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

Press release

5 May 2023

 Cellular Goods PLC

("Cellular Goods" or "the Company")

Interim results

Cellular Goods (LSE: CBX), a UK-based skincare and wellness company providing premium consumer products formulated with lab-produced cannabinoids, announces its unaudited half-year results to 28 February 2023.

Highlights

Post-period highlights

Outlook

Commenting on the results, Darcy Taylor, Chairman, said: "Despite industry headwinds, we have benefitted from a positive sales momentum in the first half that has continued into the second half. In combination with a significant rationalisation of our cost base and cash burn, we have defined a path to drive our brand business forward.

"We are continuing to assess strategic opportunities to deliver long-term shareholder value and will assess each opportunity on its merits. In the meantime, our focus will continue to be to execute the Company's existing business model and position it for long-term growth. With high-quality products, expanding sales channels, and positive responses from our targeted marketing campaigns, the Board looks forward to further progress being made for the full year."

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About Cellular Goods PLC:

Cellular Goods develops and markets premium quality skincare and wellness products based on proprietary formulations incorporating lab-made cannabinoids. Our branded products are efficacy-led and research-backed and available online in the UK and US. The Company is incorporated in the UK and listed on the Main Market of the London Stock Exchange. For more information, visit www.cellular-goods.com.

Forward-looking statements:

This document contains forward-looking statements which are subject to known and unknown risks and uncertainties because they relate to future events, many of which are beyond the Company's control. These forward-looking statements include, without limitation, statements in relation to the Company's financial outlook and future performance. No assurance can be given that future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company.

You are cautioned not to rely on these forward-looking statements, which speak only as of the date of this announcement. The Company undertakes no obligation to update or revise any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances. Nothing in this document is or should be relied upon as a warranty, promise or representation, express or implied, as to the future performance of the Company or the Group or their businesses.

INTERIM MANAGEMENT REPORT

Despite continued challenging market conditions, the growth momentum seen in the second half of last year has continued into the first half of this year, albeit from a low base. Revenue grew from approximately £13k for H1 2022 to approximately £31k for H1 2023. The growth was attributable to a sales-focused marketing strategy which leveraged last year's investment in brand awareness, as well as the expansion of product lines and sales channels.

At the same time, the Company implemented a major rationalisation programme which has reduced its annual cost base by £3.2m. Although the streamlining led to one-off charges of approximately £0.57m in the first half, their positive impact is expected to benefit the full year outcome.

First-half operating loss declined by 24% to £1.81m for February 2023 compared with £2.39m for the corresponding period last year and by 50% compared with the previous six months (H2 2022: £3.6m loss). Net cash was £2.55m as at 31 March 2023 (£4.37m as at 31 August 2022).

Merger discussions

The Company announced its intention to acquire Cannaray Brands Ltd. and Love CBD Health Ltd. from Cannaray Brands Ltd. ("Cannaray") on 26 September 2022. The Board of Directors entered into negotiations with the intention of generating value for Cellular Goods' shareholders by creating an enlarged business with significant growth opportunities and an enhanced market presence.

As negotiations progressed and changes to the deal were made, it became clear to Cellular Goods' Board and senior leadership team that the updated transaction terms were not in the best interests of the Company's shareholders. The negotiations were not able to reach a deal structure and terms that worked for both parties, and as such we decided to terminate discussions.

Cellular Goods is continuing to assess strategic opportunities to generate long term shareholder value and is open to consider proposals which deliver value and accelerate the development of the business. Moreover, the Company's expertise across biosynthetic production, which is emerging as a viable commercial-scale production technology for numerous compounds, opens up a number of options across multiple sectors beyond cannabinoids.

Marketing and product strategy

A significant expansion to Cellular Goods' 'Look Better' (skincare range) was made in the first half, with the launch of three new products in a campaign fronted by international supermodel Helena Christensen in September 2022. The three new products joined Cellular Goods' Rejuvenating Range of skincare products, containing the Company's proprietary blend of cannabigerol (CBG) and cannabidiol (CBD). The products were formulated to protect skin from UV damage and inflammation, providing an effective countermeasure to visible ageing. Cellular Goods released a whitepaper titled 'The 5 A's of cannabinoid skincare' near the launch which detailed the scientific benefits of cannabinoids in more depth.

