OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
Our fiscal year begins on January 1 and ends on December 31. Unless otherwise noted, references to year pertain to our fiscal year. For example, 2025 refers to fiscal 2025 which is the period from January 1, 2025 and to December 31, 2025.
Our Audited Financial Statements for the years ended December 31, 2025 and 2024, respectively, for Akanda Corp. as a group (the "Akanda Group"), have been prepared in accordance with International Financial Reporting Standards (IFRS) and are presented in US dollars except where otherwise indicated. Our historical results are not necessarily indicative of the results that should be expected in any future period.
We have derived the consolidated statements of operations data for Akanda Group for the years ended December 31, 2025 and 2024, respectively, and the consolidated financial position information as at December 31, 2025 and 2024, respectively, from the Akanda Group's Audited Financial Statements included under Item 18 of this Annual Report on Form 20-F.
Akanda was incorporated in the Province of Ontario, Canada on July 16, 2021 in connection with the plan of Halo to reorganize its medical cannabis market focused international business assets. On November 3, 2021, Akanda acquired Cannahealth, which owned all the issued and outstanding equity interests of Canmart and Bophelo Holdings, which, in turn, owned all the issued and outstanding equity interests of Bophelo. As a result of the Acquisition, both Bophelo and Canmart became our indirect wholly-owned subsidiaries. On April 29, 2022, the Company, through its wholly owned subsidiary, Cannahealth acquired Holigen, which owned all the issued and outstanding equity interests of RPK. As a result of the acquisition, RPK became our indirect wholly-owned subsidiary. We have consolidated all our then-subsidiary companies, Cannahealth in Malta, Bophelo in the UK, Canmart in the UK, Holigen in Portugal, RPK in Portugal and 1371011 B.C. Ltd and 1468243 BC Ltd in Canada, in the Akanda Group Audited Financial Statements and financial information presented on December 31, 2025.
As a result of Bophelo's liquidation, during the year ended December 31, 2022, Bophelo ceased operations and we derecognized its assets and have since determined that it is no longer a significant subsidiary. We will continue to report about Bophelo, until such time as our inquiry into the liquidation confirms that the process is complete. In March 2024, we sold RPK.
On August 19, 2025, Akanda acquired First Towers in exchange for newly authorized Class A Special Shares and Class B Special Shares and cash payable over time as evidenced by a promissory note, and the restructuring and assumption of certain indebtedness of First Towers.
On August 26, 2025, January 12, 2026 and April 13, 2026, Akanda Group implemented a 1-for-3.125 Reverse Stock Split, a 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 in connection with the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split were rounded to the nearest whole number. All share and per share data in this management's discussion and analysis and the Audited Consolidated Financial Statements for the years ended December 31, 2025 and 2024 have been retroactively restated to reflect the effect of the Reverse Stock Split.
As a result of Canmart's liquidation, during the year ended December 31, 2025, Canmart ceased operations and we derecognized all its assets and liabilities and have since determined that it is no longer a significant subsidiary.
| A. | Operating Results |
Results of Operations
The discussion below summarizes Akanda Group's consolidated historical operation results.
During the year ended December 31, 2025, Akanda Group evaluated the current state of Canmart and determined to discontinue and cease its UK operation. As a result, Akanda Group accounted for the operating results of Canmart, which was a net loss of $26,013, as a discontinued operation during the year ended December 31, 2025 and has reclassified the operating results of Canmart as a discontinued operation for the year ended December 31, 2024.
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024.
The following table sets forth key components of Akanda Group's results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024.
