Planet 13 Holdings Inc.: Form 10-Q for the period ended Jun 30, 2026

This management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of Planet 13 is for the three and six months ended June 30, 2026. It is supplemental to, and should be read in conjunction with, our unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2026 and 2025, and the accompanying notes presented herein. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Financial information presented in this MD&A is presented in United States dollars (“$”, “USD” or “US$”), unless otherwise indicated.

In this MD&A, unless the context otherwise requires, the terms “we,” “us,” “our,” “Company,” or “Planet 13” refer to Planet 13 Holdings Inc. together with its wholly owned subsidiaries.

This MD&A contains certain “forward-looking statements” and certain “forward-looking information” as defined under applicable United States and Canadian securities laws. Please refer to the discussion of forward-looking statements and information set out under the heading “Cautionary Note Regarding Forward-Looking Statements,” identified in this Quarterly Report on Form 10-Q. As a result of many factors, our actual results may differ materially from those anticipated in these forward-looking statements and information.

Overview

We are a multi-state cannabis operator with licenses to operate in Nevada, California, Florida, and Illinois. We are headquartered in Las Vegas, Nevada.

As of June 30, 2026, we employed approximately 650 people and remain focused on providing our customers with the best products, best services, and an experiential shopping experience at our superstore-themed dispensary while expanding our products and sales through neighborhood stores. Each of our state operations is held in state-focused subsidiaries: (a) Newtonian Principles, Inc. for California-licensed cannabis dispensing and distribution activities, (b) Next Green Wave, LLC for California-licensed cannabis cultivation and production activities, (c) MM Development Company, Inc. for all licensed Nevada cannabis cultivation, production, distribution, and dispensing, (d) VidaCann LLC. (“VidaCann”) which holds our Florida Medical Marijuana Treatment Center (“MMTC”) license, and (e) Planet 13 Illinois, LLC (“Planet 13 Illinois”) which holds an Illinois social-equity justice impaired dispensing license. We have focused on our large-store dispensing stores as superstores which offer an experiential approach to our customers, including drones, robotics, 3-D mapping projection, cannabis-culture inspired social-media backdrops for customer interaction, customer-facing production, one-on-one sales staffing and customer education, and other interactive marketing elements to differentiate from more traditional dispensing locations, which we refer to herein as “neighborhood stores”. Each of our cannabis facilities is state-licensed as an adult-use cannabis facility, a medical cannabis facility, or a dual-use facility, allowing for both adult-use and medical cannabis licensed activity, as designated below in the state-by-state breakdown.

On July 26, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Vireo Growth Inc., a British Columbia corporation (“Vireo” or “Parent”), and Supernova Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of Vireo (“Merger Sub”), pursuant to which Vireo will, as a result of the merger contemplated thereby, acquire all of the issued and outstanding equity interests of the Company. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger” and, together, with the other transactions contemplated by the Merger Agreement, the “Transactions”), with the Company surviving as a direct wholly owned subsidiary of Vireo. Capitalized terms used but not defined herein have the meanings given to them in the Merger Agreement, except as otherwise indicated.

The Company’s board of directors (the “Company Board”), acting on the unanimous recommendation of a special committee of the Company Board, consisting solely of directors who are independent and disinterested directors of the Company (the “Special Committee”), has unanimously, among other things, (i) determined that the Merger Agreement and the transactions contemplated thereby are fair to, and in the best interests of, the Company and its stockholders, (ii) approved, authorized, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby and (iii) resolved to recommend that the stockholders of the Company vote in favor of the adoption of the Merger Agreement and the approval of transactions contemplated thereby, including the Merger.

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, no par value, of the Company (“Company Common Stock”) that is issued and outstanding as of immediately prior to the Effective Time (other than Canceled Shares and Dissenting Shares) will be automatically cancelled, extinguished and converted into the right to receive 0.015383618 (the “Exchange Ratio”) of a subordinate voting share of Parent (the “Parent Shares” and such amount, the “Merger Consideration”).

Representations and Warranties; Covenants

The Company, Parent and Merger Sub have each made customary representations, warranties and covenants in the Merger Agreement. Among other things, the Company has agreed, subject to certain exceptions, from the date of the Merger Agreement until the earlier to occur of the termination of the Merger Agreement in accordance with its terms and the Effective Time, subject to specified exceptions, to, (i) use reasonable best efforts to conduct the business of the Company and its Subsidiaries in all material respects in the ordinary course of business and in a manner consistent with past practice and, to the extent consistent therewith, use reasonable best efforts to preserve in all material respects its assets and business organization and maintain in all material respects its existing business relations and goodwill with customers, suppliers, licensors, distributors, Governmental Authorities, independent contractors, employees, and business partners with whom the Company has material business relations, and (ii) not to take certain actions prior to the Effective Time without the prior written consent of Parent.

