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
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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 multi-segment company the mission of which 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 cannabis industry and is in the midst of a transformation to being significantly more customer-centric across its operations. Through our Cannabis segment, we cultivate, manufacture, and distribute cannabis products through our growing network of retail dispensaries we own or operate, as well as to third-party dispensaries, across limited-license markets through our state-licensed subsidiaries. Through our Non-Cannabis segment, we supply nutrients, lighting, and other horticultural products to the indoor and hydroponic gardening industry, and organic, non-GMO, and conventional food and agricultural ingredients to food manufacturers and retailers.
Reporting Segments
We report our operating results in two business segments: (i) Cannabis and (ii) Non-Cannabis.
Our Cannabis segment cultivates, manufactures, and distributes cannabis products to third parties in wholesale markets and sells cannabis products directly to approved patients and adult-use customers in our owned or operated retail stores. During the three months ended June 30, 2026, the Cannabis segment had operating revenue in ten states: California, Colorado, Florida, Maryland, Minnesota, Missouri, Nevada, New Mexico, New York, and Utah.
Our Non-Cannabis segment provides nutrients, lighting, and other materials used for indoor and hydroponic gardening in North America through The Hawthorne Gardening Company LLC and certain of its subsidiaries ("Hawthorne"), which was acquired on April 8, 2026, and supplies organic, non-GMO, and conventional food and agricultural products, including natural ingredients such as grains, flours, edible oils, beans, nuts, and specialty ingredients, to food manufacturers and retailers through Bridgewell Agribusiness LLC and certain of its subsidiaries ("Bridgewell"), which was acquired on June 5, 2026. Unlike our Cannabis segment, the Non-Cannabis segment serves a broad commercial customer base and is not subject to state cannabis licensing or regulatory regimes. The Non-Cannabis segment's results are included in our consolidated results from the respective acquisition dates of each of Hawthorne and Bridgewell.
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 (iii) 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.
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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 Schwazze restructuring transaction.
On April 1, 2026, the Company completed the acquisition of Eaze Inc. ("Eaze"), a cannabis delivery and technology platform operating in California and Florida. On April 8, 2026, the Company completed the acquisition of Hawthorne from The Scotts Miracle-Gro Company. On June 5, 2026, the Company completed the acquisition of all of the issued and outstanding partnership interests of Bridgewell. The Hawthorne and Bridgewell acquisitions represent the Company's strategic expansion into operations outside of the cannabis industry, establishing the Company's Non-Cannabis segment. See Note 3 for additional information regarding these acquisitions.
Three months ended June 30, 2026, Compared to Three months ended June 30, 2025
Revenue
We derived our revenue from two reportable segments: Cannabis and Non-Cannabis.
Cannabis segment revenue is derived from cultivating, processing, and distributing cannabis products through our dispensaries in ten states and our wholesale sales to third parties. For the three months ended June 30, 2026, 88% of our Cannabis segment revenue was generated from retail dispensaries and 12% from the wholesale business. For the three months ended June 30, 2025, 77% of our revenue was generated from retail business and 23% from wholesale business.
Cannabis segment revenue for the three months ended June 30, 2026, was $175.8 million, an increase of $127.7 million or 265% compared to revenue of $48.1 million for the three months ended June 30, 2025, primarily driven by the acquisitions of Eaze and Vireo Health of Rocky Mountain in 2026, as well as the acquisitions of Wholesome, Deep Roots, and Proper, which were completed in the second quarter of 2025, and therefore contributed only partially to the prior year comparative period.
Retail revenue for the three months ended June 30, 2026, was $154.1 million, an increase of $117.3 million or 319% compared to retail revenue of $36.8 million for the three months ended June 30, 2025 primarily driven by the acquisitions of Eaze and Vireo Health of Rocky Mountain in 2026, as well as the acquisitions of Wholesome, Deep Roots, and Proper, which were completed in the second quarter of 2025, and therefore contributed only partially to the prior year comparative period.
