Results

Verano Holdings Corp.

03/12/2026 | Press release | Distributed by Public on 03/12/2026 05:17

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this Form 10-K. See "Cautionary Note on Forward-Looking Statements" and "Risk Factors" in this Form 10-K. Our management believes the assumptions underlying the Company's financial statements and accompanying notes are reasonable. However, the Company's financial statements and accompanying notes may not be an indication of our financial condition and results of operations in the future. We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that disclosure was already included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 27, 2025. You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and result of operations for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023.
This management discussion and analysis (this "MD&A") of the financial condition and results of operations of Verano is for the years ended December 31, 2025 and December 31, 2024. It is supplemental to, and should be read in conjunction with, the Company's audited consolidated financial statements and the accompanying notes for the years ended December 31, 2025 and December 31, 2024. The financial statements referenced in this MD&A are prepared in accordance with U.S. GAAP. Financial information presented in this MD&A is presented in United States dollars ("$" or "US$") and expressed in thousands, unless otherwise indicated.
OVERVIEW OF THE COMPANY
Verano Holdings Corp., a Nevada corporation ("Verano," the "Company," "we," "us," or "our"), one of the U.S. cannabis industry's leading companies based on historical revenue, geographical scope and brand performance, is a vertically integrated, multi-state operator embracing a mission of saying Yesto plant progress and the bold exploration of cannabis. As an operator of licensed cannabis cultivation, processing, wholesale distribution and retail facilities, our goal is to support communal wellness by providing responsible access to regulated medical and adult use cannabis products. As of March 10, 2026,through our subsidiaries and affiliates we operate businesses in 13 states, including 160 retail dispensaries and 14 cultivation and processing facilities with over 1.1 million square feet of cultivation capacity. We produce a wide variety of cannabis products sold under our portfolio of consumer brands, including Encore™, Avexia™, MÜV™, Savvy™, (the) Essence™, BITS™, HYPHEN™, Swift Lifts™ and Verano™. We also design, build and operate branded dispensaries operating under the Zen Leaf™ and MÜV™ retail banners, among others, that deliver a cannabis shopping experience in both medical and adult use markets.
Notwithstanding the permissive regulatory environment of medical, and in some cases, also adult use (i.e., recreational) cannabis, at the state level, it remains illegal under U.S. federal law to cultivate, manufacture, distribute, sell or possess cannabis in the U.S. Because federal law prohibits transporting any federally restricted substance across state lines, cannabis cannot be transported across state lines. As a result of current federal law prohibitions, the U.S. cannabis industry is conducted on a state-by-state basis. To date, in the U.S. 40 states plus the District of Columbia and the U.S. territories of Puerto Rico, Guam, the Commonwealth of Northern Marina Islands, and the U.S. Virgin Islands have authorized comprehensive medical cannabis programs, 24 states plus the District of Columbia and the U.S. territories of Guam, the Commonwealth of Northern Mariana Islands, and the U.S. Virgin Islands have authorized comprehensive programs for medical and adult use (i.e. recreational) cannabis, and eight states allow the use of low THC and high CBD products for specified medical uses. Verano operates within states where cannabis use, medical or both medical and adult use, has been approved by state and local regulatory bodies. Strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under U.S. federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company or any of its subsidiaries. On December 18, 2025, President Trump issued the Executive Order which directs federal agencies to expedite the process of rescheduling cannabis from a Schedule I to a Schedule III controlled substance under the CSA. The effect of the Executive Order may be that the cultivation, manufacturing, distribution, sale or possession of cannabis in the U.S. is no longer federally illegal and would lessen criminal penalties at the federal level and remove Section 280E tax considerations, however, the final effects of the Executive Order are dependent on other government actions. Despite such actions and the ongoing rule making process, there can be no guarantees that the rescheduling rule making process will continue on a certain timeline or at all under this administration or that any rules will come out of the rule making process that will benefit the Company. The Executive Order, and agency implementation of the Executive Order does not federally legalize adult use and would not federally authorize or approve state sanctioned medical programs. Cannabis would still be subject to the same FDA drug approval process as all other substances, and sales outside of FDA approval, would still be criminal at the federal level.
Substantially all of the Company's business, operating results and financial condition relate to U.S. cannabis-related activities. Our strategy is to vertically integrate as a single cohesive company in multiple states through the consolidation of seed-to-sale cultivating, manufacturing, distributing, and dispensing cannabis brands and products at scale. Our cultivation, processing and distribution of cannabis consumer packaged goods are designed to support our retail dispensaries, as well as to develop and foster long term wholesale supply relationships with third-party retail operators. Our model includes establishing a diverse geographic footprint that allows us to adapt to changes in both industry and market conditions.