Treatment of Company Equity Awards

Company Options

At the Effective Time, each option to purchase shares of Company Common Stock (each such option, a “Company Option”) that has a per share exercise price that is greater than or equal to the per share value of a Parent Share multiplied by the Exchange Ratio (each, an “Underwater Option”), will, by virtue of the Merger, be cancelled and terminated for no consideration or payment and shall cease to provide the holder with the right to acquire shares of the Company or Parent or otherwise represent any right to any equity interest in Parent or any Affiliate. Immediately prior to the Effective Time, such Underwater Options will be cancelled and terminated without further action of the holder or the parties to the Merger Agreement. At the Effective Time, each Company Option (if any) that is not an Underwater Option and that is outstanding and unexercised immediately prior thereto, whether vested or unvested, will by virtue of the Merger and without any action on the part of any holder of any Company Option or any other Person, be converted into a Parent Option in accordance with the Merger Agreement.

Company RSU Awards

Prior to the Effective Time, the Company will take all actions necessary or appropriate to cause each award of restricted stock units of the Company (a “Company RSU Award”) that is outstanding as of immediately prior to such acceleration, whether vested or unvested, to become fully vested immediately prior to the Effective Time. In connection with such acceleration, the Company will issue to each holder of a Company RSU Award the shares of Company Common Stock underlying such Company RSU Award, subject to the Company’s satisfaction of all applicable tax withholding obligations in accordance with applicable Law, the applicable Company Equity Plan and award agreement, and the Merger Agreement. Each share of Company Common Stock issued pursuant to the preceding sentence will be issued and outstanding immediately prior to the Effective Time and will be converted into the right to receive the Merger Consideration.

Treatment of Company Warrants

At the Effective Time, subject to the option of holders thereof to receive the alternative consideration in respect thereof as set forth in, and in accordance with, the terms of each warrant to purchase Company Common Stock issued by the Company that are issued and outstanding immediately prior to the Effective Time (collectively, the “Company Warrants”), Company Warrants shall become exercisable into Parent Shares in accordance with their terms. Consistent with the terms of the Company Warrants, any such Company Warrant shall be exercisable for a number of Parent Shares (if applicable, rounded in accordance with the terms of the Company Warrants) equal to the product of (x) the aggregate number of shares of Company Common Stock issuable in respect of such Company Warrants immediately prior to the Effective Time multiplied by (y) the Exchange Ratio (the “Assumed Warrants”) and the exercise price (rounded up to the nearest whole cent) of the Assumed Warrants will equal (i) the Exercise Price (as defined in the Company Warrants) of the Company Warrants in effect immediately prior to the Effective Time, divided by (ii) the Exchange Ratio.

Closing Conditions

The closing of the Merger is subject to the satisfaction of certain conditions, including (i) the adoption of the Merger Agreement by (a) the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon; and (b) the affirmative vote of a simple majority of the votes cast by holders, excluding the votes for shares of Company Common Stock held or controlled by persons described in items (a) through (d) of Section 8.1(2) of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions of the Canadian Securities Administrators, at a special meeting of the Company’s stockholders; and (ii) other customary conditions for a transaction of this type, such as the absence of any legal restraint prohibiting the consummation of the Transactions, the accuracy of the Company’s representations and warranties contained in the Merger Agreement and the absence of any Company Material Adverse Effect since the date of the Merger Agreement.

Non-Solicitation; Company Adverse Recommendation Change

From the date of the Merger Agreement until the earlier of the Effective Time or termination of the Merger Agreement in accordance with its terms, the Company is subject to customary “no-shop” restrictions requiring the Company not to, among other things, directly or indirectly, (a) initiate, seek, solicit, facilitate or knowingly encourage, or induce or take any other action designed or intended to lead to, or that would reasonably be expected to lead to, any inquiry with respect to, or the making, submission or announcement of, any Company Acquisition Proposal, (b) enter into, continue or otherwise participate in any negotiations or discussions with, or furnish or cause to be furnished any information or data to, or furnish access to the Company’s (or any of its Subsidiaries’) properties with respect to, or otherwise cooperate in any way with, any Person (other than Parent or any of its Affiliates or Representatives) relating to any Company Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to any Company Acquisition Proposal, or grant any waiver or release under (or terminate, amend or modify any provision of), or fail to enforce to the fullest extent permitted under applicable Law, any confidentiality or standstill or similar agreement, (c) execute or enter into any binding or non-binding letter of intent, agreement in principle, memorandum of understanding, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other agreement, commitment, arrangement or understanding relating to or in connection with, or that is intended to or would reasonably be expected to lead to, any Company Acquisition Proposal, (d) submit to the stockholders of the Company for their approval any Company Acquisition Proposal or Company Superior Proposal, or (e) resolve to do, or agree or announce an intention to do, any of the foregoing.

The Company may, however, prior to obtaining the Company Stockholder Approval, engage in negotiations or substantive discussions with, or furnish any information to, a third party that has made a bona fide, written Company Acquisition Proposal that did not result from a breach of the non-solicitation provisions of the Merger Agreement if the Special Committee and the Company determine in good faith (after consultation with their respective financial advisors and outside legal counsel) that (x) such Company Acquisition Proposal constitutes or is reasonably likely to constitute a Company Superior Proposal and (y) failure to take such action would be inconsistent with the fiduciary duties of the Special Committee or the Company Board under applicable Law.

