Unaudited Condensed Consolidated Statements of Financial Position Total assets significantly increased to $43.48 million, with shareholders' equity turning positive to $34.64 million ASSETS | ASSETS | June 30, 2022 | December 31, 2021 | |:-----------------------------------------------|:--------------|:------------------| | Current Assets | | | | Cash | $ 3,930,702 | $ 3,495,390 | | Cash held in trust | 472,512 | — | | Trade and other receivables | 726,865 | 242,357 | | Prepayments | 380,837 | 107,759 | | Biological assets | 198,631 | — | | Inventory | 895,774 | — | | Financial asset measured at FVTPL | 337,145 | — | | Total Current Assets | 6,942,466 | 3,845,506 | | Non-Current Assets | | | | Property, plant and equipment | 12,608,287 | 1,897,748 | | Intangible assets | 23,446,256 | 259,102 | | Loan Receivable | 485,272 | 134,770 | | Right-of-use assets | — | 1,908,877 | | Total Non-Current assets | 36,539,815| 4,200,497 | | Total Assets | $ 43,482,281| $ 8,046,003 | | LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)| | | | Current Liabilities | | | | Trade and other payables | $ 4,491,284 | $ 680,328 | | Lease liability | — | 439,709 | | Loans and borrowings | 1,262,785 | 432,201 | | Secured convertible debenture | — | 6,716,190 | | Holdback payable | 400,000 | — | | Due to related party | 117,625 | — | | Total Current Liabilities | 6,271,694 | 8,268,428 | | Non-Current Liabilities | | | | Lease liability | — | 1,978,997 | | Loans and borrowings | 2,570,127 | — | | Total Non-Current Liabilities | 2,570,127 | 1,978,997 | | Total liabilities | 8,841,821 | 10,247,425 | | Shareholders' Equity (Deficit) | | | | Share capital | 47,101,209 | 7,255,695 | | Contributed surplus | 576,340 | — | | Other reserves | 21,051 | 3,618,670 | | Accumulated deficit | (12,024,032) | (13,293,889) | | Accumulated other comprehensive income | (1,034,108) | 218,102 | | Total Shareholders' Equity (Deficit) | 34,640,460| (2,201,422) | | Total Liabilities and Shareholders' Deficit| $ 43,482,281| $ 8,046,003 | - Total Assets increased significantly from $8.05 million at December 31, 2021, to $43.48 million at June 30, 2022, primarily driven by increases in property, plant and equipment and intangible assets3 - Shareholders' Equity (Deficit) improved substantially from a deficit of $2.20 million at December 31, 2021, to a positive equity of $34.64 million at June 30, 2022, mainly due to a large increase in share capital3 Unaudited Condensed Consolidated Statements of Loss and Comprehensive Loss Net income from continuing operations was $1.15 million, but a $2.59 million net loss resulted from discontinued operations Item | Item | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:------------------------------------------------------------------|:-------------------------------|:-------------------------------| | Sales | $ 73,096 | $ 3,935 | | Cost of sales | 12,870 | 5,849 | | Gross Profit (Loss) | 93,304 | (1,914) | | Operating expenses | 11,011,417 | 143,589 | | Operating loss | (10,918,113) | (145,503) | | Other (expense) income: | | | | Gain on bargain purchase | 12,760,356 | — | | Net income (loss) from continuing operations | 1,153,290 | (146,417) | | Loss from discontinued operations | (3,747,034) | (1,525,935) | | Net loss | $ (2,593,744) | $ (1,672,352) | | Comprehensive loss | $ (3,613,242) | $ (1,856,844) | | Earnings (loss) per share from continuing operations – basic and diluted | $ 0.04 | $ (0.01) | | Loss per share - basic and diluted | $ (0.10) | $ (0.13) | | Weighted average common shares outstanding | 26,835,444 | 13,129,212 | - The company reported a net income from continuing operations of $1.15 million for the six months ended June 30, 2022, a significant improvement from a loss of $146.42 thousand in the prior year, largely due to a $12.76 million gain on bargain purchase5 - Despite the gain from continuing operations, the company recorded a net loss of $2.59 million for the six months ended June 30, 2022, primarily due to a substantial loss of $3.75 million from discontinued operations5 Unaudited Condensed Consolidated Statements of Shareholders' Equity (Deficit) Shareholders' equity transitioned from a deficit to a positive $34.64 million, driven by significant share issuances Item | Item | Balance, December 31, 2020 | Balance, June 30, 2021 | Issuance of shares for Holigen Acquisition | Issuance of shares to ASDT | Issuance of shares from private placement | Issuance of shares from IPO | Issuance of shares upon conversion of note | Loss of control of Bophelo Bio | Stock-based compensation | Net loss | Translation adjustment | Balance, June 30, 2022 | |:---------------------------------------|:---------------------------|:-----------------------|:-------------------------------------------|:---------------------------|:------------------------------------------|:----------------------------|:-------------------------------------------|:-------------------------------|:-------------------------|:---------|:-----------------------|:-----------------------| | Share capital | $ 159 | $ 159 | 16,131,000 | 2,174,908 | 298,684 | 14,682,078 | 6,559,000 | (156) | — | — | — | $ 47,101,209 | | Contributed surplus | — | — | — | — | — | — | — | — | 576,340 | — | — | $ 576,340 | | Other reserves | 21,053 | 21,053 | — | — | — | — | — | (3,597,619) | — | — | — | $ 21,051 | | Accumulated deficit | (5,162,692) | (6,835,044) | — | — | — | — | — | 3,863,601 | — | (2,593,744)| — | $ (12,024,032) | | Accumulated Other comprehensive loss | 108,060 | (76,432) | — | — | — | — | — | (232,712) | — | — | (1,019,498) | $ (1034,108) | | Total | $ (5,033,420) | $ (6,890,264) | 16,131,000 | 2,174,908 | 298,684 | 14,682,078 | 6,559,000 | 33,114 | 576,340 | (2,593,744)| (1,019,498) | $ 34,640,460 | - Share capital significantly increased from $159 at December 31, 2020, to $47.10 million at June 30, 2022, primarily due to share issuances for the Holigen acquisition ($16.13 million), IPO ($14.68 million), and conversion of a note ($6.56 million)10 - The company's total shareholders' equity transitioned from a deficit of $6.89 million at June 30, 2021, to a positive equity of $34.64 million at June 30, 2022, reflecting substantial capital raises and acquisitions, despite a net loss910 Unaudited Condensed Consolidated Statements of Cash Flows Operating activities had an $8.35 million cash outflow, largely offset by $14.64 million from financing activities Cash Flow Activity | Cash Flow Activity | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:------------------------------------------------------------------|:-------------------------------|:-------------------------------| | Net income (loss) | $ (2,593,744) | $ (1,672,352) | | Cash flows used in operating activities | (8,353,721) | (1,021,118) | | Cash flows used in investing activities | (4,231,938) | (545,870) | | Cash flows provided by financing activities | 14,642,326 | 3,495,899 | | Net increase in cash and cash equivalents | 2,056,667 | 1,928,909 | | Cash and cash equivalents at the beginning of the period | 3,495,460 | 13,504 | | Cash and cash equivalents at the end of the period | $ 4,403,214 | $ 1,967,335 | - The company experienced a significant net cash outflow from operating activities of $8.35 million for the six months ended June 30, 2022, an increase from $1.02 million in the prior year13 - Cash flows from financing activities provided $14.64 million in the first half of 2022, primarily from IPO proceeds ($14.65 million) and private placement ($0.28 million), which offset the cash used in operating and investing activities13 Notes to the Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements 1. Nature of Operations and Going Concern Akanda Corp. was incorporated on July 16, 2021, and is involved in cultivating and manufacturing cannabis biomass and medical cannabis products, primarily through its UK subsidiary Canmart Ltd. The company lost control of its Lesotho-based subsidiary, Bophelo Bio Science and Wellness (Pty) Ltd., due to an insolvent liquidation order on July 15, 2022, leading to its derecognition as a discontinued operation. The company's ability to continue as a going concern is dependent on raising further funding and generating cash profits from its investments, as it incurred a significant net cash outflow from operating activities - Akanda Corp. was incorporated on July 16, 2021, and operates in the cultivation, manufacturing, sales, and distribution of cannabis-based products for medical use, primarily through its UK subsidiary Canmart Ltd1617 - The company lost control of its indirectly held subsidiary, Bophelo Bio Science and Wellness (Pty) Ltd., on June 30, 2022, due to an insolvent liquidation order, resulting in the derecognition of its assets and liabilities and a recorded loss of $2.34 million17 - The company's going concern is dependent on its ability to raise further cash funding and generate cash profits, as it incurred a net cash outflow of $8.35 million from operating activities for the six months ended June 30, 20221920 2. Basis of Preparation These condensed consolidated financial statements are prepared in accordance with IFRS and IAS 34, using the accrual basis and historical cost, with certain financial assets and liabilities valued at fair value. The acquisition of Cannahealth and its subsidiaries was accounted for as a common control transaction using the 'pooling of interests method,' with retrospective adjustments to share and