The United States government has recently adopted new approaches to trade policy and has announced tariffs on certain foreign goods and the possibility of significant additional tariff increases or expansions of tariffs. On February 20, 2026, the U.S. Supreme Court ruled that certain broad tariffs previously imposed under the IEEPA were unauthorized, leading to the termination of those specific duties. However, President Trump has since invoked Section 122 of the Trade Act to impose a new 15% global import tariff. The timing and scope of further tariffs by the United States, including potential congressional extensions of the 150-day Section 122 surcharge, and retaliatory tariffs by other countries in response to such tariffs is currently uncertain. Such tariffs and the administrative uncertainty surrounding the transition between different statutory tariff regimes could create supply chain disruptions or increased pricing of procured materials, which could impact our current and expansion strategy as well as our business, operating results and financial condition. See "Risk Factors" in Part I, Item 1Ain this Form 10-K.
SELECTED RESULTS OF OPERATIONS
The following presents selected financial data derived from the audited consolidated financial statements for the years ended December 31, 2025 and 2024. The selected consolidated financial information below may not be indicative of the Company's future performance.
Year Ended December 31, 2025, as Compared to Year Ended December 31, 2024
For the Years Ended December 31,
($ in thousands) 2025 2024 $ Change
Revenues, net of Discounts $ 821,504 $ 878,585 $ (57,081)
Gross Profit 413,497 443,931 (30,434)
Net Loss attributable to Verano Holdings Corp. & Subsidiaries (257,908) (341,859) 83,951
Net Loss per share - basic & diluted $ (0.71) $ (0.98) $ 0.27
Revenues, net of Discounts
Revenues, net of discounts for the year ended December 31, 2025 was $821,504, a decrease of $(57,081) or (6.5)%, compared to revenues, net of discounts of $878,585 for the year ended December 31, 2024. The year-over-year decrease in revenues, net of discounts, was driven primarily by third-party price compression in established markets coupled with the Company's accounts receivable strategy in the cultivation (wholesale) segment, of maintaining a number of accounts on hold for non-payment. This was partially offset by an increase in the retail segment revenues, net of discounts, driven by product availability in the Florida market and the acquisition of CC East Virginia and Cannabist AZ in August 2024, which increased the Company's retail footprint. During the year ended December 31, 2025, the Company opened seven new retail stores, two in Connecticut, three in Florida, one in Ohio and one in West Virginia. Retail revenues, net of discounts, for the year ended December 31, 2025 comprised 67.9% of revenues, net of discounts, compared to 65.5% of revenues, net of discounts, for the year ended December 31, 2024, excluding intersegment eliminations. Cultivation (wholesale) revenues, net of discounts, made up 32.1% of revenues, net of discounts for the year ended December 31, 2025, as compared to 34.5% for the year ended December 31, 2024, excluding intersegment eliminations. Please see "Results of Operations by Segment" for information regarding year over year performance of our retail revenue and cultivation (wholesale) revenues.
Gross Profit
Gross profit for the year ended December 31, 2025 was $413,497, representing a gross profit margin of 50.3%. This is compared to gross profit for the year ended December 31, 2024 of $443,931, representing a 50.5% gross profit margin. The slight decrease was primarily driven by overall top-line revenue decline coupled with increased promotional activity in established markets, partially offset by more efficient harvests from expanded cultivation facilities.
Net Loss
Net Loss attributable to the Company for purposes of this "Management's Discussion and Analysis", for the year ended December 31, 2025, was $(257,908) a decrease of $83,951, compared to a Net Loss of $(341,859) for the year ended December 31, 2024. The decrease in net loss year-over-year was attributable to lower comparative impairments and lower operating expenses, partially offset by a higher provision for income taxes for the year ended December 31, 2025, when compared to the year ended December 31, 2024.
For the Years Ended December 31,
($ in thousands) 2025 2024 $ Change
Cost of Goods Sold, net $ 408,007 $ 434,654 $ (26,647)
Total Operating Expenses 520,590 681,107 (160,517)
Other Income (Expense), net (59,137) (62,739) 3,602
Provision for Income Taxes (91,678) (41,944) (49,734)
Cost of Goods Sold, net
Cost of goods sold, net includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, rent, utilities, and related costs. Cost of goods sold, net, for the year ended December 31, 2025 was $408,007, a decrease of $(26,647) or (6.1)%, from the year ended December 31, 2024. The decrease was primarily driven by overall decline in top-line revenue coupled with more efficient harvests from expanded cultivation facilities. Additionally, the decrease was also attributable to third party price compression in the cultivation (wholesale) segment.
Total Operating Expenses
Total operating expenses for the year ended December 31, 2025 were $520,590, a decrease of $(160,517) or (23.6)%, compared to total operating expenses of $681,107 for the year ended December 31, 2024. For the years ended December 31, 2025 and December 31, 2024, total operating expenses included selling, general and administrative expenses ("SG&A"), impairments of intangibles - goodwill and impairments of intangibles, fixed assets and held for sale assets.
SG&A expenses as a percentage of revenues, net of discounts, was 41.1% and 40.2% for the years ended December 31, 2025 and 2024, respectively. The year over year decrease in SG&A was driven by a decrease in depreciation and amortization expense coupled with ongoing efficiencies generated across the business for the year ended December 31, 2025 when compared to the year ended December 31, 2024.
