Zoetic International PLC COVID-19 Update (8936G)

TIDMZOE

RNS Number : 8936G

Zoetic International PLC

20 March 2020

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

20 March 2020

Zoetic International plc

("Zoetic" or the "Company")

COVID-19 Update

Zoetic, the London listed vertically integrated CBD company, provides the following update regarding the impact of Covid-19.

In the short time since Zoetic published its operational update on 5 March 2020, the impact of Covid-19 on global economies, financial markets and consumer confidence has developed rapidly as governments in several countries have announced extraordinary measures to slow the spread of the virus. This has inevitably caused some disruption to the Company's business.

Reports indicate that convenience stores in the USA are currently experiencing a significant drop in sales and footfall and therefore, if this trend continues, the Board anticipates reduced demand for its products in the coming months. Online sales in both countries in which Zoetic operates are also showing signs of being impacted as customers have shown increasing caution with their disposable income. Within its oil & gas division, the steep fall in oil prices will lead to a reduction in revenue in the coming months.

Zoetic is taking prudent actions to manage these challenges. As previously reported, the management team has significantly reduced the Company's cost base in the past six months but, in the light of these new events, further action is now underway. Zoetic is adopting a set of exceptional operational measures to significantly reduce its costs and navigate through these unprecedented times. Regrettably, Zoetic has terminated the employment of six members of staff in the USA and the Company is exploring the possibility of putting further staff on unpaid leave or asking them to work part time should global economies deteriorate further. All non-essential expenditure is on hold. Further sales of peripheral assets have been made and the Company has been successful in recovering unpaid obligations to it in the oil & gas division.

Despite the ongoing problems in retail markets, the Company's distribution partners remain very supportive and, whilst this is no longer the right time to launch an extended distribution of Chill products in the USA, discussions with Zoetic's partners continue to be based on when, and not if, the launch should take place. Likewise, in the UK, Zoetic continues to generate interest from prospective retail partners for Zoetic and Chill branded products. The Board naturally remains cautious about predicting when this interest may materialise into demand, but the ongoing enthusiasm for the Company's products provides the Board with optimism that, when this current downturn passes, Zoetic's business model remains attractive.

Furthermore, seed harvests have exceeded expectations and Zoetic now holds an inventory of 2,925,573 feminised hemp seeds. The focus of the team in the USA has moved to seeking buyers for these. It is too early to assess how Covid-19 will impact the agricultural communities, or how hemp seed prices will react to global economic pressures, but Zoetic now has sufficient volumes of high-quality seeds to compete effectively in this market. Discussions with prospective buyers in both the US and internationally are ongoing.

Pending seed sales, the Company is taking action to maintain online retail sales. Discounts are being offered on both the Zoetic and Chill websites along with other periodic special offers. Activity on social media has been increased to expand customer reach and ensure the Company's products remain visible to prospective customers. In anticipation of fulfilling its distribution contracts, inventories of finished products are healthy and so the Board does not anticipate incurring any significant manufacturing costs or disruption to its supply chain for the time being.

The Board continues to plan for multiple scenarios and explore various ways to mitigate the impact of reduced demand for a potentially extended period of time. The Board also welcomes the initiatives that both the UK and US Governments have announced to support businesses and their employees. Further updates will be made in due course.

Nick Tulloch, Chief Executive of Zoetic, said:

" The breath-taking speed at which economies around the world have been impacted by the spread of Covid-19 is unprecedented and the impact is likely to be felt by every business.

"We are fortunate in that much work had already been undertaken to streamline the group and reduce our overheads but, in the extraordinary situation we find ourselves in, we have taken further action to remove all non-essential costs . We are taking this situation very seriously and I would caution our shareholders to be prepared for further challenges as the impact of Covid-19 and the economic downturn is felt. However, in our two CBD brands and feminised hemp seeds, we have created a business capable of generating substantial returns in the future and our task is to ensure we can deliver on that opportunity."

**ENDS**

Enquiries

Zoetic International plc [phone]

Nick Tulloch

Allenby Capital Limited (Financial Adviser and Broker) [phone]

Nick Harriss

Nicholas Malins Smith

Nick Naylor

IFC Advisory Ltd (Financial PR and IR) [phone]

Tim Metcalfe

Graham Herring

Florence Chandler

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March 20, 2020 03:00 ET (07:00 GMT)