REG - Chill Brands Group - Half-year Report for the 6 months to 30 Sep 2023
28/12/2023 07:00
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RNS Number : 9803X Chill Brands Group PLC 28 December 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF REGULATION
11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
28 December 2023
Chill Brands Group plc
("Chill Brands" or the "Company")
Half Year Results for the Six Months Ended 30 September 2023
Chill Brands Group, the international consumer packaged goods company,
announces its interim results for the six months ending 30 September 2023 (the
"Period"), which can be viewed below and also on the Company's website at
www.chillbrandsgroup.com (http://www.chillbrandsgroup.com) .
Callum Sommerton, Chief Executive Officer of Chill Brands, commented: "The
groundwork laid during the first half of this financial year prepared the
Company for significant growth. In the months since September 2023, we have
sold Chill ZERO products into hundreds of independent stores and secured
listings with major retail chains in both the US and UK.
We will see in the New Year with more than 2,365 committed retail stores,
sustained multi-channel growth and substantial purchase orders that will
result in material income for the Company as they are fulfilled during Q1.
2024 will be an exciting time for Chill Brands as we further extend our
international distribution network and expand our offering both in terms of
our own products and those sold by third-party brands on the Chill.com
website."
-ENDS-
About Chill Brands Group
Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is concerned with the
development, marketing and distribution of wellness and recreational products
containing natural, functional ingredients. The Company's proprietary product
range is distributed by some of the most recognisable convenience retail
outlets in the US and includes nicotine-free disposable vapour products that
cater to the rapidly growing market for tobacco alternatives. 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
(http://www.chillbrandsgroup.com/)
Media enquiries:
Chill Brands Group plc contact@chillbrandsgroup.com
Allenby Capital Limited (Financial Adviser and Broker) +44 (0) 20 3328 5656
Nick Harriss/Nick Naylor/Lauren Wright (Corporate Finance)
Kelly Gardiner (Equity Sales)
CHILL BRANDS GROUP PLC
("Chill Brands" or the "Company" or the "Group")
Half Year Results for the Six Months Ended 30 September 2023
Chill Brands Group, the consumer packaged-goods distribution company,
announces its unaudited half year results for the six months ending 30
September 2023 (the "Period").
Summary
During the Period the Company focused on the launch of its 'Chill ZERO'
nicotine-free vape products and the expansion of its e-commerce marketplace on
the Chill.com website, however progress in these areas only started to be
reflected in sales post the Period end. In particular, the Company announced
sales of its Chill ZERO products to significant retailers in both the UK and
USA during Q3, leading to a notable improvement in the Company's trading
performance.
The Company was sustained during the Period by funds raised in March and April
2023 with a combined total of £3.1 million (before expenses). The Company has
deployed these funds for working capital purposes and to grow the distribution
and sales of its products.
In addition, post the period end, over £3 million of convertible loan notes
raised during the previous financial year were converted to equity. This
follows the approval of the Company's prospectus, published on 30 November
2023.
Revenues recorded during the Period represent a 325% increase on the prior
year interim period. This reflects initial sales of the Company's vape
products, commissions earned on products sold by third-party brands on the
Chill.com website, and continued sales of certain legacy products including
CBD oral chew pouches. Excluding expenses related to the writing down of
legacy product inventory, sales of the Company's products during the period
achieved a margin of 31.9%.
Since the end of the Period the Company has experienced a sustained
improvement in trading conditions driven by rapid growth in sales of its vape
products. Due to this much improved sales performance and successful expansion
through new distribution agreements, the Company expects to record
substantially higher revenues during the second half of the financial year,
reflecting the positive impact of the Company's new product focus on overall
business development.
Financial Overview
During the half year Period the Company recorded revenues of £83,392 (prior
interim period: £19,610), an increase on the £82,840 recorded during the
prior full financial year ending 30 March 2023.
Sales of the Company's products resulted in a gross profit of £1,153 (prior
interim period: loss of £30,128). The Company's profit margin for the Period
was impacted by the recording of costs associated with writing-off legacy CBD
inventory. Excluding obsolete inventory expenses, the Company achieved a
margin on sales of 31.9%. The Company anticipates that its profit margins will
improve due to the high-margin nature of its core vape product. It is further
expected that unit costs will improve due to economies of scale, driven by
larger manufacturing runs made possible by heightened demand for the Company's
products.