International supermodel Helena Christensen was selected to front the rejuvenating marketing campaign because of her significant social media reach of more than one million followers on Instagram, in addition to her large US-based following. The Company began shipping its products to the USA immediately following the launch. Helena Christensen remains an important part of Cellular Goods' marketing strategy, most recently posting about the Company's face serum on 31 January 2023. Her strong following in the US has assisted the Company in generating 11% of its sales in this territory in the first half.

The first half revenue growth also reflects good progress in working round the arbitrary and unjustified bans imposed by some leading online and social media platforms, such as Facebook and Instagram. In response, the Company increased its focus on other platforms including Google, Pinterest and online content channels to reach its target audience.

Last year Cellular Goods invested in a broad-scale, 'above-the-line' campaign to raise awareness of the brand, which is widely considered a prerequisite to driving revenues for new consumer products. Having significantly raised awareness, the Company decided to refocus its marketing strategy this year to targeted online campaigns that drive near-term sales with lower acquisition costs. The Company has taken a two-pronged approach to this campaign, focusing on increasing trialling of its core products and expanding its sales channels, to encourage conversion of the consumer recognition of our brand into an initial purchase.

An additional product line, the 'Gift Better' (gifting) range, was launched in October 2022, enabling Cellular Goods to introduce its premium-quality skincare products containing lab-produced cannabinoids to a wider group of consumers at attractive price points. The launch was timed to capitalise on festive period sales, but the range continues to allow the Company to offer seasonal gifting bundles to capitalise on a number of celebrations, including Mother's Day.

Product pipeline

The Company has decided to postpone the launch of the 'Function Better' (movement) range to focus resources on strengthening its market presence behind its existing 'Look Better' and 'Gift Better' ranges before further expansion. The total addressable market for high-end beauty products is large with strong margins and, as a result, provides ample opportunity for strong growth in the short-to-medium term. The Company is in communication with potential distribution partners for the launch of the Function Better range and will provide an update in the event an agreement is reached.

The roll-out of the Look Better skincare product line extensions is in line with the Company's strategic focus on its skincare offering. Cellular Goods' exceptional product quality gives the Company an important differentiation from its competitors, and there remains a market opportunity for a cannabinoid brand with trusted, effective products. Moreover, these products allow Cellular Goods to widen its reach and meet demand for products that effectively address the huge age-prevention market. The Company's products are able to tackle the visible signs of ageing without the side effects of other products available, owing to CBG's soothing properties. The global anti-ageing products market is projected to reach US$93 billion by 2027 (Source: Statista, 2023). Until now, this bourgeoning segment has been dominated by active ingredients like Vitamin C and retinoids. However, despite their proven efficacy for addressing signs of aging skin, these ingredients are notorious for causing irritation and photosensitivity.

Management structure

For the current scale of operations, Cellular Goods has the right size of management team and to add to the leadership team would increase recurring expenditure unnecessarily. In the longer term, as the business develops, the Board intends to bring in a permanent CEO to drive the business.

Current trading and outlook

The Company has made a solid start to the second half as we navigate through ongoing industry headwinds to drive revenue growth while maintaining a tight rein on costs, which have been reduced by £3.2m on an annual basis.

The brand investment and marketing strategy, together with an expanded skincare range, has contributed to our sales momentum with March 2023 recording the Company's strongest month for sales to date.

Online sales from www.cellular-goods.com remain the key driver of the business, and Amazon sales have shown positive momentum. The Company has also seen good early results from the launch on Pinterest and will be watching this closely moving forwards.

With the positive momentum from early 2023 continuing, the Board looks forward to further progress being made for the full year.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

All transactions arise from continuing operations.

The accompanying accounting policies and notes form an integral part of these unaudited interim financial statements.