Wholesale revenue for the three months ended June 30, 2026, was $21.7 million, an increase of $10.4 million or 92% compared to wholesale revenue of $11.3 million for the three months ended June 30, 2025, primarily driven by increased throughput in the New York market, as well as the acquisitions of Wholesome, Deep Roots, and Proper, which were completed in the second quarter of 2025, and therefore contributed only partially to the prior year comparative period.
Non-Cannabis segment revenue for the three months ended June 30, 2026, was $33.5 million, reflecting partial-period contributions from Hawthorne, acquired April 8, 2026, and Bridgewell, acquired June 5, 2026. There is no comparative revenue for the three months ended June 30, 2025, as no non-cannabis business was owned during that period.
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Three Months Ended
June 30,
2026
2025
$ Change
% Change
Retail:
MN
$
19.0
$
10.9
$
8.1
74
%
NY
0.8
1.1
(0.3)
(27)
%
MD
6.7
6.7
—
—
%
UT
13.1
6.1
7.0
115
%
NV
28.3
6.4
21.9
342
%
MO
20.9
5.6
15.3
273
%
CO
28.4
—
28.4
100
%
NM
9.4
—
9.4
100
%
CA
18.0
—
18.0
100
%
FL
9.5
—
9.5
100
%
Total Retail
$
154.1
$
36.8
$
117.3
319
%
Wholesale:
MN
$
0.1
$
0.2
$
(0.1)
(50)
%
NY
8.9
4.1
4.8
117
%
MD
3.4
4.2
(0.8)
(19)
%
UT
2.4
1.1
1.3
118
%
NV
0.1
—
0.1
100
%
MO
5.9
1.7
4.2
247
%
CO
0.9
—
0.9
100
%
Total Wholesale
$
21.7
$
11.3
$
10.4
92
%
Total Cannabis Revenue
$
175.8
$
48.1
$
127.7
265
%
Non-Cannabis Revenue
33.5
—
33.5
100
%
Total Revenue
$
209.3
$
48.1
$
161.2
335
%
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.
For the Cannabis segment, cost of sales is 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. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis products, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes.
For the Non-Cannabis segment, cost of sales is determined from costs related to the procurement and distribution of horticultural products, including nutrients and lighting, through Hawthorne, and the sourcing and supply of organic, non-GMO, and conventional food and agricultural ingredients through Bridgewell. Non-Cannabis cost of sales may fluctuate over comparative periods due to changes in commodity prices, supply chain conditions, and product mix.
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Cannabis Segment
Cost of sales for the Cannabis segment for the three months ended June 30, 2026, was $85.3 million, an increase of $57.6 million compared to $27.7 million for the three months ended June 30, 2025, primarily driven by the increase in sales and acquisition activity. 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.
Gross profit for the Cannabis segment for the three months ended June 30, 2026, was $90.5 million, representing a gross margin of 51%. In comparison, gross profit for the three months ended June 30, 2025, was $20.4 million or a 42% gross margin primarily driven by the decrease in non-cash product costs associated with the acquisition related inventory fair value step up.
Non-Cannabis Segment
Cost of sales for the Non-Cannabis segment for the three months ended June 30, 2026, was $28.7 million. There is no comparative cost of sales for the three months ended June 30, 2025, as no non-cannabis business was owned during that period.
Gross profit for the Non-Cannabis segment for the three months ended June 30, 2026, was $4.8 million, representing a gross margin of 14%. There is no comparative gross profit for the three months ended June 30, 2025, as no non-cannabis business was owned during that period.
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. Total expenses reflect costs across both the Cannabis and Non-Cannabis segments, as well as unallocated corporate expenses.
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.
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Cannabis Segment
Total expenses for the three months ended June 30, 2026, were $88.3 million, an increase of $65.9 million compared to total expenses of $22.4 million for the three months ended June 30, 2025 primarily driven by the acquisitions of Eaze and Vireo Health of Rocky Mountain in 2026, as well as the acquisitions of Wholesome, Deep Roots, and Proper, which were completed in the second quarter of 2025, and therefore contributed only partially to the prior year comparative period.
