Back to all announcements

DJ World High Life PLC Interim Results

TIDMLIFE

RNS Number : 1879I

World High Life PLC

31 March 2020

31 March 2020

World High Life PLC / Market: AQSE

WORLD HIGH LIFE PLC

("World High Life" or the "Company")

Interim Results

World High Life PLC, the AQSE listed investment company with a focus on developing business opportunities in the regulated cannabis industry in Europe, is pleased to announce its interim results for the six months ended 31 December 2019.

Highlights

The Directors of World High Life are pleased to provide an update on progress and the focus of the Company advancing into 2020.

Since listing on the AQSE Growth Market (Formerly NEX Growth Market) in September 2019, the Company has achieved significant milestones, which include:

-- Successfully raised gross proceeds of GBP4,754,102 through the issue of equity securities and convertible debentures to make and fuel strategic acquisitions, primarily in the CBD Health and Wellness sector in the UK and Europe

   --      Acquired Love Hemp Ltd., one of the UK's leading suppliers of CBD and hemp products 

-- Embarked on strategic development of the Love Hemp business in an effort to vastly expand its reach and access to online and retail markets

-- Further expansion of the Love Hemp white labelling program through its wholly owned subsidiary, LH Botanicals Ltd.

-- Continuation of online and social media marketing strategies which included the announcement 3-time UFC World Champion Georges St-Pierre as worldwide Brand Ambassador for Love Hemp and World High Life

-- Initiated filings to list on North American exchanges, in the US and in Canada - all in the effort to further increase liquidity

Chairman's Statement

"The UK and European CBD Health and Wellness market, as well as the Regulated Medicinal Cannabis market is forecast to be the largest in the world by 2028," stated World High Life President and Chairman, Mr. David Stadnyk.(1) "World High Life is an investment company that recognizes the importance of building brands, distribution, relationships and great product experiences using best practices in order to be the leader in the sector as it matures. As an example, Love Hemp is a pioneer in the CBD Health and Wellness space, and through the acquisition we bring capital and experience to the mix. This enables Love Hemp to establish itself as a frontrunner throughout the UK and Europe. As this industry experiences rapid growth and heightened consumer awareness Love Hemp is well positioned with the support of World High Life to continue to rapidly grow and capture market share at a wholesale, retail and most importantly online. World High Life is well positioned as a first mover to complete further acquisitions that are accretive to Love Hemp and the overall business model of being an investment issuer. All of this building on the momentum we have and capitalize on the strength of the foundation we have established in a short period of time."

World High Life is committed to three top level objectives going forward, these include; continued use of the capital markets and the increase of liquidity in the Company's stock, providing financial and share capital as well as expertise to continue to grow its Love Hemp subsidiary and seeking new investment opportunities.

Increasing Liquidity

With growing interest in World High Life's mandate as an investment issuer and building upon potential further acquisitions, World High Life wants to ensure it has an established presence across multiple financial markets globally to attract investment and liquidity.

As such, in addition to its existing UK listing on the AQSE Growth Market, World High Life will anchor itself internationally with co listings in Europe and North American markets in the USA and Canada.

Love Hemp Acquisition and Progress

The Love Hemp team have taken significant steps to increase market share in the UK and Europe, deploying capital and expertise from the acquisition to achieving multiple milestones including:

-- Advancing the official launch of LH Botanicals - Love Hemp's all-around CBD specialist, CBD supplier and white label producer

-- Signed 3-time UFC World Champion, Georges St-Pierre as Love Hemp and World High Life Brand Ambassador - delivering a vast promotional platform with one of the most recognized sport and health personalities on the planet

-- Completing an extensive, consumer packaged goods (CPG) informed branding strategy with one of Europe's top CPG agencies, aimed at renewing the Love Hemp brand for global expansion

-- Achieved record sales through Love Hemp's Black Friday promotion, increasing online sales from previous Black Friday promotions by approximately 400%, totaling over GBP78,000

Love Hemp will be entirely focused on continued growth in the UK and Europe, increasing production capacity and growing its LH Botanicals business line as its new facility becomes operational, which will provide additional capacity to expand to global markets. The Directors believe that Love Hemp's CBD, Health and Wellness positioning is strengthening as global demand for products representing the associated lifestyles continue to open significant opportunities for growth. Overall, the Directors believe that Love Hemp is uniquely positioned with its expertise, brand and team to be a global leader in the CBD Health and Wellness space.

New Investment Opportunities

World High Life is actively seeking new investment opportunities in alignment with its objectives in the CBD Health and Wellness space. The World High Life team has extensive knowledge in the CBD Health and Wellness, and the medicinal cannabis industries, along with an extensive global network. Those strengths are being put to use in identifying and assessing potential investments that will add significant shareholder value.

Current Reality

Importantly, in response to the circumstances surrounding COVID -19, Love Hemp has been proactive in communicating with its customer base that its supply and delivery are running as normal. The Company is monitoring all aspects of the business, prioritizing the safety of its customers, team, suppliers and delivery partners.

Financials

From the date of the close of the acquisition of Love Hemp on 18 October 2019 to 31 December 2019, the combined operation has recognized GBP426,465 in revenues and achieved overall gross margins of 49%. The Company recorded an adjusted EBITDA loss of GBP1,054,088 (earnings before interest, tax, depreciation, share-based payments, and transactions costs, impairment of intangible assets, and derivative fair value adjustments) for the six-month period ended 31 December 2019. Net loss per IFRS was GBP9,835,551 for the six-month period. The Company incurred above average professional fees in relation to admission to the AQSE Growth Market which occurred on 12 September 2019. Additionally, the Company incurred GBP201,407 in transaction costs in relation to the close of the acquisition of Love Hemp which represent one-time costs. The Company was required to recognise an impairment charge to goodwill and intangible assets of GBP7,473,831 in relation to the Love Hemp acquisition given the current economic uncertainty in relation to COVID-19.

As at 31 December 2019, the Company's consolidated working capital was GBP230,015 excluding lease liabilities recorded under IFRS of GBP131,841 and deferred consideration of GBP4,000,000 to be issued in ordinary shares in relation to the Love Hemp acquisition. The Company is in the process of evaluating additional sources of capital including both equity and debt arrangements.

Subsequent to 31 December 2019 the Company received short term loans of GBP243,000. The Company aims to curtail discretionary spending as necessary to ensure its financial obligations are met on a timely basis.

Responsibility Statement

We confirm that to the best of our knowledge:

-- The interim financial statements have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, as adopted by the EU;

-- The interim financial statements give a true and fair view of the assets, liabilities, financial position and loss of the Company;

-- The Interim report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

-- The Interim report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being the information required on related party transactions.

