REG - Kanabo Group PLC - Annual Financial Report
30/04/2024 14:30
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RNS Number : 6539M Kanabo Group PLC 30 April 2024
30 April 2024
Kanabo Group Plc
("Kanabo", the "Group" or the "Company")
FULL YEAR RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2023
Key highlights FY2023 and recent weeks:
· Improve operating performance with 48% revenue growth compared with
FY2022;
· Launched Treat It an online clinic specialised in pain management;
· Strengthen the board of director with the appointment of Ian Mattioli
as the Chair;
· Expanded Treat It clinic services to include mental health;
· Partnered with City Dock Pharmacy in Wapping, London, to launch the
UK's first walk-in pain clinic.
London, UK - 30 April 2024 - Kanabo Group Plc (LSE: KNB), a leader in digital
health services and specialised medicines, including medicinal cannabis, today
announced its full-year results for the year ended 31 December 2023, marked by
strong financial performance and significant strategic advancements.
Avihu Tamir, Chief Executive Officer of Kanabo commented: "I am pleased with
the progress we made throughout 2023, highlighted by our financial performance
and strategic achievements.
We anticipate that the pressure on the UK's National Health Service will
continue unabated, resulting in sustained demand for independent services
providing access to medical professionals. We also believe that as awareness
of the benefits of specialised medicines, including medicinal cannabis, grows,
particularly for chronic conditions such as pain management, we will see
increased demand across our online clinics.
"Looking ahead, the future of Kanaboo is filled with promise and potential.
We believe that our recent achievements position us well and setting the
foundations for our growth in 2024 and beyond. We are confident in our ability
to build a scalable business that meets our sector's demand and to seize
growth opportunities. We appreciate the ongoing support from shareholders and
look forward to delivering long-term benefits for our shareholders"
2023 Financial update:
Kanabo achieved a substantial 48% increase in revenues, reaching £895k in
2023 (2022: £603k). Revenues in the second half of the year amount to £446k,
marking a 23% increase over the same period last year.
The Company significantly improved its financial performance, reducing its
adjusted net loss to £2,627k in 2023 from £3,558k in 2022, a decrease of
approximately 26.2%. This demonstrates effective cost management and increases
operational efficiency.
In May 2023, the Company completed a £2.74 million fundraising round, which
was strongly supported by both new and existing investors, including
significant participation from our senior team. On 31 December 2023, the
Company maintained a strong cash position of £3.2m, which was consistent with
the cash position at the end of 2022.
2023 corporate update:
Launch of the Treat It online clinic
The Company launched the Treat It online clinic, enhancing its digital health
platform with specialised pain management and mental health services using
Medical Cannabis. Treat It seamlessly integrates with NHS medical records for
real-time access, crucial for immediate, specialised consultations and
prescriptions. This capability allows Kanabo to provide rapid, direct care.
Our efficient use of existing e-prescription services facilitates swift growth
without significant investment in new development.
New Product Introductions
Kanabo launched two new medicinal cannabis extract formulations, tailored for
day and night use, designed specifically for inhalation, and catering to the
needs of patients with chronic, severe pain.
Kanabo Agritec Developments
The Company's Agritec division secured its first contract to develop a
medicinal Cannabis cultivation facility in Madrid, Spain. This highlights
Kanabo's agricultural technology and consultancy growth, which generated over
€500K in revenue in 2024.
Board and Management Strengthening
The appointment of Ian Mattioli as Chair and Sharon Malka as Non-Executive
Director strengthens our board with extensive experience in healthcare and
technology, aligning with our strategic growth initiatives.
Post-Year-End Developments:
Post-period, we expanded our Treat It clinic services with a dedicated Mental
Health clinic. Launched to support individuals suffering from conditions such
as anxiety, post-traumatic stress disorder (PTSD), and insomnia, this
expansion enables us to reach a wider audience seeking specialised care.
Most recently, we announced a partnership with City Dock Pharmacy in Wapping,
London, to launch the UK's first walk-in pain clinic, enhancing our
community-based healthcare offerings. Following the successful pilot at City
Dock, we have expanded our in-pharmacy clinic model to Village Pharmacy
Bramhall, Manchester. The Company is expected to establish over 10 walk-in
clinics by the end of the year and more than 50 referral pharmacies,
significantly enhancing both our network and patient access across the
country.
Future Outlook and Strategic Vision for 2024:
As we move into 2024, Kanabo is poised for a pivotal year. We believe we are
strategically positioned to leverage our expanded product portfolio and
enhanced distribution networks to meet the growing demand for digital health
services and specialised medicines. Key initiatives include:
1. Developing a streamlined triage process through a smart IT solution,
enhancing our digital health platform;
2. Expanding our in-pharmacy clinic franchise, increasing accessibility
and reach;
3. Launching and expanding our VapePod MD medical inhaler distribution in
Germany; and
4. Launching a SaaS solution for the Treat It platform, broadening our
service capabilities and market reach.
Enquiries:
Kanabo Group plc +44 (0)20 7469 0930
Avihu Tamir, Chief Executive Officer
Assaf Vardimon, Chief Financial Officer
Ian Mattioli, Non-Executive Chair of the Board
Peterhouse Capital Limited (Financial Adviser and Broker) +44 (0)20 7469 0930
Eran Zucker / Lucy Williams / Charles Goodfellow
About Kanabo Group plc
Kanabo Group plc (LSE:KNB) is a digital health company committed to
transforming patient care through its innovative technology platform and
specialised treatment offerings. Since its inception in 2017, Kanabo has been
focused on researching, developing, and commercialising regulated medicinal
cannabis-derived formulations and therapeutic inhalation devices.
Kanabo's NHS-approved online telehealth platform, The GP Service, provides
patients with video consultations, online prescriptions, and primary care
services. Leveraging its telehealth capabilities, in February 2023, Kanabo
launched Treat It, an online clinic focused on chronic pain management that
provides patients with secondary care.
With its two complementary business divisions, Kanabo has established itself
as an end-to-end digital health provider. It offers telehealth consultations,
prescriptions and tailor-made treatments.
The Company's partially owned subsidiary, Kanabo Agritec Ltd, is a cultivation
consultancy supporting cannabis businesses in developing new farms through
infrastructural, research, and product guidance. These farms deliver
high-quality raw materials for Kanabo's formulas and product line.
At Kanabo Group Plc, we are dedicated to providing patients with the highest
quality medical treatments and more accessible healthcare experiences.
Visit (http://www.kanabogroup.com/) www.kanabogroup.com
(http://www.kanabogroup.com/) for more information.
Future Performance And Forward Looking Statements
This announcement contains certain statements that constitute forward-looking
statements that may be identified by the use of terminology such as "may,"
"will," "expects," "plans," "anticipates," "estimates," "potential" or
"continue" or the negative thereof or other comparable terminology. Examples
of such statements include, but are not limited to, statements regarding the
design, scope, initiation, conduct and results of our research and development
programs; our plans and objectives for future operations; and the potential
benefits of our products and research technologies. These statements involve a
number of risks and uncertainties that could cause actual results and the
timing of events to differ materially from those anticipated by these
forward-looking statements. These risks and uncertainties include a variety of
factors, some of which are beyond our control. Forward looking statements,
opinions and estimates provided in this announcement are based on assumptions
and contingencies which are subject to change without notice, as are
statements about market and industry trends, which are based on
interpretations of current market conditions. Forward looking statements
including projections, guidance on future earnings and estimates are provided
as a general guide only and should not be relied upon as an indication or
guarantee of future performance.
Chair's Statement
I am delighted to report on Kanabo's progress in 2023. I joined the Group in
the first half of what has been a pivotal year for the Company as it
strengthened its operating footprint in digital health services and am pleased
to have been part of this progress. I believe there is a real opportunity to
develop a leading provider of digital health services to support patients who
are currently struggling to access medicinal professionals and novel
treatments due to the significant and growing pressure on existing health
services that operate through traditional channels. Kanabo is uniquely
positioned to become a go-to provider of both primary and secondary healthcare
provisions and alternative medications, affording patients more autonomy over
their specialized healthcare plan.
We made progress in the provision of primary care, secondary care, and the
development and distribution of specialized medications in 2023, with the
launch of new products and services, and through developing external
partnerships to support the Company's growth, thereby establishing a more
robust end-to-end digital healthcare service provider.
These operational achievements were underpinned by significant strategic
progress across the Group's primary and secondary healthcare divisions.
In March 2023, the Group launched the Treat-It platform, an online
consultation platform that provides patients suffering from chronic pain
conditions access to healthcare professionals who can prescribe alternative
medications, including medicinal cannabis, to help these individuals better
manage their conditions. There are approximately 8 million chronic pain
sufferers in the UK who often face significant difficulties in gaining access
to medication. Kanabo's unique approach to healthcare, offered through the
Treat-It platform, provides these individuals with the tools they need to
better manage their conditions. The Group has continued to develop Treat-It
throughout the Period, and in November, announced a partnership with BRITISH
CANNABIS to supply the CBD by BRITISH CANNABIS range of pharmacy-grade CBD
health supplements to patients via a prescription service offered through the
Treat-It platform. This partnership allows Kanabo to continue to increase the
accessibility and affordability of high-quality, alternative pain management
solutions for patients.
The development of Kanabo's healthcare consultation platforms was further
supported by a contract extension with a leading retailer to provide video
consultation and prescription services to patients via Kanabo's integrated
online telehealth platform, The GP Service. This widens Kanabo's unique
offering to a growing number of patients, providing them with digital
healthcare solutions that meet their unique needs.
Kanabo's digital healthcare provision is supported by its unique medicinal
cannabis offering, and the Company has made further progress in developing the
quality of these unique products in 2023. I am pleased to report that Kanabo
has launched two new extracts for pain management and continues to progress on
the CE Mark certification. Furthermore, in January 2024, Kanabo announced the
launch of a partnership with City Dock Pharmacy in London, establishing the
UK's first walk-in clinic for pain management, delivering specialized
medicines including medicinal cannabis.
The healthcare sector is under significant pressure in the UK and there is
growing demand for alternative approaches to both primary and secondary care
provision. Kanabo's position at the leading-edge of technology positions the
Group to continue to offer patients access to healthcare services.
The Group saw several changes to the Board in 2023. Dan Poulter and Gil Efron
both stepped down and we would like to wish them the best with their future
endeavours. I would also like to thank David Tsur for his service as Chair
before my arrival and am grateful for his continued expertise and support in
the Deputy Chair role. Finally, I would like to welcome Sharon Malka to the
Board; we are benefitting from his experience in both the healthcare and
technology sectors.
Overall, the Group has made solid progress throughout the Period. I am pleased
to be a part of Kanabo's growing offering to provide individuals with better
access to healthcare services that meet their unique needs. I look forward to
updating shareholders on our progress as we continue to leverage our position
as a go-to provider of alternative healthcare solutions.
Ian Mattioli
Chair
Chief Executive Officer's Review
Operational Review
We are pleased to report on our continued progress throughout 2023 as we
establish ourselves as an end-to-end leading provider of digital health
services and specialised medicines. As a Group, we are executing against our
strategic plan, leveraging our pharmacy network to expand the reach of our
digital health services, and expanding our medicinal cannabis product
portfolio. This is delivering steady financial progress, with revenues up 48%
to £0.89m (FY22: £0.60m), and operating losses increasing to £7.9m (FY22:
£6.8m), as a result of impairment of intangible assets and goodwill in the
amount of £4.4m (FY22: nil).
The Group's operations are now focused on two core divisions: digital health
services and specialized medicines, including medicinal cannabis. Within our
digital health services, individuals can access medicinal professionals
through either video consultations or an online consultation platform designed
to provide for the diagnosis of and treatment pathways for common conditions.
Following these consultations, patients can conveniently collect their chosen
treatment - which includes specialized medicines and, dependent on the
condition, medicinal cannabis - from any pharmacy affiliated with our service.
In terms of specialized medication, the Group has launched two new medicinal
cannabis oil formulations in the period.
In 2023, we also announced the launch of Treat-It, a pioneering online pain
clinic. The clinic provides individuals seeking relief from chronic pain
conditions with direct access to healthcare professionals and specialized
medicines, including medicinal cannabis products, through our seamless online
consultation service. These professionals are equipped to prescribe
specialized medicines, including medicinal cannabis products, as part of a
specialized care plan. Through our specialized medicines division, we provide
patients with access to innovative treatment pathways outside of those
available through traditional healthcare providers.
In response to escalating pressures on healthcare services, a growing number
of individuals are turning to private GP services. We believe a significant
opportunity exists to harness our position as an end-to-end digital health
services provider. Through strategic collaborations with our extensive
pharmacy network, we are well-placed to deliver online consultancy services to
a wider audience, affording individuals access to specialized consultations
and care pathways without traditional waiting times.
Digital Health Services
In 2023, our primary focus within the digital health services division has
been to fully leverage our existing GP Service network - both in terms of
pharmacies and potential end-users. We also sought to expand the appeal of the
service offering by introducing new products and services.
Our core service remains the provision of online video consultations with
medicinal professionals. We have seen a continued increase in demand for our
services, with the platform now delivering over 1,000 consultations per month.
The number of active pharmacies within our network now stands at 6,040
pharmacies. This extensive network ensures the convenient collection of
prescriptions and medications for our patients. In H1 2023, we signed an
agreement with the largest wholesaler of medications to UK pharmacies. This
strategic move strengthens our distribution capabilities nationwide and
ensures we are positioned to deliver a seamless, end-to-end service to our
patients throughout the UK.
Alongside driving organic growth and demand for our services, we are also
seeking to strengthen our B2B relationships. In November 2023, we announced a
12-month extension of a contract with a major UK retailer to provide video
consultation and prescription services, and we continue to service several UK
corporations that provide rapid access to medicinal professionals for their
employees as part of a broader benefits package.
In March 2023, we were delighted to extend our online consultation service
with the launch of our Treat-It platform, a dedicated online pain clinic,
offering access to specialised medicines including medicinal cannabis. There
are an estimated 8 million patients suffering from chronic pain in the UK. The
Treat-It clinic - which is regulated by the Care and Quality Commission
("CQC") - aims to offer these individuals alternative treatment pathways and
expedited access to medicinal professionals. As awareness of the availability
of our platform grows, we are seeing increased traffic to our site, which is
then converting to consultations.
Over the course of H2 2023, we successfully expanded the scope of our primary
care offering. Patients now have the convenience of accessing specific
treatments without needing a consultation with a doctor. Currently, this
service is limited to a select number of treatments, including erectile
dysfunction, cystitis, the morning-after pill, and travelers' diarrhea.
Patients undergo an online assessment, which is then reviewed by a doctor. A
prescription is promptly signed and dispatched within 48 hours if the patient
meets the eligibility criteria. We continue to assess further indications that
are suitable for these consultations and will launch these as and when
appropriate.
On 28 March 2024, we announced the extension of our specialised Treat-It
clinic, with the launch of our dedicated mental health clinic. The NHS has
seen increasing demand for mental health treatment, which is currently
outpacing its current resources, resulting in long waiting lists for patients
and prolonged periods ahead of accessing treatment. This new clinic will
function similarly to the existing Treat-It clinic for chronic pain
management, providing accessible online solutions for specific conditions.
Having made significant investments in IT infrastructure and personnel to
facilitate this launch, our new clinic empowers patients to engage in online
consultations with doctors. This process allows for a thorough assessment to
determine the most effective course of treatment and medications.
