AAWH 10-K & 10-Q changes, risk factors and insider trading

•risks related to our ability to continueexpand toour openoperations, including opening new dispensariesdispensaries, cultivation and cultivationprocessing facilities asand anticipatedintegrating acquisitions;

•the effect of risks related to material acquisitions, dispositions and other strategic transactionstransactions, including the failure to realize anticipated benefits;

•the effect of risks related to cybersecurity, data privacy, information technology systems and reliance on third-party service providers;

Cannabis remains illegal under U.S. federal law, and enforcement of cannabis laws could change.change in a manner that materially or adversely affects our business.

Unlike in Canada, which has federal legislation uniformly governing the cultivation, distribution, sale and possession of medical and adult-use cannabis, for both adult-use and medical purposes, cannabis is largely regulated at the state level in the United States. To date, the cultivation and sale of cannabis for medical uses has been legalized in 39a significant number of U.S. states, four of five permanently inhabited U.S. territoriesterritories, and the District of Columbia.Columbia, Theand adult-use of cannabis has been legalized in 24a states,growing the Northern Mariana Islands, Guam, and the Districtnumber of Columbia.jurisdictions. AlthoughNotwithstanding certainsuch U.S.state-level states have legalized the sale of medical or adult-use cannabis,legalization, the sale, distribution, and cultivation of cannabis and cannabis-related products remains illegal under U.S. federal law pursuant to the CSA. The CSA classifies cannabis as a Schedule I controlled substance, and as such, medical and adult-use cannabis use is illegal under U.S. federal law.

We may be subject to enforcement or other action by the U.S. federal government.

Violations of any federal laws andor regulationsregulations, or allegations of such violations, could result in significant fines, penalties, administrative sanctions, settlements, convictions or settlementsother arisingadverse fromconsequences, civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to,including disgorgement of profits, cessation of business activities or divestiture. TheseAny resultsof these outcomes could havematerially aand materialadversely adverse effect on us, includingaffect our reputationreputation, andour ability to conduct business, our holding (directlyownership or indirectly)operation of cannabis licenses in the United States,licenses, the listing of our Class A common stocksecurities on various stock exchanges, our financial position, operating results, profitability orcondition, liquidity and results of operations, or the market price of our shares of Class A common stock. In addition, it is difficult to estimate the time or resources that would be needed for the investigation or final resolution of any such matters because: (i) the time and resources that may be needed depend on the nature and extent of any information requested by the authorities involved, and (ii) such time or resources could be substantial.

U.S. state and local regulation of cannabis is complex, evolving, and uncertain.

Our activities are, and will continue to be, subject to evolving regulation and interpretation by various governmental authorities. The medical and adult-use cannabis industries are subject to various local, state and federal laws, regulations, guidelines, and licensing requirements relating to the manufacture, sale, distribution, management, transportation, storage, and disposal of cannabis, as well as being subject to laws and regulations relating to health and safety, the conduct of operations, and the protection of the environment. There is no assurance that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Given the current regulatory environmentChanges in theapplicable Unitedlaws States,or regulations, or in their interpretation or enforcement, could restrict our operations, increase our compliance costs, limit our ability to expand into new risks may emerge, and management may not be able to predict all such risks. If the U.S. federal government begins to enforce U.S. federal laws relating to cannabis in states where the sale and use of cannabis is currently legal,markets, or ifadversely existing state laws are repealed or curtailed,affect our business or operations in those statesone or undermore those laws would be materially and adversely affected. Federal actions against any individual or entity engaged in the cannabis industry or a substantial repeal of cannabis related legislation could adversely affect us, our business and our assets or investments.states.

As a result of the conflicting views between state legislatures and the federal government regarding cannabis, the rulemaking process at the state level that appliesapplicable to cannabis operators inat anythe state willand belocal level is ongoing and resultsubject into frequent changes.change. As a result, aMaintaining compliance programwith applicable regulatory requirements is essential to manage regulatory risk. All of our implemented operating policiesoperations, and procedures are compliance-based and are derived from the state regulatory structure governing ancillary cannabis businesses and their relationships to state-licensed or permitted cannabis operators, if any. Notwithstanding ourcompliance efforts and diligence, regulatory compliance and the process of obtaining and maintaining regulatory approvals can be costly and time-consuming. No assurance can be given that we will receiveobtain or will continue to hold the requisiteall licenses, permitspermits, or cardsapprovals required to operate our businesses as currently operated or as proposed to be operated in the future, or that we will be able to complete business transactions, including acquisitions or transfers of licenses, permits, cardslicenses or other property.regulated assets, on acceptable terms or at all.

In addition, local laws and ordinances could restrict our business activity. Although our operations are legal under the laws of the states in which we operate, local governments have the ability to limit, restrict and ban cannabis businesses from operating within their jurisdiction. Land use, zoning, local ordinances and similar laws could be adopted or changedamended in a manner that materially and haveadversely a material adverse effect onaffects our business.

