Kanabo Grp Plc Regulatory News (KNB)

2 May 2023

Kanabo Group Plc

("Kanabo", the "Group" or the "Company")

FULL YEAR RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2022

· Kanabo is now a fully focused health-tech company; combining a digital healthcare platform and treatment portfolio with a focus on medicinal cannabis products

· Successful integration of The GP Service and launch of an online pain management clinic, a key strategic pivot for the Group

· Now building a substantial operational base for future growth

Kanabo Group plc (LSE: KNB), the patient focused healthcare technology and medicinal cannabis company, announces results for the year results for the year ended 31 December 2022 ("FY 2022").

Having delivered significant progress against its strategic objectives across FY 2022, Kanabo uniquely combines a digital healthcare platform that facilitates access to healthcare professionals, and a treatment portfolio which includes medicinal cannabis products, providing seamless access to high-quality medical treatments for pain management.

2022 Key Highlights:

· Ongoing progress to improve the financial stability of the Group:

o  Revenues increased 726% to £603k (2021: £73k)

o  Operating loss totaled £6.8m (2021: operating loss of £4.6m)

o  Cash at 31 December 2022 of £3.2m (31 December 2021: £4.4m)

o  Raised £2.25m (in February 2022), by way of an oversubscribed Placing

· Acquisition of The GP Service Ltd ("GP Service") now fully integrated into the Group, expanding the Group's activities and skillset across the digital health services arena

· Launched two new 'prescription only' cannabis-derived formulations for pain management

· Launched a dedicated eCommerce platform, Kanabo. Store, focused initially at the UK market, with plans already underway to expand into additional European markets

· Formation of Kanabo Agritec - in which Kanabo holds a 40% share - dedicated to providing consulting services around the production, operation and management of medical cannabis production facilities

Post Period End and Outlook:

· Launch of Treat It, the Company's new online clinic for pain management. The service allows patients direct access to high-quality medical treatments, including medicinal cannabis, and enables patients to take control of their own personalised care

· Appointment of MHA MacIntyre Hudson as the Company's auditors

· Continue to deliver further ongoing strategic progress, which includes the process of obtaining CE Mark certification for the Group's cannabis inhaler which remains on track

· Through aligning the growing demand for digital medical access and Kanabo's knowledge of the medicinal cannabis industry, the Board remains confident in both short-term and medium-term growth prospects for the Company, and remains committed to developing a scaled business capable of fully exploiting a number of near term growth opportunities

Avihu Tamir, Chief Executive Officer of Kanabo, commented:

"2022 has proved to be one of the most strategically important years for our business, as we seek to further expand our operational footprint across both the medicinal cannabis and digital health services arenas.

"Our acquisition of GP Service will now provide the bedrock of our activities as we continue to evolve Kanabo into a wellness and healthcare specialist, whilst fully leveraging our market leading expertise in the development, and distribution of cannabis-derived medicinal products.

"2023 has started well, and we were delighted to announce the launch of our online medicinal cannabis clinic for pain management in March - leveraging our proprietary technology to provide access to pain management treatments for patients across the UK. I believe we now have the right strategic and operational focus to deliver further financial progress and I look forward updating all our key stakeholders throughout the year."

Enquiries:

About Kanabo Group Plc

Kanabo Group Plc (LSE:KNB) is a healthtech company committed to revolutionising patient care through its innovative technology platform and disruptive treatment offerings. Since its inception in 2017, Kanabo has been focused on researching, developing, and commercialising regulated medicinal cannabis-derived formulations and therapeutic inhalation devices.

Kanabo's NHS-approved online telehealth platform, The GP Service, provides patients with video consultations, online prescriptions, and primary care services. The Company is a leader in its field, focusing on improving patient outcomes and providing more accessible healthcare experiences.

In March 2023, Kanabo successfully launched its Pain Clinic, Treat It, under the expert guidance of its technological and product expertise. Treat It initially focuses on chronic pain management using plant-based medicine and treatments that are currently unavailable through traditional channels.

At Kanabo Group Plc, we are dedicated to providing patients with the highest quality medical treatments and more accessible healthcare experiences.

Visit www.kanabogroup.com for more information.

I am delighted to report on the significant strategic progress of the Company. Since the beginning of 2022 we have continued to further strengthen the business, with the development and launch of new products, acquisitive growth with the addition of The GP Service to the Group, and the launch of a Kanabo Agritec Ltd ("Agritec"), a new, partly owned subsidiary offering one-stop-shop consultancy services regarding the design, build, operation and management of the production of medicinal cannabis. The Group is now well positioned to leverage its skillset and products and capitalise on the market opportunity.

In February 2022, we announced the acquisition of The GP Service, and I would like to take this opportunity to welcome the team from The GP Service to our growing group - we look forward to working together to broaden our reach and leveraging The GP Service's platform to expand our overall accessible market. This collaboration will undoubtedly strengthen our position in the healthcare sector and benefit our stakeholders.

