Chill Brands Group PLC (LSE:CHLL, OTCQB:CHBRF) used today’s trading update to tout the AIM-listed company’s transformative pivot away from CBD products and towards more commercially viable nicotine-free vapour products.
“During the Period there has been a material shift in our business strategy, driven by the need to adapt to survive in an ever-evolving market,” stated chief executive Callum Sommerton.
Sommerton contended that the market for CBD consumer products has become extremely challenging and has therefore redirected the group’s efforts and resources towards several diversified business activities including the sale of nicotine-free vapour products and the development of an e-commerce marketplace on the Chill.com website.
“We believe that these activities hold great promise and have the potential to significantly enhance the Group's commercial prospects,” he stated.
During the reporting period, Chill Brands recorded revenues of £82,840, an 87% year-on-year decrease.
This was, however, influenced by a one-off sale event in 2022 when the group sold a large portion of its CBD product inventory to its former master distributor and connected party, Ox Distributing.
Despite certain legal costs and domain name expenses, overall expenditure decreased as compared to the prior financial year.
The group reduced losses by 25% for the year, penning £4.3mln in losses, primarily due to the removal of significant costs related to marketing sponsorships and consultancy agreements.
The loss also included non-cash expenses of £1.3mln, which consisted of share expenses for options granted and imputed interest on convertible loan notes.
To support its activities, Chill Brands raised £3.5mln through fundraising from new and existing investors, involving subscriptions for new ordinary shares and convertible loan notes.
During the reporting period, the company launched a range of synthetic nicotine products called 'Tobacco Free Nicotine'. However, due to the regulatory changes in the US, the group discontinued the TFN range, resulting in discounted inventory.
In an effort to expand its revenue streams, Chill Brands continued sales of its legacy CBD products and initiated the sales of third-party brands on the Chill.com website.
The company also launched nicotine-free vapour products and collaborated with The Vaping Group to market and distribute 'Chill Zero' in the UK.
The UK distribution of Chill Zero nicotine-free vapour products is expected to contribute significantly to the company's revenues in the financial year ending March 31, 2024.