Ascend Wellness Holdings Inc.

08/07/2025 | Press release | Distributed by Public on 08/07/2025 15:14

Quarterly Report for Quarter Ending June 30, 2025 (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 and six months ended June 30, 2025 and 2024. 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, 2024 (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 unit or share figures, except per-unit or 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, per-unit, 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 Morristown, 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 and to third-party licensed retail cannabis stores. 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 June 30, 2025, had direct or indirect operations or financial interests in seven United States geographic markets: Illinois, Maryland, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania. While we have been successful in opening facilities and dispensaries, we expect continued growth to be driven by opening new operational facilities and dispensaries under our current licenses and through partnership opportunities, expansion of our current facilities, and increased consumer demand. As of June 30, 2025, we employed approximately 2,300 people.
Our consumer products portfolio is generated primarily from plant material that we grow and process ourselves. As of June 30, 2025, we produce our consumer packaged goods in seven manufacturing facilities with 257,000 square feet of total canopy. During the three and six months ended June 30, 2025, we sold approximately 56,000 and 112,000 pounds of wholesale product, on a gross basis, respectively, compared to 47,000 and 93,000 pounds during the three and six months ended June 30, 2024, respectively. Our product portfolio consists of a range of cannabis product categories including flower, pre-rolls, concentrates, vapes, edibles, and other cannabis-related products. As of June 30, 2025, we have 44 open and operating retail locations, which includes 6 partner locations. We have fully-financed expansion plans to achieve a target of 60 total retail locations, including partner locations, in the medium-term. Our new store opening plans are flexible and will ultimately depend on market conditions, local licensing, construction, and other regulatory permissions. We are also pursuing opportunities to partner with social equity license holders to expand our presence in various states. All of our expansion plans are subject to capital allocations decisions, the evolving regulatory environment, and the general economic environment.
Recent Developments
Business Developments
The Company continues to focus on expansion opportunities across the markets in which it operates and remains committed to cost-savings initiatives, improvements in working capital management, and providing an enhanced customer experience. Some of the Company's recent business highlights include:
•entering into agreements to provide support to additional partner stores, including three that were added to our footprint during the quarter and several related to stores that are expected to be added by the end of the year;
•prepaying the remaining $60,000 that was outstanding under the previous credit facility utilizing $10,000 of cash on hand and the funding of $50,000 through new term loans that mature in July 2029, as further described in "Liquidity and Capital Resources"; and
•ending the period with $95,270 of cash and cash equivalents, an increase of $7,016 year-to-date, primarily driven by the generation of positive net cash from operating activities.
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 a consolidated variable interest entity ("VIE") ("Core Partnership One"), which entered into various transactions during the six months ended June 30, 2025, as further described below. Refer to Note 8, "Variable Interest Entities," in the Financial Statements for additional information regarding the Company's VIEs, including the Core Partnership One, and certain other transactions.
Core Partnership One Activity
In December 2024, Core Partnership One entered into a definitive agreement to acquire the membership interests of an entity that anticipates receiving two adult-use licenses, which agreement is subject to regulatory approval. In conjunction with this definitive agreement, the parties entered into certain management services agreements ("MSAs") pursuant to which Core Partnership One will provide management and advisory services for a set fee. These MSAs were subject to regulatory review and approval, which was received in February 2025. Based on the provisions of the agreements, Core Partnership One obtained operational and financial influence over the underlying entity and therefore recognized the transaction as an asset acquisition as of the February 2025 regulatory approval date of these MSAs. Total cash consideration for this transaction may be up to $4,000, subject to certain closing adjustments, which was allocated to the licenses acquired as of the effective date. Of the total consideration, $1,000 was paid at signing in December 2024 and is included within "Other non-current assets" on the unaudited Condensed Consolidated Balance Sheet in the Financial Statements as of December 31, 2024. A total of up to $1,500 is expected to be paid upon opening of the associated dispensary locations and a total of up to $1,500 is expected be paid upon final closing of the associated transaction. The total of the remaining payments is included as a sellers' note; refer to Note 11, "Debt" in the Financial Statements. Additionally, the Company recorded an acquisition-related deferred tax liability of $1,755, which was allocated to the license as additional cost basis as of the effective date. Refer to Note 4, "Acquisitions," and to Note 8, "Variable Interest Entities," for additional information.
