TIDMCHLL
RNS Number : 0890L
Chill Brands Group PLC
28 December 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF REGULATION 11 OF THE MARKET ABUSE (AMMENT) (EU EXIT) REGULATIONS
2019/310. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE
INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Chill Brands Group plc
("Chill Brands" or the "Company" or the "Group")
Interim Results for the Six Months Ended 30 September 2022
Employment Dispute
28 December 2022
Chill Brands Group, the international consumer packaged goods
company, announces its interim results for the six months ending 30
September 2022 (the "Period"), which can be viewed below and also
on the Company's website at www.chillbrandsgroup.com.
Callum Sommerton, Chief Executive Officer of Chill Brands,
commented:
"Much has changed at Chill Brands during the six months ending
30 September 2022. During this transitionary period, we have taken
steps to stabilise and improve the Company's business model while
reducing costs. We have also acted to correct past arrangements
that have complicated the Company's path to revenue.
In the months since we have relaunched the Chill brand and
commenced negotiations with external partners as we seek to build a
wider product marketplace on the Chill.com domain. We are now
preparing for the launch of our new nicotine-free vapour products
and expect them to make a significant contribution to Chill Brands'
revenue generation prospects during 2023 ."
Employment Dispute
The Company has recently commenced proceedings in relation to a
dispute with a former employee. Chill Brands is committed to taking
decisive action to safeguard its intellectual property and will not
tolerate the disruption of its existing business development
efforts.
The dispute has no impact on the Company's ongoing operations.
Further information will be provided in due course and as the
formal legal process allows.
-S-
About Chill Brands Group
Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is an
international company concerned with the development, production,
and distribution of best-in-class hemp-derived CBD products,
tobacco alternatives and other consumer packaged goods (CPG)
products. The Company operates primarily in the US, where its
products are distributed online and via some of the nation's most
recognisable convenience retail outlets. The Group's strategy is
anchored around lifestyle marketing that is designed to enhance the
popularity of its products, channelling visitors to its landmark
chill.com website.
Publication on website
A copy of this announcement is also available on the Group's
website at http://www.chillbrandsgroup.com
Media enquiries:
Chill Brands Group plc contact@chillbrandsgroup.com
Allenby Capital Limited (Financial
Adviser and Broker) +44 (0) 20 3328 5656
Nick Harriss/Nick Naylor (Corporate
Finance)
Kelly Gardiner (Equity Sales)
Unaudited Interim Results for the Six Month Period Ending 30
September 2022
Summary
The Period has seen a restructuring of the Company's operations.
Following the appointment of Callum Sommerton as Chief Executive
Officer on 19 April 2022, the Company completed a subscription
round and subsequent Open Offer to its existing shareholders,
raising a combined total of GBP3,712,201.40 before expenses. These
fundraising efforts have provided working capital to the business
while facilitating the settlement of legacy liabilities.
Since April the Company has taken steps to substantially reduce
costs, with particular attention paid to marketing activities and
professional advisory fees. To date targeted cost-cutting measures
have led to an annual saving of at least $1,000,000 from the
discontinuation of certain prior activities and the cancellation of
numerous consultancy agreements, the benefit of which will largely
occur during the second half of the year. The Company continues to
take steps to reduce spending and is replacing and renegotiating a
number of vendor contracts ahead of their scheduled 2023 renewal
dates.
Limited revenues were recorded during the Period as a result of
circumstances relating to the ownership of the Company's products.
The Company sold a large portion of its CBD product inventory to a
connected party, Ox Distributing LLC ("Ox"), during a previous
reporting period. Extended payment terms agreed in relation to that
sale provided the Company with cashflow during the Period in review
as products sold through, however additional revenues could not be
recognised for sales of products that had already been recorded as
sold to Ox during the Financial Year ending 31 March 2022. Since
the end of the Period, the Company has taken delivery of new
inventory which has started to generate recordable revenues upon
sale. This Period also saw the discontinuation of the Company's
synthetic nicotine product range.
Going forward, Chill Brands' Board of Directors (the "Board") is
confident that the Company will be able to improve revenues through
the application of its updated brand, the diversification of its
product range, a targeted expansion of its physical retail
footprint, and the further commercialisation of the Chill.com
domain asset through the sale of third-party products on the
site.
Financial Overview
During the Period the Company recorded revenues of GBP19,610.
