21 July 2020
EUROCANN INTERNATIONAL PLC
(the “Company” or “Eurocann”)
Final Results for the Year Ended 30 November 2019
Eurocann International plc, the AQSE Growth Market Company is pleased to announce its audited results for the year ended 30 November 2019.
The 2019 financial year proved to be a transformative period for the Company, culminating at the General Meeting of 21 June where shareholders voted to approve a restructuring and refinancing of the business. Concurrently the name of the Company was changed to Eurocann International plc, and two new directors, Burns Singh Tennent-Bhohi and Jeremy Ross, both joined the board, whilst £262,742 was raised before expenses.
At the General Meeting, shareholders also approved a change in the Company’s strategy, from being a generic investment company to having a more specific focus on the burgeoning medicinal cannabis sector. Since the General Meeting we have conducted due diligence on certain businesses that we have had the opportunity to either acquire outright or to invest in. However, we have not felt that any opportunity met our criteria to move forward with, and as such we have refrained from making any new investments in the medicinal cannabis sector to date.
One of the challenges faced by would-be investors in hot sectors such as medicinal cannabis has been, is determining what might be fair value for such investments. So frequently throughout history hot new assets and industries have overshot fair value, a result of a range of factors such as the greater fool theory, a misunderstanding as to the likely demand and thereby growth of such investments and industries, and the emotional state of greed. As Mark Twain reputedly said, “history doesn’t repeat itself, but it often rhymes”, and we have seen time and again, throughout history, instances where irrational exuberance has occurred, such as tulipomania, the South Sea bubble, the dot-com bubble, and, more recently, the cryptocurrency bubble.
To a degree, the medicinal cannabis industry has experienced its fair share of irrational exuberance, which has taken the prices of assets and companies to trade at levels well in excess of their fair value. This is supported when looking at the EQM Global Cannabis Index, which had an index value of 113 at the start of 2018, and which bottomed most recently, in March 2020, at 17.25.
A further, but imperative, consideration when assessing investments in the medicinal cannabis sector is that of dosage. Revisiting the statement I made in the August 2019 interim results for the Company, I wrote:
“It was only in the 1990’s when scientists recognised that the human body has its own endocannabinoid system, which genetically dates back over 600 million years. Currently there are understood to be two primary types of endocannabinoid receptor, namely CB1 and CB2, of which both are found throughout the body.
The human body produces two cannabinoids, anandamide and 2-arachidonoylglycero (2-AG), which share a similar structure to the phytocannabinoids found in marijuana and hemp. These cannabinoids produced by the body correspond and help regulate our organs and nervous systems, and if our bodies produce insufficient amounts of these cannabinoids then a number of health-related issues can arise, such as inflammation and inflammatory conditions, insomnia, stress and anxiety, bone health, ocular health, and neurological conditions.
There are currently understood to be at least 113 different phytocannabinoids isolated from cannabis, of which tetrahydrocannabinol (THC) is the most widely recognised, due primarily to its psychoactive properties. However, for medicinal purposes, cannabidiol (CBD) has garnered wide attention and is being increasingly used for pain relief and for its anti-inflammatory benefits to human health.
However, CBD itself does not attach to either of the body’s two endocannabinoid receptors, but it does support the CB1 receptor by prohibiting the breakdown of the body’s anandamide, thereby increasing the bioavailability to attach to the CB1 receptor. This is one example of where looking at the full spectrum of phytocannabinoids could be sensible so as to give greater benefits to human health through also targeting the CB2 receptor, rather than focussing on just one phytocannabinoid to aid the CB1 receptor like CBD.”
Whilst we have a growing understanding of the body’s endocannabinoid system, there are two issues that as investors we must consider when looking at how this industry might evolve. Firstly, is the consumption of phytocannabinoid infused consumables and other nutraceuticals here to stay, or is it just the latest fad amongst the health conscious, and secondly, what is the optimal dosage of phytocannabinoids, such as CBD, that is required in order to have a beneficial impact to the individual?
Currently, best practice suggests starting with a microdose and gradually increasing consumption until a dosage is found that improves an individual’s symptoms, whilst not intensifying any unwanted side-effects. However, if science emerges that supports the notion that the consumption of phytocannabinoid infused consumables and related nutraceuticals serve no discernible benefit to healthy individuals with a perfectly functioning endocannabinoid system under the age of 50, for example, how might this impact the evolution of the sector?
In the passage of time, might medicinal cannabis be recognised as only being necessary for those individuals whose endocannabinoid systems would benefit from supplementation, such as older people and those with a pre-existing morbidity? In time, healthy individuals might shun the consumption of medicinal cannabis in favour of products that might offer, for example, a potential extension to their lifespan, of which such consumables are on the horizon.
Such unknowns and the relative infancy and understanding of the market naturally make us proceed with caution when assessing opportunities. Ultimately our objective as a board is to maximise shareholder returns as optimally as we can.
