{"url_path":"/sec/akan/10-k/2026/item-18","section_key":"item-18","section_title":"Item 18 FINANCIAL STATEMENTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-06-09","source_url":"https://www.sec.gov/Archives/edgar/data/1888014/0001213900-26-066800-index.html","accession_number":"0001213900-26-066800","cik":"0001888014","ticker":"AKAN","issuer_name":"AKANDA CORP.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1888014/0001213900-26-066800-index.html","primary_entity_key":"0001888014","primary_entity_name":"AKANDA CORP."},"word_count":25812,"has_tables":true,"body_markdown":"**ITEM 18. FINANCIAL STATEMENTS**\n\n \n\nThe following financial\nstatements are filed as part of this annual report on Form 20-F.\n\n \n\n88\n\n \n\n \n\n**Index to Financial Statements**\n\n** **\n\n**Akanda Corp.**\n\n \n\n \n**Page**\n\n[Independent\nAuditor’s Report](#F_001)\nF-2\n\nAudited\nConsolidated Financial Statements:\n \n\n[Consolidated\nStatements of Financial Position as at December 31, 2025 and December 31, 2024](#F_002)\nF-3\n\n[Consolidated\nStatements of Operations for the years ended December 31, 2025 and December 31, 2024](#F_003)\nF-4\n\n[Consolidated\nStatements of Changes in Shareholders’ Equity as at December 31, 2025 and December 31, 2024](#F_004)\nF-5\n\n[Consolidated\nStatements of Cash Flows for the years ended December 31, 2025 and December 31, 2024](#F_005)\nF-6\n\n[Notes to\nthe Consolidated Financial Statements](#F_006)\nF-7\n\n \n\nF-1\n\n \n\n** **\n\n**Report of Independent Registered\nPublic Accounting Firm**\n\n \n\n \n\n \n\nTo the shareholders and the board of directors\nof Akanda Corp.\n\n \n\n**Opinion on the Financial Statements**\n\n** **\n\nWe have audited the accompanying consolidated\nstatements of financial position of Akanda Corp. (the “Company”), as of December 31, 2025 and 2024, the related consolidated\nstatements of comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for the years then ended, and the related\nnotes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present\nfairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations\nand its cash flows for the years then ended, in conformity with the International Financial Reporting Standards as issued by the International\nAccounting Standards Board.\n\n \n\n**Consideration of the Company’s Ability\nto Continue as a Going Concern**\n\n** **\n\nThe accompanying consolidated financial statements\nhave been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements,\nthe Company’s significant operating losses and cash outflows raise substantial doubt about its ability to continue as a going concern.\nThe consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.\n\n \n\n**Basis for Opinion**\n\n** **\n\nThese consolidated financial statements are the\nresponsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements\nbased on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)\nand are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable\nrules and regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audit in accordance with the\nstandards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated\nfinancial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we\nengaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding\nof internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s\ninternal control over financial reporting. Accordingly, we express no such opinion.\n\n \n\nOur audit included performing procedures to assess the risks of material\nmisstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those\nrisks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial\nstatements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as\nevaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for\nour opinion.\n\n \n\n/s/ GreenGrowthCPAs\n\n \n\nWe have served as the Company’s auditor\nsince 2023\n\nJune 9, 2026\n\nLos Angeles, California\n\nPCAOB ID Number 6580\n\n \n\nF-2\n\n \n\n \n\n**Akanda Corp.**\n\n**Consolidated Statements of Financial Position**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\nAs at \n  \nDecember 31,  \nDecember 31, \n\n  \nNote \n2025  \n2024 \n\nASSETS \n  \n   \n  \n\nCurrent \n  \n   \n  \n\nCash \n  \n$503,562  \n$3,838,650 \n\nCash held in trust \n  \n 574  \n 3,216 \n\nTrade and other receivables \n7 \n 1,399,977  \n 370,537 \n\nPrepayments \n8 \n 1,698,022  \n 391,649 \n\nLoans receivable \n13,18 \n \n—\n  \n 451,529 \n\nTotal Current Assets \n  \n 3,602,135  \n 5,055,581 \n\n  \n  \n    \n   \n\nNon-Current \n  \n    \n   \n\nProperty, plant and equipment \n10 \n 2,365,831  \n 2,339,182 \n\nIntangible assets and goodwill \n12 \n \n—\n  \n 15,827 \n\nLoan receivable \n13 \n \n—\n  \n 503,493 \n\nRight-of-use assets \n11 \n 227,589  \n \n—\n \n\nTotal Non-Current Assets \n  \n 2,593,420  \n 2,858,502 \n\n  \n  \n    \n   \n\nTotal Assets \n  \n$6,195,555  \n$7,914,083 \n\n  \n  \n    \n   \n\nLIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) \n  \n    \n   \n\nCurrent \n  \n    \n   \n\nTrade and other payables \n  \n$3,309,037  \n$2,982,499 \n\nLease liability \n14 \n 187,442  \n \n—\n \n\nLoans and borrowings \n4,15,16 \n 1,006,920  \n 352,814 \n\nConvertible promissory notes \n16 \n 1,055,420  \n \n—\n \n\nDue to related parties \n18 \n 640,546  \n 302,232 \n\nTotal Current Liabilities \n  \n 6,199,365  \n 3,637,545 \n\n  \n  \n    \n   \n\nNon-Current \n  \n    \n   \n\nLease liability \n14 \n 208,679  \n \n—\n \n\nSecured promissory notes \n4 \n 7,633,966  \n \n—\n \n\nSecured convertible debenture \n4 \n 4,143,982  \n \n—\n \n\nTotal Non-Current Liabilities \n  \n 11,986,627  \n \n—\n \n\n  \n  \n    \n   \n\nTotal Liabilities \n  \n 18,185,992  \n 3,637,545 \n\n  \n  \n    \n   \n\nShareholders’ Equity (Deficit) \n  \n    \n   \n\nCommon shares \n17 \n 73,555,097  \n 63,319,398 \n\nClass A special shares \n4,17 \n 597,836  \n \n—\n \n\nClass B special shares \n4,17 \n 20,455,241  \n \n—\n \n\nOther reserves \n  \n 3,370  \n 24,423 \n\nAccumulated deficit \n  \n (103,091,953) \n (57,459,061)\n\nAccumulated other comprehensive loss \n  \n (2,304,665) \n (1,608,222)\n\nNon-controlling interest \n20 \n (1,205,363) \n \n—\n \n\nTotal\nShareholders’ Equity (Deficit) \n  \n (11,990,437) \n 4,276,538 \n\nTotal Liabilities and\nShareholders’ Equity (Deficit) \n  \n$6,195,555  \n$7,914,083 \n\n \n\nSubsequent Events (Note 29)\n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-3\n\n \n\n \n\n**Akanda Corp.**\n\n**Consolidated Statements of Loss and Comprehensive\nLoss**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n  \n  \nYears ended \n\n  \n  \nDecember 31, \n\n  \nNote \n2025  \n2024 \n\n  \n  \n   \n  \n\nSales \n25 \n$258,075  \n$\n—\n \n\nCost of sales \n  \n 414,098  \n \n—\n \n\nGross Profit (Loss) \n  \n (156,023) \n \n—\n \n\n  \n  \n    \n   \n\nOperating expenses \n  \n    \n   \n\nDepreciation and amortization \n10,11 \n 433,693  \n 137,271 \n\nConsulting and professional fees \n18 \n 1,463,786  \n 2,377,926 \n\nPersonnel expenses \n18 \n 624,710  \n 495,699 \n\nGeneral and administrative expenses \n26 \n 2,305,195  \n 1,019,287 \n\nTotal operating expenses \n  \n 4,827,384  \n 4,030,183 \n\n  \n  \n    \n   \n\nOperating loss \n  \n (4,983,407) \n (4,030,183)\n\n  \n  \n    \n   \n\nOther income (expenses): \n  \n    \n   \n\nFinance income \n  \n \n—\n  \n 2,953 \n\nFinance expense \n4,14,15,18 \n (925,092) \n (81,083)\n\nForeign exchange gain (loss), net \n  \n 273,606  \n (132,842)\n\nTransaction costs\n \n16\n \n \n(350,000\n)\n \n \n—\n \n\nChange in fair value of financial liabilities measured at FVTPL\n \n4,16\n \n \n1,750,820\n \n \n \n—\n \n\nGain (loss) on debt settlement \n4,17 \n 1,914,956  \n (219,719)\n\nOther income \n  \n \n—\n  \n 74,455 \n\nGain on sale of subsidiary \n5 \n \n—\n  \n 198,780 \n\nWrite-off of AP, net \n  \n \n—\n  \n 475,816 \n\nWrite-off of holdback payable \n4 \n \n—\n  \n 400,000 \n\nWrite-off of loan receivable \n13 \n (235,686) \n \n—\n \n\nImpairment loss \n10, 11, 12 \n (44,812,112) \n \n—\n \n\n  \n  \n (42,383,508) \n 718,360 \n\n  \n  \n    \n   \n\nNet loss from continuing operations \n  \n (47,366,915) \n (3,311,823)\n\n  \n  \n    \n   \n\nGain (loss) from discontinued operation \n5,6 \n 507,604  \n (784,206)\n\n  \n  \n    \n   \n\nNet loss \n  \n$(46,859,311) \n$(4,096,029)\n\nTranslation adjustment \n  \n (175,651) \n (101,188)\n\nComprehensive loss \n  \n$(47,034,962) \n$(4,197,217)\n\n  \n  \n    \n   \n\nNet loss attributable to: \n  \n$   \n   \n\nShareholders of the Company \n  \n (45,653,948) \n$(4,096,029)\n\nNon-controlling interest \n  \n (1,205,363) \n \n—\n \n\n  \n  \n$(46,859,311) \n$(4,096,029)\n\n**Net comprehensive loss attributable to:** \n  \n    \n   \n\nShareholders of the Company \n  \n$(46,242,254) \n$(4,197,217)\n\nNon-controlling interest \n  \n (792,708) \n \n—\n \n\n  \n  \n$(47,034,962) \n$(4,197,217)\n\n  \n  \n    \n   \n\nLoss per share from continuing operations – basic and diluted \n17 \n$(669.58) \n$(223.48)\n\nLoss per share – basic and diluted \n17 \n$(662.22) \n$(276.40)\n\nWeighted average common shares outstanding \n17 \n 68,941  \n 14,819 \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-4\n\n \n\n \n\n**Akanda Corp.**\n\n**Consolidated Statements of Shareholders’\nEquity**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n  \nNote \nCommon\n\nShares  \nClass\nA\nSpecial\nShares  \nClass\nB\nSpecial\nShares  \nOther\n\nReserves  \nSecured\n\nConvertible\nDebt - Equity\nComponent  \nAccumulated\n\nDeficit  \nAccumulated\n\nOther\nComprehensive\nLoss  \nNon-\n\ncontrolling\ninterest  \nTotal \n\nBalance,\nDecember 31, 2023 \n  \n$51,020,121  \n$—  \n$—  \n$21,053  \n$—  \n$(53,363,032) \n$(1,507,034) \n$—  \n$(3,828,892)\n\n  \n  \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nIssuance\nof shares from private placement \n17 \n 1,396,702  \n —  \n —  \n 11,531,486  \n —  \n —  \n —  \n —  \n 12,928,188 \n\nIssuance\nof shares upon exercise of prefunded warrants \n17 \n 11,528,116  \n —  \n —  \n (11,528,116) \n —  \n —  \n —  \n —  \n — \n\nCancelled\nshares \n17 \n (1,445,188) \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n (1,445,188)\n\nShare\nissuance costs \n17 \n (728,056) \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n (728,056)\n\nFair value of RSUs redeemed at $577.97 per share \n17 \n 1,547,703  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n 1,547,703 \n\nNet\nloss \n  \n —  \n —  \n —  \n —  \n —  \n (4,096,029) \n —  \n —  \n (4,096,029)\n\nTranslation\nadjustment \n  \n —  \n —  \n —  \n —  \n —  \n —  \n (101,188) \n —  \n (101,188)\n\nBalance,\nDecember 31, 2024 \n  \n 63,319,398  \n —  \n —  \n 24,423  \n —  \n (57,459,061) \n (1,608,222) \n —  \n 4,276,538 \n\n  \n  \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nIssuance\nof shares from private placement \n17 \n 320,000  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n 320,000 \n\nIssuance\nof special shares pursuant to the acquisition of First Towers \n4,17 \n —  \n 597,836  \n 19,700,885  \n —  \n —  \n —  \n —  \n —  \n 20,298,721 \n\nIssuance\nof special shares pursuant to a debt settlement \n4,17 \n —  \n —  \n 754,356  \n —  \n —  \n —  \n —  \n —  \n 754,356 \n\nIssuance\nof shares upon conversion of promissory note \n16,17 \n 10,737,400  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n 10,737,400 \n\nFair\nvalue adjustment on the converted promissory note \n  \n (777,627) \n —  \n —  \n —  \n    \n —  \n —  \n —  \n (777,627)\n\nShare\nissuance costs \n17 \n (44,071) \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n (44,071)\n\nImpact\nof loss of control of Canmart \n6 \n (3) \n —  \n —  \n (21,053) \n —  \n 21,056  \n (520,792) \n —  \n (520,792)\n\nNet\nloss \n  \n —  \n —  \n —  \n —  \n —  \n (45,653,948) \n —  \n (1,205,363) \n (46,859,311)\n\nTranslation\nadjustment \n  \n —  \n —  \n —  \n —  \n —  \n —  \n (175,651) \n —  \n (175,651)\n\nBalance,\nDecember 31, 2025 \n  \n$73,555,097  \n$597,836  \n$20,455,241  \n$3,370  \n$720,381  \n$(103,091,953) \n$(2,304,665) \n$(1,205,363)  \n$(11,990,437)\n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-5\n\n \n\n \n\n**Akanda Corp.**\n\n**Consolidated Statements of Cash Flows**\n\n**(Expressed\nin United States Dollars)**\n\n**  **\n\n  \n  \n\n**Years ended**\n\n**December 31,**\n \n\n  \nNote \n2025  \n2024 \n\nCash flows from operating activities: \n  \n   \n  \n\nNet loss from continuing operations \n  \n$(47,366,915) \n$(3,311,823)\n\nNet gain (loss) from discontinued operations \n6 \n 507,604  \n (784,206)\n\nNet loss for the year \n  \n (46,859,311) \n (4,096,029)\n\nAdjustments for non-cash items: \n  \n    \n   \n\nGain on loss of control of Canmart, net of cash surrendered and foreign currency translation adjustment \n6 \n (12,999) \n \n—\n \n\nDepreciation and amortization \n10,11 \n 433,693  \n 137,271 \n\nDepreciation and amortization from discontinued operations \n10 \n 926  \n 265,284 \n\nInterest expenses and accretion \n  \n 925,092  \n 81,083 \n\nInterest expenses from discontinued operations \n15 \n \n—\n  \n 143,229 \n\nInterest income from Bridge loans \n13 \n \n—\n  \n (6,446)\n\nFair value of RSUs granted and exercised \n17 \n \n—\n  \n 1,547,703 \n\nGain on settlement on debt \n4,17 \n (1,914,956) \n (27,554)\n\nGain on sale of subsidiary \n5 \n \n—\n  \n (198,780)\n\nWrite-off of AP, net \n  \n \n—\n  \n (475,816)\n\nWrite-off of holdback payable \n4 \n \n—\n  \n (400,000)\n\nWrite-off of loan receivable \n13 \n 235,686  \n \n—\n \n\nForeign exchange gain, net \n  \n (273,606) \n \n—\n \n\nImpairment loss \n10,11,12 \n 44,812,112  \n \n—\n \n\nChange in fair value of financial liabilities at FVTPL\n \n4,16\n \n \n(1,750,820\n)\n \n \n—\n \n\nWorking capital adjustments (net of amounts acquired/disposed): \n  \n    \n   \n\nTrade and other receivables \n  \n 68,459  \n (254,676)\n\nPrepayments \n  \n (1,344,237) \n (285,588)\n\nInventory \n  \n \n—\n  \n 366,215 \n\nTrade and other payables \n  \n (1,209,862) \n (733,363)\n\nDue to related parties \n  \n 160,775  \n (42,898)\n\nCash flows used in operating activities \n  \n (6,729,048) \n (3,980,365)\n\n  \n  \n    \n   \n\nCash flows from investing activities: \n  \n    \n   \n\nAdditions to property, plant and equipment \n10 \n (1,234,056) \n (2,098,138)\n\nCash surrendered on sale of RPK \n5 \n \n—\n  \n (105,175)\n\nNet cash proceeds from sale of subsidiary \n5 \n \n—\n  \n 1,553,750 \n\nLoan repayment (receivable) \n13 \n 347  \n (16,602)\n\nCash lent for Bridge loan \n13 \n \n—\n  \n (350,000)\n\nCash surrendered on loss of control of Canmart \n6 \n (174) \n \n—\n \n\nAcquisition of First Towers, net of cash acquired and unpaid note consideration \n4 \n (6,218,004) \n \n—\n \n\nCash flows used in investing activities \n  \n (7,451,887) \n (1,016,165)\n\n  \n  \n    \n   \n\nCash flows from financing activities: \n  \n    \n   \n\nProceeds from private placement, net of costs \n17 \n 275,929  \n 10,754,944 \n\nProceeds from issuance of convertible promissory notes \n16 \n 12,000,000  \n \n—\n \n\nAdvances from (to) related parties \n18 \n (220,030) \n 44,954 \n\nRepayment of advances from related parties \n  \n (62,596) \n (1,470,826)\n\nLoans received \n  \n \n—\n  \n 65,282 \n\nLoans repaid \n  \n (201,206) \n (104,920)\n\nLease payments \n14 \n (113,782) \n (300,000)\n\nCash flows provided by financing activities \n  \n 11,678,315  \n 8,989,434 \n\n  \n  \n    \n   \n\nNet increase (decrease) in cash and cash equivalents \n  \n (2,502,620) \n 3,992,904 \n\nEffects of exchange rate changes on cash and cash equivalents \n  \n (835,110) \n (244,913)\n\nCash and cash equivalents at the beginning of the year \n  \n 3,841,866  \n 93,875 \n\nCash and cash equivalents at the end of the year \n  \n$504,136  \n$3,841,866 \n\n \n\nThe accompanying notes are an integral\npart of these consolidated financial statements.\n\n \n\nF-6\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**1.**\n**Nature of Operations\nand Going Concern**\n\n** **\n\nAkanda Corp. (the “Company”)\nis domiciled in Canada and was incorporated on July 16, 2021. The Company’s registered office is 77 King Street West,\nSuite 400, Toronto-Dominion Centre, Toronto Canada, Ontario, M5K 0A1. The Company, through its subsidiaries. operates as a cannabis cultivation,\nmanufacturing, and distribution company. The Company is also in the business of leasing fiber optic networks and telecommunication towers,\nthrough its subsidiary First Towers which is based in Mexico.\n\n \n\nThe Company was incorporated for the\ndesigned purpose of becoming the ultimate parent company of Cannahealth Ltd. (“Cannahealth”), through a reorganization of\nentities with common control. The share purchase agreement became unconditional on or about November 3, 2021 and the Company acquired\nthe shares in the aforementioned entities from Halo Collective Inc. (“Halo”).\n\n \n\nOn April 29, 2022, the Company, through\nits wholly owned subsidiary, Cannahealth, acquired 100% of the Ordinary Shares of Holigen Limited (“Holigen”) and its\nwholly-owned subsidiary, RPK Biopharma Unipessoal, LDA (“RPK”) from the Flowr Corporation (note 4).\n\n \n\nOn February 28, 2024, the Company\nincorporated a new subsidiary – 1468243 B.C. Ltd.\n\n \n\nOn March 24, 2024, the Company completed\nthe transaction with Somai Pharmaceuticals Ltd. (“Somai”) for the sale of RPK (note 5). The Company accounted for the operating\nresults of RPK which was a net loss of $827,620 as a discontinued operation during the year ended December 31, 2024 and has reclassified\nthe operating results of RPK as a discontinued operation for the year ended December 31, 2023.\n\n \n\nPrior to the liquidation event on\nMay 30, 2025 described below, the Company, through its subsidiary Canmart Ltd. (“Canmart”), is also in the business of sales\nand distribution of cannabis-based products for medical use, which is based in the United Kingdom (“UK”). During the first\nquarter of 2025, the Company evaluated the current state of Canmart and has determined to discontinue and cease it UK operation. The\nCompany filed for creditor’s voluntary liquidation and had the winding up commenced on May 30, 2025 (note 6). At December 31, 2025,\nthe Company no longer controlled Canmart and derecognized all assets and liabilities at their book values on May 30, 2025 and wrote down\nall balances to $nil. The Company accounted for the operating results of Canmart which was a net loss of $26,013 as a discontinued\noperation during the year ended December 31, 2025 and has reclassified the operating results of Canmart as a discontinued operation for\nthe year ended December 31, 2024.\n\n \n\nOn August 19, 2025, the Company acquired\n100% of the common shares of First Tower and Fibre Corp. (“First Towers” or “FTFC”) together with its subsidiaries,\nCanadian Towers & Fiber Optics S.A. de C.V. (“CTFO Mexico”) and Canadian Towers S.A. de C.V. (“CT Mexico”)\nfrom the shareholders of First Tower (note 4).\n\n \n\nThe Company’s consolidated financial statements have been prepared\non a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal\ncourse of business for the foreseeable future. The Company incurred a net cash outflow of $6,729,048 from operating activities for the\nyear ended December 31, 2025. As of December 31, 2025, the Company had working capital deficit of $2,597,230 and has accumulated losses\nof $103,091,953. The continuing operations of the Company are dependent upon its ability to raise further cash funding by way of issuing\ndebt and/or equity, as well as its ability to generate cash profits from its investments in First Towers in the near future.\n\n \n\nF-7\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**1.**\n**Nature of Operations\nand Going Concern (continued)**\n\n** ** \n\nThe Company is an early-stage company\nand is primarily dependent on externally provided financing and revenue generated by its subsidiary to continue as a going concern. Additional\nfunds will be required to enable the Company to pursue such an initiative and the Company may be unable to obtain such financing on satisfactory\nterms. Furthermore, there is no assurance that the Company will be profitable. Management intends to finance operating costs over the\nnext twelve months with its cash on hand, equity and debt financing, and/or additional cash that will be generated from operations. The\nCompany does not at this stage have any firm plans or commitments regarding further financing.\n\n \n\nThese uncertainties may cast significant\ndoubt upon the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments\nrelating to the recoverability and classification of assets and liabilities which might be necessary should the Company be unable to\ncontinue in existence.\n\n \n\n**2.**\n**Basis of Preparation**\n\n** **\n\n \n**(a)**\n**Statement of compliance**\n\n \n\nThese consolidated financial statements,\nincluding comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued\nby the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting\nInterpretations Committee (“IFRIC”).\n\n \n\n \n**(b)**\n**Basis of preparation**\n\n \n\nThese consolidated financial statements\nhave been prepared on an accrual basis, except for cash flow information, and are based on the historical cost, modified where applicable\nand related to the valuation of certain financial assets and financial liabilities to fair value.\n\n  \n\n \n**(c)**\n**Functional and presentation\ncurrency**\n\n \n\nThe Company and its subsidiaries are\nmeasured using the currency of the primary economic environment in which each subsidiary operates - the functional currency. The Euro\nis the functional currency of the Company’s former RPK business, Holigen and Cannahealth, Great British Pounds is the functional\ncurrency of the Company’s former Canmart business, Mexican Peso is the functional currency of CTFO Mexico and CT Mexico and Canadian\nDollars is the functional currency of First Towers, 1371011 and Akanda while the United States Dollars is its reporting currency.