TIDMCBX
RNS Number : 6977X
Cellular Goods PLC
22 December 2023
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014, as retained as part of
the law of England and Wales. Upon the publication of this
announcement via the Regulatory Information Service, this inside
information is now considered to be in the public domain.
22 December 2023
Cellular Goods PLC
("Cellular Goods" or "The Company")
Annual results
Cellular Goods (LSE: CBX), a UK based company pioneering the use
of lab-based and biosynthetic production methods for wellness and
sustainability solutions, announces its audited results for the
year ended 31 August 2023.
Summary:
-- Increased sales growth of over 132% YoY driven by the
Company's refocused marketing strategy, to progress near-term sales
with lower acquisition costs, and expansion of its 'Look Better'
Rejuvenating skincare range.
-- Prevailing headwinds faced by businesses in the premium goods
sector led the Company to undergo further measures to reduce its
cash burn and improve performance in its wellness division
including a 50% reduction in the overall cost base.
-- In September 2022 the Company expanded its Look Better range
with three new Rejuvenating products, comprising the Rejuvenating
Night Cream, the SPF 25 Rejuvenating Day Cream and the Rejuvenating
Day Mousse, complementing the Company's Rejuvenating Cannabinoid
Serum, the first and only product in the UK to use novel
cannabigerol ("CBG") to provide age-preventative benefits.
-- Simultaneously to expanding the Look Better rage, the Company
signed an agreement with the international supermodel Helena
Christensen to be the face of the Company's 'Rejuvenating Skincare
Range', contributing to an increase in US sales which account for
22% of the Company's total sales for the fiscal year ended August
2023.
-- Expanded distribution with the launch of product shipping to
the USA in September 2022 and to France and Germany in August
2023.
-- New partnership distribution channels for the Look Better
Rejuvenating skincare range were unlocked through the e-commerce
websites for high-street beauty and cosmetic retailers Sephora UK
and Debenhams, with Cellular Goods becoming the first cannabigerol
(CBG)-based skincare brand to offer its products on these
e-commerce websites.
-- In June 2023 the Company signed an agreement with Klarna Bank
AB to offer flexible purchase options, supporting increased sales
and broadening its customer base further.
-- In May 2023 the Company acquired King Tide Carbon, a
Singapore-incorporated biosynthetic algae and seaweed carbon
sequestration-as-a-service company pioneering in the carbon markets
and particularly in the realm of carbon removal, deepening its
sustainability vision while offering an opportunity to generate
long-term growth.
-- Reported loss of GBP3,309,721 (2022: loss of GBP5,989,957)
for the year ended 31 August 2023 was primarily a consequence of
one-time restructuring costs and M&A expenses. However, the
market value of the shares issued for the King Tide Carbon
acquisition was GBP569,940 which is accounted for as a loss for the
financial year 2022-2023. The actual operating loss without this
adjustment was GBP2,739,781.
-- Net cash amounted to GBP1,772,892 on 31 August 2023 (2022: GBP4,376,134).
Post-period highlights:
-- Expanded ecommerce distribution with a further retail
partnership with Chill Brands Group PLC, the online shop for
wellness and relaxation products, was announced in November 2023,
to help improve UK and US market awareness and distribution of the
Company's skincare range.
-- The Company continues to activate and leverage its existing
sales channels by participating in their seasonal promotional
campaigns and events, such as Sephora UK's beauty box and
subscription platforms over the Autumn 2023 season.
-- EU Geographic expansion of the Company's distribution
channels for its 'Look Better' skincare range into new markets
continued with the launch of product shipping to Austria, Italy,
Portugal, Spain, Denmark, Belgium and the Netherlands in November
2023.
-- King Tide Carbon achieved a significant milestone in the
production of kelp-derived biochar with 28% carbon content, in
November 2023, supporting the foundational science for the
company's commitment to sustainable carbon removal.
Current trading and outlook
-- Despite the identified industry headwinds, the Company has
benefitted from successful cost cutting and revenue growth achieved
notwithstanding challenging economic and industry conditions, in a
highly fragmented market where expected consolidation has not
occurred.
-- Growth momentum in sales for the wellness division in 2H of
the financial year stabilised, though current trading remains
encouraging from new ecommerce partner activation and distribution,
geographic expansion and additional cost cutting measures that
provides the Company an increased runway, allowing time for new
initiatives and King Tide Carbon revenue to develop.
-- As direct marketing Return on Investment (ROI) to prospective
customers in the retail industry continues to be challenged, with a
lack of clarity on marketing regulations and the continued impact
of Apple's privacy changes, we remain cautiously optimistic on our
trading outlook.
Darcy Taylor, Interim CEO at Cellular Goods, commented :
"Despite the continued challenging market conditions and industry
headwinds, we saw positive business growth over the financial year,
driven by our refocused marketing strategy and geographic and
product line expansion of the 'Look Better' skincare range. The
wider economic and sector challenges led us to significantly reduce
our marketing spend and focus on further optimising our
high-quality brand partnerships to translate into revenues and
product sales within the premium beauty segment.
"In the face of these industry headwinds, a strategic review was
conducted to identify where there was more scope for development in
the business, defining a path to drive the Company forward. As we
looked to widen our lens and explore other areas, biosynthetics for
carbon capture was identified as a sector with a large market
opportunity, offering potential for high and sustainable long-term
growth as well as being complementary to our current activities.
The acquisition of King Tide Carbon and move into the carbon
removal industry was complementary to our strategic direction,
deepening our sustainability vision and philosophy.
"We remain committed to developing next-generation skincare and
wellness products that help people look, feel and function better
as we continue to investigate future product lines and verticals.
Just as we believe in harnessing the untapped potential of CBD and
CBG, we also believe in harnessing oceanic kelp's high value
ingredients and carbon removal properties as we continue developing
science-backed, efficacy-led formulations for skincare and wellness
products that align with our wellness vision: wellness for self and
wellness for the environment.
"I would like to thank our loyal shareholders for their support
and patience while we navigate the challenging macro environment
and current industry challenges and look to an improvement in
growth and performance in the year ahead."
The Company's annual report and accounts will be uploaded to its
website www.cellular-goods.com later today.
For further information please contact:
Cellular Goods
Darcy Taylor via FSCF +44 7572 873 300
Chairman and Interim CEO
--------------------------
First Sentinel Corporate Finance
(FSCF)
--------------------------
Investor Relations
Rebecca Noonan +44 7572 873 300
IR@cellular-goods.com
Media Relations
Rebecca Noonan +44 7572 873 300
Media@cellular-goods.com
Corporate Broker & Advisor
Brian Stockbridge +44 7858 888 007
--------------------------
Novum Securities
--------------------------
Corporate Broker
Colin Rowbury
Jon Belliss +44 207 399 9427
--------------------------
About Cellular Goods PLC:
Cellular Goods is pioneering the use of lab-based and
biosynthetic production methods for wellness and sustainability
solutions. The Company launched with a focus on efficacy led and
science-backed products utilising biosynthetics, and now employs
its expertise across two verticals: premium next-generation
cannabinoid skincare products, and carbon
sequestration-as-a-service through its wholly owned business
division, King Tide Carbon, which utilises biosynthetic algae and
seaweed to provide scalable carbon removal. The Company is
incorporated in the UK and listed on the Main Market of the London
Stock Exchange. For more information, visit www.cellular-goods.com
.
CELLULAR GOODS PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEARED 31 AUGUST 2023
CHAIRMAN'S STATEMENT FOR THE YEARED 31 AUGUST 2023
Introduction
Despite the continued challenging market conditions and industry
headwinds, we saw positive business growth for the financial year
ended 31 August 2023. Driven by our refocused marketing strategy,
to progress near-term sales with lower acquisition costs, and
expansion of our 'Look Better' Rejuvenating skincare range, we saw
increased sales growth of over 132% YoY. However, the momentum seen
in the first half of the financial year did not continue at the
rate envisaged by the Company into the second half of the financial
year, as direct marketing to prospective customers in the retail
industry continues to be challenged with a lack of clarity on
marketing regulations and the continued impact of Apple's privacy
changes.
The expanded marketing and influencer outreach strategy,
including campaigns with premium online lifestyle magazines, and
the resulting increase in cost to acquire customers eroded returns
on our online advertising spend. Coupled with the sector wide
challenge of limited opportunities to market CBD and CBG-based
products in alternative channels, we took the decision to
significantly reduce our YoY and 2H fiscal year marketing spend and
focus on further optimising our social media and database
marketing.
In September 2022 the Company expanded its skincare product
range with the introduction of three new rejuvenating skincare
products and signed an agreement with the international supermodel
Helena Christensen to be the face of the Company's 'Rejuvenating
Skincare Range', to support brand awareness and sales in the UK and
US markets as well as delivering strong media coverage.
The strategic partnership with our brand ambassador supported
our strategy to continue the expansion of our 'Look Better'
skincare range into new markets and increase global access to our
products. Also in September 2022, we launched product shipping to
the USA and in August 2023 we announced product shipping to France
and Germany, followed by Austria, Italy, Portugal, Spain, Denmark,
Belgium and the Netherlands in November 2023.
Our renewed focus on improving shorter term sales and bringing
new customers in to purchase was further driven by the unlocking of
new partnership distribution channels for the Rejuvenating skincare
range through the e-commerce websites for high-street beauty and
cosmetic retailers Debenhams and Sephora UK. Debenhams is a
household name and Sephora UK is a multinational luxury goods
group. Cellular Goods became the first cannabigerol (CBG)-based
skincare brand to offer its products on these e-commerce websites,
with the Company's association to Helena Christensen appealing to
their new and existing customers looking to try next-generation
skincare formulations.
To broaden our customer base further, the Company signed an
agreement with Klarna Bank AB in June 2023 to offer flexible
purchase options, supporting increased sales and opening the
Company's products up to a wider audience. Demand for buy now, pay
later payment services has surged among all age groups in the UK
and is popular with customers across the Company's target
demographics, making it an important improvement to our ecommerce
offering.
While high quality brand ambassador partnerships and investment
in innovative purchase options aid in fostering brand awareness and
loyalty for long-term growth, it takes time for these types of
marketing activities to translate into significant revenues and
product sales within the premium beauty segment due to entrenched
consumer habits and industry headwinds.
As revenue at the financial year-end 2023 more than doubled to
GBP67,236 from GBP28,904 at year-end 2022, the Company continues to
enhance its retail strategy and drive growth by expanding its sales
channels and increasing its collaboration with established online
and high street outlets.
In light of the prevailing headwinds faced by businesses in the
premium goods sector, the wider economic conditions
disproportionately affecting start-ups, and Apple's privacy changes
negatively impacting customer acquisition in the traditionally high
return-on-investment direct-to-consumer channel, the Company
underwent further measures to reduce its cash burn and improve
performance in our wellness division. These actions include a 50%
reduction in the overall cost base, achieved through lower
management and staff costs, consultancy fees and administrative
expenses, allowing the Company to streamline its media spend levels
to address Return On Investment ("ROI") challenges.
For the current scale of operations, we believe the Company has
the right size of management team and full commitment of all its
members to drive growth. To build on the leadership team at this
time would unnecessarily increase recurring expenditure. However,
in the longer term and as the business develops, the Board intends
to bring in a permanent CEO. Although there is no definitive
deadline on how long this interim period will be, we continue to
keep a close eye on the market for potential candidates to take
over the permanent position of CEO. At the moment, our main
priority and focus is on the growth and development of Cellular
Goods.
We announced at our half-year results, in May 2023, that we were
interested in widening our lens of opportunity across biosynthetic
production fields to generate value for our shareholders, following
which we acquired King Tide Carbon. King Tide Carbon is a
Singapore-incorporated biosynthetic algae and seaweed carbon
sequestration-as-a-service company pioneering in the carbon markets
and particularly in the realm of carbon removal. The King Tide
Carbon acquisition allows us to deepen our sustainability vision
while offering an opportunity to generate long-term growth. The
strategy behind the acquisition had deep underpinnings in our
Company's wellness vision, wellness for self and wellness for the
environment.
Only two months after completion of the acquisition, the Company
was pleased to announce King Tide Carbon had entered a non-binding
memorandum of understanding with Springtide Seaweed for the
purposes of developing carbon sequestration and removal services
through sustainable kelp farming. Springtide Seaweed is in the
business of growing, cultivating and harvesting kelp in the State
of Maine, cultivating multiple species over 55 acres on deep water
sites in Frenchman Bay. Springtide Seaweed also provides nursery
and farm technology services to other kelp farms globally. The
focus of the collaboration between King Tide Carbon and Springtide
Seaweed is to utilise their combined efforts and expertise to
identify, analyse and select kelp species to maximise carbon
sequestration and removal.
