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, 2025, 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 is a cannabis company whose mission is to provide safe access, quality products and value to its customers while supporting its local communities through active participation and restorative justice programs. The Company is evolving with the industry and is in the midst of a transformation to being significantly more customer-centric across its operations, which include cultivation, manufacturing, wholesale and retail business lines. With our core operations strategically located in eight limited-license markets through our state-licensed subsidiaries, we cultivate and manufacture cannabis products and distribute these products through our growing network of retail dispensaries we own or operate as well as to third-party dispensaries in the markets in which our subsidiaries hold operating licenses.
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.
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During the three months ended March 31, 2026, the Company had operating revenue in eight states: Colorado, Maryland, Minnesota, New Mexico, New York, Missouri, Nevada, and Utah. Retail revenues during the three months ended March 31, 2026 were derived from sales in 82 dispensaries throughout these eight states. We had 24 operational dispensaries in Colorado, 8 in Minnesota, 21 in New Mexico, 4 in New York, 2 in Maryland, 11 in Missouri, 11 in Nevada, and 1 in Utah.
Business Combinations
On December 18, 2024, we entered into the Merger Agreements in connection with the Deep Roots Merger, the Proper Mergers, and the Wholesome 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. 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.
On March 19, 2026, the Company completed the acquisition of a controlling interest in Vireo Health of Rocky Mountain, LLC, which acquired 45 dispensaries and two manufacturing facilities in Colorado and New Mexico through the previously announced Schwazze restructuring transaction.
Three months ended March 31, 2026, Compared to Three months ended March 31, 2025
Revenue
We derived our revenue from cultivating, processing, and distributing cannabis products through our 82 dispensaries in eight states and our wholesale sales to third parties in eight states. For the three months ended March 31, 2026, 85% of our revenue was generated from retail dispensaries and 15% from the wholesale business. For the three months ended March 31, 2025, 78% of our revenue was generated from retail business and 22% from wholesale business.
For the three months ended March 31, 2026, Colorado operations contributed approximately 3% of revenues, Minnesota contributed 17%, New York contributed 6%, New Mexico contributed 1%, Maryland contributed 9%, Utah contributed 14%, Nevada contributed 26%, and Missouri contributed 24%. For the three months ended March 31, 2025, Minnesota operations contributed approximately 46% of revenues, New York contributed 9%, and Maryland contributed 44%.
Revenue for the three months ended March 31, 2026, was $106.2 million, an increase of $81.7 million or 333% compared to revenue of $24.5 million for the three-months ended March 31, 2025. The increase was primarily attributable to the closing of various acquisitions resulting in the addition of revenues from our operations in Colorado, New Mexico, Utah, Nevada, and Missouri.
Retail revenue for the three months ended March 31, 2026, was $89.9 million, an increase of $70.7 million or 368% compared to retail revenue of $19.2 million for the three months ended March 31, 2025. The increase was primarily attributable to the closing of various acquisitions resulting in the addition of revenues from our operations in Colorado, New Mexico, Utah, Nevada, and Missouri.
Wholesale revenue for the three months ended March 31, 2026, was $16.3 million, an increase of $11.0 million compared to wholesale revenue of $5.3 million for the three months ended March 31, 2025. The increase was primarily due to
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increased contributions from New York, and the closing of various acquisitions, resulting in the addition of revenues from our operations in Colorado, New Mexico, Utah, Nevada, and Missouri.
Three Months Ended
March 31,
2026
2025
$ Change
% Change
Retail:
MN
$
18.2
$
11.2
$
7.0
63
%
NY
0.8
1.2
(0.4)
(33)
%
MD
6.6
6.8
(0.2)
(3)
%
UT
12.3
—
12.3
100
%
NV
27.4
—
27.4
100
%
MO
20.7
—
20.7
100
%
CO & NM
3.9
—
3.9
100
%
Total Retail
$
89.9
$
19.2
$
70.7
368
%
Wholesale:
MN
$
—
$
0.3
$
(0.3)
(100)
%
NY
5.2
0.9
4.3
478
%
MD
3.4
4.1
(0.7)
(17)
%
UT
2.8
—
2.8
100
%
NV
0.2
—
0.2
100
%
MO
4.7
—
4.7
100
%
Total Wholesale
$
16.3
$
5.3
$
11.0
208
%
Total Revenue
$
106.2
$
24.5
$
81.7
333
%
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 March 31, 2026, was $46.9 million, an increase of $34.8 million compared to the three months ended March 31, 2025, of $12.1 million. The increase in cost of sales was driven by the increase in revenues.
