What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-08 · 322 added, 285 removed, 287 unchanged (68% of the section changed)

3 unchanged sentences

in this Quarterly Report is intended to update the information contained in our Annual Report on Form 10-K for the year ended December

31, 2024 filed with the Securities And Exchange Commission (the “SEC”) on March 21, 2025, as amended on March 28, 2025 (the

“Form 10-K”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis

of Financial Condition and Results of Operations” and other information contained in the Form 10-K.

The following discussion and

analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this

Quarterly Report.

31, 2024 filed with the Securities And Exchange Commission (the “SEC”) on March 21, 2025, as amended on March 28, with Items

7 and 9 from such Annual Report having been recast to retrospectively reflect discontinued operations as reflected in the Current Report

on Form 8-K filed with the SEC on October 8, 2025 (collectively, the “Form 10-K”) and presumes that readers have access to,

and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and

other information contained in the Form 10-K.

The following discussion and analysis also should be read together with our financial statements

and the notes to the financial statements included elsewhere in this Quarterly Report.

The following discussion

16 unchanged sentences

herein or as the context otherwise requires, references in this Quarterly Report to “we,” “us,” “our,”

“Company,” and “Agrify” refer to Agrify Corporation, a Nevada corporation and its consolidated subsidiaries.

Agrify is a developer of

branded innovative solutions for the cannabis and hemp industries.

Our portfolio of consumer-packaged goods brands includes our Señorita

brand which offers consumers hemp-derived tetrahydrocannabinol (“THC”) beverages that mirror well-known cocktails like a margarita

– in four flavors – classic Lime Jalapeño Margarita, Mango Margarita, Paloma and Ranch Water.

Known for its clean,

fresh taste and commitment to high-quality, natural ingredients, Señorita offers a low-sugar, low-calorie alternative to alcoholic

beverages and is available at top retailers including Total Wine, ABC Fine Wine & Spirits, and Binny’s in eleven U.S.

and Canada, with plans for expansion and future availability in premier on-premises destinations.

Other hemp-derived products including

incredibles and Beboe edible products are primarily sold online and through direct-to-retail partnerships

In addition to hemp-derived

products, Agrify has also historically been a leading provider of innovative cultivation and extraction solutions for the cannabis industry

“Company,” and “RYTHM” refer to RYTHM Inc., a Nevada corporation and its consolidated subsidiaries.

delivers well-being to customers through its portfolio of hemp-derived THC products and iconic licensed brands.

The Company’s portfolio

of consumer-packaged goods brands includes RYTHM, incredibles , Dogwalkers, Beboe, &Shine, Doctor Solomon’s and Good

Green, in addition to our Señorita brand which offers consumers hemp-derived tetrahydrocannabinol (“THC”) beverages

that mirror well-known cocktails like a margarita – in four flavors – classic Lime Jalapeño Margarita, Mango Margarita,

Paloma and Ranch Water.

Known for its clean, fresh taste and commitment to high-quality, natural ingredients, Señorita offers

a low-sugar, low-calorie alternative to alcoholic beverages and is available at top retailers including Total Wine, ABC Fine Wine &

Spirits, and Binny’s in eleven U.S.

states and Canada, with plans for expansion and future availability in premier on-premises

destinations.

Other hemp-derived products including incredibles and Beboe edible products are primarily sold online and through

direct-to-retail partnerships.

In addition to the sale of hemp-derived products (“Non-licensing Revenue”), we license our

brands to be manufactured and distributed in exchange for a licensing fee (“Licensing Revenue”).

In addition to hemp-derived products (non-licensing) and Licensing

Revenue, RYTHM has also historically been a leading provider of innovative cultivation and extraction solutions for the cannabis industry

(the “Extraction Business”).

11 unchanged sentences

Lines of Business

Hemp-Derived Products and Royalties

Non-licensing Revenue and Licensing Revenue

We acquired the Señorita

8 unchanged sentences

Gott and Bieler continue to collaborate on the brand with

Kovler and the Agrify team.

Kovler and the RYTHM team.

Señorita currently

3 unchanged sentences

Products are also available for direct-to-consumer purchase where permissible under state law at senoritadrinks.com.

On May 20, 2025, we acquired

MC Brands, which consists primarily of intellectual property rights to the incredibles brand.

Concurrent with the MC Brands

acquisition, we entered a License Agreement with subsidiaries of Green Thumb Industries Inc.

(“Green Thumb”), a related party, to use certain

intellectual property related to the Beboe, Rythm and incredibles brands.

The Beboe and Rythm licensing agreements are in connection

with our production, marketing and sale of hemp-derived products to the extent such activities are legal under applicable state and federal

laws in the United States.

By contrast, the incredibles licensing agreement grants GTI Core (an indirectly wholly-owned subsidiary

of Green Thumb) the rights to use certain intellectual property related to the incredibles brand in connection with GTI Core’s

existing state-licensed cannabis business.

The consideration payable by GTI Core for the license rights consists of a monthly license

fee, payable in cash, based on sales of product using the licensed intellectual property.

