Akanda Corp 6-K, filed Jun 9, 2022
Akanda Corp. (AKAN)
About this 6-K
Akanda Corp filed this 6-K on June 9, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of June 2022
Commission File Number: 001-41324
AKANDA CORP.
(Registrant’s Name)
1a, 1b Learoyd Road
New Romney TN28 8XU, United Kingdom
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
EXHIBIT INDEX
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AKANDA CORP. | ||
| By: | /s/ Tejinder Virk | |
| Name: | Tejinder Virk | |
| Title: | Chief Executive Officer and Director | |
Date: June 9, 2022
Exhibit 99.1
AKANDA CORP.
NOTICE OF ANNUAL GENERAL MEETING
TO BE HELD ON JUNE 24, 2022
AND
MANAGEMENT INFORMATION CIRCULAR
June 6, 2022
AKANDA CORP.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS (the "Notice")
NOTICE IS HEREBY GIVEN that an annual general meeting (the "Meeting") of the holders (the "Shareholders") of common shares (the "Common Shares") of Akanda Corp. (the "Corporation") will be held on Friday, June 24, 2022 at 11:00 a.m. (Toronto time). To deal with the public health impact of COVID-19, the Corporation is conducting an online only shareholders' meeting.
Registered Shareholders and duly appointed proxyholders can attend the Meeting online at https://www.cstproxy.com/akandacorp/2022 where they can participate, vote or submit questions during the Meeting's live webcast.
The Meeting is being held for the following purposes:
| a) | to receive the audited consolidated financial statements of the Corporation for the year ended December 31, 2021, together with the auditors' report thereon; |
| b) | to elect the directors of the Corporation for the ensuing year; |
| c) | to reappoint BF Borgers CPA PC as the auditors of the Corporation for the ensuing year and to authorize the board of directors of the Corporation (the "Board") to fix their remuneration and terms of engagement; and |
| d) | to transact such further or other business as may properly come before the Meeting or any adjournment(s) or postponement(s) thereof. |
The accompanying information circular (the "Information Circular") provides additional information relating to each of the matters to be addressed at the Meeting. Shareholders are directed to read the Information Circular carefully and in full to evaluate the matters to be considered at the Meeting.
The record date for the determination of the Shareholders entitled to receive notice of and to vote at the Meeting or any adjournment(s) or postponement(s) thereof is June 6, 2022 (the "Record Date"). Shareholders of the Corporation whose names have been entered in the register of shareholders of the Corporation at the close of business on the Record Date will be entitled to receive notice of and to vote at the Meeting or any adjournment(s) or postponement(s) thereof.
If you are a Registered Shareholder and are unable to attend the Meeting or any adjournment(s) or postponement(s) thereof, please date, sign and return the accompanying form of proxy (the "Proxy") for use at the Meeting or any adjournment(s) or postponement(s) thereof in accordance with the instructions set forth in the Proxy and Information Circular. The Corporation's transfer agent recommends that shareholders vote in advance of the Meeting.
If you are a Non-Registered Beneficial Shareholder, a voting information form (also known as a VIF), instead of a form of proxy, may be enclosed. You must follow the instructions provided by your intermediary in order to vote your Common Shares. Non-registered beneficial Shareholders who have not duly appointed themselves as proxyholders will be able to attend the Meeting virtually as guests, but guests will not be able to vote at the Meeting.
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DATED at Toronto, Ontario this 6th day of June, 2022.
| BY ORDER OF THE BOARD | |
| (signed) "Tejinder Virk" | |
| Chief Executive Officer and Director |
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AKANDA CORP.
("Akanda" or the "Corporation")
MANAGEMENT INFORMATION CIRCULAR
This management information circular (the "Information Circular") is dated June 6, 2022 and is furnished in connection with the solicitation of proxies by and on behalf of the management of the Corporation ("Management") for use at the annual general meeting (the "Meeting") of shareholders of the Corporation (the "Shareholders") to be held virtually at https://www.cstproxy.com/akandacorp/2022 on Friday, June 24, 2022 at 11:00 a.m. (Toronto time) for the purposes set out in the notice of Meeting (the "Notice") accompanying this Information Circular.
GENERAL PROXY INFORMATION
Solicitation of Proxies
Solicitation of proxies for the Meeting will be primarily by mail, the cost of which will be borne by the Corporation. Proxies may also be solicited personally by employees of the Corporation at nominal cost to the Corporation. In some instances, the Corporation has distributed copies of the Notice, the Information Circular and the accompanying form of proxy (the "Proxy", and collectively with the Notice and Information Circular, the "Documents") to clearing agencies, securities dealers, banks and trust companies, or their nominees (collectively "Intermediaries", and each an "Intermediary") for onward distribution to Shareholders whose common shares in the capital of the Corporation (the "Common Shares") are held by or in the custody of those Intermediaries ("Non-registered Shareholders").
Solicitation of proxies from Non-registered Shareholders will be carried out by Intermediaries, or by the Corporation if the names and addresses of Non-registered Shareholders are provided by the Intermediaries.
Voting at the Meeting
A registered Shareholder is not required to pre-register prior to the Meeting. It is recommended that any registered Shareholder who wishes to join the Meeting and ask a question or vote, log into the Meeting website at least 15 minutes prior to the start of the Meeting to make sure that they are connected and that the website functions are working correctly. To log in and attend the Meeting, enter your name, email address and 12-digit control number printed on the proxy card issued by Continental Stock Transfer & Trust Company ("Continental") in the appropriate sections and press enter.
Once login is successful, the Shareholder will have full functionality on the Meeting website, meaning they can ask a question, vote and view the material hosted on the site. Registered Shareholders can also join the Meeting as a guest by entering their name and email address. Joining the Meeting as a guest will allow the registered Shareholder to join the Meeting website, however, the Shareholder will only be able to listen to the broadcast of the Meeting and will not be able to ask a question or vote during the Meeting.
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Non-registered shareholders who hold their position through a bank or broker can also join the Meeting. However, in order to obtain a 12-digit control number from Continental, Non-registered Shareholders will first need to obtain a legal proxy from their bank or broker and submit a copy to Continental at proxy@continentalstock.com, no later than 72 hours prior to the Meeting along with their contact information. Following receipt, Continental will issue a 12-digit control number and email the control number along with the Meeting information to the Non-registered Shareholder. Non-registered Shareholders will be able to join the Meeting using such control number. Logging into the website with a control number will provide the Non-registered shareholders will full access to the functionality of the Meeting website, including the ability to ask a question in the chat box or vote during the Meeting.
Non-registered Shareholders can also join the Meeting as a guest by entering their name and email address into the Meeting website. Joining the Meeting as a guest will allow the Non-registered Shareholder to join the Meeting website, however, the Shareholder will only be able to listen to the broadcast of the Meeting and will not be able to ask a question or vote during the Meeting.
Shareholders may appoint a third party proxyholder to represent them at the Meeting. To register a proxyholder, shareholders MUST send an email containing their proxy to proxy@continentalstock.com and provide Continental with their proxyholder's contact information, amount of shares appointed, name in which the shares are registered if they are a registered shareholder, or name of broker where the shares are held if a beneficial shareholder, so that Continental may provide the proxyholder with a control number via email.
It is important to be connected to the internet at all times during the Meeting in order to vote when balloting commences.
In order to participate online, Shareholders must have a valid 12-digit control number and proxyholders must have received an email from Continental containing a control number.
Non-registered Shareholders
Non-registered Shareholders who have received the Documents from their Intermediary should, other than as set out herein, follow the directions of their Intermediary with respect to the procedure to be followed for voting at the Meeting. Generally, Non-registered Shareholders will either:
| · | be provided with a form of proxy executed by the Intermediary but otherwise uncompleted. The Non-registered Shareholder may complete the proxy and return it directly to Continental; or |
| · | be provided with a request for voting instructions. The Intermediary is required to send the Corporation an executed form of proxy completed in accordance with any voting instructions received by the Intermediary. |
If you are a Non-registered Shareholder, and the Corporation or its agent has sent these materials directly to you, your name and address and information about your holdings of securities have been obtained from your Intermediary in accordance with applicable securities regulatory requirements. By choosing to send the Documents to you directly, the Corporation (and not your Intermediary) has assumed responsibility for (i) delivering the Documents to you and (ii) executing your proper voting instructions. Please return your voting instructions as specified in the request for voting instructions.
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Participating in the Meeting
The Meeting will be hosted online by way of a live audiocast at https://www.cstproxy.com/akandacorp/2022. Shareholders will not be able to attend the Meeting in person. The Meeting will begin at 11:00 a.m. (Toronto time) on Friday, June 24, 2022. See "Voting at the Meeting" for additional information regarding how to attend or vote at the Meeting.
Non-registered Shareholders who do not have a 12-digit control number will only be able to attend as a guest which allows such persons to listen to the Meeting, however, Non-registered Shareholders will not be able to vote or submit questions. If you are using a 12-digit control number to login to the Meeting and you accept the terms and conditions, you will be revoking any and all previously submitted proxies. However, in such a case, you will be provided the opportunity to vote by ballot on the matters put forth at the Meeting. If you DO NOT wish to revoke all previously submitted proxies, please log in as a guest.
If you are eligible to vote at the Meeting, it is important that you are connected to the internet at all times during the Meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the Meeting.
If you do not have internet capabilities, you can listen to the Meeting by dialing 1 800-450-7155 (toll-free) inside the United States or Canada or +1 857-999-9155 (standard rates apply) outside the United States or Canada. When prompted enter the conference ID #3703053#. Dial-in capabilities are listen only and Shareholders participating in the Meeting by phone will not be able to vote or enter questions during the Meeting.
Appointment of Proxyholders
The persons named in the enclosed Proxy (the "Management Designees") are directors and/or officers of the Corporation. SHAREHOLDERS HAVE THE RIGHT TO APPOINT A PERSON TO REPRESENT HIM, HER OR IT AT THE MEETING OTHER THAN THE PERSONS DESIGNATED IN THE PROXY INSTRUMENT either by striking out the names of the persons designated in the Proxy and by inserting the name of the person or company to be appointed in the space provided in the Proxy or by completing another proper form of proxy.
Shareholders who wish to appoint a third party proxyholder to represent them at the Meeting must submit their Proxy or voting instruction form (if applicable) prior to registering their proxyholder. Registering a proxyholder is an additional step once the Proxy or voting instruction form has been submitted. Failure to register the proxyholder will result in the proxyholder not receiving a username to participate in the Meeting. To register a proxyholder, shareholders MUST send an email containing their form of proxy no later than 11:00 a.m. (Toronto time) on June 21, 2022 to proxy@continentalstock.com and provide Continental with their proxyholder's contact information, amount of shares appointed, name in which the shares are registered if they are a registered shareholder, or name of broker where the shares are held if a beneficial shareholder, so that Continental may provide the proxyholder with a control number via email.
A Proxy can be submitted to Continental either in person, or by mail or courier, to Continental Stock Transfer & Trust Company, Proxy Services, Suite SC-1, 1 State Street, New York, NY, USA 10004. The Proxy must be deposited with Continental by no later than 11:00 a.m. (Toronto time) on June 22, 2022 or, if the Meeting is adjourned or postponed, at least 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Ontario) before the beginning of any adjournment(s) or postponement(s) to the Meeting. If a Shareholder who has submitted a Proxy attends the Meeting and has accepted the terms and conditions when entering the Meeting, any votes cast by such Shareholder on a ballot will be counted and the submitted Proxy will be disregarded.
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Without a control number, proxyholders will not be able to vote at the Meeting.
Revocation of Proxy
A Registered Shareholder who has given a proxy pursuant to this solicitation may revoke it at any time up to and including the last business day preceding the day of the Meeting or any adjournment(s) or postponement(s) thereof at which the proxy is to be used:
| (a) | by an instrument in writing executed by the Shareholder or by his, her or its attorney authorized in writing and either delivered to the attention of the Corporate Secretary of the Corporation c/o Continental Stock Transfer & Trust Company, Proxy Services, Suite SC-1, 1 State Street, New York, NY, USA 10004; |
| (b) | by delivering written notice of such revocation to the chair of the Meeting prior to the commencement of the Meeting on the day of the Meeting or any adjournment(s) or postponement(s) thereof; |
| (c) | by attending the Meeting and voting the Common Shares; or |
| (d) | in any other manner permitted by law. |
Non-registered Shareholders who wish to change their vote must contact their Intermediary to discuss their options well in advance of the Meeting.
Voting of Proxies and Discretion Thereof
Common Shares represented by properly executed proxies in favour of persons designated in the printed portion of the enclosed Proxy WILL, UNLESS OTHERWISE INDICATED, BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE RE-APPOINTMENT OF BF BORGERS CPA PC, AS THE AUDITORS OF THE CORPORATION AND FOR THE AUTHORIZATION OF THE BOARD TO FIX THE AUDITORS' REMUNERATION AND TERMS OF ENGAGEMENT. The Common Shares represented by the Proxy will be voted or withheld from voting in accordance with the instructions of the Shareholder on any ballot that may be called for and, if the Shareholder specifies a choice with respect to any matter to be acted upon, the Common Shares will be voted accordingly. The enclosed Proxy confers discretionary authority on the persons named therein with respect to amendments or variations to matters identified in the Notice or other matters which may properly come before the Meeting. At the date of this Information Circular, management knows of no such amendments, variations or other matters to come before the Meeting. However, if other matters properly come before the Meeting, it is the intention of the persons named in the enclosed Proxy to vote such proxy according to their best judgment.
VOTING SECURITIES AND RECORD DATE
The voting securities of the Corporation consist of an unlimited number of common shares (the "Common Shares") and an unlimited number of preferred shares (the "Preferred Shares"). As of the Record Date, the Corporation had issued and outstanding 30,809,026 Common Shares and nil Preferred Shares.
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Pursuant to the by-laws of the Corporation, a quorum for the transaction of business at the Meeting shall be not less than two person holding or representing by proxy not less than 10% of the votes attached to all shares entitled to be voted at the Meeting.
The close of business on June 6, 2022 will act as the record date (the "Record Date") for the determination of Shareholders entitled to receive notice of the Meeting and any adjournment(s) or postponement(s) thereof. Accordingly, only Shareholders of record on the Record Date are entitled to vote at the Meeting or any adjournment(s) thereof.