Non-Cannabis Segment
Total expenses for the Non-Cannabis segment for the three months ended June 30, 2026, were $13.3 million. There is no comparative figure for the three months ended June 30, 2025, as no non-cannabis business was owned during that period.
Income (loss) from operations
Loss from operations for the three months ended June 30, 2026, was $6.3 million an increase of $4.3 million compared to a loss of $2.0 million for the three months ended June 30, 2025.
Total Other Income (Expense)
Total other income for the three months ended June 30, 2026, was $20.5 million an increase of $28.6 million compared to total other expense of $8.1 million for the three months ended June 30, 2025. This change was primarily attributable to the bargain purchase gain recognized in connection with the Hawthorne acquisition.
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 June 30, 2026, tax expense totaled $14.3 million compared to tax expense of $4.8 million for the three months ended June 30, 2025. The increase in tax expense was driven by the increase in gross profit relative to the prior year.
Six months ended June 30, 2026, Compared to Six months ended June 30, 2025
Revenue
We derived our revenue from two reportable segments: Cannabis and Non-Cannabis.
Cannabis segment revenue is derived from cultivating, processing, and distributing cannabis products through our dispensaries in ten states and our wholesale sales to third parties. For the six months ended June 30, 2026, 87% of our Cannabis segment revenue was generated from retail dispensaries and 13% from the wholesale business. For the six months ended June 30, 2025, 77% of our revenue was generated from retail business and 23% from wholesale business.
Cannabis segment revenue for the six months ended June 30, 2026, was $282.0 million, an increase of $209.4 million or 288% compared to revenue of $72.6 million for the six months ended June 30, 2025, primarily driven by the acquisitions of Eaze and Vireo Health of Rocky Mountain in 2026, as well as the acquisitions of Wholesome, Deep Roots, and Proper, which were completed in the second quarter of 2025, and therefore contributed only partially to the prior year comparative period.
Retail revenue for the six months ended June 30, 2026, was $244.0 million, an increase of $188.0 million or 336% compared to retail revenue of $56.0 million for the six months ended June 30, 2025, primarily driven by the acquisitions of Eaze and Vireo Health of Rocky Mountain in 2026, as well as the acquisitions of Wholesome, Deep Roots, and Proper, which were completed in the second quarter of 2025, and therefore contributed only partially to the prior year comparative period.
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Wholesale revenue for the six months ended June 30, 2026, was $38.0 million, an increase of $21.4 million or 129% compared to wholesale revenue of $16.6 million for the six months ended June 30, 2025, primarily driven by increased throughput in the New York market, as well as the acquisitions of Wholesome, Deep Roots, and Proper, which were completed in the second quarter of 2025, and therefore contributed only partially to the prior year comparative period.
Non-Cannabis segment revenue for the six months ended June 30, 2026, was $33.5 million, reflecting partial-period contributions from Hawthorne, acquired April 8, 2026, and Bridgewell, acquired June 5, 2026. There is no comparative revenue for the six months ended June 30, 2025, no non-cannabis business was owned during that period.
Six Months Ended
June 30,
2026
2025
$ Change
% Change
Retail:
MN
$
37.2
$
22.1
$
15.1
68
%
NY
1.6
2.3
(0.7)
(30)
%
MD
13.3
13.5
(0.2)
(1)
%
UT
25.4
6.1
19.3
316
%
NV
55.7
6.4
49.3
770
%
MO
41.6
5.6
36.0
643
%
CO
31.1
—
31.1
100
%
NM
10.6
—
10.6
100
CA
18.0
—
18.0
100
%
FL
9.5
—
9.5
100
%
Total Retail
$
244.0
$
56.0
$
188.0
336
%
Wholesale:
MN
$
0.1
$
0.4
$
(0.3)
(75)
%
NY
14.1
5.1
9.0
176
%
MD
6.8
8.3
(1.5)
(18)
%
UT
5.2
1.1
4.1
373
%
NV
0.3
—
0.3
100
%
MO
10.6
1.7
8.9
524
%
CO
0.9
—
0.9
100
%
Total Wholesale
$
38.0
$
16.6
$
21.4
129
%
Total Cannabis Revenue
$
282.0
$
72.6
$
209.4
288
%
Non-Cannabis Revenue
33.5
—
33.5
100
%
Total Revenue
$
315.5
$
72.6
$
242.9
335
%
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.