During the year ended December 31, 2025, the Company recorded goodwill impairment charges of (i) $40,827 associated with its Connecticut cultivation (wholesale) reporting unit, (ii) $35,649 associated with its Illinois retail reporting unit, (iii) $8,377 associated with its Connecticut retail reporting unit, and (iv) $1,738 associated with its Arizona retail reporting unit, as the carrying values of the reporting units exceeded the estimated fair value by such amounts. Comparatively, during the year ended December 31, 2024, the Company recognized impairment charges of $8,179 associated with its Arizona cultivation (wholesale) reporting unit.
During the year ended December 31, 2025, the Company determined that a license associated with its Pennsylvania cultivation (wholesale) reporting unit was impaired and as such, the Company recorded intangible asset impairment charges of $90,849. Additionally, during the year ended December 31, 2025 the Company recorded a fixed asset impairment charge of $428 associated with a Massachusetts cultivation facility as the carrying value exceeded the fair value by such amount and an impairment charge of $5,400 resulting from a reduction in the carrying value of a cultivation facility in Pennsylvania. Comparatively, during the year ended December 31, 2024, the Company recorded intangible asset impairment charges of (i) $293,688 related to the Company's Pennsylvania retail licenses, (ii) $5,687 related to the Company's Arizona cultivation (wholesale) tradenames, (iii) $34 related to the Company's Maryland retail tradenames; and (iv) $425 related to the Company's Arizona cultivation (wholesale) technology, on the remaining net book value. Additionally, during the year ended December 31, 2024, the Company recorded a fixed asset impairment charge of $10,526 associated with an Arizona cultivation facility, and an impairment on a held-for-sale asset related to a cultivation facility in Pennsylvania of $9,160 as the carrying value exceeded the fair value less cost to sell by such amount.
Other Income (Expense), net
Other income (expense), net for the year ended December 31, 2025 was $(59,137), a change of $3,602, as compared to other income (expense), net of $(62,739) for the year ended December 31, 2024. The change in other income (expense), net, during the year ended December 31, 2025 was attributable to the voluntary partial payoff agreement for the CC East Virginia Promissory Note resulting in a Gain on Debt Extinguishment partially offset by a Loss on Debt Extinguishment related to the Permitted Partial Optional Prepayment under the 2022 Credit Agreement and a loss of $10,000 related to a litigation settlement. Additionally, the total other income (expense), net variance was attributable to less interest expense on our debt obligations coupled with a Gain on Deconsolidation relating to our Arkansas operations during January 2025, which no longer met the criteria for consolidation as a result of termination of contracts providing us with control over the applicable entity's operations, when comparing the year ended December 31, 2025 to the year ended December 31, 2024.
Provision for Income Taxes
Provision for income taxes for the year ended December 31, 2025 was $91,678, an increase of $49,734 or 118.6% as compared to the year ended December 31, 2024. The year-over-year change in income tax expense was primarily driven by impacts from impairment losses recognized in each respective period. For the year ended December 31, 2024, the provision for income taxes was mainly impacted by the loss on impairment of intangibles and fixed assets. In contrast, for the year ended December 31, 2025, the provision reflected lower impairment losses on intangibles, fixed assets, and assets held for sale. The variation in the amounts of impairment charges between the two years resulted in the comparative fluctuation in income tax expense.
Results of Operations by Segment
The Company has two reportable segments: (i) cultivation (wholesale) and (ii) retail. Due to the vertically integrated nature of our business, the Company reviews revenue at the cultivation (wholesale) and retail levels while reviewing operating results on a consolidated basis.
The following tables summarize revenues, net of discounts, by segment for the years ended December 31, 2025 and 2024:
For the Years Ended December 31,
($ in thousands) 2025 2024 $ Change % Change
Revenues, net of Discounts
Cultivation (Wholesale) $ 318,389 $ 353,476 (35,087) (9.9) %
Retail 672,661 672,252 409 0.1 %
Intersegment Eliminations (169,546) (147,143) (22,403) 15.2 %
Total Revenues, net of Discounts $ 821,504 $ 878,585 $ (57,081) (6.5) %
Revenues, net of discounts, for the cultivation (wholesale) segment was $318,389 for the year ended December 31, 2025, a decrease of $(35,087) or (9.9)%, excluding intersegment eliminations, compared to the year ended December 31, 2024. Markets that were top contributors to the cultivation (wholesale) revenues, net of discounts were Illinois and New Jersey during the year ended December 31, 2025. The decrease in cultivation (wholesale) revenues, net of discounts, was primarily attributable to the expected third-party price compression in established markets coupled with the Company's accounts receivable strategy, which was to maintain a number of accounts on hold for non-payment when comparingthe year ended December 31, 2025 to the year ended December 31, 2024.
