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. 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 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 towards becoming significantly more customer-centric across its operations, which include cultivation, manufacturing, wholesale and retail business lines. With our core operations strategically located in three limited-license markets through our state-licensed subsidiaries, we cultivate and manufacture cannabis products and distribute these products through our growing network of Green Goods ® and other retail dispensaries that 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.
During the three months ended June 30, 2025, the Company had operating revenue in six states: Maryland, Minnesota, New York, Missouri, Nevada, and Utah. Retail revenues during the three months ended June 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. Wholesale revenues were derived from sales of products to third parties in Maryland, Minnesota, and New York.
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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, 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 three months ended June 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 June 30, 2025, Compared to Three months ended June 30, 2024
Revenue
We derived our revenue from cultivating, processing, and distributing cannabis products through our fourteen dispensaries in three states and our wholesale sales to third parties in three states. For the three months ended June 30, 2025, 77% of our revenue was generated from retail dispensaries and 23% from the wholesale business. For the three months ended June 30, 2024, 83% of our revenue was generated from retail business and 17% from wholesale business.
For the three months ended June 30, 2025, Minnesota operations contributed approximately 23% of revenues, New York contributed 11%, Maryland contributed 23%, Utah contributed 15%, Nevada contributed 13%, and Missouri contributed 15%. For the three months ended June 30, 2024, Minnesota operations contributed approximately 49% of revenues, New York contributed 10%, and Maryland contributed 41%.
Revenue for the three months ended June 30, 2025, was $48,063,010, an increase of $22,954,763 or 91% compared to revenue of $25,108,247 for the three-months ended June 30, 2024. The increase was primarily attributable to the closing of the Mergers resulting in the addition of Utah, Nevada, and Missouri revenues.
Retail revenue for the three months ended June 30 2025, was $36,772,560 an increase of $15,953,541 or 77% compared to retail revenue of $20,819,019 for the three months ended June 30, 2024. This increase was primarily due to the closing of the Mergers and the related Merger Agreements, resulting in the addition of Utah, Nevada, and Missouri revenues.
Wholesale revenue for the three months ended June 30, 2025, was $11,290,450, an increase of $7,001,222 compared to wholesale revenue of $4,289,228 for the three months ended June 30, 2024. The increase was primarily due to increased
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contributions from New York, and the closing of the Mergers and the related Merger Agreements, resulting in the addition of Utah, Nevada, and Missouri revenues.
Three Months Ended
June 30,
2025
2024
$ Change
% Change
Retail:
MN
$
10,858,055
$
12,238,957
$
(1,380,902)
(11)
%
NY
1,094,551
1,604,327
(509,776)
(32)
%
MD
6,749,585
6,975,735
(226,150)
(3)
%
UT
6,101,621
—
6,101,621
100
%
NV
6,361,285
—
6,361,285
100
%
MO
5,607,463
—
5,607,463
100
%
Total Retail
$
36,772,560
$
20,819,019
$
15,953,541
77
%
Wholesale:
MN
$
159,713
6,869
152,844
2,225
%
NY
4,127,703
998,724
3,128,979
313
%
MD
4,182,707
3,283,635
899,072
27
%
UT
1,106,756
—
1,106,756
100
%
NV
28,206
—
28,206
100
%
MO
1,685,365
—
1,685,365
100
%
Total Wholesale
$
11,290,450
$
4,289,228
$
7,001,222
163
%
Total Revenue
$
48,063,010
$
25,108,247
$
22,954,763
91
%
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 June 30, 2025, was $27,645,163, an increase of $16,087,559 compared to the three months ended June 30, 2024, of $11,557,604.
Gross profit for the three months ended June 30, 2025, was $20,417,847, representing a gross margin of 42%. In comparison, gross profit for the three months ended June 30, 2024, was $13,550,643 or a 54% gross margin. The increase in gross profit was driven by the closing of the Mergers and related Merger Agreements, 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 Merger Agreements. Excluding this amortization, gross profit would have been approximately 51% for the three months ended June 30, 2025.