The Company recorded a reduced operating loss of £1,518,355 (prior interim
period: £2,196,195) for the period, down 30.86% on the prior year. The loss
reflects a marginal increase in administrative expenses comprising additional
costs incurred by the Company related to professional fees for the preparation
of the Company's prospectus (published post-Period on 30 November 2023) and
the establishment of sales operations in the UK for the Company's UK launch of
its nicotine-free vape products starting in August 2023.
The Company's asset position is broadly consistent with the position at the
end of the prior financial year. There is a reduced cash position at 30
September 2023 as compared to 31 March 2023, in line with continued
expenditure related to growth of the business, as set out above.
Since the end of the interim Period, the Company has made additional sales and
received purchase orders creating near-term trade receivables. These are
expected to be paid during the second half of the financial year.
Fundraising during the Period
During the Period the Company's working capital needs were met through funds
raised in March and April 2023.
On 16 March 2023 the Company announced that it had raised £560,000 (before
expenses) from a financial institution. The fundraise consisted of a
subscription for 16,000,000 new ordinary shares of 1 pence each at a price of
3.5 pence per share.
On 3 April 2023 the Company announced that it had raised £2.6 million (before
expenses) from a high net worth investor. This consisted of a subscription for
25,000,000 new ordinary shares of 1 pence each at a price of 4 pence per share
for a total of £1,000,000,000, and the issue of convertible unsecured loan
notes with a value of £1.6 million. The Convertible Loan Notes carry a coupon
of 12% per annum for a term of three years from the date of issue on 31 March
2023, and are convertible into ordinary shares at 8 pence per share.
Conversion of Debt to Equity
On 30 November 2023 the Company published a prospectus following approval by
the UK Financial Conduct Authority (FCA). The publication of this prospectus
was necessary in order to facilitate the conversion of convertible loan notes
issued as part of fundraising activities and an associated Open Offer to
existing shareholders in 2022.
As a result of the conversion, which took place on 5 December 2023, the
Company has converted in excess of £3 million current and non-current
liabilities into equity.
Key Commercial Events During the Period
During the Period, the Company has focused its efforts on establishing a route
to market for its nicotine-free vape products. The first inventory of Chill
ZERO nicotine-free vapes was received in the US at the end of March 2023. The
Company went on to establish a pilot programme, engaging with select
independent stores and retail partners to assess product market fit and gather
crucial sell-through data to inform future sales strategies.
In May 2023, the Company entered into a contract with full-service industry
specialists, The Vaping Group, to provide sales, distribution and marketing
services in relation to the launch of Chill ZERO nicotine-free vape products
in the UK. The Company launched an extended range of large puff count devices
in the UK, receiving its first inventory in early August 2023. Initial efforts
focused on establishing distribution to sales to UK independent stores, with
120 outlets recorded as stocking the product within the first month of its
retail debut on 7 August 2023.
The Company also directed its efforts towards the continued development of the
Chill.com website on which it is building an e-commerce marketplace of
wellness products containing natural, functional ingredients. These include
alcohol alternatives, supplements, and products containing active ingredients
such as hemp-derivatives, adaptogens and nootropics. More than 40 external
brands now list their products for sale on the website, generating commissions
for the Company whenever sales are made.
Subsequent Events
Significant progress has been made in the months since the end of the Period.
In the US, the Company's pilot strategy has produced sufficient data to
facilitate discussions with chain retailers. This has borne fruit in the form
of an initial purchase order from Smoker Friendly, the largest dedicated
operator of smoke shops in the nation. All 13 existing Chill ZERO products
will be stocked by Smoker Friendly stores in nine US states, providing further
opportunities to develop the brand's position within the market.
In the UK, Chill ZERO vape products have been sold into more than 475
independent retail stores. The Company has also secured an initial purchase
order that will see its products stocked in 150 WHSmith's travel stores in
major airports, train stations and transit hubs around the UK. More recently,
the Company has received a seven figure purchase order for the sale of its
products into a one of the UK's top supermarket chains. This will provide
further exposure to consumers in all of the leading store operator's UK
stores. The Company has also received a significant purchase order that will
result in the sale of its vape products to a prominent operator of UK petrol
stations including those trading under major brand names including Shell, Esso
and BP.