In January 2025, Core Partnership One entered into a definitive agreement to acquire a conditional adult-use license, which agreement is subject to regulatory approval. Total cash consideration for this transaction is $1,900, which is due at final closing and is subject to certain closing adjustments. In conjunction with this definitive agreement, the parties entered into certain MSAs under which Core Partnership One will provide certain management and advisory services for a set fee. The parties also entered into a working capital loan and security agreement, under which Core Partnership One may loan up to $3,650 for the build-out of the associated dispensary. Based on the provisions of the MSAs and working capital loan, Core Partnership One obtained operational and financial influence over the underlying assets as of the February 2025 regulatory approval date of the MSAs. As such, this transaction was accounted for as an asset acquisition as of that date and the total consideration was allocated as the cost of the license acquired. The payment due at closing is included as a sellers' note; refer to Note 11, "Debt" in the Financial Statements. The associated dispensary opened in May 2025 and the Company anticipates that closing of the transaction may occur by the end of 2025. Refer to Note 4, "Acquisitions," and to Note 8, "Variable Interest Entities," for additional information.
Effective in March 2025, Core Partnership One acquired an entity that owns and operates an adult-use dispensary ("Core Partnership Dispensary Three") and also entered into a related MSA pursuant to which Core Partnership One will provide certain management and advisory services for a set fee while the underlying transaction is pending regulatory approval. Based on the provisions of this MSA, Core Partnership One obtained operational and financial influence over Core Partnership Dispensary Three and therefore recognized the transaction as a business combination as of the March 2025 regulatory approval date of this MSA. Total cash consideration for this transaction is $1,667, of which $833 was payable upon the regulatory approval of the MSA and the remainder is due at final closing, subject to certain closing adjustments. This agreement also provides for an earn-out payment, to be paid in cash, based on 3.2-times EBITDA (as defined) that is achieved during a specified twelve-month period, less the purchase price, and had an initial fair value estimate of $1,600. Refer to Note 4, "Acquisitions," and to Note 8, "Variable Interest Entities," for additional information.
Effective in May 2025, Core Partnership One acquired an entity that owns and operates an adult-use dispensary ("Core Partnership Dispensary Four") and also entered into a related MSA under which Core Partnership One will provide certain management and advisory services for a set fee while the underlying transaction is pending regulatory approval. Based on the provisions of this MSA, Core Partnership One obtained operational and financial influence over Core Partnership Dispensary Four and therefore recognized the transaction as a business combination as of the May 2025 regulatory approval date of this MSA. Total cash consideration for this transaction is $3,333, of which $1,667 was paid upon the regulatory approval of the MSA and the remainder will be due at final closing, subject to certain closing adjustments. This agreement also provides for an earn-out payment, to be paid in cash, based on 3.2-times EBITDA (as defined) that is achieved during a specified twelve-month period, less the purchase price, and had an initial fair value estimate of $1,900. Refer to Note 4, "Acquisitions," and to Note 8, "Variable Interest Entities," for additional information.
Core Partnership Three Loan Agreement
In February 2025, the Company and a third party ("Core Partnership Three") entered into a loan agreement pursuant to which the Company may provide to Core Partnership Three up to $2,500 of financing (the "Core Partnership Three Loan Agreement"). The Company has a direct equity ownership interest of 35% of the equity interests in the borrower and the Core Partnership Three Loan Agreement provides the Company with conversion options to obtain up to 100% at any time through the maturity date, subject to certain provisions and as may be permitted by applicable regulations. The Core Partnership Three Loan Agreement also contains certain provisions and restrictive covenants that provide the Company with operational and financial influence over Core Partnership Three and provides the Company with financial distributions based on the associated results of operations. The Company determined that the terms and provisions of the Core Partnership Three Loan Agreement create a variable interest in Core Partnership Three and met the criteria for consolidation as of such date.
The Company and Core Partnership Three entered into a definitive agreement to acquire an entity that received licensing approvals for the operation of an adult-use dispensary for a total of $650 of cash consideration. This agreement is subject to regulatory approval, which is expected to be received within six to twelve months following the signing date. The consideration was allocated to the cost of the license, of which $250 was paid at signing. The remaining $400 is due at the earlier of: (i) the first sale of cannabis at the associated dispensary, or (ii) the one year anniversary of the agreement date, and is included as a sellers' note; refer to Note 11, "Debt." Additionally, the Company recorded an acquisition-related deferred tax liability of $285, which was allocated to the license as additional cost basis as of the effective date. The Company will also assume the lease associated with the anticipated dispensary location. The non-controlling interest was determined to have a de minimisfair value and the net loss attributable to the non-controlling interest was not significant during the three and six months ended June 30, 2025. Since the entity is consolidated as a VIE, the intercompany activity related to the Core Partnership Three Loan Agreement is eliminated in consolidation. Refer to Note 8, "Variable Interest Entities," in the Financial Statements for additional information.