Gross profit for the three months ended March 31, 2026, was $59.3 million, representing a gross margin of 55.8%. In comparison, gross profit for the three months ended March 31, 2025, was $12.4 million or a 50.6% gross margin. The increase in gross profit was driven by the closing of various acquisitions, which added the gross profits in Colorado, New Mexico, Nevada, Missouri, and Utah. The increase in gross margin is also attributable to acquisition-related activity, as the businesses acquired generated higher margins than the businesses included in the comparative period.
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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 March 31, 2026, were $50.4 million an increase of $39.9 million compared to total expenses of $10.4 million for the three months ended March 31, 2025. The increase in total expenses was primarily attributable to an increase in transaction expenses associated with the newly-acquired businesses, an increase in stock-based compensation expense, and the addition of operating expenses in Colorado, New Mexico, Nevada, Missouri, and Utah.
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 March 31, 2026, was $9.0 million an increase of $7.0 million compared to $2.0 million for the three months ended March 31, 2025.
Total Other Expense
Total other expense for the three months ended March 31, 2026, was $13.2 million an increase of $6.4 million compared to total other expense of $6.8 million for the three months ended March 31, 2025. This change was primarily attributable to the remeasurement of contingent consideration associated with the Mergers, which resulted in a $5.5 million loss during the three months ended March 31, 2026.
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 March 31, 2026, tax expense totaled $16.1 million compared to tax expense of $1.7 million for the three months ended March 31, 2025. The increase in tax expense was driven by the increase in gross profit relative to the prior year.
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 GAAP. Total revenues, excluding revenues from states where we have divested operations, is also a non-GAAP 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
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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
March 31,
2026
2025
Net income (loss)
$
(20.3)
$
(6.5)
Interest expense, net
7.8
7.6
Income taxes
16.1
1.7
Depreciation & Amortization
3.8
0.2
Depreciation and amortization included in cost of sales
2.9
0.6
EBITDA (non-GAAP)
$
10.3
$
3.6
Non-cash inventory adjustments
0.5
0.4
Grown Rogue termination fee included in cost of goods sold
—
0.3
Change in the fair value of contingent consideration
5.5
—
Stock-based compensation
7.0
1.5
Transaction related expenses
8.7
1.2
Other (income) expense
0.7
(0.8)
Severance expense
—
0.4
Adjusted EBITDA (non-GAAP)
$
32.7
$
6.6
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 $25.5 million 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 $27.1 million, was payable monthly, and the note was set to mature on November 28, 2025. See Note 3 “Business Combinations and Dispositions” for additional information.
In connection with the closing of the Deep Roots Merger, the Company became obligated under $19.2 million 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 million, 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 $8.8 million 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 $1.0 million of promissory notes bearing an interest rate of 13.00%, payable monthly cash. See Note 3 “Business Combinations and Dispositions” for additional information.
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First Lien Term Loan and Chicago Atlantic Term Loan
On July 3, 2025, the Company entered into the First Lien Term Loan, effective July 7, 2025, with East West Bank, as Administrative Agent, and Western Alliance Bank, as co-administrative agent.
The First Lien Term Loan provides for an aggregate principal amount of $120 million. The aggregate principal amount of the First Lien Term Loan amortizes in quarterly installments of $3 million. 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 July 3, 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 3, 2025, the Company entered into the Chicago Atlantic Term Loan, effective July 7, 2025, with Chicago Atlantic Opportunity Finance, LLC, as a Lender, Chicago Atlantic Admin, LLC, as Administrative Agent and Collateral Agent and Chicago Atlantic Credit Advisers, LLC, as Lead Arranger.
The Chicago Atlantic Term Loan provides for a principal amount of $33 million to be loaned to the Company along with a $50 million 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.
