Block Commodities Limited / Epic: BLCC / Sector: Mining

29 March 2019

Block Commodities Limited ('Block Commodities' or 'the Company')

Interim Results

 

Chairman's Statement 

During the period under review, the Company continued its evolution from a junior exploration company with its Lac Dinga potash exploration licence, to a forward-thinking agri-tech company in sub-Saharan Africa, deploying new technologies to maximise value in African agriculture. Leveraging its connections in Africa, the Company is developing a platform to empower small scale farmers ("SSF") to raise productivity and secure better returns for produce, while establishing African communities as significant future global agricultural players. The platform uses blockchain technology to provide loans of utility tokens to the SSF which are then used to procure inputs from the Company.

 

Trading

During the period the Company prepared to roll out its commodities eco-system in a Zambian pilot, as an alternative to the Government's limited e-voucher scheme. An off-taker was secured and a group of local farmers engaged to run a pilot over 300ha. However, with the seasonal rains arriving earlier than forecast and delays in procuring inputs, the pilot has had to be postponed.

 

Uganda

Work continues with our off-take partner Pure Grow Africa Limited, to develop a pilot program for the Farmer 3.0 Ecosystem. It was initially envisaged to engage with up to 1,000 farmers, however delays in obtaining the necessary product import licences, mean that the initial pilot will be of a smaller scale using product procured in country.  This is now ready to be rolled out, with work expected to commence in the final quarter.

 

Lac Dinga

The Company retains its interest in the exploration side of the fertiliser industry through its 70% interest in La Société des Potasses et des Mines S.A. ('SPM'), which holds the exclusive right to conduct exploration activities for potash salts over the Lac Dinga Project Area ('Lac Dinga' or the 'Project'). The farm out agreement with African Agronomix limited ("AAX") signed in July 2017, states that the licence must be in good standing before AAX can commence work on the Project.  The Company continues to await formal approval of its application to extend the term of the licence for the third term permitted under the mining code of the Republic of Congo.

 

Financial results

The results for the period showed an operating loss of $0.5m (HY18: loss $0.7m). Finance charges increased to $0.2m (HY18: $0.1m) resulting in a loss before tax of $0.6m (HY18: $0.8m). Cash balances at 31 December 2018 were $1,000, (2017: $206,000).

 

At 31 December 2018, the Group is reporting Net Liabilities of $427,000.  The Company is currently in negotiations with the lender of the loan note with a view to the conversion of the loan note into equity.  This would both return the Group balance sheet to a net asset position, as well as eliminate the accruing finance costs going forward.

 

New commodity opportunity: entry into the cannabis market

The Board has identified an opportunity to enter the fast-growing legal medical cannabis market as the operator of medical cannabis production in jurisdictions where this is legally permitted. 

 

The global legal medicinal cannabis market is expected to reach USD 146.4 billion by end of 2025, according to Grand View Research, Inc. The CBD market has huge potential and now with growing awareness of its beneficial nature, has rapidly increasing usage. The European medical cannabis market alone is expected to be worth 55 billion euros a year by 2028, according to London-based cannabis industry market intelligence firm Prohibition Partners. It reckons the total legal market in Europe, including CBD, will be worth 123 billion euros by then.

 

Entering the cannabis market represents a strategic move for Block Commodities. Leveraging on its existing connections in Africa, the Board believes that the use of blockchain technology can add significant value to the production and distribution of cannabis products.

 

Over the last six months, the Company has worked to develop a number of opportunities to access the development of medicinal cannabis in low-cost jurisdictions.

 

To date, Block Commodities has signed an option with shareholders of Greenbelt Company Limited to acquire a 100% interest ("Sale Shares").  Greenbelt was granted a licence by the Sierra Leone Minister of Agriculture and Forestry for medical cannabis production and processing in November 2018. Block Commodities plans to fast-track and streamline operations in Sierra Leone as soon as the acquisition is finalised. 

 

Financing

As announced on 27 March 2019 the company has raised a minimum of £400,000 to enable it to acquire an option to acquire an exclusive licence to produce, process and market medicinal cannabis and for general working capital purposes.

 

Scientific Advisory Board and collaboration agreement with Hexis Lab Limited

To help deliver our strategy to enter the medicinal cannabis market, we announced earlier today a collaboration agreement with Hexis Lab Limited and the formation of a Scientific Advisory board (SAB).  We welcome Dr. Olusola Idowu the CEO of Hexis Lab and Ian C. Tordoff, an advisor and strategist specialised in health sector innovation to the SAB.