per share information. The reporting currency is United States Dollars, and management makes estimates and judgments, particularly regarding functional currencies 2.a Statement of compliance The condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB and interpretations by IFRIC, specifically IAS 34 Interim Financial Reporting - The financial statements comply with IFRS as issued by the IASB and IAS 34 Interim Financial Reporting2223 2.b Basis of preparation The statements are prepared on an accrual basis, using historical cost, with certain financial assets and liabilities measured at fair value. The acquisition of Cannahealth and its subsidiaries was treated as a common control transaction using the 'pooling of interests method,' with retrospective adjustments to share and per share information - Financial statements are prepared on an accrual basis, using historical cost, with fair value adjustments for certain financial assets and liabilities24 - The acquisition of Cannahealth and its subsidiaries was accounted for as a common control transaction using the 'pooling of interests method,' combining entities at book value from the earliest reporting date2526 - All share and per share information has been retrospectively adjusted to reflect the reorganization and share issuance as if it occurred on January 1, 201927 2.c Functional and presentation currency The condensed consolidated financial statements are prepared and presented in United States Dollars (USD), which is the Company's reporting currency - The financial statements are presented in United States Dollars (USD), the Company's reporting currency28 2.d Use of estimates and judgments The preparation of financial statements requires management to make estimates, judgments, and assumptions that impact reported amounts, with critical judgments including the determination of functional currencies - Management makes estimates, judgments, and assumptions in preparing financial statements, with critical judgments including the determination of functional currencies2930 3. New standards issued, not yet adopted An amendment to IAS 1, effective January 1, 2023, clarifies the classification of liabilities as non-current based on the substantive right to defer settlement for at least 12 months. The Company does not anticipate a significant impact on its financial statements upon adoption - An amendment to IAS 1 clarifies that liabilities are classified as non-current if the entity has a substantive right to defer settlement for at least 12 months31 - The amendment defines 'settlement' as extinguishment with cash, other economic resources, or equity instruments, with an exception for certain convertible instruments32 - The Company does not expect a significant impact on its condensed consolidated financial statements from the adoption of the IAS 1 amendment, effective January 1, 202332 4. Business combination On April 29, 2022, Akanda acquired 100% of Holigen Limited and its subsidiary RPK Biopharma, a producer of EU GMP grade cannabis flower in Portugal, for $3.0 million cash and 1,900,000 common shares. This acquisition provides immediate EU GMP production capability and market access in the EMEA region. The transaction resulted in a bargain purchase gain of $12,760,563, as the fair value of net assets acquired ($31,891,563) exceeded the consideration transferred ($19,131,000). Holigen contributed a net loss of $814,896 from the acquisition date - On April 29, 2022, Akanda acquired 100% of Holigen Limited and its subsidiary RPK Biopharma, a producer of EU GMP grade indoor grown cannabis flower in Portugal3334 Holigen Acquisition Consideration | Item | Amount | |:---------------------------------------------|:--------------| | Cash | $ 2,600,000 | | Holdback payable | 400,000 | | Fair value of 1,900,000 common shares | 16,131,000 | | Total consideration transferred | $ 19,131,000| - The acquisition resulted in a bargain purchase gain of $12.76 million, as the fair value of net assets acquired ($31.89 million) exceeded the total consideration transferred ($19.13 million)37 - From the acquisition date, Holigen's operations contributed a net loss of $814.90 thousand, primarily because it was in a pre-revenue stage38 5. Loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. Akanda Corp. lost control of its subsidiary Bophelo Bio Science and Wellness (Pty) Ltd. on June 30, 2022, following an insolvent liquidation order by the Lesotho Court on July 15, 2022. This resulted in the derecognition of all Bophelo's assets and liabilities and a recorded loss of $2,338,342. Bophelo's operating results have been reclassified as a discontinued operation for both the six months ended June 30, 2022, and 2021 - Akanda