bounce Back Loan Scheme (BBLS) managed by the British Business Bank on benefit July 2026 22,500 32,500
of and with the financial backing of the Secretary of State for Business,
Energy and Industrial Strategy. The BBLS loan of £50,000 carries an interest
of 2.50% rate per annum with repayment over 60 months
Highlands Natural Resources Corporation entered into a Small Business April 2025 9,771 19,040
Administration (SBA) loan of £154,078 with an interest of 1.00% rate per
annum.
Maturity Schedule of Government Loans £
Current Portion 19,071
2025 10,000
2026 3,200
Total 32,271
Both of these loans have been repaid subsequent to the year-end.
Convertible Loan Notes
On 13 May 2022, the Company issued convertible loan notes with an aggregate
value of £2,916,670 with an interest rate of nil through 31 May 2023 and
10% for the period after 31 May 2023. Conversion of 145,833,495 shares at a
conversion price of 2 pence per share was compulsory upon approval of a
prospectus or a change in legislation where a prospectus is not needed between
the date of issuance and through 31 May 2024. All of these loan notes were
converted into ordinary shares as described in Note 19 above, pursuant to a
prospectus dated 30 November 2023.
On 21 June 2022, the Company issued convertible loan notes with an aggregate
value of £176,835 with an interest rate of nil through 31 May 2023 and 10%
for the period after 31 May 2023. Conversion of 8,841,725 shares at a
conversion price of 2 pence per share was compulsory upon approval of a
prospectus or a change in legislation where a prospectus is not needed between
the date of issuance through 31 May 2024. All of these loan notes were
converted into ordinary shares as described in Note 19 above, pursuant to a
prospectus dated 30 November 2023.
On 31 March 2023, the Company issued convertible loan notes with an aggregate
value of £1,600,000 with an interest rate of 12%. Originally, the lender
had the right between the date of issuance and 1 April 2026 to serve a
conversion notice on the Group to convert all or some of the notes outstanding
into the applicable number of conversion shares up to 20,000,000 at the
conversion price of 8 pence per share. To the extent not already redeemed or
converted, the notes in issue were to be paid to the lender on 1 April 2026.
As announced on 23 May 2025, the Company has agreed to vary the terms of these
convertible loan notes such that their maturity date is extended to 15 May
2028, and their conversion price is amended to 2.15 pence per ordinary share,
resulting in a potential issuance of up to 74,418,605 conversion shares.
The loan notes each constitute a compound financial instrument under IAS 32.
The liability component represents the net present value of future contractual
cash flows. See below for a breakdown of the classification of the loan notes.
Equity Current liability component Long-term liability component
component £ £
Totals
£ £ Notes
13 May 2022 issuance 377,268 243,056 2,464,727 3,085,051 Converted
21 June 2022 issuance 22,849 14,736 148,611 186,196 Converted
31 March 2023 issuance 19,051 192,000 1,388,949 1,600,000 Outstanding
Totals 419,168 449,792 4,002,287 4,871,247
Reconciliation of movements for the year ended 31 March 2024 Equity Liability component Notes
component £
Totals
£ £
Amounts outstanding at 31 March 2023:
13 May 2022 issuance 377,268 2,707,783 3,085,051 Converted
21 June 2022 issuance 22,849 163,347 186,196 Converted
31 March 2023 issuance 19,051 1,580,949 1,600,000 Outstanding
Totals at 31 March 2023 419,168 4,452,079 4,871,247
Conversion in the year (400,116) (2,885,388) (3,285,504)
Interest charged - 343,300 343,300
Interest capitalised as share capital (192,000) (192,000)
Interest paid - (127,490) (127,490)
Amounts outstanding at 31 March 2024 19,052 1,590,501 1,609,553
Liability due within one year 192,000
Liability due after more than one year 1,398,501
Total 1,590,501
Net Debt
The table below outlines the changes in net debt for the Group
during the year end 31 March 2024.
