Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the financial information and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. References to “we,” “our,” “us,” the “Company,” and “Vireo Growth” refer to Vireo Growth, Inc. together with its subsidiaries unless the context otherwise requires. Amounts are presented in United States dollars, except as otherwise indicated.
Forward-Looking Statements
Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our outlook, plans and strategy for our business and potential financing, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “ Securities Act ”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or “forward-looking information” within the meaning of Canadian securities laws. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “remain,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would,” “should,” “potential,” “intention,” “strategy,” “strategic,” “approach,” “subject to,” “possible,” “pending,” “if,” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements and forward-looking information are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements or forward-looking information. Factors that could cause or contribute to such differences include, but are not limited to, those identified in this Quarterly Report on Form 10-Q and those discussed in the section titled “Risk Factors” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, as amended, and in our other SEC and Canadian public filings. Such forward-looking statements reflect our beliefs and opinions on the relevant subject based on information available to us as of the date of this report, and while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. You should not rely upon forward-looking statements or forward-looking information as predictions of future events. Furthermore, such forward-looking statements or forward-looking information speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements or forward-looking information to reflect events or circumstances after the date of such statements.
Overview of the Company
Vireo Growth was founded in 2014 as a medical cannabis company and has since developed a disciplined, strategically aligned platform within the cannabis industry. The Company’s mission is to provide safe access, quality products, and value to its customers. Vireo Growth operates cultivation, production, and dispensary facilities in Maryland, Minnesota, Missouri, Nevada, New York, and Utah. The Company allocates capital and talent to areas expected to generate long-term value and operates with a commitment to accountability, efficiency, and its stakeholders, including customers, employees, shareholders, and the communities it serves.
Operating Segment
We report our operating results in one business segment: the cultivation, production, and sale of cannabis. We cultivate, manufacture, and distribute cannabis products to third parties in wholesale markets and cultivate, manufacture, and sell cannabis products directly to approved patients and adult-use-customers in our owned or operated retail stores.
During the three and nine months ended September 30, 2025, the Company had operating revenue in six states: Maryland, Minnesota, New York, Missouri, Nevada, and Utah. Retail revenues during the three and nine months ended September
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30, 2025 were derived from sales in 36 dispensaries throughout these six states. We had eight operational dispensaries in Minnesota, four in New York, two in Maryland, eleven in Missouri, ten in Nevada, and one in Utah.
Merger Agreements with Deep Roots, Proper and Wholesome
On December 18, 2024, we entered into merger agreements (each a “ Merger Agreement ” and collectively, the “ Merger Agreements ”) with each of (i) Deep Roots Holdings, Inc. (“ Deep Roots ”) (the “ Deep Roots Merger ”), (ii) Proper Holdings, LLC (“ Proper ”), NGH Investments, Inc. (“ NGH ”), and Proper Holdings Management, Inc. (“ Proper MSA Newco ” and together with NGH and Proper, the “ Proper Companies ”) (the “ Proper Mergers ”), and (iii) WholesomeCo, Inc. (“ Wholesome ”) (the “ Wholesome Merger ” and collectively with the Deep Roots Merger and the Proper Mergers, the “ Mergers ” and each, a “ Merger ”). Each Merger was an all-share transaction whereby, at the closing of each Merger, (i) a new wholly-owned subsidiary of the Company merged with and into Deep Roots, (ii) a new wholly-owned subsidiary of the Company merged with and into Wholesome, and (ii) the Proper Companies each merged with and into new wholly-owned subsidiaries of the Company. None of the Mergers were contingent upon the completion of any of the other Mergers.
During the nine months ended September 30, 2025, all of the Mergers closed. More specifically, the Wholesome Merger closed on May 12, 2025, the Proper Mergers closed on June 5, 2025, and the Deep Roots Merger closed on June 6, 2025.
Three months ended September 30, 2025, Compared to Three months ended September 30, 2024
Revenue
We derived our revenue from cultivating, processing, and distributing cannabis products through our 36 dispensaries in six states and our wholesale sales to third parties in six states. For the three months ended September 30, 2025, 83% of our revenue was generated from retail dispensaries and 17% from the wholesale business. For the three months ended September 30, 2024, 78% of our revenue was generated from retail business and 22% from wholesale business.