On May 20, 2025, we entered

into a purchase agreement with VCP IP Holdings, LLC (“VCP”), an indirectly wholly-owned subsidiary of Green Thumb Industries

(“Green Thumb”), a related party, pursuant to which we acquired all of the equity interests in MC Brands LLC and its

wholly-owned subsidiary Core Growth LLC (both formerly wholly-owned subsidiaries of Green Thumb and together referred to as “MC

The assets of MC Brands consist primarily of intellectual property rights to the incredibles brand.

The aggregate

consideration exchanged for the equity interest was cash consideration of $5.1 million.

In connection with the purchase of MC Brands,

we also licensed the right to use the RYTHM and Beboe brands from Green Thumb for hemp-derived THC beverages and similar products.

contrast, the incredibles licensing agreement grants GTI Core the rights to use certain intellectual property related to the incredibles

brand in connection with GTI Core’s existing businesses.

On August 27, 2025, we entered

into a purchase agreement with VCP23, LLC (“VCP23”), an indirectly wholly-owned subsidiary of Green Thumb, a related party,

pursuant to which we acquired all of the equity interests in VCP.

The assets of VCP consist primarily of intellectual property rights

to several brands including RYTHM, Dogwalkers, Beboe, &Shine, Doctor Solomon’s and Good Green.

The aggregate consideration exchanged

for the equity interest was cash consideration of $50.0 million.

In connection with the purchase of VCP, we also entered a license agreement

with GTI Core, an indirect wholly-owned subsidiary of Green Thumb, related to the Acquired Brands in connection with GTI Core’s

existing businesses.

The May 20, 2025 license agreements granting us rights to use the RYTHM and Beboe brands were terminated concurrently

on August 27, 2025.

The consideration payable by GTI Core for the license rights of the incredibles brand and the Acquired Brand,

consists of a monthly license fee, payable in cash, for using the licensed intellectual property.

Co-Manufacturing Arrangements

12 unchanged sentences

Distribution Agreements

During the first half of

2025, we continued to expand distribution of our hemp-derived beverage products in our domestic markets.

We have entered into agreements

with various distributors providing for the distribution of certain of our hemp-derived beverage products, subject to certain terms and

conditions, which may vary depending on the form of the agreement.

Such agreements remain in effect for their then-current term as long

as our products are being distributed, but are subject to specified termination rights held by each party.

Additionally, we are entitled

to terminate certain distribution agreements at any time without cause upon payment of a termination fee, which may be material depending

on the agreement.

During the first nine months

of 2025, we continued to expand distribution of our hemp-derived beverage products in our domestic markets.

We have entered into

agreements with various distributors providing for the distribution of certain of our hemp-derived beverage products, subject to certain

terms and conditions, which may vary depending on the form of the agreement.

Such agreements remain in effect for their then-current term

as long as our products are being distributed, but are subject to specified termination rights held by each party.

Additionally, we are

entitled to terminate certain distribution agreements at any time without cause upon payment of a termination fee, which may be material

depending on the agreement.

Discontinued Operations

36 unchanged sentences

Significant estimates include assumptions about the valuation and recognition of stock-based compensation expense,

valuation allowance for deferred tax assets, goodwill, impairment of long-lived assets, provision for litigation, inventory reserve,

fair value measurements and useful life of fixed assets and intangible assets.

valuation allowance for deferred tax assets, goodwill, impairment of long-lived assets, provision for litigation, inventory reserve, fair

value measurements and useful life of fixed assets and intangible assets.

Financial Overview

1 unchanged sentence

Judgments and Estimates

Our management’s

discussion and analysis of our financial position and results of operations is based on our financial statements, which have been

prepared in accordance with accounting principles generally accepted in the United States of America, or U.S.

The preparation

of financial statements in conformity with U.S.

GAAP requires us to make estimates and assumptions that affect the amounts reported

in the financial statements and accompanying notes.

On an ongoing basis, we evaluate estimates, which include estimates related to

accruals, business combinations, and stock-based compensation expense.

We base our estimates on historical experience and other

market-specific or other relevant assumptions that we believe to be reasonable under the circumstances.

Actual results may differ

materially from those estimates or assumptions.

We account for warrants

as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable

Our management’s discussion

and analysis of our financial position and results of operations is based on our financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States of America, or U.S.

The preparation of financial statements in

conformity with U.S.

GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and

accompanying notes.

On an ongoing basis, we evaluate estimates, which include estimates related to accruals, business combinations, asset

acquisitions, and stock-based compensation expense.

We base our estimates on historical experience and other market-specific or other

relevant assumptions that we believe to be reasonable under the circumstances.

Actual results may differ materially from those estimates

or assumptions.

We account for warrants as

either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable

authoritative guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity

4 unchanged sentences

are indexed to our own Common Stock among other conditions for equity classification.

For issued or modified

warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at

the time of issuance or when incurred.

For issued or modified warrants that are precluded from equity classification, they are recorded as a

liability at their initial fair value on the date of issuance and marked-to-market each reporting period with the changes in fair

value of warrant liabilities recorded in other income (expense), net in the accompanying unaudited condensed consolidated statements

of operations until the warrants are exercised.