Revenues, net of discounts, for the retail segment was $672,661 for the year ended December 31, 2025, an increase of $409 or 0.1%, excluding intersegment eliminations, compared to the year ended December 31, 2024. Top contributors to retail revenues, net of discounts, during the year ended December 31, 2025, were mainly in the Florida, New Jersey and Illinois markets coupled with the acquisition of CC East Virginia and Cannabist AZ in August 2024, which increased the Company's retail footprint. In addition, when comparing the year ended December 31, 2025 to the year ended December 31, 2024, the increase in retail revenues, net of discounts, was driven by product availability in the Florida market.
Drivers of Operational Performance
Revenue
The Company derives its revenue from both its cultivation (wholesale) business in which it cultivates, produces and sells cannabis products to third-party retail customers, and its retail business, in which it directly sells cannabis products to retail patients and consumers. For the year ended December 31, 2025, approximately 32.1% of the Company's revenue was generated from the cultivation (wholesale) business and approximately 67.9% from the retail business, excluding intersegment eliminations. For the year ended December 31, 2024, approximately 34.5% of the Company's revenue was generated from the cultivation (wholesale) business and approximately 65.5% from the retail business, excluding intersegment eliminations.
Gross Profit
Gross profit is revenue less cost of goods sold, net. Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, rent, utilities, and related costs. 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. Gross profit margin measures the Company's gross profit as a percentage of revenue.
The Company's expansion strategy and revenue growth have taken priority and will continue to do so for the foreseeable future as it expands its footprint, by exploring new markets and opening or acquiring new dispensary locations, and scales production within certain markets. In the core markets in which the Company is already operational and, as the state markets mature, the Company has experienced pressure on margins within the cultivation (wholesale) and retail channels and expects this to continue as markets mature. The Company's current production capacity has not been fully realized and it is expected that price compression at the cultivation (wholesale) level, will be partially offset by operational optimization.
Total Expenses
Total expenses other than the cost of goods sold consist of selling costs to support customer relationships and to deliver product to the Company's retail stores. It also includes a significant investment in the corporate infrastructure required to support ongoing business.
Selling costs generally correlate to revenue. As a percentage of sales, selling costs are expected to continue to increase slightly in currently operational markets as facility and market expansion occurs. The increase is expected to continue to be driven primarily by the growth of the Company's retail and cultivation (wholesale) channels and new retail openings.
SG&A expenses also include personnel costs incurred, including salaries, incentive compensation, benefits, stock-based compensation and professional service costs. SG&A expenses may increase in connection with supporting the business and the Company could experience an increase in expenses related to recruiting and hiring talent, along with legal and professional fees associated with being a public-reporting company.
Provision for Income Taxes
The Company is subject to income taxes in the jurisdictions in which it operates and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As the Company operates in the cannabis industry, it is subject to the limits of Section 280E of the Code under which the Company is only allowed to deduct expenses directly related to the sale of products. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under Section 280E of the Code and a higher effective tax rate than most industries. The Company has taken a position that it does not owe taxes attributable to the application of Section 280E of the Code.
LIQUIDITY, FINANCING ACTIVITIES AND CAPITAL RESOURCES
As of December 31, 2025 and 2024, the Company had total current liabilities of $140,261 and $203,112, respectively, and had cash and cash equivalents of $82,724 and $87,796, respectively, to meet its current obligations. The Company had working capital of $264,390 and $159,541, for the years ended December 31, 2025 and 2024, respectively. This increase in working capital of $104,849 for the year ended December 31, 2025 when compared to the year ended December 31, 2024, was attributable to an increase in inventory driven by higher production volumes and more efficient harvests from expanded cultivation facilities coupled with a reduced income tax payable balance due in part to the Company's treatment of Section 280E of the Code which shifted a portion of the short-term liability to a long-term liability on the Company's Condensed Consolidated Balance Sheets.
The Company generates cash from revenues and deploys its capital to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and long term. Capital is primarily being utilized for facility improvements, strategic investment opportunities, and general and administrative expenses.
Liquidity Requirements
Our short-term liquidity requirements consist primarily of funds necessary to pay for our acquisitions, to repay borrowings, maintain our operations and other general business needs. We believe that internally generated funds and other sources of liquidity discussed below will be sufficient to meet working capital needs, capital expenditures, and other business requirements for at least the next 12 months. We believe we will meet known or reasonably likely future cash requirements through the combination of cash generated from operating activities, available cash balances and available borrowings. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of equity securities or additional borrowings; however, there can be no assurances that we will be able to obtain additional equity financing or debt financing on acceptable terms, or on terms similar to our existing financings, in the future.
Our long-term liquidity requirements consist primarily of completing additional acquisitions, scheduled debt payments, future payments of income tax payables, maintaining and expanding our operations and other general business needs. We expect to meet our long-term liquidity requirements through various sources of capital, which may include future debt or equity issuances, net cash provided by operations and other secured and unsecured borrowings. We believe that the foregoing sources of capital will provide sufficient funds for our operations, anticipated expansion and scheduled debt payments for the long-term. Our ability to fund our operating needs will depend on our future ability to continue to generate positive cash flow from operations and our ability to obtain debt or equity financing on acceptable terms.