The registered holders of Common Shares are shown on the list of Shareholders which is available for inspection during usual business hours at Continental Stock Transfer & Trust Company, Suite SC-1, 1 State Street, New York, NY, USA 10004 and at the Meeting. The list of Shareholders will be prepared not later than ten days after the Record Date. If a person has acquired ownership of shares since that date, he, she or it may establish such ownership and demand, not later than ten days before the Meeting, that his, her or its name be included in the list of Shareholders.
PARTICULARS OF MATTERS TO BE ACTED UPON
Presentation of Financial Statements
The audited consolidated financial statements of the Corporation for the year ended December 31, 2021, together with the auditors' report thereon and the related management's discussion and analysis (the "MD&A"), will be presented to the Shareholders at the Meeting or any adjournment(s) or postponement(s) thereof for their consideration.
Election of Directors
The articles of the Corporation require a minimum of one and a maximum of ten directors of the Corporation. There are currently seven directors of the Corporation. At the Meeting, it is proposed that all seven directors currently serving on the board of directors (the "Board") are to be re-elected. The present term of office of each current director of the Corporation will expire at the Meeting.
At the Meeting, management proposes to nominate the following persons for election to the Board: Louisa Mojela, Tejinder Virk, Philip van den Berg, Charles Kié, Gugu Dingaan, Gila Jones and Bridget Baker each to serve as a director of the Corporation until the next meeting of Shareholders at which the election of directors is considered, or until his or her successor is duly elected or appointed, unless he or she resigns, is removed or becomes disqualified in accordance with the articles of the Corporation or the Business Corporations Act (Ontario) (the "Act"). The persons named in the accompanying form of Proxy intend to vote for the election of such persons at the Meeting, unless otherwise directed. Management does not contemplate that any of the nominees will be unable to serve as a director of the Corporation.
The biographies of the proposed nominees for directors are set out below.
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Louisa Mojela | Ms. Mojela has served as the Executive Chairman and a director of Akanda since July 2021, and has served as the Executive Chairman and a director of Bophelo Bio Science and Wellness (Pty) Ltd. since June 2018. In addition, Ms. Mojela served as Chairman of the board of directors of Halo Collective Inc. ("Halo") from July 2020 to July 2021. Ms. Mojela is one of Southern Africa's most influential and successful business leaders. Ms. Mojela is the Group Chief Executive Officer of Wiphold (Women Investment Portfolio Holdings), one of the largest African-based ESG funds to empower black African women, which she co-founded in 1994. She has led capital raises and held directorships at companies such as Sasol Mining (a subsidiary of Sasol Holdings listed on the New York Exchange), Distell, Ixia Coal, South African Airways, Ericsson SA, Adcorp, and Sun International, amongst others. In addition to her business dealings, Ms. Mojela is focused on various social development initiatives in the Kingdom of Lesotho in line with the Sustainable Development Goals of the Government of Lesotho. She has received numerous accolades for her leadership. Among these, in 2000 she was selected as one of 40 women for the "Leading Women Entrepreneur of the World"; in 2015 she was named one of three "Business Women of the Year — Southern Africa" at the All Africa Business Leaders Awards in partnership with CNBC Africa; and in 2016, she won the European Business Assembly's "Best Manager of the Year" award at an event held in Switzerland. Ms. Mojela received a Bachelor of Commerce from the National University of Lesotho and also completed the Executive Leadership Program at Wharton School of Business at the University of Pennsylvania.
Tejinder Virk | Mr. Virk has served as Akanda's Chief Executive Officer and director since July 2021. Prior to Akanda, Mr. Virk served as the President and Managing Director (Europe) of Khiron Life Sciences (TSX-V: KHRN) (OTC: KHRNF) ("Khiron") from October 2019 to June 2021, where he was responsible for establishing Khiron's medical and consumer packaged goods business in the region. Prior to Khiron, Mr. Virk was Managing Director (Europe) for Canopy Growth Corporation (NASDAQ: CGC) (TSE: WEED) ("Canopy") from January 2019 to September 2019, where he was responsible for driving the multinational expansion of Canopy's European operations. Working with top research doctors in the United Kingdom, Spain, and Germany, he has overseen the launch of multiple medical cannabis products in Europe, including flower for inhalation and oils. Prior to Canopy, Mr. Virk served as the Managing Director of BMO Financial Group (NYSE: BMO) Investment Banking group from June 2004 to December 2018. In that role, Mr. Virk gained extensive cannabis sector M&A experience and has transacted on numerous IPOs and follow-on capital raises for global cannabis companies, including Canopy and Tilray (NASDAQ: TLRY). Mr. Virk received a Bachelor of Applied Science (BASc) in Systems Design Engineering with an Option in Management Sciences from the University of Waterloo in 2004.
Philip van den Berg | Mr. van den Berg has served as a director of Akanda since July 2021. Mr. van den Berg served as a director and Chief Financial Officer of Halo from July 2018 until April 2022 and is currently the Chief Executive Officer of Halo Tek Inc. Prior to Halo, Mr. van den Berg has served as the Chief Financial Officer of Namaste Technologies Inc. from October 2016 to June 2018 and as the Chief Financial Officer of Golden Leaf Holdings from October 2015 to March 2016. Mr. van den Berg has an extensive 30-year career in finance, principally in the equities divisions at Goldman Sachs and Deutsche Morgan Grenfell in London, as well as on the buy-side as co-founder of both Olympus Capital Management, one of the first European hedge funds and Taler Asset Management, a wealth management company based in Gibraltar. Mr. van den Berg earned a Master's degree in Economics from the University of Amsterdam in 1987.
Charles Kié | Mr. Kié has served as a director of Akanda since August 2021. In addition, Mr. Kié served as a director of Halo from October 2020 to July 2021. Mr. Kié has served as the co-founder and Chief Executive Officer of New African Capital Partners and SBNA since October 2018 and March 2021, respectively. Mr. Kié has also served as the Managing Partner of Genesis Capital since September 2018. From January 2016 to September 2018, Mr. Kié was the Chief Executive Officer of Ecobank Nigeria, the largest affiliate of the Ecobank Group, where he led its turnaround. Throughout his career, Mr. Kié pioneered milestone transactions on the capital markets, in infrastructure finance and trade finance in West and Central Africa, and as such, brings a wealth of financial and operational expertise to Akanda. Mr. Kié also currently serves as a non-executive board member at Empower Families for Innovative Philanthropy (ERFIP) — Edmond de Rothschild Foundations — Switzerland. Mr. Kié is a graduate of the Harvard Business School Advanced Management Program in 2011. Mr. Kié holds an MBA from New York University (Stern), HEC Paris and London School of Economics, as well as post-graduate degree in Corporate Restructuring from the University of Clermont Ferrand. Mr. Kié received his bachelor's degree from Ecole Supérieure de Commerce d'Abidjan in 1987.
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Gila Jones | Ms. Jones has served as a director of Akanda since February 2022. Ms. Jones is currently the Chief Operating Officer (2019 to present) at Westbrook Global Inc., a media company founded by Will and Jada Pinkett-Smith to develop, sell, produce, and market premium content for global streamers and studios. Prior to her appointment at Westbrook Global Inc., Ms. Jones was the Chief Operating Officer of beauty retailer Violet Grey, a position she held between 2018 and 2019. As the Chief Operating Officer of Violet Grey, she oversaw finance, retail, supply chain, and human resources functions. Between 2012 and 2018, Ms. Jones served as general counsel of fashion brand James Perse in a multifaceted role leading all legal and compliance matters (including corporate transactions, contracting, litigation and government inquiries, labor and employment, data privacy, and intellectual property) and human resources. Ms. Jones also oversaw the company's global real estate and expansion strategy, spanning owned and operated stores in the U.S. and Mexico, domestic shop-in-shops, and international retail and wholesale licenses in the United Kingdom, Japan, Australia, and Canada. Ms. Jones is on the board of Beignet Box, a privately held quick service seller of beignet and coffee, and RootsRex, a real estate start-up seeking to create ownership opportunities for renters of its portfolio properties. Ms. Jones is a graduate of the New York University School of Law (J.D) as well as Harvard University (A.B).
Gugu Dingaan | Ms. Dingaan has served as a director of Akanda since February 2022. Ms. Dingaan is currently employed as an investment executive by Wipcapital (Pty) Ltd, which forms part of the WIPHOLD group. Ms. Dingaan has held this position since 2004. Ms. Dingaan's role as an investment executive at Wipcapital (Pty) Ltd entails developing WIPHOLD's strategy and managing and growing its investor portfolio, including the ongoing management of relationships with various investee companies and providing them with strategic direction. Ms. Dingaan has over 17 years of experience serving as a nonexecutive director, and a member of the audit and risk, nominating, remuneration, ethics and investment committees for a number of listed and unlisted companies. Ms. Dingaan has served as a director of the Distell Group (JSE: DGH) since 2005 and chairs their social and ethics committee and is also a member of their audit and risk committee, remuneration and nomination committee and investment committee. In addition, Ms. Dingaan has served as a director of Sasfin Bank Limited (JSE: SFN) since 2017 and is a member of their social and ethics committee and is a standing invitee to the meetings of their audit and risk committee, remuneration and nomination committee and investment committee. Since 2010, Ms. Dingaan also has served on the board of Sasol Mining (Pty) Ltd, a subsidiary of Sasol Ltd (NYSE: SSL and JSE: SOL) and has chaired the board of Ixia Coal (Pty) Ltd. From 2010 to 2019, Ms. Dingaan served as a director of SA Corporate Real Estate Ltd (JSE: SAC) and chaired its audit and risk committee, as well as its remuneration committee, in addition to serving as a member of its investment committee. Ms. Dingaan has also served as a director of ABB SA (Pty) Ltd between 2010 and 2019 and chaired its audit and risk committee. Ms. Dingaan also served as a director of Adcorp Group Limited (JSE: ADR) and served on its social and ethics committee and its investment committee. Following her appointment in 2004, Ms. Dingaan also serves as a director of Landis & Gyr (Pty) Ltd and chairs its social and ethics committee and is a member of its risk and finance committee. Ms. Dingaan is a chartered account by profession and holds a Bachelor of Commerce degree and a Post Graduate Diploma in Accounting from the University of Natal. M. Dingaan is also a graduate of the University of Stellenbosch's Executive Development Programme and INSEAD's Advanced Management Programme.
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Bridget Baker | Ms. Baker has served as a director of Akanda since February 2022. Ms. Baker is a valued strategic advisor, corporate board director, and executive strategist to media, entertainment, and technology companies. Ms. Baker has proven success and deep expertise in deal negotiation, subscriber growth, strategic partnerships, and diversity advocacy. Ms. Baker had a distinguished 23-year career at NBCUniversal where she was a co-founder of CNBC and the company's first president of TV Networks Distribution from 2006 - 2013. Ms. Baker was at the forefront of a wide range of strategic initiatives, from expanding coverage of the Olympic Games to creating Hulu. In 2019, Ms. Baker was the first woman named to the board of LiveOne Inc. (NASDAQ: LVO). From 2013 - 2018, Ms. Baker was the first and only woman to serve on the board of directors of General Communication Inc., Alaska's largest telecommunications company (NASDAQ: LBRDA). In 2016 Ms. Baker was nominated to the board of directors of Yahoo!
The persons named in the accompanying Proxy (if named and absent contrary directions) intend to vote the shares represented thereby FOR the election of each of the aforementioned named nominees unless otherwise instructed on a properly executed and validly deposited proxy. Management does not contemplate that any nominees named above will be unable to serve as a director but, if that should occur for any reason prior to the Meeting, the persons named in the enclosed form of proxy reserve the right to vote for another nominee at their discretion.
Appointment of Auditors
Shareholders will be requested to re-appoint BF Borgers CPA PC, as auditors of the Corporation to hold office until the next annual meeting of Shareholders, and to authorize the directors of the Corporation to fix the auditors' remuneration and the terms of their engagement.
The persons named in the accompanying Proxy (if named and absent contrary directions) intend to vote the shares represented thereby FOR the resolution appointing BF Borgers CPA PC as auditors of the Corporation for the ensuing year and to authorize the directors to fix BF Borgers CPA PC's remuneration.
OTHER BUSINESS
Management is not aware of any matters to come before the Meeting other than those set forth in this Information Circular. If any other matter properly comes before the Meeting, the persons named in the Proxy will vote the shares represented thereby in accordance with their best judgment on such matter.
ADDITIONAL INFORMATION
Financial information is provided in the Corporation's audited consolidated financial statements for the fiscal year ended December 31, 2021 and the MD&A. Shareholders who wish to obtain a copy of the financial statements of the Corporation and the MD&A should email a request to the Corporation at accounts@akandacorp.com, Attention: Financial Reporting.