For the Cannabis segment, cost of sales is 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. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis products, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes.
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For the Non-Cannabis segment, cost of sales is determined from costs related to the procurement and distribution of horticultural products, including nutrients and lighting, through Hawthorne, and the sourcing and supply of organic, non-GMO, and conventional food and agricultural ingredients through Bridgewell. Non-Cannabis cost of sales may fluctuate over comparative periods due to changes in commodity prices, supply chain conditions, and product mix.
Cannabis Segment
Cost of sales for the Cannabis segment for the six months ended June 30, 2026, was $132.2 million, an increase of $92.4 million compared to $39.8 million for the six months ended June 30, 2025, primarily driven by the increase in sales and acquisition activity. 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.
Gross profit for the Cannabis segment for the six months ended June 30, 2026, was $149.8 million, representing a gross margin of 53%. In comparison, gross profit for the six months ended June 30, 2025, was $32.8 million or a 45% gross margin primarily driven by the decrease in non-cash product costs associated with the acquisition related inventory fair value step up.
Non-Cannabis Segment
Cost of sales for the Non-Cannabis segment for the six months ended June 30, 2026, was $28.7 million. There is no comparative cost of sales for the six months ended June 30, 2025, as no non-cannabis business was owned during that period.
Gross profit for the Non-Cannabis segment for the six months ended June 30, 2026, was $4.8 million, representing a gross margin of 14.3%. There is no comparative gross profit for the six months ended June 30, 2025, as no non-cannabis business was owned during that period.
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. Total expenses reflect costs across both the Cannabis and Non-Cannabis segments, as well as unallocated corporate expenses.
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.
Cannabis Segment
Total expenses for the six months ended June 30, 2026, were $135.9 million, an increase of $103.0 million compared to total expenses of $32.9 million for the six months ended June 30, 2025, primarily driven by the acquisitions of Eaze and Vireo Health of Rocky Mountain in 2026, as well as the acquisitions of Wholesome, Deep Roots, and Proper, which were completed in the second quarter of 2025, and therefore contributed only partially to the prior year comparative period.
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Non-Cannabis Segment
Total expenses for the Non-Cannabis segment for the six months ended June 30, 2026, were $16.0 million. There is no comparative figure for the six months ended June 30, 2025, as no non-cannabis business was owned during that period.
Income (loss) from operations
Income from operations for the six months ended June 30, 2026, was $2.6 million an increase of $2.7 million compared to a loss of $0.1 million for the six months ended June 30, 2025.
Total Other Income (Expense)
Total other income for the six months ended June 30, 2026, was $7.4 million an increase of $22.2 million compared to total other expense of $14.8 million for the six months ended June 30, 2025. This change was primarily attributable to the bargain purchase gain recognized in connection with the Hawthorne acquisition.
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 six months ended June 30, 2026, tax expense totaled $30.4 million compared to tax expense of $6.5 million for the six months ended June 30, 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 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-
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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.