Multiple states where medical and/or adult-use cannabis is legal have or are considering imposing special taxes or fees on businesses in the cannabis industry.industry It is uncertain at this time whetherand other states aremay adopt similar measures in the process of reviewing such additional taxes and fees.future. The implementation of special taxes or fees could have a material adverse effect upon our business, prospects, revenue, results of operation and financial condition.

We are affected by theevolving and dynamic laws and regulations ofgoverning the industry.cannabis industry, which could adversely affect our business strategy, operating results, and profitability.

State regulatory agencies may require us to post bonds, maintain large insurance policiespolicies, or post significant fees.

There is a risk that a greater number of state regulatory agencies will begin requiring entities engaged in certain aspects of the legal cannabis industry to post a bond or significant fees when applying, for example, for a dispensary license or renewal as a guarantee of payment of sales and franchise taxes. We are not able to quantify at this time the potential scope of such bonds or fees in the states in which we currently operate or may in the future operate. Any bondssuch bonds, insurance requirements or feesfees, ofif material amountsmaterial, could have a negative impact on theour ultimatebusiness, successfinancial condition, results of ouroperations, business.or liquidity.

Our Class A common stock is traded on the CSE. Our business, operations and investments are in the United States, and any future business, operations or investments, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada and the United States. As a result, we may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightenedsuch scrutiny will not result in turn lead to the imposition of certainrestrictions restrictionsor conditions on our ability to operateoperate, invest, or investaccess capital markets in the United States or any other jurisdiction.jurisdictions.

In 2017, there were concerns that the Canadian Depository for Securities Limited, through its subsidiary CDS Clearing and Depository Services Inc. (“CDS”), Canada’s central securities depository responsible for clearing and settling trades in the Canadian equity, fixed income and money markets, would refuse to settle trades for cannabis issuers that have investments in the United States. However,To date, CDS has not implemented this policy.

On February 8, 2018, following discussions with the Canadian Securities Administrators and recognized Canadian securities exchanges, the TMX Group, which is the owner and operator of CDS, announced the signing of a Memorandum of Understanding (“MOU”) with Aequitas NEO Exchange Inc., the CSE, the Toronto Stock Exchange and the TSX Venture Exchange. The MOU outlines the parties’ understanding of Canada’s regulatory framework applicable to the rules, procedures and regulatory oversight of the exchanges and CDS as it relates to issuers with cannabis-related activities in the United States. The MOU confirms, with respect to the clearing of listed securities, that CDS relies on the Canadian securities exchanges to review the conduct of listed issuers.

Although the MOU indicated that there arewere no plans to banprohibit the clearing and settlement of securities throughof CDS,issuers with cannabis-related activities in the United States, there can be no guaranteeassurance that this regulatory approach to regulation will continue in the future. If suchclearing aor ban were implemented at a time when sharessettlement of our Class A common stock through CDS were restricted or prohibited while our shares are listed on a Canadian stock exchange, it would have a material adverse effect on the abilityliquidity of holders of shares ofour Class A common stock tocould makebe materially and settleadversely trades.affected, Inand particular,holders theof our shares ofcould Classexperience Adifficulty commoneffecting stockor wouldsettling become highly illiquid until an alternative (if available) was implemented, and investors would have no ability to effect a trade of shares of Class A common stocktrades through the facilities of the applicable Canadian stock exchange.

In certain states, the cannabis laws and regulations limit not only the number of cannabis licenses and types of licenses issued, but also the number of cannabislicenses or types of licenses and types that onea single person or entity may own. We believe that, where such restrictions apply, the Company may still recognize revenue in the market through wholesale sales, exclusive marketing relations, the provision of managementown or support services, and joint ventures or similar contractual relationships with other operators to ensure continued compliance with the applicable regulatory guidelines.control. In addition, statessome mayjurisdictions require that certain qualified applicants or individuals participate in the ownership or control of the licensed entity. Such limitations on the ownership of additional licenses within certain states may limit our ability to expand in such states.entities.

Established in 2018 and headquartered in Morristown,Rochelle Park, New Jersey, AWH is a vertically integrated multi-state operator focused on adult-use or near-term adult-use cannabis states in limited license markets. Our core business is the cultivation, manufacturing, and distribution of cannabis consumer packaged goods, which we sell through our company-owned retail storesstores, to retail partner locations, and to third-party licensed retail cannabis stores.locations. We believe in bettering lives through cannabis. Our mission is to improve the lives of our employees, patients, customers, and the communities we serve through the use of the cannabis plant. We are committed to providing safe, reliable, and high-quality products and providing consumers options and education to ensure they are able to identify and obtain the products that fit their personal needs.