 

The Board believe that the Company now has a firm foundation upon which to build a growing revenue generating business built around our blockchain platform and look forward to reporting continued progress in the remainder of the current year

 

 

Chris Cleverly

Executive Chairman

29 March 2019

 

 

 

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

 

Unaudited Consolidated Income Statement

For the half year to 31 December 2018

 

		Unaudited 6 months to 31 December 2018	Unaudited 6 months to 31 December 2017	Audited Year ended 30 June 2018
	Note	$'000	$'000	$'000
Other trading income / (loss)		-	-	(12)
Operating expenses		(453)	(263)	(948)
Impairment of: - exploration assets - loan to unquoted company - fixed assets - investment in associate		- (50) - -	(271) - - (101)	- (100) (86) -
Other gains /(losses)		97	(44)	(20)
Operating loss		(406)	(679)	(1,166)
Net finance expense		(158)	(103)	(357)
Loss before taxation		(564)	(782)	(1,523)
Income tax expense		-	-	-
Loss for the period attributable to owners of the parent company		(564)	(782)	(1,523)
Loss per share: basic and diluted	5	(0.01 cents)	(0.04 cents)	(0.05 cents)

 

All results relate to continuing activities

 

Unaudited Consolidated Comprehensive Income Statement

For the half year to 31 December 2018

		Unaudited 6 months to 31 December 2018	Unaudited 6 months to 31 December 2017	Audited Year ended 30 June 2018
		$'000	$'000	$'000
Loss for the period		(564)	(782)	(1,523)
Other comprehensive income
Exchange translation differences on foreign operations		(12)	89	4
Total comprehensive income for the period attributable to owners of the parent company		(576)	(693)	(1,519)

 

Unaudited Consolidated Statement of Financial Position

As at 31 December 2018

 

		Unaudited 31 December 2018	Unaudited 31 December 2017	Audited 30 June 2018
	Note	$'000	$'000	$'000
Non-current assets
Intangible assets: exploration activities  6		3,000	3,000	3,000
Property plant and equipment		3	82	6
Total non-current assets		3,003	3,082	3,006
Current assets
Inventory		-	68	10
Trade and other receivables		1	109	92
Cash and cash equivalents		1	206	153
Total current assets		2	383	255
Total assets		3,005	3,465	3,261
Current liabilities
Trade and other payables		(1,797)	(1,613)	(1,719)
Loan note	7	(1,635)	(1,412)	(1,423)
Net (liabilities)/assets		(427)	440	119
Equity
Issued capital	8	19,345	19,192	19,314
Share based payment reserve		2,882	2,633	2,882
Foreign exchange translation reserve		(586)	(488)	(573)
Retained earnings		(22,068)	(20,897)	(21,504)
Total equity attributable to equity holders		(427)	440	119

 

Statement of Changes in Equity

 

	Ordinary share capital $'000	Share based payment reserve $'000	Foreign exchange translation reserve $'000	Retained earnings $'000	Total $'000
Balance at 1 July 2017	18,551	2,633	(577)	(20,115)	492
Loss for the period	-	-	-	(782)	(782)
Other comprehensive income
Exchange translation differences on foreign operations	-	-	89	-	89
Total comprehensive income for the period	-	-	89	(782)	(693)
Transactions with owners
Issue of shares	641	-	-	-	641
Total transactions with owners	641	-	-	-	641
Balance at 31 December 2017	19,192	2,633	(488)	(20,897)	440
Loss for the period	-	-	-	(741)	(741)
Other comprehensive income
Exchange translation differences on foreign operations	-	-	(85)	-	(85)
Total comprehensive income for the period	-	-	(85)	(741)	(826)
Transactions with owners
Issue of shares	122	-	-	-	122
Issue of options and warrants	-	383	-	-	383
Lapse / exercise of share-based payments	-	(134)	-	134	-
Total transactions with owners	122	249	-	134	505
Balance at 1 July 2018	19,314	2,882	(573)	(21,504)	119
Loss for the period	-	-	-	(564)	(564)
Other comprehensive income
Exchange translation differences on foreign operations	-	-	(13)	-	(13)
Total comprehensive income for the period	-	-	(13)	(564)	(577)
Transactions with owners
Issue of shares	31	-	-	-	31
Total transactions with owners	31	-	-	-	31
Balance at 31 December 2018	19,345	2,882	(586)	(22,068)	(427)

 

Unaudited Consolidated Statement of Cash Flows

 