The Company remains committed to developing next-generation
skincare and wellness products that help people look, feel and
function better. As we believe in harnessing the untapped potential
of CBD and CBG, we also believe in harnessing oceanic kelp's carbon
removal properties as well as the high value ingredients that can
be extracted from kelp. Despite the identified industry headwinds,
we have benefitted from positive business momentum. In combination
with a significant rationalisation of our cost base and cash burn,
we have defined a path to drive the Company forward as we
investigate future product lines and verticals that remain aligned
with our Company's wellness vision: wellness for self and wellness
for the environment.
Strategy and Operational Review
King Tide Carbon acquisition and rationale of the deal
The acquisition of King Tide Carbon Pte.Ltd ("KTC") and move
into the carbon removal ("CDR") industry widens our lens of
opportunity whilst remaining aligned with the Company's strategic
direction, deepening our sustainability vision and philosophy. The
strategy behind the acquisition of King Tide Carbon was the result
of a strategic review that was conducted to identify where there
was more scope for value delivery to accelerate the development of
the business.
King Tide Carbon was an early-stage carbon removal company
building on an experienced team that has decades of experience
working with biologically enabled carbon sequestration and the
sourcing of CDR contract opportunities in the growing carbon
markets. A clear opportunity was identified for the Company to
bring its experience in biosynthetics to enhance sustainability
practices to King Tide Carbon and deploy biosynthetic technology
R&D to supply partners to increase yield, hardiness, and Co2
capture properties of kelp and algae to optimise the generation of
reliable, scalable, and sustainable high-quality oceanic carbon
removal credits ("CDRs") as a service. By 2050 the global CDR
market is forecasted to increase by 300 times and the value of the
carbon offset market could top $500Bn in 2050 (source:Bloomberg
NEF).
Biosynthetics for carbon capture properties in kelp and algae is
still at an early stage but has shown potential as a viable
commercial-scale technology and is a sector with a large market
opportunity, offering potential for high and sustainable long-term
growth as well as being complementary to our current
activities.
The Company's innovation continues to be centred around
harnessing biosynthetic technologies in the development of
next-generation biosynthetic products that improve people's lives
and combat climate change. We are committed to our mission to
develop a responsible approach to ingredient sourcing using
sustainable production methods to create science-backed,
efficacy-led formulations that never compromise on quality, safety
or efficacy and really make a difference.
The market value of the shares issued for the KTC acquisition
was GBP569,940 which is accounted for as a loss for the financial
year 2022-2023. Reported losses at the financial year end 2023 are
GBP3,309,721; however, the actual operating loss without this
adjustment was GBP2,739,781, a reduction of 54% from the previous
year.
Cannabinoid market opportunity
The global cannabidiol ("CBD") and CBG (cannabigerol) market
size was valued at USD 6.4 billion in 2022 and is expected to grow
at a compound annual growth rate ("CAGR") of 16.2% from 2023 to
2030. The growing interest in the potential health benefits of
cannabidiol has led to increased investment in research and
development to understand its effects better and develop new
products. The demand for CBD/CBG for health and wellness is the
primary factor driving the market growth. Furthermore,
CBD/CBG is growing in popularity as an ingredient in skincare
products for treating acne and wrinkles. (Source: Grand View
Research)
The CBD/CBG market is a large and growing industry, but despite
the demand it also faces several difficult challenges and
significant headwinds, with heavy regulation being the main one.
The establishment of a clear and detailed regulatory framework for
the CBD/CBG industry to operate within is an ongoing process. In
the absence of comprehensive regulation, the industry continues to
grow and develop, but further regulatory changes are required to
unlock its full potential.
We believe that the operating environment for CBD and
CBG-infused skin care products in the UK and USA remains impacted
by a glut of niche brands and products. This has prompted fierce
competition for both online and offline retail space where expected
consolidation has not yet occurred, and we are witnessing attrition
in both suppliers and consumer facing brands in the space.
Voluntary carbon dioxide removal ("CDR") market opportunity
The International Panel on Climate Change ("IPCC") has made the
requirement for emissions reductions and carbon dioxide removal
extremely clear. Limiting global warming to 1.5 degrees C above
pre-industrial levels requires significant carbon reductions and 6
to 10 billion tonnes of carbon dioxide removal per year by 2050.
The voluntary carbon market ("VCM") is a key mechanism to scale
those solutions. The VCM allows for the transaction of carbon
credits between carbon project developers and buyers with each
carbon credit representing an equivalent tonne of CO2 reduced,
avoided, or removed.
The demand for high-quality, durable carbon removal credits has
increased alongside global climate commitments. The majority of
these credits are still in development and are limited in number as
per BCG 2022 insights and trends report on voluntary carbon
markets. D ue to this limited supply, organisations that are
working to reach net zero by 2030 or 2050 increasingly recognise
that they need to secure the necessary volumes of carbon dioxide
removal in advance, alongside large-scale emissions reductions.
In 2021, the global voluntary carbon market grew at a record
pace, reaching $2 billion-four times its value in 2020-and the pace
of purchases is still accelerating in 2022. By 2030, the market is
expected to scale to close to $40 billion. (Source: BCG 2022
insights and trends report on voluntary carbon markets )
However, achieving the goals outlined by the Paris Agreement
requires the rapid scaling of high-quality removals across
nature-based, hybrid, and engineered solutions.
We are on the verge of a once in a generation growth cycle, and
King Tide Carbon will aim to be a leader in delivering carbon
removal as a service.
Operational review
The Company expanded its 'Look Better' skincare range with the
launch of three new products in the Rejuvenating Range of skincare
products, containing the Company's proprietary blend of
cannabigerol ("CBG") and cannabidiol ("CBD"), using a campaign
fronted by international supermodel Helena Christensen in September
2022. With a substantial and dedicated following in the United
States, she played a pivotal role in driving the Company's growth,
contributing to a considerable increase in US sales, accounting for
22 % of the Company's total sales for the fiscal year ended August
2023.
Our retail strategy received another boost in May 2023 with the
launch of the Company's 'Look Better' skincare range and selected
products from its 'Gift Better' line on Sephora.co.uk. A total of
ten products are available with the UK high street retailer in the
Company's third major retail distribution deal after Amazon and
Debenhams, providing further validation of our premium product
strategy. We are working closely with Sephora.co.uk to participate
in selective marketing activities to drive sales and continue
assessing the potential to open other retail opportunities in
additional Sephora geographies.
The Company has taken a two-pronged approach to its marketing
strategy this year to drive trial of its core products and expand
its sales channels, and encourage conversion of the consumer
recognition of our brand into an initial purchase. Having
significantly raised awareness in 2022, our refocused marketing
strategy this year was centred on driving near-term sales with
lower acquisition costs.
Function Better movement range
As noted in our half-year results, the Company postponed the
launch of the 'Function Better' movement range to focus its
resources on strengthening the market presence behind its existing
'Look Better' and 'Gift Better' ranges before further expansion.
The prohibiting of advertising cannabinoid infused products on
leading online platforms and the imposition of new rules governing
the sale of novel foods led the Company to perform a review of the
portfolio and narrow its scope to exploring alternative
opportunities for ingredient sourcing whilst strengthening the
existing ranges. The Company remains in communication with
potential distribution partners for the launch of the 'Function
Better' range and will provide an update in the event an agreement
is reached.
Cannaray Brands acquisition
On 26 September 2022 the Company announced its intention to
acquire Cannaray Brands Ltd. and Love CBD Health Ltd. from Cannaray
Ltd. ("Cannaray"). Cellular Goods' Board of Directors entered into
negotiations with the intention of generating value for our
shareholders by creating an enlarged business with significant
growth opportunities and an enhanced market presence. As
negotiations progressed and changes to the deal were made, it
became clear to Cellular Goods' Board and senior leadership team
that the updated transaction terms were not in the best interests
of the Company's shareholders. The negotiations were not able to
reach a deal structure and terms that worked for both parties, and
as such we terminated the discussions as announced on 8 February
2023.
UK patent application Status
On 28 April 2022, the Company disclosed its initiation of a UK
priority patent application centred on the utilisation of CBG for
skin brightening. Subsequent to a thorough internal examination,
the application has not been pursued further. The decision to not
proceed was based on the realisation that the formulations
encompassed by the priority patent did not align with the Company's
current product offerings and were constrained in their
applicability to the future product pipeline. Consequently, it was
determined that the return on investment and cost benefits did not
meet the established standards of the Company.
Marketing focus
The Company started the financial year with a focus on building
a clear brand plan and ensuring investment was only made once the
strategy was defined and could be executed. The investment that was
made focused on shorter sales driving activities and leveraging of
the partnership with Helena Christensen across the UK and USA.
Apple's privacy changes, particularly the introduction of App
Tracking Transparency ("ATT") and Mail Privacy Protection ("MPP"),
have had a significant negative impact on direct marketing return
on investment. The industry is therefore in a state of ongoing
adaptation and innovation as marketers strive to maintain effective
campaigns in the face of evolving privacy regulations and consumer
preferences.
In light of these changes, the Company has refocused its
marketing strategy to be more cost efficient and effective in
adapting to these challenges. These include focusing on first-party
data collection and building stronger relationships with our
audience, as well as exploring partnerships with online
marketplaces and influencers that are privacy-compliant.
The Company continues to focus its marketing efforts on
delivering short term sales activity by utilising owned channels
and earned channels through product gifting and e-commerce
initiatives.
Post-balance sheet milestones
Since the year end, the Company has continued to enhance its
retail strategy and drive growth by expanding its sales channels
and increasing its collaboration with established online and high
street outlets. In the first quarter of the 2023-2024 financial
year, we announced a further retail partnership with Chill Brands
Group PLC, the online shop for wellness and relaxation products.
The Company's partnerships with e-commerce websites help to improve
market awareness and distribution of our skincare range whilst
building on our brand profile and broadening our accessibility to
customers.
As well as establishing new partnerships with high street
outlets, we continue to grow our existing sales channels by
participating in their seasonal promotional campaigns and events.
As the first CBG-based skincare brand to be offered as part of
Sephora UK's beauty box and subscription platforms over the Autumn
2023 season, we continue increasing our brand awareness and our
products gain more visibility and traction with new and existing
customers.
In addition to growing our existing sales channels, we have
continued our commitment to expanding distribution of our 'Look
Better' skincare range into new markets. Following the opening of
Cellular Goods' e-commerce site to our French and German customers
in November 2023, we also launched shipping of our products to
Austria, Italy, Portugal, Spain, Denmark, Belgium and the
Netherlands in November 2023.
The Company will continue to assess online traffic and new
market sales to identify potential market demand for growth into
additional territories as it remains focused on driving
distribution of our breakthrough anti-inflammatory CBD/CBG powered
products to CBD/CBG friendly markets to deliver incremental revenue
growth.
Through the Company's wholly owned subsidiary King Tide Carbon,
we aim to deliver cost-competitive carbon removal credits ("CDR")
through the integration of multiple synergistic elements within the
2023-2024 financial year. Our approach involves extracting valuable
compounds prior to submerging biomass, enhancing ocean alkalinity
to leverage existing infrastructure, and exploring alternative
pathways like biochar and biosynthetic algal growth. This
multifaceted strategy empowers us to optimise carbon sequestration
and therefore optimise the price of carbon sequestration.
As we position ourselves at the forefront of carbon removal
solutions, we are focused on scaling-up the Company's joint venture
agreements with diverse carbon capture projects over the next
twelve months. The first of which are with Springtide Seaweed, as
announced in the first quarter of the 2023/24 financial year. As
part of the joint venture agreements, the partnering companies will
use their combined efforts to identify, analyse and select kelp
species, cultivation techniques and harvesting techniques to
maximise carbon sequestration and removal services through
sustainable kelp farming. By growing partnerships with suppliers
across multiple geographies, we can access different strains of
product, increased amounts of data and more proof of concept
allowing the Company to effectively develop and broaden its range
of products and services, complementing our current activities and
helping to tackle climate change.
Additionally in November, King Tide has achieved a milestone in
the production of kelp-derived biochar with 28% carbon content,
propelling the company forward in its commitment to sustainable
carbon removal. This innovation utilizes the carbon-rich properties
of kelp, a rapidly renewable marine resource, for biochar
production, recognised for its potential in soil improvement,
carbon sequestration, and enhanced agricultural productivity. As
global scientific consensus grows on biochar's viability for
permanent carbon sequestration, King Tide aims to scale up its
carbon removal efforts and generate high-quality Carbon Dioxide
Removal ("CDR") credits. The kelp-derived biochar not only
contributes to long-term carbon storage but also promotes
environmental stewardship through circular economy principles,
reducing waste and maximizing resource utilization. With a notable
28% carbon content, the biochar demonstrates efficacy in carbon
sequestration, soil fertility enhancement, and potential industrial
applications. This achievement aligns with King Tide's dedication
to a sustainable future and collaborative interdisciplinary efforts
with experts in marine biology, environmental science, and
agriculture. The success holds promise for advancing agricultural
practices, promoting scientific collaboration, and ushering in a
new era of oceanic carbon sequestration innovation.