For the three months ended September 30, 2025, Minnesota operations contributed approximately 13% of revenues, New York contributed 7%, Maryland contributed 11%, Utah contributed 15%, Nevada contributed 27%, and Missouri contributed 27%. For the three months ended September 30, 2024, Minnesota operations contributed approximately 46% of revenues, New York contributed 11%, and Maryland contributed 43%.
Revenue for the three months ended September 30, 2025, was $91,655,155, an increase of $66,489,812 or 264% compared to revenue of $25,165,343 for the three-months ended September 30, 2024. The increase was primarily attributable to the closing of the Mergers resulting in the addition revenues from our operations in Utah, Nevada, and Missouri.
Retail revenue for the three months ended September 30 2025, was $75,951,983 an increase of $56,211,196 or 285% compared to retail revenue of $19,740,787 for the three months ended September 30, 2024. This increase was primarily due to the closing of the Mergers and the related Merger Agreements, resulting in the addition of revenues from our operations in Utah, Nevada, and Missouri.
Wholesale revenue for the three months ended September 30, 2025, was $15,703,172, an increase of $10,278,616 compared to wholesale revenue of $5,424,556 for the three months ended September 30, 2024. The increase was primarily
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due to increased contributions from New York, and the closing of the Mergers and the related Merger Agreements, resulting in the addition of revenues from our operations in Utah, Nevada, and Missouri.
Three Months Ended
September 30,
2025
2024
$ Change
% Change
Retail:
MN
$
11,954,050
$
11,391,969
$
562,081
5
%
NY
985,914
1,428,827
(442,913)
(31)
%
MD
6,620,115
6,919,991
(299,876)
(4)
%
UT
11,476,957
—
11,476,957
100
%
NV
24,946,810
—
24,946,810
100
%
MO
19,968,137
—
19,968,137
100
%
Total Retail
$
75,951,983
$
19,740,787
$
56,211,196
285
%
Wholesale:
MN
$
66,812
146,461
(79,649)
(54)
%
NY
5,117,153
1,321,224
3,795,929
287
%
MD
3,749,186
3,956,871
(207,685)
(5)
%
UT
1,856,967
—
1,856,967
100
%
NV
24,244
—
24,244
100
%
MO
4,888,810
—
4,888,810
100
%
Total Wholesale
$
15,703,172
$
5,424,556
$
10,278,616
189
%
Total Revenue
$
91,655,155
$
25,165,343
$
66,489,812
264
%
Cost of Sales and Gross Profit
Gross profit reflects total net revenue less cost of sales. Cost of sales represents the costs attributable to producing bulk materials and finished goods, which includes direct materials, labor, and certain indirect costs such as depreciation, insurance, utilities and valuation adjustments. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis product, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes.
Cost of sales are determined from costs related to the cultivation and processing of cannabis and cannabis-derived products as well as the cost of finished goods inventory purchased from third parties and valuation adjustments.
Cost of sales for the three months ended September 30, 2025, was $54,272,156, an increase of $41,430,783 compared to the three months ended September 30, 2024, of $12,841,373. The increase in cost of sales was driven by the increase in revenues.
Gross profit for the three months ended September 30, 2025, was $37,382,999, representing a gross margin of 41%. In comparison, gross profit for the three months ended September 30, 2024, was $12,323,970 or a 49% gross margin. The increase in gross profit was driven by the closing of the Mergers, which added the gross profit of Deep Roots, Proper, and Wholesome. The decrease in gross margin is primarily attributable to the amortization of the non-cash inventory fair value step initially recognized in connection with the closing of the Mergers. Excluding this amortization of $12,397,641 from the gross profit figure of $37,382,999 would have resulted in gross profit of $49,780,640 and gross margin of approximately 54% for the three months ended September 30, 2025.
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Total Expenses
Total expenses other than the cost of sales consist of selling costs to support customer relationships, marketing, and branding activities. They also include a significant investment in the corporate infrastructure required to support ongoing business.
Selling costs generally correlate to revenue. In the short-term as a percentage of sales, we expect selling costs to remain relatively flat. However, as anticipated positive regulatory developments in our core markets occur, we expect selling costs as a percentage of sales to decrease via growth in our retail and wholesale channels.
General and administrative expenses also include costs incurred at the corporate offices, primarily related to personnel costs, including salaries, benefits, and other professional service costs, as well as corporate insurance, legal and professional fees associated with being a publicly traded company. We expect general and administrative expenses as a percentage of sales to decrease as we realize revenue growth both organically and through anticipated positive regulatory developments in our core markets.
Total expenses for the three months ended September 30, 2025, were $36,574,043 an increase of $28,101,520 compared to total expenses of $8,472,523 for the three months ended September 30, 2024. The increase in total expenses was primarily attributable to an increase in transaction expenses associated with the Mergers, an increase in stock-based compensation expense, and the addition of the operating expenses of Deep Roots, Proper, and Wholesome.
Operating Income before Other Income (Expense) and Income Taxes
Operating income before other income (expense) and provision for income taxes for the three months ended September 30, 2025, was $808,956 a decrease of $3,042,491 compared to $3,851,447 for the three months ended September 30, 2024.
Total Other Expense
Total other expense for the three months ended September 30, 2025, was $13,760,817, an increase of $7,368,012 compared to total other expense of $6,392,805 for the three months ended September 30, 2024. This change was primarily attributable to the loss on extinguishment of existing debt of $8,627,647, which was recorded in connection with the First Lien Term Loan and Chicago Atlantic Term Loan.
Provision for Income Taxes
Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. For the three months ended September 30, 2025, tax expense totaled $13,347,000 compared to tax expense of $2,385,000 for the three months ended September 30, 2024. The increase in tax expense was driven by the increase in gross profit relative to the prior year.
Nine months ended September 30, 2025, compared to nine months ended September 30, 2024
Revenue
We derived our revenue from cultivating, processing, and distributing cannabis products through our 36 dispensaries in six states and our wholesale sales to third parties in six states. For the nine months ended September 30, 2025, 80% of our revenue was generated from retail dispensaries and 20% from the wholesale business. For the nine months ended September 30, 2024, 81% of our revenue was generated from retail business and 19% from wholesale business.
For the nine months ended September 30, 2025, Minnesota operations contributed approximately 21% of revenues, New York contributed 8%, Maryland contributed 20%, Utah contributed 13%, Nevada contributed 19%, and Missouri contributed 20%. For the nine months ended September 30, 2024, Minnesota operations contributed approximately 48% of revenues, New York contributed 11%, and Maryland contributed 41%.
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Revenue for the nine months ended September 30, 2025, was $164,258,806, an increase of $89,897,901 or 121% compared to revenue of $74,360,905 for the nine-months ended September 30, 2024. The increase was primarily attributable to the closing of the Mergers, resulting in the addition of revenues from our operations in Utah, Nevada, and Missouri.
Retail revenue for the nine months ended September 30 2025, was $131,958,184 an increase of $71,798,938 or 119% compared to retail revenue of $60,159,246 for the nine months ended September 30, 2024. This increase was primarily due to the closing of the Mergers, resulting in the addition of retail revenue from our operations in Utah, Nevada, and Missouri.
Wholesale revenue for the nine months ended September 30, 2025, was $32,300,622, an increase of $18,098,963 compared to wholesale revenue of $14,201,659 for the nine months ended September 30, 2024. This increase was primarily due to increased contributions from New York, and the closing of the Mergers, resulting in the addition of wholesale revenue from our operations in Utah, Nevada, and Missouri.
Nine Months Ended
September 30,
2025
2024
$ Change
% Change
Retail:
MN
$
34,021,309
$
34,608,015
$
(586,706)
(2)
%
NY
3,285,510
4,854,423
(1,568,913)
(32)
%
MD
20,189,092
20,696,808
(507,716)
(2)
%
UT
17,578,578
—
17,578,578
100
%
NV
31,308,095
—
31,308,095
100
%
MO
25,575,600
—
25,575,600
100
%
Total Retail
$
131,958,184
$
60,159,246
$
71,798,938
119
%
Wholesale:
MN
507,936
153,330
354,606
231
%
NY
10,181,207
3,454,162
6,727,045
195
%
MD
12,021,131
10,594,167
1,426,964
13
%
UT
2,963,723
—
2,963,723
100
%
NV
52,450
—
52,450
100
%
MO
6,574,175
—
6,574,175
100
%
Total Wholesale
$
32,300,622
$
14,201,659
$
18,098,963
127
%
Total Revenue
$
164,258,806
$
74,360,905
$
89,897,901
121
%
Cost of Sales and Gross Profit
Gross profit reflects total net revenue less cost of sales. Cost of sales represents the costs attributable to producing bulk materials and finished goods, which includes direct materials, labor, and certain indirect costs such as depreciation, insurance, utilities and valuation adjustments. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis product, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes.
Cost of sales are determined from costs related to the cultivation and processing of cannabis and cannabis-derived products as well as the cost of finished goods inventory purchased from third parties and valuation adjustments.
Cost of sales for the nine months ended September 30, 2025, was $94,045,648, an increase of $57,803,783 compared to the nine months ended September 30, 2024, of $36,241,865. The increase in cost of sales was driven by the increase in revenues.
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Gross profit for the nine months ended September 30, 2025, was $70,213,158, representing a gross margin of 43%. This is compared to gross profit for the nine months ended September 30, 2024, of $38,119,040 or a 51% gross margin. The increase in gross profit was driven by the closing of the Mergers, which added the gross profit of Deep Roots, Proper, and Wholesome. The decrease in gross margin was primarily attributable to the amortization of the non-cash inventory fair value step initially recognized in connection with the closing of the Mergers. Excluding this amortization of $16,549,749 from the gross profit figure of $70,213,158 would have resulted in gross profit of $86,762,907 and gross margin of approximately 53% for the nine months ended September 30, 2025.
Total Expenses
Total expenses other than the cost of sales consist of selling costs to support customer relationships, marketing, and branding activities. It also includes a significant investment in the corporate infrastructure required to support ongoing business.
Selling costs generally correlate to revenue. In the short-term as a percentage of sales, we expect selling costs to remain relatively flat. However, as anticipated positive regulatory developments in our core markets occur, we expect selling costs as a percentage of sales to decrease via growth in our retail and wholesale channels.
General and administrative expenses also include costs incurred at the corporate offices, primarily related to personnel costs, including salaries, benefits, and other professional service costs, as well as corporate insurance, legal and professional fees associated with being a publicly traded company. We expect general and administrative expenses as a percentage of sales to decrease as we realize revenue growth organically and through anticipated positive regulatory developments in our core markets.
Total expenses for the nine months ended September 30, 2025, were $69,447,203, an increase of $45,733,077 compared to total expenses of $23,714,126 for the nine months ended September 30, 2024. The increase in total expenses was primarily attributable to an increase in transaction expenses associated with the Mergers, an increase in stock-based compensation expense, and the addition of the operating expenses of Deep Roots, Proper, and Wholesome given the Mergers closed during the nine months ended September 30, 2025.
Operating Income before Other Income (Expense) and Income Taxes
Operating income before other income (expense) and provision for income taxes for the nine months ended September 30, 2025, was $765,955 a decrease of $13,638,959 compared to $14,404,914 for the nine months ended September 30, 2024.
Total Other Expense
Total other expense for the nine months ended September 30, 2025, was $28,631,635, an increase of $8,690,493 compared to other expense of $19,941,142 for the nine months ended September 30, 2024. This change was primarily attributable to the loss on extinguishment of existing debt of $8,627,647, which was recorded in connection with the First Lien Term Loan and Chicago Atlantic Term Loan.
Provision for Income Taxes
Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. For the nine months ended September 30, 2025, tax expense totaled $19,876,000 compared to tax expense of $6,770,000 for the nine months ended September 30, 2024. The increase in tax expense was driven by the increase in gross profit.
NON-GAAP MEASURES
Earnings before interest, taxes, depreciation and amortization (“ EBITDA ”) and Adjusted EBITDA are non-GAAP measures that do not have standardized definitions under the United States generally accepted accounting principles (“ GAAP ”). Total revenues, excluding revenues from states where we have divested operations, is also a non-GAAP
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measure that does not have a standardized definition under GAAP. The following information provides reconciliations of the supplemental non-GAAP financial measures EBITDA and Adjusted EBITDA presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. Reconciliations of the supplemental non-GAAP financial measure, total revenues, that exclude revenues from states where we have divested operations presented herein to the most directly comparable financial measures calculated in accordance with GAAP can be found in the tables above where the measure appears. We have provided these non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. The supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Net income (loss)
$
(26,298,861)
$
(4,926,358)
$
(47,741,680)
$
(12,306,228)
Interest expense, net
6,906,226
7,363,655
22,153,565
23,604,746
Income taxes
13,347,000
2,385,000
19,876,000
6,770,000
Depreciation & Amortization
2,082,819
256,326
3,441,872
762,864
Depreciation and amortization included in cost of sales
1,813,459
582,072
3,242,131
1,752,770
EBITDA (non-GAAP)
$
(2,149,357)
$
5,660,695
$
971,888
$
20,584,152
Non-cash inventory adjustments
13,394,126
393,000
17,753,085
130,000
Grown Rogue termination fee included in cost of goods sold
—
—
533,333
—
Stock-based compensation
4,006,712
1,304,919
9,618,192
1,424,140
Transaction related expenses
803,724
—
6,777,864
—
Other income
(479,245)
(970,850)
(861,610)
(3,881,931)
Debt financing costs
1,873,589
—
1,873,589
—
Severance expense
74,320
—
694,159
—
Loss on disposal of assets
7,837,671
—
7,843,515
218,327
Adjusted EBITDA (non-GAAP)
$
25,361,541
$
6,387,764
$
45,204,016
$
18,474,688
Liquidity, Financing Activities During the Period, and Capital Resources
We are an early-stage growth company. We are generating cash from sales and deploying our capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near term. Capital reserves are for capital expenditures and improvements in existing facilities, product development and marketing, customer, supplier, investor, industry relations, and working capital.
Current management forecasts and related assumptions support the view that we can adequately manage the operational needs of the business.
Long-Term Debt Arising from the Mergers
In connection with the closing of the Proper Mergers, the Company became obligated under $25,502,655 of notes payable due to Chicago Atlantic Admin, LLC. The unpaid principal amounts outstanding bore interest at a rate of (a) 11%, payable monthly in cash, and (b) 3.00% per annum PIK interest, payable monthly. In addition, 1% amortization of the original principal value of the note, or $27,100,000, was payable monthly, and the note was set to mature on November 28, 2025. See Note 3 “Business Combinations and Dispositions” for additional information.
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In connection with the closing of the Deep Roots Merger, the Company became obligated under $19,166,670 of notes payable due to Chicago Atlantic Admin, LLC. The unpaid principal amounts outstanding bore interest at a rate of (a) the U.S. prime rate, with a floor of 8.00%, plus (b) 6.50%, payable monthly in cash. In addition, 0.83% amortization of the original principal value of the note, or $20,000,000, was payable monthly, and the note was set to mature on August 15, 2027. See Note 3 “Business Combinations and Dispositions” for additional information.
In connection with the closing of the Wholesome Merger, the Company became obligated on a $8,766,340 term loan bearing an interest rate of 11.25%, payable monthly in cash. The term loan was repaid in full on May 13, 2025. Additionally, the Company became obligated on $1,000,000 of promissory notes bearing an interest rate of 13.00%, payable monthly cash. See Note 3 “Business Combinations and Dispositions” for additional information.
First Lien Term Loan and Chicago Atlantic Term Loan
On July 7, 2025, the Company entered into a Loan and Security Agreement (the “First Lien Term Loan”), effective July 3, 2025, with East West Bank, a California banking corporation (“East West Bank”), as Administrative Agent (the “Administrative Agent”), and Western Alliance Bank, an Arizona corporation, as co-administrative agent (the “Co-Admin Agent”).
The First Lien Term Loan provides for an aggregate principal amount of $120,000,000. The aggregate principal amount of the First Lien Term Loan amortizes in quarterly installments of $3,000,000. The Company will make such quarterly amortization payments commencing on December 31, 2025 and on the last business day of each quarter thereafter through and including June 30, 2028. Upon maturity of the First Lien Term Loan on July 31, 2028, the remaining outstanding principal amount of the First Lien Term Loan, and all accrued and unpaid interest thereon, will be due and payable in full. The First Lien Term Loan bears interest at the one-month Term Secured Overnight Financing Rate (subject to a 3% floor) plus 4% per annum. The First Lien Term Loan shall, at the Administrative Agent’s option, convert to a Prime Rate Loan at the end of the First Lien Term Loan’s current one-month interest period if an event of default shall occur and be continuing, at which time an additional 2% of default interest will also be applicable to the First Lien Term Loan.
On July 7, 2025, the Company entered into a secured term loan (the “Chicago Atlantic Term Loan”), effective July 3, 2025, with Chicago Atlantic Opportunity Finance, LLC, as a Lender, Chicago Atlantic Admin, LLC, as Administrative Agent and Collateral Agent (“2L Agent”) and Chicago Atlantic Credit Advisers, LLC, as Lead Arranger (“Lead Arranger”).
The Chicago Atlantic Term Loan provides for a principal amount of $33,000,000 to be loaned to the Company along with a $50,000,000 accordion feature, available to support future strategic initiatives, subject to the sole discretion of the Lender and 2L Agent. Amortization payments are due and payable monthly on each payment date in an amount equal to 1% of the loan amount starting November 30, 2025. All unpaid and accrued interest is due and payable on the maturity date of October 2, 2028, with an option to extend for an additional year subject to a 1% extension fee of all loans advanced by lenders under the Chicago Atlantic Term Loan. The Chicago Atlantic Term Loan bears interest at the Prime Rate (subject to a 7.5% floor) plus 5.5% per annum.
The First Lien Term Loan is secured by a perfected first priority security interest in all assets and future assets of the Company. The Chicago Atlantic Term Loan is secured by a second priority security interest in and lien on all existing assets and future assets of the Company.
The proceeds from the First Lien Term Loan and Chicago Atlantic Term Loan were used to retire all of the Company’s existing debt obligations, including the debt arising from acquisitions, including the Mergers. In connection with the retirement of the existing debt, the Company recorded a loss on extinguishment of $8,627,647, which is included in other expense on the statement of loss and comprehensive loss for the three and nine months ended September 30, 2025.
Unless otherwise specified, all deferred financing costs are treated as a contra-liability, to be netted against the outstanding loan balance and amortized over the remaining life of the loan. As of September 30, 2025, and December 31, 2024, $5,704,695 and $6,576,985 of deferred financing costs remained unamortized, respectively.
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Convertible Notes
On July 31, 2024, holders voluntarily converted convertible notes issued in 2023 into 73,016,061 Subordinate Voting Shares of the Company.
On November 1, 2024, the Company entered into the Joinder and Tenth Amendment to the Credit Agreement (the “ Tenth Amendment ”). The Tenth Amendment provides a convertible note facility (the “ Convertible Notes ”) with a maximum principal amount of $10,000,000. The Convertible Notes mature on November 1, 2027, have a cash interest rate of 12.0% per year, and are convertible into the Company’s SVSs at an amount determined by dividing the outstanding principal amount, plus all accrued but unpaid interest on the Convertible Notes on the date of such conversion, by a conversion price of $0.625. The Company incurred $145,717 in financing costs in connection with the signing of the Tenth Amendment.
On July 7, 2025, the Company retired the Convertible Notes, and issued a $10 million convertible note (the “New Convertible Notes”) to Chicago Atlantic Opportunity Finance, LLC, also with a second priority interest, that matures on October 2, 2028 with an option to extend for an additional year subject to a 1% extension fee of all Chicago Atlantic loans advanced, has a cash interest rate of Prime Rate (subject to a 7.5% floor) plus 5.0% per year, and is convertible into that number of the Company’s subordinate voting shares determined by dividing the outstanding principal amount plus all accrued but unpaid interest on the convertible notes on the date of such conversion by a conversion price of $0.625.
All deferred financing costs are treated as a contra-liability, to be netted against the outstanding loan balance and amortized over the remaining life of the loan. As of September 30, 2025 and December 31, 2024, $103,891 and $137,622 of deferred financing costs remained unamortized, respectively.
Cash Used in Operating Activities
Net cash used in operating activities was $14.9 million for the nine months ended September 30, 2025, an increase of $11.1 million as compared to $3.8 million for the nine months ended September 30, 2024. The increase was primarily attributed to an increase in assets held for sale, payment of approximately $14 million of accrued expenses assumed in the Mergers including distributions to former stockholders of Deep Roots, Proper, and Wholesome, and increased transaction costs associated with the Mergers, and approximately $3.7 million of cash debt extinguishment costs.
Cash Used in Investing Activities
Net cash provided by investing activities was $18.2 million for the nine months ended September 30, 2025, an increase of $23.7 million compared to net cash used in investing activities of $5.5 million for the nine months ended September 30, 2024. The increase was primarily attributable to the cash acquired through the closing of the Mergers during the nine-months ended September 30, 2025, partially offset by increased purchases of property, plant, and equipment.
Cash Used in Financing Activities
Net cash provided by financing activities was $22.7 million for the nine months ended September 30, 2025, a change of $22.1 million as compared to $0.6 million provided by financing activities in the nine months ended September 30, 2024. The change was principally due to the receipt of proceeds from the First Lien Term Loan and Chicago Atlantic Term Loan.
Lease Transactions
As of September 30, 2025, we are party to lease agreements for the use of buildings used in the cultivation, production and/or sales of cannabis products in Maryland, Minnesota, New York, Missouri, Nevada, and Utah.
The lease agreements for all of the retail spaces used for our dispensary operations are with third-party landlords and the remaining durations range from one to ten years. These agreements are short-term facility leases that require us to make monthly rent payments and fund common area costs, utilities and maintenance. In some cases, we have received tenant
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improvement funds to assist in the buildout of the spaces to meet our operating needs. As of September 30, 2025, we operated 36 retail locations secured under these agreements.
We also entered into sale and leaseback arrangements for our cultivation and processing facilities in Minnesota and New York with a special-purpose real estate investment trust. These leases are long-term agreements that provide, among other things, funds to make certain improvements to the properties that will significantly enhance the production capacity and operational efficiency of the facilities.
Excluding any contracts under one year in duration, the future minimum lease payments (principal and interest) on all our leases are as follows:
Operating Leases
Finance Leases
September 30, 2025
September 30, 2025
Total
2025
$
2,266,352
$
3,505,294
$
5,771,646
2026
9,052,432
14,183,661
23,236,093
2027
8,364,994
14,606,527
22,971,521
2028
7,825,020
15,042,128
22,867,148
2029
7,123,834
15,490,852
22,614,686
Thereafter
23,650,636
203,082,066
226,732,702
Total minimum lease payments
$
58,283,268
$
265,910,528
$
324,193,796
Less discount to net present value
(16,901,174)
(171,368,934)
(188,270,108)
Less liabilities held for sale
(2,481,882)
(86,897,778)
(89,379,660)
Present value of lease liability
$
38,900,212
$
7,643,816
$
46,544,028
ADDITIONAL INFORMATION
Outstanding Share Data
As of November 11, 2025, we had 1,064,669,823 shares issued and outstanding on an as converted basis, consisting of the following:
(a) Subordinate Voting Shares
1,038,706,623 Subordinate Voting Shares issued and outstanding. The holders of Subordinate Voting Shares are entitled to one vote per share at all shareholder meetings. The Company is authorized to issue an unlimited number of no-par value Subordinate Voting Shares.
(b) Multiple Voting Shares
259,634 Multiple Voting Shares issued and outstanding. The holders of Multiple Voting Shares are entitled to one hundred votes per share at all shareholder meetings. Each Multiple Voting Share is exchangeable for one hundred subordinate voting shares. The Company is authorized to issue an unlimited number of Multiple Voting Shares.
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Options, RSUs, and Warrants
As of September 30, 2025, we had 27,933,898 employee stock options outstanding, 73,173,350 RSUs outstanding, 3,037,649 Subordinate Voting Share compensation warrants denominated in C$ related to financing activities, and 15,503,937 Subordinate Voting Share compensation warrants outstanding.
Off-Balance Sheet Arrangements
As of the date of this filing, we do not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our results of operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the year ended December 31, 2024, as amended.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk have been omitted as permitted under rules applicable to smaller reporting companies.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.