2022 Credit Facility
On October 27, 2022, Verano and certain of its subsidiaries and affiliates, as the Borrowers, entered into the 2022 Credit Agreement with Chicago Atlantic, as administrative agent for the Lenders, and the Lenders party thereto, pursuant to which the Lenders advanced the Borrowers a $350,000 senior secured term loan, and which also provides the Borrowers with the right, subject to conditions, to request an additional incremental term loan of up to $100,000; provided that the Lenders elect to fund such incremental term loan. At funding, all the proceeds of the loans made under the 2022 Credit Agreement were used to repay the amounts owing under the Company's previous senior secured term loan credit facility. In connection with such repayment, such previous credit facility was terminated and is no longer in force or effect.
The 2022 Credit Agreement provides the Borrowers with the right, subject to conditions, to request an additional incremental term loan in the aggregate principal amount of up to $100,000; provided that the Lenders elect to fund such incremental term loan. Beginning in October 2023, the loan requires scheduled amortization payments of $350 per month and the remaining principal balance is due in full on October 30, 2026.
The 2022 Credit Agreement also provides the Borrowers with the right to (a) incur up to $120,000 of additional indebtedness from third-party lenders secured by real estate excluded as collateral under the 2022 Credit Agreement, (b) incur additional mortgage financing from third-party lenders secured by real estate acquired after the closing date, and (c) upon the SAFE Banking Act or similar legislation making banking services available to U.S. cannabis companies being passed by the United States Congress, incur up to $50,000 pursuant to a revolving credit facility from third-party lenders that is pari passu or subordinated to the 2022 Credit Agreement obligations, each of which are subject to customary conditions.
The obligations under the 2022 Credit Agreement are secured by substantially all of the assets of the Borrowers, excluding vehicles, specified parcels of real estate and other customary exclusions.
The 2022 Credit Agreement provides for a floating annual interest rate equal to the prime rate then in effect plus 6.50%, which rate may be increased by 3.00% upon an event of default that is not a material event of default or 6.00% upon a material event of default as provided in the 2022 Credit Agreement.
At any time, the Company may voluntarily prepay up to $100,000 of the principal balance, subject to a one-time $1,000 prepayment premium upon the first prepayment, and may prepay the remaining outstanding principal balance for a prepayment premium at varying rates based on the timing of any subsequent prepayments. The Borrowers may not voluntarily prepay more than $100,000 of the principal balance without prepaying the entire outstanding principal balance of the loan.
On April 30, 2024, the Company made a Permitted Partial Optional Prepayment (as defined in the 2022 Credit Agreement) in the amount of $50,000 pursuant to the 2022 Credit Agreement and paid a $1,000 prepayment premium in connection therewith. In connection with such Permitted Partial Optional Prepayment, Chicago Atlantic and certain Lenders agreed to (a) release certain Borrowers from their obligations under, and as parties to, the 2022 Credit Agreement and related agreements and (b) release all liens over such Borrowers' property, including real estate, held by Chicago Atlantic for the benefit of the Lenders, in each case, pursuant to a limited consent and waiver, dated as of April 29, 2024, by and among Borrowers, certain of the lenders party thereto and Chicago Atlantic.
On September 30, 2025, the Company made a Permitted Partial Optional Prepayment (as defined in the 2022 Credit Agreement) in the amount of $50,000 pursuant to the 2022 Credit Agreement, without any penalty or premium.
The 2022 Credit Agreement includes customary representations, warranties, covenants and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency.
The 2022 Credit Agreement also includes customary negative covenants limiting the Borrowers' ability to incur additional indebtedness and grant liens that are not otherwise permitted, and the ability to enter into or consummate acquisitions or dispositions that are not otherwise permitted, among others. Additionally, the 2022 Credit Agreement requires the Borrowers to meet certain financial tests regarding minimum cash balances, minimum levels of Adjusted EBITDA (as defined in the 2022 Credit Agreement) and a minimum fixed charge coverage ratio.
As of December 31, 2025, the Company was in compliance with such covenants.
George Archos, the Chairman and Chief Executive Officer of the Company, participated in the 2022 Credit Agreement as a lender funding $1,000 of the $350,000 principal amount. Mr. Archos is excluded from certain approval rights of the lenders and any penalties and fees due to Mr. Archos under the 2022 Credit Agreement are immaterial to the Company.
Revolver
On September 30, 2025, the Company entered into the Revolver, by and among the Company, as a guarantor, the Real Estate Subsidiaries, lenders from time-to-time party thereto, and Chicago Atlantic, as administrative agent for the lenders.
The Revolver initially provided for a $75,000 revolving loan facility, $50,000 of which was drawn on September 30, 2025 and was used to prepay, without any penalty or premium, $50,000 of outstanding obligations due under the 2022 Credit Agreement. The Revolver provides for a floating annual interest rate on amounts drawn equal to one-month Term SOFR (subject to a minimum 4% SOFR floor) plus 6%, which rate may be increased by 3% upon an event of default or by 6% upon a material event of default as provided in the Revolver. The Company incurred debt issuance costs of $2,210 in connection with the establishment of the Revolver.