Outlook
We are continuing to assess strategic opportunities to deliver
long-term shareholder value and will assess each opportunity on its
individual merits. In the meantime, our focus will continue to be
to execute the Company's existing business model and position it
for long-term growth.
The growth of the Company's wellness for good product pipeline
and wellness for the environment sustainability strategy are the
core areas of development. We plan to continue expanding
distribution of our 'Look Better' skincare range into new markets
to deliver revenue growth.
The Company continues its focus on bringing deep expertise in
biosynthetics to the kelp industry through King Tide Carbon and its
joint venture partners, assisting in early-stage investigations on
the extraction of high value ingredients from algae and seaweed for
use in the biosynthetic product industry. As we continue harnessing
the potential of CBD/CBG, we are also investigating the ability to
harness the high value ingredients that can be extracted from kelp
and analysing their use in future product lines.
The Company's move into the carbon removal industry is a
continued focus for our strategic direction as biosynthetics for
carbon capture remains a sector with a large market opportunity and
offers potential for high and sustainable long-term growth as well
as being complementary to our current activities.
I would like to thank our loyal shareholders for their support
and patience while we navigate the challenging macro environment
and current industry challenges and look to an improvement in
growth and performance in the year ahead.
Darcy Taylor
Chairman
21 December 2023
STRATEGIC REPORT FOR THE YEARED 31 AUGUST 2023
The directors present their strategic report for the year ended
31 August 2023.
Principal activity
The Company's principal activity is a premium high-quality,
independently tested and compliant consumer cannabinoid business
targeting the expanding but fragmented CBD sector.
Review of the business and future developments
Cellular Goods PLC is a UK-based wellness company providing
premium consumer products formulated with lab produced cannabinoids
consumer products. Cellular Goods was incorporated to establish
premium high-quality, efficacy-led and research backed
cannabinoid-powered wellness products targeting the expanding but
fragmented CBD sector.
The Company launched with a focus on efficacy led and
science-backed products utilising biosynthetic, and now employs its
knowledge across two verticals: premium next-generation cannabinoid
skincare products, and carbon sequestration-as-a-service through
its acquisition of wholly owned business division, King Tide
Carbon, which utilises biosynthetic algae and seaweed to provide
scalable carbon removal.
The Company has communicated a strategy to participate in three
product verticals within its wellness division: Function Better,
Feel Better and Look Better. These three verticals encompass
Cellular Goods' premium CBG skincare and CBD ingestible and topical
athletic recovery products. The Company's focus to date has been on
Look Better skincare offering that builds on existing consumer
behaviours, is premium focused, simple to understand and available
primarily through direct-to-consumer channels and selected retail
outlets. The Company's products are available direct to the
consumer through the Company's website, e-commerce sites, such as
Sephora Marketplace, Chill.com, Debenhams and Amazon and through
physical retail partnerships.
As the Company continues to harness the untapped potential of
biosynthetics and sustainable production methods, it has widened
its scope with the 9 May 2023 acquisition of King Tide Carbon
Pte.Ltd ("KTC") a biosynthetic algae and seaweed carbon
sequestration-as-a-service division with a clear mission to deliver
sustainable, scalable, and high-quality carbon removal credits
("CDRs") that ensure a reliable supply to support global and
national commitments to achieving net-zero carbon emissions by
2050.
The Company's medium to long-term intention was to expand its
wellness division product range and establish a deeper
sustainability offering via scalable, and high-quality carbon
removal credits while still realising latent growth in the
cannabinoid sector.
Performance of the business during the year and at the end of
the year
The Company reported a loss of GBP3,309,721 for the year ended
31 August 2023 (2022: loss of GBP5,989,957). The loss was primarily
a consequence of one-time restructuring costs and M&A
expenses.
Net assets of the Company at the year-end were GBP2,262,808
(2022: net assets GBP4,852,232).
Key Performance Indicators ("KPIs")
The Board aims to monitor the activities and performance of the
Company regularly. The Company only commenced sales midway
throughout the previous year and the Directors regularly review
sales, stock levels, new product development, and cash
reserves.
For now, the Directors consider that a KPI applicable to the
Company is maintaining cash reserves held in cash and short-term
investments.
2023 2022
Cash at bank GBP1,772,892 GBP4,376,134
Principal risks and uncertainties
The Company operates in an uncertain environment and is subject
to a number of risk factors. The Directors consider the risk
factors in this report will be relevant to the Company's
activities. It should be noted that the list is not exhaustive and
other risk factors not presently known or currently deemed
immaterial may apply.
Early stage of operations and cash levels
The Company's operations are at an early stage in nascent
industries, with nine products launched year to date in its
wellness division, and recent entry into the biosynthetic algae and
seaweed carbon sequestration-as-a-service carbon removal space. The
business is reliant on a small number of principal suppliers.
The Directors consider the principal risks for the Company to be
the maintenance of cash while it focuses on developing cannabinoid
skincare products, and carbon sequestration-as-a-service divisions,
and the level of sales being generated.
Supply arrangements
CBD and CBG - As the Company expands its product range and
enters new geographical markets, we will consider its reliance on
individual third parties, and will seek to take measures to
minimise supplier risk and the resulting potential disruption to
its business as appropriate to the business's stage of operations
and development.
The Company has partnered with a leading bio-synthetic CBG
(cannabigerol) producer and chemically-synthetic CBD (cannabidiol)
producer, both with experience and expertise in the synthesis of
cannabinoid compounds. There are several business risks related to
the procurement of synthetic cannabinoids, which form the basis of
the Company's products.
First, the Company's principal sources of synthetic CBG and CBD
are imported, and therefore subject to import and export risk,
which may be exacerbated by the consignment being a
cannabinoid.
Secondly, the synthesis of these compounds at commercial volumes
remains relatively novel, and so may be subject to unexpected
issues, delays or quality control problems, which may adversely
affect the Company's supply of high-quality synthetic cannabinoids.
Such disruption could have a material adverse effect on the
Company's business, financial condition, results of operations and
prospects.
Lastly, there are a limited number of suppliers engaged in the
commercial production of synthetic cannabinoids, thereby limiting
the Company's ability to build contingency into their supply
chain.
Oceanic biomass - As the Company scales it commercial operations
to deliver high-quality carbon removal credits ("CDRs"), we will
consider its reliance on individual third parties, and will seek to
take measures to minimise supplier risk and the resulting potential
disruption to its business as appropriate to the business's stage
of operations and development.
The Company has partnered with a leading kelp biomass supplier,
with experience and expertise in the cultivation of ocean-based
kelp biomass. There are several business risks related to the
procurement of kelp, which form the basis of the Company's CDRs
services.
First, the Company's principal sources of Kelp biomass are
imported, and therefore subject to import and export risk.
Secondly, these biomass compounds at commercial volumes remains
relatively novel, and so may be subject to unexpected issues,
delays or quality control problems, which may adversely affect the
Company's supply of high-quality biomass. Such disruption could
have a material adverse effect on the Company's business, financial
condition, results of operations and prospects.
Lastly, there are a limited number of suppliers engaged in the
commercial growing of Kelp biomass, thereby limiting the Company's
ability to build contingency into their supply chain.
Market demand
Acceptance and/or widespread use of CBD or CBG products
containing these cannabinoids is uncertain. This is further
aggravated by the inability to promote and advertise products on
social media due to marketing restrictions on products containing
CBD, which presents a hindrance to growth plans.
Corporate spending on carbon credits (CDRs) are viewed
discretionary and can be impacted by greater economic challenges.
This is further challenged by lack of standardization, integrity
and transparency for carbon credits, it can be difficult for
companies to validate their emissions reduction programs hindering
demand and impacting our growth.
Reliance on key personnel
The Company's business is dependent on the services of a small
management team and the loss of a key individual could have an
adverse effect on the future of the Company's business. The
Company's future success will also depend in part on its ability to
attract and retain highly skilled personnel. This risk is managed
by offering salaries that are competitive in the current
market.
Regulatory risk
A breach with any environmental or regulatory requirements,
including data protection and privacy breaches, may give rise to
reputational, financial, or other sanctions against the Company,
and therefore the Board considers these risks seriously and
designs, maintains and reviews the policies and processes to
mitigate or avoid these risks. The Board has a good record of
compliance, but there is no assurance that the Company's activities
will always be compliant.
There is risk for finished products which may not be sold before
their respective expiry dates, and a risk of stock of packaging
remaining unused.
Promotion of the Company for the benefit of the members as a
whole
The Directors believe they have acted in the way most likely to
promote the success of the Company for the benefit of its members
as a whole, as required by s172(1) of the Companies Act 2006.
The requirements of s172(1) are for the Directors to:
-- Consider the likely consequences of any decision in the long term
-- Act fairly between the members of the Company
-- Maintain a reputation for high standards of business conduct
-- Consider the interests of the Company's employees
-- Foster the Company's relationships with suppliers, customers and others, and
-- Consider the impact of the Company's operations on the community and the environment.
The Company has created and is expanding a new range of products
for sale in what we believe is a fast-growing but developing
environment, and is dependent on the support of consumers for its
future success. The start- up nature of the business is understood
by the Company's directors, employees and suppliers.
During the year, eight individuals served as directors of the
company, of whom five were male and three were female. At today's
date, below board and C-suite level, all full-time staff are
female.
The application of the s172 requirements can be demonstrated in
relation to some of the key decisions made during the year,
including the appointment of new directors, hiring key executives
for the supply chain and marketing, various promotional activities,
and opening new sales channels.
As a company with a growing social following and the imminent
launch of a range of cannabinoid products, the Board takes
seriously its ethical responsibilities to the communities and the
environment in which it works.
This strategic report was approved by the Board on 21 December
2023 and signed on its behalf by:
Darcy Taylor
Chairman and Interim Chief Executive Officer
DIRECTORS' REPORT FOR THE YEARED 31 AUGUST 2023
The Directors present the Annual Report and the audited
financial statements for the year ended 31 August 2023.
Principal activities
The Company established a biosynthetic CBD and CBG retail
business and was admitted to the Official List (by way of a
Standard Listing under Chapter 14 of the Listing Rules) and trading
on the London Stock Exchange on 26 February 2021. The Company was
incorporated in England and Wales. It has two subsidiaries, CBX
Cellular Goods Canada Limited incorporated in Canada and King Tide
Carbon Pte.Ltd incorporated in Singapore as part of the Company's
May 9th, 2023, acquisition.
Directors
The Directors of the Company during the year ended 31 August
2023 and to the date of this report were:
Darcy Taylor
Bruna Nikolla
Anna Chokina (resigned 26 September 2022)
Peter Wall (resigned 21 December 2022)
Simon Walters ( resigned 21 December 2022)
Gill Whitty Collins
Misha Sher
Matthew Lodge (appointed 5 May 2023)
Events after the reporting date
Our Rejuvenating Face Serum has been nominated as a finalist in
this year's Get The Gloss Awards within the category 'Best Product
For Ageing Well' as well as a finalist in the 'Best New Serum'
category for its Rejuvenating Face Serum, at the 2023 Pure Beauty
Awards.
The nomination of the Rejuvenating Face Serum has generated a
positive response in the UK as well as the US where our
Rejuvenating Face Serum was included as part of Jamie Greenberg's
'Swag Bag' event in November 2023, resulting in a notable uptick in
sales orders. Jamie Greenberg is well-respected US makeup artist,
with celebrity clients such as Margot Robbie, Taylor Swift, and
Kaley Cuoco.
The Company continued to monitor online traffic and sales to
assess potential market demand for selected territories' entry to
expand its addressable market and revenue base if confident of
generating a fast return on its capital and launched it's 'Look
Better' skincare range at the beginning of November in France and
Germany, followed by Austria, Italy, Portugal and Spain at the end
of November 2023. Cellular Goods skincare products are now
available on its ecommerce website for shipping in 8 countries (UK,
USA, France, Germany, Austria, Italy, Portugal and Spain).
Our retail strategy added another partner on 15 November 2023
with the launch of its 'Look Better' skincare range on the online
platform, Chill.com, to expand UK and US awareness and distribution
of its nine premium skincare products. Chill Brands Group PLC's
online platform, Chill.com, is an online shop for wellness and
relaxation products and expands our route to market in the UK and
US markets.
The Company marked its first opportunity to leverage Cellular
Goods' retail strategy with Sephora UK, via its online platform
Sephora.co.uk, to drive customer growth by expanding its sales
channels and increasing its collaboration with established online
and high street outlets. The Company was the first CBG-based
skincare brand to be offered as part of Sephora's 'Pick and Mix'
and 'Check Out' complimentary beauty programs as well as the
Sephora Beauty Box subscription service from 6 November 2023.
