Interim Results for the 6 Months ended 30 June 2023

Apollon Formularies PLC / EPIC: APOL / Market: AQUIS / Sector: Biotechnology

29 September 2023

APOLLON FORMULARIES PLC

(“Apollon” or the “Company”)

Interim Results

Apollon Formularies plc (AQUIS: APOL, "Apollon" or the "Company"), a UK based international medical cannabis pharmaceutical company trading on Aquis Stock Exchange, is pleased to report its interim results for the period ended 30 June 2023.

I am pleased to provide shareholders with Apollon's unaudited interim results for the six months ended 30 June 2023 and update on the progress that the Company has made, and continues to make, as it takes steps to transition towards serving a wider global market. Building on the success of 2022, we achieved some important milestones in new international jurisdictions in the first half of 2023.

Intellectual Property Licensing

During the first quarter, Apollon has focused on licensing its intellectual Property (IP) portfolio along with its proprietary formulations and patient protocols to international strategic partners.

In January 2023, Apollon announced that it had granted an exclusive Licensing Agreement with Global Hemp Group (CSE: GHG) for North America (USA, Canada and Mexico). Under the terms of this exclusive license agreement, Global Hemp Group paid Apollon a fee of USD$250,000 (CAD$341,000) and issued 10 million common shares in GHG to Apollon for a total consideration of CAD$491,000. In addition, GHG will pay Apollon an ongoing royalty of 10% of gross revenue derived from sub-licenses and products stemming from this exclusive license agreement. Subsequently, GHG extended its exclusive license agreement to include the European Union with extension to Morocco and Israel under the same royalty terms. GHG has completed and announced its first US sublicense under this agreement.

Post-Period

In July 2023, Apollon announced the granting of an exclusive license agreement to PureCann Pty Ltd., for the territory of South Africa. Under the terms of this agreement, PureCann paid Apollon an upfront exclusive license fee of £100,000. In addition, PureCann will pay Apollon an ongoing royalty of 6% on gross sales from products stemming from this exclusive license agreement. The license agreement with PureCann allows for continued expansion into Africa, which represents a significant development for the Company as it provides access to South Africa and the Southern African Development Community (SADC), comprising of 16 member states with the potential to reach over 350 million people and eventually the entire African continent as more countries legalise medicinal cannabis with an extended addressable market of over 1.4 billion people.

PureCann intends to roll out a significant dispensary network providing cannabis based medicinal products with Apollon products forming the cornerstone of their business. Apollon stands to benefit greatly from PureCann’s current network where Purecann has contractual agreements with multiple GACP/GMP cultivators, where together we would have access to high-quality low-cost biomass reducing input costs dramatically across the production chain. PureCann also has access to two GMP extraction facilities meaning they can fully produce a complete range of certified cannabis based medicinal products’(CBMP's) for use locally within South Africa, but also for export markets within Africa with medium term goals to export back into Europe where together we would have a competitive advantage on cost across the board from plant to patient.

In September 2023, the Company signed a letter of intent with Supernature Co., Ltd for an Exclusive License Agreement for Thailand. Both Apollon and Supernature are currently working on the terms of the final Exclusive Licence Agreement which will be announced to the market in due course.

Asset Purchase

On September 12, 2023, Apollon announced a new executed binding Letter of Intent (“LOI”) with Sproutly Canada, Inc. (CSE: SPR). Sproutly is a Canadian public company specialising in proprietary natural biologics drug discovery utilising a proprietary technique known as Aqueous Phytorecovery Process (APP), which extracts high-quality phytonutrients in their complete and proportional profiles.  As applied to cannabis, APP can produce water-soluble cannabis solutions that can be stably formulated into medicinal products and traditional beverages without the use of artificial chemical and/or physical means to keep the cannabinoids dissolved in the water base.

The combination of Apollon's AI based therapeutic product formulation with demonstrated success in pre-clinical and clinical testing, clinical trial capability, manufacturing and production laboratories, with Sproutly's APP technology and natural water-soluble ingredients, creates a unique opportunity to develop, new natural biologic therapeutic products with increased bioavailability, faster therapeutic response times, lower patient dose requirements and increased product shelf life.

The binding LOI, allows Sproutly to acquire the assets of Apollon pursuant to an Asset Purchase Agreement. In exchange for the assets of Apollon, Sproutly will issue to Apollon a sufficient number of Sproutly shares so that Apollon will own 49% of the enlarged share capital of Sproutly, post-transaction. If the transaction takes place with the number of outstanding Sproutly shares as are currently in issue, and at an anticipated deemed price of CAD$0.02 (the price at which the trading of common shares of Sproutly was suspended), the effective valuation of the Apollon's assets will be CAD$7million (approximately £4.2million). If the number of Sproutly shares increases between now and the date of the transaction, the number of shares to be issued to Apollon will increase accordingly.

Sproutly and Apollon have granted each other a 60-day option to conduct due diligence, following which, if agreed to by both companies, the asset acquisition will be completed. The due diligence period may be shortened by mutual agreement. It is understood by the parties that Sproutly must complete one or more audits and take other legal and regulatory steps (the "Steps") to again become active and trading on the Canadian Securities Exchange ("CSE"). The Steps will proceed simultaneously with the due diligence period and the preparation and finalisation of necessary transaction agreements for a closing (the "Closing") of the transaction.

Outlook

The first half of 2023 was a busy and successful period for Apollon, and we are excited about the Company's prospects as we look towards 2024.

We are working extensively on ways in which to access the global market, by expanding our current capabilities to contract manufacturing in international GMP facilities in addition to the manufacturing, production operations and export opportunities we have currently in Jamaica. The Company is working closely with our international partners to produce and distribute Apollon’s proprietary formulations. We will keep the market updated with any new developments.

We would like to thank our shareholders for their continued support and investment as we continue to work towards our goal of becoming the premier global medical cannabis and medicinal mushroom company in oncology and chronic pain.

Financials

For the six-month period ended 30 June 2023 the Group is reporting a loss of £763,796 (six months ended 30 June 2022: loss £212,436).

The interim report was approved by the Board of Directors and the above responsibility statement was signed on its behalf by:

Stephen D Barnhill M.D

Chairman

29 September 2023

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

The Directors of the Group accept responsibility for the contents of this announcement.

For further information please visit www.apollon.org.uk or contact:

Apollon Formularies                                                     

Tel:                                                      [phone]

Stene Jacobs                                      [e-mail]

Peterhouse Capital Limited (Corporate Adviser)             

Tel:                                                       [phone]

Guy Miller                                           [e-mail]

BlytheRay (Financial PR/IR-London)                 

Tel:                                                       [phone]

Tim Blythe/Megan Ray                            [e-mail]

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Notes	6 months to 30 June 2023 Unaudited£	6 months to 30 June 2022 Unaudited£
Continuing operations
Revenue		47,551	165,053
Administration expenses		(450,625)	(535,889)
Foreign exchange		(91,533)	203,786
Operating loss		(494,607)	(167,050)
Share on loss from associate		-	(45,386)
Other gains/(losses)	8	(273,171)	-
Finance costs		3,982	-
Loss before tax for the period		(763,796)	(212,436)
Tax		-	-
Loss for the period		(763,796)	(212,436)
Total comprehensive income for the period		(763,796)	(212,436)
Total comprehensive income for the period attributable to equity holders		(763,796)	(212,436)
Earnings per share from continuing operations attributable to the equity owners of the parent
Basic and diluted (pence per share)	5	(0.1)p	(0.03)p

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	As at30 June 2023 Unaudited£	As at31 December 2022 Audited£	As at30 June 2022 Unaudited£
Non-Current Assets
Intangible Assets	7	-	-	384,056
Available for Sale Investments	8	15,485	-	-
Investments in associate	6	2,829,140	2,996,788	2,625,721
		2,844,625	2,996,788	3,009,777
Current Assets
Trade and other receivables		677,267	593,262	645,283
Cash and cash equivalents		50,934	389	2,653
		728,201	593,651	647,936
Asset held for Sale	7	384,056	384,056	-
Total Assets		3,956,882	3,974,495	3,657,713
Current Liabilities
Trade and other payables	9	1,842,475	1,096,292	619,442
		1,842,475	1,096,292	619,442
Total Liabilities		1,842,475	1,096,292	619,442
Net Assets		2,114,407	2,878,203	3,038,271
Equity
Share premium		54,671,250	54,671,250	54,338,863
Share option reserve		85,363	85,363	85,363
Reverse acquisition reserve		(47,030,385)	(47,030,385)	(47,030,385)
Retained losses		(5,611,821)	(4,848,025)	(4,355,570)
Total Equity		2,114,407	2,878,203	3,038,271

