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Press Release

3 December 2021

Cellular Goods PLC

('Cellular Goods' or 'the Company')

Annual results

Cellular Goods, a UK-based provider of premium consumer products based on lab-made cannabinoids (LSE: CBX), announces its audited results for the 12 months ended 31 August 2021, the Company's maiden full-year figures since its flotation on the main market of the London Stock Exchange (LSE) on 26 February 2021.

Highlights:

●     Became the first UK brand for premium consumer products based on lab-made cannabinoids to join the LSE, raising £13m before expenses in a significantly oversubscribed IPO.

●     Made excellent progress to create and develop the UK's first fully-validated and legally-compliant cannabigerol (CBG) based skincare product line, which culminated with their launch on 1 December 2021, less than a year after operations began. Secured long-term supply of ultra-pure biosynthetic CBG through a multi-year agreement with Willow Biosciences Inc. in June 2021.

●     Launched a cannabidiol (CBD) ingestibles range on 1 December, following the signing of a multi-year agreement with Chanelle McCoy Health for the supply of three clinically-validated CBD ingestibles, which brought forward the introduction of a second revenue stream by more than a year.

●     Loss before tax of £3.3m (2020: £0.33m) principally attributable to business set-up costs and a one-off non-cash charge primarily for share-based incentives for the management and operational team.

●     Net cash amounted to £10.32m as at 31 August 2021. Net cash as at 1 December 2021 was £9.15m.

Outlook

●     Skincare and ingestible product ranges were launched earlier this month, initially via the Company's new transactional website.

●     A comprehensive omni-channel marketing campaign will commence in February 2022 to support Cellular's sales drive, in-line with industry best-practice whereby new beauty and wellness products typically go on sale early in the year to coincide with consumers' focus on self-care and forming positive habits. The timing will also avoid the hyper competitive pre-Christmas rush where return on advertising spend is poor for new entrants.

●     Having recently launched its first wellness consumer products, Cellular Goods has entered its most important and exciting phase of growth and begun generating revenues in the current financial year.

●     Good progress is also being made across the business and the Company is well-placed to benefit from strong industry fundamentals, which are being driven by growing public acceptance and scientific validation of the benefits of cannabinoids such as CBD and CBG. As a result, the Board looks to the future with great confidence.

Commenting on the results, Peter Wall, chairman of Cellular Goods, said: "In less than a year since listing, the Company has achieved its major operational milestones for developing Cellular Goods' inaugural range. Having launched our first range of wellness consumer products, Cellular Goods is now entering a significant chapter of its long-term business strategy.

"The environmental advantages of lab-made cannabinoid production are becoming more widely known and we are proud to be an early adopter and champion of this sustainable method. Notably, minor cannabinoids such as CBG will help to revolutionise the cannabinoid sector and we are thrilled to incorporate them in our fully-validated skincare line as we continue to deliver on our mission of becoming the most innovative listed wellness company."

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About Cellular Goods PLC

Cellular Goods is a UK-based provider of premium consumer products based on lab-made cannabinoids. It was established in August 2018 to develop efficacy-led and research-backed cannabinoid products. The initial focus is on three product verticals: premium CBG skincare, CBD ingestibles and topical athletic recovery products. The first products were launched on 1 December 2021 through the Company's website.

www.cellulargoods.co 

CHAIRMAN'S STATEMENT

Introduction

I am delighted to report the first set of full-year results for Cellular Goods since its debut on the main market of the LSE on 26 February 2021. These results, covering only six months of activities as a listed plc, come at an exciting time with the launch of our inaugural range of consumer products earlier this week.

During the year under review, the management team focused on developing a business strategy and raising capital to fund the expansion of the Company. A major milestone was achieved with the flotation, which raised additional capital of £13m before expenses and sparked unprecedented public interest in an initial public offering of our size. The IPO was significantly oversubscribed and share allocations were scaled down to maximise the opportunity for small investors to become shareholders in Cellular Goods.