As the Company continues to harness the untapped potential of
biosynthetics and sustainable production methods, it widened its
scope on 5 May 2023 with the acquisition of King Tide Carbon
Pte.Ltd ("KTC"), a biosynthetic algae and seaweed carbon
sequestration-as-a-service division. This new division has achieved
some key milestones with King Tide Carbon formalising an agreement
with Springtide Seaweed to form Kelp Farming Carbon Removal Joint
Venture.
Springtide Seaweed and King Tide will use their combined efforts
to identify, analyse and select kelp species, cultivation
techniques and harvesting techniques to maximise carbon
sequestration and removal. The term of the Joint Venture will be
for two years, with option to extend. As part of the Joint Venture,
King Tide shall provide investigatory, analytical and advisory
services with respect to determining carbon sequestration levels,
techniques and confirmation.
King Tide Carbon achieved our second major milestone on 13
November 2023 with the successful creation of kelp-derived biochar.
This was a significant milestone with the production of
kelp-derived biochar to pave the way for carbon dioxide removal
("CDR") credit production and a range of applications in
agriculture, environmental restoration and industry.
This development follows increasing global scientific consensus
that biochar is a viable, and permanent form of carbon
sequestration, paving the way for King Tide to scale up its carbon
removal efforts and generate high quality CDR credits. King Tide
will continue to refine and scale its innovative process with the
goal of making kelp-derived biochar accessible on a larger scale,
maintaining its commitment to a sustainable future and innovative
solutions for climate change.
Future developments
See the Strategic Report for anticipated future developments of
the Company.
Dividends
The Directors do not propose a dividend in respect of the year
ended 31 August 2023 (2022: nil).
Corporate governance
As a company listed on the standard segment of the Official UK
Listing Authority, the Company was not required to comply with the
provisions of the UK Corporate Governance Code.
The Company does not choose to voluntarily comply with the UK
Corporate Governance Code. The Directors are responsible for
internal control in the Company and for reviewing effectiveness.
Due to the size of the Company, all key decisions are made by the
Board. The Directors have reviewed the effectiveness of the
Company's systems during the year under review and consider that
there have been no material losses, contingencies or uncertainties
due to weaknesses in the controls. The Company will comply with the
Quoted Company Alliance Code insofar as is appropriate having
regard to the size and nature of the Company and the size and
composition of the Board.
Diversity
As the Company is at a very early stage, it is focused on
appointing Board members with the best expertise to achieve its
short-term objectives being strategic acquisitions. Once this has
been achieved, the Board will implement a strategy to achieve the
required targets on gender and ethnicity. During the year, eight
individuals served as directors of the Company, of whom five were
male and three were female. At today's date, the Board consists of
three males and two females.
Table for reporting the gender identity or sex
Number of Percentage Number of Number Percentage
board members of the senior positions in executive of executive
board on the board management management
(CEO, CFO,
and Chairman)
Men 3 60% 1 - -
Woman 2 40% 1 1 100%
Table for reporting on ethnic background
Number Percentage Number Number Percentage
of board of the of senior in executive of executive
members board positions management management
on the
board
(CEO,
CFO,
and Chairman)
White British or
other White (including
minority-white groups) 4 80% 2 1 100%
Mixed/Multiple Ethnic
Groups 1 20% - - -
Carbon and greenhouse gas emissions
The Company currently has minimal sales revenue, relatively few
employees (other than the Directors) and uses rented offices.
Therefore, the Company has minimal carbon emissions and it is not
practical to obtain emissions data at this stage. The Company
consumed less than 40,000 KWh of energy in the United Kingdom and
is currently exempt from the requirement to disclose its greenhouse
gas and other emission producing sources under the Companies Act
2006 (Strategic Report and Directors Report) Regulations 2014.
Going concern
The Directors, having made due and careful enquiry, are of the
opinion that the Company has adequate working capital to meet its
obligations over the next 12 months. The Directors therefore have
made an informed judgement, at the time of approving the financial
statements, that there is a reasonable expectation that the Company
has adequate resources to continue in operational existence for the
foreseeable future. As a result, the Directors have adopted the
going concern basis of accounting in the preparation of the annual
financial statements.
The Board presents a balanced and understandable assessment of
the Company's position and prospects in all interim and price
sensitive reports to regulators as well as in the information
required to be presented by statutory requirements.
Employees
The Company is in early stages of development. As at 31 August
2023, the Company utilised the expertise of the Directors,
consultants/contractors and two employees in Canada, and one
employee in the UK.
Climate - Related Financial Disclosure
As a pioneering force in the skincare industry, Cellular Goods
PLC is not only dedicated to pushing the boundaries of innovation
but also to addressing the critical challenges posed by climate
change, recognising the need for a comprehensive and transparent
approach.
Cellular Goods PLC acknowledges the detrimental consequences of
climate change and remains steadfast in our commitment to
evaluating and addressing both the influence of climate change on
our operations and our broader impact on the environment. We
recognise the growing interest and concerns of investors,
employees, regulators, the local community, and other stakeholders
regarding our approach to climate change planning and
adaptation.
Cellular Goods PLC aligns its climate-related financial
disclosures with global best practices, prominently guided by the
four core elements outlined by the Task Force on Climate-related
Financial Disclosures (TCFD).
Core Elements Description
Governance Structures and processes in place to oversee
climate-related issues, including the role
of the board, management, and relevant committees.
------------------------------------------------------
Strategy Insights into the company's actual and potential
impacts of climate-related risks and opportunities
on its business, strategy, and financial
planning
------------------------------------------------------
Risk Management Processes used to identify, assess, and
manage climate-related risks integrated
into overall risk management. Adaptations
to strategies in response to climate considerations.
------------------------------------------------------
Metrics and Targets Disclosure of metrics and targets used to
assess and manage relevant climate-related
risks and opportunities, providing quantitative
information on performance and progress.
------------------------------------------------------
At the heart of Cellular Goods PLC's commitment to environmental
stewardship is a strategic investment in the carbon capture
industry. Understanding the imperative of mitigating greenhouse gas
emissions, the Company actively supports initiatives that
contribute to a more sustainable future. This strategic choice is a
testament to our dedication to not only minimize our carbon
footprint but actively engage in solutions that combat climate
change on a broader scale.
In tandem with our investments in carbon capture, Cellular Goods
PLC places sustainability at the core of our skincare innovation.
We believe that skincare should not only enhance beauty but also
contribute to the well-being of our planet. Collaborating closely
with our Research and Development team, we explore and implement
sustainable alternatives for skincare formulations and packaging.
This commitment is not just a strategy; it's an ethos that informs
our decision-making, from product development to market
positioning.
Given the small size of our business, establishing a dedicated
team within the Financial Stability Task Force has not been
operationally feasible. However, we recognise the critical
importance of oversight in managing climate-related risks. In lieu
of a dedicated team, responsibilities for climate-related oversight
are distributed among existing personnel with relevant expertise.
This approach allows us to maintain a nimble and adaptive
governance structure, ensuring that climate-related considerations
are integrated into various aspects of our decision-making
processes.
In our inaugural TCFD-aligned report, we acknowledge the
existing gaps in achieving full compliance with the TCFD's
Recommendations and Recommended Disclosures. As we embark on this
journey, we commit to evaluating and enhancing our reporting
practices continually. Looking ahead, we plan to develop a
comprehensive roadmap towards full compliance over the next year.
Recognising that improvement extends beyond reporting, we aim to
bolster the Company's strategies, structures, resources, and tools
to effectively manage climate-related risks and opportunities.
The table below shows our current progress against TCFD
Recommendations
TCFD pillar Recommended Disclosure Cellular Goods Summary
Governance -- Board's oversight The Board of Directors oversees climate-related
of climate-related matters, integrating them into the
risks and opportunities. overall governance structure.
-- Management's Governance responsibilities for
role in assessing climate-related issues are distributed
and managing climate-related among existing personnel due to the
risks and opportunities. size of the business.
------------------------------ ------------------------------------------------
Strategy -- Climate-related Business strategy aligns with sustainability,
risks and opportunities fostering innovation in sustainable
the organization skincare practices. Our lab made
has identified over products, collaborative efforts with
the short, medium, the Research and Development team,
and long term. focus on exploring eco-friendly alternatives
for formulations and packaging.
-- Impact of climate-related The process of crafting lab-made
risks and opportunities products allows us to carefully control
on the business, and optimize each element of our
strategy, and financial formulations. This precision not
planning. only ensures the highest quality
but also minimizes resource consumption
-- Resilience of and waste throughout the production
the organisation's cycle. From reducing reliance on
strategy, taking traditional raw materials to eliminating
into consideration unnecessary by-products, our lab-made
different climate-related approach exemplifies our dedication
scenarios, including to sustainable practices.
a 2degC or lower
scenario. The acquisition of carbon capture
technologies aligns seamlessly with
our broader sustainability strategy.
We recognise that carbon capture
plays a crucial role in mitigating
greenhouse gas emissions, and our
investment underscores our dedication
to minimizing our carbon footprint
across the entire value chain. This
strategic move is not just a business
decision; it is a manifestation of
our ethos to be at the forefront
of responsible business practices.
------------------------------ ------------------------------------------------
Risk Management -- Organization's At Cellular Goods PLC, climate-related
processes for identifying risk identification is seamlessly
and assessing climate integrated into our routine operations.
related risk. While we may not have a dedicated
task force, each team member is responsible
-- Organization's for considering climate-related risks
processes for managing within their respective domains.
climate-related risks. This distributed approach ensures
that climate considerations are part
-- Processes for of day-to-day decision-making processes.
identifying, assessing,
and managing climate With a small team, collaboration
related risks are is key. We regularly convene cross-functional
integrated into the discussions to collectively assess
organization's overall climate-related risks. By leveraging
risk management. the expertise of each team member,
we ensure a comprehensive understanding
of potential impacts on our supply
chain, production, and market dynamics.
This collaborative effort fosters
a collective awareness of climate-related
challenges.
------------------------------ ------------------------------------------------
Metrics -- Metrics used by Cellular Goods PLC sets ambitious
and targets the organization metrics and targets encompassing
to assess climate-related its skincare and carbon capture businesses.
risks and opportunities Key metrics include reducing unnecessary
in line with its business travel, reducing waste generation
strategy and risk as the whole team works from home,
management process. and increasing the percentage of
sustainably sourced ingredients and
-- Scope 1, Scope recyclable packaging materials.
2 and, if appropriate,
Scope 3 greenhouse The Company aims to innovate with
gas (GHG) emissions a specific target for introducing
and the related risks. a number of sustainable skincare
products. In parallel, the carbon
-- Targets used capture venture involves goals for
by the organization mitigating emissions and contributing
to manage climate-related to broader climate initiatives. These
risks and opportunities metrics underline Cellular Goods'
and performance against PLC commitment to comprehensive sustainability
targets. practices across its diverse business
portfolio.
------------------------------ ------------------------------------------------
Financial risk management
The Company has a simple capital structure and its principal
financial asset is cash. The Company's market risk is limited to
price risk, primarily for the costs of operating a retail
biosynthetic CBD/CBG business carbon sequestration-as-a-service.
The Directors manage the Company's exposure to liquidity risk by
maintaining adequate cash reserves and ensuring any debt financing
is at a competitive interest rate which can be maintained within
the Company's cash resources going forward.
Further details regarding risks are detailed in the notes to the
financial statements.
Provision of information to auditors
So far as each of the Directors is aware at the time this report
is approved:
-- there is no relevant audit information of which the Company's auditors are unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the Company's auditors are aware of that
information.
Auditors
PKF Littlejohn LLP will be proposed for reappointment in
accordance with Section 485 of the Companies Act 2006. PKF
Littlejohn LLP, the auditors, have indicated their willingness to
continue in office as auditors.
Approved by the Board on 21 December 2023, and signed on its
behalf by:
Bruna Nikolla
Director and Company Secretary
STATEMENT OF DIRECTORS' RESPONSIBILITIES FOR THE YEARED 31
AUGUST 2023
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial period. Under that law the directors
have prepared the Group and Company financial statements in
accordance with UK-adopted international accounting standards and
as regards the Company financial statements, as applied in
accordance with the provisions of the Companies Act 2006. Under
company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the Company and of the profit
or loss of the Group and Company for that year.
In preparing these financial statements, the directors are
required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and accounting estimates that are reasonable and prudent;
-- State whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements and the Directors'
Remuneration Report comply with the requirements of the Companies
Act 2006 and, as regards the Group financial statements, in
accordance with UK-adopted international accounting standards. They
are also responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the directors.
The directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' responsibilities pursuant to DTR4 (Disclosure and
Transparency Rules)
The directors confirm to the best of their knowledge and
belief:
-- The Group and Company financial statements have been prepared in accordance with UK-adopted international accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and Company; and
-- The annual report includes a fair review of the development
and performance of the business and financial position of the Group
and Company, together with a description of the principal risks and
uncertainties.
On behalf of the board.