The acquisition of The GP Service has been immediately boosted earnings, contributing to an improved financial performance., We are pleased to report revenue growth of £603 thousands, compared to £73 thousands the previous year. This is before fully completing the post-merger integration, which concluded in Q1 2023.

The acquisition of The GP Service has expanded the Group's service offering in the healthcare space. With an existing network of over 40,000 patients and approximately 4,500 registered pharmacies, the platform presents an opportunity to leverage The GP Service to further promote the sales of the Group's cannabis-derived products for medical patients and other specialised treatment portfolios. We have already seen a significant increase in the number of monthly consultations and look forward to further driving the reach of the service.

In August, we announced the formation of a new subsidiary, Agritec, in which the Group has a 40% shareholding. Kanabo Agritec will provides consultancy services, leveraging the experience and knowledge of our team in areas such as cultivation, processing, and production of cannabis products to advise other cultivators on maximising their potential. Furthermore, these consultancy services enable the Group to enhance the security of its cannabis supply by diversifying its range of suppliers and generating a new revenue stream in the short term.

The Group was pleased to complete a £2,250 thousands oversubscribed Placing in February 2022, following strong demand from both new and existing shareholders. Following the well-supported fundraising in February 2022, our cash balance at 31 December 2022 was £3,204 thousands (31 December 2021: £4,477 thousands).

Following the acquisition of The GP Service, the Group strengthened the team with the appointment of Dr Mehran Afshar as Clinical Director of the Group. Dr Afshar's primary role is to manage compliance policies and procedures regarding the supply of medicinal cannabis through The GP Service.

In March 2022, Uziel Danino retired from the Board of Directors and in December, it was announced that Andrew Morrison stood down as Non-Executive Director. Both Uziel and Andrew were instrumental in the successful listing of Kanabo on the London Stock Exchange. In March 2023, it was additionally announced that Daniel Poulter had stepped down as Non-Executive Director, with Kanabo confirming it was at an advanced stage of discussions regarding the appointment of a UK-based NED. I would like to thank Uziel, Andrew and Daniel for their support and contribution to Kanabo and wish them well with their future endeavours. Gil Efron, who has considerable capital markets and healthcare expertise was appointed to the Board of Directors in March 2022.

Following the year end, the Group was delighted to announce the launch of Treat It, a dedicated online clinic for pain management, which leverages our proprietary technology to extend our market reach for our medicinal cannabis products. Furthermore, we announced the appointment of MHA MacIntyre Hudson as the Group's auditors.

The Group remains focused on the following key strategic priorities:

· Continue to capitalise on demand for access to healthcare professionals to drive growth of the GP Services business;

· Leverage a number of cross sell opportunities of the GP Service;

· Ongoing development of the Group's healthcare services, including our recently launched online pain management clinic, to further grow market share;

· Maintain existing product development activities to further strengthen the Group's medicinal cannabis product footprint;

· Focus on achieving medical device CE mark approval for our inhaler product;

· Continue to explore opportunities to further expand Kanabo's sales reach and online distribution channels.

The Kanabo team continue to be critical to the success and drive of the business and to that end, I would like to extend my sincere thanks for their contribution over the past year. It is testament to the team and their continued drive that Kanabo is so well placed to capitalise on the market opportunity in the provision of digital health services and cannabis products across Europe.

The Chair's statement is an integral part of the Company's Strategic Repot.

David Tsur

Chair

27 April 2023

2022 has been a year of significant progress for Kanabo. Not only have we launched new products and seen further demand for our core products, but we have also extended the Group's capabilities with the addition of the telehealth services provided by The GP Service. Furthermore, we have leveraged our in-house expertise through Kanabo Agritec, which adds strength and depth to our supply chain for core products.

Having completed the acquisition of The GP Service, Kanabo is now uniquely placed to provide access to high-quality medical treatment for pain management. Kanabo combines a digital healthcare platform that allows patients access to healthcare professionals, with a treatment portfolio which includes medicinal cannabis and other products not usually available to patients.

The Group continues to provide a "product-to-patient" solution for cannabis-derived products, now with a platform to prescribe medicinal products directly to patients. The Group develops and commercialises high quality cannabis formulas that are delivered to the patient via medical grade vaporisers and non-combustible inhalation solutions, either through direct sales or via prescription. Following the acquisition of The GP Service, we see great potential to grow sales via the prescription channel. Furthermore, through the Group's advisory and consultation services in Kanabo Agritec, we are able to bolster and secure the supply of quality raw product. Our pharmaceutical grade production standards ensure high quality, high potency medical-grade products.

The corporate activity undertaken throughout the year demonstrates the Group's continued focus on our strategy to be a digital healthcare provider and leading supplier of innovative medical solutions to patients suffering from conditions including chronic pain, anxiety and central nervous system diseases.