The Revolver may be drawn in $2,500 increments upon ten business days prior notice and any outstanding amount under the Revolver may be voluntarily prepaid in $2,500 increments upon five business days prior notice without any penalty or premium, unless such prepayment occurs within six months of the applicable advance, in which case, such prepayment will be subject to a six-month interest make whole. Any amounts prepaid may be redrawn subject to funding requirements set forth therein. The Revolver was initially subject to a borrowing base which required the outstanding principal balance under the Revolver to be equal to or less than 60% of the appraised value, net of certain indebtedness, of the owned real estate serving as collateral for the Revolver from time to time.
On January 12, 2026, the Company, the Real Estate Subsidiaries, the Revolver Lenders and Chicago Atlantic entered into the Revolver First Amendment to Credit Agreement and Omnibus First Amendment to Credit Documents, to amend the Revolver and related credit documents initially entered into on September 30, 2025. The Revolver First Amendment increased the lending commitment of the Revolver from $75,000 to $100,000 and amended the date on which all outstanding amounts are due in full from September 29, 2028 to February 28, 2029. Additionally, the Revolver First Amendment amended the borrowing base for the Revolver to an advance rate of up to 80%, rather than 60%, of the appraised value, net of certain indebtedness, of the owned real estate serving as collateral for the Revolver. The Revolver First Amendment also includes certain other immaterial updates to the Revolver. No additional collateral was pledged to secure the Revolver and certain real estate may be released as collateral upon specified conditions, as originally provided. Amounts drawn under the Revolver do not require amortization payments with all outstanding amounts being due in full on the maturity date of September 29, 2028.
The obligations under the Revolver are secured by substantially all of the assets of the Real Estate Subsidiaries, which primarily consistent of owned real estate, and are guaranteed by the Company on an unsecured basis. Additionally, the Revolver allows for the proportionate release of certain Real Estate Subsidiaries upon request of the Company so long as the outstanding principal balance under the Revolver does not exceed 60% of the appraised value, net of certain indebtedness, of the owned real estate serving as collateral after giving effect to such release.
The Revolver includes customary representations, warranties, covenants and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency. The Revolver also includes customary covenants, including, without limitation, limiting the Real Estate Subsidiaries' ability to incur additional indebtedness, make guarantees and grant liens that are otherwise not permitted and enter into or consummate acquisitions or dispositions that are not otherwise permitted, among others. As of December 31, 2025, the Company was in compliance with such covenants.
Revolver First Amendment
On January 12, 2026, the Company, the Real Estate Subsidiaries, the Revolver Lenders and Chicago Atlantic entered into a First Amendment (the "Revolver First Amendment") to Credit Agreement and Omnibus First Amendment to Credit Documents, to amend the Revolver and related credit documents initially entered into on September 30, 2025. The Revolver First Amendment increased the lending commitment of the Revolver from $75,000 to $100,000 and amended the date on which all outstanding amounts are due in full from September 29, 2028 to February 28, 2029. Additionally, the Revolver First Amendment amended the borrowing base for the Revolver to an advance rate of up to 80%, rather than 60%, of the appraised value, net of certain indebtedness, of the owned real estate serving as collateral for the Revolver. The Revolver First Amendment also includes certain other immaterial updates to the Revolver. No additional collateral was pledged to secure the Revolver and certain real estate may be released as collateral upon specified conditions, as originally provided. Amounts drawn under the Revolver do not require amortization payments with all outstanding amounts being due in full on the maturity date of February 28, 2029. On March 11, 2026, the Company drew $50,000 under the Revolver, bringing the total amount drawn under the Revolver to $100,000, which was used to repay the amounts owing under the 2022 Credit Agreement.
2026 Credit Agreement
On March 11, 2026, Verano and certain of its subsidiaries and affiliates from time-to-time party thereto (collectively, the "2026 Borrowers"), entered into a Credit Agreement (the "2026 Credit Agreement") with Needham Bank ("Needham"), as collateral agent and administrative agent for the lenders, Chicago Atlantic Financial Services, LLC, as co-administrative agent for the lenders, and the lenders from time-to-time party thereto (the "2026 Lenders"), pursuant to which the 2026 Lenders advanced the 2026 Borrowers a $195,000 senior secured term loan, all of which was used to repay the amounts owing under the 2022 Credit Agreement. In connection with such repayment, the Company paid a prepayment premium of approximately $4,345 and the 2022 Credit Agreement was terminated and is no longer in force or effect. Beginning in April 2026, Verano will be required to make scheduled amortization payments of $875 per month and the remaining principal balance is due in full on March 11, 2029; provided that the maturity date may be extended to March 11, 2030 upon the election of the Company, the payment of 1.5% of the then outstanding principal balance by the Company, and the consent of the 2026 Lenders. The 2026 Credit Agreement may be prepaid in part (in increments of $5,000 and in an amount not less than $10,000) or in full at any time, subject to a 1.5% prepayment premium during the first two years of the 2026 Credit Agreement and 0% thereafter; provided, that if the maturity date is extended to March 11, 2030, the prepayment premium will be 1.5% in all cases.