Core Partnership Four Loan Agreement
In March 2025, the Company and a third party ("Core Partnership Four") entered into a loan agreement pursuant to which the Company may provide to Core Partnership Four up to $2,500 of financing (the "Core Partnership Four Loan Agreement"). The Company has a direct equity ownership interest of 35% of the equity interests in the borrower and the Core Partnership Four Loan Agreement and associated agreements provide the Company with conversion options to obtain up to 100% at any time through the maturity date, subject to certain provisions and as may be permitted by applicable regulations. The Core Partnership Four Loan Agreement also contains provisions and restrictive covenants that provide the Company with operational and financial influence over Core Partnership Four and the underlying operating agreement provides the Company with financial distributions based on the associated results of operations. The Company determined that the terms and provisions of the Core Partnership Four Loan Agreement and associated agreements create a variable interest in Core Partnership Four and met the criteria for consolidation as of such date. The non-controlling interest was determined to have a de minimisfair value. Since the entity is consolidated as a VIE, the intercompany activity related to the Core Partnership Four Loan Agreement is eliminated in consolidation.
The Company and Core Partnership Four entered into a definitive agreement to acquire an entity that received licensing approvals for the operation of an adult-use dispensary, subject to regulatory approval which is expected to be received within six months following the signing date, for a total of $1,500 of cash consideration. Of the total consideration, $250 was paid as a deposit during the fourth quarter of 2024 and was included within "Other current assets" on the unaudited Condensed Consolidated Balance Sheet in the Financial Statements as of December 31, 2024, $250 was paid at signing, and the remaining $1,000 will be paid at final closing and is included as a sellers' note; refer to Note 11, "Debt" in the Financial Statements. The Company will also assume the lease associated with the dispensary location. Of the total consideration, $1,383 was allocated to the cost of the license as of the effective date and $117 was allocated to the security deposit for the associated lease, which had a lease liability and ROU asset of $872 and is classified as a finance lease; refer to Note 10, "Leases," for additional information regarding the Company's lease arrangements. Additionally, the Company recorded an acquisition-related deferred tax liability of $607, which was allocated to the license as additional cost basis as of the effective date. The net loss attributable to the non-controlling interest was not significant during the three and six months ended June 30, 2025. Refer to Note 8, "Variable Interest Entities," in the Financial Statements for additional information.
Non-Core Partnership Dispensary One
In May 2025, a consolidated VIE of the Company ("Non-Core Partnership One") entered into a definitive agreement to acquire an adult-use dispensary ("Non-Core Partnership Dispensary One"). The parties also entered into a consulting agreement under which Non-Core Partnership One will provide management and advisory services for a set fee, which became effective in June 2025 and will remain in place until regulatory approval of the definitive agreement is received and the underlying transaction thereby closes. Based on the provisions of this consulting agreement, Non-Core Partnership One obtained operational and financial influence over Non-Core Partnership Dispensary One and therefore recognized the transaction as a business combination as of the June 2025 effective date of this consulting agreement. Total cash consideration for Non-Core Partnership Dispensary One is $3,250, of which $813 was paid at signing and the remainder will be due at final closing, subject to certain closing adjustments. Refer to Note 4, "Acquisitions," and to Note 8, "Variable Interest Entities," for additional information.
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.
Key Financial Highlights
•Revenue decreased by $14,232, or 10%, during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, 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 partnerships.
•Operating loss was $1,002 during the three months ended June 30, 2025, as compared to $1,522 during the three months ended June 30, 2024, primarily resulting from improved margins and reduced general and administrative expenses, which were largely attributable to certain strategic initiatives implemented during the second half of 2024.
•Net increase in cash and cash equivalents of $7,016 during the six months ended June 30, 2025, primarily driven by improvements in working capital management, partially offset by investments in capital assets and payments associated with acquisitions.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2025 Compared with the Three Months Ended June 30, 2024
Three Months Ended
June 30,
($ in thousands) 2025 2024 Increase / (Decrease)
Revenue, net $ 127,304 $ 141,536 $ (14,232) (10)%
Cost of goods sold (85,912) (99,963) (14,051) (14)%
Gross profit 41,392 41,573 (181) NM*
Gross profit % 32.5 % 29.4 %
Operating expenses
General and administrative expenses 42,394 43,095 (701) (2)%
Operating loss
(1,002) (1,522) (520) (34)%
Other (expense) income
Interest expense (12,058) (8,535) 3,523 41%
Other, net 484 379 105 28%
Total other expense
(11,574) (8,156) 3,418 42%
Loss before income taxes
(12,576) (9,678) 2,898 30%
Income tax expense (11,831) (12,106) (275) (2)%
Net loss
$ (24,407) $ (21,784) $ 2,623 12%
*Not meaningful
Revenue
Revenue decreased by $14,232 during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. Net revenue from our wholesale operations declined by $7,613 resulting from increased competition and price compression across certain markets, particularly in Illinois and New Jersey, as well as from an increased focus on selling products through Company-owned and partner stores. During the three months ended June 30, 2025, we sold approximately 56,000 pounds of wholesale product, on a gross basis, compared to 47,000 pounds during the three months ended June 30, 2024. Revenue across legacy dispensary locations declined by $14,396, primarily driven by softness in Illinois and New Jersey that was partially offset by a benefit from adult-use sales in Ohio which began during the third quarter of 2024. Additionally, the decrease was partially offset by a contribution of $5,110 of incremental revenue from partner stores and by $2,667 of incremental revenue from new store openings that occurred in the second half of 2024 that were associated with previously acquired licenses.