Corp. lost control of Bophelo Bio Science and Wellness (Pty) Ltd. on June 30, 2022, due to an insolvent liquidation order signed by the Lesotho Court on July 15, 202239 - The loss of control led to the derecognition of all Bophelo's assets and liabilities and a recorded loss of $2.34 million, including $800.79 thousand of cash held by Bophelo39 Financial Performance of Discontinued Operation (Bophelo Bio Science and Wellness) | Item | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:--------------------------------------|:-------------------------------|:-------------------------------| | Revenue | $ 32,802 | $ — | | Operating expenses | (1,311,825) | (1,385,676) | | Other (expense) income | (129,669) | (140,259) | | Loss on loss of control of subsidiary | (2,338,342) | — | | Loss on discontinued operation | $ (3,747,034) | $ (1,525,935) | 6. Accounts Receivable The Company's total accounts receivable increased from $242,357 at December 31, 2021, to $726,865 at June 30, 2022, primarily driven by a significant rise in trade accounts receivable. A substantial portion (87%) of trade accounts receivable at June 30, 2022, was concentrated in two customers Accounts Receivable Breakdown | Item | June 30, 2022 | December 31, 2021 | |:--------------------------|:--------------|:------------------| | Trade accounts receivable | $ 538,988 | $ 29,457 | | Sales taxes receivable | 38,667 | 212,900 | | Other receivables | 149,210 | — | | Total | $ 726,865 | $ 242,357 | - Trade accounts receivable increased significantly from $29,457 at December 31, 2021, to $538,988 at June 30, 202242 - At June 30, 2022, two customers accounted for 87% of the Company's trade accounts receivable, indicating a concentration risk42 7. Inventory The Company's inventory, primarily consisting of consumer packaging and dried cannabis flower finished product at RPK in Portugal, had a carrying amount of $895,773.67 at June 30, 2022, compared to $0 at December 31, 2021. Cost of sales for inventories was $34,704 for the six months ended June 30, 2022 - Inventory, primarily consumer packaging and dried cannabis flower at RPK in Portugal, had a carrying amount of $895,773.67 at June 30, 2022 (December 31, 2021 - $0)43 - Cost of sales for inventories amounted to $34,704 for the six months ended June 30, 2022, compared to $5,849 in the prior year43 8. Financial asset measured at FVTPL During the six months ended June 30, 2022, the Company purchased 14,285,714 ordinary shares of The Flowr Corporation for approximately $801,160 as a requirement of the Holigen acquisition. The investment's fair value decreased by $472,311, resulting in a balance of $337,145 at June 30, 2022 - The Company purchased 14,285,714 ordinary shares of The Flowr Corporation for approximately $801.16 thousand as a closing deliverable for the Holigen acquisition44 Movement of Financial Asset at FVTPL | Item | Amount | |:---------------------------|:------------| | Balance, December 31, 2021 | $ — | | Purchase of investment | 801,160 | | Change in fair value | (472,311) | | Movement in exchange rate | 8,296 | | Balance, June 30, 2022 | $ 337,145 | - The investment experienced a change in fair value of $(472,311) during the period, resulting in a balance of $337,145 at June 30, 202245 9. Property and Equipment The net book value of property, plant and equipment significantly increased from $1,897,748 at December 31, 2021, to $12,608,287 at June 30, 2022, primarily due to acquisitions (Holigen) totaling $12,936,374. However, the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. led to the derecognition of $2,233,028 in net book value of PPE. Depreciation expense for the six months ended June 30, 2022, was $372,723 Property and Equipment Net Book Value | Item | December 31, 2021 | June 30, 2022 | |:-------------------------|:------------------|:--------------| | Land | $ — | $ 864,391 | | Plant and equipment | 415,157 | 11,510,800 | | Leasehold Improvements | 981,071 | — | | Motor Vehicles | 24,118 | 81,594 | | Computers | 8,918 | 29,903 | | Furniture and fixtures | 4,231 | 121,599 | | Capital work-in-progress | 464,253 | — | | Total | $ 1,897,748 | $ 12,608,287| - Acquisitions, primarily Holigen, added $12.94 million to property, plant and equipment during the six months ended June 30, 202246 - The Company derecognized property, plant and equipment with a net book value of $2.23 million due to the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd46 - Depreciation expense for the six months ended June 30, 2022, was $372,723, with $115,890 related to discontinued operations48 10. Right-of-use Assets The Company's right-of-use assets, primarily related to a land lease, were fully derecognized at June 30, 2022, with a net book value