29 September 2023

Kanabo Group Plc

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

UNAUDITED HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023

Kanabo Group plc (LSE: KNB), the patient-focused provider of digital health services and specialist medicines, including medicinal cannabis, announces results for the six months ended 30 June 2023 ("H1 2023").

Kanabo has evolved to be a digital health platform and is seeking to be a key player in advancing innovative and accessible healthcare solutions and treatments. Headquartered in the UK, Kanabo provides patients with accessible, personalised care through its innovative end-to-end platform across both digital primary and secondary care clinics.  Primary care services provide the first point of contact in the healthcare system and secondary care services is the provision of more specialist expertise and care in respect of a particular medical problem. The Group delivers digital primary care via The GP Service telehealth platform and the recently launched Treat It online pain clinic provides personalised secondary care services.  Both are integrated with a supply chain that delivers medications directly to patients and includes Kanabo's unique metered dose inhaler products.

Through its end-to-end solution, Kanabo enables patients to seamlessly access consultations, prescriptions, and treatments tailored to their needs. The Company is continually identifying additional treatments not readily available through traditional NHS channels to add to its portfolio, responding to growing patient demand for personalised care and medicine.

As a patient-first business, Kanabo aims to empower people with their own healthcare choices and make the process efficient, educational and accessible for all.

H1 2023 Key Highlights:

●     Revenue increased 88% to £0.45m (H1 2022: £0.24m), demonstrating ongoing commercial progress.

●     Operating loss reduced 63% to £1.4m (H1 2022: £3.72m), with strategic initiatives driving improved financial performance.

●     Cash at 30 June 2023 of £4.4m (31 Dec 2022: £3.2m), to support the Group's growth plans.

●     Completed a £2.74m fundraising by way of an oversubscribed Placing in April 2023, reflecting investor confidence.

●     Strengthened the Board with the Appointment of Ian Mattioli as Chair and Sharon Malka as Non-Executive Director

Post Period End and Outlook:

●    Medical inhaler completes all necessary stages for CE Mark, certification pending - Our distinctive medical device inhaler has successfully completed all necessary stages to become the first of its kind to achieve CE mark certification. We anticipate formal certification to be awarded in the coming months.

●    Major contract for Kanabo Agritec ("Agritec") - In July, Agritec secured a landmark deal to provide consultancy services for a cultivation and production facility in Madrid.

●    Kanabo now focused on growing two distinct but highly complementary divisions which are founded on the team's combined knowledge of the medicinal cannabis industry and digital health services.

●    Positive outlook for growth - The Board remains confident in both the short and medium-term prospects for the Company. We remain steadfast in our commitment to increasing sales in existing markets while exploring opportunities to expand into new geographies, whilst simultaneously further developing our product and service offering.

Future milestones:

Over the next six months, our key priorities include:

·    Expansion of primary care platform - launching a significant expansion of our primary care platform, enhancing the patient experience by facilitating direct access to treatments and medications without a preliminary consultation. The initiative implements cutting edge technology to streamline the process, which in turn will expand patient capacity in our clinics.

·    Expansion of secondary care platform - leveraging our technology and experience with launching Treat It to launch a similar service to tackle additional areas where there is a significant unmet medical need. We have identified the UK's mental health sector as the first additional sector into which we will roll out our services. The UK mental health sector is under well-documented pressure, and our intention is to expand our services in the coming months to that area, addressing patient demand.

·    Partnership with UK high street pharmacies - undertake a pilot programme that will see Kanabo collaborate with physical high street pharmacies to trial in-pharmacy consultations via our Treat It clinic, tapping into the pharmacies' existing patient networks to broaden Kanabo's outreach and addressable market.

·    EU product expansion - pending receipt of CE mark for our VapePod MD medical device inhaler, build on our UK footprint and expand our distributor network outside of the UK across Europe to launch into appropriate new territories, expanding our footprint and driving geographic diversification.

Avihu Tamir, Chief Executive Officer of Kanabo, commented:

"I'm excited about the progress we made in the first half of 2023, as we build our position as a key player in primary and secondary digital health services in the UK. With The GP Service and 'Treat It' fully integrated, we're not just broadening our reach but also enhancing our capabilities. We're in the final stages of rolling out new technology that will improve patient access to GP treatments, making healthcare more accessible than ever.

"In addition to revolutionising secondary care with affordable, quick, specialist consultations, we're exploring opportunities to expand beyond pain management into other medical fields with significant unmet demand. As we look ahead, our focus remains on growing our patient numbers and revenue while staying committed to personalised, accessible healthcare."

Enquiries:

About Kanabo Group plc

Kanabo Group plc (LSE:KNB) is a digital health company committed to transforming patient care through its innovative technology platform and specialised 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. Leveraging its telehealth capabilities, in February 2023, Kanabo launched Treat It - an online clinic focused on chronic pain management providing patients with secondary care.

With its two complementary business divisions, Kanabo has established itself as an end-to-end digital health provider, offering telehealth consultations, prescriptions, alongside the delivery of tailored treatments.