The interim report was approved by the Board of Directors and the above responsibility statement was signed on its behalf by:

David Stadnyk

Chairman

31 March 2020

For further information please contact:

 
David Stadnyk 
 Founder & CEO 
 World High Life PLC 
 +44 (0) 7926 397 675 
 info@worldhighlife.uk 
 
AQSE Corporate Adviser       Financial PR 
 Mark Anwyl/Allie Feuerlein   Camilla Horsfall/Megan Ray 
 Peterhouse Capital Limited   Blytheweigh 
 +44 (0) 20 7469 0930         +44 (0) 20 7138 3224 
 ma@peterhousecap.com         Camilla.horsfall@blytheweigh.com 
 af@peterhousecap.com         Megan.Ray@blytheweigh.com 
 
   For more information on World High Life please visit:                 www.worldhighlife.uk 

WORLD HIGH LIFE PLC CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

EXPRESSED IN POUNDS STERLING

(MORE TO FOLLOW) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)

DJ World High Life PLC Interim Results -2-

UNAUDITED

 
 
 AS AT                                                              31 December                     30 June 
                                                                           2019                        2019 
                                               Note                         GBP                         GBP 
--------------------------------------------  -----  --------------------------  -------------------------- 
 
 ASSETS 
 
 Current 
   Cash                                         4                213,538                          1,307,456 
   Trade receivables and other                  6                427,074                            286 
   Inventory                                    7                428,126                                  - 
--------------------------------------------  -----  --------------------------  -------------------------- 
                                                                      1,068,738                   1,307,742 
 Non-current 
   Property and equipment                       8                     1,234,005                           - 
   Goodwill and intangible assets               9                     2,700,000                           - 
--------------------------------------------  -----  --------------------------  -------------------------- 
 Total assets                                                         5,002,743                   1,307,742 
============================================  =====  ==========================  ========================== 
 
 LIABILITIES AND EQUITY 
 
 Current 
   Accounts payable and accrued liabilities     10               747,061                       33,731 
   Lease liability - current                    8                131,841                                  - 
   Loans payable - current                      11                 91,662                                 - 
   Deferred consideration                       9                     4,000,000                           - 
   Derivative liability                         12               934,577                                  - 
--------------------------------------------  -----  --------------------------  -------------------------- 
                                                                      5,905,141                33,731 
 Non-current 
   Lease liability                              8                884,793                                  - 
   Loans payable                                11               230,260                                  - 
   Convertible debentures                       12                    2,116,496                           - 
   Deferred tax liability                       17                 28,900                                 - 
--------------------------------------------  -----  --------------------------  -------------------------- 
 Total liabilities                                                    9,165,590                33,731 
 
 Equity 
   Share capital                                13                    1,417,127             886,413 
   Share premium                                13                    4,311,661             291,233 
   Shares to be issued                          13                            -              175,493 
   Reserves                                     13                 23,044                                 - 
   Retained losses                                         (9,914,679)                      (79,128) 
--------------------------------------------  -----  --------------------------  -------------------------- 
 Total equity                                              (4,162,847)                   1,274,011 
 Total liabilities and equity                                         5,002,743                   1,307,742 
============================================  =====  ==========================  ========================== 
 
 

Nature and continuance of operations (Note 1,2)

Subsequent events (Note 10)

The accompanying notes are an integral part of these consolidated interim financial statements.

WORLD HIGH LIFE PLC CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

EXPRESSED IN POUNDS STERLING

UNAUDITED

 
 
                                                                     Six months 
                                                                          ended 
                                                                    31 December 
                                                                           2019 
                                               Note                         GBP 
--------------------------------------------  -----  -------------------------- 
 
 Revenue                                                             426,465 
 Cost of goods sold                                                  216,861 
--------------------------------------------  -----  -------------------------- 
 Gross profit                                                        209,604 
 
 Expenses 
   Selling, general, and administrative         5                    772,121 
   Salaries and wages                                                142,417 
   Consulting                                                        228,848 
   Professional fees                                                 404,428 
   Transaction costs                                                 201,407 
   Depreciation                                 8                        5,227 
   Share-based compensation                     13                     23,044 
   Interest and accretion                      8,12                    65,527 
   Foreign exchange                                                    46,346 
--------------------------------------------  -----  -------------------------- 
 Total expenses                                                       1,889,365 
--------------------------------------------  -----  -------------------------- 
 Loss before other items                                       (1,679,761) 
  Impairment - intangible assets                               (7,473,831) 
  Derivative fair value adjustment                                (681,959) 
--------------------------------------------  ----- 
 Net and comprehensive loss for the period                     (9,835,551) 
============================================  =====  ========================== 
 
 Loss per share 
    Basic and diluted                                                    (0.14) 
--------------------------------------------  -----  -------------------------- 
 
 Weighted average number of ordinary shares 
    Basic and diluted                                                11,789,186 
============================================  =====  ========================== 
 
 

The accompanying notes are an integral part of these consolidated interim financial statements.

WORLD HIGH LIFE PLC CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

PERIOD ENDED 31 DECEMBER 2019

EXPRESSED IN POUNDS STERLING

UNAUDITED

 
 
                        Number                                                 Share 
                   of ordinary          Share           Share          subscriptions                                      Total 
                        shares        Capital         Premium               received   Reserves        Deficit           equity 
                                          GBP             GBP                    GBP        GBP            GBP              GBP 
----------------  ------------  -------------  --------------  ---------------------  ---------  -------------  --------------- 
 Balance, 30 
  June 2019          8,864,136        886,413         291,233                175,493          -       (79,128)        1,274,011 
   Ordinary 
    shares 
    issued 
    at GBP0.10 
    each               810,000         81,000               -                      -          -              -          81,000 
   Ordinary 
    shares 
    issued 
    at GBP0.60 
    each                67,500          6,750          33,750                      -          -              -           40,500 
   Ordinary 
    shares 
    issued 
    at GBP1.00 
    each             1,099,174        109,917         989,257              (175,493)          -              -         923,681 
   Ordinary 
    shares 
    issued 
    for services 
    at GBP1.00 
    each               330,468         33,047         297,421                      -          -              -        330,468 
   Ordinary 
    shares 
    issued 
    to acquire 
    Love Hemp 
    Ltd.             3,000,000        300,000       2,700,000                      -          -              -        3,000,000 
   Share-based 
    compensation             -              -               -                      -     23,044              -           23,044 
   Net loss for 
    the period               -              -               -                      -          -    (9,835,551)      (9,835,551) 
---------------- 
 Balance, 31 
  December 2019     14,171,278      1,417,127       4,311,661                      -     23,044    (9,914,679)      (4,162,847) 
================  ============  =============  ==============  =====================  =========  =============  =============== 
 
 

The accompanying notes are an integral part of these consolidated interim financial statements.