of $1,888,715, due to the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. Amortization expense for the six months ended June 30, 2022, was $58,010, recorded within discontinued operations Right-of-use Assets Movement | Item | Land lease | |:-------------------------------------------------------------------|:-----------| | Balance, December 31, 2021 | $ 1,908,877| | Amortization | (58,010) | | Impact of loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. | (1,888,715)| | Movement in exchange rates | 37,848 | | Balance, June 30, 2022 | $ — | - Right-of-use assets with a net book value of $1.89 million were derecognized at June 30, 2022, due to the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd49 - Amortization on right-of-use assets for the six months ended June 30, 2022, was $58,010, recorded within discontinued operations49 11. Intangible Assets The net book value of intangible assets significantly increased from $259,102 at December 31, 2021, to $23,446,256 at June 30, 2022, primarily due to acquisitions totaling $24,665,773, including a cannabis API manufacturing and GMP license valued at $23,415,814. The loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. resulted in the derecognition of a cannabis operator's license with a net book value of $227,704. The Company's cannabis distribution license is classified as an indefinite-life intangible asset Intangible Assets Net Book Value | Item | December 31, 2021 | June 30, 2022 | |:-------------------------|:------------------|:--------------| | Software | $ — | $ 15,124 | | Licenses | 259,102 | 23,431,132 | | Total | $ 259,102 | $ 23,446,256| - Acquisitions contributed $24.67 million to intangible assets, including a cannabis API manufacturing and GMP license with a carrying value of $23.42 million at June 30, 202250 - A cannabis operator's license with a net book value of $227,704 was derecognized due to the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd50 - The Company's cannabis distribution license is classified as an indefinite-life intangible asset, with a remaining useful life of approximately 9.5 years for finite-life intangible assets51 12. Loan Receivable The loan receivable from Cellen Life Sciences Limited increased from $134,770 at December 31, 2021, to $485,272 at June 30, 2022. This loan was subject to a restructuring arrangement after the reporting period, as detailed in Note 18 Loan Receivable from Cellen Life Sciences Limited | Item | June 30, 2022 | December 31, 2021 | |:-----------------------------------|:--------------|:------------------| | Loan to Cellen Life Sciences Limited | $ 485,272 | $ 134,770 | - The loan receivable from Cellen Life Sciences Limited increased from $134,770 to $485,272 during the six months ended June 30, 202252 - This loan was subject to a restructuring arrangement subsequent to June 30, 2022, as further described in Note 1852 13. Lease Liability The Company derecognized its lease liability, which had a net book value of $2,570,939, at June 30, 2022, due to the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. Prior to derecognition, the total lease liability was $2,418,706 at December 31, 2021 Lease Liability | Item | June 30, 2022 | December 31, 2021 | |:------------|:--------------|:------------------| | Current | $ — | $ 439,709 | | Non-current | — | 1,978,997 | | Total | $ — | $ 2,418,706 | - The Company derecognized its lease liability with a net book value of $2.57 million at June 30, 2022, due to the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd53 Undiscounted Minimum Lease Payments (Bophelo Bio Science and Wellness (Pty) Ltd) | Year ended December 31: | Amount | |:------------------------|:--------------| | 2022 remaining | $ 110,689 | | 2023 | 265,654 | | 2024 | 265,654 | | 2025 | 265,654 | | 2026 | 265,654 | | Thereafter | 3,254,264 | | Total | $ 4,427,569 | 14. Loans Payable The Company's loans payable include both Louisa Mojela loans and bank loans. All Louisa Mojela short-term loans were derecognized at June 30, 2022, due to the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. New bank loans from Caixa, totaling $1,262,785 (short-term) and $2,570,127 (long-term) at June 30, 2022, were granted to Holigen Ltd. and its subsidiaries for capital and operational needs, secured by mortgage of building and equipment 14.a Louisa Mojela loans Three short-term loans from Louisa Mojela, totaling approximately $584,570 in capital value, were granted to Bophelo Bio Science and Wellness (Pty) Ltd. to fund working capital and operating costs. All these loans were derecognized at June 30, 2022, due to the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. following its liquidation - Three short-term loans from