Actual sales of Chill branded products to retailers and consumers
significantly exceeded this level, however the Company's entire
inventory of CBD chew pouches and combustible smokes had already
been sold to Ox, its former Master Distributor. This meant that
sales of CBD pouches and combustible smoke products made during the
Period could not be recognised as additional revenue for the
Company, having previously been recorded during the financial year
ending 31 March 2022.
During the Period, Ox paid US $254,622.90 to the Company towards
the promissory note that provides extended payment terms for
products purchased by Ox between 1 April to 30 September 2021. To
date, Ox has made payments totalling $395,889.34 during this and
previous periods. In 2023, Chill Brands expects to receive a final
balancing payment for the value of the note, net of credit for
funds received directly by the Company on the sale of products,
promotional discounts and write-downs. A more detailed explanation
of the promissory note is provided in Note 7 to these interim
financial statements.
Chill Brands received new CBD pouch products in October 2022,
sales of which are now generating recordable revenues. All future
deliveries of new inventory will be owned by Chill Brands and will
therefore provide a clearer path to recordable revenues. Ox no
longer acts as the Company's Master Distributor.
The Company recorded an operating loss of GBP2,196,195 for the
period. While this loss is reflective of cash costs including those
attributable to substantial legacy legal fees and maintaining the
Company's listing, it also reflects large non-cash costs that
relate to warrants issued to Viridian Capital and other advisors.
The reported value of these warrants reflects their value
calculated based on the Company's share price at the date of their
issue.
The Company is seeking to recover slotting fees for stores that
were not effectively activated during previous reporting periods.
Updates regarding these efforts will be provided in due course.
Product Focus
During the Period, the Company continued to focus on the
development and sale of its novel CBD wellness and tobacco
alternative products. Its primary product range consists of oral
CBD pouches, combustible herbal smokes, and CBD isolate gummies.
Under the Zoetic brand, the Group continues to sell a range of
CBD-infused topical cosmetic products and CBD tinctures.
In late 2021 the Company launched a new range of 'Tobacco Free
Nicotine' ("TFN") pouches containing synthetic nicotine. In March
2022, a federal funding bill that amended the statutory definition
of "tobacco product" was passed by the US Congress, giving the US
Food and Drug Administration ("FDA") authority over synthetic
nicotine products. The FDA ruled that companies selling synthetic
nicotine products should submit Premarket Tobacco Applications
("PMTA") in order to remain on sale. While the Company filed the
necessary application, the ongoing costs of completing a PMTA were
considered prohibitive to the continuation of the Chill TFN product
range. As announced on 3 August 2022, the Company has discontinued
the development of synthetic nicotine products and steps are being
taken to conclude a final sale of the Company's remaining inventory
of TFN products.
On 7 December 2022 the Company announced that it was developing
a range of vapour products, including vapes that contain CBD and
others that are designed to provide a nicotine-free vaping
experience without the inclusion of a cannabinoid active
ingredient. The Company plans to commence sales of these vapour
products during Q1 2023, after which they are expected to become a
significant contributor to its sales and revenue.
Ownership of the Chill.com Domain
In June 2022, the Group received a letter from the Corporate
Reporting Review Team of the Financial Reporting Council ("FRC") as
part of its regular review and assessment of the quality of
corporate reporting in the UK. The FRC requested further
information in relation to the Company's 2021 Interim Financial
Report for the period ending 30 September 2021 as published on 28
January 2022 (the "Interim Report"). The letter concerned the
financial treatment of the Group's purchase of the 'Chill.com'
domain name (the "Domain Purchase"). Specifically, the FRC focused
on the treatment of the Domain Purchase within the condensed
consolidated statement of cash flows in the 2021 Interim Report
which provided for a cash outflow of GBP1,195,898. This figure was
reflective of the full purchase price of the domain, however only
GBP601,986 had been paid during the 2021 Interim Report period with
a further GBP593,912 still outstanding and only settled in June
2022, after the financial period ending 31 March 2022.
Following the review, the Group has undertaken to:
(a) correct the comparative information for the six months ended
30 September 2021 in the unaudited cash flow statement to show the
actual amount paid in respect of the Domain Purchase in 2021
(GBP601,986) and 2022 (GBP593,912).
(b) disclose the nature and amount of the change made to the
cash flow statement that was included in the 2021 Interim Report.
