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.
in sustained demand for
We anticipate that the pressure on the UK's National Health Service will continue unabated,
independent services providing access to medical
resulting
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.
Page 1 of 40
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
Avihu Tamir, Chief Executive Officer
Assaf Vardimon, Chief Financial Officer
Ian Mattioli, Non-Executive Chair of the Board
+44 (0)20 7469 0930
Peterhouse Capital Limited (Financial Adviser and
Broker)
Eran Zucker / Lucy Williams / Charles Goodfellow
+44 (0)20 7469 0930
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 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
Page 2 of 40
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
Operational Review
Chief Executive Officer's 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
Page 3 of 40
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
Page 4 of 40
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
Page 5 of 40
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
Page 6 of 40
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
Note £ 000
Revenue
Cost of sales
Gross profit
Research and development expenses
Sales and marketing expenses
General and administration expenses
Reversal of impairment
Impairment of intangible assets and goodwill
Other (expenses)/gains - including acquisition and
listing costs
Operating loss
Net finance expenses
Loss before income tax expense
7
8
9
10
11
24
13
14
895
(761)
134
(312)
(598)
(2,978)
82
(4,448)
327
2022
£ 000
603
(404)
199
(597)
(1,190)
(3,804)
59
-
(1,448)
(7,793)
(6,781)
(202)
(7,995)
(89)
(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)
Page 7 of 40
Equity holders of the parent
Non-controlling interests
(7,987)
(8)
(7,995)
(6,867)
(3)
(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
Note £ 000
2022
£ 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
Total items that may be reclassified to profit
or loss
117
117
21
21
Total comprehensive loss
(7,878)
(6,849)
Attributable to:
Equity holders of the parent
Non-controlling interests
(7,870)
(8)
(7,878)
(6,846)
(3)
(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
ASSETS
Non-current assets
Intangible assets and goodwill
Property, plant, and equipment
Right-of-use asset
Long-term deposit
Current assets
Inventories
Trade receivables
Other receivables
Financial asset through profit or loss
Short-term deposits
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity
Issued capital
Share premium account
Merger reserve
Share-based payments reserve
Share to be issued reserve
Reverse acquisition reserve
Foreign currency translation reserve
Accumulated loss
Equity attributable to equity holders of
the parent
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
Current liabilities
Trade payables
Other payables
Interest-bearing loans and borrowings
Total liabilities
Total equity and liabilities
2023
£ 000
Note
2022
£ 000
17
18
31
31
21
22
23
20
26
26
27
27
27
28
6.a,
6.c
29
30
29
4,726
49
-
-
4,775
56
20
290
-
1,529
1,681
3,576
8,351
15,811
7,251
17,495
925
1,591
(14,968)
131
(20,723)
7,513
(11)
7,502
139
139
163
414
133
710
849
8,351
10,044
96
282
31
10,453
81
43
156
491
24
3,204
3,999
14,452
10,573
6,850
11,393
1,715
10,476
(14,968)
14
(13,605)
12,448
(3)
12,445
509
509
153
1,147
198
1,497
2,007
14,452
Page 8 of 40
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
ASSETS
Non-current assets
Property, plant, and equipment
Investments in subsidiary
Intercompany receivables
Current assets
Inventories
Trade receivables
Other receivables
Intercompany receivables
Financial asset through profit or loss
Short-term deposits
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity
Issued capital
Share premium account
Merger reserve
Share-based payments reserve
Share to be issued reserve
Accumulated loss
Total equity
Current liabilities
Trade payables
Other payables
Total liabilities
Total equity and liabilities
2023
Note £ 000
2022
£ 000
18
19
25
21
22
23
25
20
26
26
27
27
27
28
6.a,
6.c
30
14
9,247
2,435
11,696
56
1
18
515
-
1,001
1,137
2,728
14,424
17
23,746
1,097
24,860
81
35
69
3,192
491
-
937
4,805
29,665
15,811
7,251
17,495
925
10,573
6,850
11,393
1,715
1,591
(28,928)
14,145
10,476
(12,326)
28,681
9
270
279
279
14,424
79
905
984
984
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
Share
capital
Share
premium
account
Merger
reserve
Attributable to owners of the Company
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
9,249
5,169
9,231
758
2,500
(14,968)
(7)
(6,748)
5,184
-
5,184