The Company has also reached agreement for its products to be sold by leading
wholesalers and distributors. These include Vape Local and Flawless, between
them some of the UK's largest vape category specialists with a combined reach
of more than 9,000 business customers. These agreements are expected to enable
Chill ZERO to further penetrate the UK market over the coming year.
Outside of the retail channel, the Company also launched its Chill ZERO
products on Amazon.co.uk in late October 2023. The products are now available
for purchase and next-day delivery on Amazon Prime, offering another
convenient way for additional customers to purchase Chill ZERO nicotine-free
vapes. Since their launch on Amazon, the products have outperformed
expectations and gained first page rankings for key search terms including
'nicotine free vape'.
Sales and purchase orders received by the Company's for its Chill ZERO
products have a combined gross value of more than £2.1 million (including
VAT). While the Company has incurred costs related to the commencement of
sales of its products by major retailers, it has taken the opportunity to
structure deals that result in the recovery of slotting fees and other similar
retail costs upon fulfilment of initial purchase orders which significantly
exceed the costs of listing.
To support the growth of its sales channels, the Company has secured a supply
chain financing facility from an existing major shareholder. The facility of
£1,000,000 carries a monthly interest rate of 2% and has a term of one year.
The funds will support the acquisition of inventory and the roll-out of
products to new stores, reducing the cashflow impact of the Company's rapid
expansion.
Outlook and Future Prospects
As outlined in this report, the Company has made significant progress in
developing a route to market for its vape products. Since the end of the
interim period, the Company has secured product listings with major UK retail
chains including a leading supermarket and WHSmith in the UK, along with
Smoker Friendly, the largest dedicated smoke shop chain in the US. The Company
has also sold its products into more than 475 independent retail stores and
established relationships with key distributors and wholesalers including
Flawless and Phoenix 2 Retail.
Listings have now been secured for Chill ZERO products in more than 2,365
locations with further progress to be made in 2024 as the products reach the
shelves of major retail stores. This has all been achieved within a matter of
months, demonstrating demand for our products and setting the stage for a
compounding effect as sales continue. As the Chill brand gains recognition and
a foothold in the market, we anticipate a cascading effect that will foster
additional sales and create opportunities for further expansion into new
retail channels. This is already apparent in both key territories as
discussions with further distributors and retailers are underway in the US and
UK.
Following progress made during the first half of the financial year, the
Company now benefits from a diversified base of business across four key
sources of revenue:
1. US retail channel sales which are expected to expand as the Company
reaches agreement to sell its products into additional stores and states. The
US is the largest vaping market in the world, accounting for an estimated
US$8.3 billion in 2023.
2. UK retail channel sales, where the Company is making rapid progress
through sales into major supermarkets, convenience store chains and other
outlets. The UK has seen an immense rise in the popularity of vaping with the
domestic market generating estimated revenues of more than GBP£3 billion in
2023.
3. Sales of Chill products online via our own website, Amazon.co.uk and
other e-commerce sites. The Company is confident that these channels will also
provide a cost-effective means of entering additional European markets during
the 2024 calendar year.
4. Sales of third-party brands on the Chill.com website. As more brands
join the site and additional user traffic is attracted by means of new
marketing campaigns, the Company expects sustained growth in the revenue
generated by its e-commerce marketplace model.
The establishment of these new revenue centres comes with its own set of costs
that will require careful financial management. The expansion of retail sales
channels, for instance, requires expenditure on store listing fees,
merchandising, compliance, and product sampling. While these are the
inevitable costs of building a consumer products brand, the Company continues
to take every opportunity to carefully structure deals that provide upside
from the first order rather than relying on future reorders to create
financial value.
Based on sales made and purchase orders received to date, the Company expects
to record a material increase in revenues for the full financial year.
The Company's Board is proud of the progress achieved this year. Chill Brands
is experiencing substantial growth with the diversification of its product
offerings, expansion into new markets, and the development of a business model
that is expected to deliver recurring revenue with healthy profit margins.
Efforts made during the Period have propelled the Company into a much stronger
position than at the outset of 2023 and Chill Brands is now positioned
favourably for continued success.