(MORE TO FOLLOW) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)

DJ World High Life PLC Interim Results -3-

WORLD HIGH LIFE PLC STATEMENT OF CASH FLOWS

SIX MONTHS ENDED

EXPRESSED IN POUNDS STERLING

UNAUDITED

 
 
                                                               31 December 
                                                                      2019 
                                                                       GBP 
----------------------------------------------   ------------------------- 
 
 Operating activities 
 Net loss for the period                                   (9,835,551) 
 Adjusted for: 
   Depreciation                                                      5,227 
   Share based payments                                            23,044 
   Accretion and interest                                          59,215 
   Shares issued for services                                   330,468 
   Accrued interest                                                  5,434 
  Impairment - intangible assets                                 7,473,831 
  Derivative fair value adjustment                               681,959 
 
 Changes in non-cash working capital: 
   Receivables and other                                           17,964 
   Inventory                                                     116,780 
   Accounts payable and accrued liabilities                   (111,970) 
-----------------------------------------------  ------------------------- 
 Cash flows from operating activities                      (1,233,599) 
 
 Investing activities 
   Acquisition of Love Hemp Limited, net                   (2,915,651) 
   Property and equipment                                       (13,946) 
-----------------------------------------------  ------------------------- 
 Cash flows from investing activities                      (2,929,597) 
 
 Financing activities 
   Ordinary shares issued for cash                               1,045,181 
   Convertible debentures                                        2,355,782 
   Convertible debentures - transaction costs                   (45,883) 
   Lease payments                                               (15,663) 
   Loan repayments                                            (270,139) 
-----------------------------------------------  ------------------------- 
 Cash flows from financing activities                            3,069,278 
 
 Change in cash                                           (1,093,918) 
 Cash, beginning of period                                       1,307,456 
-----------------------------------------------  ------------------------- 
 Cash, end of period                                            213,538 
===============================================  ========================= 
 
 

The accompanying notes are an integral part of these consolidated interim financial statements.

   1.            NATURE AND CONTINUANCE OF OPERATIONS 

World High Life Limited w as i ncorp orated by Cert i f ica te of I ncorporati on in England and Wales on 30 January 2019 with registration number 11797850 under the Companies Act 2006. The limited company reregistered as a public company on 6 August 2019, and thus became World High Life Plc (t he " C o m pan y") on the same date. The C o m pan y's head off ice and reg i s tered and records off ice address is 7-9 Swallow Street, 2(nd) Floor, London, United Kingdom, W1B 4DE.

The Company is an investment issuer with a focus on developing business opportunities in the CBD Health and Wellness market, as well as the Regulated Medicinal Cannabis in the UK and Europe. The Company's focus is on building and facilitating the growth of a diversified portfolio of companies, assets and opportunities within its focus mandate.

   2.            BASIS OF PRESENTATION 

The Company acquired the entire share capital of Love Hemp Ltd on 18 October 2019 which the Directors have treated as an asset acquisition as explained in Note 9 to the financial statements for the period ended 31 December 2019. The Directors are required to and have prepared consolidated condensed financial statements which include the results of the acquired subsidiary from the date that the acquisition took place.

The condensed interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Statements" as adopted by the European Union and the Disclosure and Transparency Rules of the UK Financial Conduct Authority.

The interim financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 2006. It has been prepared on a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union.

These consolidated interim financial statements have not been audited nor have they been reviewed by the Group's auditors under ISRE 2410 of the Auditing Practices Board .

Going concern

The Company meets its day-to-day working capital requirements through its bank facilities. The current economic conditions continue to create uncertainty, particularly over the availability of bank finance for the foreseeable future. The Company's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Company should be able to operate within the level of its current facilities.

The Financial Statements have been prepared on a going concern basis. The Company's assets are generating revenues and based on the Board's budgets, cash flow forecasts, support from the ultimate controlling parent and considered ability to raise further finance, the Directors are of the view that the Company has sufficient funds to undertake its operating activities over the next 12 months from the date these financial statements are approved. As a result, they continue to adopt the going concern basis of accounting in preparing the annual financial statements for the year ended 30 June 2019.

After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its financial statements.

   2.            BASIS OF PRESENTATION (Continued) 

Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Company's medium-term performance are liquidity risk, credit risk, interest rate risk and fair value estimation.

Critical accounting estimates

The preparation of condensed interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in Note 3.

New and amended standards mandatory for the first time for the financial year beginning 30 January 2019

The following new IFRS standards and/or amendments to IFRS standards are mandatory for the first time for the Company:

 
Standard                                                                       Effective date 
---------------------  ------------------------------------------------------  ---------------- 
 
 IFRS 16                Leases                                                  1 January 2019 
  IAS 28 (Amendments)    Long term interests in associates and joint ventures    1 January 2019 
 Annual Improvements    2015 - 2017 Cycle                                       1 January 2019 
 IAS 19 (Amendments)    Employee Benefits                                       1 January 2019 
 IFRIC 23               Uncertainty over income tax treatments                  1 January 2019 
 

The Directors believe that the adoption of these standards has not had a material impact on the financial statements other than changes to disclosures.

New standards, amendments and Interpretations in issue but not yet effective or not yet endorsed and not early adopted

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the condensed interim financial statements are listed below. The Company intends to adopt these standards, if applicable when they become effective.

 
Standard                                                                     Effective date 
--------------------  -----------------------------------------------------  ---------------- 
 
 IFRS 3 (Amendments)   Business Combinations                                  1 January 2020* 
 IAS 1 (Amendments)    Presentation of Financial Statements                   1 January 2020* 
 IAS 8 (Amendments)    Accounting policies, Changes in Accounting Estimates   1 January 2020* 
 

*Not yet endorsed by the EU.

The Company is evaluating the impact of the new and amended standards above. The Directors believe that these new and amended standards are not expected to have a material impact on the Company's results or shareholders' funds.

   3.            USE OF ESTIMATES, ASSUMPTIONS, AND JUDGEMENTS 

(MORE TO FOLLOW) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)

DJ World High Life PLC Interim Results -4-

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these judgments, estimates and assumptions could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Impairment of long-lived assets

Long-lived assets, including property and equipment, and intangible assets, are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or group of assets (CGU). The recoverable amount of an asset or a CGU is the higher of its fair value less costs to sell, and its value in use. If the carrying amount of an asset exceeds its recoverable amount, an impairment charge is recognised immediately in profit or loss by the amount by which the carrying amount of the asset exceeds the recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the lesser of the revised estimate of recoverable amount, and the carrying amount that would have been recorded had no impairment loss been recognised previously.

Business combinations

The consolidated interim financial statements comprise the financial statements of World High Life Plc and its subsidiaries as at 31 December 2019. Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has all of the following:

-- Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

   --      Exposure, or rights, to variable returns from its involvement with the investee 
   --      The ability to use its power over the investee to affect its returns 

Judgement is used in determining whether an acquisition is a business combination or an asset acquisition. Management determines whether assets acquired and liabilities assumed constitute a business. A business consists of inputs and processes applied to those inputs that have the ability to create outputs. Management determines whether assets acquired and liabilities assumed constitute a business. In examining processes and potential outputs, management considers the ability of the acquired and existing processes to adequately be capable of producing the potential outputs; where the processes are insufficient and/or incomplete to produce potential outputs, the company considers the acquisition to be an asset acquisition.