Long-Term Debt Arising from Vireo Health of Rocky Mountain
On February 27, 2026, CO Acquisition was acquired by the Company pursuant to a membership interest purchase agreement. In connection with the closing of this acquisition, the Company became obligated under $28.2 million of notes payable due to Chicago Atlantic Admin, LLC. The outstanding principal balance bears interest at a fixed rate of 20.0% per annum and matures on December 31, 2029. The default rate of interest is equal to the interest rate plus 10.0% per annum. All interest accrued until June 3, 2026 is payable in kind. Thereafter, interest will be paid monthly. If the loans are prepaid in an amount equal to $16 million or more or accelerated on or before March 30, 2027, the borrowers must pay a make-whole amount equal to all interest that would have accrued through March 30, 2027.
In connection with the closing of the Asset Sale, the Company became obligated under $44.3 million of notes payable due to Chicago Atlantic Financial Services, LLC. The unpaid principal amounts outstanding bear interest at a rate of 12%, payable monthly in cash and mature on December 31, 2031. If the loans are prepaid or accelerated on or before June 19, 2026, the Company must pay a make-whole amount equal to all interest that would have accrued through June 19, 2026. See Note 3 “Business Combinations and Dispositions” for additional information.
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 March 31, 2026, and December 31, 2025, $5.3 million and $5.7 million of deferred financing costs remained unamortized, respectively.
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Convertible Notes
On July 7, 2025, the Company retired the Convertible Notes, and issued 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 the 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 (i) the sum of (A) the result of $10,000,000 minus 50.00% of the aggregate amount of all the New Convertible Notes repaid plus (B) all accrued but unpaid interest on the New Convertible Notes on the date of such conversion by (ii) a conversion price equal to $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 each of March 31, 2026 and December 31, 2025, $0 deferred financing costs remained unamortized, respectively.
Cash Provided by Operating Activities
Net cash provided by operating activities was $11.9 million for the three months ended March 31, 2026, an increase of $15.3 million as compared to net cash used in operating activities of $3.4 million for the three months ended March 31, 2025. The increase was primarily driven by higher revenues and operating income resulting from the Company’s expanded operations following the completed acquisition activity.
Cash Used in Investing Activities
Net cash provided by investing activities was $8.0 million for the three months ended March 31, 2026, an increase of $9.1 million compared to net cash used in investing activities of $1.1 million for the three months ended March 31, 2025. The increase was primarily attributable to the cash acquired through the closing of Vireo Health of Rocky Mountain during the three-months ended March 31, 2026, partially offset by increased purchases of property, plant, and equipment.
Cash Used in Financing Activities
Net cash used in financing activities was $4.6 million for the three months ended March 31, 2026, a change of $3.7 million as compared to $0.9 million used in financing activities for the three months ended March 31, 2025. The change was principally due to increased principal repayments on the First Lien Term Loan and Chicago Atlantic Term Loan relative to the comparative period.
Lease Transactions
As of March 31, 2026, we are party to lease agreements for the use of buildings used in the cultivation, production and/or sales of cannabis products in Colorado, New Mexico, 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 improvement funds to assist in the buildout of the spaces to meet our operating needs. As of March 31, 2026, we operated 82 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.
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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
March 31, 2026
March 31, 2026
Total
2026
$
11.3
$
10.7
$
22.0
2027
14.7
14.6
29.3
2028
14.5
15.0
29.5
2029
13.5
15.5
29.0
2030
13.4
16.0
29.4
Thereafter
81.5
187.1
268.6
Total minimum lease payments
$
148.9
$
258.9
$
407.8
Less discount to net present value
(64.2)
(163.1)
(227.3)
Present value of lease liability
$
84.7
$
95.8
$
180.5
ADDITIONAL INFORMATION
Outstanding Share Data
As of May 12, 2026, we had 1,383,830,362 shares issued and outstanding on an as converted basis, consisting of the following:
(a) Subordinate Voting Shares
1,360,581,362 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
232,490 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.
Options, RSUs, and Warrants
As of March 31, 2026, we had 34,629,892 employee stock options outstanding, 59,565,217 RSUs outstanding, 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, 2025, as amended.
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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.