Ascend Wellness Holdings Inc.
05/13/2026 | Press release | Distributed by Public on 05/13/2026 15:16
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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 months ended March 31, 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."
The following discussion should be read in conjunction with, and is qualified in its entirety by, the Financial Statements. The discussion in this section contains both historical information and forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, and forward-looking information, within the meaning of applicable Canadian securities laws, (collectively, "forward-looking statements") that involve risks and uncertainties. Generally, forward-looking statements may be identified by the use of forward-looking terminology such as "plans," "expects," "does not expect," "proposed," "is expected," "budgets," "scheduled," "estimates," "forecasts," "intends," "anticipates," "does not anticipate," "believes," or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events, or results may, could, would, or might occur or be achieved. There can be no assurance that such forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such forward-looking statements. Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause the actual results, level of activity, performance, or achievements of the Company to be materially different from those or implied by such forward-looking statements. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions, or expectations upon which they are placed will occur. Forward-looking statements in this MD&A are expressly qualified by this cautionary statement. See "Forward-Looking Statements" for more information.
Financial information and share figures, except per-share amounts, presented in this MD&A are presented in thousands of United States dollars ("$"), unless otherwise indicated. We round amounts in this MD&A to the thousands and calculate all percentages and per-share data from the underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot, or recalculate based on reported numbers due to rounding. Unless otherwise indicated, all references to years are to our fiscal year, which ends on December 31.
The Company's shares of Class A common stock are listed on the Canadian Securities Exchange (the "CSE") under the ticker symbol "AAWH.U" and are quoted on the OTCQX® Best Market under the symbol "AAWH." We are an emerging growth company under federal securities laws and as such we are able to elect to follow scaled disclosure requirements for this filing.
BUSINESS OVERVIEW
Established in 2018 and headquartered in 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 stores, to retail partner locations, and to third-party licensed retail 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 March 31, 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 March 31, 2026, we employed approximately 2,300 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 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 56,000 pounds of wholesale product, on a gross basis, during each of the three months ended March 31, 2026 and 2025. 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 March 31, 2026, we have 48 open and operating retail locations, which includes 10 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.
Recent Developments
Business Developments
The Company continues to focus on optimizing its operations, including evaluating expansion opportunities across the markets in which it operates. In addition to recent acquisition-related activity, as further described below, dispensaries that are associated with two previously consolidated transactions opened during the quarter, and an additional dispensary opened subsequently in April. The Company has also debuted a revamped product offering of its Ozone-branded products that are aimed to provide an elevated customer experience and complement Ascend's other product offerings in the market.
Recent and Pending Transactions
Refer to Note 4, "Acquisitions," in the Financial Statements for additional information regarding the Company's acquisition-related activity, including previous transactions that remain pending.
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.
2026 Asset Acquisition
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 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. 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.
Operational and Regulation Overview
We believe our operations are in material compliance with all applicable state and local laws, regulations, and licensing requirements in the states in which we operate. However, cannabis is illegal under United States federal law. Substantially all of our revenue is derived from United States cannabis operations. For information about risks related to United States cannabis operations, refer to Item 1A., "Risk Factors," of the Annual Report and Item 1A. of Part II of this Quarterly Report.
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") has announced new hearings scheduled to begin on June 29, 2026, which will address the proposed broader rescheduling of marijuana from Schedule I to Schedule III, including adult-use cannabis. The Company is evaluating 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. 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 filing of this Quarterly Report.
The April 2026 Order 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 pending DEA proceedings regarding the broader rescheduling of marijuana, including adult-use 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 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.
Key Financial Highlights
•Revenue decreased by $11,064, or 9%, during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily driven by declines across our legacy business resulting from increased competition and pricing pressure in most of our markets, slightly offset by incremental revenue from acquisitions and consolidated partnership activity.
•Operating profit was $2,546 during the three months ended March 31, 2026, as compared to $2,486 during the three months ended March 31, 2025, primarily attributable to improved margins, offset by higher general and administrative expenses to support our expanded operations.