The Company measures all the assets acquired and liabilities assumed at their acquisition-date fair values. Non-controlling interests in the acquiree are measured on the basis of the non-controlling interests' proportionate share of the equity in the acquiree's identifiable net assets. Acquisition-related costs are recognized as expenses in the periods in which the costs are incurred and the services are received (except for the costs to issue debt or equity securities which are recognized according to specific requirements). The excess of the aggregate of (a) the consideration transferred to obtain control, the amount of any non-controlling interest in the acquiree over (b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed, is recognised as goodwill as of the acquisition date.

   3.            USE OF ESTIMATES, ASSUMPTIONS, AND JUDGEMENTS (Continued) 

Determination of asset fair values and allocation of purchase consideration

Significant asset acquisitions and business combinations require judgements and estimates to be made at the date of acquisition in relation to determining the relative fair value of property and equipment, as well as the allocation of the purchase consideration over the fair value of the assets. The information necessary to measure the fair values as at the acquisition date of assets acquired requires management to make certain judgements and estimates about future events, including but not limited to future production potential, and future market prices of products, and the ability to effectively distribute products. In certain circumstances, such as the valuation of property and equipment, intangible assets and goodwill acquired, the Company may rely on independent third-party valuators. Provisional purchase price allocations are subject to review by management upon integration of the acquired businesses and will be adjusted as necessary were circumstances indicate it is appropriate to do so.

Share-based payments

The Company utilizes the Black-Scholes Option Pricing Model ("Black-Scholes") to estimate the fair value of warrants and stock options granted to Directors, Officers, employees, consultants. The use of Black-Scholes requires management to make various estimates and assumptions that impact the value assigned to the stock options including the forecast future volatility of the stock price, the risk-free interest rate, dividend yield and the expected life of the stock options. Any changes in these assumptions could have a material impact on the Share-based compensation calculation value, however the most significant estimate is the volatility. The Company estimated volatility based on historic share prices of companies operating in the regulated cannabis industry. Historical volatility is not necessarily indicative of future volatility. The expected life of stock options or warrants is determined based on the estimate that they would be exercised evenly over their term. There was no recent history of stock option exercises available to consider in the estimate of expected life at the time of grant.

   4.            SIGNIFICANT ACCOUNTING POLICIES 

Foreign currencies

Functional and presentation currency

The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and its subsidiaries was determined by conducting an analysis of the consideration factors identified in IAS 21, "The Effects of Changes in Foreign Exchange Rates" ("IAS 21"). The functional currency of the Company is Pounds Sterling which is also the presentation currency of the group.

Translation of foreign transactions and balances into the functional currency

Foreign currency transactions are translated into the functional currency of the Company at rates of exchange prevailing on the dates of the transactions. At each reporting date, all monetary assets and liabilities that are denominated in foreign currencies are translated to the functional currency of the Company at the rates prevailing at the date of the statement of financial position. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transaction

Cash

In the Statement of Cash Flows, cash is comprised of cash at bank and in hand 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.

   4.            SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Loss per share

The Company presents basic loss per share for its ordinary shares, calculated by dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share does not adjust the loss attributable to ordinary shareholders or the weighted average number of ordinary shares outstanding when the effect is anti-dilutive.

Financial instruments

Financial assets

On initial recognition, financial assets are recognised at fair value and are subsequently classified and measured at: (i) amortised cost; (ii) fair value through other comprehensive income ("FVOCI"); or (iii) fair value through profit or loss ("FVTPL"). The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are expensed. All financial assets not classified and measured at amortised cost or FVOCI, are measured at FVTPL. On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income.

(MORE TO FOLLOW) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)

DJ World High Life PLC Interim Results -5-

For a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model The classification determines the method by which the financial assets are carried on the statement of financial position subsequent to inception and how changes in value are recorded.

Impairment

An 'expected credit loss' impairment model applies which requires a loss allowance to be recognised based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognised for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset's original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognised in profit or loss for the period.

In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortised cost decreases, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities

Financial liabilities are designated as either: (i) FVTPL; or (ii) other financial liabilities. All financial liabilities are classified and subsequently measured at amortised cost except for financial liabilities at FVTPL. The classification determines the method by which the financial liabilities are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Accounts payable and accrued liabilities is classified as other financial liabilities and carried on the statement of financial position at amortised cost.

   4.            SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investments have been impacted.

For all financial assets objective evidence of impairment could include:

   -         significant financial difficulty of the issuer or counterparty; or 
   -         default or delinquency in interest or principal payments; or 

- it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial assets, such as receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. The carrying amount of financial assets is reduced by the impairment loss directly for all financial assets with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Taxation

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax expense is the expected tax payable on the taxable income for the

year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recorded by providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities which affect neither accounting nor taxable loss as well as differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

   4.            SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and other equity instruments are recognised as a deduction from equity. Ordinary shares issued for consideration other than cash, are valued based on their market value at the date the shares are issued.

The Company has adopted a residual value method with respect to the measurement of warrants attached to private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The Company considers the fair value of ordinary shares issued in the private placements to be the more easily measurable component and the ordinary shares are valued at their fair value, as determined by the closing market price on the announcement date. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as reserves.

Inventory

Inventories of finished goods and packing materials are valued initially at cost and subsequently at the lower of cost and net realisable value. Inventory consists of infused products, raw materials, accessories, and product packaging. Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost is determined using the weighted average cost basis. Products for resale and supplies and consumables are valued at the lower of cost and net realizable value. The Company reviews inventory for obsolete and slow-moving goods and any such inventory is written-down to net realisable value.

Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated using the following methods and rates:

 
 
 Category                  Method                Rate 
------------------------  -------------------   ----- 
 Leasehold improvements    Declining balance      20% 
 Production equipment      Declining balance      15% 
 Office equipment          Declining balance      15% 
------------------------  --------------------  ----- 
 
 

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the profit or loss in the period the asset is derecognized. The assets' residual values, useful lives and methods of depreciation are reviewed at each reporting date, and adjusted prospectively, if appropriate.

   4.            SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Leases

To identify a lease, the Company (1) considers whether an explicit or implicit asset is specified in the contract and (2) determines whether the Company obtains substantially all the economic benefits from the use of the underlying asset by assessing numerous factors, including but not limited to substitution rights and the right to determine how and for what purpose the asset is used.

(MORE TO FOLLOW) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)

DJ World High Life PLC Interim Results -6-

When assessing the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option or to not exercise a termination option. This judgment is based on factors such as contract rates compared to market rates, economic reasons, significance of leasehold improvements, termination and relocation costs, installation of specialized assets, residual value guarantees, and any sublease term.