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

	Note	Share premium£	Share option reserve£		Reverse Acquisition Reserve£	Retained losses£	Total equity£
Balance as at 1 January 2022		54,050,764	85,363		(47,030,385)	(4,143,134)	2,962,608
Loss for the period		-	-		-	(212,436)	(212,436)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Total comprehensive income for the year		-	-		-	(212,436)	(212,436)
Share issue		288,099	-		-	-	288,099
Total transactions with owners, recognised in equity		288,099	-		-	-	288,099
Balance as at 30 June 2022		54,338,863	85,363		(47,030,385)	(4,355,570)	3,038,271
Balance as at 1 January 2023		54,671,250	85,363		(47,030,385)	(4,848,025)	2,878,203
Loss for the period		-	-		-	(763,796)	(763,796)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Total comprehensive income for the year		-	-		-	(763,796)	(763,796)
Total transactions with owners, recognised in equity		-	-		-	-	-
Balance as at 30 June 2023		54,671,250	85,363		(47,030,385)	(5,611,821)	2,114,407

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

		Notes	6 months to 30 June 2023Unaudited£	6 months to 30 June 2022 Unaudited£
Cash flows from operating activities
Operating loss			(763,796)	(212,436)
Adjustments for:
Loss from associate			-	45,386
Finance costs		10	5,856	-
Decrease in trade and other receivables			(87,005)	(284,626)
Increase/(decrease) in trade and other payables			722,658	440,469
Foreign exchange			91,533	(203,786)
Net cash used in operations			(30,754)	(214,993)
Cash flows from investing activities
Proceeds from sale of investments		8	13,147	-
Loans granted (to)/from associate			76,115	(87,340)
Net cash used in investing activities			89,262	(87,340)
Cash flows from financing activities
Loan repaid to director		10	(7,963)	-
Net cash generated from financing activities			(7,963)	-
Net (decrease)/increase in cash and cash equivalents			50,545	(302,333)
Cash and cash equivalents at beginning of period			389	304,986
Cash and cash equivalents at end of period			50,934	2,653

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1. General Information

Apollon Formularies Plc is a medicinal cannabis pharmaceutical company incorporated and registered in the Isle of Man. The Company’s registered office is Quayside House, 6 Hope Street, Castletown, Isle of Man, IM9 1AS. The Company’s ordinary shares are traded on the Aquis Exchange Growth Market as operated by Aquis Stock Exchange Ltd (“AQUIS”).

2. Basis of Preparation

The condensed interim financial statements have been prepared in accordance with the Aquis Growth Market Rulebook. As permitted, the Company has chosen not to adopt IAS 34 “Interim Financial Statements” in preparing this interim financial information. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2022. The interim financial statements have been prepared in accordance with UK adopted International Accounting Standards.

The interim financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 2006. It has been prepared on a going concern basis in accordance with the recognition and measurement criteria of UK adopted International Accounting Standards.

Statutory financial statements for the period ended 31 December 2022 were approved by the Board of Directors on 30 June 2023. The report of the auditors on those financial statements was unqualified. The condensed interim financial statements are unaudited and have not been reviewed by the Company’s auditor. 

Going concern

The preparation of financial statements requires an assessment on the validity of the going concern assumption. The Directors have reviewed projections for a period of at least 12 months from the date of approval of the financial statements as well as potential opportunities.  Any potential shortfalls in funding have been identified and the steps to which Directors are able to mitigate such scenarios and/or defer or curtail discretionary expenditures should these be required have been considered.

The Directors are aware that the Group’s ability to remain a going concern for at least 12 months from the approval of these financial statements is dependent on the Group’s ability to raise further equity and/or debt finance. This is expected to happen within the going concern period of the next 12 months.

In approving the financial statements, the Board has recognised that these circumstances create a level of uncertainty. However, having made enquiries and considered the uncertainties outlined above, the Directors have a reasonable expectation that the Group will continue to be able to raise finance as required over this period to enable it to continue in operation and existence for the foreseeable future.  Accordingly, the Board believes it is appropriate to adopt the going concern basis in the preparation of the financial statements.

Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group’s medium term performance and the factors that mitigate those risks have not substantially changed from those set out in the Group’s 2022 Annual Report and Financial Statements, a copy of which is available on the Group’s website: www.apollon.org.uk. The key financial risks are market risk, exchange rate risk, liquidity risk and credit risk.

Critical accounting estimates

The preparation of condensed interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in Note 2 of the Group’s 2022 Annual Report and Financial Statements. The nature and amounts of such estimates have not changed significantly during the interim period.

3.   Accounting Policies

The same accounting policies, presentation and methods of computation are followed in the interim consolidated financial information as were applied in the Group’s latest annual audited financial statements except for Intangible assets and those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2023 and will be adopted in the 2023 annual financial statements.  

A number of new standards, amendments and became effective on 1 January 2023 and have been adopted by the Group. None of these standards have materially affected the Group.

3.1 Basis of preparation of financial statements

The Group Financial Statements consolidate the Financial Statements of the Company and its subsidiaries made up to 30 June 2023. Subsidiaries are entities over which the Group has control. 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.

Generally, there is a presumption that a majority of voting rights result 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 with the other vote holders of the investee;
• Rights arising from other contractual arrangements; and
• 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the Group Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less any impairment provision. The financial statements of the subsidiary are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used in line with those used by other members of the Group. All significant intercompany transactions and balances between Group enterprises are eliminated on consolidation.

3.2 Intangible assets

Intangible asset expenditure relates to patents and associated data acquired.

Intangible assets are only capitalised if the costs can be measured reliably and will generate future economic benefits in the form of cashflows to the Group.

Intangible assets are not subject to amortisation but are assessed annually for impairment. The assessment is carried out by allocating the patent assets to cash generating units (“CGU’s”), which are based on specific projects. The CGU’s are then assessed for impairment using a variety of methods including those specified in IAS 36.

Whenever the patent assets in cash generating units does not lead to the desired research outcome and the Group has decided to discontinue such activities of that unit, the associated expenditures are written off to the Statement of Comprehensive Income.

The Group is not income generating as yet and therefore there has been no amortization since acquisition. Patents and associated data will be amortized when the Group starts generating revenue relating to the assets.

1. 3. Asset held for sale

Asset are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable.  They are stated at the lower of carrying amount and fair value less costs to sell.

1. 4. Intellectual property (IP)

IP assets (comprising patents) acquired by the Group as a result of a business combination are initially recognised at fair value or as a purchase at cost and are capitalised.

Internally generated IP costs are written off as incurred except where IAS 38 criteria, as described in research and development above, would require such costs to be capitalised.

The Group’s view is that capitalised IP assets have a finite useful life and to that extent they should be amortised over their respective unexpired periods with provision made for impairment when required. Capitalised IP assets are not amortised until the Group is generating an economic return from the underlying asset and as such no amortisation has been incurred to date as the products to which they relate are not ready to be sold on the open market. When the trials are completed and the products attain the necessary accreditation and clearance from the regulators, the Group will assess the estimated useful economic like and the IP will be amortised using the straight-line method over their estimated useful economic lives.

4.   Dividends

No dividend has been declared or paid by the Group during the six months ended 30 June 2023 (six months ended 30 June 2022: £nil).

5.   Earnings per Share

The calculation of loss per share is based on a retained loss of £763,796 for the six months ended 30 June 2023 (six months ended 30 June 2022: £212,436) and the weighted average number of shares in issue in the period ended 30 June 2023 of 771,191,266 (six months ended 30 June 2022: 748,713,039).

No diluted earnings per share is presented for the six months ended 30 June 2023 or six months ended 30 June 2022 as the effect on the exercise of share options would be to decrease the loss per share.

6.   Associate

On 28 September 2018, the Legal Subsidiary acquired a right to receive a 49% equity interest in Apollon Formularies Jamaica Limited (“Apollon Jamaica”), a company incorporated in Jamaica, upon approval by the Cannabis Licensing Authority (CLA) of Jamaica for Company to so own such equity in a medically licensed cannabis company. In the interim, the Company entered into a contract with Apollon Jamaica whereby the Company receives 95% of the net profits of Apollon Jamaica. The Legal Subsidiary also entered into a contract with its shareholder, Stephen D. Barnhill, M.D., who is the person presently recognised as the owner of such 49% equity interest in Apollon Jamaica, that he: (i) pledges to assign such equity to Company upon CLA approval of Company being an owner, (ii) commits to vote the equity he holds in Apollon Jamaica in accordance with such assignment obligation to the extent permitted by law, and (iii) will participate as a director of Apollon Jamaica and act when voting in a way that is consistent with such equity commitments to the Company to the extent permitted by law.