If, at any time prior to the receipt of the Company Stockholder Approval, the Company, the Company Board or the Special Committee receives a Company Superior Proposal that did not result from a breach of the non-solicitation provisions of the Merger Agreement, the Company Board or the Special Committee may authorize and cause the Company, in certain circumstances, to make a Company Adverse Recommendation Change and cause the Company to terminate the Merger Agreement and to concurrently enter into a definitive agreement relating to a Company Superior Proposal, subject to complying with specified notice requirements to Parent and other conditions set forth in the Merger Agreement, including paying the Company Termination Fee (as defined below) to Parent in specified circumstances, as described below.

Termination Rights

The Merger Agreement contains certain customary termination rights for the Company and Parent, including, (i) if the Merger is not consummated on or before 5:00 p.m. (New York City time) on July 26, 2027, subject to extension to October 26, 2027, solely to the extent that the requisite cannabis regulatory approvals have not been obtained (as extended, if applicable, the “Termination Date”), (ii) if the Company Stockholder Approval is not obtained at a meeting of Company stockholders (or any adjournment or postponement thereof) at which a vote is taken on the adoption of the Merger Agreement, (iii) if the other party breaches its representations, warranties or covenants in a manner that would cause the conditions to the closing of the Transactions with respect to such representations, warranties or covenants to not be satisfied and fails to cure such breach within the applicable cure period, (iv) if any Governmental Authority of competent jurisdiction shall have issued or entered any Order after the date of the Merger Agreement or any Law shall have been enacted or promulgated after the date of the Merger Agreement that has the effect of permanently restraining, enjoining, rendering illegal or otherwise prohibiting the Merger or other transactions contemplated by the Merger Agreement, and in the case of such an Order, such Order shall have become final and non-appealable, and (v) by mutual written agreement of Parent and the Company. In addition, (x) subject to compliance with certain terms of the Merger Agreement, the Merger Agreement may be terminated by the Company (prior to obtaining the Company Stockholder Approval) in order to enter into a definitive agreement providing for a Company Superior Proposal and (y) the Merger Agreement may be terminated by Parent if the Company Board or the Special Committee shall have made a Company Adverse Recommendation Change or the Company or the Company Board, as applicable, shall have materially breached any of its obligations under certain non-solicitation provisions of the Merger Agreement.

Termination Fee

If the Merger Agreement is terminated (i)(a) by Parent on the basis of a breach of a covenant or agreement contained in the Merger Agreement or (b) by either Parent or the Company if the Merger is not consummated on or before the Termination Date or if the Company Stockholder Approval is not obtained at a meeting of Company stockholders (or any adjournment or postponement thereof) at which a vote is taken on the adoption of the Merger Agreement, and prior to such termination, a Company Acquisition Proposal has been publicly disclosed and not publicly withdrawn at least three business days prior to the Company Stockholders’ Meeting or is otherwise known to the Company Board and not withdrawn and within nine months after any such termination, any Company Acquisition Proposal is consummated or the Company enters into a definitive agreement with respect to any Company Acquisition Proposal (regardless of when or whether such transaction is ultimately consummated), (ii) by the Company at any time prior to receipt of the Company Stockholder Approval, in order for the Company to enter into a definitive agreement with respect to a Company Superior Proposal to the extent permitted by the Merger Agreement, or (iii) by Parent if the Company Board or the Special Committee shall have made a Company Adverse Recommendation Change or the Company or the Company Board, as applicable, shall have materially breached any of its obligations under certain non-solicitation provisions of the Merger Agreement, then the Company will be required to pay Parent a termination fee equal to $1,800,000 (the “Termination Fee”).

Concurrently with the execution of the Merger Agreement, and as a condition and inducement to Parent’s willingness to enter into the Merger Agreement, each of Larry Scheffler, Robert Groesbeck, David Loop and Christopher Wren, and certain Affiliates of each of them, entered into a voting agreement (collectively, the “Voting Agreements”) with Parent, pursuant to which each such individual has agreed, among other things, and subject to the terms thereof, to vote the respective shares of Company Common Stock beneficially owned by each such individual in favor of the adoption of the Merger Agreement and against any Company Acquisition Proposal (including any Company Superior Proposal).

The Voting Agreements will terminate upon the earliest of (i) the valid termination of the Merger Agreement in accordance with its terms, (ii) the Effective Time, and (iii) the written agreement of the parties thereto.

Concurrently with the execution of the Merger Agreement, and as a condition and inducement to Parent’s willingness to enter into the Merger Agreement, each of Larry Scheffler, Robert Groesbeck, David Loop and Christopher Wren, and certain Affiliates of each of them, has also entered into a lock-up agreement (collectively, the “Lock-Up Agreements”) with Parent, pursuant to which each such Person has agreed not to transfer Parent Shares beneficially held or to be held by such Person that constitute, or will constitute, Merger Consideration (the “Locked-Up Shares”). With respect to each such group of stockholders, 5% of the Locked-Up Shares will be released at the Effective Time, 31.67% of the Locked-Up Shares will be released nine months after the Effective Time, 31.66% of the Locked-Up Shares will be released 15 months after the Effective Time and 31.67% of the Lock-Up Shares will be released 18 months after the Effective Time.