The Company has elected not to recognize right-of-use assets and lease liabilities for low-value assets or short-term leases with a term of 12 months or less. These lease payments are recognised in operating expenses over the lease term.

The lease liability is initially measured at the present value of the lease payments that are not paid. The Company elected to not separate non-lease components from lease components and to account for the non-lease and lease components as a single lease component. Lease payments generally include fixed payments less any lease incentives receivable. The lease liability is discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. The Company estimates the incremental borrowing rate based on the lease term, collateral assumptions, and the economic environment in which the lease is denominated. The lease liability is subsequently measured at amortized cost using the effective interest method. The lease liability is remeasured when the expected lease payments change as a result of new assessments of contractual options and residual value guarantees.

The right-of-use asset is recognised at the present value of the liability at the commencement date of the lease less any incentives received from the lessor. Added to the right-of-use asset are initial direct costs, payments made before the commencement date, and estimated restoration costs. The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

Revenue

The Company's accounting policy for revenue recognition under IFRS 15 is as follows:

To determine the amount and timing of revenue to be recognised, the Company follows a 5-step process:

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied.

Revenue from the direct sale of infused products for a fixed price is recognized when the Company transfers control of the good to the customer upon delivery.

   4.            SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Share-based payments

The Company may grant stock options to acquire common shares of the Company to Directors, Officers, employees and consultants. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides services similar to those performed by an employee.

The fair value of stock options is measured on the date of grant, using the Black-Scholes option pricing model, and is recognized over the vesting period. Consideration paid for the shares on the exercise of stock options is credited to share capital. In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.

   5.            NATURE OF EXPENSES 
 
 
                                                       31 December 
                                                              2019 
 Selling, general and administrative expense                   GBP 
---------------------------------------------   ------------------ 
 Office and administration                                  51,313 
 Advertising and promotion                                425,880 
 Rent, utilities, operating costs                         110,110 
 Travel and entertainment                                 143,416 
 Insurance                                                  25,126 
 Bank charges and processing costs                          16,276 
----------------------------------------------  ------------------ 
 Total                                                    772,121 
----------------------------------------------  ------------------ 
 
 
   6.            TRADE RECEIVABLES AND OTHER CURRENT ASSETS 
 
 
                                          31 December 
                                                 2019 
                                                  GBP 
-------------------------------   ------------------- 
 Trade receivables                          170,997 
 Other receivables                            33,613 
 VAT receivable                                56,191 
 Prepaid expenses and deposits               166,273 
--------------------------------  ------------------- 
 Total                                       427,074 
--------------------------------  ------------------- 
 
 
   7.            INVENTORY 
 
 
                          31 December 
                                 2019 
                                  GBP 
----------------   ------------------ 
 Raw materials                176,323 
 Finished goods               251,803 
-----------------  ------------------ 
 Total                        428,126 
-----------------  ------------------ 
 
 
   8.            PROPERTY AND EQUIPMENT 
 
 
                              Leasehold                   Right              Production                  Office 
                           Improvements                  of Use               Equipment               Equipment                   Total 
                                    GBP                     GBP                     GBP                     GBP                     GBP 
--------------  -----------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
 Cost 
 Balance 30                           -                       -                       -                       -                       - 
 June 2019 
 Additions - 
  Love Hemp 
  acquisition                 54,862              1,032,297                   58,419                147,309               1,292,887 
--------------  -----------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
 Balance 31 
  December 
  2019                        54,862              1,032,297                   58,419                147,309               1,292,887 
--------------  -----------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
 
 Accumulated 
 depreciation 
 Balance 30                           -                       -                       -                       -                       - 
 June 2019 
 Additions - 
  Love Hemp 
  acquisition                   2,243                         -               14,432                  36,980                  53,655 
 Depreciation                     348                         -                1,393                   3,486                   5,227 
--------------  -----------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
 Balance 31 
  December 
  2019                          2,591                         -               15,825                  40,466                  58,882 
--------------  -----------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
 
 Net book 
 value 
 30 June 2019                         -                       -                       -                       -                       - 
 31 December 
  2019                        52,271             1,032,297                    42,594                106,843              1,234,005 
--------------  -----------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
 
 

A continuity of the lease liability underlying the right of use assets is as follows:

 
 
                                                            31 December 
                                                                   2019 
                                                                    GBP 
--------------------------------------------   ------------------------ 
 Balance, 30 June 2019                                                - 
 Acquired in Love Hemp transaction (Note 9)           1,032,297 
 Principal reduction                                     (15,663) 
---------------------------------------------  ------------------------ 
 Balance, 31 December 2019                            1,016,634 
 Less: Current portion                                (131,841) 
 Lease liability                                         884,793 
---------------------------------------------  ------------------------ 
 
 

The Company recorded interest expense of GBP6,312 in relation to the lease liability during the period.

   9.            ACQUISITION OF LOVE HEMP LIMITED 

In October 2019 the Company acquired 100% of Love Hemp Ltd. ("Love Hemp") for consideration of between GBP9 million and GBP10 million as follows:

   --              GBP3 million of the consideration paid in cash on completion 
   --              GBP3 million satisfied by the issue of 3,000,000 Ordinary Shares on completion 

A further earn out of up to a maximum of GBP4 million to be paid as follows:

(MORE TO FOLLOW) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)

DJ World High Life PLC Interim Results -7-

-- GBP1,500,000 in cash on the date falling six months and one day from the date of completion, provided that at the Company's election it can alternatively pay to the sellers an amount of GBP2,000,000 to be satisfied by the issue of Ordinary Shares calculated on a 10% discount to the 10 day VWAP preceding the date of the issue of those shares

-- GBP1,500,000 in cash on the date falling twelve months and one day from the date of completion provided that at the Company's election it can alternatively pay to the sellers an amount of GBP2,000,000 to be satisfied by the issue of Ordinary Shares calculated on a 10% discount to the 10 day VWAP preceding the date of the issue of those shares

The acquisition aligns with the Company's mandate to invest in leading companies in the European CBD wellness industry. Love Hemp is an early mover in the UK CBD market with established distribution and long-standing brand recognition.

The acquisition has been accounted for as a business combination, using the acquisition method. The purchase consideration has been provisionally allocated based on the Company's estimated fair value of the identifiable assets acquired and the liabilities assumed at the acquisition date.

The estimated purchase price allocation is as follows:

 
 
 Consideration                                                GBP 
----------------------------------------------   ---------------- 
 3,000,000 Ordinary shares at a fair value of 
  GBP1.00 per share:                                   3,000,000 
 Cash                                                  3,000,000 
 Contingent consideration                              4,000,000 
-----------------------------------------------  ---------------- 
                                                     10,000,000 
 Provisional net assets of Love Hemp Ltd. 
 Cash                                                      84,349 
 Accounts receivable                                     378,395 
 Inventory                                               544,906 
 Other current assets                                      66,357 
 Equipment                                               192,989 
 Right of use asset                                    1,032,297 
 Lease liability                                    (1,032,297) 
 Accounts payable and accrued liabilities              (825,300) 
 Loan payable                                          (586,627) 
 Deferred tax                                           (28,900) 
-----------------------------------------------  ---------------- 
 Net assets acquired                                   (173,831) 
 Goodwill and intangible assets                      10,173,831 
-----------------------------------------------  ---------------- 
 Total                                               10,000,000 
-----------------------------------------------  ---------------- 
 
 
   9.            ACQUISITION OF LOVE HEMP LIMITED (Continued) 

As of the date of these consolidated interim financial statements, the determination of fair value of assets and liabilities acquired is based on preliminary estimates and has not been finalised. The Company is currently in the process of determining the fair values of the net assets acquired, specifically the final allocation between goodwill and intangible assets. The actual fair values of the assets and liabilities may differ materially from the amounts disclosed in the preliminary fair value above and are subject to change within a period not to exceed twelve months from the acquisition date with retroactive restatement of the impact of adjustment to those provisional fair values effective as at the acquisition date.

Goodwill is expected to arise in the acquisition of Love Hemp because the cost of acquisition included amounts in relation to the benefit of expected revenue growth, existing distribution relationships, and future market development. These benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

Subsequent to 31 December 2019, in light of the international COVID-19 Virus pandemic, the Company determined it would be prudent to conduct an impairment analysis of the acquired goodwill and intangible assets. The Company determined that an impairment charge of GBP7,473,831 of the provisional goodwill and intangible assets was appropriate given uncertain economic growth prospects. A continuity of goodwill is as follows:

 
 
                                  31 December 
                                         2019 
                                          GBP 
--------------------------   ---------------- 
 Acquisition of Love Hemp         10,173,831 
 Impairment                       (7,473,831) 
---------------------------  ---------------- 
 Total                              2,700,000 
---------------------------  ---------------- 
 
 
   10.          ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 
 
 
                                          31 December 
                                                 2019 
                                                  GBP 
-------------------------------   ------------------- 
 Accounts payable                            516,891 
 Accrued liabilities and other               213,401 
 Taxes payable                                 16,769 
--------------------------------  ------------------- 
 Total                                       747,061 
--------------------------------  ------------------- 
 
 
   11.          LOANS PAYABLE 

A continuity of the loan balance is as follows:

 
 
                                                            31 December 
                                                                   2019 
                                                                    GBP 
------------------------------------------------   -------------------- 
 Balance acquired - Love Hemp acquisition (Note 
  9)                                                          586,627 
 Accrued interest                                                 5,434 
 Repayments                                                (270,139) 
 Current portion                                             (91,662) 
-------------------------------------------------  -------------------- 
 Balance at 31 December 2019                                 230,260 
-------------------------------------------------  -------------------- 
 
 

a) During April 2019, Love Hemp entered a loan agreement for a principal amount of up to GBP 360,343 bearing interest at 9.90%. The loan matures in sixty months and requires monthly repayments of GBP 7,638. Upon maturity, Love Hemp is required to pay a completion fee of GBP 10,495. The loan is secured by the assets of Love Hemp.

b) Love Hemp issued a 12% promissory note of GBP250,000 which was repaid following the close of the acquisition.

   12.          CONVERTIBLE DEBENTURES 
 
 
                                                    October                      November 
                                                       2019                          2019             Total 
                                                        GBP                           GBP                          GBP 
-----------------------------  ----------------------------  ----------------------------  --------------------------- 
 Balance, 30 June 2019                                    -                             -                            - 
 Convertible debentures 
  issued 
  (a,b)                                  2,338,554                           17,228                  2,355,782 
 Transaction costs - cash                   (45,883)                                    -               (45,883) 
 Conversion feature                       (250,734)                          (1,884)                  (252,618) 
 Accretion expense                             19,803                              149                     19,952 
 Interest expense                              38,976                              287                    39,263 
 Balance, 31 December 2019               2,100,716                           15,780                  2,116,496 
-----------------------------  ----------------------------  ----------------------------  --------------------------- 
 
 

In October and November of 2019, the Company issued 2,355,782 GBP1.00 convertible debenture units raising gross proceeds of GBP2,355,782. The convertible debentures units each consist of one debenture convertible into GBP0.10 nominal value Ordinary Shares at a price of GBP1.00 and one share purchase warrant exercisable at a price of GBP1.50 for a period of two years from closing, subject to the Company's right to accelerate the maturity date upon 30 days' notice in the event that the Ordinary Shares trade at GBP2.50 or higher for a 10 day period.

The debentures accrue interest of 10% annually and are subject to the Company's right to force conversion upon 30 days' notice in the event that the Ordinary Shares trade at GBP3.00 or higher for a 10-day period. Interest may be paid in cash or in Ordinary Shares, or a combination thereof at the discretion of the Company. The Debentures will mature in two years plus one day from the closing dates.

In connection with the above the Company paid cash transaction costs of $45,883 and issued a total of 5,497 share purchase warrants exercisable at a price of 1.50 per ordinary share for a period of two years from issue.

As stated in the convertible debenture agreements the conversion price will be adjusted if the Company completes a rights offering for less than 90% of the quoted price. The variability of the conversion price creates a derivative which has been recognized as a financial liability.

   12.          CONVERTIBLE DEBENTURES (Continued) 

(MORE TO FOLLOW) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)

DJ World High Life PLC Interim Results -8-

A continuity of the derivative liability related to the debenture conversion feature is as follows

 
 
                                                   October                      November 
                                                      2019                          2019              Total 
                                                       GBP                           GBP                           GBP 
----------------------------  ----------------------------  ----------------------------  ---------------------------- 
 Balance, 30 June 2019                                   -                             -                             - 
 Conversion feature - 
  initial recognition                       250,734                           1,884                     252,618 
 Fair value adjustment                      676,927                           5,032                     681,959 
 Balance, 31 December 2019                  927,661                           6,916                     934,577 
----------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 

The conversion feature was valued at 31 December, 2019 using the Black-Scholes valuation model with the following assumptions: Expected life 1.8 years, volatility 75%, discount rate 2.25%, dividend yield 0%.

   13.          SHARE CAPITAL AND RESERVES 

Auth orised

Un li m ited ordinary s hares w i th GBP0.10 par val ue. As of 31 December 2019, there were 14,171,278 ordinary shares outstanding.

Escrow Shares

The Company has ordinary shares subject to trading restrictions and escrow which are to be released in tranches through 2021. As at 31 December 2019, a total of 9,794,000 ordinary shares were subject to these escrow restrictions.