No revenue was generated during the year and a loss before tax of £3.3m was incurred (2020: £0.33m loss), reflecting start-up costs, expenses relating to our IPO as well as a £0.9m one-off non-cash cost relating to share-based incentives provided mainly to management and staff.

Since the IPO, the Company has made excellent progress to create a trusted new British consumer wellness brand incorporating lab-made cannabinoids, which are legally compliant, independently tested for quality, environmentally friendly, and not tested on animals. Our inaugural range comprising skincare and ingestibles was launched on 1 December 2021.

I would therefore like to congratulate the executive management team and the operational staff, our suppliers and partners for their hard work, which has laid a strong foundation for strong growth in the years ahead.

Beyond the immediate focus on the first skincare and ingestibles products, the Company is also making good progress with the development of its next vertical, a 'movement range' aimed at the after-sports market. We anticipate this will be ready for consumer launch in 2022.

With a clear product roadmap, Cellular Goods is entering its most important and exciting phase of growth and has started generating revenues from skincare and ingestibles in the current financial year, to be followed by the movement products.

Going forward, the Company's biggest challenge is to continue executing well on its long-term strategic goals that will require ongoing investment in the business and in people. Total staff numbers have increased considerably since the listing in February. We also have a strong balance sheet to fund this growth with net cash of £9.15m as at 1 December.

I would also like to thank our many shareholders for their support and patience while we scaled-up our activities in the run-up to the product launch on 1 December 2021.

Strategy and operational review

According to BDS Analytics and Arcview Market Research, the market for annual CBD sales in the USA will surpass $20 billion by 2024. Meanwhile, the Centre for Medicinal Cannabis estimated that 1.3 million British consumers were using CBD products, the market was growing at double digits annually, and could be worth almost £1bn a year by 2025.

The strong industry growth prospects, together with the wide disparity in the quality and consistency of products currently on the market, has opened an opportunity for a supplier of premium cannabinoid-based products with known and verifiable provenance to differentiate itself in the market.

Cellular Goods was established to address this market gap by developing premium quality, efficacy-led and research-backed cannabinoid products which leverage lab-made cannabinoids such as CBD and CBG. The manufacture of the Company's product is outsourced to partners and does not involve the cultivation or processing of the cannabis sativa plant. The Company believes that its strategic decision to source exclusively lab-made cannabinoids will become increasingly important as consumers become more discriminating about rival brands while enforcement of existing and new consumer regulations concerning the source of cannabinoids tightens.

Operational review

Solid progress was made in the second half of the year as the Company pivoted from business planning and fund-raising to the development and launch of its first products to tight timescales. The initial focus is on three product verticals: a premium CBG skincare range and CBD-based ingestibles this year followed by topical athletic recovery products in 2022.

The inaugural skincare range comprises a face oil, an after-shave moisturiser, and a serum. Their creation and development involved taking each product from concept and prototype to preparing proprietary formulations followed by extensive testing to validate their efficacy. These formulations incorporate biosynthetic CBG (cannabigerol) which has demonstrated anti-inflammatory, anti-oxidant and anti-microbial properties.

After several months of extensive development in-house and at our UK-based contract manufacturer, the formulations were finalised in July. This was followed by a rigorous testing process focusing on product quality, stability, and compatibility with packaging.

All three skincare products have been fully validated for marketing and labelling as:

●     Suitable for sensitive skin

●     Dermatologist approved

●     Dermatologically tested

The completion of branding and packaging design led by creative director, Sara Hemming, for both the skincare and ingestible lines was a further significant milestone to be reached, with designs being approved for compliance in time for the launch.

Successful product launch

As a result of the excellent progress described above, the inaugural range of skincare products and ingestibles was launched on 1 December 2021, via the Company's online ecommerce platform.

Customer order intake for the face oil and after shave moisturiser have now commenced, and will be followed by the skincare serum in February 2022.