•Net decrease in cash and cash equivalents of $24,756 during the three months ended March 31, 2026, primarily resulting from net cash used in operating activities, including an interest payment of $19,125 on our term notes and a $17,000 payment associated with a litigation matter (refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations-Legal Matters-Green Thumb Industries Arbitration Matter" for additional information), partially offset by funding provided by improvements in working capital management.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2026 Compared with the Three Months Ended March 31, 2025
|
Three Months Ended March 31, |
|||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | Increase / (Decrease) | ||||||||||||||||||||
| Revenue, net | $ | 116,933 | $ | 127,997 | $ | (11,064) | (9)% | ||||||||||||||||
| Cost of goods sold | (72,051) | (88,436) | (16,385) | (19)% | |||||||||||||||||||
| Gross profit | 44,882 | 39,561 | 5,321 | 13% | |||||||||||||||||||
| Gross profit % | 38.4 | % | 30.9 | % | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| General and administrative expenses | 42,336 | 37,075 | 5,261 | 14% | |||||||||||||||||||
| Operating profit | 2,546 | 2,486 | 60 | 2% | |||||||||||||||||||
|
Other (expense) income
|
|||||||||||||||||||||||
| Interest expense | (20,253) | (11,190) | 9,063 | 81% | |||||||||||||||||||
| Other income, net | 121 | 477 | (356) | (75)% | |||||||||||||||||||
| Total other expense, net | (20,132) | (10,713) | 9,419 | 88% | |||||||||||||||||||
|
Loss before income taxes
|
(17,586) | (8,227) | 9,359 | 114% | |||||||||||||||||||
| Income tax expense | (11,907) | (11,031) | 876 | 8% | |||||||||||||||||||
|
Net loss
|
$ | (29,493) | $ | (19,258) | $ | 10,235 | 53% | ||||||||||||||||
Revenue
Revenue decreased by $11,064 during, or 9%, the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. Revenue across legacy dispensary locations declined by $10,210, primarily driven by softness in Illinois, New Jersey, and Pennsylvania that was partially offset by a benefit from adult-use sales in Ohio. Additionally, the decrease was partially offset by a contribution of $8,985 of incremental revenue from partner stores and new stores that were added during 2025 and 2026. Net revenue from our wholesale operations declined by $9,839 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, New Jersey, and Massachusetts. We sold approximately 56,000 pounds of wholesale product, on a gross basis, during each of the three months ended March 31, 2026 and 2025.
Cost of Goods Sold and Gross Profit
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 during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. Gross profit for the three months ended March 31, 2026 was $44,882, representing a gross margin of 38.4%, compared to gross profit of $39,561 and gross margin of 30.9% for the three months ended March 31, 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 were partially offset by an impact from increased competition and pricing pressure across most of our markets. The current period includes a $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 of lower write-downs of certain inventory items related to net realizable value adjustments, expired products, and obsolete packaging.
General and Administrative Expenses
General and administrative expenses increased by $5,261, or 14%, during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily driven by:
•a $2,066 increase in overhead expenses, including $2,314 of expenses associated with a rebalancing of certain overhead expenses from cost of goods sold, as well as costs associated with the expansion of operations, partially offset by ongoing cost control initiatives;
•$1,848 of higher compensation expenses in support of the expansion of consolidated operations;
•$1,500 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; and
•a $657 loss on settlement of a loan receivable.
These increases were partially offset by a benefit of $432 of acquisition-related earn-out fair value adjustments and a $340 reversal of expense associated with an acquisition earn-out that was not achieved.
Interest Expense
Interest expense increased by $9,063, or 81%, during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The current year was impacted primarily by higher interest associated with finance leases; refer to Note 10, "Leases," in the Financial Statements for additional information. During the three months ended March 31, 2026, the Company had a weighted-average outstanding debt balance, excluding finance leases, of $319,335 with a weighted-average interest rate of 12.3%, compared to a weighted-average debt balance of $346,089 during the three months ended March 31, 2025 with a weighted-average interest rate of 11.5%.
Income Tax Expense
The Company's quarterly tax provision is calculated under the discrete method which treats the interim period as if it were the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The Company believes, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method due to the high degree of uncertainty in estimating annual pre-tax income due to the early growth stage of the business.
The IRS has taken the position that cannabis companies are subject to the limitations of IRC Section 280E, under which such companies are only allowed to deduct expenses directly related to the sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E and those allowed for financial statement reporting purposes ("book-to-tax" differences). Cannabis companies operating in states that align their tax codes with IRC Section 280E are also unable to deduct ordinary and necessary business expenses for state tax purposes. Ordinary and necessary business expenses deemed non-deductible under IRC Section 280E are treated as permanent book-to-tax differences. Therefore, the effective tax rate on income realized by cannabis companies can be highly variable and may not necessarily correlate with pre-tax income or loss.