Darcy Taylor
Chairman
21 December 2023
DIRECTORS' REMUNERATION REPORT FOR THE YEARED 31 AUGUST 2023
This remuneration report sets out the Company's policy on the
remuneration of executive and non-executive Directors together with
details of Directors' remuneration packages and service contracts
for the year ended 31 August 2023. Due to the size of the Board and
the early stage of the Company's listing, an independent
remuneration committee is not considered appropriate. The Company
did not appoint any third-party advisers in relation to directors'
remuneration.
The items included in this report are unaudited unless otherwise
stated.
Remuneration policy
In setting the policy, the Board has taken the following into
account:
-- The need to attract, retain and motivate individuals of a
calibre who will ensure successful leadership and management of the
Company;
-- The Company's general aim of seeking to reward all employees
fairly according to the nature of their respective roles and
performance;
-- Remuneration packages offered by similar companies within similar sectors;
-- The need to align the interests of shareholders as a whole
with the long-term growth of the Company; and
-- The need to be flexible and adjust with operational changes
throughout the term of this policy.
Current and future policy
Executive directors are paid monthly, and their compensation
package includes a combination of fixed salaries, pensions, and any
other performance-related bonuses. Any increase will be properly
documented highlighting the reasons and mainly be based on
comparisons with other companies of a similar size and sector.
UK-based executive directors are entitled to participate in the
Company's auto-enrolment pension scheme if they wish. No directors
receive any benefits for life insurance, accidental death or
critical illness cover, hospital fees, dental care or similar. No
director has any entitlement to a company car, fuel allowance, or
equivalent benefits.
The Directors are reimbursed by the Company for any travel,
hotel or other expenses that occur in connection with the discharge
of their duties.
Non-executive directors may be entitled to remuneration based on
recommendations of the Chairman and comparisons with other
companies of a similar size in a similar sector.
No directors have received bonuses, and any eventual bonuses
will be decided upon by the full board with each director recusing
himself or herself from discussions about his or her bonus.
The Company does not have a remuneration committee. During the
year, key decisions made by the full board in respect of
remuneration were remuneration packages for Darcy Taylor. Anna
Chokina, executive director who left the board during the year,
received the payments due under her service contract.
During 2023, the Company conducted a comprehensive annual salary
review of the executive director's compensation, along with a
broader review of the entire personnel compensation structure. This
review was prompted by the need to address the challenging
circumstances created by the organizational restructuring and
redundancies undertaken during the year.
As a result of this thorough review, it was determined that an
adjustment to the compensation package of Bruna Nikolla was
warranted. This adjustment aims to fairly compensate Bruna for the
additional board level responsibilities that she has shouldered in
navigating the organization through these significant changes while
also ensuring our executive team remains competitive and motivated.
Effective 1 February 2023, Bruna Nikolla's compensation package was
increased to GBP150,000. This adjustment addressed increased scope
of work and aligned her with current market rate compensation.
The Directors have considered the requirement to present
information on the relative performance of spend on pay compared to
shareholder dividends. As the Company does not currently pay
dividends, we have not considered it necessary to include such
information.
Directors' remuneration (audited)
Details of the directors' remuneration during the year ended 31
August 2023 are as follows:
Director Salary Benefits- Pension 2023 2022
and fees in-kind contributions Total Total
GBP GBP GBP GBP GBP
Executive
directors
Darcy Taylor 220,000 - - 220,000 -
Bruna Nikolla 137,500 - 552 138,052 3,692
Anna Chokina
(resigned 320,769 - 110 320,879 223,627
26 September
2022)
Simon Walters
(resigned 10,000 - 237 10,237 121,320
21 December
2022)
Alexis Abraham
(resigned - - - - 174,100
28 February
2022)
Eric Chang - - - - 156,562
(resigned 15
April 2022)
Non-executive
directors
Darcy Taylor 4,000 4,000 36,000
Gill Whitty
Collins 30,000 - - 30,000 9,144
Matthew Lodge 10,000 - - 10,000 -
Misha Sher - - - - 9,144
Peter Wall
(resigned 17,500 - - 17,500 42,000
--------- ---------- -------------- -------- --------
21 December
2022)
--------- ---------- -------------- -------- --------
Total 749,769 - 899 750,668 775,589
--------- ---------- -------------- -------- --------
Service agreements and Letters of Appointment
Under a letter of appointment with Darcy Taylor dated 18
February 2020, conditional upon Admission, he was appointed as a
non-executive director of the Company for an annual fee of
GBP30,000, payable monthly in arrears. From 10 May 2022, Mr.
Taylor's role changed to non-executive chairman, under a new
two-year agreement at GBP48,000 per annum, payable monthly in
arrears. On the 1 October 2022, he was appointed as an interim CEO,
in addition to the chairman role, with a fee of GBP192,000 per
annum.
The appointment as chairman is for an initial term of 24 months
and is terminable on three months' notice by either party. No
compensation is payable for loss of office and the appointment may
be terminated immediately if, among other things, Mr Taylor is in
material breach of the terms of the appointment. He was appointed
to oversee the transition of the Company into new markets, with his
role intended to last until a permanent CEO is established and to
explore potential merger and acquisitions avenues.
Bruna Nikolla was appointed as a director on 22 August 2022 and
is the Company's Chief Financial Officer and Company Secretary. She
receives a salary of GBP150,000 per annum, payable monthly in
arrears.
Gill Whitty Collins was appointed as a non-executive director of
the Company on 12 May 2022 and is entitled to fees of GBP30,000 per
year under a contract for services for an initial two-year period
which can be terminated by either party giving three months'
notice. Ms. Whitty Collins is expected to devote at least six days
a year to perform duties for the Company. The appointment may be
terminated immediately if, among other things, she is in material
breach of the terms of the appointment.
Misha Sher was appointed as a non-executive director of the
Company on 12 May 2022 and is entitled to fees of GBP30,000 per
year under a contract for services for an initial two-year period
which can be terminated by either party giving three months'
notice. Mr. Sher is expected to devote at least six days a year to
perform duties for the Company. The appointment may be terminated
immediately if, among other things, he is in material breach of the
terms of the appointment.
Matthew Lodge was appointed as a non-executive director of the
Company on 5 May 2023 and is entitled to fees of GBP30,000 per year
under a contract for services for an initial two-year period which
can be terminated by either party giving three months' notice. Mr.
Lodge is expected to devote at least six days a year to perform
duties for the Company. The appointment may be terminated
immediately if, among other things, he is in material breach of the
terms of the appointment.
Anna Chokina was appointed as CEO under a service agreement
dated 6 December 2021, for an annual salary of GBP300,000 payable
monthly in arrears. Mrs. Chokina resigned on 26 September 2022.
Under a letter of appointment dated 1 February 2021, Peter Wall
was appointed as non-executive chairman of the Company and received
an annual fee of GBP48,000, payable monthly in arrears. Under the
terms of a subsequent agreement dated 10 May 2022, Mr. Wall's role
changed to non-executive director, for a further two years, for an
annual fee of GBP30,000 payable monthly in arrears. Mr. Wall
resigned on 21 December 2022.
Simon Walters was appointed as finance director under a service
agreement dated 10 February 2021, for an annual salary of
GBP120,000 payable monthly in arrears. On 1 September 2022, the
role held by Mr. Walters changed to non-executive director, for an
initial period of four months with a monthly fee of GBP2,500. Mr.
Walters resigned on 21 December 2022.
Share warrants
Directors hold warrants to subscribe for Ordinary shares in the
company in the future, as shown in the table
below.
At 0.97p At 1p At 2.9p At 5p
each each each each
Misha Sher 2,000,000 - - -
Matthew Lodge 5,000,000 - - -
Gill Whitty - - 2,000,000 -
Collins
Darcy Taylor - 1,500,000 - 1,000,000
Peter Wall - 2,500,000 - 2,000,000
Simon Walters - 1,500,000 - 1,000,000
The warrants at 0.97p per share, issued on 5 May 2023 and 10 May
2023, one third will vest on 5 May 2024 and 10 May 2024 with the
remaining two thirds vesting in twenty-four equal monthly
instalments thereafter.
The warrants at 1p per share vested on Admission to Listing on
26 February 2021, had an exercise period of two years from that
date, and any shares arising before 26 February 2022 were subject
to a lock-in to that date, being 12 months from admission. These
warrants have now all expired as of 26 February 2023.
The warrants at 2.9p per share, issued on 3 April 2023, one
third vested on 1 May 2023 with the remaining two thirds vesting in
twenty-four equal monthly instalment thereafter.
The warrants at 5p per share, being the placing price in
Admission, vested 25% on Admission and thereafter in 25% tranches
every six months. They have an exercise period to 26 February 2024,
being three years from Admission, and any Ordinary shares which
arose from exercise prior to 26 February 2022 were subject to a
lock-in to that date.
Share options
Director Bruna Nikolla held options to subscribe for 7,000,000
Ordinary shares in the Company at 31 August 2023. Director Anna
Chokina (who resigned on 26 September 2023) held options to
subscribe for 16,781,594 Ordinary shares in the Company at 31
August 2023.
Statement of directors' shareholdings
The Directors who held office at 31 August 2023 and their
respective beneficial interests in the Ordinary shares
of the Company at the year-end were:
Ordinary shares Share options
Matthew Lodge 95,000,000 -
Bruna Nikolla - 7,000,000
Corporate Governance Statement
The Company intends to comply with the provisions of the
Corporate Governance Code published by the Quoted Companies
Alliance (QCA Corporate Governance Code) insofar as is appropriate
having regard to the size and nature of the Company and the size
and composition of the Board.
The Company's Standard Listing means that it is also not
required to comply with those provisions of the Listing Rules which
only apply to companies on the Premium List. The FCA will not have
the authority to (and will not) monitor the Company's compliance
with any of the Listing Rules which the Company has indicated that
it intends to comply with on a voluntary basis, nor to impose
sanctions in respect of any failure by the Company so to
comply.
Other matters
The Company does not have an annual or long-term incentive
scheme in place for any of the Directors and as such there are no
disclosures in this respect.
This report was approved by the board on 21 December 2023 and
signed on its behalf by:
Darcy Taylor
Chairman and Interim Chief Executive Officer
INDEPENT AUDITOR'S REPORT FOR THE YEARED 31 AUGUST 2023
Opinion
We have audited the financial statements of Cellular Goods Plc
(the 'parent company') and its subsidiaries (the 'group') for the
year ended 31 August 2023 which comprise the Consolidated Statement
of Comprehensive Income, the Consolidated and Company Statements of
Financial Position, the Consolidated and Company Statements of
Changes in Equity, the Consolidated and Company Statements of Cash
Flows and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK-adopted
international accounting standards and as regards the parent
company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs as at 31
August 2023 and of the group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
-- the parent company financial statements have been properly
prepared in accordance with UK-adopted international accounting
standards and as applied in accordance with the provisions of the
Companies Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the group's and parent
company's ability to continue to adopt the going concern basis of
accounting included:
-- an assessment of management's assumptions in modelling future
financial performance and cash flow requirements, including
consideration of future plans, the ability to raise additional
funds if required and ensuring all commitments are reflected
therein;
-- checking the mathematical accuracy of the spreadsheet used to
model future financial performance and cash flow requirements;
and
-- assessing whether management has adequately disclosed any
conditions which may cast significant doubt on the ability of the
group and company to continue as a going concern in the financial
statements.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
group's or parent company's ability to continue as a going concern
for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of misstatements
on our audit and on the financial statements. For the purposes of
determining whether the financial statements are free from material
misstatement, we define materiality as the magnitude of
misstatement that makes it probable that the economic decisions of
a reasonably knowledgeable person, relying on the financial
statements, would be changed or influenced.
We also determine a level of performance materiality which we
use to assess the extent of testing needed to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole. In determining our overall
audit strategy, we assessed the level of uncorrected misstatements
that would be material for the financial statements as a whole.
We determined the group and parent company materiality for the
financial statements as a whole to be GBP99,100 and GBP97,600
(2022: GBP87,700 and GBP78,900) respectively, calculated at 3% of
the loss before tax (2022: 1.5% of total expenses). We considered
loss before tax to be an appropriate benchmark as the group
increased commercial operations in the year, generating more
revenue, but also introduced cost control measures. In 2022 we
considered total expenses to be the appropriate benchmark for a
start-up group. Performance materiality was set at 60% (2022: 70%)
of overall materiality for the group and parent company at
GBP59,400 and GBP58,560 (2022: GBP61,300 and GBP55,200)
respectively, whilst the threshold for reporting unadjusted
differences to those charged with governance was set at GBP4,955
for the group and GBP4,880 for the parent company (2022: GBP4,300
and GBP3,900). We also agreed to report differences below that
threshold that, in our view, warranted reporting on qualitative
grounds.
The component materiality was set at group performance
materiality.