The fair value of the warrant liabilities are estimated using a Black-Scholes

option-pricing model.

For issued or modified warrants

that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of

issuance or when incurred.

For issued or modified warrants that are precluded from equity classification, they are recorded as a liability

at their initial fair value on the date of issuance and marked-to-market each reporting period with the changes in fair value of warrant

liabilities recorded in other income (expense), net in the accompanying unaudited condensed consolidated statements of operations until

the warrants are exercised.

The fair value of the warrant liabilities are estimated using a Black-Scholes option-pricing model.

The estimated fair value

of the warrant liabilities is determined using Level 3 inputs.

Inherent in a Black-Scholes option-pricing model are assumptions used

in calculating the estimated fair values that represent our best estimate.

The volatility rate is determined utilizing our own share

price and the share price of competitors over time.

Inherent in a Black-Scholes option-pricing model are assumptions used in

calculating the estimated fair values that represent our best estimate.

The volatility rate is determined utilizing our own share price

and the share price of competitors over time.

Revenue Recognition

We generate revenue from

continuing operations through the sale of hemp-derived THC products and related party licensing arrangements.

We generate revenue from continuing operations through the sale of

hemp-derived THC products (non-licensing) and Licensing Revenue.

We license intellectual property to a related party under arrangements

that provide for sales-based royalties.

We recognize royalty income

derived from licensing agreements in accordance with ASC 606, specifically, for sales-based royalties.

In accordance with

ASC Topic 606, Revenue Recognition (“ASC 606”), revenue is recognized through a five-step model, as outlined below:

that provide for sales-based license fees.

We recognize licensing income derived from licensing agreements in accordance with ASC 606,

specifically, for sales-based license fees.

In accordance with ASC Topic

606, Revenue Recognition (“ASC 606”), revenue is recognized through a five-step model, as outlined below:

Identify the customer contract :

12 unchanged sentences

Recognize revenue as the performance obligations are satisfied :

- Revenue from the sale of hemp-derived THC products is recognized

when control of the product transfers to the customer, typically upon delivery or shipment, as the customer assumes the risks and rewards

of ownership.

Payment terms vary by customer, but the time between revenue recognition and payment due is generally not significant.

Revenue from the sale of hemp-derived THC products (non-licensing)

is recognized when control of the product transfers to the customer, typically upon delivery or shipment, as the customer assumes the

risks and rewards of ownership.

Payment terms vary by customer, but the time between revenue recognition and payment due is generally

not significant.

For products sold under consignment arrangements, revenue is recognized only when control is transferred to the end customer.

do not maintain a specific reserve for returns due to the limited circumstances under which returns are permitted in customer agreements.

Payments for slotting, listing fees, or other marketing or promotional activities, where legally permitted, are recorded as a reduction

in revenue unless a distinct good or service is received in exchange.

- In accordance with ASC 606-10-55-65 through 55-65B, royalty revenue

We do not maintain a specific reserve for returns due to the limited circumstances under which returns are permitted in customer

Payments for slotting, listing fees, or other marketing or promotional activities, where legally permitted, are recorded as

a reduction in revenue unless a distinct good or service is received in exchange.

In accordance with ASC 606-10-55-65 through 55-65B, Licensing Revenue

is recognized only when the underlying sale by the licensee occurs, and the performance obligation has otherwise been satisfied.

This approach ensures that revenue is recognized in the period in which it is earned and determinable, consistent with the transfer of

control of the intellectual property to the licensee.

approach ensures that revenue is recognized in the period in which it is earned and determinable, consistent with the transfer of control

of the intellectual property to the licensee.

We account for income taxes

21 unchanged sentences

balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

We have an uncertain tax position offsetting our research and development

tax credits given we have not engaged any third parties to perform a study to support credits claimed under Internal Revenue Code

§41 for tax years ended December 31, 2016 through December 31, 2024.

If recognized, none of the unrecognized tax benefits would

impact our effective tax rate.

an uncertain tax position offsetting our research and development tax credits given we have not engaged any third parties to perform a study

to support credits claimed under Internal Revenue Code §41 for tax years ended December 31, 2016 through December 31, 2024.

If recognized, none of the unrecognized tax benefits would impact our effective tax rate.

We recognize the benefit

31 unchanged sentences

and directors.

permitted under ASC 718, we have made an accounting policy choice to account for forfeitures when they occur.

As permitted under ASC 718,

we have made an accounting policy choice to account for forfeitures when they occur.

