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DJ Sativa Group PLC Results to 31 December 2019 and Quarter 1 Accounts

TIDMSATI

RNS Number : 8716O

Sativa Group PLC

03 June 2020

T he information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Sativa Group Plc

("Sativa" or the "Company" or the "Group")

Final Results for the Period Ended 31 December 2019 and Quarter 1 2020 Management Accounts Highlights

3 June 2020

Sativa Group Plc (AQSE: SATI), (or "Sativa" or "the Company" or "the Group"), the UK's leading quoted CBD wellness and medicinal cannabis company, is pleased to announce its audited results from the year ended 31 December 2019, and draft unaudited Quarter 1 2020 interim management results.

Highlights:

-- Revenue increased by greater than five-fold from GBP0.26m to GBP1.45 million in the year to 31 December 2019, representing an increase of 190% on the annualised run rate of the revenue reported in H2 2018.

-- Gross profit margin improved from 42% to 52%, due to a decrease in the cost of CBD extract and production efficiencies, within market expectations.

-- The Group continues to expand its range of products, with the launch of the flagship Goodbody Botanicals brand, targeted at high-street pharmacies, grocers and independent pharmacies, and Goodbody Wellness, the premium health and beauty range.

-- The Tessellate Collective business was launched in Q2, opening up a new revenue stream as the direct selling channel.

-- Distribution partnership agreement signed with SHS Retail & Distribution a leader in distribution to high street grocers and pharmacies.

-- Sativa Cultivation & Extraction awarded a Home Office Controlled Drug licence, to fulfil its research partnership agreement with King's College London.

-- Henry Lees-Buckley appointed as Chief Executive Officer in August. Henry was previously CEO of Uni-Select [TSX:UNS], a Canadian TSX quoted company.

-- Clive Page OBE, Professor of Pharmacology at King's College London, appointed to Scientific Advisory Board.

-- PhytoVista Laboratories, increasingly recognised as a leading UK analytical laboratory for the testing of cannabinoids and terpenes, completed it's 3,000th cumulative sample test in December, 90% of which was for external CBD and food manufacturers.

-- The Company completed a GBP1.38 million (before costs) share placement and subscription in December, the majority of which came from existing shareholders.

Post year end:

-- On 2 June 2020, the Group signed a Bid Conduct Agreement and plan to announce the receipt of a firm offer from Stillcanna Inc. on 3 June 2020 to implement a UK Scheme of Arrangement. The transaction is analogous to a reverse takeover in that the Company's shareholders will acquire a controlling interest of approximately 65% of all Stillcanna shares following completion, on a fully diluted basis.

-- Goodbody Botanicals signed a distribution agreement with Alliance Healthcare, the leader in distribution to independent pharmacies across the UK, and secured its first product listing with WH Smith Travel via the SHS agreement.

-- Goodbody Botanicals commenced production of cannabigerol (CBG) and alcohol-based hand sanitisers in response to the increased need for hand sanitation as a result of COVID-19.

   --      PhytoVista Laboratories completed its 4,000th sample test in March 2020. 

The Directors do not recommend a payment of a dividend for the year ended 31 December 2019.

Quarter 1 2020:

Subsequent to the announcement of a firm offer for the Sativa Group Plc by Stillcanna Inc. ("Stillcanna"), the Group will publish unaudited Q1 2020 primary statements for inclusion in Stillcanna's Information Circular document to be distributed to Stillcanna shareholders in June ahead of a Shareholder Meeting to vote on the approval of the offer.

The following highlights of the Quarter 1 2020 interim results represent unaudited, draft management accounts, that are subject to further review and amendments:

-- Revenue of GBP0.36m recognised in the quarter, representing growth of 49% on the prior period. The results were in-line with management expectations for January and February but missed March expectations due to the impact of COVID-19 global pandemic restrictions.

-- Gross Profit of GBP0.21m was recognised, representing a gross-profit margin of 59%, ahead of management expectations, due to efficiency gains.

-- EBITDA loss (loss from operating activities before depreciation, share-based payments and exceptional items) of GBP0.76m was recognised in the quarter, which was ahead of management expectations mainly due to significant operating cost savings implemented by management to address the COVID-19 trading environment.

   --      Cash and cash equivalents of GBP1.1m. 

Henry Lees-Buckley, CEO of Sativa Group Plc, said:

"While we experienced very solid revenue and gross margin growth in 2019, we were building a strong foundation for accelerating sales in 2020 and beyond. Building leading brands for multiple consumer channels and online is the priority. Highlights in the year included the launch of the Goodbody Botanicals brand for high street pharmacies and grocers and the launch of the Goodbody Wellness brand to support the health, beauty and high-end retail segments. We continued to focus on developing and producing high quality and compliant products for all markets. PhytoVista Laboratories continues to support not only our quality commitment but also other industry participants.

As we look at Q1 2020, we started the year by enhancing our distribution and winning new business. As with the rest of the world, we have been affected by the slow down related to COVID 19. We took the necessary cost reductions and again adapted pivoted to utilise our skills and capacity to produce hand sanitiser products to consumers and corporate customers in the UK.

In Q1 we at Sativa Group Plc decided to combine resources with the Canadian group, Stillcanna Inc., a European CBD producer. We believe that creating a true European seed to consumer group is critical and this combination provides cultivation, extraction and laboratory capacity to produce high quality and compliant CBD from Stillcanna coupled with Sativa's quality products, production, testing and consumer brands."

The Directors of the Company accept responsibility for this announcement.

For further information please contact:

 
Henry Lees-Buckley            Joseph Colliver 
 Chief Executive Officer       Chief Financial Officer 
 Sativa Group Plc              Sativa Group Plc 
 +44 (0) 20 7971 1255          +44 (0) 20 7971 1255 
 enquiries@sativagroup.co.uk   enquiries@sativagroup.co.uk 
 www.sativagroup.co.uk         www.sativagroup.co.uk 
AQSE Growth Market Corporate 
 Adviser 
 Corporate Finance 
 Guy Miller/Allie Feuerlein 
 Peterhouse Capital Limited 
 +44 (0) 20 7220 9795 
 

Chairman's Statement

Overview

The Group, in its first full year of trading, made substantial progress across all five of its business streams and activities, reporting marked financial advances including in overall revenues and gross margin, and maintaining its position as the UK's leading quoted CBD and medicinal cannabis business. Its continued investment in generating organic growth remains early stage but is bearing fruit.

The Group's own successes are coinciding with the early signs of what the Board expects will be a favourable sea-change in the UK's attitude to CBD and medicinal cannabis. In January 2020 the NHS licensed the prescription of a CBD medicine for the treatment of epilepsy in England, a major industry breakthrough which is expected to benefit more than 2,000 child patients in the near-term.

The Group's product range continued to expand, with the two distinct retail own-brands of Goodbody Botanicals and Goodbody Wellness being sold in parallel with other guest brands through the Group's online, wholesale, retail and direct-sell distribution channels.

In the final quarter the Group announced a distribution agreement with SHS Sales & Marketing which has already borne fruit in 2020, with product on-shelf across the WH Smith Travel retail chain and also signed a distribution agreement with the Alliance Healthcare network. The Board believes that partnering with SHS will lead to the Group penetrating additional high-volume high street chains and grocers, along with superstores and forecourts.

Sativa now holds a rare Home Office Controlled Drug licence for the cultivation, production, possession and supply of cannabis, enabling it to fulfil its research partnership agreement with King's College London to research the impact of cannabinoids on inflammation and respiratory conditions.

During 2019 the Company transitioned from being an investment vehicle to a fully-fledged trading company, reflected in the name change from Sativa Investments Plc to Sativa Group Plc. This reflects the focus on wholly-owned UK operations.

Henry Lees-Buckley was appointed as Chief Executive Officer in August 2019. Henry was previously CEO of Uni-Select [TSX: UNS], a Canadian TSX quoted company with US$1.7 billion of sales from operations in the UK, Canada and the USA, and brings a wealth of operational and public market experience. Following a review of the Company's operations he has taken steps to streamline sales and production activities to improve costs and efficiencies.

The Company's two Canadian investments, Veritas Pharmaceuticals and Rapid Dose Technologies were sold in the first quarter of 2020.

(MORE TO FOLLOW) Dow Jones Newswires

June 03, 2020 12:30 ET (16:30 GMT)

DJ Sativa Group PLC Results to 31 December 2019 and -2-

Central to the Group's policy and activities is adherence to best practice and regulatory compliance. In this it is supported by PhytoVista Laboratories, which has become a well-established presence in the sector in testing both Sativa's and third party products. As part of the commitment to the highest standards, Goodbody Botanicals and Goodbody Wellness' packaging has sector-leading provision of product and dosage information. Each item is fully tested and each package gives information to enable the buyer to check the test results online.

In December the Group successfully raised GBP1.38 million (before expenses) by way of a placing and subscription accompanied by the issue of warrants. At 31 December 2019 cash balances were GBP1.99 million.

Trading in the first quarter of 2020 has started well but the downturn in economic activity as a result of consumer concern and government advice in relation to the COVID-19 pandemic has affected the Group. Retail outlets have been temporarily closed and some employees have been furloughed.

The focus is on driving sales through the Group's website and direct-selling subsidiary, Tessellate Collective. Revenues are supported by the newly-launched CBG hand cleanser and work continues on other product development. However, in the light of uncertain economic conditions forecasting Sativa's full year 2020 financial outcome is challenging.

Jonathan Wearing

Chairman

03 June 2020

Chief Executive's Operational Review

Performance

2019 has been a year of building a solid foundation for growth. Having joined the Group in August 2019 I was pleased to find a group set to take on the challenges of a new and evolving market. The Sativa Group is uniquely positioned to take advantage of the CBD and Medicinal Cannabis market in the UK. We believe a key differentiator will be the quality of the products we take to market. Our product development, testing and production is supported by PhytoVista Laboratories ensuring we produce and sell the highest quality products.

2019 has seen us experiment, learn and sharpen our focus, adjust to the evolving market and grow. Sales in the year to 2019 grew to GBP1.45m.

In the second quarter and early third quarter 2019 we opened three pilot "Goodbody Wellness" retail locations in Bath, Cirencester and Bristol. The plan was to test the stores and set them up with the format and systems to enable franchising. Sales in the stores increased gradually but the stores were not yet at a breakeven level when the global COVID-19 pandemic forced them to be closed. Therefore, although we are capable of franchising, we have held off on franchising until the model is proven. We are also developing lower cost concession and pods to enable franchising in smaller markets and urban shopping centres.

The George Botanicals CBD brand continued to grow throughout 2019. In Q3 2019 after feedback from consumer focus groups we developed a new brand focused on the UK high street pharmacies and grocers. This is the Goodbody Botanicals brand. This brand drives the message of "CBD You Can Trust", supported by the THC free formulation and testing by the Sativa Group companies. The brand has been very well received by this customer segment with listing discussions ongoing. One highlight in Q1 2020 is the list at WH Smith Travel with circa 90 locations.

The Tessellate Collective direct selling brand continues to grow by building sales with existing sales advocates as well as adding new advocates across the UK.

PhytoVista Laboratories has continued to grow throughout 2019 and had a strong start in 2020. The team is recognised across the UK as a leading Cannabis product testing laboratory. They provide testing for a good majority of the CBD brands in the UK as well as in-house testing for Sativa Group products. PhytoVista is also now in the final stages of securing ISO accreditation for Cannabis product testing.

Veterinary product development continues as we determine the optimal formula for the Canine Osteoarthritis market. We are helped along this path with support from our Scientific Advisory Board. This focus presents a unique opportunity to be the first entrant into the UK market. It is a complicated process and is governed by the UK VMD, and we are following all the required regulatory processes and procedures.

We continue to optimise processes and the leadership team. We have increased our capabilities and processes in the areas of Marketing, Ecommerce and Supply Chain. These are critical areas we will continue to invest in to enable us to drive profitable sales growth.

We were pleased with the first two months of Quarter 1 2020 as we tracked to deliver increased performance in alignment with our plan. As with everyone in the UK we experienced the impact of COVID-19 and the resulting lockdown. We took immediate cost reduction actions across the business. Additionally, we have converted some of our production capacity to hand sanitiser. This new product is proving successful both in selling online and to corporations and groups looking for customised packaging/labelling solutions.

Also announced in Q1 2020 we entered into discussions regarding a takeover of the Sativa Group Plc by Stillcanna Inc of Canada. The basis of the transaction positions the Group, when combined, as a brand that creates a true European seed to consumer CBD wellness group with cultivation and extraction. We will also work jointly on a UK FSA Novel Foods application. This is an important new requirement for food supplements coming into force on 31 March 2021.

The first main focus for 2020 is on developing the brands within the Group as follows:

o Goodbody Wellness - Focused on Health and beauty, high end retail and online. This brand is getting a complete upgrade and relaunch scheduled for 1 July 2020.

o Goodbody Botanicals - Focused on pharmacies, grocers and online.

o Tessellate Collective - Direct selling model.

o George Botanicals - Focused on discount, other retail and online.

o PhytoVista - Expand the business and ISO accreditation.

o Veterinary - Continue building for the future.

This focus will be implemented in 2020, through increased focus on Marketing and Ecommerce efforts across core brands.

The second big focus for 2020 will be acquisition completion and integration - the merger of the Sativa Group Plc and Stillcanna Inc. We will move through the process and if the transaction is completed, integrate the businesses effectively.

Quality and Compliance

Along with the commercial focus noted above, the Group remains highly focused on and committed to quality and compliance. This comes in all forms be it on the financial, governance and public disclosure front, as well as product quality and regulatory compliance across the Group.

Henry Lees-Buckley

Chief Executive Officer

03 June 2020

Sativa Group Plc

Group Statement of Comprehensive Income for the year ended 31 December 2019

 
 
                                                          Note             12.5 months 
                                                                   2019           2018 
                                                                  GBP'000      GBP'000 
Revenue                                                   2         1,449          260 
Cost of sales                                                       (695)        (150) 
                                                                --------- 
Gross profit                                                          754          110 
Operating costs                                           3       (3,318)      (1,187) 
                                                                ---------  ----------- 
Loss from operating activities before depreciation, 
 share-based payment charges and exceptional 
 items                                                            (2,564)      (1,077) 
 
Depreciation                                              9         (260)        (114) 
Impairment of fixed assets                                9          (89)            - 
Costs of acquiring businesses                                           -         (37) 
Share-based payment charges                               15        (729)        (638) 
                                                                ---------  ----------- 
Loss from operating activities                                    (3,642)      (1,866) 
 
Finance costs - lease liabilities                                    (11)            - 
Fair value (losses) / gains on listed investments         10        (144)            7 
                                                                ---------  ----------- 
Loss before taxation                                              (3,797)      (1,859) 
 
Taxation                                                  6             -            - 
                                                                ---------  ----------- 
Loss for the period                                               (3,797)      (1,859) 
                                                                =========  =========== 
 
Total comprehensive loss for the period 
 attributable to: 
 The owners of the parent company                                 (3,789)      (1,859) 
Non-controlling interest                                              (8)            - 
                                                                  (3,797)      (1,859) 
                                                                =========  =========== 
 
Loss per share                                                      Pence        Pence 
 
Basic and diluted loss per share                          7        (0.72)       (0.52) 
 
 
 
 
Sativa Group Plc (Registration number: 11118594) 
 Group Statement of Financial Position as at 31 December 2019 
 
                                                        2019       2018 
                                            Notes    GBP'000    GBP'000 
  Assets and liabilities 
  Non-current assets 

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June 03, 2020 12:30 ET (16:30 GMT)

DJ Sativa Group PLC Results to 31 December 2019 and -3-

  Intangible assets                         8             572        572 
  Property, plant and equipment             9           1,207        344 
  Investments                               10             72        243 
                                                    ---------  --------- 
                                                        1,851      1,159 
                                                    ---------  --------- 
 
  Current assets 
  Inventories                               11            208        112 
  Trade and other receivables               12            500        234 
  Cash and cash equivalents                 20          1,993      3,743 
                                                    ---------  --------- 
                                                        2,701      4,089 
                                                    ---------  --------- 
 
  Current liabilities 
  Lease liabilities < 12 months             18          (170)          - 
  Trade and other payables                  13          (430)      (281) 
                                                        (600)      (281) 
                                                    ---------  --------- 
  Non-current liabilities 
  Lease liabilities > 12 months             18          (451)          - 
                                                    ---------  --------- 
                                                        (451)          - 
                                                    ---------  --------- 
 
  Net assets                                            3,501      4,967 
                                                    =========  ========= 
 
 
 
 Equity 
 Issued share capital                  14     1,423     1,275 
 Share premium account                        5,427     4,867 
 Share-based payments reserve                 1,900       675 
 Retained earnings                          (5,250)   (1,859) 
                                           --------  -------- 
 Equity attributable to the owners 
  of the parent                               3,500     4,958 
 Non-controlling interest                         1         9 
                                           --------  -------- 
 
 Total equity                                 3,501     4,967 
                                           ========  ======== 
 

Approved and authorised for issue by the Board on 03 June 2020 and signed on its behalf by:

Joseph Colliver

Director

Sativa Group Plc

Group Statement of Changes in Equity for the year ended 31 December 2018

 
                     Share     Share    Share-based  Retained       Total      Non-controlling   Total 
                     capital   premium    payments    earnings   attributable      interest      Equity 
                               account    reserve                 to owners                       2018 
                                                                    of the 
                                                                    parent 
                    --------  --------  -----------  ---------  -------------  ---------------  -------- 
 
                     GBP'000  GBP'000     GBP'000     GBP'000      GBP'000         GBP'000       GBP'000 
 
Share placing          1,245     4,665            -          -          5,910                -     5,910 
Share placing 
 issue costs               -     (209)           37          -          (172)                -     (172) 
Shares issued on 
 acquisition of 
 business                 25       406            -          -            431                -       431 
Shares issued 
 under share 
 option 
 / warrant schemes         5         5            -          -             10                -        10 
Share-based 
 payments                  -         -          638          -            638                -       638 
                    --------  --------  -----------  ---------  -------------  ---------------  -------- 
 
Total 
 contributions by 
 owners of 
 the parent 
 recognised 
 directly in 
 equity                1,275     4,867          675          -          6,817                -     6,817 
                    --------  --------  -----------  ---------  -------------  ---------------  -------- 
 
Non-controlling 
 interest on 
 investment 
 in German 
 subsidiary                -         -            -          -              -                9         9 
                    --------  --------  -----------  ---------  -------------  ---------------  -------- 
Total changes in 
 ownership 
 interest 
 in subsidiaries 
 that do not 
 result 
 in a loss of 
 control                   -         -            -          -              -                9         9 
                    --------  --------  -----------  ---------  -------------  ---------------  -------- 
Total transactions 
 with owners 
 recognised 
 directly in 
 equity                1,275     4,867          675          -          6,817                9     6,826 
Loss for the year          -         -            -    (1,859)        (1,859)                -   (1,859) 
Total 
 comprehensive 
 income for the 
 year                      -         -            -    (1,859)        (1,859)                -   (1,859) 
 
Balance at 31 
 December 2018         1,275     4,867          675    (1,859)          4,958                9     4,967 
                    ========  ========  ===========  =========  =============  ===============  ======== 
 

Sativa Group Plc

Group Statement of Changes in Equity for the year ended 31 December 2019

 
                     Share     Share    Share-based  Retained       Total      Non-controlling   Total 
                     capital   premium    payments    earnings   attributable      interest      Equity 
                               account    reserve                 to owners                       2019 
                                                                    of the 
                                                                    parent 
                    --------  --------  -----------  ---------  -------------  ---------------  -------- 
 
                     GBP'000  GBP'000     GBP'000     GBP'000      GBP'000         GBP'000       GBP'000 
 
Brought forward 1 
 January 2019          1,275     4,867          675    (1,859)          4,958                9     4,967 
Share placing 
 (note 14)                86       400          894          -          1,380                -     1,380 
Share placing 
 issue costs (note 
 14)                       -      (34)            -          -           (34)                -      (34) 
Shares issued 
 under share 
 option 
 / warrant schemes 
 (note 15)                62       194            -          -            256                -       256 
Transfer of 
 share-based 
 payment charge 
 for warrants and 
 options exercised 
 / forfeited               -         -        (398)        398              -                -         - 
Share-based 
 payments (note 
 15)                       -         -          729          -            729                -       729 
                    --------  --------  -----------  ---------  -------------  ---------------  -------- 
 
Total transactions 
 with owners 
 recognised 
 directly in 
 equity                  148       560        1,225        398          2,331                -     2,331 
                    --------  --------  -----------  ---------  -------------  ---------------  -------- 
 
Loss for the year          -         -            -    (3,789)        (3,789)              (8)   (3,797) 
Total 
 comprehensive 
 income for the 
 year                      -         -            -    (3,789)        (3,789)              (8)   (3,797) 
 
Balance at 31 
 December 2019         1,423     5,427        1,900    (5,250)          3,500                1     3,501 
                    ========  ========  ===========  =========  =============  ===============  ======== 
 

Sativa Group Plc

Group Statement of Cash Flows for the year ended 31 December 2019

 
                                                             2019      2018 
                                                          GBP'000   GBP'000 
Cash flows from operating activities               Note 
Loss for the period                                       (3,797)   (1,859) 
Depreciation of property, plant and equipment       9         260       114 
Impairment of fixed assets                          9          89         - 
Loss on disposal of property, 
 plant and equipment                                            5         - 
Share-based payment charges                         15        729       638 
Fair value losses/(gains) on listed investments     10        144       (7) 
Interest on lease liabilities                                  11         - 
Increase in inventories                                      (96)      (57) 
Increase in trade and other receivables                     (116)     (162) 
Increase/(decrease) in trade and other 
 payables                                                     158     (198) 
                                                         -------- 
Net cash used in operations                               (2,613)   (1,531) 
                                                         -------- 
 
Cash flows from investing activities 
Net cash inflow on acquisition of businesses                    -        29 
Proceeds from sale/ (purchase) of listed 
 investments                                        10         27     (236) 
Payments for property, plant and equipment          9       (525)     (266) 
Proceeds for sale of plant and equipment                        4         - 
                                                         -------- 
Net cash used in investing activities                       (494)     (473) 
                                                         --------  -------- 
 
Cash flows from financing activities 
Net proceeds from issue of equity shares            14      1,452     5,738 

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DJ Sativa Group PLC Results to 31 December 2019 and -4-

Repayments of lease liability                       18       (95)         - 
Proceeds from non-controlling interests 
 for issuance of shares                                         -         9 
                                                         -------- 
Net cash generated by financing activities                  1,357     5,747 
                                                         --------  -------- 
 
Net (decrease)/increase in cash and cash 
 equivalents during the period                            (1,750)     3,743 
Cash and cash equivalents at the beginning 
 of the period                                              3,743         - 
                                                         -------- 
Cash and cash equivalents at the end 
 of the period                                      20      1,993     3,743 
                                                         --------  -------- 
 

Consolidated movements in net cash

 
                               At 1 January             Other non-cash  At 31 December 
                                       2019  Cash flow       movements            2019 
Year ended 31 December 2019         GBP'000    GBP'000         GBP'000         GBP'000 
----------------------------   ------------  ---------  --------------  -------------- 
Cash and cash equivalents             3,743    (1,750)               -           1,993 
Finance leases                            -         95           (716)           (621) 
-----------------------------  ------------  ---------  --------------  -------------- 
Net cash at end of year               3,743    (1,655)           (716)         (1,372) 
-----------------------------  ------------  ---------  --------------  -------------- 
 

Other non-cash movements include new lease liabilities and interest on lease liabilities.

 
                                                        Cash  At 31 December 
                                  On incorporation      flow            2018 
Period ended 31 December 2018              GBP'000   GBP'000         GBP'000 
------------------------------    ----------------  --------  -------------- 
Cash and cash equivalents                        -     3,743           3,743 
--------------------------------  ----------------  --------  -------------- 
Net cash at end of period                        -     3,743           3,743 
--------------------------------  ----------------  --------  -------------- 
 
 
Sativa Group Plc (Registration number: 11118594) 
 Company Statement of Financial Position for the year ended 31 
 December 2019 
 
 
 
 
                                             2019      2018 
                                   Notes   GBP'000   GBP'000 
 Assets and liabilities 
 Non-current assets 
 Property, plant and equipment     9           549        51 
 Investments                       10          761       710 
                                          --------  -------- 
                                             1,310       761 
                                          --------  -------- 
 
 Current assets 
 Trade and other receivables       12        3,377     1,650 
 Cash and cash equivalents                   1,623     3,646 
                                          --------  -------- 
                                             5,000     5,296 
                                          --------  -------- 
 
 Current liabilities 
 Lease liabilities < 12 months     18        (104)         - 
 Trade and other payables          13        (215)     (172) 
                                          -------- 
                                             (319)     (172) 
                                          --------  -------- 
 
 Non-current liabilities 
 Lease liabilities > 12 months     18        (374)         - 
                                             (374)         - 
 
 Net assets                                  5,617     5,885 
                                          ========  ======== 
 
 
 Equity 
 Issued share capital                  14     1,423   1,275 
 Share premium account                        5,427   4,867 
 Share-based payments reserve                 1,900     675 
 Retained earnings                          (3,133)   (932) 
 
 Equity attributable to the owners 
  of the parent                               5,617   5,885 
                                           ========  ====== 
 

The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 of not to present its individual Statement of Comprehensive Income and related notes. The loss and total comprehensive income for the period dealt with in the financial statements of the Company for the year ended 31 December 2019 was GBP2,599,000 (2018: GBP932,000).

Approved and authorised for issue by the Board on 03 June 2020 and signed on its behalf by:

Joseph Colliver

Director

Sativa Group Plc

Company Statement of Changes in Equity for the year ended 31 December 2018

 
                                              Share     Share    Share-based  Retained       Total 
                                              capital   premium    payments    earnings   attributable 
                                                        account    reserve                  to owners 
                                                                                          of the parent 
                                                                                              2018 
                                             --------  --------  -----------  ---------  -------------- 
 
                                              GBP'000  GBP'000     GBP'000     GBP'000       GBP'000 
 
Share placing                                   1,245     4,665            -          -           5,910 
Share placing issue costs (note 14)                 -     (209)           37          -           (172) 
Shares issued on acquisition of business           25       406            -          -             431 
Shares issued under share option / warrant 
 schemes (note 15)                                  5         5            -          -              10 
Share-based payments (note 15)                      -         -          638          -             638 
                                                                                         -------------- 
Total transactions with owners recognised 
 directly in equity                             1,275     4,867          675          -           6,817 
                                             --------  --------  -----------  ---------  -------------- 
 
Loss for the year                                   -         -            -      (932)           (932) 
                                                                                         -------------- 
Total comprehensive income for the year             -         -            -      (932)           (932) 
 
Balance at 31 December 2018                     1,275     4,867          675      (932)           5,885 
                                             ========  ========  ===========  =========  ============== 
 
 
 
                                             Share     Share    Share-based  Retained       Total 
                                             capital   premium    payments    earnings   attributable 
                                                       account    reserve                 to owners 
                                                                                            of the 
                                                                                            parent 
                                                                                             2019 
                                            --------  --------  -----------  ---------  ------------- 
 
                                             GBP'000  GBP'000     GBP'000     GBP'000      GBP'000 
 
  Balance brought forward 1 January 
  2019                                         1,275     4,867          675      (932)          5,885 
 
Share placing (note 14)                           86       400          894          -          1,380 
Share placing issue costs (note 14)                -      (34)            -          -           (34) 
Shares issued under share option 
 / warrant schemes (note 15)                      62       194            -          -            256 
Transfer of share-based payment charge 
 for options and warrants exercised 
 / forfeited                                       -         -        (398)        398              - 
Share-based payments (note 15)                     -         -          729          -            729 
                                                                                        ------------- 
Total transactions with owners recognised 
 directly in equity                              148       560        1,225        398          2,331 
                                            --------  --------  -----------  ---------  ------------- 
 
Loss for the year                                  -         -            -    (2,599)        (2,599) 
                                                                                        ------------- 
Total comprehensive income for the 
 year                                              -         -            -    (2,599)        (2,599) 
 
Balance at 31 December 2019                    1,423     5,427        1,900    (3,133)          5,617 
                                            ========  ========  ===========  =========  ============= 
 
 

Sativa Group Plc

Company Statement of Changes in Equity for the year ended 31 December 2019

Sativa Group Plc

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DJ Sativa Group PLC Results to 31 December 2019 and -5-

Company Statement of Cash Flow for the year ended 31 December 2019

 
                                                          2019      2018 
                                                         GBP'000   GBP'000 
Cash flows from operating activities              Note 
Loss for the period                                      (2,599)     (932) 
Depreciation of property, plant and equipment      9          68         1 
Share-based payment charges                                  507       616 
Intercompany loan impairment charge                          625         - 
Fair value losses/(gains) on listed investments    10        144       (7) 
Interest on lease liabilities                                  5         - 
Decrease /(increase) in trade and other 
 receivables                                                  55      (80) 
Movement in Intragroup balances                          (2,257)   (1,560) 
Increase in trade and other payables                          44       172 
                                                        -------- 
Net cash used in operations                              (3,408)   (1,790) 
                                                        -------- 
 
Cash flows from investing activities 
Payments for investment in German subsidiary                   -      (14) 
Proceeds from sale/(purchase) of listed 
 investments                                       10         27     (236) 
Payments for property, plant and equipment         9        (36)      (52) 
                                                        --------  -------- 
Net cash used in investing activities                        (9)     (302) 
                                                        --------  -------- 
 
Cash flows from financing activities 
Repayments of lease liabilities                    18       (58)         - 
Net proceeds from placing of equity shares         14      1,452     5,738 
Net cash generated by financing activities                 1,394     5,738 
                                                        --------  -------- 
 
Net (decrease)/increase in cash and cash 
 equivalents during the year                             (2,023)     3,646 
Cash and cash equivalents at the beginning 
 of the period                                             3,646         - 
                                                        --------  -------- 
Cash and cash equivalents at the end 
 of the period                                     20      1,623     3,646 
                                                        --------  -------- 
 

Company movements in net cash

 
                                                                              At 31 
                                 At 1 January             Other non-cash   December 
                                         2019  Cash flow       movements       2019 
  Year ended 31 December 2019         GBP'000    GBP'000         GBP'000    GBP'000 
------------------------------   ------------  ---------  --------------  --------- 
Cash and cash equivalents               3,646    (2,023)               -      1,623 
Finance leases                              -         58           (536)      (478) 
-------------------------------  ------------  ---------  --------------  --------- 
Net cash at end of year                 3,646    (1,965)           (536)      1,145 
-------------------------------  ------------  ---------  --------------  --------- 
 

Other non-cash movements include new lease liabilities and interest on lease liabilities.

 
                                                                At 31 December 
                                  On incorporation   Cash flow            2018 
Period ended 31 December 2018              GBP'000     GBP'000         GBP'000 
------------------------------    ----------------   ---------  -------------- 
Cash and cash equivalents                        -       3,646           3,646 
--------------------------------  ----------------   ---------  -------------- 
Net cash at end of period                        -       3,646           3,646 
--------------------------------  ----------------   ---------  -------------- 
 
 
 
Sativa Group Plc 
 Notes to the Financial Statements for the year ended 31 December 
 2019 
 
   1           Accounting policies 

Reporting entity

Sativa Group Plc is a public limited company, incorporated and domiciled in England & Wales. The ordinary shares of the Company are traded on the NEX Exchange.

Statement of compliance

These financial statements have been prepared in accordance with all International Financial Reporting Standards ("IFRS"), as adopted by the European Union, and IFRIC interpretations applicable as at 31 December 2019 and with those parts of the Companies Act 2006 applicable to those companies reporting under IFRS.

The financial statements have been prepared having early adopted IFRS 9 'Financial Instruments', and IFRS 15 'Revenue from contracts with customers', within the prior year financial statements. During the year IFRS 16 'Leases' was adopted using the fully retrospective option with no impact on the prior year comparatives as the group did not have any operating leases requiring to be accounted for under IFRS 16.

Principal activities

The principal activities of the Group are the production, testing and compliance, research and development including pharmacology, commercialisation and sales and marketing of cannabidiol products.

Basis of preparation

These financial statements have been prepared in sterling on an historical cost basis, unless otherwise stated, and have been rounded to the nearest thousand pounds.

A summary of the significant accounting policies used in the preparation of these financial statements is set out below.

Basis of consolidation

The Group financial statements include the financial statements of the Company and all of its subsidiary undertakings made up to 31 December 2019. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All intra-group balances and transactions are eliminated. The financial statements of all subsidiaries are prepared up to the same date as the parent Company.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree, and the equity interests issued by the Group. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at the acquisition date.

Acquisition-related costs are expensed as incurred.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Group financial review, together with the financial position of the Group, its cash flows and liquidity position.

The current trading environment is difficult to forecast given the impact of the COVID-19 global pandemic, but the Group is focusing its growth strategy on online sales, to compensate for declines in other channels. The Group has launched new product lines to address increased demand for hand sanitation, reduced ongoing operating costs, and expects a return to strong sales growth in traditional channels in H2. Current cashflow projections forecast sufficient cash at hand to meet operational requirements into Q4 2020 (excluding transaction fees associated with the proposed Stillcanna merger), and is reliant on additional funding being secured during 2020.

On 2 June 2020, the Group signed a Bid Conduct Agreement and plan to announce the receipt of a firm offer from Stillcanna Inc. on 3 June 2020 to implement a UK Scheme of Arrangement, including a break fee payable by Stillcanna equal to the higher of GBP1m or 25% of the value of an alternative transaction, with a timetable for completion by early August, subject to shareholder approval from both sets of shareholders. The proposed transaction generates a vertically integrated 'seed to shelf' company, with strong strategic synergies, and a strengthened balance sheet. The forecasted cash at hand for the combined business extends into mid-2021, and combined with planned future fund raising provides sufficient working capital to operate for the foreseeable future, based on conservative 'COVID-19' trading conditions.

   1          Accounting policies (continued) 

Going concern (continued)

Whether or not this transaction is approved by both sets of shareholders, which the Directors believe is highly likely given the level of irrevocable support from both sets of shareholders, the Directors are confident that the Group will be able to raise required funds from a share placement or subscription, where active conversations are underway. The directors therefore acknowledge that the requirement for further fundraises gives rise to a material uncertainly in relation to the adoption of the going concern assumption.

Accordingly, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and they have adopted the going concern basis of accounting in preparing the annual Group financial statements.

Revenue recognition

Revenue is recognised as follows:

Sale of cannabidiol products

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Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, or collected by the customer, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, any acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied. No element of financing is deemed present as the sales are made with only a short credit period, which is consistent with market practice.

Laboratory testing services

Revenue in respect of laboratory testing services is recognised as these services are delivered.

Foreign currencies

In preparing the financial information of each individual group entity, transactions in currencies other than the entity's functional currency are recognised at the rates of exchange prevailing at the date of those transactions. At the end of the financial period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise. The consolidated financial statements are presented in GBP, which is Sativa Group's functional and presentational currency.

Leases

Low value leases and leases of less than one year are recognised on a straight-line basis over the lease term. On inception of other leases, 'right-of-use' assets have been capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term discounted at an incremental borrowing rate.

A liability corresponding to the capitalised lease has also been recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs.

Exceptional items

The Group presents as exceptional items on the face of the Statement of Comprehensive Income those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to better understand the elements of financial performance in the period.

Taxation

The tax charge or credit is based on the result for the period and comprises current and deferred income tax. Tax is recognised in the Statement of Comprehensive Income except when it relates to items recognised directly in equity in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable profit for the period, using tax rates enacted or substantively enacted at the period end date and includes any adjustment to tax payable in respect of previous periods.

   1          Accounting policies (continued) 

Taxation (continued)

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities included in the financial statements and the tax base of those assets and liabilities. Deferred tax assets are recognised only to the extent that the directors consider that it is probable that future taxable profits will be available against which an asset can be utilised.

Deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the period end date. Deferred income tax assets and deferred income tax liabilities arising in different tax jurisdictions are not offset.

Current tax assets and current tax liabilities and deferred tax assets and deferred tax liabilities are offset, if and only if, there is a legally enforceable right to set off the amounts and the entity intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Pensions and post-retirement benefits

The Group operates a defined contribution pension scheme which is available to all employees. The assets of the scheme are held separately from those of the Group in independently administered funds. Payments are made by the Group to this scheme and contributions are charged in the Statement of Comprehensive Income as they become payable. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments.

Goodwill

Goodwill arising on business combinations is initially measured at cost being the excess of the difference between the cost of acquisition and the net fair value of the identifiable assets and liabilities acquired. Costs of acquiring businesses are expensed as incurred. Goodwill is subsequently measured at cost less any accumulated impairment losses.

Goodwill is not amortised but is reviewed annually for impairment. Impairment is determined by assessing the recoverable amount of the cash-generating unit which contains the goodwill. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the Statement of Comprehensive Income.

The Company's investments in subsidiaries

The Company recognises its investments in subsidiaries at cost less any impairment in its separate financial statements. Impairment is determined by assessing the recoverable amount of the investment. Where the recoverable amount is less than the carrying amount, an impairment loss is recognised in the Statement of Comprehensive Income.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated at the annual rates shown below so as to write off the cost, less any estimated residual values, over the expected useful economic lives of the assets concerned:

   --      Computer equipment                                - 33% on a straight-line basis 
   --      Leasehold improvements        - over the expected life of the lease 
   --      Furniture and fittings                                 - 20% on a straight-line basis 
   --      Plant and machinery                                 - 5-20% on a reducing balance basis 

-- Right to use assets are measured at cost to include the lease liability, direct and restoration cost and are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Impairment of assets

The Group reviews the carrying amounts of its tangible and intangible assets at least annually to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount provided that this does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in profit or loss.

   1          Accounting policies (continued) 

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. Net realisable value represents the estimated selling price in the ordinary course of business, less all costs necessary to complete the sale.

Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade and other receivables are measured at amortised cost using the effective interest method less any allowance for expected credit loss. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.

Cash and cash equivalents

Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand. For the purpose of the Statement of Cash Flows, cash and cash equivalents as defined above are stated net of any outstanding bank overdrafts.

Financial liabilities and equity instruments

Equity and debt instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

The Group's financial liabilities include trade and other payables which are measured at amortised cost using the effective interest rate method.

An equity instrument is any contract which evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group, such as share capital and share premium, are recognised at the proceeds received net of direct issue costs.

Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

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Share-based payments

The cost of equity settled transactions with employees is measured by reference to the fair value on the date they are granted. Where there are no market conditions attaching to the exercise of the options, the fair value is determined using a range of inputs into the Black-Scholes pricing model. Where there are market conditions attaching to the exercise of the options a trinomial option pricing model is used to determine fair value based on a range of inputs. The fair value of equity-settled transactions is charged to the Statement of Comprehensive Income over the period in which the service conditions are fulfilled with a corresponding credit to a share-based payments reserve in equity.

At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in the Statement of Comprehensive Income, with a corresponding adjustment to equity. On the exercise of share options, an amount equal to the fair value of the option at the date it was granted is transferred from the share-based payments reserve into retained earnings.

Where the Company grants options over its own shares to the employees of its subsidiaries it recognises, in its individual financial statements, an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its consolidated financial statements with the corresponding credit being recognised directly in equity. When the company issues options for services rendered by a non-employee they are measured at fair value for the services received.

   1             Accounting policies (continued) 

New accounting standards and interpretations not yet adopted

For the purpose of the preparation of these consolidated financial statements, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 1 January 2019. No new standards, amendments or interpretations to existing standards that have been published and that are mandatory for the Group's accounting periods beginning on or after 1 January 2020, or later periods, have been adopted early.

The new standards and interpretations are not expected to have any significant impact on the financial statements when applied.

Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets, liabilities, revenues and expenses. However, the nature of estimation means that actual outcomes could differ from those estimates.

In applying the Group's accounting policies, management has made the following judgements and estimates which have the most significant effect on the amounts recognised in the financial statements.

Acquisition intangibles

The Group initially measures the separable intangible assets acquired in a business combination at their fair value at the date of acquisition. Management judgement is required in deriving a number of assumptions which are used in assessing the fair value of each acquisition intangible including the timing and amount of future incremental cash flows expected to be generated by the asset and in calculating an appropriate cost of capital.

Share-based payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Judgement is required in determining the most appropriate valuation model and the most appropriate inputs into the model including the level of volatility and the expected life of the option. Further information is given in note 15.

Impairment of goodwill

The Group tests goodwill for impairment on an annual basis in line with the accounting policy noted above. This involves judgement regarding the future development of the business and the estimation of the level of future growth, cash flows and an appropriate discount rate to support the carrying value of goodwill. Further information is given in note 8.

Impairment of other assets

The Group reviews the carrying value of all other assets for indications of impairment at each year end. If indicators of impairment exist, the carrying value of the asset is subject to further testing to determine whether its carrying value exceeds its recoverable amount. This process will usually involve the estimation of future cash flows which are likely to be generated by the asset. Further Information is given in note 9.

Trade and other receivables including group balances

Trade and other receivables are recognised to the extent that they are considered recoverable. Management judgement is required in considering the recoverability of debts and in the estimation of any provisions which may be required where recoverability is considered to be uncertain. Further information is given in note 12.

Incremental borrowing rate

When capitalising the right of use asset an incremental borrowing rate was determined from the current bank rates available. This was determined separately to the head office lease and the retail units based on the prevailing rates at the time. Further information is given in note 18.

   2          Segment reporting 

Segment information is presented in the financial statements in respect of the Group's business segments, which are the primary basis of segment reporting. The business reporting format reflects the Group's management and internal reporting structure.

Sale of cannabidiol products ("Products") is the income that the Group receives from the sale of its products. Testing of cannabidiol products ("Testing") is the income that the Group receives from testing of products. Extraction and R&D reflects the results of the Group's extraction and R&D operations which develops future products.

Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 
                                                                    Period 
                                                       Extraction   ended 31 
                                    Products  Testing    and R&D    December 
                                    GBP'000   GBP'000   GBP'000     GBP'000 
Period ended 31 December 
 2018 
Gross sales                              222       40           -        262 
Inter-segment sales                        -      (2)           -        (2) 
                                    --------  -------  ----------  --------- 
Segment revenue                          222       38           -        260 
                                    --------  -------  ----------  --------- 
 
Segment results                        (399)    (210)       (318)      (927) 
                                    --------  -------  ---------- 
Share based payment charges                                            (638) 
Unallocated costs                                                      (301) 
                                                                   --------- 
Operating loss                                                       (1,866) 
Fair value gains on listed 
 investments                                                               7 
                                                                   --------- 
Loss for the period                                                  (1,859) 
                                                                   --------- 
 
Year ended 31 December 2019 
Gross sales                            1,226      327           -      1,553 
Inter-segment sales                     (76)     (28)           -      (104) 
                                    --------  -------  ----------  --------- 
Segment revenue                        1,150      299           -      1,449 
                                                                   --------- 
 
Segment results                      (1,433)    (312)          30    (1,715) 
                                    --------  -------  ---------- 
Share based payment charges                                            (729) 
Regulatory                                                             (110) 
Unallocated costs                                                    (1,088) 
                                                                   --------- 
Operating loss                                                       (3,642) 
Finance costs - lease liabilities                                       (11) 
Fair value losses on listed 
 investments                                                           (144) 
                                                                   --------- 
Loss for the period                                                  (3,797) 
                                                                   --------- 
 

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Goodbody Wellness and Goodbody Botanicals sales are combined as product sales, PhytoVista laboratories provide testing services. The regulatory supports the whole group and unallocated costs are central costs and are non-operating in nature and do not have a direct impact on the operating segments. No single customer accounted for more than 10% of total revenue in the period.

   2          Segment reporting (continued) 
 
                                          Extraction 
                       Products  Testing    and R&D   Company  Eliminations    Consolidated 
                       GBP'000   GBP'000   GBP'000    GBP'000    GBP'000        GBP'000 
As at 31 December 
 2018 
Segment assets: 
Segment assets              624      539          66    4,497         (478)           5,248 
Inter-segment 
 balances                     5        5           -    1,560       (1,570)               - 
                       --------  -------  ----------  -------  ------------  -------------- 
Total assets                629      544          66    6,057       (2,048)           5,248 
                       --------  -------  ----------  -------  ------------  -------------- 
 
Segment liabilities: 
Segment liabilities        (57)     (37)        (26)    (172)            11           (281) 
Inter-segment 
 balances                 (737)    (476)       (357)        -         1,570               - 
                       --------  -------  ----------  -------  ------------  -------------- 
Total liabilities         (794)    (513)       (383)    (172)         1,581           (281) 
                       --------  -------  ----------  -------  ------------  -------------- 
 
As at 31 December 
 2019 
Segment assets: 
Segment assets            1,381      665          87    3,118         (699)           4,552 
Inter-segment 
 balances                     -        4           -    3,192       (3,196)               - 
                       --------  -------  ----------  -------  ------------  -------------- 
Total assets              1,381      669          87    6,310       (3,895)           4,552 
                                                      -------  ------------  -------------- 
 
Segment liabilities: 
Segment liabilities       (340)     (27)           -    (692)             8         (1,051) 
Inter-segment 
 balances               (2,660)    (924)       (237)        -         3,821               - 
                       --------  -------  ----------  -------  ------------  -------------- 
Total liabilities       (3,000)    (951)       (237)    (692)         3,829         (1,051) 
                       --------  -------  ----------  -------  ------------  -------------- 
 

The Group's operations were undertaken entirely within the United Kingdom.

The Company's assets are shown separately as they are non-operating in nature and do not have a direct impact on the operating segments.

The Group does not expect to have any contracts where the period between the transfer of the promised goods and services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

   3          Operating costs 
 
                                                   2019           2018 
                                                  GBP'000      GBP'000 
 
Wages and salaries (note 4)                          1,580       441 
Operating lease charges                                  -         1 
Sales and Marketing                                    472       163 
Infrastructure                                         595        88 
Other operating costs                                  671       494 
                                                  -------- 
                                                     3,318     1,187 
                                                  --------  -------- 
 
Depreciation of property, plant and equipment          260       114 
Impairment of property, plant and equipment             89         - 
                                                  --------  -------- 
Total depreciation and impairment                      349       114 
                                                  --------  -------- 
 
Auditor's remuneration 
 - The audit of the Group and its subsidiaries 
  annual accounts                                       43        31 
Fees payable for other services provided 
 by the Auditor and its related entities: 
 - Accounting services                                   -         9 
 - Tax compliance and advisory services                 32         8 
                                                  --------  -------- 
 
   4          Particulars of employees 

The average number of staff, including directors, employed by the Group during the period, analysed by category, was as follows:

 
                         2019     2018      2019          2018 
                         Group    Group    Company     Company 
                         Number   Number   Number       Number 
 
Management                 9        5        4          4 
Administrative staff      10        2        5          1 
Sales and marketing       13        2        -          - 
Technical and support      9        1        -          - 
                          41       10        9         5 
                        -------  -------  --------  -------- 
 
 

The aggregate payroll costs of these employees were as follows:

 
-                               2019      2018      2019        2018 
                               Group     Group   Company     Company 
                             GBP'000   GBP'000   GBP'000     GBP'000 
 
Wages and salaries           1,415      416       487        259 
Social security costs         142        23        68         7 
Other pension costs (note 
 19)                           23        2         -          - 
                             1,580      441       555       266 
                            --------  --------  --------  -------- 
 
Share based payment costs 
 (note 15) 
 - on options granted         579       635       357        612 
                             2,159     1,076      912       878 
                            --------  --------  --------  -------- 
 
   5           Directors' remuneration and share options 

The total remuneration of the directors (including fees) for the period was as follows:

 
                                        2019          2018 
                                     GBP'000       GBP'000 
 
Directors' remuneration                  413           228 
Directors' pension contributions           3             - 
 
(6,166) 
                                    -------- 
                                         416           228 
                                    --------      -------- 
 
 

The remuneration of each of the directors of the Company during the period ended 31 December 2019 was as follows:

 
                     Salary or  Pension    Total    Total 
                          fees 
                          2019     2019     2019     2018 
                       GBP'000  GBP'000  GBP'000  GBP'000 
 
Angus Kerr                  32        -       32        9 
Geremy Thomas               92        -       92       92 
Jonathan Wearing            36        -       36       19 
Joseph Colliver            120        3      123       34 
Mark Blower                 40        -       40       49 
Henry Lees-Buckley          93        -       93        - 
Noel Lyons                   -        -        -       25 
                     ---------  -------  -------  ------- 
                           413        3      416      228 
                     ---------  -------  -------  ------- 
 

The Group paid contributions of GBP2,562 to a defined contribution pension scheme in respect of Joseph Colliver.