As of March 31, 2026, the Company recorded an uncertain tax liability totaling $218,673 for uncertain tax positions related to the treatment of certain transactions and deductions under IRC Section 280E based on legal interpretations that challenge the Company's tax liability under IRC Section 280E. The Company is evaluating the impact of the April 2026 Order on its existing uncertain tax positions recorded under IRC Section 280E (see Note 14, "Income Taxes," in the Financial Statements), but, given the uncertainties described above, has not adjusted such positions as of the date this Quarterly Report was issued. The Company has been selected for examination of its amended tax returns filed with these unrecognized tax benefits but does not currently anticipate its unrecognized tax benefits to be resolved in the next twelve months and anticipates that the total amount of unrecognized tax benefits may change within the next twelve months for additional uncertain tax positions taken on a go-forward basis. If favorably resolved, the unrecognized tax benefits would decrease the Company's effective tax rate.
The statutory federal tax rate was 21% during both periods. The Company has operations in seven U.S. geographic markets: Illinois, Maryland, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania, which have state tax rates ranging from 6% to 11.5%. Certain states, including Illinois, Maryland, Massachusetts, Michigan, New Jersey, and Pennsylvania do not align with IRC Section 280E for state tax purposes and permit the deduction of ordinary and necessary business expenses from gross profit in the calculation of state taxable income. There have been no material changes to income tax matters in connection with the normal course of our operations during the current year.
The Company's income tax expense was $11,907, or 26.5%, of gross profit, during the three months ended March 31, 2026, as compared to an income tax expense of $11,031, or 27.9%, of gross profit, during the three months ended March 31, 2025. The effective tax rate on gross profit for the three months ended March 31, 2026 reflects a net benefit from the tax treatment of a settlement payment and certain acquired intangible assets, partially offset by a $1,095 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.
NON-GAAP FINANCIAL MEASURES
We define "Adjusted Gross Profit" as gross profit excluding non-cash inventory costs, which include depreciation and amortization included in cost of goods sold, equity-based compensation included in cost of goods sold, and other non-cash inventory adjustments. We define "Adjusted Gross Margin" as Adjusted Gross Profit as a percentage of net revenue. Our "Adjusted EBITDA" is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. We define "Adjusted EBITDA Margin" as Adjusted EBITDA as a percentage of net revenue. Management calculates Adjusted EBITDA as the reported net income or loss, adjusted to exclude: income tax expense, other (income) expense, interest expense, depreciation and amortization, depreciation and amortization included in cost of goods sold, non-cash inventory adjustments, equity-based compensation, equity-based compensation included in cost of goods sold, start-up costs, start-up costs included in cost of goods sold, transaction-related and other non-recurring expenses, gain or loss on sale of assets, and litigation settlement, as applicable. Accordingly, management believes that Adjusted EBITDA provides meaningful and useful financial information, as this measure demonstrates the operating performance of the business. The tables below provide reconciliations of these non-GAAP measures to the most comparable U.S. GAAP financial measure. Non-GAAP financial measures may be considered in addition to the results prepared in accordance with U.S. GAAP, but they should not be considered a substitute for, or superior to, U.S. GAAP results. The Company's presentation of these financial measures may not be comparable to similar non-GAAP measures used by other companies.
The following table presents Adjusted Gross Profit for the three months ended March 31, 2026 and 2025:
|
Three Months Ended March 31, |
|||||||||||
| ($ in thousands) | 2026 | 2025 | |||||||||
| Gross Profit | $ | 44,882 | $ | 39,561 | |||||||
| Depreciation and amortization included in cost of goods sold | 8,080 | 9,700 | |||||||||
| Equity-based compensation included in cost of goods sold | 326 | 1,138 | |||||||||
|
Non-cash inventory adjustments(1)
|
644 | 1,774 | |||||||||
| Adjusted Gross Profit | $ | 53,932 | $ | 52,173 | |||||||
| Adjusted Gross Margin | 46.1 | % | 40.8 | % | |||||||
(1)Consists of write-offs of expired products, obsolete packaging, and net realizable value adjustments related to certain inventory items.