Since our formation, we have expanded our operational footprint, primarily through acquisitions, and, as of December 31, 2024,2025, had direct or indirect operations or financial interests in seven United States geographic markets: Illinois, Maryland, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania. While we have been successful in opening cultivation facilities and dispensaries under our current licenses, we expect continued growth to be driven by opening dispensaries under our current licenses and through partnership opportunities, expansion of our current cultivation facilities, and increased consumer demand. We currently employ approximately 2,300 people.people, excluding employees of retail partner locations.

Our consumer products portfolio is generated primarily from plant material that we grow and process ourselves. As of December 31, 2024,2025, we produce our consumer packaged goods in six manufacturing facilities with approximately 255,000258,000 square feet of total canopy. InDuring January 2024,2025, we enteredsold intoapproximately 225,000 pounds of wholesale product, on a definitivegross agreement,basis, which is pending regulatory approval,compared to acquire a cultivation license and a manufacturer license that we intend to use at a second cultivation site in Massachusetts to further expand our production capacity in that market. We added approximately 15,000187,000 squarepounds feet of total additional canopy with the additional site, which build out was largely completedsold during the second quarter of 2024, and anticipate the transaction will close in the first half of 2025.2024. Our product portfolio consists of a range of cannabis product categories including flower, pre-rolls, concentrates, vapes, edibles, and other cannabis-related products. As of December 31, 2024,2025, we had 3947 open and operating retail locations, including 29 partner locations, and, subsequently re-opened our Detroit, Michigan dispensary for a total of 40 dispensaries as of March 1, 2025, including 2retail partner locations. We have fully-financed expansion plans to achieve a target of 60 total retail locations, including retail partner locations. Our new store opening plans are flexible and will ultimately depend on market conditions, local licensing, construction, and other regulatory permissions. Our expansion plans are subject to capital allocations decisions, the evolving regulatory environment, and the general economic environment.

On NovemberDecember 22,19, 2022,2025, the Company filed a registration statement on Form S-3 (the “Registration Statement”) containing a base shelf prospectus with the SEC (the “Shelf Prospectus”), which Registration Statement became effective on DecemberJanuary 22, 2022.2026. A corresponding base shelf prospectus (the “Canadian Prospectus”) was filed with, and receipted by, the securities regulatory authorities in each of the provinces and territories Canada under the U.S.-Canada multijurisdictional disclosure system (“MJDS”). The Registration Statement and Canadian Prospectus register and qualify the distributionoffer fromand treasurysale of up to an aggregate amount of $100,000$100 worthmillion of shares of Class A common stock, preferred stock, warrants, debt securities, subscription rights and/or units of the Company (“Securities”) for a period of three years. The terms of any Securities to be offered under the baseShelf prospectusProspectus and Canadian Prospectus will be specified in a prospectus supplement, which will be filed with the applicable U.S. and Canadian securities regulatory authorities in connection with any such offering. To date, no prospectus supplement has been filed. The Shelf Prospectus and the Canadian Prospectus were filed to provide maximumadditional flexibility to pursue strategic initiatives.

•generating $73,292$38,053 of net cash from operating activities,activities and ending the year with $85,676 of cash and cash equivalents, as further described in “Liquidity and Capital Resources.”

RecentMidwest Retail Partner One Activity

In December 2024, Midwest Retail Partner One, a consolidated VIE, as further described in Note 8, “Variable Interest Entities,” in the IllinoisFinancial PartnershipStatements, entered into a definitive agreement to acquire the membership interests of an entity that anticipates receiving two adult-use licenseslicenses, inwhich Illinois,agreement is subject to regulatory approval. In conjunction with this definitive agreement, the parties entered into certain management services agreements under(“MSAs”) pursuant to which theMidwest IllinoisRetail PartnershipPartner will,One subject to regulatory review and approval,will provide certain management and advisory services for a set fee. These MSAs were subject to regulatory review and approval, which was received in February 2025. Based on the provisions of the agreements, Midwest Retail Partner One obtained operational and financial influence over the underlying entity and therefore recognized the transaction as an asset acquisition as of the February 2025 regulatory approval date of these MSAs. Total cash consideration for this transaction may be up to $4,000, subject to certain closing adjustmentsadjustments, andwhich was allocated to the licenses acquired as of whichthe effective date. Of the total consideration, $1,000 was paid at signing in December 2024 and is included within “Other non-current assets” on the Consolidated Balance Sheet in the Financial Statements as of December 31, 2024. A total of up to $1,500 mayis expected to be paid upon opening of the associated dispensary locations and a total of up to $1,500 mayis expected to be paid upon final closing of the associated transaction. The total of the remaining payments is included as a sellers’ note; refer to Note 11, “Debt” in the Financial Statements. Additionally, the Company recorded an acquisition-related deferred tax liability of $1,755, which was allocated to the license as additional cost basis as of the effective date. One of the dispensary locations opened in March 2026. Refer to Note 4, “Acquisitions,” and to Note 8, “Variable Interest Entities,” for additional information.

