REG - Chill Brands Group - Half-year Report for the period to 30 Sept. 2022
28/12/2022 12:00
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RNS Number : 0890L Chill Brands Group PLC 28 December 2022
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.
Chill Brands Group plc
("Chill Brands" or the "Company" or the "Group")
Interim Results for the Six Months Ended 30 September 2022
Employment Dispute
28 December 2022
Chill Brands Group, the international consumer packaged goods company,
announces its interim results for the six months ending 30 September 2022 (the
"Period"), which can be viewed below and also on the Company's website at
www.chillbrandsgroup.com.
Callum Sommerton, Chief Executive Officer of Chill Brands, commented:
"Much has changed at Chill Brands during the six months ending 30 September
2022. During this transitionary period, we have taken steps to stabilise and
improve the Company's business model while reducing costs. We have also acted
to correct past arrangements that have complicated the Company's path to
revenue.
In the months since we have relaunched the Chill brand and commenced
negotiations with external partners as we seek to build a wider product
marketplace on the Chill.com domain. We are now preparing for the launch of
our new nicotine-free vapour products and expect them to make a significant
contribution to Chill Brands' revenue generation prospects during 2023."
Employment Dispute
The Company has recently commenced proceedings in relation to a dispute with a
former employee. Chill Brands is committed to taking decisive action to
safeguard its intellectual property and will not tolerate the disruption of
its existing business development efforts.
The dispute has no impact on the Company's ongoing operations. Further
information will be provided in due course and as the formal legal process
allows.
-ENDS-
About Chill Brands Group
Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is an international company
concerned with the development, production, and distribution of best-in-class
hemp-derived CBD products, tobacco alternatives and other consumer packaged
goods (CPG) products. The Company operates primarily in the US, where its
products are distributed online and via some of the nation's most recognisable
convenience retail outlets. The Group's strategy is anchored around lifestyle
marketing that is designed to enhance the popularity of its products,
channelling visitors to its landmark chill.com website.
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 (Corporate Finance)
Kelly Gardiner (Equity Sales)
Unaudited Interim Results for the Six Month Period Ending 30 September 2022
Summary
The Period has seen a restructuring of the Company's operations. Following the
appointment of Callum Sommerton as Chief Executive Officer on 19 April 2022,
the Company completed a subscription round and subsequent Open Offer to its
existing shareholders, raising a combined total of £3,712,201.40 before
expenses. These fundraising efforts have provided working capital to the
business while facilitating the settlement of legacy liabilities.
Since April the Company has taken steps to substantially reduce costs, with
particular attention paid to marketing activities and professional advisory
fees. To date targeted cost-cutting measures have led to an annual saving of
at least $1,000,000 from the discontinuation of certain prior activities and
the cancellation of numerous consultancy agreements, the benefit of which will
largely occur during the second half of the year. The Company continues to
take steps to reduce spending and is replacing and renegotiating a number of
vendor contracts ahead of their scheduled 2023 renewal dates.
Limited revenues were recorded during the Period as a result of circumstances
relating to the ownership of the Company's products. The Company sold a large
portion of its CBD product inventory to a connected party, Ox Distributing LLC
("Ox"), during a previous reporting period. Extended payment terms agreed in
relation to that sale provided the Company with cashflow during the Period in
review as products sold through, however additional revenues could not be
recognised for sales of products that had already been recorded as sold to Ox
during the Financial Year ending 31 March 2022. Since the end of the Period,
the Company has taken delivery of new inventory which has started to generate
recordable revenues upon sale. This Period also saw the discontinuation of the
Company's synthetic nicotine product range.
Going forward, Chill Brands' Board of Directors (the "Board") is confident
that the Company will be able to improve revenues through the application of
its updated brand, the diversification of its product range, a targeted
expansion of its physical retail footprint, and the further commercialisation
of the Chill.com domain asset through the sale of third-party products on the
site.