The following table presents Adjusted EBITDA for the three months ended March 31, 2026 and 2025:
|
Three Months Ended March 31, |
|||||||||||
| ($ in thousands) | 2026 | 2025 | |||||||||
|
Net loss
|
$ | (29,493) | $ | (19,258) | |||||||
| Income tax expense | 11,907 | 11,031 | |||||||||
| Other income, net | (121) | (477) | |||||||||
| Interest expense | 20,253 | 11,190 | |||||||||
| Depreciation and amortization | 18,280 | 18,400 | |||||||||
|
Non-cash inventory adjustments(1)
|
644 | 1,774 | |||||||||
| Equity-based compensation | 447 | 1,516 | |||||||||
|
Start-up costs(2)
|
3,334 | 736 | |||||||||
|
Transaction-related and other non-recurring expenses(3)
|
1,214 | 2,063 | |||||||||
| (Gain) loss on sale of assets | (137) | 38 | |||||||||
| Adjusted EBITDA | $ | 26,328 | $ | 27,013 | |||||||
| Adjusted EBITDA Margin | 22.5 | % | 21.1 | % | |||||||
(1)Consists of write-offs of expired products, obsolete packaging, and net realizable value adjustments related to certain inventory items.
(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 months ended March 31, 2026 also includes $2,314 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.
(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 months ended March 31, 2026 includes a net reduction of approximately $432 of acquisition-related earn-out fair value adjustments, a $340 reversal of an acquisition earn-out that was not achieved, and $244 of property development expense write-offs. The three months ended March 31, 2025 includes approximately $400 of expenses associated with our January 2025 term loans.
LIQUIDITY AND CAPITAL RESOURCES
We are an emerging growth company and our primary sources of liquidity are operating cash flows, borrowings through the issuance of debt, and funds raised through the issuance of equity securities. We are generating cash from sales and deploying our capital reserves to acquire and develop assets capable of producing additional revenue and earnings over both the immediate and long term. Capital reserves are being utilized for acquisitions in the medical and adult-use cannabis markets, capital expenditures and improvements in existing facilities, and product development and marketing, as well as customer, supplier, and investor and industry relations.
Financing History and Future Capital Requirements
Historically, we have used private financing as a source of liquidity for short-term working capital needs and general corporate purposes. In May 2021, we completed an initial public offering of shares of our Class A common stock through which we raised aggregate net proceeds of approximately $86,065, after deducting underwriting discounts and commissions and certain direct offering expenses paid by us. In August 2021, we entered into a credit facility under which we initially borrowed $210,000 through term loans. During the second quarter of 2022, we borrowed an additional $65,000 of term loans from certain lenders under the expansion feature of this credit facility, as further described below. During the second quarter of 2023, we raised an aggregate of $7,000 in gross proceeds through a non-brokered private placement offering of an aggregate of 9,859 shares of the Company's Class A common stock to a single investor. In July 2024 we issued term notes in aggregate principal of $235,000, which proceeds were used, together with cash on hand, to prepay a portion of our other term loans then-outstanding, as discussed further below. In January 2025, we issued an additional $15,000, in aggregate principal of term loans, for general corporate purposes, including to fund growth initiatives, and in May 2025 we issued an additional $50,000, in aggregate principal of term loans, which proceeds were utilized, along with cash on hand, to prepay the remaining $60,000 then-outstanding under our previous credit facility, as discussed further below.
Our future ability to fund operations, to make planned capital expenditures, to acquire other entities or investments, to make scheduled debt payments, and to repay or refinance indebtedness depends on our future operating performance, cash flows, and ability to obtain equity or debt financing, which are subject to prevailing economic conditions, as well as financial, business, and other factors, some of which are beyond our control.
As of March 31, 2026 and December 31, 2025, we had total current liabilities of $88,458 and $109,009, respectively, and total current assets of $188,964 and $208,949, respectively, which includes cash and cash equivalents of $60,920 and $85,676, respectively, to meet our current obligations. As of March 31, 2026, we had working capital of $100,506, compared to $99,940 as of December 31, 2025.
Approximately 91% and 94% of our cash and cash equivalents balance as of March 31, 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 March 31, 2026 and December 31, 2025. As of March 31, 2026, we had cash and cash equivalents of $60,920, 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.
2024 Term Notes
On July 16, 2024, the Company issued $235,000 in aggregate principal of senior secured notes due July 16, 2029 (the "July 2024 Term Notes") through a private placement (the "2024 Notes Offering") pursuant to an indenture agreement (the "July 2024 Loan Agreement"). The July 2024 Term Notes were issued at 94.75% of face value and do not require scheduled principal amortization payments. The total of the original issue discount and other capitalized direct financing fees was approximately $21,200 and will be amortized over the associated term using the straight-line method, which approximates the interest method. The Company utilized the proceeds from the 2024 Notes Offering, along with cash on hand, to prepay $215,000 of borrowings then-outstanding under a previous credit facility (the "2021 Credit Facility"). The July 2024 Loan Agreement permitted the Company, subject to certain limitations, to issue additional notes thereunder, including up to an additional $60,000 in aggregate principal, with the proceeds therefrom to be used to prepay the remaining outstanding balance under, and to terminate, the 2021 Credit Facility.