That disclosure can be found in Note 3 of this interim report.
The Group recognises that the FRC's review of this matter is
inherently limited and does not benefit from a detailed knowledge
of the Group's business or the underlying transactions considered.
The FRC's role is not to verify the information provided but to
consider compliance with reporting requirements as it has done in
this instance.
Further to the aforementioned correspondence and corrections,
the FRC has closed its enquiries into the Group's 2021 interim
report. The Group continues to work with its auditors and advisors
to ensure that it complies with all statutory reporting obligations
and publishes financial information in an accurate and timely
manner.
Outlook and Future Prospects
This has been a transitionary phase for Chill Brands. The
Company has taken steps to redress issues with its operating model
following a change to its management structure and fundraising
activity during April and May 2022. The Board continues to act to
reduce the ongoing costs of the Company's operations to ensure that
it is lean and above all well- prepared to navigate the current
period of global economic instability.
During the same period it has become increasingly important for
companies like Chill Brands to adopt an exceptionally targeted
strategy in relation to retail sales of CBD products. In addition
to international regulatory uncertainty, CBD brands must now also
compete with psychoactive Delta 8, 9, and 10 hemp derivative
products that have commenced sales in certain convenience outlets
across the United States. Chill Brands is currently unable to
participate in the psychoactive cannabinoid product market due to
the nature of its London listing and the application of UK law. The
Company has therefore adjusted its rollout strategy to primarily
target liquor stores, smoke shops, dispensaries, and other
specialist retail venues where CBD products continue to show
encouraging signs of growth both in terms of revenue and
popularity.
It is against this challenging retail environment that the
Company has equipped itself with a number of tools that are
expected to improve its revenue generation prospects. Chill Brands
has now established a US national sales team of brokers and agents
whose remuneration comprises performance-based commissions. This
approach has enabled the Company to reduce retained costs while
improving its access to an expansive array of retail distribution
opportunities.
The Company has also secured full ownership of the Chill.com
domain and has plans to further exploit that asset. Following a
relaunch of the Chill brand and website in October 2022, the
Company has recorded improved traffic and return customer rates
alongside numerous other key metrics. While continuing to improve
its online conversion funnel, Chill Brands intends to establish a
marketplace of complementary brands and products that will generate
both additional traffic and revenue with the Company taking a
percentage of sales made by third-party brands through the site. As
stated elsewhere in this report, the Company is negotiating with a
number of other brands and intends to sell a wide range of products
via its website with several set to launch during Q1 2023.
In addition to commencing sales of products from other brands,
the Company has engaged in research and development initiatives
with a view to improving the diversity of its own product range. As
previously announced, 2023 will see the launch of Chill Brands' new
line of nicotine-free vapour products. These products are in high
demand and are quickly expected to become a reliable source of
revenue for the Company.
Having built the foundations of a strong and appealing brand,
the Board believes that the Company is well positioned to achieve
sustainable growth by innovating while paying close attention to
sales and marketing fundamentals. It is through this brand that
Chill Brands will engage consumers with novel products and active
ingredients, both as part of its own proprietary range and through
sales of third-party products via the Chill.com e-commerce
platform.
During 2023 Chill Brands will continue to focus on cash
management and the reduction of operating expenses. Through the
launch of vapour products, expansion of its retail distribution
network, and establishment of a scalable product marketplace on
Chill.com, the Board is confident that the Company will also
significantly improve its revenue generation prospects.