At 31 March 2023 Cash Flows Foreign currency adjustments Other adjustments and reclassifications At 31 March 2024
Cash and cash equivalents 3,767,426 (2,447,912) (4,225) - 1,315,289
Borrowings
Debt due within one year 468,893 (19,289) - (238,587) 211,017
Debt due after one year 4,034,726 - - (2,622,971) 1,411,755
4,503,619 (19,289) - (2,861,558) 1,622,772
Total net debt (736,193) (2,428,623) (4,225) 2,861,558 (307,483)
25. Financial Instruments and Risk Management
The Group's financial instruments comprise primarily cash and various items
such as trade debtors and trade creditors which arise directly from its
operations. The main purpose of these financial instruments is to provide
working capital for the Group's operations.
The Group does not utilise complex financial instruments or hedging mechanisms
in respect of its non-sterling operations.
Financial Assets by Category
The categories of financial assets included in the balance sheet and the
heading in which they are included are as follows:
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Non-current assets
Loan to group undertaking - - - -
Current assets
Trade receivables 1,366,307 1,321,808 16,331 842
Other receivables 5,742 - - -
Cash and cash equivalents 1,315,289 1,225,912 3,767,426 3,544,243
Categorised as financial assets measured at amortised cost 2,687,338 2,547,720 3,783,757 3,545,085
The loan to group undertaking has no fixed repayment date and its future
repayment will depend upon the financial performance of subsidiary. All other
amounts are short term and none are past due at the reporting date.
Financial Liabilities by Category
The categories of financial liabilities included in the balance sheet and the
heading in which they are included are as follows:
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Current liabilities
Trade and other payables 658,142 439,131 418,641 97,263
Loans 1,622,772 1,618,001 4,503,619 4,484,558
Categorised as financial liabilities measured at amortised cost 2,280,864 2,057,132 4,922,260 4,581,821
All amount, excluding loans, are short term payables.
Credit Risk
The maximum exposure to credit risk at the reporting date by class of
financial asset was:
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Trade and other receivables 1,366,307 1,321,808 16,331 842
Related party note receivables - - 155,901 -
Credit and Liquidity Risk
Credit risk is managed on a Group basis. Funds are deposited with financial
institutions with a credit rating equivalent to, or above, the main UK
clearing banks. The Group's liquid resources are invested having regard to the
timing of payments to be made in the ordinary course of the Group's
activities. All financial liabilities are payable in the short term (normally
between 0 and 3 months) and the Group maintains adequate bank balances to meet
those liabilities as they fall due.
Capital Management
The Group considers its capital to be equal to the sum of its total equity.
The Group monitors its capital using a number of metrics including cash flow
projections, working capital ratios, the cost to achieve development
milestones and potential revenue from partnerships and ongoing licensing
activities. The Group's objective when managing its capital is to ensure it
obtains sufficient funding for continuing as a growing concern, The Group
funds its capital requirements through the issue of new share to investors.
Interest Rate Risk
The maximum exposure to interest rate risk at the reporting date by class of
financial asset was:
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Bank balances and receivables 1,315,289 1,225,912 3,767,426 3,544,243
The Group uses liquid resources to meet the cost of future development
activities. Consequently, it seeks to minimise risk in the holding of its bank
deposits. The Group is not financially dependent on the small rate of interest
income earned on these resources and therefore the risk of interest rate
fluctuations is not significant to the business and the Directors have not
performed a detailed sensitivity analysis. Nonetheless, the Directors take
steps when possible and cost effective to secure rates of interest which
generate a return for the Group by depositing sums which are not required to
meet the immediate needs of the Group in interest-bearing deposits. Other
balances are held in interest-bearing, instant access accounts. All deposits
are placed with main clearing banks to restrict both credit risk and liquidity
risk. The deposits are placed for the short term, between one and three
months, to provide flexibility and access to the funds and to avoid locking
into potentially unattractive interest rates.
Market Risk
Market risk arises from changes in interest rates, foreign exchange rates and
equity prices, as well as in their correlations and volatility levels. Market
risk is managed on a Group basis in the ordinary course of the Group's
activities.
Currency Risk
The Group operates in a global market with income possibly arising in a number
of different currencies, principally in Sterling or US Dollars. The majority
of the operating costs are incurred in Sterling with the rest predominantly in
US Dollars. The Group does not hedge potential future income or costs, since
the existence, quantum and timing of such transactions cannot be accurately
predicted. The exchange rate in US Dollars to Sterling was 1.263 and 1.239 as
of 31 March 2024 and 2023, respectively.