•Revenue increaseddecreased by $43,009,$61,018, or 8%,11%, during 2024,2025, as compared to 2023,2024, primarily driven by expansiondeclines across our legacy business resulting from increased competition and pricing pressure in most of our cultivationmarkets, activitiespartially andoffset by incremental revenue from acquisitions,acquisitions partiallyand offsetconsolidated bypartnership declines in certain legacy markets due to increased competition.activity.

•Operating profitloss was $4,734$17,012 during 2024,2025, as compared to an operating lossprofit of $3,619$4,734 during 2023.2024. TheOur improvementresults for 2025 include a $17,000 settlement expense related to an arbitration matter (refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Legal Matters–Green Thumb Industries Arbitration Matter” for additional information). Additionally, the current year was primarily drivenimpacted by thelower expansion of wholesale production and leveraging of existing infrastructure,revenue, partially offset by slightlyimproved margins, which were largely attributable to certain strategic initiatives implemented during the second half of 2024, and higher general and administrative expenses attributable to certain one-time costs, including expenses associated with our debt refinancing and other strategic initiatives.

•Net increasedecrease in cash and cash equivalents of $15,746$2,578 during 2024,2025, primarily driven by a benefitresulting from theinvestments timing and amount of tax payments, including certain tax refunds received, as well as the timing and management of payments related to workingin capital activities,assets partially offset byand payments associated with acquisitions, investmentsoffset by funding provided by improvements in working capital assets,management and costsnet associatedproceeds withfrom ourthe debtissuance refinancing.of debt.

Cost of goods sold increaseddecreased by $13,919,$46,488, or 4%,12%, during 2024,2025, as compared to 2023.2024. Cost of goods sold represents direct and indirect expenses attributable to the production of wholesale products as well as direct expenses incurred in purchasing products from other wholesalers. Gross profit for 20242025 was $184,210,$169,680, representing a gross margin of 32.8%,33.9%, compared to gross profit of $155,120$184,210 and gross margin of 29.9%32.8% for 2023.2024. Gross margin forin the current year benefitedbenefitted from expandedimproved realization at certain cultivation facilities and better production andoutput improved utilization atacross our New Jersey cultivation facilityfacilities, primarily Illinois and expansionMassachusetts, and a benefit from a higher volume of wholesaleCompany-produced salesproducts insold thatthrough market,our retail stores and partner stores, partially offset by increased competition and pricing pressure across most of our markets, particularly in certainNew retailJersey markets.and Illinois. The current year alsoincludes benefiteda $9,855 benefit from $13,491a rebalancing of loweroverhead expenses at certain cultivation locations from cost of goods sold to general and administrative expenses based on overhead allocations relative to production output at those locations, but was impacted by $13,003 of higher write-downs of certain inventory items thatrelated wereto largelynet drivenrealizable byvalue pricingadjustments, pressureexpired inproducts, theand priorobsolete year.packaging.

General and administrative expenses increaseddecreased by $20,737,$9,784, or 13%,5%, during 2024,2025, as compared to 2023.2024. The increasedecrease was primarily related to:

•the absence of a $2,083 reserve and a $984 discount recognized on a long-term receivable in the prior year;

We are subject to risks and uncertainties relating to the April 23, 2026 order issued by the U.S. Department of Justice rescheduling certain medical cannabis to Schedule III (the “April 2026 Order”) and the related pending DEA administrative proceedings concerning broader cannabis rescheduling.

The Company’s revenue is derived from sales of both medical and adult-use cannabis operations.cannabis. The April 2026 Order does not address adult-use cannabis, which remains federally illegal under the Controlled Substances Act. Accordingly, any benefits of the April 2026 Order to our business, including potential relief from IRC Section 280E with respect to our medical cannabis operations, may be materially smaller than those realized by competitors with predominantly medical-only operations, while the operational, regulatory, and legal risks associated with the federal illegality of adult-use cannabis remain unchanged.

The legal basis for the April 2026 Order is expectedsubject to be challenged inactive litigation. If the April 2026 Order is enjoined, narrowed, or vacated, tax positions or operational decisions we take in reliance on it may be reversed, and we could be required to amend tax filings, recognize additional tax liabilities, or modify our compliance programs. Additionally, while the IRS has indicated that forthcoming guidance regarding the April 2026 Order will include clarification on activity-based allocation and apportionment, the specific details and timing of such guidance remain unclear. Accordingly, our cost allocations between IRC Section 280E-exempt medical and IRC Section 280E non-exempt adult-use operations may be subject to tax audit challenges.

The DEA hasrecently commencedconducted a separate administrative hearing process to consider the broader rescheduling of all cannabis from Schedule I to Schedule III. The timingoutcome and outcomeoverall timing of the conclusion of that process are uncertain, and any resulting rule may be subject to litigation. Until a broader rescheduling rule is final and effective, our adult-use cannabis operations may remain subject to the limitations of IRC Section 280E and the other risks of federal Schedule I status described in our Annual Report on Form 10-K.