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21
21
(6,867)
(6,867)
(3)
(6,870)
-
21
-
21
(6,867)
(6,846)
(3)
(6,849)
Page 9 of 40
As at 1
January 2022
Loss for the
year
Other
comprehensive
loss
Total
comprehensive
comprehensive
loss
Acquisition of a
subsidiary
Issue of share
capital
Exercise of
options
Exercise of
warrants
Share-based
payments
As at 31
December
2022
Loss for the
year
Other
comprehensive
income
Total
comprehensive
loss
Issue of share
capital
Acquisition of a
subsidiary
Debts
settlements
Options
expiration
Share-based
payments
As at 31
December
2023
6.c
533
-
2,162
27
703
1,434
28
7
5
28
81
242
28
-
-
-
-
-
-
-
-
(10)
-
967
7,976
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10
-
-
10,671
2,137
12
323
967
-
-
-
-
-
10,671
2,137
12
323
967
10,573 6,850
11,393
1,715
10,476
(14,968)
14
(13,605)
12,448
(3)
12,445
-
-
-
-
-
-
27
2,378
281
-
-
-
-
6.c
2,783
-
6,102
27.a
(c)
28
28
77
120
-
-
-
-
-
-
-
-
-
-
-
-
-
(869)
79
-
-
-
-
(8,885)
-
-
-
-
-
-
-
-
-
-
-
-
117
(7,987)
(7,987)
(8)
(7,995)
-
117
-
117
117
(7,987)
(7,870)
(8)
(7,878)
-
-
-
-
-
-
-
-
869
-
2,659
-
197
-
79
-
-
-
-
-
2,659
-
197
-
79
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
Note £ 000
£ 000
£ 000
Shares
based
payments
reserve
£ 000
Shares
to be
issued
reserve
£ 000
Accumulated
loss
Total
equity
£ 000
£ 000
at
As
1
January 2022
9,249
5,169
9,231
750
2,500
(6,360)
20,539
Total
comprehensive
loss
Acquisition of
a subsidiary
Issue of share
capital
Exercise
options
Exercise
warrants
Share-based
payments
at
As
December
2022
31
of
of
6.a
27
28
28
28
-
-
533
2,162
703
1,434
7
81
-
5
242
-
-
2,162
-
-
-
-
-
-
-
(10)
-
975
-
(5,976)
(5,976)
7,976
-
-
-
-
-
-
10
-
-
10,671
2,137
12
323
975
10,573 6,850
11,393 1,715
10,476 (12,326)
28,681
Total
comprehensive
loss
Issue of share
capital
Acquisition of
a subsidiary
Debts
settlements
Options
-
-
2,378
281
2,783
-
77
120
27
6.a,6.c
27.a
(c)
28
-
-
6,102
-
-
-
-
-
-
-
-
(8,885)
-
(17,471)
(17,471)
-
-
-
2,659
-
197
Page 10 of 40
Options
expiration
Share-based
payments
As
at
December
2023
31
28
28
-
-
-
-
-
-
(869)
79
-
-
869
-
-
79
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
Operating activities
Loss before tax
2023
Note £ 000
2022
£ 000
(7,995)
(6,870)
Adjustments to reconcile profit before tax to net cash
flows:
Reversal of impairment
Share-based payment expense
Depreciation of property, plant and equipment, and
right-of-use assets
Amortisation of intangible assets and impairment of
goodwill
Impairment charge on receivables
Loss on current financial asset
Impairment of intangible assets and goodwill
Net finance expenses
Loss from sale of property, plant and equipment
Other gain
24
28
(82)
79
18,31 74
(59)
967
69
17
1,378
976
22
-
13,20 158
4,448
31
41
(20)
18
31
3
259
-
56
-
-
Working capital changes:
Change in trade receivables
Change in other receivables
Change in inventories
Change in trade payables
Change in other payables
Change in long-term deposit
Interest paid
Net cash flows used in operating activities
Investing activities
Purchase of property, plant, and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale the of financial asset
Acquisition of a subsidiary, net of cash acquired
Investment in short-term deposits
Development expenditures
Net cash flows from/ (used in) investing activities
Financing activities
Share issue net of issuing cost
Share issuing cost
Proceeds from the exercise of warrants
Proceeds from the exercise of share options
Receipts of long-term loans
Repayment of lease liability
Repayment of borrowings
Net cash flows from financing activities
Net decrease in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
23
(103)
25
10
(536)
-
(2,469)
(51)
(2,520)
(3)
155
(18)
92
677
(31)
(3,727)
(52)
(3,779)
(25)
5
333
-
(1,500)
(508)
(1,695)
(68)
-
-
235
(5)
(85)
77
2,740
(81)
-
-
82
(43)
(133)
2,565
2,250
(113)
323
12
68
(37)
(100)
2,403
(1,650)
127
3,204
1,681
(1,299)
26
4,477
3,204
36
18
18
20
6
17
27
27
27
29
36
36
26
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
Operating activities
Loss before tax
Adjustments to reconcile profit before tax to net cash
flows:
Reversal losses on financial assets
Share-based payment expense
Depreciation of property, plant, and equipment
Net impairment losses on financial asset
Impairment charge on receivables
2023
Note £ 000
2022
£ 000
(17,471)
(5,976)
24
18
22
(82)
63
4
1,991
-
(59)
205
4
-
3
Page 11 of 40
Impairment charge on receivables
Loss on current financial asset
Impairment of investment in subsidiaries
Net finance (expenses) income
Share of loss of subsidiaries
22
-
13,20 158
12,907
(1)