Cost of Goods Sold and Gross Profit
Cost of goods sold decreased by $14,051 during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. Cost of goods sold represents direct and indirect expenses attributable to the production of wholesale products as well as direct expenses incurred in purchasing products from other wholesalers. Gross profit for the three months ended June 30, 2025 was $41,392, representing a gross margin of 32.5%, compared to gross profit of $41,573 and gross margin of 29.4% for the three months ended June 30, 2024. Gross margin for the current quarter benefited from improved realization at certain cultivation facilities, primarily Illinois and Massachusetts, and a benefit from a higher volume of Company-produced products sold through our retail stores. These benefits were largely offset by an impact from increased competition and pricing pressure across most of our markets, as well as a shift in mix between retail and wholesale products. The current period was also impacted by $5,142 of higher 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 decreased by $701, or 2%, during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The decrease was primarily driven by $405 of lower professional services fees resulting from certain cost-savings initiatives and the absence of a $2,744 reserve recognized in the prior year related to certain amounts associated with a previous transaction. These benefits were partially offset by $1,943 of higher overhead expenses, primarily associated with the expansion of operations, and $673 of higher depreciation and amortization, which was attributable to a larger average balance of fixed assets in service and the incremental amortization of licenses from prior year acquisitions.
Interest Expense
Interest expense increased by $3,523, or 41%, during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, primarily driven by higher cash interest expense associated with new term notes (refer to "Liquidity and Capital Resources" for further information). During the three months ended June 30, 2025, the Company had a weighted-average outstanding debt balance of $346,661 with a weighted-average interest rate of 11.6%, excluding finance leases, compared to a weighted-average debt balance of $312,923 during the three months ended June 30, 2024 with a weighted-average interest rate of 9.5%.
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 internal revenue service has taken the position that cannabis companies are subject to the limitations of Internal Revenue Code ("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 June 30, 2025, the Company recorded an uncertain tax liability totaling $172,945 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 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.
Income tax expense was $11,831, or 28.6%, of gross profit, during the three months ended June 30, 2025, as compared to $12,106, or 29.1%, of gross profit, during the three months ended June 30, 2024. The effective tax rate on gross profit for the three months ended June 30, 2025 benefited from an incremental impact attributable to the tax treatment of certain acquired intangible assets, partially offset by higher penalties and interest due on tax payments and uncertain tax positions. Refer to Note 14, "Income Taxes," in the Financial Statements for additional information regarding the Company's income taxes.
RESULTS OF OPERATIONS
Six Months Ended June 30, 2025 Compared with the Six Months Ended June 30, 2024
Six Months Ended
June 30,
($ in thousands) 2025 2024 Increase / (Decrease)
Revenue, net $ 255,301 $ 283,946 $ (28,645) (10)%
Cost of goods sold (174,348) (190,336) (15,988) (8)%
Gross profit 80,953 93,610 (12,657) (14)%
Gross profit % 31.7 % 33.0 %
Operating expenses
General and administrative expenses 79,469 92,557 (13,088) (14)%
Operating profit
1,484 1,053 431 41%
Other (expense) income
Interest expense (23,248) (17,073) 6,175 36%
Other, net 961 689 272 39%
Total other expense
(22,287) (16,384) 5,903 36%
Loss before income taxes (20,803) (15,331) 5,472 36%
Income tax expense (22,862) (24,616) (1,754) (7)%
Net loss $ (43,665) $ (39,947) $ 3,718 9%
Revenue
Revenue decreased by $28,645, or 10%, during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. Revenue across legacy dispensary locations declined by $32,342 across our legacy locations, primarily driven by softness in Illinois and New Jersey that was partially offset by a benefit from adult-use sales in Ohio which began during the third quarter of 2024. Additionally, the decrease was partially offset by a contribution of $8,329 of incremental revenue from partner stores and by $6,541 of incremental revenue from new store openings that occurred in the second half of 2024 that were associated with previously acquired licenses. Net revenue from our wholesale operations declined by $11,173 resulting from increased competition and price compression across certain markets, particularly in Illinois and New Jersey, as well as from an increased focus on selling products through Company-owned and partner stores. During the six months ended June 30, 2025, we sold approximately 112,000 pounds of wholesale product, on a gross basis, compared to 93,000 pounds during the six months ended June 30, 2024.