We believe our current production capacity has not been fully realized and we expect future operations to benefit from increased revenue growth reflective of higher demand, increased product output and new product development. However, we expect gradual price compression as markets mature, which could place downward pressure on our retail and wholesale gross margins.
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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 June 30, 2025, were $22,436,537 an increase of $14,679,916 compared to total expenses of $7,756,621 for the three months ended June 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 three months ended June 30, 2025.
Operating Income (Loss) before Other Income (Expense) and Income Taxes
Operating income (loss) before other income (expense) and provision for income taxes for the three months ended June 30, 2025, was ($2,018,660) a decrease of $7,812,712 compared to $5,794,022 for the three months ended June 30, 2024.
Total Other Expense
Total other expense for the three months ended June 30, 2025, was $8,061,339, an increase of $2,038,906 compared to total other expense of $6,022,433 for the three months ended June 30, 2024. This change was primarily attributable to decreased other income driven by the decreasing value of the warrants we hold in Grown Rogue.
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, 2025, tax expense totaled $4,854,000 compared to tax expense of $440,000 for the three months ended June 30, 2024.
Six months ended June 30, 2025, compared to six months ended June 30, 2024
Revenue
We derived our revenue from cultivating, processing, and distributing cannabis products through our fourteen dispensaries in three states and our wholesale sales to third parties in three states. For the six months ended June 30, 2025, 77% of our revenue was generated from retail dispensaries and 23% from the wholesale business. For the six months ended June 30, 2024, 82% of our revenue was generated from retail business and 18% from wholesale business.
For the six months ended June 30, 2025, Minnesota operations contributed approximately 31% of revenues, New York contributed 10%, Maryland contributed 30%, Utah contributed 10%, Nevada contributed 9%, and Missouri contributed 10%. For the six months ended June 30, 2024, Minnesota operations contributed approximately 48% of revenues, New York contributed 11%, and Maryland contributed 41%.
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Revenue for the six months ended June 30, 2025, was $72,603,651, an increase of $23,408,089 or 48% compared to revenue of $49,195,562 for the six-months ended June 30, 2024. The increase was primarily attributable to the closing of The Merger Agreements, resulting in the addition of Utah, Nevada, and Missouri revenues.
Retail revenue for the six months ended June 30 2025, was $56,006,201 an increase of $15,587,742 or 39% compared to retail revenue of $40,418,459 for the six months ended June 30, 2024. This increase was primarily due to the closing of the Merger Agreements, resulting in the addition of Utah, Nevada, and Missouri revenues.
Wholesale revenue for the six months ended June 30, 2025, was $16,597,450, an increase of $7,820,347 compared to wholesale revenue of $8,777,103 for the six months ended June 30, 2024. This increase was primarily due to increased contributions from New York, and the closing of the Merger Agreements, resulting in the addition of Utah, Nevada, and Missouri revenues.
Six Months Ended
June 30,
2025
2024
$ Change
% Change
Retail:
MN
$
22,067,259
$
23,216,046
$
(1,148,787)
(5)
%
NY
2,299,596
3,425,596
(1,126,000)
(33)
%
MD
13,568,977
13,776,817
(207,840)
(2)
%
UT
6,101,621
—
6,101,621
100
%
NV
6,361,285
—
6,361,285
100
%
MO
5,607,463
5,607,463
100
%
Total Retail
$
56,006,201
$
40,418,459
$
15,587,742
39
%
Wholesale:
MN
441,124
6,869
434,255
6,322
%
NY
5,064,054
2,132,938
2,931,116
137
%
MD
8,271,945
6,637,296
1,634,649
25
%
UT
1,106,756
—
1,106,756
100
%
NV
28,206
—
28,206
100
%
MO
1,685,365
—
1,685,365
100
%
Total Wholesale
$
16,597,450
$
8,777,103
$
7,820,347
89
%
Total Revenue
$
72,603,651
$
49,195,562
$
23,408,089
48
%
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 six months ended June 30, 2025, was $39,773,492, an increase of $16,373,000 compared to the six months ended June 30, 2024, of $23,400,492.