Financial Overview
During the Period the Company recorded revenues of £19,610. Actual sales of
Chill branded products to retailers and consumers significantly exceeded this
level, however the Company's entire inventory of CBD chew pouches and
combustible smokes had already been sold to Ox, its former Master Distributor.
This meant that sales of CBD pouches and combustible smoke products made
during the Period could not be recognised as additional revenue for the
Company, having previously been recorded during the financial year ending 31
March 2022.
During the Period, Ox paid US $254,622.90 to the Company towards the
promissory note that provides extended payment terms for products purchased by
Ox between 1 April to 30 September 2021. To date, Ox has made payments
totalling $395,889.34 during this and previous periods. In 2023, Chill Brands
expects to receive a final balancing payment for the value of the note, net of
credit for funds received directly by the Company on the sale of products,
promotional discounts and write-downs. A more detailed explanation of the
promissory note is provided in Note 7 to these interim financial statements.
Chill Brands received new CBD pouch products in October 2022, sales of which
are now generating recordable revenues. All future deliveries of new inventory
will be owned by Chill Brands and will therefore provide a clearer path to
recordable revenues. Ox no longer acts as the Company's Master Distributor.
The Company recorded an operating loss of £2,196,195 for the period. While
this loss is reflective of cash costs including those attributable to
substantial legacy legal fees and maintaining the Company's listing, it also
reflects large non-cash costs that relate to warrants issued to Viridian
Capital and other advisors. The reported value of these warrants reflects
their value calculated based on the Company's share price at the date of their
issue.
The Company is seeking to recover slotting fees for stores that were not
effectively activated during previous reporting periods. Updates regarding
these efforts will be provided in due course.
Product Focus
During the Period, the Company continued to focus on the development and sale
of its novel CBD wellness and tobacco alternative products. Its primary
product range consists of oral CBD pouches, combustible herbal smokes, and CBD
isolate gummies. Under the Zoetic brand, the Group continues to sell a range
of CBD-infused topical cosmetic products and CBD tinctures.
In late 2021 the Company launched a new range of 'Tobacco Free Nicotine'
("TFN") pouches containing synthetic nicotine. In March 2022, a federal
funding bill that amended the statutory definition of "tobacco product" was
passed by the US Congress, giving the US Food and Drug Administration ("FDA")
authority over synthetic nicotine products. The FDA ruled that companies
selling synthetic nicotine products should submit Premarket Tobacco
Applications ("PMTA") in order to remain on sale. While the Company filed the
necessary application, the ongoing costs of completing a PMTA were considered
prohibitive to the continuation of the Chill TFN product range. As announced
on 3 August 2022, the Company has discontinued the development of synthetic
nicotine products and steps are being taken to conclude a final sale of the
Company's remaining inventory of TFN products.
On 7 December 2022 the Company announced that it was developing a range of
vapour products, including vapes that contain CBD and others that are designed
to provide a nicotine-free vaping experience without the inclusion of a
cannabinoid active ingredient. The Company plans to commence sales of these
vapour products during Q1 2023, after which they are expected to become a
significant contributor to its sales and revenue.
Ownership of the Chill.com Domain
In June 2022, the Group received a letter from the Corporate Reporting Review
Team of the Financial Reporting Council ("FRC") as part of its regular review
and assessment of the quality of corporate reporting in the UK. The FRC
requested further information in relation to the Company's 2021 Interim
Financial Report for the period ending 30 September 2021 as published on 28
January 2022 (the "Interim Report"). The letter concerned the financial
treatment of the Group's purchase of the 'Chill.com' domain name (the "Domain
Purchase"). Specifically, the FRC focused on the treatment of the Domain
Purchase within the condensed consolidated statement of cash flows in the 2021
Interim Report which provided for a cash outflow of £1,195,898. This figure
was reflective of the full purchase price of the domain, however only
£601,986 had been paid during the 2021 Interim Report period with a further
£593,912 still outstanding and only settled in June 2022, after the financial
period ending 31 March 2022.