Nevada

As of June 30, 2026, we held the following licensed operations in Nevada: (a) one dual-licensed dispensary superstore adjacent to the Las Vegas Strip with 24,000 square feet of licensed dispensary (the “Planet 13 Las Vegas Superstore”), (b) one adult-use “neighborhood store” at 2,300 square feet of licensed dispensary (the “Medizin dispensary”), (c) three dual-licensed production facilities, one of which is co-located and customer-facing at the Las Vegas SuperStore Entertainment complex with 18,500 square feet of licensed production, (d) three dual-licensed cultivation facilities, one with approximately 16,100 square foot indoor cultivation facility under perpetual harvest cycle, a second with 45,000 square feet co-located with our production license at that facility, and a small-indoor rural site in Beatty, Nevada that is expandable up to 2,300,000 square feet of greenhouse located on 80-acres owned by us, also co-located with our production license at that facility, and (e) one cannabis distribution license and (f) one cannabis consumption license operating as DAZED! Consumption lounge, a 3,000 square foot location inside the Planet 13 Las Vegas Superstore Entertainment complex. Of the three Nevada cultivation facilities, the Company is currently only utilizing one, the 45,000 sq ft shared use cultivation/production facility, while the other two facilities are dark and reserved for future expansion, or potential sale.

At the Planet 13 Las Vegas Superstore Entertainment complex, we also offer ancillary services to our customers, including a restaurant with a liquor license, and a retail store, which sells branded merchandise products and other non-regulated items in our facility.

California

As of June 30, 2026, we held the following licenses in California: One dual-use and two adult-use cultivation licenses along with a nursery license and distribution license. The Company has discontinued operations at both its Orange County, California retail store, as well as its Coalinga California cultivation facility, pending transfer and sale of the licenses, which was completed on August 3, 2026.

Florida

As of June 30, 2026, we are continuing capital outlays to utilize our Florida MMTC license issued by the Florida Department of Health that was acquired through our acquisition of VidaCann. Licensed MMTCs are vertically integrated and the only businesses in Florida authorized to dispense medical marijuana cannabis to qualified patients and caregivers. MMTCs are authorized to cultivate, process, transport and dispense medical marijuana. As of December 31, 2025 there were 22 companies with MMTC licenses in Florida, many of which are not yet operational. License holders are not subject to restrictions on the number of dispensaries that may be opened or on the number or size of cultivation and processing facilities they may operate. On September 15, 2023, we recorded an impairment charge of $32,750,466 against our previously acquired Florida MMTC License to reflect the value of the Florida MMTC License as of the date we domesticated to Nevada. We recognized an additional impairment of $7,197,418, that brought the carrying value of our Florida MMTC License to $9,000,000, as of December 31, 2023. The amount was equal to the sale price negotiated with a third party who acquired the license from us on May 6, 2024, prior to us closing the acquisition of VidaCann on May 10, 2024. The VidCann acquisition added a cultivation and processing facility, a production facility and a twenty-six (26) retail store network, to which we have added seven (7) additional locations, bringing the total number of medical dispensaries we operate in Florida to thirty three (33).

As part of our Florida expansion, as of the date of this Quarterly Report on Form 10-Q, we have entered into two leases for additional dispensing locations in Florida, which remain subject to completion of tenant improvements and regulatory inspection prior to sales to customers. The first location in Sarasota, is nearing completion of tenant improvements and is expected to be operational in August of 2026, followed by the second location in St. Petersburg, which will begin construction in the second half of 2026.

Illinois

On August 5, 2021, Planet 13 Illinois won a Conditional Adult Use Dispensing Organization License in the Chicago-Naperville-Elgin region from the Illinois Department of Financial and Professional Regulation. The conditional license was issued to Planet 13 Illinois on July 22, 2022. At the time the license was awarded, we owned 49% of Planet 13 Illinois and 51% was owned by Frank Cowan.

On August 5, 2022, we entered into an option purchase agreement that gives us the option to purchase 51% of Planet 13 Illinois that it does not already own from Frank Cowan for $866,250 in cash and 1,063,377 common shares of the Company. The option was exercisable at our discretion for a period of two years.

On October 14, 2022, the Company, through its wholly owned subsidiary Planet 13 Chicago, LLC, entered into a $2,500,000 real property purchase agreement for a proposed dispensing location in Waukegan, Illinois, for an approximately 8,000 square foot building on 1.9 acres, previously occupied by a financial institution tenant. The Company’s obligation to close on the transaction is conditioned upon obtaining local jurisdiction zoning and land-use approvals, completion of customary due diligence, and that the current non-occupying tenant terminate their lease at the property. On November 1, 2022, the Company provided notice of this site selection to the Illinois cannabis regulator.

On February 7, 2023, we exercised and closed our option to purchase Mr. Cowan’s 51% interest in Planet 13 Illinois. On February 3, 2023, we closed on the purchase of a dispensary location in the town of Waukegan, a suburb of the greater Chicago area, and on December 4, 2023, opened the Planet 13 Illinois dispensary to the public.