Given the continued pressure on the UK's National Health Service, we
anticipate a sustained demand for our independent services.
Specialised Medications
The Group's research and development ("R&D") team is actively expanding
the portfolio with new products. In January 2023, we announced the launch of
two new medicinal cannabis extract formulations for pain management, one for
night use and the other for daytime, specifically designed for inhalation.
These cater to patients with chronic, severe pain and have been developed for
delivery via exact dosing using the Group's VapePod MD delivery device. The
VapePod is Kanabo's medical-grade vaporiser and ensures patients can rely on
the secure, consistent, and measured dosing of medicinal cannabis extracts.
In 2020, the Group initiated the CE Mark certification process for its VapePod
device. In the second half of 2023, the device made further progress towards
achieving the CE Mark. Following the update in the September 2023 Half Year
Results, we believe the process remains on track, and we will promptly update
shareholders on any further developments. Upon obtaining CE Mark
accreditation, we will explore opportunities to partner with a distributor to
expand into select European markets. We believe that with approval, the
VapePod will have a strong market advantage due to its design.
In November 2023, we announced a strategic partnership with BRITISH CANNABIS,
allowing Kanabo to offer pharmacy-grade CBD health supplements from the CBD by
BRITISH CANNABIS range. This collaboration extends the availability of these
supplements through prescriptions provided by our Treat-It online pain clinic.
Additionally, Treat-It will be included as part of BRITISH CANNABIS Canndr
app, an online platform which allows patients to choose and evaluate
high-quality cannabis medicines available on the market.
Kanabo Agritec ("Agritec")
In July 2023, Agritec - a consultancy focused on designing, building,
operating, and managing medicinal cannabis facilities - announced its first
contract win. Under the agreement, Agritec will be working with its Spanish
partner, Taima Growth S.L ("Taima"), to establish a cannabis cultivation
centre. Payment will be received upon the successful achievement of specific
milestones in the project. Kanabo holds a 40% stake in Agritec.
The contract with Taima is for the development of an indoor medicinal cannabis
cultivation and processing facility in Madrid, Spain. The contract - split
over two phases - will see the facility granted a licence for the production
and manufacturing of cannabis. Upon completion, the facility is anticipated to
have the capacity to yield up to 3,000kg of cannabis flowers annually.
Through our involvement with Agritec, Kanabo is not only able to leverage its
extensive knowledge and experience in establishing and optimising medicinal
cannabis facilities, but it also ensures that the Group has a diversified
supply chain through key offtake agreements.
Subsequent to the reporting period, we are pleased to announce the receipt of
the first milestone payment of approximately €266,000, representing 50% of
the payments of Phase 1. We continue to work with Taima to complete Phase 1 of
the project, at which point, the Spanish Agency of Medicines and Medical
("AEMPS") devices will inspect the facility. Subject to successfully passing
the inspection, AEMPS will grant a licence for the production and
manufacturing of cannabis and its products. With our support, Taima will then
move on to the delivery of Phase 2, which - once concluded - will result in
the facility being fully operational.
Directorate & Personnel Changes
In the first half of the year, we saw a number of changes to the Board, most
notably the appointment of Ian Mattioli as Chair. Mr Mattioli brings
significant experience to the role, having co-founded a leading UK pensions
and wealth management consultancy, where he currently serves as CEO. The
continued guidance of Mr David Tsur's experience, who assumed the role of
Deputy Chair upon Mr Mattioli's appointment, further strengthens our
leadership team. Additionally, we welcomed Mr Sharon Malka to the Board in May
2023. With a professional background rooted in healthcare and technology
companies, Mr Malka's expertise promises to be instrumental as Kanabo advances
into its next phase of growth.
Over the course of 2023, Dan Poulter and Gil Efron both stepped down from the
Board. We continue to send our best wishes to Gil on his recovery and wish Dan
all the best with his existing work commitments. We sincerely thank them for
their valuable contributions during their tenure with Kanabo and wish them
continued success in their future endeavors.
In the second half of the year, we successfully negotiated an agreement with
the lessors of our Company offices in Israel to conclude the lease term early.
Consequently, we closed the Israeli office on 31 December 2023. This strategic
move, along with the previously communicated transition of a number of key
roles from Israel to the UK, is anticipated to yield annualised savings of
£250k. Along with reducing the cost base, the closure of the office in Israel
significantly streamlines the operating structure of the business and drives
increased efficiencies.
Corporate activity
In the first half of the year, we successfully closed a £2.74 million
fundraising, which both new and existing investors strongly supported. Our
senior team also participated in the fundraising, with Avihu Tamir (CEO), Ian
Mattioli (Chair), David Tsur (Deputy Chair), and Suleman Sacranie (CTO and
Founder of The GP Service) also participating.
The fundraising proceeds are being used to support the business and seize
opportunities in the digital health sector. We have invested significantly in
the IT infrastructure, supporting The GP Service platform, and allowing
expansion into areas like mental health. Additionally, internal resources have
been enhanced to ensure the necessary expertise for regulatory and care
aspects in delivering these services.
In March 2023, the Company received notice that 11157353 Canada Corp., which
trades under the name Materia ("Materia"), had been put into receivership.
Kanabo had entered a strategic partnership with Materia in respect of their
Maltese EU GMP certified facility, German medicinal cannabis wholesalers and a
UK CMD eCommerce platform. Following the liquidation of Materia, Kanabo
initiated legal action to recoup outstanding payments, and was awarded £82k.
R&D/Investment
Investment in our R&D continued during 2023, ensuring we retained our
reputation as a pioneer in the development of medicinal cannabis medications.
We also strengthened our IT infrastructure to ensure it has sufficient
bandwidth to support the Group as it continues to attract increased numbers of
consultations and to expand into additional medicinal verticals.
We recognise that maintaining our technology and products is essential to
delivering our broader plan of becoming a leading digital health services
provider with access to specialised medicines. As a result, we remain
committed to providing ongoing support and investment in our R&D teams to
support this objective.
Post period end
Post period end, we announced a partnership with City Dock Pharmacy in
Wapping, London, to launch a walk-in pain clinic. The clinic offers both
appointment-based and walk-in services. Patients can use the Treat-It platform
to access medicinal consultations and pharmacists are on hand to assist
patients in navigating the treatment options. The partnership will support the
delivery of personalised treatment plans to patients suffering from chronic
pain, who often face difficulty accessing medicinal treatments.
Since launch, I am pleased to report that the clinic has performed ahead of
our internal expectations. We are currently in discussions with several other
pharmacies to replicate this model across other sites in the UK.
We have also launched medicinal cannabis cards for eligible patients at our
Treat-It clinic, providing them with easy access to their prescriptions via QR
code. We believe that in the context of complex legislation regarding
medicinal cannabis, this will reduce stress and inconvenience for patients by
affirming their legal right to their prescribed medication and may help
de-stigmatise medicinal cannabis use.
Summary and Outlook
We have spent 2023 ensuring our business has the foundations upon which to
build a leading digital health services company. The formulation and launch of
medicinal cannabis products also remain the bedrock of the Group, enabling us
to deliver unique formulations to both the medicinal and wellness markets.
Reflecting on our objectives set six months ago (half-year reports in
September 2023), we can showcase concrete achievements on three of our main
objectives:
1. Partnerships with High Street Pharmacies: Our pilot program with City
Pharmacy in Wapping has shown promising results, affirming our strategy to
integrate in-pharmacy consultations and broaden our reach now, allowing
prescriptions for certain indications without needing a video consultation
through our platform.
2. Secondary Care Platform Development: We have expanded our services to
the mental health sector, addressing the high demand for such care in the UK.
Building upon our existing platform, Treat-It, we have successfully launched a
mental health service that accommodates patients suffering from conditions
like anxiety, post-traumatic stress disorder ("PTSD"), insomnia, and more.
This initiative broadens our clinic's target market, allowing us to extend our
specialised care to a wider audience needing our support.
3. EU Product Expansion: As we await CE mark approval for our VapePod MD
medicinal inhaler device, we have already taken key steps towards extending
our distribution network beyond the UK, targeting broader European expansion.
We have signed a Memorandum of Understanding with a pharmaceutical wholesale
distributor to distribute the Kanabo medicinal device in Germany.
Additionally, we are in the process of finalising definitive distribution
agreements.
Future milestones for 2024:
Looking forward, we continue to progress towards the fourth objective laid out
in the Half-Year Report in 2023:
1. Primary Care Platform expansion: Over the past six months, we have been
developing a 'smart' IT solution to create a streamlined triage process for
medicinal consultations on our platform. We aim to pilot this innovative
approach by the end of Q2 2024, with the goal to transition 70% of existing
online GP consultations to this more efficient method, laying the groundwork
for scaling our consultation services.
We also plan to build on these achievements with the following future
milestones, which will shape our efforts in the next half-year of 2024:
2. In-Pharmacy Clinic Franchise Expansion: Following our successful
in-pharmacy pilot, we are set to enhance our in-pharmacy clinic franchise,
aiming to extend out network to over 10 pharmacies by year-end. This expansion
aims to leverage existing pharmacy networks to increase Kanabo's market reach
and accessibility significantly.
3. German Market Distribution Launch: As we anticipate imminent receipt of
the CE Mark approval, we are gearing up to launch and expand our distribution
across Germany. Our objective is to onboard several key distributors,
positioning Kanabo as the leading medicinal cannabis vape brand in Germany.
4. Treat-It Platform expansion: Capitalising on our NHS-approved online
consultation platform, we are launching a software as a service ("SaaS")
Solution that enables other providers to utilise the Treat-It platform. This
strategic move leverages our proven technology to expand service capabilities
beyond our direct offerings.
We anticipate the pressure on the UK's National Health Service will continue
unabated, resulting in sustained demand for independent services providing
access to medicinal professionals. We also believe as awareness of the
benefits of specialised medicines, including medicinal cannabis, grows,
particularly for chronic conditions such as pain management, we will see
increased demand across our online clinics.
The Kanabo Board is confident in our ability to build a scalable business that
meets our sector's demand and to seize growth opportunities. We appreciate the
ongoing support from shareholders and look forward to keeping them updated on
our progress.
Avihu Tamir
Chief Executive Officer
Consolidated Statement of Profit or Loss
For the year ended 31 December 2023 2022
Note £ 000 £ 000
Revenue 7 895 603
Cost of sales 8 (761) (404)
Gross profit 134 199
Research and development expenses 9 (312) (597)
Sales and marketing expenses 10 (598) (1,190)
General and administration expenses 11 (2,978) (3,804)
Reversal of impairment 24 82 59
Impairment of intangible assets and goodwill (4,448) -
Other (expenses)/gains - including acquisition and listing costs 13 327 (1,448)
Operating loss (7,793) (6,781)
Net finance expenses 14 (202) (89)
Loss before income tax expense (7,995) (8,870)
Income tax expense 15 - -
Loss for the year (7,995) (6,870)
Attributable to:
Equity holders of the parent (7,987) (6,867)
Non-controlling interests (8) (3)
(7,995) (6,870)
Loss (basic and diluted) per share from operations attributable to the equity
owners
Basic and diluted loss per share (pence per share) 16 (1.49) (1.65)
The notes to the financial statements form an integral part of these financial
statements.
Consolidated Statement of Comprehensive Loss
For the year ended 31 December 2023 2022
Note £ 000 £ 000
Loss for the year (7,995) (6,870)
Other comprehensive income for the year
Items that may be subsequently reclassified to the profit or loss:
Foreign operations - foreign currency translation differences 117 21
Total items that may be reclassified to profit or loss 117 21
Total comprehensive loss (7,878) (6,849)
Attributable to:
Equity holders of the parent (7,870) (6,846)
Non-controlling interests (8) (3)
(7,878) (6,849)
The notes to the financial statements form an integral part of these financial
statements.
Consolidated Statement of Financial Position
As at 31 December 2023 2022
Note £ 000 £ 000
ASSETS
Non-current assets
Intangible assets and goodwill 17 4,726 10,044
Property, plant, and equipment 18 49 96
Right-of-use asset 31 - 282
Long-term deposit 31 - 31
4,775 10,453
Current assets
Inventories 21 56 81
Trade receivables 22 20 43
Other receivables 23 290 156
Financial asset through profit or loss 20 - 491
Short-term deposits 26 1,529 24
Cash and cash equivalents 26 1,681 3,204
3,576 3,999
Total assets 8,351 14,452
EQUITY AND LIABILITIES
Equity
Issued capital 27 15,811 10,573
Share premium account 27 7,251 6,850
Merger reserve 27 17,495 11,393
Share-based payments reserve 28 925 1,715
Share to be issued reserve 6.a, 6.c 1,591 10,476
Reverse acquisition reserve (14,968) (14,968)
Foreign currency translation reserve 131 14
Accumulated loss (20,723) (13,605)
Equity attributable to equity holders of the parent 7,513 12,448
Non-controlling interests (11) (3)
Total equity 7,502 12,445
Non-current liabilities
Interest-bearing loans and borrowings 29 139 509
139 509
Current liabilities
Trade payables 163 153
Other payables 30 414 1,147
Interest-bearing loans and borrowings 29 133 198
710 1,497
Total liabilities 849 2,007
Total equity and liabilities 8,351 14,452
The notes to the financial statements form an integral part of these financial
statements.
The financial statements were approved and authorised for issue by the Board
of Directors on 30 April 2024 and were signed on their behalf by:
Ian Mattioli
Chair
Company's Statement of Financial Position
As at 31 December 2023 2022
Note £ 000 £ 000
ASSETS
Non-current assets
Property, plant, and equipment 18 14 17
Investments in subsidiary 19 9,247 23,746
Intercompany receivables 25 2,435 1,097
11,696 24,860
Current assets
Inventories 21 56 81
Trade receivables 22 1 35
Other receivables 23 18 69
Intercompany receivables 25 515 3,192
Financial asset through profit or loss 20 - 491
Short-term deposits 26 1,001 -
Cash and cash equivalents 26 1,137 937
2,728 4,805
Total assets 14,424 29,665
EQUITY AND LIABILITIES
Equity
Issued capital 27 15,811 10,573
Share premium account 27 7,251 6,850
Merger reserve 27 17,495 11,393
Share-based payments reserve 28 925 1,715
Share to be issued reserve 6.a, 6.c 1,591 10,476
Accumulated loss (28,928) (12,326)
Total equity 14,145 28,681
Current liabilities
Trade payables 9 79
Other payables 30 270 905
279 984
Total liabilities 279 984
Total equity and liabilities 14,424 29,665
The notes to the financial statements form an integral part of these financial
statements.
As permitted by section 408 of the Companies Act 2006, the parent company's
income statement has not been included in these financial statements. The loss
for the parent Company was £17,471 thousand (2022: loss of £5,976 thousand).