The following management discussion and analysis, which we refer to as the “MD&A,” of the financial condition and results of operations of Ascend Wellness Holdings, Inc. (the “Company,” “AWH,” or “Ascend”) is for the three and six months ended MarchJune 31,30, 2026 and 2025. It is supplemental to, and should be read in conjunction with, the unaudited condensed consolidated financial statements, and the accompanying notes thereto, (the “Financial Statements”) appearing elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report” or “Form 10-Q”) and our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”), which has been filed with the United States Securities and Exchange Commission (“SEC”) and with the relevant Canadian securities regulatory authorities under its profile on the System for Electronic Document Analysis and Retrieval Plus (“SEDAR+”). The Financial Statements and Annual Report were prepared in accordance with accounting principles generally accepted in the United States of America, which we refer to as “U.S. GAAP.”

Since our formation, we have expanded our operational footprint, primarily through acquisitions, and, as of MarchJune 31,30, 2026, had direct or indirect operations or financial interests in seven United States geographic markets: Illinois, Maryland, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania. While we have been successful in opening cultivation facilities and dispensaries under our current licenses, we expect continued growth to be driven by opening dispensaries under our current licenses and through partnership opportunities, expansion of our current cultivation facilities, and increased consumer demand. As of MarchJune 31,30, 2026, we employed approximately 2,3002,200 people, excluding employees of retail partner locations.

OurDuring consumerthe productsthree portfolioand issix generatedmonths primarilyended fromJune plant30, material2026 thatand 2025, we growsold a total of approximately 63,000 and process ourselves. As of March 31, 2026, we produce our consumer packaged goods in six manufacturing facilities with approximately 260,000 square feet of total canopy. We sold approximately 56,000119,000 pounds of wholesale product, on a gross basis, respectively, compared to 56,000 and 112,000 pounds sold during each of the three and six months ended MarchJune 31,30, 20262025, and 2025.respectively. Our product portfolio consists of a range of cannabis product categories including flower, pre-rolls, concentrates, vapes, edibles, and other cannabis-related products. As of MarchJune 31,30, 2026, we have 4855 open and operating retail locations, which includes 1017 retail partner locations. We have expansion plans to achieve a target of 60 total retail locations, including retail partner locations. Our new store opening plans are flexible and will ultimately depend on market conditions, local licensing, construction, and other regulatory permissions. Our expansion plans are subject to capital allocation decisions, the evolving regulatory environment, and the general economic environment.

Pursuant to various contractual agreements, the Company is providing funding and operational support to third-parties that meet the criteria to be consolidated as variable interest entities (each, a “VIE”). Refer to Note 8, “Variable Interest Entities,” in the Financial Statements for additional information regarding the Company’s VIEs, including the Midwest Retail Partner One, and certain other transactions.VIEs.

In April 2025, the Company entered into a definitive agreement pursuant to which the Company proposed to acquire an entity that anticipated obtaining an adult-use license (“Northeast Retail Partnership Dispensary Six”) and receive $1,000 of cash consideration in exchange for the Company’s Ohio cultivation license (the “Ohio Cultivation License”). This transaction was subject to certain closing conditions, including regulatory approvals, and closed in March 2026. Northeast Retail Partnership Dispensary Six was not operational at the time of closing and therefore the Company accounted for this transaction as an asset acquisition and, as further described in Note 4, “Acquisitions,” in the Financial Statements, allocated the cost of $2,700 to the license acquired, in addition to an acquisition-related deferred tax liability of $1,063. The Company recognized a gain on sale of $137, which is included within “General and administrative expenses” on the unaudited Condensed Consolidated Statements of Operations in the Financial Statements for the six months ended June 30, 2026. This gain represented the excess of fair value compared with the $3,529 book value of the Ohio Cultivation License that was de-recognized as of the transaction date.date, less the $1,000 cash received and a nominal value associated with inventory. The parties also settled $349 that the Company previously funded under a note receivable and reimbursed the seller for an additional $588 related to capital expenditures. The Company also assumed the lease for the dispensary location which had a lease liability and ROU asset of $1,066 as of the effective date and is classified as an operating lease. Refer to Note 4, “Acquisitions,” in the Financial Statements for additional information related to this transaction and refer to Note 10, “Leases,” for additional information regarding the Company’s leases.