As of June 30, 2026 we operate one Planet 13 branded dispensary in Waukegan, Illinois. The Company has plans to leverage its resources in Illinois by introducing its exclusive line of products through licensing agreements for sale at its retail store and wholesale throughout the State in 2026.

Competitive Conditions

The markets in which we operate are highly competitive, with increasing competition from larger, better financed companies, as well as new entrants. Competition has become more intense as competitors offer an increasing number of diversified products and engage in price competition in all markets. Planet 13 is committed to enhancing the customer experience through events, exclusive product offerings, improved pricing and enhancements to its loyalty program to help attract and retain customers in light of this competitive environment.

We expect to continue to focus on several areas, including customer experience, product innovation, production efficiencies, marketing and branding, and ongoing cost control and reductions. The management team constantly monitors ongoing developments in the cannabis and related industries to help us remain competitive. We have been closely tracking the illicit market for cannabis and manufacturers and retailers of intoxicating hemp products as the illicit market also has a direct financial impact on our business.

Recent Developments

On April 23, 2026, the U.S. Department of Justice (DOJ) officially moved marijuana from Schedule I to Schedule III of the Controlled Substances Act. This recognizes the drug has accepted medical uses and a lower potential for abuse, a major departure from its previous treatment as a drug with no medical value. The order immediately applies to FDA-approved products and state-licensed medical marijuana. A new expedited administrative hearing process is expected to begin on June 29, 2026, to consider further, broader rescheduling. This shift is expected to provide significant tax relief to state-licensed cannabis businesses, allowing them to deduct business expenses that were previously prohibited under IRS rule 280E. The reclassification aims to ease federal restrictions, enabling more rigorous scientific research and expanding access for patients.

Results of Operations

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27

Three and Six Months Ended June 30, 2026 Compared to the Three and Six Months Ended June 30, 2025

Revenue, net of Discounts

Net Revenue for the three months ended June 30, 2026 was $22,859,292 vs $21,092,230 in the prior quarter for a sequential increase of 8.4% or $1,767,062. The Company, however experienced a 14.9% decrease in net revenue of $3,995,069 from $26,854,361 in the comparable prior year period. Net Revenue during the six months ended June 30, 2026 was $43,951,522, a 19.9% decrease of $10,934,646 when compared to the prior year period of $54,886,168.

The quarter over quarter sequential increase was primarily driven by a 17.1% revenue increase in the Florida market vs the prior quarter. The year over year decreases in net revenue were primarily driven by the Company's exit from the California market with the wholesale portion substantially complete at the end of 2025 and the final day of sales at the dispensary on February 10, 2026. California revenue represented approximately $6,500,000 of the overall $10,934,646 revenue decline vs prior year with the majority of the remaining decrease coming from the Nevada market. The Company experienced ongoing price compression in all markets driven by additional competition and the persistent impact of the illicit market.

In Nevada, The Company saw a reduction in the number of customers at the Planet 13 Las Vegas Superstore compared to the prior year, and decreases in revenue from both retail and wholesale operations, as tourism in Las Vegas has continued to be challenged in 2026. In particular, the flower category suffered from intense price compression and oversupply in the market, negatively impacting both retail and wholesale revenue in the period. We believe that the decline in tourism in Las Vegas, combined with an overall reduction in the disposable income of our customers during the six months ended June 30, 2026, had a negative impact on the number of tourists and local customers visiting the Planet 13 Las Vegas Superstore and our other retail locations. The Company is focused on driving customer traffic to the Las Vegas Superstore location with local marketing efforts, partnerships with taxi cab and rideshare drivers and targeting high impact events such as certain concerts, events at the Sphere, and EDC, among others.

Details of net revenue by product category are as follows:

Gross Profit

Gross profit margin for the six months ended June 30, 2026 was 49.5% compared to 43.1% for the six months ended June 30, 2025. Overall gross profit was $21,737,721 and $23,665,998 for the six months ended June 30, 2026 and 2025 respectively, a decrease of 8.1%. The increase in gross profit margin percentage was offset by the 19.9% decrease in Net Revenue vs the prior year.

The increase in gross profit margin percentage for the six months ended June 30, 2026 was the result of several factors including: the exit from California wholesale, the cost reductions in Nevada cultivation and improvements in third party procurement in Nevada. The Company also had a positive, one-time adjustment to its inventory reserve balance of $1,000,000 in the quarter as increased sales in Florida is helping work through the excess WIP inventory carrying over from 2025. Without the inventory reserve adjustment, gross profit margin would have been 49.5% for the three month and 47.2% for the six month periods. The Company expects margins to continue to improve from this level going forward due to continued efforts in Nevada, and as Florida begins to scale and BHO products are introduced.

General and Administrative Expenses

General and Administrative (“G&A”) expenses (which includes non-cash share-based compensation expenses), decreased by 18.5% during the six months ended June 30, 2026, when compared to the six months ended June 30, 2025. The decrease in G&A expenses across board was the result of the focused cost cutting initiatives undertaken by the Company during 2025 now showing in the results. Overall, excluding non-cash share-based compensation expenses, G&A expenses as a percentage of revenue equaled 48.2% for the six months ended June 30, 2026, compared to 49.4% for the six months ended June 30, 2025.