Louisa Mojela, totaling approximately $584,570, were provided to Bophelo Bio Science and Wellness (Pty) Ltd. for working capital and operating costs575960 - All Louisa Mojela loans were derecognized at June 30, 2022, as a result of the loss of control of Bophelo Bio Science and Wellness (Pty) Ltd. due to its insolvent liquidation585960 14.b Bank loans Holigen Ltd. and its subsidiaries received bank loans from Caixa, totaling $1,262,785 (short-term) and $2,570,127 (long-term) at June 30, 2022. These loans, for building construction and equipment purchase, bear interest at 3.00% and are secured by mortgage, with repayment dates in February and June 2026 - Holigen Ltd. and its subsidiaries have short-term bank loans from Caixa totaling $1.26 million at June 30, 2022, for building construction and equipment61 - Long-term bank loans from Caixa for Holigen totaled $2.57 million at June 30, 2022, also for building construction and equipment62 - Both short-term and long-term Caixa loans bear interest at 3.00%, are secured by mortgage of building and equipment, and have repayment dates in February and June 20266162 15. Share Capital The Company has an unlimited authorized share capital of common shares with no par value. As of June 30, 2022, 30,809,026 common shares were issued and outstanding, with a capital value of $47,053,521, reflecting significant issuances from the Holigen acquisition, IPO, private placements, and convertible note conversions. The weighted average common shares outstanding for EPS calculations was 26,835,444. The Company also granted 2,480,532 restricted stock units (RSUs) to directors, officers, and employees, incurring $576,340 in share-based payment expenses 15.a Authorized The Company has an authorized share capital of an unlimited amount of common shares with no par value - The Company's authorized share capital consists of an unlimited amount of common shares with no par value63 15.b Shares issued and outstanding As of June 30, 2022, 30,809,026 common shares were issued and outstanding, with a capital value of $47,053,521. Key issuances during the period included 1,900,000 shares for the Holigen acquisition, 4,000,000 shares from the IPO, and 1,645,745 shares upon conversion of a note Shares Issued and Outstanding | Item | Number of shares | Capital | |:---------------------------------------------|:-----------------|:--------------| | Balance, December 31, 2021 | 22,231,318 | $ 7,255,695 | | Issuance of shares in Holigen acquisition | 1,900,000 | 16,131,000 | | Issuance of shares to ASDT | 869,963 | 2,174,908 | | Issuance of shares from private placement | 162,000 | 278,481 | | Issuance of shares from IPO | 4,000,000 | 14,654,593 | | Issuance of shares upon conversion of note | 1,645,745 | 6,559,000 | | Loss of control of Bophelo Bio | — | (156) | | Balance, June 30, 2022 | 30,809,026 | $ 47,053,521| - The Company issued 1,900,000 common shares at a fair value of $8.49 per share as part of the consideration for the Holigen acquisition65 - The Company issued 4,000,000 common shares in its IPO for gross proceeds of $16.00 million and net proceeds of $14.68 million65 - 1,645,745 common shares were issued to Halo Collective, Inc. at $4 each to settle a convertible debenture of $6.58 million65 15.c Earnings per share The weighted average number of common shares outstanding for basic and diluted earnings per share for the six months ended June 30, 2022, was 26,835,444, an increase from 13,129,212 in the prior year. The Company had no potential dilution during these periods - The weighted average common shares outstanding for basic and diluted EPS was 26,835,444 for the six months ended June 30, 2022, compared to 13,129,212 in 202166 - The Company reported earnings per share from continuing operations of $0.04 for the six months ended June 30, 2022, and a total loss per share of $(0.10)5 15.d Restricted stock units On April 22, 2022, the Company granted 2,480,532 restricted stock units (RSUs) to directors, officers, and employees under its Employee Share Ownership Plan (ESOP). A service cost of $576,340 related to these RSUs was recognized in general and administrative expenses for the six months ended June 30, 2022 - The Company granted 2,480,532 restricted stock units (RSUs) to directors, officers, and employees on April 22, 2022, under its ESOP67 - A service cost of $576,340 related to these RSUs was included in general and administrative expenses for the six months ended June 30, 202267 16. Related Party Transactions The Company settled a secured convertible debenture with Halo Collective Inc. for $6,582,980 by issuing 1,645,745 common shares on March 15, 2022, triggered by its IPO. Key management personnel remuneration, including stock-based