Apollon Formularies - Interim Results

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

30 September 2022

APOLLON FORMULARIES PLC

("Apollon" or the "Company")

Interim Results

Apollon Formularies plc (AQSE: APOL), a UK based international medical cannabis pharmaceutical company trading on Aquis Stock Exchange, is pleased to report its unaudited interim results for the period ended 30 June 2022.

Period Highlights:

·      Joint Venture with Tri-Medi Canna in South Africa to start servicing the South African Development community (SADC) comprising of 16 member states, encompassing a population of circa 350 million

·      Acquired patents from Aion Therapeutic Inc. ("Aion") which covers all associated supporting data including pre-clinical testing results from BIOENSIS:

o  Composition and Methods for Treatment of Cancers;

o  Composition and Methods for Treatment of Inflammation;

o  Methods for Treatment of Human Cancers using Mushroom Combinations; and

o  Methods for Treatment of Human Cancers using Cannabis Compositions.

·      Renewal of CLA-licenses for Processing and Retail (Therapeutic) until January 2025. Apollon's Research and Development license is current under application to be renewed which the company expects to receive in due course

·      Signed more than a dozen Tripartite Agreements with CLA-licensed cultivators to accelerate processing and manufacturing of medical cannabis products for patients, clinical trials, and export

·      Grand opening of the International Cancer and Chronic Pain Institute in Kingston, Jamaica

·      Appointment of Dr. Archibald McDonald, Professor Emeritus, as Director of Clinical Trials

·      Appointment of Dr. Herbert Fritsche and Roderick McIllree to the Board of Directors

Post Period Highlights:

·      Acquisition of Citiva Jamaica LLC, giving Apollon Jamaica ownership of a university-affiliated, world class research, cultivation, manufacturing, and processing facility for medical grade cannabis

·      Dr. Stephen Barnhill, Chairman and CEO of Apollon, delivered a keynote address at the Cannabis Science Conference in Baltimore

Chairman's Report

I am pleased to provide shareholders with Apollon's unaudited interim results for the six months ended 30 June 2022 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 export market. Building on the success of 2021, we made some exciting advancements in the first half of 2022.

Following the grand opening of the International Cancer and Chronic Pain Institute in February 2022, Apollon has had continued demand from international patients for treatment and consultations at the Institute, located in Kingston, Jamaica, as well as at the Wellness Centre in Negril.

In March 2022, Apollon announced the formation of a joint venture partnership in South Africa with Tri-Medi Canna to establish a vertically operated business, Apollon SA Pty. This joint venture represents our first international expansion and is a significant development for the Company as it provides access, under license, to the Southern African Development Community (SADC), comprising of 16 member states with the potential to reach over 350 million people. According to Prohibition Partners' Africa Cannabis Report, March 2019, Africa's medical cannabis sector is forecast to be worth up to $7.1 billion by 2023, which provides an excellent potential for Apollon to establish a commercial footprint.

We have also acquired four international patents from Aion Therapeutics. These patents are filed through the Patent Cooperation Treaty covering 156 countries and contracting states, as well as being filed in Jamaica. This acquisition includes all associated supporting data including the pre-clinical testing results from BIOENSIS, an independent, pre-clinical predictive pharmaceutical testing laboratory in the United States. The patent titles are:

·      Composition and Methods for Treatment of Cancers

·      Composition and Methods for Treatment of Inflammation

·      Methods for Treatment of Human Cancers using Mushroom Combinations

·      Methods for Treatment of Human Cancers using Cannabis Compositions

Apollon currently provides these medical cannabis and medicinal mushroom products by physician prescription at the International Cancer and Chronic Pain Institute in Kingston, Jamaica, and at the CLA licensed dispensary in Negril, Jamaica. Apollon will, and in the near term, provide them through medically supervised patient trials to validate the successful results seen in pre-clinical testing.

During the Period, we made a number of appointments to strengthen our medical team and Board in preparation for global expansion:

·      In January 2022, it was announced that Dr. Archibald McDonald, Professor Emeritus, and former University Dean, Faculty of Medical Sciences and Pro-Vice Chancellor at the University of the West Indies, was appointed as Director of Clinical Trials at Apollon. Dr. McDonald is currently the Chairman of the Ethics Committee of the Ministry of Health in Jamaica and is now working with the Company on medically supervised patient trials

·      Further to this appointment, we were delighted to welcome Dr. Herbert Fritsche to the Board of Directors. Dr Herbert Fritsche is former Professor of Laboratory Medicine and Chief of the Clinical Chemistry Section at the University of Texas, M.D. Anderson Cancer Center in Houston, Texas and world-renowned Clinical Chemist recognised internationally as an expert in the field of clinical chemistry, cancer diagnostics and laboratory medicine

·      Additionally, we appointed long-time advisor and major shareholder, Roderick McIllree, to the Board as a Non-Executive Director. Roderick has a wealth of experience in advising, funding and running public companies across multiple global exchanges in several sectors

Furthermore, in January 2022, the CLA approved Apollon's request for the renewal of two medical cannabis licenses: Processing, and Retail (Therapeutic) for an additional three years. The Company has a current CLA approved Research and Development (Experimental) license, and we are currently one of the very few companies in Jamaica with all three of these vertically integrated CLA approved licenses.

The combination of these licenses allows us to successfully implement our business plan and achieve the goal of developing, processing, and manufacturing our proprietary formulations, selling Apollon's cannabis derived pharmaceutical and nutraceutical products, treating patients, performing clinical trials, and legally exporting our scientifically validated medical cannabis products globally.

We announced at the start of the period the signing of more than a dozen Tripartite Agreements with CLA-licensed cultivators, allowing access to consistent availability of large quantities of high-quality, fresh harvests of cannabis buds to be used by Apollon to accelerate the processing and manufacturing of medical cannabis products for patients, clinical trials, and export. In an effort to ensure that traditional growers are not left out of the regulated medical cannabis system, we established the Apollon Kannabiz Cooperative, as we believe that local farmers should not only "grow for us" but should also be given an opportunity to "grow with us".

Post-Period

In July 2022, Apollon Jamaica announced an agreement to acquire Citiva Jamaica LLC, which will give us ownership of a world class research, cultivation, manufacturing and processing facility, affiliated with, and located in the Medical School of the University of West Indies. This is a transformative achievement which will allow access to global markets for our trade marked and patent protected formulations. The Board expects that the opportunities opened up from this acquisition will create significant revenue growth for the Company over the next 12 months.

Earlier this month, Dr. Stephen Barnhill, Chairman and CEO of Apollon, delivered a keynote address at the Cannabis Science Conference ("CSC") in Baltimore on the "Unique Combination of Cannabis and Mushrooms for the Treatment of Cancer". CSC is the world's largest and fastest growing cannabis science event, bringing together a wide range of experts within the industry. This endorsement of Apollon by CSC is significant as it helps to further strengthen our credibility and will improve our visibility.

Outlook

The first half of 2022 was a busy and successful period for Apollon, and we are excited about the Company's prospects as we look towards 2023.

We are working extensively on ways in which to access the global export market, such as through expanding our current capabilities to a GMP facility and working with our partners in South Africa. We will keep the market updated with any developments in this domain. We also hope to be present at more conferences and speaking engagements to further cement Apollon's reputation and increase visibility. 

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

Financials

For the six-month period ended 30 June 2022 the Group is reporting a loss of £212,436 (six months ended 30 June 2021: loss £1,695,662).

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

30 September 2022

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 Company accept responsibility for the contents of this announcement.

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

Apollon Formularies                                                     

Tel:                                                      +44 771 198 0221

Stene Jacobs                                      stene@apollon.org.uk 

Peterhouse Capital Limited (Corporate Adviser)             

Tel:                                                       +44 207 220 9795

Guy Miller                                           gm@peterhousecapital.com

BlytheRay (Financial PR/IR-London)                 

Tel:                                                       +44 207 138 3204

Tim Blythe/Megan Ray                           apollon@blytheray.com

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Major non-cash transactions

On 19 May 2022, intangible assets with a value of £384,056 were purchased by the Company by way of allotment of 4,348,679 shares at a price of £0.06625 per share, totalling £288,099 and an additional £95,957 in cash payable.

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 6 Hope Street, Castletown, Isle of Man, IM9 1AS. The Company's ordinary shares are traded on the AQSE Exchange Growth Market as operated by Aquis Stock Exchange Ltd ("AQSE").

2. Basis of Preparation

The condensed interim financial statements have been prepared in the AQSE Listing Rules. 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 2021. 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 2021 were approved by the Board of Directors on 30 June 2022. 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 condensed interim financial statements have been prepared on a going concern basis with a material uncertainty. The Directors believe funds can continue to be raised from the capital markets to support any working capital shortfalls, though this may be affected by current extreme market volatility in the United Kingdom. The Directors have a reasonable expectation that the Group and Company will continue to be able to raise finance as required and to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing 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 Company's medium term performance and the factors that mitigate those risks have not substantially changed from those set out in the Company's 2021 Annual Report and Financial Statements, a copy of which is available on the Company'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 Company's 2021 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 2022 and will be adopted in the 2022 annual financial statements.  

A number of new standards, amendments and became effective on 1 January 2022 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 2022. 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 subsidiaries are accounted for at cost less impairment within the Company Financial Statements. 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 Company.

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

4.   Dividends

No dividend has been declared or paid by the Company during the six months ended 30 June 2022 (six months ended 30 June 2021: £nil).

5.   Earnings per Share

The calculation of loss per share is based on a retained loss of £212,436 for the six months ended 30 June 2022 (six months ended 30 June 2021: £1,695,662) and the weighted average number of shares in issue in the period ended 30 June 2022 of 748,713,039 (six months ended 30 June 2021: 344,509,274).

No diluted earnings per share is presented for the six months ended 30 June 2022 or six months ended 30 June 2021 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 Subsidary 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: 

The Company's share of Apollon Jamaica result for the period was a loss of £45,386 (2021: loss of £11,412) of a total loss of £92,624 (2021: total loss of £22,290).

7. Intangible Assets

During the period, the Company acquired intellectual property from AI Pharmaceuticals Ltd., a wholly owned Jamaican subsidiary of Aion Therapeutic Inc. Under the terms of the Agreement, the Company acquired the following patents and all associated supporting data:

·      Compositions and Methods for Treatment of Cancers.

·      Compositions and Methods for Treatment of Inflammation.

·      Methods for Treatment of Human Cancers using Mushroom Compositions.

·      Methods for Treatment of Human Cancers using Cannabis Compositions.

8. Events after the reporting date

On 26 July 2022, the Group's associate, Apollon Formularies Jamaica Ltd, reached an agreement to acquire Citiva Jamaica LLC. Apollon Formularies plc will pay consideration of US$60,000 cash and issue 18,465,910 new Ordinary Shares in the Company.

On 26 July 2022 the Group entered into a loan agreement for US$150,000 with 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.

9. Approval of interim financial statements

The Condensed interim financial statements were approved by the Board of Directors on 30 September 2022.

**ENDS**