| Years ended | |||||||||
| December 31, | |||||||||
| 2025 | 2024 | ||||||||
| Sales | $ | 258,075 | $ | - | |||||
| Cost of sales | 414,098 | - | |||||||
| Gross Profit (Loss) | (156,023 | ) | - | ||||||
| Operating expenses | |||||||||
| Depreciation and amortization | 433,693 | 137,271 | |||||||
| Consulting and professional fees | 1,463,786 | 2,377,926 | |||||||
| Personnel expenses | 624,710 | 495,699 | |||||||
| General and administrative expenses | 2,305,195 | 1,019,287 | |||||||
| Total operating expenses | 4,827,384 | 4,030,183 | |||||||
| Operating loss | (4,983,407 | ) | (4,030,183 | ) | |||||
| Other (expense) income: | |||||||||
| Finance income | - | 2,953 | |||||||
| Finance expense | (925,092 | ) | (81,083 | ) | |||||
| Foreign exchange gain (loss), net | 273,606 | (132,842 | ) | ||||||
| Transaction costs | (350,000 | ) | - | ||||||
| Change in fair value of financial liabilities measured at FVTPL | 1,750,820 | - | |||||||
| Gain (loss) on debt settlement | 1,914,956 | (219,719 | ) | ||||||
| Other income | - | 74,455 | |||||||
| Gain on sale of subsidiary | - | 198,780 | |||||||
| Write-off of AP, net | - | 475,816 | |||||||
| Write-off of holdback payable | - | 400,000 | |||||||
| Write-off of loan receivable | (235,686 | ) | - | ||||||
| Impairment loss | (44,812,112 | ) | - | ||||||
| (42,383,508 | ) | 718,360 | |||||||
| Net loss from continuing operations | (47,366,915 | ) | (3,311,823 | ) | |||||
| Gain (loss) from discontinued operations | 507,604 | (784,206 | ) | ||||||
| Net loss | $ | (46,859,311 | ) | $ | (4,096,029 | ) | |||
| Translation adjustment | (175,651 | ) | (101,188 | ) | |||||
| Comprehensive loss | $ | (47,034,962 | ) | $ | (4,197,217 | ) | |||
| Net loss attributable to: | |||||||||
| Shareholders of the Company | $ | (45,653,948 | ) | $ | (4,096,029 | ) | |||
| Non-controlling interest | (1,205,363 | ) | - | ||||||
| $ | (46,859,311 | ) | $ | (4,096,029 | ) | ||||
| Net comprehensive loss attributable to: | |||||||||
| Shareholders of the Company | $ | (46,242,254 | ) | $ | (4,197,217 | ) | |||
| Non-controlling interest | (792,708 | ) | - | ||||||
| $ | (47,034,962 | ) | $ | (4,197,217 | ) | ||||
| Loss per share from continuing operations - basic and diluted | $ | (669.58 | ) | $ | (223.48 | ) | |||
| Loss per share - basic and diluted | $ | (662.22 | ) | $ | (276.40 | ) | |||
| Weighted average common shares outstanding | 68,941 | 14,819 | |||||||
Revenue
The revenue of $258,075 for the year ended December 31, 2025 as compared to $nil for 2024 came from the Company's First Towers's operations in Mexico. The revenue increase in 2025 was mainly the result of the acquisition of First Towers during the year. First Towers generate revenue from leasing its fiber optic networks and telecommunication towers.
Cost of Sales
Cost of sales increased from $nil in 2024 to $414,098 in 2025. The increase is directly related to the increase in sales activities and costs on maintenance and services on telecom towers during the current year since the acquisition of First Towers, as compared to no sales in the prior year when we did not own First Towers.
Amortization and Depreciation
Amortization and depreciation expenses increased from $137,271 for 2024 to $433,693 for the year ended December 31, 2025. The increase in the amortization and depreciation expenses recorded during the year ended December 31, 2025 was mainly attributable to the depreciation of First Tower assets held in Mexico and leased assets in the current year as compared in the prior year.
Consulting and Professional Fees
The consulting and professional fees incurred decreased from $2,377,926 in 2024 to $1,463,786 for the year ended December 31, 2025. This decrease in consulting and professional fees resulted from lower fees incurred during the current year as compared to the prior year. Consulting and professional fees incurred were mainly related to the engagement of various professional advisors and consultants in relation to Akanda's completion of the First Towers acquisition and related financings.
Personnel Expenses
The Akanda Group incurred personnel expenses of $624,710 for the year ended December 31, 2025 compared to $495,699 for 2024. The increase in personnel expenses was due to the change in management and increase in key personnel as a result of the acquisition of First Towers during the current year.
General and Administration Expenses
The Akanda Group incurred general and administration expenses of $2,305,195 and $1,019,287 for the years ended December 31, 2025 and 2024, respectively. These costs consisted mainly of IR related expenses and a broad range of site related operational expenses such as utilities, fuel costs, import duties, security expenses, repairs and maintenance and consumables and office related operational expenses for its day to day business activities. The increased in costs was also the result of the acquisition of First Towers during the current year.
Interest Expense
The Company incurred interest expenses of $925,092 for the year ended December 31, 2025 compared to interest expense of $81,083 for 2024. The increase in expenses during the year ended December 31, 2025 was mainly due to a large amount of interest accrued from secured promissory notes and loans assumed by the Company as a result of the acquisition of First Towers during the current year as compared to the prior year.
Interest income
Interest income for the year ended December 31, 2025 was $nil compared to $2,953 for 2024. The decrease was mainly due to the elimination of the interest receivable for a bridge loan the Company made to First Towers in 2024 as a result of its acquisition during the current year and derecognition of Canmart's interest receivable for a bridge loan to Cellen Life Sciences Limited and Cellen Biotech Limited pursuant to the Company ceasing its UK operation.
Foreign Currency Translation
The foreign exchange gain (loss) is recognized on the translation of the consolidated financial statements from their functional currencies to United States Dollar. The Euro is the functional currency for our former Cannahealth, Holigen and RPK businesses, Great British Pounds is the functional currency for our former Canmart business, Mexican Peso is the functional currency of our CT Mexico and CT&FO Mexico subsidiaries, and Canadian dollars is the functional currency of Akanda, 1371011 B.C. Ltd. and First Towers while the United States Dollar is its reporting currency. The exchange gains and losses have not been incurred on any transactions or balances held by these companies in a different currency.
Net Loss and Total Comprehensive Loss
For the years ended December 31, 2025 and 2024, the group incurred a net loss of $46,859,311 and $4,096,029, respectively, and a comprehensive loss of $47,034,962 and $4,197,217, respectively, which consisted primarily of depreciation and amortization of $433,693 and $137,271, respectively, consulting and professional fee expenses of $1,463,786 and $2,377,926, respectively, personnel expenses of $624,710 and $495,699, respectively, general and administrative expenses of $2,305,195 and $1,019,287, respectively, and gain (loss) from discontinued operation gain of $507,604 and loss of $784,206, respectively. The significant increase in losses for the year ended December 31, 2025 was mainly due to impairment loss of $44,812,112 recognized during the current year as compared to no impairment incurred in the prior year.
Off-Balance Sheet Arrangements
Akanda did not have, during the reporting period, and we do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditure or capital resources that is material to investors.
| B. | Liquidity and Capital Resources |
Cash Flows
The Akanda Group's principal liquidity requirements are for corporate operating expenses, working capital and capital expenditures. Historically, we have funded our liquidity requirements primarily through shareholder loans, loans from third parties and from the issuance of shares. We did not have, during the reporting period, and we do not currently have any contractual obligations for ongoing capital expenditures.
The following table summarizes our cash flows from operating, investing and financing activities for the years ended December 31, 2025 and 2024:
| Year Ended December 31, 2025 | ||||||||||||
| 2025 | Change | 2024 | ||||||||||
| Cash used in operating activities | $ | (6,729,048 | ) | $ | (2,748,683 | ) | $ | (3,980,365 | ) | |||
| Cash used in investing activities | $ | (7,451,887 | ) | $ | (6,435,722 | ) | $ | (1,016,165 | ) | |||
| Cash provided by financing activities | $ | 11,678,315 | $ | 2,688,881 | $ | 8,989,434 | ||||||
Cash Flows from Operating Activities
For the year ended December 31, 2025, Akanda Group's cash flow from operating activities decreased by $2,748,683 due to higher corporate expenses incurred as a result of corporate activities such as the acquisition of First Towers, gain on debt settlement, change in fair value of financial assets at FVTPL, and impairment loss recognized during the current year as well as changes in working capital relating to decrease in accounts receivable, increase in prepayments, decrease in trade and other payables and increase in due to related parties.
Cash Flows from Investing Activities
Cash used in investing activities was $7,451,887 for the year ended December 31, 2025, which were mainly attributable to cash paid as part of consideration for the acquisition of First Towers, additional purchases or costs for fiber optic projects, telecommunication towers and computer equipment and additional cost for farmland. The cash used in investing activities during the year ended December 31, 2024 were attributable to acquisition costs of farmland and additional purchases of computer equipment, furniture and fixtures and leasehold improvements, cash surrendered upon disposal of RPK, cash lent out for a bridge loan entered in the current year and loan receivable, partially offset by cash proceeds from the sale of RPK.
Cash Flows from Financing Activities
Cash provided by financing activities was $11,678,315 for the year ended December 31, 2025, which was mainly attributable to the proceeds from private placement offering and notes financing, as discussed below, and partially offset by repayment of loans, lease payments and advances to related parties. Cash provided by financing activities during the year ended December 31, 2024 was mainly attributable to the proceeds from public offerings and short term loans and partially offset by repayment of loans and lease payments.
Share Capital and Financings
During the year ended December 31, 2025, Akanda Group completed the following financings:
| (i) | On March 26, 2025, pursuant to a series of subscription agreement entered with investors on March 21 and 24, 2025, Akanda Group 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. |
| (ii) | On September 12, 2025, the Company closed the Securities Purchase Agreement entered on September 11, 2025 with certain institutional investors to issue and sell to each of the September Investors a convertible promissory note for gross proceeds of $12,000,000. |
| The Company issued 408,427 common shares pursuant to the conversion of an aggregate principal amount of $10,737,400, under the terms of the convertible promissory note. |
During the year ended December 31, 2024, Akanda Group completed the following financings:
| (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. All of the pre-funded warrants have been exercised in accordance with their terms. |
| (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. All of the pre-funded warrants have been exercised in accordance with their terms. |
| (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. All of the pre-funded warrants have been exercised in accordance with their terms. |
| (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. All of the pre-funded warrants have been exercised in accordance with their terms. |
| (v) | 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. All of the pre-funded warrants have been exercised in accordance with their terms. |
| (vi) | 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. All of the pre-funded warrants have been exercised in accordance with their terms. |
| (vii) | 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. All of the pre-funded warrants have been exercised in accordance with their terms. |
Short Term Loan
During the year ended December 31, 2024, Akanda Group received additional loans of $110,236 for its capital as well as working capital needs, of which $44,954 was advances from related parties. No new short term loans were received during the year ended December 31, 2025 or in 2026 through the date of this Annual Report on Form 20-F.