This interim financial report was approved by the board of
Directors on 27 December 2022 and signed on its behalf by:
Callum Sommerton
Chief Executive Officer, Chill Brands Group plc
Consolidated Statement of Comprehensive Income (Unaudited)
For the six months ended 30 September 2022
Unaudited six months Unaudited six months
ended 30 September 2022 ended 30 September 2021 Audited year ended 31
GBP GBP March 2022 GBP
------------------------- ------------------------- --------------------------
Revenue 19,610 1,073,872 624,187
Cost of sales (49,738) (756,434) (738,555)
Obsolete inventory expense - - (664,442)
------------------------- ------------------------- --------------------------
Gross (loss) profit (30,128) 317,438 (778,810)
Administrative expenses (1,249,219) (1,437,282) (2,837,400)
Share expenses for options
granted (916,848) (1,348,903) (1,958,076)
Operating Loss (2,196,195) (2,468,747) (5,574,286)
Finance income 8,282 32 1,962
------------------------- ------------------------- --------------------------
Loss on ordinary activities
before taxation (2,187,913) (2,468,715) (5,572,324)
Taxation on loss on
ordinary activities - - -
------------------------- ------------------------- --------------------------
Loss for the period from
continuing activities (2,187,913) (2,468,715) (5,572,324)
Loss for the period from
discontinued activities (14,749) (114,960) (139,179)
Loss for the period (2,202,662) (2,583,675) (5,711,503)
Other comprehensive
income
Items that may be
re-classified subsequently
to profit or loss:
Foreign exchange
adjustment on
consolidation 324,591 (99,496) (271,869)
Total comprehensive loss
for the
period attributable to the
equity holders (1,878,071) (2,683,171) (5,983,372)
------------------------- ------------------------- --------------------------
Earnings (loss) per share
attributed to equity
holders
Attributable to continuing
activities (0.89) (1.18) 2.65
Attributable to
discontinued activities (0.01) (0.06) 0.06
------------------------- ------------------------- --------------------------
Total (0.90) (1.24) 2.71
------------------------- ------------------------- --------------------------
Consolidated Statement of Financial Position (Unaudited)
At 31 March 2022 and 2021
Unaudited six months Unaudited six months
ended 30 September 2022 ended 30 September 2021 Audited year ended 31
GBP GBP March 2022 GBP
-------------------------- -------------------------- --------------------------
Non-Current Assets
Tangible assets 54,621 70,562 54,173
Right of use lease asset 269,855 285,559 260,376
Related party note
receivable, net of
current portion - 566,571 -
Intangible assets 1,370,160 1,195,898 1,190,225
Total Noncurrent Assets 1,694,636 2,118,590 1,504,774
Current Assets
Inventories, net 765,644 1,063,278 636,294
Trade and other
receivables 414,055 625,568 700,199
Cash and cash equivalents 1,822,322 2,079,779 420,045
Other current assets 53,720 - -
Total Current Assets 3,055,741 3,768,625 1,756,538
Total Assets 4,750,377 5,887,215 3,261,312
========================== ========================== ==========================
Non-Current Liabilities
Loans, excluding current
maturities 3,147,151 67,424 50,463
Right of use lease
liability, net of
current portion 204,266 231,231 205,672
-------------------------- --------------------------
Total Noncurrent
Liabilities 3,351,417 298,655 256,135
Current Liabilities
Current maturities of
loans 10,000 10,000 18,494
Trade and other payables 331,981 759,989 730,184
Current portion of right
of use lease liability 74,602 58,110 62,390
Accrued liabilities 22,575 618,912 654,071
Total Current Liabilities 439,158 1,447,011 1,465,139
Total Liabilities 3,790,575 1,745,666 1,721,274
-------------------------- --------------------------
Net Assets 959,802 4,141,549 1,540,038
-------------------------- -------------------------- --------------------------
Equity
Share capital 2,451,153 2,120,700 2,120,700
Share premium account 10,421,550 10,298,440 10,298,440
Share based payments
reserve 4,751,130 2,780,589 3,389,762
Shares to be issued
reserve 16,941 - 89,517
Foreign currency
translation reserve 585,368 433,150 260,777
Retained loss (17,266,340) (11,491,330) (14,619,158)
-------------------------- --------------------------
Total Equity 959,802 4,141,549 1,540,038
========================== ========================== ==========================
Consolidated Statement of Changes in Equity
For the six months ended 30 September 2022
Share Shares
Share Based To Be Foreign
Share Premium Payment Issued Currency
Capital Account Reserve Reserve Translation Retained
GBP GBP GBP GBP Reserve GBP Loss GBP Total GBP
---------- ----------- ---------- --------- ------------ ------------- ------------
At 31 March 2021 2,020,700 4,698,441 1,431,686 - 532,646 (8,907,655) (224,182)
------------------ ---------- ----------- ---------- --------- ------------ ------------- ------------
