14th December 2022

Love Hemp Group plc

("Love Hemp", the "Group", or the "Company")

Trading, Financing and Corporate Update

Love Hemp Group plc (AQSE: LIFE) (OTCQB: WRHLF), the brand-led consumer goods company focused on CBD health and wellness solutions, is pleased to provide a trading, financing and corporate update. 

Trading update

The Company is pleased to report a strong sales performance for the first quarter of the financial year, to the end of September 2022, with sales of £1.05m compared to £0.74m in the same period in 2021, representing a year-on-year increase of 42%. This sales growth was driven largely by increases in retail channel sales and includes the Tesco launch, reported 2 September 2022.

This sales growth has been achieved despite a challenging operating environment due in part to slower than normal customer payments in the retail sector, ongoing challenging consumer confidence with rising prices, both of which have impacted the Company's working capital.

In recent weeks, the Company has also seen its invoice discount lender, Windfall Logistics Ltd stop providing cash-flow to the Company through its invoice discounting facility due to Love Hemp's largest retail customer issuing unexpected invoices for past product promotions, including a small overdue loan amounting to £450,000. Without the routine cash-flow being provided from Windfall Logistics for its ongoing supply of products to retail customers, the Company has needed to look at other forms of immediate cash-flow and has benefitted in the short-term from a focus upon its own online sales to provide essential cash flow to the business and give the Company time to address the situation.    

The working capital difficulties have resulted in lower sales during the second quarter of the current financial year which is expected to result in slower growth despite this quarter being typically the best trading period of the year with Black Friday and Christmas promotions. This slower trading, coupled with the cessation of cash-flow from Windfall Logistics has put additional pressure on the Company's already difficult cash flow and the Directors have determined the need to immediately inject capital or refinance the business particularly as the current market conditions show no sign of improving and may even deteriorate further in the short-term.

The Board has, therefore, been evaluating a number of options to provide immediate and additional cash flow to the business to ensure the Company can build upon the market-leading brand position Love Hemp has achieved.

At the same time as addressing the immediate cash needs of the business the Directors have also been considering financing options which may better support the long term value opportunity that exists with the UFC partnership which was entered into in June 2021. To realise this potential value will require further funding.

The Board has therefore focused on addressing both the short term and medium-term financial needs of the business through options including the raising of additional cash from equity or debt financing, the sale of certain assets, and the evaluation of merger or joint venture opportunities with other cannabis derivative businesses in the UK and Europe.

Financing

Love Hemp is pleased to confirm today it has entered into a Binding Agreement with a group of strategic investors (the Lender) for a £1.5 million secured loan with a term of five years. The debt facility will incur total aggregate transaction costs of £310,000. The Lender includes existing shareholders of Love Hemp which the Board believes will further align the interests of the shareholders and Love Hemp.

In addition, the Lender has been issued 13.5m Warrants which are exercisable at £0.01 per share and have a 12 month term.

The loan will accrue at an annual interest rate of 20% and is payable upon redemption on or before the maturity date of 2027. The first year of the loan is interest-free.  In addition, a redemption premium is payable of 20% of the total capital if the loan is repaid within the first year, 50% if paid within two years, and 300% is payable if the loan is repaid after the second anniversary.

Part of the use of proceeds of the investment includes an initial payment of £700,000 to Windfall Logistics Ltd to eliminate the debt and release the security held by them over the Love Hemp Group assets. Up to £150,000 of this cash may be returned to Love Hemp over the coming months as Windfall Logistics completes the collection of cash from Love Hemp customers against the remaining outstanding invoices, offset by future retrospective charges for promotions.

A new debenture over the Love Hemp assets has been entered into with the Lender as security for their loan. The facility with Windfall Logistics Ltd. is now terminated.

The remaining funds will be used to complete the manufacturing facility in Croydon, marketing, support research and development with the introduction of new products and for general working capital purposes.

Directorship and Management changes

Following the completion of the loan, Andrew Male Non Executive Director has resigned from the Board with immediate effect and both Graham Mullis, non-executive Chairman and Anthony Dyer, interim CFO have also resigned but will remain as non-executive Directors for a transition period until replacements are appointed. The process to appoint replacements will commence immediately and a further announcement will be made in due course. Tony Calamita, Group CEO and Executive Director of the Board will remain in his current role.

Corporate update

The Company will not be able to complete the audit of its financial statements for the financial year FY2021/22 to enable it to file those accounts by the end of the year. With the significant change in Board members following the refinancing of the Company, the AGM, also due to be organised by the end of 2022 will be delayed. A date for the AGM will be announced shortly and will be coordinated with the filing of the financial statements as early as possible in 2023.

The Company has also agreed with the Aquis Stock Exchange that it will not apply to lift the suspension until after the financial statements have been filed and will continue to work closely with its potential AQSE Growth Market Adviser to complete its take-on process. The planned timing and progress of these critical activities will be communicated in due course.   

Graham Mullis, Non-Executive Chairman comments:

"Whilst the Company has continued to make operational progress in difficult market conditions, manging working capital has been a major challenge and a significant distraction to the Board and management. We are, therefore, pleased to complete the loan facility which has provided the Company with the best and most timely option of addressing both the short and long term finance options of the Company.

As I prepare to leave the Company, I would like to thank Tony, Andrew and Anthony for their support as the Board navigated its way successfully through some difficult issues during this year. I believe with new finance, potentially stronger access to further finance, and a new Board, the Company has a bright future."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

The Directors of Love Hemp Group plc take responsibility for the content of this announcement.

-ENDS-

For further information please visit: www.lovehempgroup.com or contact:

Love Hemp Group                             +44 (0) 203 968 6643

Tony Calamita                                     investor.relations@lovehempgroup.com

About Love Hemp Group

Love Hemp Group is a brand-led consumer goods company focussed on health and wellness solutions for consumer use cases including sleep, pain, anxiety, stress and recovery. The Company is a pioneer in the UK-based premium high-quality CBD market, with over 40 products including oils, edibles, sprays, cosmetics and topicals. The Company's range of products are sold online across 70 websites and in over 2,000 stores including some of the biggest retailers in the UK, such as Holland & Barrett, Boots and Ocado. Listed on the Aquis Stock Exchange (AQSE: LIFE) the Company recently changed its name to Love Hemp Group plc, from World High Life, to better reflect its focus on supporting the "best in class" CBD brand as it embarks on a wider expansion of its core business and offering.

Market Abuse Regulation (MAR) Disclosure

This information contained within this announcement is deemed by the Company to constitute inside information. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.