The obligations under the 2026 Credit Agreement are secured by substantially all of the assets of the 2026 Borrowers, excluding vehicles, specified parcels of real estate, other customary exclusions and subject to compliance with the terms of the 2026 Credit Agreement, entities, assets and parcels of real estate acquired after the closing of the 2026 Credit Agreement. The 2026 Credit Agreement provides for a floating annual interest rate equal to one-month Term SOFR (subject to a minimum 4% SOFR floor) plus 5.5%, which rate may be increased by 5% upon an event of default as provided in the 2026 Credit Agreement. The 2026 Credit Agreement included customary representations and warranties, covenants and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency.
Additionally, the 2026 Credit Agreement requires the Borrowers to meet certain financial tests regarding minimum cash balances and a minimum fixed charge coverage ratio.
George Archos, the Chairman, Chief Executive Officer and President of the Company, funded, through an affiliated entity, $10,000,000 of the amount provided by a 2026 Lender. As a result of this participation, Mr. Archos will receive his pro rata share of all interest and principal payments made by the Company to such 2026 Lender under the 2026 Credit Agreement.
Columbia Care Eastern Virginia LLC
On July 29, 2024, the Company entered into the Virginia EPA to purchase all of the issued and outstanding equity interests of CC East Virginia. The transaction closed on August 21, 2024. Pursuant to the Virginia EPA, the Company issued the CC East Virginia Promissory Note in the amount of $26,700, which was amended to $27,852 on May 27, 2025 in connection with a purchase price adjustment. The CC East Virginia Promissory Note has an estimated fair value of $26,068, and bears interest at a rate of 7% per annum beginning on the closing date, through maturity on the two-year anniversary of the closing date. Subsequently, on May 27, 2025, the Company entered into a waiver and partial payoff agreement related to a portion of the CC East Virginia Promissory Note. During the year ended December 31, 2025, the Company partially extinguished the CC East Virginia Promissory Note.
Mortgage
On March 14, 2025, the Company entered into a loan with Rainbow Realty Group IV, LLC to borrow a principal amount of $12,000 secured by real estate in Coolidge, Arizona and North Las Vegas, Nevada. The loan bears an interest rate of 11% per annum and matures in March 2030.
Tax Liabilities
The Company has U.S. income tax payable liabilities. These income tax payable liabilities will require payment from our liquidity sources, and we believe we have sufficient liquidity for both short-term and long-term payments of our income tax payable liabilities in addition to our other obligations. The Company expects to retain additional cash from operations, due in part to the Company's treatment of Section 280E of the Code as not applying to limit its deduction of ordinary and necessary business expenses.
Sources and Uses of Cash
Cash Provided by (Used in) Operating, Investing and Financing Activities
Net cash provided by (used in) operating, investing, and financing activities for the years ended December 31, 2025 and 2024, were as follows:
For the Years Ended December 31,
2025 2024 $ Change
Net Cash Provided by Operating Activities $ 52,855 $ 112,195 $ (59,340)
Net Cash Used In Investing Activities (32,601) (133,251) 100,650
Net Cash Used In Financing Activities (25,321) (65,926) 40,605
Cash Flows from Operating Activities. Cash flow generated from operating activities provides us with a significant source of liquidity. Our cash flows from operating activities result from cash received from our customers, offset by cash payments we make for products and services, operational costs, and income taxes. During the year ended December 31, 2025 and 2024, the Company had net cash inflows of $52,855 and $112,195, respectively. The $59,340 decrease was largely driven by an increase in inventory driven by higher production volumes and more efficient harvests from expanded cultivation facilities coupled with the income tax payments during the year ended December 31, 2025.
Cash Flows from Investing Activities. During the year ended December 31, 2025 and 2024, the Company had net cash outflows of $(32,601) and $(133,251), respectively. The $100,650 decrease in net cash outflows during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily driven by lower purchases of property, plant and equipment of $(41,226) during the year ended December 31, 2025, compared to purchases of property, plant and equipment of $(99,048) during the year ended December 31, 2024, as well as acquisition activity during the year ended December 31, 2024.
Cash Flows from Financing Activities.During the year ended December 31, 2025 and 2024, the Company had net cash outflows of $(25,321) and $(65,926), respectively. The $40,605 decrease in net cash outflows during the year ended December 31, 2025 compared to the year ended December 31, 2024 was attributable to proceeds from debt related to the loan with Rainbow Realty Group IV, LLC, which was offset by principal repayments of debt during the year ended December 31, 2025. During the year ended December 31, 2024, the net cash outflow was primarily attributable to the Company's Permitted Partial Optional Prepayment (as defined in the 2022 Credit Agreement) pursuant to the 2022 Credit Agreement.
The Company expects capital expenditures for 2026 to be between $30,000 and $50,000. The Company's 2026 capital expenditures are expected to support cultivation operational efficiency, selective expansion of retail operations in existing and potential new markets, retail store enhancements, and continued investment in technology and infrastructure.