The GP Service

We were delighted to announce the acquisition of The GP Service in February 2022. Utilising an online consultation platform, The GP Service offers the services of online doctors to help diagnose and treat common conditions. The system, already an approved provider on the NHS digital framework, allows patients to consult with qualified doctors, who then are able to provide prescriptions, referral letters and fit notes.

As well as providing access to GP appointments, The GP Service also partners with certain UK corporations to provide services to employees as part of benefits packages and in June 2022, it was confirmed it had extended its contract with one of the UK's largest group of retail businesses. The service now provides live video consultation appointments with registered GPs, and prescriptions are available through the platform's partner network of over 4,000 pharmacies across the UK. Given the increasing pressure experienced by the NHS, we anticipate seeing continued demand for our private GP appointments through The GP Service as individuals seek access to medical advice.

Following the acquisition, we have invested in technology to support its suite of digital tools, including video consultations, digital prescriptions and access to primary care services. This investment supported the service in seeing a steady growth in the number of monthly users of the digital health services, with more an 100% increase in the number of consultations on a monthly basis since the acquisition of the GP Service.

The GP Service (cont.)

Under the new management of Kanabo, The GP Service's core activities have shown a growth of over 100% in monthly revenue from acquisition to the end of the year. This growth is expected to continue as we add new treatments to the platform and invest in additional IT developments.

The acquisition of The GP Service has provided the Group with a solid foundation in the UK digital health market and presents an opportunity to capitalise on the footprint to expand our activities and further strengthen our UK market position.

Products

In March 2022, we unveiled our cutting-edge eCommerce platform, Kanabo.store. Initially targeting the UK market, the platform allows customers to purchase Kanabo's devices and pods directly. Our unique VapePod, a first-of-its-kind medical-grade vaporiser, offers users a convenient and precise dosing experience.

Since the launch, we have been dedicated to broadening our product offerings. We introduced two new medical cannabis extract formulas for inhalation, specifically designed for pain management and compatible with the VapePod. As the only products of their kind currently available in the UK market, these innovative solutions have garnered positive feedback from our customers.

We are making significant progress towards acquiring CE Mark approval for our proprietary VapePod MD delivery device. Once approved, the VapePod MD will become Europe's first medical device-certified cannabis inhaler of its kind, paving the way for increased sales throughout Europe and rapid expansion into Germany and other EU markets. In the coming months, we anticipate providing an update on this development.

Our partnership with Medocann, a leading premium cultivator in Israel, continues to strengthen as we collaborate on a unique, high-end product line of cannabis-based products for medicinal use. The products in development will target specific medical conditions, and Kanabo has exclusive distribution rights to the co-developed products in the German and UK markets.

Agritec

As a Group, we have acquired extensive expertise in designing, building, operating and managing medicinal cannabis facilities. By setting up Kanabo Agritec, we can leverage this expertise to boost and diversify the supply chain through key offtake agreements, reducing the risk of overreliance on any particular supplier. Alongside the launch of Kanabo Agritech, we announced our first contract for the subsidiary - an MoU for the design, build, and operation of a 4,000kg per annum indoor cultivation and processing facility in Madrid, Spain, dedicated exclusively to medicinal cannabis. The negotiations to formalise the MoU with a signed contract continue to progress well.

Corporate activity

Our Placing in February 2022 was well supported by both existing shareholders and new investors and we will use the £2,250 thousands proceeds to accelerate our strategy to become one of Europe's leading digital healthcare providers, with access to a broad treatment portfolio, including medicinal cannabis.

Early in 2022, we announced the decision not to proceed with the acquisition of the European businesses of Canada-based Materia, comprising the Maltese EU GMP certified facility, German medical cannabis wholesaler and a UK CBD eCommerce platform, with the preference to proceed with a strategic partnership instead. In March 2023, the Company received notice that 11157353 Canada Corp., which trades under the name Materia ("Materia"), has been put into receivership.

On 25 July 2021, Kanabo signed a head of terms agreement for the acquisition of Materia. As part of this agreement, the Group loaned Materia CAD$1,000 thousands, as announced on 6 June 2022, the loan given to Materia by the Company was fully impaired based on the Directors' assessment of Materia's ability to repay the debt. The Company will continue to work to extract as much value as possible in the form of cash or assets for the benefit of Kanabo.

Kanabo, as a Group, explores acquisition opportunities and strategic partnerships that will help us improve our expertise, enhance our digital healthcare services, and speed up bringing our products to market. Our strategic preference is to acquire companies in the "last mile", which will help us increase our sales and profits when integrated to the broader Group.