Financial assets and liabilities denominated in US Dollars and translated into
Sterling at the closing rate were:
Group 2024 Company 2024 Group 2023 Company 2023
£ £ £ £
Financial assets 50,241 - 758,117 -
Financial liabilities (228,783) - (613,328) -
Net financial (liabilities)/assets (178,542) - 144,789 -
The following table illustrates the sensitivity of the net result for the
period and the reported financial assets of the Group in regard to the
exchange rate for Sterling: US Dollar:
2024 as reported If Sterling Rose 20% If Sterling Fell 20%
£ £ £
Group result for the period (3,370,293) (3,285,701) (3,454,885)
US Dollar denominated net financial liabilities (178,542) (161,515) (195,569)
Total equity at 31 March 2024 2,570,877 2,834,231 2,287,523
26. Related Party Transactions
Eric Schrader, a former director of the Company, owns Racquette Hanger, LLC
which let property to the Group during year for the storage and distribution
of products. During the year ended 31 March 2024, the Group made rental
payments to Racquette Hanger, LLC of £79,202 (2023: £39,163).
Eric Schrader has an interest in Kuma Creative which provided marketing
services to the Group. During the year ended 31 March 2024, the Group made
payments to Kuma Creative of £47,975 (2023: £36,889).
Scott Thompson, a former director of the Company, is a partner at Lippes
Mathias which provided legal advice to the Group. During the year ended 31
March 2024, the Group made payments to Lippes Mathias of £76,983 (2023:
£62,534).
In 2021, the Group entered into a distribution agreement with Ox Distributing
LLC, a brokerage firm specialising in ecommerce shipping in convenience
stores, grocery stores and other retail chains in the Unites States. Ox
Distributing, LLC is owned by Eric Schrader, a related party to the Group
given that he was a director of the Company and had significant influence over
the entity. During the year ended 31 March 2024, the Group made sales net of
promotional discounts of CBD products to Ox Distributing, LLC, with terms
equivalent to those that prevail in an arm's length transaction, of £35,086
(2023:£nil) resulting from the sale of CBD products to the Company. As of 31
March, 2024 the Group has accounts receivable of £nil (2023: £nil) owed by
Ox Distributing, LLC. As of 31 March 2024 the Group has a note receivable from
Ox Distributing, LLC of £nil (2023: £155,900).
27. Events After the Reporting Period
After the Period, a dispute over the removal of certain Directors by
shareholder vote arose from a requisition letter for a General Meeting that
occurred on 4 June 2024. Disputes connected to this matter led to almost
$400,000 being withdrawn from the Company's accounts and increased legal costs
in the UK and US. The Company also temporarily lost control of its domain
asset, Chill.com, from June to December 2024, until an out-of-court settlement
was reached. Chill.com is now managed by the Company.
Since then, the UK Government has legislated a ban on disposable vapes
effective 1 June 2025. This includes Chill ZERO nicotine-free disposables,
requiring the Company to develop compliant devices to sustain its vape product
revenue in the UK.
On 24 April 2025, the Company announced that its largest shareholder, Jonathan
Swann, had committed to underwrite a convertible loan note facility with a
principal value of £1,000,000. Other investors were invited to subscribe for
convertible loan notes on identical terms, with those investing up to £50,000
required to remit funds at the point of subscription, and those investing more
than £50,000 subject to drawdown mechanics at the discretion of the Company.
The Convertible Loan Notes were priced at 1.5 pence per loan note, have a term
of three years, and carry interest of 10 per cent per annum. Each entitles the
subscriber to a new ordinary share of 1 pence per share. As part of the
fundraising, subscribers are also entitled to a 1-1 warrant priced at 125% of
the 10-day moving average at the time of funds being drawn. For any funds
drawn prior to the Company's shares returning to trading following their
suspension commenced on 3 June 2024, the average share price used for
calculation of the warrant price shall be 1.5 pence per share. The final terms
of the fundraise were announced by the Company on 23 May 2025.
No other matters or events occurring after 31 March 2024 are considered
relevant to the Company's financial statements for the Period.
28. Ultimate controlling party
In the opinion of the Directors there is no ultimate controlling party.
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. END FR EAFKAAEPSEAARecent news on Chill Brands
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