1,608
19
3
259
-
54
2,371
Working capital changes:
Change in trade receivables
Change in other receivables
Change in inventories
Change in trade payables
Change in other payables
Change in intercompany receivables
Net cash flows used in operating activities
Investing activities
Purchase of property, plant, and equipment
Proceeds from the sale of financial asset
Investment in short-term deposit
Net cash flows used in investing activities
Financing activities
Share issue net of issuing cost
Proceeds from the exercise of warrants
Proceeds from the exercise of share options
Receipts of short-term loans
Net cash flows from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
34
51
25
(70)
(438)
(652)
(1,872)
(28)
141
(18)
55
756
(3,509)
(5,742)
18
20
27
27
27
26
(1)
333
(1,000)
(668)
-
-
-
-
2,659
-
-
82
2,741
200
937
1,137
2,137
323
12
59
2,531
(3,211)
4,148
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
formulations and
regulated medicinal cannabis-derived
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:
Page 12 of 40
·
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
in full on
transactions between members of the Group are eliminated
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
Page 13 of 40
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
in these
circumstances is measured based on the relative values of the disposed operation
and the portion of the cash-generating unit retained.
loss on disposal. Goodwill disposed
the gain or
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
in an orderly transaction between market participants at the
liability
Page 14 of 40
liability
measurement date.
in an orderly transaction between market participants at the
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
the
techniques
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.
that are appropriate
in
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:
External revenues by product line
Primary care
Secondary care
Total
2023
£ 000
828
67
895
2023
£ 000
External revenues by timing of
revenue
Services transferred at point of time
Goods transferred at point of time
Net asset
828
67
895
f) Government grants
2022
£ 000
505
98
603
2022
£ 000
505
98
603
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
Page 15 of 40
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.
Page 16 of 40
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
Equipment and furnishing
Computers
and
electronic
equipment
%
15%
15%
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
Page 17 of 40
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
intangibles, excluding capitalised
impairment
development costs, are not capitalised and the related expenditure is recognised
in profit or loss in the period in which the expenditure is incurred.
losses. Internally generated
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
Page 18 of 40
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
Page 19 of 40
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
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.
introduction of emission-reduction
that may
legislation
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
information available and
through reviewing
developments during the year and since the year-end. The Board assesses the
loan on an individual basis to examine impairment.
forecasts, other financial
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).
Page 20 of 40
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
behavioural
exercise
considerations.
of non-transferability,
restrictions
and
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
Page 21 of 40
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
Inter-segment
Total revenue 828
828
-
67
-
67
897
-
897
(668)
(1,382)
(93)
(70(
(761)
(1,452)
(4,448)
-
(4,448)
Expenses
Cost of sales
Depreciation
and
amortisation
Impairment
of goodwill
and
intangible
assets
Segment loss
Total assets
(6,570)
5,347
(1,425)
1,152
Total
liabilities
528
321
(7,995)
8,351
849
Year ended 31 December 2022:
-
-
-
-
-
-
-
-
-
895
-
895
(761)
(1,452)
(4,448)
(7,995)
8,351
849
Primary
care
Secondary
care
Total
segments
Adjustments
and
eliminations
Consolidated
£ 000
£ 000
£ 000
£ 000
£ 000
Revenue
Page 22 of 40
Revenue
External
customers
Inter-segment
Total
revenue
Expenses
Cost of sales
Depreciation
and
amortisation
505
-
505
98
-
98
603
-
603
(349)
(980)
(55)
(64(
(404)
(1,045)
Segment loss
Total assets
(2,075)
11,314
Total
liabilities
609
(4,795)
3,138
1,398
(6,870)
14,452
2,007
-
-
-
-
-
-
-
-
The Group's operation does not include any reconciling items.
