20-F: Akanda Corp. Reports 2024 Annual Results, Focuses on Canadian Cultivation and Strategic Telecom Merger

Akanda Corp. reports a reduced net loss for 2024, exits European operations, and advances plans for a Canadian cultivation facility and a merger with First Towers & Fiber Corp.

Summary

• Akanda Corp. reported a net loss of $4.1 million for 2024, a significant decrease from the $32.3 million loss in 2023.
• The company generated revenue of $836,664 in 2024, primarily from its Canmart operations in the UK, which are now being discontinued.
• Akanda is shifting its focus to developing a hemp and THC/CBD cultivation facility in British Columbia, Canada.
• The company is pursuing a business combination with First Towers & Fiber Corp. to diversify its business beyond the cannabis market.
• Akanda raised approximately $11.5 million through public sales of its securities between February and October 2024.
• The company sold its RPK subsidiary in Portugal for $2.0 million in March 2024.
• Akanda's subsidiary, Bophelo, remains in liquidation proceedings.
• The company is involved in ongoing legal proceedings with former executives.
• Akanda expects to have sufficient capital to fund its current operations through the middle of 2025.
• The company implemented a 1-for-40 reverse stock split in May 2024 and a 1-for-2 reverse stock split in November 2024 to regain compliance with Nasdaq listing requirements.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company has reduced its net loss and is pursuing strategic initiatives, it still faces significant challenges, including ongoing legal issues, reliance on external funding, and the need to maintain Nasdaq compliance. The diversification into telecom is a positive, but its success remains uncertain.

Positives

• Significant reduction in net loss compared to the previous year.
• Successful sale of RPK subsidiary, streamlining operations.
• Progress in developing a Canadian cultivation facility.
• Securing additional funding through public offerings.
• Pursuit of a business combination to diversify revenue streams.

Negatives

• Continued net losses and reliance on external funding.
• Discontinuation of Canmart operations, eliminating a source of revenue.
• Ongoing legal proceedings with former executives.
• Bophelo subsidiary remains in liquidation.
• Implemented reverse stock splits to maintain Nasdaq listing.

Risks

• Limited operating history and minimal revenues to date.
• Uncertainty regarding the success of the business combination with First Towers & Fiber Corp.
• Dependence on raising additional capital.
• Intense competition in the cannabis industry.
• Evolving regulatory landscape for cannabis.
• Potential for future litigation.
• Risk of being a passive foreign investment company (PFIC) for U.S. federal income tax purposes.

Future Outlook

Akanda's future outlook is focused on developing its Canadian cultivation facility and completing the business combination with First Towers & Fiber Corp. The company expects to have sufficient capital to fund its current operations through the middle of 2025.

Industry Context

Akanda's shift towards Canadian cultivation and a telecom merger reflects a broader trend of cannabis companies seeking diversification and stability in a rapidly evolving and competitive market. The exit from European operations aligns with a strategic focus on more promising markets and business opportunities.

Comparison to Industry Standards

• Akanda's financial performance is difficult to benchmark against industry standards due to its unique combination of cannabis operations and planned telecom business.
• Comparable cannabis companies like Aurora Cannabis and Canopy Growth are also facing challenges in achieving profitability, highlighting the difficulties in the sector.
• The success of Akanda's Canadian cultivation facility will depend on its ability to achieve competitive yields and manage costs effectively, similar to other agricultural businesses.
• The merger with First Towers & Fiber Corp. is a unique strategy, making direct comparisons to other industry players challenging.

Management Changes

Legal Proceedings

• The company is involved in ongoing legal proceedings with former executives Louisa Mojela, Tejinder Virk, Vidya Iyer, and Shailesh Bhushan.
• Dentons UK and Middle East LLP (Dentons) filed a debt claim against Canmart for legal services and advice invoiced between July 2022 and November 2022.
• On September 10, 2024, Dallas Dunkley filed a claim against the Company for wrongful dismissal.

Related Party Transactions

• The Company has loans outstanding to 1248787 B.C. Ltd., a company controlled by Jatinder Dhaliwal, a director of Akanda.
• The Company has loan transactions with Halo, a company of which Katharyn Field, the executive director and interim CEO of Akanda, is CEO and Chairman.
• The Company has a loan receivable from First Towers & Fiber Corp. (First Towers), a corporation incorporated under the laws of the Province of British Columbia and controlled by Christopher Cooper, a director of Akanda.

Stakeholder Impact

• Shareholders face potential dilution from future equity issuances.
• Employees are impacted by the discontinuation of Canmart operations and the transition to a new business focus.
• Customers of Canmart will no longer have access to the company's products.
• Suppliers and creditors may be affected by the company's financial challenges and restructuring efforts.

Next Steps

• Develop the Canadian THC and CBD farming facility.
• Complete the business combination with First Towers & Fiber Corp.
• Manage ongoing legal proceedings.
• Secure additional funding to support operations and expansion.
• Monitor and maintain compliance with Nasdaq listing requirements.

Key Dates

Keywords

Akanda Corp, cannabis, cultivation, First Towers & Fiber Corp, merger, financial results, RPK, Canmart, Bophelo, reverse stock split, Nasdaq, hemp, CBD, THC