Following the review, the Group has undertaken to:
(a) correct the comparative information for the six months ended 30 September
2021 in the unaudited cash flow statement to show the actual amount paid in
respect of the Domain Purchase in 2021 (£601,986) and 2022 (£593,912).
(b) disclose the nature and amount of the change made to the cash flow
statement that was included in the 2021 Interim Report. That disclosure can be
found in Note 3 of this interim report.
The Group recognises that the FRC's review of this matter is inherently
limited and does not benefit from a detailed knowledge of the Group's business
or the underlying transactions considered. The FRC's role is not to verify the
information provided but to consider compliance with reporting requirements as
it has done in this instance.
Further to the aforementioned correspondence and corrections, the FRC has
closed its enquiries into the Group's 2021 interim report. The Group continues
to work with its auditors and advisors to ensure that it complies with all
statutory reporting obligations and publishes financial information in an
accurate and timely manner.
Outlook and Future Prospects
This has been a transitionary phase for Chill Brands. The Company has taken
steps to redress issues with its operating model following a change to its
management structure and fundraising activity during April and May 2022. The
Board continues to act to reduce the ongoing costs of the Company's operations
to ensure that it is lean and above all well- prepared to navigate the current
period of global economic instability.
During the same period it has become increasingly important for companies like
Chill Brands to adopt an exceptionally targeted strategy in relation to retail
sales of CBD products. In addition to international regulatory uncertainty,
CBD brands must now also compete with psychoactive Delta 8, 9, and 10 hemp
derivative products that have commenced sales in certain convenience outlets
across the United States. Chill Brands is currently unable to participate in
the psychoactive cannabinoid product market due to the nature of its London
listing and the application of UK law. The Company has therefore adjusted its
rollout strategy to primarily target liquor stores, smoke shops, dispensaries,
and other specialist retail venues where CBD products continue to show
encouraging signs of growth both in terms of revenue and popularity.
It is against this challenging retail environment that the Company has
equipped itself with a number of tools that are expected to improve its
revenue generation prospects. Chill Brands has now established a US national
sales team of brokers and agents whose remuneration comprises
performance-based commissions. This approach has enabled the Company to reduce
retained costs while improving its access to an expansive array of retail
distribution opportunities.
The Company has also secured full ownership of the Chill.com domain and has
plans to further exploit that asset. Following a relaunch of the Chill brand
and website in October 2022, the Company has recorded improved traffic and
return customer rates alongside numerous other key metrics. While continuing
to improve its online conversion funnel, Chill Brands intends to establish a
marketplace of complementary brands and products that will generate both
additional traffic and revenue with the Company taking a percentage of sales
made by third-party brands through the site. As stated elsewhere in this
report, the Company is negotiating with a number of other brands and intends
to sell a wide range of products via its website with several set to launch
during Q1 2023.
In addition to commencing sales of products from other brands, the Company has
engaged in research and development initiatives with a view to improving the
diversity of its own product range. As previously announced, 2023 will see the
launch of Chill Brands' new line of nicotine-free vapour products. These
products are in high demand and are quickly expected to become a reliable
source of revenue for the Company.
Having built the foundations of a strong and appealing brand, the Board
believes that the Company is well positioned to achieve sustainable growth by
innovating while paying close attention to sales and marketing fundamentals.
It is through this brand that Chill Brands will engage consumers with novel
products and active ingredients, both as part of its own proprietary range and
through sales of third-party products via the Chill.com e-commerce platform.
During 2023 Chill Brands will continue to focus on cash management and the
reduction of operating expenses. Through the launch of vapour products,
expansion of its retail distribution network, and establishment of a scalable
product marketplace on Chill.com, the Board is confident that the Company will
also significantly improve its revenue generation prospects.