603
-
603
(404)
(1,045)
(6,870)
14,452
2,007
Geographical location:
At 31 December 2023:
Assets
United Kingdom
Israel
Total assets
Liabilities
United Kingdom
Israel
Total liabilities
At 31 December 2022:
Assets
United Kingdom
Israel
Total assets
Liabilities
United Kingdom
Israel
Total liabilities
Primary
care
Secondary
care
Total
segments
£ 000
£ 000
£ 000
5,347
-
5,347
528
-
528
375
777
1,152
292
29
321
7,574
777
8,351
820
29
849
Primary
care
Secondary
care
Total
segments
£ 000
£ 000
£ 000
11,314
-
11,314
609
-
609
740
2,398
3,138
987
411
1,398
12,054
2,398
14,452
1,596
411
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.
loans and borrowings
Interest-bearing
(note 29)
Trade payables
Less: cash and short-term deposits
Net asset
Total equity
Gearing ratio
2023
£ 000
133
577
(3,210)
(2,500)
7,502
-33%
2022
£ 000
198
153
(3,228)
(1,730)
12,445
-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:
Page 23 of 40
The consolidated financial statements of the Group include:
Name
Kanabo Research
Ltd. (a)
Kanabo Agritec
Ltd.
The GP Service
(UK) Limited
Kanabo
Limited
GP
Principal
activities
R&D
Country
of
incorporation
Israel
100
2022 Registered
office
(b)
100
equity
%
interest
2023
Consulting
Israel
40
40
(b)
Telemedicine UK
100
100
(c)
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
in
the UK and Europe.
thousands of patients
improving outcomes
for
to
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:
Assets
Property, plant, and equipment
Intangible assets
Cash and cash equivalents
Trade receivables
Other receivables
Liabilities
Interest-bearing loan
Trade payables
Other payables
Total identifiable net liabilities at fair value
value
Fair
recognised on
acquisition
£000
11
116
235
33
74
469
(500)
(19)
(97)
(616)
(147)
Other intangible assets arising from the acquisition
Goodwill arising from the acquisition
The fair value of purchase consideration transferred 10,671
6,763
4,055
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
Page 24 of 40
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.
Deemed cost
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Total identifiable net liabilities at fair value
Total RTO expenses
£ 000
1,911
434
359
(54)
739
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:
Pre-acquisition equity (a)
Kanabo Research Ltd share capital at acquisition (b)
£ 000
(739)
2,099
Page 25 of 40
Kanabo Research Ltd share capital at acquisition (b)
Investment in Kanabo Research Ltd (c)
Reverse acquisition expense (d)
Total
2,099
(17,500)
1,172
(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
Services
Sale of products
Total
2023
£ 000
828
67
895
2022
£ 000
505
98
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
Salaries and related expenses
Share-based payment expense
Cost of sales
IT Development and licenses
Impairment changes on receivables
Other including commissions
Total
9. Research and development expenses
Salaries and related expenses
Share-based payment expense
IT development and licenses
Rent and related expenses
Professional services
Other
Total
2023
£ 000
563
14
136
11
-
37
761
2023
£ 000
258
49
-
4
1
-
312
2022
£ 000
317
13
48
12
3
11
404
2022
£ 000
293
68
181
39
2
14
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
Salaries and related expenses
Share-based payment expense (gain)
Subcontractors
Marketing expenses
Conferences
Total
11. General and administration expenses
Salaries and related expenses
Share-based payment expense
Insurance
Professional services
Rent and related expenses (*)
Depreciation
Amortisation (note 17)
IT Development and licenses
Travel and accommodation
2023
£ 000
332
(40)
3
303
-
598
2023
£ 000
505
56
101
528
100
74
1,378
70
90
2022
£ 000
403
349
60
364
14
1,190
2022
£ 000
778
537
82
1,005
81
69
976
45
128
Page 26 of 40
Travel and accommodation
Other
Total
90
76
2,978
128
103
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:
Fees payable to the Company's auditor for:
- The audit of the parent company and
consolidated financial statements
- Interim review of the Group for the six-month
period ended 30 June 2023 and 30 June 2022 in
accordance with ISRE 2410
2023
£ 000
2022
£ 000
131
8
131
8 (a)
(a) The services for interim review in 2022 were provided by Jeffreys Henry LLP.