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Exhibit 99.2
| AKANDA CORP. FOLD HERE • DO NOT SEPARATE • INSERT IN ENVELOPE PROVIDED Signature_____________________________ Signature, if held jointly___________________________________ Date_____________, 2022 Note: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as attorney, executor, administrator, trustee, guardian, or corporate officer, please give title as such. CONTROL NUMBER Please mark your votes like this X PROXY THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1 AND 2. FOLD HERE • DO NOT SEPARATE • INSERT IN ENVELOPE PROVIDED INTERNET – www.cstproxyvote.com Use the Internet to vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares. Vote at the Meeting – If you plan to attend the virtual online annual meeting, you will need your 12 digit control number to vote electronically at the annual meeting. To attend; https://www.cstproxy.com/akandacorp/2022 MOBILE VOTING On your Smartphone/Tablet, open the QR Reader and scan the below image. Once the voting site is displayed, enter your Control Number from the proxy card and vote your shares. MAIL – Mark, sign and date your proxy card and return it in the postage-paid envelope provided. YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY. IMMEDIATE - 24 Hours a Day, 7 Days a Week or by Mail Vote by Internet, Smartphone or Tablet - QUICK EASY Your Mobile or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card by mail. Votes submitted electronically over the Internet must be received by 11:59 p.m., Eastern Time, on June 22, 2022. PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY. 1. Election of Directors (1) Louisa Mojela (2) T ejinder Virk (3) Philip van den Berg (4) Charles Kié (5) Gugu Dingaan (6) Gila Jones (7) Bridget Baker FOR WITHHOLD 2. T o reappoint BF Borgers CPA PC as the auditors of the corporation for the ensuing year and to authorize the board of directors of the corporation to fix their remuneration and terms of engagement. FOR WITHHOLD |
| FOLD HERE • DO NOT SEPARATE • INSERT IN ENVELOPE PROVIDED AKANDA CORP. The undersigned appoints Tejinder Virk and Trevor Scott, or and each of them as proxies, each with the power to appoint his substitute, and authorizes each of them to represent and to vote, as designated on the reverse hereof, all of the common shares of Akanda Corp. held of record by the undersigned at the close of business on June 6, 2022 at the Annual Meeting of Shareholders of Akanda Corp. to be held on June 24, 2022, or at any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS INDICATED. IF NO CONTRARY INDICATION IS MADE, THE PROXY WILL BE VOTED IN FAVOR OF ELECTING THE SEVEN NOMINEES TO THE BOARD OF DIRECTORS AND IN FAVOR OF PROPOSAL 2, AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS NAMED AS PROXY HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING. THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT. EACH HOLDER HAS THE RIGHT TO APPOINT A PERSON, WHO NEED NOT BE A HOLDER, TO ATTEND AND REPRESENT HIM OR HER AT THE ANNUAL GENERAL AND SPECIAL MEETING. IF YOU WISH TO APPOINT A PERSON OTHER THAN THE PERSONS WHOSE NAMES ARE PRINTED HEREIN, PLEASE INSERT THE NAME OF YOUR CHOSEN PROXYHOLDER IN THE SPACE PROVIDED. THE SECURITIES REPRESENTED BY THIS PROXY WILL BE VOTED OR WITHHELD FROM VOTING, IN ACCORDANCE WITH THE INSTRUCTIONS OF THE HOLDER, ON ANY BALLOT THAT MAY BE CALLED FOR AND, IF THE HOLDER HAS SPECIFIED A CHOICE WITH RESPECT TO ANY MATTER TO BE ACTED ON, THE SECURITIES WILL BE VOTED ACCORDINGLY. (Continued and to be marked, dated and signed, on the other side) PROXY THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of Shareholders To view the 2022 Information Circular and to Attend the Annual Meeting, please go to: https://www.cstproxy.com/akandacorp/2022 |
Exhibit 99.3
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
Overview
Our fiscal year begins on January 1 and ends on December 31. Unless otherwise noted, references to year pertain to our fiscal year. For example, 2021 refers to fiscal 2021 which is the period from January 1, 2021 and to December 31, 2021.
Our Audited Financial Statements for the years ended December 31, 2021, 2020 and 2019, respectively, for Akanda Corp. as a group (the “Akanda Group”), have been prepared in accordance with International Financial Reporting Standards (IFRS) and are presented in millions of US dollars except where otherwise indicated. Our historical results are not necessarily indicative of the results that should be expected in any future period.
We have derived the consolidated statements of operations data for Akanda Group for the years ended December 31, 2021, 2020 and 2019, respectively and the consolidated financial position information as at December 31, 2021, 2020 and 2019, respectively, from the Akanda Group’s Audited Financial Statements included under Item 18 of this Annual Report on Form 20-F.
Akanda was incorporated in the Province of Ontario, Canada on July 16, 2021 in connection with the plan of Halo to reorganize its medical cannabis market focused international business assets. On November 3, 2021, Akanda acquired Cannahealth, which owned all the issued and outstanding equity interests of Canmart and Bophelo Holdings, which, in turn, owned all the issued and outstanding equity interests of Bophelo. As a result of the Acquisition, both Bophelo and Canmart became our indirect wholly-owned subsidiaries. We have consolidated all our subsidiary companies, Cannahealth Ltd. in Malta, Bophelo Holdings Ltd. in the UK, Canmart Ltd. in the UK and Bophelo Bio Science and Wellness Pty Ltd. in the Kingdom of Lesotho, in the Akanda Group Audited Financial Statements and financial information presented prior to July 16, 2021, the date of our inception and November 3, 2021, the date of the Acquisition, is that of our subsidiary companies. As Akanda was only incorporated in July 2021, comparative financial information for the financial years ending December 31, 2020 and 2019 only include the financial effect of Canmart, Bophelo Bio Science & Wellness and Cannahealth.
A. Operating Results
Results of Operations
The discussion below summarizes Akanda Group’s consolidated historical operation results.
On September 28, 2021, Halo entered into a share purchase agreement with Akanda in connection with the sale and purchase of its equity holding in Cannahealth. The agreement became unconditional on or around 3 November 2021 and the Acquisition was successfully completed.
Prior to the completion of the Acquisition, Halo completed an internal reorganization, pursuant to which Halo’s international assets in the UK & Lesotho namely Canmart Ltd, Bophelo Holdings Ltd and Bophelo Bio Science and Wellness (Pty) Ltd became, directly or indirectly, wholly owned subsidiaries of Cannahealth. As part of this internal reorganization, Bophelo Holdings Ltd acquired the claims held by Halo against the Company, as well 100% of the issued share capital of the Company from Halo. Bophelo Holdings Ltd, is in turn, a wholly owned subsidiary of Cannahealth. Following the completion of the internal reorganization and the successful closing of the Transaction, Akanda became the ultimate parent company of Bophelo Bio Science and Wellness (Pty) Ltd.
Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 and the Year Ended December 31, 2019.
The following table sets forth key components of Akanda’s results of operations for the years ended December 31, 2021 compared to the years ended December 31, 2020 and December 31, 2019.
| Year ended | ||||||||||||
| December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Sales | $ | 41,431 | $ | 2,062 | $ | — | ||||||
| Cost of sales | 43,022 | 1,809 | — | |||||||||
| Gross (Loss) Profit before loss on change in fair value biological assets | (1,591 | ) | 253 | — | ||||||||
| Loss on change in fair value of biological assets | (713,135 | ) | (58,429 | ) | — | |||||||
| Gross Loss | (714,726 | ) | (58,176 | ) | — | |||||||
| Operating expenses | ||||||||||||
| Depreciation and amortization | 309,022 | 248,743 | 198,824 | |||||||||
| Consulting and professional fees | 1,855,419 | 702,016 | 365,641 | |||||||||
| Personnel expenses | 2,379,649 | 374,900 | 100,256 | |||||||||
| Travel expenses | 65,667 | 50,636 | 56,851 | |||||||||
| General and administrative expenses | 1,504,172 | 229,743 | 179,663 | |||||||||
| License fees | 5,073 | 1,491 | — | |||||||||
| Total operating expenses | 6,119,002 | 1,607,529 | 901,235 | |||||||||
| Operating loss | (6,833,728 | ) | (1,665,705 | ) | (901,235 | ) | ||||||
| Other (expense) income: | ||||||||||||
| Finance income | 26,749 | 10,188 | 401 | |||||||||
| Finance expense | (1,092,881 | ) | (645,162 | ) | (493,807 | ) | ||||||
| Foreign exchange loss, net | (231,391 | ) | — | — | ||||||||
| Other income | 54 | 108 | — | |||||||||
| (1,297,469 | ) | (634,866 | ) | (493,406 | ) | |||||||
| Net loss | $ | (8,131,197 | ) | $ | (2,300,571 | ) | $ | (1,394,641 | ) | |||
| Translation adjustment | 110,042 | 150,626 | (42,566 | ) | ||||||||
| Comprehensive loss | $ | (8,021,155 | ) | $ | (2,149,945 | ) | $ | (1,437,207 | ) | |||
| Loss per share - basic and diluted | $ | (0.50 | ) | $ | (0.18 | ) | $ | (0.11 | ) | |||
| Weighted average common shares outstanding | 16,223,996 | 13,129,212 | 13,129,212 | |||||||||
Revenue
The revenue of $41,431 for the year ended December 31, 2021 as compared to $2,062 for 2020 came from Canmart Ltd. in the UK. There was however no revenue in 2019 as Canmart was newly incorporated in 2019 and did not have a full year of operation.. The revenue increase in 2021 is significant because due to more focus on ramping up of its operations by securing CBPM products from international suppliers in Canada, importing these products and applying additional efforts on expanding sales of these imported products to patients, through dispensing clinics and physicians. Canmart sold, during the current period, a variety of different CBPM product types, including cannabis oil and cannabis flower for medical use. Canmart has access to use a 30,000 square foot logistics warehouse in SE England. Canmart has obtained the necessary licenses to import CBPMs to supply the patients in the U.K. domestic market. Canmart is further focusing on tapping other international markets for the import of various CBPM products.
Cost of Sales
Cost of sales increased from $nil in 2019 to $1,809 in 2020 and $43,022 in 2021. The increase is directly related to the increase in sales activities during the 2021 year. This increase in sales represents the associated cost of CBPMs imported by Canmart and supplied to its patients. The increase is essentially commensurate with increased purchases and sales of CBPMs in the current period due to the fact that Canmart only commenced meaningful sales activity in the year ended December 31, 2021 compared to the low level of sales in the previous periods.
Loss on change in fair value of biological assets
The loss on change in fair value of biological assets was recognized in Bophelo Bio Science & Wellness Pty Ltd. This is because of the fact that there is huge certainty around selling of the harvested produce both locally and for export. The fair value of the biological assets was determined based on the most recent available evidence for the selling price of similar biological assets. The valuation was done by an independent valuator considering the selling price available for cannabis biomass in Lesotho and the historical cost paid by the company for the cannabis seeds. The loss increased from $nil in 2019 and $nil in 2020 to $693,572 in 2021 and it has the effect of writing down the value of the biological assets to nil as at the end of December 31, 2021.
Amortization and Depreciation
Amortization and depreciation expenses increased from $198,824 for 2019 and $248,743 for 2020 to $309,022 for the year ended December 31, 2021. The increase in the amortization and depreciation expenses recorded during the year ended December 31, 2021 was due to depreciation charges on additional items of property, plant and equipment that were acquired and brought into use during 2021. Amortization and depreciation charges for the year ended December 31, 2021 were a result of additional amortization and depreciation on intangible assets (the Company’s cannabis operating license) and property, plant and equipment that was in place at January 1, 2021 as well due to additional depreciation on new additions to property, plant and equipment that took place during the year ended December 31, 2021.
Consulting and Professional Fees
The consulting and professional fees incurred increased from $365,641 in 2019 and $702,016 in 2020 to $1,855,419 for the year ended December 31, 2021. This increase in consulting and professional fees resulted from the increased operations in the Kingdom of Lesotho, and increased corporate activity around completion of the internal reorganization undertaken by Halo as a precursor to the Acquisition, as well as due to the engagement of various professional advisors in relation to Akanda Group’s plans for an initial public offering and listing. During the year ended December 31, 2021, Bophelo incurred $ 642,997 in consulting and professional fees, primarily due to an increase in consulting fees related to the management and administration of Bophelo’s business and operations in the Kingdom of Lesotho as a result of increased operational activity during the year ended December 31, 2021.
Personnel Expenses
The group incurred personnel expenses of $2,379,649 for the year ended December 31, 2021 compared to $374,900 and $100,256 for 2020 and 2019, respectively. The increase in personnel expenses was due to increased operational staff for Bophelo’s cultivation operations in the Kingdom of Lesotho. Additional staff were hired due to a ramp-up of cultivational activities as well as site build-out activities. Furthermore, Halo seconded several senior cultivation staff members to Bophelo in order to assist with the set-up of operations. For the year ended December 31, 2021, Bophelo experienced a significant increase in personnel expenses amounting to $ 1,255,056, compared with $374,900 for 2020 and $100,256 primarily due to a large number of casual waged workers being hired to assist with the build out of Bophelo’s new shade cloth cultivation areas, as well to assist with other site build out activities relating to general infrastructure needed on the site. Canmart also experienced significant increase in the personnel expenses due to the hiring of executives and management during June and July 2021, including Akanda’s executive team who are employed by Canmart that came to around $938,433 in 2021.
General and Administration Expenses
The group incurred general and administration expenses of $1,504,172, $229,743 and $179,663 for the years ended December 31, 2021 2020 and 2019, respectively. These costs consisted mainly of a broad range of site related operational expenses such as utilities, fuel costs, import duties, security expenses, repairs and maintenance and consumables. These costs increased compared to the prior period mainly due to increased activity on site as the ramp up of the facility continues. The year-on-year increase is mainly due to increased operational expenditure, most notably consumables costs (which increased from $ 60,057 in 2019, $63,859 in 2020 to $641,098 in 2021), resulting from the uplift in site activity and the increased planting and harvesting activity of noncommercial cannabis crops as well as due to increased infrastructure build out.
Interest Expense
The group incurred interest expense of $1,092,881 for the year ended December 31, 2021 compared to interest expense of $645,162 for 2020 and $493,807 for 2019. The increase in interest expense was primarily due to the interest expense unwind relating to the lease liability that was recognized on inception of the lease of Bophelo’s premises in T’sakohlo in April 2019. Interest expense implicit in the lease were compounded by the fact that Bophelo did not make lease payments under the lease until the mid of 2021.
Interest income
Interest income for the year ended December 31, 2021 was $26,749 compared to $10,188 for 2020 and $401 for 2019. This increase was related to interest received during the 2021 year as a result of Bophelo experiencing increased average cash balances throughout the year.
Foreign Currency Translation
The foreign exchange gain/(loss) is recognized on the translation of the financial statements from their functional currencies to United States Dollar. The Lesotho Loti is the functional currency of Bophelo, Great British Pounds is the functional currency of Canmart and Canadian dollars is the functional currency of Akanda while the United States Dollar is its reporting currency. The exchange gains and losses have not been incurred on any transactions or balances held by these companies in a different currency.
Net Loss and Total Comprehensive Loss
For the years ended December 31, 2021, 2020 and 2019, respectively, the group incurred a net loss of $8,131,197, $2,300,571 and $1,394,641, respectively, and a comprehensive loss of $8,021,155, $2,149,945 and $1,437,207, respectively, which consisted primarily of consulting and professional fee expenses of $1,855,419, $702,016 and $365,641, respectively, personnel expenses of $2,379,649, $374,900, $100,256, respectively, and general and administrative expenses of $1,504,172, $229,743 and $179,663, respectively. The increase in losses for the year ended December 31, 2021 compared to 2020 and 2019 is due to increased expenses relating to an uptake in operational and cultivating activities during the year ended December 31, 2021, mainly as result of the build out of the shade cloth cultivation facility and other site ramp up and build out activities. Additionally, the increase in the expenses was also due to the corporate activity carried out on the Halo restructuring and Akanda’s IPO.
Off-Balance Sheet Arrangements
Akanda did not have, during the reporting period, and we do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditure or capital resources that is material to investors.