For the half year to 31 December 2018		Unaudited 6 months to 31 December 2018	Unaudited 6 months to 31 December 2017	Audited year ended 30 June 2018
Operating activities		$'000	$'000	$'000
Loss before tax		(564)	(782)	(1,523)
Adjustments for:
Impairment of evaluation and exploration assets		-	271	-
Impairment of investment in associate		-	101	-
Impairment of property plant and equipment		-	-	86
Impairment of loan to unquoted company		50	-	100
Profit on disposal of investment		-	-	(24)
Share based payment change		-	7	334
Depreciation		3	5	7
Movements in exchange		(106)	48	65
Net interest expense		158	103	357
Operating cash flow before movements in working capital		(460)	(247)	(598)
Working capital adjustments:
- Decrease / (increase) in inventory		10	(68)	(10)
- Decrease / (increase) in receivables		26	(9)	-
- Increase / (decrease) in payables		226	(41)	159
Cash used in operations		(198)	(365)	(449)
Net interest paid		-	(1)	(42)
Net cash outflow from operating activities		(198)	(366)	(491)
Investing activities
Loan to unquoted company		(50)		(100)
Net cash flow from investing activities		(50)	-	(100)
Financing activities
Issue of shares		96	561	733
Net cash flow from financing activities		96	561	733
Net (decrease) / increase in cash and cash equivalents		(152)	195	142
Cash and cash equivalents at start of the period		153	11	11
Effect of foreign exchange rates		-	-	-
Cash and cash equivalents at end of the period		1	206	153

 

 

Notes to the Unaudited Interim Financial Statements

 

1.	General information

 

During the period under review, the Company continued its evolution from a junior exploration company with its Lac Dinga potash exploration licence, to a forward-thinking agri-tech company in sub-Saharan Africa, deploying new technologies to maximise value in African agriculture. Leveraging its connections in Africa, the Company is developing a platform to empower small scale farmers ("SSF") to raise productivity and secure better returns for produce, while establishing African communities as significant future global agricultural players. The platform uses blockchain technology to provide loans of utility tokens to the SSF which are then used to procure inputs from the Company.  The Company was also preparing its entry into the medicinal cannabis market as announced on 27 March 2019.

 

Block Commodities is a public limited company incorporated and domiciled in the Guernsey.  The address of its registered office is Richmond House, St Julian's Avenue, St Peter Port, Guernsey GY1 1GZ.

 

The Company is admitted to trading on the NEX Exchange Growth market.

 

The unaudited interim financial statements for the 6 months ended 31 December 2018 were approved for issue by the board on 29 March 2019.

 

The interim financial statements for the 6 months ended 31 December 2018 and the 6 months ended 31 December 2017 are unaudited and do not constitute full accounts.  The comparative figures for the year ended 30 June 2018 are extracts from the annual report and do not constitute statutory accounts.

 

The unaudited interim financial statements have been prepared in US Dollars as this is the currency of the primary economic environment in which the Group operates.

 

2.	Basis of preparation

 

The condensed consolidated financial statements of the Group for the six months ended 31 December 2018, which are unaudited and have not been reviewed by the Company's auditor, have been prepared in accordance with the International Financial Reporting Standards ('IFRS'), as adopted by the European Union, accounting policies adopted by the Group and set out in the annual report for the year ended 30 June 2018 (available at www.blockcommodities.com).  The Group does not anticipate any additional significant change in these accounting policies for the year ended 30 June 2019. References to 'IFRS' hereafter should be construed as references to IFRSs as adopted by the EU.

 

While the financial figures included in this report have been computed in accordance with IFRSs applicable to interim periods, this report does not contain sufficient information to constitute an interim financial report as that term is defined in IFRSs.

 

The financial information contained in this report also does not constitute statutory accounts under the Companies (Guernsey) Law 2008, as amended.

 

3.	Significant accounting policies

 

Basis of accounting

The unaudited interim financial statements have been prepared on the historical cost basis except for financial instruments measured at fair value.  The principal accounting policies adopted are consistent with those of the financial statements for the year ended 30 June 2018.

 

4.	Segment reporting

The directors consider that the Group's activities comprise the segments of fertiliser trading and potash exploration and other unallocated expenditure in one Geographical segment, Africa.

 

Revenue represents sales to external customers.  Unallocated expenditure relates to central costs and any items of expenditure that cannot be directly attributed to an individual segment.