Cost of Goods Sold and Gross Profit
Cost of goods sold decreased by $15,988, or 8%, during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. Cost of goods sold represents direct and indirect expenses attributable to the production of wholesale products as well as direct expenses incurred in purchasing products from other wholesalers. Gross profit for the six months ended June 30, 2025 was $80,953, representing a gross margin of 31.7%, compared to gross profit of $93,610 and gross margin of 33.0% for the six months ended June 30, 2024. Gross margin in the current year was impacted by increased competition and pricing pressure across most of our markets, particularly in New Jersey and Illinois, as well as a shift in mix between retail and wholesale products. These impacts were partially offset by improved realization at certain cultivation facilities, primarily Illinois and Massachusetts, and benefit from a higher volume of Company-produced products sold through our retail stores. The current period was also impacted by $6,442 of higher 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 decreased by $13,088, or 14%, during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The decrease was primarily driven by:
•a $7,622 decrease in total compensation expense, including $9,146 lower equity-based compensation expense that was largely due to the acceleration of certain awards in the prior year and from strategic streamlining initiatives that were implemented in late 2024, partially offset by slightly higher headcount in the current year due to the expansion of operations;
•the absence of a $5,447 estimated reserve recognized in the prior year related to certain amounts associated with a previous transaction;
•the absence of a $984 discount on a long-term receivable recognized in the prior year; and
•$260 of lower professional service fees resulting from certain cost-savings initiatives.
These decreases were partially offset by a $1,955 increase in overhead expenses, primarily associated with the expansion of operations, and a $655 increase in depreciation and amortization expense, which was attributable to a larger average balance of fixed assets in service.
Interest Expense
Interest expense increased by $6,175, or 36%, during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, primarily driven by higher cash interest expense associated with new term notes (refer to "Liquidity and Capital Resources" for further information). During the six months ended June 30, 2025, the Company had a weighted-average outstanding debt balance of $345,027 with a weighted-average interest rate of 11.6%, excluding finance leases, compared to a weighted-average debt balance of $314,149 during the six months ended June 30, 2024 with a weighted-average interest rate of 9.5%.
Income Tax Expense
Income tax expense was $22,862, or 28.2%, of gross profit, during the six months ended June 30, 2025, as compared to $24,616, or 26.3%, of gross profit, during the six months ended June 30, 2024. The effective tax rate on gross profit for the six months ended June 30, 2025 was impacted by higher penalties and interest due on tax payments and uncertain tax positions, partially offset by a benefit from an incremental impact attributable to the tax treatment of certain acquired intangible 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, and gain or loss on sale of assets. Accordingly, management believes that Adjusted EBITDA provides meaningful and useful financial information, as this measure demonstrates the operating performance of the business. 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 following table presents Adjusted Gross Profit for the three and six months ended June 30, 2025 and 2024:
Three Months Ended
June 30, 		Six Months Ended
June 30,
($ in thousands) 2025 2024 2025 2024
Gross Profit $ 41,392 $ 41,573 $ 80,953 $ 93,610
Depreciation and amortization included in cost of goods sold 8,581 7,105 18,281 14,767
Equity-based compensation included in cost of goods sold 164 4,336 1,302 6,547
Non-cash inventory adjustments(1)
5,142 - 6,916 474
Adjusted Gross Profit $ 55,279 $ 53,014 $ 107,452 $ 115,398
Adjusted Gross Margin 43.4 % 37.5 % 42.1 % 40.6 %
(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 and six months ended June 30, 2025 and 2024:
Three Months Ended
June 30, 		Six Months Ended
June 30,
($ in thousands) 2025 2024 2025 2024
Net loss
$ (24,407) $ (21,784) $ (43,665) $ (39,947)
Income tax expense 11,831 12,106 22,862 24,616
Other, net (484) (379) (961) (689)
Interest expense 12,058 8,535 23,248 17,073
Depreciation and amortization 17,830 15,681 36,230 32,061
Non-cash inventory adjustments(1)
5,142 - 6,916 474
Equity-based compensation 288 7,515 1,804 16,195
Start-up costs(2)
3,880 951 4,616 1,445
Transaction-related and other non-recurring expenses(3)
2,405 5,721 4,468 9,604
Loss (gain) on sale of assets
17 - 55 (11)
Adjusted EBITDA $ 28,560 $ 28,346 $ 55,573 $ 60,821
Adjusted EBITDA Margin 22.4 % 20.0 % 21.8 % 21.4 %
(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, unallocated overhead expenses at certain cultivation facilities, and other expenses resulting from delays in regulatory approvals. Also includes other one-time or non-recurring expenses, as applicable.
(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. The three and six months ended June 30, 2025 each include approximately $700 of expenses associated with our May 2025 term loans and the six months ended June 30, 2025 includes approximately $400 of expenses associated with our January 2025 term loans. The three and six months ended June 30, 2025 also each include approximately $100 of fair value adjustments associated with acquisition earn-outs. The three and six months ended June 30, 2024 include a reserve of $2,744 and $5,774, respectively, related to certain amounts associated with a previous transaction and $490 and $630, respectively, of fair value adjustments related to an acquisition earn-out. The six months ended June 30, 2024 also includes $984 recognized as a discount on a noncurrent receivable.
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, for capital expenditures and improvements in existing facilities, 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, and in August 2021 we entered into a credit facility under which we initially borrowed a $210,000 term loan and we subsequently borrowed an additional $65,000 during the second quarter of 2022. 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 June 30, 2025 and December 31, 2024, we had total current liabilities of $100,790 and $144,541, respectively, and total current assets of $225,654 and $229,376, respectively, which includes cash and cash equivalents of $95,270 and $88,254, respectively, to meet our current obligations. As of June 30, 2025, we had working capital of $124,864, compared to $84,835 as of December 31, 2024.
Approximately 94% and 93% of our cash and cash equivalents balance as of June 30, 2025 and December 31, 2024, 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 had an accumulated deficit as of June 30, 2025 and December 31, 2024, as well as a net loss for the six months ended June 30, 2025 and 2024, which are indicators that raise substantial doubt of our ability to continue as a going concern. Management believes that substantial doubt of our ability to continue as a going concern for at least one year from the issuance of our Financial Statements has been alleviated due to the cash balance on hand and the generation of positive net cash provided by operating activities. Management plans to 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 Notes Offering
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 outstanding under the 2021 Credit Facility, as further described below. The 2024 Term Notes were funded by a combination of new and existing lenders. Borrowings from these existing lenders were accounted for as a modification of existing debt. The Company incurred approximately $3,600 of other expenses associated with this transaction that were not capitalizable. 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 January 2025 Term Notes and the July 2024 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, as further described below. The January 2025 Term Notes and the May 2025 Term Notes were funded by existing lenders and met the criteria for modification accounting treatment. The total of the original issue discount and other capitalized direct financing fees was approximately $700 for the January 2025 Term Notes and $1,600 for the May 2025 Term Notes, which amounts will be amortized over the associated terms using the straight-line method, which approximates the interest method. The Company incurred approximately $400 of other expenses associated with the January 2025 Term Notes and $700 associated with the May 2025 Term Notes which were not capitalizable and are included within "General and administrative expenses" on the unaudited Condensed Consolidated Statements of Operations in the Financial Statements for the respective periods.
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, which is included within "Accounts payable and accrued liabilities" on the unaudited Condensed Consolidated Balance Sheet in the Financial Statements as of June 30, 2025. 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 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 equal to: zero through July 15, 2026, 4.5% if paid between July 16, 2026 through July 15, 2027, 3.0% if paid between July 16, 2027 through July 15, 2028, and zero if paid July 16, 2028 and thereafter. 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. In January 2025, the July 2024 Loan Agreement was amended to modify certain terms and provisions, which amended terms and provisions were not due to actual or anticipated covenant violations. 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 June 30, 2025. 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 Company's debt transactions.
Credit Facility
In August 2021, we entered into a credit agreement with a group of lenders (the "2021 Credit Agreement") that provided for an initial term loan of $210,000, which was borrowed in full. The 2021 Credit Agreement provided for an expansion feature that allowed us to request an increase in the term loan outstanding up to $275,000 if the existing lenders (or other lenders) agreed to provide such additional term loans. During the second quarter of 2022, we borrowed an additional $65,000 of incremental term loans through this expansion feature (the "2022 Loans" and, together with the initial term loan, the "2021 Credit Facility") for total borrowings of $275,000. The proceeds from the initial term loan under the 2021 Credit Facility were used, in part, to prepay certain then-outstanding debt obligations and, together with the 2022 Loans, fund working capital and general corporate matters, including, but not limited to, growth investments, acquisitions, capital expenditures, and other strategic initiatives.