In January 2025, the Company borrowed an additional $15,000 through the issuance of additional term notes (the "January 2025 Term Notes"). The January 2025 Term Notes were issued at 97% of face value and are subject to the same terms and provisions of the July 2024 Loan Agreement, including the interest rate and maturity date thereunder, as further described below. In May 2025, the Company issued an additional $50,000, in aggregate principal, of term notes (the "May 2025 Term Notes" and, together with the July 2024 Term Notes and January 2025 Term Notes, the "2024 Term Notes") which proceeds were utilized, along with cash on hand, to prepay the remaining $60,000 of borrowings outstanding under the 2021 Credit Facility.
The 2024 Term Notes bear interest at a rate of 12.75% per annum, payable semi-annually in arrears on January 15 and July 15 of each year until the maturity date, commencing on January 15, 2025, unless earlier prepaid in accordance with the terms of the July 2024 Loan Agreement. In conjunction with the May 2025 Term Notes, those lenders prepaid $2,323 of accrued interest from the January 15 interest payment date through issuance, and, in turn, those lenders received interest for the full interest payment period that was payable on July 15, 2025. The 2024 Term Notes are irrevocably and unconditionally guaranteed, jointly and severally, on a senior secured basis by certain of the Company's subsidiaries (the "Guarantees"). The 2024 Term Notes and the Guarantees are (i) secured, on a first lien basis, by substantially all assets of the Company and the guarantors of the July 2024 Term Notes, subject to certain carveouts, and (ii) issued and governed by the July 2024 Loan Agreement.
The Company may, at any time and from time to time upon not less than 15 nor more than 60 days' prior notice, prepay the 2024 Term Notes, along with accrued and unpaid interest, subject to a prepayment premium. The July 2024 Loan Agreement requires mandatory prepayments from proceeds of certain events. In the event of a change of control, as provided in the July 2024 Loan Agreement, the Company will be required to make an offer to each holder of the 2024 Term Notes to repay all or any part of such holders' 2024 Term Notes at a price in cash equal to not less than 101% of the aggregate principal amount of such 2024 Term Notes repaid, plus accrued and unpaid interest thereon.
Pursuant to the July 2024 Loan Agreement, the Company has agreed to comply with certain customary covenants, including, but not limited to, restrictions on the Company's ability to: declare or pay dividends or make certain other payments; purchase, redeem, or otherwise purchase or retire for value any equity interests or any subordinated indebtedness or otherwise make any restricted investment or restricted payment; incur certain indebtedness; create certain liens; consolidate, amalgamate, merge, or transfer all or substantially all of the assets of the Company and certain restricted subsidiaries taken as a whole; enter into certain transactions with affiliates; and engage in certain types of businesses. Additionally, the July 2024 Loan Agreement provides for customary events of default which, if certain of them occur, would permit certain parties, including holders of not less than 25% in aggregate principal of the then-outstanding 2024 Term Notes to declare the principal of, and interest or premium, if any, and any other monetary obligations on, all the then-outstanding 2024 Term Notes to be due and payable immediately.
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 March 31, 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.
Refer to Note 11, "Debt," in the Financial Statements for additional information regarding the July 2024 Loan Agreement and the Company's other debt transactions.
Mortgage Note
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 March 31, 2026 and December 31, 2025, $191 and $187, respectively, of principal is included within "Current portion of debt, net" and $9,082 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.
Cash Flows
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2026 | 2025 | |||||||||
| Net cash (used in) provided by operating activities | $ | (19,411) | $ | 5,939 | |||||||
| Net cash used in investing activities | (4,753) | (7,847) | |||||||||
| Net cash (used in) provided by financing activities | (592) | 13,688 | |||||||||
Operating Activities
Net cash used in operating activities was $19,411 during the three months ended March 31, 2026, as compared to $5,939 of net cash provided during the three months ended March 31, 2025. The current year reflects $19,323 of cash interest paid on debt arrangements, compared with $16,400 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.