This interim financial report was approved by the board of Directors on 27
December 2022 and signed on its behalf by:
Callum Sommerton
Chief Executive Officer, Chill Brands Group plc
Consolidated Statement of Comprehensive Income (Unaudited)
For the six months ended 30 September 2022
Unaudited six months ended 30 September 2022 £ Unaudited six months ended 30 September 2021 £ Audited year ended 31 March 2022 £
Revenue 19,610 1,073,872 624,187
Cost of sales (49,738) (756,434) (738,555)
Obsolete inventory expense - - (664,442)
Gross (loss) profit (30,128) 317,438 (778,810)
Administrative expenses (1,249,219) (1,437,282) (2,837,400)
Share expenses for options granted (916,848) (1,348,903) (1,958,076)
Operating Loss (2,196,195) (2,468,747) (5,574,286)
Finance income 8,282 32 1,962
Loss on ordinary activities before taxation (2,187,913) (2,468,715) (5,572,324)
Taxation on loss on ordinary activities - - -
Loss for the period from continuing activities (2,187,913) (2,468,715) (5,572,324)
Loss for the period from discontinued activities (14,749) (114,960) (139,179)
Loss for the period (2,202,662) (2,583,675) (5,711,503)
Other comprehensive income
Items that may be re-classified subsequently to profit or loss: 324,591 (99,496) (271,869)
Foreign exchange adjustment on consolidation
Total comprehensive loss for the (1,878,071) (2,683,171) (5,983,372)
period attributable to the equity holders
Earnings (loss) per share attributed to equity holders
Attributable to continuing activities (0.89) (1.18) 2.65
Attributable to discontinued activities (0.01) (0.06) 0.06
Total (0.90) (1.24) 2.71
Consolidated Statement of Financial Position (Unaudited)
At 31 March 2022 and 2021
Unaudited six months ended 30 September 2022 £ Unaudited six months ended 30 September 2021 £ Audited year ended 31 March 2022 £
Non-Current Assets
Tangible assets 54,621 70,562 54,173
Right of use lease asset 269,855 285,559 260,376
Related party note receivable, net of current portion - 566,571 -
Intangible assets 1,370,160 1,195,898 1,190,225
Total Noncurrent Assets 1,694,636 2,118,590 1,504,774
Current Assets
Inventories, net 765,644 1,063,278 636,294
Trade and other receivables 414,055 625,568 700,199
Cash and cash equivalents 1,822,322 2,079,779 420,045
Other current assets 53,720 - -
Total Current Assets 3,055,741 3,768,625 1,756,538
Total Assets 4,750,377 5,887,215 3,261,312
Non-Current Liabilities
Loans, excluding current maturities 3,147,151 67,424 50,463
Right of use lease liability, net of current portion 204,266 231,231 205,672
Total Noncurrent Liabilities 3,351,417 298,655 256,135
Current Liabilities
Current maturities of loans 10,000 10,000 18,494
Trade and other payables 331,981 759,989 730,184
Current portion of right of use lease liability 74,602 58,110 62,390
Accrued liabilities 22,575 618,912 654,071
Total Current Liabilities 439,158 1,447,011 1,465,139
Total Liabilities 3,790,575 1,745,666 1,721,274
Net Assets 959,802 4,141,549 1,540,038
Equity
Share capital 2,451,153 2,120,700 2,120,700
Share premium account 10,421,550 10,298,440 10,298,440
Share based payments reserve 4,751,130 2,780,589 3,389,762
Shares to be issued reserve 16,941 - 89,517
Foreign currency translation reserve 585,368 433,150 260,777
Retained loss (17,266,340) (11,491,330) (14,619,158)
Total Equity 959,802 4,141,549 1,540,038
Consolidated Statement of Changes in Equity
For the six months ended 30 September 2022
Share Capital £ Share Premium Account £ Share Based Payment Reserve £ Shares To Be Issued Reserve £ Foreign Currency Translation Reserve £ Retained Loss £ Total £
At 31 March 2021 2,020,700 4,698,441 1,431,686 - 532,646 (8,907,655) (224,182)
Comprehensive income for the period
Loss for the period - - - - - (5,711,503) (5,711,503)
Other comprehensive income
Translation adjustment - - - - (271,869) - (271,869)
Total comprehensive loss for the period attributable to the equity holders - - - - (271,869) (5,711,503) (5,983,372)
Issue of warrant and options - - 1,958,076 - - - 1,958,076