Changes in or Adoption of Accounting Practices
Refer to the discussion of recently adopted/issued accounting pronouncements within the Notes to the Consolidated Financial Statements, Note 2 - Significant Accounting Policies.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company's consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed by the Company on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the review affects both current and future periods. Significant judgments, estimates, and assumptions that have the most significant effect on the amounts recognized in the consolidated financial statements are described below.
Goodwill and Indefinite-lived Intangible Asset Impairment
Goodwill and indefinite-lived intangible assets are evaluated for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that could more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying value. In performing our annual goodwill impairment test, we may start with an optional qualitative assessment as allowed for under the accounting guidance. As part of the qualitative assessment, we evaluate all events and circumstances, including both positive and negative events, in their totality, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we bypass the qualitative assessment, or if the qualitative assessment indicates that a quantitative analysis should be performed, we perform a quantitative test for impairment. As part of the Company's quantitative impairment analysis, the fair value of a reporting unit or indefinite-lived intangible asset is generally determined using both the income and market approaches. The income approach requires management to estimate a number of factors for each reporting unit or indefinite-lived intangible asset, including projected future operating results, economic projections, anticipated future cash flows and discount rates. The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping, as well as recent guideline transactions.
The determination of the fair value of the reporting units or indefinite-lived intangible assets requires the Company to make significant estimates and assumptions with respect to the business and financial performance of the Company's reporting units or indefinite-lived intangible assets. These estimates and assumptions primarily include, but are not limited to, the selection of appropriate peer group companies, control premiums appropriate for acquisitions in the industries in which we compete, discount rates, terminal growth rates, forecasts of revenue, operating income, depreciation, amortization, working capital requirements and capital expenditures. With regard to the Company's goodwill reporting units, the Company also compares the sum of estimated fair values of reporting units to the Company's fair value as implied by the market value of its equity. This comparison provides an indication that, in total, assumptions and estimates are reasonable. Future declines in the overall market value of the Company's equity securities may provide an indication that the fair value of one or more reporting units has declined below its carrying value.
Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions, could have a significant impact on either the fair value of the reporting units and indefinite-lived intangibles, the amount of any goodwill and indefinite-lived intangible impairment charges, or both. These estimates can be affected by a number of factors including, but not limited to, general economic conditions, availability of market information as well as the Company's profitability. The Company continues to monitor these potential impacts and economic, industry and market trends, and the impact these may have on the reporting units or indefinite-lived intangible assets.
Finite-Lived Intangible Assets and Other Long-lived Assets Recoverability
The Company evaluates the recoverability of finite-lived intangible assets and other long-lived assets whenever events or changes in circumstances indicate that the carrying value of such an asset may not be recoverable. The evaluation of finite-lived intangible assets and other long-lived assets is performed at the lowest level of identifiable cash flows.
If the asset group fails the recoverability test, then an impairment charge is determined based on the difference between the fair value of the asset group compared to its carrying value. The fair value of the long-lived assets included in an impaired asset group may be determined using an income, market, or cost approach, or a combination thereof. The income approach utilizes assumptions including management's best estimates of the expected future cash flows and the estimated useful life of the asset group. The cost approach utilizes assumptions for the current replacement costs of similar assets adjusted for estimated depreciation and deterioration of the existing equipment and economic obsolescence. The market approach requires the use of judgment in evaluating market comparable assets.
The determination of the fair value of the asset group requires management to estimate a number of factors including anticipated future cash flows, discount rates, and the identification of market comparable assets. Although we believe these estimates are reasonable, actual results could differ from those estimates due to the inherent uncertainty involved in making such estimates.
Business Combinations
In a business combination, all identifiable assets, liabilities and contingent liabilities acquired are recorded at their fair values. The determination of fair values of assets and liabilities acquired requires estimates and the use of valuation techniques when market value is not readily available. For any intangible asset identified, depending on the type of intangible asset and the complexity of determining its fair value, an independent valuation expert or management may develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net cash flows. For intangible assets, the Company generally uses the income approach to determine fair value. The income approach requires management to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, discount rates, terminal growth rates, royalty rates, forecasts of revenue, operating income, depreciation, amortization and capital expenditures. The discount rates applied to the projections reflect the risk factors associated with those projections. Judgment is also required in determining the intangible asset's useful life.
Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair value of the intangible assets acquired. Certain fair values may be estimated at the transaction date pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination, they may be adjusted in subsequent periods.
Provision for Income Tax
Provision for income taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. Although we believe our assumptions, judgments and estimates are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts provided for income taxes.
We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. These uncertain tax positions include our estimates related to uncertainties that are based on an assessment of whether our available documentation corroborating the nature of our activities supporting the tax positions will be sufficient. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. If the final outcome of these tax related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. The IRS has taken the position that cannabis companies are subject to the limits of Section 280E of the Code under which they are only allowed to deduct expenses directly related to costs of goods sold. The Company has taken a position that its deduction of ordinary and necessary business expenses is not limited by Section 280E of the Code.
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