 

6 months ending 31 December 2018		Trading	Exploration	Unallocated	Total
		$'000	$'000	$'000	$'000
Revenue		-	-	-	-
Segment results
- Operating loss		(105)	-	(251)	(356)
- Impairment		-	-	(50)	(50)
- Interest expense		-	-	(158)	(158)
Loss before tax		(105)	-	(459)	(564)
Income tax		-	-	-	-
Loss after tax		(105)	-	(459)	(564)

 

 

6 months ending 31 December 2017		Trading	Exploration	Unallocated	Total
		$'000	$'000	$'000	$'000
Revenue		-	-	-	-
Segment results
- Operating loss		(122)	-	(185)	(307)
- Impairment		(101)	(271)	-	(372)
- Interest expense		-	-	(103)	(103)
Loss before tax		(223)	(271)	(288)	(782)
Income tax		-	-	-	-
Loss after tax		(223)	(271)	(288)	(782)

 

 

Year ending 30 June 2018		Trading	Exploration	Unallocated	Total
		$'000	$'000	$'000	$'000
Revenue		-	-	-	-
Segment results
- Operating loss		(402)	(14)	(563)	(979)
- Impairment		-	(87)	(100)	(187)
- Interest expense		-	-	(357)	(357)
Loss before tax		(402)	(101)	(1,020)	(1523)
Income tax		-	-	-	-
Loss after tax		(402)	(101)	(1,020)	(1,523)

 

 

Year ending 30 June 2017		Trading	Exploration	Unallocated	Total
		$'000	$'000	$'000	$'000
Revenue		-	-	-	-
Segment results
- Operating loss		(806)	-	(438)	(1,244)
- Share of loss of associate		(24)	-	-	(24)
- Impairment		-	(719)	-	(719)
- Interest expense		-	-	(286)	(286)
Loss before tax		(830)	(719)	(724)	(2,273)
Income tax		-	-	-	-
Loss after tax		(830)	(719)	(724)	(2,273)

 

Segment assets consist primarily of intangible assets, property, plant and equipment, other receivables and cash and cash equivalents.  Segment liabilities comprise operating liabilities.

 

Capital expenditure comprises of additions to property, plant and equipment and intangibles.

 

The segment assets and liabilities at 31 December 2018 and capital expenditure for the year then ended are as follows:

		Trading	Exploration	Unallocated	Total
		$'000	$'000	$'000	$'000
Assets		4	3,000	1	3,005
Liabilities		-	(955)	(2,477)	(3,432)
Capital expenditure		-	-	-	-

 

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

 

At 31 December 2018			Assets	Liabilities
			$'000	$'000
Segment assets and liabilities			3,004	955
Unallocated:
Cash			1	-
Trade and other payables			-	842
Loan Note			-	1,635
Total			3,005	3,432

 

 

The segment assets and liabilities at 31 December 2017 and capital expenditure for the period then ended are as follows:

 

		Trading	Exploration	Unallocated	Total
		$'000	$'000	$'000	$'000
Assets		78	3,089	299	3,465
Liabilities		-	(1,117)	(1,908)	(3,025)
Capital expenditure		-	132	-	132

 

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

 

At 31 December 2017			Assets	Liabilities
			$'000	$'000
Segment assets and liabilities			3,167	1,117
Unallocated:
Other receivables			94	-
Cash			205	-
Trade and other payables			-	496
Loan Note			-	1,412
Total			3,465	3,025

 

 

The segment assets and liabilities at 30 June 2018 and capital expenditure for the year then ended are as follows:

		Trading	Exploration	Unallocated	Total
		$'000	$'000	$'000	$'000
Assets		18	3,000	243	3,261
Liabilities		-	942	2,188	3,130
Capital expenditure		-	-	-	-

 

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

 

At 30 June 2018			Assets	Liabilities
			$'000	$'000
Segment assets and liabilities			3,018	942
Unallocated:
Other receivables			90	-
Cash			153	-
Trade and other payables			-	765
Loan Note			-	1,423
Total			3,261	3,130

 

 

5.	Earnings per share

 

The calculation of basic and diluted earnings per share is based on the following data:

 

		Unaudited 6 months to 31 December 2018	Unaudited 6 months to 31 December 2017	Unaudited year ended 30 June 2018
		$'000	$'000	$'000
Loss for the purpose of basic loss per share		(564)	(782)	(1,523)
Number of shares
Weighted average number of ordinary shares for the purposes of calculating basic and diluted loss per share		4,826,314,237	2,209,126,360	3,112,078,626
Basic and diluted loss per share (cents) -attributable to equity holders		(0.01c)	(0.04c)	(0.05c)

 

6. Intangible assets		Unaudited 6 months to 31 December 2018	Unaudited 6 months to 31 December 2017	Unaudited year ended 30 June 2018
		$'000	$'000	$'000
		3,000	3,000	3,000

 

Evaluation and exploration costs are capitalised in accordance with IFRS6

 

The asset comprises the Lac Dinga exploration licence in the Republic of Congo held by La Societé des Potasses et des Mines SA ("SPM") in which the Group has a 70% interest.  The second term of the licence expired in April 2018.  Under the Mining Code of the republic of Congo, an application has been made to extend it for a third two year term.  SPM is awaiting formal approval from the government.