The remuneration of the highest paid director during the year ended 31 December 2019 was GBP123,000 (2018: 92,000) plus pension contributions of GBP2,562 (2018: GBPnil).

The following options over shares in the Company granted to the directors remain outstanding at 31 December 2019:

 
 Director            Balance       Exercised          Balance        Option     Dates exercisable 
                       at 31      / transferred    at 31 December    exercise 
                     December      in the year          2019          price 
                       2018                                          (pence) 
 
 Angus Kerr         2,222,222                 -         2,222,222     2.25         24 Oct 2021 
 
 Geremy Thomas      79,277,775      (4,000,000)        75,277,775      0.5          On issue 
 
 Mark Blower        9,000,000                 -         9,000,000      0.5          On issue 
 
                                                                                  1/3(rd) - 05 
                                                                                     Dec 2019 
                                                                                   1/3(rd) - 05 
                                                                                     Dec 2020 
                                                                                   1/3(rd) - 05 
 Joseph Colliver    3,350,000                 -         3,350,000      1.5           Dec 2021 
                    4,444,447                 -         4,444,447     2.25         05 Dec 2021 
                   ----------- 
                    7,794,447                 -         7,794,447 
                   -----------  ---------------  ---------------- 
 

Further information on the Group's share options can be found at note 15 to the accounts.

   6          Taxation 

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The taxation credit recognised in the Group Statement of Comprehensive Income can be analysed as follows:

 
                                           2019           2018 
                                          GBP'000        GBP'000 
Current income tax 
UK corporation tax on profit for                -              - 
 the current year 
                                      ----------- 
                                                -              - 
Deferred income tax 
Deferred income tax credit for                  -              - 
 the current year 
 
Total taxation credit                           -              - 
                                      -----------    ----------- 
 

The taxation for the period is higher than the average rate of corporation tax in the UK of 19%. The differences are reconciled below:

 
                                                  2019         2018 
                                                 GBP'000      GBP'000 
 
Loss before taxation                             (3,797)      (1,859) 
                                             -----------  ----------- 
 
Tax on loss at average standard rate 
 of 19%                                            (721)        (353) 
 
Expenses not deductible for tax purposes             102           48 
Deferred taxation not recognised                     619          305 
 
Taxation credit recognised for the                     -       - 
 current year 
                                             -----------  ----------- 
 

No deferred tax asset has been recognised in the Company or the Group in relation to unrelieved trading losses or temporary differences on share based payments and accelerated capital allowances as, in accordance with IAS 12, there is at present insufficient evidence that sufficient taxable profits will be available in the near future to recover the assets. This is due to the early stage of commercialisation of products and services and the position will be reviewed each year. The Group did not recognise deferred tax assets at 31 December 2019 in respect of:

 
Group 
                                              2019      2018 
                                             GBP'000   GBP'000 
 
 
Accelerated capital allowances                  (94)      (34) 
Share based payments                             978     1,434 
Trading losses                                   946       249 
                                            -------- 
                                               1,830     1,649 
                                            --------  -------- 
 
 
 
 
  Company 
                                              2019      2018 
                                             GBP'000   GBP'000 
 
 
Accelerated capital allowances                  (19)      (10) 
Share based payments                             978     1,434 
Trading losses                                   473        48 
                                            -------- 
                                               1,432     1,472 
                                            --------  -------- 
 
 

The above assets were calculated using a tax rate of 17%, the substantively enacted tax rate at each year end which was to apply from 1 April 2020. Since the year end, changes in the budget have been substantially enacted which will keep the tax rate at 19%.

   7           Loss per share 

Basic loss per share is computed by dividing the loss for the period attributable to equity holders of the parent by the weighted-average number of ordinary shares outstanding during the period.

The following tables set out the computations for basic and diluted loss per share:

 
 Year ended 31 December 2019           Loss     Weighted    Per-share  Per-share 
                                                 average      amount     amount 
                                                  number      Pence      Pence 
                                      GBP'000   of shares      2019       2018 
 Basic and Diluted EPS 
 Loss for the period attributable 
  to equity holders of the              (3,79 
  parent                                  7 )  523,701,761     (0.72)     (0.52) 
 

Diluted earnings per share

Diluted earnings per share is computed by dividing the profit for the period attributable to equity holders of the parent by the weighted-average number of ordinary shares outstanding during the period as adjusted for the effect of all dilutive potential ordinary shares.

The weighted average number of shares and the loss for the year for the purposes of calculating diluted loss per share are the same as for the basic loss per share calculation. This is because the outstanding share options would have the effect of reducing the loss per share and would not, therefore, be dilutive under the terms of IAS 33.

In order to better demonstrate the performance of the Group, an adjusted loss per share calculation has been presented below which adds back or deducts items typically adjusted for by users of financial statements as they are exceptional items. In 2019 this was share-based payment charges and Impairment of fixed assets. The calculations of the adjusted basic and diluted loss per share amounts are based on the following information:

 
                                                 2019             2018 
                                                GBP'000          GBP'000 
Loss for the period attributable to equity 
 holders of the parent                            (3,797)          (1,859) 
Adjustments: 
Costs of acquiring businesses                           -               37 
Impairment of fixed assets                             89                - 
Share-based payment charges                           729              638 
 
(6,166) 
Adjusted earnings                                 (2,979)          (1,184) 
 
Weighted average number of shares             523,701,761      358,012,732 
 
 
Adjusted loss per share:     2019      2018 
                             Pence     Pence 
 
Basic and diluted            (0.57)  (0.33) 
 
   8           Intangible assets 

Group

 
                                             Goodwill 
                                              GBP'000 
Cost and net carrying value 
 
Acquisitions in period to 31 December 
 2018                                          572 
At 31 December 2018 and 31 December 2019       572 
 
 

Goodwill arose on the acquisition of Goodbody Botanicals Ltd and PhytoVista Laboratories Ltd and represents the excess of the initial consideration over the fair value of the net liabilities acquired.

   8          Intangible assets (continued) 

The goodwill was tested for impairment at 31 December 2019 by comparing the carrying value of the cash-generating units with the recoverable amount. The recoverable amount was determined using a value in use methodology based on discounted cash flow projections. The key assumptions used in the value in use calculations were as follows:

(i) The operating cash flows for the business for the three years to 31 December 2022 were taken from the latest board approved forecast;

(ii) No growth in operating cash flows has been assumed for the remainder of the value in use calculation period;

    (iii)    A pre-tax discount rate of 12% - 15% has been used. 

On the basis of the above assumptions and using projection periods of 5 years, 10 years and in perpetuity, the recoverable amount, based on a value in use methodology, is estimated to exceed the carrying amount by the amounts show in the table below. Future annual operating cash inflows, which are most sensitive to the level of new business sales, would need to be consistently lower than the growth assumptions used in the value in use calculation by the percentages shown in the table below to reduce the recoverable amount to below the carrying amount.

Goodbody Botanicals Ltd

 
                                          In perpetuity  10 years  5 years 
 
Amount by which recoverable amount, 
 based on value in use, exceeds the 
 carrying amount (GBP'000)                        3,433     3,029    1,130 
 
Reduction in annual revenue growth 
 below the growth assumptions used 
 in value in use calculation required 
 to reduce the recoverable amount below 
 the carrying amount                                33%       32%      23% 
 

PhytoVista Laboratories Ltd

 
                                          In perpetuity  10 years  5 years 
 
Amount by which recoverable amount, 
 based on value in use, exceeds the 
 carrying amount (GBP'000)                        1,578     1,229      305 
 
Reduction in annual revenue growth 
 below the growth assumptions used 
 in value in use calculation required 
 to reduce the recoverable amount below 
 the carrying amount                                32%       29%      14% 
 
   9          Property, plant and equipment 
 
Group          Furniture  Computer    Lease     Lease     Leasehold      Plant       Assets      Total 
                  and     equipment   options    right   improvements     and        in the 
                fittings                        of use                 machinery     course      GBP'000 
                GBP'000    GBP'000    GBP'000    asset     GBP'000                     of 
                                                GBP'000                 GBP'000   construction 
                                                                                    GBP'000 
Cost 
Additions              8         19        85         -            98         56             -       266 
Acquisition 
 through 
 business 
 combinations          4          4         -         -            29        155             -       192 
At 31 
 December 
 2018                 12         23        85         -           127        211             -       458 
 
Additions             22         87         -       704           200        177            39     1,229 
Disposals              -        (2)      (85)         -             -       (10)             -      (97) 
At 31 

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DJ Sativa Group PLC Results to 31 December 2019 and -10-

 December 
 2019                 34        108         -       704           327        378            39     1,590 
 
Depreciation and 
Impairment 
charges 
 
Depreciation 
 expense               1          3        85         -             7         18             -       114 
At 31 
 December 
 2018                  1          3        85         -             7         18             -       114 
 
Disposals              -          -      (85)         -             -        (2)             -      (87) 
Depreciation 
 expense               6         23         -        88            80         63             -       260 
Impairment 
 charge                -         --         -        79            10          -             -        89 
At 31 
 December 
 2019                  7         26         -       167            97         79             -       376 
 
Net carrying 
amount 
At 31 
 December 
 2018                 11         20         -         -           120        193             -       344 
At 31 
 December 
 2019                 27         82         -       537           230        292            39     1,207 
 

The depreciation charge for period is recognised within administrative expenses. The depreciation and impairment figures for Property, plant and equipment includes an impairment figure of GBP89,000. This was calculated using discounted future cashflow modelling which showed a high probability that future cash flows would not cover the capitalised costs of the Right of use shop assets in Goodbody Wellness stores (GBP79,000) and leasehold improvements in the Goodbody Wellness Bath store (GBP10,000). This was based on the amount not covered by the forecast future cash generation over the lease period using a pre-tax discount rate of 15%.

