NewsKanabo Posts £4.6m Loss For 2021 But Remains Bullish...

Kanabo Posts £4.6m Loss For 2021 But Remains Bullish As It Shifts Focus Towards Dispensing & Prescribing

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KANABO has released its first full-year financial results since becoming the second cannabis company in history to launch on the London Stock Exchange (LSE) in February last year. 

The release provides a first look into Kanabo’s performance as a revenue generating company, following the launch of its flagship vape products in the second half of the year. 

It also details the company’s plans for a shift in direction, just weeks after it announced that its £36m acquisition of Materia, a major deal which has been in the works for nearly a year, was no longer going ahead. 

This change in course, like a number of its UK-listed peers, has been driven by the ongoing downward trend in cannabis stocks. However, Kanabo’s CEO and Founder Avihu Tamir told BusinessCann he remains optimistic about both the company’s and the sector’s outlook, predicting a ‘second coming’ which will propel valuations. 

Full Year Results

In the 12 months to December 31 2021, Kanabo reported a pre-tax loss of £4.6m, up from around £600k a year earlier. 

It also reported an operating loss of £3.4m, equating to a loss per share of 1.4p, which it attributed to a number of factors, including the fact it remained ‘predominantly pre-revenue during the period’. 

Kanabo’s medical cannabis vapes were launched in the UK in late August, following the launch of its CBD VapePods in the UK, Germany, Canada, France, Italy and Poland in July. 

Over its revenue generating period, Kanabo reported sales of £73k. 

Its initial sales were more than offset by the £569k in sales and marketing expenses recorded for the year, alongside £653k in share-based payment expenses and £2m in administration expenses. 

The company also reported £242k in research and development costs, adding that it ‘did not capitalise any research and development expenses’ during the period because it believed ‘it is not yet probable that the technology and products upon which the research and development expenditure related to will bring in future economic benefits to the Group.’

Another £598K impairment was attributed to loans issued to Materia as part of the acquisition deal which is no longer going ahead, a sum Kanabo says it may or may not get back. 


It explained that while Materia is ‘willing to repay the balance’, there was no ‘sufficient evidence to demonstrate’ Materia has the cash to repay the loan in full, therefore the company’s directors have chosen to ‘fully impair the loan’. 

“The Company and Materia will continue to discuss their future collaboration and a strategic partnership through which the Company hope to recover the loan balance,” it added. 

Following the £3.4m loss, Kanabo had £4.5m in the bank as of December 31 2021, a figure it says will be sufficient to meet its obligations for the next 12 months, even if the company did not raise any more money. 

Materia Deal

When BusinessCann last spoke to Kanabo in November 2021, Mr Tamir said that the then 4-month old deal was set to ‘put Kanabo in a different category’ to its peers, taking its market cap past £100m and put it in a strong position to become one of ‘two or three’ European cannabis unicorn companies in the near future.

Since then Kanabo’s market cap has dropped from around £60m to £16.5m, and the acquisition deal which has been in the works for 10-months has been scrapped in favour of a ‘strategic partnership’ between the two companies. 

In a statement released in late May, Mr Tamir said: “We have concluded that the all-share acquisition of Materia is no longer in the best interests of Kanabo given prevailing market conditions and the alternatives available to us.”

For Kanabo, the deal consisted of two core benefits, use of Materia’s  EU GMP certified facility in Malta, and a well established inroads into the German medical cannabis market. 

As part of the new partnership, Kanabo will retain access to this production facility, estimated to be able to process 6000kg of flower a year worth a potential €36m, via a new ‘contract manufacturing agreement’.

Mr Tamir told BusinessCann: “In the near future, the company will present a few exclusive agreements with suppliers that will support and strengthen the Kanabo supply chain. 

Kanabo’s Founder & CEO Avihu Tamir

“In addition, as was announced, we have made a strategic contract manufacturing agreement with Materia that will allow us to benefit from the existing relationship between the companies. We also previously announced a strategic supplier agreement with Medocann, a leading premium quality medical cannabis provider in Israel whose products will be sold in the UK and in Germany.”

Materia also has a pharmaceutical wholesale operation in Germany, which Kanabo has previously referred to as its ‘weak spot’, offering the company a solid inroad into Europe’s biggest medical cannabis market. 

When asked whether the breakdown of the deal would impact its German expansion ambitions, Mr Tamir said he didn’t ‘expect this to be a significant setback as the core strategy for the German market is based on our medical inhaler device.’. 

He added: “The interest from distributors in the German market for our device has been high since it is expected to be the only medical device of its kind that has a metered-dose extract and vaporization technology.

“The device was approved as a medical device in Israel, and it is in the process of starting clinical trials that will show safety, bioavailability and efficacy. Secondly, it has passed an initial audit and we expect the final approval for the medical device CE mark imminently.”

New Direction 

With the dramatic scaling back of its flagship acquisition deal, Kanabo is now shifting its focus away from cultivation and production towards ‘last mile assets’. 

This shift has been reflected in Kanabo’s post-period activities, including the launch of its own ecommerce platform in March 2022, and the acquisition of UK private telemedicine healthcare provider The GP Service in February.

“The change is mainly due to market conditions. Currently, the focus has shifted from cultivation and production to last-mile assets like dispensing and prescribing medicinal cannabis. 

“We see that across the industry the highest revenue and long-lasting value occurs mainly with retailers, brand owners and those who have a direct relationship with patients and consumers. With the GP Service, we will be able to grow the market of medical cannabis patients and bring safe access to millions of UK citizens who are eligible and can benefit from it.”

Despite being forced to continually battle adverse market headwinds, Mr Tamir says he believes the drop is stock prices is merely a symptom of a ‘young market’, and that the same thing happened in North America. 

“After the first exciting listings came a slowdown in the cannabis stocks. However, once they started to generate sales and growth the shares rose higher than they were in the first cycle; I believe the EU market is no different.

“At the end of the day, it’s all about the expectation of investors, and in the long run, we all know that cannabis will be a significant industry in the UK and EU as it is in North America today. We remain confident that there will be a “second coming” for the sector that will propel valuations higher for those companies like Kanabo who have distinctive skills and market access.”

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