Comprehensive
income for the
period
Loss for the
period - - - - - (5,711,503) (5,711,503)
Other
comprehensive
income
Translation
adjustment - - - - (271,869) - (271,869)
------------
Total
comprehensive
loss for the
period
attributable
to the equity
holders - - - - (271,869) (5,711,503) (5,983,372)
Issue of
warrant and
options - - 1,958,076 - - - 1,958,076
Shares to be
issued - - 89,517 - - 89,517
Shares issued
in the period 100,000 5,900,000 - - - 6,000,000
Cost relating
to share
issues - (300,001) - - - - (300,001)
At 31 March 2022 2,120,700 10,298,440 3,389,762 89,517 260,777 (14,619,158) 1,540,038
------------------ ---------- ----------- ---------- --------- ------------ ------------- ------------
Comprehensive
income for the
period
Loss for the
period - . - - - - (2,202,662) (2,202,662)
Other
comprehensive
income
Translation
adjustment - - - - 324,591 - 324,591
------------
Total
comprehensive
loss for the
period
attributable
to the equity
holders - - - - 324,591 (2,202,662) (1,878,071)
Issue of
warrant and
options - - 1,361,368 - (444,520) 916,848
Shares to be
issued - - - 22,653 - - 22,653
Shares issued
in the period 330,453 399,471 - (81,200) - - 648,724
Termination of
shares to be
issued - - - (14,029) - - (14,029)
Cost relating
to share
issues - (276,361) - - - - (276,361)
At 30 September
2022 2,451,153 10,421,550 4,751,130 16,941 585,368 (17,266,340) 959,802
------------------ ---------- ----------- ---------- --------- ------------ ------------- ------------
Consolidated Statement of Cash Flows
For the six months ended 30 September 2022
Unaudited six months
ended 30 September 2021
GBP
(Restated)
--------------------------
Unaudited six months
ended 30 September 2022 Audited year ended 31
GBP March 2022 GBP
------------------------- -------------------------- --------------------------
Cash Flows From Operating
Activities
Loss for the period (2,202,662) (2,583,675) (5,711,503)
Adjustments for:
Depreciation and
amortization charges 70,541 7,835 113,090
Impairment provision - - 664,441
Loss on disposal of
tangible and intangible
assets - - 226
Share expenses for options
granted 925,472 1,348,903 1,958,076
Shares issued as
compensation - - 89,517
Foreign exchange
translation adjustment 56,066 (112,157) (319,545)
Operating cash flow before
working capital movements (1,150,583) (1,339,094) (3,205,698)
------------------------- -------------------------- --------------------------
Decrease (increase) in
inventories (129,350) 175,501 (61,957)
Decrease (increase) in
trade and other
receivables 286,144 (112,173) (564,106)
Increase(decrease) in
trade and other payables (398,203) (845,537) 68,531
Decrease (increase) in
other assets (53,720) 125,873 -
Increase(decrease) in
other liabilities - (122,091) -
Increase(decrease) in
accrued liabilities (37,584) (1,219,750) (1,199,600)
Net Cash outflow from
Operating Activities (1,483,296) (3,337,271) (4,962,830)
------------------------- -------------------------- --------------------------
Cash Flows From Investing
Activities
Purchase of tangible fixed
assets - (23,800) (27,443)
Cash paid for intangible
assets (593,912) (601,986) (617,198)
Net Cash generated
from/(used in) Investing
Activities (593,912) (625,786) (644,641)
------------------------- -------------------------- --------------------------
Cash Flows From Financing
Activities
Net proceeds from issue of
shares 372,363 5,699,999 5,699,999
Loans made by the Company (9,572) - (11,467)
Issuance of loan noted 3,093,504 - -
Payments of lease
liability (38,838) - (528,001)
Repayment of long-term
debt - (3,000)
Net Cash Generated from
Financing Activities 3,417,457 5,696,999 5,688,532
------------------------- -------------------------- --------------------------
Net increase in cash and
cash equivalents
As above 1,340,249 1,733,942 28,260
Cash and cash equivalents
at beginning of period 420,045 333,176 333,176
Foreign exchange
adjustment on opening
balances 62,028 12,661 58,609
Cash and cash equivalents
at end of period 1,822,322 2,079,779 420,045
========================= ========================== ==========================
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended 30 September 2022
NOTE 1 - GENERAL INFORMATION
Chill Brands Group PLC (formerly Zoetic International PLC) and
its subsidiaries (together the "Group") are involved in the
development, production and distribution of premium cannabidiol
("CBD") products. The Company, a public limited company
incorporated and domiciled in England and Wales, is the Group's
ultimate parent company. The Company was incorporated on 13
November 2014 with Company Registration Number 09309241 and its
registered office and principal place of business is 27/28
Eastcastle Street, London W1W 8DH. The principal executive offices
are located at 1601 Riverfront Drive, Grand Junction, Colorado
81501.