Shares to be issued - - 89,517 - - 89,517
Shares issued in the period 100,000 5,900,000 - - - 6,000,000
Cost relating to share issues - (300,001) - - - - (300,001)
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 - . - - - - (2,202,662) (2,202,662)
Other comprehensive income
Translation adjustment - - - - 324,591 - 324,591
Total comprehensive loss for the period attributable to the equity holders - - - - 324,591 (2,202,662) (1,878,071)
Issue of warrant and options - - 1,361,368 - (444,520) 916,848
Shares to be issued - - - 22,653 - - 22,653
Shares issued in the period 330,453 399,471 - (81,200) - - 648,724
Termination of shares to be issued - - - (14,029) - - (14,029)
Cost relating to share issues - (276,361) - - - - (276,361)
At 30 September 2022 2,451,153 10,421,550 4,751,130 16,941 585,368 (17,266,340) 959,802
Consolidated Statement of Cash Flows
For the six months ended 30 September 2022
Unaudited six months ended 30 September 2022 £ Unaudited six months ended 30 September 2021 £ Audited year ended 31 March 2022 £
(Restated)
Cash Flows From Operating Activities
Loss for the period (2,202,662) (2,583,675) (5,711,503)
Adjustments for:
Depreciation and amortization charges 70,541 7,835 113,090
Impairment provision - - 664,441
Loss on disposal of tangible and intangible assets - - 226
Share expenses for options granted 925,472 1,348,903 1,958,076
Shares issued as compensation - - 89,517
Foreign exchange translation adjustment 56,066 (112,157) (319,545)
Operating cash flow before working capital movements (1,150,583) (1,339,094) (3,205,698)
Decrease (increase) in inventories (129,350) 175,501 (61,957)
Decrease (increase) in trade and other receivables 286,144 (112,173) (564,106)
Increase(decrease) in trade and other payables (398,203) (845,537) 68,531
Decrease (increase) in other assets (53,720) 125,873 -
Increase(decrease) in other liabilities - (122,091) -
Increase(decrease) in accrued liabilities (37,584) (1,219,750) (1,199,600)
Net Cash outflow from Operating Activities (1,483,296) (3,337,271) (4,962,830)
Cash Flows From Investing Activities
Purchase of tangible fixed assets - (23,800) (27,443)
Cash paid for intangible assets (593,912) (601,986) (617,198)
Net Cash generated from/(used in) Investing Activities (593,912) (625,786) (644,641)
Cash Flows From Financing Activities
Net proceeds from issue of shares 372,363 5,699,999 5,699,999
Loans made by the Company (9,572) - (11,467)
Issuance of loan noted 3,093,504 - -
Payments of lease liability (38,838) - (528,001)
Repayment of long-term debt - (3,000)
Net Cash Generated from Financing Activities 3,417,457 5,696,999 5,688,532
Net increase in cash and cash equivalents
As above 1,340,249 1,733,942 28,260
Cash and cash equivalents at beginning of period 420,045 333,176 333,176
Foreign exchange adjustment on opening balances 62,028 12,661 58,609
Cash and cash equivalents at end of period 1,822,322 2,079,779 420,045
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended 30 September 2022
NOTE 1 - GENERAL INFORMATION
Chill Brands Group PLC (formerly Zoetic International PLC) and its
subsidiaries (together the "Group") are involved in the development,
production and distribution of premium cannabidiol ("CBD") 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 principal executive 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 2022 have been prepared in accordance with IAS 34
Interim Financial Reporting. The comparative figures for 31 March 2022 are
extracted from the Group's audited accounts to that date. The comparative
figures for the period ended 30 September 2021 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 2022 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 2022 and the six months ended 30 September 2021 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 2022 does not constitute the full statutory accounts for that
period. The Annual Report and Financial Statements for the year ended 31 March
2022 have been filed with the Registrar of Companies.