Gross profit for the six months ended June 30, 2025, was $32,830,159, representing a gross margin of 45%. This is compared to gross profit for the six months ended June 30, 2024, of $25,795,070 or a 52% gross margin. The increase in gross profit was driven by the closing of the Merger Agreements, which added the gross profit of Deep Roots, Proper, and
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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 Merger Agreements. Excluding this amortization, gross profit would have been approximately 51% for the six months ended June 30, 2025.
We believe our current production capacity has not been fully realized and we expect future operations to benefit from increased revenue growth reflective of higher demand, increased product output and new product development. However, we expect gradual price compression as markets mature, which could place downward pressure on our retail and wholesale gross margins.
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 six months ended June 30, 2025, were $32,873,160 an increase of $17,631,557 compared to total expenses of $15,241,603 for the six months ended June 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 six months ended June 30, 2025.
Operating Income (Loss) before Other Income (Expense) and Income Taxes
Operating income (loss) before other income (expense) and provision for income taxes for the six months ended June 30, 2025, was ($43,001) a decrease of $10,596,468 compared to $10,553,467 for the three months ended June 30, 2024.
Total Other Expense
Total other expense for the six months ended June 30, 2025, was $14,870,818, an increase of $1,322,481 compared to other expense of $13,548,337 for the six months ended June 30, 2024. This change was primarily attributable to decreased other income driven by the decreasing value of the warrants we hold in Grown Rogue International, Inc. (“ Grown Rogue ”) .
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, 2025, tax expense totaled $6,529,000 compared to tax expense of $4,385,000 for the six months ended June 30, 2024.
NON-GAAP MEASURES
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a non-GAAP measure that does not have a standardized definition 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 measure that does not have a
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standardized definition under GAAP. The following information provides reconciliations of the supplemental non-GAAP financial measure 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
Six Months Ended
June 30,
June 30,
2025
2024
2025
2024
Net income (loss)
$
(14,934,029)
$
(668,441)
$
(21,442,819)
$
(7,379,870)
Interest expense, net
7,647,822
7,518,454
15,247,339
16,241,091
Income taxes
4,854,000
440,000
6,529,000
4,385,000
Depreciation & Amortization
1,101,919
252,958
1,359,053
506,538
Depreciation and amortization included in cost of sales
858,632
585,740
1,428,672
1,170,698
EBITDA (non-GAAP)
$
(471,656)
$
8,128,711
$
3,121,245
$
14,923,457
Non-cash inventory adjustments
3,925,959
41,000
4,358,959
(263,000)
Grown Rogue termination fee included in cost of goods sold
266,667
—
533,333
—
Stock-based compensation
4,150,630
(60,568)
5,611,480
119,221
Transaction related expenses
4,729,444
—
5,974,140
—
Other income
407,673
(1,593,492)
(382,365)
(2,911,081)
Severance expense
239,924
—
619,839
—
Loss on disposal of assets
5,844
97,471
5,844
218,327
Adjusted EBITDA (non-GAAP)
$
13,254,485
$
6,613,122
$
19,842,475
$
12,086,924
Included in the table below is a reconciliation of Pro Forma EBITDA. Pro Forma EBITDA and Pro Forma Adjusted EBITDA reflects the financial results of the Company giving effect to the Mergers as if they had occurred on January 1, 2025 . Pro Forma EBITDA and Pro Forma Adjusted EBITDA are non-GAAP measures that do not have a standardized definition under the generally accepted accounting principles in the United States of America (“ GAAP”). The following information provides reconciliations of the supplemental non-GAAP financial measure Pro Forma EBITDA presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. 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.