On April 23, 2026, the U.S. Department of Justice (the “DOJ”) issued an order placing cannabis products subject to qualifying state medical cannabis licenses and other cannabis products that are FDA-approved into Schedule III under the Controlled Substances Act (21 U.S.C. § 801 et seq.) (the “CSA”) (the “April 2026 Order”). In addition, the Drug Enforcement Administration (“DEA”) hasheld announcedan newadministrative hearingshearing scheduled to begin onfrom June 29, 2026,2026 whichthrough willJuly 15, 2026 to address the proposed broader rescheduling of marijuana from Schedule I to Schedule III, including adult-use (recreational) cannabis. The Company is evaluatingWhile the impactin-person of the April 2026 Order on its medical cannabis operations, including its federal and state tax positions, compliance obligations, licensing, access to financial services, and capital markets activities. Due to limited implementation guidance, regulatory interpretation, and the uncertain outcome of additional DEA proceedings, the Company cannot reasonably estimate the financial impact of the April 2026 Order as of the date of filingportion of this Quarterlyhearing Report.concluded on July 15, 2026, participants in the proceeding have until August 17, 2026 to file post-hearing briefs. Once all post-hearing briefs have been received, the DEA Chief Administrative Law Judge overseeing the proceeding will issue his rescheduling recommendation, but the final rescheduling decision ultimately rests with the DEA Administrator.

The Company continues to evaluate the impact of the April 2026 Order on its medical cannabis operations, including its federal and state tax positions, compliance obligations, licensing, access to financial services, and capital markets activities. As further discussed within the “Results of Operations” sub-sections of this MD&A and Note 14, “Income Taxes,” in the Financial Statements, the Company’s estimated tax provision for the three and six months ended June 30, 2026 includes a benefit related to the revised tax treatment of the Company’s medical-related business. The Company continues to evaluate the limited implementation guidance and regulatory interpretation that is currently available, but the uncertainty of additional information related to such, as well as the potential outcome of additional DEA proceedings, may have a material effect on our future results of operations, cash flows, and liquidity, particularly if it reduces or eliminates the application of Internal Revenue Code (“IRC”) Section 280E to some or all of our state-licensed cannabis operations. Any such impact will depend on, among other things, whether the April 2026 Order withstands any legal challenges to its validity, the scope of our qualifying medical cannabis activities, our ability to substantiate deductions attributable to those activities, future guidance that may be issued by various regulatory bodies, including but not limited to the Internal Revenue Service (“IRS”), DOJ, DEA, and various state regulators, and the outcome of pendingthe DEA proceedings regarding the broader rescheduling of marijuana, including adult-use (recreational) cannabis. The Company will continue to evaluate, as more guidance becomes available, whether to file amended tax returns and potential changes to our systems, controls, and cost allocation methodologies that may be required. At this time, we cannot be certain of the future amount of benefit to our income taxes that may be realized, whether the April 2026 Order will improve our access to capital or banking services, or if additional federal regulatory changes will occur.

•Revenue decreased by $11,064,$1,186, or 9%,1%, during the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025, primarily driven by declines across our legacy business resulting from increased competition and pricing pressure in most of our markets, slightlylargely offset by incremental revenue from acquisitions and consolidated partnership activity.

•Operating profit was $2,546$5,280 during the three months ended MarchJune 31,30, 2026, as compared to $2,486operating loss of $1,002 during the three months ended MarchJune 31,30, 2025, primarily attributable to improved margins,margins offsetand bylower highernet general and administrative expenses to support our expanded operations.expenses.

•Net decrease in cash and cash equivalents of $24,756$18,676 during the threesix months ended MarchJune 31,30, 2026, primarily resulting from payments associated with acquisitions and capital expenditures, which were offset by net cash usedprovided inby operating activities,activities includingthat was inclusive of an interest payment of $19,125 on our term notes and a $17,000 payment associated with a litigation matter (refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Legal Matters–Green Thumb Industries Arbitration Matter” for additional information), partially offset by funding provided by improvements in working capital management..

Three Months Ended MarchJune 31,30, 2026 Compared with the Three Months Ended MarchJune 31,30, 2025

Revenue decreased by $11,064 during,$1,186, or 9%,1%, during the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025. Revenue across legacy dispensary locations declined by $10,210,$7,318, primarily driven by softness in Illinois,Pennsylvania, New Jersey, and PennsylvaniaIllinois that was partially offset by a benefit from adult-use sales in Ohio. Additionally,These thedeclines decrease waswere partially offset by a contribution of $8,985$13,584 of incremental revenue from partner stores and new stores that were added during 2025 and 2026. Net revenue from our wholesale operations declineddecreased by $9,839$7,452 largely resulting from an increased focus on selling products through Company-owned and retail partner locations, as well as ongoing price compression across certain markets, particularly in Illinois,Illinois and New Jersey, and Massachusetts.Jersey. We sold approximately 56,00063,000 pounds of wholesale product, on a gross basis, during eachthe ofthree months ended June 30, 2026, compared to 56,000 during the three months ended MarchJune 31, 2026 and30, 2025.