NOTE 2 - ACCOUNTING POLICIES
Basis of preparation
The interim condensed unaudited consolidated financial
statements for the period ended 30 September 2022 have been
prepared in accordance with IAS 34 Interim Financial Reporting. The
comparative figures for 31 March 2022 are extracted from the
Group's audited accounts to that date. The comparative figures for
the period ended 30 September 2021 are unaudited.
The condensed unaudited consolidated interim financial
statements of the Group have been prepared on the basis of the
accounting policies, presentation, methods of computation and
estimation techniques used in the preparation of the audited
accounts for the period ended 31 March 2022 and expected to be
adopted in the financial information by the Group in preparing its
annual report for the year ending 31 March 2023.
The financial information in this statement relating to the six
months ended 30 September 2022 and the six months ended 30
September 2021 has neither been audited nor reviewed by the
auditors pursuant to guidance issued by the Auditing Practices
Board. The financial information presented for the year ended 31
March 2022 does not constitute the full statutory accounts for that
period. The Annual Report and Financial Statements for the year
ended 31 March 2022 have been filed with the Registrar of
Companies.
The financial information of the Group is presented in British
Pounds Sterling ("GBP").
NOTE 3 - RESTATEMENT OF THE 30 SEPTEMBER 2021 CASH FLOWS STATEMENT
During the Financial Year ending 31 March 2022, the Group
entered into an agreement to purchase the Chill.com web domain (the
"Domain"). Financial information relating to the purchase of the
Domain was recorded in the Group's unaudited 2021 Interim Financial
Report as published on 28 January 2022.
A subsequent review of the unaudited 2021 Interim Report by the
Corporate Reporting Review Team of the Financial Reporting Council
identified that the condensed consolidated statement of cash flows
in the Interim Report provided for a cash outflow of GBP1,195,898.
This figure was reflective of the full purchase price of the
domain, however only GBP601,986 had been paid during the Interim
Report period with a further GBP593,912 still outstanding and only
settled in June 2022, after the financial period ending 31 March
2022.
The Company's interim cash flow statement for the six months
ended 30 September 2021 has been restated. This restatement shows
the balance of GBP601,986 for the purchase of intangible assets,
which was the actual amount paid to date for the domain name
"Chill.com" during the period, with the offsetting restatement of
GBP593,912 in the decrease of accrued liabilities.
NOTE 4 - INCOME TAX EXPENSE
No tax is applicable to the Group for the period ended 30
September 2022. No deferred income tax asset has been recognized in
respect of the tax losses carried forward, due to the uncertainty
as to whether the Group will generate sufficient profits in the
foreseeable future to prudently justify this.
NOTE 5 - LOSS PER SHARE
Basic loss per ordinary share is calculated by dividing the loss
attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the period.
Diluted earnings per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion
of all dilutive potential ordinary shares. There are currently no
dilutive potential ordinary shares.
During the Period the Company raised funds through a placing
round and an Open Offer to existing shareholders (together, the
"Fundraising"). The Fundraising consisted of two parts. The issue
of new ordinary shares of 1 pence each at a price of 2 pence per
Ordinary Share, and the issue of Convertible Loan Notes at a price
of 2 pence per Convertible Loan Note. The Convertible Loan Notes
are intended to automatically convert into Ordinary Shares
following the approval of a prospectus by the Financial Conduct
Authority (FCA) and publication of the same. The conversion of the
Convertible Loan Notes would lead to the admittance of 154,675,225
new Ordinary Shares. A complete explanation of the Group's
fundraising activities during the Period can be found within the
regulatory news announcements dated 26 April 2022, 31 May 2022 and
17 June 2022.
Earnings
GBP Weighted average number of shares Loss per share (pence)
------------------- ---------------------------------- -----------------------
Loss per share attributed to
ordinary shareholders (2,187,913) 245,115,305 (0.90)
NOTE 6 - INVENTORIES
Inventories comprise finished products and raw materials either
developed by the Group or bought in from third parties. All
inventory items are stated at their cost of production or
acquisition, or at net realizable value if this is lower. Recorded
Inventories are inclusive of the Group's hemp seed assets of
GBP396,933. While seed testing continues through a joint venture
agreement, there were no recordable biological assets being grown
for the six month periods ended September 30, 2022 and 2021. For
the periods ended September 30, 2022 and 2021, the Group had no
impairments on inventory.