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These 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
June 30,
2025
Net income (loss)
$
(21,034,208)
Interest expense, net
9,193,304
Income taxes
10,804,770
Depreciation & Amortization
3,375,305
EBITDA (non-GAAP)
$
2,339,171
Non-cash inventory adjustments
4,252,451
Stock-based compensation
6,328,592
Transaction related expenses
9,056,447
Other (income) expense
134,938
Severance expense
239,834
Loss on disposal of assets
844,269
Adjusted EBITDA (non-GAAP)
$
23,195,702
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.
Credit Facility
During 2017 the Company signed a promissory note payable in the amount of $1,010,000. The note bears interest at a rate of 15% per annum with interest payments required on a monthly basis. In 2019 the Company’s promissory note payable in the amount of $1,010,000 was modified to increase the amount payable to $1,110,000. The Company paid the note off in full during the year ended December 31, 2024.
On November 19, 2021, the Company signed a promissory note payable in the amount of $2,000,000 in connection with the acquisition of Charm City Medicus, LLC. The note bears an interest rate of 8% per annum with interest payments due on the last day of each calendar quarter. On November 19, 2023, the Company and lender amended the note. Per the terms of the amendment, the interest rate was modified to 15%, and the Company paid off $1,000,000 of principal. On November 27, 2024, the Company and lender executed the second amendment to the note. Per the terms of the amendment, the maturity date was extended, the interest rate was increased to 18%, and the Company repaid $100,000 in principal. The remaining principal balance of $900,000 was repaid in full during the three months ended March 31, 2025.
On March 25, 2021, the Company entered into a credit agreement for a senior secured delayed draw term loan with an aggregate principal amount of up to $46,000,000 (the “ Credit Facility ”) and executed a draw of $26,000,000 in principal. The unpaid principal amounts outstanding under the Credit Facility bear interest at a rate of (a) the U.S. prime rate plus 10.375%, payable monthly in cash, and (b) 2.75% per annum paid in kind (“ PIK ”) interest payable monthly. In connection with the Credit Facility, the Company also pays a monthly credit monitoring fee in the amount of $130,400 which was included in interest expense in the consolidated statements of loss and comprehensive loss for the six months ended June 30, 2025, and 2024.
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On November 18, 2021, the Company and lenders amended the Credit Facility to provide for an additional loan of $4,200,000 with a cash interest rate of 15% per annum, PIK interest of 2% per annum and a maturity date of November 29, 2024. Obligations under the Credit Facility are secured by substantially all the assets of the Company.
On January 31, 2022, Vireo Growth and certain of its subsidiaries, as borrowers (collectively, the “ Borrowers ”), entered into a Third Amendment to the Credit Facility (the “ Third Amendment ”) providing for additional delayed draw term loans of up to $55 million (the “ Delayed Draw Loans ”). The cash interest rate on the Delayed Draw Loans under the Third Amendment is equal to the U.S. prime rate plus 10.375%, with a minimum required rate of 13.375% per annum, in addition to PIK interest of 2.75% per annum.
On March 31, 2023, the Company executed a fifth amendment to its Credit Facility with its senior secured lender, Chicago Atlantic Admin, LLC (the " Chicago Atlantic Admin "), an affiliate of Green Ivy Capital, and a group of lenders. The amended credit facility extends the maturity date on its Delayed Draw Loans to April 30, 2024, through the issuance of 15,000,000 Subordinate Voting Shares in lieu of a cash extension fee. These 15,000,000 shares were valued at $1,407,903 using a fair value per share of $0.094 were recorded as a deferred financing cost. The fair value per share reflects a 22% discount to the market price at the time of issuance to account for the four-month trading lock-up imposed on the shares. The amendment also provides the Company with reduced cash outlays by eliminating required amortization of the loan and requires the Company to divest certain assets to improve its liquidity position and financial performance.
On April 30, 2024, the Company executed a short-term extension of the maturity date on the Credit Facility with Chicago Atlantic Admin. The Credit Facility was extended until June 14, 2024 and then further extended to July 31, 2024. In connection with these extensions, no other changes were made to the material terms of the existing agreement.