Our approach to the audit
In designing our audit, we determined materiality and assessed
the risk of material misstatement in the financial statements. In
particular, we looked at areas involving significant accounting
estimates and judgement by the directors and considered future
events that are inherently uncertain such as the valuation of share
based payments and stock provisions. We also addressed the risk of
management override of internal controls, including among other
matters consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud. The
component was audited by the group audit team for consolidation
purposes.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter How our scope addressed this matter
======================================= =============================================================
Asset acquisition (refer to notes Our audit work in this area included:
5 and 13) * Reviewing the contractual terms of the sale and
During the year, the company acquired purchase agreement.
King Tide Carbon Pte Ltd Singapore
together with a carbon removal
services business to be operated * Checking good title over the subsidiary company.
by that entity by issuing 95,000,000
ordinary shares.
There is a risk that the acquisition * Testing the valuation of the share consideration.
has not been accounted for correctly
as either an asset acquisition
or a business combination, including * Evaluating management's accounting treatment of the
where applicable the fair value transactions as an asset acquisition versus a
of assets and liabilities acquired, business combination within the scope of IFRS 3.
the recognition of goodwill and
other separately identifiable
intangible assets. * Evaluating the presentation and disclosures in the
financial statements.
The directors' treatment of the
acquisitions was concluded as reasonable.
The acquisition of the subsidiary
undertaking did not constitute a
business combination in accordance
with IFRS 3.
=============================================================
Valuation of inventory (refer Our audit work in this area included:
to note 14) * Vouched the cost of inventory back to supporting
There is a risk that inventory documentation including, where applicable, packaging,
is not valued at the lower of storage and overhead costs.
cost and net realisable value.
Inventory is subject to impairment,
given the expiry date of certain * Verified the ageing of inventory at year-end,
ingredients and finished goods, together with the product expiry dates.
and based upon the quantity of
inventory held compared to actual
and forecast sales volumes. * For post year-end sales, tested that the sales price
realised exceeded the carrying value of inventory.
* Reviewed the sales forecasts volumes, and the
expected time to realise those sales, with reference
to the volume and expiry dates of inventory.
* Obtained confirmations of inventory quantities from
material third party inventory holders and reconciled
to the group's year-end inventory listings.
The directors' judgements and assumptions
applied in the calculation of the
year-end inventory provision were
concluded as reasonable.
=============================================================
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained within the annual report. Our opinion
on the group and parent company financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the
other information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion the part of the directors' remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements and the part of the
directors' remuneration report to be audited are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the group and parent company financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements,
the directors are responsible for assessing the group's and the
parent company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do
so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- We obtained an understanding of the group and parent company
and the sector in which they operate to identify laws and
regulations that could reasonably be expected to have a direct
effect on the financial statements. We obtained our understanding
in this regard through discussions with management, industry
research and experience of the sector.
-- We determined the principal laws and regulations currently
relevant to the group and parent company in this regard to be those
arising from FCA Rules, the Food Standards Agency, London Stock
Exchange Rules, Disclosure and Transparency Rules and international
accounting standards.
-- We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by
the group and parent company with those laws and regulations. These
procedures included, but were not limited to, enquiries of
management and review of minutes, review of Regulatory News Service
(RNS) announcements, and review of legal and regulatory
correspondence.
-- We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to
the non-rebuttable presumption of a risk of fraud arising from
management override of controls, that the estimates, judgements and
assumptions applied by management in their valuation of share-based
payments and inventory represented the highest risk of material
misstatement and we addressed this by challenging the assumptions
and judgements made by management in those areas.
-- We addressed the risk of fraud arising from management
override of controls by performing audit procedures which included,
but were not limited to: the testing of journals; reviewing
accounting estimates for evidence of bias; and evaluating the
business rationale of any significant transactions that are unusual
or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or
non-compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events and
transactions reflected in the financial statements, as we will be
less likely to become aware of instances of non-compliance. The
risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Other matters which we are required to address
We were appointed by Board of Directors on 24 August 2021 to
audit the financial statements for the year ended 31 August 2020
and subsequent financial periods. Our total uninterrupted period of
engagement is four years, covering the years ended 31 August 2020
to 2023.
The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
David Thompson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP Statutory Auditor
15 Westferry Circus
Canary Wharf
London E14 4HD
21 December 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31
AUGUST 2023
2023 2022
Note GBP GBP
Revenue 3 67,236 28,904
Cost of sales (25,796) (10,787)
------------- -------------
Gross profit 41,440 18,117
Administrative expenses 5 (3,375,179) (6,009,375)
------------- -------------
Operating loss (3,333,739) (5,991,258)
Finance income 24,113 1,301
------------- -------------
Loss before taxation (3,309,626) (5,989,957)
Corporation tax 9 (95) -
------------- -------------
Loss for the year (3,309,721) (5,989,957)
Other comprehensive loss/(gain) (24) 1,284
------------- -------------
Total comprehensive loss for
the year (3,309,745) (5,988,673)
------------- -------------
Earnings per share
Basic earnings per share - continuing
and total
operations 10 (0.615p) (1.183p)
------------- -------------
The consolidated statement of comprehensive income has been
prepared on the basis that all operations are continuing
operations.
The Accounting Policies and notes on pages [33-44] form part of
these consolidated financial statements.
The Company has elected to take exemption under section 408 of
the Companies Act 2006 not to present the parent company Statement
of Comprehensive Income.
The loss of the parent company for the year was GBP3,259,358
(2022: loss of GBP5,991,009).
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION AS AT
31 AUGUST 2023
Consolidated Consolidated Company Company
2023 2022 2023 2022
Note GBP GBP GBP GBP
ASSETS
Non-current assets
Investment in subsidiary 13 - - 61 1
Current assets
Cash and cash equivalents 1,772,892 4,376,134 1,711,893 4,376,134
Inventory 14 582,883 504,127 582,883 504,127
Trade and other receivables 12 92,835 251,104 198,107 250,830
------------ ------------ ------------ -----------
Total Assets 2,448,610 5,131,365 2,492,944 5,131,092
============ ============ ============ ===========
EQUITY AND LIABILITIES
Equity attributable
to owners
Share capital 15 602,250 507,250 602,250 507,250
Share premium 15 12,988,101 12,513,101 12,988,101 12,513,101
Accumulated losses (13,040,611) (9,730,889) (12,991,820) (9,732,462)
Share-based payment
reserve 17 1,714,392 1,564,070 1,714,392 1,564,070
Foreign translation
reserve (1,324) (1,300) - -
------------ ------------ ------------ -----------
Total Equity and Reserves 2,262,808 4,852,232 2,312,923 4,851,959
============ ============ ============ ===========
LIABILITIES
Current Liabilities
Trade and other payables 16 185,802 279,133 180,021 279,133
------------ ------------ ------------ -----------
185,802 279,133 180,021 279,133
============ ============ ============ ===========
Total Equity and Liabilities 2,448,610 5,131,365 2,492,944 5,131,092
============ ============ ============ ===========
The Accounting Policies and Notes on pages [33-44] form part of
the financial statements
The consolidated and company financial statements were approved
and authorised for issue by the Board of Directors. Signed on
behalf of the Board of Directors by:
Bruna Nikolla
Director
21 December 2023
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 AUGUST
2023
Share Share premium Foreign Share-based Retained Total equity
capital currency payment earnings
translation reserve
GBP GBP GBP GBP GBP GBP
As at 1 September
2022 507,250 12,513,101 (1,300) 1,564,070 (9,730,889) 4,852,232
Loss for the
year - - - - (3,309,721) (3,309,721)
Exchange difference
on translation - - (24) - - (24)
--------- -------------- ------------- ------------ ------------- -------------
Total comprehensive
loss for the
year - - (24) - (3,309,721) (3,309,745)
--------- -------------- ------------- ------------ ------------- -------------
Issue of ordinary
shares (05/05/2023) 95,000 475,000 - - - 570,000
Share-based
payments - - - 150,322 - 150,322
--------- -------------- ------------- ------------ ------------- -------------
Total transactions
with owners
recognised in
equity 95,000 475,000 - 150,322 - 720,322
--------- -------------- ------------- ------------ ------------- -------------
As at 31 August
2023 602,250 12,988,101 (1,324) 1,714,392 (13,040,611) 2,262,808
========= ============== ============= ============ ============= =============
Share Share premium Foreign Share-based Retained Total equity
capital currency payment earnings
translation reserve
GBP GBP GBP GBP GBP GBP
As at 1 September
2021 504,750 12,490,601 (2,584) 1,295,918 (3,740,931) 10,547,754
Loss for the
year - - - - (5,989,957) (5,989,957)
Exchange difference
on translation - - 1,284 - - 1,284
--------- -------------- ------------- ------------ ------------ -------------
Total comprehensive
loss for the
year - - 1,284 - (5,989,957) (5,988,673)
--------- -------------- ------------- ------------ ------------ -------------
Issue of ordinary
shares (04/03/2022) 2,500 22,500 - - - 25,000
Share-based
payments - - - 268,152 - 268,152
--------- -------------- ------------- ------------ ------------ -------------
Total transactions
with owners
recognised in
equity 2,500 22,500 - 268,152 - 293,152
--------- -------------- ------------- ------------ ------------ -------------
As at 31 August
2022 507,250 12,513,101 (1,300) 1,564,070 (9,730,889) 4,852,232
========= ============== ============= ============ ============ =============
The Accounting Policies and Notes on pages [33-44] form part of
the financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY AS AT 31 AUGUST 2023
Share-based
Share Share payment Retained Total
capital Premium reserve earnings equity
GBP GBP GBP GBP GBP
As at 1 September
2022 507,250 12,513,101 1,564,070 (9,732,462) 4,851,959
Loss for the year - - - (3,259,358) (3,259,358)
Total comprehensive
loss
for the year - - - (3,259,358) (3,259,358)
--------- ----------- ------------ ------------- --------------
Issue of ordinary shares
(05/05/2023) 95,000 475,000 - - 570,000
Share-based payments - - 150,322 - 150,322
--------- ----------- ------------ ------------- --------------
Total transactions
with owners recognised
in equity 95,000 475,000 150,322 - 720,322
--------- ----------- ------------ ------------- --------------
As at 31 August 2023 602,250 12,988,101 1,714,392 (12,991,820) 2,312,923
========= =========== ============ ============= ==============
Share-based
Share Share payment Retained Total
capital Premium reserve earnings equity
GBP GBP GBP GBP GBP
As at 1 September
2021 504,750 12,490,601 1,295,918 (3,741,453) 10,549,816
Loss for the year - - - (5,991,009) (5,991,009)
Total comprehensive
loss
for the year - - - (5,991,009) (5,991,009)
--------- ----------- ------------ ------------ ------------
Issue of ordinary
shares (04/03/2022) 2,500 22,500 - - 25,000
Share-based payments - - 268,152 - 268,152
--------- ----------- ------------ ------------ ------------
Total transactions
with owners recognised
in equity 2,500 22,500 268,152 - 293,152
--------- ----------- ------------ ------------ ------------
As at 31 August 2022 507,250 12,513,101 1,564,070 (9,732,462) 4,851,959
========= =========== ============ ============ ============
The Accounting Policies and Notes on pages [33-44] form part of
the financial statements.
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 AUGUST 2023
Consolidated Consolidated Company Company
2023 2022 2023 2022
GBP GBP GBP GBP
Cash flows from operating
activities
Loss for the year (3,309,721) (5,989,957) (3,259,358) (5,991,009)
------------- ------------- ------------ ------------
Share-based payment charge 150,322 268,152 150,322 268,152
Increase in inventory (78,757) (446,950) (78,757) (446,950)
Decrease in debtors 158,269 117,243 52,723 116,612
(Decrease)/Increase in creditors (93,331) 78,886 (99,111) 81,853
Research and development non-cash 570,000 - 570,000 -
Foreign exchange differences (24) 1,264 - -
Finance income (22,812) (1,301) (22,812) (1,301)
------------- ------------- ------------ ------------
Net cash flow used in operating
activities (2,626,054) (5,972,643) (2,686,993) (5,972,643)
============= ============= ============ ============
Cash flows from investing
activity
Increase in investment - - (60) -
Finance income 22,812 1,300 22,812 1,301
------------- ------------- ------------ ------------
Net cash flow generated from
investing activity 22,812 1,300 22,754 1,301
============= ============= ============ ============
Cash flows from financing
activity
Issue of ordinary shares,
net of issue costs - 25,000 - 25,000
------------- ------------- ------------ ------------
Net cash generated from financing
activity - 25,000 - 25,000
------------- ------------- ------------ ------------
Net increase in cash and
cash equivalents (2,603,242) (5,946,342) (2,664,241) (5,946,342)
Cash and cash equivalents
at beginning of year 4,376,134 10,322,476 4,376,134 10,332,476
------------- ------------- ------------ ------------
Cash and cash equivalents
at end of year 1,772,892 4,376,134 1,711,893 4,376,134
============= ============= ============ ============
Significant non-cash transactions
On 5 May 2023 the Company issued 95,000,000 ordinary shares at
GBP0.006 per share, amounting to GBP570,000, as consideration for
the acquisition of the biosynthetic algae and seaweed carbon
sequestration 'as a service' business held by King Tide Carbon Pte.