The financial information of the Group is presented in British Pounds Sterling
("£").
NOTE 3 - RESTATEMENT OF THE 30 SEPTEMBER 2021 CASH FLOWS STATEMENT
During the Financial Year ending 31 March 2022, the Group entered into an
agreement to purchase the Chill.com web domain (the "Domain"). Financial
information relating to the purchase of the Domain was recorded in the Group's
unaudited 2021 Interim Financial Report as published on 28 January 2022.
A subsequent review of the unaudited 2021 Interim Report by the Corporate
Reporting Review Team of the Financial Reporting Council identified that the
condensed consolidated statement of cash flows in the Interim Report provided
for a cash outflow of £1,195,898. This figure was reflective of the full
purchase price of the domain, however only £601,986 had been paid during the
Interim Report period with a further £593,912 still outstanding and only
settled in June 2022, after the financial period ending 31 March 2022.
The Company's interim cash flow statement for the six months ended 30
September 2021 has been restated. This restatement shows the balance of
£601,986 for the purchase of intangible assets, which was the actual amount
paid to date for the domain name "Chill.com" during the period, with the
offsetting restatement of £593,912 in the decrease of accrued liabilities.
NOTE 4 - INCOME TAX EXPENSE
No tax is applicable to the Group for the period ended 30 September 2022. No
deferred income tax asset has been recognized 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 5 - 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.
During the Period the Company raised funds through a placing round and an Open
Offer to existing shareholders (together, the "Fundraising"). The Fundraising
consisted of two parts. The issue of new ordinary shares of 1 pence each at a
price of 2 pence per Ordinary Share, and the issue of Convertible Loan Notes
at a price of 2 pence per Convertible Loan Note. The Convertible Loan Notes
are intended to automatically convert into Ordinary Shares following the
approval of a prospectus by the Financial Conduct Authority (FCA) and
publication of the same. The conversion of the Convertible Loan Notes would
lead to the admittance of 154,675,225 new Ordinary Shares. A complete
explanation of the Group's fundraising activities during the Period can be
found within the regulatory news announcements dated 26 April 2022, 31 May
2022 and 17 June 2022.
Earnings £ Weighted average number of shares Loss per share (pence)
(2,187,913) 245,115,305 (0.90)
Loss per share attributed to ordinary shareholders
NOTE 6 - 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 realizable value if this is
lower. Recorded Inventories are inclusive of the Group's hemp seed assets of
£396,933. While seed testing continues through a joint venture agreement,
there were no recordable biological assets being grown for the six month
periods ended September 30, 2022 and 2021. For the periods ended September 30,
2022 and 2021, the Group had no impairments on inventory.
NOTE 7 - NOTE RECEIVABLE - RELATED PARTY
During the six-month period ended 30 September 2021, the Group entered into a
note agreement with a related party - Ox Distributing LLC. The note receivable
provided extended payment terms in relation to the purchase of products in
Ox's former capacity as the Group's Master Distributor.
The note receivable consists of a note from an entity owned and operated by a
shareholder of the Group. The note carries interest on the unpaid principal
balance of 0% interest from 30 September 2021 through 31 January 2022 and
shall bear interest at the short term rate of 0.18 percent per annum from 1
February 2022 until the note is paid in full on 1 May 2023.
The balance of the note was originally recorded at £943,874 (2021). This
value was reduced by deductions relating to product that was not delivered to
Ox during 2021. The note was further reduced in line with promotional offers
and free fills provided to retailers as part of the Group's rollout strategy.
To date, Ox has made payments against the note totalling $395,889.34 (circa
GBP £324,728.23). At 30 September 2022, the remaining value of the note was
recorded as £194,294 and is included under 'Trade and other receivables'
within the 'current assets' section of the unaudited interim Consolidated
Statement of Financial Position.