A detailed breakdown of G&A expenses is as follows:

Non-cash, share-based compensation of $661,230 was recognized during the three months ended June 30, 2026, increasing from $497,296 that was recognized during the three months ended June 30, 2025. The increase is primarily attributable to the 13,673,635 Restricted Share Units (“RSUs”) that were granted on March 31, 2025. These amounts are non-cash, and the expense is recognized in accordance with the vesting schedule of the underlying RSUs. See Note 12 to our audited consolidated financial statements filed with our Annual Report on Form 10-K for the year ended December 31, 2025, for additional details on the assumptions used to calculate fair value as well as information regarding the vesting of the various components of the non-cash share-based compensation.

Sales and marketing expenses decreased by 18.5% or $300,604 during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The decrease in marketing expenses was a result of the Company's overall cost reduction efforts, partially offset by the cost of efforts to drive increased customer traffic to the Planet 13 Las Vegas Superstore.

Lease expense decreased by 19.8% during the three months ended June 30, 2026, when compared to the three months ended June 30, 2025. The decrease in Lease expense is primarily due to the exit from the Orange County, California dispensary, which was completed on February 10, 2026, the exit from administrative office space in Nevada and two unprofitable store locations in Miami Florida.

Depreciation and amortization decreased by 21.4% during the three months ended June 30, 2026, when compared to the three months ended June 30, 2025. The reduction is primarily due to the elimination of depreciation charges as a result of the asset sales in California.

Interest expense of $95,557 was incurred during the three months ended June 30, 2026, compared to net interest expense of $377,290 during the three months ended June 30, 2025. The reduction in interest expense when compared to prior year is the result of paying off several higher interest notes by utilizing a low interest revolving line of credit and the settlement of a promissory note secured by a property in Beatty Nevada in December 2025. The interest expense is net of interest earned on a corresponding money market account. The balance of long-term debt as of June 30, 2026, was $1,265,683 compared to $1,234,353 as of December 31, 2025.

We conduct our operations primarily in United States dollars and hold all of our currency in US dollars. An insignificant amount of expenses are incurred in Canadian dollars, or Euros. The foreign currency gains/losses reflect fluctuations in the underlying exchange rates on the dates expenses are incurred compared to when they are paid. It is our policy not to hedge our foreign exchange exposure.

Other income/expense, consisting of gains on the sale of fixed assets and other miscellaneous transactions, including Automated Teller Machine (“ATM”) fees, and other income, was income of $261,170 for the three months ended June 30, 2026, compared to other income consisting of ATM fees, and other miscellaneous income of $325,704 for the three months ended June 30, 2025. Other income for the six months ended June 30, 2026 included $1,565,000 gain on the sale of assets. The prior year other income included the recovery of a property in a legal settlement related to the El Capitan matter valued at $4,570,227.

Income tax expense for the three months ended June 30, 2026, was $2,868,254 compared to $6,423,562 for the prior year period. The tax expense decreased primarily due to a reduction in uncertain tax positions required for the Florida medical cannabis market associated with IRC 280E, when compared to the prior year. The reduction is a direct result of the recent rescheduling of marijuana for medical purposes. Non-medical markets are still subject to Section 280E of the Internal Revenue Code (the “Code”), which prohibits businesses from taking deductions or credits in carrying on any trade or business consisting of trafficking in certain controlled substances that are prohibited by federal law. We, to the extent our “trafficking” activities, and/or key contract counterparties directly engaged in trafficking in cannabis, have incurred significant tax liabilities from the application of Section 280E. Our income tax obligations under Section 280E of the Code are typically substantially higher as compared to companies to which Section 280E does not apply. Section 280E essentially requires us to pay federal, and as applicable, state income taxes on gross profit, which presents a significant financial burden that increases our net loss and may make it more difficult for us to generate net profit and cash flow from operations in future periods. In addition, to the extent that the application of Section 280E creates a financial burden on contract counterparties, such burdens may impact the ability of such counterparties to make full or timely payment to us, which would also have a material adverse effect on our business.

The overall net loss for the three months ended June 30, 2026, was $5,586,446 (($0.02) per share) compared to an overall net loss of $13,301,242 (($0.04) per share) for the three months ended June 30, 2025.

Segmented Disclosure

The Company determined that each of its locations represents an operating segment. These operating segments have been aggregated into a single reportable segment as the Company operates as a vertically integrated cannabis company with dispensary, cultivation, production and distribution operations in the States of Nevada and Florida, dispensary, cultivation and distribution operations in the State of California and dispensary operations in the State of Illinois.

Liquidity and Capital Resources

As of June 30, 2026, our financial instruments consist of cash, deposits, accounts receivable, accounts payable and accrued liabilities, and notes payable. We have no speculative financial instruments, derivatives, forward contracts, or hedges.

As of June 30, 2026, we have working capital of $16,615,110 compared to working capital of $22,234,681 as of June 30, 2025. The working capital reduction is the result of substantially less inventory and accounts receivable related to California operations and the reduction in Nevada cultivation, partially offset by a reduction in accounts payable and accrued expenses in the current period. The Company believes that it has adequate liquidity in the form of cash on hand to continue to fund its operations over the next 12 months.