Apollon Jamaica is accounted for as an associate because the Legal Subsidiary has significant influence over it, has a representative serving as a director who participates in its policy-making process, and has engaged in material transactions with it that includes loans and a right to receive 95% of its profits.

These factors have been determined to be sufficient to meet the requirements of IAS 28 even though the Company does not presently own any equity in Apollon Jamaica and, once it does, will only receive a 49% share of the return on investment (which will come from the 5% net income) and only have 49% voting rights.

As an associate, Apollon Jamaica is accounted for on an equity accounting basis.

The carrying value of the investment in the associate is determined as follows: 

	30 June 2023£
Investment in associate
At beginning of period	-
Share of loss in associate	-
At end of period	-

Loans to Associate
At beginning of period	2,996,788
Loans granted from associate	(76,115)
Foreign exchange	(91,533)
At end of period	2,829,140
Total	2,829,140

The Company’s share of Apollon Jamaica result for the year was a loss of £5,035 (2022: loss of £45,386) of a total loss of £10,275 (2022: total loss of £92,624). The share of the loss in associate for the period ended 30 June 2023 is restricted to the carried forward investment in associate and has therefore been recognised as £nil. As a result, the remaining investment balance carried forward from the period ended 31 December 2022 remains at £nil.

7.   Asset Held for Sale

Following the mutual termination of the proposed asset disposal to Global Hemp Group, on 12 September 2023, the Company entered into a binding letter of intent (“LOI”) with Sproutly Canada, Inc. (“Sproutly”).

Under the terms of the LOI, Sproutly will acquire all the Assets of Apollon Formularies plc, other than cash, cash equivalents, and accounts receivables, for a payment of 350,000,000 Sproutly common shares at a deemed price of C$0.02 per share, for a total consideration of C$7,000,000. If the number of Sproutly shares increases between now and the date of the transaction, the number of shares to be issued to Apollon will increase accordingly.

Sproutly and Apollon have granted each other a 60-day option to conduct due diligence, following which, if agreed to by both companies, the asset acquisition will be completed. The due diligence period may be shortened by mutual agreement.

The value of Asset Held for Sale is the expected sale proceeds from Sproutly, being the total consideration of shares and cash, converted into pounds sterling using the exchange rates on 12 September 2023 being C$0.58.

8.  Available for sale investment

The movement in available for sale investments during the period was as follows:

Available for sale investments	£
Balance as at 1 January 2023	-
10,000,000 shares in Global Hemp Group Plc	301,803
Sale of Global Hemp Group Plc Shares	(13,147)
Fair value adjustment	(273,171)
As at 30 June 2023	15,485

9. Trade and Other Payables

Current:	30 June 2023£	30 June 2022£
Trade payables	1,113,012	503,509
Directors Loan (note 10)	152,305	-
Tax and payroll	19,976	19,976
Other creditors	557,182	95,957
	1,842,475	619,442

The carrying amounts of the Group’s trade and other payables are denominated in pounds sterling.

10.  Director Loan

During the year ended 31 December 2022, the Company entered into a loan agreement with Director Roderick McIllree. The term of the loan is 12 months (extendable for an additional 12 months by mutual agreement) and bears an interest rate of 8% pa. Roderick McIllree is also a shareholder of the Company. At as 30 June 2023, the Company owes Roderick McIllree £152,305.

	30 June 2023£
Opening balance	154,412
Loans granted	6,000
Loans repaid	(13,963)
Interest	5,856
Closing balance	152,305

11. Events after the reporting date

On 12 September 2023, the Group entered into a binding letter of intent (“LOI”) with Sproutly Canada, Inc. (“Sproutly”), Under the terms of the LOI, Sproutly will acquire all the Assets of Apollon Formularies plc, for a payment of 350,000,000 Sproutly common shares at a deemed price of C$0.02 per share, for a total consideration of C$7,000,000. If the number of Sproutly shares increases between now and the date of the transaction, the number of shares to be issued to Apollon will increase accordingly.

12. Approval of interim financial statements

The Condensed interim financial statements were approved by the Board of Directors on 29 September 2023.

**ENDS**

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