Ltd Singapore (see note 13).
The Accounting Policies and Notes on pages [33-44] form part of
the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 AUGUST 2023
1. General Information
The Company was incorporated in England and Wales on 25 August
2018 as Leaf Studios Limited, but subsequently re-registered as a
public limited company and renamed as Leaf Studios PLC. On 29
September 2020, the Company's name was changed to Cellular Goods
PLC.
The registered office is 9th Floor, 16 Great Queen Street,
London, WC2B 5DG. The principal activity of the Company is
establishing a biosynthetic CBD/CBG retail business as well as
delivering carbon removal as a service.
The Company gained admission to the Official List (by way of a
Standard Listing under Chapter 14 of the Listings Rules) and
trading on the London Stock Exchange on 26 February 2021.
The Company has two subsidiaries, CBX Cellular Goods Canada
Limited incorporated in Canada, and King Tide Carbon Pte.Ltd which
was incorporated in Singapore.
2. Accounting Policies
The Directors consider that in the proper preparation of the
financial statements there were no critical or significant areas
which required the use of accounting estimates and exercise of
judgement by management while applying the Company's accounting
policies, with the exception of share-based payment calculations
and inventory valuations.
There is no material difference between the fair value of
financial assets and liabilities and their carrying amount.
The functional and presentational currency is Pounds Sterling
("GBP").
2.1. Basis of preparation
These financial statements have been prepared in accordance with
UK-adopted international accounting standards in accordance with
the requirements of the Companies Act 2006. The financial
statements have been prepared under the historical cost convention.
There is no material difference between the fair value of financial
assets and liabilities and their carrying amount.
Amounts in the financial statements have been rounded to the
nearest pound.
2.2. Revenue recognition
Revenue from the sale of goods is recognised when a group entity
sells a product to a customer. Sales are mostly made via online
portals, paid by credit card, at which point revenue is recognised.
For sales made in traditional retail shops, revenue is recognised
when consumers buy each product (goods held by retail outlets are
not treated as sales by Cellular Goods).
2.3. Inventory
Inventory is valued at lower of cost and net realisable value.
Cost is based on the purchase price of the manufactured products,
materials and transport costs. Net realisable value is based on the
estimated selling price less estimated selling costs. Stock
considered to have no value has been written down to nil.
2.4. Basis of consolidation
The Group financial statements consolidate those of the Company
and its two subsidiaries as of 31 August 2023. The subsidiaries
have a reporting date of 31 August and are entities over which the
Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement
with the subsidiary and has the ability to affect those returns
through its power over the entity. The subsidiaries have been fully
consolidated from the date on which control was transferred to the
Group.
Inter-company transactions, unrealised gains and losses on
intra-group transactions and balances between Group companies are
eliminated on consolidation.
New and Revised Standards
There were no new and amended standards adopted for the first
time which had a material impact on the Group or Company.
IFRS in issue but not applied in the current financial
statements
The following IFRS and IFRIC Interpretations have been issued
but have not been applied by the Group or Company in preparing
these financial statements, as they are not yet effective. The
Group or Company intends to adopt these standards and
interpretations when they become effective, rather than adopt them
early.
-- Presentation of Financial Statements: Classification of
Liabilities as Current or Non-current (Amendments to IAS 1)
effective 1 January 2024
-- Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting Policies (Amendments to IAS
1) effective 1 January 2023
-- Accounting Policies, Changes in Accounting Estimates and
Errors - Definition of Accounting Estimates (Amendments to IAS 8)
effective 1 January 2023
-- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) effective 1 January 2024
-- International Tax Reform: Pillar Two Model Rules (Amendments
to IAS 12) effective 1 January 2023
The above standards are not expected to have a material impact
on the Group or Company in future reporting periods and on
foreseeable future transactions.
2.5. Going concern
The Directors have assessed the current financial position of
the Group, along with future cash flow requirements, to determine
whether the Group has the financial resources to continue as a
going concern for the foreseeable future. As part of their
assessment, the Directors have also taken into account the ability
to raise additional funding whilst maintaining sufficient cash
resources to meet all commitments.
The Directors have prepared detailed cash flow forecasts with
strong cost control measures in place to enable the Group to grow
according to its plans. Given the current economic uncertainties,
the Group has controls in place to monitor spend and ensure that it
can continue to operate for the foreseeable future. Additional cost
control measures are available, if required. The conclusion of this
assessment is that it is appropriate that the Group be considered a
going concern. For this reason, the Directors continue to adopt the
going concern basis in preparing the financial statements.
2.6. Capital risk management
The Company's objectives when managing capital is to safeguard
the Company's ability to continue as a going concern, in order to
provide returns for shareholders and benefits for other
stakeholders, and to maintain an optimal capital structure. The
Company has no borrowings. In order to maintain or adjust the
capital structure, the Company may adjust the amount of dividends
paid to shareholders, return capital to shareholders or issue new
shares. The Company monitors capital on the basis of the total
equity held by the Company.
2.7. Financial Instruments
Initial recognition
A financial asset or financial liability is recognised in the
Statement of Financial Position of the Group when it arises or when
the Group becomes part of the contractual terms of the financial
instrument.
Classification
Financial assets at amortised cost
The Group measures financial assets at amortised cost if both of
the following conditions are met:
1. The asset is held within a business model whose objective is
to collect contractual cash flows; and
2. The contractual terms of the financial asset generating cash
flows at specified dates only pertain to capital and interest
payments on the balance of the initial capital.
Financial assets which are measured at amortised cost, are
measured using the Effective Interest Rate method ("EIR") and are
subject to impairment. Gains and losses are recognised in profit or
loss when the asset is derecognised, modified or impaired.
Financial liabilities at amortised cost
Financial liabilities measured at amortised cost using the EIR
method include trade and other payables that are short term in
nature.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as finance costs
in profit or loss.
Derecognition
Financial liabilities are derecognised if the company's
obligations specified in the contract expire or are discharged or
cancelled.
A financial asset is derecognised when:
1. The rights to receive cash flows from the asset have expired, or
2. The company has transferred its rights to receive cash flows
from the asset or has undertaken the commitment to fully pay the
cash flows received without significant delay to a third party
under an arrangement and has either (a) transferred substantially
all the risks and the assets of the asset or (b) has neither
transferred nor held substantially all the risks and estimates of
the asset but has transferred the control of the asset.
2.8. Impairment
The Group recognises a provision for impairment for expected
credit losses regarding all financial assets. Expected credit
losses are based on the balance between all the payable contractual
cash flows and all discounted cash flows that the Company expects
to receive. Regarding trade receivables, the Company applies the
IFRS 9 simplified approach in order to calculate expected credit
losses. Therefore, at every reporting date, provision for losses
regarding a financial instrument is measured at an amount equal to
the expected credit losses, trade receivables and contract assets
have been grouped based on shared risk characteristics.
At each balance sheet date, the Directors review the carrying
amounts of the Company's investments, to determine whether there
are any indications that those investments have suffered an
impairment loss.
2.9. Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements are measured using
the currency of the primary economic environment in which entities
operate ('the functional currency'). The financial statements are
presented in Pounds Sterling, which is the parent company's
functional and presentation currency. There has been no change in
the functional currency during the current or preceding period.
(ii) Transactions and balances
Transactions in foreign currencies are translated into Pounds
Sterling using monthly average exchange rates. This is permissible
in this case as there are no significant fluctuations between the
currencies with which the entity operates. Monetary assets and
liabilities denominated in foreign currencies are retranslated at
the exchange rates ruling at the Statement of Financial Position
date and any exchange differences arising are taken
to profit or loss.
(iii) Foreign operations
In the Group's financial statements, all assets, liabilities and
transactions of Group entities with a functional currency other
than GBP are translated into GBP upon consolidation. The functional
currency of the entities in the Group has remained unchanged during
the reporting period. On consolidation, assets and liabilities have
been translated into GBP at the closing rate at the reporting date.
Income and expenses have been translated into GBP at the average
rate over the reporting period. Exchange differences arising from
significant foreign subsidiaries are charged or credited to other
comprehensive income and recognised in the currency translation
reserve in equity. On disposal of a foreign operation, the related
cumulative translation differences recognised in equity are
reclassified to profit or loss and are recognised as part of the
gain or loss on disposal.
2.10. Share-based payments
Where share options are awarded to employees, the fair value of
the options at the date of grant is charged to profit or loss over
the vesting period. Non-market vesting conditions are taken into
account by adjusting the number of equity instruments expected to
vest at each balance sheet date so that, ultimately, the cumulative
amount recognised over the vesting period is based on the number of
options that eventually vest. Market vesting conditions are
factored into the fair value of the options granted. The cumulative
expense is not adjusted for failure to achieve a market vesting
condition.
The fair value of the award also takes into account non-vesting
conditions. These are either factors beyond the control of either
party (such as a target based on an index) or factors which are
within the control of one or other of the parties (such as the
Company keeping the scheme open or the employee maintaining any
contributions required by the scheme).
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
profit or loss over the remaining vesting period.
Where equity instruments are granted to persons other than
employees, profit or loss is charged with fair value of goods and
services received.
2.11. Taxation and deferred taxation
The income tax expense or income for the year is the tax payable
on the current period's taxable income. This is based on the
national income tax rate enacted or substantively enacted for each
jurisdiction with any adjustment relating to tax payable in
previous years and changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of
assets and liabilities and their carrying amounts in the financial
statements.
Current tax credits arise from the UK legislation regarding the
treatment of certain qualifying research and development costs,
allowing for the surrender of tax losses attributable to such costs
in return for a tax rebate.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to be applicable when the
asset or liability crystallises based on current tax rates and laws
that have been enacted or substantively enacted by the reporting
date. The relevant tax rates are applied to the cumulative amounts
of deductible and taxable temporary differences to measure the
deferred tax asset or liability.
A deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it
can be regarded as more likely than not that there will be suitable
taxable profits against which to recover carried forward tax losses
and from which the future reversal of temporary differences
can be deducted. The carrying amount of deferred tax assets are reviewed at each reporting date.
2.12. Trade and other payables
Short-term creditors are measured at the transaction price.
Other financial liabilities are measured initially at fair value,
net of transaction costs, and are measured subsequently at
amortised cost using the effective interest rate method.
2.13. Trade and other receivables
Trade and other receivables are short-term financial assets due
to the Company. Other receivables are recognised at the
transaction's price when it is probable that economic benefit will
flow to the Company.
2.14. Equity
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction from the proceeds.
The share premium account represents premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from share
premium, net of any related income tax benefits.
2.15. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and demand
deposits with banks and other financial institutions, that are
readily convertible into known amounts of cash, and which are
subject to an insignificant risk of changes in value.
3. Segment information
In the year to 31 August 2023, revenue was derived wholly from
the sale of cannabinoid products. This has been consistent with the
prior year's revenue, derived wholly from the sale of cannabinoid
products.
Under IFRS 8 there is a requirement to show the profit or loss
for each reportable segment and the total assets and total
liabilities for each reportable segment if such amounts are
regularly provided to the chief operating decision-maker.
The Group has one operating segment, being the establishment and
operation of a biosynthetic retail services business, therefore all
IFRS 8 disclosures are incorporated within other notes to the
financial statements. Except as disclosed in note 5, the carbon
renewal business had no material transactions, assets or
liabilities during the period and at year-end.
4. Critical accounting estimates and judgement
In the application of the Group's and Company's accounting
policies, the directors are required to make judgements, estimates
and assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised, if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods.
The directors have applied their knowledge and experience of the
industry in determining the level of provisions required in
calculating inventory values. Specific estimates and judgements are
required on the ageing of inventory, expiry dates, local economic
conditions, increased costs and lower margins, overstocking and
more. Provision estimates are forward looking and are formed using
a combination of factors including management's knowledge of the
industry and the overall assessment made by management of the risks
in relation to inventory.
Estimating the fair value of share-based payment transactions
requires determination of the most appropriate valuation model,
which is dependent on the terms and conditions of the grant of
share options and warrants. This estimate also requires
determination of the most appropriate inputs into the valuation
model including volatility and dividend yield and making
assumptions about them. The assumptions used for estimating the
fair value of share-based payment transactions are disclosed in
note 17.