Six Months Ended
Three Months Ended
June 30,
June 30,
2026
2025
2026
2025
Net income (loss)
$
(20.4)
$
(21.4)
$
(0.1)
$
(14.9)
Interest expense, net
17.2
15.2
9.5
7.6
Income taxes
30.4
6.5
14.3
4.9
Depreciation & Amortization
9.9
1.4
6.1
1.1
Depreciation and amortization included in cost of sales
7.1
1.4
4.2
0.9
EBITDA (non-GAAP)
$
44.2
$
3.1
$
34.0
$
(0.4)
Non-cash inventory adjustments
3.6
4.4
3.1
3.9
Grown Rogue termination fee included in cost of goods sold
—
0.5
—
0.3
Change in the fair value of contingent consideration
2.6
—
(2.9)
—
Stock-based compensation
14.5
5.6
7.5
4.2
Transaction related expenses
28.4
6.0
19.7
4.7
One time legal costs
2.4
—
2.4
—
Other (income) expense
(0.5)
(0.4)
(1.2)
0.4
Bargain purchase gain
(21.7)
—
(21.7)
—
Severance expense
—
0.6
—
0.2
Loss on disposal of assets
0.6
—
0.6
—
Adjusted EBITDA (non-GAAP)
$
74.1
$
19.8
$
41.5
$
13.3
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.
First Lien Term Loan and Chicago Atlantic Term Loan
On July 3, 2025, the Company entered into a Loan and Security Agreement (the “ First Lien Term Loan ”), effective July 7, 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 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 a secured term loan (the “ Chicago Atlantic Term Loan ”), effective July 7, 2025, with Chicago Atlantic Opportunity Finance, LLC, as a Lender (the “ Lender ”), Chicago Atlantic Admin, LLC, as
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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 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 the purchase of New York Property
On May 26, 2026, the Company's subsidiary, 256 County Route 117 Perth LLC (" Perth Property Buyer "), completed the acquisition of a 389,000 square foot cannabis cultivation and production facility located in Perth, New York (the " Perth Property ") from IIP-NY 2 LLC, a subsidiary of Innovative Industrial Properties, Inc. (" IIP "), for an aggregate purchase price of $90.2 million. The Perth Property was previously leased by VHNY from IIP under a finance lease arrangement. In connection with the acquisition, VHNY’s existing lease for the Perth Property was terminated, and the Company derecognized the related right-of-use asset and lease liability.
In connection with the acquisition, Buyer entered into a term loan with IIP in the original principal amount of $49.0 million (the "Seller Note"). The Seller Note bears interest at 15% per annum, payable monthly on an interest-only basis, and has an initial maturity date of May 25, 2027, with two one-year extension options available to the Perth Property Buyer upon payment of a 1.0% extension fee and absence of an uncured event of default. The Seller Note is secured by a first-priority mortgage on the Property and is unconditionally guaranteed by the Company.
Concurrently, Buyer entered into a term loan with Chicago Atlantic Lincoln, LLC in the original principal amount of $41.0 million (the " Chicago Atlantic Perth Loan "), bearing interest at prime plus 5.75% per annum and maturing on May 28, 2028. The Chicago Atlantic Perth Loan is secured by a second-priority mortgage on the Perth Property, subordinated to the Seller Note pursuant to an intercreditor agreement, and is guaranteed by Vireo Health. The Chicago Atlantic Perth Loan permits voluntary prepayment subject to a make-whole premium
Long-Term Debt Arising from Vireo Health of Rocky Mountain
On February 27, 2026, CO Acquisition was acquired by VHC 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%,
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payable monthly in cash and mature on December 31, 2031. See Note 3 “Business Combinations and Dispositions” for additional information.
Long-Term debt Arising from the Bridgewell Acquisition
In connection with the acquisition of Bridgewell, the Company assumed a Loan and Security Agreement (the "Bridgewell Credit Facility") dated April 21, 2026, by and among Agribusiness Holdings Limited Partnership, BWAB Holdings, LLC, and Bridgewell Agribusiness LLC, as borrowers, the lenders party thereto, and Chicago Atlantic Financial Services, LLC, as administrative agent. The Bridgewell Credit Facility provides for term loans in an aggregate principal amount of up to $22.0 million, all of which was funded on the closing date. Borrowings under the Bridgewell Credit Facility bear interest at a fixed cash rate of 12.0% per annum, payable monthly in arrears. The facility matures on August 19, 2026.
In connection with the Bridgewell Acquisition, the Company also assumed five subordinated promissory notes with an aggregate principal balance of approximately $9.1 million, bearing interest at rates ranging from 7% to 15% per annum and maturing on December 31, 2026 or December 31, 2027. These notes are subordinated to the Bridgewell Credit Facility in right of payment.