This interim financial report was approved by the Board of Directors on 11
December 2023 and signed on its behalf by:
Callum Sommerton
Chief Executive Officer, Chill Brands Group plc
Chill Brands Group PLC
Consolidated Statement of Comprehensive Income (Unaudited)
For the six months ended 30 September 2023
Unaudited six months ended 30 September 2023 £ Unaudited six months ended 30 September 2022 £ Audited year ended 31 March 2023 £
Revenue 83,392 19,610 82,840
Cost of sales (56,776) (49,738) (61,798)
Obsolete inventory expense (25,463) - (227,901)
Gross (loss) profit 1,153 (30,128) (206,859)
Administrative expenses (1,519,508) (1,249,219) (2,636,115)
Share expenses for options granted - (916,848) (1,126,846)
Operating Loss (1,518,355) (2,196,195) (3,969,820)
Finance income 60,553 8,282 24,159
Finance cost (111,036) - (323,556)
Other income - - 6,203
Loss on ordinary activities before taxation (1,568,838) (2,187,913) (4,263,014)
Taxation on loss on ordinary activities - - -
Loss for the period from continuing activities (1,568,838) (2,187,913) (4,263,014)
Loss for the period from discontinued activities (13,698) (14,749) (24,877)
Loss for the period (1,582,536) (2,202,662) (4,287,891)
Other comprehensive income
Items that may be re-classified subsequently to profit or loss: 23,143 324,591 (24,241)
Foreign exchange adjustment on consolidation
Total comprehensive loss for the (1,559,393) (1,878,071) (4,312,132)
period attributable to the equity holders
Earnings (loss) per share attributed to equity holders
Attributable to continuing activities (0.56) (0.89) (1.75)
Attributable to discontinued activities (0.01) (0.01) (0.01)
Total (0.57) (0.90) (1.76)
Chill Brands Group PLC
Consolidated Statement of Financial Position (Unaudited)
At 30 September 2023 and 2022
Unaudited six months ended 30 September 2023 £ Unaudited six months ended 30 September 2022 £ Audited year ended 31 March 2023 £
Non-Current Assets
Tangible assets 36,510 54,621 42,612
Right of use lease asset 244,879 269,855 210,216
Intangible assets 1,201,062 1,370,160 1,209,424
Total Noncurrent Assets 1,482,451 1,694,636 1,462,252
Current Assets
Inventories, net 622,197 765,644 464,028
Trade and other receivables 391,879 414,055 447,367
Cash and cash equivalents 1,954,306 1,822,322 3,767,426
Other current assets - 53,720 -
Total Current Assets 2,968,382 3,055,741 4,678,821
Total Assets 4,450,833 4,750,377 6,141,073
Non-Current Liabilities
Loans, excluding current maturities 1,426,168 3,147,151 4,034,726
Right of use lease liability, net of current portion 114,341 204,266 149,755
Total Noncurrent Liabilities 1,540,509 3,351,417 4,184,481
Current Liabilities
Current maturities of loans 3,179,164 10,000 468,893
Trade and other payables 294,937 354,556 540,641
Current portion of right of use lease liability 135,949 74,602 68,386
Total Current Liabilities 3,610,050 439,158 1,077,920
Total Liabilities 5,150,559 3,790,575 5,262,401
Net Assets (699,726) 959,802 878,672
Equity
Share capital 2,876,153 2,451,153 2,611,153
Share premium account 11,718,000 10,421,550 10,923,000
Share based payments reserve 4,516,608 4,751,130 4,516,608
Compound loan note equity component reserve 419,168 - 419,168
Shares to be issued reserve - 16,941 1,079,256
Foreign currency translation reserve 259,930 585,368 236,536
Retained loss (20,489,585) (17,266,340) (18,907,049)
Total Equity (699,726) 959,802 878,672
Chill Brands Group PLC
Consolidated Statement of Changes in Equity
For the six months ended 30 September 2023
Share Capital £ Share Premium Account £ Share Based Payment Reserve £ Compound Loan Note Equity Component Reserve £ Shares To Be Issued Reserve £ Foreign Currency Translation Reserve £ Retained Loss £ Total £
At 31 March 2022 2,120,700 10,298,440 3,389,762 - 89,517 260,777 (14,619,158) 1,540,038
Comprehensive income for the period
Loss for the period - - - - (4,287,891) (4,287,891)
- -
Other comprehensive income
Translation adjustment - - - - (24,241) - (24,241)
-
Total comprehensive loss for the period attributable to the - - - - (24,241) (4,287,891) (4,312,132)
equity holders -
Issue of warrant and options - 1,126,846 - - - 1,126,846
- -