5. Expenses by nature
2023 2022
GBP GBP
Legal and professional 318,234 374,498
Auditor's remuneration 34,000 26,500
Directors' remuneration 740,741 775,589
Share-based payment charge 150,322 268,152
Consultancy 57,513 903,426
Advertising and promotion 607,504 1,927,813
Product research and development 586,576 356,524
Other expenses 880,289 1,376,883
--------- ---------
3,375,179 6,009,375
--------- ---------
On 5 May 2023 the Company issued 95,000,000 ordinary shares at
GBP0.006 per share, amounting to GBP570,000, as consideration for
the acquisition of the developing biosynthetic algae and seaweed
carbon sequestration 'as a service' business held going forward by
King Tide Carbon Pte. Ltd Singapore. At the date of acquisition,
the business comprised of the intellectual property rights
developed to date and still under development, including
information on potential customers and suppliers, technical
information related to algae production and carbon sequestration
and removal services, and the industry expertise and future
services of former owner Matthew Lodge. The consideration paid of
GBP570,000 has been fully expensed and is included above within
'Product research and development'.
6. Auditor's remuneration
2023 2022
GBP GBP
Fees payable to the Company's auditor for
the audit of the Group's and Company's
annual financial statements 34,000 26,500
34,000 26,500
------ ------
7. Directors' remuneration
Directors' remuneration amounted to GBP750,668 during the year
(2022: GBP775,589), of which GBPnil (2022: GBPnil) remained
outstanding at the year end. Detailed disclosure of Directors'
remuneration is disclosed in the Directors' Remuneration
Report.
8. Employees
The average number of employees for the Group during the year
was 5 (2022: 5), apart from the Directors.
2023 2022
GBP GBP
Directors' remuneration 740,741 775,589
Wages and salaries 499,293 654,096
Social security costs 87,620 105,700
Pension 8,318 10,925
Share-based payments 150,322 268,152
--------- ---------
1,486,294 1,814,462
========= =========
9. Taxation
The tax charge for the year was GBP95 (2022 - GBPnil). The
Company had tax losses at the year-end of GBP11,371,187 (2022:
GBP8,848,182), on which no deferred tax asset has been
recognised.
Factors affecting the tax charge
The tax assessed for the year is higher (2022: higher) than the
standard rate of corporation tax in the UK. The difference is
explained below:
2023 2022
GBP GBP
Loss on ordinary activities before tax (3,309,626) (5,991,009)
------------ ------------
Loss for year multiplied by standard rate
of corporation tax in the UK of 19% (2022:
19%) (628,829) (1,138,292)
Effects of:
Disallowable expenditure 137,795 53,813
Unutilised losses on which no deferred
tax losses is required 491,034 1,084,479
------------ ------------
Tax charge for the year - -
============ ============
On 3 March 2021, the UK government announced that it intended to
increase the main rate of corporation tax to 25% for the financial
years beginning 1 April 2023. This new rate was substantively
enacted by Finance Act 2021 on 10 June 2021.
10. Earnings per share
2023 2022
Loss attributable to equity holders of GBP3,309,721 GBP5,989,957
the Company
Weighted average number of Ordinary Shares
in issue (number) 537,962,329 505,989,726
Basic earnings per share (pence per share) (0.615p) (1.183p)
11. Financial Instruments
2023 2022 2023 2022
GBP GBP GBP GBP
Group Group Company Company
Carrying amount of financial
assets
Financial assets measured
at amortised cost
Cash and cash equivalents 1,772,892 4,376,134 1,711,893 4,376,134
--------- --------- --------- ---------
1,772,892 4,376,134 1,711,893 4,376,134
========= ========= ========= =========
Carrying amount of financial
liabilities
Financial liabilities measured
at amortised cost
Trade and other payables 185,802 279,133 180,021 279,133
========= ========= ========= =========
12. Trade and other receivables
2023 2022 2023 2022
GBP GBP GBP GBP
Group Group Company Company
VAT debtor 31,491 94,556 31,491 94,556
Prepayments 59,100 153,697 58,114 153,697
Amounts due by subsidiary
undertaking - - 107,712 2,577
Other debtors 2,244 2,852 790 -
------ ------- ------- -------
92,835 251,105 198,107 250,830
====== ======= ======= =======
13. Investment in subsidiaries
Cellular Goods PLC, as a multinational corporation, holds
complete ownership of two subsidiary companies, CBX Cellular Goods
Canada Ltd, and King Tide Carbon Pte. Ltd Singapore, each with
distinct focuses and contributions to the parent company's
operations. CBX Cellular Goods Canada is incorporated in Canada and
has its registered office at 700-401 West Georgia Street,
Vancouver, British Columbia V6B 5A1, Canada. It specializes in the
research, development, and production of innovative consumer
skincare and wellness products in the biosynthetic CBD and CBG
space. King Tide Carbon Pte. Ltd Singapore is a wholly owned
subsidiary dedicated to oceanic biosynthetic carbon removal
industry. Incorporated and registered in Singapore with its
registered office at 101 Telok Ayer Street, #03-02, Singapore
068574. Furthermore, King Tide Pte. Ltd Singapore also has its
wholly owned subsidiary, King Tide Carbon Canada Ltd, dedicated to
the carbon removal industry and registered office at 700-401 West
Georgia Street, Vancouver, British Columbia V6B 5A1, Canada.
The carbon removal services business was acquired separately by
the parent company from the newly incorporated subsidiary
undertaking King Tide Carbon Pte. Ltd Singapore but will be
operated going forward by that entity (see note 5). The acquisition
of King Tide Carbon Pte. Ltd Singapore therefore did not constitute
a business combination in accordance with IFRS 3.
The subsidiary undertakings are set out below.
Name Principal activity Holding
CBX Cellular Goods Canada Ltd Cannabinoid wellness products 100%
King Tide Carbon Pte. Ltd Singapore Carbon removal services 100%
Investments
in subsidiary
Cost and net book value GBP
As at 1 September 2022 1
Additions 60
--------------
As at 31 August 2023 61
==============
14. Inventory
2023 2022 2023 2022
GBP GBP GBP GBP
Group Group Company Company
Raw materials and packaging 456,297 363,410 582,883 363,410
Finished goods 179,983 335,150 179,983 335,150
Provision for obsolescence (53,397) (194,433) (53,397) (194,433)
582,883 504,127 582,883 504,127
-------- --------- -------- ---------
The cost of inventory recognised within cost of sales amounted
to GBP25,796 (2022: GBP10,787). Write-downs of inventory to net
realisable value amounting to GBP53,397 (2022: GBP194,433) was
recognised in administrative expenses in the statement of profit or
loss.
15. Share capital and share premium
Number
of Share Share
shares capital premium Total
No. GBP GBP GBP
At 1 September 2022 507,250,000 507,250 12,513,101 13,020,351
Issue of ordinary shares
(05/05/2023) 95,000,000 95,000 475,000 570,000
At 31 August 2023 602,250,000 602,250 12,988,101 13,590,351
=========== ======== =========== ==========
16. Trade and other payables
2023 2022 2023 2022
GBP GBP GBP GBP
Group Group Company Company
Trade creditors 104,892 125,374 100,381 125,374
Accruals 56,926 84,222 55,728 84,222
Other creditors 23,984 69,537 23,911 69,537
185,802 279,133 180,021 279,133
------- ------- ------- -------
17. Share-based payments
The Company has issued a total of 64,960,000 warrants to
subscribe for additional share capital of the company, of which,
2,500,000 have been exercised and 21,000,000 have lapsed, leaving
41,460,000 in issue. Each warrant entitles the holder to subscribe
for one ordinary equity share in the Company. The right to convert
each warrant is unconditional.
In the year to 31 August 2023, the Company issued 26,831,594
share options to subscribe for additional share capital of the
Company to its employees, of which 2,500,000 have lapsed, leaving
24,331,594 in issue. Each option entitles the holder to subscribe
for one ordinary equity share in the Company. The right to convert
each option is subject to the terms of each respective share option
agreement.
Weighted
Warrants average exercise 31-Aug-23 31-Aug-22
price Number Number
At the beginning of the year 3.05p 50,460,000 52,960,000
Issued on 3 April 2023 2.90p 2,000,000 -
Issued on 9 May 2023 0.97p 5,000,000 -
Issued on 10 May 2023 0.97p 2,000,000 -
Issued on 8 June 2023 1.50p 3,000,000 -
Lapsed in the year 1.00p (21,000,000) -
Exercised in the year 1.00p - (2,500,000)
------------------ ------------- -------------
At the end of the year 3.62p 41,460,000 50,460,000
================== ============= =============
Equity-settled share-based payments are measured at fair-value
(excluding the effect of non-market- based vesting conditions) as
determined through use of the Black-Scholes technique at the date
of issue.
Weighted
Share options average exercise 31-Aug-23 31-Aug-22
price Number Number
At the beginning of the year 7.47p 22,550,000 -
Issued in the year 1.20p 7,000,000 23,050,000
Lapsed in the year 7.15p (5,218,406) (500,000)
Exercised in the year - - -
----------------- ----------- ----------
At the end of the year 5.74p 24,331,594 22,550,000
================= =========== ==========
The total share-based payment charge for year was GBP150,322
(2022: GBP268,153). An amount of GBP150,322 (2022: GBP268,153) has
been charged to administrative expenses and GBPnil (2022: GBPnil)
to share premium.
The share-based payment charge was calculated using the
Black-Scholes model. All warrants have a vesting period between one
and three years from the date of issue and are subject to their
respective lock-in conditions if exercised. All share options have
an exercise period of between three and ten years.
Volatility for the calculation of the share-based payment charge
in respect of the warrants issued was determined by reference to
movements in share price of the Company for the period after the
date of admission and by reference to the relative share prices of
a selected peer group of companies listed on the London Stock
Exchange up to the date of admission.
The inputs into the Black-Scholes model for the share options
issued in the year are as follows:
31-Aug 31-Aug
2023 2022
Share options Share options
issued issued
Weighted average share price at grant
date - pence 0.398 6.79
Weighted average exercise price - pence 3.615 7.47
Weighted average volatility 126.33% 70.80%
Weighted average expected life in years 3 1.8
Weighted average contractual life in
years 10 10
2.5 to
Risk-free interest rate 3.5% 1.5 to 2.5%
Expected dividend yield 0% 0%
Weighted average fair-value of warrants
granted (pence) 0.49 2.07
The total number of warrants held by directors at 31 August 2023
was 10,000,000 (2022: 9,500,000). The total number of share options
issued to directors at 31 August 2023 was 7,000,000 (2022:
20,000,000).
18. Contingent liabilities
There were no contingent liabilities at 31 August 2023 or 31
August 2022.
19. Capital commitments
There were no capital commitments at 31 August 2023 or 31 August
2022.
20. Controlling party
There was no ultimate controlling party as at the year-end.
21. Related party transactions
During the year, the Company incurred fees of GBP11,125 (2022:
GBP28,812) for consulting services from Headline FD Limited, a
company majority-owned by Simon Walters. No other related party
transaction occurred during this financial year.
22. Subsequent events
Subsequent to the year end, the Company has continued to enhance
its retail strategy as it announced in the first quarter of the
2023-2024 financial year, a further retail partnership with Chill
Brands Group PLC, the online shop for wellness and relaxation
products.
As well as establishing new partnerships with high street
outlets, we continue to grow our existing sales channels by
participating in their seasonal promotional campaigns and events.
Over the Autumn 2023 season Cellular Goods' products were offered
as the first CBG-based skincare brand to be part of Sephora UK's
beauty box and subscription platforms.
In November 2023 Cellular Goods' e-commerce site was opened to
our French and German customers and later in the same month we also
launched shipping of our products to Austria, Italy, Portugal,
Spain, Denmark, Belgium and the Netherlands.
As we position ourselves at the forefront of carbon removal
solutions, King Tide in mid-November has achieved a milestone in
the production of kelp-derived biochar with 28% carbon content,
propelling the company forward in its commitment to sustainable
carbon removal. This innovation utilizes the carbon-rich properties
of kelp, a rapidly renewable marine resource, for biochar
production, recognised for its potential in soil improvement,
carbon sequestration, and enhanced agricultural productivity. As
global scientific consensus grows on biochar's viability for
permanent carbon sequestration, King Tide aims to scale up its
carbon removal efforts and generate high-quality Carbon Dioxide
Removal ("CDR") credits. The kelp-derived biochar not only
contributes to long-term carbon storage but also promotes
environmental stewardship through circular economy principles,
reducing waste and maximizing resource utilization. With a notable
28% carbon content, the biochar demonstrates efficacy in carbon
sequestration, soil fertility enhancement, and potential industrial
applications. This achievement aligns with King Tide's dedication
to a sustainable future and collaborative interdisciplinary efforts
with experts in marine biology, environmental science, and
agriculture. The success holds promise for advancing agricultural
practices, promoting scientific collaboration, and ushering in a
new era of oceanic carbon sequestration innovation.
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END
FR DBBDDLUDDGXB
(END) Dow Jones Newswires
December 22, 2023 02:00 ET (07:00 GMT)
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