NOTE 8 - 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 £1,370,160
(2022) and £1,195,898 (2021). The amortisation expense for the period ended
30 September is £28,845 and £nil (2021). The change in the balance of the
intangible asset from 30 September 2021 to 30 September 2022 is reflective of
amortisation expense and adjusted for foreign currency translation.
NOTE 9 - LOANS
On 10 June 2020, the Group entered into a BBLS managed by the British Business
Bank 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 (2022) and £47,500 (2021).
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 £26,147 (2022) and £29,924
(2021).
On 20 April 2020, Zoetic Corporation entered into a PPP loan of £93,100 with
an interest of 1.00% rate per annum with principal and accrued interest due
and payable on 20 April 2022. During the period ended 31 March 2021, the Group
received full forgiveness of the SBA loan.
On 26 April 2022, the Company issued convertible loan notes with an aggregate
value of £2,916,670 with an interest rate of nil through 30 September 2023
and 10% for the period after 30 September 2023. These convertible loan notes
are set to convert automatically and compulsorily into 145,833,500 Ordinary
Shares following the approval of a Prospectus by the FCA and publication of
the same.
On 17 June 2022, the Company issued convertible loan notes with an aggregate
value of £176,835 with an interest rate of nil through 30 September 2023 and
10% for the period after 30 September 2023. These convertible loan notes are
set to convert automatically and compulsorily into 8,841,725 Ordinary Shares
following the approval of a Prospectus by the FCA and publication of the same.
NOTE 10 - 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 specialized 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 recognized 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
recognize leases having a term of less than one year in the consolidated
statements of financial position.
For 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 recognized 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 2021. 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 £269,855 (2022) and £285,559
(2021).
NOTE 11 - 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 2022 212,070,034 2,120,700 10,298,440
20 April 2022 - issuance of shares 10,000 1,000 17,500
21 April 2022 - issuance of shares 500,000 5,000 57,500
26 April 2022 - issuance of shares 29,166,699 291,667 291,667
27 May 2022 - issuance of shares 227 2.27 20.43
17 June 2022 - issuance of shares 1,768,345 17,683 17,683
4 July 2022 - issuance of shares 1,510,000 15,100 15,100
Cost relating to share issues - - (276,361)
Balance at 30 September 2022 245,115,305 2,451,152 10,421,550
The Company has only one class of share and all shares rank pari passu in
every respect.
NOTE 12 - EQUITY-SETTLED SHARE-BASED PAYMENTS RESERVE
30 September 2022 £ 31 March 2022 £
At beginning of period 3,389,762 1,431,686
On options and warrants granted in the year 1,361,368 1,958,076
Released on lapsing of warrants during the year - -
At end of period 4,751,130 3,389,762
NOTE 13 - SUBSEQUENT EVENTS
The Company received new inventory items consisting of CBD pouch products
immediately after the end of the Period. CBD pouch products sold during the
Period were owned by Ox Distributing LLC and did not generate new revenues for
the Group as the sale had already been recorded in the 2021-2022 financial
year. CBD pouch products sold between the end of the Period and the
publication of this report have been drawn from inventory owned by Chill
Brands and have generated new recordable revenues for the Group.
In October 2022 the Group announced a new sales pilot programme targeting
cannabis dispensaries. The initiative is intended to develop a new revenue
stream from this unique category of retail outlets. In December 2022 the Group
also announced that a sale totalling over $20,000 had been made to a new
distributor to stock 60 additional stores across the American Midwest.
The Group's Chill.com e-commerce website was relaunched on 18 October 2022
following a redesign and refresh of the Chill brand. During the first seven
days following its relaunch the site generated gross sales in excess of
$10,000.
In December 2022 the Group announced that it had commenced the development of
a line of nicotine-free vape products. These products are expected to launch
during Q1 2023. New inventory of Chill vapour products will be owned by Chill
Brands Group plc and its subsidiaries.
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