NOTE 7 - NOTE RECEIVABLE - RELATED PARTY
During the six-month period ended 30 September 2021, the Group
entered into a note agreement with a related party - Ox
Distributing LLC. The note receivable provided extended payment
terms in relation to the purchase of products in Ox's former
capacity as the Group's Master Distributor.
The note receivable consists of a note from an entity owned and
operated by a shareholder of the Group. The note carries interest
on the unpaid principal balance of 0% interest from 30 September
2021 through 31 January 2022 and shall bear interest at the short
term rate of 0.18 percent per annum from 1 February 2022 until the
note is paid in full on 1 May 2023.
The balance of the note was originally recorded at GBP943,874
(2021). This value was reduced by deductions relating to product
that was not delivered to Ox during 2021. The note was further
reduced in line with promotional offers and free fills provided to
retailers as part of the Group's rollout strategy. To date, Ox has
made payments against the note totalling $395,889.34 (circa GBP
GBP324,728.23). At 30 September 2022, the remaining value of the
note was recorded as GBP194,294 and is included under 'Trade and
other receivables' within the 'current assets' section of the
unaudited interim Consolidated Statement of Financial Position.
NOTE 8 - INTANGIBLE ASSETS
The Group purchased the domain name Chill.com on 22 June 2021.
This domain name is the only intangible asset held by the
Group.
This domain name is stated in the accounts at its cost of
acquisition less a provision for amortisation. The domain name is
amortised over 25 years using the straight line method. The balance
as of 30 September was GBP1,370,160 (2022) and GBP1,195,898 (2021).
The amortisation expense for the period ended 30 September is
GBP28,845 and GBPnil (2021). The change in the balance of the
intangible asset from 30 September 2021 to 30 September 2022 is
reflective of amortisation expense and adjusted for foreign
currency translation.
NOTE 9 - LOANS
On 10 June 2020, the Group entered into a BBLS managed by the
British Business Bank with the financial backing of the Secretary
of State for Business, Energy and Industrial Strategy. The BBLS
loan of GBP50,000 carries an interest of 2.50% rate per annum with
repayment over 60 months beginning July 2021. The loan balance as
of 30 September was GBP27,500 (2022) and GBP47,500 (2021).
On 22 April 2020, Highlands Natural Resources Corporation
entered into a Paycheck Protection Program (PPP) loan with the U.S.
Small Business Administration (SBA) for GBP154,078 with an interest
of 1.00% rate per annum with principal and accrued interest due and
payable on 22 April 2022. During the period ended 31 March 2021,
the Group received partial forgiveness of the SBA loan. The loan
balance as of September 30 was GBP26,147 (2022) and GBP29,924
(2021).
On 20 April 2020, Zoetic Corporation entered into a PPP loan of
GBP93,100 with an interest of 1.00% rate per annum with principal
and accrued interest due and payable on 20 April 2022. During the
period ended 31 March 2021, the Group received full forgiveness of
the SBA loan.
On 26 April 2022, the Company issued convertible loan notes with
an aggregate value of GBP2,916,670 with an interest rate of nil
through 30 September 2023 and 10% for the period after 30 September
2023. These convertible loan notes are set to convert automatically
and compulsorily into 145,833,500 Ordinary Shares following the
approval of a Prospectus by the FCA and publication of the
same.
On 17 June 2022, the Company issued convertible loan notes with
an aggregate value of GBP176,835 with an interest rate of nil
through 30 September 2023 and 10% for the period after 30 September
2023. These convertible loan notes are set to convert automatically
and compulsorily into 8,841,725 Ordinary Shares following the
approval of a Prospectus by the FCA and publication of the
same.
NOTE 10 - LEASES
The Group determines if an arrangement is a lease at inception
if the contract conveys the right to control the use and obtain
substantially all the economic benefits from the use of an
identified asset for a period of time in exchange for
consideration.