Broader industry involvement

Kanabo continues to be highly respected within the industry, which is reflected in it being selected as a steering group member for the- development of a British Standard for CBD non-tobacco Vape products. It is expected that a Publicly Available Specifications ("PAS") document will be published in 2023, with a standardisation document defining best practice in the industry. We firmly believe regulation and policy are critical as the use of cannabis for medical and wellness purposes continues to gain momentum. We want to ensure we remain at the forefront of the industry, guaranteeing the highest standards in both our production processes and final market products.

Post Period end

In March 2023, following the year end, we realised our plan to cross pollinate our business, through leveraging The GP Service's fully compliant digital framework to prescribe the Group's medicinal cannabis products with the launch of our Treat It platform. Treat It is a dedicated online pain management clinic, with access to a broad treatment portfolio including medicinal cannabis. The clinic affords patients suffering from chronic pain conditions greater access to our medicinal cannabis treatments.

In March 2023, the Group appointed MHA MacIntyre Hudson as the new auditors for the Group after the Group was informed that Jeffreys Henry - the previous auditor - was no longer eligible to undertake LSE audits.

Outlook

As we look forward to 2023, we believe the business is now well balanced with both our core cannabis capabilities and The GP Services division. Since we acquired The GP Service, we have seen a significant increase in demand for the services, with demand for services up 72% when comparing Q1 2023 versus Q1 2022. We believe this demand will not abate in the near future for various reasons including the continued pressure on nationalised services. We are also cognizant of the opportunity to leverage the established and extensive network within GP Service to expand the potential audience for our UK prescription products.

There is significant opportunity in the medicinal cannabis market for companies with innovative products, particularly as regulation is introduced across more European markets. The Group's proprietary VapePod MD system has been submitted for CE Mark approval and we hope to be in a position to announce progress on the certification in the coming months. There is also the potential for more markets - such as France and Spain, where any use of cannabis is currently prohibited - to open up. Furthermore, The GP Service platform has significant cross-selling potential for our wellness and medical products.

We continue to recognise the importance of developing new products to bring to market, and to that end, our scientists are focused on delivering innovative formulas aimed at both the medical and wellness markets. In addition to leveraging The GP Service platform, we are committed to introducing new treatments to both primary and secondary care, ensuring that we stay at the forefront of providing cutting-edge solutions to our customers.

We have made a positive start to 2023 and remain excited by the significant market opportunity ahead of us. We believe the Group now has the capabilities and potential to truly capitalise on it given our position as one of the leading providers of cannabis for medical and wellness services.

We believe there is significant potential to drive our market share in both the direct sale of cannabis products and our online GP platform, The GP Service, alongside our recently launched Treat It platform, which combines both elements of the business and provides access to medical professionals who can prescribe medicinal cannabis.

As we head into 2023, we have a more diverse business proposition. The combined expertise and offering presents a unified platform that uniquely combines a digital healthcare platform and treatment portfolio, connecting patients with accessible, affordable, and personalised healthcare.

The Board remains confident in both short-term and medium-term growth prospects for the Company and remains committed to developing a scaled business capable of fully exploiting a number of near-term growth opportunities.

The Chief Executive Officer's review is an integral part of the Company's Strategic Repot.

Avihu Tamir

Chief Executive Officer

27 April 2023

Financial results for 2022 reflect a year of transition for Kanabo. Alongside investment in the underlying business, with the launch of new products, a dedicated online marketplace, and a more secure supply chain via Kanabo Agritec, we have undertaken a strategically important acquisition, bringing the GP Service into the Group. The acquisition not only provides an additional revenue stream to the Group, but a significant network of GPs and pharmacies which we can leverage to drive sales of our medicinal cannabis products. A summary of the financial performance for the year is given below.

Kanabo revenues in 2022 totaled £603 thousands (2021: £73 thousands), an increase of 726% compared to the previous year primarily due to the contribution of revenues generated from The GP Service.

Operating loss for 2022 was £6,781 thousands (2021: operating loss of £4,574 thousands), representing a 48% increase, largely due to one off expenses, including acquisition-related transaction costs which were expensed as incurred.

During the period, the Company invested £597 thousands (2021: £242 thousands) in Research and Development, £361 thousands of which was directly related to staff compensation, including salaries and share based payments.

Sales and Marketing expense increased during the period to £1,190 thousands (2021: £569 thousands), £752 thousands of which was directly related to staff compensation with the remainder due to the increased marketing costs for wellness products following the launch of the Company's UK eCommerce site.

General and administration expenses for 2022 were £3,804 thousands (2021: £2,000 thousands). General and administration expenses increased mainly due to the increase in the Group's activity following the acquisition of GP Service. Out of the General and administration expenses a total amount of £1,581 thousands (2021: £443 thousands) was for non-cash expenses (i.e., amortisation, depreciation, and other share-based payments expenses).

Net financing expenses for 2022 were £89 thousands (2021: £23 thousands gains), reflecting interest on interest bearing loans and finance cost over lease.