compensation, totaled $1,567,209 for the six months ended June 30, 2022. Balances payable to related parties decreased significantly from $9,601,708 at December 31, 2021, to $743,188 at June 30, 2022, primarily due to the settlement of the convertible debenture and derecognition of loans to Louisa Mojela - On March 15, 2022, the Company settled a secured convertible debenture with Halo Collective Inc. for $6.58 million by issuing 1,645,745 common shares, triggered by its IPO68 Key Management Remuneration | Item | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |:-------------------------------|:-------------------------------|:-------------------------------| | Key Management Remuneration | 1,079,324 | 114,235 | | Stock-based compensation | 487,885 | — | | Short term accommodation expense | — | 35,924 | | Total | $ 1,567,209 | $ 150,158 | - Balances payable to related parties decreased from $9.60 million at December 31, 2021, to $743,188 at June 30, 2022, reflecting the settlement of the convertible debenture and derecognition of Louisa Mojela loans69 17. Segmented Information The Company operates in three reportable segments: Cultivation (medical cannabis cultivation in Portugal and formerly Lesotho), Distribution (medical cannabis distribution in the UK), and Corporate (head office and general corporate expenses). The Cultivation segment's assets significantly increased to $37,990,837 at June 30, 2022, primarily due to the Holigen acquisition, while the Distribution segment generated the majority of external revenues ($15,580) for continuing operations. The Cultivation segment reported a profit of $5,744,346, largely influenced by the bargain purchase gain, while the Distribution and Corporate segments reported losses - The Company has three reportable segments: Cultivation (RPK/Holigen in Portugal), Distribution (Canmart Ltd in the UK), and Corporate (head office costs)74 Reportable Segment Assets and Liabilities | Item | June 30, 2022 | December 31, 2021 | |:-----------------------------------|:--------------|:------------------| | Segment Assets: | | | | Cultivation | $ 37,990,837 | $ 4,127,138 | | Distribution | 4,297,366 | 3,716,771 | | Corporate | 1,194,078 | 205,797 | | Total Segment Assets | $ 43,482,281| $ 8,043,909 | | Segment Liabilities: | | | | Cultivation | 6,494,334 | 3,020,730 | | Distribution | 379,982 | 323,129 | | Corporate | 1,967,505 | 6,899,644 | | Total Segment Liabilities | $ 8,841,821 | $ 10,243,143 | Reportable Segment Revenues and Income (Loss) (Six months ended June 30, 2022) | Item | Cultivation | Distribution | Corporate | Total | |:-----------------------------------|:------------|:-------------|:------------|:--------------| | Revenues from external customers | $ 57,516 | $ 15,580 | $ — | $ 73,096 | | Other income (expense) | 12,760,356 | (6,600) | (646,494) | 12,107,262 | | Discontinued operations | (3,747,034) | — | — | (3,747,034) | | Reportable segment income (loss) | $ 5,744,346 | $ (6,867,849)| $ (1,470,241)| $ (2,593,744)| 18. Subsequent Events Subsequent to June 30, 2022, the High Court of Lesotho formally placed Bophelo Bio Science and Wellness (Pty) Ltd. in liquidation, an action contested by Akanda. The Company received a Nasdaq notification for non-compliance with the minimum bid price rule. Akanda granted 4,503,514 RSUs and entered into several consulting agreements, with most consultants settled via RSU grants. A loan restructuring agreement was finalized with Cellen Life Sciences Limited, extending the repayment term to November 2026 and deferring interest. The Company also terminated its President and entered into a supply agreement with Cansativa GmbH for at least 1,000 kg of dried cannabis flower - On July 26, 2022, the High Court of Lesotho placed Bophelo Bio Science and Wellness (Pty) Ltd. in liquidation, an action Akanda intends to contest and investigate80 - On September 27, 2022, Nasdaq notified the Company of non-compliance with the minimum bid price requirement ($1.00 per share for 30 consecutive business days), granting 180 calendar days to regain compliance81 - Subsequent to June 30, 2022, the Company granted 4,503,514 Restricted Share Units (RSUs) to directors and consultants and entered into consulting agreements totaling over $2 million in cash and RSU payments8283 - A Loan Restructuring Agreement with Cellen Life Sciences Limited on November 10, 2022, extended the $0.5 million loan repayment to November 2026, with interest deferred until November 202483 - On August 8, 2022, the Company's subsidiary RPK entered into a supply agreement with Cansativa GmbH to deliver at least 1,000 kilograms of dried cannabis flower over the first 12-month term84
Akanda (AKAN) - 2022 Q2 - Quarterly Report