The following table relates to the six months ended June 30, 2026 and 2025:

Cash Flows from Operating Activities

Net cash provided by operating activities was $429,408 for the six months ended June 30, 2026, compared to cash used in operating activities of $6,416,537 for the six months ended June 30, 2025. A significant portion of the increase in cash provided by operating activities is directly attributable to the net change in certain working capital items during the six months ended June 30, 2026, when compared to the six months ended June 30, 2025. This was driven primarily by decreases in accounts receivable, inventory, accounts payable and accrued expense accounts in the six months ended June 30, 2025.

Cash Flows from Investing Activities

Net cash provided by investing activities was $476,800 for the six months ended June 30, 2026, compared to net cash used in investing activities of $4,967,370 for the six months ended June 30, 2025. Funds received in the current period were related to the sale of dispensary assets in Orange County, California, offset by capital expenditures in Florida. Capital expenditures in the prior year period were primarily related to new store buildouts and upgrades to the cultivation facilities in Florida.

Cash Flows from Financing Activities

Net cash provided by financing activities was $0 during the six months ended June 30, 2026, compared to net cash provided by financing activities of $1,802,368 for the six months ended June 30, 2025. The funds received in the prior period were a $9,750,000 draw from the revolving line of credit, mostly offset by the payoff of debts related to the VidaCann acquisition.

Capital Resources

We have a recent history of operating losses. It may be necessary for us to arrange for additional financing to meet our ongoing growth initiatives.

Management believes it will be able to raise equity capital as required in the long term, but recognizes the risks attached thereto. There can be no assurance that it will be able to obtain adequate financing in the future or that the terms of such financing may be favorable.

Should financing not be available, the Company has adequate liquidity in the form of cash on hand and assets for sale to fund all of its planned capital expenditures and expansion plans as well as to continue to fund its operation over the next 12 months, including the planned build-out of its operations in Florida.

Capital Management

Our capital consists of shareholders’ equity. Our objective when managing capital is to maintain adequate levels of funding to support the development of our businesses and maintain the necessary corporate and administrative functions to facilitate these activities. This is done primarily through equity financing. Future financings are dependent on market conditions and there can be no assurance we will be able to raise funds in the future. We invest all capital that is surplus to our immediate operational needs in short-term, highly liquid, and high-grade financial instruments. There were no changes to our approach to capital management during the period. We are not subject to externally imposed capital requirements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of June 30, 2026.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP requires our management to make judgements, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements. Although these estimates are based on management’s best knowledge of the amounts, events or actions, actual results may differ from those estimates. Estimates and judgements are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable.

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

There have been no material changes to our critical accounting estimates as set forth in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025.

There have been no material changes to our market risk disclosures as set forth in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2025.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation as of June 30, 2026, our Co-Chief Executive Officers and Chief Financial Officer concluded that our Company’s disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

In addition to other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition, financial results, or future performance. Other than as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

Because the Exchange Ratio is fixed and the market price of Vireo’s subordinate voting shares may fluctuate, our stockholders cannot be certain of the value of the consideration they will receive in the Merger, if completed.

If the Merger is completed, each share of Company Common Stock issued and outstanding immediately prior to the effective time of the Merger, other than shares that are canceled pursuant to the Merger Agreement and shares held by stockholders who properly exercise and perfect applicable dissenters’ rights, will be converted into the right to receive 0.015383618 of a subordinate voting share of Vireo, subject to customary adjustments for stock splits, recapitalizations and similar events as provided in the Merger Agreement. Because the Exchange Ratio is fixed and will not be adjusted to reflect changes in the market price of Vireo’s subordinate voting shares or Company Common Stock, the value of the consideration received by our stockholders will depend on the market price of Vireo’s subordinate voting shares at the time the Merger is completed.

The market prices of Vireo’s subordinate voting shares and the Company Common Stock may fluctuate during the pendency of the Merger. Accordingly, our stockholders will not know or be able to determine the market value of the Merger consideration they will receive until the Merger is completed. Changes in the market prices of Vireo’s subordinate voting shares and the Company Common Stock may result from a variety of factors, including general market and economic conditions, developments affecting the cannabis industry, changes in applicable laws and regulations, changes in Vireo’s or our respective businesses, operations, financial condition and prospects, market assessments of the likelihood and anticipated timing of completion of the Merger and developments relating to the receipt of required regulatory approvals. Many of these factors are beyond Vireo’s and our control.

Completion of the Merger is subject to a number of conditions, and the failure or delay in satisfying those conditions could prevent or delay completion of the Merger and adversely affect our business, financial condition and results of operations.

