Akanda Corp. — FY2023 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report. Financial statements are prepared under IFRS and reported in U.S. dollars. Akanda is an early-stage medical-cannabis cultivation, manufacturing and distribution company; its principal operating businesses during the year were Canmart in the U.K. and RPK in Portugal.
Key financial results
| Metric | FY2023 | FY2022 |
|---|---|---|
| Sales | $2.160 million | $2.620 million |
| Gross profit | $111,449 | $3.270 million |
| Operating loss | $(10.051) million | $(20.176) million |
| Net loss | $(32.275) million | $(11.658) million |
| Cash used in operating activities | $(1.501) million | $(11.469) million |
- Sales fell about 18%, which management attributed mainly to increased discounts, rebates and returns. FY2023 revenue comprised $1.736 million from RPK and $423,683 from Canmart.
- Cost of sales rose to $1.909 million from $566,252. Gross profit before biological-asset and inventory fair-value changes was $251,537, compared with $2.053 million. The fair-value adjustment was a $140,088 loss in FY2023 versus a $1.216 million gain in FY2022.
- FY2023 net loss included a $24.666 million impairment charge, comprising $15.938 million against intangible assets and $8.728 million against property, plant and equipment, associated with the planned sale of RPK. Lower consulting, personnel and administrative expenses reduced the operating loss, but did not offset the impairment and weaker gross profit.
- Cash and cash held in trust totaled $93,875 at year-end. Current assets were $1.806 million against current liabilities of $10.172 million, a working-capital deficit of $8.366 million. Total assets were $8.840 million; total liabilities were $12.669 million and shareholders’ equity was negative $3.829 million.
- Loans and borrowings totaled $3.863 million, in addition to $2.256 million due to related parties, $6.015 million of trade and other payables, a $400,000 holdback payable and $135,337 of lease liabilities. RPK’s Caixa Agricola loans were secured by its building and equipment.
- Investing activities provided $24,888 in cash; financing activities provided $1.487 million, primarily from loans and related-party advances. The company reported no off-balance-sheet arrangements or ongoing contractual capital-expenditure commitments.
Changes, outlook and material matters
- Revenue declined, while the net loss widened substantially because of the impairment. Cash used in operations improved year over year, reflecting lower operating outflows and working-capital movements.
- Management and the auditor stated that significant operating losses, the working-capital deficit and reliance on external financing raise substantial doubt about Akanda’s ability to continue as a going concern. The company said it needed further funding and had no firm financing commitments at the financial-statement date. The filing’s earlier expectation that cash would support operations through mid-2024 should be considered alongside the subsequent financings described below.
- On April 1, 2024, Akanda completed the sale of RPK for $2.0 million cash; Somai also assumed approximately €4.0 million of debt and liabilities. The sale removes the Portuguese cultivation business and, according to the filing, ends the related cooperation arrangements. The stated finder’s fee is $446,250, described as 5% of the gross sale price; those figures do not appear to reconcile and warrant verification.
- After year-end, the company raised approximately $708,000, $150,000 and $125,000 in registered direct offerings, and $5.0 million gross in an underwritten offering. The offerings included substantial pre-funded warrants; many were exercised, increasing the share count. The company reported 32,015,528 shares outstanding as of April 30, 2024, versus 5,628,295 at December 31, 2023. A further share consolidation of between 10-for-1 and 100-for-1 was authorized by shareholders in March 2024.
- Akanda’s indirect subsidiary Bophelo remains in liquidation proceedings in Lesotho; the company says it intends to contest the liquidation and seek recovery of loans. The company also disclosed employment-related disputes, including a former CEO’s claim of £1.630 million, a former CFO’s claim of CAD $271,990 that Akanda disputes, and other claims settled or subject to appeal. Mojela’s wrongful-termination application failed, with £60,000 in legal costs awarded to Akanda and Canmart; an appeal process was still described as ongoing.
- Nasdaq had notified Akanda of minimum-bid-price noncompliance. In January 2024 it received a further 180-day extension to regain compliance. The filing provides no specific financial guidance and says it cannot identify reliable recent trends given the company’s startup stage. Management does not expect to pay dividends in the foreseeable future.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to material weaknesses in impairment accounting and identification and disclosure of related-party transactions. Management described planned remediation; the auditor did not attest to internal controls. The financial-statement audit included a going-concern emphasis.
Important facts for investors to verify
- Current liquidity and cash runway after the RPK sale, post-year-end financings, transaction costs and debt assumptions.
- Final proceeds and accounting impact of the RPK disposal, including the stated $446,250 finder’s fee and the debt and liabilities assumed by Somai.
- Fully diluted share count, remaining pre-funded warrants, potential dilution and the status of Nasdaq bid-price compliance or any share consolidation.
- Status and potential financial exposure of the Bophelo liquidation, employment claims and appeals, and related-party balances and financing arrangements.
- Progress on remediation of the disclosed material weaknesses and the reliability of future impairment and related-party reporting.