13. Other operating income/expenses
Acquisition and listing costs
Provision (reverse provision) for agent fees
(*)
Loss from sale of property, plant, and
equipment
Other gain (note 31)
Accrued income from R&D refund
Loss on current financial asset (note 20)
Total
2023
£ 000
224
(524)
2022
£ 000
514
675
41
-
(20)
(206)
158
(327)
-
-
259
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)
Finance income
Interest earned on bank deposits
Finance costs
Bank charges
Interest on interest-bearing loans
Interest on finance lease (note 31)
Net foreign exchange losses
Net finance expenses recognised in
profit or loss
15. Income tax
a. Analysis of charge in the year
2023
£ 000
(18)
(18)
23
31
18
72
148
202
2022
£ 000
-
-
15
32
24
71
18
89
Reconciliation of tax expense and the accounting profit multiplied by the United
Kingdom's domestic tax rate for 2023 and 2022:
Page 27 of 40
Accounting loss before income tax
At England's statutory income tax rate of
23.5% (2022: 19%)
Non-deductible expenses for tax purposes:
Non-deductible expenses
Amortisation and impairment of intangible
assets
Effect of higher tax rates in Israel
Current year losses for which no deferred tax
asset is recognised
Income tax benefits reported in the
statement of profit or loss
2023
£ 000
(7,995)
2022
£ 000
(6,870)
(1,879)
(1,305)
(16)
1,107
9
779
-
(11)
169
(47)
1,194
-
b. Reconciliation of deferred tax liabilities, net
As at 1 January
Deferred taxes acquired in
business combinations (note 6.a)
Deferred tax asset on losses
recognised due to offset of liability
under IAS 12
As at 31 December
Group
2023
£ 000
-
-
-
-
2022
£ 000
-
1,651
(1,651)
-
Company
2023
£ 000
-
-
2022
£ 000
-
-
-
-
-
-
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.
Loss attributable to ordinary equity holders of the
parent (£000)
Weighted average number of ordinary shares for basic
EPS
Basic and diluted loss per share (pence per
share)
2023
(7,987)
2022
(6,867)
536,803,686 415,187,814
(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:
Cost
At 1 January 2022
Additions - internally
developed
Acquisition of a subsidiary
(note 6.a)
At 31 December 2022
Additions - internally
developed
At 31 December 2023
Amortisation and
impairment
At 1 January 2022
Amortisation
Acquisition of a subsidiary
(note 6.a)
At 31 December 2022
Amortisation
Impairment
At 31 December 2023
Net book value
At 31 December 2022
Development
costs
Intangible
asset
Goodwill Total
£ 000
£ 000
£ 000
£ 000
-
85
1,352
1,437
508
1,945
-
85
1,236
1,321
416
-
1,737
-
-
-
-
-
85
6,764
4,055
12,171
6,764
-
4,055
-
12,256
508
6,764
4,055
12,764
-
891
-
891
962
393
2,246
-
-
-
-
-
4,055
4,055
-
976
1,236
2,212
1,378
4,448
3,590
116
5,873
4,055
10,044
Page 28 of 40
At 31 December 2022
At 31 December 2023
116
208
5,873
4,518
4,055
-
10,044
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:
Goodwill
2023
£ 000
PFS
-
2022
£ 000
PFS
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.