B. Liquidity and Capital Resources
Cash Flows
The Akanda Group’s principal liquidity requirements are for corporate operating expenses, working capital and capital expenditures. Historically, and prior to the Initial Public Offering, we have funded our liquidity requirements primarily through shareholder loans and cash on hand which is from the issuance of shares. We did not have, during the reporting period, and we do not currently have any contractual obligations for ongoing capital expenditures.
The following table summarizes our cash flows from operating, investing and financing activities for the years ended December 31, 2021, 2020 and 2019:
| Year Ended | ||||||||||||
| December 31, 2021 | ||||||||||||
| 2021 | Change | 2020 | ||||||||||
| Cash used by operating activities | $ | (6,557,062 | ) | $ | (5,204,594 | ) | $ | (1,352,468 | ) | |||
| Cash used in investing activities | $ | (576,472 | ) | $ | (144,269 | ) | $ | (432,203 | ) | |||
| Cash provided by financing activities | $ | 11,235,691 | $ | 10,202,206 | $ | 1,033,485 | ||||||
| Year Ended | ||||||||||||
| December 31, 2020 | ||||||||||||
| 2020 | Change | 2019 | ||||||||||
| Cash used by operating activities | $ | (1,352,468 | ) | $ | (710,140 | ) | $ | (642,328 | ) | |||
| Cash used in investing activities | $ | (432,203 | ) | $ | 260,567 | $ | (692,770 | ) | ||||
| Cash provided by financing activities | $ | 1,033,485 | $ | (1,082,827 | ) | $ | 2,116,312 | |||||
Cash Flows from Operating Activities
For the year ended December 31, 2021, Akanda’s cash flow from operating activities increased by $5,204,594 due to increased operating expenses at Bophelo due to a ramp of up of activity on site, as well as due to corporate expenses incurred as a result of corporate activity, such as the formation of Akanda Corp., the acquisition of Cannahealth (and its subsidiaries) from Halo and the Initial Public Offering and listing of the Company. Working capital investment decreased as a result of an increase in accounts payable relating to accrued legal, consulting and audit fees.
Cash Flows from Financing Activities
Share Capital and Seed Financing
During the year ended December 31, 2021, Akanda issued a total of 22,231,318 common shares with an associated share capital value of $20,891,213. Shortly after the formation of Akanda on July 16, 2021, Akanda issued a total of 5,626,805 Common Shares at a price of $0.0000001 each to Louisa Mojela (1,875,602 Common Shares), Tejinder Virk (1,875,602 Common Shares) and Raj Beri (includes 844,021 Common Shares held of record at December 31, 2021 by ERB Investment Holdings, LLC and 937,801 Common Shares held of record at December 31, 2021 by S&G Holdings, Ltd. Both ERB Investment Holdings, LLC and S&G Holdings, Ltd. are wholly owned and controlled by Raj Beri). On August 26, 2021, the Company sold 468,900 Common Shares to an accredited investor at a subscription price of $0.53 and received $250,000 in gross proceeds in a private placement in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder. Boustead Securities, LLC served as the placement agent for the Seed Financing and waived any commission for this transaction. On November 10, 2021, Akanda issued 880,000 common shares to Louisa Mojela to settle an outstanding loan of $2,200,000 that was payable to Louisa Mojela by Bophelo Bio Science and Wellness (Pty) Ltd. On 12 November 2021, Akanda issued 2,126,400 common shares (with an associated share capital value of $5,312,000) to investors pursuant to a private placement.
Subsequent to the year ended December 31, 2021, Akanda completed its initial public offering of 4,000,000 common shares at a price of $4.00 per share to the public for a total of $16,000,000 of gross proceeds to Akanda, prior to deducting underwriting discounts, commissions, and other offering expenses on March 17, 2022. The common shares began trading on The Nasdaq Capital Market on March 15, 2022, under the symbol “AKAN.” Akanda intends to use the proceeds from the initial public offering primarily for property, plant and equipment, operations, working capital and general corporate purposes.
Short Term Loan
During year ended December 31, 2021, Akanda received additional loans in the amount of $6,679,135 for its capital as well as working capital needs.
Disclosure of Contractual Arrangements
On December 31, 2021, Akanda Group was committed to minimum lease payments as follows:
| Less | ||||||||||||
| than | ||||||||||||
| One | 1 – 5 | Over 5 | ||||||||||
| Contractual Obligation | Year | Years | Years | |||||||||
| Land lease | $ | 108,628 | $ | 1,042,832 | $ | 3,193,669 | ||||||
The amounts above are undiscounted and include the total amounts due, including the interest component.
On December 31, 2020, Akanda Group was committed to minimum lease payments as follows:
| Less | ||||||||||||
| than | ||||||||||||
| One | 1 – 5 | Over 5 | ||||||||||
| Contractual Obligation | Year | Years | Years | |||||||||
| Land lease | $ | 283,976 | $ | 1,254,226 | $ | 3,762,677 | ||||||
C. Research and Development, Patents and Licenses
Not applicable.
D. Trend Information
Because we are still in the startup phase and have only recently commenced operations, we are unable to identify any recent trends in revenue or expenses. Thus, we are unable to identify any known trends, uncertainties, demands, commitments or events involving our business that are reasonably likely to have a material effect on our revenues, income from operations, profitability, liquidity or capital resources, or that would cause the reported financial information in this prospectus to not be indicative of future operating results or financial condition.
E. Critical Accounting Policies and Estimates
Please refer to Note 4 of Akanda Group’s audited financial statements included in Item 18 of this Annual Report on Form 20-F.
Exhibit 99.4
Index to Financial Statements
Akanda Corp.
| Page | |
| Independent Auditor’s Report | F-2 |
| Audited consolidated Financial Statements: | |
| Consolidated Statement of Financial Position as at December 31, 2021 and December 31, 2020 | F-3 |
| Consolidated Statement of Operations for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 | F-4 |
| Consolidated Statement of Changes in Shareholders’ Equity as at December 31, 2021 and December 31, 2020 | F-5 |
| Consolidated Statement of Cash Flows for the years ended December 31, 2021, December 31, 2020, and December 31, 2019 | F-6 |
| Notes to the Consolidated Financial Statements | F-7 |
F-1
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Akanda Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Akanda Corp. (the “Company”), as of December 31, 2021 and 2020, the related consolidated statements of comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for the years then ended, and related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with the International Financial Reporting Standards as issued by the International Accounting Standards Board.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
Served as Auditor since 2021
Lakewood, CO
May 2, 2022
PCAOB ID Number 5041
F-2
|
Akanda Corp. Consolidated Statements of Financial Position (Expressed in United States Dollars) |
||
| Note | December 31, 2021 | December 31, 2020 | ||||||||||
| ASSETS | ||||||||||||
| Current | ||||||||||||
| Cash | $ | 3,495,390 | $ | 13,504 | ||||||||
| Trade and other receivables | 4 | 242,357 | — | |||||||||
| Prepayments | 242,529 | 113,485 | ||||||||||
| Inventory | 5 | — | 611 | |||||||||
| Total Current Assets | 3,980,276 | 127,600 | ||||||||||
| Non-Current | ||||||||||||
| Property, plant and equipment | 6 | 1,897,748 | 1,626,032 | |||||||||
| Right-of-use assets | 7 | 1,908,877 | 2,199,779 | |||||||||
| Intangible assets | 8 | 259,102 | 321,406 | |||||||||
| Total Non-Current assets | 4,065,727 | 4,147,217 | ||||||||||
| Total Assets | $ | 8,046,003 | $ | 4,274,817 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||||||
| Current | ||||||||||||
| Trade and other payables | $ | 680,328 | $ | 183,895 | ||||||||
| Lease liability | 9 | 439,709 | 283,976 | |||||||||
| Loans and borrowings | 10 | 432,201 | 2,263,605 | |||||||||
| Secured convertible debenture | 13 | 6,716,190 | — | |||||||||
| Total Current Liabilities | 8,268,428 | 2,731,476 | ||||||||||
| Non-Current | ||||||||||||
| Lease liability | 9 | 1,978,997 | 2,598,176 | |||||||||
| Loans and borrowings | 10 | — | 3,977,108 | |||||||||
| Total Non-Current Liabilities | 1,978,997 | 6,575,284 | ||||||||||
| Total liabilities | 10,247,425 | 9,306,760 | ||||||||||
| Shareholders’ Deficit | ||||||||||||
| Share Capital | 11 | 7,255,695 | 1,636 | |||||||||
| Other reserves | 11 | 3,618,670 | 21,053 | |||||||||
| Accumulated deficit | (13,293,889 | ) | (5,162,692 | ) | ||||||||
| Accumulated other comprehensive income | 218,102 | 108,060 | ||||||||||
| Total Shareholders’ Deficit | (2,201,422 | ) | (5,031,943 | ) | ||||||||
| Total Liabilities and Shareholders’ Deficit | $ | 8,046,003 | $ | 4,274,817 | ||||||||
| Subsequent events | 19 | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Akanda Corp
Consolidated Statements of
Loss and Comprehensive Loss
(Expressed in United States Dollars)
| Year ended December 31, | ||||||||||||||||
| Note | 2021 | 2020 | 2019 | |||||||||||||
| Sales | $ | 41,431 | $ | 2,062 | $ | — | ||||||||||
| Cost of sales | 43,022 | 1,809 | — | |||||||||||||
| Gross (Loss) Profit before loss on change in fair value biological assets | (1,591 | ) | 253 | — | ||||||||||||
| Loss on change in fair value of biological assets | 5 | (713,135 | ) | (58,429 | ) | — | ||||||||||
| Gross Loss | (714,726 | ) | (58,176 | ) | — | |||||||||||
| Operating expenses | ||||||||||||||||
| Depreciation and amortization | 7, 8 | 309,022 | 248,743 | 198,824 | ||||||||||||
| Consulting and professional fees | 1,855,419 | 702,016 | 365,641 | |||||||||||||
| Personnel expenses | 2,379,649 | 374,900 | 100,256 | |||||||||||||
| Travel expenses | 65,667 | 50,636 | 56,851 | |||||||||||||
| General and administrative expenses | 1,504,172 | 229,743 | 179,663 | |||||||||||||
| License fees | 5,073 | 1,491 | — | |||||||||||||
| Total operating expenses | 6,119,002 | 1,607,529 | 901,235 | |||||||||||||
| Operating loss | (6,833,728 | ) | (1,665,705 | ) | (901,235 | ) | ||||||||||
| Other (expense) income: | ||||||||||||||||
| Finance income | 26,749 | 10,188 | 401 | |||||||||||||
| Finance expense | (1,092,881 | ) | (645,162 | ) | (493,807 | ) | ||||||||||
| Foreign exchange loss, net | (231,391 | ) | — | — | ||||||||||||
| Other income | 54 | 108 | — | |||||||||||||
| (1,297,469 | ) | (634,866 | ) | (493,406 | ) | |||||||||||
| Net loss | $ | (8,131,197 | ) | $ | (2,300,571 | ) | $ | (1,394,641 | ) | |||||||
| Translation adjustment | 110,042 | 150,626 | (42,566 | ) | ||||||||||||
| Comprehensive loss | $ | (8,021,155 | ) | $ | (2,149,945 | ) | $ | (1,437,207 | ) | |||||||
| Loss per share - basic and diluted | 11 | $ | (0.50 | ) | $ | (0.18 | ) | $ | (0.11 | ) | ||||||
| Weighted average common shares outstanding | 11 | 16,223,996 | 13,129,212 | 13,129,212 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Akanda Corp.
Consolidated Statements of
Shareholders’ Deficit
(Expressed in United States Dollars)
| Note | Share capital | Other reserves | Accumulated deficit | Accumulated Other comprehensive loss | Total | |||||||||||||||||||
| Balance, December 31, 2018 | $ | 10 | $ | — | $ | (1,467,480 | ) | $ | — | $ | (1,467,470 | ) | ||||||||||||
| Effective of change in par value | (7 | ) | 7 | — | — | — | ||||||||||||||||||
| Share issuance | 11 | 156 | — | — | — | 156 | ||||||||||||||||||
| Net loss | — | — | (1,394,641 | ) | — | (1,394,641 | ) | |||||||||||||||||
| Translation adjustment | — | — | — | (42,566 | ) | (42,566 | ) | |||||||||||||||||
| Balance, December 31, 2019 | $ | 159 | $ | 7 | $ | (2,862,121 | ) | $ | (42,566 | ) | $ | (2,904,521 | ) | |||||||||||
| Balance, December 31, 2019 | $ | 159 | $ | 7 | $ | (2,862,121 | ) | $ | (42,566 | ) | $ | (2,904,521 | ) | |||||||||||
| Share issuance | 11 | 1,477 | — | — | — | 1,477 | ||||||||||||||||||
| Contribution to reserves by owners of the Company | — | 21,046 | — | — | 21,046 | |||||||||||||||||||
| Net loss | — | — | (2,300,571 | ) | — | (2,300,571 | ) | |||||||||||||||||
| Translation adjustment | — | — | — | 150,626 | 150,626 | |||||||||||||||||||
| Balance, December 31, 2020 | $ | 1,636 | $ | 21,053 | $ | (5,162,692 | ) | $ | 108,060 | $ | (5,031,943 | ) | ||||||||||||
| Balance, December 31, 2020 | $ | 159 | $ | 21,053 | $ | (5,162,692 | ) | $ | 108,060 | $ | (5,031,943 | ) | ||||||||||||
| Recapitalization | 1, 11 | — | 3,597,617 | — | — | 35,977 | ||||||||||||||||||
| Issuance of shares for cash, net of costs | 11 | 5,054,059 | — | — | — | 5,054,059 | ||||||||||||||||||
| Shares for debt | 10, 11 | 2,200,000 | — | — | — | 2,200,000 | ||||||||||||||||||
| Net loss | — | — | (8,131,197 | ) | — | (8,131,197 | ) | |||||||||||||||||
| Translation adjustment | — | — | — | 110,042 | 110,042 | |||||||||||||||||||
| Balance, December 31, 2021 | $ | 7,255,695 | $ | 3,618,670 | $ | (13,293,889 | ) | $ | 218,102 | $ | (2,201,422 | ) | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Akanda Corp.
