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.