Cost of goods sold, which represents direct and indirect expenses attributable to the production of wholesale products as well as direct expenses incurred in purchasing products from other wholesalers, decreased by $16,385$5,285 during the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025. Gross profit for the three months ended MarchJune 31,30, 2026 was $44,882,$45,491, representing a gross margin of 38.4%,36.1%, compared to gross profit of $39,561$41,392 and gross margin of 30.9%32.5% for the three months ended MarchJune 31,30, 2025. Gross margin for the current quarter benefited from a higher volume of Company-produced products sold through our retail stores and retail partner locations, as well as an increased focus on higher-margin products. These benefits wereproducts, partially offset by an impact from increased competition and pricing pressure across most of our markets. The current period includesalso areflects $2,314 benefit from a rebalancing of overhead expenses at certain cultivation locations from cost of goods sold to general and administrative expenses based on overhead allocations relative to production output at those locations and $1,130$3,576 of lower write-downs of certain inventory items related to net realizable value adjustments, expired products, and obsolete packaging.

•$1,500General and administrative expenses decreased by $2,183, or 5%, during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The decrease was primarily attributable to a net benefit of $4,181 of acquisition-related earn-out fair value adjustments that was offset by $1,285 of higher depreciation and amortization associated with a larger average balance of fixed assets in service, including finance leases, and the incremental amortization of licenses from prior year acquisitions;acquisitions, and $1,018 of higher compensation expenses in support of the expansion of consolidated operations.

These increases were partially offset by a net benefit of $432$4,953 of acquisition-related earn-out fair value adjustments and a $340 reversal of expense associated with an acquisition earn-out that was not achieved.adjustments.

Interest expense increased by $9,063,$17,806, or 81%,77%, during the threesix months ended MarchJune 31,30, 2026, as compared to the threesix months ended MarchJune 31,30, 2025.2025, The current year wasprimarily impacted primarilyby by$17,013 of higher interest associated with finance leases; refer to Note 10, “Leases,” in the Financial Statements for additional information. During the threesix months ended MarchJune 31,30, 2026, the Company had a weighted-average outstanding debt balance, excluding finance leases, of $319,335$321,055 with a weighted-average interest rate of 12.3%, compared to a weighted-average debt balance of $346,089$345,027 during the threesix months ended MarchJune 31,30, 2025 with a weighted-average interest rate of 11.5%.11.6%.

The Company’s incomeIncome tax expense was $11,907,$6,186, or 26.5%,6.8%, of gross profit, during the threesix months ended MarchJune 31,30, 2026, as compared to an income tax expense of $11,031,$22,862, or 27.9%,28.2%, of gross profit, during the threesix months ended MarchJune 31,30, 2025. The effective tax rate on gross profit for the threesix months ended MarchJune 31,30, 2026 reflects a net benefit of $14,818 related to a release from the reserve for uncertain tax positions, a benefit related to the deductibility of certain expenses associated with medical cannabis activities as permitted in the current year following updates from the April 2026 Order, and a benefit from the tax treatment of a settlement paymentpayment. andThese certainbenefits acquired intangible assets,were partially offset by a $1,095$2,180 increase in the Company’s valuation allowance for certain deferred tax assets. Refer to Note 14, “Income Taxes,” in the Financial Statements for additional information regarding the Company’s income taxes.

The following table presents Adjusted Gross Profit for the three and six months ended MarchJune 31,30, 2026 and 2025:

The following table presents Adjusted EBITDA for the three and six months ended MarchJune 31,30, 2026 and 2025:

(2)One-time costs associated with acquiring real estate, obtaining licenses and permits, and other costs incurred before commencement of operations at certain locations, as well as incremental expenses associated with the expansion of activities at our cultivation facilities that are not yet operating at scale, other expenses resulting from delays in regulatory approvals, and other related one-time or non-recurring expenses, as applicable. The three and six months ended MarchJune 31,30, 2026 also includes $2,314$2,526 and $4,840, respectively, of unallocated overhead expenses at certain cultivation facilities resulting from a rebalancing of overhead expenses from cost of goods sold to general and administrative expenses based on overhead allocations relative to production output at those locations.locations, compared with $3,113 during each of the three and six months ended June 30, 2025.

(3)Other non-recurring expenses including legal and professional fees associated with litigation matters, potential acquisitions, other regulatory matters, and other reserves or one-time expenses, including certain non-recurring professional fees and severance expenses associated with certain strategic initiatives. The three and six months ended MarchJune 31,30, 2026 includes a net reduction ofrelated approximately $432 ofto acquisition-related earn-out fair value adjustments, a $340 reversaladjustments of anapproximately acquisition earn-out that was not achieved,$4,181 and $244$4,953, ofrespectively, and $33 and $277, respectively, related to property development expense write-offs. The three and six months ended MarchJune 31,30, 2025 include approximately $700 of expenses associated with our May 2025 term loans and the six months ended June 30, 2025 includes approximately $400 of expenses associated with our January 2025 term loans. The three and six months ended June 30, 2025 also each include approximately $100 of fair value adjustments associated with acquisition earn-outs.