At 31 December 2022, the Company had £3,204 thousands in cash (31 December 2021: £4,477 thousands). The decrease in cash balances can be primarily attributed to the £3,776 thousands used in operating activities, offset by £2,250 thousands raised in February 2022.

2022 was a significant year of progress for Kanabo. The acquisition of The GP Service has created a second revenue stream for the business, but also bolstered our business model by creating a robust, established and legitimate route to market for our medicinal cannabis products through the significant GP and pharmacy network. We have also launched our dedicated online marketplace, and created Kanabo Agritec which seeks to both diversify and de-risk our supply chain. We believe the business now has strong foundations and is well placed to capitalise on the opportunity and provide access to GP services for those who need it, and also enable chronic pain sufferers more access to medicinal cannabis products. We have maintained the momentum as we have moved into 2023 and remain optimistic about the Group's prospects in the years ahead.

On 25 July 2021, Kanabo signed a head of terms agreement for the acquisition of 11157353 Canada Corp., which trades under the name Materia ("Materia"). As part of this agreement, the Group loaned Materia CAD$1.0m, as announced on 6 June 2022, the loan given to Materia by the Company was fully impaired based on the Directors' assessment of Materia's ability to repay the debt.

Post-period end, the Company received notice that Materia, has been put into receivership. The Company will continue to work to extract as much value as possible in the form of cash or assets for the benefit of Kanabo.

The Chief Financial Officer's review is an integral part of the Company's Strategic Repot.

Assaf Vardimon

Chief Financial Officer

27 April 2023

The notes to the financial statements form an integral part of these financial statements.

The notes to the financial statements form an integral part of these financial statements.

(*) Reclassified, see note 27.

The notes to the financial statements form an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 27 April 2023 and were signed on their behalf by:

David Tsur

Chair

The notes to the financial statements form an integral part of these financial statements.

As permitted by section 408 of the Companies Act 2006, the parent company's income statement has not been included in these financial statements. The loss for the parent Company was £5,976 thousands (2021: loss of £5,584 thousands).

The financial statements were approved and authorised for issue by the Board of Directors on 27 April 2023 and were signed on their behalf by:

David Tsur

Chair

Company Registration No. 10485105

The notes to the financial statements form an integral part of these financial statements.

The notes to the financial statements form an integral part of these financial statements.

The notes to the financial statements form an integral part of these financial statements.

(*) Reclassification of the share of loss Kanabo research Ltd.

The notes to the financial statements form an integral part of these financial statements.

1. Corporate information

The consolidated financial statements of Kanabo Group Plc and its subsidiaries (collectively, the Group) for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the Directors on 27 April 2023.

Kanabo Group Plc (the Company or the parent) is a limited company incorporated and domiciled in England and whose shares are publicly traded on the London Stock Exchange in the standard segment. The registered office is located at Churchill House 137-139 Brent Street London NW4 4DJ, United Kingdom.

The Group's principal activities are the distribution and development of cannabis derived medical and wellness products.

2. Significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom and those parts of the Companies Act 2006 applicable to companies reporting IFRS, expect as otherwise stated.

The consolidated financial statements are prepared under the historical cost convention with the exception of certain investments which are carried at fair value.

The consolidated financial statements are presented in GBP (£) and all values are rounded to the nearest thousand (£000), except when otherwise indicated.

2.2 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2022. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

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

· Exposure, or rights, to variable returns from its involvement with the investee.

· The ability to use its power over the investee to affect its returns.

2. Significant accounting policies (cont.)

2.2 Basis of consolidation (cont.)

Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

· The contractual arrangement(s) with the other vote holders of the investee.

· Rights arising from other contractual arrangements.

· The Group's voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest, and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

2.3 Going concern

The preparation of the financial statements requires an assessment on the validity of the going concern assumption.

The Directors are required to satisfy themselves that it is reasonable for them to conclude whether it is appropriate to prepare the financial statements on a going concern basis, and as part of that process they have followed the Financial Reporting Council's guidelines ("Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risk" issued April 2016).

As at 31 December 2022, the Group's cash position was £3,204 thousands and it was in a strong net current asset position. Based on the above, the Group's current cash reserves and detailed cash forecasts produced, the Directors are confident that the Group will be able to meet its obligations as they fall due over the course of the next 12 months. Whilst the Group may seek to raise further funds in the next 12 months, the Directors are confident that the Group would be able to meet their obligations as they fall due in the event of no further funding being obtained due to the low level of committed expenditure relative to the forecasted discretionary expenditure, which could be reduced or deferred.

2. Significant accounting policies (cont.)

2.3 Going concern (cont.)

The impact of the risk factors such as high interest rates and high inflation, declining consumer power, Russia's invasion of Ukraine, and supply chain disruptions had a little effect on the business of the Group during 2022 following that the Directors do not believe that these risks will have a significantly adverse impact on the Group in the foreseeable future.

2.4 Estimates and assumptions

Significant accounting estimations

The Group's consolidated financial statements includes the use of estimates and assumptions. The significant accounting estimates with a significant risk of a material change to the carrying value of assets and liabilities within the next year in terms of IAS 1 are:

· Depreciation of PPE and amortisation of intangible assets

The directors are required to review the estimated useful of PPE and amortisation periods of intangible assets. Were useful lives and amortisation periods to be shorter, or were there impairments of PPE or intangible assets, this would cause an acceleration in depreciation and amortisation charges in future periods. See note 17 for further information.

Other areas of judgement and accounting estimates

While these areas do not meet the definition under IAS 1 of significant accounting estimates or critical accounting judgements, the recognition and measurement of certain material assets and liabilities are based on assumptions and/or are subject to longer term uncertainties. The other areas of judgement and accounting estimates are:

· Share-based payments

In respect of service conditions, the company is required to assess how many share options will eventually vest. As this estimation changes over time this may require a re-estimation of share-based payment charges reflected in profit or loss. The cumulative charge will reflect the amount of share options that ultimately vest. See note 28 for more details including the company's approach to valuing share options and the inputs to the valuations model.

· Impairments of financial and non-financial assets

See disclosures in note 2.5.o.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies

a) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

The Group determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organised workforce with the necessary skills, knowledge, or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances, and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss.

3. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

a) Business combinations and goodwill (cont.)

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

b) Reverse takeover accounting

On 16 February 2021, the Company acquired Kanabo Research Ltd via a reverse takeover which resulted in the Company becoming the ultimate holding company of the Group. The transaction was accounted for as a reverse acquisition since it did not meet the definition of a business combination under IFRS 3. In accordance with IFRS 2, a share-based payment expense equal to the deemed cost of the acquisition less the fair value of the net assets of the Company at acquisition was recognised.

When considering how the acquisition of Kanabo Research Ltd via a reverse takeover should be accounted for, the Directors have been required to make a judgment on whether the acquisition falls within the scope of IFRS 3 or not. The Directors assessed the accounting acquiree, Kanabo Group Plc, at the time of acquisition to not be a business as defined by IFRS 3. As a result, the acquisition was assessed as falling outside the scope of IFRS 3. See note 6.c.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

c) Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

· Expected to be realised or intended to be sold or consumed in the normal operating cycle.

· Held primarily for the purpose of trading.

· Expected to be realised within twelve months after the reporting period.

· Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

· It is expected to be settled in the normal operating cycle.

· It is held primarily for the purpose of trading.

· It is due to be settled within twelve months after the reporting period.

· There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

d) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in the absence of a principal market, in the most advantageous market.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

Fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities measured at fair value or for which fair value is disclosed are categorised into levels within the fair value hierarchy based on the lowest level input that is significant to the entire fair value measurement:

On 21 February 2022, the Company acquired 100% of the voting rights of GP Service (UK) Limited ("GPS") a non-listed company based in UK. The acquisition price was determine based on the closing bid prices which are level 1 fair value measurements.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

e) Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements, except for the procurement services below, because it typically controls the goods or services before transferring them to the customer.

In determining the amount of revenue from contracts with customers, the Company evaluates whether it is a principal or an agent in the arrangement. The Company is a principal when the Company controls the promised goods or services before transferring them to the customer. In these circumstances, the Company recognises revenue for the gross amount of the consideration. When the Company is an agent, it recognises revenue for the net amount of the consideration, after deducting the amount due to the principal.

Revenue from the sale of goods:

Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods have transferred to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue from selling agreements is recognised when the revenue recognition criteria have been met and only to the extent the consideration is not contingent upon other deliverables in the agreements.

Revenue from consultations:

The Group is providing online medical services. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a s service to a customer. Revenue is recognised at a point in time (i.e., upon receipt of the customer of the equipment) because this is when the customer benefits from the Group's consultation services.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

f) Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual instalments.

g) Taxes

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates (England's statutory income tax rate of 19% and Israel: 23%) and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised in full using the balance sheet liability method on temporary differences except:

When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

· In respect of taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

g) Taxes (cont.)

Deferred tax (cont.)

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

· When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

· In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

In assessing the recoverability of deferred tax assets, the Group relies on the same forecast assumptions used elsewhere in the financial statements and in other management reports, which, among other things, reflect the potential impact of climate-related development on the business, such as increased cost of production as a result of measures to reduce carbon emission.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised in profit or loss.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

g) Taxes (cont.)

Deferred tax (cont.)

The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

h) Foreign currencies

The Group's consolidated financial statements are presented in British Pound (£). For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation, the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method.

(i) Transactions and balances

Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group's net investment in a foreign operation. These are recognised in OCI until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recognised in OCI.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI, or profit or loss are also recognised in OCI or profit or loss, respectively).