As announced on 16 August 2021, a multi-year manufacture and supply agreement was signed with Chanelle McCoy Health Ltd (CMH) for the launch of an ingestibles range of clinically-validated products. These were unveiled at the same time as the skincare range. The agreement enabled Cellular Goods to bring forward the introduction of a complementary wellness product range by more than a year. CMH is a research-led developer of high quality ultra-pure CBD products that are fully compliant with the new novel food regime which came into force in the UK and EU earlier this year.

In June 2021 a multi-year supply agreement was signed with Willow Biosciences (Willow), securing long-term supply of proprietary, ultra-pure, biosynthetic CBG for use in the Company's skincare products.

Marketing and product development

Both the skincare and ingestible products are on sale initially in the UK, direct to consumers through the Company's website. This enables the Company to prioritise its marketing on channels that generate the greatest customer engagement and return on investment. A comprehensive omni-channel marketing campaign will commence in February 2022 to support our sales drive, in-line with industry best-practice whereby new beauty and wellness products typically go on sale early in the year to coincide with consumers' focus on self-care and forming positive habits. The timing will also avoid the hyper competitive pre-Christmas rush where return on advertising spend is poor for new entrants.

As part of the ongoing product development for the skincare range, the Company has also begun the next phase of testing which will include the gold standard user trial/consumer panel testing, in addition to a combination of quantitative and qualitative efficacy-based studies for its skincare products. Separately, travel sizes and sampling sachets are also being finalised to expand the range of skincare offerings and gifting options for Cellular Goods customers for next year.

Development of the first three products in the movement range for sports recovery and daily body maintenance continues. The criteria for clinical trials have also been finalised and the trials will be initiated next year on completion of stability and compatibility testing.

The Company continues to evaluate potential partnership opportunities to sell its products via third party online retailers and traditional brick-and-mortar outlets who will contribute to broaden exposure, consumer recognition and acceptance.

Further to the multi-year supply agreement with Chanelle McCoy Health, the Company is currently working with two leading cannabinoid producers including Willow and has volume supply agreements in place to ensure security of supply of cannabinoids including CBD and CBG. The producers have experience and expertise in the manufacture of pharmaceutical grade cannabinoid compounds through lab-based processes, thereby securing a consistent supply of legally compliant raw materials that are not derived from plant material.

In April 2021, the Company strengthened its operational capability with the appointment of Istok Nahtigal as the head of process and applied sciences with responsibility for developing, monitoring and optimising the Company's relationships with its manufacturing partners. Further senior hires were made to strengthen the product development team and support quality assurance and project delivery including Jodie Sanders, commercial and partnerships director, and Sean O'Dwyer, marketing director, who joined the Company in August and September 2021 respectively.

In addition, the Company has also significantly increased investment in its marketing and brand management resources with a roster of consumer product agencies for digital advertising, content marketing and sales promotion including Cream, Rakuten, Climb Online and Numberly. Similarly, Good Culture has been appointed as the consumer public relations agency to drive brand and product awareness for the launch of the Company's skincare and ingestible product range.

Outlook

With the launch of its first products, Cellular Goods has entered its most important and exciting phase of growth and has started generating revenues in the current financial year.

Excellent progress is being made across the business, and the Company is well-placed to benefit from strong industry fundamentals which are being driven by growing public acceptance and scientific validation of the benefits of cannabinoids such as CBD and CBG.

The market for sustainable CBD and CBG-based consumer products is expected to grow massively over the long term and is in its early stages of mass adoption. Cellular Goods is well placed to ride this consumer mega-trend, which is being driven by changing attitudes to, and greater understanding of, the benefits of cannabinoids. As a result, the Board look forward to the future with great confidence and optimism.

Peter Wall

Chairman

3 December 2021
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME  FOR THE YEAR ENDED 31 AUGUST 2021

The consolidated statement of comprehensive income has been prepared on the basis that all operations are continuing operations.

The Accounting Policies and notes below form part of these consolidated financial statements.

The Company has elected to take exemption under section 408 of the Companies Act 2006 not to present the parent company Statement of Comprehensive Income.

The loss of the parent company for the year was £3,334,439 (2020: loss of £329,886).