Shares to be issued - - 1,072,743 - 1,072,743
- -
Shares issued in the period 490,453 799,471 - - (83,004) - 1,206,920
-
Equity component of compound financial instrument - - 419,168 - - 419,168
- -
Cost relating to share issues (174,911) - - - - (174,911)
- -
At 31 March 2023 2,611,153 10,923,000 4,516,608 419,168 1,079,256 236,536 (18,907,049) 878,672
Comprehensive income for the period
Loss for the period . - - - (1,582,536) (1,582,536)
- -
Other comprehensive income
Translation adjustment - - - 23,394 - 23,394
-
Total comprehensive loss for the period attributable to the - - - 23,394 (1,582,536) (1,559,142)
equity holders -
Shares issued in the period 265,000 795,000 - (1,060,000) - -
-
Termination of shares to be issued - - (19,256) - (19,256)
- -
At 30 September 2023 2,876,153 11,718,000 4,516,608 419,168 - 259,930 (20,489,585) (699,726)
Chill Brands Group PLC
Consolidated Statement of Cash Flows
For the six months ended 30 September 2023
Unaudited six months ended 30 September 2023 £ Unaudited six months ended 30 September 2022 £ Audited year ended 31 March 2023 £
Cash Flows From Operating Activities
Loss for the period (1,582,536) (2,202,662) (4,287,891)
Adjustments for:
Depreciation and amortisation charges 112,055 70,541 132,779
Impairment provision 25,463 - 227,901
Promotional product in lieu of fees 5,538 - 41,818
Imputed interest on convertible loan notes 111,036 - 177,722
Share expenses for options granted - 925,472 1,126,846
Termination of options (19,256) - -
Shares issued as compensation - - 40,739
Foreign exchange translation adjustment (19,795) 56,066 1,157
Operating cash flow before working capital movements (1,367,495) (1,150,583) (2,538,929)
Decrease (increase) in inventories (183,632) (129,350) (30,029)
Decrease (increase) in trade and other receivables 49,950 232,424 288,864
Increase(decrease) in trade and other payables (245,704) (436,057) (234,692)
Net Cash outflow from Operating Activities (1,746,881) (1,483,566) (2,514,786)
Cash Flows From Investing Activities
Cash paid for intangible assets - (593,912) (639,192)
Net Cash generated from/(used in) Investing Activities - (593,912) (639,192)
Cash Flows From Financing Activities
Net proceeds from issue of shares - 372,363 2,004,013
Loans made by the Company - 3,083,932 4,693,504
Payments of lease liability (60,244) (38,838) (66,173)
Repayment of long-term debt (9,323) (9,572) (18,859)
Net Cash Generated from Financing Activities (69,567) 3,407,885 6,612,485
Net increase in cash and cash equivalents
As above (1,816,448) 1,340,249 3,458,507
Cash and cash equivalents at beginning of period 3,767,426 420,045 420,405
Foreign exchange adjustment on opening balances 3,328 62,028 (111,486)
Cash and cash equivalents at end of period 1,954,306 1,822,322 3,767,426
CHILL BRANDS GROUP PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended 30 September 2023
NOTE 1 - GENERAL INFORMATION
Chill Brands Group PLC ("the Company") and its subsidiaries (together "the
Group") are involved in the development, production and distribution of
consumer packaged goods products including nicotine-free vapour 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
office and principal place of business is 27/28 Eastcastle Street, London W1W
8DH. The Company's US offices are located at 1601 Riverfront Drive, Grand
Junction, Colorado 81501.
NOTE 2 - ACCOUNTING POLICIES
Basis of preparation
The interim condensed unaudited consolidated financial statements for the
period ended 30 September 2023 have been prepared in accordance with IAS 34
Interim Financial Reporting. The comparative figures for 31 March 2023 are
extracted from the Group's audited accounts to that date. The comparative
figures for the period ended 30 September 2022 are unaudited.
The condensed unaudited consolidated interim financial statements of the Group
have been prepared on the basis of the accounting policies, presentation,
methods of computation and estimation techniques used in the preparation of
the audited accounts for the period ended 31 March 2023 and expected to be
adopted in the financial information by the Group in preparing its annual
report for the year ending 31 March 2023.