In determining the spot exchange rate to use on initial recognition of the related asset, expense, or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Group initially recognises the nonmonetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines the transaction date for each payment or receipt of advance consideration.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

h) Foreign currencies (cont.)

(ii) Group companies

On consolidation, the assets and liabilities of foreign operations are translated into British Pound (£) at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions or average for the required period. The exchange differences arising on translation for consolidation are recognised in OCI and recognised in a separate reserve - foreign currency translation reserve.. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is reclassified to profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.

(iii) Financial Risk Management Objectives and Policies

The Company does not enter into any forward exchange rate contracts.

The main financial risks arising from the Company's activities are market risk, interest rate risk, foreign exchange risk, credit risk, liquidity risk and capital risk management. Further details on the risk disclosures can be found in note 32.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

i) Property, plant, and equipment

Property, plant, and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment losses and excluding day-to-day servicing expenses. Cost includes spare parts and auxiliary equipment that are used in connection with plant and equipment.

The cost of an item of property, plant and equipment comprises the initial estimate of the costs of dismantling and removing the item and restoring the site on which the item is located.

Depreciation is estimated to write off the cost of assets to their residual value on straight line basis over the estimated useful lives of the assets as follows:

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

j) Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Group as a lessee The Group applies a single recognition and measurement approach for all leases. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful life of the asset.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

j) Leases (cont.)

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate.

Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. The Group's lease liabilities are included in Interest-bearing loans and borrowings.

k) Financial assets at fair value through profit and loss

Financial assets are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the period in which they arise, including the corresponding tax effect. Fair values are determined based on an annual valuation performed by an accredited external independent valuer applying a valuation model recommended by the International Valuation Standards Committee.

Financial assets are derecognised either when they have been disposed of (i.e., at the date the recipient obtains control) or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

l) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is recognised in profit or loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category that is consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss.

Research and development costs

Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:

· The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.

· Its intention to complete and its ability and intention to use or sell the asset.

· How the asset will generate future economic benefits.

· The availability of resources to complete the asset.

· The ability to measure reliably the expenditure during development.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete, and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

m) Financial Assets

Classification

The Group classifies its financial assets in the following categories: at amortised cost (including trade receivables and other financial assets at amortised cost) fair value through other comprehensive income or fair value through profit or loss. The classification depends on the financial asset's contractual cash flow characteristics and the business model for managing them. Management determines the classification of its financial assets at initial recognition.

 Financial assets at amortised cost

(i) Classification of financial assets at amortised cost

The Company classifies its financial assets as at amortised cost only if both of the following criteria are met:

· the asset is held within a business model whose objective is to collect the contractual cash flows; and

· the contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are initially measured at fair value and subsequently measured using the effective interest rate method less impairment.

(ii) Impairment and risk exposure

All of the financial assets at amortised cost are denominated in Pounds Sterling. As a result, there is no exposure to foreign currency risk. There is also no exposure to price risk.

For the Directors' justification for there being no expected credit loss charge required in respect of the loan due from Materia and the amounts due from the subsidiary, note 24.

There is no definition of default at present. This will be reassessed as and when repayments are due in respect of financial assets at amortised cost held.

n) Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for, as follows:

· Raw materials: purchase cost on a first-in/first-out basis.

· Finished goods and work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing costs.

Initial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognised in OCI, in respect of the purchases of raw materials. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

o) Impairment of non-financial assets

The Group assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Group bases its impairment calculation on most recent budgets and forecast calculations, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

Goodwill and intangible assets are tested for impairment annually and when circumstances indicate that the carrying value may be impaired.

Depreciation of PPE and amortisation of intangible assets

The directors are required to review the estimated useful of PPE and amortisation periods of intangible assets. Were useful lives and amortisation periods to be shorter, or were there impairments of PPE or intangible assets, this would cause an acceleration in depreciation and amortisation charges in future periods. See notes 6.a and 17 for further information

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

o) Impairment of non-financial assets (cont.)

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than it is carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

The Group assesses where climate risks could have a significant impact, such as the introduction of emission-reduction legislation that may increase manufacturing costs. These risks in relation to climate related matters are included as key assumptions where they materially impact the measure of recoverable amount, these assumptions have been included in the cash-flow forecasts in assessing value-in-use amounts.

Recoverability of the investment in subsidiary (note 19)

As at 31 December 2022 the carrying value of the Company's investment in Kanabo Research Ltd was £14,142 thousands (2021: £17,951 thousands). The recoverable value of this investment is not considered to be less than it is carrying value as at 31 December 2022 and therefore no impairment has been have recognised. The Directors have made this assessment through reviewing forecasts, other available financial information available and developments during the year and since the year-end. The key inputs within the forecast include revenue growth, gross profit margins and overheads.