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 June 30, 2026 and December 31, 2025, $7.5 million and $5.8 million of deferred financing costs remained unamortized, respectively.
Convertible Notes
On July 7, 2025, the Company retired the Convertible Notes, and issued a $10,000,000 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 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 $18.75.
In connection with the acquisition of Bridgewell, the Company issued the Bridgewell Convertible Notes to the Sellers on June 5, 2026, with an aggregate principal amount of approximately $13.7 million. The Bridgewell Notes bear interest at a rate of 3.85% per annum and mature five years from the date of issuance. The Bridgewell Convertible Notes are not convertible prior to the second anniversary of issuance. On or after the second anniversary, the Bridgewell Convertible Notes are convertible, at the option of the holders, into an aggregate estimated 734,551 subordinate voting shares of the Company at a deemed conversion price of $18.60 per share, subject to final adjustment in accordance with the terms of the Securities Purchase Agreement and applicable Canadian Securities Exchange policies.
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 June 30, 2026 and December 31, 2025, $0 deferred financing costs remained unamortized, respectively.
Cash Provided by Operating Activities
Net cash provided by operating activities was $14.3 million for the six months ended June 30, 2026, an increase of $22.5 million as compared to net cash used in operating activities of $8.2 million for the six months ended June 30, 2025. The increase was primarily driven by higher revenues and operating income resulting from the Company’s expanded operations following the completed acquisition activity.
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Cash Used in Investing Activities
Net cash used in investing activities was $61.7 million for the six months ended June 30, 2026, compared to net cash provided by investing activities of $32.9 million for the six months ended June 30, 2025, a change of $94.6 million. The shift from cash provided to cash used was primarily attributable to increased purchases of property and equipment, driven by the purchase of a building in New York for approximately $90.2 million.
Cash Provided by or Used in Financing Activities
Net cash provided by financing activities was $47.6 million for the six months ended June 30, 2026, a change of $57.8 million as compared to $10.2 million used in financing activities for the six months ended June 30, 2025. The change was principally due to increased proceeds received from long-term debt relative to the comparative period.
Lease Transactions
As of June 30, 2026, we are party to lease agreements for the use of buildings across our Cannabis and Non-Cannabis segments. Cannabis segment leases relate to buildings used in the cultivation, production, and/or sale of cannabis products in California, Colorado, Florida, New Mexico, Maryland, Minnesota, New York, Missouri, Nevada, and Utah. Non-Cannabis segment leases relate to warehouse, distribution, and office facilities used in the operations of Hawthorne and Bridgewell.
We lease certain retail dispensary locations within our Cannabis segment and certain cultivation facilities, as well as warehouse and distribution facilities used by our Non-Cannabis segment operations, under agreements with third-party landlords. These agreements require us to make monthly rent payments and fund common area costs, utilities, and maintenance, and in some cases certain other operating costs associated with the facilities. In some cases, we have received tenant improvement funds to assist in the buildout of the spaces to meet our operating needs.
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
June 30, 2026
June 30, 2026
Total
2026
$
15.0
$
1.0
$
16.0
2027
28.0
2.0
30.0
2028
27.0
2.1
29.1
2029
23.4
2.1
25.6
2030
21.8
2.2
24.0
Thereafter
153.4
24.6
178.0
Total minimum lease payments
$
268.7
$
34.0
$
302.7
Less discount to net present value
(114.1)
(25.2)
(139.3)
Present value of lease liability
$
154.6
$
8.8
$
163.4
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ADDITIONAL INFORMATION
Outstanding Share Data
As of August 14, 2026, we had 48,821,377 shares issued and outstanding on an as converted basis, consisting of the following:
(a) Subordinate Voting Shares
48,049,577 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
7,718 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 June 30, 2026, we had 1,091,449 employee stock options outstanding, 2,098,159 RSUs outstanding, and 3,183,465 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.
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.