 

In order to develop the asset and issue a maiden resource statement, the Group announced on 19 July 2017 that it has entered an agreement with African Agronomix Limited ("AAX"), whereby AAX has the right to acquire up to 100% of the Company's interest in Lac Dinga project structured over four distinct phases. The agreement was effective 17 October 2017 and AAX are acting as the operator of the project on behalf of SPM. AAX have delayed commencement of the next phase of exploration work pending receipt of the license renewal.

 

 

7. Loan Note

 

				$'000
At 1 July 2017				1,170
Unpaid interest capitalised				190
Exchange rate adjustment				52
At 31 December 2017				1,412
Exchange rate adjustment				11
At 30 June 2018				1,423
Unpaid interest capitalised				306
Exchange rate adjustment				(94)
At 31 December 2018				1,625

 

On 1 September 2017, the Company, with agreement of the lender, renewed the term of the loan for a further 2 years. Unpaid interest of £145,669 was rolled into the principal outstanding.  The loan is repayable on the earlier of:

• 1 September 2019;
• completion by the Company of equity financing which (in aggregate) raises more than £2.0m; and
• completion of any non-trade finance debt financing.

In addition, the lender has the right at any time to convert any amount of the loan outstanding at a conversion price of 0.025p per ordinary share or, if lower, at a price per share at which shares are issued for cash following the renewal of the loan.

 

Subject to certain trigger events the lender agreed to reduce the interest on the loan note to 10% per annum, payable monthly. In this context, the Company was required to make a minimum monthly payment to the lender of at least £5,000 in respect of accruing interest, and any balance of such accruing but unpaid interest shall be rolled-up as additional loan capital.  Interest will be charged on the additional loan capital on 1 September 2018 and 1 September 2019 only.

 

         in the event that the Company fails to comply with the terms of the loan note, the Company agreed that the reduced rate of interest noted above shall cease to be effective and the interest rate (and associated provisions) shall revert to those set out in the original loan, together with all other consequences, with effect from 1 September 2017; and

 

         the Company agrees to pay a facility re-arrangement fee of £50,000 in respect of the renewal at 1 September 2017. The lender agreed to waive this fee provided that the Company complies with the terms of the loan note on an ongoing basis (failing which, such fee shall be immediately due and payable). 

 

The Company has not met its obligations and accordingly a provision has been made for the full amount of interest and arrangement fees under the agreement. The amount of unpaid interest and fees capitalised at 1 September 2018 was $306,000.

 

8. Share Capital
			Ordinary shares of no par value
			Allotted and fully paid
			Number	$'000
At 1 July 2017			1,876,112,472	18,551
Issue of shares			1,971,111,111	641
At 31 December 2017			3,847,223,583	19,192
Issue of shares			883,139,567	122
At 1 July 2018			4,730,363,150	19,314
Issue of shares			107,000,000	31
At 31 December 2017			4,837,363,150	19,345

 

On 17 July 2017, 111,111,111 shares were issued at 0.045p for cash.

 

On 25 October 2017, 100,000,000 shares were issued at 0.06p for cash.

 

On 16 November 2017 and 15 December 1,600,000,000 shares were issued at 0.025p for cash and a further 160,000,000 were issued to advisors.

 

On 29 March 2018 122,500,000 shares were issued as incentive shares. A further 176,710,996 shares were issued to directors, and consultants in settlement of fees due.

 

On 21 June 2018 471,428,571 shares were issued for cash at 0.035p and 112,500,000 shares were issued to advisors and consultants in settlement of fees.

 

On 19 July 2018 107,000,000 shares were issued for cash at 0.035p

 

For more information, visit: http://www.blockcommodities.com

 

 

The Directors of the Company accept responsibility for the content of this announcement.

  

For further information, please contact:

 

Block Commodities Limited
Chris Cleverly	info@blockcommodities.com
NEX Exchange Corporate Adviser:
Alexander David Securities Limited
David Scott - Corporate Finance	+44 (0) 20 7448 9820
James Dewhurst - Corporate Broking	+44 (0) 20 7448 9820
Public and Investor Relations:
Cassiopeia Services - Stefania Barbaglio	stefania@cassiopeia-ltd.com