Business context and reporting period
Akanda Corp.’s Form 20-F is an annual report for the fiscal year ended December 31, 2021, not a standalone Q4 filing. The company was incorporated in July 2021 and acquired the holding company for its UK distributor, Canmart, and Lesotho cultivator, Bophelo, in November 2021. Under common-control accounting, the consolidated statements include the operating businesses’ comparative results from earlier periods. Financial statements are prepared under IFRS in U.S. dollars.
Akanda cultivates medical cannabis in Lesotho and imports and distributes cannabis-based medical products in the UK. At year-end, Bophelo had no commercial cultivation revenue; all reported sales were attributed to Canmart.
Financial performance and position
| Metric (USD) | 2021 | 2020 | 2019 |
|---|---|---|---|
| Sales | $41,431 | $2,062 | $0 |
| Gross loss, including biological-asset fair-value loss | $714,726 | $58,176 | $0 |
| Operating expenses | $6,119,002 | $1,607,529 | $901,235 |
| Operating loss | $6,833,728 | $1,665,705 | $901,235 |
| Net loss | $8,131,197 | $2,300,571 | $1,394,641 |
| Operating cash used | $6,557,062 | $1,352,468 | $642,328 |
| Investing cash used | $576,472 | $432,203 | $692,770 |
| Financing cash provided | $11,235,691 | $1,033,485 | $2,116,312 |
At December 31, 2021, cash was $3,495,390, current assets were $3,980,276, and current liabilities were $8,268,428, implying a working-capital deficit of about $4.29 million. Total liabilities were $10,247,425; these included a $6,716,190 secured convertible debenture, $2,418,706 of lease liabilities and $432,201 of current loans and borrowings. Total assets were $8,046,003 and shareholders’ deficit was $2,201,422. The filing reports no income-tax expense for 2021.
The biological-asset fair-value charge was $713,135 in the income statement; the notes explain that $693,572 related to the year-end write-down of biological assets to nil and $19,563 to unusable seeds. The reported basic and diluted loss per share was $0.50.
Material changes versus prior periods
- Reported sales rose from $2,062 in 2020 to $41,431 in 2021, but remained small relative to expenses. The filing attributes the increase to Canmart’s expanded sourcing, imports and distribution of UK medical cannabis products.
- Net loss widened to $8.13 million from $2.30 million in 2020. Management attributes the increase mainly to site construction and cultivation ramp-up in Lesotho, higher staffing and operating costs, and corporate restructuring and IPO-related costs.
- Operating cash outflow increased substantially, while financing provided $11.24 million, primarily through share issuances and loans. The year-end cash balance increased from $13,504 in 2020 to $3.50 million in 2021.
- The company reported a $231,391 net foreign-exchange loss in 2021 and stated that it had no foreign-currency hedging contracts.
Outlook, risks and unusual items
- Going concern: The auditor’s report and management’s disclosures state that operating losses raise substantial doubt about Akanda’s ability to continue as a going concern. The statements were prepared on a going-concern basis and include no adjustments for a possible failure to continue. The company depends on external financing.
- Plans: Management aimed to begin exporting Bophelo biomass to Europe in 2022 and planned to add oils and extracts from 2023 onward. These are plans, not assured results. The filing states Bophelo had made only one small local flower sale by April 2022; export agreements were not yet generating sales, and required permits or product specifications could remain obstacles.
- Post-year-end funding: Akanda completed a March 2022 IPO of 4 million shares at $4 per share, receiving $16 million gross and $14.68 million net. This occurred after the reporting period. The filing also describes a proposed Holigen acquisition for cash, shares and assumed subsidiary debt, expected to close in Q2 2022 subject to conditions; it was not reported as completed.
- Regulatory and execution risks: Cannabis regulation is restrictive and evolving. Canmart’s UK controlled-drug license expired in February 2022; its renewal application was pending, although it could continue day-to-day operations under the existing license while awaiting a decision. Bophelo’s production, quality certifications, export permits, crop yields and customer acceptance are material execution risks.
- Other risks: The filing highlights limited operating history, product and agricultural risks, competition, reliance on third parties, COVID-19 impacts, foreign-exchange exposure, Lesotho emerging-market and currency-transfer risks, and potential difficulty obtaining further capital.
- Related parties and governance: A significant portion of liabilities was owed to related parties, including a lease with a trust controlled by the Executive Chair. Halo held about 43.8% of shares as of April 30, 2022, and the filing identifies potential conflicts and concentrated voting control.
- Auditor and controls: The auditor issued an unqualified opinion on the IFRS financial statements while separately highlighting substantial doubt about going concern. Management reported disclosure controls and internal control over financial reporting effective at December 31, 2021; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Reconcile revenue: the audited statements and MD&A report 2021 sales of $41,431, but a risk-factor passage states Canmart sales of approximately $41,431,359. The filing text does not provide a clear reconciliation.
- Confirm the company’s current liquidity, cash burn and financing needs, including how the IPO proceeds were used and whether they address the auditor’s going-concern uncertainty.
- Check the status and terms of Canmart’s UK license renewal, Bophelo’s export permissions, and whether planned European shipments and offtake agreements have resulted in accepted, paid sales.
- Verify the status and final economics of the proposed Holigen acquisition, including closing conditions, share issuance, cash payment and subsidiary debt assumption.
- Review related-party balances, lease terms and governance safeguards, as well as subsequent changes in major-shareholder ownership and dilution.