   9          Property, plant and equipment continued 
 
Company          Furniture    Computer   Lease        Leasehold           Plant           Assets     Total 
                       and   equipment    right    improvements   and machinery           in the 
                  fittings               of use                                           course 
                   GBP'000     GBP'000    asset         GBP'000         GBP'000  of construction   GBP'000 
                                                                                         GBP'000 
                                         GBP'000 
 
  Cost 
Additions                6           3         -             43               -                -        52 
At 31 December 
 2018                    6           3         -             43               -                -        52 
 
Additions                -           7       529              6               1               23       566 
At 31 December 
 2019                    6          10       529             49               1               23       618 
 
Accumulated 
depreciation 
Depreciation 
 expense                 -           -         -              1               -                -         1 
At 31 December 
 2018                    -           -         -              1                                          1 
 
Depreciation 
 expense                 1           3        55              9               -                -        68 
At 31 December 
 2019                    1           3        55             10               -                -        69 
 
Net carrying 
amount 
At 31 December 
 2018                    6           3         -             42               -                -        51 
At 31 December 
 2019                    5           7       474             39               1               23       549 
 
   10         Fixed asset investments 
 
Group                          Listed      Total 
                             investments   GBP'000 
                               GBP'000 
 
Cost or fair value 
Additions in the period              236       236 
Fair value gains                       7         7 
At 31 December 2018                  243       243 
 
Additions in the period                -         - 
Disposals in the period             (27)      (27) 
Fair value losses                  (144)     (144) 
At 31 December 2019                   72        72 
 
Net carrying amount 
At 31 December 2018                  243       243 
At 31 December 2019                   72        72 
 
 
Company                              Shares          Listed      Total 
                                 in subsidiaries   investments   GBP'000 
                                     GBP'000         GBP'000 
 
Cost or fair value 
Additions in the period                      445           236       681 
Capital contribution relating 
 to share-based payments                      22             -        22 
Fair value gains                               -             7         7 
At 31 December 2018                          467           243       710 
 
Disposals in the period                        -          (27)      (27) 
Capital contribution relating 
 to share-based payments                     222             -       222 
Fair value losses                              -         (144)     (144) 
At 31 December 2019                          689            72       761 
 
Net carrying amount 
At 31 December 2018                          467           243       710 
At 31 December 2019                          689            72       761 
 

The capital contribution relating to share-based payment relates to share options granted by the company to employees of subsidiary undertakings in the group. Refer to note 15 for further details on the group's share option scheme.

At 31 December 2019 the Company held 100% of the nominal value of all classes of the share capital of the companies set out below, except Sativa Germany GmbH where the Company holds 60% of the issued share capital. All of these companies are incorporated in England & Wales, except Sativa Germany GmbH which is incorporated in Germany.

   10         Fixed asset investments (continued) 
 
Name of subsidiary             Nature of business                   Class of shares 
 
Goodbody Botanicals            Operational and trading entity.         Ordinary 
 Ltd                            Purchasing raw product, processing 
                                and manufacturing end product, 
                                marketing and selling CBD products 
                                to customers 
PhytoVista Laboratories        Commercial laboratory, performing       Ordinary 
 Ltd                            scientific tests to confirm 
                                the chemical make up of CBD 
                                and other related products, 
                                to 3rd party manufacturers, 
                                growers and others 
Sativa Cultivation and         Growing cannabis for research           Ordinary 
 Extraction Limited             activities, with the objective 
                                of expanding into production 
                                of cannabidiol and medicinal 
                                cannabis products 
Goodbody Wellness Limited      Retail operations as wellness           Ordinary 
                                centers, owned sites, to be 
                                distributed though health and 
                                wellbeing channels 
Sativa Germany GmbH            Company, aiming to acquire an           Ordinary 
                                import / export and wholesale 
                                license to distribute cannabidiol 
                                products in Germany. 
George Botanicals Ltd          Dormant                                 Ordinary 
Goodbody & Blunt Ltd           Dormant                                 Ordinary 
Sativa Research & Development  Dormant                                 Ordinary 
 Ltd 
Saiva Wellness Centres         Dormant                                 Ordinary 
 Ltd 
Sativa Investments Ltd         Dormant                                 Ordinary 
Sativa Cosmetics Ltd           Dormant                                 Ordinary 
Sativa Foundation              Dissolved 14/01/2020                   Limited by 
                                                                       guarantee 
 

The registered office address of each of the above subsidiaries is The Blue Building, Stubbs Lane, Beckington, Frome, BA11 6TE except for the following:

 
 
Sativa Germany GmbH  Thujaweg 1, 76149 Karlsruhe, Germany 
 
   11        Inventories 

Group

 
                                2019        2018 
                               GBP'000     GBP'000 
 
Raw materials                        65        86 
Finished goods and 
 goods for resale                   143        26 
                                    208    112 
 

Inventory costs recognised as an expense within cost of sales in the Group Statement of Comprehensive Income amounted to GBP436,000.

   12         Trade and other receivables 
 
Group                                2019        2018 
                                    GBP'000     GBP'000 
 
Trade receivables                        144        89 
Other receivables                        308       133 
Prepayments and accrued 
 income                                   48        12 
                                         500       234 
 
 
Company                                      2019         2018 
                                            GBP'000      GBP'000 
 
Amounts receivable from 
subsidiaries                                   3,192      1,560 
Prepayments and accrued income                    11          3 
Other receivables                                174         87 
                                               3,377      1,650 
 

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DJ Sativa Group PLC Results to 31 December 2019 and -11-

All trade and other receivables have been reviewed for expected credit losses. Unless specific agreement has been reached with individual customers, sales invoices are due for payment either 30 or 60 days after the date of the invoice. Trade receivables include amounts that are past due at the reporting date for which no allowance for expected credit losses has been recognised because these amounts are still considered to be recoverable. The Group does not hold any collateral or other credit enhancements over its trade receivable balances.

An analysis of trade receivables ageing based on due date is set out below.

 
Group                          2019        2018 
                              GBP'000     GBP'000 
 
Not yet overdue                     63        31 
1 - 30 days overdue                 38        45 
30 - 60 days overdue                 8         8 
60+ days overdue                    35         5 
                                   144        89 
 

No allowance for expected credit losses were recognised within trade receivables.

The loss allowance for the trade receivables overdue is measured at an amount equal to lifetime expected credit losses and totals GBPnil, based on current expectation and historical experience.

Management have considered the provisions around impairment of inter-company indebtedness contained within IFRS 9 "Financial Instruments" and concluded that the likelihood of default is low in light of future growth projections, forecasts, and the ability to cross charge loans within the Group as our route to market strategy evolves during the growth phase of development lifecycle. However, as inter-company balances are expected to be repaid over the long-term, and group entities are in an early stage of product commercialisation, management have adopted a prudent approach and recognise that there is an element of uncertainty over future performance and a provision of GBP625,000 has therefore been recognised in line with the requirements of IFRS 9.

   13         Trade and other payables 
 
Group                                    2019     2018 
                                      GBP'000  GBP'000 
 
Trade payables                            273      157 
Other taxes and social security            55       25 
Other payables                             25       45 
Accruals                                   77       54 
                                          430      281 
 
 
Company                                  2019     2018 
                                      GBP'000  GBP'000 
 
Trade payables                            123       81 
Other taxes and social security            25       10 
Other payables                              6       34 
Accruals                                   61       47 
                                          215      172 
 
   14         Equity share capital 
 
Group and Company                             2019        2018 
                                             GBP'000   GBP'000 
Issued and fully paid share capital: 
569,189,167 ordinary shares of 0.25 pence 
 each                                          1,423     1,275 
 
 
 
                                               2019 
                                               Number 
 
Balance brought forward 1 January 2019      509,900,000 
Issued on exercise of share options          24,789,167 
Issued on share placing at 4 pence           34,500,000 
Number of shares in issue at end of the 
 period                                     569,189,167 
 

Ordinary shares issued during the year ended 31 December 2019 on the exercise of share options or Warrants were as follows:

 
Date shares     Instrument   Number of shares  Issue price 
 issued                       issued            (pence) 
 
11 April 2019       Options         6,666,667         2.25 
5 May 2019          Options           500,000         1.00 
21 June 2019       Warrants         8,098,000          0.5 
21 June 2019       Warrants         2,024,500         1.00 
21 June 2019        Options           500,000         1.00 
3 September 
 2019               Options         7,000,000          0.5 
 

Details of outstanding options over the shares of the Company are provided in note 15.

The total share issue costs during the period ended 31 December 2019 of GBP34,000 have been deducted from the share premium account.

   15        Share-based payments and warrants 

During the period ended 31 December 2019, the Group granted a number of share options which have been treated as equity-settled arrangements. A share based payment charge of GBP729,000 (2018: GBP638,000) was recognised in the year of which GBP579,000 (2018: GBP638,000) was in relation to options issued to employees and GBP150,000 (2018: GBPnil) in respect of options granted in relation to sponsorship of a car in the 2019 Ginetta Junior Championship. Non-employee options were valued based on the market value of services provided. This is charged to the profit and loss and share based payment reserve.