The financial statements were approved and authorised for issue by the Board
of Directors on 30 April 2024 and were signed on their behalf by:
Ian Mattioli
Chair
Company Registration No. 10485105
Consolidated Statement of Changes in Equity
Attributable to owners of the Company
Share capital Share premium account Merger reserve Share-based payments reserve Shares to be issued reserve Reverse acquisition reserve Foreign currency translation reserve Accumulated loss Total Non-controlling interests Total equity
Note £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000
As at 1 January 2022 9,249 5,169 9,231 758 2,500 (14,968) (7) (6,748) 5,184 - 5,184
Loss for the year - - - - - - - (6,867) (6,867) (3) (6,870)
Other comprehensive loss - - - - - - 21 - 21 - 21
Total comprehensive loss - - - - - - 21 (6,867) (6,846) (3) (6,849)
Acquisition of a subsidiary 6.c 533 - 2,162 - 7,976 - - - 10,671 - 10,671
Issue of share capital 27 703 1,434 - - - - - - 2,137 - 2,137
Exercise of options 28 7 5 - (10) - - - 10 12 - 12
Exercise of warrants 28 81 242 - - - - - - 323 - 323
Share-based payments 28 - - - 967 - - - - 967 - 967
As at 31 December 2022 10,573 6,850 11,393 1,715 10,476 (14,968) 14 (13,605) 12,448 (3) 12,445
Loss for the year - - - - - - - (7,987) (7,987) (8) (7,995)
Other comprehensive income - - - - - - 117 - 117 - 117
Total comprehensive loss - - - - - - 117 (7,987) (7,870) (8) (7,878)
Issue of share capital 27 2,378 281 - - - - - - 2,659 - 2,659
Acquisition of a subsidiary 6.c 2,783 - 6,102 - (8,885) - - - - - -
Debts settlements 27.a (c) 77 120 - - - - - - 197 - 197
Options expiration 28 - - - (869) - - - 869 - - -
Share-based payments 28 - - - 79 - - - - 79 - 79
As at 31 December 2023 15,811 7,251 17,495 925 1,591 (14,968) 131 (20723) 7,513 (11) 7,502
The notes to the financial statements form an integral part of these financial
statements.
Company's Statement of Changes in Equity
Share capital Share premium account Merger reserve Shares based payments reserve Shares to be issued reserve Accumulated loss Total equity
Note £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000
As at 1 January 2022 9,249 5,169 9,231 750 2,500 (6,360) 20,539
Total comprehensive loss - - - - - (5,976) (5,976)
Acquisition of a subsidiary 6.a 533 2,162 2,162 - 7,976 - 10,671
Issue of share capital 27 703 1,434 - - - - 2,137
Exercise of options 28 7 5 - (10) - 10 12
Exercise of warrants 28 81 242 - - - - 323
Share-based payments 28 - - - 975 - - 975
As at 31 December 2022 10,573 6,850 11,393 1,715 10,476 (12,326) 28,681
Total comprehensive loss - - - - - (17,471) (17,471)
Issue of share capital 27 2,378 281 - - - - 2,659
Acquisition of a subsidiary 6.a,6.c 2,783 - 6,102 - (8,885) - -
Debts settlements 27.a (c) 77 120 - - - - 197
Options expiration 28 - - - (869) - 869 -
Share-based payments 28 - - - 79 - - 79
As at 31 December 2023 15,811 7,251 17,495 925 1,591 (28,928) 14,145
The notes to the financial statements form an integral part of these financial
statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023 2022
Note £ 000 £ 000
Operating activities
Loss before tax (7,995) (6,870)
Adjustments to reconcile profit before tax to net cash flows:
Reversal of impairment 24 (82) (59)
Share-based payment expense 28 79 967
Depreciation of property, plant and equipment, and right-of-use assets 18,31 74 69
Amortisation of intangible assets and impairment of goodwill 17 1,378 976
Impairment charge on receivables 22 - 3
Loss on current financial asset 13,20 158 259
Impairment of intangible assets and goodwill 4,448 -
Net finance expenses 31 56
Loss from sale of property, plant and equipment 18 41 -
Other gain 31 (20) -
Working capital changes:
Change in trade receivables 23 (3)
Change in other receivables (103) 155
Change in inventories 25 (18)
Change in trade payables 10 92
Change in other payables (536) 677
Change in long-term deposit - (31)
(2,469) (3,727)
Interest paid 36 (51) (52)
Net cash flows used in operating activities (2,520) (3,779)
Investing activities
Purchase of property, plant, and equipment 18 (25) (68)
Proceeds from sale of property, plant and equipment 18 5 -
Proceeds from sale the of financial asset 20 333 -
Acquisition of a subsidiary, net of cash acquired 6 - 235
Investment in short-term deposits (1,500) (5)
Development expenditures 17 (508) (85)
Net cash flows from/ (used in) investing activities (1,695) 77
Financing activities
Share issue net of issuing cost 27 2,740 2,250
Share issuing cost (81) (113)
Proceeds from the exercise of warrants 27 - 323
Proceeds from the exercise of share options 27 - 12
Receipts of long-term loans 29 82 68
Repayment of lease liability 36 (43) (37)
Repayment of borrowings 36 (133) (100)
Net cash flows from financing activities 2,565 2,403
Net decrease in cash and cash equivalents (1,650) (1,299)
Net foreign exchange difference 127 26
Cash and cash equivalents at 1 January 3,204 4,477
Cash and cash equivalents at 31 December 26 1,681 3,204
The notes to the financial statements form an integral part of these financial
statements.
Company's Statement of Cash Flows
For the year ended 31 December 2023 2022
Note £ 000 £ 000
Operating activities
Loss before tax (17,471) (5,976)
Adjustments to reconcile profit before tax to net cash flows:
Reversal losses on financial assets 24 (82) (59)
Share-based payment expense 63 205
Depreciation of property, plant, and equipment 18 4 4
Net impairment losses on financial asset 1,991 -
Impairment charge on receivables 22 - 3
Loss on current financial asset 13,20 158 259
Impairment of investment in subsidiaries 12,907 -
Net finance (expenses) income (1) 54
Share of loss of subsidiaries 19 1,608 2,371
Working capital changes:
Change in trade receivables 34 (28)
Change in other receivables 51 141
Change in inventories 25 (18)
Change in trade payables (70) 55
Change in other payables (438) 756
Change in intercompany receivables (652) (3,509)
Net cash flows used in operating activities (1,872) (5,742)
Investing activities
Purchase of property, plant, and equipment 18 (1) -
Proceeds from the sale of financial asset 20 333 -
Investment in short-term deposit (1,000) -
Net cash flows used in investing activities (668) -
Financing activities
Share issue net of issuing cost 27 2,659 2,137
Proceeds from the exercise of warrants 27 - 323
Proceeds from the exercise of share options 27 - 12
Receipts of short-term loans 82 59
Net cash flows from financing activities 2,741 2,531
Net increase (decrease) in cash and cash equivalents 200 (3,211)
Cash and cash equivalents at 1 January 937 4,148
Cash and cash equivalents at 31 December 26 1,137 937
The notes to the financial statements form an integral part of these financial
statements.
Notes to the Financial Statements
1. Corporate information
The consolidated financial statements of Kanabo Group Plc and its subsidiaries
(collectively, the Group) for the year ended 31 December 2023 were authorised
for issue in accordance with a resolution of the Directors on 30 April 2024.
Kanabo Group Plc (the Company or the parent) is a limited company incorporated
and domiciled in England and whose shares are publicly traded on the London
Stock Exchange in the standard segment. The registered office is located at
Churchill House, 137-139 Brent Street, London, NW4 4DJ, United Kingdom.
The Group's principal activities are digital health committed to transforming
patient care through its innovative technology platform and specialised
treatment offerings. The Group has been focused on researching, developing,
and commercialising regulated medicinal cannabis-derived formulations and
therapeutic inhalation devices.
2. Material accounting policy information
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all the periods presented unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in
accordance with International Accounting Standards as adopted in the United
Kingdom (UK adopted IFRS) and those parts of the Companies Act 2006 applicable
to companies reporting IFRS, except as otherwise stated.
The consolidated financial statements are prepared under the historical cost
convention with the exception of certain investments which are carried at fair
value such as financial assets measured at fair value.
The consolidated financial statements are presented in GBP (£), which is the
functional currency of the company, and all values are rounded to the nearest
thousand (£000), except when otherwise indicated.
2.2 Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Company and its subsidiaries as at 31 December 2023. Control is achieved when
the Group is exposed or has rights to variable returns from its involvement
with the investee and has the ability to affect those returns through its
power over the investee. Specifically, the Group controls an investee if, and
only if, the Group has:
· Power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee).
· Exposure, or rights, to variable returns from its involvement with
the investee.
· The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights results in
control. To support this presumption and when the Group has less than a
majority of the voting or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing whether it has power over an
investee, including:
· The contractual arrangement(s) with the other vote holders of the
investee.
· Rights arising from other contractual arrangements.
· The Group's voting rights and potential voting rights.
The Group re-assesses whether it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until the date the
Group ceases to control the subsidiary.
Profit or loss and each component of OCI are attributed to the equity holders
of the parent of the Group and to the non-controlling interests, even if this
results in the non-controlling interests having a deficit balance. When
necessary, adjustments are made to the financial statements of subsidiaries to
bring their accounting policies in line with the Group's accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash
flows relating to transactions between members of the Group are eliminated in
full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control,
is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related
assets (including goodwill), liabilities, non-controlling interest and other
components of equity, while any resultant gain or loss is recognised in profit
or loss. Any investment retained is recognised at fair value.
2.3 Going concern
The preparation of the financial statements requires an assessment on the
validity of the going concern assumption.
The Directors are required to satisfy themselves that it is reasonable for
them to conclude whether it is appropriate to prepare the financial statements
on a going concern basis, and as part of that process they have followed the
Financial Reporting Council's guidelines ("Guidance on the Going concern Basis
of Accounting and Reporting on Solvency and Liquidity Risk" issued April
2016).
As at 31 December 2023, the Group's cash position was £3,210 thousand and it
was in a strong net current asset position. Based on the above and the Group's
current cash reserves and detailed cash forecasts produced, the Directors are
confident that the Group will be able to meet its obligations as they fall due
over the course of the next 12 months. The Group is planning to run new income
streams and / or raise further funds in the next 12 months. The Directors are
confident that the Group would be able to meet it's obligations as they fall
due, due to the low level of committed expenditure relative to the forecasted
discretionary expenditure, which could be reduced or deferred. Although, the
Board acknowledges that there is a material uncertainty related to the timing
of the new income streams and further fund raise, which could give rise to
significant doubt over the Group's ability to continue as a going concern, the
Board is satisfied the Group will have sufficient funds either from forecasted
operations or through additional fundraising to meet its own working capital
requirements up to, and beyond, twelve months from the approval of these
accounts.
2.4 Estimates and assumptions
Significant accounting estimations
The Group's consolidated financial statements include the use of estimates and
assumptions. The significant accounting estimates with a significant risk of
material change to the carrying value of assets and liabilities within the
next year in terms of IAS 1 are:
· Depreciation of PPE and amortisation of intangible assets
The directors are required to review the estimated usefulness of PPE and
amortisation periods of intangible assets. Were useful lives and amortisation
periods to be shorter, or were there impairments of PPE or intangible assets,
this would cause an acceleration in depreciation and amortisation charges in
future periods. See note 17 for further information.
Other areas of judgment and accounting estimates
While these areas do not meet the definition under IAS 1 of significant
accounting estimates or critical accounting judgments, the recognition and
measurement of certain material assets and liabilities are based on
assumptions and/or are subject to longer-term uncertainties. The other areas
of judgment and accounting estimates are:
· Share-based payments
In respect to service conditions, the company is required to assess how many
share options will eventually vest. As this estimation changes over time this
may require a re-estimation of share-based payment charges reflected in profit
or loss. The cumulative charge will reflect the amount of share options that
ultimately vest. See note 28 for more details including the company's approach
to valuing share options and the inputs to the valuation model.
· Impairments of financial and non-financial assets
See disclosures in note 2.5.o.
2.5 Summary of significant accounting policies
a) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost
of an acquisition is measured as the aggregate of the consideration
transferred, which is measured at the acquisition date fair value, and the
amount of any non-controlling interests in the acquiree. For each business
combination, the Group elects whether to measure the non-controlling interests
in the acquiree at fair value or at the proportionate share of the acquiree's
identifiable net assets. Acquisition-related costs are expensed as incurred
and included in administrative expenses.
The Group concludes that it has acquired a business when it obtains a
collection of activities and assets, comprising an input and a substantive
process, which collectively play a significant role in the ability to generate
outputs. The acquired process is considered substantive if it is critical to
the ability to continue producing outputs and the inputs acquired include an
organised workforce with the necessary skills, knowledge or experience to
perform that process or it significantly contributes to the ability to
continue producing outputs and is considered unique or scarce or cannot be
replaced without significant cost, effort or delay in the ability to continue
producing outputs.
When the Group acquires a business, it assesses the financial assets and
liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer will be
recognised at fair value at the acquisition date. Contingent consideration
classified as equity is not remeasured and its subsequent settlement is
accounted for within equity. Contingent consideration is classified as an
asset or liability that is a financial instrument and within the scope of IFRS
9 Financial Instruments and is measured at fair value with the changes in fair
value recognised in the statement of profit or loss in accordance with IFRS 9.
Other contingent consideration that is not within the scope of IFRS 9 is
measured at fair value at each reporting date with changes in fair value
recognised in profit or loss.
Goodwill is initially measured at cost (being the excess of the aggregate of
the consideration transferred and the amount recognised for non-controlling
interests and any previous interest held over the net identifiable assets
acquired and liabilities assumed). If the fair value of the net assets
acquired is more than the aggregate consideration transferred, the Group
re-assesses whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to measure the
amounts to be recognised at the acquisition date. If the reassessment still
results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognised in profit or
loss.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date, allocated to each of the
Group's cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of
the operation within that unit is disposed of, the goodwill associated with
the disposed operation is included in the carrying amount of the operation
when determining the gain or loss on disposal. Goodwill disposed in these
circumstances is measured based on the relative values of the disposed
operation and the portion of the cash-generating unit retained.
b) Reverse takeover accounting
On 16 February 2021, the Company acquired Kanabo Research Ltd via a reverse
takeover which resulted in the Company becoming the ultimate holding company
of the Group. The transaction was accounted for as a reverse acquisition since
it did not meet the definition of a business combination under IFRS 3. In
accordance with IFRS 2, a share-based payment expense equal to the deemed cost
of the acquisition less the fair value of the net assets of the Company at
acquisition was recognised.
When considering how the acquisition of Kanabo Research Ltd via a reverse
takeover should be accounted for, the Directors have been required to make a
judgment on whether the acquisition falls within the scope of IFRS 3 or not.
The Directors assessed the accounting acquiree, Kanabo Group Plc, at the time
of acquisition to not be a business as defined by IFRS 3. As a result, the
acquisition was assessed as falling outside the scope of IFRS 3. See note 6.c.
c) Current versus non-current classification
The Group presents assets and liabilities in the statement of financial
position based on current/non-current classification. An asset is current when
it is:
· Expected to be realised or intended to be sold or consumed in the
normal operating cycle.
· Held primarily for the purpose of trading.
· Expected to be realised within twelve months after the reporting
period.
· Cash or cash equivalent unless restricted from being exchanged or
used to settle a liability for at least twelve months after the reporting
period.
All other assets are classified as non-current.
A liability is current when:
· It is expected to be settled in the normal operating cycle.
· It is held primarily for the purpose of trading.
· It is due to be settled within twelve months after the reporting
period.
· There is no unconditional right to defer the settlement of the
liability for at least twelve months after the reporting period.
The terms of the liability that could, at the option of the counterparty,
result in its settlement by the issue of equity instruments do not affect its
classification.
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and
liabilities.
d) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date.
Fair value measurement assumes that the transaction will take place in the
asset's or the liability's principal market or, in the absence of a principal
market, in the most advantageous market.
The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability, if
market participants act in their economic best interest.