Consolidated Statements of Cash Flows
(Expressed in United States Dollars)
| Year ended December 31, | ||||||||||||||||
| Note | 2021 | 2020 | 2019 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | $ | (8,131,197 | ) | $ | (2,300,571 | ) | $ | (1,394,641 | ) | |||||||
| Adjustments for non-cash items: | ||||||||||||||||
| Depreciation and amortization | 6,7,8 | 309,022 | 248,743 | 198,824 | ||||||||||||
| Change in fair value of biological assets | 5 | 713,135 | — | — | ||||||||||||
| Interest expenses | 1,139,475 | 645,162 | 493,807 | |||||||||||||
| Write-off of property, plant and equipment | — | 23,748 | — | |||||||||||||
| Working capital adjustments: | ||||||||||||||||
| Trade and other receivables | (242,357 | ) | — | — | ||||||||||||
| Prepayments | (129,044 | ) | (113,175 | ) | (310 | ) | ||||||||||
| Inventory | (712,524 | ) | (611 | ) | — | |||||||||||
| Trade and other payables | — | 140,897 | 42,285 | |||||||||||||
| Other current liabilities | 496,428 | — | — | |||||||||||||
| Increase in due to related parties | — | 3,339 | 17,707 | |||||||||||||
| Cash flows used in operating activities | (6,557,062 | ) | (1,352,468 | ) | (642,328 | ) | ||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Additions to property, plant and equipment | 6 | (576,472 | ) | (439,137 | ) | (670,297 | ) | |||||||||
| Proceeds from advances issued | — | 6,934 | (6,848 | ) | ||||||||||||
| Payments for acquisition of cannabis licenses | 8 | — | — | (15,625 | ) | |||||||||||
| (576,472 | ) | (432,203 | ) | (692,770 | ) | |||||||||||
| Cash flows used in investing activities | ||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds from share issue | 5,054,058 | 1,477 | — | |||||||||||||
| Loans received | 6,679,135 | 1,169,796 | 2,116,312 | |||||||||||||
| Loans repaid | — | (137,788 | ) | — | ||||||||||||
| Lease payments | (497,502 | ) | — | — | ||||||||||||
| Cash flows provided by financing activities | 11,235,691 | 1,033,485 | 2,116,312 | |||||||||||||
| Net increase (decrease) in cash and cash equivalents | 4,102,157 | (751,186 | ) | 781,214 | ||||||||||||
| Effects of exchange rate changes on cash and cash equivalents | (620,271 | ) | (54,873 | ) | 14,205 | |||||||||||
| Cash and cash equivalents at the beginning of the period | 13,504 | 819,563 | 24,144 | |||||||||||||
| Cash and cash equivalents at the end of the period | $ | 3,495,390 | $ | 13,504 | $ | 819,563 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Akanda Corp
Notes to the Consolidated
Financial Statements
(Expressed in United States Dollars)
| 1. | Nature of Operations and Going Concern |
Akanda Corp. (the “Company”) is domiciled in Canada and was incorporated on July 16, 2021. The Company’s registered office is 77 King Street West, Suite 400, Toronto-Dominion Centre, Toronto Canada, Ontario, M5K0A1.
The Company through its indirectly held subsidiary, Bophelo Bio Science and Wellness Pty Ltd. is in the business of cultivating and manufacturing cannabis biomass and medical cannabis products in Lesotho, for export to international markets. The Company is also in the business of sales and distribution of cannabis-based products for medical use, through its subsidiary Canmart Ltd which is based in the UK.
The Company was incorporated for the designed purpose of becoming the ultimate parent company of Cannahealth Ltd. (“Cannahealth”), through a reorganization of entities with common control. The share purchase agreement became unconditional on or about November 3, 2021 and the Company acquired the shares in the aforementioned entities from Halo Collective Inc. (“Halo”).
The Company’s consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
The Company is an early-stage company and is primarily dependent on externally provided financing to continue as a going concern. Additional funds will be required to enable the Company to pursue such an initiative and the Company may be unable to obtain such financing on satisfactory terms. Furthermore, there is no assurance that the Company will be profitable. Management intends to finance operating costs over the next twelve months with its cash on hand, and/or additional financing that has not currently been sought. These consolidated financial statements do not reflect any adjustments that may be necessary should the Company be unable to continue as a going concern, and such adjustments could be material.
During March 2020, the World Health Organization declared Covid-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.
| 2. | Basis of preparation |
| (a) | Statement of compliance |
These consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).
| (b) | Basis of preparation |
These consolidated financial statements have been prepared on an accrual basis except for the cash flow information and are based on the historical cost, modified where applicable and related to the valuation of certain financial assets and financial liabilities to fair value.
F-7
Cannahealth and its subsidiaries, Bophelo H, Bophelo, and Canmart (as later defined) were under the common control of Halo until the acquisition by the Company had occurred. As of November 2021, shareholdings in each of the four separate entities were made consistent through the issuance of shares or the repurchase of shares for cash to the relevant shareholders (the 'Reorganization Transactions'). As of November 2021, shareholdings in each of the four entities were identical. When the Company was formed in July 2021 with a view to ultimately acquiring Cannahealth and its subsidiaries, its majority shareholders were also consistent with each of the three existing entities. Therefore, immediately prior to the acquisition, the majority shareholder ownership of the Company and Cannahealth were demonstrated common control, and immediately after the acquisition, the shareholdings held in the Company by each individual shareholder were also identical.
The Company performed an assessment and determined Bophelo Bio Science & Wellness Pty Ltd to be the predecessor entity to the Company, and that the corporate restructuring in which Akanda became the parent company did not have economic substance. As such, in preparing the Company's consolidated financial statements, the Company accounted for the acquisition as a transaction between entities under common control combining the Company and Cannahealth from the earliest reporting date using the 'pooling of interests method' of accounting, where assets for the Companies that came under common control were transferred into the consolidated group at the book value on the date in which common control was achieved.
In the acquisition described above, shares were issued to existing shareholders for no consideration. Therefore, the number of shares outstanding was increased without an increase in resources. Therefore, the number of shares outstanding before the exchange have been adjusted for the change in shares as if the issuance had occurred at the beginning of the earliest period presented. All share and per share information presented herein has been retrospectively adjusted to give effect to the culmination of the reorganization and the issuance of shares on incorporation of Akanda on January 1, 2019.
| (c) | Functional and presentation currency |
These consolidated financial statements are prepared in United States Dollars (“USD”), which is the Company’s reporting currency. All financial information has been rounded to the nearest dollar except where indicated otherwise.
| (d) | Use of estimates and judgments |
The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates, judgements and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses during the period. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Areas in which management has made critical judgments in the process of applying accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements include the determination of the Company’s and its subsidiaries’ functional currencies. Information about key assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year are included in the following notes to the consolidated financial statements for the years ended December 31, 2021, 2020 and 2019:
| ● | Note 3(d): Estimates of variable consideration receivable from revenue from contracts with customers |
| ● | Note 3(f): Estimates of the net realizable value of the Company’s inventories |
| ● | Note 3(g): Estimates of the fair value of the Company’s biological assets |
| ● | Note 3(h): Measurement and useful lives of the Company’s property, plant and equipment |
| ● | Note 3(h): Measurement and useful lives of the Company’s intangible assets |
| ● | Note 3(k): Estimates and assessment of the income tax assets/liabilities |
| ● | Note 3(l): Estimates of the Company’s incremental borrowing rate used in the valuation of its leases |
F-8
| 3. | Significant accounting policies: |
| (a) | Basis of consolidation |
These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities that are controlled by the Company. Control exists when the Company has power over the investee and the Company is exposed or has the rights to variable returns from the investee. Subsidiaries are included in the consolidated financial results of the Company from the effective date of acquisition up to the effective date of disposition or loss of control. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent account policies. All intercompany transactions and balances and unrealized gains and losses from intercompany transactions have been eliminated.
The subsidiaries of the Company are as follows:
| Country
of Incorporation | Holding | Functional Currency | ||||
| Cannahealth Ltd. (“Cannahealth”) | Malta | 100% owned | EUR | |||
| Bophelo Holdings Ltd. (“Bophelo H”) | United Kingdom | 100% owned | GBP | |||
| Bophelo Bio Science and Wellness (Pty) Ltd. (“Bophelo”) | Lesotho | 100% owned | LSL | |||
| Canmart Ltd. (“Canmart”) | United Kingdom | 100% owned | GBP |
| (b) | Foreign currency |
Items included in the financial statements of each of the Company’s consolidated subsidiaries are measured using the currency of the primary economic environment in which each subsidiary operates (the functional currency). The consolidated financial statements are presented in USD. All assets and liabilities in each statement of financial position are translated at the closing rate at the date of that statement of financial position. All income and expenses are translated at exchange rates at the dates of the transactions.
Foreign currency transactions are translated into the respective functional currencies of the Company and its subsidiaries using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss. Non-monetary items that are not carried at fair value are translated using the exchange rates as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.
The results and financial position of the Company’s foreign subsidiaries that have a different functional currency from the Company’s functional and presentation currency are translated into USD as follows:
(i) Assets and liabilities of the foreign subsidiary are translated at the closing exchange rate on the date of the consolidated statement of financial position;
(ii) Revenue and expenses of the foreign subsidiary are translated at the average closing exchange rate for the period reported in the consolidated statement of profit or loss. When the average exchange rate does not provide a reasonable approximation of the cumulative effect of the rates prevailing on the transaction date, the Company utilizes the closing exchange rate on the date of the transaction;
(iii) The exchange rate differences for foreign subsidiaries are recognized in other comprehensive income in the cumulative translation account.
F-9
| (c) | Financial instruments |
| (i) | Financial assets |
The Company initially recognizes a financial asset on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
Upon recognition of a financial asset, classification is made based on the business model for managing the asset and the asset’s contractual cash flow characteristics. The financial asset is initially recognized at its fair value and subsequently classified and measured as (i) amortized cost; (ii) fair value through other comprehensive income (“FVOCI”); or (iii) FVTPL. Financial assets are classified as FVTPL if they have not been classified as measured at amortized cost or FVOCI.
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Financial assets and liabilities are offset and the net amount presented in the consolidated statements of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. The Company has classified all of its financial assets as financial assets measured at amortized cost or FVTPL. The Company has not classified any financial assets as FVTPL or FVOCI.
Financial assets measured at amortized cost
A non-derivative financial asset is measured at amortized cost when both of the following conditions are met: (i) the asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows; and (ii) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Such assets are recognized initially at fair value plus any directly attributable transaction costs and measured at amortized cost using the effective interest method subsequent to initial recognition, loans and receivables are measured at amortized cost. Financial assets measured at amortized cost are comprised of cash and trade and other receivables.
| (ii) | Financial liabilities |
The Company recognizes a financial liability on the trade date in which it becomes a party to the contractual provisions of the instrument at fair value plus any directly attributable costs. Financial liabilities are subsequently measured at amortized cost or FVTPL and are not subsequently reclassified. The Company’s financial liabilities are trade and other payables and loans and borrowings which are recognized on an amortized cost basis.
Financial liabilities measured at amortized cost
All financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. All financial liabilities are measured at amortized cost, except for financial liabilities measured at FVTPL. A financial liability may no longer be reclassified subsequent to initial recognition. Subsequent to initial recognition, financial liabilities are measured at amortized cost using the effective interest method.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or when they expire. The Company has the following non-derivative financial liabilities which are classified as financial liabilities measured at amortized cost: trade and other payables and loans and borrowings.
F-10
| (d) | Revenue from contracts with customers |
Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it transfers control over a good or service to a customer. The Company records revenue upon transfer of promised goods or services to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services based on the following five step approach:
Step 1: Identify the contracts with customers;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the contract; and
Step 5: Recognize revenue as performance obligations are satisfied.
The Company typically satisfies its performance obligations at a point in time, upon completion of sale. The Company primarily acts as principal in contracts with its customers. The Company does not have material obligations for returns, refunds and other similar obligations, nor warranties and related obligations.
Revenue is recognized at the amount of the transaction price that is allocated to the performance obligation. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.
The company has a single revenue stream currently that relates to the sale of cannabis-based products for medicinal use. This revenue stream is assessed as one performance obligation. Revenue from cannabis based medicinal product sales is recognized once the performance obligation has been satisfied, which would be upon the customer taking the delivery of the product. The transaction price for each product and service will be determined based on the respective invoice.
The Company exercises judgments in determining the amount of the costs incurred to obtain or fulfil a contract with a customer, which includes, but is not limited to (a) the likelihood of obtaining the contract, (b) the estimate of the profitability of the contract, and (c) the credit risk of the customer. An impairment loss will be recognized in profit or loss to the extent that the carrying amount of the asset exceeds (a) the remaining amount of consideration that the entity expects to receive in exchange for the goods or services to which the asset relates, less (b) the costs that relate directly to providing those goods or services and that have not been recognized as expenses.
| (e) | Cash and cash equivalents |
The Company considers all liquid investments purchased with a maturity of three months or less at acquisition to be cash and cash equivalents, which are carried and classified at amortized cost. The Company did not hold any cash equivalents as of December 31, 2021 and 2020.
| (f) | Inventories |
Inventories consist of raw materials and are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in first-out principle, and includes expenditures incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining selling prices. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. When the circumstances that previously caused inventories to be written down below cost no longer exist, or when there is clear evidence of an increase in selling prices, the amount of the write-down previously recorded is reversed.
F-11
| (g) | Biological assets |
Biological assets are measured at their fair value less costs to sell in the Statement of Financial Position. The Company’s method of accounting for biological assets attributes value accretion on a straight-line basis throughout the life of the biological asset from initial cloning to the point of harvest. All direct and indirect costs of biological assets are capitalized as they are incurred.
Biological assets and produce held by the Company is planned to be used in four possible ways:
| ● | Sale to the export market; |
| ● | Sale to the local market; |
| ● | Repurposed for use in research and development; and |
| ● | Written off for being obsolete. |
| (h) | Property, plant and equipment |
| (i) | Recognition and measurement |
Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When parts of an item of property and equipment have different estimated useful lives, they are accounted for as separate items within property and equipment. The costs of the ongoing regular servicing of property and equipment are recognized in tin the period in which they are incurred.
| (ii) | Depreciation |
Depreciation is recognized in profit or loss over the estimated useful lives of each part of an item of property and equipment in a manner that most closely reflects management’s estimated future consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows:
| Plant and equipment | 10 years | |||
| Leasehold improvements | 20 years | |||
| Motor Vehicles | 4 years | |||
| Computers | 3 years | |||
| Furniture and fixtures | 6 years |
| (i) | Intangible assets |
The Company has a cannabis operator’s license in Lesotho, held by its subsidiary Bophelo, which is valid for 10 years and is subject to a renewal at the end of the 10 years. The license is automatically renewed annually on payment of necessary fees as well as submission of operational documents to the Ministry of Health. Intangible assets are recorded at cost less amortization and impairment losses, if any.