Completion of the Merger is subject to the satisfaction or, where permitted, waiver of a number of conditions, including, among others: (i) approval of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of the Company Common Stock entitled to vote thereon; (ii) approval by a simple majority of the votes cast by our stockholders, excluding the votes attached to shares held or controlled by persons specified under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions; (iii) the effectiveness of the Registration Statement on Form S-4 relating to the Vireo subordinate voting shares to be issued in the Merger and the absence of an effective stop order or related SEC proceeding; (iv) approval of the Vireo subordinate voting shares to be issued in the Merger for listing on the Canadian Securities Exchange and receipt of the required acceptance or approval of the Canadian Securities Exchange; (v) the absence of any applicable law or order prohibiting, restraining or making illegal the completion of the Merger; (vi) the receipt and continued effectiveness of certain specified governmental and cannabis regulatory authorizations, permits and consents, including, as applicable, the expiration or termination of applicable waiting periods; (vii) the absence of certain pending governmental proceedings challenging or seeking to restrain the Merger or impose specified limitations or remedies; (viii) the accuracy of the parties’ respective representations and warranties, subject to the standards set forth in the Merger Agreement, and the parties’ performance in all material respects of their respective obligations under the Merger Agreement; (ix) the absence of a material adverse effect with respect to either us or Vireo; and (x) the receipt by each party of an opinion of its counsel regarding the intended U.S. federal income tax treatment of the Merger.

There can be no assurance that these conditions will be satisfied or waived or that the Merger will be completed on the terms or within the timeframe currently contemplated, or at all. Governmental and cannabis regulatory authorities may delay or decline to grant required approvals or may impose conditions, limitations or restrictions in connection with such approvals. Other events, developments or circumstances may also delay or prevent completion of the Merger.

The Merger Agreement generally may be terminated by either party if the Merger has not been completed by July 26, 2027. In specified circumstances relating to the failure to obtain cannabis consents and associated regulatory conditions, and provided that the other applicable closing conditions have been satisfied, waived or are capable of being satisfied at closing, either party may extend the termination date to October 26, 2027 in accordance with the procedures set forth in the Merger Agreement.

If the Merger is not completed, the market price of the Company Common Stock could decline to the extent that its market price reflects an assumption that the Merger will be completed. We would also remain liable for significant transaction expenses incurred in connection with the Merger, and our business may be adversely affected by the diversion of management attention, disruption of our relationships with employees, customers, suppliers and other business partners, negative reactions from the investment community and the loss of potential business opportunities during the pendency of the Merger. In addition, under specified circumstances described in the Merger Agreement, we may be required to pay Vireo a termination fee of $1.8 million. Any of these consequences could materially and adversely affect our business, financial condition, results of operations and the market price of our common stock.

The announcement and pendency of the Merger may disrupt our business, and the Merger Agreement subjects us to restrictions on the conduct of our business until the Merger is completed or the Merger Agreement is terminated.

Uncertainty regarding the Merger may adversely affect our relationships with our employees, customers, suppliers, licensors, distributors, governmental authorities, independent contractors, business partners and other third parties. Employees may experience uncertainty regarding their roles or employment following completion of the Merger, which could adversely affect our ability to attract, retain and motivate key personnel. The loss or distraction of employees, including members of senior management, could adversely affect our business and operations. In addition, our management has devoted, and will continue to devote, significant attention and resources to the completion of the Merger, which may divert attention from our ongoing business and other strategic priorities.

Our customers, suppliers and other business partners may also experience uncertainty concerning their current or future relationships with us or the combined company. Such uncertainty could cause customers to reduce or delay purchases, cause suppliers or other counterparties to seek to modify or terminate existing business relationships, or make it more difficult for us to establish new relationships. Competitors may seek to take advantage of this uncertainty, which could adversely affect our business, financial condition and results of operations.

Under the Merger Agreement, we are generally required to conduct our business in all material respects in the ordinary course consistent with past practice and to use reasonable best efforts to preserve our assets, business organization and material business relationships until the earlier of the effective time of the Merger and termination of the Merger Agreement. Subject to specified exceptions, qualifications and monetary thresholds, we may not take certain actions without Vireo’s prior written consent, including issuing securities, declaring or paying dividends, making certain compensation or employment-related changes, acquiring or disposing of businesses or assets, entering into new lines of business, incurring or guaranteeing certain indebtedness, making certain capital expenditures, entering into, amending or terminating certain material contracts, or settling certain proceedings or claims.

The Merger Agreement also restricts our ability to solicit, initiate, facilitate or knowingly encourage alternative acquisition proposals or engage in discussions or negotiations regarding such proposals. Subject to the procedures and conditions specified in the Merger Agreement, we may furnish information and participate in negotiations regarding a bona fide written acquisition proposal received after execution of the Merger Agreement that did not result from a breach of the applicable restrictions if the required determinations are made regarding the likelihood that the proposal constitutes a superior proposal and the fiduciary duties of the Company Board or the Special Committee. The Merger Agreement also permits us, subject to specified conditions, to terminate the Merger Agreement to enter into a definitive agreement with respect to a superior proposal, in which case we would be required to pay the $1.8 million termination fee.

These restrictions could prevent us from pursuing strategic, operational, financing or other opportunities that may arise prior to completion of the Merger, responding effectively to competitive pressures or industry developments, or taking actions that we might otherwise consider beneficial to our business and stockholders. The adverse effects of these restrictions and the uncertainty associated with the Merger could be exacerbated by any delay in completing the Merger or could continue or accelerate if the Merger is not completed.