The Group identifies a lease as a finance lease if the agreement
includes any of the following criteria: transfer of ownership by
the end of the lease term; an option to purchase the underlying
asset that the lessee is reasonably certain to exercise; a lease
term that represents 75 percent or more of the remaining economic
life of the underlying asset; a present value of lease payments and
any residual value guaranteed by the lessee that equals or exceeds
90 percent of the fair value of the underlying asset; or an
underlying asset that is so specialized in nature that there is no
expected alternative use to the lessor at the end of the lease
term. A lease that does not meet any of these criteria is
considered an operating lease.
Lease right-of-use assets represent the Group's right to use an
underlying asset for the lease term and lease liabilities represent
the Group's obligation to make lease payments arising from the
lease. Right-of-use assets and liabilities are recognized at the
commencement date of a lease based on the present value of lease
payments over the lease term. Lease terms may include options to
extend or terminate the lease. The Group includes these extension
or termination options in the determination of the lease term when
it is reasonably certain that we will exercise that option. The
Group does not recognize leases having a term of less than one year
in the consolidated statements of financial position.
For purposes of determining the present value of the lease
payments, the Group use a lease's implicit interest rate when
readily determinable. As leases do not provide an implicit interest
rate, the Group used an incremental borrowing rate based on
available information at the commencement of the lease. Lease cost
for operating leases is recognized on a straight-line basis over
the lease term.
On 5 May 2021, the Group entered into an office lease agreement
between the Company and Bonsai Development LLC. The operating lease
is a five year lease with an option to extend up to five years. The
Group believes the option to extend up to five years is not
probable as of 30 September 2021. The Group recorded a right of use
lease asset and corresponding liability using an incremental
borrowing rate to determine the discount rate. As of 30 September,
the right of use lease asset had a balance of GBP269,855 (2022) and
GBP285,559 (2021).
NOTE 11 - SHARE CAPITAL & RESERVES
Allotted, called up and fully paid Ordinary shares of GBP0.01
each:
Number of Share Capital Share Premium
Shares GBP GBP
Balance at 31 March 2022 212,070,034 2,120,700 10,298,440
20 April 2022 - issuance
of shares 10,000 1,000 17,500
21 April 2022 - issuance
of shares 500,000 5,000 57,500
26 April 2022 - issuance
of shares 29,166,699 291,667 291,667
27 May 2022 - issuance
of shares 227 2.27 20.43
17 June 2022 - issuance
of shares 1,768,345 17,683 17,683
4 July 2022 - issuance
of shares 1,510,000 15,100 15,100
Cost relating to share
issues - - (276,361)
Balance at 30 September
2022 245,115,305 2,451,152 10,421,550
The Company has only one class of share and all shares rank pari
passu in every respect.
NOTE 12 - EQUITY-SETTLED SHARE-BASED PAYMENTS RESERVE
30 September 31 March
2022 GBP 2022 GBP
At beginning of period 3,389,762 1,431,686
On options and warrants granted
in the year 1,361,368 1,958,076
Released on lapsing of warrants - -
during the year
-------------------------- --------------------------
At end of period 4,751,130 3,389,762
NOTE 13 - SUBSEQUENT EVENTS
The Company received new inventory items consisting of CBD pouch
products immediately after the end of the Period. CBD pouch
products sold during the Period were owned by Ox Distributing LLC
and did not generate new revenues for the Group as the sale had
already been recorded in the 2021-2022 financial year. CBD pouch
products sold between the end of the Period and the publication of
this report have been drawn from inventory owned by Chill Brands
and have generated new recordable revenues for the Group.
In October 2022 the Group announced a new sales pilot programme
targeting cannabis dispensaries. The initiative is intended to
develop a new revenue stream from this unique category of retail
outlets. In December 2022 the Group also announced that a sale
totalling over $20,000 had been made to a new distributor to stock
60 additional stores across the American Midwest.
The Group's Chill.com e-commerce website was relaunched on 18
October 2022 following a redesign and refresh of the Chill brand.
During the first seven days following its relaunch the site
generated gross sales in excess of $10,000.
In December 2022 the Group announced that it had commenced the
development of a line of nicotine-free vape products. These
products are expected to launch during Q1 2023. New inventory of
Chill vapour products will be owned by Chill Brands Group plc and
its subsidiaries.
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END
IR KZMZZGRNGZZM
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December 28, 2022 07:00 ET (12:00 GMT)
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