The financial information in this statement relating to the six months ended
30 September 2023 and the six months ended 30 September 2022 has neither been
audited nor reviewed by the auditors pursuant to guidance issued by the
Auditing Practices Board. The financial information presented for the year
ended 31 March 2023 does not constitute the full statutory accounts for that
period. The Annual Report and Financial Statements for the year ended 31 March
2023 have been filed with the Registrar of Companies.
The financial information of the Group is presented in British Pounds Sterling
("£").
NOTE 3 - INCOME TAX EXPENSE
No tax is applicable to the Group for the period ended 30 September 2023. No
deferred income tax asset has been recognised in respect of the tax losses
carried forward, due to the uncertainty as to whether the Group will generate
sufficient profits in the foreseeable future to prudently justify this.
NOTE 4 - LOSS PER SHARE
Basic loss per ordinary share is calculated by dividing the loss attributable
to equity holders of the Company by the weighted average number of ordinary
shares in issue during the period. Diluted earnings per share is calculated by
adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. There are currently no
dilutive potential ordinary shares.
Earnings £ Weighted average number of shares Loss per share (pence)
(1,559,393) 281,098,912 (0.57)
Loss per share attributed to ordinary shareholders
NOTE 5 - INVENTORIES
Inventories comprise finished products and raw materials either developed by
the Group or bought in from third parties. All inventory items are stated at
their cost of production or acquisition, or at net realisable value if this is
lower. There are no biological assets being grown for the six month periods
ended September 30, 2023 and 2022. Recorded Inventories are inclusive of the
Group's hemp seed assets of £363,240. For the period ended September 30,
2023, the Group had impairments of £25,463 inventory, relating predominantly
to provisioning of legacy CBD pouch and gummy products nearing their
recommended sell by date codes.
NOTE 6 - NOTE RECEIVABLE - RELATED PARTY
During the six month period ended 30 September 2021, the Group entered into a
note agreement with a related party. The note receivable consisted of a note
from an entity owned and operated by a shareholder of the Group. The note
carried interest on the unpaid principal balance of nil interest from 30
September 2021 through 31 January 2022 and bear interest at the short term
rate of 0.18 percent per annum from 1 February 2022. The note has now been
paid in full. The total balance due from the related parties note receivable
at 30 September was nil (2023) and £194,294 (2022). The note was reduced in
line with promotional offers and free fills provided to retailers as part of
the Group's rollout strategy.
NOTE 7 - INTANGIBLE 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 accounts at its cost of acquisition less a
provision for amortisation. The domain name is amortised over 25 years using
the straight line method. The balance as of 30 September was £1,201,062
(2023) and £1,370,160 (2022). The amortisation expense for the period ended
30 September is £26,201 (2023) and £28,845 (2022). The change in the balance
of the intangible asset from 30 September 2022 to 30 September 2023 is
reflective of amortisation expense and adjusted for foreign currency
translation.
NOTE 8 - LOANS
On 10 June 2020, the Group entered into a BBLS 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 of £50,000
carries an interest of 2.50% rate per annum with repayment over 60 months
beginning July 2021. The loan balance as of 30 September was £27,500 (2023)
and £37,500 (2022).
On 22 April 2020, Highlands Natural Resources Corporation entered into a
Paycheck Protection Program (PPP) loan with the U.S. Small Business
Administration (SBA) for £154,078 with an interest of 1.00% rate per annum
with principal and accrued interest due and payable on 22 April 2022. During
the period ended 31
March 2021, the Group received partial forgiveness of the SBA loan. The loan
balance as of September 30 was £14,738 (2023) and £26,147 (2022).
On 13 May 2022, the Group 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 is compulsory upon approval of the
prospectus or a change in legislation where a prospectus is not needed between
the date of issuance and through 31 May 2024. To the extent not already
redeemed or converted, the notes then in issue shall be paid to the lender on
31 May 2024.
On 21 June 2022, the Group 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 is compulsory upon approval of the
prospectus or a change in legislation where a prospectus is not needed between
the date of issuance through 31 May 2024. To the extent not already redeemed
or converted, the notes then in issue shall be paid to the lender on 31 May
2024.
On 31 March 2023, the Group issued convertible loan notes with an aggregate
value of £1,600,000 with an interest rate of 12%. The lender has the right
between the date of issuance and through 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.
The loan notes constitute a compound financial instrument under IAS 32. The
liability component representing the net present value of future contractual
cash flows.