As of MarchJune 31,30, 2026 and December 31, 2025, we had total current liabilities of $88,458$112,643 and $109,009, respectively, and total current assets of $188,964$186,867 and $208,949, respectively, which includes cash and cash equivalents of $60,920$67,000 and $85,676, respectively, to meet our current obligations. As of MarchJune 31,30, 2026, we had working capital of $100,506,$74,224, compared to $99,940 as of December 31, 2025.

Approximately 91% and 94% of our cash and cash equivalents balance as of MarchJune 31,30, 2026 and December 31, 2025, respectively, is on deposit with banks, credit unions, or other financial institutions. We have not experienced any material impacts related to banking restrictions applicable to cannabis businesses. Our cash and cash equivalents balance is not restricted for use by VIEs.

As reflected in the Financial Statements, we have had recurring losses that have resulted in an accumulated deficit as of MarchJune 31,30, 2026 and December 31, 2025. As of MarchJune 31,30, 2026, we had cash and cash equivalents of $60,920,$67,000, which, combined with anticipated cash flows from operating activities, management believes is more than adequate to support operations for the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q. Over the longer term, management expects to fund our operations and strategic initiatives with cash flows from operating activities and existing financing arrangements, and we currently do not have significant debt maturities until 2029. Management may continue to access capital markets for additional funding through debt and/or equity financings to supplement future cash needs, as may be required. However, management cannot provide any assurances that the Company will be successful in accomplishing its business plans. If we are unable to raise additional capital on favorable terms, if at all, whenever necessary, we may be forced to decelerate or curtail certain of our operations until such time as additional capital becomes available.

As amended, the July 2024 Loan Agreement requires the Company, on a consolidated basis, to maintain liquidity, consisting of cash and/or cash equivalents plus any future revolving credit availability, as of the last day of each fiscal month, as amended, in an aggregate amount of at least $20,000, with which the Company was in compliance as of MarchJune 31,30, 2026. The Company is required to comply with certain other financial covenants in contemplation of certain transactions or events, such as acquisitions and other financing activities, as defined within and provided for under the July 2024 Loan Agreement, as amended.

On September 29, 2025, certain of the Company’s subsidiaries (the “Borrowing Subsidiaries”) entered into a loan agreement and related promissory note with an aggregate principal amount of $9,345 (the “Mortgage Note”), which was borrowed in full. The Company anticipates utilizing the net proceeds for general corporate purposes, including to fund growth initiatives. The Mortgage Note matures on September 29, 2030 and borrowings thereunder bear interest at a rate of 8.5% per annum. Principal will be repaid based on an amortization period of twenty years and any unpaid principal and accrued interest will be due and payable upon maturity. Monthly payments of principal and interest commenced on November 1, 2025. As of MarchJune 31,30, 2026 and December 31, 2025, $191$195 and $187, respectively, of principal is included within “Current portion of debt, net” and $9,082$9,033 and $9,133, respectively, is included within “Long-term debt, net” on the unaudited Condensed Consolidated Balance Sheets in the Financial Statements. The obligations under the Mortgage Note are secured by mortgages on three properties that the Company owns in Ohio, as well as assignment of any leases and rent amounts related to these properties that the Company may enter into. The Mortgage Note contains customary representations and events of default. The Borrowing Subsidiaries have agreed to comply with certain customary covenants, including, but not limited to, restrictions on their ability to: incur additional indebtedness; create certain liens; make material changes to the nature of the business conducted; and sell, lease, transfer, or otherwise dispose of all or a substantial part of their assets. The Mortgage Note also requires the Borrowing Subsidiaries to maintain a debt service coverage ratio (as defined in the Mortgage Note) of not less than 1.30 to 1.00 measured annually based on the entire calendar year and commencing on December 31, 2026.

Net cash usedprovided inby operating activities was $19,411$3,040 during the threesix months ended MarchJune 31,30, 2026, as compared to $5,939 of net cash provided$23,740 during the threesix months ended MarchJune 31,30, 2025. The current year reflects $19,323$19,524 of cash interest paid on debt arrangements, compared with $16,400$17,307 paid for interest in the prior year, and a $17,000 settlement payment associated with a previous litigation matter, which were offset by a net improvement from working capital management.

Net cash used in investing activities was $4,753$17,841 during the threesix months ended MarchJune 31,30, 2026, as compared to $7,847$16,436 during the threesix months ended MarchJune 31,30, 2025. The current year includesreflects higher payments associated with acquisitions as compared to the prior year, offset by proceeds received from the settlement of a previous loan receivable and the sale of certain assets,assets and reflects lower capital expenditures, which were offset by higher payments associated with acquisitions as compared to the prior year.expenditures.