Investing Activities
Net cash used in investing activities was $4,753 during the three months ended March 31, 2026, as compared to $7,847 during the three months ended March 31, 2025. The current year includes proceeds received from the settlement of a previous loan receivable and the sale of certain assets, and reflects lower capital expenditures, which were offset by higher payments associated with acquisitions as compared to the prior year.
Financing Activities
Net cash used in financing activities was $592 during the three months ended March 31, 2026, as compared to $13,688 of net cash provided during the three months ended March 31, 2025. The current period reflects repayments under finance leases and the remittance of taxes withheld under equity compensation plans, whereas the prior year reflects the receipt of proceeds from the issuance of the January 2025 Term Notes, net of related financing costs, offset by repurchases of common stock and repayments under finance leases.
Contractual Obligations and Other Commitments and Contingencies
Material contractual obligations arising in the normal course of business primarily consist of long-term fixed rate debt and related interest payments, leases, finance arrangements, and amounts due for acquisitions. We believe that cash flows from operations will be sufficient to satisfy our capital expenditures, debt services, working capital needs, and other contractual obligations for the next twelve months.
The following table summarizes the Company's material future contractual obligations as of March 31, 2026:
| (in thousands) | Commitments Due by Period | |||||||||||||||||||||||||||||||
| Contractual Obligations | Total | Remainder of 2026 | 2027 - 2028 | 2029 - 2030 | Thereafter | |||||||||||||||||||||||||||
|
Term notes(1)
|
$ | 300,000 | $ | - | $ | - | $ | 300,000 | $ | - | ||||||||||||||||||||||
|
Fixed interest related to term notes(2)
|
133,875 | 19,125 | 76,500 | 38,250 | - | |||||||||||||||||||||||||||
|
Mortgage Note(3)
|
12,756 | 737 | 1,964 | 10,055 | - | |||||||||||||||||||||||||||
|
Sellers' notes(4)
|
9,608 | 9,608 | - | - | - | |||||||||||||||||||||||||||
|
Operating leases(5)
|
139,733 | 9,446 | 25,973 | 25,530 | 78,784 | |||||||||||||||||||||||||||
|
Finance leases(5)
|
725,549 | 27,007 | 73,063 | 76,540 | 548,939 | |||||||||||||||||||||||||||
|
Finance arrangements(6)
|
17,963 | 1,952 | 5,406 | 4,093 | 6,512 | |||||||||||||||||||||||||||
| Total | $ | 1,339,484 | $ | 67,875 | $ | 182,906 | $ | 454,468 | $ | 634,235 | ||||||||||||||||||||||
(1)Principal payments due under our term notes payable as of March 31, 2026. Refer to Note 11, "Debt," in the Financial Statements for additional information regarding our debt arrangements.
(2)Represents fixed interest rate payments on borrowings under our term notes payable based on the principal outstanding as of March 31, 2026. Interest payments could fluctuate based on prepayments or additional amounts borrowed.
(3)Represents payments due monthly on borrowings under our Mortgage Note, which consist of principal and interest. Refer to Note 11, "Debt," in the Financial Statements for additional information.
(4)Consists of amounts owed for acquisitions or other similar transactions. Certain cash payments include an interest accretion component, and the timing of certain payments may vary based on regulatory approval. Refer to Note 11, "Debt," in the Financial Statements for additional information.
(5)Reflects our contractual obligations to make future payments under non-cancelable leases and an estimate for anticipated extension periods, as applicable. Refer to Note 10, "Leases," in the Financial Statements for additional information.
(6)Reflects our contractual obligations to make future payments under non-cancelable operating leases that did not meet the criteria to qualify for sale-leaseback treatment. Refer to Note 10, "Leases," in the Financial Statements for additional information.
The table above excludes up to an additional total of $10,000 that we expect to fund under a research collaboration agreement associated with a prior acquisition and of which $819 was remitted during 2025. The remainder will be paid based on a percentage of annual revenue through April 2031, unless satisfied earlier. Refer to Note 15, "Commitments and Contingencies," in the Financial Statements for additional information. Additionally, the Company has commercial relationships with license holders across the markets in which it operates with mutually beneficial purchasing and supply arrangements entered into in the ordinary course of business.
As of the date of this filing, we do not have any off-balance sheet arrangements, as defined by applicable regulations of the SEC, that have, or are reasonably likely to have, a material current or future effect on the results of our operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.