Additionally, the Company has cannabis distribution licenses in the United Kingdom held by its subsidiary, Canmart which have been assessed as having an indefinite useful life. As such, these licenses are not amortized but their recoverable amounts are tested annually for impairment. The indefinite intangible assets are recorded at cost less impairment losses, if any. The Company capitalizes the initial license application cost as the cost of intangible assets while the annual license renewal fees are expensed in the year during which they occur
F-12
| (j) | Impairment of non-financial assets |
The Company assesses at each reporting period whether there is an indication that a non-financial asset may be impaired. An impairment loss is recognized when the carrying amount of an asset, or its cash generating unit (“CGU”), exceeds its recoverable amount. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount is the greater of the asset’s or CGU’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre- tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less cost to sell, an appropriate valuation model is used. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs.
Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized.
| (k) | Income Taxes |
Income tax expense comprises current and deferred taxes. Current taxes and deferred taxes are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive loss.
Current taxes are the expected tax receivable or payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax receivable or payable in respect of previous years. Deferred taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred taxes are not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future.
In addition, deferred taxes are not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the tax laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
| (l) | Leases |
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether the contract involves the use of an identified asset, whether the right to obtain substantially all of the economic benefits from use of the asset during the term of the arrangement exists, and if the Company has the right to direct the use of the asset. At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative standalone prices.
F-13
As a lessee, the Company recognizes a right-of-use asset and a lease liability at the commencement date of a lease. The right-of- use asset is initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received.
The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the lease term, or the end of the useful life of the asset. In addition, the right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. Lease payments included in the measurement of the lease liability are comprised of:
| ● | a) fixed payments, including in-substance fixed payments, less any lease incentives receivable; |
| ● | b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
| ● | c) amounts expected to be payable under a residual value guarantee; |
| ● | d) exercise prices of purchase options if the Company is reasonably certain to exercise that option; and |
| ● | e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. |
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in the estimate or assessment of the expected amount payable under a residual value guarantee, purchase, extension or termination option.
Variable lease payments not included in the initial measurement of the lease liability are charged directly to profit or loss.
| (m) | Earnings per share |
The Company presents basic earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for the Company’s own shares held. Diluted EPS is computed similar to basic EPS except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of any exercisable instruments, if dilutive. The number of additional shares is calculated by assuming that outstanding exercisable instruments were exercised and that the proceeds from such exercise were used to acquire common shares at the average market price during the reporting periods.
| (n) | New standard issued not yet adopted |
In January 2020, the IAS issued an amendment to IAS 1 Presentation of Financial Statements that clarifies the criterion for classifying a liability as non-current relating to the right to defer settlement of a liability for at least 12 months after the reporting period.
F-14
| 1. | Liabilities are classified as non-current if the entity has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendment no longer refers to unconditional rights. The assessment determines whether a right exists, but it does not consider whether the entity will exercise the right. |
| 2. | ‘Settlement’ is defined as the extinguishment of a liability with cash, other economic resources or an entity’s own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument. |
The amendment applies to annual reporting periods beginning on or after January 1, 2023, and is applied retrospectively upon adoption. The Company does not expect the amendments to have a significant impact on the consolidated financial statements upon adoption.
| 4. | Accounts receivable |
| As at December 31: | 2021 | 2020 | ||||||
| Trade accounts receivable | $ | 29,457 | $ | — | ||||
| Sales taxes receivable | 212,900 | — | ||||||
| $ | 242,357 | $ | — | |||||
As at December 31, 2021, there was one customer with an amount greater than 10% of the Company’s trade accounts receivable which represented 94% of the balance. The Company did not record any bad debt expense during the year ended December 31, 2021 (2020- $nil; 2019-$nil)
| 5. | Inventory |
The Company’s inventory included cannabis based products for medical use in the UK and cannabis seeds in Lesotho. The stock held in the UK had to be destroyed as they went out of date and therefore do not carry any value as at December 31, 2021 (2020 - $611). The majority of the stock of cannabis seeds held in Lesotho were transferred to biological assets during the year. During the year ended December 31, 2021, the Company wrote-off inventories of $19,563, as a loss on change in fair value of biological assets related to seeds that were unusable (2020 – nil, 2019 – nil), which is presented in the Statement of Operations. The Company did not record any inventory as expense during the year ended December 31, 2021 (2020 – nil, 2019 – nil).
Biological assets
Set out below is a reconciliation of the Company’s biological assets as at December 31, 2021 and as at December 31, 2020:
| For the period ended December 31 | 2021 | 2020 | ||||||
| Balance, beginning of the period | $ | — | $ | — | ||||
| Requisition of raw materials from inventory | 202,900 | — | ||||||
| Capitalized costs | 490,672 | — | ||||||
| Loss on change in fair value of biological assets | (693,572 | ) | — | |||||
| $ | — | $ | — | |||||
Biological assets at December 31, 2021 consisted of approximately 49,269 cannabis plants which are expected to yield approximately 492.69 kilograms of medical cannabis when harvested in April 2022. Additionally, biological assets at December 31, 2021 includes 156,073 cannabis seeds. The fair value of biological assets has been assessed as nil at December 31, 2021 due to the fact that the current harvest is the Company’s first commercial harvest, the Company has not yet historically made any material sales of medical cannabis and, furthermore, the Company does not yet have a buyer for the expected harvest.
F-15
| 6. | Property and equipment |
| Plant and | Leasehold | Motor | Furniture and | Capital work-in- | ||||||||||||||||||||||||
| Cost | equipment | Improvements | Vehicles | Computers | fixtures | progress | Total | |||||||||||||||||||||
| Balance, December 31, 2019 | $ | 449,044 | $ | 304,770 | $ | 38,427 | $ | — | $ | — | $ | 616,377 | $ | 1,408,618 | ||||||||||||||
| Additions | 172,369 | — | — | — | — | 266,768 | 439,137 | |||||||||||||||||||||
| Write-offs | (23,748 | ) | — | — | — | — | — | (23,748 | ) | |||||||||||||||||||
| Foreign exchange movements | (11,305 | ) | (11,333 | ) | (1,429 | ) | — | — | — | (24,067 | ) | |||||||||||||||||
| Balance, December 31, 2020 | $ | 586,360 | $ | 293,437 | $ | 36,998 | $ | — | $ | — | $ | 883,145 | $ | 1,799,940 | ||||||||||||||
| Additions | 53,808 | 493,136 | 14,214 | 10,427 | 4,887 | — | 576,472 | |||||||||||||||||||||
| Reclassifications | — | 360,695 | — | — | — | (360,695 | ) | — | ||||||||||||||||||||
| Foreign exchange movements | (50,157 | ) | (57,574 | ) | (3,589 | ) | (303 | ) | (192 | ) | (58,197 | ) | (170,012 | ) | ||||||||||||||
| Balance, December 31, 2021 | $ | 590,011 | $ | 1,089,694 | $ | 47,623 | $ | 10,124 | $ | 4,695 | $ | 464,253 | $ | 2,206,400 | ||||||||||||||
| Accumulated depreciation | Plant and equipment |
Leasehold Improvements |
Motor Vehicles |
Computers | Furniture and fixtures |
Capital work-in- progress |
Total | |||||||||||||||||||||
| Balance, December 31, 2019 | $ | 67,113 | $ | 22,489 | $ | 4,803 | $ | — | $ | — | $ | — | $ | 94,405 | ||||||||||||||
| Depreciation | 60,212 | 14,950 | 9,425 | — | — | — | 84,587 | |||||||||||||||||||||
| Foreign exchange movements | (3,615 | ) | (1,115 | ) | (354 | ) | — | — | — | (5,084 | ) | |||||||||||||||||
| Balance, December 31, 2020 | $ | 123,710 | $ | 36,324 | $ | 13,874 | $ | — | $ | — | $ | — | $ | 173,908 | ||||||||||||||
| Depreciation | 63,785 | 78,352 | 11,208 | 1,245 | 483 | — | 155,073 | |||||||||||||||||||||
| Foreign exchange movements | (12,641 | ) | (6,053 | ) | (1,577 | ) | (39 | ) | (19 | ) | — | (20,329 | ) | |||||||||||||||
| Balance, December 31, 2021 | $ | 174,854 | $ | 108,623 | $ | 23,505 | $ | 1,206 | $ | 464 | $ | — | $ | 308,652 | ||||||||||||||
| Net book value | Plant and equipment |
Leasehold Improvements |
Motor Vehicles |
Computers | Furniture and fixtures |
Capital work-in- progress |
Total | |||||||||||||||||||||
| Balance, December 31, 2020 | $ | 462,650 | $ | 257,113 | $ | 23,124 | $ | — | $ | — | $ | 883,145 | $ | 1,626,032 | ||||||||||||||
| Balance, December 31, 2021 | $ | 415,157 | $ | 981,071 | $ | 24,118 | $ | 8,918 | $ | 4,231 | $ | 464,253 | $ | 1,897,748 | ||||||||||||||
As at December 31, 2021 and 2020 the Company’s Capital work in progress relate to the ongoing civil, gravelling, storm drainage work on site, as well as the construction of hoop houses and a Cravo A-Frame style greenhouse for future medical cannabis cultivation in Bophelo Bio Science in Lesotho.
The Company considered indicators of impairment at December 31, 2021 and 2020. The Company did not record any impairment loss during the year ended December 31, 2021 (2020 – $23,748, 2019 – nil).
F-16
| 7. | Right-of-use assets |
| Land lease | ||||
| Balance, December 31, 2019 | $ | 2,409,934 | ||
| Additions | — | |||
| Amortization | (56,292 | ) | ||
| Movement in exchange rates | (153,863 | ) | ||
| Balance, December 31, 2020 | $ | 2,199,779 | ||
| Additions | — | |||
| Amortization | (115,183 | ) | ||
| Movement in exchange rates | (175,719 | ) | ||
| Balance, December 31, 2021 | $ | 1,908,877 | ||
| 8. | Intangible assets |
| Cost: | Licences | |||
| Balance, December 31, 2019 | $ | 437,911 | ||
| Movement in exchange rates | (15,085 | ) | ||
| Balance, December 31, 2020 | $ | 422,826 | ||
| Movement in exchange rates | (33,370 | ) | ||
| Balance, December 31, 2021 | $ | 389,456 | ||
| Accumulated depreciation | Licences | |||
| Balance, December 31, 2019 | $ | 63,202 | ||
| Amortization | 41,337 | |||
| Movement in exchange rates | (3,119 | ) | ||
| Balance, December 31, 2020 | $ | 101,420 | ||
| Amortization | 38,766 | |||
| Movement in exchange rates | (9,832 | ) | ||
| Balance, December 31, 2021 | $ | 130,354 | ||
| Net book value | Licences | |||
| Balance, December 31, 2020 | $ | 321,406 | ||
| Balance, December 31, 2021 | $ | 259,102 | ||
The Company’s intangible assets consist of a cannabis operator’s license with a carrying value of $242,086 at December 31, 2021 (2020 - $304,260) and a cannabis distribution license with a carrying value of $17,016 at December 31, 2021 (2020 - $17,146). The Company considered indicators of impairment at December 31, 2021 and 2020. The Company did not record any impairment loss during the year ended December 31, 2021 (2020 - nil, 2019 – nil).
At December 31, 2021, the remaining useful life of the Company’s cannabis operator’s license is approximately 6.5 years. The Company’s cannabis distribution license has been classified as an indefinite-life intangible asset as the Company expects to maintain this asset and the end point of the useful life of such asset cannot be determined. The Company evaluates the assumption of the indefinite life of the cannabis distribution license at least annually.
F-17
| 9. | Lease liability |
| As at December 31: | Maturity | Incremental borrowing rate | 2021 | 2020 | ||||||||||||
| Current | 2022 | 10.25 | % | $ | 439,709 | $ | 283,976 | |||||||||
| Non-current | 2023-2039 | 10.25 | % | 1,978,997 | 2,598,176 | |||||||||||
| $ | 2,418,706 | $ | 2,882,152 | |||||||||||||
The Company has committed to the following undiscounted minimum lease payments remaining as at December 31, 2021:
| Year ended December 31: | ||||
| 2022 | $ | 108,628 | ||
| 2023 | 260,708 | |||
| 2024 | 260,708 | |||
| 2025 | 260,708 | |||
| 2026 | 260,708 | |||
| Thereafter | 3,193,669 | |||
| $ | 4,345,129 | |||
| 10. | Loans payable |
| (a) | Louisa Mojela loans: |
The loans described below have been granted to the Company to fulfill its capital and operational requirements. The terms of the loans are described below:
| (i) | Bridge loan |
The loan is a bridge financing facility of $1 million USD to fund capital expenditure and working capital of the Company. The loan carries a redemption premium of 100% of the capital amount borrowed. This redemption premium is triggered and becomes payable upon the successful raising of capital of not less than $18m (which must take place before October 31, 2020), or in the event of a conversion of the bridge loan to equity. This loan was repayable within 18 months from the date of first drawdown (which was on or around December 1, 2019), alternatively, the repayment of the loan plus the redemption premium is payable on the successful raising of capital of not less than $18m. The loan carries interest at a rate of 1.5% per month applicable from the first draw down date. In the event that the redemption premium is triggered and payable, all interest accrued on the loan is cancelled and only the capital plus the redemption premium is then accrued and payable. The loan agreement was amended in May 2020 to cater for a further additional borrowing (on the same terms and conditions described above) to the amount of US$100,000. This resulted in a cumulative amount borrowed of $1.1million (capital amount of the loan). The loan is secured by a first notarial bond/mortgage over the Company’s property.
The security is shared with Middleton Gardens Ltd. (“Middleton”), a company registered in the British Virgin Islands with whom Bophelo had entered into a loan agreement and both Middleton and L Mojela entered into an intercreditor agreement to this effect. On or around November 11, 2021, the loan was converted to shares in the Company’s capital (see (iv)) and as such, all accrued interest on the loan was cancelled and replaced with a 100% redemption premium. As such, and immediately prior to the conversion of the loan to equity, the principal amount of $1.1 million plus an accrued redemption premium of a further $1.1 million was payable. Accordingly, a total of $2.2 million in debt due to Ms. Louisa Mojela was settled through an issue of 880,000 common Shares of the Company at a price of $2.50 each, and with a total value of $2.2 million. As such, the balance owing in terms of the bridge loan at December 31, 2021 is nil (2020: $1,350,813).
