(the “Company” or “Eurocann”)
Final Results for the Year Ended
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
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
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
A further, but imperative, consideration when assessing investments in the medicinal cannabis sector is that of dosage. Revisiting the statement I made in the
“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
The financial results for the 12-month period to
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.
The Directors of the Company accept responsibility for the contents of this announcement.
Burns Singh Tennent-Bhohi /
Telephone: 020 3778 1106
Telephone: 020 7220 9796
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
30 NOVEMBER 20192019 2018 £ £ Administrative expenses (237,279) (134,055) Interest receivable and similar income 4,092 5,822 Amounts written off investments (214,996) 853 Loss before taxation (448,183) (127,380) Taxation - - 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 2019AS AT 30 NOVEMBER 20192019 2018 £ £ £ £ Fixed assets Investments 48,778 141,354 Current assets Debtors 13,930 164,050 Cash at bank and in hand 101,448 40 115,378 164,090 Creditors: amounts falling due (55,604) (73,702) within one year Net current assets 59,774 90,388 Total assets less current 108,552 231,742 liabilities Capital and reserves Called up share capital 1,210,810 1,208,059 Share premium account 1,150,383 1,067,510 Other reserves 239,369 - Profit and loss reserves (2,492,010) (2,043,827) Total equity 108,552 231,742 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 Director
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
30 NOVEMBER 2019Share Share premium Other reserves Profit and Total capital account loss reserves £ £ £ £ £ Balance at 1 1,158,059 1,042,510 - (1,916,447) 284,122 December 2017 Year ended 30 November 2018: Loss and - - - (127,380) (127,380) total comprehensive income for the year Issue of 50,000 25,000 - - 75,000 share capital Balance at 30 1,208,059 1,067,510 - (2,043,827) 231,742 November 2018 Year ended 30 November 2019: Loss and - - - (448,183) (448,183) total comprehensive income for the year Issue of 2,751 409,792 - - 412,543 share capital Expenses of - (326,919) - - (326,919) share issue Issue of - - 239,369 - 239,369 share options / warrants Balance at 30 1,210,810 1,150,383 239,369 (2,492,010) 108,552 November 2019 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 NOVEMBER 20192019 2018 £ £ £ £ Cash flows from operating activities Cash absorbed by operations (130,836) (79,911) Investing activities Purchase of fixed asset investments (15,000) (1,822) Proceeds on disposal of fixed asset 37,659 - investments Interest received 93 4,000 Dividends received - 1,822 Net cash generated from investing 22,752 4,000 activities Financing activities Proceeds from issue of shares and warrants 209,492 75,000 Net cash generated from financing 209,492 75,000 activities Net increase/(decrease) in cash and cash 101,408 (911) equivalents Cash and cash equivalents at beginning of 40 951 year Cash and cash equivalents at end of year 101,448 40