On May 21, 2024 the Company executed a $1,200,000 term loan with Chicago Atlantic Admin to assist with the purchase of a site for a new dispensary location. The loan bears an interest rate of 12.0% and is due on May 28, 2027. Financing costs of $68,600 were incurred in connection with the closing of the loan.
On July 31, 2024, the Company executed a ninth amendment to the Company’s Credit Facility. The ninth amendment to the Company’s Credit Facility extends the maturity date on the Credit Facility loans to January 29, 2027, adjusts and extends the deadline with respect to the Company’s ongoing disposition of its New York operations through July 31, 2025, and amends certain financial measure definitions and covenants within the agreement. The Company issued 12,500,000 Subordinate Voting Shares to the lenders in consideration for the amendment. These 12,500,000 shares were valued at $5,387,500 using a fair value per share of $0.431 and were recorded as a deferred financing cost.
Long-Term Debt Arising from Acquisitions
In connection with the closing of the Proper Mergers, the Company acquired $25,502,655 of notes payable due to Chicago Atlantic Admin. The unpaid principal amounts outstanding bear 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, is payable monthly, and the note matures 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 acquired $19,166,670 of notes payable due to Chicago Atlantic Admin. The unpaid principal amounts outstanding bear 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, is payable monthly, and the note matures 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 acquired 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 acquired $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.
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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, 2025, and December 31, 2024, $5,161,990 and $6,576,985 of deferred financing costs remained unamortized, respectively.
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 “ New Convertible Notes ”) with a maximum principal amount of $10,000,000. The New 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 New 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.
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, 2025 and December 31, 2024, $113,336 and $137,622 of deferred financing costs remained unamortized, respectively.
Cash Used in Operating Activities
Net cash used in operating activities was $8.2 million for the six months ended June 30 2025, an increase of $7.0 million as compared to $1.2 million for the six months ended June 30, 2024. The increase was primarily attributed to less favorable changes in working capital, particularly assets held for sale, and increased transaction costs associated with the Mergers.
Cash Used in Investing Activities
Net cash provided by investing activities was $32.9 million for the six months ended June 30, 2025, an increase of $37.2 million compared to net cash used in investing activities of $4.2 million for the six months ended June 30, 2024. The increase was primarily attributable to the cash acquired through the closing of the Merger Transactions during the six-months ended June 30, 2025.
Cash Used in Financing Activities
Net cash used in financing activities was $10.2 million for the six months ended June 30, 2025, a change of $10.9 million as compared to $0.7 million provided by financing activities in the six months ended June 30, 2024. The change was principally due to increased debt principal payments during the six-months ended June 30, 2025, as compared to the six months ended June 30, 2024.
Lease Transactions
As of June 30, 2025, we entered into 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 improvement funds to assist in the buildout of the spaces to meet our operating needs. As of June 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
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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
June 30, 2025
June 30, 2024
Total
2024
$
4,547,220
$
6,928,944
$
11,476,164
2025
8,929,972
14,183,661
23,113,633
2026
8,720,658
14,606,527
23,327,185
2027
8,174,143
15,042,128
23,216,271
2028
7,088,413
15,490,852
22,579,265
Thereafter
23,594,331
203,082,066
226,676,397
Total minimum lease payments
$
61,054,737
$
269,334,178
$
330,388,915
Less discount to net present value
(19,672,643)
(173,790,735)
(193,463,378)
Less liabilities held for sale
(2,481,882)
(86,897,778)
(89,379,660)
Present value of lease liability
$
38,900,212
$
8,645,665
$
47,545,877
ADDITIONAL INFORMATION
Outstanding Share Data
As of August 11, 2025, we had 949,802,390 shares issued and outstanding on an as converted basis, consisting of the following:
(a) Subordinate Voting Shares
923,839,190 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 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, Warrants, and Convertible Promissory Notes
As of June 30, 2025, we had 30,359,033 employee stock options outstanding, 72,098,150 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.
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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.