SEDAR Interim Financial Statements

Adastra Holdings Ltd. Condensed Interim Consolidated Financial Statements For the nine months ended Sep 30, 2025, and 2024 (Unaudited - Expressed in Canadian dollars) Notice of Disclosure of Non-Auditor Review Pursuant to subsection 4.3(3)(a) of National Instrument 51-102 - Continuous Disclosure Obligations, issued by the Canadian Securities Administrators, if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unaudited condensed interim consolidated financial statements of Adastra Holdings Ltd. (the “Company”) for the interim period ended Sep 30, 2025 and 2024, have been prepared in accordance with the International Accounting Standard 34 Interim Financial Reporting, as issued by the International Accounting Standards Board, and are the responsibility of the Company’s management. The Company’s independent auditors have not performed a review of these condensed interim consolidated financial statements. November 28, 2025 ADASTRA HOLDINGS LTD. Condensed Interim Consolidated Statements of Loss and Comprehensive Loss For the nine months ended September 30, 2025, and 2024 (Unaudited - Expressed in Canadian dollars, except number of shares) The accompanying notes are an integral part of these condensed interim consolidated financial statements. 1 Note September 30, 2025 December 31, 2024 $ $ ASSETS Current assets Cash 786,599 1,296,727 Amounts receivable 4 1,751,786 2,919,080 Prepaid expenses and deposits 5 183,394 471,959 Inventory 6 3,727,043 5,594,309 Income tax receivable 21,772 21,772 6,470,594 10,303,847 Long-term deposits 5 1,662,000 512,000 Property and equipment 7 7,875,917 8,526,397 Total assets 16,008,511 19,342,244 LIABILITIES Current liabilities Accounts payable and accrued liabilities 8 13,384,376 14,271,549 Current portion of lease liability 9 7,043 19,032 Government loan 49,815 63,000 Current portion of mortgage payable 10 3,496,917 - 16,938,151 14,353,581 Lease liability 9 17,616 68,389 Mortgage payable 10 - 3,470,540 Total liabilities 16,955,767 17,892,510 SHAREHOLDERS' EQUITY Share capital 11 29,964,446 29,964,446 Reserves 11 6,474,732 6,474,732 Deficit (37,386,430) (34,989,444) Total shareholders’ equity (947,254) 1,449,734 Total liabilities and shareholders’ equity 16,008,511 19,342,244 Nature of operations and going concern (Note 1) Commitments and contingencies (Note 15) Approved on behalf of the Board of Directors on November 28, 2025: “Jon Edwards” “Mark Qvist” Director Director ADASTRA HOLDINGS LTD. Condensed Interim Consolidated Statements of Loss and Comprehensive Loss For the nine months ended September 30, 2025, and 2024 (Unaudited - Expressed in Canadian dollars, except number of shares) The accompanying notes are an integral part of these condensed interim consolidated financial statements. 2 Three months ended September 30, Nine months ended September 30, Note 2025 2024 2025 2024 $ $ $ $ Revenue 7,624,291 11,974,583 21,248,150 35,337,730 Excise taxes (2,880,337) (4,871,007) (9,123,582) (15,231,911) Net Revenue 4,743,954 7,103,576 12,124,568 20,105,819 Cost of sales 6,7 (3,402,289) (4,374,546) (8,115,086) (12,915,317) Gross profit 1,341,665 2,729,120 4,009,482 7,190,502 Operating expenses General and administrative 17 801,622 1,274,828 2,854,393 3,350,954 Sales and marketing 17 854,338 993,273 2,660,749 2,908,202 Depreciation and amortization 7 38,313 115, --- 951 103,579 346,671 Provision for expected credit losses 4 (6,745) - 4,091 738,526 Total operating expenses 1,687,529 2,384,052 5,622,813 7,344,353 Loss from operations (345,864) 345,068 (1,613,330) (153,851) Other income (expense) Interest expense 8,9,10 (291,006) (277,071) (788,281) (1,007,546) Gain on settlement of accounts payable 16,543 4,623 16,543 Loss before income taxes (636,870) 84,540 (2,396,988) (1,144,854) Deferred income tax recovery - - Income tax expense - - Net loss and comprehensive loss (636,870) 84,540 (2,396,988) (1,144,854) Net loss per share Basic and diluted (0.11) 0.01 (0.43) (0.20) Weighted average number of common shares outstanding Basic and diluted 5,597,050 5,597,050 5,597,050 5,597,050 ADASTRA HOLDINGS LTD. Condensed Interim Consolidated Statements of Cash Flows For the Nine months ended September 30, 2025 and 2024 (Unaudited - Expressed in Canadian dollars) The accompanying notes are an integral part of these condensed interim consolidated financial statements. 3 2025 2024 $ $ Operating activities Net loss and comprehensive loss for the period (2,396,988) (1,144,854) Adjustments for non-cash items: Depreciation and amortization 103,579 913,975 Interest expense 788,281 1,007,546 Provision for expected credit losses 4,091 738,526 Gain on settlement of accounts (16,543) Net change in non-cash working capital items: Amounts receivable 1,163,203 780,841 Prepaid expenses and deposits 288,565 284,559 Inventory 1,867,266 (612,732) Accounts payable and accrued liabilities (1,675,454) (770,460) Cash provided by (used in) operating activities 142,543 1,180,858 Investing activity Purchases of property and equipment 546,901 (304,753) Long term deposits (1,150,000) - Cash used in investing activity (603,099) (259,023) Financing activities Payment of mortgage interest 26,377 (314,738) Repayment of lease liability Loan Repayment (62,762) (13,185) (22,630) - Cash used in financing activities (49,570) (337,368) Net decrease in cash (510,126) 538,755 Cash, beginning of the period 1,296,727 1,378,960 Cash, end of the period 786,601 1,917,715 Supplemental cash flow information (Note 13) ADASTRA HOLDINGS LTD. Condensed Interim Consolidated Statements of Changes in Shareholder’s Equity (Unaudited - Expressed in Canadian dollars, except number of shares) The accompanying notes are an integral part of these condensed interim consolidated financial statements. 4 Common shares Share capital Reserves Deficit Total # $ $ $ $ Balance, December 31, 2023 5,597,050 29,964,446 6,474,732 (21,754,030) 14,685,148 Loss for the period - - - (1,229,394) (1,229,394) Balance, June 30, 2024 5,597,050 29,964,446 6,474,732 (22,983,424) 13,455,754 Balance, December 31, 2024 5,597,050 29,964,446 6,474,732 (34,989,444) 1,449,734 Loss for the period - - - (2,396,988) (2,396,988) Balance, September 30, 2025 5,597,050 29,964,446 6,474,732 (37,386,432) (947,254) ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 5 NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN Adastra Holdings Ltd. (the “Company”) was incorporated under the laws of the province of British Columbia on October 14, 1987. The Company extracts and processes cannabis for sale to the recreational and medical markets in Canada. The Company is listed on the Canadian Securities Exchange (“CSE”) under the symbol “XTRX”. The Company’s registered and record --- s office is located at 5451 275th Street, Langley City, British Columbia, V4W 3X8. These condensed interim consolidated financial statements are prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of operations. These condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue in existence. The Company’s ability to continue as a going concern is dependent on its ability to generate positive cash flows from operations, complete additional financings, and/or extend or modify its mortgage payable (Note 10). As at September 30, 2025, the Company had a working capital deficiency of $10,467,557 (December 31, 2024 - $4,049,734) and a deficit of $37,386,432 (December 31, 2024 - $34,989,444). During the nine months ended September 30, 2025, the Company incurred a net loss and comprehensive loss of $2,396,988 (2024 - $1,229,394). These events and conditions indicate a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. If the going concern assumption were not appropriate for these condensed interim consolidated financial statements, it could be necessary to restate the Company’s assets and liabilities on a liquidation basis. NOTE 2 - BASIS OF PRESENTATION (a) Statement of compliance These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). As such, these condensed interim consolidated financial statements do not contain all the disclosures required by IFRS for annual financial statements and should be read in conjunction with the Company’s audited annual consolidated financial statements for the years ended December 31, 2024 and 2023. These condensed interim consolidated financial statements were approved by the Board of Directors and authorized for issue on November 28, 2025. (b) Basis of measurement These condensed interim consolidated financial statements have been prepared on a historical cost basis except for those financial instruments which have been classified at fair value through profit or loss. In addition, except for cash flow information, these condensed interim consolidated financial statements have been prepared using the accrual method of accounting. All amounts on these condensed interim consolidated financial statements are presented in Canadian dollars which is the functional currency of the Company and its subsidiaries. (c) Principles of consolidation These condensed interim consolidated financial statements include the financial information of the Company and entities controlled by the Company. Control exists where the parent entity has power over the investee and is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the inve --- stee. Subsidiaries are included in the condensed interim consolidated financial statements from the date control commences until the date control ceases. All intercompany transactions and balances are eliminated on consolidation. The accounting policies of subsidiaries are changed where necessary to align them with the policies adopted by the Company. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 6 NOTE 2 - BASIS OF PRESENTATION (continued) These condensed interim consolidated financial statements incorporate the accounts of the Company and the following Canadian subsidiaries: Functional currency Ownership percentage Adastra Labs Holdings (2019) Ltd. (formerly Adastra Labs Holdings Ltd.) CAD 100% Adastra Labs Inc. CAD 100% 1178562 B.C. Ltd. CAD 100% Adastra Brands Inc. CAD 100% 1204581 B.C. Ltd. (“Phyto BrandCo”) CAD 100% NOTE 3 - MATERIAL ACCOUNTING POLICIES The accounting policies applied in the preparation of these condensed interim consolidated financial statements are consistent with those applied and disclosed in Note 3 of the consolidated financial statements for the years ended December 31, 2024 and 2023. The preparation of the condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenues and expenses. Management continually evaluates these judgments, estimates and assumptions based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and judgments which may cause a material adjustment to the carrying amounts of assets and liabilities. The Company’s interim results are not necessarily indicative of its results for a full year. The critical judgements and estimates applied in the preparation of these interim financial statements are consistent with those applied and disclosed in Note 3 to the consolidated financial statements for the years ended December 31, 2024 and 2023. (a) Standards issued but not yet effective Certain pronouncements have been issued by the IASB or IFRIC that are effective for accounting periods beginning on or after July 1, 2025. The Company has reviewed these updates and determined that many of these updates are not applicable or consequential to the Company and have been excluded from discussion within these significant accounting policies. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 7 NOTE 4 - AMOUNTS RECEIVABLE As at September 30, 2025 and December 31, 2024, amounts receivables consisted of the following: September 30, 2025 December 31, 2024 $ $ Trade receivables, net of expected credit losses (Note 14) 1,751,786 2,919,080 1,751,786 2,919,080 During the nine months ended September 30, 2025, the Company reduced a provision for expected credit losses against trade receivables of $6,745 (2024 - $738,526) related to overdue trade receivables. NOTE 5 - PREPAID EXPENSES AND DEPOSITS As at September 30, 2025 and December 31, 2024, prepaid expenses and deposits consisted of the following: September 30, 2025 December 31, 202 --- 4 $ $ Prepaid expenses 139,019 107,038 Deposits 44,375 364,921 183,394 471,959 As at September 30, 2025, deposits of $44,375 (December 31, 2024 - $364,921) consist of $28,750 (December 31, 2024 - $278,340) in deposits GIC and $15,625 (December 31, 2024 - $86,581) in other deposits. Long-term deposits of $1,662,000 (December 31, 2024 - $512,000) consist of deposits held in trust with the Canadian Revenue Agency (“CRA”) for excise bond. NOTE 6 - INVENTORY As at September 30, 2025 and December 31, 2024, inventory consisted of the following: September 30, 2025 December 31, 2024 $ $ Dried cannabis, hemp biomass and terpenes 362,759 308,999 Packaging 945,083 1,601,575 Production work in process 1,208,328 1,841,758 Finished goods 1,210,874 1,841,977 3,727,043 5,594,309 Inventory expensed to cost of sales during the nine months ended September 30, 2025 was $8,115,086 (2024 - $7,322,143). During the nine months ended September 30, 2025, the Company allocated $813,982.10 in wages and salaries to inventory (2024 - $889,393). ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 8 NOTE 7 - PROPERTY AND EQUIPMENT The following table summarizes the continuity of property and equipment as at September 30, 2025 and December 31, 2024: Land Building Furniture and equipment Computer software Laboratory equipment Extraction equipment Building improvements Right-of- use asset Total $ $ $ $ $ $ $ $ $ Cost Balance, December 31, 2023 1,592,232 1,999,328 442,212 12,105 1,400,978 2,536,227 3,958,408 132,301 12,073,791 Additions - - 191,541 - 71,027 153,607 - - 416,175 Balance, December 31, 2024 1,592,232 1,999,328 633,753 12,105 1,472,005 2,689,834 3,958,408 132,301 12,489,966 Additions - - 5,103 - - - - - 5,103 Disposal (82,333) (82,333) Balance, September 30, 2025 1,592,232 1,999,328 638,856 12,105 1,472,005 2,689,834 3,958,408 49,968 12,412,736 Accumulated depreciation Balance, December 31, 2023 - 516,410 118,832 6,837 465,098 1,198,239 737,979 18,979 3,062,374 Depreciation - 99,966 87,943 1,054 198,778 293,281 197,921 22,252 901,195 Balance, December 31, 2024 - 616,376 206,775 7,891 663,876 1,491,520 935,900 41,231 3,963,569 Depreciation - 74,975 64,881 632 121,219 179,747 148,440 (16,572) 404,342 Balance, September 30, 2025 - 691,351 271,586 8,523 785,095 1,671,267 1,084,340 24,659 4,536,821 Carrying value Balance, December 31, 2024 1,592,232 1,382,952 426,978 4,214 808,129 1,198,314 3,022,508 91,070 8,526,397 Balance, September 30, 2025 1,592,232 1,307,977 367,270 3,582 686,910 1,018,567 2,874,068 25,309 7,875,915 During the nine months ended September 30, 2025, the Company allocated $339,076 (2024 - $377,306) of depreciation to the production of inventory and $65,266 (2024 - $68,222) to operating expenses. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 9 NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES As at September 30, 2025 and December 31, 2024, accounts payable and accrued liabilities consisted of the following: September 30, 2025 December 31, 2024 $ $ Accounts payable 2,653,426 2,210,279 Accrued liabilities 690,579 609,964 Excise tax payable 9,130,093 11,151,279 Sales tax payable Factoring Account 450,134 460,145 300,027 - 13,384,377 14,271,549 Effective Octo --- ber 17, 2018, Canada Revenue Agency ("CRA") began levying an excise tax on the sale of medical and consumer cannabis products. The Company becomes liable for these excise duties when cannabis products are delivered to the customer. The Company’s CRA cannabis license must be renewed monthly. During the nine months ended September 30, 2025, the Company recorded interest expense of $788,281 (2024 - $663,026) related to outstanding excise taxes and $8,040 (2024 - $47,034) related to other overdue accounts. NOTE 9 - LEASE LIABILITY A summary of the Company’s lease liabilities for the nine months ended September 30, 2025 and the year ended December 31, 2024 is as follows: September 30, 2025 December 31, 2024 $ $ Opening balance 87,421 104,227 Interest 6,492 13,483 Repayments (16,435) (30,289) Closing balance 7,477 87,421 Less: current portion Less: Termination of Lease (7,043) (52,818) (19,032) - Long-term portion 17,616 68,389 On June 15, 2023, the Company entered into a four-year lease for a promotional vehicle. The base monthly payment is $1,188 with an initial payment of $9,806. The incremental borrowing rate used to discount the lease liability was 16%. On July 7, 2025, the Company terminated its lease agreement for the promotional vehicle with GMC, which was originally entered into on June 15, 2023 for a four-year term. In accordance with IFRS 16, the Company derecognized the related lease liability and right-of-use asset as of the termination date. Any difference between the carrying amount of the lease liability and the right-of-use asset, together with any termination costs, was recognized in profit or loss for the period. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 10 NOTE 10 - MORTGAGE PAYABLE Sixth Mortgage Seventh Mortgage Total $ $ $ Balance, December 31, 2023 3,479,054 - 3,479,054 New mortgage (refinancing) (3,500,000) 3,500,000 - Transaction costs - (35,000) (35,000) Finance expense 382,321 71,165 453,486 Repayments (361,375) (65,625) (427,000) Balance, December 31, 2024 - 3,470,540 3,470,540 Finance expense - 321,690 321,690 Repayments - (295,312) (295,312) Balance, September 30, 2025 - 3,496,918 3,496,918 a) On July 26, 2023, the Company refinanced the fifth Mortgage (the “Sixth Mortgage”) which bore interest at the greater of 11.49% or the prime rate plus 4.29% per annum, calculated monthly, for one year. The interest rate increased to 15.99% for an additional 3 months. The Sixth Mortgage had a maturity date of November 1, 2024 and was secured by the property and building improvements. The Sixth Mortgage payable was recorded at amortized cost (principal value less $35,000 transaction costs). b) On October 29, 2024, the Company refinanced the Sixth Mortgage (the “Seventh Mortgage”) which bears interest at the greater of 11.25% or the prime rate plus 5.3% per annum, calculated monthly, for one year. As at December 31, 2024, the prime rate was 2.75% (December 31, 2024 – 3.25%). The interest rate increases to the greater of 17.99% or the prime rate plus 12.04% for an additional 3 months. The Seventh Mortgage has a maturity date of February 1, 2026 and is secured by the property and building improvements. The Seventh Mortgage payable was recorded at amortized cost (principal value less $35,000 transaction costs). As at September 30, 2025, the carrying value of the mortgage was --- $3,487,854 (December 31, 2024 - $3,470,540) and the Company maintains minimum interest-only payments of $32,813 (2024 - $33,513) per month. As at September 30, 2025, the total non-discounted remaining scheduled payments related to the mortgage including interest payments totaled $3,800,809 (December 31, 2024 - $3,985,538). Total interest expense during the three months ended September 30, 2025 was $321,690 (2024 - $218,934). NOTE 11 - SHARE CAPITAL (a) Authorized Unlimited number of voting common shares without par value. (b) Issued share capital As at September 30, 2025, 5,597,050 common shares were issued and outstanding (December 31, 2024 - 5,597,050). (c) Share issuances During the nine months ended September 30, 2025 and the year ended December 31, 2024, the Company had no share transaction. Effective October 3, 2024, there was a 10:1 share consolidation of common shares held. As a result of the share consolidation, all shares and options, warrants, EPS, have been restated in the condensed interim consolidated financial statements reflecting the share consolidation. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 11 NOTE 11 - SHARE CAPITAL (continued) (d) Stock options The Company has an incentive stock option plan (the “Plan”) which provides for the granting of options. Under the Plan the maximum number of stock options issued cannot exceed 10% of the Company’s currently issued and outstanding common shares. Options granted under the Plan may have a maximum term of ten years. A participant, who is not a consultant conducting investor relations activities, who is granted an option that is exercisable at the market price at the date of grant, will have their options vest immediately, unless otherwise determined by the Board of Directors. Options granted at below market prices will vest one-sixth every three months. Options belonging to a participant who is a consultant conducting investor relations activities who is granted an option under the Plan will become vested with the right to exercise one-quarter of the option upon conclusion of every three months subsequent to the grant date. All options are to be settled by issuance of common shares. During the nine months ended September 30, 2025 and the year ended December 31, 2024, the Company had no stock option grants. A summary of the changes in the Company’s stock options outstanding and exercisable is as follows: Stock options outstanding and exercisable Weight average exercise price # $ As at December 31, 2023 287,000 13.77 Forfeited (64,000) 9.08 As at December 31, 2024 223,000 15.11 Forfeited/Expired (134,833) (13.46) As at September 30, 2025 88,167 17.65 As at September 30, 2025, the Company had stock options outstanding and exercisable as follows: Expiry date Options outstanding and exercisable Weighted average exercise price Weighted average remaining life # $ Years August 5, 2026 3,333 13.50 1.35 October 25, 2026 30,000 10.60 1.57 October 28, 2026 6,500 9.50 1.58 88,167 17.65 0.89 ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 12 NOTE 12 - RELATED PARTY TRANSACTIONS Key management personnel are those having the authority and responsibility for planning, directing, and controllin --- g the Company. There were no loans to key management personnel or directors, or entities over which they have control or significant influence during the nine months ended September 30, 2025 and the year ended December 31, 2024. The following related parties transacted with the Company or Company-controlled entities during the nine months ended September 30, 2025 and the year ended December 31, 2024: a) Michael Forbes was a Director and the Company’s President and CEO. He was appointed on April 29, 2021 and is the owner of MDC Forbes, which provides CEO services to the Company. He resigned on March 29, 2024. b) Paul Morgan is a Director of the Company. He was appointed on July 14, 2021. c) Lachlan McLeod was appointed CFO of the Company on January 1, 2023 and was an employee of Fehr & Associates CPA (“F&A”), which provided accounting services to the Company. On June 2, 2023, the Company hired Mr. McLeod as an employee and the F&A agreement was subsequently terminated. On April 14, 2024, Mr. McLeod was additionally appointed as Interim CEO and Corporate Secretary of the Company. Mr. McLeod resigned as Interim CEO, CFO and Corporate Secretary on September 25, 2024. d) On March 13, 2024, Andrew Hale joined the board of directors. On February 14, 2025, Mr. Hale resigned as a director. e) On April 2, 2024, Jon Edwards joined the board of directors. f) On February 28, 2025, Mark Qvist joined the board of directors. The aggregate value of transactions with key management personnel and directors and entities over which they have control or significant influence during the nine months ended September 30, 2025 and 2024 were as follows: 2025 2024 $ $ Fehr & Associates CPA - - Lachlan McLeod - 118,579 MDC Forbes Inc. - 85,571 Paul Morgan - 16,833 Smoke Wallin - 12,010 - 232,993 As at September 30, 2025 and December 31, 2024, the Company had no outstanding accounts payable balances with related parties. The transactions with the key management personnel and directors are included in operating expenses as follows: (a) Consulting fees and professional fees Included CEO services by Michael Forbes, charged to the Company via MDC Forbes Inc., and accounting services of the Company’s CFO, Lachlan McLeod. (b) Wages and salaries During the nine months ended September 30, 2025, total wages and salaries paid to key management totaled $nil (2024 - $118,579) and incurred directors fees of $nil (2024 - $114,414). (c) Office expenses During the year ended December 31, 2024, the Company included rent recovery of $9,498 related to MDC Forbes Inc. for the PerceiveMD operations. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 13 NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION 2025 2024 $ $ Non-cash investing activities Equipment purchases included in accounts payable and accrued liabilities - - Total income tax paid in the nine months ended September 30, 2025 was $nil (2024 - $nil). NOTE 14 - FINANCIAL RISK MANAGEMENT (a) Capital management The Company's capital structure consists of all components of shareholders' equity. The Company's objective when managing capital is to maintain adequate levels of funding to support the current operations including corporate and administrative functions and to support operations. The Company obtains funding primarily through issuing common stock and through its mortgage payable. Future --- financings are dependent on market conditions and there can be no assurance the Company will be able to raise funds in the future. There were no changes in the Company’s approach to capital management during the nine months ended September 30, 2025. The Company is not subject to externally imposed capital requirements. (b) Financial instruments - fair value The Company’s financial instruments consist of cash, accounts receivables, deposits, accounts payable and accrued liabilities, mortgage payable, and government loan, all of which are classified as and measured at amortized cost. As at September 30, 2025, the carrying values of cash, accounts receivables, deposits and accounts payable and accrued liabilities, mortgage payable, and government loan approximate their fair value because of the short-term nature of these instruments. Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements. The three levels of hierarchy are: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and Level 3 – Inputs for the asset or liability that are not based on observable market data. There have been no transfers between fair value levels during the period. The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board mitigates these risks by assessing, monitoring, and approving the Company’s risk management processes. (c) Financial instruments - risk The Company’s financial instruments are exposed to certain financial risks, including credit risk, liquidity risk and interest rate risk. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to fulfill its contractual obligations. The Company is exposed to credit risk through its cash balances held in financial institutions and trade receivables. The maximum exposure to credit risk is equal to the carrying value of such financial assets. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 14 NOTE 14 - FINANCIAL RISK MANAGEMENT (continued) The aging of the Company’s accounts receivable as at September 30, 2025 and December 31, 2024 was as follows: September 30, 2025 December 31, 2024 $ $ Current 1,489,819 2,796,204 1 – 30 days 109,462 59,519 31- 60 days 41,744 - 61 – 90 days - - Over 90 days 158,090 1,007,273 Total accounts receivable 1,799,115 3,862,996 Provision for expected credit losses (47,330) (943,916) 1,751,786 2,919,080 The Company had the following changes related to the expected credit loss provision: September 30, 2025 December 31, 2024 $ $ Opening balance 43,239 188,619 Additions to ECL 4,090 755,297 Write off bad debt - - Expected credit loss provision 47,329 943,916 Accounts receivable for cannabis sales are paid by most provinces in less than 60 days from receipt of goods. The objective of managing credit risk is to minimize potential losses on financial assets. The Company assesses the quality of its counterparties, taking into account their credit worthiness and reputation, past performance and other factors. The Company has recognized a provision for expected credit losse --- s on its trade receivables. At September 30, 2025, 86% (December 31, 2024 – 89%) of the Company’s amounts receivable, net of expected credit losses, are held with provincial governments with low credit risk. The Company had the following breakdown of customers with greater than 10% of overall accounts receivable: September 30, 2025 December 31, 2024 Customer A 70% 41% Customer B - 3% Customer C - 14% Customer D - 23% Cash is only deposited with or held by institutions of high credit worthiness. Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities. The Company manages its liquidity risk by reviewing on an ongoing basis its cash position and if required raises funding through additional share capital issuances or debt financing. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 15 NOTE 14 - FINANCIAL RISK MANAGEMENT (continued) Total Within 1 year 1 – 3 years 3 – 5 years Maturity analysis of financial liabilities $ $ $ $ Accounts payable and accrued liabilities 13,384,376 13,384,376 - - Lease liability 24,659 7,043 17,616 - Mortgage payable 3,496,917 3,496,917 - - Government loan 49,815 23,985 25,830 - 16,955,767 16,912,321 43,446 - As at September 30, 2025, the Company had a cash balance of $786,599 and current liabilities of $16,938,151 (December 31, 2024 - $1,296,727 and $14,353,581 respectively). Interest rate risk Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company’s mortgage payable and lease liabilities carry fixed interest rates and as such, the Company is not exposed to interest rate risk. (d) Economic dependence Economic dependence risk is the risk of reliance upon a select number of customers which significantly impact the financial performance of the Company. The Company had the following breakdown of customers with greater than 10% of overall revenue. Nine months ended September 30, 2025 September 31, 2024 Customer A 36% 35% Customer B 25% 34% Customer C 13% 20% NOTE 15 – COMMITMENTS AND CONTINGENCIES Contingencies On March 15, 2023, the Company was served with a civil claim filed in the Supreme Court of British Columbia pursuant to the Class Proceedings Act, R.S.B.C. 1996, c. 50 alleging that the Company’s press release of February 22, 2023 misstated certain material facts which mislead the plaintiff in the claim. The suit also names the Company’s subsidiary ALI. and the Company’s Former Chief Executive Officer. The Company denies the allegations in the claim and specifically that the press release was misleading. No specific amount of damages is claimed. As of September 30, 2025, there have been no changes to the status of the claim. NOTE 16 - SEGMENTED INFORMATION Reportable segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources, and in assessing performance. The Company’s chief operating decision makers are the Board of Directors. They review the operating performance of the Company by two segments comprised of manufacturing and non-manufacturing operations. The manufacturing operations includes the manufacturing, sale and distribution of cannabis rel --- ated products. The non-manufacturing operations included PerceiveMD, which was disposed of during the year ended December 31, 2024. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The chief operating decision makers utilize gross profit as a key measure in making operating decisions and assessing performance. The non-manufacturing segment is immaterial and, accordingly, segmented figures are not presented. ADASTRA HOLDINGS LTD. Notes to the Condensed Interim Consolidated Financial Statements For the nine months ended September 30, 2025 and 2024 (Expressed in Canadian dollars, except number of shares) 16 NOTE 17 – EXPENSES The Company presents its Condensed Interim Consolidated Statements of Net Income and Comprehensive Income on a functional basis in which expenditures are aggregated to the function to which they relate. The Company has identified the major functions as general and administrative and sales and marketing. General and administrative Sales and marketing Total Nine months ended September 30, 2025 $ $ $ Advertising and promotion - 386,046 386,046 Data program expenses - 2,021,407 2,021,407 Insurance 204,743 - 204, 743 Office expenses 688,267 688,267 Professional fees and consulting 1,019,563 1,019,563 Repair and maintenance expenses 52,670 52,670 Travel 49,216 49,216 Wages and salaries 889,150 204,080 1,093,230 2,854,393 2,660,749 5,515,142 General and administrative Sales and marketing Total Nine months ended September 30, 2024 $ $ $ Advertising and promotion - 700,088 700,088 Data program expenses - 1,749,187 1,749,187 Insurance 165,044 - 165,044 Office expenses 774,036 - 774,036 Professional fees and consulting 791,713 - 791,713 Repair and maintenance expenses 117,901 - 117,901 Travel - 43,838 43,838 Wages and salaries 1,502,261 415,088 1,917,349 3,350,955 2,908,201 6,259,156 NOTE 18 – LOSS PER SHARE The following is a reconciliation of basic and diluted loss per share: 2025 2024 $ $ Net loss from continuing operations attributable to shareholders (2,396,988) (1,310,245) Weighted average number of Common Shares outstanding(1) 5,597,050 5,597,050 Basic loss per share (0.42) (0.23) (1) Effective October 3, 2024, there was a 10:1 share consolidation of common shares held. As a result of the share consolidation, all shares and options, warrants, EPS, have been restated in the condensed interim consolidated financial statements reflecting the share consolidation.