Business Context and Reporting Period
Company: Akanda Corp. (Foreign Private Issuer)
Reporting Period: Six months ended June 30, 2024 (Interim)
Filing Date: October 29, 2024 (Form 6-K)
Akanda Corp. operates in the medical cannabis sector with subsidiaries in the UK (Canmart), Malta (Cannahealth), and Portugal (Holigen). The company completed the sale of its Portuguese subsidiary, RPK Biopharma, on April 1, 2024, classifying its results as discontinued operations. The company is currently focused on its UK operations and recent capital raising activities.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 |
|---|---|---|
| Revenue (Sales) | $477,006 | $128,741 |
| Gross Profit | $173,858 | $25,751 |
| Gross Margin | 36.4% | 20.0% |
| Operating Loss | $(2,352,825) | $(2,668,201) |
| Net Loss (Continuing Ops) | $(2,221,485) | $(2,656,388) |
| Net Loss (Total) | $(2,682,890) | $(5,877,882) |
| Cash Used in Operating Activities | $(2,591,980) | $(1,680,496) |
| Cash Provided by Financing Activities | $8,638,126 | $7,423,592 |
Debt and Liquidity: The company funded operations primarily through public offerings and short-term loans. As of June 30, 2024, the company had minimum lease payment obligations of $40,000 due within one year. The filing does not provide a specific total debt balance as of June 30, 2024, but notes the assumption of approximately €4 million of debt by the buyer of RPK.
Material Changes vs. Prior Period
- Revenue Growth: Sales increased 270% to $477,006, driven by increased sales activity of cannabis oil and flower by the UK subsidiary, Canmart.
- Discontinued Operations: The sale of RPK Biopharma resulted in a reclassification of its results. The loss from discontinued operations decreased significantly from $(3,221,494) in 2023 to $(461,405) in 2024.
- Expense Reductions: Personnel expenses decreased by 36% ($209,106 vs. $326,072) due to executive changes. Consulting fees decreased by 15% ($1.72M vs. $2.03M) as IPO-related activities concluded.
- One-Time Items: The 2024 period included a $400,000 gain from the write-off of a holdback payable and a $165,625 loss on the sale of the RPK subsidiary.
- Foreign Exchange: The company recorded a net foreign exchange loss of $132,703 in 2024, compared to a gain of $45,667 in 2023.
Guidance, Outlook, and Risks
Management Commentary: Management attributes the improved net loss primarily to the lower operating results of the divested RPK subsidiary and the gain on the write-off of the holdback payable. The company continues to rely on equity financing to fund operations.
Subsequent Events (Post-June 30, 2024):
- Debt Settlement: Fully paid remaining Halo loans by September 17, 2024.
- Asset Acquisition: Acquired a hemp license in Canada and paid an additional $750,000 for farmland options in September 2024.
- Capital Raise: Completed an underwritten public offering on October 3, 2024, raising $1.5 million gross proceeds.
Risks and Contingencies:
- Limited operating history and reliance on future financing.
- Regulatory risks regarding cannabis laws and guidelines.
- Exposure to product liability and recalls.
- Foreign currency translation risks (functional currencies include Euro, GBP, and CAD).
- Ability to maintain Nasdaq listing.
Investor Verification Checklist
- Capital Dilution: Verify the impact of multiple registered direct offerings and prefunded warrant exercises completed in H1 2024 and the subsequent October 2024 offering on share count and ownership.
- Revenue Sustainability: Assess the sustainability of the 270% revenue increase driven by Canmart and the specific mix of medical cannabis products sold.
- Liquidity Runway: Confirm current cash balances and burn rate given the continued negative operating cash flow of $(2.59M) for the six-month period.
- Discontinued Operations: Ensure the financial impact of the RPK sale and the assumption of its debt by the buyer is fully understood and that no contingent liabilities remain.
- Regulatory Compliance: Monitor the status of the new Canadian hemp license and the associated farmland acquisition costs.