Issued and Outstanding - Ordinary Shares

On 20 November 2019 the Company completed a consolidation of its Ordinary shares ("share consolidation") on the basis of one post-consolidation Ordinary share for every ten pre-consolidation Ordinary shares held (10-to-1). All references contained in these financial statements to issued and outstanding Ordinary shares, warrants, per share amounts, and exercise prices, have been retroactively restated to reflect the effect of the share consolidation.

During the period ended 31 December 2019 the Company issued ordinary shares as follows:

a) In July 2019 the Company issued 307,993 units at a price of GBP1.00 per unit for gross proceeds of GBP307,993 with each unit consisting of one ordinary share and one half of a share purchase warrant. The par value of GBP0.10 per share totalling GBP30,799 was recorded to share capital and GBP277,194 was recorded to share premium. GBP175,493 of the proceeds was recorded prior to 30 June 2019 and was previously recorded as shares to be issued. Each full warrant entitles the holder to acquire an additional ordinary share at a price of GBP2.00 per ordinary share for a period of 2 years from the date of issuance. If the price of the ordinary shares of the Company trade above GBP5.00 per share on a stock exchange for 10 consecutive days, the Company has the right to provide notice to accelerate the expiry of the warrants to 30 days after the notice is given.

b) In July 2019 the Company issued 199,000 ordinary shares at a fair value of GBP1.00 each for services totalling GBP199,000.

   13.          SHARE CAPITAL AND RESERVES (Continued) 

Issued and Outstanding - Ordinary Shares (Continued)

c) In August 2019, the Company issued 728,500 Ordinary Shares to raise GBP728,500 at a subscription price of GBP1.00 to which the subscribers also received half a warrant of which a whole warrant can be exercised in return for an Ordinary Share at a price of GBP2.00 per Ordinary Share for a period of two years from the date of issue. The Company maintains an election to accelerate the expiry of such warrants should the Company's shares trade at a price of GBP5.00 or more for a period of 10 days.

d) In August 2019, the Company issued 810,000 Ordinary Shares to raise GBP81,000 at a subscription price of GBP0.10.

e) In August 2019, the Company issued 67,500 Ordinary Shares to raise GBP40,500 at a subscription price of GBP0.60 to which the subscribers also received half a warrant of which a whole warrant can be exercised in return for an Ordinary Share at a price of GBP1.20 per Ordinary Share for a period of two years from the date of issue. The Company maintains an election to accelerate the expiry of such warrants should the Company's shares trade at a price of GBP3.00 or more for a period of 10 days.

During the period ended 31 December 2019 the Company issued ordinary shares as follows:

f) In August 2019, the Company issued 62,681 Ordinary Shares to raise GBP62,681 at a subscription price of GBP1.00 to which the subscribers also received half a warrant of which a whole warrant can be exercised in return for an Ordinary Share at a price of GBP2.00 per Ordinary Share for a period of two years from the date of issue. The Company maintains an election to accelerate the expiry of such warrants should the Company's shares trade at a price of GBP5.00 or more for a period of 10 days.

g) In September 2019 the Company issued 50,000 ordinary shares at a fair value of GBP1.00 each to Peter House Capital Ltd. for services totalling GBP50,000.

h) In December 2019, the Company issued 81,468 Ordinary Shares to raise GBP81,468 at a subscription price of GBP1.00 to which the subscribers also received half a warrant of which a whole warrant can be exercised in return for an Ordinary Share at a price of GBP2.00 per Ordinary Share for a period of two years from the date of issue. The Company maintains an election to accelerate the expiry of such warrants should the Company's shares trade at a price of GBP5.00 or more for a period of 10 days.

During the period ended 30 June 2019 the Company issued ordinary shares as follows:

a) In January 2019 the Company was incorporated with an issued share capital of GBP10 divided into 100 ordinary shares with a nominal value of GBP1.00.

b) In June 2019 the Company issued 8,281,571 ordinary shares at a price of GBP0.10 per share for gross proceeds of GBP828,157.

c) In June 2019 the Company issued 582,464 units at a price of GBP0.60 per unit for gross proceeds of GBP349,479 with each unit consisting of one ordinary share and one half of a share purchase warrant. The par value of GBP0.10 per share totalling GBP58,246 was recorded to share capital and GBP291,233 was recorded to share premium. Each full warrant entitles the holder to acquire an additional ordinary share at a price of GBP1.20 per ordinary share for a period of 2 years from the date of issuance. If the price of the ordinary shares of the Company trade above GBP3.00 per share on a stock exchange for 10 consecutive days, the Company has the right to provide notice to accelerate the expiry of the warrants to 30 days after the notice is given.

d) In accordance with a GBP1.00 unit offering a total GBP175,493 had been collected by the Company prior to closing.

   13.          SHARE CAPITAL AND RESERVES (Continued) 

Warrants

A summary of warrant activity is as follows:

 
 
                                                                              Weighted 
                                             Number of                Average Exercise 
                                              Warrants                       Price GBP 
-----------------------------  -----------------------  ------------------------------ 
 Balance at 30 June 2019                       291,240                            1.20 
 Granted                                    3,050,952                             1.58 
                                                        ------------------------------ 
 Balance at 31 December 2019                3,342,192                            1.54 
=============================  =======================  ============================== 
 
 

The following table summarises warrants outstanding at 31 December 2019:

 
 
                       Number 
                           of                        Weighted Average 
---------------                                                        ------------------------- 
                                                                                        Weighted 
                                                                                         Average 
                                                       Exercise Price                  Remaining 
 Expiry date         Warrants                                     GBP                      Years 
---------------    ----------  --------------------------------------  ------------------------- 
 June 28, 2021        291,240                                    1.20                       1.49 
 July 19, 2021        153,999                                    2.00                       1.55 
 August 16, 
  2021                364,250                                    2.00                       1.63 
 August 27, 
  2021                 33,750                                    1.20                       1.66 
 August 27, 
  2021                 31,341                                    2.00                       1.66 
 September 12, 
  2020                 55,199                                    1.00                       0.70 
 October 9, 
  2021              1,140,485                                    1.50                       1.78 
 October 9, 
  2021                 10,400                                    1.50                       1.78 
 October 15, 
  2021                866,666                                    1.50                       1.79 
 October 28, 
  2021                331,403                                    1.50                       1.83 
 October 28, 
  2021                  4,934                                    1.50                       1.83 
 November 21, 
  2021                 40,734                                    2.00                       1.89 
 November 29, 

(MORE TO FOLLOW) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)

DJ World High Life PLC Interim Results -9-

  2021                 17,228                                    1.50                       1.92 
 November 29, 
  2021                    563                                    1.50                       1.92 
-----------------  ----------  --------------------------------------  ------------------------- 
                    3,342,192                                    1.54                       1.72 
  ===============  ==========  ======================================  ========================= 
 
 

Share-based compensation expense recognized during the period of GBP 23,044 related to 55,199 warrants granted to the Corporate Adviser upon listing on the AQSE Growth Market. The warrants were valued using the Black-Scholes Option Pricing Model using the following weighted average assumptions

 
 
                                             31 December 
                                                    2019 
-----------------------------------------   ------------ 
 Risk-free interest rate                           2.25% 
 Expected life                                         2 
 Annualized volatility                               75% 
 Dividend rate                                        0% 
 Weighted average fair value per warrant      GBP 0.42 
------------------------------------------  ------------ 
 
 

Expected annualized volatility was determined using the historic volatility of established comparable publicly traded cannabis companies.