F-18
| (ii) | Short-term loan #1 |
This is a short-term loan facility of approximately $135,226 in capital value lent. This loan was provided in the financial year ending December 31, 2020. The purpose of this loan was to assist the Company in funding working capital deficits. This loan was unsecured, repayable within 30 days of receiving the payment and carried interest at the rate linked to the prime lending rate in the Republic of South Africa. The capital balance of this loan was repaid in full before the end of the financial year December 31, 2020. The interest balance on this loan remains unpaid and outstanding as at December 31, 2021 with a value of $ 9,068 (2020: $11,230).
| (iii) | Short-term loan #2 |
This is a short-term loan facility of approximately $190,444 in capital value lent. This loan was provided in the financial year ending December 31, 2020. The purpose of this loan was to assist the Company in funding its day-to-day operating costs. This loan does not have a fixed repayment date, is unsecured and is interest free. The balance on this loan at December 31, 2021 is $174,840 (2020: $190,444).
| (iv) | Shares-for-debt |
On November 11, 2021 the Company converted the remaining balances outstanding of (i), in exchange for 880,000 shares in the Company’s capital. The transaction was valued at $2,200,000, which represented a 100% premium on the balance outstanding immediately prior to the transaction. The Company treated the redemption premium as interest and the face value of the bridge loan was settled by the issuance of shares that were required to settle the amount due.
| (v) | Short-term loan |
During the year ended December 31, 2021, the Company received short term loan facility of approximately $258,900 (L 4,000,000) to assist the Company in funding its day-to-day operating costs. As at December 31, 2021 the balance remaining was $248,293 (2020: US$ Nil). This loan does not have a fixed repayment date, is unsecured and is interest free.
| 11. | Capital |
| (a) | Authorized |
The Company has authorized share capital of an unlimited amount of common shares with no par value.
| (b) | Shares issued and outstanding |
Shares issued and outstanding are as follows:
| Cost: | Number of shares | Capital | ||||||
| Balance, December 31, 2019 | 13,129,212 | $ | 1,636 | |||||
| Balance, December 31, 2020 | 13,129,212 | 1,636 | ||||||
| Shares issued to founders | 5,626,806 | 1 | ||||||
| Seed subscription | 468,900 | 250,000 | ||||||
| Private Placement | 2,126,400 | 4,804,058 | ||||||
| Settlement of Bridge Loan | 880,000 | 2,200,000 | ||||||
| Balance, December 31, 2021 | 22,231,318 | $ | 7,255,695 | |||||
| (i) | The 13,129,212 shares issued to Halo in exchange for the Cannahealth acquisition have been deemed to be issued and outstanding as of the earliest reporting date, December 31, 2019. |
F-19
| (ii) | On July 16, 2021, the Company issued 5,626,806 common shares in the Company’s capital to its founders. | |
| (iii) | On July 26, 2021, the Company completed a seed capital offering issuing 468,900 common shares in the Company’s capital at approximately $0.53 per share. | |
| (iv) | On November 12, 2021, the Company issued 13,129,212 shares to the former shareholders of Cannahealth Limited to facilitate the acquisition of the entity, at a value of $0.01 per share. | |
| (v) | On November 12, 2021, the Company completed a private placement, receiving gross consideration of $5,312,136 upon the issuance of 2,126,400 common shares of the Company at a price of $2.50 per share. The Company paid $508,078 in advisory fees and commissions associated with the offering. | |
| (vi) | On November 10, 2021, the Company issued 880,000 common shares at a value of $2.50 per common share to settle bridge loans payable of $2,200,000. |
| (c) | Earnings per share |
The weighted average number of common shares outstanding for basic and diluted earnings per share for the year ended December 31, 2021 was 16,223,996. The weighted average number of ordinary shares outstanding for basic and diluted earnings per share for the years ended December 31, 2020 and 2019 was 13,129,212, adjusted for the same amount issued for the acquisition of Cannahealth. The Company did not have any potential dilution at December 31, 2021, 2020, or 2019.
| 12. | Income taxes |
The components of income tax expense (benefit) are as follows:
| Year ended December 31 | 2021 | 2020 | 2019 | |||||||||
| Current: | ||||||||||||
| Kingdom of Lesotho | $ | — | $ | — | $ | — | ||||||
| Republic of Malta | — | — | — | |||||||||
| United Kingdom | — | — | — | |||||||||
| $ | — | $ | — | $ | — |
A reconciliation of the expected income tax recovery to the actual income tax recovery is as follows:
Deferred tax assets and liabilities have not been recognized for the following:
| Year ended December 31 | 2021 | 2020 | 2019 | |||||||||
| Net loss before income taxes | $ | (8,131,197 | ) | $ | (2,300,571 | ) | $ | (1,394,641 | ) | |||
| Statutory income tax rate | 26.50 | % | 26.50 | % | 26.50 | % | ||||||
| Income tax benefit | (2,154,767 | ) | (609,651 | ) | (369,580 | ) | ||||||
| Foreign rate differential | 1,227,150 | 379,594 | 230,116 | |||||||||
| Unrecognized loss carryforwards | 1,089,449 | 230,057 | 139,464 | |||||||||
| $ | — | $ | — | $ | — | |||||||
The Company has reconciled to the average statutory tax rate of the Kingdom of Lesotho (10%), the Republic of Malta (35%) and the United Kingdom (19%).
F-20
Deferred tax assets
| As at December 31 | 2021 | 2020 | ||||||
| Net operating loss before carryforwards | $ | — | $ | — | ||||
| Unrecognized loss carryforwards | $ | — | $ | — | ||||
Deferred tax assets have not been recognized in respect of unutilized tax losses carried forward because it is not probable that future taxable profit will be available against which the Company can use the benefits therefrom
| 13. | Related party transactions |
Secured convertible debenture
On November 3, 2021 (the “Issuance Date”), the Company entered into an agreement with Halo in which the Company issued Halo a secured convertible debenture with an initial value of $6,559,294. The balance payable of the secured convertible debenture is $6,716,190 as at December 31, 2021 which included additional loan owed to Halo for November and December 2021as well as an interest of $10,423. The notes are convertible into common shares of the Company’s capital receiving the number of shares, at its current market price, required to satisfy the principal and interest payable. The obligation to convert the note within six months of the Issuance Date is triggered by (a) an initial public offering by the Company on a stock exchange; (b) an amalgamation, arrangement, merger, reverse takeover, reorganization or similar event; (c) a sale or conveyance of all or substantially all of the property and assets of the Company to any arm’s length third party for consideration consisting of free trading securities and the subsequent distribution of all of such consideration to all of the holders of common shares, on a pro rata basis; (d) the sale or exchange of all or substantially all of shares of the Borrower for free trading securities. The debt bears interest at one percent per annum, matures on November 3, 2022 and is secured by all of the assets of the Company other than the interests in the securities of Bophelo Bio Science and Wellness Pty. Ltd. and ranks ahead of all other debt issued by the Company.
Transactions with Key Management Personnel
The Company has identified its Board of Directors, Executive Chairman, Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) and its President as its key management personnel who have the authority and responsibility for planning, directing and controlling the Company’s main activities.
| For the years ended December 31 | 2021 | 2020 | 2019 | |||||||||
| Key Management Remuneration | 1,148,206 | 259,035 | 116,481 | |||||||||
| Director Professional fees | — | 121,467 | 121,970 | |||||||||
| Short term accommodation expense | 69,521 | 45,482 | 26,264 | |||||||||
| 1,217,727 | 425,984 | 264,715 | ||||||||||
The Key Management remuneration is included in the Personnel expenses as well as the Professional and Consulting fees in the Statement of Operations.
The Director’s professional fees incurred during the years December 31, 2020 and December 31, 2019 were related to the services provided by a director of Bophelo Bio Science & Wellness Pty Ltd. that was over and above the regular remuneration paid to the directors.
During the year ended December 31, 2021, the Company incurred expenditures of $69,521 (2020 - $45,482; 2019 - $26,264) associated with rental of short-term accommodates from the Company’s executive Chairman, LM Mojela, to house the Company’s expatriate staff working on site at the Company’s cultivation operation in the Kingdom of Lesotho.
F-21
During the year ended December 31, 2020, the Company incurred professional services expense of $121,467 (2019 - $121,970) associated with services provided by a director of the Company that was not a result of the regular remuneration paid to the Company’s directors.
As of December 31, 2021, the Company has balances payable to related parties of $9,601,708(2020 - $9,225,650) as below:
| a. | As at December 31, 2021 the entire balance of Loans and Borrowings (Note 10) $432,201 (2020 - $1,552,487) was owed to Louisa Mojela. The balance does not bear interest, is unsecured and does not have a fixed repayment date. | |
| b. | The remuneration payable to key management as at December 31, 2021 is $34,611 (2020 - $102,785) | |
| c. | As at December 31, 2021 the balance presented in the Lease liability (Note 9) pertained to the amount owing to Mophuthi Trust, a Trust controlled by Louisa Mojela and Granny Seape to the extent of $2,418,706 (2020 – 2,882,152) | |
| d. | The balance of $6,716,190 under Secured convertible debentures as at December 31, 2021 carries interest at 1% per annum. (2020 - $4,688,226) |
The Company’s related party transactions are measured at the exchange amount which is the amount of consideration established and agreed to by the related parties.
| 14. | Financial instruments |
The following is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments as at December 31, 2021 and 2020:
| 2021 | 2020 | |||||||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||||||
| As at December 31 | Level | amount | value | amount | value | |||||||||||||||
| Financial assets | ||||||||||||||||||||
| Financial assets measured at amortized cost: | ||||||||||||||||||||
| Cash | 1 | $ | 3,495,390 | 3,495,390 | $ | 13,504 | 13,504 | |||||||||||||
| Trade and other receivables | 2 | 242,357 | 242,357 | — | — | |||||||||||||||
| Financial liabilities | ||||||||||||||||||||
| Financial assets measured at amortized cost: | ||||||||||||||||||||
| Trade and other payables | 2 | $ | 680,328 | 680,328 | $ | 183,895 | 183,895 | |||||||||||||
| Loans and borrowings | 2 | 432,201 | 432,210 | 6,240,713 | 6,240,713 | |||||||||||||||
| Lease liabilities | 2 | 2,418,706 | 2,418,706 | 2,882,152 | 2,882,152 | |||||||||||||||
| Secured convertible debenture | 2 | 6,716,190 | 6,716,190 | — | — | |||||||||||||||
The Company has determined the estimated fair values of its financial instruments based on appropriate valuation techniques. The carrying values of current monetary assets and liabilities approximate their fair values due to their relatively short periods to maturity.
| 15. | Risks arising from financial instruments and risk management |
The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange and interest rate risks), credit risk and liquidity risk. Risk management is the responsibility of the Company, which identifies, evaluates and, where appropriate, mitigates financial risks.
F-22
| (a) | Market risk |
Foreign exchange risk: is the risk that the fair value of future cash flows for financial instruments will fluctuate because of changes in foreign exchange rates. The Company has not entered into any foreign exchange hedging contracts. The Company is exposed to currency risk from the British Pound (“GBP”), Lesotho Loti (“LSL”) and Canadian dollar (“CAD”) through the following foreign currency denominated financial assets and liabilities:
| As at December 31 (expressed in GBP) | 2021 | 2020 | ||||||
| Financial assets | ||||||||
| Cash | £ | 2,577,674 | £ | — | ||||
| Trade and other receivables | 30,983 | 344 | ||||||
| £ | 2,608,657 | £ | — | |||||
| Financial liabilities | ||||||||
| Trade and other payables | £ | 239,763 | £ | |||||
| £ | 239,763 | £ | ||||||
| As at December 31 (expressed in CAD) | 2021 | 2020 | ||||||
| Financial assets | ||||||||
| Trade and other receivables | $ | 255,880 | $ | — | ||||
| $ | 255,880 | $ | — | |||||
| Financial liabilities | ||||||||
| Trade and other payables | $ | 234,711 | $ | — | ||||
| $ | 234,711 | $ | — | |||||
| As at December 31 (expressed in LSL) | 2021 | 2020 | ||||||
| Financial assets | ||||||||
| Cash | L | 321,646 | L | — | ||||
| Trade and other receivables | ||||||||
| L | 323,667 | L | — | |||||
| Financial liabilities | ||||||||
| Lease liabilities | L | 38,965,352 | L | — | ||||
| Loans and borrowings | 7,846,551 | — | ||||||
| L | 46,811,903 | L | — | |||||
Based on the above net exposures as at December 31, 2021, assuming that all other variables remain constant, a 5% appreciation or deterioration of the USD against the GBP would result in a corresponding increase or decrease, respectively on the Company’s net income of approximately $161,000 (2020 – nil), CAD - $3,000 (2020 – nil) and LSL - $143,000 (2020 – $156,000).
| (b) | Credit risk |
Credit risk is the risk of financial loss to the Company if a partner or counterparty to a financial instrument fails to meet its contractual obligation and arises principally from the Company’s cash and accounts receivable. The carrying amounts of the financial assets represents the maximum credit exposure. The Company limits its exposure to credit risk on cash by placing these financial instruments with high-credit quality financial institutions.
F-23
At December 31, 2021 the Company was subject to a concentration of credit risk related to its accounts receivable as 94% of the balance of amounts owing is from one customer. As at December 31, 2021, none of the outstanding accounts receivable were outside of the normal payment terms and the Company did not record any bad debt expenses during the years ended December 31, 2021, December 31, 2020 and December 31, 2019. As at December 31, 2021 and 2020, the expected credit lifetime credit losses for accounts receivable aged as current were nominal amounts. The Company considers a financial asset in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
| (c) | Liquidity risk |
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity risk by continuously monitoring forecasted and actual cash flows, as well as anticipated investing and financing activities and to ensure that it will have sufficient liquidity to meet its liabilities and commitments when due and to fund future operations. The Company’s trade and other payables are due within the current operating period.
| 16. | Capital Management |
The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to continue the business of the Company. The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share and warrant issuances, granting of stock options, the issuance of debt or by undertaking other activities as deemed appropriate under the specific circumstance. The Board of Directors does not establish a quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and to provide capital to pursue the development and commercialization of its products. In the management of capital, the Company includes cash, long-term debt and capital. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares or new debt.