Therefore, to this end, I am pleased to report that we have not sat idle on the funds secured from investors following the General Meeting in June 2019, and we have deployed an element of the capital in opportunities that we feel offer meaningful near-term returns, which we look forward to providing material details and updates on in the near future.
The financial results for the 12-month period to 30 November 2019 show a loss after taxation of £448,183 (2018: £127,380). The basic loss per share was 0.02p (2018: 0.02p).
The directors do not recommend the payment of a dividend for the period.
MATERIAL UNCERTAINTY RELATING TO GOING CONCERN
The auditor drew attention to note 1 in the financial statements, which indicates that the Company will need to raise additional funds to continue to meet ongoing operational costs for the next 12 months. Whilst the directors expect to meet funding requirements based upon the current economic environment there exists a material uncertainty which may cast significant doubt as to whether the Company will be able to raise sufficient funds and therefore continue as a going concern. Our opinion is not modified in respect of this matter.
Given the uncertainties noted above the auditor considered going concern to be a Key Audit Matter. The auditor have assessed the managements forecasts and underlying assumptions. In doing so they have considered factors such as historical operating expenditure and the Company’s ability to raise funding in the near future.
In spite of not having concluded a transaction in the medicinal cannabis sector to date, and adopting a prudent approach in what we believe has become a cluttered market, reminiscent of various gold rushes over the course of history, we believe that our approach is in the best interests of our shareholders and the Company.
We are optimistic as to the future of the Company, and look forward to outlining details of our plans for the business going forward in the near future.
Executive Director, Eurocann International plc
21 July 2020
The Directors of the Company accept responsibility for the contents of this announcement.
Eurocann International plc
Burns Singh Tennent-Bhohi / Conrad Windham
Telephone: 020 3778 1106
Peterhouse Capital Limited
Guy Miller and Mark Anwyl
Telephone: 020 7220 9796
|STATEMENT OF COMPREHENSIVE INCOME |
FOR THE YEAR ENDED 30 NOVEMBER 2019
|Interest receivable and similar income||4,092||5,822|
|Amounts written off investments||(214,996)||853|
|Loss before taxation||(448,183)||(127,380)|
|Loss for the financial year||(448,183)||(127,380)|
|The profit and loss account has been prepared on the basis that all operations are continuing operations.|
|Basic and diluted earnings per share||(0.02)||(0.02)|
|BALANCE SHEET AS AT 30 NOVEMBER 2019 |
AS AT 30 NOVEMBER 2019
|Cash at bank and in hand||101,448||40|
|Creditors: amounts falling due within one year||(55,604)||(73,702)|
|Net current assets||59,774||90,388|
|Total assets less current liabilities||108,552||231,742|
|Capital and reserves|
|Called up share capital||1,210,810||1,208,059|
|Share premium account||1,150,383||1,067,510|
|Profit and loss reserves||(2,492,010)||(2,043,827)|
|The financial statements were approved by the board of directors and authorised for issue on ......................... and are signed on its behalf by:|
|Mr C Windham|
|STATEMENT OF CHANGES IN EQUITY |
FOR THE YEAR ENDED 30 NOVEMBER 2019
|Share capital||Share premium account||Other reserves||Profit and loss reserves||Total|
|Balance at 1 December 2017||1,158,059||1,042,510||-||(1,916,447)||284,122|
|Year ended 30 November 2018:|
|Loss and total comprehensive income for the year||-||-||-||(127,380)||(127,380)|
|Issue of share capital||50,000||25,000||-||-||75,000|
|Balance at 30 November 2018||1,208,059||1,067,510||-||(2,043,827)||231,742|
|Year ended 30 November 2019:|
|Loss and total comprehensive income for the year||-||-||-||(448,183)||(448,183)|
|Issue of share capital||2,751||409,792||-||-||412,543|
|Expenses of share issue||-||(326,919)||-||-||(326,919)|
|Issue of share options / warrants||-||-||239,369||-||239,369|
|Balance at 30 November 2019||1,210,810||1,150,383||239,369||(2,492,010)||108,552|
|Other reserves arises on the issue of share options / warrants.|
|STATEMENT OF CASH FLOWS FOR THE YEAR ENDED NOVEMBER |
FOR THE YEAR ENDED 30 NOVEMBER 2019
|Cash flows from operating activities|
|Cash absorbed by operations||(130,836)||(79,911)|
|Purchase of fixed asset investments||(15,000)||(1,822)|
|Proceeds on disposal of fixed asset investments||37,659||-|
|Net cash generated from investing activities||22,752||4,000|
|Proceeds from issue of shares and warrants||209,492||75,000|
|Net cash generated from financing activities||209,492||75,000|
|Net increase/(decrease) in cash and cash equivalents||101,408||(911)|
|Cash and cash equivalents at beginning of year||40||951|
|Cash and cash equivalents at end of year||101,448||40|