Post-tax discounted rates
Pre-tax discounted rates
Long-term growth rates
18. Property, plant and equipment
Group:
2023
%
16.7%
22.1%
2%
2022
%
28.3%
37.7%
2%
Computers
and
electronic
equipment
£ 000
Equipment
and
furnishing
Leasehold
improvement
Total
£ 000
£ 000
£ 000
subsidiary
Cost
At 1 January 2022
Acquisition of
(note 6.a)
Additions
Exchange differences
At 31 December 2022
Additions
Disposals
Exchange differences
At 31 December 2023
subsidiary
Depreciation
At 1 January 2022
Acquisition of
(note 6.a)
Depreciation charge for the
year
At 31 December 2022
Depreciation charge for the
year
Disposals
Exchange differences
At 31 December 2023
Net book value
At 31 December 2022
At 31 December 2023
Company:
26
13
18
-
57
23
(22)
(4)
54
13
7
11
31
11
(17)
(1)
24
26
30
66
29
68
(3)
160
25
(88)
(6)
91
24
18
22
64
23
(41)
(4)
42
96
49
39
16
19
(2)
72
-
(34)
(1)
37
11
11
7
29
7
(15)
(3)
18
43
19
1
-
31
(1)
31
2
(32)
(1)
-
-
-
4
4
5
(9)
-
-
27
-
Computers
and
electronic
Total
Page 29 of 40
electronic
equipment
£ 000
£ 000
23
-
23
1
24
2
4
6
4
10
17
14
23
-
23
1
24
2
4
6
4
10
17
14
Cost
At 1 January 2022
Additions
At 31 December 2022
Additions
At 31 December 2023
Depreciation
At 1 January 2022
Depreciation charge for the year
At 31 December 2022
Depreciation charge for the year
At 31 December 2023
Net book value
At 31 December 2022
At 31 December 2023
19. Investment in subsidiaries
Company:
As at 1 January
Additions
Impairment of investment in subsidiaries
Equity results
As at 31 December
The GP Service (UK) Ltd.
2023
£ 000
23,746
16
(12,907)
(1,608)
9,247
2022
£ 000
14,676
11,441
-
(2,371)
23,746
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
As at 1 January
Proceeds from the sale of
financial asset
Loss on a financial asset at
fair value through profit or
loss (note 13)
As at 31 December
Current
Non-current
Group
2023
£ 000
491
(333)
2022
£ 000
750
-
Company
2023
£ 000
491
(333)
2022
£ 000
750
-
(158)
(259)
(158)
(259)
-
-
-
491
491
-
-
-
-
491
491
-
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
Page 30 of 40
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
Finished goods
Raw materials
Total
Group
2023
£ 000
42
14
56
2022
£ 000
61
20
81
Company
2023
£ 000
42
14
56
2022
£ 000
61
20
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
Trade receivables
Allowance for expected credit
losses
Total
Group
2023
£ 000
23
(3)
2022
£ 000
48
(5)
Company
2023
£ 000
1
-
2022
£ 000
38
(3)
20
43
1
35
Trade receivables are non-interest bearing and are generally on terms of 30 to 90
days.
23. Other receivables
Prepaid expenses
VAT recoverable
R&D grant receivables
Other tax receivables
Other
Total
24. Short term loan
Group and the Company:
Group
2023
£ 000
31
12
206
10
31
290
2022
£ 000
17
66
64
9
-
156
Company
2023
£ 000
12
6
-
-
-
18
2022
£ 000
5
64
-
-
-
69
Interest
rate
10%
Currency
CAD
Fixed-rate loan
Accumulated interest
Less impairment
allowance/ECL
Total
31
December
2023
£ 000
31
December
2022
£ 000
-
-
-
-
-
611
15
626
(626)
-
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
Page 31 of 40
is shared equally with another
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
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:
Interest
rate
9%
-
31
December
2023
Currency £ 000
31
December
2022
£ 000
GBP
GBP
2,435
2,506
4,941
(1,991)
2,950
515
2,435
1,097
3,192
4,289
-
3,192
1,097
The GP Service (UK)
Limited
Kanabo Research Ltd.
Less impairment
Total
Current
Non-current
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
2023
£ 000
Cash at bank and in hand 1,681
1,681
Total
2022
£ 000
3,204
3,204
2022
£ 000
24
Company
2023
£ 000
1,137
1,137
Company
2023
£ 000
1,001
2022
£ 000
937
937
2022
£ 000
-
Group
2023
£ 000
1,529
Deposits at bank and in
hand
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.