Disclosure of Contractual Arrangements
On December 31, 2025, Akanda Group was committed to minimum lease payments as follows:
| Less than | 1 - 5 | Over | ||||||||||
| Contractual Obligation | One Year | Years | 5 Years | |||||||||
| Office lease | $ | 144,000 | $ | - | $ | - | ||||||
| Tower leases | 69,739 | 239,495 | 33,944 | |||||||||
| $ | 213,739 | $ | 239,495 | $ | 33,944 | |||||||
The amounts above are undiscounted and include the total amounts due, including the interest component, that has been reclassified to accounts payable.
On December 31, 2024, Akanda Group was committed to minimum lease payments as follows:
| Less than | 1 - 5 | Over | ||||||||||
| Contractual Obligation | One Year | Years | 5 Years | |||||||||
| Office lease | $ | 40,000 | $ | - | $ | - | ||||||
The amounts above are undiscounted and include the total amounts due, including the interest component, that has been reclassified to accounts payable.
Subsequent to the year ended December 31, 2025, the Company:
| i. | Implemented a Reverse Stock Split: |
| a. | 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. |
| b. | 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. |
| ii. | Issued the following shares: |
| a. | On January 14, 2026, pursuant to the conversion of September Note, the Company issued 26,217 common shares at conversion price of $15.26 for an aggregate principal amount of $399,957. |
| b. | On January 16, 2026, pursuant to the conversion of September Note, the Company issued 26,217 common shares at conversion price of $15.26 for an aggregate principal amount of $399,957. |
| c. | On January 22, 2026, pursuant to the final conversion of September Note, the Company issued 41,208 common shares at conversion price of $15.26 for an aggregate principal amount of $628,642. |
| iii. | Closed a $7,000,000 Convertible Note Offering: |
On January 21, 2026, the Company entered into a Securities Purchase Agreement dated January 20, 2026 (the "January Purchase Agreement") with certain institutional investors (the "January Investors") to issue and sell to each of the January Investors a convertible promissory note (each, individually, a "January Note" and collectively, the "January Notes"), for aggregate gross proceeds to the Company of $7.0 million (the "Purchase Price"), before deducting fees to the Placement Agent (as defined below) and other expenses payable by the Company in connection with the offering (the "January Offering"). The closing of the January Offering occurred on January 21, 2026.
The Company used the net proceeds from the sale of the January Notes for (i) marketing purposes of approximately $2.3 million, (ii) working capital and general corporate purposes of approximately $2.6 million and (iii) the repayment of certain indebtedness of up to $2.1 million.
The maturity date of each January Note is the 12-month anniversary of the issuance date of such January Note, and is the date upon which the principal amount, as well as any other fees, shall be due and payable. The January Notes bear interest at a rate of 10% per annum.
Each January Investor has the right, at any time, to convert all or any portion of the then outstanding and unpaid principal amount and interest if any (including any costs, fees, and charges) into the Company's Common Shares, at a conversion price (the "Conversion Price") equal to the lower of (i) $5.715 per share (the "Initial Conversion Price"), (ii) 85% of the VWAP (as defined in the January Notes) of the Common Shares during the five consecutive Trading Day (as defined in the January Notes) period ending and including the Trading Day immediately preceding the delivery of the Conversion Notice (as defined in the January Notes); or (iii) 85% of the Closing Sale Price (as defined in the January Notes) on the Trading Day prior to the Conversion Notice being submitted; provided, however, that in no event shall the Conversion Price equal a price per share that is less than $1.125. As of the filing date of this Annual report on Form 20-F, none of the January Note has been converted and it continues to accrue interest on the total principal amount.
In addition, the Company paid the placement agent $70,000 in cash fees in relation to the January Offering at the closing.
| C. | Research and Development, Patents and Licenses |
Not applicable.
| D. | Trend Information |
Because we ceased our European operations and should still be considered in the startup phase, we are unable to identify any recent trends in revenue or expenses. Thus, we are unable to identify any known trends, uncertainties, demands, commitments or events involving our business that are reasonably likely to have a material effect on our revenues, income from operations, profitability, liquidity or capital resources, or that would cause the reported financial information in this Annual Report on Form 20-F to not be indicative of future operating results or financial condition.
| E. | Material Accounting Policies and Estimates |
Please refer to Note 3 of Akanda Group's audited consolidated financial statements included in Item 18 of this Annual Report on Form 20-F.