The 2021 Credit Facility had a maturity date of August 27, 2025 and did not require scheduled principal amortization payments. Prepayments were permitted at any time, subject to a customary make-whole payment or prepayment penalty, as applicable. In July 2024, the Company prepaid $215,000 of borrowings outstanding under the 2021 Credit Facility (the "July 2024 Prepayment"), primarily utilizing the proceeds from the issuance of the 2024 Term Notes, as discussed above. The Company recognized, as a component of interest expense during the third quarter of 2024, a loss on extinguishment of $5,475 related to the July 2024 Prepayment, which included $3,527 of prepayment fees and the write-off of $1,948 of unamortized deferred financing costs that were attributable to those lenders who did not provide funding under the 2024 Term Notes. A total of $1,579 of prepayment fees and $1,428 of previously unamortized deferred financing costs that were associated with existing lenders remained capitalized and were deferred over the term of the 2024 Term Notes in accordance with modification treatment. A total of $943 of unamortized deferred financing costs were associated with the portion of the 2021 Credit Facility that was not prepaid and were amortized through the remaining term of those loans.
A total of $60,000 remained outstanding under the 2021 Credit Agreement following the July 2024 Prepayment and was subsequently prepaid in full in May 2025 (the "May 2025 Prepayment") utilizing the proceeds from the May 2025 Term Notes, along with cash on hand, as further described above. In conjunction with the May 2025 Prepayment, the Company recognized a loss on extinguishment of $126, primarily consisting of unamortized deferred financing costs that were then-outstanding. Following the May 2025 Prepayment, the 2021 Credit Facility was terminated and the obligations thereunder were considered satisfied in full. Refer to Note 11, "Debt," in the Financial Statements for additional information regarding the 2021 Credit Facility and the Company's other debt transactions.
Cash Flows
Six Months Ended June 30,
(in thousands) 2025 2024
Net cash provided by operating activities
$ 23,740 $ 36,154
Net cash used in investing activities (16,436) (18,863)
Net cash used in financing activities
(288) (6,086)
Operating Activities
Net cash provided by operating activities decreased by $12,414 during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The prior year includes a benefit from tax refunds totaling approximately $17,800 and the current year reflects improvements in working capital management, including a net benefit from the collection of receivables and the timing of payments to suppliers and vendors.
Investing Activities
Net cash used in investing activities decreased by $2,427 during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The prior year includes the collection of a note receivable, whereas the current year benefited from lower payments associated with acquisitions.
Financing Activities
Net cash used in financing activities was $288 during the six months ended June 30, 2025, as compared to $6,086 during the six months ended June 30, 2024. The current period reflects the receipt of proceeds from the issuance of the January 2025 Term Notes and May 2025 Term Notes, net of related financing costs, largely offset by the May 2025 Prepayment and repurchases of common stock. The prior year primarily reflects the remittance of taxes withheld under equity-based compensation plans.
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 June 30, 2025:
(in thousands) Commitments Due by Period
Contractual Obligations Total Remainder of 2025 2026 - 2027 2028 - 2029 Thereafter
Term notes(1)
$ 300,000 $ - $ - $ 300,000 $ -
Fixed interest related to term notes(2)
172,178 18,968 76,500 76,710 -
Sellers' notes(3)
22,237 11,000 11,237 - -
Finance arrangements(4)
19,876 1,273 5,257 5,238 8,108
Operating leases(5)
610,581 19,919 81,696 85,773 423,193
Finance leases(5)
53,530 3,061 10,869 10,058 29,542
Total $ 1,178,402 $ 54,221 $ 185,559 $ 477,779 $ 460,843
(1)Principal payments due under our term notes payable as of June 30, 2025. Refer to Note 11, "Debt," in the Financial Statements for additional information.
(2)Represents fixed interest rate payments on borrowings under our term notes payable based on the principal outstanding as of June 30, 2025. Interest payments could fluctuate based on prepayments or additional amounts borrowed.
(3)Consists of amounts owed for acquisitions or other purchases. 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.
(4)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.
(5)Reflects our contractual obligations to make future payments under non-cancelable leases. Refer to Note 10, "Leases," in the Financial Statements for additional information.
The table above excludes up to a 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 the second quarter of 2025. The remainder will be 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.
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 capital expenditures, net of tenant improvement allowances, totaling approximately $30,000 to $35,000 for 2025. 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 include construction costs for the initial build-out of each location, general maintenance costs, and upgrades to existing locations.