\n\n \n\nThese consolidated financial statements\nare prepared and presented in United States Dollars (“USD” or “$”), which is the Company’s reporting currency.\nAll financial information has been rounded to the nearest dollar except where indicated otherwise.\n\n \n\nF-8\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **  \n\n**2.**\n**Basis of Preparation\n(continued)**\n\n \n\n \n**(d)**\n**Use of estimates\nand judgments**\n\n \n\nThe preparation of consolidated financial\nstatements in conformity with IFRS requires management to make estimates, judgements and assumptions that affect the application of accounting\npolicies and the reported amounts of assets, liabilities, revenue and expenses during the year. Estimates and underlying assumptions\nare reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and\nin any future periods affected. Areas in which management has made critical judgments in the process of applying accounting policies\nand that have the most significant effect on the amounts recognized in the consolidated financial statements include the determination\nof the Company’s and its subsidiaries’ functional currencies. Information about key assumptions and estimation uncertainties\nthat have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial\nyear are included in the following notes to consolidated financial statements for the year ended December 31, 2025:\n\n \n\n \n●\nNote 3(d): Estimates of\nthe fair value of the Company’s compound financial instruments\n\n \n\n \n●\nNote 3(e): Estimates of\nvariable consideration receivable from revenue from contracts with customers\n\n \n\n \n●\nNote 3(g): Estimates of\nthe net realizable value of the Company’s inventories\n\n \n\n \n●\nNote 3(h): Estimates of\nthe fair value of the Company’s biological assets\n\n \n\n \n●\nNote 3(i): Measurement\nand useful lives of the Company’s property, plant and equipment\n\n \n\n \n●\nNote 3(j): Measurement\nand useful lives of the Company’s intangible assets\n\n \n\n \n●\nNote 3(l): Estimates and\nassessment of the income tax assets/liabilities\n\n \n\n \n●\nNote 3(m): Estimates of\nthe Company’s incremental borrowing rate used in the valuation of its leases\n\n \n\n \n●\nNote 3(o): Estimates of\nthe Company’s acquisition\n\n \n\n**3.**\n**Material Accounting\nPolicies**\n\n \n\n  **(a)** **Basis of consolidation**\n\n \n\nThese consolidated financial statements\ninclude the accounts of the Company and its subsidiaries. Subsidiaries are entities that are controlled by the Company. Control exists\nwhen the Company has power over the investee and the Company is exposed or has the rights to variable returns from the investee. Subsidiaries\nare included in the consolidated financial results of the Company from the effective date of acquisition up to the effective date of\ndisposition or loss of control. The financial statements of the subsidiaries are prepared for the same reporting period as the parent\ncompany, using consistent account policies. All intercompany transactions and balances and unrealized gains and losses from intercompany\ntransactions have been eliminated.\n\n \n\nF-9\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **  \n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n \n\n \n**(a)**\n**Basis of consolidation\n(continued)**\n\n  \n\nThe subsidiaries of the Company are\nas follows:\n\n \n\n   Country of\nIncorporation  Holding   Functional\nCurrency\n\nCannahealth Ltd. (“Cannahealth”)  Malta   100%  EUR\n\nBophelo Holdings Ltd. (“Bophelo H”)  United Kingdom   100%  GBP\n\nBophelo Bio Science and Wellness (Pty) Ltd. (“Bophelo”)  Lesotho   100%  LSL\n\nCanmart Ltd. (“Canmart”)**  United Kingdom   100%  GBP\n\nHoligen Holdings Limited (“Holigen”)  Portugal   100%  EUR\n\nRPK Biopharma Unipessoal Lda. (“RPK”)*  Portugal   0%  EUR\n\n1371011 BC Ltd. (“1371011”)  Canada   100%  CAD\n\n1468243 BC Ltd. (“1468243”)  Canada   100%  CAD\n\nFirst Towers & Fibers Corp. (“First Towers”)  Canada   100%  CAD\n\nCanadian Towers & Fiber Optics S.A. de C.V. (“CTFO Mexico”)  Mexico   96%  MXN\n\nCanadian Towers S.A. de C.V. (“CT Mexico”)  Mexico   0% (structured entity) [1]   MXN\n\n \n\n****RPK was sold during the year ended December 31, 2024*\n\n*****Canmart was liquidated on May 30, 2025*\n\n \n\n*Non-controlling\ninterests*\n\n \n\nNon-controlling\ninterests are classified as a separate component of equity. On initial recognition, non-controlling interests are measured at their proportionate\nshare of the acquisition date fair value of identifiable net assets of the related subsidiary acquired by the Company. Subsequent to\nthe acquisition date, adjustments are made to the carrying amount of non-controlling interests for the non-controlling interests’\nshare of changes to the subsidiary’s equity. Adjustments to recognize the non-controlling interests’ share of changes to\nthe subsidiary’s equity are made even if this results in the non-controlling interests having a deficit balance.\n\n \n\n[1]\nPursuant to the acquisition\nof First Towers, the Company consolidated CT Mexico over which it holds no direct or indirect ownership interest as at acquisition\ndate, as originally accounted under First Towers. As the Company acquired First Towers, the Company had determined that it exercises\ncontrol over CT Mexico in accordance with IFRS 10 – Consolidated Financial Statements, as it:\n\n \n\n–has\nthe power to direct the relevant activities of CT Mexico through contractual arrangements\nand operational control;\n\n \n\n \n–\nis exposed to variable\nreturns through its funding, management, and operational activities with the entity; and\n\n \n\n \n–\nhas the ability to use\nits power over CT Mexico to affect those returns.\n\n \n\nAccordingly,\nCT Mexico has been fully consolidated in these financial statements. The Company has determined that CT Mexico qualifies as a structured\nentity under IFRS 12 due to the nature of its design and purpose. CT Mexico is structured in such a way that voting or similar rights\nare not the dominant factor in determining control.\n\n \n\nThe\nCompany does not provide financial support to CT Mexico beyond existing contractual obligations, and there are no explicit arrangements\nthat would require the Company to do so in the future.\n\n \n\nF-10\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n** ** \n\n  **(b)** **Foreign currency**\n\n \n\nItems included in the financial statements\nof each of the Company’s consolidated subsidiaries are measured using the currency of the primary economic environment in which\neach subsidiary operates (the functional currency). The consolidated financial statements are presented in USD. All assets and liabilities\nin each statement of financial position are translated at the closing rate at the date of that statement of financial position. All income\nand expenses are translated at exchange rates at the dates of the transactions.\n\n \n\nForeign currency transactions are translated\ninto the respective functional currencies of the Company and its subsidiaries using the exchange rates prevailing at the dates of the\ntransactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end\nexchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss. Non-monetary items\nthat are not carried at fair value are translated using the exchange rates as at the date of the initial transaction. Non-monetary items\nmeasured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.\n\n \n\nThe results and financial position\nof the Company’s foreign subsidiaries that have a different functional currency from the Company’s functional and presentation\ncurrency are translated into USD as follows:\n\n \n\n \n(i)\nAssets and liabilities\nof the foreign subsidiary are translated at the closing exchange rate on the date of the consolidated statement of financial position;\n\n \n\n \n(ii)\nRevenue and expenses of\nthe foreign subsidiary are translated at the average closing exchange rate for the period reported in the consolidated statement\nof profit or loss. When the average exchange rate does not provide a reasonable approximation of the cumulative effect of the rates\nprevailing on the transaction date, the Company utilizes the closing exchange rate on the date of the transaction; and\n\n \n\n \n(iii)\nThe exchange rate differences\nfor foreign subsidiaries are recognized in other comprehensive income in the cumulative translation account.\n\n \n\n  **(c)** **Financial instruments**\n\n \n\n \n*(i)*\n*Financial assets*\n\n \n\nThe Company initially recognizes a\nfinancial asset on the trade date at which the Company becomes a party to the contractual provisions of the instrument.\n\n \n\nUpon recognition of a financial asset,\nclassification is made based on the business model for managing the asset and the asset’s contractual cash flow characteristics.\nThe financial asset is initially recognized at its fair value and subsequently classified and measured as (i) amortized cost; (ii) fair\nvalue through other comprehensive income (“FVOCI”); or (iii) FVTPL. Financial assets are classified as FVTPL if they\nhave not been classified as measured at amortized cost or FVOCI.\n\n \n\nThe Company derecognizes a financial\nasset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash\nflows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are\ntransferred. Financial assets and liabilities are offset and the net amount presented in the consolidated statements of financial position\nwhen, 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\nasset and settle the liability simultaneously. The Company has classified all of its financial assets as financial assets measured at\namortized cost or FVTPL. The Company has not classified any financial assets as FVTPL or FVOCI.\n\n \n\nF-11\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n  \n\n \n**(c)**\n**Financial instruments\n(continued)**\n\n \n\n \n*(i)*\n*Financial assets (continued)*\n\n \n\nFinancial assets measured at amortized\ncost\n\nA non-derivative financial asset is\nmeasured at amortized cost when both of the following conditions are met: (i) the asset is held within a business model whose objective\nis to hold assets in order to collect the contractual cash flows; and (ii) the contractual terms of the financial asset give rise\non specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Such assets\nare recognized initially at fair value plus any directly attributable transaction costs and measured at amortized cost using the effective\ninterest method subsequent to initial recognition, loans and receivables are measured at amortized cost. Financial assets measured at\namortized cost are comprised of cash, trade and other receivables, loans receivable and due from related party.\n\n \n\nImpairment of financial assets\nat amortized cost\n\nThe Company recognized a loss allowance\nfor expected credit losses (“ECL”) on financial assets that are measured at amortized cost. At each reporting date, the Company\nmeasures the loss allowance for the financial asset at an amount equal to the lifetime ECL if the credit risk on the financial asset\nhas increased significantly since initial recognition. If at the reporting date, the financial asset’s credit risk has not increased\nsignificantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the 12-month\nECL.\n\n \n\n \n*(ii)*\n*Financial liabilities*\n\n \n\nThe Company recognizes a financial\nliability on the trade date in which it becomes a party to the contractual provisions of the instrument at fair value plus any directly\nattributable costs. Financial liabilities are subsequently measured at amortized cost or FVTPL and are not subsequently reclassified.\nThe Company’s financial liabilities are trade and other payables and loans and borrowings which are recognized on an amortized\ncost basis.\n\n \n\nFinancial liabilities measured\nat amortized cost\n\n All financial liabilities are\nrecognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. Such financial\nliabilities are recognized initially at fair value plus any directly attributable transaction costs. All financial liabilities are measured\nat amortized cost, except for financial liabilities measured at FVTPL. A financial liability may no longer be reclassified subsequent\nto initial recognition. Subsequent to initial recognition, financial liabilities are measured at amortized cost using the effective interest\nmethod.\n\n \n\nThe Company derecognizes a financial\nliability when its contractual obligations are discharged or cancelled, or when they expire. The Company has the following non-derivative\nfinancial liabilities which are classified as financial liabilities measured at amortized cost: trade and other payables, due to related\nparties, and loans and borrowings.\n\n \n\n  **(d)** **Compound financial instruments**\n\n \n\nThe Company may issue financial instruments\nthat contain both liability and equity components. When the initial proceeds from such instruments are received, the liability component\nis recognized at the fair value of a similar liability that does not have an equity conversion option. The residual amount is allocated\nto the equity component and recorded in equity as a conversion feature reserve. Transaction costs are allocated proportionately to the\nliability and equity components. The liability is subsequently measured at amortized cost using the effective interest method.\n\n \n\nF-12\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n  \n\n \n**(d)**\n**Compound financial\ninstruments (continued)**\n\n \n\nThe allocation between liability and\nequity components is based on estimated fair values using discounted cash flows or option pricing models. Changes in assumptions may\nsignificantly affect the relative allocation and subsequent accounting treatment.\n\n \n\n  **(e)** **Revenue from contracts with customers**\n\n \n\nRevenue is measured based on the consideration\nspecified in a contract with a customer. The Company recognizes revenue when it transfers control over a good or service to a customer.\nThe Company records revenue upon transfer of promised goods or services to customers in amounts that reflect the consideration to which\nthe Company expects to be entitled in exchange for those goods or services based on the following five step approach:\n\n \n\n \nStep 1:\nIdentify the contracts\nwith customers;\n\n \n\n \nStep 2:\nIdentify the performance\nobligations in the contract;\n\n \n\n \nStep 3:\nDetermine the transaction\nprice;\n\n \n\n \nStep 4:\nAllocate the transaction\nprice to the performance obligations in the contract; and\n\n \n\n \nStep 5:\nRecognize revenue as performance\nobligations are satisfied.\n\n \n\nThe Company typically satisfies its\nperformance obligations at a point in time, upon completion of sale. The Company primarily acts as principal in contracts with its customers.\nThe Company does not have material obligations for returns, refunds and other similar obligations, nor warranties and related obligations.\n\n  \n\nRevenue is recognized at the amount\nof the transaction price that is allocated to the performance obligation. The transaction price is the amount of consideration to which\nan entity expects to be entitled in exchange for transferring promised goods or services to a customer.\n\n \n\nThe Company has the following revenue\nstreams:\n\n \n\n \n1)\nSale of cannabis-based\nproducts for medicinal use\n\n \n\n \n \nThis revenue stream is\nassessed as one performance obligation. Revenue from cannabis based medicinal product sales is recognized once the performance obligation\nhas been satisfied, which would be upon the customer taking the delivery of the product. The transaction price for each product and\nservice will be determined based on the respective invoice.\n\n \n\n \n \nPursuant to the cessation\nof Canmart in May 2025, no revenues have been recognized from this stream. As of December 31, 2025, the Company has not yet cultivated\nany product on its farm land property. The Company is currently operating under its hemp cultivation license and continuously working\non its full cultivation license for cannabis cultivation.\n\n \n\n \n2)\nLease and construction\nof telecommunications infrastructure, including towers and fiber networks\n\n \n\n \n \n\n*Leasing Revenue*\n\nRevenue from the lease of tower and fiber\nassets is recognized on a straight-line basis over the lease term, in accordance with IFRS 16. Lease agreements are classified as\noperating leases, typically ranging from five to thirteen years, and generally include fixed payments without significant variable\ncomponents.\n\n \n\nF-13\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n  \n\n \n**(e)**\n**Revenue from contracts\nwith customers (continued)**\n\n \n\n \n \n\n*Construction and Services Revenue*\n\nRevenue from infrastructure construction\nand related services is recognized over time as performance obligations are satisfied, based on input methods such as costs incurred\nrelative to total expected costs. These are typically fixed-price contracts governed by IFRS 15.\n\n \n\nThe Company exercises judgments in\ndetermining the amount of the costs incurred to obtain or fulfil a contract with a customer, which includes, but is not limited to (a) the\nlikelihood of obtaining the contract, (b) the estimate of the profitability of the contract, and (c) the credit risk of the\ncustomer. An impairment loss will be recognized in profit or loss to the extent that the carrying amount of the asset exceeds (a) the\nremaining amount of consideration that the entity expects to receive in exchange for the goods or services to which the asset relates,\nless (b) the costs that relate directly to providing those goods or services and that have not been recognized as expenses.\n\n \n\nSome of the Company’s revenue\nis derived from fixed price service contracts that may extend beyond one reporting period. Management must use estimates to determine\nthe percentage of work completed and revenue to recognize at the financial reporting period end date. For the year ended December 31,\n2025, all revenue is derived from leasing arrangements. No revenue was earned from contracts containing variable consideration or significant\nfinancing components.\n\n \n\n  **(f)** **Cash and cash equivalents**\n\n \n\nThe Company considers all liquid investments\npurchased with a maturity of three months or less at acquisition to be cash and cash equivalents, which are carried and classified\nat amortized cost. The Company did not hold any cash equivalents as of December 31, 2025 and 2024.\n\n \n\n  **(g)** **Inventories**\n\n \n\nInventories consist of raw materials\nand are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in first-out principle,\nand includes expenditures incurred in acquiring the inventories and other costs incurred in bringing them to their existing location\nand condition. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due\nto obsolescence, damage, or declining selling prices. Net realizable value is the estimated selling price in the ordinary course of business,\nless the estimated costs of completion and selling expenses. When the circumstances that previously caused inventories to be written\ndown below cost no longer exist, or when there is clear evidence of an increase in selling prices, the amount of the write-down previously\nrecorded is reversed.\n\n \n\n  **(h)** **Biological assets**\n\n \n\nBiological assets are measured at their\nfair value less costs to sell in the consolidated statement of financial position. The Company’s method of accounting for biological\nassets attributes value accretion on a straight-line basis throughout the life of the biological asset from initial cloning to the point\nof harvest. All direct and indirect costs of biological assets are capitalized as they are incurred.\n\n \n\nBiological assets and produce held\nby the Company is planned to be used in four possible ways:\n\n* *\n\n \n*●*\n*Sale to the export market;*\n\n \n\n \n*●*\n*Sale to the local market;*\n\n \n\n \n*●*\n*Repurposed for use in\nresearch and development; and*\n\n \n\n \n*●*\n*Written off for being\nobsolete.*\n\n** **\n\nF-14\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n** ** \n\n  **(i)** **Property, plant and equipment**\n\n \n\n \n*(i)*\n*Recognition and measurement*\n\n \n\nItems of property and equipment are\nmeasured at cost less accumulated depreciation and accumulated impairment losses. When parts of an item of property and equipment have\ndifferent estimated useful lives, they are accounted for as separate items within property and equipment. The costs of the ongoing regular\nservicing of property and equipment are recognized in tin the period in which they are incurred.\n\n \n\n \n*(ii)*\n*Depreciation*\n\n \n\nDepreciation is recognized in profit\nor 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\nestimated future consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative\nperiods are as follows:\n\n \n\nPlant and equipment   10 years\n\nLeasehold improvements   5 years\n\nMotor Vehicles   4 years\n\nComputers   3 years\n\nFurniture and fixtures   6 years\n\n \n\nThe Company has a majority of its\nproperty, plant and equipment in Mexico, held by its subsidiary First Towers, of which the depreciation is calculated using the straight-line\nmethod at the following annual rates:\n\n \n\n  *●* Fiber Optic Network 10%\n\n \n\n  *●* Telecom Towers 10%\n\n \n\n  *●* Machinery and Equipment 10%\n\n \n\n  *●* Other equipment 30%\n\n \n\nConstruction in progress represents\ncapitalized costs related to the construction of telecommunications towers and fiber optic infrastructure that are not yet available\nfor use. These amounts are transferred to the appropriate asset category when construction is complete and the asset is ready for its\nintended use, at which point depreciation commences. Construction in progress is not depreciated.