Recoverability of amounts due from the subsidiary (note 25)

By 31 December 2022 the parent Company had advanced £506 thousands (including interest) as a loan to Kanabo Research Ltd and £2,686 thousands as an ongoing operational balance. The Directors expect this balance to be fully recoverable and have thus not recognised any IFRS 9 expected credit loss charges. They made this assessment through reviewing forecasts, other financial information available and developments during the year and since the year-end. The Board asset the loan on individual basis to examine impairment.

By 31 December 2022 the parent Company had advanced £1,097 thousands (including interest) as a loan to GPS. The Directors expect this balance to be fully recoverable and have thus not recognised any IFRS 9 expected credit loss charges. They made this assessment through reviewing forecasts, other financial information available and developments during the year and since the year-end. The Board asset the loan on individual basis to examine impairment.

Recoverability of amounts due from Materia (note 24)

By 31 December 2022 the Group had advanced CAD 1,000 thousand (£582 thousands) to Materia Ventures ("Materia"), a company incorporated in Canada.

When assessing whether the loan receivable and accrued interest is recoverable or not, the Directors identified a number of impairment indicators. Whilst no repayments of the loan are due, or yet to have been received and whilst through communications with Materia the Directors understand Materia is willing to repay the balance, there is not sufficient evidence to demonstrate that it is probable that Materia can make full repayment of the balance. The Directors have therefore taken a prudent view and decided to fully impair the loan, however, the Company and Materia will continue to discuss their future collaboration and a strategic partnership through which the Company hope to recover the loan balance.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

p) Cash and short-term deposits

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term highly liquid deposits with a maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management.

q) Provisions

A provision in accordance with IAS 37 is recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects part or all of the expense to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense is recognised in the statement of profit or loss net of any reimbursement.

r) Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

s) Share-based payments

Employees (including Directors senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).

That cost is recognised in employee benefits expense, together with a corresponding increase in equity (other capital reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

s) Share-based payments (cont.)

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.

The fair value is measured by use of the Black-Scholes model as the Directors view this as providing the most reliable measure of valuation. The expected life used in the model has been adjusted, based on management's best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. The market

price used in the model is the issue price of Company shares at the last placement of shares immediately preceding the calculation date. The fair value calculated is inherently subjective and uncertain due to the assumptions made and the limitations of the calculation used.

t) Equity

Equity instruments issued by the Company are recorded at the value of net proceeds after direct issue costs.

u) Shares to be issued

Obligations which are to be settled via the issue of the Company's shares at the year-end which meet the definition of equity per IAS 32 are classified as shares to be issue within equity and are held at fair value.

3. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

v) Employee benefits

Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. Leave obligations are calculated by multiplying the average days of outstanding leave at the period end by the daily salary rate of the employee concerned. The liabilities are presented as current employee benefit obligations in the balance sheet.

Other long-term employee benefit obligations

There are no other long-term employee benefit obligations.

Post-employment obligations

The Group operates one post-employment scheme, a defined contribution pension plan available to all employees. The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Share-based payments

Share-based compensation benefits are provided to employees via the Group Employee Option Plan, an employee share scheme, the executive short term incentive scheme and share appreciation rights. Information relating to these schemes is set out in note 28.

Employee options

The fair value of options granted under the Group Employee Option Plan is recognised as an employee benefit expense, with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:

· including any market performance conditions (e.g. the Company's share price);

· excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

· including the impact of any non-vesting conditions (e.g. the requirement for employees to save or hold shares for a specific period of time).

The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

2. Significant accounting policies (cont.)

2.5 Summary of significant accounting policies (cont.)

w) Employee benefits (cont.)

Employee options (cont.)

The Employee Option Plan is accounted for as detailed in note 28. When the options are exercised, the appropriate amount of shares are transferred to the employee. The proceeds received, net of any directly attributable transaction costs, are credited directly to equity.

Bonus plans

Where contractually obliged or where there is a past practice that has created a constructive obligation to give staff bonuses, the Group recognises a liability and an expense for bonuses based on a formula that takes into consideration certain financial and operational objectives.

3. Segment information

Following the acquisition of The GP Service (UK) Limited ("GPS") (see note 6.a), For management purposes, the Group is organised into business units based on its products and services and has three reportable segments, as follows:

· Primary Care - Tele pharma services provided by GPS.

· Secondary Care - Development and distribution of cannabis derived medical and wellness products.

No operating segments have been aggregated to form the above reportable operating segments.

The Executive Management Committee is the Chief Operating Decision Maker (CODM) and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements. Also, the Group's financing (including finance costs, finance income and other income) and income taxes are managed on a Group basis and are not allocated to operating segments. Transfer prices between operating segments are on an arm's-length basis in a manner similar to transactions with third parties.

3. Segment information (cont.)

Year ended 31 December 2022:

The Group's operation does not include any reconciling items.

Geographical location: