AKANDA Corp is under threat of being delisted from NASDAQ for the second time in less than a year, throwing its future as a publicly listed company into question.
Earlier this month, Akanda informed investors it had received a warning from the Listings Qualifications Department of the NASDAQ stock exchange that if it could not bring its share price back above US$1 for 10 consecutive days before January 1, 2024, it would face delisting.
This comes less than six months after Akanda implemented a 1-for-10 reverse stock split on its ordinary shares to rescue it from being delisted, following another warning from the exchange in October 2022.
It frames what has been a torrid year for the company, which has lost its CEO and its core operations in South Africa, been fighting ongoing legal battles, and seen its largest shareholder, Halo Collective, sell off swathes of its stock.
Current financial position
The recent announcement has led to concerns among investors that the company may have little runway left, with the ongoing drop in share price leaving it little recourse to raise more funds publicly.
Its most recently published financial figures from May show that the company generated $2.6m in 2022, up from $41.4k in 2021 as it began generating meaningful revenues for the first time.
Almost all of this revenue increase came from RPK Biopharma Unipessoal, which is indirectly held by Akanda through Holigen Limited, which reported sales of $1.9m over the period.
Its UK subsidiary CanMart generated $101.7k, up from $41k in 2021, while Bophelo ‘made only one sale of cannabis flower to a local buyer in April 2022 and generated sales revenue of $31k’, but has since been placed into insolvency.
Notably, the majority of this revenue was also generated in the final quarter of the year as Akanda ‘recognised its first material revenues since inception’ through sales to Germany’s medical market.
On an annualised basis, this would suggest Akanda could be set to generate sales of around €7.2m ($8.1m) in 2023 through Holigen alone, though it says these initial revenues were generated across just two months and with its facility operating at 40% of capacity.
The company is yet to turn a profit, however, and is seemingly haemorrhaging money.
Operating losses increased almost tenfold last year from $2.6m to $20m, which it attributed to ‘the costs of listing, as well as increased operating expenses to execute our business plan and growth strategy’.
Furthermore, the company booked a loss of $2.3m due to the loss of control of its operations in Lesotho.
Business of Cannabis has contacted Akanda for comment.
Cash position
As of December 31, 2022, Akanda reported cash and equivalents of just $255k, down from $3.5m a year earlier.
In an effort to provide some more runway, the company announced on May 04 that it had secured a short-term $500k loan from Veridia Canada.
The loan, which is not interest-bearing if it is repaid within 90 days, is secured by the ‘existing inventory and equipment, accounts receivable and purchase orders’ of the group’s only revenue-generating subsidiary RPK.
Katharyn Field, Interim Chief Executive Officer of Akanda, commented: “This short-term loan provides us with the flexibility needed to continue the implementation of our strategic plan while continuing to evaluate longer-term financing options.”
Halo Collective
Ms Field, who joined as acting CEO of the company following Tej Virk’s departure in February this year, is also the CEO of Akanda’s largest shareholder, Halo Collective.
While Akanda and multi-national cannabis operator Halo have a long and intertwined history, the latter has significantly reduced its stake in Akanda in recent months, and is dealing with its own financial woes, meaning any financial support is likely off the table.
Back in 2021, not long after Akanda was established, Halo announced that it was ‘readying Akanda for a senior exchange listing by entering into a share purchase agreement’.
This deal saw Halo sell 100% of the outstanding shares in Bophelo and CanMart for around $13m.
As part of the deal, Halo secured a 68.7% stake in Akanda alongside a board nomination and ‘right of first offer to participate in certain future equity offerings by Akanda’.
Despite the majority shareholding, the two companies made it clear that Akanda was ‘an independent company’.
Following its IPO, company reports suggest that as of April 30, 2022, Halo’s stake in the company’s outstanding common shares stood at 43.84%, meaning that Halo ‘may continue to exert significant influence over us’.
According to documents filed with the SEC, Halo has since made five separate sales of Akanda stock, seeing its stake in the company drop to just 10%.
Halo is also dealing with its own issues. In its most recently published financial figures for the three months to September 30, 2022, Halo recorded a net loss of $5.8m on sales of $5.4m.
Last month it also informed investors that it had changed its auditor following the resignation of its former auditor, effective June 19, 2023.
