AKANDA CORP.

Akanda Corp. is an early-stage, emerging growth company headquartered in Toronto, Canada, primarily focused on cannabis cultivation, manufacturing, and distribution ¹. The company has a limited operating history and has generated minimal revenues to date ². Its business model has recently undergone significant changes, shifting away from European operations to focus on developing a hemp and THC/CBD farming facility in British Columbia, Canada ³. The company also plans a business combination with First Towers and Fiber Corp. to diversify its business offerings beyond the cannabis market ⁴.

The company's core business model is centered on cannabis cultivation, manufacturing, and distribution. Historically, it generated revenue from the sale and distribution of cannabis-based products for medical use through its subsidiary Canmart Ltd. in the UK ⁵. However, Canmart's operations are being discontinued, and the company is transitioning to cultivation in British Columbia ⁶. Revenue generation is transactional, primarily from product sales, and the company is in the early stages of developing its cultivation capabilities in Canada ⁷.

The company's primary product and service line, as of the reported period, was the distribution of cannabis-based medicinal products (CBPMs) through Canmart in the UK ⁸. Canmart sold cannabis oil and cannabis flower for medical use and had the necessary licenses to import CBPMs to supply the UK domestic market ⁹. Canmart also had access to a 30,000 square foot logistics warehouse in SE England ¹⁰. However, Canmart's UK operations are being discontinued, and its importation licenses and leasing agreement for the warehouse were not renewed ¹¹. The company is now focused on developing THC and CBD facilities at its Gabriola Island, British Columbia site, for which it obtained a hemp license from Health Canada in September 2024 ¹².

For the fiscal year ended December 31, 2024, Akanda Group reported sales of $836,664 ¹³, an increase from $423,683 in 2023 ¹⁴. The cost of sales for 2024 was $628,282 ¹⁵, resulting in a gross profit of $208,382 ¹⁶. Operating expenses totaled $4,590,864 ¹⁷, leading to an operating loss of $(4,382,482) ¹⁸. The net loss from continuing operations was $(3,268,409) ¹⁹, and the loss from discontinued operations was $(827,620) ²⁰. This resulted in a total net loss of $(4,096,029) ²¹ and a comprehensive loss of $(4,197,217) ²². Diluted EPS was $(3.93) ²³. Cash and cash equivalents at year-end were $3,838,650 ²⁴. Total current liabilities were $3,637,545 ²⁵, and total liabilities were $3,637,545 ²⁶. The company reported total shareholders' equity (deficit) of $4,276,538 ²⁷.

Comparing 2024 to 2023, sales increased from $423,683 to $836,664 ²⁸, primarily due to higher sales of CBPM product types by Canmart ²⁹. Cost of sales also increased from $364,346 to $628,282 ³⁰, commensurate with the increased sales activity ³¹. Gross profit significantly improved from $59,337 in 2023 to $208,382 in 2024 ³². Operating expenses increased from $3,718,135 to $4,590,864 ³³, driven by higher general and administrative expenses, particularly investor relations expenses ³⁴. The net loss substantially decreased from $(32,275,070) in 2023 to $(4,096,029) in 2024 ³⁵, mainly due to no impairment loss recognized in 2024 compared to an impairment loss of $24,665,564 in 2023 related to discontinued operations ³⁶.

During the reported period, Akanda sold its subsidiary RPK to Somai Pharmaceuticals Ltd. for a total cash consideration of $2,000,000 ³⁷, recognizing a gain on sale of subsidiary of $198,780 ³⁸. Somai also assumed approximately 4,000,000 Euros of RPK's debt ³⁹. The company also made initial option payments totaling $1,800,000 for Canadian farming property in British Columbia, with an additional $750,000 milestone payment made in September 2024 upon obtaining a hemp license from Health Canada ⁴⁰. Furthermore, the company completed several registered direct and underwritten public offerings, raising an aggregate of approximately $11.5 million between February 2024 and October 2024 ⁴¹.

Akanda does not anticipate generating material revenues in 2025 due to the cessation of its Canmart operations ⁴². The revenues generated in 2024 are not recurring, and the British Columbia farming facility has not yet generated any revenues ⁴³. The company explicitly states it does not expect to generate any revenues in 2025 unless and until it successfully consummates its business combination with First Towers and Fiber Corp., for which there is no assurance of success ⁴⁴.

A major growth area for Akanda is the development of its hemp and THC/CBD farming facility in Gabriola Island, British Columbia ⁴⁵. The company has acquired the right to develop this property for two years, with plans to establish Tetrahydrocannabinol (THC) and CBD facilities ⁴⁶. An initial non-refundable payment of $1,800,000 was made for this right, and an additional $750,000 milestone payment was made in September 2024 upon receiving a hemp license from Health Canada ⁴⁷. Future payments are contingent on achieving milestones such as THC cultivation approval, sales of THC product, and CBD cultivation approval ⁴⁸.

Another significant growth vector is the planned business combination with First Towers and Fiber Corp. (FTFC), a private company that develops, constructs, and owns telecommunications infrastructure in Mexico ⁴⁹. This combination is intended to expand Akanda's business offerings and reduce its reliance on the cannabis market ⁵⁰. Substantially all FTFC shareholders will receive approximately 15.3 million Purchaser Shares, subject to adjustment, while other shareholders will receive an aggregate of $14,100,000, payable 18 months after closing ⁵¹. Akanda will also assume FTFC's outstanding options and certain indebtedness ⁵². The company has agreed to advance FTFC a $1,000,000 loan facility, with $400,000 already borrowed through April 2025 ⁵³. The "End Date" for the Share Exchange Agreement has been amended to June 30, 2025 ⁵⁴.

Following the closing of the business combination, Akanda has committed to using commercially reasonable efforts to raise additional funds of at least $4,000,000 and a maximum of $10,000,000 ⁵⁵. This fundraising will comprise two tranches: a debt or equity financing of at least $2,000,000 and a maximum of $5,000,000 within four months of the closing date, and a subsequent debt or equity financing to raise an additional amount of at least $2,000,000 and a maximum of $5,000,000 within seven months of the closing date ⁵⁶. The type of securities and offering price will be determined by the company based on market conditions ⁵⁷.

The company's operational outlook includes a transition in its workforce strategy. As of April 30, 2025, Akanda ceased having any full-time employees and has only two part-time executives, a direct result of discontinuing Canmart operations and shifting focus to the British Columbia cultivation facilities ⁵⁸. The company has not yet commenced cultivation operations at its British Columbia location ⁵⁹. Inflation has increased operating and production costs globally, including labor, electrical, and material costs such as fertilizer, which has impacted net revenue ⁶⁰. The planned British Columbia facility is indoor, so seasonality is not expected to affect harvest month-to-month, but it may impact logistics due to weather ⁶¹.

Akanda's capital allocation plans include continued investment in its British Columbia farming property, with additional milestone payments anticipated upon achieving THC and CBD cultivation approvals ⁶². The company also approved a new 30% evergreen 2024 Equity Incentive Plan on March 22, 2024 ⁶³. The company has historically funded its liquidity requirements through shareholder loans, third-party loans, and share issuances ⁶⁴.

Akanda faces substantial risks, including its early-stage nature with limited operating history and minimal revenue, raising significant doubt about its ability to continue as a going concern ⁶⁵. The company expects to require additional funding for its planned hemp and THC/CBD cultivation facility in British Columbia and the business combination with First Towers and Fiber Corp., with no assurance that such funding will be available on acceptable terms ⁶⁶. Its subsidiary Bophelo is in insolvency proceedings, and the company is not actively contesting the matter due to lack of funds and resources ⁶⁷. Litigation risks are significant, with several claims from former executives and a legal firm, which could be expensive and divert management attention and resources ⁶⁸. The planned business combination with First Towers and Fiber Corp. introduces numerous risks, including potential integration difficulties, diversion of management attention, dilution of shareholder value, and the possibility that the transaction may not be completed ⁶⁹. The cannabis industry is subject to intense and increasing competition, with many competitors having greater resources and longer operating histories ⁷⁰. Demand for cannabis products is sensitive to scientific research, regulatory changes, litigation, and media attention, which could adversely affect market acceptance ⁷¹. The company is also exposed to the inherent risks of an agricultural business, such as crop disease, volatile weather, and the need to deliver quality products at competitive prices ⁷². Dependence on third-party suppliers, service providers, and distributors poses a risk of disruption if these parties breach agreements or cease participation ⁷³. As a foreign private issuer, Akanda is subject to economic, political, and regulatory risks associated with international operations, including currency exchange rate fluctuations and differing regulatory requirements ⁷⁴. The cannabis regulatory regime in Canada is new and evolving, and changes in laws or enforcement could adversely affect operations ⁷⁵. There is also a risk of being classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in material adverse tax consequences for U.S. Holders ⁷⁶. The company has identified a material weakness in its internal control over financial reporting due to inadequate staffing and supervision in bookkeeping and accounting operations, which could lead to untimely identification and resolution of accounting and disclosure matters ⁷⁷.

Management's message to shareholders conveys a company in a significant transitional phase, actively repositioning its business after exiting European operations and focusing on new ventures in Canada and Mexico. The company explicitly states it does not expect to generate material revenues in 2025, as a result of shutting down its Canmart operations, and does not anticipate any revenues in 2025 unless and until it consummates its business combination with First Towers and Fiber Corp., of which it can give no assurance of success ⁷⁸. The two or three strategic priorities emphasized are the development of the Canadian hemp and THC/CBD farming facility in British Columbia, the successful consummation of the business combination with First Towers and Fiber Corp. to diversify business offerings, and securing additional financing post-combination, aiming to raise at least $4,000,000 and a maximum of $10,000,000 ⁷⁹. Management acknowledges the need for additional funding to develop its pre-revenue hemp and THC/CBD cultivation facility and to fund the planned combination with First Towers and Fiber Corp. and operations thereafter ⁸⁰.