   14.         RELATED PARTY TRANSACTIONS 

K ey m a n ag e ment pers o n nel

Key m a nag e m e nt pers o nnel i ncl u de t h o se pers o ns h a v i ng au t h ori ty a nd res pon si b ili ty for p lann i ng, d irecti ng a nd co n tro lli ng t he act i v iti es of t he C o m p a ny as a w ho le. T he Co m p a ny h as deter m i ned t hat k ey man a g e ment pers on nel co n si st of exec u t i ve and n o n- e xecu t i ve m e m bers of t he C o m pan y's Board of Direct ors and corp orate O ff icers an d / or co m p a n ies co n tro lled by t h o se i n d i v i d uals.

During the period ended 31 December 2019 the Company entered the following transactions with key management personnel.

-- Accrued 18,750 in Director and Officer salaries and service fees which are included in accrued liabilities.

   15.          FINANCIAL INSTRUMENTS 

Fa ir va lue

Fi n a n cial i n stru m e n ts mea s ured at fair val ue are cl a ss i f i ed i n to o ne of t hree l e vels in t he fair val ue h ierarchy accord i ng to t he relati ve reliab ili ty of t he i n p u ts u sed to es t i mate t he fair val ues. T he t h ree levels of t he fair val ue h ierarchy are:

-- L e v el 1 - Unad j u sted q u o ted prices in acti ve mar kets f or i den tical as sets or liab iliti e s;

-- L e v el 2 - In p u ts o t her t h an q u o ted prices t hat are ob servab le f or t he a sset or liab il ity eit her d irect ly or i n d irect l y; and

   --     L e v el 3 - In p u ts  t hat are  n ot  based  on  ob servab le  market  data. 

C ash is carried at f a ir val ue u s i ng a lev el 1 fair val ue m eas ure men t. T he recorded val ues of receivables, acco un ts p a yab le and accrued liab ilities appro x i mate t heir fair val ues d ue to t heir s h ort-term to m a t uri t y.

Fin a nci al ri sk m a n ag e m e nt

T h e C o m p a n y's ri sk ex po s ures and t he i m pact on t he C o m pan y's f i n a ncial i n st r u m e n ts are s um marised bel o w.

Cr ed it r i sk

Credit risk is the risk of a potential loss to the Company if customer or third party to a financial instrument fails to meet its contractual obligations. The majority of the Company's credit exposure at 31 December 2019 is the carrying amount of cash. The Company does not have significant credit risk with respect to its customers. All cash and cash equivalents are placed with major UK financial institutions.

The Company provides credit to its customers in the normal course of business and has established credit evaluation and monitoring processes to mitigate credit risk.

In terest r a te r i sk

T h e C o m pany is ex po sed to i n terest rate ri sk to t he ex t e nt t hat t he ca sh mai n tai ned at t he f i nan c ial i n st i t u t i o ns is s u b ject to a f l oati ng rate of i n terest. T he i n terest rate risk on cash is n ot co n s i dered si g n i f i can t.

accrued liabilities, and current portion of loans payable which have contractual maturities within one year. The Company manages liquidity risk by reviewing its capital requirements on an ongoing basis.

   15.          FINANCIAL INSTRUMENTS (Continued) 

Fin a nci al ri sk m a n ag e m e nt (Continued)

Liqu i d it y risk

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at 31 December 2019, the Company's current financial liabilities consist of accounts payable and

Fo rei gn cu rrency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency rates. As at 31 December 2019 the Company had cash, accounts payable and accrued liabilities, denominated in Canadian dollars ("CAD"). A 10% fluctuation in the foreign exchange rate between the Pound Sterling and Canadian dollar would have an impact of approximately $15,000 on profit or loss for the period. The Company does not undertake currency hedging activities to mitigate its foreign currency risk.

   16.          CAPITAL MANAGEMENT 

The Company defines capital as equity. The Company manages its capital structure and makes adjustments in order to have the funds available to support its operating activities.

The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern to pursue the development of its business. The Company manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may issue new equity instruments, new debt, or acquire and/or dispose of assets. As discussed in Note 1, the Company's ability to continue as a going concern is uncertain and dependent upon the continued financial support of its shareholders, future profitable operations, the lack of adverse political developments in the United Kingdom and Europe with respect to cannabis legislation, and securing additional financing.

Management reviews its capital management approach on an ongoing basis. There were no changes in the Company's approach to capital management during the periods presented. The Company is not subject to externally imposed capital requirement.

   17.          INCOME TAX 

Tax recognised in profit or loss:

 
 
                                                    31 December 
                                                           2019 
                                                            GBP 
-----------------------------------   ------------------------- 
 Loss for the period                       (9,835,551) 
 
 Adjustments for: 
 Share-based compensation                         23,044 
 Impairment - intangible assets                       7,473,831 
 Derivative fair value adjustment               681,959 
------------------------------------  ------------------------- 
 Loss for tax purposes                     (1,656,717) 
 Net tax credit                                 314,776 
------------------------------------  ------------------------- 
 Tax at the applicable rate of 19%                            - 
------------------------------------  ------------------------- 
 
 

No charge to taxation arises due to the losses incurred. The Company has tax losses of approximately GBP2,122,000 available to carry forward against future taxable profits. The deferred tax liability of GBP28,900 relates to temporary differenced arising in relation to tax credits of Love Hemp.

   18.          SUBSEQUENT EVENTS 

Subsequent to 31 December 2019 , the Company completed the following transaction:

a) The Company entered unsecured loan agreements whereby approximately GBP243,000 was advanced to the Company with an interest rate of 5% per annum repayable on November 1, 2020.

b) On 4 February 2020 the Company issued 69,630 Ordinary shares of GBP0.1 each for GBP1.10 per share for a total consideration of $100,000 USD in lieu of consulting fees.

c) On 27 February 2020 the Company issued 2,550,000 options over Ordinary shares of GBP0.01 each, vesting 27 August 2020 and expiring 27 February 2025 with an exercise price of GBP1.28 to Directors, employees and consultants.

d) On 27 February 2020 the Company issued 40,734 warrants vesting immediately and expiring 21 November 2021 with an exercise price of GBP2.00 subscribers of shares.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

NEXFIFLDVAILVII

(END) Dow Jones Newswires

March 31, 2020 04:12 ET (08:12 GMT)