All employee options issued to date either had an immediate vesting date, a fixed future vesting date, usually 3 years, or in the case of employees mainly 1/3 per year over three years or performance based.

The following is a summary of the movements in outstanding share options.

Year ended 31 December 2019

 
                                             Number of    Weighted 
                                               options     average 
                                                           exercise 
                                                            price 
                                                           (pence) 
 
Options brought forwards at 1 January 
 2019                                        134,696,154       0.84 
Granted during the period                      7,076,923       6.50 
Exercised during the period                 (14,666,667)       1.33 
Surrendered / forfeited during the period    (8,346,154)       2.61 
 
Outstanding at 31 December 2019              118,760,256       0.93 
 
Exercisable as at 31 December 2019            98,575,353       0.59 
 

The 4,000,000 options surrendered during the period by Geremy Thomas are only surrendered if certain options issued since admission vest, the remaining 4,346,154 option surrendered / forfeited in the year relate to holders leaving the company or passing away.

Of the options outstanding at 31 December 2019, 93,700,852 options have an exercise price of 0.5 pence, 1,000,000 options have an exercise price of 1 pence, 3,350,000 options have an exercise price of 1.5 pence, 13,555,558 options have an exercise price of 2.25 pence and 4,076,923 options have an exercise price of 6.5 pence.

 
Number of options    Exercise price      Sativa Group      Fair value 
    exercised                           Plc share price     per option 
                                          on date of        at date of 
                                           exercise           grant 
                        (pence)            (pence)           (pence) 
 
        6,666,667              2.25                7.25          10.30 
          500,000              1.00                7.25           0.40 
          500,000              1.00                5.88           0.40 
        7,000,000              0.50                6.13           0.40 
 
       14,666,667 
 
   15        Share-based payments and warrants (continued) 

The fair values of the options granted in the period ended 31 December 2019 were estimated at the date of grant using a Black-Scholes option pricing model. The inputs to the option pricing model are summarised below.

 
Date of grant        Number of      Exercise   Share price    Fair value 
                   options granted    price    at grant date   per option 
                                                               at date of 
                                                                 grant 
                                    (pence)      (pence)        (pence) 
 
15 January 2019            923,077      6.50           5.925     4.30 
11 February 
 2019                    3,076,923      6.50           5.500      4.0 
15 January 2019          3,076,923      6.50           5.925     4.30 
                         7,076,923 
 
 
Expected volatility                      100% 
Expected dividend yield                   0% 
Expected option life                    5 years 
Risk-free interest rate                  0.9% 
Employees remaining employed in the 
 group                                   100% 
 

(*) - the share price at date of grant was estimated based on the market value of shares issued on the share placing at 29 March 2018.

Future share price volatility was estimated by using historic share price volatility over the most recent period.

The average remaining contractual life of the options outstanding at 31 December 2019 was 4.3 years.

Warrants

The following is a summary of the movements in outstanding warrants.

Year ended 31 December 2019

 
                                      Number of    Weighted 
                                       warrants     average 
                                                    exercise 
                                                     price 
                                                    (pence) 
Brought Forward 1 January 2019         10,122,500        0.6 
Granted during the period              30,825,000       4.75 
Exercised during the period          (10,122,500)        0.6 
 
Outstanding at 31 December 2019        30,825,000       4.75 
 
Exercisable as at 31 December 2019              -          - 
 

The warrants outstanding at 31 December 2019 all have an exercise price of 4.75 pence. This price was set based on the market price expected at issue. They were offered as an incentive to shareholders purchasing shares in the fund raise in December 2019. They could apply for one warrant per share purchased.

   15        Share-based payments and warrants (continued) 

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DJ Sativa Group PLC Results to 31 December 2019 and -12-

The fair values of the warrants granted in the period ended 31 December 2019 were estimated at the date of grant using a Black-Scholes option pricing model. The inputs to the option pricing model are summarised below.

 
Date of grant           Number of  Exercise     Share price   Fair value 
                 warrants granted     price   at grant date   per option 
                                                              at date of 
                                                                   grant 
                                    (pence)         (pence)      (pence) 
 
19 December 
 2019                  30,825,000      4.75            4.75          2.9 
 
 
 
Expected volatility          100% 
Expected dividend yield       0% 
Expected option life        3 years 
Risk-free interest rate      0.9% 
 

Future share price volatility was estimated by using historic share price volatility over the most recent period.

The average remaining contractual life of the warrants outstanding at 31 December 2019 was 3 years.

   16        Contingent liabilities 

The Group are in receipt of a potential claim from an ex-employee regarding the exercise of share options. The maximum exposure of a potential claim is GBP315,000. The Directors believe it will be satisfactorily resolved without a settlement.

   17        Capital management 

The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern so that it can provide a return to shareholders and benefits for other stakeholders.

The capital monitored by the group consists of all components of equity attributable to owners of the parent as set out in the Group Statement of Changes in Equity and cash and cash equivalents.

The Group currently maintains a capital structure which is appropriate for its needs principally through a combination of cash flow management and forecasting and the issue of new shares, primarily in connection with the funding of new business streams.

The Group is not subject to externally imposed capital requirements other than the minimum capital requirements imposed by the Companies Act 2006 on all public limited companies.

   18        Leases 

On inception of the lease, a right of use asset and lease liability is recognised based on the discounted payments over the lease term. The incremental borrowing rate used based on current market rates was 2% for head office and 6% on the retail premises.

There were no material leases in 2018 so no comparators have been recalculated using FRS 16.

Group

 
                                Right of  Lease liability  Lease liability  Lease liability 
                   Months to   use asset          < 1year        1-2 Years        2-5 Years 
                end of Lease     GBP'000          GBP'000          GBP'000          GBP'000 
Premises               10-54         531              167              143              305 
Equipment              23-24           6                3                3                - 
 
Total values                         537              170              146              305 
 

Company

 
                                Right of  Lease liability  Lease liability  Lease liability 
                 Months to     use asset          < 1year        1-2 Years        2-5 Years 
                end of Lease     GBP'000          GBP'000          GBP'000          GBP'000 
Premises                  54         470              102              104              268 
Equipment                 24           4                2                2                - 
 
Total values                         474              104              106              268 
 
   19        Pension schemes 

The Group operated a defined contribution pension scheme for employees during the period. The pension cost charge represents contributions payable by the Group into the scheme and amounted to GBP23,000 (2018:GBP2,000). At 31 December 2019, trade and other payables included GBP1,000 (2018:GBP1,000) payable to the Group pension scheme.

   20         Cash and cash equivalents 

For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks, net of outstanding overdrafts as follows.

 
Group                       2019         2018 
                            GBP'000    GBP'000 
 
Cash and bank balances        1,993      3,743 
                                     --------- 
 
 
Company                     2019         2018 
                            GBP'000    GBP'000 
 
Cash and bank balances        1,623      3,646 
                          ---------  --------- 
 
   21         Related party transactions 

Sativa Group Plc is the parent company of the Group. There was no overall control of Sativa Group Plc.

Balances between the Company and its wholly owned subsidiaries, which are related parties of the Company, are disclosed in notes 12 and 13. During the year, the Company recharged GBP71,883 (2018: GBP560,000) of costs to its wholly owned subsidiaries. Details of transactions between the Company and other related parties are disclosed below.

At 31 December 2019, trade and other payables in the Company included GBP995.82 (2018: GBP54,847) payable to Carbon Managers Limited, a company in which Mr Thomas is a director and major shareholder. This amount is in respect of expenses payable to Geremy Thomas as a director of the Company.

Amounts charged by Angus Kerr for his services as a director of the Company are payable to Elixir Strategy Limited, a company in which Mr Kerr is a director and major shareholder. Amounts charged by Jonathan Wearing for his services as a director of the Company are payable to Hurstmount Limited, a company in which Mr Wearing is a director and major shareholder. At 31 December 2019, trade and other payables in the Company included GBP1,250 (2018: GBP1,250) payable to Elixir Strategy Limited, Nil (2018: GBP3,000) payable to Hurstmount Limited and GBP15,264 (2018: GBP2,500) payable to Mark Blower for directors fees due. Details of directors' fees paid during the year are disclosed in note 5.

During the period in addition to directors' fees as disclosed in note 5, the Group was charged rent of GBP111,000 (2018: GBP37,000) by Carbon Managers Limited. Other expenses paid to Carbon managers by the group totalled GBP6,561. At 31 December 2018, trade and other payables in the Group included GBP1,207 (2018: GBP83,535) payable to Carbon Managers Limited. Mark Blower was also paid GBP2,544.97 travel expenses.

Key management are considered to be the executive directors of the Company as well as the subsidiary directors and Company Secretary. The remuneration of the directors of the company is disclosed in note 5 of these financial statements. The total remuneration of key management is set out below:

 
                                              2019       2018 
                                            GBP'000     GBP'000 
 
Salaries, bonuses and fees and related 
 employer national insurance                    530         271 
Share-based payments                            290         543 
 
                                                820         814 
                                         ----------  ---------- 
 
   22        Post balance sheet events 

There has been two major post balance sheet events that have impacted on the business. Firstly, the COVID-19 world pandemic has forced the closure of all retail stores in line with other businesses and government requirements. The rest of the business has significantly reduced turnover, therefore investments in sales, marketing and other discretionary areas spend have been significantly reduced. Staff have been furloughed across the business and longer-term reductions in headcount and other costs are planned.

Secondly, Sativa Group on the 2nd June 2020 entered into an agreement to undertake a scheme of arrangement with Stillcanna Inc a company registered in Canada that grows and extracts CBD oil in Europe. This strengthens the Group's balance sheet, and allows the new group to have complete control from seed to consumer strategy and the integration allows novel food status and other synergies upon consolidation to be achieved.

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

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