\n\n \n\n  **(j)** **Intangible assets**\n\n \n\nIntangible assets are recorded at cost\nless amortization and impairment losses, if any. The Company had a cannabis operator’s license in Lesotho, held by its subsidiary\nBophelo, which was valid for 10 years and was subject to a renewal at the end of the 10 years. The license automatically\nrenewed annually on payment of necessary fees as well as submission of operational documents to the Ministry of Health. As a result of\nloss of control of Bophelo, the license was derecognized and recorded as a loss on the consolidated statement of loss and comprehensive\nloss. The Company also had a cannabis API manufacturing and GMP license in Portugal, held by its subsidiary Holigen-RPK, which is valid\nfor 10 years. Concurrent to the sale of RPK, the Company derecognized the value of the license.\n\n \n\nF-15\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n \n\n \n**(j)**\n**Intangible assets\n(continued)**\n\n   \n\nThe Company had cannabis distribution\nlicenses in the United Kingdom held by its subsidiary, Canmart which have been assessed as having an indefinite useful life. As such,\nthese licenses were not amortized but their recoverable amounts are tested annually for impairment. Pursuant to the cessation of Canmart\nin May 2025, the license was derecognized and recorded as a loss on the consolidated statement of loss and comprehensive loss. The indefinite\nintangible assets are recorded at cost less impairment losses, if any. The Company capitalizes the initial license application cost as\nthe cost of intangible assets while the annual license renewal fees are expensed in the year during which they occur.\n\n \n\n  **(k)** **Impairment of non-financial assets**\n\n \n\nThe Company assesses at each reporting\nperiod whether there is an indication that a non-financial asset may be impaired. An impairment loss is recognized when the carrying\namount of an asset, or its cash generating unit (“CGU”), exceeds its recoverable amount. A CGU is the smallest identifiable\ngroup of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The\nrecoverable amount is the greater of the assets or CGU’s fair value less costs to sell and value in use. In assessing value in\nuse, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market\nassessments 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\nvaluation model is used. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for\nthe CGU to which the asset belongs.\n\n \n\nImpairment losses recognized in prior\nperiods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is\nreversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to\nthe extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortization,\nif no impairment loss had been recognized.\n\n \n\n  **(l)** **Income taxes**\n\n \n\nIncome tax expense comprises current\nand deferred taxes. Current taxes and deferred taxes are recognized in profit or loss except to the extent that it relates to a business\ncombination, or items recognized directly in equity or in other comprehensive loss.\n\n \n\nCurrent taxes are the expected tax\nreceivable or payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting\ndate, and any adjustment to tax receivable or payable in respect of previous years. Deferred taxes are recognized in respect of\ntemporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for\ntaxation purposes.\n\n \n\nDeferred taxes are not recognized for\nthe following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination\nand that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled\nentities to the extent that it is probable that they will not reverse in the foreseeable future.\n\n \n\nIn addition, deferred taxes are not\nrecognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred taxes are measured at the tax rates\nthat are expected to be applied to temporary differences when they reverse, based on the tax laws that have been enacted or substantively\nenacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current\ntax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different\ntax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be\nrealized simultaneously.\n\n \n\nF-16\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n \n\n \n**(l)**\n**Income taxes (continued)**\n\n \n\nA deferred tax asset is recognized\nfor unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits\nwill be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the\nextent that it is no longer probable that the related tax benefit will be realized.\n\n \n\n  **(m)** **Leases**\n\n \n\nAt inception of a contract, the Company\nassesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control\nthe use of an identified asset for a period of time in exchange for consideration. The Company assesses whether the contract involves\nthe use of an identified asset, whether the right to obtain substantially all of the economic benefits from use of the asset during the\nterm 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\ncontract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis\nof their relative standalone prices.\n\n \n\nAs a lessee, the Company recognizes\na 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,\nwhich is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date,\nplus any decommissioning and restoration costs, less any lease incentives received.\n\n \n\nThe right-of-use asset is subsequently\ndepreciated 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,\nthe right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain remeasurements of the lease liability.\n\n \n\nA lease liability is initially measured\nat the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the\nlease, or if that rate cannot be readily determined, the incremental borrowing rate. Lease payments included in the measurement of the\nlease liability are comprised of:\n\n \n\n \na)\nfixed payments, including\nin-substance fixed payments, less any lease incentives receivable;\n\n \n\n \nb)\nvariable lease payments\nthat depend on an index or a rate, initially measured using the index or rate as at the commencement date;\n\n \n\n \nc)\namounts expected to be\npayable under a residual value guarantee;\n\n \n\n \nd)\nexercise prices of purchase\noptions if the Company is reasonably certain to exercise that option; and\n\n \n\n \ne)\npayments of penalties for\nterminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.\n\n \n\nThe lease liability is measured at\namortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change\nin 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,\npurchase, extension or termination option.\n\n \n\nVariable lease payments not included\nin the initial measurement of the lease liability are charged directly to profit or loss.\n\n \n\nF-17\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n \n\n  **(n)** **Loss per share**\n\n \n\nThe Company presents basic loss per\nshare (“LPS”) data for its ordinary shares. Basic LPS is calculated by dividing the profit or loss attributable to ordinary\nshareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for the Company’s\nown shares held. Diluted LPS is computed similar to basic LPS except that the weighted average shares outstanding are increased to include\nadditional shares for the assumed exercise of any exercisable instruments, if dilutive. The number of additional shares is calculated\nby assuming that outstanding exercisable instruments were exercised and that the proceeds from such exercise were used to acquire common\nshares at the average market price during the reporting periods.\n\n \n\n  **(o)** **Share capital**\n\n \n\nCommon shares are classified as equity.\nTransaction costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net\nof any tax effects. Common shares issued for consideration other than cash, are valued based on their market value at the date the shares\nare issued. The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private\nplacement units. The residual value method first allocates value to the more easily measurable component based on fair value and then\nthe residual value, if any, to the less easily measurable component. The Company considers the fair value of common shares issued in\na private placement to be the more easily measurable component and the common shares are valued at their fair value, as determined by\nthe closing quoted bid price on the announcement date. The balance, if any, is allocated to the attached warrants. Any fair value attributed\nto the warrants is recorded as reserves.\n\n \n\n  **(p)** **Business combinations**\n\n \n\nAcquisitions of a business are accounted\nfor using the acquisition method. The consideration transferred in a business combination is measured at fair value. This is calculated\nas the sum of the acquisition date fair values of the assets transferred by the Company and liabilities incurred by the Company to the\nformer owners of the acquiree in exchange for control of the acquiree. Acquisition related costs are recognized in profit and loss as\nincurred.\n\n \n\nGoodwill is measured as the excess\nof the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s\npreviously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired\nand the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and\nliabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and\nthe fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized in profit or loss\nas a bargain purchase gain.\n\n \n\nJudgment is required to determine if\nthe Company’s acquisitions represent a business combination or an asset acquisition. For acquisitions accounted as business combination,\ngoodwill was recognized on the transactions and acquisition costs were expensed. The cost of the business combination is measured as\nthe aggregate of the fair values (at the date of exchange) of assets acquired and liabilities incurred or assumed. For acquisitions representing\nasset acquisition, no goodwill was recognized on the transactions and acquisition costs were capitalized to the assets purchased. An\nallocation of the purchase price to the individual identifiable assets acquired, including intangible assets, and liabilities assumed\nbased on their fair values at the date of purchase was required. The fair values of the net assets acquired was calculated using significant\nestimates and judgments. If estimates or judgments differed, this could result in a materially different allocation of net assets on\nthe consolidated statement of financial position.\n\n \n\nF-18\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** ** \n\n**3.**\n**Material Accounting\nPolicies (continued)**\n\n \n\n  **(q)** **Accounting standards issued and adopted**\n\n \n\n**Amendments to IAS 1 and IFRS Practice\nStatement 2 – Disclosure of Accounting policies**\n\n \n\nThe amendments require that an entity\ndiscloses its material accounting policy information, instead of its significant accounting policies. Further amendments explain how\nan entity can identify a material accounting policy. Examples of when an accounting policy is likely to be material are added. To support\nthe amendment, the IASB has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality\nprocess’ described in IFRS Practice Statement 2. The amendments are effective for annual reporting periods beginning on or after\nJanuary 1, 2024. The adoption of this amendment did not have a significant impact to the Company’s consolidated financial statements.\n\n \n\nIn January 2020, the IAS issued\nan amendment to IAS 1 Presentation of Financial Statements that clarifies the criterion for classifying a liability as non-current relating\nto the right to defer settlement of a liability for at least 12 months after the reporting period.\n\n \n\n \n1.\nLiabilities are classified\nas non-current if the entity has a substantive right to defer settlement for at least 12 months at the end of the reporting period.\nThe amendment no longer refers to unconditional rights. The assessment determines whether a right exists, but it does not consider\nwhether the entity will exercise the right.\n\n  \n\n \n2.\n’Settlement’\nis defined as the extinguishment of a liability with cash, other economic resources or an entity’s own equity instruments.\nThere is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion\noption is classified as an equity instrument as a separate component of a compound financial instrument.\n\n \n\nIn October 2022, the IASB issued amendments\nto IAS 1 that specified how an entity assesses whether it has the right to defer settlement of a liability when that right is subject\nto compliance with covenants within twelve months after the reporting period. The amendment applies to annual reporting periods beginning\non or after January 1, 2024 and is applied retrospectively upon adoption. The adoption of this amendment did not have a significant\nimpact to the Company’s consolidated financial statements.\n\n \n\n  **(o)** **Recent accounting pronouncements**\n\n \n\nCertain new IFRS standards and interpretations\nhave been issued but are not shown as they are not expected to have a material impact on the Company’s consolidated financial statements.\n\n \n\nF-19\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** ** \n\n**4.**\n**Business Combination**\n\n \n\n**Acquisition of RPK**\n\n \n\nOn April 29, 2022, the Company, through\nits wholly owned subsidiary, Cannahealth, acquired 100% of the Ordinary Shares of Holigen and its wholly-owned operating subsidiary,\nRPK from the Flowr Corporation (“Flowr”). Consideration for the acquisition consisted of a payment of $3,000,000 in\ncash and 33 common shares of the Company’s share capital. Of the total cash purchase price, $2,600,000 has been paid\nand $400,000 as holdback payable. The holdback payable represents funds withheld until resolution of a potential liability between\nthe vendor and a service provider, of which the Company expects resolution within the next twelve (12) months.\n\n \n\nThe purchase of Holigen has been accounted\nfor by the acquisition method, with the results of Holigen included in the Company’s results of operation from the date of acquisition.\nThe purchase of Holigen was determined as being a business combination in accordance with the requirements of IFRS 3 - *Business Combinations*,\ndue to the fact that the Company acquired control over Holigen on the acquisition date through the purchase of 100% of its voting\nsecurities and consequent transfer of the purchase consideration to the sellers of the Holigen, namely Flowr.\n\n  \n\nOn February 28, 2024, the Company\nsigned a definitive Share Purchase Agreement and Escrow Agreement with Somai Pharmaceuticals Ltd. (“Somai”), pursuant to\nwhich Somai will acquire RPK for a total consideration of $2,000,000. The transaction was completed during the year ended December 31,\n2024 (note 5).\n\n \n\n*Status of Holigen’s seller*\n\n* *\n\nIn October 2022, Flowr commenced Court-supervised\nrestructuring proceedings under the *Companies’ Creditors Arrangement Act* (“CCAA”) in order to receive a stay\nof proceedings that will allow Flowr to conduct a Sale and Investment Solicitation Process (“SISP”). The Court granted an\nInitial Order in these CCAA proceedings and appointed Ernst & Young Inc. as ‘the Monitor’.\n\n \n\nDuring the year ended December 31,\n2023, Flowr completed the sale of all of the shares of its subsidiaries, The Flowr Group (Okanagan) Inc. and certain other assets, comprising\nsubstantially all of the assets of Flowr. As a result, and pursuant to an Order dated July 21, 2023, the Monitor completed cash and share\ndistributions to Flowr’s debenture holders. There is no recovery available for Flowr’s unsecured creditors and shareholders. For\nthis reason, the Company recognized a write-off of holdback payable of $400,000 during the year ended December 31, 2024.\n\n \n\n**Acquisition of First Towers**\n\n \n\nOn August 22, 2025, the Company consummated\nthe Business Combination pursuant to the Share Exchange Agreement ( “SEA”), as amended on August 19, 2025, with First Towers\n& Fibers Corp. (“First Towers”), a corporation existing under the laws of the Province of British Columbia. Pursuant\nto SEA, all of the common shares of First Towers have been acquired by the Company and in exchange, the Company will issue Class A Special\nShares and Class B Special Shares and cash payable over time and evidenced by a promissory note. As a result of the closing, which was\neffective on August 21, 2025 but dated as of August 19, 2025, First Towers became a wholly owned subsidiary of the Company together with\nits subsidiaries, CT Mexico and CTFO Mexico.\n\n \n\n*Consideration Shares*\n\nThe Company did not issue any of its\ncommon shares as of the closing, as originally contemplated by the SEA. On August 29, 2025, the Company held a Special Meeting of Shareholders\nand approved the creation of new classes of securities, including Class A Special Shares convertible into Company common shares on a\none for one basis and Class B Special Shares convertible into Company common shares on a one for one basis. After the Special Meeting\nand the approval of the new classes of securities, the Company issued post-consolidated 6,441 Class A Special Shares in accordance with\nthe terms of the SEA, as amended. On November 28, 2025, the Company held a second Special Meeting of shareholders and approved the issuance\nof an aggregate of post-consolidated 212,265 Class B Special Shares issuable to the former First Towers shareholders pursuant to the\nterms of the SEA, as amended (note 17).\n\n \n\nF-20\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** ** \n\n**4.**\n**Business Combination\n(continued)**\n\n \n\n**Acquisition of First Towers (continued)**\n\n \n\n*Consideration Note*\n\nIn connection with the closing, the\nCompany entered into a promissory note with a First Towers Shareholder (the “Consideration Note”), in lieu of the Company\nissuing Class A Special Shares and Class B Special Shares as consideration to such shareholder. The Consideration Note is in the principal\namount of $14,133,966. It has a maturity date of August 19, 2027 and has an interest rate of 16% per annum payable quarterly. In addition,\nthe Company paid to the holder of the Consideration Note a commitment fee of $424,019, recorded as interest expense in the consolidated\nstatements of loss and comprehensive loss. The Consideration Note is secured by all of the assets of the Company pursuant to a General\nSecurity Agreement dated as of August 19, 2025.\n\n \n\nDuring the year ended December 31,\n2025, the Company made a partial repayment of $6,500,000 and recorded an interest expense of $448,417 (2024 — $nil) related to\nthis loan. As of the December 31, 2025, the Consideration Note balance including interest was $8,082,383 (2024 — $nil). The Consideration\nNote balance is presented separately in the consolidated statements of financial position of which the remaining principal of $7,633,966\nwas accounted under non-current secured promissory note and the interest payable of $448,417 was recorded under loans and borrowings.\n\n \n\nFirst Towers owns and operates 700+kms\n5G dark fiber network in central Mexico, where some of the strongest industrial and fastest growing state economies in Mexico are located,\nwith multinational telecommunications giant Telefonica as anchor under a 20-year leasing contract.\n\n \n\nThe purchase of First Towers has been\naccounted for by the acquisition method, with the results of First Towers included in the Company’s results of operation from the\ndate of acquisition. For accounting purposes, the acquisition of First Towers was determined as being a business combination in accordance\nwith IFRS 3, with the Company identified as the accounting acquirer and First Towers as the acquiree. The fair value of the total consideration\nhas been allocated as below:\n\n \n\nClass A Special Shares (6,441 special shares*) \n$597,836 \n\nClass B Special Shares (212,265 special shares*) \n 19,700,885 \n\nCash (via Promissory Note) \n 14,133,966 \n\nTotal Consideration Paid \n$34,432,687 \n\n  \n   \n\nCash \n$281,996 \n\nTrade and other receivables (note 7) \n 1,163,221 \n\nPrepayments \n 7,420 \n\nProperty, plant and equipment, net (note 10) \n 4,123,220 \n\nRight-of-use assets (note 11) \n 181,206 \n\nGoodwill (note 12) \n 39,572,129 \n\nAccounts payable and accrued liabilities \n (1,402,638)\n\nDue to related parties \n (225,900)\n\nLease liabilities (note 14) \n (189,096)\n\nLoans and borrowings (note 15) \n (171,247)\n\nDue to/from Akanda \n (8,907,624)\n\nNet Assets Acquired \n$34,432,687 \n\n \n\n*The fair value of 218,706 special shares issued was determined to be $92.81 per special share using the market price at acquisition date.\n\n \n\nF-21\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**4.**\n**Business Combination\n(continued)**\n\n \n\n**Acquisition of First Towers (continued)**\n\n \n\nDuring the year ended December 31,\n2025, the Company recorded a goodwill of $39,572,129, representing the fair value of net liabilities acquired of $5,139,442 and the fair\nvalue of consideration of $34,432,687. The fair value of the net asset acquired was determined by an independent valuer using the discounted\ncash flow method of valuation.\n\n \n\nFrom the date of acquisition, the\noperations of First Towers contributed a net loss of $564,023 primarily due to the fact that First Towers was substantially in early\nrevenue stage. If the acquisition had taken place on January 1, 2025, the operations of First Towers would have contributed net gain\nof $3,263,489 for the year ended December 31, 2025.\n\n \n\nDuring the year ended December 31,\n2025, the acquired business contributed $258,075 in revenue and a net loss of $564,023 to the Company’s consolidated results.\n\n \n\nThe Company performed its annual test\nfor goodwill as at December 31, 2025. The Company did so by comparing the sum of the carrying value of the CGU of First Towers and the\ncarrying value of goodwill against the fair value of First Towers’ business. Based on the impairment test, the carrying value for\nboth goodwill and CGU far exceeded the fair value of First Towers’ business. As a result, goodwill was fully impaired as at December\n31, 2025 and an impairment loss of $39,572,129 was recorded in the consolidated statements of loss and comprehensive loss during the year\nended December 31, 2025 (note 12).\n\n \n\nAssumption of First Towers Indebtedness\n\n \n\nIn connection with the First Towers\nTransaction and the Closing, the Company entered into a Debt Settlement Agreement (the “PGC DSA”) and a Convertible Promissory\nNote (the “PGC Note”) with PGC Finco Inc. (“PGC”), and a Debt Settlement Agreement (the “Dunstan DSA”)\nand a Convertible Promissory Note (the “Dunstan Note”) with Dunstan Holdings Ltd. (“Dunstan”).\n\n \n\nIn satisfaction of all indebtedness\nof First Towers to PGC, the Company assumed indebtedness of First Towers in the aggregate principal amount of $4,153,078 which is evidenced\nby the PGC Note and the aggregate interest payable capitalize into a new loan of $2,068,633 which is evidenced by the PGC DSA. The Company\nagreed to pay PGC, in settlement of PGC DSA, a cash payment of $500,000 and issue to PGC, upon shareholder approval therefore, 24,762\nClass B Special Shares.\n\n \n\nIn satisfaction of all indebtedness\nof First Towers to Dunstan, the Company assumed indebtedness of First Towers in the aggregate principal amount of $756,917 which is evidenced\nby the Dunstan Note and the aggregate interest payable capitalize into a new loan of $602,325 which is evidenced by the Dunstan DSA. The\nCompany agreed to issue to Dunstan, upon shareholder approval therefore, 7,787 Class B Special Shares in settlement of Dunstan DSA.\n\n \n\nEach of the PGC Note and the Dunstan\nNote (collectively, the “Notes”) has a maturity date of August 19, 2031, has an interest rate of 8-1/2% per annum payable\nsemiannually in arrears, and are secured by all of the assets of the Company. Each Note may be converted from time to time by either\nthe Company or the holder of the Note, into common shares of the Company. As a result of the shareholders’ approval on November\n28, 2025, the Company may issue up to 1,213,333 common shares, from time to time in accordance with the terms, which is the maximum number\nof shares issuable upon the conversion of $4,909,995 of principal, plus interest, under the 6-year convertible promissory notes. The\nconversion price shall be a price per share equal to the greater of (a) $6.12 and (b) a 10% discount to the seven-trading day VWAP immediately\nprior to receipt of the conversion notice.\n\n \n\nF-22\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **   \n\n**4.**\n**Business Combination\n(continued)**\n\n \n\n**Acquisition of First Towers (continued)**\n\n \n\nAssumption of First Towers Indebtedness\n(continued)\n\n \n\nThe convertible debenture was determined\nto be a hybrid financial instrument with a liability and an embedded derivative liability. The Company has elected the option in IFRS\n9 to recognize the convertible debenture as one financial instrument at FVTPL. At the time of issuance, the Company determined the principal\namount of $4,909,995 as the fair value. During the year ended December 31, 2025, the Company assessed that the fair value of the convertible\ndebenture had decreased and recognized a $766,013 gain on change in fair value of financial liabilities measured at FVTPL in the consolidated\nstatements of loss and comprehensive loss.\n\n \n\nDuring the year ended December 31,\n2025, the Company paid $500,000 in cash and issued 32,549 Class B Special Shares with a fair value of $754,356 for the settlement of PGC\nDSA and Dunstan DSA (note 17). As a result of the issuance, the Company recognized a gain on debt settlement of $1,893,196 in the consolidated\nstatements of loss and comprehensive loss. As of December 31, 2025, the outstanding balance of the Notes was $4,143,982.\n\n \n\n**5.**\n**Sale of RPK**\n\n \n\nDuring the year ended December 31,\n2024, the Company commenced plans to sell its subsidiary - RPK, and on March 24, 2024, pursuant to the signed definitive Share Purchase\nAgreement and Escrow Agreement with Somai in February 2024, the Company completed the transaction with Somai for the sale of its RPK.\n\n \n\nUnder the terms of the Share Purchase\nAgreement, Somai acquired RPK for a total cash consideration of Two Million United States Dollars ($2,000,000). In addition, Somai assumed\nup to One Million Euros of current liabilities and RPK’s debt with the senior secured lender Bank, Caixa Agricola. In total, Somai\nassumed approximately 4,000,000 Euros of debt. In accordance with the agreement, a deposit of Five Hundred Thousand United\nStates Dollars ($500,000) was released from a joint escrow account and the remainder of the purchase price was paid directly to the Company.\n\n \n\nIn connection with the closing, the\nCompany paid a cash finder’s fee for an aggregate of $446,250.\n\n \n\nThe Company recognized a gain on sale\nof subsidiary of $198,780 in the consolidated statements of loss and comprehensive loss. The gain on sale was computed as follows:\n\n \n\nCash received \n$2,000,000 \n\nFinder’s fee – transaction cost \n (446,250)\n\nConsideration received, net \n$1,553,750 \n\n  \n   \n\nCash \n$105,175 \n\nAccounts receivable (note 7) \n 158,812 \n\nInventory (note 9) \n 895,715 \n\nPrepayments \n 33,762 \n\nProperty, plant and equipment, net (note 10) \n 1,769,221 \n\nIntangible licenses (note 12) \n 3,783,117 \n\nAccounts payable \n (2,016,744)\n\nBank loans (note 15) \n (3,374,088)\n\nNet assets sold \n$1,354,970 \n\n  \n   \n\nGain on sale of subsidiary \n$198,780 \n\n \n\nThe Company accounted for the operating\nresults of RPK which was a net loss of $827,620 as a discontinued operation during the year ended December 31, 2024 and has reclassified\nthe operating results of RPK as a discontinued operation for the year ended December 31, 2023.\n\n \n\nF-23\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **   \n\n**6.**\n**Loss of Control of Canmart\nLtd.**\n\n** **\n\nDuring the first quarter of 2025,\nthe Company evaluated the current state of Canmart and has determined to discontinue and cease it UK operation. The Company came to this\ndecision after receiving notification from Canmart’s directors that they intend to resign and thought out the difficulty in finding\nqualified replacements, among other things. The Company then filed for creditor’s voluntary liquidation and had the winding up\ncommenced on May 30, 2025.\n\n \n\nAs at December 31, 2025, the Company\nno longer controlled Canmart and derecognized all assets and liabilities at their book values on May 30, 2025 and wrote down all balances\nto $nil. During the year ended December 31, 2025, the Company recorded a gain on loss of control of Canmart of $533,617. The Company accounted\nfor the operating results of Canmart as a discontinued operation during the year ended December 31, 2025 and has reclassified the operating\nresults of Canmart as a discontinued operation for the year ended December 31, 2024. Set out below is the financial performance and cash\nflow information for the years ended December 31, 2025 and 2024 related to the discontinued operation:\n\n \n\nYears ended December 31, \n2025  \n2024 \n\nNet Revenue \n$\n—\n  \n$208,382 \n\nOperating expenses \n (31,794) \n (560,681)\n\nOther income (expenses) \n 5,781  \n 395,713 \n\n  \n (26,013) \n 43,414 \n\nGain on loss of control of subsidiary \n 533,617  \n \n—\n \n\nGain on discontinued operations \n$507,604  \n$43,414 \n\n  \n    \n   \n\nExchange differences on translation of discontinued operations \n$(794,635) \n$1,099,986 \n\nOther comprehensive income from discontinued operations \n$(794,635) \n$1,099,986 \n\n  \n    \n   \n\nCash flows provided by (used in) operating activities \n$(21,509) \n$49,803 \n\nCash flows provided by (used in) investing activities \n 174  \n (3,189)\n\nCash flows provided by (used in) financing activities \n \n—\n  \n (50,472)\n\nEffects of exchange rate changes on cash and cash equivalents \n 705  \n (956)\n\nNet change in cash provided by (used in) by the subsidiary \n$(20,630) \n$(4,814)\n\n  \n    \n   \n\nCarrying amount of net liabilities immediately prior to loss of control of subsidiary \n$(12,825) \n   \n\nReclassification of foreign currency translation reserve \n (520,792) \n   \n\nGain on loss of control of subsidiary \n$(533,617) \n   \n\n \n\nAs at May 30, 2025, the carrying amounts\nof assets and liabilities of Canmart were as follows:\n\n \n\nCash \n$174 \n\nAccounts receivable (note 7) \n 78,737 \n\nPrepayments \n 62,461 \n\nLoan receivables (note 13) \n 592,713 \n\nProperty, plant and equipment, net (note 10) \n 3,067 \n\nIntangible licenses (note 12) \n 17,009 \n\nTotal assets \n$754,161 \n\n  \n   \n\nTrade and other payables \n$766,986 \n\nTotal liabilities \n$766,986 \n\n  \n   \n\nNet liabilities \n$(12,825)\n\n \n\nF-24\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **   \n\n**7.** **Trade and Other Receivables**\n\n** **\n\n  \nDecember 31,  \nDecember 31, \n\n  \n2025  \n2024 \n\nTrade accounts receivable \n$97,627  \n$356,105 \n\nSales taxes and other taxes recoverable \n \n1,301,319\n  \n 14,432 \n\nOther receivables \n 1,031  \n \n—\n \n\n  \n$\n**1,399,977**\n  \n$370,537 \n\n** **\n\nTrade receivables represent amounts\ndue from customers under normal credit terms, generally 30 to 90 days. As at December 31, 2025, there were three customers\n(2024 — two customers) with an amount greater than 10% of the Company’s trade accounts receivable which represented 100%\nof the balance (2024 — 74%). The Company did not recognize any bad debt expense during the years ended December 31, 2025 and 2024.\n\n \n\nSales taxes and other taxes recoverable\nconsists mainly of Mexican value-added tax and other taxes recoverable which represented 96% of the balance as of December 31, 2025.\n\n \n\nDuring the year ended December 31,\n2024, the Company derecognized accounts receivable with a net book value of $158,812 in connection with the sale of RPK (note 5). During\nthe year ended December 31, 2025, the Company derecognized accounts receivable with a net book value of $78,737 in connection with the\nloss of control of Canmart (note 6).\n\n \n\n**8.**\n**Prepayments**\n\n \n\n  \nDecember 31,  \nDecember 31, \n\n  \n2025  \n2024 \n\nAdvertising and promotion \n$1,594,444  \n$231,250 \n\nConsulting fees \n \n—\n  \n 100,000 \n\nManagement fees \n 100,000  \n \n—\n \n\nOther prepayments and deposits \n 3,578  \n 60,399 \n\n  \n$1,698,022  \n$391,649 \n\n \n\nOther prepayments and deposits consists\nof advances to suppliers for tower and fiber network construction, advance payments for insurance premiums, deposits, and or other services\nexpected to be utilized within the next twelve months.\n\n \n\n**9.**\n**Inventory**\n\n \n\nThe Company’s inventory prior\nto the sale of RPK included consumer packaging inventory and dried cannabis flower finished product at RPK in Portugal. During the year\nended December 31, 2024, concurrent to the sale of RPK (note 5), the Company derecognized inventory with a net book value of $895,715.\n\n \n\n*Biological assets*\n\n \n\nAs at December 31, 2024, the Company\nno longer owns any cannabis plants.\n\n \n\nF-25\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**10.**\n**Property, Plant and\nEquipment**\n\n \n\nCost \nLand  \nPlant\nand\nequipment  \nLeasehold\n\nImprovements  \nMotor\n\nVehicles  \nComputers  \nFurniture\n\nand fixtures  \nFibre\nOptics\nProjects  \nTelecom\n\nTowers  \nMachinery\n&\nSat. Equip  \nConstruction\n\n-in-progress  \nTotal \n\nBalance, December 31, 2023 \n$1,355,337  \n$12,502,023  \n$1,538  \n$32,716  \n$48,862  \n$134,956  \n$—  \n$—  \n$—  \n$—  \n$14,075,432 \n\nAdditions \n 1,950,000  \n —  \n 141,806  \n —  \n 3,776  \n 2,556  \n —  \n —  \n —  \n —  \n 2,098,138 \n\nImpact of sale of RPK \n (909,551) \n (12,148,749) \n —  \n (28,983) \n (25,610) \n (126,346) \n —  \n —  \n —  \n —  \n (13,239,239)\n\nForeign exchange\nmovements \n (180,786) \n (353,274) \n (6,683) \n (3,733) \n (15,610) \n (6,227) \n —  \n —  \n —  \n —  \n (566,313)\n\nBalance, December 31, 2024 \n 2,215,000  \n —  \n 136,661  \n —  \n 11,418  \n 4,939  \n —  \n —  \n —  \n —  \n 2,368,018 \n\nAcquisition (note 4) \n —  \n —  \n —  \n —  \n 3,765  \n 6,574  \n 534,284  \n 2,323,038  \n 423,505  \n 832,054  \n 4,123,220 \n\nAdditions \n 150,000  \n —  \n —  \n —  \n —  \n —  \n 1,076,062  \n 7,764  \n 230  \n —  \n 1,234,056 \n\nImpact of loss of control of Canmart \n —  \n —  \n (1,627) \n —  \n (8,405) \n (5,308) \n —  \n —  \n —  \n —  \n (15,340)\n\nForeign exchange\nmovements \n 109,504  \n —  \n 6,660  \n —  \n 498  \n 412  \n (52,473) \n (15,848) \n (15,207) \n (19,913) \n 13,633 \n\nBalance, December\n31, 2025 \n$2,474,504  \n$—  \n$141,694  \n$—  \n$7,276  \n$6,617  \n$1,557,873  \n$2,314,954  \n$408,528  \n$812,141  \n$7,723,587 \n\n \n\nAccumulated depreciation \nLand  \nPlant\nand\nequipment  \nLeasehold\n\nImprovements  \nMotor\n\nVehicles  \nComputers  \nFurniture\n\nand fixtures  \nFibre\nOptics\nProjects  \nTelecom\n\nTowers  \nMachinery\n&\nSat. Equip  \nConstruction\n\n-in-progress  \nTotal \n\nBalance, December 31, 2023 \n$—  \n$2,723,166  \n$308  \n$21,364  \n$44,761  \n$38,570  \n$—  \n$—  \n$—  \n$—  \n$2,828,169 \n\nDepreciation \n —  \n —  \n 18,907  \n —  \n 315  \n —  \n —  \n —  \n —  \n —  \n 19,222 \n\nDepreciation – from discontinued\noperation \n —  \n 255,023  \n 309  \n 2,202  \n 3,253  \n 4,497  \n —  \n —  \n —  \n —  \n 265,284 \n\nImpact of sale of RPK \n —  \n (2,662,688) \n —  \n (19,866) \n (24,764) \n (34,669) \n —  \n —  \n —  \n —  \n (2,741,987)\n\nForeign exchange\nmovements \n —  \n (315,501) \n (899) \n (3,700) \n (15,932) \n (5,820) \n —  \n —  \n —  \n —  \n (341,852)\n\nBalance, December 31, 2024 \n —  \n —  \n 18,625  \n —  \n 7,633  \n 2,578  \n —  \n —  \n —  \n —  \n 28,836 \n\nDepreciation \n —  \n —  \n 27,804  \n —  \n 1,583  \n 115  \n 124,721  \n 111,445  \n 14,320  \n —  \n 279,988 \n\nDepreciation – from discontinued\noperation \n —  \n —  \n 104  \n —  \n 309  \n 513  \n —  \n —  \n —  \n —  \n 926 \n\nImpact of loss of control of Canmart \n —  \n —  \n (760) \n —  \n (8,204) \n (3,309) \n —  \n —  \n —  \n —  \n (12,273)\n\nForeign exchange\nmovements \n —  \n —  \n 1,458  \n —  \n 431  \n 181  \n (38,637) \n (509) \n (4,843) \n —  \n (41,919)\n\nBalance, December\n31, 2025 \n$—  \n$—  \n$47,231  \n$—  \n$1,752  \n$78  \n$86,084  \n$110,936  \n$9,477  \n$—  \n$255,558 \n\n \n\nImpairment \nLand  \nPlant\nand\nequipment  \nLeasehold\n\nImprovements  \nMotor\n\nVehicles  \nComputers  \nFurniture\n\nand fixtures  \nFibre\nOptics\nProjects  \nTelecom\n\nTowers  \nMachinery\n&\nSat. Equip  \nConstruction-\n\nin-progress  \nTotal \n\nBalance, December 31, 2023 \n$737,994  \n$7,902,730  \n$                   —  \n$9,174  \n$1,135  \n$76,998  \n$—  \n$—  \n$—  \n$—  \n$8,728,031 \n\nImpact of sale of RPK \n (737,994) \n (7,902,730) \n —  \n (9,174) \n (1,135) \n (76,998) \n —  \n —  \n —  \n —  \n (8,728,031)\n\nBalance, December 31, 2024 \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n —  \n — \n\nAddition \n 2,158,885  \n —  \n —  \n —  \n 1,999  \n 3,931  \n 906,133  \n 1,324,749  \n 239,853  \n 466,648  \n 5,102,198 \n\nBalance,\nDecember 31, 2025 \n$2,158,885  \n$—  \n$—  \n$—  \n$1,999  \n$3,931  \n$906,133  \n$1,324,749  \n$239,853  \n$466,648  \n$5,102,198 \n\n \n\nNet book value \nLand  \nPlant\nand\nequipment  \nLeasehold\n\nImprovements  \nMotor\n\nVehicles  \nComputers  \nFurniture\n\nand fixtures  \nFibre\nOptics\nProjects  \nTelecom\n\nTowers  \nMachinery\n&\nSat. Equip  \nConstruction\n\n-in-progress  \nTotal \n\nBalance, December 31, 2024 \n$2,215,000  \n$           —  \n$118,036  \n$          —  \n$3,785  \n$2,361  \n$—  \n$—  \n$—  \n$—  \n$2,339,182 \n\nBalance, December\n31, 2025 \n$315,619  \n$—  \n$94,463  \n$—  \n$3,525  \n$2,608  \n$565,656  \n$879,269  \n$159,198  \n$345,493  \n$2,365,831 \n\n  \n\nAs at December 31, 2024, the Company\nderecognized property, plant and equipment with a net book value of $1,769,221 in connection with the sale of RPK (note 5). As at December\n31, 2025, the Company derecognized property, plant and equipment with a net book value of $3,067 in connection with the loss of control\nof Canmart (note 6).\n\n \n\nDuring the year ended December 31,\n2025, the Company recognized depreciation of its property, plant and equipment of $281,229 (2024 — $284,509) of which $926 was\nrelated to the operations of Canmart and was recorded within discontinued operations.\n\n \n\nIn connection with the annual test\nperformed for goodwill (note 12), the Company assessed that the sum of the carrying value of the CGU of First Towers (mainly PPE) and\nthe carrying value of goodwill greatly exceeds the fair value of First Towers’ business. As a result, the excess of calculated impairment\nloss, after reducing goodwill, was pro-rated to PPE and ROU assets as at December 31, 2025. An impairment loss of $2,943,313 was recorded\nin the consolidated statements of loss and comprehensive loss during the year ended December 31, 2025.\n\n \n\nThe Company also performed an annual test for its land property as\nat December 31, 2025. The Company assessed that a significant portion of the net book value of land was impaired. An impairment loss of\n$2,158,885 was also recorded in the consolidated statements of loss and comprehensive loss during the year ended December 31, 2025.\n\n \n\nF-26\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**10.**\n**Property, Plant and\nEquipment (continued)**\n\n \n\n**1900 Ferne Road, Gabriola Island,\nBritish Columbia**\n\n** **\n\nOn September 19, 2023, and as amended\non September 22, 2023 and September 24, 2025, the Company entered into an option agreement with 1107385 B.C. Ltd (“1107385”)\nto purchase farming land property and related operations and licenses from 1107385. To acquire the property, the Company must pay the\nfollowing:\n\n \n\n  A. The Company will issue a non-refundable payment equal to $1,800,000 and if paid in common shares of the Company will be based on formula to calculate the per share price as set forth in the agreement. The initial payment will be broken up into following:\n\n \n\n  ● the First Option Payment, upon signing (issued 156 common shares with a fair value of $431,149) (note 16)\n\n \n\n  ● the Second Option Payment, 15 days after signing (paid $600,000)\n\n \n\n  ● the Third Option Payment, 30 days after signing (paid $600,000)\n\n \n\n  Pursuant to the amendment on September 24, 2025, the term contained in the option agreement has been extended to September 25, 2027. The Company plans during this additional two year period to develop Tetrahydrocannabinol (THC) and cannabidiol (CBD) facilities at this site. In exchange for such extension, the Company shall pay to 1107385 a total of $250,000, of which:\n\n \n\na.$150,000 shall be paid upon signing was (paid in September 2025); and\n\n \n\nb.$100,000 shall be paid on the 12-month anniversary of the Amendment\n\n \n\n \nB.\nAdditional payments will\nbe made based upon milestones achieved from the development. Further payment milestones include:\n\n \n\n  ● Upon approval or a license for THC cultivation on the property from the applicable regulatory authority, $500,000 will be paid to the Owner.\n\n     \n\n  ● Upon sale of THC product cultivated from the property, $500,000 will be paid\n\n     \n\n  ● Upon Hemp cultivation approval from the application regulatory authority, $750,000 will be paid (paid in September 2024)\n\n     \n\n  ● Upon CBD cultivation approval from the application regulatory authority, $750,000 will be paid\n\n \n\nOn September 5, 2024, Health Canada\napproved a hemp license for the Company. As a result, the Company was paid an additional $750,000 to 1107385 for completing one of the\nmilestone events on September 16, 2024. During the year ended December 31, 2024, the Company completed the initial payment and acquired\nthe right to develop the farming property.\n\n \n\nThe Company has been working on obtaining\nits full cultivation license for a variety of potential products containing THC. As of December 31, 2025, the Company has not yet cultivated\nany product from this land.\n\n \n\nF-27\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**11.**\n**Right-of-use Assets**\n\n** **\n\nOn January 1, 2025, the Company entered\ninto a lease agreement for an office space with a monthly lease payment of $12,000 over a period of two years. The right-of-use assets\nrecognized was measured at an amount equal to the recognized lease liabilities (note 14).\n\n \n\nPursuant to the acquisition of First\nTowers (note 4), part of the net assets assumed by the Company consist primarily of ground leases for tower and fiber infrastructure\nsites in Mexico. As of this period, First Towers owns and deployed 24 towers and an additional 6 are under construction. These assets\nare depreciated on a straight-line basis over the lease term.\n\n \n\nDuring the year ended December 31,\n2025, subsequent to the acquisition, First Towers completed the construction of 6 lease towers, and with this First Towers now have 30\ncellular towers deployed. Of the six towers, three were leased and have the following monthly lease payment and terms: MX$6,500 over\na period of 10 years, MX$4,000 over a period of 10 years and MX$5,000 over a period of 5 years. The lease for the remaining three towers\nis still pending and have been deemed as not yet available for use during the year ended December 31, 2025. The right-of-use assets recognized\nwas measured at an amount equal to the recognized lease liabilities (note 14).\n\n \n\nThe details of the right-of-use assets\nrecognized as at December 31, 2025 are as follows:\n\n \n\n  \nOffice lease  \nTower and Fiber\nInfrastructure  \nTotal \n\nBalance, December 31, 2023 \n$121,982  \n$\n—\n  \n$121,982 \n\nAmortization \n (118,049) \n \n—\n  \n (118,049)\n\nMovement in exchange rates \n (3,933) \n \n—\n  \n (3,933)\n\nBalance, December 31, 2024 \n \n—\n  \n \n—\n  \n \n—\n \n\nAdditions \n 272,274  \n 64,530  \n 336,804 \n\nAcquisition (note 4) \n \n—\n  \n 181,206  \n 181,206 \n\nAmortization \n (140,123) \n (13,582) \n (153,705)\n\nImpairment loss \n \n—\n  \n (137,785) \n (137,785)\n\nMovement in exchange rates \n 3,987  \n (2,918) \n 1,069 \n\nBalance, December 31, 2025 \n$136,138  \n$91,451  \n$227,589 \n\n \n\nDuring the year ended December 31,\n2025, the Company recorded amortization on its right-of-use assets of $153,726 (2024 — $118,049).\n\n \n\nIn connection with the annual test\nperformed for goodwill (note 12), the Company assessed that the sum of the carrying value of the CGU of First Towers and goodwill greatly\nexceeds the fair value of First Towers’ business. As a result, the excess of calculated impairment loss, after reducing goodwill,\nwas pro-rated to PPE and ROU assets as at December 31, 2025. An impairment loss of $137,785 was recorded in the consolidated statements\nof loss and comprehensive loss during the year ended December 31, 2025.\n\n** **\n\n**12.**\n**Intangible Assets and\nGoodwill**\n\n \n\nCost: \nSoftware  \nLicences  \nGoodwill  \nTotal \n\nBalance, December 31, 2023 \n$19,554  \n$24,664,298  \n$\n—\n  \n$24,683,852 \n\nImpact of sale of RPK \n (18,663) \n (24,648,225) \n \n—\n  \n (24,666,888)\n\nMovement in exchange rates \n (891) \n (246) \n \n—\n  \n (1,137)\n\nBalance, December 31, 2024 \n \n—\n  \n 15,827  \n \n—\n  \n 15,827 \n\nAcquisition (note 4) \n \n—\n  \n \n—\n  \n 39,572,129  \n 39,572,129 \n\nImpact on loss of control of Canmart \n \n—\n  \n (17,009) \n \n—\n  \n (17,009)\n\nMovement in exchange rates \n \n—\n  \n 1,182  \n \n—\n  \n 1,182 \n\nBalance, December 31, 2025 \n$\n—\n  \n$\n—\n  \n$39,572,129  \n$39,572,129 \n\n \n\nF-28\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**12.**\n**Intangible Assets and\nGoodwill (continued)**\n\n  \n\nAccumulated amortization: \nSoftware  \nLicences  \nGoodwill  \nTotal \n\nBalance, December 31, 2023 \n$16,992  \n$4,929,645  \n$\n—\n  \n$4,946,637 \n\nAmortization \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n \n\nImpact of sale of RPK \n (16,593) \n (4,929,645) \n \n—\n  \n (4,946,238)\n\nMovement in exchange rates \n (399) \n \n—\n  \n \n—\n  \n (399)\n\nBalance, December 31, 2024 and 2025 \n$\n—\n  \n$\n—\n  \n$\n—\n  \n$\n—\n \n\n \n\nImpairment: \nSoftware  \nLicences  \nGoodwill  \nTotal \n\nBalance, December 31, 2023 \n$2,070  \n$15,935,463  \n$\n—\n  \n$15,937,533 \n\nImpact of sale of RPK \n (2,070) \n (15,935,463) \n \n—\n  \n (15,937,533)\n\nBalance, December 31, 2024 \n \n—\n  \n \n \n  \n \n—\n  \n \n—\n \n\nAddition \n \n—\n  \n \n—\n  \n 39,572,129  \n 39,572,129 \n\nBalance, December 31, 2025 \n$\n—\n  \n$\n—\n  \n$39,572,129  \n$39,572,129 \n\n \n\nNet book value: \nSoftware  \nLicences  \nGoodwill  \nTotal \n\nBalance, December 31, 2024 \n$\n     —\n  \n$15,827  \n$\n     —\n  \n$15,827 \n\n**Balance, December 31, 2025**** **\n**$****—**** **** **\n**$****—**** **** **\n**$****—**** **** **\n**$****—**** **\n\n \n\nDuring the year ended December 31,\n2024, concurrent to the sale of RPK, the Company derecognized RPK’s cannabis API manufacturing and GMP license with a net book\nvalue of $3,783,117 (note 5). As of December 31, 2024, the Company’s remaining intangible asset consist of cannabis distribution\nlicense with a carrying value of $15,827.\n\n \n\nDuring the year ended December 31,\n2025, concurrent to the loss of control of Canmart, the Company derecognized Canmart’s cannabis distribution license with a net\nbook value of $17,009 (note 6).\n\n \n\nThe Company performed its impairment\ntest on goodwill and assessed that the sum of carrying value of CGU of First Towers and the carrying value of goodwill greatly exceeds\nthe fair value of First Towers’ business. The calculated impairment loss was allocated to goodwill and other long-lived assets of\nFirst Towers — PPE (note 10) and ROU assets (note 11). Goodwill was fully impaired as at December 31, 2025 and an impairment loss\nof $39,572,129 was recorded in the consolidated statements of loss and comprehensive loss during the year ended December 31, 2025.\n\n \n\nAs of December 31, 2025, the Company has nil intangible assets and\ngoodwill.\n\n \n\n**13.**\n**Loan Receivable**\n\n \n\n  \nDecember 31,  \nDecember 31, \n\n  \n2025  \n2024 \n\nLoan to Cellen Life Sciences Limited (a) \n$\n          —\n  \n$503,493 \n\nLoan to an arm’s length party (b) \n \n—\n  \n 83,357 \n\nLoan to First Towers & Fiber Corp. (c) \n \n—\n  \n 352,953 \n\nAdvances to Halo (d) \n \n—\n  \n 15,219 \n\n  \n$\n—\n  \n$955,022 \n\n \n\n  (a) On November 10, 2022, the Company entered into an agreement (the “Loan Restructuring Agreement”) with Cellen Life Sciences Limited and Cellen Biotech Limited (collectively referred to as “Cellen”) which entails the restructuring of the payment terms applicable to the $500,000 loan payable by Cellen to the Company pursuant to a Bridge Loan Facility Agreement previously entered into on December 2, 2021. In terms of the Loan Restructuring Agreement, Cellen shall repay the $500,000 by no later than the fourth anniversary of the Loan Restructuring Agreement, namely by November 10, 2026. The loan shall not bear interest until the 2nd anniversary (namely November 10, 2024) of the Loan Restructuring Agreement, where thereafter, it shall bear interest at a rate of 5% per annum on the principal amount of the loan ($500,000). The loan is secured over the assets of Cellen. During the year ended December 31, 2025, the Company no longer controlled Canmart and as a result, the Company derecognized all assets and liabilities at their book values on May 30, 2025. The Company wrote down this loan with a net book value of $503,493 to $nil (note 6).\n\n \n\nF-29\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**13.**\n**Loan Receivable (continued)**\n\n \n\n  (b) During the year ended December 31, 2023, the Company loaned an amount of $84,020 (£66,000) to an arm’s length party. This loan is non-interest bearing, unsecured and has no specific terms of repayment. During the year ended December 31, 2024, the Company loaned out an additional $633 (£500). The additional loan is non-interest bearing, unsecured and has no specific terms of repayment. During the year ended December 31, 2025, the Company received a partial repayment of $347 (£270). As of December 31, 2025, the Company no longer controlled Canmart and as a result, the Company derecognized all assets and liabilities at their book values on May 30, 2025. The Company wrote down this loan with a net book value of $89,220 to $nil (note 6.\n\n \n\n  (c)\nOn November 21, 2024, the Company entered into a Bridge Loan Agreement with First Towers & Fiber Corp., a corporation incorporated under the laws of the Province of British Columbia (“First Towers”) and a company controlled by a director of the Company (note 18), pursuant to which the Company loaned out $350,000 (the “Loan”) to First Towers. Interest of the prime rate (as defined in the Loan Agreement) plus 2% will accrue and be calculated daily on the principal amount of the Loan on the basis of the actual number of days the Loan is outstanding in a year of 365 or 366 days, as applicable, and will be compounded and payable monthly in arrears on the first business day of each month.\n\n \n\nThe obligations under the Loan will rank as the third ranking and most senior secured debt of First Towers. The Loan, together with all accrued interest, fees and other amount payable pursuant to the Loan Agreement, will be due and payable by First Towers in full on demand by the Company. In addition, First Towers has the right at any time to repay the Loan or any part of the Loan without premium, penalty or bonus. As general and continuing collateral security for the obligations under the Loan Agreement, First Towers agreed to execute and deliver to and in favor of the Company, a general security agreement creating a third-ranking security interest over all of First Towers’ property, an investment property pledge agreement creating a third-ranking security interest in all present and after acquired shares owned in First Towers (the “Pledged Shares”), a control agreement for the Pledged Shares, and an insurance transfer and consent, assigning certain insurance of First Towers to the Company as mortgagee, third loss payee and additional named insured as required by the Loan Agreement.\n\n \n\nPursuant to the Bridge Loan Agreement, the Company shall also advance to First Towers a $1,000,000 loan on the same terms as the existing Loan Agreement. As of December 31, 2025, the Company lent out the following loans:\n\n \n\n  i. On January 24, 2025, the Company lent an amount of $30,000 to First Towers. The loan is unsecured, bears interest of 20% per annum and payable within 12 months.\n\n \n\n  ii. On February 14, 2025, the Company lent an amount of $170,000 to First Towers. The loan is unsecured, bears interest of 20% per annum and payable within 12 months.\n\n \n\n  iii. On April 2, 2025, the Company lent a total amount of $200,000 to First Towers. The loan is unsecured, bears interest of 20% per annum and payable within 12 months.\n\n \n\n  iv. On May 1, 2025, the Company lent a total amount of $23,000 to First Towers. The loan is unsecured, bears interest of 20% per annum and payable within 12 months.\n\n \n\n \nAs at December 31, 2025,\nthe loan receivable balance including interest was terminated in consolidation as of the closing of the First Towers Transaction\non August 19, 2025.\n\n \n\nF-30\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** ** \n\n**13.**\n**Loan Receivable (continued)**\n\n \n\n  (d)\nDuring the year ended December 31, 2024, the Company paid and accrued an amount of $15,969 (CAD21,875) of fees for services rendered by certain legal firms to Halo, a company controlled by the interim CEO of the Company (note 18). The transactions were accounted by the Company as advances or loans to Halo. The loans are non-interest bearing, unsecured and has no specific terms of repayment.\n\n \n\nDuring the year ended December 31, 2025, the Company paid an additional amount of $220,030 (CAD307,437) of fees for services rendered by certain legal firms to Halo. These amounts, accounted as loans, are non-interest bearing, unsecured and have no specific terms of repayment. During the year ended December 31, 2025, the Company determined that the receivable balance are no longer collectible from Halo and recognized a write-off of $235,686.\n\n \n\nThe details of the loans receivable\nrecognized as at December 31, 2025 are as follows:\n\n \n\n  \n  \n\nBalance, December 31, 2023 \n$593,232 \n\nAddition \n 366,602 \n\nInterest Receivable \n 6,446 \n\nMovement in exchange rates \n (11,258)\n\nBalance, December 31, 2024 \n 955,022 \n\nAddition \n 643,030 \n\nInterest Receivable \n 92,638 \n\nCash payment \n (347)\n\nImpact on loss of control of Canmart \n (592,713)\n\nTermination of loans to First Towers’ including interest, pursuant to the acquisition \n (868,591)\n\nWrite-off of loans to Halo \n (235,686)\n\nMovement in exchange rates \n 6,647 \n\nBalance, December 31, 2025 \n$\n—\n \n\n \n\n   Maturity   December 31, 2025   December 31, 2024 \n\nCurrent   2025   $\n—\n   $451,529 \n\nNon-current   2026    \n—\n    503,493 \n\n        $\n—\n   $955,022 \n\n \n\n**14.**\n**Lease Liability**\n\n \n\nOn January 1, 2025, the Company entered\ninto a lease agreement for an office space with a monthly lease payment of $12,000 over a period of two years. Under IFRS 16, the Company\nrecognizes lease liabilities measured at the present value of the remaining lease payments, discounted using the Company’s incremental\nborrowing rate.\n\n \n\nPursuant to the acquisition of First\nTowers (note 4), part of the net liabilities assumed by the Company consist primarily of ground leases for tower and fiber infrastructure\nsites in Mexico. As of the acquisition date, First Towers owns and deployed 24 towers and an additional 6 are under construction.\n\n \n\nF-31\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** ** \n\n**14.**\n**Lease Liability (continued)**\n\n    \n\nDuring the year ended December 31,\n2025, subsequent to the acquisition, First Towers completed the construction of 6 lease towers, and with this First Towers now have 30\ncellular towers deployed. Of the six towers, three were leased and have the following monthly lease payment and terms: MX$6,500 over\na period of 10 years, MX$4,000 over a period of 10 years and MX$5,000 over a period of 5 years. The lease for the remaining three towers\nis still pending and have been deemed as not yet available for use during the year ended December 31, 2025. All leases contain extension\nand termination options to provide flexibility in managing the portfolio. Under IFRS 16, the Company recognizes lease liabilities measured\nat the present value of the remaining lease payments, discounted using First Towers’ existing incremental borrowing rate.\n\n \n\nThe details of the lease liability\nrecognized as at December 31, 2025 are as follows:\n\n \n\n  \nOffice Lease  \nTower Leases  \nTotal \n\nBalance, December 31, 2023 \n$135,337  \n$\n—\n  \n$135,337 \n\nAccrued interest \n 4,663  \n \n—\n  \n 4,663 \n\nLease payables transferred back from AP for cash settlement \n 160,000  \n \n—\n  \n 160,000 \n\nCash payments \n (300,000) \n \n—\n  \n (300,000)\n\nMovement in exchange rates \n \n—\n  \n \n—\n  \n \n—\n \n\nBalance, December 31, 2024 \n \n—\n  \n \n—\n  \n \n—\n \n\nAdditions \n 272,274  \n 64,653  \n 336,927 \n\nAcquisition (note 4) \n \n—\n  \n 189,096  \n 189,096 \n\nAccrued interest \n 11,564  \n 8,973  \n 20,537 \n\nCash payments \n (96,000) \n (17,782) \n (113,782)\n\nReclass to Accounts payable \n (48,000) \n \n—\n  \n (48,000)\n\nMovement in exchange rates \n \n—\n  \n 11,343  \n 11,343 \n\nBalance, December 31, 2025 \n$139,838  \n$256,283  \n$396,121 \n\n \n\n \n \n**Maturity**\n \n**Incremental\nborrowing rate**\n \n \n**December 31,\n2025**\n \n \n**December 31,\n2024**\n \n\nCurrent\n \n2025\n \n \n0.83% - 5.45\n%\n \n$\n187,442\n \n \n$\n—\n \n\nNon-current\n \n2035\n \n \n0.83% - 5.45\n%\n \n \n208,679\n \n \n \n—\n \n\n \n \n \n \n \n \n \n \n**$**\n**396,121**\n \n \n**$**\n—\n \n\n \n\nThe Company has committed to the following\nundiscounted minimum lease payments remaining as at December 31, 2025:\n\n \n\nYears ended December 31: \n  \n\n2026 \n$213,739 \n\n2027 \n 51,553 \n\n2028 \n 51,553 \n\n2029 \n 51,553 \n\n2030 \n 51,553 \n\nThereafter \n 67,227 \n\n  \n$487,178 \n\n \n\nF-32\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** ** \n\n**15.**\n**Loans and Borrowings**\n\n** ** \n\n \n*(a)*\n*Bank loans:*\n\n \n\nThe loans below have been granted to\nHoligen Ltd. and its subsidiary in order to fund their capital and operational needs on site.\n\n \n\n \n*(i)*\n*Short term loans*\n\n \n\nAs at December 31, 2023, the balance\nof the loans from Caixa was $875,016 which consisted of loans for the purpose of building construction and purchase of equipment. The\nrepayment date on these loans are February 22, 2026 and June 5, 2026 respectively. These loans are charged with interest at the rate\nof 3% and are secured by mortgage of building and equipment. As of December 31, 2024, pursuant to the sale of RPK, the Company derecognized\nshort term loans with a net book value of $918,198 (note 5).\n\n \n\n \n*(ii)*\n*Long term loans*\n\n \n\nAs at December 31, 2023, the balance\nof the loans from Caixa was $2,497,155 which consisted of loans for the purpose of building construction and purchase of equipment. The\nrepayment date on these loans are February 22, 2026 and June 5, 2026 respectively. These loans are charged with interest at the rate\nof 3% and are secured by mortgage of building and equipment. As at December 31, 2024, pursuant to the sale of RPK, the Company derecognized\nlong term loans with a net book value of $2,455,890 (note 5).\n\n \n\nDuring the year ended December 31, 2024,\nthe Company recognized interest expense of $124,205 from these loans which was recorded within discontinued operations.\n\n \n\n \n*(b)*\n*Other loans:*\n\n \n\n  *(i)* In connection with the acquisition of Holigen, the Company assumed a total loan of €124,890 from an arm’s length parties. The loans are non-interest bearing, unsecured and have no specific terms of repayment. As at December 31, 2025, the loan balance of $146,614 (2024 — $129,716) remains outstanding.\n\n \n\n  *(ii)* During the year ended December 31, 2022, the Company received a loan of £25,000 ($30,224) from a former related party (note 18). The loan is unsecured and bears interest of £200 per week. The loan matured on January 31, 2023 and is due on demand. Any unpaid amount is charged with late fees of £200 for each week the payment is late.\n\n \n\nOn January 17, 2023, the Company received\nan additional loan of €45,000 ($48,666) from the same former related party. The loan is unsecured and bears interest of 0.75% per\nday, compounding daily. The loan matured on February 1, 2023 and is due on demand. Any unpaid amount is charged with late fees of 1%\ncompounding interest for each day the payment is late. During the year ended December 31, 2023, the lender has willingly forgone any\ninterest arising from this loan.\n\n \n\nDuring the year ended December 31, 2024,\nthe Company recorded interest expense of $9,210 and paid these loans in full, including late fees amounting to $15,591. As at December\n31, 2024, the loans balance including accrued interest was $nil.\n\n \n\n  *(iii)* During the year ended December 31, 2023, the Company received loans of CAD$105,000 ($77,450) from an arm’s length parties. The loans bear interest of 18% per annum, unsecured and payable within 12 months. During the year ended December 31, 2025, the Company recorded interest expense of $4,706 (2024 — $13,808) and paid these loans in full.\n\n \n\nF-33\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**15.**\n**Loans and Borrowings\n(continued)**\n\n  \n\n  *(iv)* During the year ended December 31, 2023, the Company received loans of CAD$86,880 ($65,507) from an arm’s length parties. The loans bear interest of 7% per annum, unsecured and payable within 12 months.\n\n \n\nDuring the year ended December 31, 2024,\nthe Company received additional loans of CAD$87,133 ($65,282) from an arm’s length parties. These loans bear the same interest\nof 7% per annum, unsecured and payable within 12 months.\n\n \n\nThe Company recorded interest expense\nof $4,640 (2024 — $8,854) from these loans and made a partial repayments of $102,585 during the year ended December 31, 2025. As\nat December 31, 2025, the remaining loans balance including accrued interest was $38,838 (2024 — $133,083).\n\n \n\n  *(v)* In connection with the acquisition of First Towers (note 4), the Company assumed a total loans of CAD$237,061 ($171,247) from an arm’s length parties. Of the loans, CAD$137,061 ($100,000) bears interest at 12% per annum - compounded monthly and not in advance, and due on demand and the remaining CAD$100,000 ($71,247) is non-interest bearing, unsecured and have no specific terms of repayment. During the year ended December 31, 2025, the Company recorded interest expense of $18,802 (2024 — $nil). As at December 31, 2025, the loans balance including accrued interest was $373,051 (2024 — $nil) remains outstanding.\n\n \n\n**16.**\n**Convertible Promissory\nNotes**\n\n \n\nOn September 12, 2025, the Company\nclosed the Securities Purchase Agreement entered on September 11, 2025 with certain institutional investors (the “September Investors”),\nto issue and sell to each of the September Investors a convertible promissory note (each, individually, a “September Note”\nand collectively, the “September Notes”), for aggregate gross proceeds to the Company of $12,000,000, before deducting fees\nto the Placement Agent and other expenses payable by the Company in connection with the offering (the “September Offering”).\n\n \n\nThe Company intends to use the net\nproceeds (i) for marketing purposes of up to $3.5 million, (ii) for the renewal and continued development of the Company’s Gabriola,\nB.C. site, (iii) working capital and general corporate purposes of up $3 million and (iv) of up to $7 million for the repayment of certain\nindebtedness, of which approximately $6,500,000 was applied towards the partial payment of the Consideration Note.\n\n \n\nAs compensation for such placement\nagent services, the Company paid the Placement Agent $300,000 in cash, an aggregate fee equal to 2.5% of the gross proceeds from the\nSeptember Offering, plus $50,000 for its fees and expenses.\n\n \n\nThe maturity date of each September\nNote is the 12-month anniversary of the issuance date of such September Note, and is the date upon which the principal amount, as well\nas any other fees, shall be due and payable. The Notes bear interest at a rate of 10% per annum.\n\n \n\nThe September Note was determined to\nbe a hybrid financial instrument with a liability and an embedded derivative liability. The Company has elected the option in IFRS 9 to\nrecognize the September Note as one financial instrument at FVTPL. Under this approach, the transaction costs of $350,000 incurred in\nrelation to September Note was recorded in the consolidated statements of loss and comprehensive loss. At the time of issuance, the Company\ndetermined the principal amount of $12,000,000 as the fair value of the September Note.\n\n \n\nDuring the year ended December 31,\n2025, the Company issued 9,189,611 pre-consolidated common shares (408,427 post-consolidated common shares) pursuant to the conversion\nof an aggregate principal amount of $10,737,400, under the terms of the September Notes (note 17).\n\n \n\nDuring the year ended December 31, 2025, the Company assessed that\nthe fair value of the converted September Notes was $9,957,773 and the fair value of the remaining September Note was $1,055,420. As a\nresult, the Company recognized a total of $984,807 gain on change in fair value of financial liabilities measured at FVTPL in the consolidated\nstatements of loss and comprehensive loss.\n\n \n\nF-34\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**17.**\n**Share Capital**\n\n** **\n\n \n**(a)**\n**Authorized**\n\n \n\nThe Company has authorized share capital\nof an unlimited number of common shares, an unlimited number of Class A Special Shares, an unlimited number of Class B Special Shares,\nand an unlimited number of preferred shares, issuable in series, with no par value.\n\n \n\nOn May 21, 2024, the Company implemented\na 1-for-40 Reverse Stock Split on its ordinary shares. No fractional shares were issued in connection with the Reverse Stock Split. Any\nfractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole number.\n\n \n\nOn November 14, 2024, the Company implemented\na 1-for-2 Reverse Stock Split on its ordinary shares. No fractional shares were issued in connection with the Reverse Stock Split. Any\nfractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole number.\n\n \n\nOn August 26, 2025, the Company implemented\na 1-for-3.125 Reverse Stock Split on its common shares. No fractional shares were issued in connection with the Reverse Stock Split.\nAny fractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole number.\n\n \n\nSubsequent to the year ended December 31, 2025, the Company implemented\na 1-for-5 Reverse Stock Split and a 1-for-4.5 Reverse Stock Split on its common shares, respectively. No fractional shares were issued\nin connection with the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split were rounded down to the nearest\nwhole number. All share and per share data in these consolidated financial statements have been retroactively restated to reflect the\neffect of the reverse stock split (note 29).\n\n \n\n  **(b)** **Shares issued and outstanding**\n\n** **\n\n  \nNumber of shares  \nCapital \n\nBalance, December 31, 2023 \n 989  \n$51,020,121 \n\nIssuance of shares from private placement \n 3,452  \n 1,396,702 \n\nIssuance of shares upon exercise of prefunded warrants \n 24,091  \n 11,528,116 \n\nCancelled shares \n (2,111) \n (1,445,188)\n\nShare issuance costs \n \n—\n  \n (728,056)\n\nFair value of RSUs redeemed at $577.97 per share \n 2,677  \n 1,547,703 \n\nBalance, December 31, 2024 \n 29,098  \n 63,319,398 \n\nIssuance of shares from private placement \n 3,250  \n 320,000 \n\nIssuance of shares upon conversion of promissory note \n 408,427  \n 10,737,400 \n\nFair value adjustment on the converted promissory note \n \n—\n  \n (777,627)\n\nShare issuance costs \n \n—\n  \n (44,071)\n\nImpact on loss of control of Canmart \n \n—\n  \n (3)\n\nBalance, December 31, 2025 \n 440,775  \n$73,555,097 \n\n \n\nDuring the year ended December\n31, 2025, the Company had the following share capital transactions:\n\n \n\n  *(i)* On March 26, 2025, pursuant to a series of subscription agreement entered with investors on March 21 and 24, 2025, the Company completed its private offering with the issuance of 3,250 common shares at a subscription price of $98.44 per share for gross proceeds of $320,000.\n\n \n\n  *(ii)* On October 2, 2025, pursuant to the conversion of promissory note (note 16), the Company issued 68,828 common shares at conversion price of $64.80 for an aggregate principal amount of $4,460,000.\n\n \n\n  *(iii)* On October 6, 2025, pursuant to the conversion of promissory note (note 16), the Company issued 1,422 common shares at conversion price of $64.80 for an aggregate principal amount of $92,160.\n\n \n\nF-35\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**17.**\n**Share Capital (continued)**\n\n** **\n\n \n**(b)**\n**Shares issued and\noutstanding (continued)**\n\n \n\nDuring the year ended December 31,\n2025, the Company had the following share capital transactions (continued):\n\n \n\n  *(iv)* On October 9, 2025, pursuant to the conversion of September Note (note 16), the Company issued 1,778 common shares at conversion price of $44.94 for an aggregate principal amount of $79,900.\n\n \n\n  *(v)* On October 16, 2025, pursuant to the conversion of September Note (note 16), the Company issued 5,111 common shares at conversion price of $45.33 for an aggregate principal amount of $231,668.\n\n \n\n  *(vi)* On October 21, 2025, pursuant to the conversion of September Note (note 16), the Company issued 10,222 common shares at conversion price of $42.65 for an aggregate principal amount of $435,965.\n\n \n\n  *(vii)* On October 24, 2025, pursuant to the conversion of September Note (note 16), the Company issued 5,111 common shares at conversion price of $40.93 for an aggregate principal amount of $209,185.\n\n \n\n  *(viii)* On November 14, 2025, pursuant to the conversion of September Note (note 16), the Company issued 5,111 common shares at conversion price of $24.67 for an aggregate principal amount of $126,097.\n\n \n\n  *(ix)* On November 17, 2025, pursuant to the conversion of September Note (note 16), the Company issued 10,889 common shares at conversion price of $24.67 for an aggregate principal amount of $268,642.\n\n \n\n  *(x)* On November 24, 2025, pursuant to the conversion of September Note (note 16), the Company issued 1,022 common shares at conversion price of $17.65 for an aggregate principal amount of $18,045.\n\n \n\n  *(xi)* On November 26, 2025, pursuant to the conversion of September Note (note 16), the Company issued 1,333 common shares at conversion price of $18.63 for an aggregate principal amount of $24,837.\n\n \n\n  *(xii)* On December 3, 2025, pursuant to the conversion of September Note (note 16), the Company issued 1,156 common shares at conversion price of $18.68 for an aggregate principal amount of $21,587.\n\n \n\n  *(xiii)* On December 8, 2025, pursuant to the conversion of September Note (note 16), the Company issued 76,445 common shares at conversion price of $18.09 for an aggregate principal amount of $1,383,224.\n\n \n\n  *(xiv)* On December 15, 2025, pursuant to the conversion of September Note (note 16), the Company issued 100,000 common shares at conversion price of $15.26 for an aggregate principal amount of $1,525,500.\n\n \n\n  *(xv)* On December 16, 2025, pursuant to the conversion of September Note (note 16), the Company issued 8,889 common shares at conversion price of $18.09 and 11,111 common shares at conversion price of $15.68 for an aggregate principal amount of $335,090.\n\n \n\n  *(xvi)* On December 18, 2025, pursuant to the conversion of September Note (note 16), the Company issued 55,555 common shares at conversion price of $15.26 for an aggregate principal amount of $847,500.\n\n   \n\nF-36\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**17.**\n**Share Capital (continued)**\n\n** **\n\n \n**(b)**\n**Shares issued and\noutstanding (continued)**\n\n \n\nDuring the year ended December 31,\n2025, the Company had the following share capital transactions (continued):\n\n \n\n  *(xvii)* On December 19, 2025, pursuant to the conversion of September Note (note 16), the Company issued 33,333 common shares at conversion price of $15.26 for an aggregate principal amount of $508,500.\n\n \n\n  *(xviii)* On December 23, 2025, pursuant to the conversion of September Note (note 16), the Company issued 11,111 common shares at conversion price of $15.26 for an aggregate principal amount of $169,500.\n\n \n\n  *(xix)* In connection with the private placement completed during the year,\nthe Company incurred a total share issuance costs of $44,071.\n\n \n\nDuring the year ended December 31,\n2024, the Company had the following share capital transactions:\n\n \n\n  *(i)* On February 2, 2024, pursuant to the securities purchase agreement entered with Corbo Capital Inc. on February 1, 2024, the Company announced closing of registered direct offering with the issuance of 49 common shares at a purchase price of $2,283.75 per share and prefunded warrants to purchase 260 common shares at a price of $2,283.19 per share for gross proceeds of $708,000. The prefunded warrants were immediately exercisable for $0.56 per share and may be exercised at any time until all of the prefunded warrants are exercised in full, subject to certain beneficial ownership limitations as set forth in the prefunded warrant. Under the residual method, the Company allotted $3,370 to the prefunded warrants and recorded the value under other reserves in the consolidated statements of financial position. During the year ended December 31, 2024, the Company issued 260 common shares pursuant the exercise of above prefunded warrants.\n\n \n\n  *(ii)* On March 4, 2024, pursuant to the securities purchase agreement entered with Corbo Capital Inc. on March 1, 2024, the Company announced closing of registered direct offering with the issuance of 65 common shares at a purchase price of $1,155.60 per share and prefunded warrants to purchase 64 common shares at a price of $1,155.04 per share for gross proceeds of $150,000. The prefunded warrants were immediately exercisable for $0.56 per share and may be exercised at any time until all of the prefunded warrants are exercised in full, subject to certain beneficial ownership limitations as set forth in the prefunded warrant. No value has been allotted to the prefunded warrants under the residual method. During the year ended December 31, 2024, the Company issued 64 common shares pursuant the exercise of above prefunded warrants.\n\n \n\n  *(iii)* On March 5, 2024, pursuant to the securities purchase agreement entered with Corbo Capital Inc. on March 4, 2024, the Company announced closing of registered direct offering with the issuance of 65 common shares at a purchase price of $949.05 per share and prefunded warrants to purchase 66 common shares at a price of $948.49 per share for gross proceeds of $125,000. The prefunded warrants were immediately exercisable for $0.56 per share and may be exercised at any time until all of the prefunded warrants are exercised in full, subject to certain beneficial ownership limitations as set forth in the prefunded warrant. No value has been allotted to the prefunded warrants under the residual method. During the year ended December 31, 2024, the Company issued 66 common shares pursuant the exercise of above prefunded warrants.\n\n \n\nF-37\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**17.**\n**Share Capital (continued)**\n\n \n\n \n**(b)**\n**Shares issued and\noutstanding (continued)**\n\n \n\nDuring the year ended December 31,\n2024, the Company had the following share capital transactions (continued):\n\n  \n\n  *(iv)* On March 27, 2024, pursuant to an underwriting agreement entered with Univest Securities, LLC (“Univest”) as the underwriter on March 25, 2024, the Company announced closing of underwritten public offering with the issuance of 548 common shares at a purchase price of $684.56 per share and prefunded warrants to purchase 8,866 common shares at a price of $684.00 per share for gross proceeds of $5,000,000. The prefunded warrants are immediately exercisable for $0.56 per share and may be exercised at any time until all of the prefunded warrants are exercised in full, subject to certain beneficial ownership limitations as set forth in the prefunded warrant. No value has been allotted to the prefunded warrants under the residual method. During the year ended December 31, 2024, the Company issued 8,866 common shares pursuant the exercise of above prefunded warrants.\n\n \n\n  *(v)* On April 26, 2024, the Company cancelled 2,111 common shares with a fair value of $1,445,188.\n\n \n\n  *(vi)* On May 17, 2024, pursuant to the securities purchase agreement entered with DRNK Beverage Corp. on the same day, the Company announced the 1st closing of registered direct offering with the issuance of 442 common shares at a purchase price of $579.94 per share and prefunded warrants to purchase 3,867 common shares at a price of $579.38 per share for gross proceeds of $2,500,000. The prefunded warrants are immediately exercisable for $0.56 per share and may be exercised at any time until all of the prefunded warrants are exercised in full, subject to certain beneficial ownership limitations as set forth in the prefunded warrant. No value has been allotted to the prefunded warrants under the residual method. During the year ended December 31, 2024, the Company issued 3,867 common shares pursuant the exercise of above prefunded warrants.\n\n  \n\n  *(vii)* On May 20, 2024, pursuant to the securities purchase agreement entered with DRNK Beverage Corp. on May 17, 2024, the Company announced the 2nd closing of registered direct offering with the issuance of 442 common shares at a purchase price of $579.94 per share, and prefunded warrants to purchase 2,143 common shares at a price of $579.38 per share for gross proceeds of $1,500,000. The prefunded warrants are immediately exercisable for $0.56 per share and may be exercised at any time until all of the prefunded warrants are exercised in full, subject to certain beneficial ownership limitations as set forth in the prefunded warrant. No value has been allotted to the prefunded warrants under the residual method. During the year ended December 31, 2024, the Company issued 2,143 common shares pursuant the exercise of above prefunded warrants.\n\n \n\n  *(viii)* On May 24, 2024, the Company issued 2,677 common shares at a fair value of $1,547,703 on the RSUs granted to consultants of the Company to settle up consulting fees amounting to $900,000. As a result of the settlement, the Company recognized a loss on debt settlement of $647,703 in the consolidated statements of loss and comprehensive loss.\n\n \n\n  *(ix)* On October 3, 2024, pursuant to an underwriting agreement entered with Univest as the underwriter on October 2, 2024, the Company announced closing of underwritten public offering with the issuance of 1,841 common shares at a purchase price of $140.625 per share and prefunded warrants to purchase 8,825 common shares at a price of $140.611 per share for gross proceeds of $1,500,000. The prefunded warrants are immediately exercisable for $0.014 per share and may be exercised at any time until all of the prefunded warrants are exercised in full, subject to certain beneficial ownership limitations as set forth in the prefunded warrant. During the year ended December 31, 2024, the Company issued 8,825 common shares pursuant the exercise of above prefunded warrants.\n\n \n\n  *(x)* In connection with the closed direct offerings and underwriting public offerings completed during the year ended December 31, 2024, the Company incurred a total share issuance cost of $728,056.\n\n \n\nF-38\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**17.**\n**Share Capital (continued)**\n\n  \n\n \n**(c)**\n**Special Shares**\n\n** **\n\nClass A Special Shares\n\n \n\nOn August 29, 2025, the Company approved\nan amendment of the Articles to create a new class of special common shares without nominal or par value (the “Class A Special\nShares). The Class A Special Shares is convertible into Company common shares on a one for one basis. The holders of the Class A Special\nShares shall be entitled to one vote for each Class A Special Shares held at all meetings of shareholders of the Corporation and shall\nvote as a single class with the Common Shares.\n\n \n\nIn the event of any Liquidation Distribution,\nsubject to the prior rights of the holders of the shares of any other class ranking senior to the Common Shares and equal in rank to\nthe Common Shares and Class B Special Shares, the holders of the Class A Special Shares shall be entitled to receive all remaining property\nand assets of the Corporation.\n\n \n\nClass B Special Shares\n\n \n\nOn August 29, 2025, the Company approved\nan amendment of the Articles to create a new class of special common shares without nominal or par value (the “Class B Special\nShares”). The Class B Special Shares is convertible into Company common shares on a one for one basis. The holders of the Class\nB Special Shares shall be entitled to one vote for each Class B Special Share held at all meetings of shareholders of the Corporation\nand shall vote as a single class with the Common Shares and the Class A Special Shares, other than meetings at which only the holders\nof another class or series of shares are entitled to vote separately as a class or series.\n\n \n\nIn the event of any Liquidation Distribution,\nsubject to the prior rights of the holders of the shares of any other class ranking senior to the Common Shares and equal in rank to\nthe Class A Special Shares and Common Shares, the holders of the Class B Special Shares shall be entitled to receive all remaining property\nand assets of the Corporation.\n\n \n\n**Issued and Outstanding**\n\n \n\nOn August 29, 2025, the Company issued\n6,441 Class A Special Shares with a fair value of $597,836 pursuant to the acquisition of First Towers in accordance with the terms of\nthe amended SEA (note 4).\n\n \n\nOn November 28, 2025, the Company issued\n212,265 Class B Special Shares with a fair value of $19,700,885 pursuant to the acquisition of First Towers in accordance with the terms\nof the amended SEA (note 4) and 32,549 Class B Special Shares with a fair value $754,356 pursuant to the settlement of PGC DSA and Dunstan\nDSA. In connection with the debt settlement, the Company recognized a gain on debt settlement of $1,893,196 in the consolidated statements\nof loss and comprehensive loss.\n\n \n\nA summary of the Company’s outstanding\nSpecial Shares as at December 31, 2025 are as follows:\n\n \n\n  \nNumber of Class A Special Shares  \nNumber of Class B Special Shares  \nCapital \n\nBalance, December 31, 2024 \n \n—\n  \n \n—\n  \n$\n—\n \n\nIssuance of special shares pursuant to the acquisition of First Towers \n 6,441  \n 212,265  \n 20,298,721 \n\nIssuance of special shares pursuant to a debt settlement \n \n—\n  \n 32,549  \n 754,356 \n\nBalance, December 31, 2025 \n 6,441  \n 244,814  \n$21,053,077 \n\n \n\nF-39\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**17.**\n**Share Capital (continued)**\n\n  \n\n \n**(d)**\n**Loss per share**\n\n** **\n\nThe weighted average number of common\nshares outstanding for basic and diluted loss per share for the year ended December 31, 2025 was 68,941 (2024 — 14,819). The Company\ndid not have any potential dilution during the years ended December 31, 2025 and 2024.\n\n \n\n \n**(e)**\n**Restricted stock\nunits**\n\n** **\n\nIn order to incentivize senior executive\nmanagement and key staff, the Company makes use of equity incentives awarded pursuant to the Employee Share Ownership Plan (“ESOP”).\nIn terms of the ESOP, as amended in March 2024, the Company may award up to 30% of the Company’s issued share capital (at\nany point in time) in qualifying ESOP incentives.\n\n \n\nOn May 24, 2024, the Company granted\n2,677 restricted stock units (“RSUs”) at a market price of $577.97 to consultants of the Company to settle consulting payables\nof $900,000. Each of the RSUs vest immediately. The fair value of the granted RSUs was estimated to be $1,547,703. 2,677 of the granted\nRSUs were exercised during the year ended December 31, 2024.\n\n  \n\nA summary of the Company’s outstanding\nRSUs as at December 31, 2025 are as follows:\n\n \n\n  \nNumber of RSUs \n\nBalance, December 31, 2023 \n \n—\n \n\nGranted \n 2,677 \n\nExercised \n (2,677)\n\nBalance, December 31, 2024 and 2025 \n \n—\n \n\n \n\nDuring the year ended December 31,\n2024, the Company recorded $798,795 of expenses related to the RSUs as consulting and accounting fees, $100,000 remains as prepaid expenses,\n$647,703 recognized as gain on debt settlement and the remaining $1,205 due to foreign currency translation was recorded to accumulated\nother comprehensive income.\n\n \n\n**18.**\n**Related Party Transactions**\n\n** **\n\n*Transactions with Key Management\nPersonnel*\n\n* *\n\nThe Company has identified its Board\nof Directors, Executive Chairman, Chief Executive Officer (“CEO”), and Chief Financial Officer (“CFO”) as its\nkey management personnel who have the authority and responsibility for planning, directing and controlling the Company’s main activities.\n\n \n\nFor the years ended December 31, \n2025  \n2024 \n\nKey Management Remuneration \n$679,005  \n$365,994 \n\nFormer Management Fees \n \n—\n  \n 129,705 \n\nStock-based compensation \n \n—\n  \n \n—\n \n\n  \n$679,005  \n$495,699 \n\n \n\nThe Key Management remuneration\nis included in Consulting and Professional Fees and Personnel Expenses in the Statement of Operations.\n\n \n\nF-40\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **    \n\n**18.**\n**Related Party Transactions\n(continued)**\n\n** ** \n\nAs of December 31, 2025,\nthe Company has balances payable to related parties of $640,546 (2024 — $302,232) as below:\n\n \n\n  a. Included within accounts payable and accrued liabilities at December 31, 2025 is remuneration payable to key management totaling $640,546 (2024 — $244,933), which includes amounts owing to the following current and former directors and officers of the Company:\n\n \n\n \n●\ncurrent directors and officers:\n\n \n\n  i. $32,000 owing to J Dhaliwal (2024 — $8,000);\n\n \n\n  ii. $2,298 owing to G Deol (2024 — $2,192);\n\n \n\n  iii. $8,000 owing to K Field (2024 — $72,000);\n\n \n\n  iv. $259,435 owing to D Jenkins (2024 — $160,241);\n\n \n\n  v. $192,175 owing to C Cooper (2024 — $2,500);\n\n \n\n  vi. $69,333 owing to U Chaudhry (2024 — $nil);\n\n \n\n  vii. $17,555 owing to E Contreras (2024 — $nil);\n\n  \n\n  viii. $18,382 owing to F Juarez (2024 — $nil); and\n\n \n\n  ix. $41,368 owing to D Gordon (2024 — $nil).\n\n \n\n \nb.\nThe former director and\nofficer of RPK, Kiranjit Sidhu is also the owner of Catalyst Capital LLC (“Catalyst”).\n\n \n\n  i. On November 14, 2022, the Company received a loan of £25,000 ($30,224) from Catalyst. The loan is unsecured and bears interest of £200 per week. The loan has matured on January 31, 2023 and is due on demand. Any unpaid amount is charged with late fees of £200 for each week the payment is late. During the year ended December 31, 2024, the Company paid this loan in full as part of the debt settlement entered in April 2024.\n\n    \n\n  ii. On January 17, 2023, the Company received an additional loan of €45,000 ($48,666) from Catalyst. The loan is unsecured and bears interest of 0.75% per day, compounding daily. The loan has matured on February 1, 2023 and is due on demand. Any unpaid amount is charged with late fees of 1% compounding interest for each day the payment is late. During the year ended December 31, 2023, the lender has willingly forgone any interest arising from this loan. During the year ended December 31, 2024, the Company paid this loan in full as part of the debt settlement entered in April 2024.\n\n \n\n  iii. On February 5, 2023, the Company entered into another independent contractor agreement with Mr. Sidhu, pursuant to which, he agreed to provide services regarding the business operations, business development, legal and strategic matters to the Company for $650,000. The payment for the services was partially settled by the issuance of 28 RSUs converted to 28 Common Shares in May 2023 and 24 RSUs converted to 24 Common Shares in July 2023. As of December 31, 2023, the balance of the payable was $350,395, and was recorded under due to related parties’ account. During the year ended December 31, 2024, the Company paid this payable in full as part of the debt settlement entered in April 2024.\n\n \n\n  iv. On April 4, 2024, the Company entered into debt settlement agreement with Mr. Sidhu to settle up all amounts owing of $487,295, which includes outstanding loans and other consulting payables. Pursuant to the agreement, Mr. Sidhu agreed to accept $136,757 in full settlement of the outstanding debt. On April 10, 2024, the Company paid the agreed amounts and recognized a gain on debt settlement of $353,159 in the consolidated statements of loss and comprehensive loss.\n\n \n\nF-41\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**18.**\n**Related Party Transactions\n(continued)**\n\n   \n\n \nc.\nThe Company has the following\nloans outstanding to 1248787 B.C. Ltd. (“1248787”), a company controlled by Jatinder Dhaliwal, a director of the\nAkanda:\n\n \n\n  i. On August 18, 2023, the Company received a loan of C$24,000 ($17,714) from 1248787. The loan is unsecured, bears interest of 18% per annum and payable within 12 months. During the year ended December 31, 2025, the Company recorded interest expense of $1,076 (2024 — $3,157) and paid the loan in full.\n\n \n\n  ii. On September 27, 2023, the Company received a loan of C$3,000 ($2,219) from 1248787. The loan is unsecured, bears interest of 18% per annum and payable within 12 months. During the year ended December 31, 2025, the Company recorded interest expense of $134 (2024 — $395) and paid the loan in full.\n\n \n\n  iii. On October 13, 2023, the Company received a loan of C$40,000 ($29,258) from 1248787. The loan is unsecured, bears interest of 18% per annum and payable within 12 months. During the year ended December 31, 2025, the Company recorded interest expense of $1,793 (2024 — $5,259) and paid the loan in full.\n\n \n\n \nd.\nThe Company has the following\nloans transactions with Halo, a company controlled by Katharyn Field, the executive director and interim CEO of Akanda:\n\n \n\n   \n*Unsecured debenture*\n\n \n\nDuring the year ended December 31, 2024, the Company received additional\nloans from Halo in the aggregate principal amount of $44,954 (2023 — $1,192,953). The loans are unsecured and bears interest\nrate of 7% per annum and have no specific terms of repayment. The Company recorded interest expense of $39,170 from these loans and also\nmade a full repayment during the year ended December 31, 2024.\n\n \n\n  e. On April 24, 2024, Mr. Harvinder Singh resigned as an independent director of the Board of Directors of the Company. A Resignation and Mutual Release Agreement dated April 24, 2024 was entered between the Company and Mr. Singh, pursuant to which the Company agreed to pay Harvinder Singh a separation and release amount of $50,000. The Company has paid the amount in full on April 25, 2024. During the year ended December 31, 2024, the Company recognized a gain on debt settlement of $48,592 in the consolidated statements of loss and comprehensive loss.\n\n \n\nF-42\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**18.**\n**Related Party Transactions\n(continued)**\n\n \n\nAs of December 31, 2025,\nthe Company has balances receivable from related parties of $nil (2024 — $368,172) as below:\n\n \n\n \na.\n*Advances*—\n*Halo*\n\n \n\n    During the year ended December 31, 2024, the Company paid and accrued an amount of $15,969 (CAD21,875) of fees for services rendered by certain legal firms to Halo, a company controlled by the interim CEO of the Company. The transactions were accounted by the Company as advances or loans to Halo. The loans are non-interest bearing, unsecured and has no specific terms of repayment.\n\n  \n\n    During the year ended December 31, 2025, the Company paid an additional amount of $220,030 (CAD307,437) of fees for services rendered by certain legal firms to Halo. These amounts, accounted as loans, are non-interest bearing, unsecured and have no specific terms of repayment. During the year ended December 31, 2025, the Company determined that the full loan receivable balance are no longer collectible from Halo and recognized a write-off of $235,686.\n\n \n\n \nb.\nThe Company has the following\nloan receivable from First Towers & Fiber Corp. (“First Towers”), a company controlled by Christopher Cooper, a director\nof Akanda:\n\n \n\n    On November 21, 2024, the Company entered into a Bridge Loan Agreement with First Towers & Fiber Corp., a corporation incorporated under the laws of the Province of British Columbia (“First Towers”), pursuant to which the Company agreed to loan to First Towers $350,000 (the “Loan”). Interest of the prime rate (as defined in the Loan Agreement) plus 2% will accrue and be calculated daily on the principal amount of the Loan on the basis of the actual number of days the Loan is outstanding in a year of 365 or 366 days, as applicable, and will be compounded and payable monthly in arrears on the first business day of each month.\n\n \n\n    Pursuant to the Bridge Loan Agreement, the Company shall also advance to First Towers a $1,000,000 loan on the same terms as the existing Loan Agreement. As of December 31, 2025, the Company lent out a total of $423,000. As at December 31, 2025, the loan receivable balance including interest was terminated in consolidation as of the closing of the First Towers Transaction on August 19, 2025.\n\n \n\nThe Company’s related\nparty transactions are measured at the exchange amount which is the amount of consideration established and agreed to by the related\nparties.\n\n \n\nF-43\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**19.**\n**Income Taxes**\n\n** **\n\nThe components of income tax expense\n(benefit) are as follows:\n\n** **\n\nYears ended December 31, \n 2025  \n 2024 \n\nCurrent: \n$\n—\n  \n$\n—\n \n\nKingdom of Lesotho \n \n—\n  \n \n—\n \n\nRepublic of Malta \n \n—\n  \n \n—\n \n\nUnited Kingdom \n \n—\n  \n \n—\n \n\nMexico \n \n—\n  \n \n—\n \n\n  \n$\n—\n  \n$\n—\n \n\n \n\nA reconciliation of the expected income\ntax recovery to the actual income tax recovery is as follows:\n\n \n\nDeferred tax assets and liabilities\nhave not been recognized for the following:\n\n \n\nYears ended December 31, \n2025  \n2024 \n\nNet loss before income taxes: \n$(46,859,311) \n$(4,096,029)\n\nStatutory income tax rate \n 26.50% \n 26.50%\n\n  \n    \n   \n\nIncome tax benefit \n (12,417,717) \n (1,085,448)\n\nNon-deductible items \n 12,052,596  \n 37,379 \n\nNon-taxable items \n (537,615) \n (371,570)\n\nForeign rate differential \n (273,547) \n 9,859 \n\nUnrecognized loss carryforwards \n 1,176,283  \n 1,409,780 \n\n  \n$\n—\n  \n$\n—\n \n\n \n\nThe Company has reconciled to the\naverage statutory tax rate of the Republic of Malta (35%), the United Kingdom (25%), the Republic of Portugal (21%), and the Mexico (30%).\n\n \n\n*Deferred tax assets*\n\n \n\nAt December 31, \n 2025  \n 2024 \n\nNet operating loss before carryforwards \n$\n—\n  \n$\n—\n \n\nUnrecognized loss carryforwards \n$\n—\n  \n$\n—\n \n\n \n\nDeferred tax assets have not been\nrecognized in respect of unutilized tax losses carried forward because it is not probable that future taxable profit will be available\nagainst which the Company can use the benefits therefrom.\n\n  \n\n**20.**\n**Non-controlling Interest**\n\n** **\n\nAs at December 31, 2025, the carrying\nvalue of non-controlling interest (“NCI”) was $1,205,363 which was determined as follows:\n\n \n\n \nCTFO Mexico  \nCT Mexico  \nTotal \n\nBalance, December 31, 2024 \n$\n—\n  \n$\n—\n  \n$\n—\n \n\nNet loss allocated to NCI \n 94,145  \n 1,111,218  \n 1,205,363 \n\nBalance, December 31, 2025 \n$94,145  \n$1,111,218  \n$1,205,363 \n\n \n\nF-44\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**21.**\n**Financial Instruments**\n\n** **\n\nDetermination of Fair Values\n\n \n\nIFRS 13, *Fair Value Measurement*,\nestablishes a fair value hierarchy that reflects the significance of the inputs used in measuring fair value. The fair value hierarchy\nhas the following levels:\n\n \n\nLevel 1 — Quoted prices\nin active markets for identical assets or liabilities;\n\n \n\nLevel 2 — Inputs other\nthan quoted prices included within Level 1 that are either directly or indirectly observable;\n\n \n\nLevel 3 — Unobservable\ninputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions\nmarket participants would use in pricing.\n\n \n\nA number of the Company’s accounting\npolicies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values\nhave been determined for measurement and/or disclosure purposes based on the following models. When applicable, further information about\nthe assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.\n\n \n\nThe following is a comparison by class\nof the carrying amounts and fair value of the Company’s financial instruments as at December 31, 2025 and 2024:\n\n \n\n  \n  \nDecember 31, 2025  \nDecember 31, 2024 \n\nFinancial assets \nLevel \nCarrying\namount  \nFair value  \nCarrying\namount  \nFair value \n\nFinancial assets measured at amortised cost: \n  \n   \n   \n   \n  \n\nCash and cash held in trust \n1 \n$504,136  \n$504,136  \n$3,841,866  \n$3,841,866 \n\nTrade and other receivables \n2 \n 1,399,977  \n 1,399,977  \n 370,537  \n 370,537 \n\nLoan receivable \n2 \n \n—\n  \n \n—\n  \n 955,022  \n 955,022 \n\n  \n  \n    \n    \n    \n   \n\nFinancial liabilities \n  \n    \n    \n    \n   \n\nFinancial liabilities measure at amortised cost: \n  \n    \n    \n    \n   \n\nTrade and other payables \n2 \n 3,309,037  \n 3,309,037  \n 2,982,499  \n 2,982,499 \n\nLoans and borrowings \n2 \n 1,006,920  \n 1,006,920  \n 352,814  \n 352,814 \n\nSecured promissory notes \n2 \n 7,633,966  \n 7,633,966  \n \n—\n  \n \n—\n \n\nLease liabilities \n2 \n 396,121  \n 396,121  \n \n—\n  \n \n—\n \n\nDue to related parties \n2 \n 640,546  \n 640,546  \n 302,232  \n 302,232 \n\n  \n  \n    \n    \n    \n   \n\nFinancial liabilities measure at FVTPL: \n  \n    \n    \n    \n   \n\nConvertible promissory notes \n2 \n 1,055,420  \n 1,055,420  \n \n—\n  \n \n—\n \n\nSecured convertible debenture \n2 \n 4,143,982  \n 4,143,982  \n \n—\n  \n \n—\n \n\n \n\n**22.** **Risks Arising from Financial Instruments and Risk Management**\n\n** **\n\nThe Company’s activities expose\nit to a variety of financial risks: market risk (including foreign exchange and interest rate risks), credit risk and liquidity risk.\nRisk management is the responsibility of the Company, which identifies, evaluates and, where appropriate, mitigates financial risks.\n\n \n\nF-45\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**22.**\n**Risks Arising from Financial\nInstruments and Risk Management (continued)**\n\n \n\n  **(a)** **Market risk**\n\n \n\nForeign exchange risk: is the risk\nthat the fair value of future cash flows for financial instruments will fluctuate because of changes in foreign exchange rates. The Company\nhas not entered into any foreign exchange hedging contracts. The Company is exposed to currency risk from the British Pound (“GBP”),\nEuro (“EUR”), Canadian dollar (“CAD”) and Mexican Peso (“MXN”) through the following foreign currency\ndenominated financial assets and liabilities:\n\n  \n\nAs at (expressed in GBP)  December 31,\n2025   December 31, 2024 \n\nFinancial assets        \n\nCash  £100   £16,558 \n\nTrade and other receivables   354    293,055 \n\nLoan receivable   \n—\n    469,233 \n\n   £454   £778,846 \n\nFinancial liabilities          \n\nTrade and other payables  £2,126   £820,809 \n\n   £2,126   £820,809 \n\n \n\nAs at (expressed in EUR)  December 31,\n2025   December 31, 2024 \n\nFinancial assets        \n\nCash  €11,304   €12,504 \n\nTrade and other receivables   3,076    3,076 \n\n   €14,380   €15,580 \n\nFinancial liabilities          \n\nTrade and other payables  €5,263   €838 \n\nLoans and borrowings   124,890    124,890 \n\n   €130,153   €125,728 \n\n \n\nAs at (expressed in CAD)  December 31,\n2025   December 31, 2024 \n\nFinancial assets        \n\nCash and cash held in trust  $287,503   $5,473,500 \n\nLoans receivable   \n—\n    515,197 \n\n   $287,503   $5,988,697 \n\nFinancial liabilities          \n\nTrade and other payables  $4,137,013   $2,809,356 \n\nDue to related party   882,165    425,962 \n\nLease liabilities   191,706    \n—\n \n\nLoans and borrowings   1,177,564    315,557 \n\nConvertible promissory notes   1,446,893    \n—\n \n\nSecured promissory notes   10,465,530    \n—\n \n\nSecured convertible debenture   5,681,053    \n—\n \n\n   $23,981,924   $3,550,875 \n\n \n\nF-46\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**22.**\n**Risks Arising from Financial\nInstruments and Risk Management (continued)**\n\n \n\n \n**(a)**\n**Market risk (continued)**\n\n \n\nAs at (expressed in MXN) \nDecember 31,\n2025  \nDecember 31,\n\n2024 \n\nFinancial assets \n   \n  \n\nCash \n$5,028,415  \n$\n         —\n \n\nTrade and other receivables \n 24,199,567  \n \n—\n \n\nDue from related parties \n 68,814  \n \n—\n \n\n  \n$29,296,796  \n$\n—\n \n\nFinancial liabilities \n    \n   \n\nTrade and other payables \n$5,425,846  \n$\n—\n \n\nLease liabilities \n 4,609,418  \n \n—\n \n\n  \n$10,035,264  \n$\n—\n \n\n \n\nBased on the above net exposures as\nat December 31, 2025, assuming that all other variables remain constant, a 5% appreciation or deterioration of the USD against the\nGBP would result in a corresponding increase or decrease, respectively on the Company’s net income of approximately $nil (2024\n— $2,000), EUR — $5,000  (2024 — $5,000), CAD — $864,000  (2024 — $85,000) and MXN —\n$54,000 (2024 — $nil).\n\n \n\n \n**(b)**\n**Credit risk**\n\n \n\nCredit risk is the risk of financial\nloss to the Company if a partner or counterparty to a financial instrument fails to meet its contractual obligation and arises principally\nfrom the Company’s cash and accounts receivable. The carrying amounts of the financial assets represents the maximum credit exposure.\nThe Company limits its exposure to credit risk on cash by placing these financial instruments with high-credit quality financial institutions.\n\n \n\nAt December 31, 2025, the Company was\nsubject to a concentration of credit risk related to its accounts receivable as 100% (2024 — 74% from two customers) of the balance\nof amounts owing is from three customers. The Company did not record any bad debt expense during the years ended December 31, 2025 and\n2024. As at December 31, 2025, the expected credit lifetime credit losses for accounts receivable aged as current were nominal amounts.\nThe Company considers a financial asset in default when internal or external information indicates that the Company is unlikely to receive\nthe outstanding contractual amounts in full. A financial asset is written off when there is no reasonable expectation of recovering the\ncontractual cash flows.\n\n \n\n \n**(c)**\n**Liquidity risk**\n\n \n\nLiquidity risk is the risk that the\nCompany will not be able to meet its financial obligations as they come due. The Company manages its liquidity risk by continuously monitoring\nforecasted and actual cash flows, as well as anticipated investing and financing activities and to ensure that it will have sufficient\nliquidity to meet its liabilities and commitments when due and to fund future operations. The Company’s trade and other payables\nare due within the current operating year.\n\n \n\n**23.**\n**Capital Management**\n\n** **\n\nThe Company manages its capital structure\nand makes adjustments to it, based on the funds available to the Company, in order to continue the business of the Company. The Company,\nupon approval from its Board of Directors, will balance its overall capital structure through new share and warrant issuances, granting\nof stock options, the issuance of debt or by undertaking other activities as deemed appropriate under the specific circumstance. The\nBoard of Directors does not establish a quantitative return on capital criteria for management, but rather relies on the expertise of\nthe Company’s management to sustain future development of the business.\n\n \n\nThe Company’s objectives when\nmanaging capital are to safeguard the Company’s ability to continue as a going concern and to provide capital to pursue the development\nand commercialization of its products. In the management of capital, the Company includes cash, short-term debt and capital. The Company\nmanages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of\nthe underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares or new debt.\n\n \n\nAt the current stage of the Company’s\ndevelopment, in order to maximize its current business activities, the Company does not pay out dividends. Management reviews its capital\nmanagement approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.\n\n \n\nThe Company’s overall strategy\nwith respect to capital risk management remains unchanged for the years ended December 31, 2025 and 2024.\n\n \n\nF-47\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**24.**\n**Segmented Information**\n\n** **\n\nThe Company has four reportable\nsegments: Infrastructure, Cultivation, Distribution and Corporate. Infrastructure activities is a new segment of the Company pursuant\nto the acquisition of First Towers in August 2025 which relates to the leasing and/or rental of fiber optic networks and telecommunication\ntowers at First Towers in Mexico. Cultivating activities which comprise the “cultivation” segment is made up of the medical\ncannabis cultivation operations at RPK/Holigen in Portugal up until the sale completion in March 2024 (refer to note 5). Distributing\nactivities relate to the distribution of medical cannabis by Canmart in the United Kingdom up until the winding up in May 2025 (refer\nto note 6). Corporate activities entail head office costs and other general corporate expenses related to the administration of the broader\ngroup. The accounting policies of the operating segments are the same as those described in the summary of material accounting policies.\nThe reportable segments have been determined by management on the basis that these are strategic business units that offer different\nproducts and services. The business units in Portugal (up until the sale of subsidiary described in note 5) which fall under the cultivation\nsegment were focused on the cultivation of medical cannabis and medical cannabis biomass respectively, while the business unit in the\nUnited Kingdom (up until the winding up described in note 6), which falls under the distribution segment, undertakes the sale and distribution\nof medical cannabis products. The corporate segment undertakes management and treasury services within the group and for the benefit\nof all group companies. They are managed separately as each business unit requires different strategies, risk management and technologies.\n\n \n\nSet out below is information about\nthe assets and liabilities as at December 31, 2025 and 2024 and profit or loss from each segment for the years ended December 31, 2025\nand 2024:\n\n \n\n  \nAs at December 31, 2025 \n\nFinancial statement line item: \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nReportable segment assets \n$3,831,917  \n$335,689  \n$\n         —\n  \n$2,027,949  \n$6,195,555 \n\nReportable segment liabilities \n 2,111,874  \n 150,358  \n \n—\n  \n 15,923,760  \n 18,185,992 \n\n \n\n  \nAs at December 31, 2024 \n\nFinancial statement line item: \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nReportable segment assets \n$\n—\n  \n$2,232,785  \n$1,052,080  \n$4,629,218  \n$7,914,083 \n\nReportable segment liabilities \n \n—\n  \n 133,163  \n 1,026,211  \n 2,478,171  \n 3,637,545 \n\n \n\n  \nFor the year ended December 31, 2025 \n\nFinancial statement line item: \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nRevenues from external customers \n$258,075  \n$\n—\n  \n$\n—\n  \n$\n—\n  \n$258,075 \n\nIntersegment revenues \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n \n\nOther income (expense) \n (42,501,110) \n (2,158,885) \n \n—\n  \n 3,201,579  \n (41,458,416 \n\nFinance income \n (92,457) \n \n—\n  \n \n—\n  \n 92,457  \n \n—\n \n\nFinance expense \n (28,742) \n \n—\n  \n \n—\n  \n (896,350) \n (925,092)\n\nDepreciation & amortization \n 264,532  \n \n—\n  \n \n—\n  \n 169,161  \n 433,693 \n\nDiscontinued operations \n \n—\n  \n \n—\n  \n 10,911,606  \n (10,404,002) \n 507,604 \n\nReportable segment loss \n (43,269,642) \n (2,170,333) \n \n—\n  \n (1,419,336) \n (46,859,311)\n\n \n\nF-48\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**24.**\n**Segmented Information\n(continued)**\n\n ** ** \n\n  \nFor the year ended December 31,\n2024 \n\nFinancial statement line item: \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nRevenues from external customers \n$\n              —\n  \n$\n—\n  \n$\n      —\n  \n$\n  —\n  \n$\n     —\n \n\nIntersegment revenues \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n \n\nOther income (expense) \n \n—\n  \n (879,154) \n \n—\n  \n 1,675,644  \n 796,490 \n\nFinance income \n \n—\n  \n \n—\n  \n \n—\n  \n 2,953  \n 2,953 \n\nFinance expense \n \n—\n  \n \n—\n  \n \n—\n  \n (81,083) \n (81,083)\n\nDepreciation & amortization \n \n—\n  \n \n—\n  \n \n—\n  \n 137,271  \n 137,271 \n\nDiscontinued operations \n \n—\n  \n (827,620) \n 43,414  \n \n—\n  \n (784,206)\n\nReportable segment income (loss) \n \n—\n  \n (206,397) \n 43,414  \n (3,933,046) \n (4,096,029)\n\n \n\nSet out below are reconciliations\nof each reportable segment’s revenues, profit or loss for the years ended December 31, 2025 and 2024, and assets and liabilities\nas at December 31, 2025 and 2024:\n\n \n\n  \nFor the year ended December 31,\n2025 \n\nRevenues \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nTotal revenues \n$258,075  \n$\n           —\n  \n$\n          —\n  \n$\n           —\n  \n$258,075 \n\nElimination of inter segment revenue \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n \n\nTotal revenue \n$258,075  \n$\n—\n  \n$\n—\n  \n$\n—\n  \n$258,075 \n\n \n\n  \nFor the year ended December 31,\n2024 \n\nRevenues \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nTotal revenues \n$               —  \n$           —  \n$             —  \n$          —  \n$       — \n\nElimination of inter segment revenue \n —  \n —  \n —  \n —  \n — \n\nTotal revenue \n$\n  —\n  \n$\n—\n  \n$\n—\n  \n$\n—\n  \n$\n—\n \n\n \n\n  \nFor the year ended December 31, 2025 \n\nLoss \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nTotal loss for reportable segments \n$(43,269,642) \n$(2,170,333) \n$(10,911,606) \n$8,984,666  \n$(47,366,915)\n\nTotal loss on discontinued operations \n \n—\n  \n \n—\n  \n 10,911,606  \n (10,404,002) \n 507,604 \n\nElimination of inter segment profit or loss \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n \n\nLoss before income tax expense \n$(43,269,642) \n$(2,170,333) \n$\n—\n  \n$(1,419,336) \n$(46,859,311)\n\n \n\n  \nFor the year ended December 31,\n2024 \n\nLoss \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nTotal loss for reportable segments \n$\n            —\n  \n$621,223  \n$\n    —\n  \n$(3,933,046) \n$(3,311,823)\n\nTotal loss on discontinued operations \n \n—\n  \n (827,620) \n 43,414  \n \n—\n  \n (784,206)\n\nElimination of inter segment profit or loss \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n  \n \n—\n \n\nLoss before income tax expense \n$\n—\n  \n$(206,397) \n$43,414  \n$(3,933,046) \n$(4,096,029)\n\n \n\nF-49\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**24.**\n**Segmented Information\n(continued)**\n\n \n\n  \nAs at December 31, 2025 \n\nAssets \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nTotal assets for reportable segments \n$3,831,917  \n$335,689  \n$\n             —\n  \n$100,152,700  \n$104,320,306 \n\nElimination of inter segment assets \n \n—\n  \n \n—\n  \n \n—\n  \n (98,124,751) \n (98,124,751)\n\nSegments’ assets \n$3,831,917  \n$335,689  \n$\n—\n  \n$2,027,949  \n$6,195,555 \n\n \n\n  \nAs at December 31, 2024 \n\nAssets \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nTotal assets for reportable segments \n$\n           —\n  \n$2,232,785  \n$1,052,080  \n$50,488,643  \n$53,773,508 \n\nElimination of inter segment assets \n \n—\n  \n \n—\n  \n \n—\n  \n (45,859,425) \n (45,859,425)\n\nSegments’ assets \n$\n—\n  \n$2,232,785  \n$1,052,080  \n$4,629,218  \n$7,914,083 \n\n \n\n  \nAs at December 31, 2025 \n\nLiabilities \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nTotal liabilities for reportable segments \n$12,841,578  \n$1,072,219  \n$\n           —\n  \n$38,754,893  \n$52,668,690 \n\nElimination of inter segment liabilities \n (10,729,704) \n (921,860) \n \n—\n  \n (22,831,134) \n (34,482,698)\n\nEntity’s liabilities \n$2,111,874  \n$150,359  \n$\n—\n  \n$15,923,759  \n$18,185,992 \n\n \n\n  \nAs at December 31, 2024 \n\nLiabilities \nInfrastructure  \nCultivation  \nDistribution  \nCorporate  \nTotal \n\nTotal liabilities for reportable segments \n$\n               —\n  \n$883,397  \n$11,169,051  \n$25,958,535  \n$38,010,983 \n\nElimination of inter segment liabilities \n \n—\n  \n (750,234) \n (10,142,840) \n (23,480,364) \n (34,373,438)\n\nEntity’s liabilities \n$\n—\n  \n$133,163  \n$1,026,211  \n$2,478,171  \n$3,637,545 \n\n \n\n**25.**\n**Revenue and Geographic\nInformation**\n\n \n\nThe Company, through its subsidiary\n– First Towers, generates revenue from the leasing of telecommunications infrastructure, including tower sites and dark fiber routes.\nAs of December 31, 2025, the Company’s revenue is earned entirely in Mexico, where all of its telecommunications infrastructure\nassets are located.\n\n \n\n**26.**\n**General and Administrative Expenses**\n\n \n\nThe following provides a breakdown\nof general and administrative expenses by nature for the years ended December 31, 2025 and 2024:\n\n \n\n  \n2025  \n2024 \n\n  \n   \n  \n\nAdvertising and promotion \n$2,135,054  \n$724,785 \n\nInsurance \n 910  \n \n—\n \n\nOffice and administrative \n 20,880  \n 6,297 \n\nRent \n 7,831  \n 6,926 \n\nTransfer agent and filing fees \n 128,619  \n 139,221 \n\nTravel expenses \n 11,901  \n 142,058 \n\nTotal general and administrative expenses \n$2,305,195  \n$1,019,287 \n\n \n\nF-50\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**27.**\n**Insolvency Proceedings**\n\n \n\nIn July 2022, the Company announced\nthat the High Court of Lesotho (the “Lesotho Court”) has placed in liquidation the Company’s, wholly-owned subsidiary,\nBophelo Bio Science and Wellness (Pty) Ltd. (“Bophelo”). The action to place Bophelo in liquidation was taken by the Lesotho\nCourt pursuant to an application and request (the “Liquidation Application”) that was filed by Louisa Mojela, the former\nExecutive Chairman of the Company, who was terminated as Executive Chairman of Akanda, and the Mophuti Matsoso Development Trust (“MMD\nTrust”). Akanda had intended to convene a special committee to investigate Ms. Mojela’s actions and conduct, including actions\nand conduct taken by her prior to her filing of the Liquidation Application, and further intended to pursue all of its available legal\nrights and remedies against Ms. Mojela and the MMD Trust for taking this unauthorized action. The Company also intended to contest and\nseek to reverse the determination by the Lesotho Court to place Bophelo in liquidation and seek to recover significant loans that it\nhas made to Bophelo to fund the execution of Bophelo’s business plan; however, due to lack of funds and resources, the Company\nis not at this time actively contesting the matter and cannot give no assurance that it will do so in the future. Finally, Ms. Mojela\nhas been summarily terminated as Chairman of Bophelo for Cause, as a “bad leaver”, as a result of her action to seek to place\nBophelo in liquidation. Ms. Mojela has instituted legal proceedings against the Company as a result of the termination of her employment.\nIn an action taken without the Company’s knowledge, the Lesotho Court has ordered an insolvent liquidation of Bophelo, and has\nappointed Mr. Chavonnes Cooper of Cape Town, South Africa, as liquidator of Bophelo for purposes of maintaining the value of the assets\nowned or managed by Bophelo. The order was signed by the Honorable Mr. Justice Mokhesi on July 15, 2022.\n\n \n\nAt the date of these consolidated\nfinancial statements, the liquidation of Bophelo Bio Science and Wellness (Pty) Ltd. is still ongoing.\n\n \n\n**28.**\n**Contingencies**\n\n \n\nOn October 20, 2022, Louisa Mojela\nfiled a claim against Canmart and the Company for wrongful termination of her Service Agreement. The claimant sought £1,832,150.62\nplus further administrative and legal fees. The Company denied her claim and lodged a counterclaim lodged for losses caused by the Claimant\nincluding a loan of US $6,849,935.69 (The loan we cited in the proceedings was $3m USD) Akanda advanced to Bophelo. On 31 January 2023,\nMojela applied for summary judgment in respect of some but not all of these amounts. On October 30, 2023, Mojela’s entire application\nfor summary judgment failed. On January 15, 2024, a Consequentials hearing was held at which the High Court subsequently awarded Akanda\nand Canmart £60,000 for legal costs. On 5 February 2024, Mojela sought permission to appeal of the summary judgment decision but\nher application for permission to appeal was refused on 11 April 2024. On 17 April, 2024, Mojela applied for a hearing to renew her application\nto appeal. In the meanwhile, proceedings are stayed as parties await the results of this hearing.\n\n \n\nOn December 2, 2024, the Company entered\ninto a settlement agreement to settle this dispute for a sum of £100,000 ($129,705) and accounted the full amount as former management\nfees. During the year ended December 31, 2024, the Company paid the amount in full and recognized a gain on debt settlement of $9,670\nin the consolidated statements of loss and comprehensive loss.\n\n \n\nOn April 29, 2023, Trevor Scott, former\nCFO of the Company, issued a claim against the Company for amounts owing under his employment agreement totaling £420,659.95. Claim\nhas been denied in its entirety and a counter-claim lodged for losses caused by the Claimant. The final hearing conflicts with Mojela’s\nConsequentials hearing and thus the Company has applied to postpone it. During the year ended December 31, 2023, the parties entered\ninto an agreement to settle this dispute for a sum of £67,392 to be paid in installment. During the year ended December 31,\n2024, the Company paid the amount in full.\n\n \n\nOn May 12, 2023, Tejinder Virk, former\nCEO of the Company, issued a claim for Detriment and dismissal for alleged protected disclosures totaling £1,630,302.22 net.\nThe claim has been denied in its entirely. Witness statements were exchanged on 30 April 2024 and the Tribunal hearing is scheduled to\ntake place by video between 8-10, 13-17 and 20 – 22 May 2024. On May 10, 2024, the Company entered into a settlement agreement\nwith Tejinder Virk to settle the claims for a sum of £30,000 to be paid in installment. During the year ended December 31,\n2024, the Company paid the amount in full and recognized a gain on debt settlement of $25,969 in the consolidated statements of\nloss and comprehensive loss.\n\n  \n\nF-51\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**28.**\n**Contingencies (continued)**\n\n \n\nOn May 15, 2023, Vidya Iyer, the Company’s\nformer SVP of Finance issued a claim for amounts owing under her employment agreement totaling £151,774. Claim has been denied\nin its entirety and a counter-claim lodged for losses caused by the Claimant. Final hearing by video is slated between April 3, 2024\nto April 5, 2024. Claimant updated her schedule of loss on December 19, 2023. Documents to be exchanged by January 8, 2024 with bundle\nto be produced by January 29, 2024. Witness statements to be exchanged by March 18, 2024. On March 27, 2024, the Company entered into\na settlement agreement with Vidya Iyer to settle the claims for a sum of £30,000 to be paid in installment. During the year\nended December 31, 2024, the Company paid the amount in full and recognized a gain on debt settlement of $147,437 in the consolidated\nstatements of loss and comprehensive loss.\n\n \n\nOn January 29, 2024, the Company\nwas informed that Mr. Shailesh Bhushan, the former Chief Financial Officer of the Company, filed a complaint with the Employment\nStandards Branch of British Columbia claiming unpaid salary and invoices in the aggregate amount of CAD $271,990 from the period\nDecember 2022 through November 2023. The Company previously offered to Mr. Bhushan an annual salary of CAD $60,000 and as such,\nbelieves the claim to be frivolous, strongly disputes the amount claimed, and intends to vigorously defend itself. The Employment Standards\nBranch has prepared its Investigative Report in the matter and the report will be provided to the adjudicator who will determine the complaint.\nFollowing disclosure of the Investigative Report Mr. Bhushan has sought to withdraw his Employment Standards Branch complaint against\nthe Company in order to pursue the same claims in the court action described below. The Company is objecting to Mr. Bhushan’s request\nto withdraw on the basis, among other things, of abuse of process. As of May 15, 2026, no decision has yet been made on the Company’s\nobjection or the complaint.\n\n \n\nOn February 23, 2024, Mr. Bhushan\nfiled a Notice of Civil Claim in the Supreme Court of British Columbia against Akanda alleging constructive dismissal and claiming severance\npay, general damages, aggravated and punitive damages, and allegedly unpaid salary and bonus. He also seeks special costs. Mr. Bhushan\nhas named Akanda directors Jatinder Dhaliwal, Katharyn Field, David Jenkins, and Harvinder Singh as defendants, whom he alleges are personally\nliable for unpaid wages. The Company and the other defendants filed their Response to Civil Claim on May 2, 2024. The Company denies\nall liability and takes the position that Mr. Bhushan was terminated for just cause. The Company also disputes the amounts claimed,\nand denies that Akanda and Halo are a common employer. The proceeding is at the discovery stage and no trial date has been set. As of\nMay 15, 2026, to the Company’s knowledge Mr. Bhushan has not yet attempted to amend his Notice of Civil Claim to include the claims\nhe seeks to withdraw from the Employment Standards Branch complaint. The Company intends to object to any attempt to so amend on the basis,\namong other things, of abuse of process.\n\n \n\nOn September 10, 2024, Dallas Dunkley\nfiled a claim against the Company for wrongful dismissal. The Company served its Statement of Defense on November 20, 2024. The total\namount claimed in the Statement of Claim is $200,000 on account of wrongful dismissal damages, damages for loss of vacation pay,\nand general, aggravated, and punitive damages, plus interest and costs. The Company’s position is that Mr. Dunkley was never an\nemployee of the Company, and therefore, is not entitled to any damages. The parties have completed mediation and examinations for discovery,\nand a pre-trial has been scheduled for August 27, 2026. Liability is undetermined at this time in light of the early stage of litigation.\n\n \n\nIn January 2024 and January 2025, the\nCompany received subpoenas from the SEC, Division of Enforcement. As of December 31, 2025, no provision has been recorded because the\nCompany does not believe that a present obligation exists for which an outflow of resources is probable and can be reliably estimated;\nhowever, the ultimate outcome of the matter cannot be predicted at this time.\n\n \n\n**29.**\n**Subsequent Events**\n\n** **\n\nSubsequent to the year ended December\n31, 2025, the Company:\n\n \n\n \ni.\n*Implemented a Reverse\nStock Split:*\n\n* *\n\n    On January 12, 2026, the Company implemented a 1-for-5 Reverse Stock Split on its ordinary shares. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole number. All share and per share data in these consolidated financial statements have been retroactively restated to reflect the effect of the reverse stock split\n\n \n\n    On April 13, 2026, the Company implemented a 1-for-4.5 Reverse Stock Split on its ordinary shares. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole number. All share and per share data in these consolidated financial statements have been retroactively restated to reflect the effect of the reverse stock split\n\n \n\nF-52\n\n \n\n \n\n**Akanda Corp.**\n\n**Notes to the Consolidated Financial Statements**\n\n**(Expressed\nin United States Dollars)**\n\n** **\n\n**29.**\n**Subsequent Events (continued)**\n\n  \n\n \nii.\n*Issued the following\nshares:*\n\n \n\n  a. On January 14, 2026, pursuant to the conversion of September Note (note 16), the Company issued 26,217 common shares at conversion price of $15.26 for an aggregate principal amount of $399,957.\n\n \n\n  b. On January 16, 2026, pursuant to the conversion of September Note (note 16), the Company issued 26,217 common shares at conversion price of $15.26 for an aggregate principal amount of $399,957.\n\n  \n\n  c. On January 23, 2026, pursuant to the final conversion of September Note (note 16), the Company issued 41,208 common shares at conversion price of $15.26 for an aggregate principal amount of $628,642.\n\n \n\n  iii. *Closed a $7,000,000 Convertible Note Offering:*\n\n* *\n\nOn January 21, 2026, the Company\nentered into a Securities Purchase Agreement dated January 20, 2026 (the “January Purchase Agreement”) with certain institutional\ninvestors (the “January Investors”) to issue and sell to each of the January Investors a convertible promissory note (each,\nindividually, a “January Note” and collectively, the “January Notes”), for aggregate gross proceeds to the Company\nof $7.0 million (the “Purchase Price”), before deducting fees to the Placement Agent (as defined below) and other expenses\npayable by the Company in connection with the offering (the “January Offering”). The closing of the January Offering occurred\non January 21, 2026.\n\n \n\nThe Company intends to use the net\nproceeds from the sale of the January Notes for (i) marketing purposes of up to $2.3 million, (ii) working capital and general corporate\npurposes of approximately $2.6 million and (iii) the repayment of certain indebtedness of up to $2.1 million.\n\n \n\nUnivest Securities, LLC (the “Placement Agent”)\nacted as placement agent for the January Offering.\n\n \n\nThe maturity date of each January\nNote is the 12-month anniversary of the issuance date of such January Note, and is the date upon which the principal amount, as well\nas any other fees, shall be due and payable. The January Notes bear interest at a rate of 10% per annum.\n\n \n\nEach January Investor has the right,\nat any time, to convert all or any portion of the then outstanding and unpaid principal amount and interest if any (including any costs,\nfees, and charges) into the Company’s Common Shares, at a conversion price (the “Conversion Price”) equal to the lower\nof (i) $5.715 per share (the “Initial Conversion Price”), (ii) 85% of the VWAP (as defined in the January Notes) of the Common\nShares during the five consecutive Trading Day (as defined in the January Notes) period ending and including the Trading Day immediately\npreceding the delivery of the Conversion Notice (as defined in the January Notes); or (iii) 85% of the Closing Sale Price (as defined\nin the January Notes) on the Trading Day prior to the Conversion Notice being submitted; provided, however, that in no event shall the\nConversion Price equal a price per share that is less than $1.143.\n\n \n\nIn addition, the Company entered\ninto an engagement letter, as amended (the Engagement Letter”) with the Placement Agent, pursuant to which the Placement Agent\nagreed to serve as the placement agent for the issuance and sale of securities of the Company. As compensation for such placement agent\nservices, the Company has agreed to pay the Placement Agent an aggregate cash fee equal to 1.0% of the gross proceeds received by the\nCompany from the January Offering. Accordingly, the Company intends to pay the Placement Agent $70,000 in cash fees in relation to the\nJanuary Offering at the closing.\n\n  \n\nF-53"}