During 2025, we expect to build out additional dispensaries across our network, including partner dispensaries. 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 June 30, 2025, our construction in progress ("CIP") balance was $10,539 and relates to capital spending on projects that were not yet complete. This balance includes amounts related to certain expansion projects at our New Jersey, Illinois, and Massachusetts cultivation facilities, partner dispensary build-outs, and other projects across our dispensaries and cultivation facilities.
Share Repurchase Program
In December 2024, the Company's board of directors (the "Board") authorized a share buyback program (the "Buyback Program") which permits the Company to repurchase up to the lesser of: (i) 10,216 shares of the Company's Class A common stock; and (ii) $2,250 worth of shares of Class A common stock, in the open market pursuant to a normal course issuer bid, subject to applicable legal, regulatory, and contractual requirements. The total number of shares purchased, timing of purchases, and share prices are dependent upon market conditions and business considerations, any applicable securities law requirements, CSE rules, and any determination of best use of cash available at the time. Any such shares purchased will be retired. The Buyback Program will expire on January 1, 2026, and may be suspended, terminated, or modified at any time for any reason and the Company is under no obligation to purchase any such shares for the duration of the Buyback Program. As of June 30, 2025, a total of 2,723 shares had been repurchased under the Buyback Program for an aggregate cost, inclusive of fees, of $994. As of June 30, 2025, approximately $1,256 worth of share purchases remains available under the Buyback Program. Refer to Note 12, "Stockholders' Equity," in the Financial Statements for additional information regarding the Company's capital structure.
Other Matters
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 June 30, 2025, there were 13,123 shares of Class A common stock available for grant for future awards under the Amended 2021 Plan.
During the six months ended June 30, 2025, the Company granted a total of 225 RSUs under the Amended 2021 Plan and a total of 4,075 granted are unvested as of June 30, 2025. Total unrecognized compensation cost related to the RSUs was $3,162 as of June 30, 2025, which is expected to be recognized over a weighted-average remaining period of 2.2 years.
As of June 30, 2025, a total of 3,126 stock option awards are outstanding under the Amended 2021 Plan, of which 2,841 are exercisable. No options were granted during the six months ended June 30, 2025 and none were exercised. As of June 30, 2025, the outstanding options have a remaining weighted-average contractual life of 2.4 years and total unrecognized compensation cost related to unvested options was $145, which is expected to be recognized over a weighted-average remaining period of 1.4 years. In July 2025, the Company granted a total of 9,942 of stock options with an exercise price of $0.35, of which 12.5% vested on the grant date and the remaining vest quarterly over a two-year period.
During the three months ended June 30, 2025 and 2024, the Company recognized $124 and $3,179, 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 $1,302 and $6,547, respectively, within "Cost of goods sold." During the six months ended June 30, 2025 and 2024, the Company recognized $502 and $9,648, respectively, of expense within "General and administrative expenses" and $1,302 and $6,547, 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 June 30, 2025, 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 information regarding the Company's leases and lease-related transactions.
Legal Matters
Refer to Note 15, "Commitments and Contingencies," in the Financial Statements for information regarding the Company's significant legal matters.
Pending Transactions
In February 2025, Non-Core Partnership One entered into a definitive agreement through which it anticipates acquiring two adult-use dispensaries, subject to certain closing conditions, including regulatory approval which had not been received as of June 30, 2025. Total cash consideration for this transaction is $7,850, subject to certain closing adjustments, including the settlement of a note outstanding, and of which $250 was paid at signing. This transaction also provides for an earn-out payment, payable in cash, in an amount equal to the lesser of $2,000 or three times the Annual EBITDA (as defined) during the one-year period following closing. Refer to Note 8, "Variable Interest Entities," in the Financial Statements for additional information.
In April 2025, the Company entered into a definitive agreement pursuant to which the Company proposes to exchange its Ohio cultivation license and facility and related assets (the "Ohio Cultivation Assets") for an entity that anticipates obtaining an adult-use license in New Jersey and $1,000 of cash consideration. Pursuant to this definitive agreement, the Company also proposes to acquire an entity in Ohio that owns and operates a dispensary in Ohio in exchange for a conditional dispensary license that the Company expects to receive, plus an additional $1,000 of cash consideration. This transaction is subject to certain closing conditions, including regulatory approvals. The Ohio Cultivation Assets were being contemplated for sale in this specific transaction with this specific buyer and the Company determined the Ohio Cultivation Assets do not meet the criteria to be classified as held-for-sale as of June 30, 2025. The total of the Ohio Cultivation Assets was approximately $8,800 as of June 30, 2025, including $4,000 of intangible assets, net, $3,000 of goodwill, $1,200 of inventory, and $300 of property and equipment, net.
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 August 07, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on August 07, 2025 at 21:15 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]