The Company's partially owned subsidiary, Kanabo Agritec Ltd, is a cultivation consultancy supporting cannabis businesses in developing new farms through infrastructural, research, and product guidance. These farms deliver high-quality raw materials for Kanabo's formulas and product line.

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.

Operational Review

I am delighted to report that Kanabo has continued to make significant progress in the first half of 2023 and continued its strategic evolution to becoming a digital health provider, giving patients access to a wide range of treatment pathways, including primary and secondary care. The Group has delivered a strong performance across both operating divisions in H1 2023, resulting in an increase in revenues of 88% to £0.45m (H1 2022: £0.24m).

The Group has now fully embedded The GP Service (acquired in February 2022) into its operations, creating a balanced business with two distinct but complementary operating divisions with significant overlap: medicinal cannabis and digital health services. Within the medicinal cannabis division, we have continued to launch new products and deliver strong sales. Additionally, Kanabo now has an established digital health services platform, which provides customers access to online consultations with healthcare professionals. In March of this year, we announced the launch of Treat It, our online medicinal cannabis clinic, which symbolised the combination of both divisions. Patients seeking treatment plans for chronic pain management are able to access online consultations with healthcare professionals who, in turn, are able to prescribe medicinal cannabis products, among others, as part of an innovative treatment pathway, which is currently unavailable through other channels.

The Group remains focused on building an end-to-end digital health services company that enables patients to take control of their own healthcare pathway through providing access to personalised medical treatments and innovative healthcare solutions, including medicinal cannabis. Furthermore, we are developing additional technologies for the digital health platform that will further improve access to secondary care - seeking to offer affordable specialist consultations at a fraction of the cost and without the traditional waiting times. Additionally, we are exploring opportunities to leverage our expertise with our online chronic pain clinic and expand into complementary medical fields.

Digital Health Services

We are delighted to report the digital health services division continues to perform strongly following the integration of The GP Service. We are cognisant of the platform's need to deliver a high-quality and seamless interface for our customers and, to that end, we have invested in the suite of technology tools, which enables customers to benefit from video consultations, digital prescriptions and access to primary and secondary care services. Looking forward, we will seek to expand the breadth of our online health services, aiming to increase our addressable market and boost revenue through medication sales.

Since the integration of The GP Service, we have seen demand for online consultations increase exponentially, and the platform is now delivering more than 1,000 monthly consultations (H1 2022: ~700 monthly consultations). Furthermore, the network of pharmacies connected to our NHS-approved digital health platform has grown to over 4,000 pharmacies.

In March 2023, we announced an exciting expansion of the online consultation service with the launch of Treat It, Kanabo's dedicated online medicinal cannabis clinic. The clinic - which is regulated by the Care Quality Commission ("CQC") - aims to directly address the issue of limited access to pain management treatments for those suffering from chronic pain. There are estimated to be more than 8 million chronic pain patients in the UK, and they often face difficulties accessing medical treatment as a result of long waiting times, bureaucracy and affordability. The Treat It clinic enables patients to access healthcare professionals via our digital healthcare platform, who are able to prescribe a wide range of personalised treatments, including the prescription of medicinal cannabis where appropriate.

As well as providing access to GP appointments for private individuals, the Group also has a number of agreements with UK corporations to provide services to its employees as part of a broader benefits package. Given the continued pressures being experienced by the National Health Service in the UK, we anticipate further demand for our online consultations going forward.

Specialised Medications

Kanabo's research and development ("R&D") team continue to develop and launch additional products into the Group's portfolio, and in January announced the launch of two new medicinal cannabis extract formulas for inhalation. These have been specifically developed for patients suffering from severe pain and are delivered via the Group's VapePod MD delivery device, our medical-grade vaporiser, that ensures precise dosing. The R&D team continually develops new formulae and products to ensure Kanabo retains its reputation as a developer of innovative and cutting-edge products.

Post-period end, we were informed that the Group's VapePod MD delivery device has made further progress towards achieving CE Mark approval. We expect the device to be the first medical device-certified cannabis inhaler of its kind to have achieved the CE Mark status, which will open up a wealth of opportunities for Kanabo to expand its footprint across Europe. Upon receipt of a CE Mark accreditation, the Group intends to progress the rollout across certain European markets and will make further announcements in due course.

Kanabo Agritec

Kanabo Agritec ("Agritec") - a cannabis cultivation consultancy firm in which Kanabo has a 40% stake -delivered first contract win in July 2023. Agritec will work alongside its Spanish partner, Taima Growth S.L. ("Taima") to establish a cultivation centre and will receive payment upon achieving certain milestones across the project. Agritec is a dedicated consultancy focused on the design build, operation and management of medicinal cannabis facilities.

The contract with Taima is for the development of an indoor medicinal cannabis cultivation and processing facility in Madrid, Spain. The contract - split over two phases - will see the facility granted a license for production and manufacturing of cannabis, and once completed, will be capable of producing up to 3,000kg of cannabis flowers annually.

Through our involvement with Agritec, Kanabo is not only able to leverage its extensive knowledge and experience in establishing and optimising medicinal cannabis facilities, but it also ensures that the Group has a diversified supply chain through key offtake agreements.