Fair value measurement of a non-financial asset considers a market
participant's ability to generate economic benefits by using the asset in its
highest and best use or by selling it to another market participant that would
use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair
value, maximising the use of relevant observable inputs and minimising the use
of unobservable inputs.
All assets and liabilities measured at fair value or for which fair value is
disclosed are categorised into levels within the fair value hierarchy based on
the lowest level input that is significant to the entire fair value
measurement:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable
directly or indirectly.
Level 3 - inputs that are not based on observable market data (valuation techniques
which use inputs that are not based on observable market data).
On 21 February 2022, the Company acquired 100% of the voting rights of
GP Service (UK) Limited ("GPS") a non-listed company based in the UK. The
acquisition price was determine based on the closing bid prices which are
level 2 fair value measurements.
e) Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods
or services are transferred to the customer at an amount that reflects the
consideration to which the Group expects to be entitled in exchange for those
goods or services. The Group has generally concluded that it is the principal
in its revenue arrangements, except for the procurement services below,
because it typically controls the goods or services before transferring them
to the customer.
In determining the amount of revenue from contracts with customers, the
Company evaluates whether it is a principal or an agent in the arrangement.
The Company is a principal when the Company controls the promised goods or
services before transferring them to the customer. In these circumstances, the
Company recognises revenue for the gross amount of the consideration. When the
Company is an agent, it recognises revenue for the net amount of the
consideration, after deducting the amount due to the principal.
Revenue from the sale of goods:
Revenue from the sale of goods is recognised when significant risks and
rewards of ownership of the goods have transferred to the buyer, the amount of
revenue can be measured reliably, it is probable that the economic benefits
associated with the transaction will flow to the Company and the costs
incurred or to be incurred in respect of the transaction can be measured
reliably. Revenue is measured at the fair value of the consideration received
or receivable, net of returns, trade discounts and volume rebates. Revenue
from selling agreements is recognised when the revenue recognition criteria
have been met and only to the extent the consideration is not contingent upon
other deliverables in the agreements.
Revenue from consultations:
The Group is providing online medicinal services. Revenue is measured based on
the consideration specified in a contract with a customer and excludes amounts
collected on behalf of third parties. The Group recognises revenue when it
transfers control of a service to a customer. Revenue is recognised at a point
in time (i.e. upon receipt of the customer of the equipment) because this is
when the customer benefits from the Group's consultation services.
Disaggregation of revenues:
2023 2022
£ 000 £ 000
External revenues by product line
Primary care 828 505
Secondary care 67 98
Total 895 603
2023 2022
£ 000 £ 000
External revenues by timing of revenue
Services transferred at point of time 828 505
Goods transferred at point of time 67 98
Net asset 895 603
f) Government grants
Government grants are recognised where there is reasonable assurance that the
grant will be received, and all attached conditions will be complied with.
When the grant relates to an expense item, it is recognised as income on a
systematic basis over the periods that the related costs, for which it is
intended to compensate, are expensed. When the grant relates to an asset, it
is recognised as income in equal amounts over the expected useful life of the
related asset.
When the Group receives grants for non-monetary assets, the asset and the
grants are recorded at nominal amounts and released to profit or loss over the
expected useful life of the asset, based on the pattern of consumption of the
benefits of the underlying asset by equal annual instalments.
g) Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates
(England's statutory income tax rate of 23.5% and Israel: 23%) and tax laws
used to compute the amount are those that are enacted or substantively enacted
at the reporting date in the countries where the Group operates and generates
taxable income.
Current income tax relating to items recognised directly in equity is
recognised in equity and not in the statement of profit or loss. Management
periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date. Deferred tax liabilities
are recognised in full using the balance sheet liability method on temporary
differences except:
· When the deferred tax liability arises from the initial recognition
of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
· In respect of taxable temporary differences associated with
investments in subsidiaries, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences,
the carry forward of unused tax credits and any unused tax losses. Deferred
tax assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences
and the carry forward of unused tax credits and unused tax losses can be
utilised, except:
· When the deferred tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss.
· In respect of deductible temporary differences associated with
investments in subsidiaries, deferred tax assets are recognised only to the
extent that it is probable that the temporary differences will reverse in the
foreseeable future and taxable profit will be available against which the
temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the Group relies on
the same forecast assumptions used elsewhere in the financial statements and
in other management reports, which, among other things, reflect the potential
impact of climate-related development on the business, such as increased cost
of production as a result of measures to reduce carbon emissions.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised
outside profit or loss. Deferred tax items are recognised in correlation to
the underlying transaction either in other comprehensive income or directly in
equity.
Tax benefits acquired as part of a business combination, but not satisfying
the criteria for separate recognition at that date, is recognised
subsequently, if new information about facts and circumstances changes. The
adjustment is either treated as a reduction in goodwill (as long as it does
not exceed goodwill) if it was incurred during the measurement period or
recognised in profit or loss.
The Group offsets deferred tax assets and deferred tax liabilities if and only
if it has a legally enforceable right to set off current tax assets and
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities which intend
either to settle current tax liabilities and assets on a net basis or to
realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
h) Foreign currencies
The Group's consolidated financial statements are presented in British Pound
(£). For each entity, the Group determines the functional currency and items
included in the financial statements of each entity are measured using that
functional currency. The Group uses the direct method of consolidation and on
disposal of a foreign operation the gain or loss that is reclassified to
profit or loss reflects the amount that arises from using this method.
(i) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group's
entities at their respective functional currency spot rates at the date the
transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rates at the reporting
date
Differences arising on settlement or translation of monetary items are
recognised in profit or loss with the exception of monetary items that are
designated as part of the hedge of the Group's net investment in a foreign
operation. These are recognised in OCI until the net investment is disposed
of, at which time, the cumulative amount is reclassified to profit or loss.
Tax charges and credits attributable to exchange differences on those monetary
items are also recognised in OCI.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value is
determined. The gain or loss arising from the translation of non-monetary
items measured at fair value is treated in line with the recognition of the
gain or loss on the change in fair value of the item (i.e. translation
differences on items whose fair value gain or loss is recognised in OCI or
profit or loss are also recognised in OCI or profit or loss, respectively).
In determining the spot exchange rate to use on the initial recognition of the
related asset, expense or income (or part of it) on the derecognition of a
non-monetary asset or non-monetary liability relating to advance
consideration, the date of the transaction is the date on which the Group
initially recognises the nonmandatory asset or non-monetary liability arising
from the advance consideration. If there are multiple payments or receipts in
advance, the Group determines the transaction date for each payment or receipt
of advance consideration.
(ii) Group companies
On consolidation, the assets and liabilities of foreign operations are
translated into British Pound (£) at the rate of exchange prevailing at the
reporting date and their statements of profit or loss are translated at
exchange rates prevailing at the dates of the transactions or average for the
required period. The exchange differences arising in translation for
consolidation are recognised in OCI and recognised in a separate reserve -
foreign currency translation reserve. On disposal of a foreign operation, the
component of OCI relating to that foreign operation is reclassified to profit
or loss.
Any goodwill arising from the acquisition of a foreign operation and any fair
value adjustments to the carrying amounts of assets and liabilities arising on
the acquisition are treated as assets and liabilities of the foreign operation
and translated at the spot rate of exchange at the reporting date.
(iii) Financial Risk Management Objectives and Policies
The Company does not enter any forward exchange rate contracts.
The main financial risks arising from the Company's activities are market
risk, interest rate risk, foreign exchange risk, credit risk, liquidity risk
and capital risk management. Further details on the risk disclosures can be
found in note 32.
i) Property, plant, and equipment
Property, plant, and equipment are measured at cost, including directly
attributable costs, less accumulated depreciation, accumulated impairment
losses.
Where material, the cost of an item of property, plant and equipment comprises
the initial estimate of the costs of dismantling and removing the item and
restoring the site on which the item is located.
Depreciation is estimated to write off the cost of assets to their residual
value on straight-line basis over the estimated useful lives of the assets as
follows:
%
Leasehold improvements 15%
Equipment and furnishing 15%
Computers and electronic equipment 15%-33%
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
The directors perform at least an annual review of the residual values and
useful lives of property, plant and equipment, and any such changes in
estimates are dealt with prospectively as a change in estimate.
Gains and losses on disposals are determined by comparing proceeds with
carrying amounts. These are included in profit or loss.
j) Leases
The Group assesses at contract inception whether a contract is or contains a
lease. That is if the contract conveys the right to control the use of an
identified asset for a period in exchange for consideration.
Group as a lessee applies a single recognition and measurement approach for
all leases. The Group recognises lease liabilities to make lease payments and
right-of-use assets representing the right to use the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease
(i.e. the date the underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised,
initial direct costs incurred and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use assets are
depreciated on a straight-line basis over the shorter of the lease term and
the estimated useful life of the asset.
Lease liabilities
At the commencement date of the lease, the Group recognises the lease
liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments (including
in-substance fixed payments) less any lease incentives receivable, variable
lease payments that depend on an index or a rate and amounts expected to be
paid under residual value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to be exercised by the
Group and payments of penalties for terminating the lease, if the lease term
reflects the Group exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are
recognised as expenses (unless they are incurred to produce inventories) in
the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its
incremental borrowing rate at the lease commencement date because the interest
rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change
in the lease term, a change in the lease payments (e.g. changes to future
payments resulting from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an option to purchase the
underlying asset. The Group's lease liabilities are included in
Interest-bearing loans and borrowings.
k) Financial assets at fair value through profit and loss
Financial assets are stated at fair value, which reflects market conditions at
the reporting date. Gains or losses arising from changes in the fair values
are included in profit or loss in the period in which they arise, including
the corresponding tax effect. Fair values are determined based on an annual
valuation performed by an accredited external independent valuer applying a
valuation model recommended by the International Valuation Standards
Committee.
Financial assets are derecognised either when they have been disposed of (i.e.
at the date the recipient obtains control) or when they are permanently
withdrawn from use and no future economic benefit is expected from their
disposal. The difference between the net disposal proceeds and the carrying
amount of the asset is recognised in profit or loss in the period of
derecognition.
l) Intangible assets
Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is
their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses. Internally generated intangibles, excluding
capitalised development costs, are not capitalised and the related expenditure
is recognised in profit or loss in the period in which the expenditure is
incurred.
The useful lives of intangible assets are assessed as either finite or
indefinite.
Intangible assets with finite lives are amortised over the estimated useful
life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are reviewed at least
at the end of each reporting period. Changes in the expected useful life or
the expected pattern of consumption of future economic benefits embodied in
the asset are considered to modify the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite lives is recognised in
profit or loss in the expense category that is consistent with the function of
the intangible assets.
Intangible assets with indefinite useful lives are not amortised, but are
tested for impairment annually, either individually or at the cash-generating
unit level. The assessment of indefinite life is reviewed annually to
determine whether the indefinite life continues to be supportable. If not, the
change in useful life from indefinite to finite is made on a prospective
basis.
An intangible asset is derecognised upon disposal (i.e. at the date the
recipient obtains control) or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising upon derecognition of the
asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the statement of profit or loss.
Research and development costs
Research costs are expensed as incurred. Development expenditures on an
individual project are recognised as an intangible asset when the Group can
demonstrate:
· The technical feasibility of completing the intangible asset so that
the asset will be available for use or sale.
· Its intention to complete and its ability and intention to use or
sell the asset.
· How the asset will generate future economic benefits.
· The availability of resources to complete the asset.
· The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the
asset is carried at cost less any accumulated amortisation and accumulated
impairment losses. Amortisation of the asset begins when development is
complete, and the asset is available for use. It is amortised over the period
of expected future benefit. Amortisation is recorded in cost of sales. During
the period of development, the asset is tested for impairment annually.
m) Financial Assets
Classification
The Group classifies its financial assets in the following categories: at
amortised cost (including trade receivables and other financial assets at
amortised cost), fair value through other comprehensive income or fair value
through profit or loss. The classification depends on the financial asset's
contractual cash flow characteristics and the business model for managing
them. Management determines the classification of its financial assets at
initial recognition.
Financial assets at amortised cost
(i) Classification of financial assets at amortised cost
The Company classifies its financial assets as at amortised cost only if both
of the following criteria are met:
· the asset is held within a business model whose objective is to
collect the contractual cash flows; and
· the contractual terms give rise to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are initially measured at a fair value and
subsequently measured using the effective interest rate method less
impairment.
(ii) Impairment of financial assets measured at amortised cost
The Group always recognises lifetime expected credit losses (ECL) for trade
receivables. The expected credit losses on these financial assets are
estimated using a provision matrix based on the Group's historical credit loss
experience, adjusted for factors that are specific to the debtors, general
economic conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including time value
of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when
there has been a significant increase in credit risk since initial
recognition. However, if the credit risk on the financial instrument has not
increased significantly since initial recognition, the Group measures the loss
allowance for that financial instrument at an amount equal to 12-month ECL.
There is no definition of default at present. This will be reassessed as and
when repayments are due in respect of financial assets at amortised cost held.
n) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and conditions
are accounted for, as follows:
· Raw materials: purchase cost on a first-in/first-out basis.
· Finished goods and work in progress: cost of direct materials and
labour and a proportion of manufacturing overheads based on the normal
operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and the estimated costs necessary
to make the sale.
o) Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that
an asset may be impaired. If any indication exists, or when annual impairment
testing for an asset is required, the Group estimates the asset's recoverable
amount. An asset's recoverable amount is the higher of an assets or CGU's fair
value less costs of disposal and its value in use. The recoverable amount is
determined for an individual asset unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of
assets. When the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs of disposal, recent market transactions are
considered. If no such transactions can be identified, an appropriate
valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded companies or other
available fair value indicators.
The Group bases its impairment calculation on the most recent budgets and
forecast calculations, which are prepared separately for each of the Group's
CGUs to which the individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. A long-term growth rate
is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in the statement of
profit or loss in expense categories consistent with the function of the
impaired asset, except for properties previously revalued with the revaluation
taken to OCI. For such properties, the impairment is recognised in OCI up to
the amount of any previous revaluation.
For assets excluding goodwill, an assessment is made at each reporting date to
determine whether there is an indication that previously recognised impairment
losses no longer exist or have decreased. If such indication exists, the Group
estimates the assets or CGU's recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the assumptions
used to determine the asset's recoverable amount since the last impairment
loss was recognised. The reversal is limited so that the carrying amount of
the asset does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. Such reversal is recognised
in the statement of profit or loss unless the asset is carried at a revalued
amount, in which case, the reversal is treated as a revaluation increase.
Impairment is determined for goodwill by assessing the recoverable amount of
each CGU (or Group of CGUs) to which the goodwill relates. When the
recoverable amount of the CGU is less than it is carrying amount, an
impairment loss is recognised. Impairment losses relating to goodwill cannot
be reversed in future periods.
Intangible assets with indefinite useful lives are tested for impairment
annually as at 31 December at the CGU level, as appropriate, and when
circumstances indicate that the carrying value may be impaired.
The Group assesses whether climate risks, including physical risks and
transition risks could have a significant impact. If so, these risks are
included in the cash-flow forecasts in assessing value-in-use amounts.
Depreciation of PPE and amortisation of intangible assets
Property, plant and equipment and intangible assets are tested for impairment
annually and when circumstances indicate that the carrying value may be
impaired.
The directors are required to review the estimated usefulness of PPE and
amortisation periods of intangible assets. Were useful lives and amortisation
periods shorter, or were there impairments of PPE or intangible assets, this
would cause an acceleration in depreciation and amortisation charges in future
periods. See note 17 for further information.
Impairment is determined for goodwill by assessing the recoverable amount of
each CGU (or group of CGUs) to which the goodwill relates. When the
recoverable amount of the CGU is less than its carrying amount, an impairment
loss is recognised. Impairment losses relating to goodwill cannot be reversed
in future periods.
The Group assesses where climate risks could have a significant impact, such
as the introduction of emission-reduction legislation that may increase
manufacturing costs. These risks in relation to climate-related matters are
included as key assumptions where they materially impact the measure of
recoverable amount.
Recoverability of the investment in subsidiaries (note 19)
As at 31 December 2023, the carrying value of the Company's investments in
Kanabo Research Ltd and the GP Service (UK) Limited was £9,247 thousand
(2022: £23,746 thousand). The recoverable value of these investments is
considered to be less than it is carrying value as at 31 December 2023 and
therefore an impairment of £12,907 thousand has been recognised. The
Directors have made this assessment through reviewing forecasts, other
available financial information available and developments during the year and
since the year-end. The key inputs within the forecast include revenue growth,
gross profit margins and overheads.
Recoverability of amounts due from the subsidiary (note 25)
By 31 December 2023, the parent Company had an ongoing operational balance of
£2,506 thousand to Kanabo Research Ltd (2022: £2,686 thousand). The
Directors don't expect this balance to be fully recoverable and have thus
recognised a credit loss charges of £1,991 thousand. They made this
assessment through reviewing forecasts, other financial information available
and developments during the year and since the year-end. The Board assesses
the loan on an individual basis to examine impairment.
By 31 December 2023 the parent Company had advanced £2,435 thousand
(including interest) (2022: £1,097 thousand) as a loan to GPS. The Directors
expect this balance to be fully recoverable and have thus not recognised any
IFRS 9 expected credit loss charges. They made this assessment through
reviewing forecasts, other financial information available and developments
during the year and since the year-end. The Board assesses the loan on an
individual basis to examine impairment.
p) Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprises
cash at banks and on hand and short-term highly liquid deposits with a
maturity of three months or less from inception, that are readily convertible
to a known amount of cash and subject to an insignificant risk of changes in
value.
For the purpose of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and short-term deposits, as defined above, net of
outstanding bank overdrafts as they are considered an integral part of the
Group's cash management.
q) Provisions
A provision in accordance with IAS 37 is recognised when the Company has a
present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. When the Company expects part or all of the expense
to be reimbursed, for example under an insurance contract, the reimbursement
is recognised as a separate asset but only when the reimbursement is virtually
certain. The expense is recognised in the statement of profit or loss net of
any reimbursement.
r) Trade and other payables
Trade and other payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from suppliers. Accounts
payable are classified as current liabilities if payment is due within one
year or less (or in the normal operating cycle of the business if longer). If
not, they are presented as non-current liabilities.
Trade and other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
s) Share-based payments
Employees (including Directors and senior executives) of the Group receive
remuneration in the form of share-based payments, whereby employees render
services as consideration for equity instruments (equity-settled
transactions).
That cost is recognised in employee benefits expenses, together with a
corresponding increase in equity (other capital reserves) over the period in
which the service and, where applicable, the performance conditions are
fulfilled (the vesting period). The cumulative expense recognised for
equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the Group's
best estimate of the number of equity instruments that will ultimately vest.
The expense or credit in the statement of profit or loss for a period
represents the movement in cumulative expense recognised as at the beginning
and end of that period.
Service and non-market performance conditions are not taken into account when
determining the grant date fair value of awards, but the likelihood of the
conditions being met is assessed as part of the Group's best estimate of the
number of equity instruments that will ultimately vest. Market performance
conditions are reflected within the grant date fair value. Any other
conditions attached to an award, but without an associated service
requirement, are considered to be non-vesting conditions. Non-vesting
conditions are reflected in the fair value of an award and lead to an
immediate expensing of an award unless there are also service and/or
performance conditions.
No expense is recognised for awards that do not ultimately vest because
non-market performance and/or service conditions have not been met. Where
awards include a market or non-vesting condition, the transactions are treated
as vested irrespective of whether the market or non-vesting condition is
satisfied, provided that all other performance and/or service conditions are
satisfied.
When the terms of an equity-settled award are modified, the minimum expense
recognised is the grant date fair value of the unmodified award, provided the
original vesting terms of the award are met. An additional expense, measured
as at the date of modification, is recognised for any modification that
increases the total fair value of the share-based payment transaction, or is
otherwise beneficial to the employee. Where an award is cancelled by the
entity or by the counterparty, any remaining element of the fair value of the
award is expensed immediately through profit or loss.
The fair value is measured using the Black-Scholes model as the Directors view
this as providing the most reliable measure of valuation. The expected life
used in the model has been adjusted, based on management's best estimates, for
the effects of non-transferability, exercise restrictions and behavioural
considerations.
The market price used in the model is the issue price of Company shares at the
last placement of shares immediately preceding the calculation date. The fair
value calculated is inherently subjective and uncertain due to the assumptions
made and the limitations of the calculation used.
t) Equity
Equity instruments issued by the Company are recorded at the value of net
proceeds after direct issue costs.
u) Shares to be issued
Obligations which are to be settled via the issue of the Company's shares at
the year-end which meet the definition of equity per IAS 32 are classified as
shares to be issued within equity and are held at fair value.
v) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave, that are expected to be settled wholly
within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employees services up to the end
of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled. Leave obligations are calculated by
multiplying the average days of outstanding leave at the period end by the
daily salary rate of the employee concerned. The liabilities are presented as
current employee benefit obligations in the balance sheet.
Other long-term employee benefit obligations
There are no other long-term employee benefit obligations.
Post-employment obligations
The Group operates one post-employment scheme: a defined contribution pension
plan available to all employees. The Group pays contributions to publicly or
privately administered pension insurance plans on a mandatory, contractual or
voluntary basis. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as employee
benefit expenses when they are due. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in future payments is
available.
Share-based payments
Share-based compensation benefits are provided to employees via the Group
Employee Option Plan, an employee share scheme, the executive short term
incentive scheme and share appreciation rights. Information relating to these
schemes is set out in note 28.
Employee options
The fair value of options granted under the Group Employee Option Plan is
recognised as an employee benefit expense, with a corresponding increase in
equity. The total amount to be expensed is determined by reference to the fair
value of the options granted:
· including any market performance conditions (e.g. the Company's share
price);
· excluding the impact of any service and non-market performance
vesting conditions (e.g. profitability, sales growth targets and remaining an
employee of the entity over a specified time period); and
· including the impact of any non-vesting conditions (e.g. the
requirement for employees to save or hold shares for a specific period).
The total expense is recognised over the vesting period, which is the period
over which all the specified vesting conditions are to be satisfied. At the
end of each period, the entity revises its estimates of the number of options
that are expected to vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to original estimates, if
any, in profit or loss, with a corresponding adjustment to equity.
The Employee Option Plan is accounted for as detailed in note 28. When the
options are exercised, the appropriate number of shares is transferred to the
employee. The proceeds received, net of any directly attributable transaction
costs, are credited directly to equity.
Bonus plans
Where contractually obliged or where there is a past practice that has created
a constructive obligation to give staff bonuses, the Group recognises a
liability and an expense for bonuses based on a formula that takes into
consideration certain financial and operational objectives.
w) Cost of investment in subsidiary
In accordance with IAS 27 Separate Financial Statements the Parent Company has
elected to apply the equity method in accounting for the cost of investment in
its subsidiaries.
Such investments are initially recognised at cost. Subsequently they are
accounted for using the equity method, where the Parent Company's share of
post-acquisition profits and losses and other comprehensive income is
recognised in profit or loss or other comprehensive income respectively
(except for losses in excess of the Parent Company's investment in the
subsidiary unless there is an obligation to make good those losses).
Where equity share-based payments are granted to employees of such subsidiary
undertakings the cumulative charge is added to the cost of investment.
3. Segment information
Following the acquisition of The GP Service (UK) Limited ("GPS"), for
management purposes, the Group is organised into business units based on its
products and services and has two reportable segments, as follows:
· Primary Care - Tele pharma services provided by GPS.
· Secondary Care - Development and distribution of cannabis derived
medicinal and wellness products.
No operating segments have been aggregated to form the above reportable
operating segments.
The Executive Management Committee is the Chief Operating Decision Maker
(CODM) and monitors the operating results of its business units separately to
make decisions about resource allocation and performance assessment. Segment
performance is evaluated based on profit or loss and is measured consistently
with profit or loss in the consolidated financial statements. Also, the
Group's financing (including finance costs, finance income, and other income)
and income taxes are managed on a Group basis and are not allocated to
operating segments. Transfer prices between operating segments are on an
arms-length basis like transactions with third parties.
Year ended 31 December 2023:
Primary care Secondary care Total segments Adjustments and eliminations Consolidated
£ 000 £ 000 £ 000 £ 000 £ 000
Revenue
External customers 828 67 897 - 895
Inter-segment - - - - -
Total revenue 828 67 897 - 895
Expenses
Cost of sales (668) (93) (761) - (761)
Depreciation and amortisation (1,382) (70( (1,452) - (1,452)
Impairment of goodwill and intangible assets (4,448) - (4,448) - (4,448)
Segment loss (6,570) (1,425) (7,995) - (7,995)
Total assets 5,347 1,152 8,351 - 8,351
Total liabilities 528 321 849 - 849
Year ended 31 December 2022:
Primary care Secondary care Total segments Adjustments and eliminations Consolidated
£ 000 £ 000 £ 000 £ 000 £ 000
Revenue
External customers 505 98 603 - 603
Inter-segment - - - - -
Total revenue 505 98 603 - 603
Expenses
Cost of sales (349) (55) (404) - (404)
Depreciation and amortisation (980) (64( (1,045) - (1,045)
Segment loss (2,075) (4,795) (6,870) - (6,870)
Total assets 11,314 3,138 14,452 - 14,452
Total liabilities 609 1,398 2,007 - 2,007
The Group's operation does not include any reconciling items.
Geographical location:
At 31 December 2023:
Primary care Secondary care Total segments
£ 000 £ 000 £ 000
Assets
United Kingdom 5,347 375 7,574
Israel - 777 777
Total assets 5,347 1,152 8,351
Liabilities
United Kingdom 528 292 820
Israel - 29 29
Total liabilities 528 321 849
At 31 December 2022:
Primary care Secondary care Total segments
£ 000 £ 000 £ 000
Assets
United Kingdom 11,314 740 12,054
Israel - 2,398 2,398
Total assets 11,314 3,138 14,452
Liabilities
United Kingdom 609 987 1,596
Israel - 411 411
Total liabilities 609 1,398 2,007
4. Capital management
For the Group's capital management, capital includes issued capital, share
premium and all other equity reserves attributable to the equity holders of
the parent. The primary objective of the Group's capital management is to
maximise shareholder value.
The Group manages its capital structure and adjusts considering changes in
economic conditions and the requirements of the financial covenants. The Group
includes net debt, interest-bearing loans and borrowings, trade and other
payables, less cash and short-term deposits.
2023 2022
£ 000 £ 000
Interest-bearing loans and borrowings (note 29) 133 198
Trade payables 577 153
Less: cash and short-term deposits (3,210) (3,228)
Net asset (2,500) (1,730)
Total equity 7,502 12,445
Gearing ratio -33% -14%
There have been no breaches of the financial covenants of any interest-bearing
loans and borrowing in the current period.
No changes were made to the objectives, policies or processes for managing
capital during the years ended 31 December 2023 and 2022.
5. Group information
The consolidated financial statements of the Group include:
% equity interest
Name Principal activities Country of incorporation 2023 2022 Registered office
Kanabo Research Ltd. (a) R&D Israel 100 100 (b)
Kanabo Agritec Ltd. Consulting Israel 40 40 (b)
The GP Service (UK) Limited Telemedicine UK 100 100 (c)
Kanabo GP Limited Holding company UK 100 100 (d)
(a) The Company holds 40% of the equity in Kanabo Agritec Ltd. but
consolidates 100% of this entity. See note 6.b for details on interest held in
Kanabo Agritec Ltd.
(b) 6 Malkei Yehuda Street, Herzliya, Israel.
(c) Coventry University Technology Park the Technocentre, CV1 2TT, Coventry,
United Kingdom.
(d) Churchill House, 137-139 Brent Street, London, NW4 4DJ, United Kingdom.
6. Business combinations and acquisition of non-controlling interests
(a) Acquisition of The GP Service (UK) Limited
On 21 February 2022, the Company acquired 100% of the voting rights of
GP Service (UK) Limited ("GPS"): a non-listed company based in the UK and
specialising in care telemedicine providers in exchange for a net
consideration of £13,499 thousand ("Net Consideration") with a fair value
of £10,671 thousand. The Net Consideration was satisfied by the allotment of
94,133,645 B ordinary shares of £0.00001 each in the capital of Kanabo GP
Limited, a subsidiary of Kanabo Group Plc, for £0.1265 per share
("Consideration Shares"). It has been agreed as part of the acquisition that
the principal and interest owed as at completion by GPS to MEIF WM Debt
LP (£1,591 thousand) will be repayable by the Company by the allotment of
12,574,931 ordinary shares within 18 months based on the same price of
£0.1265 per share.
The Group's acquisition of the GPS will facilitate the rapid growth of its
existing digital and telemedicine business and will establish a new and fully
compliant channel to market the Group's products for medicinal patients.
Through improved access to these products, the Group hopes to make a
substantial contribution to improving outcomes for thousands of patients in
the UK and Europe.
As of the signature date of the report, the total amount of 12,574,931 shares
have not yet been issued and the contingent consideration has been included in
the "shares to issued" reserve within equity.
The fair values of the identifiable assets and liabilities of GPS as at the
date of acquisition were:
Fair value recognised on
acquisition
£000
Assets
Property, plant, and equipment 11
Intangible assets 116
Cash and cash equivalents 235
Trade receivables 33
Other receivables 74
469
Liabilities
Interest-bearing loan (500)
Trade payables (19)
Other payables (97)
(616)
Total identifiable net liabilities at fair value (147)
Other intangible assets arising from the acquisition 6,763
Goodwill arising from the acquisition 4,055
The fair value of purchase consideration transferred 10,671
Other intangible assets arising on acquisition include the technology that was
acquired through business combinations. The management assessed the lifetime
of these assets for a minimum of 7 years and as a result recorded amortisation
expenses for £962 thousand (2022: £891 thousand).
As agreed between the parties, the net liabilities recognised on the
acquisition date were based on GPS results as of 31 January 2022: starting 1
February 2022 the results of GPS are being consolidated in the Group's
financial statements.
The revenue of GPS and net loss for the period were £828 thousand (2022:
£505 thousand) and £1,160 thousand (2022: 1,185 thousand) respectively.
(b) Investment in subsidiary
In March 2022, Kanabo Research Ltd ("KNR") (a wholly owned subsidiary of the
Company) and a third-party partner formed an entity, Kanabo Agritec
Ltd. ("Agritec"), to enter into agreements with third parties at minimal cost
to leverage the Company's Intellectual Property for the cultivation,
processing, and production of cannabis products. KNR holds 40% of the voting
shares in this entity. The third party holds the remaining 60% of the voting
shares. KNR committed to finance Agritec up to an amount equal to 75% of the
principal amount requested by Agritec , the other Founders, together, will
lend up to the remaining 25% of the principal amount in equal portions among
them. As of the reporting period, KNR loaned Agritec a total amount of ILS 100
thousand (£24 thousand).
Under the contractual arrangement with the third-party partners, KNR has a
majority representation on the entity's board of Directors and KNR's approval
is required for all major operational decisions, KNR assessed that the voting
rights in Agritec are not the dominant factor in deciding who controls the
entity. Therefore, KNR concluded that Agritec is a structured entity under
IFRS 10 Consolidated Financial Statements and that KNR controls it with
non-controlling interests. Therefore, Agritec is consolidated in the Group's
consolidated financial statements. The shares of the third-party partner are
recorded under the equity as non-controlling interests and the return on
investment is recorded as non-controlling interests under the profit and loss.
(c) Reverse acquisition
On 16 February 2021, the Company formerly known as Spinnaker Opportunities Plc
acquired through a share-for-share exchange the entire share capital of Kanabo
Research Ltd ("KNR"), whose principal activity is the provision of THC-Free
retail CBD products and Vaporisation devices.
Although the transaction resulted in KNR becoming a wholly owned subsidiary of
the Company, the transaction constituted a reverse acquisition, as the
previous shareholders of KNR own a substantial majority of the Ordinary Shares
of the Company, and the executive management of KNR became the executive
management of Kanabo Group Plc.
In substance, the shareholders of KNR acquired a controlling interest in the
Company and the transaction has therefore been accounted for as a reverse
acquisition. As the Company's activities prior to the acquisition were purely
the maintenance of the LSE Listing, acquiring KNR and raising equity finance
to provide the required funding for the operation of the acquisition, it did
not meet the definition of a business in accordance with IFRS 3.
Accordingly, this reverse acquisition does not constitute a business
combination and was accounted for in accordance with IFRS 2 "Share-based
Payments" and associated IFRIC guidance. Although the reverse acquisition is
not a business combination, the Company has become a legal parent and is
required to apply IFRS 10 and prepare consolidated financial statements. The
Directors have prepared these financial statements using the reverse
acquisition methodology, but with the result that rather than recognising
goodwill, the difference between the equity value given up by KNR's
shareholders and the share of the fair value of net assets gained by these
shareholders is charged to the consolidated statement of comprehensive income
as a share-based payment on the reverse acquisition and represents in
substance the cost of acquiring an LSE listing.
On 16 February 2021, the Company issued 230,769,231 ordinary shares to acquire
the 237,261 ordinary shares of KNR based on a share price of £0.065 (the
price at which those shares were issued as part of the placing that day. The
Company's investment in KNR is valued at £15,000 thousand prior to the
consideration of contingent consideration and share-based payment charges for
the year recognised in the subsidiary - see note 2.o for further commentary
regarding this component of the carrying value of the investment in the
subsidiary as at 31 December 2023.
On 16 November 2021, the Company achieved two of its deferred consideration of
share milestones under the terms of the share purchase agreement. The
achievement entitles the sellers to 38,461,492 deferred consideration shares
with a total value of £2,500 thousand which increases the total investment to
£17,500 thousand. As the Company met this obligation, during 2023, the
Company issued the deferred consideration shares.
Because the legal subsidiary, KNR, was treated on consolidation as the
accounting acquirer and the legal Parent Company, Kanabo Group Plc, was
treated as the accounting subsidiary, the fair value of the shares deemed to
have been issued by KNR was calculated at £1,911 thousand based on an
assessment of the purchase consideration for a 100% holding of Kanabo Group
Plc
According to IFRS 2, the value of the share-based payment is calculated as the
difference between the deemed cost and the fair value of the net assets as at
the acquisition date. During the period between 1 January 2021 to 16 February
2021, several shareholders exercised their warrants. The exercised warrants
indicated that in the event the RTO acquisition would not be completed the
funds would be returned to the shareholders. For that reason, it was decided
that it would be more appropriate to use the Company's value of the net assets
as of 1 January 2021.
£ 000
Deemed cost 1,911
Trade and other receivables 434
Cash and cash equivalents 359
Trade and other payables (54)
Total identifiable net liabilities at fair value 739
Total RTO expenses 1,172
The difference between the deemed cost (£1,911 thousand) and the fair value
of the net assets assumed per above of £739 thousand resulted in £1,172
thousand being expensed within "reverse acquisition expenses" in accordance
with IFRS 2, Share-Based Payments, reflecting the economic cost to KNR's
shareholders of acquiring a quoted entity.
The reverse acquisition reserve which arose from the reverse takeover is made
up as follows:
£ 000
Pre-acquisition equity (a) (739)
Kanabo Research Ltd share capital at acquisition (b) 2,099
Investment in Kanabo Research Ltd (c) (17,500)
Reverse acquisition expense (d) 1,172
Total (14,968)
(a) Recognition of pre-acquisition equity of Kanabo Group Plc as at 1
January 2021.
(b) KNR had issued a share capital of £2,099 thousand. As these financial
statements present the capital structure of the legal parent entity, the
equity of KNR is eliminated.
(c) The value of the shares issued by the Company in exchange for the entire
share capital of KNR; the entry is required to eliminate the balance sheet
impact of this transaction.
(d) The shares to be issued to the vendors upon the meeting of two of the
agreed milestones. As the Company met the agreed milestones, during 2023, the
Company issued the deferred consideration shares.
7. Revenues
2023 2022
£ 000 £ 000
Services 828 505
Sale of products 67 98
Total 895 603
During 2023 and 2022 the revenues were generated only from the sale of
products (sale of CBD and THC products) and services (primary care) and were
made to customers in the United Kingdom.
All revenues were recognised at a point in time.
8. Cost of sales
2023 2022
£ 000 £ 000
Salaries and related expenses 563 317
Share-based payment expense 14 13
Cost of sales 136 48
IT Development and licenses 11 12
Impairment changes on receivables - 3
Other including commissions 37 11
Total 761 404
9. Research and development expenses
2023 2022
£ 000 £ 000
Salaries and related expenses 258 293
Share-based payment expense 49 68
IT development and licenses - 181
Rent and related expenses 4 39
Professional services 1 2
Other - 14
Total 312 597
The GPS made capitalisation of development expenses which incurred during 2023
and 2022 as management has taken the view that probably the technology and
products upon which the research and development expenditure is related will
bring future economic benefits to the Group.
10. Sales and marketing expenses
2023 2022
£ 000 £ 000
Salaries and related expenses 332 403
Share-based payment expense (gain) (40) 349
Subcontractors 3 60
Marketing expenses 303 364
Conferences - 14
Total 598 1,190
11. General and administration expenses
2023 2022
£ 000 £ 000
Salaries and related expenses 505 778
Share-based payment expense 56 537
Insurance 101 82
Professional services 528 1,005
Rent and related expenses (*) 100 81
Depreciation 74 69
Amortisation (note 17) 1,378 976
IT Development and licenses 70 45
Travel and accommodation 90 128
Other 76 103
Total 2,978 3,804
(*) Rent and related expenses refer to expenses that are out of the scope of
IFRS 16, see note 31.
12. Auditor's remuneration
During the reporting period, the Company incurred the following costs in
respect of services provided by the current and previous auditor:
2023 2022
£ 000 £ 000
Fees payable to the Company's auditor for:
- The audit of the parent company and consolidated financial statements 131 131
- Interim review of the Group for the six-month period ended 30 June 2023 and 8 8 (a)
30 June 2022 in accordance with ISRE 2410
(a) The services for interim review in 2022 were provided by Jeffreys Henry
LLP.
13. Other operating income/expenses
2023 2022
£ 000 £ 000
Acquisition and listing costs 224 514
Provision (reverse provision) for agent fees (*) (524) 675
Loss from sale of property, plant, and equipment 41 -
Other gain (note 31) (20) -
Accrued income from R&D refund (206) -
Loss on current financial asset (note 20) 158 259
Total (327) 1,448
Other expenses comprise acquisition-related transaction costs which were
expensed as incurred and included as other expenses (note 6.a) and expenses
generated from the preparations of the Group's prospectus.
(*) On 23 May 2023, the Company signed a settlement agreement with one of its
previous service providers. According to the agreement, the Company will issue
5,000,000 new ordinary shares in exchange for removing all mutual claims.
The shares will be issued for the provision of brokerage services in relation
to the acquisition of The GP Service ("GPS"). 4LLC will receive their shares
in two tranches, with 3,000,000 shares ("First Tranche") and the remaining
2,000,000 shares ("Second Tranche") within three months.
Of the First Tranche, 337,192 new ordinary shares ("4LLC Shares") were issued
by the Company. The remaining 2,662,808 ordinary shares of the First Tranche
will be transferred from the shares previously held by Mr. Atul Devani,
Co-founder of GPS. Based on the compromise agreement signed with Mr. Devani,
on his leaving the Company be returned 25% of the shares received as
consideration for the acquisition of GPS. As such, in the settlement of the
First Tranche, the Company issued only 337,192 new ordinary shares.
During August 2023, the shares agreed on the Second Tranche have been issued.
Following the settlement agreement, the company reversed the previously booked
provision and, as a result, recorded income of £524 thousand booked
under "Other operating expenses".
14. Net finance expenses (income)
2023 2022
£ 000 £ 000
Finance income
Interest earned on bank deposits (18) -
(18) -
Finance costs
Bank charges 23 15
Interest on interest-bearing loans 31 32
Interest on finance lease (note 31) 18 24
72 71
Net foreign exchange losses 148 18
Net finance expenses recognised in profit or loss 202 89
15. Income tax
a. Analysis of charge in the year
Reconciliation of tax expense and the accounting profit multiplied by the
United Kingdom's domestic tax rate for 2023 and 2022:
2023 2022
£ 000 £ 000
Accounting loss before income tax (7,995) (6,870)
At England's statutory income tax rate of 23.5% (2022: 19%) (1,879) (1,305)
Non-deductible expenses for tax purposes:
Non-deductible expenses (16) (11)
Amortisation and impairment of intangible assets 1,107 169
Effect of higher tax rates in Israel 9 (47)
Current year losses for which no deferred tax asset is recognised 779 1,194
Income tax benefits reported in the statement of profit or loss - -
b. Reconciliation of deferred tax liabilities, net
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
As at 1 January - - - -
Deferred taxes acquired in business combinations (note 6.a) - 1,651 - -
Deferred tax asset on losses recognised due to offset of liability under IAS - (1,651) - -
12
As at 31 December - - - -
The Group has accumulated tax losses of approximately £15,242 thousand (2022:
£10,099 thousand) that are available, under current legislation, to be
carried forward indefinitely against future profits.
A deferred tax asset has not been recognised in respect of these losses of the
Company due to the uncertainty of future profits. The amount of the deferred
tax asset not recognised is approximately £3,739 thousand (2022: £2,448
thousand).
16. Earnings per share (EPS)
Basic EPS is calculated by dividing the profit for the year attributable to
ordinary equity holders of the parent by the weighted average number of
ordinary shares outstanding during the year.
2023 2022
Loss attributable to ordinary equity holders of the parent (£000) (7,987) (6,867)
Weighted average number of ordinary shares for basic EPS 536,803,686 415,187,814
Basic and diluted loss per share (pence per share) (1.49) (1.65)
There is no difference between the basic and diluted earnings per share as a
loss has been made in the year.
17. Intangible assets and goodwill
Group:
Development costs Intangible asset Goodwill Total
£ 000 £ 000 £ 000 £ 000
Cost
At 1 January 2022 - - - -
Additions - internally developed 85 - - 85
Acquisition of a subsidiary (note 6.a) 1,352 6,764 4,055 12,171
At 31 December 2022 1,437 6,764 4,055 12,256
Additions - internally developed 508 - - 508
At 31 December 2023 1,945 6,764 4,055 12,764
Amortisation and impairment
At 1 January 2022 - - - -
Amortisation 85 891 - 976
Acquisition of a subsidiary (note 6.a) 1,236 - - 1,236
At 31 December 2022 1,321 891 - 2,212
Amortisation 416 962 - 1,378
Impairment - 393 4,055 4,448
At 31 December 2023 1,737 2,246 4,055 3,590
Net book value
At 31 December 2022 116 5,873 4,055 10,044
At 31 December 2023 208 4,518 - 4,726
Acquisition during reporting period
Intangible assets arising on acquisition include the technology that was
acquired through business combinations. The management assessed the lifetime
of this asset for a minimum of seven (7) years and as a result recorded
amortisation expenses of £962 thousand (2022: £891 thousand).
Impairment review disclosures
Goodwill is allocated to the Group's cash-generating units (CGUs) identified
according to business segment. The carrying amounts of goodwill by segment as
at 31 December 2023 and 2022 are as follows:
2023 2022
£ 000 £ 000
PFS PFS
Goodwill - 4,055
During the year, the acquired goodwill was tested for impairment in accordance
with IAS 36 based on the relevant CGUs. Following the impairment tests, the
Group recognised an impairment over the goodwill following the updated
carrying values. The recoverable amount of a CGU is determined based on
value-in-use calculations. These calculations use cash flow projections based
on current business plans. The key assumptions for the value-in-use
calculations are those regarding revenue growth rates, discount rates and
long-term growth rates over a period of five years from the Statement of
Financial Position date and thereafter. Management determined revenue growth
based on past performance and its expectations for market development.
Discount rates were determined using pre-tax rates that reflect current market
assessments of the time value of money and the risks specific to the CGUs.
Terminal value is calculated as cash flows beyond the five-year period
extrapolated using estimated long-term growth rates. Additionally, these
value-in-use calculations were stress tested on a more prudent basis (assuming
a mixture of 75% or 95% of revenue growth dependent upon the relevant CGU) and
gave rise to no change in the carrying value of goodwill.
The revenue growth rate does not exceed the long-term average growth rate for
the businesses in which the CGUs operate.
2023 2022
% %
Post-tax discounted rates 16.7% 28.3%
Pre-tax discounted rates 22.1% 37.7%
Long-term growth rates 2% 2%
18. Property, plant and equipment
Group:
Computers and electronic equipment Equipment and furnishing Leasehold improvement Total
£ 000 £ 000 £ 000 £ 000
Cost
At 1 January 2022 26 39 1 66
Acquisition of subsidiary (note 6.a) 13 16 - 29
Additions 18 19 31 68
Exchange differences - (2) (1) (3)
At 31 December 2022 57 72 31 160
Additions 23 - 2 25
Disposals (22) (34) (32) (88)
Exchange differences (4) (1) (1) (6)
At 31 December 2023 54 37 - 91
Depreciation
At 1 January 2022 13 11 - 24
Acquisition of subsidiary (note 6.a) 7 11 - 18
Depreciation charge for the year 11 7 4 22
At 31 December 2022 31 29 4 64
Depreciation charge for the year 11 7 5 23
Disposals (17) (15) (9) (41)
Exchange differences (1) (3) - (4)
At 31 December 2023 24 18 - 42
Net book value
At 31 December 2022 26 43 27 96
At 31 December 2023 30 19 - 49
Company:
Computers and electronic equipment Total
£ 000 £ 000
Cost
At 1 January 2022 23 23
Additions - -
At 31 December 2022 23 23
Additions 1 1
At 31 December 2023 24 24
Depreciation
At 1 January 2022 2 2
Depreciation charge for the year 4 4
At 31 December 2022 6 6
Depreciation charge for the year 4 4
At 31 December 2023 10 10
Net book value
At 31 December 2022 17 17
At 31 December 2023 14 14
19. Investment in subsidiaries
Company:
2023 2022
£ 000 £ 000
As at 1 January 23,746 14,676
Additions 16 11,441
Impairment of investment in subsidiaries (12,907) -
Equity results (1,608) (2,371)
As at 31 December 9,247 23,746
The GP Service (UK) Ltd.
On 21 February 2022, the Company acquired 100% of the voting rights of The
GP Service (UK) Limited ("GPS"), a UK-based private company specialising in
care telemedicine, via a share-for-share exchange. The carrying value of
investment comprises £13,499 thousand in respect of share consideration (fair
value of £10,671 thousand), of which £1,591 thousand remains unissued as at
31 December 2023.
During 2023, £234 thousand (2022: £122 thousand) was recognised in respect
of share-based payment charges recognised in the subsidiary during the
reporting period. As there is no agreement in place for GPS to reimburse the
Company for share options issued to and exercised by employees of GPS, the
share-based payment charged recognised in the subsidiary in the year is
recognised as a capital contribution in the subsidiary and thus an investment
to the Company.
The Company owns 100% of the share capital of GPS.
Kanabo Research Ltd.
On 16 February 2021, the Company acquired 100% of the voting rights of Kanabo
Research Ltd ("KNG"), an Israeli-based private company operating the CBD
industry, via a share-for-share exchange. The carrying value of investment
comprises £17,500 thousand in respect of share consideration, of which
£2,500 thousand were issued during 2023, see note 27.a.(d).
During 2023, £219 thousand gain (2022: £648 thousand expense) was recognised
in respect of share-based payment charges recognised in the subsidiary during
the reporting period. As there is no agreement in place for KNG to reimburse
the Company for share options issued to and exercised by employees of KNG, the
share-based payment charged recognised in the subsidiary in the year is
recognised as a capital contribution in the subsidiary and thus an investment
to the Company.
The Company owns 100% of the share capital of KNG.
An impairment of total £12,907 thousand (2022: nil) has been recognised in
the year over the above two investments as the Directors do not believe the
recoverable value of the investments to be above it their carrying value.
20. Financial asset through profit or loss
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
As at 1 January 491 750 491 750
Proceeds from the sale of financial asset (333) - (333) -
Loss on a financial asset at fair value through profit or loss (note 13) (158) (259) (158) (259)
As at 31 December - 491 - 491
Current - 491 - 491
Non-current - - - -
On 24 May 2021, the Company entered into an agreement to receive shares in
Hellenic Dynamics S.A ("HD") following a reverse takeover by HD of a listed
company. HD is a company incorporated in Greece and is a medicinal cannabis
cultivator who is in the process of securing admission to the London Stock
Exchange through a Reverse Take Over ("RTO").
As part of the agreement, for consideration of £750 thousand the Company has
acquired 5,000 shares in HD's parent company, Samos Investments Ltd, and will
be entitled to receive shares in HD as part of HD's proposed listing on the
London Stock Exchange. The number of HD shares that will be issued to the
Company shall be calculated as £750 thousand divided by the RTO valuation
share price less a 30% discount.
On 15 November 2022, the Financial Conduct Authority ("FCA") approved the
prospectus issued by the UK SPAC in connection with its acquisition
of Hellenic and the proposed re-admission of the UK SPAC (to be
renamed Hellenic Dynamics Plc) to the Standard Listing segment of the
Official List and trading on the London Stock Exchange's Main Market.
Following the RTO, the Company received 357,142,857 shares in Hellenic
representing 2.9% of Hellenic share capital.
The fair value of the quoted notes is based on price quotations at the
reporting date.
During 2023, the Company sold its investment for a total consideration of
£333 thousand, and as a result, recorded a net loss of £158 thousand.
21. Inventories
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Finished goods 42 61 42 61
Raw materials 14 20 14 20
Total 56 81 56 81
During 2023, £32 thousand was recognised as an expense for inventories
carried at net realisable value. This is recognised in cost of sales.
22. Trade receivables
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Trade receivables 23 48 1 38
Allowance for expected credit losses (3) (5) - (3)
Total 20 43 1 35
Trade receivables are non-interest bearing and are generally on terms of 30 to
90 days.
23. Other receivables
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Prepaid expenses 31 17 12 5
VAT recoverable 12 66 6 64
R&D grant receivables 206 64 - -
Other tax receivables 10 9 - -
Other 31 - - -
Total 290 156 18 69
24. Short term loan
Group and the Company:
31 December 31 December
2023 2022
Interest rate Currency £ 000 £ 000
Fixed-rate loan 10% CAD - 611
Accumulated interest - 15
- 626
Less impairment allowance/ECL - (626)
Total - -
On 25 July 2021, the Company signed a head of agreement with 11157353 Canada
Corp. a company incorporated in Canada ("Materia").
As part of the agreement the Company agreed to extend Materia a £1.7 million
(CAD 3 million) credit facility which was to be drawn down in tranches based
upon agreed uses.
Under the agreement, amounts loaned are due for repayment twelve months after
the drawdown date. No repayments were received in the year and none have been
received post-yearend.
According to the loan agreement, Materia is obliged to receive the Company's
approval for any additional investment from a third party (excluding current
investors). The loan is secured by a General Security Agreement under which
all Materia's assets from time to time constitute a floating collateral for
the Loan. The collateral is shared equally with another lender to Materia
(unconnected to the Group) and the relationship between the two lenders is
regulated by an inter-creditor agreement.
Additionally, the agreement states that should the proposed transaction not be
complete within six months of the signing of the heads of terms, interest of
10% per annum would be charged on amounts drawn down from the date of
drawdown.
As of 31 December 2021, the Company transferred Materia CAD 1,000 thousand
(£582 thousand) in three tranches. During 2021 the Company recorded interest
income in the total amount of £15 thousand. The loan receivable has been
impaired in full.
During the reporting period, the Group received notice that Materia entered a
receivership process in Canada, the Group initiated legal action to recoup
outstanding payments and was awarded £82 thousand. As a result of the
repayment, the Group reversed previous booked impairment.
25. Intercompany receivables
Company:
31 December 31 December
2023 2022
Interest rate Currency £ 000 £ 000
The GP Service (UK) Limited 9% GBP 2,435 1,097
Kanabo Research Ltd. - GBP 2,506 3,192
4,941 4,289
Less impairment (1,991) -
Total 2,950
Current 515 3,192
Non-current 2,435 1,097
When conducting their IFRS 9 expected credit loss assessment, the Directors
have assessed there are indications that an impairment is required to be
recognised and thus the intercompany receivables has been adjusted at carrying
value.
26. Cash and cash equivalents and short-term deposits
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Cash at bank and in hand 1,681 3,204 1,137 937
Total 1,681 3,204 1,137 937
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Deposits at bank and in hand 1,529 24 1,001 -
Total 1,529 24 1,001 -
The Directors consider the carrying amount of cash and cash equivalents and
deposits approximate to their fair value.
27. Issued capital
a. Authorised shares
As at 31 December 2023, the Company had 632,427,870 allotted and fully paid
ordinary shares.
The ordinary shares have attached to them full voting, dividend, and capital
distribution rights (including on a winding up). The ordinary shares do not
confer any rights of redemption.
2023 2022
Number of ordinary shares of £0.025 each
As at 1 January 422,916,056 369,966,277
Shares issued for RTO (d) 38,461,492 -
Shares issued to settled debt (c) 3,080,247 -
Shares issued due to option and warrant exercises - 3,522,319
Share issued in placing and subscriptions (a) - 28,125,000
Share issued in placing and subscriptions (e) 95,138,889 -
Issue of shares for acquisition of subsidiary (b), (d) 72,831,186 21,302,460
As at 31 December 632,427,870 422,916,056
2023 2022
£ 000 £ 000
As at 1 January 10,573 9,249
Shares issued for RTO (d) 962 -
Shares issued to settled debt (c) 77 -
Shares issued due to option and warrant exercises - 88
Share issued in placing and subscriptions (a) - 703
Share issued in placing and subscriptions (e) 2,378 -
Issue of shares for acquisition of subsidiary (b), (d) 1,821 533
As at 31 December 15,811 10,573
(a) On 21 February 2022, the Company issued 28,125,000 ordinary shares,
raising £2,250 thousand before costs.
(b) On 21 February 2022, the Company acquired 100% of the voting rights of
The GP Service (UK) Limited ("GPS"), note 6.a and 27.a.(d)
As of 31 December 2023, 12,574,931 shares for the acquisition of GPS still
need to be issued.
(c) On 23 May and on 11 August 2023, the Company issued a total of 3,080,247
ordinary shares for settled debts to suppliers:
- Asserson Law Offices ("Asserson") received 743,055 ordinary shares
for £0.0606 per share. These shares were issued as payment for outstanding
invoices.
- The 4th Consulting LLC ("4LLC") received 5,000,000 ordinary shares
for £0.0301 per share as part of a settlement agreement entered between the
Company, Luca Longobardi, and 4LLC ("4LLC Settlement Agreement"). The shares
were issued for the provision of brokerage services about the acquisition of
The GP Service ("GPS"). Out of the agreed shares, 2,662,808 ordinary shares
were transferred from the shares previously held by Atul Devani, Co-founder
of GPS.
See note 13 regarding the 4LLC Settlement Agreement.
(d) On 13 June 2023, the Company published a prospectus (the "Prospectus")
in relation to the proposed issue of 38,461,492 Ordinary Shares ("2020
Deferred Consideration Shares") in connection with the acquisition of Kanabo
Research Limited for £0.065 per share and proposed issue of 72,831,186
Ordinary Shares ("Outstanding Consideration Shares") in connection with the
acquisition of The GP Service (UK) Ltd at £0.1265 per share.
On 28 June 2023 the "Outstanding Consideration Shares" were issued.
On 10 July 2023 the "The 2020 Deferred Consideration Shares" were issued.
(e) On 9 May 2023 and 10 May 2023 ("admission dates"), the Company raised
£2,740 thousand (before costs) by the issue of 95,138,889 ordinary shares of
£0.025 each. The Group additionally granted a half warrant to the
noteholders to subscribe for an additional half a new ordinary share at an
exercise price of £0.0576 for 24 months following the Admission Dates.
Participants in the fundraising include a new institutional investor as well
as the Group's Directors and Senior Officers of the Company. The issue of the
shares to the Directors and Senior Officers of the Company in the fundraising
was conditional upon the approval of the Company's shareholders of certain
resolutions to be proposed at the annual general meeting of the Group (the
"AGM").
On 30 June 2023, the AGM approved the issue of the shares. As a result,
additional 18,749,999 ordinary shares of £0.025 each out of the 95,138,889
have been issued.
The total warrants issued sum to 47,569,444 (see note 28).
b. Share premium account
2023 2022
£ 000 £ 000
As at 1 January 6,850 5,169
Shares issued in placing and subscriptions 281 1,434
Shares issued to settle debts 120 -
Shares issued due to option and warrant exercises - 247
As at 31 December 7,251 6,850
c. Merger reserve
2023 2022
£ 000 £ 000
As at 1 January 11,393 9,231
Shares issued in the year for RTO 2,500 -
Shares issued in the year for subsidiary purchase 3,602 2,162
As at 31 December 17,495 11,393
Nature and purpose of each reserve in equity - disclosure under SOCIEs
The merger reserve arises when the company acquires at least 90% interest in
the shares of another company and under the s612 Companies Act 2006 the excess
of fair value of the shares issued more than their nominal value is precluded
from being recognised in the share premium account. This reserve is not
distributable.
28. Share-based payments
Warrants
The following table illustrates the number and weighted average exercise
prices (WAEP) of, and movements in, the granted warrants during the year:
2023 2022
Number WAEP Number WAEP
Outstanding at 1 January 31,976,719 0.43 13,505,931 0.09
Granted 47,569,444 0.06 28,125,000 0.20
Realised - - (3,231,501) 0.10
Expired (14,062,500) 0.16 (6,422,711) 0.10
Outstanding at 31 December 65,483,663 0.10 31,976,719 0.18
Exercisable at 31 December 65,483,663 0.10 31,976,719 0.18
a. On 10 May 2023 ("Admission Date"), the Group completed a fundraising
round of £2,740 thousand (before costs) via the issue of 95,138,889 ordinary
shares of £0.025 each. Directors and Officers also participate in the
fundraising in the total amount of £540 thousand (before costs). The issue of
the shares to the Directors and Officers of the Company in the fundraise is
conditional upon the approval by the Company's shareholders of certain
resolutions to be proposed at the annual general meeting of the Group (the
"AGM"). On 30 June 2023 the AGM approved the issue of 18,749,999 ordinary
shares to Directors and Officers who participate in the fundraising.
As part of the fundraising the Group additionally granted a half warrant to
the noteholders to subscribe for an additional half a new ordinary share at an
exercise price of £0.0576 each for a period of 24 months following the
Admission Date. The total warrants issued sum to 47,569,444. The issue of the
warrants is conditional upon the approval by the Company's shareholders of
certain resolutions to be proposed at the annual general meeting of the Group
(the "AGM"). On 30 June 2023, the AGM approved the issue of warrants.
b. On 21 February 2022 ("Admission Date"), the authorised share capital
was increased by £2,250 thousand (before costs) by the issue of 28,125,000
ordinary shares of £0.025 each. On the admission date, the Group additionally
granted a half warrant to the noteholders to subscribe for an additional half
a new ordinary share at an exercise price of £0.16 for a period of 18 months
following the Admission Date. An additional half warrant was granted to the
noteholders to subscribe for an additional half a new ordinary share at an
exercise price of £0.24 for a period of 24 months following the Admission
Date. The total warrants issued sum to 28,125,000. The warrants were not
issued for goods or services provided and therefore fall outside the scope of
IFRS 2 and do not require fair valuing.
As of 31 December 2023, none of the warrants have been converted into shares.
During and after the reporting period, all the warrants expired.
c. On 17 February 2021 ("Admission Date") the Group granted a warrant to
the noteholders to subscribe to one Ordinary Share for every two Conversion
Shares issued to the noteholder. The warrants are exercisable at the
Conversion Price (£0.05) and will be valid for three years. The total
warrants issued sum to 1,650,000. The warrants were not issued for goods or
services provided and therefore fall outside the scope of IFRS 2 and do not
require fair valuing.
As of 31 December 2023, 1,150,000 warrants have not yet been converted into
shares.
After the reporting period, all the remaining warrants expired.
d. On 27 January 2021, the Company entered a financial adviser warrant
deed entitling Peterhouse Capital Limited to warrants over several ordinary
shares, representing approximately 0.75 percent of the enlarged Issued Share
Capital (the share capital on the date of the RTO) in accordance with their
engagement letter. The warrants are exercisable at the fundraising price,
exercisable for a period of 7 years from the date of admission. The total
warrants issued sum to 2,701,719. As the warrants were issued to the brokers
assisting with the raise upon re-listing, the fair value of these warrants,
£113 thousand, was treated as a share issue cost and debited against the
share premium.
As of 31 December 2023, none of these warrants have been converted into
shares.
Share options
The following table illustrates the number and weighted average exercise
prices (WAEP) of, and movements in, share options during the year:
2023 2022
Number WAEP Number WAEP
Outstanding at 1 January 36,902,016 0.12 15,988,895 0.16
Granted 25,050,000 0.03 22,759,150 0.08
Forfeited and expired (20,978,516) - (1,555,211) -
Exercised - - (290,818) -
Outstanding at 31 December 40,973,500 0.05 36,902,016 0.12
Exercisable at 31 December 21,858,454 0.07 13,733,577 0.11
a. On 28 March 2021, the Group approved an Israeli appendix to the
share-based payment plan ("The Israeli new plan"). The plan will include a
replacement of existing options granted by Kanabo Research Ltd to three of its
employees and consultants and for future grants for Kanabo Research Ltd
employees. The plan is for 10 years following the date of approval.
b. During the period ended 31 December 2018, the Company had a share-based
payment plan. The plan was approved in February 2018 and has a 10-year
duration. The terms of vesting vary according to the grant agreement subject
to approval by the Board of Directors. Some grants mature immediately, and
others vest over up to 4 years.
c. During 2022, 290,818 options were exercised to shares. The net proceeds
summed to £12 thousand.
d. On 30 August 2022, 22,759,150 share options were granted to employees
and senior executives under the options plans.
e. On 19 June 2023, 25,050,000 share options were granted to employees and
senior executives under the options plans.
f. The following tables list the inputs to the models used for the three
plans for the years ended 31 December 2023 and 2022, respectively:
Year ended 31 December 2023
19 June 2023
Weighted average fair values at the measurement date £0.019
Dividend yield 0%
Expected volatility 91.87%
Risk-free interest rate (%) 4.53
Expected life of share option (years) 10
Weighted average share price £0.029
Model used Black-Scholes
Year ended 31 December 2022
30 August 2022 30 August 2022 30 August 2022 30 August 2022 30 August 2022
Weighted average fair values at the measurement date £0.023 £0.022 £0.025 £0.022 £0.021
Dividend yield 0% 0% 0% 0% 0%
Expected volatility 91.3% 91.3% 91.3% 91.3% 91.3%
Risk-free interest rate (%) 2.7 2.7 2.7 2.7 2.7
Expected life of share option (years) 10 10 10 10 10
Weighted average share price £0.065 £0.08 £0.025 £0.1015 £0.1265
Model used Black-Scholes Black-Scholes Black-Scholes Black-Scholes Black-Scholes
The expected volatility reflects the assumption that the historical volatility
over a period similar to the life of the options is indicative of future
trends, which may not necessarily be the actual outcome.
The risk-free rate of return is based on zero-yield government bonds for a
term consistent with the option life.
g. During the period the Group recognised a total amount of £79 thousand
(2022: £967 thousand) for share-based payment expenses.
The amount was recorded in the profit and loss as follows:
2023 2022
£ 000 £ 000
Cost of sales (note 8) 14 13
Research and development expenses (note 9) 49 68
Sales and marketing expenses (note 10) (40) 349
General and administration expenses (note 11) 56 537
Total 79 967
29. Interest-bearing loans and borrowings
Group:
2023 2022
Interest rate Currency Maturity £ 000 £ 000
Current interest-bearing loans and borrowings
Lease liability (note 31) 7.5% ILS - - 65
CBILS loan 9% GBP 2024 133 133
Total 133 198
Non-current interest-bearing loans and borrowings
Lease liability (note 31) 7.5% ILS - - 233
CBILS loan 9% GBP 2025 133 267
Loans from third parties' investors in subsidiary (note 6.b) 3.23% ILS No maturity date was set 6 9
Total 139 509
Total interest-bearing loans and borrowings 272 707
CBILS loan
On 22 January 2021, The GP Service (UK) Limited received a Coronavirus
Business Interruption Loan Scheme (CBILS) which carries a fixed rate interest
of 9% and is repayable by instalments over a 3-year period commencing March
2022.
The loan is recognised as a financial liability at amortised cost. Interest is
calculated under the effective interest method. The initial recognition at
fair value was not materially different from the proceeds received.
30. Other payables
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Payroll and related expenses 27 41 8 -
Accrued expenses 362 991 253 859
Provision for accrued bonus - 56 - 22
Provision for accrued vacation and convalescence 17 43 9 24
Other 8 16 - -
Total 414 1,147 270 905
31. Leases
On 22 December 2021, Kanabo Research Ltd ("KNR") (a wholly owned subsidiary of
the Company) signed a lease agreement with a third party to rent space in
Israel, in exchange for a total of ILS 24 thousand per month linked to the
Consumer Price Index. The start date of the rental agreement was agreed
between the parties on 17 March 2022. The lease agreement is for three years
and includes an extension option for three more years. If KNR exercises the
rent extension option, the monthly rent will be updated with an increase of
6%. KNR exercises significant discretion in examining whether it is reasonably
certain that an extension option will be exercised. At the date the lease
began, the company recognised a right of use in the property against a lease
obligation of £327 thousand (ILS 1,399 thousand). To secure the lease
agreement, the company provided a deposit of £31 thousand (ILS 132 thousand).
After the reporting period, the deposit was released, and the amount returned
to the KNR.
During 2023, KNR recognised depreciation expenses of £51 thousand (2022: £47
thousand) as well as financing expenses of £18 thousand (2022: £24
thousand). The annual interest rate for capitalisation that was applied for
the purpose of calculating the obligation at the start of the lease was 7.5%.
On 22 October 2023, KNR signed an agreement to cancel the remainder of the
lease period (from 1 January 2024, onwards) for its offices. Accordingly, KNR
deducted the balance of the right-of-use asset and the balance of the
liabilities for the lease and recognised the profit of about £20 thousand
presented under 'Other expenses/(gains)' in the profit and loss.
Set out below are the carrying amounts of the right-of-use asset recognised
and the movements during the period:
2023 2022
£ 000 £ 000
As at 1 January 282 -
Additions - 327
Depreciation expense (51) (47)
Disposal (231) -
Exchange differences - 2
As at 31 December - 282
Set out below are the carrying amounts of the lease liability (included under
interest-bearing loans and borrowings) and the movements during the period:
2023 2022
£ 000 £ 000
As at 1 January 298 -
Additions - 327
Accretion of interest 18 24
Disposal (251) -
Payments (62) (57)
Effect of movement on the exchange rate (3) 4
As at 31 December - 298
Current - 65
Non-current - 233
32. Financial instruments risk management objectives and policies
The Group's principal financial liabilities comprise loans and borrowings and
trade and other payables. The main purpose of these financial liabilities is
to finance the Group's operations. The Group's principal financial assets
include trade receivables and cash and short-term deposits that derive
directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk. The
Group's senior management oversees the management of these risks. The Group's
senior management is supported by a financial risk committee that advises on
financial risks and the appropriate financial risk governance framework for
the Group. The financial risk committee provides assurance to the Group's
senior management that the Group's financial risk activities are governed by
appropriate policies and procedures and that financial risks are identified,
measured and managed in accordance with the Group's policies and risk
objectives. All derivative activities for risk management purposes are carried
out by specialist teams that have the appropriate skills, experience and
supervision. It is the Group's policy that no trading in derivatives for
speculative purposes may be undertaken. The Board of Directors reviews and
agrees on policies for managing each of these risks, which are summarised over
the next pages.
The following table sets out the categories of financial instruments held by
the Group as at 31 December 2023 and 31 December 2022:
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Financial assets
Financial assets held at amortised cost
Intercompany receivables - - 4,941 4,289
Trade receivables 20 43 1 35
Long term deposit - 31 - -
Short-term deposits 1,529 24 1,001 -
Cash and cash equivalents 1,681 3,204 1,137 937
Financial assets held at fair value
Financial asset through profit or loss - 491 - 491
Total financial assets 3,230 3,793 7,080 5,752
Current 3,230 3,762 7,080 5,752
Non-current - 31 - -
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Financial liabilities
Financial liabilities held at amortised cost
Trade payables 163 153 9 79
Other payables 414 1,147 270 905
Interest-bearing loan and borrowings 272 707 - -
Total financial liabilities 849 2,007 279 984
Current 710 1,498 279 984
Non-current 139 509 - -
Market risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: interest rate risk, currency risk
and other price risk, such as equity price risk and commodity risk. Financial
instruments affected by market risk include loans and borrowings, deposits,
debt and equity investments and derivative financial instruments.
The sensitivity analyses have been prepared on the basis that the amount of
net debt, the ratio of fixed to floating interest rates of debt and
derivatives and the proportion of financial instruments in foreign currencies
are all constant and based on the hedge designations in place at 31 December
2023.
The analyses exclude the impact of movements in market variables on the
carrying values of provisions, and the non-financial assets and liabilities of
foreign operations. The Group is not materially exposed to market risk.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in the market interest
rates. The Group's doesn't exposure to the risk of changes in market interest
rates.
The Group is not materially exposed to interest rate risk because it does not
have any funds at floating interest rates; all the Group borrowings are at
fixed interest rates.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of
an exposure will fluctuate because of changes in foreign exchange rates. The
Group's exposure to the risk of changes in foreign exchange rates relates
primarily to the Group's operating activities (when revenue or expense is
denominated in a foreign currency) and the Group's net investments in foreign
subsidiaries.
The Group doesn't hedge its exposure to fluctuations in the translation into
the British Pound of its foreign operations.
The Directors do not believe that the Group has a material exposure to foreign
currency risk.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations
under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risk from its operating activities
(primarily trade receivables) and from its financing activities, including
deposits with banks and financial institutions, foreign exchange transactions
and other financial instruments.
The Group's maximum exposure to credit risk in relation to each class of
recognised asset is the carrying amount of those assets as indicated in the
balance sheet. At the reporting date, there was no significant concentration
of credit risk. Receivables at the year-end were not past due and the
Directors consider there to be no significant credit risk arising from these
receivables.
Liquidity risk
The Group monitors its risk of a shortage of funds using a liquidity planning
tool.
Cash flow working capital forecasting is performed for regular reporting to
the Directors. The Directors monitor these reports and forecasts to ensure the
Group has sufficient cash to meet its operational needs.
The table below summarises the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments:
Year ended 31 December 2023
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Interest-bearing loans and - - 133 133 6 272
borrowings
Trade payables 163 - - - - 163
Other payables 414 - - - - 414
Total 577 - 133 133 6 849
Year ended 31 December 2022
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Interest-bearing loans and - - 133 267 9 409
borrowings
Lease liability - 11 36 251 - 298
Trade payables 153 - - - - 153
Other payables 1,147 - - - - 1,147
Total 1,300 11 169 518 9 2,007
Capital risk management
The Company defines capital based on the total equity of the Company. The
Company manages its capital to ensure that the Company will be able to
continue as a going concern while maximising the return to stakeholders
through the optimisation of the debt and equity balance.
To maintain or adjust the capital structure, the Company may adjust the number
of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt in the future.
33. Related party transactions
The Group is headed by Kanabo Group Plc, the ultimate parent entity. There is
no ultimate controlling party. The Directors have determined that there is no
controlling party as no individual shareholder holds a controlling interest in
the Company. A controlling party is defined as a shareholder who holds more
than 25% ownership of shares in the Company.
Key management personnel compensation
For the details of the Directors' remuneration in 2023 and 2022, please see
the Director's Remuneration Report on the Annual Report.
The amounts outstanding at the period end due to Non-Executive Directors was
£nil (2022: £nil).
Trading transactions
During the year, Group companies did not enter any transactions with related
parties who are not members of the Group.
Transactions with Group undertaking
2023 2022
£ 000 £ 000
With Kanabo Research Ltd:
Purchase of services 176 729
Total 176 729
Sales to and purchases from the Group undertaking were carried out on
commercial terms and conditions based on the transfer price work.
34. Employees
The monthly average number of employees in the Group was 17 (2022: 20), which
excludes Non-Executive Directors, subcontractors in Sri Lanka and portion
allocation between the different departments.
Group Company
2023 2022 2023 2022
Number Number Number Number
Research and development 1 2 - -
Sales and marketing 3 3 1 -
General and administration 13 15 2 2
Total number of employees 17 20 3 2
Their aggregate remuneration, including the Executive Directors' remuneration,
comprised:
Group Company
2023 2022 2023 2022
£ 000 £ 000 £ 000 £ 000
Wages and salaries 924 1,345 284 116
Pension 66 51 13 6
Social security costs 85 113 40 18
Share-based payment 59 783 43 17
Total number of employees 1,134 2,292 380 157
35. Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group's financial statements are
disclosed below. The Group intends to adopt these new and amended standards
and interpretations, if applicable, when they become effective.
No amendments to IFRS or new IFRS standards effective for periods on or after
1.1.2023 had any impact on the Group or Company
Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
In September 2022, the IASB issued amendments to IFRS 16 to specify the
requirements that a seller-lessee uses in measuring the lease liability
arising in a sale and leaseback transaction, to ensure the seller-lessee does
not recognise any amount of the gain or loss that relates to the right of use
it retains.
The amendments are effective for annual reporting periods beginning on or
after 1 January 2024 and must applied retrospectively to sale and leaseback
transactions entered into after the date of initial application of IFRS 16.
Earlier application is permitted and that fact must be disclosed.
The amendments are not expected to have a material impact on the Group's
financial statements.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020 and October 2022, the IASB issued amendments to paragraphs 69
to 76 of IAS 1 to specify the requirements for classifying liabilities as
current or non-current. The amendments clarify:
· What is meant by a right to defer settlement
· That a right to defer must exist at the end of the reporting period
· That classification is unaffected by the likelihood that an entity
will exercise its deferral right
· That only if an embedded derivative in a convertible liability is
itself an equity instrument would the terms of a liability not impact its
classification
In addition, a requirement has been introduced to require disclosure when a
liability arising from a loan agreement is classified as non-current and the
entity's right to defer settlement is contingent on compliance with future
covenants within twelve months.
The amendments are effective for annual reporting periods beginning on or
after 1 January 2024 and must be applied retrospectively. The Group is
currently assessing the impact the amendments will have on current practice
and whether existing loan agreements may require renegotiation.
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
In May 2023, the IASB issued amendments to IAS 7 Statement of Cash Flows and
IFRS 7 Financial Instruments: Disclosures to clarify the characteristics of
supplier finance arrangements and require additional disclosure of such
arrangements. The disclosure requirements in the amendments are intended to
assist users of financial statements in understanding the effects of supplier
finance arrangements on an entity's liabilities, cash flows and exposure to
liquidity risk.
The amendments will be effective for annual reporting periods beginning on or
after 1 January 2024. Early adoption is permitted but will need to be
disclosed.
The amendments are not expected to have a material impact on the Group's
financial statements.
36. Reconciliation of liabilities from financing activities
Year ended 31 December 2023
Non-cash changes
1 January 2023 Financing cash Acquisition of subsidiary New lease Lease termination 31 December 2023
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Interest-bearing loan (note 29) 400 (134) - - - 266
Lease liability (note 31) 298 (47) - - (251) -
Loans from third parties (note 29) 9 (3) - - - 6
Total 707 (184) - (251) 272
Year ended 31 December 2022
Non-cash changes
1 January 2022 Financing cash Acquisition of subsidiary New lease Lease termination 31 December 2022
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Interest-bearing loan (note 29) - (100) 500 - - 400
Lease liability (note 31) - (29) - 327 - 298
Loans from third parties (note 29) - 9 - - - 9
Total - (120) 500 327 - 707
37. Copies of the Annual Report
Copies of the Annual Report are available on the Company's website at
www.kanabogroup.com (http://www.kanabogroup.com) and from the Company's
registered office Churchill House, 137-139 Brent Street, London, NW4 4DJ,
United Kingdom.
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