As at 1 January
Shares issued for RTO (d)
Shares issued to settled debt (c)
Shares issued due to option and warrant
exercises
Share issued in placing and subscriptions (a)
Share issued in placing and subscriptions (e)
Issue of shares for acquisition of subsidiary
(b), (d)
As at 31 December
As at 1 January
Shares issued for RTO (d)
2022
2023
Number of ordinary shares of
£0.025 each
422,916,056
38,461,492
3,080,247
-
369,966,277
-
-
3,522,319
-
95,138,889
72,831,186
28,125,000
-
21,302,460
632,427,870
422,916,056
2023
£ 000
10,573
962
2022
£ 000
9,249
-
Page 32 of 40
Shares issued for RTO (d)
Shares issued to settled debt (c)
Shares issued due to option and warrant
exercises
Share issued in placing and subscriptions (a)
Share issued in placing and subscriptions (e)
Issue of shares for acquisition of subsidiary
(b), (d)
As at 31 December
962
77
-
-
2,378
1,821
-
-
88
703
-
533
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
As at 1 January
Shares issued in placing and subscriptions
Shares issued to settle debts
Shares issued due to option and warrant
exercises
As at 31 December
c. Merger reserve
As at 1 January
Shares issued in the year for RTO
Shares issued in the year for subsidiary
purchase
As at 31 December
2023
£ 000
6,850
281
120
-
7,251
2023
£ 000
11,393
2,500
3,602
2022
£ 000
5,169
1,434
-
247
6,850
2022
£ 000
9,231
-
2,162
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:
Page 33 of 40
2023
Number
31,976,719
WAEP
0.43
2022
Number
13,505,931
WAEP
0.09
at
1
0.06
-
47,569,444
-
(14,062,500) 0.16
65,483,663 0.10
0.20
28,125,000
0.10
(3,231,501)
(6,422,711)
0.10
31,976,719 0.18
at
31
Outstanding
January
Granted
Realised
Expired
Outstanding
December
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:
Outstanding at 1
January
Granted
Forfeited and expired
Exercised
Outstanding at 31
December
Exercisable at 31
December
2023
Number
36,902,016
WAEP
0.12
2022
Number
15,988,895
WAEP
0.16
25,050,000
(20,978,516)
-
40,973,500 0.05
0.03
-
-
22,759,150
(1,555,211)
(290,818)
36,902,016 0.12
0.08
-
-
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.
Page 34 of 40
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
Weighted average fair
values at the
measurement date
Dividend yield
Expected volatility
Risk-free interest rate
(%)
Expected life of share
option (years)
Weighted average
share price
Model used
19 June
2023
£0.019
0%
91.87%
4.53
10
£0.029
Black-
Scholes
Year ended 31 December 2022
Weighted average fair
values at the
measurement date
Dividend yield
Expected volatility
Risk-free interest rate
(%)
Expected life of share
option (years)
Weighted average
share price
Model used
30
August
2022
£0.023
30
August
2022
£0.022
30
August
2022
£0.025
30
August
2022
£0.022
30
August
2022
£0.021
0%
91.3%
2.7
0%
91.3%
2.7
0%
91.3%
2.7
0%
91.3%
2.7
0%
91.3%
2.7
10
10
10
10
10
£0.065
£0.08
£0.025
£0.1015
£0.1265
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
£ 000
Cost of sales (note 8)
14
Research and development expenses (note 9) 49
Sales and marketing expenses (note 10)
General and administration expenses (note
11)
Total
(40)
56
79
2022
£ 000
13
68
349
537
967
29. Interest-bearing loans and borrowings
Group:
Current interest-
bearing loans and
borrowings
Lease liability (note
31)
CBILS loan
Total
Non-current
interest-bearing
loans and
borrowings
Lease liability (note
31)
CBILS loan
Interest
rate
Currency Maturity
2023
£ 000
2022
£ 000
7.5%
ILS
-
9%
GBP
2024
-
133
133
7.5%
ILS
-
-
9%
GBP
2025
133
Page 35 of 40
65
133
198
233
267
CBILS loan
Loans from third
parties' investors in
subsidiary (note 6.b)
Total
9%
3.23%
GBP
ILS
Total interest-bearing loans and
borrowings
CBILS loan
2025
No maturity
date was
set
133
6
267
9
139
509
272
707
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
Payroll and related expenses
Accrued expenses
Provision for accrued bonus
Provision for accrued vacation
and convalescence
Other
Total
31. Leases
Group
2023
£ 000
27
362
-
17
8
414
2022
£ 000
41
991
56
43
16
1,147
Company
2023
£ 000
8
253
-
9
-
270
2022
£ 000
-
859
22
24
-
905
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:
As at 1 January
Additions
Depreciation expense
Disposal
Exchange differences
As at 31 December
2023
£ 000
282
-
(51)
(231)
-
-
2022
£ 000
-
327
(47)
-
2
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:
As at 1 January
Additions
Accretion of interest
Disposal
Payments
Effect of movement on the exchange rate
As at 31 December
Current
Non-current
2023
£ 000
298
-
18
(251)
(62)
(3)
-
-
-
2022
£ 000
-
327
24
-
(57)
4
298
65
233
32. Financial instruments risk management objectives and policies
The Group's principal financial liabilities comprise loans and borrowings and
Page 36 of 40
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:
Financial assets
Financial assets held at amortised
cost
Intercompany receivables
Trade receivables
Long term deposit
Short-term deposits
Cash and cash equivalents
Financial assets held at fair value
Financial asset through profit or
loss
Total financial assets
Group
2023
£ 000
2022
£ 000
Company
2023
£ 000
2022
£ 000
-
20
-
1,529
1,681
-
43
31
24
3,204
4,941
1
-
1,001
1,137
4,289
35
-
-
937
-
491
-
491
3,230
3,793
7,080
5,752
Current
Non-current
3,230
-
3,762
31
7,080
-
5,752
-
Financial liabilities
Group
2023
£ 000
2022
£ 000
Company
2023
£ 000
2022
£ 000
liabilities held at
Financial
amortised cost
Trade payables
Other payables
Interest-bearing
borrowings
Total financial liabilities
loan
Current
Non-current
Market risk
163
414
272
and
153
1,147
707
9
270
-
79
905
-
849
2,007
279
984
710
139
1,498
509
279
-
984
-
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
Page 37 of 40
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
133
£ 000
133
£ 000
6
£ 000
272
163
414
577
-
-
-
-
-
133
-
-
133
-
-
6
163
414
849
Interest-bearing loans
and
borrowings
Trade payables
Other payables
Total
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
133
£ 000
267
£ 000
9
£ 000
409
-
153
1,147
1,300
11
-
-
11
36
-
-
169
251
-
-
518
-
-
-
9
298
153
1,147
2,007
Interest-bearing loans
and
borrowings
Lease liability
Trade payables
Other payables
Total
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
£ 000
2022
£ 000
With Kanabo Research
Page 38 of 40
With Kanabo Research
Ltd:
Purchase of services
Total
176
176
729
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
2023
Number
1
2022
Number
2
Company
2023
Number
-
2022
Number
-
3
13
17
3
15
20
1
2
3
-
2
2
Research and
development
Sales and marketing
General and
administration
Total number of
employees
Their aggregate remuneration, including the Executive Directors' remuneration,
comprised:
Group
2023
£ 000
924
66
85
59
1,134
2022
£ 000
1,345
51
113
783
2,292
Company
2023
£ 000
284
13
40
43
380
2022
£ 000
116
6
18
17
157
Wages and salaries
Pension
Social security costs
Share-based payment
Total number of
employees
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
its
instrument would the terms of a
liability not
impact
equity
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.
Page 39 of 40
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
1
January
2023
Financing
cash
Non-cash changes
New
lease
Lease
termination
Acquisition
of
subsidiary
31
December
2023
£ 000
£ 000
£ 000
400
(134)
298
(47)
9
(3)
-
-
-
707
(184)
Interest-
bearing
loan
(note
29)
Lease
liability
(note
31)
Loans
from
third
parties
(note
29)
Total
£
000
-
£ 000
£ 000
-
266
-
-
-
(251)
-
-
6
(251)
272
Year ended 31 December 2022
1
January
2022
Financing
cash
Non-cash changes
New
lease
Lease
termination
Acquisition
of
subsidiary
31
December
2022
£ 000
£ 000
£ 000
Interest-
bearing
loan
(note
29)
Lease
liability
(note
31)
Loans
from
third
parties
(note
29)
Total
-
-
-
-
(100)
500
(29)
9
-
-
£
000
-
327
-
£ 000
£ 000
-
-
-
400
298
9
(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 and from the Company's registered office Churchill
House, 137-139 Brent Street, London, NW4 4DJ, United Kingdom.
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FR IMMJTMTBJBBI
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