Directorate & Personnel Changes

Over the course of the first half, we have significantly strengthened our Board, most notably with the appointment of Ian Mattioli as Non-Executive Chair. As co-founder and CEO of a leading UK pensions and wealth management consultancy, Ian brings extensive experience in financial services, wealth management and capital markets. Following Ian's appointment, Mr David Tsur, who has served as Kanabo's Non-Executive Chair, moved to the role of Deputy Chair, where we can continue to benefit from his knowledge and expertise as we have done since the Company came to market.

Additionally, we announced the appointment of Sharon Malka, who has gained significant experience with international healthcare and technology companies, as Non-Executive Director.

We would like to thank both Dan Poulter and Gil Efron, who both stepped down from the Board in the first half for their contributions to the business. We wish Dan all the best as he focuses on his existing commitments outside of the business and continue to send our best wishes to Gil as he continues with rehabilitation following his accident.

Across the period, the Group has also transitioned a number of key roles out of Israel, where employees typically command a higher salary, to the UK. This move has not only simplified the operating structure of the business but has also immediately triggered a reduction in the cost base.

Corporate activity

In May 2023, we announced a £2.74 million fundraising, which received strong support from both existing and new investors, and also saw participation from key members of the team, including Ian Mattioli (Chair), David Tsur (Deputy Chair), Avihu Tamir (CEO) and Suleman Sacranie (CTO and Founder of The GP Service).

Proceeds of this fundraising will enable Kanabo to pursue its key strategic initiatives: to capitalise on the opportunity in both digital healthcare services and the rising demand for medicinal cannabis products and other innovative products. Proceeds have been allocated to expand the digital health services division and to invest in product development, technology and network growth.

The Group appointed MHA MacIntyre Hudson ("MHA") in March as the Company's auditors, replacing Jeffreys Henry LLP ("Jeffreys Henry"), the Company's previous auditors, following Jeffreys Henry's decision not to register themselves with the Financial Reporting Council as an eligible auditor to undertake Public Interest Entity audits.

Summary & Outlook

Kanabo is a well-balanced business boasting growing primary and secondary digital healthcare services, alongside our core cannabis product development competencies.

Our development and launch of new products remain a cornerstone of our business and in maintaining our market leading position. We are recognised for having cutting edge products and solutions and, to that end, our R&D team continues to focus on the delivery of innovative formulae aimed at both the medical and wellness markets.

The recently launched Treat It platform, which combines both elements of our business, is also extremely well placed for growth. According to Statista, the value of the medicinal cannabis market in Europe is expected to grow from $300 million in 2019 to over $2.5 billion in 2024[1].

Furthermore, there is increased demand in the UK for private health services, as outlined previously. Over 8 million people in the UK used online GP services last year[2], and the digital health market in the UK is expected to reach £25 billion by 2025[3]. With our innovative end-to-end solution, Kanabo is well-placed to benefit from this shift and demand for accessible, personalised digital healthcare.

Over the next six months, our key priorities include:

·    Expansion of primary care platform - launching a significant expansion of our primary care platform, enhancing the patient experience by facilitating direct access to treatments and medications without a preliminary consultation. The initiative implements cutting edge technology to streamline the process, which in turn will expand patient capacity in our clinics.

·    Expansion of secondary care platform - leveraging our technology and experience with launching Treat It to launch a similar service to tackle additional areas where there is a significant unmet medical need. We have identified the UK's mental health sector as the first additional sector into which we will roll out our services. The UK mental health sector is under well-documented pressure, and our intention is to expand our services in the coming months to that area, addressing patient demand.

·    Partnership with UK high street pharmacies - undertake a pilot programme that will see Kanabo collaborate with physical high street pharmacies to trial in-pharmacy consultations via our Treat It clinic, tapping into the pharmacies' existing patient networks to broaden Kanabo's outreach and addressable market.

·    EU product expansion - pending receipt of CE mark for our VapePod MD medical device inhaler, build on our UK footprint and expand our distributor network outside of the UK across Europe to launch into appropriate new territories, expanding our footprint and driving geographic diversification.

As a team, Kanabo believes there is a significant market opportunity for the Group across both divisions. Demand for access to healthcare professionals continues to rise, with the widely reported pressures on national health systems resulting in increased waiting times and frustration from patients, particularly those suffering from chronic pain. Our medicinal cannabis products are also gaining traction in a growing market, and we believe there is a real opportunity to expand our sales channels to other geographies both within and outside of Europe.

Whilst we recognise the broader socio-economic pressures that are being felt worldwide, the Board of Kanabo believe we are well placed to develop a scaled business addressing demand across our sector, and in capitalising on a number of near-term growth opportunities. We thank shareholders for their continued support and look forward to continuing to update them on our progress.

Ian Mattioli & Avihu Tamir

Chair of the Board & Chief Executive Officer

29 September 2023

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a)   the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting'.

(b)   the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year; and

(c)   the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

CAUTIONARY STATEMENT

This Interim Management Report (IMR) has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose. 

(*) A reclassification was carried out in accordance with 2022 audited annual reports.

(*) A reclassification was carried out in accordance with 2022 audited annual reports.