Subsequent to 30 September 2023, on 30 November 2023, the Group received
approval from the UK Financial Conduct Authority for publication of a UK
prospectus document (the "Prospectus"). The Prospectus has been produced to
enable the issue and admission of 154,675,220 ordinary shares of 1 pence each
in the capital of the Group to the standard segment of the FCA Official List
and to trading on the London Stock Exchange's Main Market for listed
securities, resulting from the conversion of the May 2022 loan notes and the
June 2022 loan notes.
NOTE 9 - LEASES
The Group determines if an arrangement is a lease at inception if the contract
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. 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 we will exercise that option. The Group does not
recognise leases having a term of less than one year in the consolidated
statements of financial position.
For the purposes of determining the present value of the lease payments, the
Group use a lease's implicit interest rate when readily determinable. As
leases do not provide an implicit interest rate, the Group used an incremental
borrowing rate based on available information at the commencement of the
lease. Lease cost for operating leases is recognised on a straight-line basis
over the lease term.
On 5 May 2021, the Group entered into an office lease agreement between the
Company and Bonsai Development LLC. The operating lease is a five year lease
with an option to extend up to five years. The Group believes the option to
extend up to five years is not probable as of 30 September 2023. The Group
recorded a right of use lease asset and corresponding liability using an
incremental borrowing rate to determine the discount rate. As of 30 September,
the right of use lease asset had a balance of £179,481 (2023) and £269,855
(2022).
On 9 June 2023, the Group entered into a warehouse lease agreement between the
Company and Raquette Hanger, LLC ( a related party). The operating lease is a
one year lease with an option to extend up to five years. The Group recorded a
right of use lease asset and corresponding liability using an incremental
borrowing rate to determine the discount rate. As of 30 September 2023, the
right of use lease asset had a balance of £65,398. The Group believes the
option to extend up to five years is not probable as of 30 September 2023.
NOTE 10 - SHARE CAPITAL & RESERVES
Allotted, called up and fully paid Ordinary shares of £0.01 each:
Number of Shares Share Capital Share Premium £
£
Balance at 31 March 2023 261,115,305 2,611,153 10,923,000
15 May 2023 - issuance of shares 26,500,000 265,000 750,000
Balance at 30 September 2023 287,615,305 2,876,153 11,718,000
The Group has only one class of share and all shares rank pari passu in every
respect.
NOTE 11 - EQUITY-SETTLED SHARE-BASED PAYMENTS RESERVE
30 September 2023 £ 31 March 2023 £
At beginning of period 4,516,608 3,389,762
On options and warrants granted in the year - 1,126,846
Released on lapsing of warrants during the year - -
At end of period 4,516,608 4,516,608
NOTE 12 - SUBSEQUENT EVENTS
In October 2023 the Group announced the sale of its Chill ZERO nicotine-free
vapour products into WHSmith travel stores. The products will be stocked in an
initial 150 outlets including those in key travel hubs such as Heathrow
Airport and London Kings Cross Station.
On October 12 2023, the Group announced the launch of its Chill ZERO
nicotine-free vapour products onto the Amazon.co.uk e-commerce platform.
In November 2023 the Group announced the launch of its Chill Zero
nicotine-free vapour products on Vape Local, and the sale of products to the
leading UK vapour products distributor, Flawless.
On 30 November 2023, the Group received approval from the UK Financial Conduct
Authority for publication of a UK prospectus document (the "Prospectus"). The
Prospectus has been produced to enable the issue and admission of 154,675,220
ordinary shares with a value of 1 pence each in the capital of the Group to
the
standard segment of the FCA Official List and to trading on the London Stock
Exchange's Main Market for listed securities, which will result from the
conversion of the May 2022 loan notes and the June 2022 loan notes.
On 20 December 2023, the Company announced the sale of its Chill ZERO
nicotine-free vapour products into stores operated by one of the UK's top
supermarket chains, alongside a new supply-chain finance facility.
To support the growth of its sales channels, the Company secured a supply
chain financing facility from an existing major shareholder in November 2023.
The facility of £1,000,000 carries a monthly interest rate of 2% and has a
term of one year. The funds will support the acquisition of inventory and the
roll-out of products to new stores, reducing the cashflow impact of the
Company's rapid expansion.
On 22 December 2023, the Company announced the sale of its Chill ZERO
nicotine-free vapour products into stores operated by a major operator of UK
fuel forecourts.
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