Capital Expenditures
We anticipate net capital expenditures of approximately $20,000 during 2026. Changes to this estimate could result from the timing of various project start dates, which are subject to local and regulatory approvals, as well as capital allocation considerations. Spending at our cultivation and processing facilities includes: construction; purchase of capital equipment such as extraction equipment, heating, ventilation, and air conditioning equipment, and other manufacturing equipment; general maintenance; and information technology capital expenditures. Dispensary-related capital expenditures includes construction costs for the initial build-out of each location, general maintenance costs, and upgrades to existing locations.
During 2026, we expect to provide funding for partner dispensaries and the build out of additional dispensaries across our network. We also anticipate completing certain expansion projects across our cultivation facilities in addition to other enhancements and general maintenance activities across our portfolio. Management expects to fund capital expenditures primarily by utilizing cash flows from operations.
As of March 31, 2026, our construction in progress ("CIP") balance was $9,873 and relates to capital spending on projects that were not yet complete. This balance includes amounts related to: certain enhancement projects at our New Jersey, Illinois, Michigan, and Massachusetts cultivation facilities; certain build out projects at partner dispensaries; and other projects across our dispensaries and cultivation facilities.
Other Matters
Conversion of Shares of Class B Common Stock
On May 4, 2026, in accordance with the automatic conversion provisions of the Company's certificate of incorporation, each share of Class B common stock then outstanding automatically converted into one share of Class A common stock on a one-for-one basis. Accordingly, all 65 shares of Class B common stock that were issued and outstanding were converted and retired effective May 4, 2026. Refer to Note 12, "Stockholders' Equity," in the Financial Statements for additional information.
Equity Incentive Plans
The Company's current stock incentive plan, as amended, (the "Amended 2021 Plan"), authorizes the issuance of options, stock appreciation rights, restricted stock awards, restricted stock units ("RSUs"), and other stock-based awards (collectively the "2021 Plan Awards"). The Amended 2021 Plan provides for a maximum number of shares of Class A common stock available for issuance to not exceed 10% of the total number of issued and outstanding shares of Class A common stock, on a non-diluted basis, as constituted on the grant date of a plan award. As of March 31, 2026, there were 6,559 shares of Class A common stock available for grant for future equity-based compensation awards under the Amended 2021 Plan.
During the three months ended March 31, 2026, no RSUs were granted under the Amended 2021 Plan, and a total of 1,461 that were previously granted were unvested as of March 31, 2026. Total unrecognized compensation cost related to the RSUs was $1,393 as of March 31, 2026, which is expected to be recognized over a weighted-average remaining period of 1.8 years.
As of March 31, 2026, a total of 12,256 stock option awards are outstanding under the Amended 2021 Plan, of which 6,237 are exercisable. A total of 200 stock option awards were granted during the three months ended March 31, 2026 and a total of 65 were exercised. As of March 31, 2026, the outstanding options have a remaining weighted-average contractual life of 1.4 years and total unrecognized stock-based compensation expense related to unvested options was $654, which is expected to be recognized over a weighted-average remaining period of 1.0 years.
During the three months ended March 31, 2026 and 2025, the Company recognized $121 and $378, respectively, of equity-based compensation expense within "General and administrative expenses" on the unaudited Condensed Consolidated Statements of Operations in the Financial Statements and recognized $326 and $1,138, respectively, within "Cost of goods sold."
In July 2021, the Company adopted an employee stock purchase plan (the "2021 ESPP"), pursuant to which 4,000 shares of Class A common stock are reserved for issuance thereunder, subject to certain adjustments and other terms. As of March 31, 2026, no shares have been issued under the 2021 ESPP.
Refer to Note 13, "Equity-Based Compensation Expense," in the Financial Statements for additional information regarding the Company's equity awards and equity-based compensation expense.
Lease-Related Transactions
Refer to Note 10, "Leases," in the Financial Statements for additional information regarding the Company's leases and lease-related transactions.
Legal Matters
Below is a description of our significant legal matters and the related impact, as applicable, on our financial condition, results of operations, and prospects. Refer to Note 15, "Commitments and Contingencies," in the Financial Statements for information regarding the Company's significant legal matters.
Green Thumb Industries Arbitration Matter
On February 11, 2026, the Company entered into a settlement agreement (the "Settlement Agreement") with Green Thumb Industries Inc. and TWD18, LLC (collectively, "GTI"), pursuant to which the parties agreed to resolve an arbitration matter that concerned certain contractual obligations and payment terms arising out of prior commercial arrangements between the parties for a negotiated payment amount of $17,000. This payment amount was included within "Accounts payable and accrued liabilities" on the unaudited Condensed Consolidated Balance Sheet as of December 31, 2025 and was subsequently paid on February 12, 2026, thereby satisfying the arbitration award and resolving all claims asserted in the arbitration proceeding. This matter is not expected to affect the Company's other commercial relationships with GTI and is not expected to result in a material disruption to the Company's ongoing operations.
State of Ohio Complaint
On February 6, 2026, the Attorney General of the State of Ohio filed a complaint against the Company and eight other multi-state operators ("MSOs") in the cannabis industry with operations in Ohio, alleging anticompetitive collusion among the MSOs to exclude single state operators based in Ohio from the cannabis market. The Company denies the claims with respect to the Company and plans to vigorously contest the case.
Pending Transactions and Other Activity
In April 2025, the Company entered into a definitive agreement pursuant to which the Company proposes to acquire an entity in Ohio that owns and operates a dispensary in Ohio and receive $1,000 of cash consideration in exchange for an entity that holds a conditional dispensary license that the Company expects to receive. This transaction is subject to certain closing conditions, including regulatory approvals. This transaction is with a specific buyer and the Company determined the underlying assets do not meet the criteria to be classified as held-for-sale as of March 31, 2026.
During the three months ended March 31, 2026, the Company remitted a total of $3,200 for deposits towards future potential transactions. These amounts are included within "Other current assets" on the unaudited Condensed Consolidated Balance Sheet in the Financial Statements as of March 31, 2026 and within "Payments for acquisition of businesses and related deposits, net of cash acquired" on the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2026.
Subsequent Transactions
The Company entered into a loan agreement through which the Company may, at its sole discretion, provide financing to Northeast Retail Partner Seven and will also provide certain business, operational, and financial advisory services to Northeast Retail Partner Seven pursuant to a support services agreement. Accordingly, the Company has determined that Northeast Retail Partner Seven has met the criteria to be consolidated as a VIE. In April 2026, Northeast Retail Partner Seven entered into a definitive agreement pursuant to which it anticipates acquiring licenses associated with two dispensaries in the Northeast. Total cash consideration for this transaction is $3,600, of which $800 was remitted in May 2026, with the remainder due at final closing and subject to customary closing adjustments, as applicable. The third party also anticipates assuming the leases for the dispensary locations. In conjunction with this definitive agreement, the parties also entered into a consulting services agreement pursuant to which the third party will advise on certain business, operational, and financial matters for a monthly fee while the transaction is pending. The Company is in the process of evaluating the accounting for the April 2026 transaction described herein and expects this transaction will be consolidated as a business combination as of the effective date.
Subsequent to the end of the quarter, the Company made the decision that it will temporarily suspend operations at its Lansing, Michigan facility toward the end of the second quarter of 2026 to prepare for remediation activities related to a fire incident at the site that was contained. The Company does not anticipate a material impact on its Michigan business.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accompanying Financial Statements are prepared in accordance with U.S. GAAP, which requires us to make certain estimates in the application of our accounting policies based on the best assumptions, judgments, and opinions of our management. The Company's significant accounting policies are described in Note 2, "Basis of Presentation and Significant Accounting Policies," in the Financial Statements. For a description of our critical accounting policies, see Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report. There have been no significant changes to our critical accounting policies and estimates discussed in our Annual Report.
Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements
For information about recently issued accounting standards that have not yet been adopted, see Note 2, "Basis of Presentation and Significant Accounting Policies," to the Financial Statements.
The Company is an emerging growth company under federal securities laws and as such we are able to elect to follow scaled disclosure requirements for this filing, including an extended transition period for complying with new or revised accounting standards applicable to public companies.
REGULATORY ENVIRONMENT: ISSUERS WITH UNITED STATES CANNABIS-RELATED ASSETS
In accordance with the Canadian Securities Administration Staff Notice 51-352, information regarding the current federal and state-level United States regulatory regimes in those jurisdictions where we are currently directly and indirectly involved in the cannabis industry, through our subsidiaries and investments, is incorporated by reference from subsections "Overview of Government Regulation," "Compliance with Applicable State Laws in the United States," and "State Regulation of Cannabis," under Item 1., "Business," of the Company's Annual Report, as filed with the SEC and with the relevant Canadian securities regulatory authorities under its profile on SEDAR+.
Ascend Wellness Holdings Inc. published this content on May 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 13, 2026 at 21:16 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]