At the current stage of the Company’s development, in order to maximize its current business activities, the Company does not pay out dividends. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.
The Company’s overall strategy with respect to capital risk management remains unchanged for the year ended December 31, 2021.
| 17. | Determination of fair values |
IFRS 13, Fair Value Measurement, establishes a fair value hierarchy that reflects the significance of the inputs used in measuring fair value. The fair value hierarchy has the following levels:
| ● | Level 1 – Quoted prices in active markets for identical assets or liabilities; | |
| ● | Level 2 – Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; | |
| ● | Level 3 – Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions market participants would use in pricing. |
A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non- financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following models. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
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| (a) | Biological assets |
The fair value of the biological assets is based on the most recent available evidence for the selling price of similar biological assets. An independent valuator based his valuation of cannabis biological assets being valued at $0.15 per gram and cannabis seeds were valued at historical cost. The fair value of cannabis biomass was based on the selling price of cannabis biomass that recently happened in Lesotho, while the fair value of cannabis seeds on hand was based on the historical cost of the seeds based on what was paid by the company.
| (b) | Intangible assets |
The fair value of intangible assets is based on a discounted cash flow analysis in which management determines the estimated future cash flows and eventual sale of the assets.
| 18. | Segmented info |
The Company has three reportable segments: Cultivation, Distribution & Corporate. The cultivation is done in Lesotho at Bophelo Bio Science & Wellness Pty Ltd. The distribution is done by Canmart Ltd. in the UK and the corporate segment. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The reportable segments have been determined by the management on the basis that these are strategic business units that offer different products & services. The business unit in Lesotho under the cultivation segment is in the process of cultivation of cannabis biomass and cannabis based medical products, the business unit in the UK under the distribution segments offers sales and distribution of cannabis based medical products. The corporate segment offers management and treasury services within the group companies. They are managed separately as each business requires different strategy and technology.
Set out below is information about the assets and liabilities as at December 31, 2021 and 2020 and profit or loss from each segment for the years ended December 31, 2021, 2020 and 2019:
| As at December 31, 2021 | ||||||||||||||||
| Financial statement line item: | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Reportable segment assets | $ | 4,127,138 | $ | 3,716,771 | $ | 205,797 | $ | 8,043,909 | ||||||||
| Reportable segment liabilities | 3,020,730 | 323,129 | 6,899,644 | 10,243,143 | ||||||||||||
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| As at December 31, 2020 | ||||||||||||||||
| Financial statement line item: | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Reportable segment assets | $ | 4,253,676 | $ | 19,664 | $ | — | $ | 4,273,340 | ||||||||
| Reportable segment liabilities | 9,305,736 | 1,024 | — | 9,306,760 | ||||||||||||
| For the year ended December 31, 2021 | ||||||||||||||||
| Financial statement line item: | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Revenues from external customers | $ | — | $ | 41,431 | $ | — | $ | 41,431 | ||||||||
| Intersegment revenues | — | — | — | — | ||||||||||||
| Other income | — | 55 | — | 55 | ||||||||||||
| Finance income | 26,659 | 90 | — | 26,749 | ||||||||||||
| Finance expense | 1,082,372 | — | 10,509 | 1,092,881 | ||||||||||||
| Depreciation & amortization | 308,544 | 478 | — | 309,022 | ||||||||||||
| Reportable segment loss | (5,331,600 | ) | (1,775,923 | ) | (1,019,823 | ) | (8,127,347 | ) | ||||||||
| For the year ended December 31, 2020 | ||||||||||||||||
| Financial statement line item: | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Revenues from external customers | $ | — | $ | 2,062 | $ | — | $ | 2,062 | ||||||||
| Intersegment revenues | — | — | — | — | ||||||||||||
| Other revenue | — | — | — | — | ||||||||||||
| Finance income | 10,187 | 1 | — | 10,188 | ||||||||||||
| Finance expense | 645,162 | — | — | 645,162 | ||||||||||||
| Depreciation & amortization | 248,743 | — | — | 248,743 | ||||||||||||
| Reportable segment loss | (2,298,310 | ) | (2,261 | ) | — | (2,300,571 | ) | |||||||||
| For the year ended December 31, 2019 | ||||||||||||||||
| Financial statement line item: | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Revenues from external customers | $ | — | $ | — | $ | — | $ | — | ||||||||
| Intersegment revenues | — | — | — | — | ||||||||||||
| Other revenue | — | — | — | — | ||||||||||||
| Finance income | 399 | 2 | — | 401 | ||||||||||||
| Finance expense | 493,807 | — | — | 493,807 | ||||||||||||
| Depreciation & amortization | 198,824 | — | — | 198,824 | ||||||||||||
| Reportable segment loss | (1,394,611 | ) | (30 | ) | — | (1,394,641 | ) | |||||||||
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Set out below are reconciliations of each reportable segment’s revenues, profit or loss, assets and liabilities as at December 31, 2021 and 2020, and for the years ended December 31, 2021, 2020 and 2019:
| For the year ended December 31, 2021 | ||||||||||||||||
| Revenues | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total revenues | $ | — | $ | 41,431 | $ | — | $ | 41,431 | ||||||||
| Elimination of inter segment revenue | — | — | — | — | ||||||||||||
| Total revenue | $ | — | $ | 41,431 | $ | — | $ | 41,431 | ||||||||
| For the year ended December 31, 2020 | ||||||||||||||||
| Revenues | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total revenues | $ | — | $ | 2,062 | $ | — | $ | 2,062 | ||||||||
| Elimination of inter segment revenue | — | — | — | — | ||||||||||||
| Total revenue | $ | — | $ | 2,062 | $ | — | $ | 2,062 | ||||||||
| For the year ended December 31, 2019 | ||||||||||||||||
| Revenues | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total revenues | $ | — | $ | — | $ | — | $ | — | ||||||||
| Elimination of inter segment Revenue | — | — | — | — | ||||||||||||
| Total revenue | $ | — | $ | — | $ | — | $ | — | ||||||||
| For the year ended December 31, 2021 | ||||||||||||||||
| Loss | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total profit or loss for reportable segments | $ | (5,331,600 | ) | $ | (1,775,923 | ) | $ | (1,019,823 | ) | $ | (8,127,347 | ) | ||||
| Other profit or loss | — | — | — | — | ||||||||||||
| Elimination of inter segment profit or loss | — | — | — | — | ||||||||||||
| Loss before income tax expense | $ | (5,331,600 | ) | $ | (1,775,923 | ) | $ | (1,019,823 | ) | $ | (8,127,347 | ) | ||||
| For the year ended December 31, 2020 | ||||||||||||||||
| Loss | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total profit or loss for reportable segments | $ | (2,298,310 | ) | $ | (2,261 | ) | $ | — | $ | (2,300,571 | ) | |||||
| Other profit or loss | — | — | — | — | ||||||||||||
| Elimination of inter segment profit or loss | — | — | — | — | ||||||||||||
| Loss before income tax expense | $ | (2,298,310 | ) | $ | (2,261 | ) | $ | — | $ | (2,300,571 | ) | |||||
| For the year ended December 31, 2019 | ||||||||||||||||
| Loss | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total profit or loss for reportable segments | $ | (1,394,611 | ) | $ | (30 | ) | $ | — | $ | (1,394,641 | ) | |||||
| Other profit or loss | — | — | — | — | ||||||||||||
| Elimination of inter segment profit or loss | — | — | — | — | ||||||||||||
| Loss before income tax expense | $ | (1,394,611 | ) | $ | (30 | ) | $ | — | $ | (1,394,641 | ) | |||||
| As at December 31, 2021 | ||||||||||||||||
| Assets | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total assets for reportable segments | $ | 4,127,138 | $ | 4,082,801 | $ | 26,025,848 | $ | 34,235,787 | ||||||||
| Other assets | — | — | — | — | ||||||||||||
| Elimination of inter segment assets | — | (366,030 | ) | (25,825,848 | ) | (26,191,878 | ) | |||||||||
| Entity’s assets | $ | 4,127,138 | $ | 3,716,771 | $ | 200,000 | $ | 8,043,909 | ||||||||
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| As at December 31, 2020 | ||||||||||||||||
| Assets | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total assets for reportable segments | $ | 4,253,676 | $ | 19,664 | $ | — | $ | 4,273,340 | ||||||||
| Other assets | — | — | — | — | ||||||||||||
| Elimination of inter segment assets | — | — | — | — | ||||||||||||
| Entity’s assets | $ | 4,253,676 | $ | 19,664 | $ | — | $ | 4,273,340 | ||||||||
| As at December 31, 2021 | ||||||||||||||||
| Liabilities | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total liabilities for reprtable segments | $ | 10,602,945 | $ | 5,437,189 | $ | 6,899,644 | $ | 22,939,779 | ||||||||
| Other liabilities | — | — | — | — | ||||||||||||
| Elimination of inter segment liabilities | (7,582,575 | ) | (5,114,060 | ) | — | (12,696,635 | ) | |||||||||
| Entity’s liabilities | $ | 3,020,730 | $ | 323,129 | $ | 6,899,644 | $ | 10,243,144 | ||||||||
| As at December 31, 2020 | ||||||||||||||||
| Liabilities | Cultivation | Distribution | Corporate | Total | ||||||||||||
| Total liabilities for reprtable segments | $ | 9,305,736 | $ | 1,024 | $ | — | $ | 9,306,760 | ||||||||
| Other liabilities | — | — | — | — | ||||||||||||
| Elimination of inter segment liabilities | — | — | — | — | ||||||||||||
| Entity’s liabilities | $ | 9,305,736 | $ | 1,024 | $ | — | $ | 9,306,760 | ||||||||
The Company has identified only three operating segments as disclosed above. The activities of two other subsidiary companies namely Cannahealth and Bophelo H are to hold the investments within the group companies. Therefore, there profit or loss, assets and liabilities are not included in the above segment information.
| 19. | Subsequent events |
| 1. | Appointment of Directors |
On 20 February 2022, the Company appointed the following individuals to the board of directors:
| ● | Bridget Baker |
| ● | Gila Jones |
| ● | Gugu Dingaan |
All three of the above directors were appointed as independent non-executive directors and, following their appointment, increased the total number of directors of the Company to seven, with a majority of directors being considered to be independent.
| 2. | Private Placement |
On 14 January 2022, the Company completed a second interim closing of a private placement, which saw subscribers receive 154,000 common shares of the Company in lieu of gross proceeds of $385,000. On 10 February 2022, the Company completed its third and final closing of a private placement which saw subscribers receive 8,000 common shares of the Company in lieu of gross proceeds of $20,000.
| 3. | Conversion of Debenture |
On 14 March 2022, and immediately prior to an Initial Public Offering of the Company, Akanda Corp. issued 1,645,745 common shares to Halo Collective, Inc. (“Halo”) at a price of $4 each to settle the principal amount ($6,559,294) plus accrued interest ($23,686) owing to Halo in terms of a convertible debenture agreement, which totalled $6,582,980 at the time of conversion. The conversion of the debt owing was triggered by the Initial Public Offering in terms of the convertible debenture agreement.
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| 4. | ESG Trust |
On 17 March 2022, the Company issued 869,963 common shares to the Akanda Bokamoso Empowerment Trust in terms of unconditional awards vested to the Akanda Bokamoso Empowerment Trust in terms of the Company’s Employee Share Ownership Plan. The Akanda Bokamoso Empowerment Trust has been established by Akanda Corp. as an ESG Trust to benefit employees of Akanda Corp. and its subsidiaries, especially those who are disadvantaged and vulnerable persons living in the Kingdom of Lesotho.
| 5. | IPO & Listing |
On 17 March 2022, the Company completed an Initial Public Offering and listed on the Nasdaq stock exchange. The Initial Public Offering saw the Company issue 4,000,000 common shares to IPO investors in exchange for gross proceeds of $16,000,000 and net proceeds of $14,682,089 after deducting underwriter commissions and allowable expenses.
| 6. | Conversion of Warrant |
On 22 March 2022, the Company’s underwriter’s, Boustead Securities Limited (“BSL”), exercised a purchase warrant to acquire 234,839 common shares. In terms of the purchase warrant held by the underwriters, BSL are entitled to purchase up to 280,000 common shares of the Company at a strike price of $5 per share. In terms of the warrant, BSL are entitled to convert their warrant into a right to purchase up to a maximum of 280,000 Akanda common shares based on the following formula:
X = Y(A-B)/A
Where:
| ● | A= the fair market value per Akanda share at the time of exercise ($31) | |
| ● | B = the strike per share ($5) | |
| ● | A - B = the difference between the fair market value of an Akanda common share at the time of exercise and the strike price of the warrant ($26), | |
| ● | Y = the maximum number of shares issuable to BSL under the warrant (280,000 common shares) | |
| ● | X = the number of common shares issuable to BSL upon exercise B multiplied by the number of shares exercisable under the warrant, and divided by the fair market value per share at the time of the exercising of the warrant. | |
| ● | On 22 March 2022, BSL exercised the warrant at an underling fair value price per share of $31 per share and are entitled to receive 234,839 common shares in accordance with the above formula as net settlement of the purchase warrant, which was calculated as follows: |
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| 7. | Acquisition of Holigen Limited |
On 20 April 2022, announced it has entered into a definitive agreement to acquire 100% of the issued and outstanding shares of Holigen Limited (“Holigen”) from The Flowr Corporation. Holigen is the owner of RPK Biopharma Unipessoal, Lda (“RPK”) a Portugal-based cultivator, manufacturer and distributor of medical cannabis products. Under the terms of the definitive agreement, Akanda will acquire Holigen for a combination of US$3.0 million in cash (C$3.75 million), 1.9 million Akanda common shares, and the assumption at RPK of approximately US$4.3 million (€4.0 million) of debt which is non- recourse to Akanda. In addition, to further align Akanda and Flowr, concurrently with the closing of the acquisition, Akanda will purchase 14,285,714 Flowr common shares for aggregate gross proceeds to Flowr of approximately US$790,000 (C$1.0 million) at a price per share of C$0.07.
The acquisition, which has been approved by the Boards of Directors of both companies, is expected to close during the second quarter of 2022, and is subject to the satisfaction or waiver of customary closing conditions, including the approval by the TSX Venture Exchange.
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