It is important that the

1 unchanged sentence

Results of Operations

Comparison of the Three and Six Months

Ended June 30, 2025 and 2024

Comparison of the Three and Nine Months

Ended September 30, 2025 and 2024

The following table summarizes

our results of continuing operations for the three and six months ended June 30, 2025 and 2024:

our results of continuing operations for the three and nine months ended September 30, 2025 and 2024:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Cost of goods sold

Selling, general and administrative

Research and development

Change in contingent consideration

Loss on disposal of property and equipment

Total operating expenses

2 unchanged sentences

Change in fair value of warrant liabilities

Other (expense) income, net

Total other (expense) income, net

Other income, net

Total other expense, net

Loss from continuing operations before income taxes

1 unchanged sentence

Loss from continuing operations, net of income taxes

(Loss) income from discontinued operations

(Loss) gain on disposal of Extraction business

Income tax effect on discontinued operations

Loss from discontinued operations

Gain on disposal of Extraction business

(Loss) income from discontinued operations, net of income taxes

Net (loss) income

Income (loss) attributable to non-controlling interest

Net (loss) income attributable to Agrify Corporation

Net (loss) income per share attributable to Common Stockholders – basic (1)

Net (loss) income per share attributable to Common Stockholders – diluted (1)

Weighted average common shares outstanding - basic (1)

Weighted average common shares outstanding – diluted (1)

presented have been adjusted to retroactively reflect the 1-for-15 reverse stock split on October 8, 2024.

Additional information regarding

reverse stock splits may be found in Note 1 – Overview, Basis of Presentation, and Significant Accounting Policies, included in

the notes to the condensed consolidated financial statements.

We generate revenue from

sales of hemp-derived THC products and related party royalty revenue.

Net loss per share attributable to Common Stockholders – basic and diluted

Weighted average common shares outstanding - basic and diluted

We generate revenue from sales of hemp-derived THC products (non-licensing)

and related party Licensing Revenue.

The following table provides

a breakdown of our revenue from continuing operations for the three and six months ended June 30, 2025 and 2024:

a breakdown of our revenue from continuing operations for the three and nine months ended September 30, 2025 and 2024:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

Hemp-derived products

Royalty Revenue

Non-licensing Revenue

Licensing Revenue

Total revenue

Revenue increased by $1.8

million for the three months ended June 30, 2025, as compared to the same period in 2024.

Revenue increased by $4 million

for the three months ended September 30, 2025, as compared to the same period in 2024.

The comparative increase in revenue was primarily

driven by the acquisition of Señorita in December 2024 and the acquisition of MC Brands in May 2025 and all revenue from the Cultivation

Business and Extraction Business for the three months ended June 30, 2024 being presented as part of discontinued operations.

Business and Extraction Business for the three months ended September 30, 2024 being presented as part of discontinued operations.

the revenue recognized for the three months ended September 30, 2025, $696 thousand was attributable to related parties.

Revenue increased by $6.6

million for the six months ended June 30, 2025, as compared to the same period in 2024.

The comparative increase in revenue was primarily

driven by the acquisition of Señorita in December 2024 and the acquisition of MC Brands in May 2025 and all revenue from the Cultivation

Business and Extraction Business for the six months ended June 30, 2024 being presented as part of discontinued operations.

million for the nine months ended September 30, 2025, as compared to the same period in 2024.

The comparative increase in revenue was

primarily driven by the acquisition of Señorita in December 2024 and the acquisition of MC Brands in May 2025 and all revenue from

the Cultivation Business and Extraction Business for the nine months ended September 30, 2024 being presented as part of discontinued

Of the revenue recognized for the nine months ended September 30, 2025, $961 thousand was attributable to related parties.

Cost of Goods Sold

Cost of goods sold represents

costs associated with the hemp-derived products sales.

Cost of goods sold represents costs associated with the hemp-derived

products sales (non-licensing).

The following table provides

a breakdown of our cost of goods sold from continuing operations for the three and six months ended June 30, 2025 and 2024:

a breakdown of our cost of goods sold from continuing operations for the three and nine months ended September 30, 2025 and 2024:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

Hemp-derived products

Non-licensing Revenue

Total cost of goods sold

Cost of goods sold

increased by $1.4 million for the three months ended June 30, 2025 compared to the same period in 2024.

The comparative increase in cost

of goods sold is associated with the acquisition of Señorita in December 2024, which aligns with the increase in revenue.

increased by $2.6 million for the three months ended September 30, 2025 compared to the same period in 2024.

The comparative increase

in cost of goods sold is associated with the acquisition of Señorita in December 2024, which aligns with the increase in revenue.

Cost of goods sold increased

by $1.8 million for the six months ended June 30, 2025 compared to the same period in 2024.

The comparative increase in cost of goods

sold is associated with acquisition of Señorita in December 2024, which aligns with the increase in revenue.

by $4.5 million for the nine months ended September 30, 2025 compared to the same period in 2024.

The comparative increase in cost of

goods sold is associated with acquisition of Señorita in December 2024, which aligns with the increase in revenue.

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

Gross profit totaled $1.4

thousand, or 33.4% of total revenue during the three months ended June 30, 2025.

Gross profit totaled $772

thousand, or 29.9% of total revenue during the six months ended June 30, 2025.

million, or 34.0% of total revenue during the three months ended September 30, 2025.

Gross profit totaled $2.1 million, or 32.4% of total

revenue during the nine months ended September 30, 2025.

Selling, General and Administrative

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

4 unchanged sentences

Other SG&A expenses include, but are not limited

to, professional fees for legal, consulting, depreciation and amortization and accounting services, as well as facility-related costs.

SG&A expense increased

by $6.8 million, or 1005%, for the three months ended June 30, 2025, compared to the same period in 2024.

The comparative change is primarily

attributable to sales and marketing expense to support the growth of the hemp-derived THC products in addition to the SG&A expense

from the Cultivation Business and Extraction Business for the three months ended June 30, 2024 being presented as part of discontinued

to, professional fees for legal, consulting, and accounting services.

SG&A expense increased

by $9.0 million, or 406%, for the six months ended June 30, 2025, compared to the same period in 2024.

The comparative change is primarily

attributable to sales and marketing expense to support the growth of the hemp-derived THC products in addition to the SG&A expense

from the Cultivation Business and Extraction Business for the six months ended June 30, 2024 being presented as part of discontinued

Research and Development

Three months ended

Six months ended

(In thousands)

Research and development

expense decreased by $185 thousand, or 100% for the three months ended June 30, 2025, compared to the same period in 2024.

is attributable to the reduction in personnel resulting from the discontinuation of Extraction Business.

Research and development

expense decreased by $460 thousand, or 100% for the six months ended June 30, 2025, compared to the same period in 2024.

is attributable to the reduction in personnel resulting from the discontinuation of Extraction Business.

by $9.0 million, or 741%, for the three months ended September 30, 2025, compared to the same period in 2024.

The comparative change is

primarily attributable to sales and marketing expense to support the growth of the hemp-derived THC products in addition to

the SG&A expense from the Cultivation Business and Extraction Business for the three months ended September 30, 2024 being presented

as part of discontinued operations.

Of the SG&A expense incurred for the three months ended September 30, 2025, $3.1 million was attributable

to related parties.

SG&A expense increased by $17.7 million, or 467%, for the nine

months ended September 30, 2025, compared to the same period in 2024.

The comparative change is primarily attributable to sales and marketing

expense to support the growth of the hemp-derived THC products (non-licensing) in addition to the SG&A expense from the Cultivation

Business and Extraction Business for the nine months ended September 30, 2024 being presented as part of discontinued operations.

SG&A expense incurred for the nine months ended September 30, 2025, $7.3 million was attributable to related parties.

Other Income, Net

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

1 unchanged sentence

Change in fair value of warrant liabilities

Other (expense) income, net

Total other (expense) income, net

Other income, net

Total other expense, net

Interest expense, net was

$291 thousand for the three months ended June 30, 2025, compared to interest expense, net of $28 thousand for the three months ended June

$1.1 million for the three months ended September 30, 2025, compared to interest expense, net of $38 thousand for the three months ended

September 30, 2024.

The change is attributable mainly to the increase of $50.0 million principal under the Convertible Notes.

in interest expense, net for the three months ended September 30, 2025 is $1.4 million incurred with a related party.

Interest expense, net was

$290 thousand for the six months ended June 30, 2025, compared to interest expense, net of $128 thousand for the six months ended June

$1.4 million for the nine months ended September 30, 2025, compared to interest expense, net of $166 thousand for the nine months

ended September 30, 2024.

The change is attributable mainly to the increase of $80.0 million principal under the Convertible Notes.

in interest expense, net for the nine months ended September 30, 2025 is $2.2 million incurred with a related party.

The change in fair value

of warrant liabilities decreased by $1.2 million, or 91% during the three months ended June 30, 2025, compared to the same period in

The decrease is primarily related to the fair value remeasurement of warrants.

of warrant liabilities increased by $14.4 million, or 96% during the three months ended September 30, 2025, compared to the same period

The increase is primarily related to the fair value remeasurement of warrants.

The change in fair value

of warrant liabilities decreased by $696 thousand, or 172% during the six months ended June 30, 2025, compared to the same period in

The decrease is primarily related to the fair value remeasurement of warrants.

of warrant liabilities increased by $15.1 million or 98% during the nine months ended September 30, 2025, compared to the same period

The increase is primarily related to the fair value remeasurement of warrants.

Other expense, net was $53

thousand for the three months ended June 30, 2025, compared to none for the same period in 2024.

thousand for the three months ended September 30, 2025, compared to none for the same period in 2024.

Other income, net was $71

thousand for the six months ended June 30, 2025, compared to none for the same period in 2024.

thousand for the nine months ended September 30, 2025, compared to none for the same period in 2024.

Income Tax (Expense) Benefit

There was no income tax

expense or benefit for the three months ended June 30, 2025 and June 30, 2024.

There was no income tax

expense or benefit for the six months ended June 30, 2025 and June 30, 2024.

There was no income tax expense

or benefit for the three months ended September 30, 2025 and September 30, 2024.

There was no income tax expense

or benefit for the nine months ended September 30, 2025 and September 30, 2024.

Liquidity and Capital Resources

As of June 30, 2025, our

principal sources of liquidity were cash and cash equivalents and marketable securities totaling $41.0 million.

Our current working capital

needs are to support revenue growth and manage inventory to meet demand forecasts and support operational growth.

Our long-term financial

needs primarily include working capital requirements.

There are many factors that may negatively impact our available sources of funds

in the future, including the ability to generate cash from operations, raise debt capital and raise cash from the issuance of our securities.

The amount of cash generated from operations is dependent upon factors such as the successful execution of our business strategy and

general economic conditions.

As of September 30, 2025,

our principal sources of liquidity were cash and cash equivalents and marketable securities totaling $35.6 million.

Our current working

capital needs are to support revenue growth and manage inventory to meet demand forecasts and support operational growth.

Our long-term

financial needs primarily include working capital requirements.

There are many factors that may negatively impact our available sources

of funds in the future, including the ability to generate cash from operations, raise debt capital and raise cash from the issuance of

our securities.

The amount of cash generated from operations is dependent upon factors such as the successful execution of our business

strategy and general economic conditions.

As part of our growth strategies,

5 unchanged sentences

a secured convertible note (the “November 2024 Note”) to RSLGH, LLC (“RSLGH”), a subsidiary of Green Thumb.

November 2024 Note is a secured obligation and ranks senior to all of our indebtedness except for the May 2025 Notes (as defined below),

which rank on parity with the November 2024 Note.

The November 2024 Note will mature on November 5, 2025 and has a 10.0% annualized interest

The principal amount of the November 2024 Note will be payable on the maturity date.

The November 2024 Note provides for advances

of up to $20 million in the aggregate, of which $10 million was advanced upon issuance.

The November 2024 Note was amended on May 8, 2025

to issue pre-funded warrants in lieu of cash interest with 18,614 pre-funded warrants issued on May 8, 2025 and an additional 11,373 pre-funded

warrants to be issued on September 1, 2025, which were issued in lieu of the cash interest that would otherwise be payable under the November

The number of pre-funded warrants is equal to the cash interest amount otherwise payable on the November 2024 Note divided

by the closing share price on May 8, 2025, which is the effective date of the amendment.

No changes were made to the conversion price

of the principal amount of the November 2024 Note.

On May 22, 2025, we and RSLGH entered into a second amendment to the November 2024

Note, which amended the terms to, among other things, permit RSLGH to elect, subject to any required approvals under Nasdaq listing rules,

to receive pre-funded warrants in lieu of shares of Common Stock upon conversion of the November 2024 Note at a conversion price equal

to the existing conversion price of $3.158 less the $0.001 exercise price of each pre-funded warrant.

November 2024 Note is a secured obligation and ranks senior to all of our indebtedness except for the May 2025 Notes and the August 2025

Notes (each as defined below), which rank on parity with the November 2024 Note.

The November 2024 Note will mature on November 5, 2025

and accrue interest at a 10.0% annualized rate.

The principal amount of the November 2024 Note is payable on the maturity date.

2024 Note provides for advances of up to $20 million in the aggregate, of which $10 million was advanced upon issuance.

The November 2024

Note was amended on May 8, 2025 to issue pre-funded warrants in lieu of cash interest with 18,614 pre-funded warrants issued on May 8,

2025 and an additional 11,373 pre-funded warrants issued on September 1, 2025, which were issued in lieu of the cash interest that would

otherwise be payable under the November 2024 Note.

The number of pre-funded warrants is equal to the cash interest amount otherwise payable

on the November 2024 Note divided by the closing share price on May 8, 2025, which was the effective date of the amendment.

were made to the conversion price of the principal amount of the November 2024 Note.

On May 22, 2025, we and RSLGH entered into a second

amendment to the November 2024 Note, which amended the terms to, among other things, permit RSLGH to elect, subject to any required approvals

under Nasdaq listing rules, to receive pre-funded warrants in lieu of shares of Common Stock upon conversion of the November 2024 Note

at a conversion price equal to the existing conversion price of $3.158 less the $0.001 exercise price of each pre-funded warrant.

to September 30, 2025, the holder of the November 2024 Note elected to convert the outstanding principal and interest through November

3, 2025, into pre-funded warrants.

The outstanding principal and accrued interest amounts of $10 million and $175 thousand respectively,

resulted in the issuance of 3,167,564 and 55,433 pre-funded warrants, respectively.

On May 22, 2025, we issued

2 unchanged sentences

The May 2025 Notes are secured obligations and rank senior to all of our

indebtedness except for the November 2024 Note, which ranks on parity with the May 2025 Notes.

The May 2025 Notes will mature on November

22, 2026 and accrue interest at a 10.0% annualized rate, with interest to be paid on the first calendar day of each September and March

while the May 2025 Notes are outstanding, in pre-funded warrants, beginning September 1, 2025.

The principal amount of the May 2025 Notes

will be payable on the maturity date.

The May 2025 Notes may be converted into Common Stock or, at the election of the holder, into pre-funded

warrants, with a beneficial ownership limitation for RSLGH of 49.99% and a beneficial ownership limitation for other holders of 4.99%,

in each case subject to applicable Nasdaq listing rules.

If a holder elects to convert the May 2025 Notes into Common Stock, the conversion

price per share will be $23.53, equal to the most recent closing price of the Common Stock on the Nasdaq Capital Market at the time the

May 2025 Notes were issued, subject to customary adjustments for certain corporate events.

If a holder elects to convert the May 2025

Notes into pre-funded warrants, and for interest payments payable in the form of pre-funded warrants, the conversion price per pre-funded

warrant will be equal to the $23.53 conversion price less than $0.001 exercise price of the warrant.

The conversion of the May 2025 Notes

into Common Stock and/or pre-funded warrants is subject to certain customary conditions and, to the extent necessary, the receipt of stockholder

approval under Nasdaq listing rules.

indebtedness except for the November 2024 Note and the August 2025 Notes, which rank on parity with the May 2025 Notes.

The May 2025 Notes

will mature on November 22, 2026 and accrue interest at a 10.0% annualized rate, with interest to be paid on the first calendar day of

each September and March while the May 2025 Notes are outstanding, in pre-funded warrants, beginning September 1, 2025.

The principal

amount of the May 2025 Notes will be payable on the maturity date.

The May 2025 Notes may be converted into Common Stock or, at the election

of the holder, into pre-funded warrants, with a beneficial ownership limitation for RSLGH of 49.99% and a beneficial ownership limitation

for other holders of 4.99%, in each case subject to applicable Nasdaq listing rules.

If a holder elects to convert the May 2025 Notes

into Common Stock, the conversion price per share will be $23.53, equal to the most recent closing price of the Common Stock on the Nasdaq

Capital Market at the time the May 2025 Notes were issued, subject to customary adjustments for certain corporate events.

elects to convert the May 2025 Notes into pre-funded warrants, and for interest payments payable in the form of pre-funded warrants, the

conversion price per pre-funded warrant will be equal to the $23.53 conversion price less than $0.001 exercise price of the warrant.

conversion of the May 2025 Notes into Common Stock and/or pre-funded warrants is subject to certain customary conditions and, to the extent

necessary, the receipt of stockholder approval under Nasdaq listing rules.

On August 25, 2025, we issued

secured convertible notes with an aggregate original principal amount of $50.0 million (collectively the “August 2025 Notes”)

to RSLGH and to certain other third-party accredited investors.

The August 2025 Notes are secured obligations of ours and rank senior

to all of our indebtedness except for the May 2025 and November 2024 Notes, which ranks on parity with the August 2025 Notes.

2025 Notes will mature on February 25, 2027 and accrue interest at a 10.0% annualized rate, with interest to be paid on the first calendar

day of each September and March, while the August 2025 Notes are outstanding beginning March 1, 2026.

The principal

amount of the August 2025 Notes will be payable on the maturity date.

The August 2025 Notes may be converted into Common Stock or, at

the election of the holder, into pre-funded warrants, with a beneficial ownership limitation for RSLGH of 49.99% and a beneficial ownership

limitation for other holders of 4.99%, in each case subject to applicable Nasdaq listing rules.

If a holder elects to convert the August

2025 Notes into Common Stock, the conversion price per share will be $29.475, equal to the Minimum Price as such term is defined under

Nasdaq Listing Rule 5635 at the time the August 2025 Notes were issued, subject to customary adjustments for certain corporate events.

If a holder elects to convert the August 2025 Notes into pre-funded warrants, and for interest payments elected to be paid in the form of pre-funded

warrants, the conversion price per pre-funded warrant will be equal to the $29.475 conversion price less than $0.001 exercise price of

The conversion of the August 2025 Notes into Common Stock and/or pre-funded warrants is subject to certain customary conditions

and, to the extent necessary, the receipt of stockholder approval under Nasdaq listing rules.

The following table presents

the major components of net cash flows from and used in operating, investing, and financing activities for the six months ended June 30,

the major components of net cash flows from and used in operating, investing, and financing activities for the nine months ended September

30, 2025 and 2024:

Six months ended

Nine months ended

September 30,

(In thousands)

5 unchanged sentences

The following discussion

explains the major components contributing to the net cash flows from operating, investing, and financing activities for the six months

ended June 30, 2025 and 2024, as summarized in the table above.

Each section below provides details on the key drivers of the cash inflows

and outflows for the respective periods.

explains the major components contributing to the net cash flows from operating, investing, and financing activities for the nine months

ended September 30, 2025 and 2024, as summarized in the table above.

Each section below provides details on the key drivers of the cash

inflows and outflows for the respective periods.

Cash Flow from Operating Activities

For the six months ended

June 30, 2025, our operating cash flows included a net loss of $9.0 million, which included $735 thousand related to depreciation and

amortization, $1.1 million of stock-based compensation expense, $292 thousand gain related to the change in fair value of warrant liabilities,

and $3.5 million gain on disposal of Extraction business.

Net cash was decreased by changes in operating assets and liabilities of $4.6

For the six months ended

June 30, 2024, we had net income of $1.3 million, which included $782 thousand related to depreciation and amortization, $571 thousand

of stock-based compensation expense, $404 thousand loss related to the change in fair value of warrant liabilities, $2.2 million gain

from change in contingent consideration, and $5.9 million gain on settlement of contingent liability.

Net cash was increased by changes

in operating assets and liabilities of $782 thousand.

For the nine months ended

September 30, 2025, our operating cash flows included a net loss of $19.7 million, which included $2.5 million related to depreciation

and amortization, $1.6 million of stock-based compensation expense, $372 thousand loss related to the change in fair value of warrant

liabilities, and $3.5 million gain on disposal of Extraction business.

Net cash was decreased by changes in operating assets and liabilities

of $4.5 million.

For the nine months ended September 30, 2024, we had net loss of $17.4

million, which included $1.1 million related to depreciation and amortization, $854 thousand of stock-based compensation expense, $15.5

million loss related to the change in fair value of warrant liabilities, $2.2 million gain from change in contingent consideration, and

$5.9 million gain on settlement of contingent liability.

Net cash was increased by changes in operating assets and liabilities of $2.8

Cash Flow from Investing Activities

For the six months ended

June 30, 2025, net cash used in investing activities was $5.1 million, which primarily resulted from the related party acquisition of

For the six months ended

June 30, 2024, net cash provided in investing activities was $336 thousand, which primarily resulted from $330 thousand in proceeds from

the repayment of a loan receivable.

For the nine months ended

September 30, 2025, net cash used in investing activities was $55 million, which primarily resulted from the related party acquisition

of MC Brands and VCP.

For the nine months ended September 30, 2024, net cash provided by

investing activities was $340 thousand, which primarily resulted from $330 thousand in proceeds from the repayment of a loan receivable.

Cash Flow from Financing Activities

the six months ended June 30, 2025, net cash provided by financing activities was $30.0 million, which resulted from proceeds from May

For the six months ended

June 30, 2024, net cash provided by financing activities was $4.1 million, primarily driven by proceeds from the issuance of common stock

and warrants of $2.1 million and proceeds from the issuance of related party notes of 2.3 million.

For the nine months ended

September 30, 2025, net cash provided by financing activities was $80.0 million, which resulted from proceeds from May and August 2025

For the nine months ended

September 30, 2024, net cash provided by financing activities was $5.7 million, primarily driven by proceeds from the issuance of common

stock and warrants of $2.1 million and proceeds from the issuance of related party notes of $4.0 million.

Off-Balance Sheet Arrangements

14 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions.

These estimates are

based on our knowledge and understanding of current conditions and actions that we may take in the future.

Changes in these

estimates will occur as a result of the passage of time and the occurrence of future events.

Subsequent changes in these estimates

may have a significant impact on our financial condition and results of operations and are recorded in the period in which they

become known.

We have identified the following estimates that, in our opinion, are subjective in nature, require the exercise of

judgment and involve complex analysis:

the fair value of derivative assets and liabilities, goodwill impairment assessment,

intangible assets, revenue recognition and cost of goods sold.

These estimates are based

on our knowledge and understanding of current conditions and actions that we may take in the future.

Changes in these estimates will occur

as a result of the passage of time and the occurrence of future events.

Subsequent changes in these estimates may have a significant impact

on our financial condition and results of operations and are recorded in the period in which they become known.

We have identified the

following estimates that, in our opinion, are subjective in nature, require the exercise of judgment and involve complex analysis:

fair value of derivative assets and liabilities, net realizable value of inventory, goodwill impairment assessment, intangible assets

and revenue recognition.

The significant accounting

policies and estimates that have been adopted and followed in the preparation of our condensed consolidated financial statements are

detailed in Note 1 - Overview, Basis of Presentation and Significant Accounting Policies included in the Form 10-K and Note 1 - Overview,

Basis of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements in Part I, Item

1 of this Quarterly Report.

There have been no changes in these policies and estimates that had a significant impact on the financial

condition and results of operations for the periods covered in this Quarterly Report.

Recently Issued Accounting Pronouncements

For more information on

recently issued accounting pronouncements are included within Note 1 - Overview, Basis of Presentation and Significant Accounting Policies,

included elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 of this Quarterly

policies and estimates that have been adopted and followed in the preparation of our condensed consolidated financial statements are detailed

in Note 1 - Overview, Basis of Presentation and Significant Accounting Policies included in the Form 10-K and Note 1 - Overview, Basis

of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements in Part I, Item 1 of

this Quarterly Report.

Other than the addition of the accounting policies related to business combinations and asset acquisitions described

in Note 1 – Overview, Basis of Presentation and Significant Accounting Policies, there have been no changes in these policies and

estimates that had a significant impact on the financial condition and results of operations for the periods covered in this Quarterly

Recently Issued Accounting Pronouncements Adopted

For more information on recently

issued accounting pronouncements are included within Note 1 - Overview, Basis of Presentation and Significant Accounting Policies, included

elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 of this Quarterly Report.

New Accounting Pronouncements Not Yet Adopted

For more information on

new accounting pronouncements not yet adopted are included within Note 1 - Overview, Basis of Presentation and Significant Accounting

Policies, included elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 in this

Quarterly Report.

For more information on new

accounting pronouncements not yet adopted are included within Note 1 - Overview, Basis of Presentation and Significant Accounting Policies,

included elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 in this Quarterly

Quantitative and Qualitative Disclosures

About Market Risk

a “smaller reporting company” as defined by 17 C.F.R.

§ 229.10, we are not required to provide information required

by this Item.

As a “smaller reporting

company” as defined by 17 C.F.R.

§ 229.10, we are not required to provide information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis